UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 20-F20‑F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

for the fiscal year ended December 31, 20112013
Commission File Number 1-322971‑32297

CPFL ENERGIA S.A.

(Exact name of registrant as specified in its charter)

Rua Gomes de Carvalho, 1,510, 14^th floor -‑ Suite 142
CEP 04547-00504547‑005 Vila Olímpia -‑ São Paulo, São Paulo
Federative Republic of Brazil
+55 11 3841-8507
3841‑8507
(Address of principal executive offices)

Lorival Nogueira Luz JúniorGustavo Estrella
+55 19 3756 8704 – lorival.luz@cpfl.com.brgustavoestrella@cpfl.com.br
Rodovia Campinas Mogi Mirim,Engenheiro Miguel Noel Nascentes Burnier, 1,755, km 2,5 – Parque São Quirino – Campinas, São Paulo -‑ 13088 900140
Federative Republic of Brazil

(Name, telephone, e-maile‑mail and/or facsimile
number and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:

*Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None  

As of December 31, 2011,2013, there were 962,274,260 common shares, without par value, outstanding

Indicate by check mark if the registrant is a well-knownwell‑known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes T   No £  

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934.

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes T   No £  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-TS‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes £   No £   N/A T  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non‑accelerated filer.  See definition of accelerated filer and large accelerated filer in Rule 12b-212b‑2 of the Exchange Act (Check one):

Large Accelerated Filer T   Accelerated Filer £   Non‑accelerated Filer £  

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP £   IFRS T   Other £  

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17£   Item 18 £  

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).

Yes £   No T  

Table of Contents

Table of Contents
	Page Forward-looking Statements 1 FORWARD-LOOKING STATEMENTS Certain Terms and Conventions 1 1 Presentation of Financial InformationCERTAIN TERMS AND CONVENTIONS 21 PRESENTATION OF FINANCIAL INFORMATION 2 ITEM 1. Identity of Directors, Senior Management and Advisers 2 ITEM 2. Offer Statistics and Expected Timetable 2 ITEM 3. Key Information 2 ITEM 3. Key Information 2 Selected Financial and Operating Data 2 Convenience Translations into U.S. Dollars 5 Exchange Rates 6 Exchange Rates 5 RISK FACTORS 7 Risk Factors 6 Risks Relating to Our Operations and the Brazilian Power Industry 6 7 Risks Relating to Brazil 13 12 Risks Relating to the ADSs and Our Common Shares 14 14 ITEM 4. Information on the Company 15 15 Overview 15 Overview 15 Our Strategy 19 Our Strategy 18 Our Service TerritorTerritoryy 2210 Distribution Distributio21n 20 Purchases of Electricity 2324 Consumers and Tariffs 2425 Generation of Electricity 2627 Electricity Commercialization, Services and ServicesOther 3538 Competition 3639 Our Concessions and Authorizations 3640 Properties 4043 Environmental 4044 The Brazilian Power Industry 4044 Principal Regulatory Authorities 4145 Concessions, Permissions and Authorizations 4246 The New Industry Model Law 4448 System Tariffs Tariffs for the Use of the Distribution and Transmission Systems52 48 Basis of Calculation of Distribution Tariffs 4953 Government Incentives to the Energy Sector 5054 Regulatory Charges 5155 Energy Reallocation Mechanism 56 52 ITEM 4B. 4A. Unresolved Staff Comments 57 52 ITEM 5. Operating and Financial Review and Prospects 57 53 ITEM 6. Directors, Senior Management and Employees 90 77 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 97 Major Shareholders and Related Party Transactions 85 ITEM 8. Financial Information 100 Financial Information 88 ITEM 9. The Offer and Listing 102 89 ITEM 10. Additional Information 104 91 Material Contracts 111 Material Contracts 98 ITEM 11. Quantitative and Qualitative Disclosures aboutAbout Market Risk 108121 ITEM 12. Description of Securities Other than Equity Securities 108122 Reimbursement of Fees and Direct and Indirect Payments by the Depositary 123 109 ITEM 13. Defaults, Dividend Arrearages and Delinquencies 123 109 ITEM 14. Material Modifications to the Rights of Security Holders and Use Of Proceeds of PROCEEDS 123 109 ITEM 15. Controls and Procedures 123 109 Management’s Report on Internal Control over Financial Reporting 123 110 ITEM 16. 110 124 ITEM 16A. Audit Committee Financial Expert 124 110 ITEM 16B. Code of Ethics 124 111  iii ITEM 16C. Principal Accountant Fees and Services 125 111 Audit and Non‑AuditNon-Audit Fees 125 111 Audit Committee Approval Policies and Procedures 125 111 ITEM 16D. Exemptions from the Listing Standards for Audit Committees 125 111 ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 125 112 ITEM 16F. Change in the Registrant'sRegistrant’s Certifying Accountant 125 112 ITEM 16G. Corporate Governance 126 112 ITEM 17. 16H. Mine Safety Disclosure Financial Statements 127 112 ITEM 18. 17. Financial Statements 127 113 ITEM 19. 18. Financial Statements Exhibits 127 113 ITEM 19. Exhibits 127 GLOSSARY OF TERMS 128 113 SIGNATURES 116131    iv   Table of Contents   FORWARD-LOOKINGFORWARD‑LOOKING STATEMENTS This annual report contains information that constitutes forward-lookingforward‑looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.  Many of the forward-lookingforward‑looking statements contained in this annual report can be identified by the use of forward-lookingforward‑looking words, such as “believe,” “may,” “aim,” “estimate,” “continue,” “anticipate,” “will,” “intend,” “expect” and “potential,” among others.  Forward-lookingForward‑looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition.  Those statements appear in a number of places in this annual report, principally under the captions “Item 3.  Key Information—Risk Factors,”Factors”, “Item 4.  Information on the Company” and “Item 5.  Operating and Financial Review and Prospects.”Prospects”.  We have based these forward-lookingforward‑looking statements largely on our current beliefs, expectations and projections about future events and financial trends affecting our business.  Many important factors, in addition to those discussed elsewhere in this annual report, could cause our actual results to differ substantially from those anticipated in our forward-lookingforward‑looking statements.  These factors include: ·        general economic, political, demographic and business conditions in Brazil and particularly in the markets we serve; ·        changes in applicable laws and regulations, as well as the enactment of new laws and regulations, including those relating to environmental, tax and employment matters; ·        electricity shortages; ·        changes in tariffs; ·        our inability to generate electricity due to water shortages, transmissionTransmission outages, operational or technical problems or physical damages to our facilities; ·        potential disruption or interruption of our services; ·        inflation and exchange rate variation; ·        the early termination of our concessions to operate our facilities; ·        increased competition in the power industry markets in which we operate; ·        our inability to implement our capital expenditure plan, including our inability to arrange financing when required and on reasonable terms; ·        changes in consumer demand; ·        existing and future governmental regulations relating to the power industry; and ·        the risk factors discussed under “Item 3.  Key Information—Risk Factors,” beginning on page 7. 6. Forward-lookingForward‑looking statements speak only as of the date they were made, and we undertake no obligation to update or to revise them after we distribute this annual report because of new information, future events or other factors.  In light of these limitations, you should not place undue reliance on forward-lookingforward‑looking statements contained in this annual report. CERTAIN TERMS AND CONVENTIONS A glossary of electricity industry terms is included in this annual report, beginning on page 113. 128.   1   Table of Contents   PRESENTATION OF FINANCIAL INFORMATION We maintain our books and records inreais.  We prepared our consolidated financial statements included in this annual report in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). Our consolidated annual financial statements We restated ourbalance sheets, as of January 1, 2012 and December 31, 2012, and the Statements of Income, of Comprehensive Income, of Change in Shareholders´ Equity and Cash Flows for the yearyears endedDecember 31, 2010 2012 and 2011 as a result of the adoption, as of January 1, 2013, of two newstandardsissued by the IASB: IAS 19 (Employee Benefits – as revised in 2011)  and IFRS 11 (Joint Arrangements).  These newstandardswere our first financial statements preparedapplied retrospectively to 2012 and 2011 pursuant to IAS 8 (Accounting Policies, Changes in accordance with IFRS.  IFRS 1 – “First‑time AdoptionAccounting Estimates and Errors) for comparison purposes.  The adoption of International Financial Reporting Standards” has been applied in preparingthese newstandardsimpacted several line items of our financial statements asstatements.  One of andthese impacts relate to the method of  accounting for the year ended December 31, 2010 and forresults ofjoint-ventures, which are now recognized using the year ended December 31, 2009 for comparative purposes.  Until December 31, 2009,equity method of accounting instead of the proportional consolidation method we used prior to the adoption ofIFRS 11.  See note 2.8 to our consolidated financial statements were prepared in accordance with accounting practices adopted in Brazil (“Brazilian Accounting Principles”), for a description of thesestandardsand reconciled to generally accepted accounting principles in the United States.  Brazilian Accounting Principles differ in certain significant respects from IFRS.  When preparing our 2010 consolidated financial statements under IFRS, management amended certain accounting methods in the Brazilian Accounting Principles financial statements to comply with IFRS, as issued by the IASB.  The reconciliations and descriptions of the effect of the transition from Brazilian Accounting Principles to IFRS are presented in note 5 to our audited consolidated financial statements included in our 2010 annual report.  Following our adoption of IFRS, as issued by the IASB, we are no longer required to reconciletheir impact on our financial statements prepared in accordance with IFRS to generally accepted accounting principles in the United States. statements. We have translated certain of thereal amounts contained in this annual report into U.S. dollars.  The rate used to translate such amounts was R$1.876 to US$1.00, which was the rate for the selling of U.S. dollars in effect as of December 31, 2011 as reported by the Central Bank of Brazil (the “Central Bank”).  The U.S. dollar equivalent information presented in this annual report is provided solely for convenience of investors and should not be construed as implying that thereal amounts represent, or could have been or could be converted into, U.S. dollars at the above rate.  See “Item 3.  Key Information—Exchange Rates” for more information regarding the Brazilian foreign exchange rate system and historical data on the exchange rate betweenreais and U.S. dollars. Not applicable. ITEM 1.Identity of Directors, Senior Management and Advisers Not applicable. ITEM 2.Offer Statistics and Expected Timetable Not applicable. ITEM 3.                       Key Information Selected Financial and Operating Data The tables below contain a summary of our financial data as of and for eachyears ended December 31, 2013, 2012, 2011, 2010 and 2009. Our financial data as of December 31, 2013 and 2012 and as of January 1, 2012 and for the periods indicated.  The summary of our financial datathree years in the period ended December 31, 2013 was derived from our consolidated annual financial statements, which appear elsewhere in this annual report were prepared in accordance with IFRS, as issued by the IASB. As described above and in further detail in note 2.8 to our audited financial statements, our financial data as of and for the years ended December 31, 2012 and 2011 was restated as a result of the restrospective adoption of certain new accounting standards. You should read this selected financial data in conjunction with our consolidated financial statements and the related notes included in this annual report. The selected consolidated Our financial informationdata as of December 31, 2010 and 2009 and for the two years ended December 31, 2010 was derived from our audited financial statements that are not included in this annual report. Because these financial statements, and the financial data derived therefrom, were not restated to reflect the adoption of the new standards described above, they are not comparable to our financial statements, and the financial data derived therefrom, as of and for the years ended December 31, 2009, 20102013, 2012 and 2011 prepared in accordance with IFRS, as issued by the IASB, has been derived from(see note 2.8 to our audited consolidated financial statements, which appear elsewhere in this annual report.statements). The following tables present our selected financial data as of and for each of the periods indicated. 2   Table of Contents   STATEMENT OF OPERATIONS DATA For the year ended December 31, 2011 2010 2009 For the year ended December 31, US$ R$ 2013 2012(5) 2011(5) 2010(6) 2009(6) (in millions, except per share and per ADS data) US$ R$       (in millions, except per share and per ADS data) Net operating revenue 6,805 12,764 12,024 11,358 6,247 14,634 14,891 12,674 12,024 11,358 Cost of electric energy services:     Cost of electric energy services:   Cost of electric energy 3,316 6,221 6,222 6,015 3,499 8,197 8,253 6,668 6,222 6,015 Operating cost 617 1,158 1,068 1,054 626 1,468 1,378 1,070 1,068 1,054 Services rendered to third parties 607 1,139 1,051 621 431 1,010 1,356 1,138 1,051 621 Gross operating income 2,265 4,246 3,683 3,668 1,690 3,960 3,904 3,798 3,683 3,668       Operating expenses:     Operating expenses:   Sales expenses 194 364 301 255 160 377 468 364 301 255 General and administrative expenses 328 615 443 403 397 929 724 595 443 403 Other operating expense 115 216 200 227 122 285 377 213 200 227 Income from electric energy service 1,628 3,051 2,739 2,783 1,012 2,370 2,335 2,625 2,739 2,783 Financial income (expense):     Interest in associates and joint ventures 52 121 82 - Financial income (expense):   Income 372 698 483 351 298 699 707 753 566 351 Expense (739) (1,387) (837) (661) (713) (1,671) (1,285) (1,156) (837) (672) Net financial income (expenses) (367) (689) (354) (310) (415) (971) (578) (403) (271) (321) Income before taxes 1,261 2,362 2,385 2,473 649 1,519 1,878 2,304 2,468 2,461 Social contribution (112) (210) (221) (208) (67) (157) (178) (204) (229) (207) Income tax (304) (570) (604) (576) (176) (413) (493) (555) (625) (573) Total taxes (416) (780) (825) (784) (243) (570) (671) (759) (853) (780) Net income 845 1,582 1,560 1,689 405 949 1,207 1,545 1,615 1,681 Net income attributable to controlling shareholders 816 1,530 1,538 1,657 400 937 1,176 1,493 1,572 1,650 Net income attributable to non controlling shareholders 28 52 22 32 Net income per share(1) 0.85 1.59 1.60 1.73 Net income attributable to non‑controlling shareholders 5 12 31 52 22 31 Earnings per share attributable to controlling shareholders(1):   Basic 0.41 0.97 1.22 1.55 1.66 1.72 Diluted 0.41 0.95 1.20 1.55 1.66 1.72 Net income per ADS 1.70 3.18 4.80 5.18 0.83 1.94 2.40 3.10 3.32 3.44 Dividends(2) 803 1,506 1,260 1,227 397 931 1,096 1,506 1,260 1,227 Weighted average of number of common shares (in million) 962 962 960 Weighted average of number of common shares (in millions) 962 960 Dividends per share(1)(2) 0.83 1.57 1.31 1.28 0.41 0.97 1.14 1.57 1.31 1.28 Dividends per ADS(2) 1.67 3.13 2.62 2.56 0.83 1.94 2.28 3.13 2.62 2.56   3   Table of Contents   BALANCE SHEET DATA For the year ended December 31, For the year ended December 31, 2011 2010 2009 2013 2012(5) 2011(5) 2010(6) 2009(6) US$ R$ US$ R$ (in millions, except per share and per ADS data) (in millions)         Current assets:   Current assets:   Cash and cash equivalents 1,439 2,700 1,563 1,487 1,796 4,206 2,435 2,663 1,563 1,487 Consumers, concessionaires and licensees 999 1,874 1,816 1,753 857 2,008 2,205 1,861 1,816 1,753 Other current assets 421 789 519 409 448 1,050 905 799 519 409 Total current assets 2,859 5,363 3,898 3,649 3,101 7,264 5,545 5,323 3,898 3,649   Noncurrent assets:   Noncurrent assets:   Accounts receivable 97 182 196 225 66 154 162 182 196 225 Financial asset of concession 734 1,377 935 674 1,190 2,787 2,343 1,377 935 674 Investments in joint-ventures 441 1,033 1,022 1,006 - Property, plant and equipment 4,421 8,292 5,786 5,213 3,294 7,717 7,104 5,673 5,786 5,213 Intangible Assets 4,759 8,927 6,585 6,063 3,734 8,748 9,180 8,535 6,585 6,063 Other noncurrent assets 1,744 3,272 2,657 2,666 1,425 3,339 3,568 3,073 2,657 2,666 Total noncurrent assets 11,755 22,050 16,159 14,841 10,150 23,778 23,379 19,846 16,159 14,841 Total assets 14,614 27,413 20,057 18,490 13,251 31,043 28,294 25,169 20,057 18,490   Current liabilities:   Short-term debt(3) 881 1,653 2,251 1,364 Current liabilities:   Short‑term debt(3) 784 1,837 1,962 1,496 2,251 1,364 Other current liabilities 1,517 2,846 2,177 2,059 1,310 3,068 3,007 2,819 2,177 2,059 Total current liabilities 2,398 4,499 4,428 3,423 2,094 4,906 4,969 4,315 4,428 3,423   Noncurrent liabilities:   Long-term debt(3) 6,373 11,955 7,167 6,548 Other long-term liabilities 1,283 2,406 1,712 1,983 Noncurrent liabilities:   Long‑term debt(3) 6,482 15,184 13,511 10,317 7,167 6,548 Other long‑term liabilities 920 2,155 2,553 1,879 1,712 1,983 Noncurrent liabilities 7,656 14,361 8,879 8,531 7,401 17,339 16,064 12,196 8,879 8,531 Noncontrolling interest 792 1,485 256 267 Non-controlling interest 758 1,775 1,510 1,485 256 267 Net equity attributable to controlling shareholders 3,768 7,067 6,494 6,269 2,998 7,024 6,381 7,173 6,494 6,269 Total liabilities and shareholders’ equity 14,614 27,413 20,057 18,490 13,251 31,043 28,294 25,169 20,057 18,490   4   Table of Contents   OPERATING DATA(*)DATA For the year ended December 31, For the year ended December 31, 2011 2010 2009 2008 2007 2013 2012(8) 2011(8) 2010(6) 2009(6) Energy sold (in GWh):     Residential 13,626 12,983 12,346 11,649 10,766 15,426 14,567 13,626 12,983 12,346 Industrial 14,718 15,413 14,970 16,066 16,692 14,691 14,536 14,718 15,413 14,970 Commercial 8,140 7,695 7,297 6,938 6,509 8,837 8,714 8,140 7,695 7,297 Rural 1,991 2,100 2,256 2,449 2,511 2,081 2,093 1,991 2,100 2,256 Public administration 1,154 1,112 1,074 1,027 972 1,234 1,220 1,154 1,112 1,074 Public lighting 1,495 1,444 1,408 1,355 1,284 1,586 1,525 1,495 1,444 1,408 Public services 1,823 1,742 1,664 1,634 1,590 1,820 1,864 1,823 1,742 1,664 Own consumption 33 33 32 30 34 33 Total energy sold to Final Consumers 42,979 42,522 41,048 41,150 40,354 45,709 44,552 42,979 42,522 41,048 Electricity sales to wholesalers (in GWh) 14,089 12,737 12,925 9,551 8,731 14,975 14,429 12,271 12,737 12,925 Total consumers (in thousands)(4) 6,952 6,748 6,567 6,425 6,257 7,386 7,176 6,952 6,748 6,567 Installed capacity (in MW) 2,644 2,309 1,737 1,704 1,588 Assured energy (in GWh) 11,678 7,786 7,485 7,134 6,698 Installed Capacity (in MW) 2,988 2,961 2,644 2,309 1,737 Assured Energy (in GWh)(7) 12,758 12,742 11,678 7,786 7,485 Energy generated (in GWh) 9,638 9,142 5,984 6,659 6,382 11,427 10,570 9,638 9,142 5,984     (*)           Unaudited. (1) Net income per share and Dividends per share are based on the number of shares resulting from the reverse and forward stock split of our common shares, which occurred in July 2011, as if they had occurred inon January 1, 2009. (2) “Dividends” represent the total amount of dividends from net income for each period indicated, subject to approval of the shareholders at the general shareholders’ meeting to be held in the following year. (3) Short-termShort‑term debt and Long‑term debt include derivativeloans and financing, debentures, accrued interest.interest on loans, financing and debentures and derivatives. (4) Represents active consumers (meaning consumers who are connected to the distribution network)Distribution Network), rather than consumers invoiced at period-end.period‑end. (5) Data for 2012 and 2011 have been restated in application of IAS 19 – Employee Benefits (as revised in 2011) and IFRS 11 – Joint Arrangements, as described in note 2.8 to our consolidated financial statements.  With respect to IAS 19 – Employee Benefits, the principal adjustments are as follows: (i) changes in the accounting record method of actuarial gain and losses, such that accumulated differences between actuarial estimates and actual obligations are recognized in Other Comprehensive Income when they occur, and (ii) instead of recording interest cost and expected returns on plan assets as previously, we now record an amount for “net interest”.  With respect to IFRS 11 – Joint Arrangements, the results of thejoint-ventures ENERCAN, BAESA, Chapecoense and EPASA are recognized using the equity method of accounting in 2013, 2012 and 2011 rather than through proportional consolidation as previously. Balance sheet for the year ended December 31, 2011 is the same to the one presented on January 1, 2012 in Financial Statements. (6) Data for 2010 and 2009 have not been restated in application of IAS 19 – Employee Benefits (as revised in 2011)  and IFRS 11 – Joint Arrangements, described in note 2.8 to our consolidated financial statements.  In particular, data for 2010 and 2009 reflect the results of the joint-venturesENERCAN, BAESA, Chapecoense and EPASA through proportional consolidation in 2010 and 2009, as opposed to the equity method of accounting applicable in 2013, 2012 and 2011. (7) Refers to Assured Energy in GW available at the end‑period, multiplied by the number of hours per each year.  For further information about commencement of operations of each power plant, see “Item 4.  Information on the Company”. (8) 2012 and 2011 volume information was restated for comparison purposes between operational and financial information, due to the adoption of IFRS 11.   5 TableConvenience Translations into U.S. Dollars Solely forthe investorsconvenience, we have translated certain amounts included in this annual report fromreais into U.S. dollars at the commercial selling rate at closing for the purchase of ContentsU.S. dollars, as reported by the Brazilian Central Bank, as of December 31, 2013 of R$2.343 to US$1.00.  The translated amounts have been rounded.  These translations should not be considered as a representation that any such amounts have been, could have been or could be converted into U.S. dollars at that or at any other exchange rate, as of that date or any other date.  In addition, the translations should not be construed as a representation that the amountstranslatedinto U.S. dollars are in accordance with generally accepted accounting principles.  See “—Exchange Rates” below for more information regarding thereal/U.S. dollar exchange rate.   Exchange Rates The Brazilian Central Bank allows thereal/U.S. dollar exchange rate to float freely, and it has intervened occasionally to control unstable movements in foreign exchange rates.  We cannot predict whether the BrazilianCentral Bank or the Brazilian government will continue to let therealfloat freely or will intervene in the exchange rate market through a currency band system or otherwise.  Thereal may substantially depreciate or appreciate against the U.S. dollar.  For more information on these risks, see “Item 3.  Additional Information—Risk Factors—Risks Relating to Brazil.”Brazil”. 5 Table of Contents The following table provides information on the selling exchange rate, expressed inreaisper U.S. dollar (R$/US$), for the periods indicated. Year-end Average for period(1) Low High Year‑end Average for period(1) Low High (reais per U.S. dollar) (reais per U.S. dollar) Year ended:   December 31, 2007 1.771 1.930 1.733 2.156 December 31, 2008 2.337 1.833 1.559 2.500 Year ended:   December 31, 2009 1.741 1.990 1.702 2.422 1.741 1.990 1.702 2.422 December 31, 2010 1.666 1.759 1.655 1.881 1.666 1.759 1.655 1.881 December 31, 2011 1.876 1.671 1.535 1.902 1.876 1.671 1.535 1.902 December 31, 2012 2.044 1.958 1.702 2.112 December 31, 2013 2.343 2.174 1.953 2.446 (1) Year-end figures representAverage for period represents the average of the month-endmonth‑end selling exchange rates during the relevant period.   Month-end Average for period(1) Low High   (reais per U.S. dollar) Month ended:         September 2011 1.854 1.750 1.604 1.902 October 2011 1.689 1.773 1.689 1.886 November 2011 1.811 1.790 1.727 1.894 December 2011 1.876 1.837 1.783 1.876 January 2012 1.739 1.790 1.739 1.868 February 2012 1.709 1.718 1.702 1.738 March (through March 27, 2012) 1.814 1.790 1.715 1.827   Month‑end Average for period(1) Low High   (reais per U.S. dollar) Month ended:          October 2013 2.203 2.189 2.161 2.212 November 2013 2.325 2.295 2.243 2.336 December 2013 2.343 2.345 2.310 2.382 January 2014 2.426 2.382 2.334 2.440 February 2014 2.333 2.384 2.333 2.424 March 2014 2.263 2.326 2.260 2.365 April 2014 (through April 2) 2.271 2.267 2.262 2.271 (1)           The figures providedAverage for months in 2011 and 2012, as well as for the month of March up to and including March 27, 2012, representperiod represents the average of the selling exchange rates at the close of trading on each business day during such period. Risk Factors 6 Table of Contents RISK FACTORS Risks Relating to Our Operations and the Brazilian Power Industry We are subject to comprehensive regulation of our business, which fundamentally affects our financial performance. Our business is subject to extensive regulation by various Brazilian regulatory authorities, particularly the National Electric Energy Agency (Agência Nacional de Energia Elétrica (“ANEEL”)., or ANEEL.  ANEEL regulates and oversees various aspects of our business and establishes our tariffs.  If we are obligedobligated by ANEEL to make additional and unexpected capital investments and are not allowed to adjust our tariffs accordingly, or if ANEEL modifies the regulations related to such adjustment, we may be adversely affected. In addition, both the implementation of our strategy for growth and our the ordinary business may be adversely affected by governmental actions such as changes to current legislation, the termination of federal and state concession programs, creation of more rigid criteria for qualification in public energy auctions, or a delay in the revision and implementation of new annual tariffs. If regulatory changes require us to conduct our business in a manner substantially different from our current operations, as a result of regulatory changes, our operations and financial results may be adversely affected. 6 Table of Contents The regulatory framework under which we operate is subject to legal challenge. The Brazilian government implemented fundamental changes in the regulation of the power industry underin legislation passed in 2004 legislation known as theLei do Novo Modelo do Setor Elétrico, or New Industry Model Law.  Challenges to the constitutionality of the New Industry Model Law are still pending before the Brazilian Federal Supreme Court.Court (Supremo Tribunal Federal).  If all or part of the New Industry Model Law were held to be unconstitutional, there would be uncertain consequences for the validity of existing regulation and the further development of the regulatory framework.  The outcome of the legal proceedings is difficult to predict, but it could have an adverse impact on the entire energy sector, including our business and results of operations. We are uncertain as to the renewal of our concessions.concessions and authorizations. We carry out our generation, transmission and distribution activities pursuant to concession agreements entered into with the Brazilian Federal Government.government.  Our concessions range in duration from 16 to 35 years, with the first expiration date in 2015.  Five of our distribution subsidiaries, as well as three small hydroelectric power plants and six micro hydroelectric power plants that generate energy exclusively for these distribution subsidiaries, have concessions that expire in July 2015 with options to renew for an additional 20 years.  In 2011, these five distribution subsidiaries represented 6.0% of net operating revenues of our distribution companies and 5.6% of the energy distributed by our distribution companies. The Brazilian constitution requires that all concessions relating to public services be awarded through a bidding process.public tender.  Under laws and regulations specific to the electric energy sector, the Federal GovernmentBrazilian government may renew existing concessions for additional periods of up to 20 or 30 years, depending on the nature of the concession, without a bidding process,public tender, provided that the concessionaire has met minimum performance standards and that the proposal is otherwise acceptable to the Federal Government.Brazilian government.  The Federal GovernmentBrazilian government has considerable discretion under the ConcessionsLaw No. 8,987/95, or the Concession Law, and the concession contracts with respect to renewal of concessions.  Moreover, there The first of our distribution concessions due to expire are those held by our distribution subsidiaries CPFL Santa Cruz, CPFL Jaguari, CPFL Mococa, CPFL Leste Paulista and CPFL Sul Paulista, which were originally granted in 1999 for a 16‑year term that is no extensive historydue to expire in July 2015.  In 2013, these five distribution subsidiaries represented 5.6% of administrativeour distribution net operating revenues and 5.4% of the energy billed by our Distribution segment. A recent change in law determined the general conditions for the renewal practice.  Asof distribution concessions, including those held by CPFL Santa Cruz, CPFL Jaguari, CPFL Mococa, CPFL Leste Paulista and CPFL Sul Paulista, subject to certain conditions, for a result,term of up to 30 years.  See “Item 4.  Information on the Company—Our Concessions and Authorizations—Concessions”.  Accordingly, we have applied for renewal of these concessions.  We are currently awaiting a response from the Brazilian government with respect to this renewal request.  We cannot assure yougive any assurance that our concessionsthe renewals will be renewedgranted, either on an early basis or at all, or if granted that theythe relevant conditions will be acceptable.  If these or any of our concessions are not renewed, on the same terms.or if they are renewed subject to conditions that are unfavorable to us, our revenues could be adversely affected. The tariffs that we charge for sales of electricity to captive consumersCaptive Consumers and the tariff for using the distribution system that we charge to Free and Special Consumers are determined by ANEEL pursuant to concession agreements with the Brazilian government, so our operating revenues could be adversely affected if ANEEL makes decisions relating to our tariffs that are not favorable to us. ANEEL has substantial discretion to establish the tariff rates our distribution companies charge our consumers.  Our tariffs are determined pursuant to concession agreements with the Brazilian Federal Government,government, and in accordance with ANEEL’s regulations and decisions. 7 Table of Contents Our concession agreements and the Brazilian law establish a mechanism that permits three types of tariff adjustments:  (i) the annual adjustment (“(reajuste tarifário anualannual”), or RTA, (ii) the periodic revision (“(revisão tarifária periódica”), or RTP, and (iii) the extraordinary revision (“(revisão tarifária extraordinária”)., or RTE.  We are entitled to apply each year for the annual adjustment, which is designed to offset some effects of inflation on tariffs and pass through to consumers certain changes in our cost structure that are beyond our control, such as the cost of electricity we purchase from certain sources and certain regulatory charges, including charges for the use of transmission and distribution facilities.  In addition, ANEEL carries out a periodic revision every four or five years that is aimed at identifying variations in our costs as well as setting a factor based on our operational efficiency that will be applied against the index of our ongoing annual tariff adjustments, the objective of which is to share any related gains with our consumers.  We are also subject to extraordinary revision of our tariffs that may affect (negatively or positively) our results of operations or financial position. 7 Table of Contents We cannot be sure if ANEEL will establish tariffs at rates that are favorable to us, due to changes in the methods used by ANEEL in calculating the periodic revision adjustments.  In addition, to the extent that any of these adjustments are not granted by ANEEL in a timely manner, our financial condition and results of operations may be adversely affected. On November 22, 2011, ANEEL defined the methodology applicable to the third periodic revision cycle (2011 to 2014) through Resolution No. 457/2011.  For the third cycle, ANEEL has designated a new method of recognizing which costs we may pass through to our consumers.  In addition, ANEEL approved the new methodology for calculating the tariff for using the distribution system (Tarifa de Uso do Sistema de Distribuição), or TUSD, and other electricity tariffs, under which distributorsdistribution companies assume all market risk resulting from tariff indicatorsindicators.  As compared to the previous tariff cycle, this new methodology negatively impactsimpacted our financial condition and results of operations. On October 10, 2013, through Public Consultation 011/2013, ANEEL began the process to consider the methodology to be applied in the next periodic revision cycle (2015 to 2018).  The documents released for public consultation indicate that this periodic revision cycle will likely substantially maintain the existing methodology, other than the accounting methodology to be used by ANEEL in determining the Regulatory Asset Base (Base de Remuneração Regulatória), or BRR, which may be significantly modified.  This public consultation is expected to be concluded by the end of 2014. We could be penalized by ANEEL for failing to comply with the terms of our concession agreements, which could result in fines, other penalties and, depending on the gravity of the non‑compliance, in our concessions being terminated. ANEEL may impose penalties on us in the event that we fail to comply with any provision of our concession agreements.  Depending on the gravity of the non‑compliance, these penalties could include the following: ·        warning notices; ·        fines per breach of up to 2.0% of the revenues from the relevant concession in the financial year ended immediately prior to the date of the relevant breach; ·        injunctions related to the construction of new facilities and equipment; ·        restrictions on the operation of existing facilities and equipment; ·        intervention by ANEEL in the management of the concessionaire; and ·        termination of the concession. In addition, the Brazilian government has the power to terminate any of our concessions by means of expropriation for reasons related to the public interest. We are currently in compliance with all of the material terms of our concession agreements.However, we cannot assure you that we will not be penalized by ANEEL for breaching our concession agreements or that our concessions will not be terminated in the future.  The compensation to which we are entitled upon expiration or early termination of our concessions may not be sufficient for us to realize the full value of certain assets.  IfIn addition, if any of our concession agreements is terminated for reasons attributable to us, the effective amount of compensation by the granting authorities could be materially reduced through the imposition of fines or other penalties.  Accordingly, the imposition of fines or penalties on us or the termination of any of our concessions could have a material adverse effect on our financial condition and results of operations. 8   Table of Contents   We may not be able to fully pass through the costs of our electricity purchases and, to meet demand, we could be forced to enter into short‑term agreements to purchase electricity at prices substantially higher than under our long‑term purchase agreements. Under the New Industry Model Law, an electricity distributor must contract in advance, through public bids, for 100% of its forecastedforecast electricity needs for its distribution concession areas.  Over-areas, and is authorized to pass up to 105% of this electricity on to consumers.  Over‑ or under-forecastingunder‑forecasting demand can have adverse consequences.  If our forecastedforecast demand is incorrect and we purchase less or more electricity than we need, we may be prevented from fully passing through the costs of our electricity purchases and we may also be forced to enter into short‑term agreements to purchase or sell electricity at prices substantially higher or lower than under our long‑term purchase agreements.  For instance, the New Industry Model Law provides, among other restrictions, that if our forecasts fall significantly short of actual electricity demand, we may be forced to make up the shortfall with shorter term electricity purchase agreements.  If our acquisitions of electricity in the public auctions are above the Annual Reference Value (Valor Anual de Referência), as defined in “Item 4.  Information on the Company—The New Industry Model Law—The Annual Reference Value,” established by the Brazilian government, we may not be able to fully pass through the costs of our electricity purchases.  Our forecastedforecast electricity demand may prove inaccurate, including as a result of consumers moving between the different markets (regulated and free).  If there are significant variations between our electricity needs and the volume of our electricity purchases, our results of operations may be adversely affected.  See “Item 4.  Information on the Company—The Brazilian Power Industry—The New Industry Model Law.”Law”.  In addition, the MME enacted Act. No. 455 on August 2, 2012, under whichex post energy volume adjustment will be prohibited starting as from June 1, 2014, and the parties will have to registerex ante with the Electric Energy Trading Chamber (Câmara de Comercialização de Energia Elétrica), or CCEE, their expected consumption volume, except when the parties have specifically indicated that the relevant agreement is linked to the effective consumption volume.  If our projected energy volume is incorrect and we purchase less or more electricity than we need, we will no longer be able to adjust for the energy volume exposed.  See “Item 4. Information on the Company—The New Industry Model Law—Recent Developments in the Free Market”. We generate a significant portion of our operating revenues from consumers that qualify as Free Consumers, which are allowed to seek alternative electricity suppliers.  We may face other types of competition that could adversely affect our market share and revenues. Within our concession areas, other electricity suppliers are permitted to compete with us in offering electricity to certain consumers that qualify as Free Consumers, to whom our distribution subsidiaries may supply electricity only at regulated tariffs.  These consumers qualified as Free Consumers may elect to opt out of our regulated distribution system upon the expiration of their contracts with us by providing six months’ prior notice, or by providing a year’s prior notice if their contract has no fixed termination date.notice.  At December 31, 2011,2013, we supplied energy to 4847 consumers qualified as Free Consumers, which accounted for approximately 2.2%1.7% of our net operating revenues of our Distribution segment, and approximately 2.7%2.4% of the total volume of electricity sold by our distributorsDistribution segment during 2011.2013.  In addition, other consumers meeting certain criteria may become Free Consumers if they move to energy from renewable energy sources, such as small hydroelectricSmall Hydroelectric Power Plants, wind power plants or biomass.  At December 31, 20112013 we had a total of 1,615 potentially1,692 consumers who could choose their supplier, or Potentially Free Consumers.  Potentially Free Consumers which accounted for approximately 13.3%11.7% of ourthe net operating revenues of our Distribution segment, and approximately 14.9%14.6% of the total volume of electricity sold by our distribution companiesDistribution segment during 2011. If our consumers that are not currently qualified as Free Consumers decide to become Free Consumers and purchase electricity from other electricity suppliers in our concession areas, our market share and results of operations would be adversely affected.2013. In addition,Additionally, it is possible that our large industrial clients could be authorized by ANEEL to generate electric energy for their own consumption or sale to other parties, in which case they may obtain an authorization or concession for the generation of electric power in a given area, which could adversely affect our results of operations. Our operating results depend on prevailing hydrological conditions.  Poor hydrological conditions may affect our results of operations. We are dependent on the prevailing hydrological conditions in the geographic region in which we operate.  In 2013, according to data from the National Electrical System Operator (Operador Nacional do Sistema Elétrico), or ONS, approximately 79% of Brazil’s electricity supply came from Hydroelectric Power Plants.  Our region is subject to unpredictable hydrological conditions, with non‑cyclical deviations from average rainfall.  In order to compensate for poor hydrological conditions and to maintain security levels in reservoirs and the electricity supply level, the ONS may dispatch Thermoelectric Power Plants, including those operated by us.  The replacement of hydroelectric generation with thermoelectric generation may lead to adverse results in our generation segment since Hydroelectric Power Plants, including those operated by us, may receive in the Energy Reallocation Mechanism(Mecanismo de Realocação de Energia), or MRE, an amount of energy lower than their Assured Energy.  This deficit of energy will represent an expense valued at the electricity spot price, exposing the operator of the Hydroelectric Power Plants to spot price risk. 9 Table of Contents In the Distribution segment, thermoelectric generation can lead to additional costs with energy purchase, when ONS dispatches Thermoelectric Power Plants by merit order, and extraordinary charges, such as a component of the System Service Charge (Encargo de Serviço do Sistema), the ESS, related to energy security, the ESS-SE, when these power plants are dispatched out of the merit order.  These additional costs are ultimately passed through by the distributor to consumers through tariff increases in future annual adjustments or periodic reviews, as permitted by regulation.  However, there may be a cash flow mismatch in the intervening period, since these costs must be covered immediately, while the tariffs are only readjusted later.    See “Item 4.  Information on the Company—Regulatory Charges—ESS”. The impact of an electricity shortage and related electricity rationing, as in 2001 and 2002, may have a material adverse effect on our business and results of operations. We are dependent onDuring the prevailing hydrological conditions in the geographic region in which we operate.  In 2011, according to data from the National Electrical System Operator,Operador Nacional do Sistema Elétrico (“ONS”), more than 91% of Brazil’s electricity supply came from hydroelectric generation facilities.  Our region is subject to unpredictable hydrological conditions, with non‑cyclical deviations from average rainfall.  The most recentlow rainfall period of low rainfall was between 2000 and 2001, when the Brazilian government instituted the Rationing Program, a program to reduce electricity consumption that was in effect from June 1, 2001 to February 28, 2002.  The Rationing Program established limits for energy consumption for industrial, commercial and residential consumers, which ranged from a 15.0% to a 25.0% reduction in energy consumption.  If Brazil experiences another electricity shortage (a condition which might happen and we are not able to control or anticipate), the Brazilian government may implement similar or other policies in the future to address the shortage that could have a material adverse effect on our financial condition and results of operations.  A recurrenceof poor hydrological conditions that resultcannot be offset by other energy sources, such as Thermoelectric Power Plants, thereby resulting in a low supply of electricity to the Brazilian market, could cause, among other things, the implementation of broad electricity conservation programs, including mandated reductions in electricity consumption.  We cannot assure you that periodsPeriods of severe or sustained below-averagebelow‑average rainfall will notresulting in an electricity shortage may adversely affect our future financial results. We are uncertain as to the review of our Hydroelectric Power Plants’ Assured Energy. 9Decree No. 2,655 of July 2, 1998 established that the Assured Energy of generation power plants would be revised every five years.  As part of these revisions, the Brazilian Ministry of Mines and Energy, or MME, can revise a company’s Assured Energy, limited to a maximum change of 5% per revision or 10% over the entire period of the concession agreement.  In addition to these periodic revisions,the effects of the first revision are expected to take place in 2015 (pursuant toPortaria No. 303 of November 18, 2004) for all Hydroelectric Power Plants.  We cannot be certain whether the MME will make any revisions to our Assured Energy, either under the periodic revision cycle or under this extraordinary revision, and if so whether it will increase or decrease our Assured Energy.  If our Assured Energy is decreased, our ability to supply electricity under our power purchase agreements, or PPAs, would be adversely affected, which could lead to a decrease in our revenues and increase our costs if our generation subsidiaries are required to purchase power elsewhere. Table of Contents Construction, expansion and operation of our electricity generation, transmission and distribution facilities and equipment involve significant risks that could lead to lost revenues or increased expenses. The construction, expansion and operation of facilities and equipment for the generation, transmission and distribution of electricity involves many risks, including: ·        the inability to obtain required governmental permits and approvals; ·        the unavailability of equipment; ·        supply interruptions; ·        work stoppages; ·        labor unrest; 10 Table of Contents ·        social unrest; ·        weather and hydrological interferences; ·        unforeseen engineering and environmental problems; ·        increases in electricity losses, including technical and commercial losses; ·        construction and operational delays, or unanticipated cost overruns; ·        the inability to win electricity auctions promoted by ANEEL; and ·        unavailability of adequate funding. If we experience these or other problems, we may not be able to generate andor distribute electricity in amounts consistent with our projections, which may have an adverse effect on our financial condition and results of operations. We are subject to environmental and health regulations that may become more stringent in the future and may result in increased liabilities and increased capital expenditures. Our distribution and generation activities are subject to comprehensive federal and state legislation as well as supervision by Brazilian governmental agencies that are responsible for the implementation of environmental and health laws and policies.  These agencies could take enforcement action against us for our failure to comply with their regulations.  These actions could include, among other things, the imposition of fines and revocation of licenses.  It is possible that enhanced environmental and health regulations will force us to allocate capital expenditures to compliance, and consequently, divert funds from planned investments.  Such a diversion could have a material adverse effect on our financial condition and results of operations. If we are unable to complete our proposed capital expenditure program in a timely manner, the operation and development of our business may be adversely affected. We plan to invest approximately R$3,0971,425 million in our generation activities (R$1,307 million in renewable sources and R$4,984118 million in conventional sources) and R$5,826 million in our distribution activities during the period from 20122014 through 2016.2018.  Our ability to carry out this capital expenditure program depends on a variety of factors, including our ability to charge adequate tariffs for our services, our access to domestic and international capital markets and a variety of operating, regulatory and other contingencies.  Wecannot be certain that we will have the financial resources to complete our proposed capital expenditure program, and failure to do so could have a material adverse effect on the operation and development of our business. 10 Table of Contents We are strictly liable for any damages resulting from inadequate provision of electricity services, and our contracted insurance policies may not fully cover such damages. Under Brazilian law, we are strictly liable for direct and indirect damages resulting from the inadequate provision of electricity distribution services.  In addition, our distribution facilities may, together with our generation utilities, be held liable for damages caused to others as a result of interruptions or disturbances arising from the generation, transmission or distribution systems, whenever these interruptions or disturbances are not attributed to an identifiable member of the ONS.  We cannot assure you that our contracted insurance policies will fully cover damages resulting from inadequate rendering of electricity services, which may have an adverse effect on us. We may not be able to create the expected benefits and return on investments from theour renewable energy generation businessesbusinesses. Through our subsidiary CPFL Renováveis we recently entered into. We have entered into a number of energymade substantial capital investments in generation businesses (wind, thermoelectricother than hydro power, principally wind and biomass energy) with substantial capital investments.  We have few operating history and track record in these industriesbiomass.  These renewable generation businesses are dependent on certain factors that are not within our control and may not be able to foster the synergies with our traditionalsignificantly affect these businesses.  In addition: 11 ·Table of Contents In the biomass business, we may suffer from a lackmarket shortages of sugar cane, (aa necessary input for the generation of this type of energy) in the market.biomass generation.  In addition, we depend to a certain extent on the performance of our partners in these projects in the construction and operation of the plants; ·Among thebiomass plants.  The operation of wind farms involves significant uncertainties and risks, with respect to our wind farms under construction, we haveincluding financial risk associated with the difference between the energy we generate and the energy contracted through the reservepublic energy contract (Contrato de Energia de Reserva – CER), in which we bear the risk of divergences arising from:  (a)auctions.  These financial risks are principally:  (i) lower wind intensity and duration different fromthan that contemplated in the study phase of the project; (b)(ii) any delay in commencement of operations of thea wind farms under construction;farm’s operations; and (c)(iii) unavailability of wind turbines at levels above the performance benchmarks;benchmarks. If these generation plants are not able to (i) generate the energy we have contracted by our clients, or (ii) generate the energy necessary to supply, any clients in the free market, and (iii), the energy provided to us is insufficient to supply the contracted demand, we may be obliged to buy the shortfall in the spot market.  Spot market in which the price per MWh is usually moreprices are volatile and may be higher than the price at which our price, resultingrenewable energy subsidiaries have contracted to sell energy, which would increase our costs and lead to losses in an adverse effect on us.this segment.  See “Item 4.  Information on the Company—The Brazilian Power Industry—The New Industry Model Law.”Law”. Our growth, operating results and financial condition may be negatively affected by one or more of the above factors. We are controlled by a few shareholders acting together, and their interests could conflict with yours. As of December 31, 2011, VBC2013, ESC Energia S.A. (“VBC”), PREVI (throughor ESC, BB Carteira Livre I FIA),FIA and Energia São Paulo FIP (including through Fundo de Investimento em Ações, or Energia São Paulo FIA/Bonaire Participações S.A.) owned 24.33%, owned 25.55%, 31.02%29.99% and 12.62%14.87%, respectively, of our outstanding common shares.  Bonaire Participações S.A., or Bonaire, is a holding company controlled by Energia São Paulo Fundo de Investimento em Ações.  These entities are parties to a shareholders’ agreement, pursuant to which they share the power to control us.  Our controlling shareholders may take actions that could be contrary to your interests, and our controlling shareholders will be able to prevent other shareholders, including you, from blocking these actions.  In particular, our controlling shareholders control the outcome of decisions at shareholders’ meetings, and they can elect a majority of the members of our Board of Directors.  Our controlling shareholders can direct our actions in areas such as business strategy, financing, distributions, acquisitions and dispositions of assets or businesses.  Their decisions on these matters may be contrary to the expectations or preferences of our noncontrollingnon-controlling shareholders, including holders of our ADSs.  See “Item 7.  Major Shareholders and Related Party Transactions—Shareholders’ Agreement.”Agreement”. 11 Table of Contents We are exposed to increases in prevailing market interest rates, as well as foreign exchange rate risk. As of December 31, 2011,2013, approximately 87.1%88.2% of our total indebtedness was denominated inreaisand indexed to Brazilian money-marketmoney‑market rates or inflation rates, or bore interest at floating rates.  The remaining 12.9%11.8% of our total indebtedness was denominated in U.S. dollars and substantially subject to currency swaps that converted these obligations intoreais.  In addition, the costs of electricity purchased from the Itaipu power plant (“Itaipu”)Power Plant, or Itaipu, are indexed to the U.S. dollar exchange variation.  Our tariffs are adjusted annually in order to contemplate the losses or gains’ effectsgains from such electricity acquisition.  Accordingly, if these indexation rates rise or the U.S. dollar/realexchange rates appreciate, our financing expenses will increase. Our indebtedness and debt service obligations could adversely affect our ability to operate our business and make payments on our debt. As of December 31, 2011,2013, we had a debt of R$13,60817,021 million.  Our indebtedness increases the possibility that we may be unable to generate cash sufficient to pay when due the principal, interest or other amounts due in respect of our indebtedness.  In addition, we may incur additional debt from time to time to finance strategic acquisitions, investments, joint ventures or for other purposes, subject to the restrictions applicable under our existing indebtedness.  If we incur additional debt, the risks associated with our leverage would increase. We may acquire other companies in the electricity business, as we have in the past, and these acquisitions could increase our leverage or adversely affect our consolidated performance. We regularly analyze opportunities to acquire other companies engaged in activities along the entire electricity generation, transmission and distribution chain.  If we do acquire other electricity companies, itthis could increase our leverage or reduce our profitability.  Furthermore, we may not be able to integrate the acquired company’s activities and achieve the economies of scale and expected efficiency gains that often drive such acquisitions, and failure to do so could harm our financial condition and results of operations. 12 Table of Contents Risks Relating to Brazil The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy.  This involvement, as well as Brazilian political and economic conditions, could adversely affect our business and the trading price of our ADSs and our common shares. The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes significant changes in policy and regulations.  The Brazilian government’s actions to control inflation and other policies and regulations have often involved, among other measures, increases in interest rates, changes in tax policies, price controls, currency devaluations, capital controls and limits on imports.  Our business, financial condition and results of operations may be adversely affected by changes in policy or regulations at the federal, state or municipal levels involving or affecting factors such as: ·        interest rates; ·        monetary policy; ·        currency fluctuations; ·        inflation;   ·        liquidity of domestic capital and lending markets; ·        tax policies; ·        changes in labor laws; ·        regulatory environment of our sector; 12 Table of Contents ·        exchange rates and exchange controls and restrictions on remittances abroad, such as those that were briefly imposed in 1989 and early 1990; and ·        other political, social and economic developments in or affecting Brazil. We cannot assure you that the Brazilian government will continue with the current economic policies, or that any changes implemented by the Brazilian government will not, directly or indirectly, affect our business and results of operations. Exchange rate instability may adversely affect our financial condition and results of operations and the market price of the ADSs and our common shares. The Brazilian currency has during the last decades experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies.currencies over the last decade.  In the context of the crisis in the global financial markets after mid-2008,mid‑2008, thereal depreciated against the U.S. dollar, during 2008 and reaching R$2.337 per US$1.00 at year year‑end 2008.  During 2009, thereal appreciated 25.5% against the U.S. dollar in the context of the economic recovery, and reaching R$1.741 per US$1.00 at year-endyear‑end 2009.  On December 31, 2011, 2012 and 2013, the exchange rate of thereal against the U.S. dollar was R$1.876, R$2.044 and R$2.343 per US$1.00.1.00, respectively.  On March 27, 2012,April 2, 2014, the exchange rate was R$1.8142.271 per US$1.00.  We cannot assure that theTherealwill notmay further depreciate against the U.S. dollar in 2014 and in the future. Depreciation of therealincreases the cost of servicing our foreign currency denominated debt and the cost of purchasing electricity from the Itaipu power plant, a hydroelectric facilityHydroelectric Power Plant that is one of our major suppliers and that adjusts electricity prices based in part on its U.S. dollar costs.  Depreciation of therealagainst the U.S. dollar could create inflationary pressures in Brazil and cause increases in interest rates, which could negatively affect the growth of the Brazilian economy as a whole and harm our financial condition and results of operations, curtail access to foreign financial markets and may prompt government intervention, including recessionary governmental policies.  Depreciation of therealagainst the U.S. dollar can also lead to decreased consumer spending, deflationary pressures and reduced growth in the economy as a whole.  On the other hand, appreciation oftherealrelative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange current account, as well as dampen export-drivenexport‑driven growth.  Depending on the circumstances, either depreciation or appreciation of therealcould materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations. 13 Table of Contents Depreciation of thereal  also reduces the U.S. dollar value of distributions and dividends ouron the ADSs and the U.S. dollar equivalent of the market price of our common shares and, as a result, the ADSs. Government efforts to combat inflation may hinder the growth of the Brazilian economy and could harm our business. Brazil has in the past experienced extremely high rates of inflation and has therefore followed monetary policies that have resulted in one of the highestreal interest rates in the world.  Between 2006 and 2011,2013, the base interest rate in Brazil, (“SELIC”)or SELIC, varied between 8.7%17.25% p.a. and 18.0%7.5% p.a. and was 11% on April 2, 2014.  Inflation and the Brazilian government’s measures to fight it, principally through the Brazilian Central Bank, have had and may in the future have significant effects on the Brazilian economy and our business.  Tight monetary policies with high interest rates may restrict Brazil’s growth and the availability of credit.  Conversely, more lenient government and Brazilian Central Bank policies and interest rate decreases may trigger increases in inflation, and, consequently, volatility in growth and the need for sudden and significant interest rate increases, which could negatively affect our business.  In addition, if Brazil again experiences high inflation, we may not be able to adjust the rates we charge our consumers to offset the effects of inflation on our cost structure. Developments and the perception of risk in other countries, including the United States and emerging market countries, may adversely affect the market price of Brazilian securities, including our ADSs and our common shares. The market value of securities of Brazilian issuers is affected by economic and market conditions in other countries, including the United States, the European Union and emerging market countries.  The global financial crisis that commenced in 2008 led to significant consequences, including stock and credit market volatility, unavailability of credit, higher interest rates, a general economic slowdown, volatile exchange rates and inflationary pressure.  Global recovery from this crisis was slower than expected in 2013, with the largest emerging economies of China, Brazil and India posting weaker than expected results, while the United States and the European Union continued to experience weak GDP growth.  Although economic conditions in thoseother countries may differ significantly from economic conditions in Brazil, investor reactions todevelopments in otherthose countries may have an adverse effect on the market value of securities of Brazilian issuers.  Crises in the United States, the European Union or emerging market countries may diminish investor interest in securities of Brazilian issuers, including ours.  This could adversely affect the trading price of the ADSs or our common shares, and could also make it more difficult for us to access the capital markets and finance our operations in the future on acceptable terms or at all. 13 Table of Contents The current global financial crisis, especially in the European Union, has generated significant consequences, such as stock and credit market volatility, unavailability of credit, higher interest rates, a general economic slowdown, volatile exchange rates and inflationary pressure, among others, which may, directly or indirectly, adversely affect us and the market price of Brazilian securities, including the ADSs and our common shares.  It is still not clear how these consequences will affect Brazilian economy in 2012. Risks Relating to the ADSs and Our Common Shares Holders of our ADSs may encounter difficulties indo not have the exercise ofsame voting rights.rights as our shareholders. Holders of our common sharesADSs do not have the same voting rights as holders of our shares.  Holders of our ADSs are entitled to vote on shareholder matters.  You may encounter difficulties in the contractual rights set forth for their benefit under the deposit agreements.  ADS holders exercise of some of yourvoting rights as a shareholder if you hold our ADSs rather than the underlying common shares.  For example, you are not entitled to attend a shareholders’ meeting, and you can only vote by giving timelyproviding instructions to the depositary, in advanceas opposed to voting at shareholders’ meetings or by proxy.  In practice, the ability of a holder of ADSs to instruct the meeting.depositary as to voting will depend on the timing and procedures for providing instructions to the depositary, either directly or through the holder’s custodian and clearing system. If you surrender your ADSs and withdraw common shares, you risk losing the ability to remit foreign currency abroad and certain Brazilian tax advantages. As an ADS holder, you benefit from the electronic certificate of foreign capital registration obtained by the custodian for our common shares underlying the ADSs in Brazil, which permits the custodian to convert dividends and other distributions with respect to the common shares into non‑Brazilian currency and remit the proceeds abroad.  If you surrender your ADSs and withdraw common shares, you will be entitled to continue to rely on thecustodian’s electronic certificate of foreign capital registration for only five business days from the date of withdrawal.  Thereafter, upon the disposition of or distributions relating to the common shares, you will not be able to remit abroad non‑Braziliannon-Brazilian currency unless you obtain your own electronic certificate of foreign capital registration or you qualify under Brazilian foreign investment regulations that entitle some foreign investors to buy and sell shares on Brazilian stock exchanges without obtaining separate electronic certificates of foreign capital registration.  If you do not qualify under the foreign investment regulations you will generally be subject to less favorable tax treatment of dividends and distributions on, and the proceeds from any sale of, our common shares. 14 Table of Contents If you attempt to obtain your own electronic certificate of foreign capital registration, you may incur expenses or suffer delays in the application process, which could delay your ability to receive dividends or distributions relating to our common shares or the return of your capital in a timely manner.  The depositary’s electronic certificate of foreign capital registration may also be adversely affected by future legislative changes. Holders of ADSs may be unable to exercise preemptive rights with respect to our common shares. We may not be able to offer our common shares to U.S. holders of ADSs pursuant to preemptive rights granted to holders of our common shares in connection with any future issuance of our common shares unless a registration statement under the Securities Act is effective with respect to such common shares and preemptive rights, or an exemption from the registration requirements of the Securities Act is available.  We are not obligated to file a registration statement relating to preemptive rights with respect to our common shares, and we cannot assure you that we will file any such registration statement.  If such a registration statement is not filed and an exemption from registration does not exist, Deutsche Bank, as depositary, will attempt to sell the preemptive rights, and you will be entitled to receive the proceeds of such sale.  However, these preemptive rights will expire if the depositary does not sell them, and U.S. holders of ADSs will not realize any value from the granting of such preemptive rights. 14 Table of Contents The relative volatility and illiquidity of the Brazilian securities markets may substantially limit your ability to sell the common shares underlying the ADSs at the price and time you desire. Investing in securities that trade in emerging markets, such as Brazil, often involves greater risk than investing in securities of issuers in the United States, and such investments are generally considered to be more speculative in nature.  The Brazilian securities market is substantially smaller, less liquid, more concentrated and can be more volatile than major securities markets in the United States.  Accordingly, although you are entitled to withdraw the common shares underlying the ADSs from the depositary at any time, your ability to sell the common shares underlying the ADSs at a price and time at which you wish to do so may be substantially limited.  There is also significantly greater concentration in the Brazilian securities market than in major securities markets in the United States.  The ten largest companies in terms of market capitalization represented 52.6%51.2% of the aggregate market capitalization of theBM&FBOVESPA S.A. -‑ Bolsa de Valores, Mercadorias & Futuros(“, or BM&FBOVESPA”),&FBOVESPA, as of December 31, 2011.2013.  The top ten stocks in terms of trading volume accounted for 53.7%41.3%, 50.0%43.0% and 47.2% of all shares traded on the BM&FBOVESPA in 2009, 20102013, 2012 and 2011, respectively. ITEM 4.                       Information on the Company Overview We are a corporation (sociedade por ações) incorporated and existing under the laws of Brazil with the legal name CPFL Energia S.A.  Our principal executive offices are located at Rua Gomes de Carvalho, 1,510, 14th floor – Suite 142, Vila Olímpia, CEP 04547-005,04547‑005, in the City of São Paulo, state of São Paulo, Brazil and our telephone number is +55 11 3841-8507. 3841‑8507.  We are a holding company that, through our subsidiaries, distributes, generates and commercializes electricity in Brazil.  We were incorporated in 1998 as a joint venture among VBC Energia S.A., or VBC, 521 Participações S.A. and Bonaire to combine their interests in companies operating in the Brazilian power sector. We are one of the largest electricity distributors in Brazil, based on the 39,91741,148 GWh of electricity we distributed to approximately 7.07.4 million consumers in 2011.2013.  In 2011,electricity generation, our installed capacityInstalled Capacity at December 31, 2013 (after accounting for the decrease in our participation in CPFL Renováveis as a result of its initial public offering in 2013) was 2,6442,988 MW.  WeThrough our interest in CPFL Renováveis, we are also involved inthe building four biomass generation projects, one small hydroelectric power plant and 25of 19 wind farms, throughas a result of which we expect to increase our installed capacityInstalled Capacity (calculated on the same basis of consolidation) to 3,3013,292 MW1once they are completed over the next three years.five years as they are completed. 15 Table of Contents We also engage in power commercialization, buying and selling electricity commercialization,to power producers, free consumers and power trading companies.  We also provide agency services to Free Consumers before the CCEE and other agents, as well as electricity-relatedelectricity‑related services to our affiliates and unaffiliated parties.  In 2011,2013, the total amount of electricity sold by our commercialization subsidiaries was 5,0372,017 GWh and 8,66511,595 GWh to affiliated and unaffiliated parties, respectively. In 2011 and through March 29, 2012,The following significant developments have occurred in our business since the following developments affected our corporate structure:beginning of 2012: ·        On April 19, 2011, we entered intoIn February 2012, CPFL Renováveis signed an agreement with Energias Renováveis S.A. (“ERSA”) to combine assets and projects relating to renewable energy sources (wind, biomass and small hydroelectric power plants).  The transaction encompassed: (i) the transfer of wind, biomass and small hydroelectric plants previously owned and operated by CPFL Geração and CPFL Comercialização Brasil S.A. (“CPFL Brasil”) to certain companies, which subsequently transferred the wind, biomass and small hydroelectric power plants to a holding company, SMITA Empreendimentos e Participações S.A. (“SMITA”); (ii) the establishment of SMITA by CPFL Geração and CPFL Brasil; (iii) the incorporation of SMITA by ERSA, of which we turned out holding 54.5% interest; and (iv) the change of ERSA’s corporate name to CPFL Energia Renováveis S.A. (“CPFL Energias Renováveis”).  CPFL Energias Renováveis’ financial statements have been consolidated in our consolidated financialstatements since August 1, 2011. The transaction was ratified by our shareholders on December 19, 2011. 1This number includes four wind farms from the Bons Ventos complex which acquisition is still subject to the approval of ANEEL and other contractual conditions. 15 Table of Contents ·On April 7, 2011, CPFL Energia S.A. entered into a Sale and Purchase Agreement for the acquisition of 100%the Bons Ventos Wind Farm, or Bons Ventos, for a total acquisition price of the sharesR$1,095.3 million, consisting of Jantus for(i) R$823 million.  On September 21, 2011, CPFL Energia S.A. assigned the Sale445.1 million plus R$83.4 million of price adjustment paid in cash, (ii) assumption of debt of R$439.2 million, and Purchase Agreement(iii) R$127.5 million to CPFL Energias Renováveis.  In order to complete the acquisition, our subsidiary CPFL Brasil contributed funds to CPFL Energias Renováveis, of which we now hold 63% interest.settle debentures issued by Bons Ventos.  The transaction contemplated the acquisition of:  (i)was approved by ANEEL and closed in June 2012.  Bons Ventos has an authorization to develop and operate four wind farms in operationthat are fully operational (Taíba Albatroz, Bons Ventos, Enacel, Canoa Quebrada, all located in the state of Ceará) with installed capacitya total Installed Capacity of 210 MW, and (ii) a portfolio of157.5 MW.  All the energy produced by these wind farm projects with total installed capacity of 732 MW inpower plants has been contracted to Eletrobrás for 20 years, under the states of Ceará and Piauí, of which 412 MW has already been certified and eligible for participation in the next electricity auctions.  The acquisition was complete on December 19, 2011.Proinfa Program (Programa de Incentivo às Fontes Alternativas de Energia Elétrica).  ·        On December 29, 2011, throughIn March 2012, our subsidiary CPFL Energias Renováveis we acquired allpurchased theComplexo Atlântica, or Atlântica Complex, consisting of the shares of Santa Luzia Energética S.A. (“Santa Luzia”), representing 100% of its capital stock for R$132 million through assumption of debts with BNDES.  As a result, we now have Santa Luzia small hydroelectric power plant,four wind farms located in the citiesmunicipality of São Domingos and Iguaçu,Palmares do Sul, in the state of Santa Catarina, with installed capacityRio Grande do Sul, for an acquisition price of 28,5 MW. ·On January 12, 2012, through our subsidiary CPFL Energias Renováveis, we entered into a SaleR$24.5 million.  The wind farms have aggregate Installed Capacity of 120 MW and Purchase Agreement for the acquisition of 100% of the shares of Atlântica I Parque Eólico S.A. (“Atlântica I”), Atlântica II Parque Eólico S.A. (“Atlântica II”), Atlântica IV Parque Eólico S.A. (“Atlântica IV”) and Atlântica V Parque Eólico S.A. (“Atlântica V”). Atlântica I, Atlântica II, Atlântica IV and Atlântica V hold authorizations to produce energy from wind sources as independent producersIndependent Power Producers for a term of 35 years.  These wind farms are located in the state of Rio Grande do Sul and have aggregate installed capacity of 120 MW, all of which have been certified andTheir energy output was sold at thean alternative energy sources auction of alternative sources of energy held onin August 2010. The acquisition is subject to certain conditions provided for in the Sale and Purchase Agreement and approval by the ANEEL. ·        On February 24,In March 2012, through our subsidiary CPFL Energias Renováveis we entered into a Sale and Purchase Agreement for the acquisition ofsigned an agreement to acquire 100% of the shares of BVP S.A., which holds 100% of the shares of Bons Ventos Geradora de Energia S.A. (“Bons Ventos”).  The total acquisition cost was R$1,062 million, distributed as follows: (i) R$600 million in cash, and (ii) R$462 million through assumption of net debts, which amount may be adjusted by the acquisition closing date.  Bons Ventos holds authorizations to explore the following wind farms: (i) Taíba Albatroz, with installed capacity of 16,8 MW, (ii) Bons Ventos, with installed capacity of 50,4 MW, (iii) Enacel, with installed capacity of 31,5 MW and (iv) Canoa Quebrada, with installed capacity of 58,8 MW.  All of these wind farms are fully operational in the state of Ceará, and have entered into agreements with Eletrobrás to sell all of the generated energy under the Proinfa Program.  The acquisition is subject to certain conditions provided for in the Sale and Purchase Agreement, including authorizations from regulatory authorities. ·On March 9, 2012, through our subsidiary CPFL Energias Renováveis, we entered into an agreement to purchase 100% of the electricelectrical energy and water steam co-generationco‑generation assets of SPE Lacenas Participações Ltda., a subsidiary of Usina Açucareirawhich controlled the Ester (“Usina Ester”).  Usina Ester holds authorization from ANEEL to exploit electric energy from biomass (sugar cane), with installed capacity of 40,0 MW.  These co-generation plants,Thermoelectric Power Plant, located in the citymunicipality of Cosmópolis in the state of São Paulo,Paulo.  The transaction was completed in October 2012.  The purchase price was R$111.5 million, consisting of (i) R$55.2 million in cash and (ii) R$56.3 million in assumed debt.  Around 7 MW average of co‑generation energy from the Ester Thermoelectric Power Plant was commercialized in the 2007 alternative energy sources auction, for a period of 15 years and at an average selling price of R$192 per MWh (as at December 31, 2013).  The remaining 2.8 MW of energy was sold on the free market for 21 years. ·In November 2012, the Tanquinho Solar Power Plant, or Tanquinho, commenced operation.  Tanquinho was the first solar power plant in the state of São Paulo.  Tanquinho is located in the city of Campinas at Tanquinho Substation, which belongs to one of our distribution subsidiaries, covers an area of 13,700 square meters and has Installed Capacity of 1.1 MWp.  Tanquinho is expected to generate approximately 1.6 GWh per year.  CPFL Renováveis constructed the project and continues to manage and operate the plant. ·In December 2012, the concessions of the Rio do Peixe I, Rio do Peixe II and Macaco Branco Small Hydroelectric Power Plants were renewed for an additional 30 years. ·In June 2013, CPFL Renováveis acquired Rosa dos Ventos Geração e Comercialização de Energia S.A., or Rosa dos Ventos. This acquisition was completed in February 2014.  The acquisition price, after all adjustments, was R$103.4 million, consisting of (i) R$70.3 million in cash and (ii) the assumption of net debt in the amount of R$33.1 million.  Rosa dos Ventos holds an ANEEL authorization to exploit two wind farms:  (i) Canoa Quebrada, which has Installed Capacity of 10.5 MW; and (ii) Lagoa do Mato, which has Installed Capacity of 3.2 MW.  These wind farms are fully operational.located on the coast of the state of Ceará and are in full commercial operation, and all the energy generated has been contracted to Eletrobrás through the Proinfa Program. 16 Table of Contents ·In July 2013, CPFL Renováveis carried out its IPO and its common shares began trading publicly on the BM&FBOVESPA.  The offering consisted of a primary offering of 29.2 million common shares (including overallotment option) and a concurrent secondary offering of 44.0 million common shares, at a price of R$12.51 per share.  As a result of this transaction, our interest in CPFL Renováveis was reduced from 63% to 58.84%.  Although our interest was reduced, the transaction resulted in an increase of R$59.3 million in our shareholder’s equity, capital reserve account, due to the increase of the nominal value of the shares of CPFL Renováveis (see note 14.5 to our audited financial statements).  All references in this Annual Report to our total Installed Capacity and other operating information as at and for the year ended December 31, 2013 reflect the impact of this change in shareholding and consolidation. ·In August 2013, Coopcana Biomass Thermoelectric Plant, or UTE Coopcana, commenced operations.  UTE Coopcana is located in São Carlos do Ivaí, in the state of Paraná, has Installed Capacity of 50 MW, and has sold all its energy sold in the Free Market under a supply agreement with a 21‑year term averaging 18 MW of contracted energy. ·In September 2013, operations started at the Campo dos Ventos II Wind Farm with 30 MW of Installed Capacity.  The Campo dos Ventos II Wind Farm is located in João Câmara, state of Rio Grande do Norte and was acquired in the 2010 Reserve Energy Auction (LER). Although construction of the transmission line is not yet complete, these wind farms are ready to start generating energy and have therefore been receiving revenues since September 2013, since the PPAs included in Brazilian power auctions are required to provide that the generation entity will be paid if it meets its obligations on time, even if transmission has not been provided.  ·In November 2013, Alvorada Biomass Thermoelectric Plant, or UTE Alvorada, commenced operations.  UTE Alvorada is located in Araporã, in the state of Minas Gerais, has Installed Capacity of 50 MW, and has sold all its energy in the Free Market under a supply agreement with a 20‑year term averaging 18 MW of contracted energy. ·In December 2013, at the Second A‑5/2013 Energy Auction, CPFL Renováveis traded an average of 26.1 MW of contracted energy to be generated by the Pedra Cheirosa complex, consisting of two wind farms in the state of Ceará 51.3 MW of Installed Capacity.  An “A‑5” auction is an energy auction held five years before the initial delivery date.  The contracts arising from the trade will be executed with the distribution companies that participated in the auction as buyers.  The contracts will have 20‑year terms, with energy supply commencing on January 1, 2018.  The traded energy was sold at an average price of R$125.04 per MWh, with annual adjustments to be made in accordance with changes to the IPCA. ·In February 2014, CPFL Renováveis entered into an agreement with Arrow – Fundo de Investimento em Participações, or Arrow, an investment fund, to acquire Arrow’s indirect subsidiary Dobrevê Energia S.A., or DESA.  The agreement provides that Arrow’s intermediate holding company WF2 Holding S.A., or WF2, which owns DESA, will be merged with and into CPFL Renováveis.  As a result, CPFL Renováveis’ share capital will be increased by the issuance of new common shares. CPFL Renováveis will assume WF2’s debt in the amount of approximately R$200 million as at December 31, 2013, and Arrow will receive new common shares of CPFL Renováveis representing 12.63% of CPFL Renováveis’ total share capital.  Completion of this acquisition is subject to certain conditions, providedincluding approvals by ANEEL, the Administrative Counsel for inEconomic Defense (Conselho Administrativo de Defesa Econômica), or CADE, the agreement, including authorizations from regulatory authorities.approval of certain creditors of DESA and WF2, and the completion of satisfactory legal, financial, engineering and environmental due diligence to be conducted by both parties. The following chart provides an overview of our corporate structure as ofat March 29, 2012:31, 2014:  1617   Table of Contents     Notes: (1) Controlling shareholders; (2) Includes the 0.1% stake of Camargo Corrêa S.A.; (2)(3) Includes the 0.2% stake of Petros and Sistel pension funds; (4) Termoparaíba and Termonordeste thermoelectric facilitiesThermoelectric Facilities; Note:(5) CPFL Energia owns a 63%58.8% indirect interest in CPFL Energias Renováveis (35.5% through CPFL Geração and 27.5% through CPFL Brasil) o. Our core businesses are: ·        Distribution.  In 2011,2013, our eight fully-consolidatedfully‑consolidated distribution subsidiaries delivered 39,91741,148 GWh of electricity to approximately 7.07.4 million consumers primarily in the states of São Paulo and Rio Grande do Sul. ·        Conventional generation sourcesGeneration.  As ofAt December 31, 2011, we2013 our conventional generation subsidiaries had installed capacityInstalled Capacity of 2,233 MW.  During 2011,2013, we generated a total of 8,9039,544 GWh of electricity, and we had 9,94910,010 GWh of assured energy,Assured Energy at December 31, 2013, the amount of energy representing our long‑term average electricity production, as established by ANEEL, which is the primary driver of our revenues relating tofrom generation activities. We hold equity interests in eight hydroelectric plants (SerraHydroelectric Power Plants:  Serra da Mesa, Monte Claro, Barra Grande, Campos Novos, Luiz Eduardo Magalhães-Lajeado,es‑Lajeado, Castro Alves, 14 de Julho and Foz do Chapecó). Although the concession for Serra da Mesa hydroelectric generation facilityHydroelectric Facility is held by another party, Furnas, we are entitledentitled to 51.54% of its assured energy.  In October 2010, Foz do Chapecó hydroelectric plant started operations, currently representing an installed capacity of 855 MW, of which we hold a share of 51%, or 436.1 MW.Assured Energy.  We also own three thermoelectric power plants,Thermoelectric Power Plants, Termonordeste, Termoparaíba and Carioba, although the Carioba Thermoelectric Power Plant has been deactivated.  In addition, 12 of our 47 Small Hydroelectric Power Plants remain under the management of two of which were acquired in 2009 (Termonordesteour conventional generation subsidiaries, CPFL Geração and Termoparaíba) throughCPFL Centrais Geradoras, and report their results within the acquisition of EPASA. In December 2010 and January 2011, respectively, Termonordeste and Termoparaíba power plants started operations with installedcapacity of 170.8 MW each one. We hold an aggregate 52.75%2 interest in Termonordeste and Termoparaíba, or 180.2 MW.Conventional Generation segment. 2We acquired 51% of the shares of EPASA in September 2009.  However, as a result of a dilution of EPASA’s capital stock in December 2011, we now hold a 52.75% interest in it. 1718   Table of Contents   ·        Renewable generation sources.GenerationIn 2011, we established.  Our indirect subsidiary CPFL Energias Renováveis, in which we own 63%a 58.84% interest to concentratethrough CPFL Geração following CPFL Renováveis’ IPO, concentrates our activities in energy generation through renewable sources.  Currently,CPFL Renováveis operates all of our wind farms and thermoelectric biomass plants,Thermoelectric Biomass Power Plants, as well as 35 of our 47 small hydroelectric power plants, are managed by CPFL Energias Renováveis.Small Hydroelectric Power Plants.  These 35 small hydroelectric power plantsSmall Hydroelectric Power Plants, which are responsible for 92.1% of the aggregate capacity generated by our small hydroelectric plants as a whole, of which: (i) 34 are operational, with aggregate installed capacity of 307 MW, located in the states of São Paulo, Santa Catarina, Rio Grande do Sul, Minas Gerais and Mato Grosso, are all operational and (ii) one is under construction in the statehave aggregate Installed Capacity of Santa Catarina, with an estimated installed capacity of 20 MW and scheduled to commence operations in 2013. Additionally, we have 33326 MW.  CPFL Renováveis also has 37 wind farms, of which (i) eight3are operational, with aggregate installed capacity of 367.5 MW,22 farms, located in the statestates of Ceará, Rio Grande do Norte and Rio Grande do Sul, are operational and have aggregate Installed Capacity of 719 MW, and (ii) 25arethe remaining 15 farms are under construction, with an estimated installed capacity of 670 MW and scheduled to commence operations between 20122014 and 2014.  We also2018, and are expected to have nine thermoelectric biomass plants,Installed Capacity of which: (i) three areapproximately 383 MW.  CPFL Renováveis has eight operational Thermoelectric Biomass Power Plants, with aggregate installed capacityInstalled Capacity of 135370 MW, located in the states of Minas Gerais, Paraná, São Paulo and Rio Grande do Norte,Norte.  CPFL Renováveis also operates the Tanquinho Solar Power Plant, which is located in the state of São Paulo and (ii) four are under construction, with an estimated capacityhas Installed Capacity of 195 MW and scheduled to start operations between 2012 and 2014.  We closed 2011 with1.1 MWp.  At December 31, 2013 our total installed capacity (i.e., includingconsolidated Installed Capacity through our conventional generation sources segment) of 2,644 MW.  We will use partRenewable Generation segment (calculated on the basis of our increased installed capacity for our own distribution and commercialization activities.58.84% interest in CPFL Renováveis) was 755 MW.  ·        Commercialization and Services.  Our subsidiary CPFL Brasil handlescommercialization subsidiaries handle our commercialization operations and providesprovide agency services to Free Consumers before the CCEE and other agents, including guidance on their operational requirements.  CPFL Brasil, our largest commercialization subsidiary, procures and sells electricity to Free Consumers, other commercialization and generation companies and distribution facilities.  In 2013, we sold 13,612 GWh of electricity, of which 11,515 GWh was sold to unaffiliated third parties. ·Services.  Commencing January 1, 2012, we report the results of our services activities as a separate operating segment.  Our subsidiary CPFL Serviços provides electricity-relatedelectricity‑related services, such as project design and construction, to our affiliates and unaffiliated parties.  In 2011, we sold 13,702 GWh of electricity, of which 8,665 GWh was sold to unaffiliated third parties.  Our Strategy Our overall objective is to consolidate our leadership position in the Brazilian electricity sector while creating value for our shareholders.  We seek to achieve these goals in all of our sectors (distribution, conventional generation, sources, renewable generation, sources, and commercialization and services) by pursuing operational efficiency (through innovation and technology) and growth (through business synergies and new projects).  Our strategies are grounded on financial discipline, social responsibility and enhanced corporate governance.  More specifically, our approach involves the following key business strategies. strategies: Complete the development of our existing renewable generation projects, and expand our generation portfolio by developing new conventional and renewable energy generation projects toand maintain our position as market leader in renewable energy sources.In  At December 31, 2013, our total consolidated Installed Capacity (calculated on the basis of our 58.84% interest in CPFL Renováveis) was 2,988 MW, of which 2,234 MW was conventionally generated and 755 MW was generated through renewable sources.  Through CPFL Renováveis, in August 2011 we became the largest renewable energy companygeneration group in Latin America by establishing CPFL Energias RenováveisBrazil in terms of Installed Capacity and acquiring 100% of the shares of Jantus,capacity under construction, according to ANEEL. Our total Installed Capacity at December 31, 2013 represents a company engaged in the generation of energy through renewable sources, especially wind power. In 2011, our installed capacity increased to 2,644 MW, 2,233 MW of which was conventionally generated, and 411 MW of which was generated through renewable sources.  This represented a 14.5%0.9% increase as compared to 2010, whenInstalled Capacity of 2,961 MW (restated on the basis of our installed capacity was 2,309 MW.58.84% post‑IPO interest in CPFL Renováveis) at December 31, 2012.  This increasegrowth was due to (i) the creationcommercial start‑up of two thermoelectric biomass plants, UTE Coopcana and UTE Bio Alvorada in August 2013 and November 2013, respectively, and the Campo dos Ventos II Wind Farm in September 2013.  If we had retained our 63% pre‑IPO stake in CPFL Renováveis in which we currently hold a 63% ownership interest, (ii) the commencement of operations at Bio Formosa and Bio Buriti biomass thermoelectric power plants, and (iii) the acquisition of new renewable energy facilities (the Jantus’ wind farms andSanta Luzia small hydroelectric power plant).  In January 2012, we entered into a Sale and Purchase Agreement for the acquisition of 100% of the shares of Atlântica I, Atlântica II, Atlântica IV and Atlântica V, companies engaged in generation of energy through wind sources.  In February 2012, we executed a Sale and Purchase Agreement for the acquisition of 100% of the shares of BVP, the holding company of Bons Ventos.  Which is still subject to certain conditions, including approvalboth years, our Installed Capacity would have grown by the regulatory authorities.2.6%. 3This number includes four wind farms from the Bons Ventos complex which acquisition is still subject to the approval of ANEEL and other contractual conditions. 18 Table of Contents By the end of 2012,2014, with the completion of the acquisition of the Rosa dos Ventos Wind Farmsandthe commercial start-up ofAtlântica Wind Farmsand when CPFL Bio Ipê, CPFL Bio Pedra and Santa Clara wind farms are the Macacos Iis expected to become fully operational, we expect our installed capacity mayInstalled Capacity to reach 2,922 MW3.3,113 MW.  By the end of 2013, when Coopcana and Alvorada biomass thermoelectric power plants and Salto Góes small hydroelectric power plant, Campo dos Ventos II, Macacos I and Atlântica wind farms are expected to become fully operational, this capacity may reach 3,141 MW and, by the end of 2014,2018, when we expect the Campo dos Ventos, and São Benedito wind farmsand Pedra Cheirosa Complexes to become operational, it maywe expect our Installed Capacity to reach 3,3013,292 MW.  Part 19 Table of theseContents Many of our generation facilities have associatedhold long‑term power purchase agreements (“PPAs”),PPAs, approved by ANEEL, which we believe will ensure us an attractive rate of return on our investment.  We also have a 2,743consolidated portfolio of 2,217 MW (of which(calculated on the basis of our share is 1,72858.84% interest in CPFL Renováveis’ total portfolio of 3,767 MW) portfolio of renewable generation projects to be developed by CPFL Renováveis in the next years through our subsidiary CPFL Energias Renováveis.coming years.  As consumption of electricity in Brazil increases, we believe that there will continue to be new opportunities for us to explore investments in additional conventional and renewable generation projects. Focus on further improving our operating efficiency.  The distribution of electricity in our distribution concession areas is our largest business segment, representing approximately 60%76.5% of our consolidated EBITDA.net income in 2013.  We continue to focus on improving the quality of our service and maintaining efficient operating costs by exploiting synergies and technologies.  We also make an effort to standardize and update our operations regularly, introducing automated systems where possible.  In 2011,recent years, in order to achieve a new level of operational efficiency, we startedcommenced roll‑out of the Tauron project, aiming at an efficiency breakthroughProgram, which consists of two main projects:  Smart Metering for Commercial and Industrialconsumers(high and medium voltage customers) and Mobile Workforce Management.  This program is already delivering benefits, with 13,000 smart meters deployed in ourthe field and two distribution operations, companies operating with a data dispatch system, replacing the previous voice‑based on new technologies, performance management, asset management and leadership.system.  We expect to fully implement Tauron projectcomplete these two projects by 2013. the end of 2014. Expand and strengthen our commercialization and services business.  Free Consumers representmake up a significant segment of the electricity market in Brazil, (approximately 25%representing approximately 27% of the market share).  We strive to enter into bilateral contracts (throughmarket.  Through our subsidiary CPFL Brasil, our commercialization subsidiary)subsidiary, we are focusing on signing bilateral contracts with former consumerscustomers of our distribution companies that become Free Consumers, in addition to attracting additional Free Consumers from outside ofconcession areas other than those covered by our distribution companies’ concession areas.companies.  In order to achieve this objective, we foster positive relationships with customers by providing electricity-related services, strategic advicededicated key account managers, CCEE operational support and decision-making support.PPAs customized to each consumer profile. Position ourselves to take advantage of consolidation in our industry by using our experience in successfully integrating and restructuring other operations.  We believe that with the stabilization of the regulatory environment in the Brazilian power industry, there may be substantial consolidation in the generation, the transmission and, particularly, the distribution sectors.  Given our financial strength and managerial expertise, we believe that we are well-positionedwell‑positioned to take advantage of this consolidation.  If promising assets are available on attractive terms, we may make acquisitions that complement our existing operations and afford us and our consumers further opportunities to take advantage of economies of scale. Maintain a high level of social responsibility in the communities in which we operate.  We aim to hold our business operations to the highest standards of social responsibility and sustainable development.  We also support initiatives to advance the economic, cultural and social interests of the communities in which we operate and contribute effectively to their further development. Follow enhanced corporate governance standards.  We are dedicated to maintaining the highest levels of management transparency and corporate governance, providing equitable shareholder rights and, through various measures, including the increase of our free float and the liquidity of our shares, seeking value for our shareholders. 3This number includes four wind farms from the Bons Ventos complex which acquisition is still subject to the approval of ANEEL and other contractual conditions. 1920   Table of Contents   Our Service Territory    Distribution We are one of the largest electricity distributors in Brazil, based on the amount of electricity we delivered in 2011.2013.  Our eight distribution subsidiaries together supply electricity to a region covering 175,2374176,521 square kilometers, primarily in the Statesstates of São Paulo and Rio Grande do Sul.  Their concession areas include 5595611 municipalities and a population of approximately 17.718 million people.  Together, they provided electricity to approximately 7.07.4 million consumers as of December 31, 2011.2013.  Our eight subsidiaries distributed approximately 13% of the total electricity distributed in Brazil in 2013, based on data from the Energetic Studies Company (Empresa de Pesquisas Energéticas - EPE).), or EPE. 4The decrease as compared to 2010 was due to the fact that certain cooperatives within the CPFL Piratininga concession distribution area have been classified by ANEEL as permissionaires (and, as such, they are now considered as distributors).  However, this decrease did not impact our revenues and results of operations. 20 Table of Contents Distribution Companies We have eight distribution subsidiaries: ·        CPFL Paulista.  Companhia Paulista de Força e Luz, (“or CPFL Paulista”)Paulista, supplies electricity to a concession area covering 90,440 square kilometers in the state of São Paulo with a population of approximately 9.49.6 million people.  Its concession area covers 2345municipalities, including the cities ofCampinas, Bauru, Ribeirão Preto, São José do Rio Preto, Araraquara and Piracicaba.  CPFL Paulista had approximately 3.74.0 million consumers as ofat December 31, 2011.2013.  In 2011,2013, CPFL Paulista distributed 21,00821,841 GWh of electricity, which accountsaccounting for approximately 22.7%22.2% of the total electricity distributed in the state of São Paulo and 6.6%6.5% of the total electricity distributed in Brazil during that period.the year. 1               This total refers to the total number of municipalities situated within the concession area of our subsidiaries.  In addition, we serve consumers located in municipalities outside of our concession areas in cases where those consumers are not served by the local concessionaire. 21 Table of Contents ·        CPFL Piratininga.  Companhia Piratininga de Força e Luz, (“or CPFL Piratininga”)Piratininga, supplies electricity to a concession area covering 5,618 square kilometers in the southern part of the state of São Paulo with a population of approximately 3.63.7 million people.  Its concession area covers 275municipalities, including the cities of Santos, Sorocaba and Jundiaí.  CPFL Piratininga had approximately 1.51.6 million consumers as ofat December 31, 2011.2013.  In 2011,2013, CPFL Piratininga distributed 9,0419,169 GWh of electricity, accounting for approximately 9.8%11.5% of the total electricity distributed in the state of São Paulo and 2.8%3.4% of the total electricity distributed in Brazil during that period.the year. ·        RGE.  Rio Grande Energia S.A. (“RGE”), or RGE, supplies electricity to a concession area covering 58,82358,940 square kilometers in the state of Rio Grande do Sul with a population of approximately 3.83.7 million people.  Its concession area covers 2535255 municipalities, including the cities of Caxias do Sul, Gravataí, Passo Fundo and Gravataí.Bento Gonçalves.  During 2013, RGE won a new tender for two municipalities in the state, Putinga and Anta Gorda.  RGE had approximately 1.31.4 million consumers as ofat December 31, 2011.2013.  In 2011,2013, RGE supplied 7,6227,792 GWh of electricity (6,548(6,605 GWh distributed to Final Consumers, and 1,0741,187 GWh delivered principally to small electric concessionaires and small rural cooperatives), which accountsaccounting for approximately 31.4%33.6% of the total electricity distributed in the state of Rio Grande do Sul and 2.4%2.1% of the total electricity distributed in Brazil during that period.the year. ·        CPFL Santa Cruz.  Companhia Luz e Força Santa Cruz, (“or CPFL Santa Cruz”)Cruz, supplies electricity to a concession area covering 11,870 square kilometers, which includes 245municipalities in the northwest part of the state of São Paulo and three5municipalities in the state of Paraná.  In 2011,2013, CPFL Santa Cruz distributed 9671,029 GWh of electricity to approximately 186,000196,990 consumers, accounting for approximately 1.0%0.8% of the total electricity distributed in the state of São Paulo and 0.3%0.2% of the total electricity distributed in Brazil during that period.the year. ·        CPFL Jaguari.  Companhia Jaguari de Energia, (“or CPFL Jaguari”)Jaguari, supplies electricity to a concession area covering 252 square kilometers, which includes two5municipalities of the state of São Paulo.  In 2011,2013, CPFL Jaguari distributed 431478 GWh of electricity to approximately 34,00036,948 consumers. ·        CPFL Mococa.  Companhia Luz e Força de Mococa, (“or CPFL Mococa”)Mococa, supplies electricity to a concession area covering 1,844 square kilometers, which includes one5municipality ofin the state of São Paulo and three5municipalities in the state of Minas Gerais.  In 2011,2013, CPFL Mococa distributed 211201 GWh of electricity to approximately 42,00043,844 consumers. ·        CPFL Leste Paulista.  Companhia Leste Paulista de Energia, (“or CPFL Leste Paulista”)Paulista, supplies electricity to a concession area covering 2,589 square kilometers, which includes seven5municipalities of the state of São Paulo.  In 2011,2013, CPFL Leste Paulista distributed 263273 GWh of electricity to approximately 52,00054,694 consumers. ·        CPFL Sul Paulista.  Companhia Sul Paulista de Energia, (“or CPFL Sul Paulista”)Paulista, supplies electricity to a concession area covering 3,802 square kilometers, which includes five5municipalities of the state ofSão Paulo.  In 2011,2013, CPFL Sul Paulista distributed 373366 GWh of electricity to approximately 75,00079,664 consumers. 5These numbers consider municipalities within the concession area of each subsidiary only. Please note that we also serve consumers in municipalities within the concession area of other concessionaire where, for any reason, those consumers are not assisted by such concessionaire.  21 Table of Contents Distribution Network Our eight distribution subsidiaries own distribution lines with voltage levels ranging from 34.5 kV to 138 kV.  These lines distribute electricity from the connection point with the Basic Network to our power sub-stations,sub‑stations, in each of our concession areas.  All consumers that connect to these distribution lines, such as Free Consumers or other concessionaires, are required to pay a tariff for using the system -(Tarifa de Uso do Sistema de Distribuição (“TUSD”)., or TUSD. 22 Table of Contents Each of our subsidiaries has a distribution network consisting of a widespread network of predominantly overhead lines and sub-stationssub‑stations having successively lower voltage ranges.  Consumers are classified in different voltage levels based on their consumption of, and demand for, electricity.  Large industrial and commercial consumers receive electricity at high voltageHigh Voltage ranges (up to 138 kV) while smaller industrial, commercial and residential consumers receive electricity at lower voltage ranges (2.3 kV and below). As ofAt December 31, 2011,2013, our distribution networknetworks consisted of 210,491239,835 kilometers of distribution lines, including 276,561342,336 distribution transformers.  Our eight distribution subsidiaries had 9,4379,753 km of high voltageHigh Voltage distribution lines between 34.5 kV and 138 kV.  At that date, we had 434454 transformer sub-stationssub‑stations for transforming high voltageHigh Voltage into medium voltagesMedium Voltages for subsequent distribution, with total transforming capacity of 13,650 mega-volt14,535 mega‑volt amperes.  Of the industrial and commercial consumers in our concession area, 283345 had 69 kV, 88 kV or 138 kV high-voltagehigh‑voltage electricity supplied through direct connections to our high voltageHigh Voltage distribution lines. System Performance Electricity Losses We experience two types of electricity losses:  technical losses and commercial losses.  Technical losses are those that occur in the ordinary course of our distribution of electricity.  Commercial losses are those that result from illegal connections, fraud or billing errors and similar matters.  Electricity loss rates of our three largest distribution subsidiaries (CPFL Paulista, CPFL Piratininga and RGE) compare favorably to the average for other major Brazilian electricity distributors in 20102012 according to the most recent information available from the Brazilian Association of Electric Energy Distributors (Associação Brasileira de Distribuidores de Energia Elétrica (“ABRADEE”), or ABRADEE, an industry association. We are also actively engaged in efforts to reduce commercial losses from illegal connections, fraud or billing errors.  To achieve this, in each of our eight subsidiaries, we have deployed trained technical teams to conduct inspections, enhanced monitoring for irregular consumption, increased replacements for obsolete measuring equipment and developed a computer program to discover and analyze irregular invoicing.  Approximately 437,330We conducted 279,902 inspections were conducted during 2011,2013, which we believe led to a recovery of receivables estimated at more than R$163.837 million. Power Outages The following table sets forth the frequency and duration of electricity outages per consumer for the years 2011ended December 31, 2013 and 20102012 for each of our distribution subsidiaries: Year ended December 31, 2011   CPFL Paulista CPFL Piratininga RGE CPFL Santa Cruz CPFL Jaguari CPFL Mococa CPFL Leste Paulista CPFL Sul Paulista Year ended December 31, 2013   CPFL Paulista CPFL Piratininga RGE CPFL Santa Cruz CPFL Jaguari CPFL Mococa CPFL Leste Paulista CPFL Sul Paulista FEC1 5.36 4.87 9.44 8.15 5.10 5.24 6.17 5.73 4.73 4.58 9.04 6.82 5.43 4.93 6.33 6.72 DEC2 6.77 6.44 15.19 8.43 7.00 5.95 9.66 9.06 7.14 7.44 17.35 6.97 5.92 4.86 7.58 9.08     (1) Frequency of outages per consumer per year (number of outages) (2) Duration of outages per consumer per year (in hours)   Year ended December 31, 2012   CPFL Paulista CPFL Piratininga RGE CPFL Santa Cruz CPFL Jaguari CPFL Mococa CPFL Leste Paulista CPFL Sul Paulista FEC1 5.37 4.23 8.75 5.82 4.62 5.69 6.55 9.01 DEC2 7.48 5.64 14.33 5.27 4.48 5.82 8.26 10.90 (1) Frequency of outages per consumer per year (number of outages). (2) Duration of outages per consumer per year (in hours).  22 Table of Contents   Year ended December 31, 2010                     CPFL Paulista CPFL Piratininga RGE CPFL Santa Cruz CPFL Jaguari CPFL Mococa CPFL Leste Paulista CPFL Sul Paulista                   FEC1 5.05 5.22 9.66 6.52 7.81 4.52 7.69 7.75 DEC2 5.65 6.88 14.71 5.49 9.24 4.59 8.28 9.21 (1)           Frequency of outages per consumer per year (number of outages) (2)           Duration of outages per consumer per year (in hours) We seek to improve the quality and reliability of our power supply, as measured by the frequency and duration of our power outages.  According to data from ABRADEE for 2010,2012, our frequency and duration of interruptions per consumer in the past few years compare favorably to the averages for other Brazilian distribution companies. 23 Table of Contents Based on data published by ANEEL, the duration and frequency of outages at CPFL Paulista and CPFL Piratininga are among the lowest in Brazil compared to companies of similar size.  The duration of outages at RGE are comparatively higher than those at CPFL Paulista and CPFL Piratininga, but they remain in line with the average rate for power companies in Southern Brazil mainly as a result of the lack of redundancies in its distribution system, the use of medium voltage lines and a lower level of automation in the network.  However, their duration and frequency of outages are below the national average. ANEEL establishes performance indicators per consumer to be complied with by power companies.  If these indicators are not reached, we are obliged to reimburse our consumers, and our revenues are negatively affected.  In 2010,2012, according to data from ANEEL, the amount we reimbursed our consumers was lower than the average amount reimbursed by power companies of similar size. Our distribution subsidiaries have construction and maintenance technology that allows for repairs of the electricity network without interruption in electricity service, which allows us to have low levels of scheduled interruption, amounting to approximately up to 14%11.3% of total interruptions.  Unscheduled interruptions due to accidents or natural causes, including lightning storms, fire and wind represented the remainder of our total interruptions.  In 2011,2013, we invested a total ofapproximately R$1,081845 million in improvementsour Distribution segment, primarily in:  (i) expansion, maintenance, improvement, automation, modernization and reinforcement of (i) the logistics of our operations,electrical system in order to meet market growth; (ii) our systems,operational infrastructure; (iii) customer service; and (iii) our infrastructure to support operations, across our different business segments.(iv) research and development programs, among other things.  We expect to invest an additional R$1,108867 million for such purposes in 2012.2014. We strive to improve response times for our repair services.  The quality indicators for the provision of energy by CPFL Paulista and CPFL Piratininga have maintained levels of excellence while complying with regulatory standards.  This was also mainly the result of our efficient operational logistics, including the strategic positioning of our teams and the technology and automation of our network and operation centers, together with a preventive maintenance and conservation plan. Purchases of Electricity Most of the electricity we sell is purchased from unrelated parties, rather than generated by our facilities.  In 2011, 11.1%2013, 12.1% of the total electricity our distribution subsidiaries acquired was purchased from our generation subsidiaries. subsidiaries (including our joint‑ventures).  In 2011,2013, we purchased 10,85510,719 GWh of electricity from the Itaipu power plant,Power Plant, amounting to 21.3%18.6% of the total electricity we purchased.  Itaipu is located on the border of Brazil and Paraguay and is subject to a bilateral treaty between the two countries pursuant to which Brazil has committed to purchasing specified amounts of electricity.  This treaty will expire in 2023.  Electric utilities operating under concessions in the Midwest, South and Southeast regions of Brazil are required by law to purchase a portion of the electricity that Brazil is obligated to purchase from Itaipu.  The amounts that these companies must purchase are governed by take-or-paytake‑or‑pay contracts with tariffs established in US$/kW.  ANEEL annually determines the amount of electricity to be sold by Itaipu.  We pay for energy purchased from Itaipu in accordance with the ratio between the volume established by ANEEL and our statutorily established share, regardless of whether Itaipu generates such amount of electricity, at a price ofUS$24.88/kW.26.08/Kw.  Our purchases represent approximately 17.0% of Itaipu’s total supply to Brazil.  This share was fixed by law according to the amount of electricity sold in 1991.  The rates at which companies are required to purchase Itaipu’s electricity are established pursuant to the bilateral treaty, and fixed to cover Itaipu’s operating expenses and payments of principal and interest on Itaipu’s U.S. dollar-denominateddollar‑denominated debts, as well as the cost of transmitting the power to their concession areas. 23 Table of Contents The Itaipu plantPower Plant has an exclusive transmission network.  Distribution companies pay a fee for the use of this network. In 2011,2013, we paid an average of R$89.68121.11 per MWh for purchases of electricity from Itaipu, as compared towith R$93.23104.98 during 20102012 and R$104.4189.68 during 2009.2011.  These figures do not include the transmission fee. We purchased 39,99846,972 GWh of electricity in 20112013 from generating companies other than Itaipu, representing 78.7%81.4% of the total electricity we purchased.  We paid an average of R$110.73147.30 per MWh for purchasesof electricity from generating companies other than Itaipu, as compared towith R$109.47121.11 per MWh in 20102012 and R$104.44112.67 per MWh in 2009.2011.  For more information on the regulated marketRegulated Market and the free market,Free Market, see “—The Brazilian Power Industry—The New Industry Model Law.”Law”. 24 Table of Contents The following table shows amounts purchased from our suppliers in the regulated marketRegulated Market and in the free market,Free Market, for the periods indicated. Year Ended December 31, Year Ended December 31, 2011 2010 2009 2013 2012 2011 (in GWh) (in GWh) Energy purchased for resale       Itaipu Binacional 10,855 10,835 11,084 Itaipu 10,719 10,781 10,855 Electric Energy Trading Chamber - CCEE 5,002 3,373 3,101 2,974 2,662 4,878 PROINFA 1,032 1,133 958 Energy purchased in the regulated market and through bilateral contracts 33,964 37,043 37,531 Proinfa Program 1,019 1,070 1,032 Energy purchased in the Regulated Market and through bilateral contracts 42,980 48,085 38,301 TOTAL 50,853 52,384 52,674 57,692 62,597 55,065   The provisions of our electricity supply contracts are governed by ANEEL regulations.  The main provisions of each contract relate to the amount of electricity purchased, the price, including adjustments for various factors such as inflation indexes, and the duration of the contract. Beginning in 2013, all distribution companies in Brazil are required to purchase electricity from generation companies whose concessions were renewed in accordance with Law 12,783.  The tariffs and volumes of electricity to be purchased by each distribution company, as well as the provisions of the applicable agreements between the generation and distribution companies, were set by ANEEL in the law.  The tariff for energy sold by generation companies whose concessions were renewed in accordance with Law 12,783 is R$32.89, significantly lower than the current average energy prices.  A number of our competitors in the generation market did not seek to renew their concessions under Law 12,783, leading to higher prices in the spot market for electricity.  See “Item 3.  Key Information—Risk Factors—Our operating results depend on prevailing hydrological conditions.  Poor hydrological conditions may require a higher dispatch of thermoelectric generation in the Brazilian electric system, which may affect our results of operations”. Transmission Tariffs.  In 2011,2013, we paid a total of R$1,314728 million in tariffs for the use of the transmission network, including Basic Network tariffs, connection tariffs and transmission of high-voltagehigh‑voltage electricity from Itaipu at rates set by ANEEL. Consumers and Tariffs Consumers We classify our consumers into five principal categories.  See note 26 to our audited consolidated financial statements for a breakdown of our sales by category. ·        Industrial consumers.  Sales to final industrial consumers accounted for 27.7%26.1% of our revenue ofrevenues from electricity sales in 2011.our Distribution segment in 2013. ·        Residential consumers.  Sales to final residential consumers accounted for 40.1%41.4% of our revenue ofrevenues from electricity sales in 2011.our Distribution segment in 2013. ·        Commercial consumers.consumers.  Sales to final commercial consumers, which include service businesses, universities and hospitals, accounted for 20.7%21.4% of our revenue ofrevenues from electricity sales in 2011.our Distribution segment in 2013. 24 Table of Contents ·        Rural consumers.  Sales to final rural consumers accounted for 3.0% of our revenue ofrevenues from electricity sales in 2011.our Distribution segment in 2013. 25 Table of Contents ·        Other consumers.  Sales to other consumers, which include public and municipal services such as street lighting, accounted for 8.5%8.1% of our revenue of electricity sales in 2011.our Distribution segment in 2013. Retail Distribution Tariffs.  We classify our consumers into two different groups, Group A consumers and Group B consumers, based on the voltage level at which the electricity is supplied to them.  Each consumer is placed in a certain tariff level defined by law and based on its respective classification, although some volume-basedclassification.  Some discounts are available.available depending on the consumer classification, tariff level or environment for trading (Free Consumers and generators).  Group B consumers pay higher tariffs.  Tariffs in Group B vary by type of consumer (industrial, residential, commercial or rural)(residential, rural, other categories and public lighting).  Consumers in Group A pay lower tariffs, decreasing from A4 to Al, because they are supplied electricity at higher voltages, which requires lower use of the energy distribution system.  The tariffs we charge for sales of electricity to Final Consumers are determined pursuant to our concession agreements and regulations establishedratified by ANEEL.  These concession agreements and related regulations establish a cap on tariffs that provides for annual, periodic and extraordinary adjustments.  For a discussion of the regulatory regime applicable to our tariffs and their adjustment, see “—The Brazilian Power Industry.”Industry”. Group A consumers receive electricity at 2.3 kV or higher.  Tariffs for Group A consumers are based on the voltage level at which electricity is supplied, and the time of year and the time of day electricity is supplied, althoughsupplied.  The consumers may opt for a different tariff applicable in peak periods in order to optimize the use of the electric network.  Tariffs for Group A consumers consist of two components:  a “capacity charge”the TUSD and an “energy charge.”the tariff for energy consumption, or TE.  The capacity charge,TUSD, expressed inreais per kW, is based on:  (i) the electricity demand contracted by the party connected to the system; (ii) certain regulatory charges; and (iii) technical and non‑technical losses of energy on the higher of (i) contracted firm capacity or (ii) power capacity actually used.distribution system.  The energy charge,TE, expressed inreaisper MWh, is based on the amount of electricity actually consumed.  Group AThese consumers are those that will likely qualify asmay opt to purchase electricity in the Free ConsumersMarket under the New Industry Model Law.  See “—The Brazilian Power Industry—The New Industry Model Law.”Law”. Group B consumers receive electricity at less than 2.3 kV (220V and 127V).  Tariffs for Group B consumers consist solely of anare charged for the tariff for using the distribution system and also for energy consumption charge andconsumption.  Both are based on the classification of the consumer.charged in R$/MWh. The following tables setsset forth our average retail prices for each consumer category for 20112013 and 2010.2012.  These prices include taxes (ICMS, PIS and COFINS) and were calculated based on our revenues and the volume of electricity sold in 20112013 and 2010.2012. Year ended December 31, 2011   CPFL Paulista CPFL Piratininga RGE CPFL Santa Cruz CPFL Leste Paulista CPFL Sul Paulista CPFL Jaguari CPFL Mococa Year ended December 31, 2013   CPFL Paulista CPFL Piratininga RGE CPFL Santa Cruz CPFL Leste Paulista CPFL Sul Paulista CPFL Jaguari CPFL Mococa (R$/MWh) (R$/MWh) Residential 416.68 418.90 541.53 483.21 511.15 481.14 404.51 551.81 362.57 351.98 430.59 345.40 391.18 389.56 286.82 478.59 Industrial 322.85 313.27 365.08 373.34 416.55 325.14 292.58 355.70 311.98 304.74 301.21 320.33 328.00 304.86 241.09 347.11 Commercial 349.56 366.33 516.05 437.55 476.79 457.17 363.79 461.81 320.44 328.12 416.85 358.88 368.54 365.49 267.43 428.69 Rural 192.31 226.27 278.91 235.28 257.46 252.16 211.65 264.64 180.39 210.91 221.40 207.09 225.19 228.55 174.64 248.85 Other 263.01 278.88 375.98 312.84 340.36 308.73 262.51 317.38 241.97 237.18 183.19 169.24 324.87 269.18 216.20 295.39 Total 348.63 359.99 440.20 399.14 400.59 384.20 314.96 409.66 317.96 321.24 323.81 286.17 329.32 332.46 248.96 382.16       Year ended December 31, 2010                     CPFL Paulista CPFL Piratininga RGE CPFL Santa Cruz CPFL Leste Paulista CPFL Sul Paulista CPFL Jaguari CPFL Mococa                     (R$/MWh) Residential 400.76 394.42 509.89 432.07 458.09 452.57 379.55 507.27 Industrial 311.90 295.54 346.97 323.89 342.95 287.54 275.80 330.85 Commercial 339.05 347.41 491.23 395.70 428.93 432.77 344.44 428.78 Rural 181.49 213.16 235.64 212.40 232.12 243.18 198.59 243.94 Other 250.07 246.31 231.00 184.17 303.61 295.12 246.49 294.39 Total 334.34 335.74 380.34 323.59 352.11 353.03 296.27 376.04                   25 Table of Contents   Year ended December 31, 2012   CPFL Paulista CPFL Piratininga RGE CPFL Santa Cruz CPFL Leste Paulista CPFL Sul Paulista CPFL Jaguari CPFL Mococa   (R$/MWh) Residential 435.92 421.82 574.07 499.93 517.27 484.53 408.83 561.97 Industrial 337.54 323.62 387.23 369.94 405.36 342.09 287.36 366.44 Commercial 362.04 369.08 542.93 445.90 481.60 441.20 366.92 467.04 Rural 201.74 230.32 286.14 238.51 265.33 252.28 215.05 270.56 Other 268.94 263.54 212.53 199.61 343.06 313.66 263.45 322.24 Total 364.69 364.89 416.12 367.08 407.33 393.87 313.75 423.06   Under current regulations, residential consumers may be eligible to pay a reduced tariffs if: (i) their monthly earnings are equaltariff (Tarifa Social de Energia Elétrica), or lower than half of the minimum wage, (ii) their monthly earnings are lower than three minimum wages, and one (or more) of the family members has a disease that requires continuous use of an electric-powered equipment, or (iii) they receive certain benefits under Brazilian government’s social programs . In orderTSEE.  Families eligible to benefit from the regulations, these consumers must registerTSEE are (i) those registered with the respective federal government registry. The discounts applied toBrazilian government’s Single Registry of Social Programs (Cadastro Único para Programas Sociais do Governo Federal) with monthly per capita income at or below half the tariffs depend onnational minimum wage and (ii) those who receive the amount of energy consumed.Continued Social Assistance Provision Benefits (Benefício da Prestação Continuada da Assistência Social).  Discounts range from 10% to 65% foron energy consumption varying from less than 30 KWkWh to 220 KWkWh per month.  Another benefit afforded toIn addition, these residential consumers is that they are not required to pay emergency capacity and emergency acquisition chargesthe Proinfa Program charge or any extraordinary tariff approved by ANEEL.  Indigenous peoples and residents of traditional rural communities (quilombos) receive free electricity up to maximum consumption of 50 kWh. 26 Table of Contents TUSD.  Under applicable lawsThe TUSD tariffs are set by ANEEL and regulations, we are required to allow other consumers to use our high‑voltage distribution lines, including Free Consumers within our distribution concession areas that are supplied by other distributors.  Allconsist of our consumers must pay a fee for the use of our network.three tariffs described under “Item 4.  Information on the Company—System Tariffs—TUSD”.  In 2011,2013, tariff revenues for the use of our network by Free Consumers amounted to R$1,314966 million.  The average tariff for the use of our network was R$90.03/55.78/MWh and R$88.15/89.07/MWh in 20112013 and 2010,2012, respectively, including the TUSD we charge to other distributors connected to our distribution network.Distribution Networks. Billing Procedures The procedure we use for billing and payment for electricity supplied to our consumers is determined by consumer category.and tariff categories.  Meter readings and invoicing take place on a monthly basis for low voltageLow Voltage consumers, with the exception of rural consumers, whose meters are read in intervals varying from one to threetwo months, as authorized by relevant regulation.  Bills are preparedissued from meter readings or, onif meter readings are not possible, from the basisaverage of estimated usage.monthly consumption.  Low voltage consumers are billed within maximum three business days after the meter reading, with payment required withinminimum five business days after the invoice presentation date.  In case of nonpayment, we send the consumer a notice of nonpayment with the following month’s invoice and we allow the consumer up to 15 days to settle the amount owed to us.  If payment is not received within three business days after that 15-day15‑day period, the consumer’s electricity supply may be suspended.  We may also take other measures, such as inclusion of the consumer in the list of debtors of credit reporting agencies, or extrajudicial or judicial collection through collection agencies. High voltage consumers are read and billed on a monthly basis with payment required within five business days after the invoice date.receipt of invoice.  In the event of nonpayment, we send the consumer a notice fourup to two business days, after the due date, giving a deadline of 15 days to make payment.  If payment is not made within three business days after that 15‑day period, the consumer’s service is discontinued. According to data from ABRADEE for 2010,2012, the percentage of customers in default of our three largest distribution subsidiaries compare favorably to the average for other major Brazilian electricity distributors.  For this purpose, consumers in default are consumers whose bills are oneup to 8990 days due.overdue.  Bills due and outstanding for over 89360 days are deemed not recoverable.unrecoverable. Customer Service We strive to provide high-qualityhigh‑quality customer service to our distribution consumers.  We operate call centers at each of our distribution subsidiaries providing customer service 24 hours a day, 7 days a week.  In 2011,2013, our call centers responded to approximately 10.610.7 million calls.  We also provide customer service through our Internet website, which handled approximately 12.215.0 million customer requests in 2011,2013, and through our branch offices, which handled approximately 4.03.8 million customer requests in 2011.2013.  The growth in electronic requests has allowed us to reduce our customer service costs and provide customer service through our call center to a larger number of customers without access to the Internet.  Following receipt of a customer service request, we dispatch our technicians to make any necessary repairs. Generation of Electricity We are actively expanding our generating capacity.  In accordance with Brazilian regulation, revenues from generation are based mainly on assured energyAssured Energy of each facility, rather than its installed capacityInstalled Capacity or actual output.  Assured energyEnergy is a fixed output of electricity established by the Brazilian government in the relevant concessionagreement.  For certain companies, actual output is determined periodically by the ONS in view of demand and hydrological conditions.  Provided generators havethat a generation facility has sold theirits electricity and participateparticipates in the Energy Reallocation Mechanism,Mecanismo de Realocação de Energia (“MRE”), theyMRE, it will receive at least the revenue amount correspondingthat corresponds to the assured energy,Assured Energy, even if they doit does not actually generateall of it.the energy.  Conversely, if a generatinggeneration facility’s output exceeds its assured energy,Assured Energy, its incremental revenue is equal only to the costs associated therewith. 27 Table of Contents Most of our hydroelectric plantsHydroelectric Power Plants are members of the MRE, a system by which mitigates hydrologic risks.hydroelectric generation facilities share the hydrological risks of the Interconnected Power System.  Our total Installed Capacity in our Conventional Generation and Renewable Generation segments (after accounting for the decrease in our participation in CPFL Renováveis as a result of its initial public offering in 2013) was 2,988 MW as of December 31, 2013.  Most of the electricity we produce comes from our Hydroelectric Power Plants.  We generated a total of 11,427 GWh in 2013, 10,570 GWh in 2012 and 9,638 GWh in 2011, in each case after accounting for the decrease in our participation in CPFL Renováveis as a result of its initial public offering in 2013. Conventional Generation 26Hydroelectric Power Plants Table of Contents At December 31, 2011,2013, our subsidiary CPFL Geração owned a 51.54% interest in the assured energyAssured Energy from the Serra da Mesa power plant.Power Plant.  Through ourits generation subsidiaries CERAN, BAESA, ENERCAN and Chapecoense, CPFL Geração also owned interests in the Monte Claro, Barra Grande, Campos Novos, Castro Alves, 14 de Julho and Foz do Chapecó plants,Power Plants, which have been operational since December 2004, November 2005, February 2007, March 2008, December 2008 and October 2010, respectively.  Through CPFL Jaguari Geração, we owned a 6.93% interest in the Assured Energy from the Luis Eduardo Magalhães power plant.  We also operated three thermoelectric power plants, twoPower Plant. All Installed Capacity and Assured Energy numbers stated in the discussion below refer to the full capacity of the plant in question rather than our consolidated share of such energy, which were acquired in 2009 (Termonordeste and Termoparaíba) through the acquisition of EPASA (subsidiary of CPFL Geração).  Termonordeste started operations on December 24, 2010 and Termoparaíba, on January 13, 2011.  At December 31, 2011, throughreflects our subsidiaries CPFL Geração and CPFL Brasil, we owned 63.0% interest in CPFL Energias Renováveis, a company resulting from an association with ERSA, and which holds our subsidiaries engaged in the generation of electricity from renewable sources.  We have fully consolidated CPFL Energias Renováveis in our financial statements since August 1, 2011, upon the incorporation of SMITA by ERSA. On a meeting held on March 8, 2012, our Board of Directors approved engagement of investment banks to commence studies regarding a potential public offering of CPFL Energias Renováveis.As of the date of this annual report, CPFL Energias Renováveis is comprised of:plant. ·18 subsidiaries involved in the generation of electric energy through 35 small hydroelectric power plants, of which: (i) 34 are operational, with total installed capacity of 307 MW, located in the states of São Paulo, Santa Catarina, Rio Grande do Sul, Minas Gerais and Mato Grosso, and (ii) one is under construction, with estimated installed capacity of 20 MW, scheduled to start operations in 2013; ·33 subsidiaries involved in the generation of electric energy from wind sources, of which (i) eightare operational, with total installed capacity of 367.5 MW, located in the state of Ceará, and (ii) 25are under construction, with an estimated installed capacity of 670 MW, scheduled to start operations between 2012 and 2014; ·Seven subsidiaries involved in the generation of electric energy from biomass, of which (i) three are operational, with total installed capacity of 135 MW, located in the states of São Paulo and Rio Grande do Norte and (ii) four are under construction, with an estimated installed capacity of 195 MW, scheduled to start operations between 2012 and 2014. On August 27, 2010, our first sugarcane bagasse-powered plant started operations, through CPFL Bioenergia (Baldin energy generation plant) with 45 MW of capacity. CPFL Bio Formosa began operations on September 2, 2011, with capacity of 40 MW. CPFL Bio Buriti became operational on October 7, 2011 with capacity of 50 MW. We also owned 12 small hydroelectric power plants through CPFL Geração and certain of our distribution companies at December 31, 2011. Our total installed capacity from all of these facilities was 2,644 MW as of December 31, 2011.  Most of the electricity we produce comes from our hydroelectric plants.  We generated 9,638 GWh in 2011, 9,142 GWh in 2010 and 5,984 GWh in 2009.  6This number includes four wind farms from the Bons Ventos complex which acquisition is still subject to the approval of ANEEL and other contractual conditions. 27 Table of Contents We are currently involved in the construction of CPFL Bio Ipê, CPFL Bio Pedra, Alvorada and Coopcana co‑generation plants, Salto Góes small hydroelectric power plant and Santa Clara, Campo dos Ventos, Macacos I, São Benedito and Atlântica wind farms.  We expect to refurbish two small hydroelectric power plants in the state of Rio Grande do Sul in 2013.  Once these facilities are complete, we expect our share in the aggregate installed capacity of these projects will be 3,301 MW by the end of 2014.  The following table sets forth certain information relating to our principal facilities in operation as of December 31, 2011:   Holding company Partic. Capacity* (MW)   Assured energy* (GWh)   Placed in service Facility upgraded Concession expires Hydroelectric plants:     Our share TOTAL   Our share TOTAL         Serra da Mesa CPFL Geração 51,54% 657,1 1.275,0   3,029.5 5,878.0   1998   2028(1) Monte Claro CPFL Geração 65% 84,5 130,0   335.9 516.8   2004   2036 Barra Grande CPFL Geração 25,01% 172,6 690,0   833.9 3,334.1   2005   2036 Campos Novos CPFL Geração 48,72% 428,7 880,0   1.612.8 3,310.4   2007   2035 Castro Alves CPFL Geração 65% 84,5 130,0   364.4 560.6   2008   2036 14 de Julho CPFL Geração 65% 65,0 100,0   284.7 438.0   2008   2036   Luis Eduardo Magalhães   CPFL Jaguari Geração   6,93% 62,5   902,5   319.7   4,613.0   2001   2032   Foz do Chapecó CPFL Geração 51% 436,1   855,0   1,930.0 3,784.3   2010   2036 SUBTOTAL - Hydroelectric plants     1.991,0     8,710.9                                   Thermoelectric plants:                       Carioba CPFL Geração 100% 36,0 36,0   93.7 93.7   1954   2027 EPASA                       Termonordeste CPFL Geração 52,75% 90,1 170,8   572.1 1,084.5   2010   2042 Termoparaíba CPFL Geração 52,75% 90,1 170,8   572.1 1,084.5   2011   2042 SUBTOTAL - Thermoelectric plants     216,2     1,237.8                                   Renewable sources                       Small Hydroelectric Plants                       Cariobinha CPFL Geração 100% 1,3 1,3   - -   1936 (3) 2027 Salto do Pinhal CPFL Geração 100% 0,6 0,6   - -   1911 (3) 2027   Ponte do Silva CPFL Geração 100% 0,1 0,1   - -   1956   (4) Lavrinha CPFL Sul Paulista 100% 0,3 0,3   (5)     1947   (4) Macaco Branco CPFL Jaguari 100% 2,4 2,4   (5)     1911   2015 Pinheirinho CPFL Mococa 100% 0,6 0,6   (5)     1911   (4) Rio do Peixe I CPFL Leste Paulista 100% 3,1 3,1   (5)     1925   2015 Rio do Peixe II CPFL Leste Paulista 100% 15,0 15,0   (5)     1998   2015 Santa Alice CPFL Leste Paulista 100% 0,6 0,6   (5)     1907   (4) São José CPFL Sul Paulista 100% 0,8 0,8   (5)     1934   (4)   São Sebastião CPFL Mococa 100% 0,7 0,7   (5)     1925   (4)   Turvinho CPFL Sul Paulista 100% 0,8 0,8   (5)     1912   (4)                         Americana CPFL Renováveis 63,00% 18,9 30,0   49.6 78.8   1949 2002 2027 Andorinhas CPFL Renováveis 63,00% 0,3 0,5   2.5 4.0   1937 (2) (4) Buritis CPFL Renováveis 63,00% 0,5 0,8   5.0 7.9   1922   2027 Capão Preto CPFL Renováveis 63,00% 2,7 4,3   12.6 20.0   1911 2008 2027 Chibarro CPFL Renováveis 63,00% 1,6 2,6   9.3 14.8   1912 2008 2027 28 Table of Contents Dourados CPFL Renováveis 63,00% 6,8 10,8   42.8 68.0   1926 2002 2027 Eloy Chaves CPFL Renováveis 63,00% 12,0 19,0   67.3 106.9   1954 1993 2027 Esmeril CPFL Renováveis 63,00% 3,2 5,0   15.9 25.2   1912 2003 2027 Gavião Peixoto CPFL Renováveis 63,00% 3,0 4,8   21.1 33.5   1913 2007 2027 Guaporé CPFL Renováveis 63,00% 0,4 0,7   3.4 5.4   1950 (2) (4) Jaguari CPFL Renováveis 63,00% 7,4 11,8   49.6 78.8   1917 2002 2027 Lençóis CPFL Renováveis 63,00% 1,1 1,7   9.3 14.7   1917 1988 2027 Monjolinho CPFL Renováveis 63,00% 0,4 0,6   1.7 2.7   1893 2003 2027 Pinhal CPFL Renováveis 63,00% 4,3 6,8   20.4 32.4   1928 1993 2027 Pirapó CPFL Renováveis 63,00% 0,4 0,7   3.5 5.6   1952   (4) Saltinho CPFL Renováveis 63,00% 0,5 0,8   4.0 6.4   1950   (4) Salto Grande CPFL Renováveis 63,00% 2,9 4,6   15.0 23.8   1912 2003 2027 Socorro CPFL Renováveis 63,00% 0,6 1,0   3.3 5.3   1909 1994 2027 Santana CPFL Renováveis 63,00% 2,7 4,3   16.0 25.4   1951 2002 2027   Três Saltos CPFL Renováveis 63,00% 0,4   0,6   3.3   5.3   1928   2027 São Joaquim CPFL Renováveis 63,00% 5,1 8,1   31.1 49.3   1911 2002 2027   Diamante CPFL Renováveis 63,00% 2,6   4,2   9.8 15.5   2005   2019   Santa Luzia CPFL Renováveis 63,00% 18,0   28,5   99.3 157.7   2007   2037   Arvoredo CPFL Renováveis 63,00% 8,2   13,0   42.5 67.5   2010       Alto Irani CPFL Renováveis 63,00% 13,2   21,0   75.1 119.1   2008   2032   Plano Alto CPFL Renováveis 63,00% 10,1   16,0   56.3 89.4   2008   2032   Barra da Paciência CPFL Renováveis 63,00% 14,5   23,0   85.5 135.8   2011   2029   Cocais Grande CPFL Renováveis 63,00% 6,3   10,0   28.1 44.7   2009   2029   Corrente Grande CPFL Renováveis 63,00% 8,8   14,0   50.8 80.6   2010   2030   Ninho da Águia CPFL Renováveis 63,00% 6,3   10,0   32.6 51.7   2010   2029   Paiol CPFL Renováveis 63,00% 12,6   20,0   60.2 95.5   2010   2032   São Gonçalo CPFL Renováveis 63,00% 6,9   11,0   35.9 56.9   2010   2030   Varginha CPFL Renováveis 63,00% 5,7   9,0   29.3 46.4   2010   2029   Várzea Alegre CPFL Renováveis 63,00% 4,7   7,5   26.5 42.0   2011   2029 SUBTOTAL - Small Hydroelectric power plants   219,5 333,0 ## 1,018.7                                   Thermoelectric biomass plants:                       Baldin (CPFL Bioenergia) CPFL Renováveis 63,00% 28,4 45,0   70.8 112.4   2010   2039 Bio Buriti CPFL Renováveis 63,00% 31,5 50,0   115.9 184.0   2011   2040 Bio Formosa CPFL Renováveis 63,00% 25,2 40,0   88.3 140.2   2011   2032 SUBTOTAL - Thermoelectric biomass plants   85,1 135,0   275.0 436.5                                 Wind farm plants                       Praia Formosa CPFL Renováveis 63,00% 66,2 105,0   165.0 261.9   2009   2029 Icaraizinho CPFL Renováveis 63,00% 34,4 54,6   56.8 90.2   2009   2029 Choró CPFL Renováveis 63,00% 15,9 25,2   69.0 109.5   2009   2029 Paracuru CPFL Renováveis 63,00% 15,9 25,2   144.6 229.5   2008   2028 SUBTOTAL - Wind Farms     132,3 210,0   435.5 691.2                                 TOTAL (our share only)      2.644,1     11,677.9                                   (*)           Unaudited by our independent auditors. (1)           The concession for Serra da Mesa is held by Furnas.  We have a contractual right to 51.54% of the assured energy of this facility, under a 30-year rental agreement, expiring in 2028. (2)           Power plants that will be upgraded by 2013. (3)           Power plants that are not active. (4)           Hydroelectric projects with an installed capacity equal to or less than 1,000 kW that are registered with the regulatory authority and the administrator of power concessions, but do not require concession or authorization processes for operating. (5)           Power plants that currently do not have assured energy approved by the MME.  The energy that they produce is used by our distribution subsidiaries, reducing our energy purchases.  We have applied for the assignment of a total of 78.6 GWh per year of assured energy for these nine small hydroelectric power plants and are waiting for MME and ANEEL approval. 29 Table of Contents Hydroelectric plants Serra da Mesa.  Our largest hydroelectric facilityHydroelectric Facility in operation is the Serra da Mesa facility, which we acquired in 2001 from VBC,ESC (formerly VBC), one of our controlling shareholders.  Furnas began construction of the Serra da Mesa facility in 1985.  In 1994, construction was suspended due to a lack of resources, which led to a public bidding procedure in order to resume construction.  Serra da Mesa currently consists of three hydroelectric facilitiesHydroelectric Facilities located on the Tocantins River in the state of Goiás.  The Serra da Mesa facility began operations in 1998 and has an installed capacitya total Installed Capacity of 1,275 MW.  The concession for the Serra da Mesa facility is owned by Furnas, which is also the operator, and we own part of the facility.  Under Furnas’ rental agreement with us, which has a 30-year30‑year term commencing in 1998, we have the right to 51.54% of the assured energyAssured Energy of the Serra da Mesa facility until 2028 irrespective of the actual electricity produced by the facility, even if, during the term of the concession, there is an expropriation or forfeiture of the concession or the term of the concession expires.  We sell all of such electricity to Furnas under an electricity purchase contract that expires in March 2014 at a price that iswas adjusted annually based on the IGP-M.IGP‑M.  After the expiration of this electricity purchase arrangement with Furnas, we will retain,wich assures until 2028, the right to 51.54% of the assured energyAssured Energy of Serra da Mesa.  We will be allowedMesa and the terms of our agreement of our right to commercialize it in accordancesuch Energy are currently under discussion with regulations applicable at such time.Furnas.  Our share of the installed capacityInstalled Capacity and assured energyAssured Energy of the Serra da Mesa facility is 657 MW and 3,030 GWh/year, respectively.  On May 5, 2008,April 27, 2012, the MME published Ordinance No. 262, which extended the concession held by Furnas requested the renewal of the plant concession term for an additional 35 years.  On February 15, 2011, ANEEL forwarded Furna’s request to the Ministry of Mines and Energy, Ministério de Minas e Energia (“MME”), which approval is still pending.November 12, 2039. CERAN Complex.  We own a 65.0% interest in CERAN, a subsidiary that was granted a 35-year35‑year concession in March 2001 to construct, finance and operate the CERAN hydroelectric complex.  The other shareholders are CEEE (30.0%(with 30.0%) and Desenvix (5.0%(with 5.0%).  The CERAN hydroelectric complex consists of three hydroelectric plants:Hydroelectric Power Plants:  Monte Claro, Castro Alves and 14 de Julho.  The complex is located on the Antas River approximately 120 km north of Porto Alegre, near the city of Bento Gonçalves, in the state of Rio Grande do Sul.  The entire CERAN Complex has an installed capacityInstalled Capacity of 360 MW and estimated assured energyAssured Energy of 1,515.5 GWh per year, of which our share will beis 985.1 GWh/year.  We sell our participation in the assured energyAssured Energy of this complex to affiliates in our group.  These facilities are operated by CERAN, under CPFL Geração’s supervision. ·Monte Claro (CERAN Complex) (CERAN Complex).  In 2004,  Monte Claro’s first generating unit, which became operational with an installed capacityin 2004, has Installed Capacity of 65 MW and assured energy of 509.8 GWh a year, and in 2006, the second generating unit, which became operational within2006, also has an installed capacityInstalled Capacity of 65 MW, giving total Installed Capacity of 130 MW and assured energyAssured Energy of 7.0516.8 GWh per year. The plant has a total 28 Table of 130 MW in installed capacity and 516.8 GWh in assured energy per year.Contents ·Castro Alves (CERAN Complex) (CERAN Complex).  In March 2008, the first generation unit of the Castro Alves plantPower Plant became operational, with an installed capacitytotal Installed Capacity of 43.4 MW and annual assured energy of 353.0 GWh.MW.  In April 2008, the second generation unit became operational, with an installed capacityInstalled Capacity of 43.4 MW and annual assured energy of 207.6 GWh.  ThisMW.  In June 2008, this plant became fully operational in June 2008, with a(when the third generation unit started operations), giving total installed capacityInstalled Capacity of 130 MW and annual assured energyAssured Energy of 560.6 GWh. Castro Alves added 84.5 MW to our capacity and an annual assured energy of 364.4 GWh.GWh per year. 30· Table of Contents 14 de Julho (CERAN Complex) (CERAN Complex).  The first generation unit of the 14 de Julho plantPower Plant became operational in December 2008, and the second generation unit became fully operational in March 2009.  This plant has a total installed capacityInstalled Capacity of 100 MW and an annual assured energyAssured Energy of 438.0 GWh. 14 de Julho added 65 MW We are currently engaged in refurbishment of the CERAN complex.  We are installing equipment to assure the free flow of water in the three hydroelectric plants and therefore increase their availability.  In 2013, we completed refurbishment of the Monte Claro Hydroelectric Power Plant, and we expect to complete the remaining improvements in all CERAN facilities by the end of 2016.  In addition, we are currently discussing the possibility of transferring the Monte Claro substation to the Basic Network with ANEEL, which would eliminate its maintenance costs and our capacity and an annual assured energyresponsibility for operation of 284.7 GWh.the related substation. Barra Grande.  This facility became fully operational onin May 1, 2006 with a total installed capacityInstalled Capacity of 690 MW and total assured energyAssured Energy of 3,334.1 GWh per year.  CPFL Geração owns a 25.01% interest in this plant.  The other shareholders of the joint venture are Alcoa (42.18%), CBA (Companhia Brasileira de Alumínio) (15.00%), DME (Departamento Municipal de Eletricidade de Poços de Caldas) (8.82%), andCamargo Corrêa Cimentos S.A. (9.00%).  We sell our participation in the assured energyAssured Energy of this facility to affiliates in our group. Campos Novos.  We own a 48.72% interest in ENERCAN, a joint venture formed by a consortium of private and public sector companies that was granted a 35-year35‑year concession in May 2000 to construct, finance and operate the Campos Novos hydroelectric facility.Hydroelectric Facility.  The plant was constructed on the Canoas River in the state of Santa Catarina, and became fully operational onin May 1, 2007 with a total installed capacityInstalled Capacity of 880 MW and assured energyAssured Energy of 3,310.4 GWh per year, of which our interest is 1,612.9 GWh per year.  The other shareholders of ENERCAN are CBA (24.73%), Votorantim Metais Níqueis S.A. (20.04%) and CEEE (6.51%).  The plant is operated by ENERCAN under CPFL Geração’s supervision.  This plant increased our installed capacityInstalled Capacity by 428.8 MW.  We sell our participation in the assured energyAssured Energy of this joint venture to affiliates in our group. Foz do Chapecó.  We own a 51.0% interest in Chapecoense, a joint venture formed by a consortium of private and public sector companies that was granted a 35-year35‑year concession in November 2001 to construct, finance and operate the Foz do Chapecó hydroelectric facility.Hydroelectric Power Plant.  The remaining 49.0% interest in the joint venture is divided among Furnas, which holds a 40% interest, and CEEE, which holds a 9.0% interest.  The Foz do Chapecó hydroelectric plantHydroelectric Power Plant is located on the Uruguay River, on the border between the states of Santa Catarina and Rio Grande do Sul.  The first generating unit started commercial operations on October 14, 2010, the second one on November 23, 2010, the third one on December 30, 2010 and the fourth one on March 12, 2011.  The Foz do Chapecó hydroelectric plant has added 436.1Power Plant became fully operational in March 2011 with 855 MW to our installed capacity.of total Installed Capacity and Assured Energy of 3,784.3 GWh per year.  Of our 51% share in the assured energyAssured Energy of this project, we sell 40% to affiliates in our group and 11% through Agreements on Energy Commercialization in the Regulated Market (Contratos de Comercialização de Energia no Ambiente Regulado), or CCEARs.  In February 2012, we completed the installation of a lowering system in the Foz do Chapecó generating units.  Through this system, we helped the ONS control the reactive power in the region.  ANEEL will reimburse our investment in Foz do Chapecó in six years.  This may also allow us to increase our revenues, as we receive payments as the system is used.  In January 2013, at the request of ANEEL, we began the process of transferring the Foz do Chapecó substation and exclusive transmission lines to the Basic Network, thereby eliminating maintenance costs, responsibility for operation of these assets and reducing the transmission line energy loss factor (regulatory loss) from 1.61% to 0.29%, which resulted in a cost reduction of approximately R$8.4 million in 2013. Luis Eduardo Magalhães Power Plant.  We own a 6.93% interest in the Assured Energy from the Luis Eduardo Magalhães power plant,Power Plant, also known as UHE Lajeado.  The plant is located on the Tocantins river in the state of Tocantins, and became fully operational in November 2002 with a total installed capacityInstalled Capacity of 902.5 MW and assured energyAssured Energy of 4,613 GWh per year.  The plant was built by Investco S.A., a consortium comprised of LajeadoEnergia, EDP (Energias de Portugal), CEB (Companhia Energética de Brasília) and Paulista Lajeado (which we acquired in 2007).  We sell our participation in the assured energy 29 Table of this plant to affiliates in our group.Contents Thermoelectric power plantsPower Plants We hold authorizations to operate three thermoelectric power plants.Thermoelectric Power Plants.  Termonordeste, which commenced operations in December 2010, and Termoparaíba, which commenced operations in January 2011, are powered by fuel oil from the EPASA complex, with total installed capacityInstalled Capacity of 341.6 MW and assured energytotal Assured Energy of 2,169.0 GWh.  We own an aggregate 52.75% interest in Termonordeste and Termoparaíba.  The Termonordeste and Termoparaíba thermoelectric power plantsThermoelectric Power Plants are located in the city of João Pessoa, in the state of Paraíba.  The construction of these plants began in October 2009.  Termonordeste started commercial operations on December 24, 2010, and Termoparaíba on January 13, 2011.  The electricity offrom these power plants was sold in CCEARs, and part of this energy was bought by our own distributors. The Carioba facility has an installed capacityInstalled Capacity of 36 MW; however, it is outhas been officially deactivated since October 19, 2011 as provided for in Order No. 4,101 of commercial operations since February 19, 2011.  We have applied to terminate Carioba’sthe Carioba concession oncesince ANEEL reduced the subsidy associated with the Fuel Usage Quota Account (Conta de Consumo de Combustível), or the CCC account.Account.  ANEEL has recommended that the MME terminates Carioba’s concession.  The MME is currently analyzing ourthe request. Small Hydroelectric Power Plants We operate 46 small hydroelectric powerAt December 31, 2013, 12 of our 47 Small Hydroelectric Power Plants were under the management of two of our conventional generation subsidiaries, CPFL Geração and CPFL Centrais Geradoras.These 12 Small Hydroelectric Power Plants reported their results within the Conventional Generation segment.  They consist of two groups of facilities: ·Nine of these facilities were originally managed together with their associated distribution companies within our Distribution segment.  Law No. 12,783 of January 11, 2013 specified the conditions for the renewal of generation, transmission and distribution concessions obtained under articles 17, 19 or 22 of Law No. 9,074 of July 7, 1995.  Under Law No. 12.783, these concessions may be extended once, at the discretion of the Brazilian government, for up to 30 years, in order to ensure the continuity and efficiency of the services rendered and low tariffs.  In addition, Law No. 12,783 provided that holders of concessions that were due to expire in 2015, 2016 and 2017 could apply for early renewal in 2013, subject to certain conditions.  However, Resolution No. 521/12 published by ANEEL on December 14, 2012 established that the generation concessions to be renewed under Law No. 12,783 must be partitioned into separate operating entities where the Installed Capacity of the original concessionaire entity exceeded 1 MW.  On October 10, 2012, in anticipation of Law 12,783, we applied for early renewal of the concessions held by our distribution subsidiaries CPFL Santa Cruz, CPFL Jaguari, CPFL Mococa, CPFL Leste Paulista and CPFL Sul Paulista, which were originally granted in 1999 for a 16‑year term.  In application of the partition requirement under Resolution No. 521/12, we were required to separate the generation and distribution activities of three of the plants, Rio do Peixe I and II and Macaco Branco, whose generation facilities were transferred to CPFL Centrais Geradoras on August 29, 2013.  At that time, our Management decided for operational reasons to partition the generation and distribution activities of the remaining six facilities held by the five distribution subsidiaries (Santa Alice, Lavrinha, São José, Turvinho, Pinheirinho and São Sebastião), the generation facilities of which 34were also transferred to CPFL Centrais Geradoras. ·The remaining three facilities, Cariobinha, Salto do Pinhal and Ponte do Silva are owned by CPFL Energias Renováveis, threeheld by CPFL Geração and nine by some of our distribution companies.  Since 1988, we have been investingheld there since their concession contracts were signed. On December 4, 2012, the concessions of the Rio do Peixe I and II and Macaco Branco Small Hydroelectric Power Plants were renewed for 30 years under Law No. 12,783.  The renewal of these concessions was subject to the following conditions: (i)            The energy generated must be sold to all distribution companies in their renovation and automationBrazil according to increase their output.  The program principally involvesquotas defined by ANEEL (previously, energy was sold only to the replacement of existing turbines and upgrade of peripheral equipment and automated systems, as well as restoring infrastructure.  Through these initiatives, we hope to increase these plants’ assured energy and electricity production and reduce operational costs.related distribution subsidiary). 3130   Table of Contents (ii)           The concessionaire’s annual revenue is set by ANEEL, subject to tariff reviews (previously, the energy prices were defined contractually and adjusted according to the IPCA). (iii)          The assets that remained unamortized at the renewal date would be indemnified, and the indemnification payment would not be considered as annual revenue.  The remuneration relating to new assets or existing assets that were not indemnified would be considered as annual revenue.  Rio do Peixe I and II received a total of R$34.4 million in indemnification payments.  The assets of Macaco Branco had been fully amortized, and therefore generated no indemnification payment. The following table sets forth certain information relating to our principal conventional generation facilities in operation and the Small Hydroelectric Power Plants that reported their results within the Conventional Generation segment as of December 31, 2013:   Holding company Partic. Capacity (MW) Assured Energy (GWh) Placed in service Facility upgraded Concession expires       Our share TOTAL Our share TOTAL       Hydroelectric plants:                   Serra da Mesa CPFL Geração 51.54% 657.1 1,275.0 3,029.5 5,878.0 1998   2028(1) Monte Claro CPFL Geração 65% 84.5 130.0 335.9 516.8 2004   2036 Barra Grande CPFL Geração 25.01% 172.6 690.0 833.9 3,334.1 2005   2036 Campos Novos CPFL Geração 48.72% 428.7 880.0 1,612.8 3,310.4 2007   2035 Castro Alves CPFL Geração 65% 84.5 130.0 364.4 560.6 2008   2036 14 de Julho CPFL Geração 65% 65.0 100.0 284.7 438.0 2008   2036 Luis Eduardo Magalhães CPFL Jaguari de Geração 6.93% 62.5 902.5 319.7 4,613.0 2001   2032 Foz do Chapecó CPFL Geração 51% 436.1 855.0 1,930.0 3,784.3 2010   2036 SUBTOTAL ‑ Hydroelectric plants     1,991.0   8,710.9                             Thermoelectric plants:                   Carioba CPFL Geração 100% 36.0 36.0 93.7 93.7 1954   2027(2) EPASA                   Termonordeste CPFL Geração 52.75% 90.1 170.8 572.1 1,084.5 2010   2042 Termoparaíba CPFL Geração 52.75% 90.1 170.8 572.1 1,084.5 2011   2042 SUBTOTAL ‑ Thermoelectric plants     216.2   1,237.8                             Small Hydroelectric Plants                   Cariobinha CPFL Geração 100% 1.3 1.3 ‑       2027(2) Salto do Pinhal CPFL Geração 100% 0.6 0.6 ‑       2027(2)(3) Ponte do Silva CPFL Geração 100% 0.1 0.1 ‑       2027(2)(3) Lavrinha CPFL Centrais Geradoras 100% 0.3 0.3 (4)       (3) Macaco Branco CPFL Centrais Geradoras 100% 2.4 2.4 14.5       2042 Pinheirinho CPFL Centrais Geradoras 100% 0.6 0.6 (4)       (3) Rio do Peixe I CPFL Centrais Geradoras 100% 3.1 3.1 ‑       2042 Rio do Peixe II CPFL Centrais Geradoras 100% 15.0 15.0 46.9       2042 Santa Alice CPFL Centrais Geradoras 100% 0.6 0.6 (4)       (3) São José CPFL Centrais Geradoras 100% 0.8 0.8 (4)       (3) São Sebastião CPFL Centrais Geradoras 100% 0.7 0.7 (4)       (3) Turvinho CPFL Centrais Geradoras 100% 0.8 0.8 (4)       (3) SUBTOTAL – Small Hydroelectric Plants       26.3   61.4         TOTAL – Conventional Generation     2,233   10,010                             (1) The concession for Serra da Mesa is held by Furnas.  We have a contractual right to 51.54% of the Assured Energy of this facility, under a 30-year rental agreement. (2) Power plants which are not active. (3) Hydroelectric projects with an Installed Capacity equal to or less than 1,000 kW that are registered with the regulatory authority and the administrator of power concessions, but do not require concession or authorization processes for operating. (4) Power plants that currently do not have Assured Energy approved by the MME.  We have recently requested ANEEL and the MME approve the parameters of reference used to calculate the Assured Energy for these power plants; however, until the approval of Assured Energy at these plants is published, energy produced by these plants will be sold in the spot market. 31 Table of Contents Renewable Generation At December 31, 2013, through our subsidiary CPFL Geração, we owned a 58.84% interest in CPFL Renováveis, a company resulting from an association with ERSA, which holds our subsidiaries engaged in the generation of electricity from renewable sources.  Through CPFL Renováveis, in August 2011, we became the largest renewable energy generation group in Brazil in terms of Installed Capacity and capacity under construction, according to ANEEL.  We have fully consolidated CPFL Renováveis in our financial statements since August 1, 2011.  CPFL Renováveis carried out its initial public offering in July 2013, resulting in a decrease in our shareholding from 63% to 58.84%. CPFL Renováveis invests in independent renewable energy production sources with low environmental and social impact, such as Small Hydroelectric Power Plants, wind farms, biomass‑fueled thermoelectric plants and photovoltaic solar plants, focusing exclusively on the Brazilian market.  CPFL Renováveis has extensive experience in the development, acquisition, construction and operation of electricity generating plants using renewable energy sources.  CPFL Renováveis operates in the four main segments of the renewable energy generation industry in Brazil:  Small Hydroelectric Power Plants, wind farms, biomass‑fueled thermoelectric plants and photovoltaic solar plants.  CPFL Renováveis operates in eight Brazilian states and its business contributes to the local and regional economic and social development. At the date of this Annual Report, CPFL Renováveis consists of the generation entities described below. All Installed Capacity and Assured Energy numbers stated in the discussion below refer to the full capacity of the plant in question rather than our consolidated share of such energy, which reflects our interest in the plant. ·24 subsidiaries involved in the generation of electric energy through 35 Small Hydroelectric Power Plants in operation, with aggregate Installed Capacity of 326 MW, located in the states of São Paulo, Santa Catarina, Rio Grande do Sul, Minas Gerais and Mato Grosso. ·37 subsidiaries involved in the generation of electric energy from wind sources, of which (i) 22 farms, located in the states of Ceará, Rio Grande do Norte and Rio Grande do Sul, are operational or generating revenues and have aggregate Installed Capacity of 719 MW, and (ii) the remaining 15 farms are under construction, scheduled to commence operations between 2014 and 2018, and are expected to have aggregate Installed Capacity of approximately 383 MW.  ·Eight subsidiaries involved in the generation of electric energy from biomass, all of which are operational, with total Installed Capacity of 370 MW, located in the states of Minas Gerais, Paraná, São Paulo and Rio Grande do Norte.  On August 27, 2010, CPFL Bioenergia’s Baldin plant, our first sugarcane bagasse‑powered plant started operations, with 45 MW of total Installed Capacity.  CPFL Bio Formosa began operations on September 2, 2011, with total Installed Capacity of 40 MW.  CPFL Bio Buriti became operational on October 7, 2011 with total Installed Capacity of 50 MW.  Bio Ipê became operational on May 17, 2012 with total Installed Capacity of 25 MW.  Bio Pedra became operational on May 31, 2012 with total Installed Capacity of 70 MW.  On October 18, 2012, we completed the acquisition of the Ester Thermoelectric Power Plant, which has total Installed Capacity of 40 MW.  CPFL Bio Coopcana and CPFL Bio Alvorada, each with 50 MW of total Installed Capacity, began operations on August 28, 2013 and November 11, 2013, respectively. ·One subsidiary involved in the generation of electric energy from a solar power plant, Tanquinho which is located in the state of São Paulo and has total Installed Capacity of 1.1 MWp.  Tanquinho started operations on November 27, 2012 and is expected to generate approximately 1.6 GWh/year. Table of Contents   For instance,Existing Installed Capacity The following describes our existing and operational renewable generation plants: Small Hydroelectric Power Plants Small Hydroelectric Power Plants are plants with generation capacity between 1MW and 30MW and a reservoir area of up to three square kilometers.  A typical Small Hydroelectric Power Plant reservoir does not allow for a continuous water flow.  Without a continuous water flow, Small Hydroelectric Power Plants operate under a “trickle” system.  Frequently, Small Hydroelectric Power Plants experience idleness when the available water flow is less than the turbine capacity.  If flows are greater than the equipment’s capacity, water is “spilled”.  Small Hydroelectric Power Plants may participate in the MRE, and the amount of energy sold by the power plant depends solely on its certificate of guarantee and does not depend on its individual energy production.  Most Small Hydroelectric Power Plants are built on medium‑sized rivers with considerable depth variations, generating enough hydraulic energy to power small turbines.  CPFL Renováveis operates 35 of our 47 Small Hydroelectric Power Plants primarily under the concession regime and the authorization regime, all located in the state of São Paulo, Minas Gerais, Mato Grosso, Santa Catarina and Rio Grande do Sul. There have been various revisions to CPFL Renováveis’ Assured Energy, which were mainly reductions in Assured Energy primarily due to the modernization projects we carried out at Gavião Peixoto, Chibarro and Capão Preto, the MME approved new assured energy levels at these plants, which increased from 19.3 GWh per year to 33.5 GWh per year for Gavião Peixoto, from 6.1 GWh per year to 14.8 GWh per year for Chibarro and from 8.7 GWh per year to 19.9 GWh per year for Capão Preto.reductions in operational performance. The automation of these power plants allows us to carry out control, supervision and operations remotely.  WeSince CPFL Energia acquired the CPFL Renováveis renewable business, we have established an operational center for the management and monitoring of our power plants in Campinas, making it possible forthe city of São Paulo and in Fortaleza (in the state of Ceará).  We have also established an operational center to manage and monitor our wind farms, so that the entire production cycle of the power plants to beis now remotely controlled in real time. Through 2013 we expect to begin projects to refurbish two power plants:  Andorinhas and Guaporé. Biomass Thermoelectric Power Plants Biomass‑fueled thermoelectric plants are generators that use the combustion of organic matter for the production of energy.  This organic matter may include products such as sugar cane bagasse, vegetable coal, biogas, black liquor, rice husk and wood chips.  Energy fueled by biomass is renewable and pollutes less than other energy forms, such as those obtained from the use of fossil fuels (petroleum and mineral coal).  The construction period of biomass‑fueled thermoelectric plants is shorter than that of Small Hydroelectric Power Plants (from one to two years, on average).  The necessary investment per installed MW for the construction of a biomass‑fueled thermoelectric plant is proportionally lower than the investment for construction of a Small Hydroelectric Power Plant.  On the other hand, the operation of a biomass‑fueled thermoelectric plant is generally more complex, as it involves the acquisition, logistics and construction of organic matter used for power generation.  For this reason, the operational costs of biomass‑fueled thermoelectric plants tend to be higher than the operational costs of Small Hydroelectric Power Plants. Despite being more complex, biomass‑fueled thermoelectric plants benefit from:  (i) expedited environmental licensing; (ii) abundant fuel in Brazil, which may come from sub‑products of other activities (e.g. wood chips); and (iii) proximity to consumers, reducing transmission costs.  Fuel acquisition and logistics costs are significantly lower for biomass‑fueled thermoelectric plants compared to Thermoelectric Power Plants from non‑renewable sources.  Despite being eligible for the Clean Development Mechanism established by the Kyoto Protocol (Mecanismo de Desenvolvimento Limpo), or MDL, and having the potential to generate carbon credits, biomass‑fueled thermoelectric plants have encountered difficulties in obtaining approval for projects due to the methodology of the approval process.  CPFL Renováveis has been developing projects focusing on the open market. We currently have eight biomass‑fueled thermoelectric plants under the authorization regime, located in the states of São Paulo, Minas Gerais, Rio Grande do Norte and Paraná. CPFL Bioenergia.  In partnership with Baldin Bioenergia, we have constructed a co-generationco‑generation plant in the city of Pirassununga, in the state of São Paulo.  The total cost of the biomass thermoelectric power plant was R$104 million.  The construction beganPaulo, which became operational in October 2008 and commercial operations started on August 27, 2010.  This co-generationco‑generation plant has addedtotal Installed Capacity of 45.0 MW to our installed capacity.  AllMW.  The plant has an Assured Energy of 112.1 GWh and all of this electricity has been sold to CPFL Brasil. 33 Table of Contents CPFL Bio Formosa.  In 2009, CPFL Brasil established the Baia Formosa power plant (CPFL Bio Formosa), with an installed capacitytotal Installed Capacity of 40 MW.  The construction of CPFL Bio Formosa plant began operations in March 2010 and the plant began operations on September 2, 2011.   The total cost of construction was R$132 million.  In 2006, our consulting group helped the Farias Group to sell approximatelyApproximately 11 MW of energy were sold in the A-5 auction (an auction held five years before the initial delivery date, see “Auctions(see “—The Brazilian Power Industry—The New Industry Model Law —Auctions on the Regulated Market”), with CCEARs in force until 2025.  The success of the auction helped CPFL Brasil to establish Usina Baia Formosa (currently CPFL Bio Formosa) in 2009. CPFL Bio Buriti.  OnIn March 23, 2010, CPFL Bio Buriti (which was formed to develop electric energy generation projects using sugar cane bagasse) executed a partnership agreement with Grupo Pedra Agroindustrial to develop new biomass generation projects.  The construction of CPFL Bio Buriti began in March 2010 and the plant began operations onin October 7, 2011.  The installed capacitytotal Installed Capacity of this plant is 50 MW and the investment was R$148 million.MW.  CPFL Bio Buriti has an associated PPA of 184.1 GWh in force until 2030.2030 with CPFL Brasil. Wind Farms:   Praia Formosa:Praia Formosa wind farm, in the state of Ceará, began operations in August 26, 2009.  It has an installed capacity of 105 MW and an associated PPA in force until 2029. Icaraizinho:Icaraizinho wind farm, in the state of Ceará, began operations in October 14, 2009.  It has an installed capacity of 54.6 MW and an associated PPA in force until 2029. Foz do Rio Choró:Foz do Rio Choró wind farm, in the state of Ceará, began operations in January 31, 2009.  It has an installed capacity of 25.2 MW and an associated PPA in force until 2029. Paracuru:Paracuru wind farm, in the state of Ceará, began operations in November 29, 2008.  It has an installed capacity of 25.2 MW and an associated PPA in force until 2028. Taíba Albatroz: Taíba Albatroz wind farm, in the state of Ceará, has an installed capacity of 16.8 MW and an associated agreement with Eletrobrás under the Proinfa Program to sell all of the energy generated for a period of 20 years.  The acquisition of Taíba Albatroz wind farm is subject to ANEEL’s approval. Bons Ventos: Bons Ventos wind farm, in the state of Ceará, has an installed capacity of 50.4 MW and an associated agreement with Eletrobrás under the Proinfa Program to sell all of the energy generated for a period of 20 years.  The acquisition of Bons Ventos wind farm is subject to ANEEL’s approval. 32 Table of Contents Enacel: Enacel wind farm, in the state of Ceará, has an installed capacity of 31.5 MW and an associated agreement with Eletrobrás under the Proinfa Program to sell all of the energy generated for a period of 20 years.  The acquisition of Enacel wind farm is subject to ANEEL’s approval. Canoa Quebrada: Canoa Quebrada wind farm, in the state of Ceará, has an installed capacity of 58.8 MW and an associated agreement with Eletrobrás under the Proinfa Program to sell all of the energy generated for a period of 20 years.  The acquisition of Canoa Quebrada wind farm is subject to ANEEL’s approval. Expansion of Installed Capacity Demand for electricity in our distribution concession areas continues to grow.  To address this increase in demand, and to improve our margins, we are expanding our installed capacity.  Through our subsidiary CPFL Energias Renováveis, we are building CPFL Bio Ipê, CPFL Bio Pedra, Alvorada and Coopcana co-generation plants, Salto Góes small hydroelectric power plant and Santa Clara, Campo dos Ventos, Macacos I, São Benedito and Atlântica wind farms, which together will have an installed capacity of 885 MW (our share will be 558 MW).  By the end of 2014, we expect that the total generating capacity from these facilities will become fully operational. The following table sets forth information regarding our current generation projects as of the date of this annual report:   Estimated Installed Capacity* Estimated Assured Energy* Estimated Construction Cost Start of Construction Expected Start of Operations Our Ownership Estimated Installed Capacity Available* Estimated Assured Energy Available to us* Plants under development (MW) (GWh/yr) (R$ million)     (%)   (GWh/yr) Thermoelectric biomass                 CPFL Bio Ipê 25 71.7 29 December 2010 2012 63,00 16 45,2 CPFL Bio Pedra 70 213.9 226 September 2010 2012 63,00 44 134,8 Alvorada Thermoelectric plant 50 157.7 154 February 2012 2013 63,00 32 99,3 Coopcana Thermoelectric plant 50 157.7 153 February 2012 2013 63,00 32 99,3 Subtotal 195 601.0 562       123 378,6                   Hydroelectric power plant                 Salto Góes 20 97.2 135 November 2010 2013 63,00 13 61,3 Subtotal 20 97.2 135       13 61,3                   Wind Farms                 Santa Clara wind farms (7 companies) (1) 188 693.3 879 August 2010 2012 63,00 118 436,8 Campo dos Ventos II Wind Farm 30 131.8 143 2012 2013 63,00 19 83,0 Campo dos Ventos Wind Farms (5 companies) (2) 138 600.1 657 Awaiting approval of ANEEL 2014 63,00 87 378,0 Macacos I Wind Farms (4 companies)(3) 78 326.3 372 November 2010 2013 63,00 49 205,6 São Benedito Wind Farms (4 companies)(4) 116 530.9 504 2012 2014 63,00 73 334,4 Atlântica Wind Farms (4 companies)(5) 120 461.7 538 2012 2013 63,00 76 290,9 Subtotal 670 2,744.0 3093       422 1.728,7                   TOTAL 885 3,442.2 3790       558 2168,6 (*)           Unaudited by our independent auditors. (1)           Santa Clara I, II, III, IV, V and VI and Eurus VI. (2)           Campo dos Ventos I, III, IV, São Domingos and Ventos de São Martinho. (3)           Macacos, Pedra Preta, Costa Branca and Juremas. (4)           Ventos de São Benedito, Ventos de Santo Dimas, Santa Mônica and Santa Úrsula. (5)           Atlântica I, II, IV and V. 33 Table of Contents Biomass Thermoelectric power plants Project Bio Ipê.  OnIn March 23, 2010, CPFL Bio Ipê (which was formed to develop electric energy generation projects using sugar cane bagasse) executed a partnership agreement with Grupo Pedra Agroindustrial to develop new biomass generation projects.  The construction of CPFL Bio Ipê plant began operations in December 2010 and operations are scheduled to start in the first half ofMay 2012.  The installed capacitytotal Installed Capacity of this plant is expected to be of 25 MW and the investment is approximately R$29 million.MW.  This project has an associated PPA of 71.7 GWh in force until 2030.2030 and the energy has been entirely sold to CPFL Brasil. ProjectCPFL Bio Pedra.  OnIn March 23, 2010, CPFL Bio Pedra (which we formed to develop electric energy generation projects using sugar cane bagasse) executed a partnership agreement with Grupo Pedra Agroindustrial to develop new biomass generation projects.  The installed capacityBio Pedra started operations in May 2012 with total Installed Capacity of this project is expected to be 70 MW and the investment is approximately R$226 million.  Operations are scheduled to start in the first halfAssured Energy of 2012.213.7 GWh.  The electricity from Bio Pedra has been sold through an auction held in 2010, with CCEARs in force until 2027. Project Alvorada. The construction of CPFL Bio Alvorada will begin inEster.  In October 2012, CPFL Renováveis completed the acquisition of the electrical energy and steam co‑generation assets of SPE Lacenas Participações Ltda., which controlled the Ester Thermoelectric Power Plant, located in the citymunicipality of Araporã,Cosmópolis in the state of Minas Gerais, and operations are scheduled to startSão Paulo.  Around 7 MW average of co‑generation energy from theEster Thermoelectric Power Plant was commercialized in the first half2007 alternative energy sources auction, for a period of 2013.15 years and at an average selling price of R$192.00 per MWh (as at December 31, 2013).  The installed capacityremaining 2.8 MW of CPFL Bio Alvorada is expected to be 50 MW and assured energy is 157,7 GWh.  The investment is approximately R$154 million.  This project has an associated PPA in force until 2032.was sold on the free market for 21 years. ProjectCPFL Coopcana.The construction of CPFL BioUTE Coopcana will beginbegan in 2012 in the city of São Carlos do Avaí, in the state of Paraná, and operations are scheduled to start in the first halfstarted on August 28, 2013.The total Installed Capacity of 2013. The installed capacity of CPFL BioUTE Alvorada is expected to beof 50 MW and assured energyAssured Energy is 157,7 MWh.  The investment is approximately R$153 million.  This project has an associated PPA in force until 2033. Small hydroelectric power plant Project Salto Góes.The construction of Salto Góes small hydroelectric power plant began in November 2010 in the city of Tangará, in the state of Santa Catarina, and operations are scheduled to start in the first half of 2013. The installed capacity of Salto Góes is expected to be 20 MW and the investment is approximately R$135 million.  The electricity from Salto Góes has been sold through an auction of alternative sources held in 2010, with CCEARs in force until 2042. Wind Farms Project Santa Clara Wind Farms.  During 2009, CPFL Geração developed and planned a number of wind power generation projects and, in September 2009, acquired a complex of additional wind farms.  The Santa Clara wind farms I, II, III, IV, V, VI and Eurus VI will have aggregate installed capacity of 188 MW and aggregate assured energy of 693.3 GWh.  The construction of the wind farms has already started, and operations are scheduled to start in the second half of 2012.  The total estimated cost of construction is R$879 million. The electricity from these wind farms have been sold through an auction held in 2009, with CCEARs in force until 2032. Project Campo dos Ventos Wind Farms.  In 2010, CPFL Geração acquired Campo dos Ventos I, III, V, São Domingos and Ventos do São Martinho wind farms7.The total estimated cost of construction of these five wind farms is R$657 million, and operations are scheduled to start in the second half of 2014.  They will have installed capacity of 138 MW and assured energy of 600.1157.7 GWh.  This project has an associated PPA in force until 2033.2033 with CPFL Brasil. Project CPFL Alvorada. The UTE Alvorada plantis locatedin the city of Araporã, in the state of Minas Gerais, began operations in November 2013.  The total Installed Capacity of UTE Alvorada is 50 MW and Assured Energy is 158.6 GWh.  This project has an associated PPA in force until 2032 with CPFL Brasil. Solar Power Plant Tanquinho.  The Tanquinho solar power plant, in the state of São Paulo, started operations in November 2012, with total Installed Capacity of 1.1 MWp.  We expect Tanquinho to generate approximately 1.6 GWh per year. Wind Farms Wind power is derived from the force of the wind passing over the blades of a wind turbine, causing the turbine to spin.  The amount of mechanical power that is transferred and the potential of electricity to be produced are directly related to the density of the air, the area covered by the blades of the wind turbine and the wind speed and height of each wind turbine. The construction of a wind farm is less complex than the construction of Small Hydroelectric Power Plants, consisting of the preparation of the foundation and installation of wind turbines, which are assembled on site by the suppliers.  The construction period of a wind farm is shorter than that of a Small Hydroelectric Power Plant, ranging from 18 months to two years, on average, and the investment per installed MW for the construction of a wind farm is proportionally lower than the investment for construction of a Small Hydroelectric Power Plant.  In contrast, theoperation may be more complex and there are more risks associated with the variability of winds, especially in Brazil, where there is little history of wind measurement. 34 Table of Contents Certain regions of Brazil are more favorable in terms of wind speed, with higher average speeds and lower volatility as measured by speed variation, allowing for more predictability in the volume of wind energy to be produced.  Wind farms operate in a complementary manner with hydroelectric plants, since wind speed is usually higher in drought periods and it is therefore possible to preserve water from reservoirs in scarce rain periods.  The complementary operation of wind farms and Small Hydroelectric Power Plants should allow us to “stock up” on electric power in the Small Hydroelectric Power Plants’ reservoirs during period of high wind power generation.  Estimates of the 2001 Wind Potential Atlas (Atlas do Potencial Eólico) (the latest study on the subject) indicate a wind energy potential of 143 GW in Brazil, a volume that greatly exceeds the country’s current total Installed Capacity of 3.4 GW as of December 31, 2013, signaling a high growth potential in this segment.  Wind farms are also eligible for MDL and have the potential to generate carbon credits for sale. We currently have 22 wind farms under the authorization regime, located in Ceará, Rio Grande do Norte and Rio Grande do Sul. Praia Formosa: Praia Formosa Wind Farm, in the state of Ceará, began operations in August 2009.  It has an Installed Capacity of 105 MW and an associated agreement with Eletrobras under the Proinfa Program to sell all of the energy generated for a period of 20 years.  The PPA is in force until August 2029. Icaraizinho: Icaraizinho Wind Farm, in the state of Ceará, began operations in October 2009.  It has an Installed Capacity of 54.6 MW and an associated agreement with Eletrobras under the Proinfa Program to sell all of the energy generated for a period of 20 years.  The PPA is in force until October 2029. Foz do Rio Choró: Foz do Rio Choró Wind Farm, in the state of Ceará, began operations in January 2009.  It has an Installed Capacity of 25.2 MW and an associated agreement with Eletrobras under the Proinfa Program to sell all of the energy generated for a period of 20 years.  The PPA is in force until June 2029. Paracuru: Paracuru Wind Farm, in the state of Ceará, began operations in November 29, 2008.  It has an Installed Capacity of 25.2 MW and an associated PPA in force until November 2028. Taíba Albatroz: Taíba Albatroz Wind Farm, in the state of Ceará, has an Installed Capacity of 16.8 MW and an associated agreement with Eletrobras under the Proinfa Program to sell all of the energy generated for a period of 20 years.  The acquisition of Taíba Albatroz Wind Farm was concluded in June 2012. Bons Ventos: Bons Ventos Wind Farm, in the state of Ceará, has an Installed Capacity of 50.4 MW and an associated agreement with Eletrobras under the Proinfa Program to sell all of the energy generated for a period of 20 years.  The acquisition of Bons Ventos Wind Farm was concluded in June 2012.  Canoa Quebrada: Canoa Quebrada Wind Farm, in the state of Ceará, has an Installed Capacity of 58.8 MW and an associated agreement with Eletrobras under the Proinfa Program to sell all of the energy generated for a period of 20 years.  The acquisition of Canoa Quebrada Wind Farm was concluded in June 2012. Enacel: Enacel Wind Farm, in the state of Ceará, has an Installed Capacity of 31.5 MW and an associated agreement with Eletrobras under the Proinfa Program to sell all of the energy generated for a period of 20 years.  The acquisition of Enacel Wind Farm was concluded in June 2012. Santa Clara Complex: Santa Clara Complex, in the state of Rio Grande do Norte, comprises seven wind farms with an Installed Capacity of 188 MW and an associated CCEAR in force until June 2032.  The Santa Clara wind farms sold their energy through the 2009 Reserve Energy Auction.  Although construction of the transmission line is not yet complete, these wind farms are ready to start generating energy and have therefore been receiving revenues since July 2012, since the PPAs included in Brazilian power auctions are required to provide that the generation entity will be paid if it meets its obligations on time, even if transmission has not been provided. Campo dos Ventos II Wind Farm.In 2010, CPFL Geração acquired Campo dos Ventos II wind farm.  Construction of Campo dos Ventos IIWind Farm (CPFL Renováveis currently holds this investment) in the cities of João Câmara and Parazinho, in the state of RioGrande do Norte, iswhich began operations in progress.  Operations are scheduled to start in the second half ofSeptember 2013.  The total estimated cost of construction is R$143 million.  This wind farm will havehas an installed capacityInstalled Capacity of 30 MW and assured energyAssured Energy of 131.8131.4 GWh.  The electricity from Campo dos Ventos II has been sold through an auction held in 2010, with PPAs in force until August 2033. Although construction of the transmission line is not yet complete, these wind farms are ready to start generating energy and have therefore been receiving revenues since September 2013, as described previously on“Overview”. 35 Table of Contents Rosa dos Ventos Wind Farm.  In June 2013, CPFL Renováveis acquired Rosa dos Ventos Wind Farm, located in the state of Ceará.  This wind farm has an Installed Capacity of 13.7 MW and the electricity produced by Rosa dos Ventos is subject to an agreement with Eletrobras under the Proinfa Program. Atlântica. The Atlântica Complex consists of the Atlântica I, II, IV and V Wind Farms.   Certain of this complex’s units began operations in 2013, and full operations at the complex began on March 22, 2014.  The Complex has   an aggregate Installed Capacity of 120 MW and aggregate Assured Energy of 461.7 GWh.    The electricity from these wind farms has been sold through an alternative energy auction held in 2010, with CCEARs in force until 2033. The following table sets forth certain information relating to our principal renewable facilities in operation as of December 31, 2013:    Holding company Partic. Capacity (MW) Assured Energy (GWh) Placed in service Facility upgraded Concession expires       Our share TOTAL Our share TOTAL       Small Hydroelectric plants:                   Americana CPFL Renováveis 58.84% 17.7 30.0 41.8 71.0 1949 2002 2027 Andorinhas CPFL Renováveis 58.84% 0.3 0.5 2.2 3.7 1940   (1) (3) Buritis CPFL Renováveis 58.84% 0.5 0.8 1.8 3.1 1922   2027 (2) Capão Preto CPFL Renováveis 58.84% 2.5 4.3 11.8 20.0 1911 2008 2027 Chibarro CPFL Renováveis 58.84% 1.5 2.6 8.3 14.1 1912 2008 2027 Dourados CPFL Renováveis 58.84% 6.4 10.8 36.0 61.2 1926 2002 2027 Eloy Chaves CPFL Renováveis 58.84% 11.1 18.8 59.7 101.5 1954 1993 2027 Esmeril CPFL Renováveis 58.84% 2.9 5.0 14.8 25.2 1912 2003 2027 Gavião Peixoto CPFL Renováveis 58.84% 2.8 4.8 18.7 31.7 1913 2007 2027 Guaporé CPFL Renováveis 58.84% 0.4 0.7 2.9 4.9 1950   (1) (3) Jaguari CPFL Renováveis 58.84% 6.9 11.8 23.2 39.4 1917 2002 2027 Lençóis CPFL Renováveis 58.84% 1.0 1.7 5.4 9.1 1917 1988 2027 Monjolinho CPFL Renováveis 58.84% 0.4 0.6 0.6 1.0 1893 2003 2027 Pinhal CPFL Renováveis 58.84% 4.0 6.8 19.1 32.4 1928 1993 2027 Pirapó CPFL Renováveis 58.84% 0.5 0.8 3.0 5.1 1952   (3) Saltinho CPFL Renováveis 58.84% 0.5 0.8 3.8 6.4 1950   (3) Salto Grande CPFL Renováveis 58.84% 2.7 4.6 13.3 22.6 1912 2003 2027 Socorro CPFL Renováveis 58.84% 0.6 1.0 1.5 2.5 1909 1994 2027 (2) Santana CPFL Renováveis 58.84% 2.5 4.3 13.5 23.0 1951 2002 2027 Três Saltos CPFL Renováveis 58.84% 0.4 0.6 2.8 4.7 1928   2027 (2) São Joaquim CPFL Renováveis 58.84% 4.8 8.1 26.1 44.4 1911 2002 2027 Diamante CPFL Renováveis 58.84% 2.5 4.2 8.2 14.0 2005   2019 Santa Luzia CPFL Renováveis 58.84% 16.8 28.5 94.9 161.4 2007   2037 Arvoredo CPFL Renováveis 58.84% 7.6 13.0 40.0 68.1 2010   2037 Alto Irani CPFL Renováveis 58.84% 12.4 21.0 70.6 120.0 2008   2032 Plano Alto CPFL Renováveis 58.84% 9.4 16.0 52.9 90.0 2008   2032 Barra da Paciência CPFL Renováveis 58.84% 13.5 23.0 76.7 130.4 2011   2029 Cocais Grande CPFL Renováveis 58.84% 5.9 10.0 26.4 44.9 2009   2029 Corrente Grande CPFL Renováveis 58.84% 8.2 14.0 44.0 74.7 2011   2030 Ninho da Águia CPFL Renováveis 58.84% 5.9 10.0 33.5 56.9 2011   2029 Paiol CPFL Renováveis 58.84% 11.8 20.0 56.8 96.5 2010   2032 São Gonçalo CPFL Renováveis 58.84% 6.5 11.0 39.2 66.6 2010   2030 Varginha CPFL Renováveis 58.84% 5.3 9.0 27.8 47.2 2010   2029 Várzea Alegre CPFL Renováveis 58.84% 4.4 7.5 25.2 42.7 2011   2029 Salto Góes CPFL Renováveis 58.84% 11.8 20.0 57.2 97.2 2012   2043 SUBTOTAL ‑ Small Hydroelectric Power Plants (our share)     192   964                             Thermoelectric biomass plants:                   Baldin (CPFL Bioenergia) CPFL Renováveis 58.84% 26.5 45.0 66.0 112.1 2010   2039 Bio Buriti CPFL Renováveis 58.84% 29.4 50.0 108.3 184.1 2011   2040 Bio Formosa CPFL Renováveis 58.84% 23.5 40.0 56.7 96.4 2011   2032 Bio Ipê CPFL Renováveis 58.84% 14.7 25.0 42.2 71.7 2012   2041 Bio Pedra CPFL Renováveis 58.84% 41.2 70.0 125.8 213.7 2012   2047 Bio Ester CPFL Renováveis 58.84% 23.5 40.0 52.6 89.4 2010   2045 Bio Alvorada CPFL Renováveis 58.84% 29.4 50.0 93.3 158.6 2013   2042 Bio Coopcana CPFL Renováveis 58.84% 29.4 50.0 92.8 157.7 2013   2042 SUBTOTAL ‑ Thermoelectric biomass plants (our share)     217   638                             Wind farm plants                   Praia Formosa CPFL Renováveis 58.84% 61.8 105.0 148.6 252.6 2009   2033 Icaraizinho CPFL Renováveis 58.84% 32.1 54.6 113.8 193.4 2009   2033 Choró CPFL Renováveis 58.84% 14.8 25.2 38.0 64.6 2009   2033 Paracuru CPFL Renováveis 58.84% 14.8 25.2 64.8 110.2 2008   2036 Taiba CPFL Renováveis 58.84% 9.9 16.8 34.6 58.8 2008   2032 Bons Ventos CPFL Renováveis 58.84% 29.7 50.4 84.4 143.4 2010   2033 Canoa Quebrada CPFL Renováveis 58.84% 34.6 58.8 124.1 210.9 2010   2032 Enacel CPFL Renováveis 58.84% 18.5 31.5 52.7 89.6 2010   2032 Santa Clara I CPFL Renováveis 58.84% 17.7 30.0 70.6 120.0 2011   2045 Santa Clara II CPFL Renováveis 58.84% 17.7 30.0 65.5 111.3 2011   2045 Santa Clara III CPFL Renováveis 58.84% 17.7 30.0 64.4 109.5 2011   2045 Santa Clara IV CPFL Renováveis 58.84% 17.7 30.0 63.4 107.7 2011   2045 Santa Clara V CPFL Renováveis 58.84% 17.7 30.0 63.9 108.6 2011   2045 Santa Clara VI CPFL Renováveis 58.84% 17.7 30.0 62.9 106.9 2011   2045 Eurus VI CPFL Renováveis 58.84% 4.7 8.0 16.0 27.2 2011   2045 Campo dos Ventos II CPFL Renováveis 58.84% 17.7 30.0 77.3 131.4 2013   2045 SUBTOTAL ‑ Wind farms (our share)     344   1,145                             Solar power plant                   Tanquinho CPFL Renováveis 58.84% 0.6 1.1 1.0 1.66 2012   - SUBTOTAL – Solar power plant (our share)     0.6   1.0                             TOTAL (our share only)      755   2,748                             (1) Power plants which are not active. (2) Hydroelectric projects with an Installed Capacity equal to or less than 1,000 kW that are registered with the regulatory authority and the administrator of power concessions, but do not require concession or authorization processes for operating. (3) Power plants that currently do not have Assured Energy approved by the MME.  We have recently requested ANEEL and the MME approve the parameters of reference used to calculate the Assured Energy for these power plants; however, until the approval of Assured Energy at these plants is published, energy produced by these plants will be sold in the spot market. 36 7Please note thatTable of Contents Expansion of Installed Capacity Demand for electricity in our distribution concession areas continues to grow.  To address this increase in demand, and to improve our margins, we are expanding our Installed Capacity in renewable generation.  CPFL Renováveis is constructing the Macacos I, São Benedito, Campo dos Ventos IV and Eurus V wind farms,Pedra Cheirosa Wind Farm Complexes, which we mentioned inare expected to have an aggregate Installed Capacity of383 MW (of which our 2010 annual report, have been deactivated due to technical reasons,consolidated share will be225 MW).  We expect that the total generating capacity from these facilities will become fully operational by the end of 2018.   The following table sets forth information regarding these renewable generation construction projects: Plants under development Estimated Installed Capacity Estimated Assured Energy Start of Construction Expected Start of Operations Our Ownership Estimated Installed Capacity Available Estimated Assured Energy Available to us   (MW) (GWh/yr)     (%)   (GWh/yr) Wind Farms               Macacos I Wind Farms (4 companies)(1) 78 328.5 2010 2014 58.84 46 193.3 São Benedito Wind Farms (6 companies)(2) 172 779.6 2012 2016 58.84 101 458.7 Campo dos Ventos Wind Farms (3 companies)(3) 82 352.2 2012 2016 58.84 48 207.2 Pedra Cheirosa Wind Farms (2 companies)(4) 51 228.6 2016 2018 58.84 30 134.4 TOTAL 383 1,688.9       225 993.8 (1) Macacos, Pedra Preta, Costa Branca and have been replaced withJuremas. (2) Ventos de São Benedito, Ventos de Santo Dimas, Santa Mônica, Santa Úrsula, São Domingos and Ventos dode São Martinho wind farms.Martinho. (3)Campo dos Ventos I, III, V. (4) Pedra Cheirosa I and II.  34 37   Table of Contents   Project Macacos I Wind Farms.  The Macacos I complex is compriseComplex consists of bythe Macacos, Pedra Preta, Costa Branca and Juremas wind farms,Wind Farms, which willare expected to have an aggregate installed capacityInstalled Capacity of 78 MW and aggregate assured energyAssured Energy of 326.3328.5 GWh.  The construction of these wind farms has already started and operations are scheduled to commence in thesecond halfquarter of 2013.  The total estimated cost of construction is R$372 million.2014.  The electricity from these wind farms has been sold through an auction of alternative sourcesenergy auction held in 2010, with CCEARs starting in 2014 and in force until 2032.2034. Project São Benedito Wind Farms.Benedito. The São Benedito complex is comprisedComplex consists of the Ventos de São Benedito, Ventos de Santo Dimas, Santa Mônica, São Domingos, Ventos do São Martinho and Santa Úrsula wind farms,Wind Farms, which willare expected to have an aggregate installed capacityInstalled Capacity of 116172 MW and aggregate assured energyAssured Energy of 530.9779.6 GWh.  The total estimated costSão Domingos and Ventos de São Martinho Wind Farms, previously part of construction of these wind farms is R$504 million, and operations are scheduledthe Campo dos Ventos Complex, were allocated to startthe São Benedito Complex in the second half of 2014.  This project has an associated PPA in force until 2034. Project Atlântica Wind Farms.The Atlântica complex is comprised of Atlântica I, II, IV and V wind farms, which will have an aggregate installed capacity of 120 MW and aggregate assured energy of 461.7 GWh.order to increase synergies.  Operations are scheduled to start in the second half of 2013.2016.  This project has a PPA in force until 2034. Campo dos Ventos.  The total estimated costCampo dos Ventos I, III and V Wind Farm projects were acquired by CPFL Geração in 2010.  Operations are scheduled to start in the first half of construction of these2016.  The wind farms is R$538 million. The electricity from these wind farmswill have Installed Capacity of 82 MW and Assured Energy of 352.2 GWh.  This project has been sold through an auction of alternative sources held in 2010, with CCEARsa PPA in force until 2033. Pedra Cheirosa. The Pedra Cheirosa Complex is comprised of the Pedra Cheirosa I e Pedra Cheirosa II Wind Farms, which will have an aggregate Installed Capacity of 51.3 MW and aggregate Assured Energy of 228.6 GWh.  The contracts arising from this trade shall be executed with the electric energy distributors that stated themselves to be energy buyers at that auction. The duration of these contracts shall be 20 years, and the start of energy supply shall take place on January 01, 2018. The batches were sold at the average price of R$ 125.04 per MWh, with annual adjustments by the IPCA. Electricity Commercialization, Services and ServicesOther Commercialization Operations Our subsidiary CPFL Brasil carries out our electricity commercialization operations.  Its key functions are: ·        procuring electricity for commercialization activities by entering into bilateral contracts with energy companies (including our generation subsidiaries and third parties) and purchasing electricity in public auctions; ·        reselling electricity to Free Consumers; and ·        reselling electricity to distribution companies (including CPFL Paulista, CPFL Piratininga and RGE) and other agents in the electricity market through bilateral contracts.contracts; and ·providing agency services to Free Consumers and Power Generators before the CCEE and other agents, such as guidance on their operational requirements. The rates at which CPFL Brasil purchases and sells electricity in the free marketFree Market are determined by bilateral negotiations with its suppliers and consumers.  The contracts with distribution companies are regulated by ANEEL.  In addition to marketing electricity to unaffiliated parties, CPFL Brasil resells electricity to CPFL Paulista, CPFL Piratininga and RGE, but profit margins from sales to related parties have been limited by ANEEL regulations.  Prior to the New Industry Model Law, distribution companies were permitted to purchase up to 30.0% of their electricity requirements from affiliated companies.  The ability to sell electricity to affiliated companies has been eliminated under the New Industry Model Law, with the exception of those contracts approved by ANEEL prior to March 2004.  However, we are allowed to sell electricity to distributors through the open bidding process in the regulated market.Regulated Market. 38 Table of Contents Services Through CPFL Brasil,Serviços, we provide agency services to Free Consumers before the CCEE and other agents, such as guidance on their operational requirements.  We also offer our consumers a wide range of electricity-related services through CPFL Brasil and CPFL Serviços.electricity‑related services.  These services are designed to help consumers improve the efficiency, cost and reliability of the electric equipment they use.  Our main electricity-relatedelectricity‑related services include: ·        Electric network maintenance:CPFL Serviçosoffers maintenance services on medium- and high-voltage networks on one-time or periodic basis with rapid diagnosis and precise service.  We also perform remodels on our sub-stations, maintenance services on generating units and work on live-wire networks. 35 Table of Contents  ·Distribution networks:CPFL Serviços plans and constructs all electric energy distribution system network, including above and underground electricity grids, medium-voltage sub-stations and transformers, industrial plants and lighting solutions.  Our experience in the market and familiarity with norms in different regions of Brazil allow us to respect the relevant standards in all parts of the country.  As a result, we are able to bring quality and technologically-advanced energy to our consumption points. ·Transmission networks:  CPFL Serviços plans, constructs, commissions and provides electricity to substations and transmission lines always in line with each consumer’s needs and growth expectations and in accordance with the most rigorous safety criteria, aiming for an optimal use of resources. ·        Self-productionDistribution networks:CPFL Serviços plans and constructs electric energy distribution system networks, including above‑ and underground electricity grids, medium‑voltage sub‑stations and transformers, industrial plants and lighting solutions.  We have significant experience in the market and familiarity with the various technical standards applicable in different regions of Brazil.  As a result, we are able to bring quality and technologically‑advanced energy solutions. ·Electric network maintenance: CPFL Serviçosoffers maintenance services on medium‑ and high‑voltage networks on one‑time or periodic basis with rapid diagnosis and precise service.  We also perform renovation of sub‑stations, maintenance services for generating units and work on live‑wire networks. ·Self‑production networks: The self-productionself‑production networks offered by CPFL Brasil are made upServiços consist of electric energy production alternatives.  They ensure supply of energy to consumers, diversify inputs and reduce costs.  We have generators (dieseloffer diesel and natural gas) thatgas generators that operate only in peak periods, which reducesreduce our customers’ electricity costs of our customers.costs.  Our co-generationnatural gas co‑generation activities (natural gas) include the simultaneous and sequential production of electric and thermoelectric energy using a single kind of fuel.fuel type.  We also offer solutions in acclimatization and energy-efficiencyenergy‑efficiency projects, as well as distributed generation of solar energy. ·        Equipment recovery:CPFL Serviços has experience in refurbishing electric assets in any state in order to restore their efficiency.  Our familiarity with refurbishing equipment also allowallows us to produce distribution and high-powerhigh‑power transformers.  In addition, we self-produceself‑produce and fabricate measurement panels, as well as panels for protection and command networks. ·CPFL Atende: CPFL Atende is a contact center and customer relationship company, created to provide services both for companies within our group and for other companies.  Among these services are face‑to‑face service, back office services, credit recovery, toll free customer support, ombudsman services, service desks and sales. ·CPFL Total: CPFL Total is a collections and onlending company that offers bill payment services for water, electric power, telephone, bank and cable television bills.  CPFL is also equipped to issue back copies of electric power bills, change billing preferences and top up prepaid cellphone cards.  CPFL Total also provides the “Serviço em Conta���, which enables us to charge business customers for additional products and services through their electricity bills. ·CPFL Nect: CPFL Nect is a company created to provide administrative services such as human resources, materials purchasing and logistics, maintenance and operation of IT systems and administrative infrastructure for the companies within our group.  CPFL Nect aims to standardize processes and achieve productivity gains. Competition We face competition from other generation and commercialization companies in the sale of electricity to Free Consumers.  Distribution and transmissionTransmission companies are required to permit the use of their lines and ancillary facilities for the distribution and transmission of electricity by other parties upon payment of a tariff. 39 Table of Contents Brazilian law providesand our concession agreements provide that all of our distribution and hydroelectric concessions or authorizations can be renewed once with approval from the MME or ANEEL as the granting authority, provided that the concessionaire so requests and that certain requirements related to the rendering of public services or hydropower exploitation are met.  We intend to apply for the extension of each concession upon its expiration.  We may face significant competition from third parties in bidding for renewal of such concessions or for any new concessions.  ANEELThe Brazilian government has absolute discretion over whether to renew existing concessions, and the acquisition of certain concessions by competing investors could adversely affect our results of operations. Our Concessions and Authorizations Hydroelectric generation projects with a capacity greater than 1,000 kW operated by an independent producerIndependent Power Producer can usually only be implemented through concessions granted by ANEEL through public biddings (and the execution of a concession agreement).  Requests to renew these concessions are examined by ANEEL on a case‑by‑case basis, according to the terms of the related agreement and public bidding note.  However, ANEEL retains the power to deny the request to extend the concession period. Certain projects such as wind farms, small scale hydroelectric power plantsHydroelectric Power Plants and thermoelectric power plantsThermoelectric Power Plants are implemented through an authorization awarded by the granting authority without the need for a public bidding process (unlike concessions).  Renewal of these authorizations is also at the discretion of ANEEL and is decided on a case-by-casecase‑by‑case basis.  ANEEL must provide justification for its decisions and any renewal must foster the public interest. For further information about concessions and authorizations, see “The Brazilian Power Industry – Concessions.”Industry—Concessions”. 36 Table of Contents Concessions We operate under concessions granted by the Brazilian government through ANEEL for our generation, transmission and distribution businesses.  We have the following concessions with respect to our distribution and transmission business: Concession no. Concessionaire State Term 014/1997 CPFL Paulista São Paulo 30 years from November 1997 09/2002 CPFL Piratininga São Paulo 30 years from October 1998 013/1997 RGE Rio Grande do Sul 30 years from November 1997 021/1999 CPFL Santa Cruz São Paulo and Paraná 16 years (from February 1999 to July 2015) 015/1999 CPFL Jaguari São Paulo 16 years (from February 1999 to July 2015) 017/1999 CPFL Mococa São Paulo and Minas Gerais 16 years (from February 1999 to July 2015) 018/1999 CPFL Leste Paulista São Paulo 16 years (from February 1999 to July 2015) 019/1999 CPFL Sul Paulista São Paulo 16 years (from February 1999 to July 2015) 003/2013 CPFL Transmissão São Paulo 30 years (from February 2013 to February 2043)   The table below summarizes the concessions relative to our generation business.  In addition to these concessions, CPFL Sul Centrais Geradoras, as an Independent Power Producer with generating capacity of less than 1,000 kW, operates under a regulatory authorization rather than a concession agreement. 40 Table of Contents Concession no. Independent Power Producers / Concessionaire Plant State Term Maximum renewal period 128/2001 Foz do Chapecó Foz do Chapecó Santa Catarina and Rio Grande do Sul 35 years from November 2001 At the discretion of ANEEL 036/2001 Barra Grande Barra Grande Rio Grande do Sul 35 years from May 2001 At the discretion of ANEEL 008/2001 CERAN 14 de Julho, Castro Alves and Monte Claro Rio Grande do Sul 35 years from March 2001 At the discretion of ANEEL 043/2000 ENERCAN Campos Novos Santa Catarina 35 years from May 2000 At the discretion of ANEEL 005/1997 Investco Luiz Eduardo Magalhães Tocantins 35 years from December 1997 At the discretion of ANEEL 015/1997 CPFL Geração 2 small hydroelectric power plants and one thermoelectric facilityUTE Carioba São Paulo 30 years from November 1997 30 years Decree No. 85,983/81 CPFL Geração Serra da Mesa Goiás (1) 20 years 09/1999015/1997 CPFL JaguariGeração Macaco Branco (small hydroelectric power plant)Cariobinha (Small Hydroelectric Power Plant) São Paulo 1630 years (from February 1999 to July 2015)from November 1997 2030 years 10/1999015/1997 CPFL Leste PaulistaGeração Salto do Pinhal (micro Hydroelectric Power Plant) São Paulo 30 years from November 1997 30 years 015/1997 CPFL Geração Ponte do Silva (micro Hydroelectric Power Plant) São Paulo 30 years from November 1997 30 years 015/1999 CPFL Centrais Geradoras(4) Macaco Branco (Small Hydroelectric Power Plant) São Paulo 30 years (from December 2012) (2) 018/1999 CPFL Centrais Geradoras(4) Rio do Peixe I and II (small hydroelectric power plants)(Small Hydroelectric Power Plants) São Paulo 1630 years (from February 1999 to July 2015)December 2012) 20 years(2) (3) CPFL Centrais Geradoras(4) Santa Alice (micro Hydroelectric Power Plant) São Paulo (3) ‑ (3) CPFL Centrais Geradoras(4) Lavrinha (micro Hydroelectric Power Plant) São Paulo (3) ‑ (3) CPFL Centrais Geradoras(4) São José (micro Hydroelectric Power Plant) São Paulo (3) ‑ (3) CPFL Centrais Geradoras(4) Turvinho (micro Hydroelectric Power Plant) São Paulo (3) ‑ (3) CPFL Centrais Geradoras(4) Pinheirinho (micro Hydroelectric Power Plant) São Paulo (3) ‑ (3) CPFL Centrais Geradoras(4) São Sebastião (micro Hydroelectric Power Plant) São Paulo (3) ‑ 015/1997 CPFL Renováveis Americana São Paulo 30 years from November 1997 3020 years 015/1997Dispatch No. 1990 CPFL Renováveis Andorinhas São PauloRio Grande do Sul 30 years from November 1997(3) 30 years(3) 015/1997 CPFL Renováveis Buritis São Paulo 30 years from November 1997 3020 years 015/1997 CPFL Renováveis Capão Preto São Paulo 30 years from November 1997 3020 years 015/1997 CPFL Renováveis Chibarro São Paulo 30 years from November 1997 3020 years 015/1997 CPFL Renováveis Dourados São Paulo 30 years from November 1997 3020 years 015/1997 CPFL Renováveis Eloy Chaves São Paulo 30 years from November 1997 3020 years 015/1997 CPFL Renováveis Esmeril São Paulo 30 years from November 1997 3020 years 015/1997 CPFL Renováveis Gavião Peixoto São Paulo 30 years from November 1997 3020 years 015/1997Resolution No. 1,987 CPFL Renováveis Guaporé São PauloRio Grande do Sul 30 years from November 1997(3) 30 years(3) 015/1997 CPFL Renováveis Jaguari São Paulo 30 years from November 1997 3020 years 015/1997 CPFL Renováveis Lençóis São Paulo 30 years from November 1997 3020 years 015/014/1997 CPFL Renováveis Monjolinho São Paulo 30 years from November 1997 3020 years 015/1997 CPFL Renováveis Pinhal São Paulo 30 years from November 1997 3020 years 015/1997Dispatch No. 1989 CPFL Renováveis Pirapó São PauloRio Grande do Sul 30 years from November 1997(3) 30 years(3) 015/1997Dispatch No. 1988 CPFL Renováveis Saltinho São PauloRio Grande do Sul 30 years from November 1997(3) 30 years(3) 015/1997 CPFL Renováveis Salto Grande São Paulo 30 years from November 1997 3020 years 015/014/1997 CPFL Renováveis Socorro São Paulo 30 years from November 1997 3020 years 015/1997 CPFL Renováveis Santana São Paulo 30 years from November 1997 3020 years 015/014/1997 CPFL Renováveis Três Saltos São Paulo 30 years from November 1997 3020 years 015/1997 CPFL Renováveis São Joaquim São Paulo 30 years from November 1997 3020 years OrdinanceResolution No. 475 CPFL Renováveis Diamante São PauloMato Grosso 30 years from November 1997 30 years   (1) We have the contractual right to 51.54% of the assured energyAssured Energy of this facility under a 30-year rental agreement, expiring in 2028.  The concession for Serra da Mesa is held by Furnas and expired on May 7, 2011.it was recently extended to November 12, 2039.  On May 5, 2008, Furnas requestedApril 27, 2012, the MME published Ordinance No. 262, which approved the renewal of the concession for Serra da Mesa plantMesa. (2) Hydroelectric projects with an Installed Capacity higher than 1,000 kW that were granted through a concession process with the regulatory authority and the administrator of power concessions. (3) Hydroelectric projects with an Installed Capacity equal to or less than 1,000 kW that are registered with the regulatory authority and the administrator of power concessions, but do not require concession or authorization processes for an additional termoperating. (4) CPFL Centrais Geradoras:  as described previously on “Overview”, a subsidiary created to consolidate the generation activities of 29 years.  On February 15, 2011, ANEEL forwarded Furna’s request to MME, which approval is still pending.the (i) renewed and unbundled generation concessions – Small Hydroelectric Power Plant (Macaco Branco and Rio do Peixe I and II) and (ii) unbundled generation concessions – micro Hydroelectric Power Plant (Santa Alice, Lavrinha, São José, Turvinho, Pinheirinho and São Sebastião). 3741   Table of Contents     In connection with our distribution subsidiaries CPFL Santa Cruz, CPFL Jaguari, CPFL Mococa, CPFL Leste Paulista and CPFL Sul Paulista, see “Item 3.  Risk Factors—We are uncertain as to the renewal of our concessions”. Authorizations Authorization no. Independent Power Producers / Concessionaire Plant State Term Maximum renewal period 2106/20092106 CPFL Bioenergia Baldin thermoelectric power plantThermoelectric Power Plant São Paulo 30 years from September 24, 2009 At the discretion of MMEthe granting authority 2277/20102277 EPASA Termoparaíba thermoelectric power plantThermoelectric Power Plant Paraíba 35 years from December 7, 2007 At the discretion of MME 2277/20102277 EPASA Termonordeste thermoelectric power plantThermoelectric Power Plant Paraíba 35 years from December 12, 2007 At the discretion of MME 259/2002Resolution No. 259 CPFL Bio Formosa S.A. Baía Formosa thermoelectric power plantThermoelectric Power Plant Rio Grande do Norte 30 years from May 15, 2002 At the discretion of MMEthe granting authority 2643/2010Resolution No. 2643 CPFL Bio Buriti S.A. Buriti thermoelectric power plantThermoelectric Power Plant São Paulo 30 years from December 7,16, 2010 At the discretion of MMEthe granting authority 2375/2010Resolution No. 2375 CPFL Bio Ipê S.A. Ipê thermoelectric power plantThermoelectric Power Plant São Paulo 30 years from May 3, 2010 At the discretion of MMEthe granting authority 129/2010Ordinance No. 129 CPFL Bio Pedra S.A. Pedra thermoelectric power plantThermoelectric Power Plant São Paulo 35 years from February 28, 2010 At the discretion of MMEthe granting authority 609/2010Ordinance No. 609 Santa Clara I Energia Renováveis Ltda. Santa Clara I Rio Grande do Norte 35 years from July 1,02, 2010 At the discretion of MMEthe granting authority 683/2010Ordinance No. 683 Santa Clara II Energia Renováveis Ltda. Santa Clara II Rio Grande do Norte 35 years from August 4,05, 2010 At the discretion of MMEthe granting authority 610/2010Ordinance No. 610 Santa Clara III Energia Renováveis Ltda. Santa Clara III Rio Grande do Norte 35 years from July 1,02, 2010 At the discretion of MMEthe granting authority 672/2010Ordinance No. 672 Santa Clara IV Energia Renováveis Ltda. Santa Clara IV Rio Grande do Norte 35 years from July 29,30, 2010 At the discretion of MMEthe granting authority 838/2010Ordinance No. 838 Santa Clara V Energia Renováveis Ltda. Santa Clara V Rio Grande do Norte 35 years from October 8,11, 2010 At the discretion of MMEthe granting authority 670/2010Ordinance No. 670 Santa Clara VI Energia Renováveis Ltda. Santa Clara VI Rio Grande do Norte 35 years from July 29,30, 2010 At the discretion of MMEthe granting authority 749/2010Ordinance No. 749 Eurus VI Energias Renováveis Ltda. Eurus VI Rio Grande do Norte 35 years from August 24,25, 2010 At the discretion of MMEthe granting authority Resolution No. 606 CPFL RenováveisSPE Arvoredo Energia S.A. Arvoredo Santa Catarina 30 years from November 5,7, 2002 At the discretion of MMEthe granting authority Resolution No.  587 CPFL RenováveisSPE Alto Irani Energia S.A. Alto Irani Santa Catarina 30 years from October 29,30, 2002 At the discretion of MMEthe granting authority Resolution No.  607 CPFL RenováveisSPE Plano Alto Energia S.A. Plano Alto Santa Catarina 30 years from November 7, 2002 At the discretion of MMEthe granting authority Resolution No.  348 CPFL RenováveisSPE Barra da Paciência Energia S.A. Barra da Paciência Minas Gerais 30 years from December 17,20, 1999 At the discretion of MMEthe granting authority Resolution No.  349 CPFL RenováveisSPE Cocais Grande Energia S.A. Cocais Grande Minas Gerais 30 years from December 22,23, 1999 At the discretion of MMEthe granting authority Resolution No.  17 CPFL RenováveisSPE Corrente Grande Energia S.A. Corrente Grande Minas Gerais 30 years from January 17, 2000 At the discretion of the granting authority Resolution No.  370 SPE Ninho da Águia Energia S.A. Ninho da Águia Minas Gerais 30 years from December 30, 1999 At the discretion of the granting authority Resolution No.  406 SPE Paiol Energia S.A. Paiol Minas Gerais 30 years from August 07, 2002 At the discretion of the granting authority Resolution No.  13 SPE São Gonçalo Energia S.A. São Gonçalo Minas Gerais 30 years from January 14, 2000 At the discretion of MME Resolution No. 370 CPFL Renováveis Ninho da Águia Minas Gerais 30 years from December 29, 1999 At the discretion of MME Resolution No. 406 CPFL Renováveis Paiol Minas Gerais 30 years from August 06, 2002 At the discretion of MME Resolution No. 13 CPFL Renováveis São Gonçalo Minas Gerais 30 years from January, 13, 2000 At the discretion of MMEgranting authority Resolution No.  355 CPFL RenováveisSPE Varginha Energia S.A. Varginha Minas Gerais 30 years from December 22,23, 1999 At the discretion of MMEthe granting authority Resolution No.  367 CPFL RenováveisSPE Várzea Alegre Energia S.A. Várzea Alegre Minas Gerais 30 years from December 29,30, 1999 At the discretion of MMEthe granting authority Ordinance No. 352 CPFL RenováveisSPE Santa Luzia Energética S.A. Santa Luzia Santa Catarina 35 years from December 20,21, 2007 At the discretion of MMEthe granting authority Resolution No. 307 CPFL RenováveisEólica Formosa Geração e Comercialização de Energia S.A. Praia Formosa Ceará 30 years from June  04,05, 2002 At the discretion of MMEthe granting authority Resolution No. 454 CPFL RenováveisEólica Icaraizinho Geração e Comercialização de Energia S.A. Icaraizinho Ceará 30 years from August 27,28, 2002 At the discretion of MMEthe granting authority Resolution No. 306 CPFL RenováveisSIIF Cinco Geração e Comercialização de Energia S.A. Choró Ceará 30 years from June  04,05, 2002 At the discretion of MMEthe granting authority Resolution No. 460 CPFL RenováveisEólica Paracuru Geração e Comercialização de Energia S.A. Paracuru Ceará 30 years from August 27,28, 2002 At the discretion of MMEthe granting authority Ordinance No. 564/11564 CPFL RenováveisPedra Preta Energia S.A. Pedra Preta Rio Grande do Norte 35 years from October 11,14, 2011 At the discretion of MMEthe granting authority Ordinance No. 557/11557 CPFL RenováveisMacacos Energia S.A. Macacos Rio Grande do Norte 35 years from September 27,29, 2011 At the discretion of MMEthe granting authority Ordinance No. 556/11556 CPFL RenováveisJuremas Energia S.A. Juremas Rio Grande do Norte 35 years from September 27,29, 2011 At the discretion of MMEthe granting authority Ordinance No. 585/11585 CPFL RenováveisCosta Branca Energia S.A. Costa Branca Rio Grande do Norte 35 years from October 11,14, 2011 At the discretion of MMEthe granting authority Ordinance No. 134 Atlântica I Parque Eólico S.A. Atlântica I Rio Grande do Sul 35 years from February 28, 2011 At the discretion of the granting authority Ordinance No. 148 Atlântica II Parque Eólico S.A. Atlântica II Rio Grande do Sul 35 years from March 04, 2011 At the discretion of the granting authority Ordinance No. 147 Atlântica IV Parque Eólico S.A. Atlântica IV Rio Grande do Sul 35 years from March 04, 2011 At the discretion of the granting authority Ordinance No. 168 Atlântica V Parque Eólico S.A. Atlântica V Rio Grande do Sul 35 years from March 22, 2011 At the discretion of the granting authority Ordinance No. 625 Bons Ventos Geradora de Energia S.A. Enacel Ceará 30 years from November 13, 2002 At the discretion of the granting authority Ordinance No. 680 Bons Ventos Geradora de Energia S.A. Canoa Quebrada Ceará 30 years from December 11, 2002 At the discretion of the granting authority Ordinance No. 778 Bons Ventos Geradora de Energia S.A. Taíba Albatroz Ceará 30 years from December 24, 2002 At the discretion of the granting authority Ordinance No. 093 Bons Ventos Geradora de Energia S.A. Bons Ventos Ceará 30 years from March 10, 2003 At the discretion of the granting authority Ordinance No. 257 Campo dos Ventos II Energias Renováveis S.A. Campo dos Ventos II Rio Grande do Norte 35 years from April 18, 2011 At the discretion of the granting authority Ordinance No. 3714 SPE Bio Alvorada S.A. Bio Alvorada Thermoelectric Power Plant Minas Gerais 30 years from October 29, 2012 At the discretion of the granting authority Ordinance No. 3328 SPE Bio Coopcana S.A. Bio Coopcana Thermoelectric Power Plant Paraná 30 years from February 14, 2012 At the discretion of the granting authority Resolution No. 2510 SPE Salto Góes Energia S.A. Salto Góes Santa Catarina 30 years from August 19, 2010 At the discretion of the granting authority Resolution No.357 SPE Aiuruoca Energia S.A. Aiuruoca Minas Gerais 30 years from December 23, 1999 At the discretion of the granting authority Resolution No.540 SPE Cachoeira Grande Energia S.A. Cachoeira Grande Minas Gerais 30 years from October 15, 2003 At the discretion of the granting authority Resolution No.718 SPE Santa Cruz Energia S.A Santa Cruz Minas Gerais 30 years from December 18, 2002 At the discretion of the granting authority Resolution No.3967 Campo dos Ventos I Energias Renováveis S.A. Campo dos Ventos I Rio Grande do Norte 30 years from March 26, 2013 At the discretion of the granting authority Resolution No.3968 Campo dos Ventos III Energias Renováveis S.A. Campo dos Ventos III Rio Grande do Norte 30 years from March 26, 2013 At the discretion of the granting authority Resolution No.3969 Campo dos Ventos V Energias Renováveis S.A. Campo dos Ventos V Rio Grande do Norte 30 years from March 27, 2013 At the discretion of the granting authority Resolution No.117 Lacenas Participações Ltda. Ester Thermoelectric Power Plant São Paulo 30 years from May 21, 1999 At the discretion of the granting authority   3842   Table of Contents     Independent Power Producers A generation company classified as an independent producerIndependent Power Producer under Brazilian law receives a concession or authorization to produce energy for its own consumption or for sale to local distribution companies, Free Consumers and other types of consumers.  The price to be charged by Independent Power Producers for the sale of energy to certain types of consumer is subject to general criteria established by ANEEL, whereas the sale price to others can be freely negotiated between the parties. Concessionaires A generation company classified as a concessionaire under Brazilian law receives a concession to distribute, transmit and/or generate electric energy.  Since concessions usually involve public services or assets, they can only be granted through a public bidding procedure (licitação pública).  AllMost of the tariffs charged by concessionaires of public services are determined by ANEEL and concessionairesANEEL.  Concessionaires are not free to negotiate these rates with consumers.consumers, except for (i) generation concessionaires, which are free to establish those rates, as long as their concessions have not been extended pursuant to Law No. 12,783/13, in which case ANEEL determines the tariff that must be applied and (ii) distribution concessionaires that may grant discounts to consumers (as long as equal treatment is granted to other consumers within the same category). The concession agreement and related documents establish the concession period and whether the related concession can be extended.  For concessions to generate electric energy, the amortization period for the related investment is 35 years, renewable once for a maximum period of 20 years.years, according to Law No. 9,074/95 or for a maximum period of up to 30 years, if the concession period extension is subject to Law No. 12,783/13. Although concession agreements and applicable laws generally allow for the extension of the concession period, such extension is not a right.  The decision to extend a concession agreement is subject to the discretion ofthe granting authority, which must provide justification for its decision, and the decision must foster the public interest. 39 Table of Contents Properties Our principal properties consist of hydroelectric generation plants.  Due to the adoption of IFRS, we have reclassified our distribution companies’ fixed assets, comprised mainly of substations and distribution networks, partially as intangible assets and partially as financial assets of concession.  The net book value of our total property, plant and equipment as of December 31, 20112013 was R$8,2927,717 million.  No single one of our properties produces more than 10.0% of our total revenues.  Our facilities are generally adequate for our present needs and suitable for their intended purposes. Pursuant to Brazilian law, the essential properties and facilities that we use in performing our obligations under our concession agreements cannot be transferred, assigned, pledged or sold to, or encumbered by, any of our creditors without prior approval from ANEEL. 43 Table of Contents Environmental The Brazilian constitution gives both the Brazilian Federalfederal and State Governmentsstate governments the power to enact laws designed to protect the environment.  A similar power is given to municipalities whose local interests may be affected.  Municipal laws are considered to be a supplement to federal and state laws.  A violator of applicable environmental laws may be subject to administrative and criminal sanctions, and will have an obligation to remediate and/or provide compensation for environmental damages.  Administrative sanctions may include substantial fines and suspension of activities, while criminal sanctions may include fines and, for individuals (including executive officers and employees of companies who commit environmental crimes), imprisonment. Our energy distribution, transmission and generation facilities are subject to environmental licensing procedures, which include the preparation of environmental impact assessments before such facilities are constructed.  Once the respective environmental licenses are obtained, the holder of the license remains subject to compliance with specific requirements. The environmental issues regarding the construction of new electricity generation facilities require specially-tailoredspecially‑tailored oversight.  For this reason, CPFL Geração manages these matters in order to ensure that its policies and environmental obligations are given adequate consideration.  Decisions are made by environmental committees, whose members include representatives of each project partner and of each plant’s environmental management office.  Our environmental committees are constantly interacting with government agencies to ensure environmental compliance and future electricity generation.  In addition, we support local community programs that relocate rural families in collective resettlements and provide institutional support for families involved in the conservation of local biodiversity. In order to facilitate compliance with environmental laws, we use an environmental management system compliant with ISO 14001 that has been implemented in all of our segments.  We have established a system to identify, evaluate and update matters relating to applicable environmental laws, as well as other requirements applicable to our environmental management system.  Our generation and distribution of electricity is subject to internal and external audits that verify whether our activities are in compliance with ISO 14001.  Our environmental management processes take into consideration our budgets and realistic forecasts, and always aim to achieve improvements at the financial, social and environmental levels. The Brazilian Power Industry In 2011,According to the ANEEL, as of December 31, 2013, the Installed Capacity of power generation in Brazil was 126,383 MW.  Historically, approximately 70% of the total Installed Capacity in Brazil has derived from Hydroelectric Power Plants.  Large Hydroelectric Power Plants tend to be far from the consumption centers.  This requires construction of large transmission lines at high and extra‑high voltage (230 kV to 750 kV) that often cross the territory of several states.  Brazil has a robust electric grid system, with more than 105,000 km of transmission lines with voltage equal to or greater than 230 kV and processing capacity of over 274,000 MVA from the State of Rio Grande do Sul through the State of Amazonas. According to the EPE, electricity consumption in Brazil grew by 3.5% in 2013, reaching 464 GWh.  The MME approved aand the EPE estimate that electricity consumption will grow by 4.3% per year until 2023.  According to the ten-year expansion plan under whichpublished by the MME and the EPE, Brazil’s installed power generation capacityInstalled Capacity is projectedexpected to increase to 171.1reach 183.1 GW by 2020,2022, of which 115.1119.0 GW (67.3%(65.0%) is projected to be hydroelectric, 28.925.9 GW (16.9%(14.2%) is projected to be thermoelectric and nuclear and 27.138.1 GW (15.8%(20.8%) is projected to be from renewable sources. In 2011, EletrobrásCurrently, approximately 31% of the Installed Capacity in Brazil is owned 36%by Eletrobras, a joint capital and publicly traded company controlled by the Brazilian government.  We are the second largest private player within the electricity generation sector, with 2.4% of Brazilian generation assets.  Through its subsidiaries, Eletrobrás is also responsible for 56%the market share.  The distribution segment in Brazil remains fragmented, with six companies controlling approximately 50% of Brazil’s installed transmission capacity.  In addition, it holds interests in certain Brazilianstate-controlled entities involved in the generation, transmission andmarket.  We are the largest player, with 13% of the electricity distribution of electricity.  They include, among others, Companhia Hidroelétrica do São Francisco — CHESF and Furnas Centrais Elétricas.market. 4044   Table of Contents   In 2011, private companies represented approximately 35% of the markets for generation activities, in terms of total capacity and demand, and 30% of the transmission market in terms of revenue.  Principal Regulatory Authorities Ministry of Mines and Energy — MME The MME is the Brazilian government’s primary regulatorauthority in the power industry.  Following the adoption of the New Industry Model Law in 2004, the Brazilian government, acting primarily through the MME, has assumed certain duties that were previously the responsibility of ANEEL, including drafting guidelines for the granting of concessions and issuing directives governing the biddingtender process for concessions that relate to public services and public assets. National Energy Policy Council — CNPE The National Energy Policy Council,Conselho Nacional de Política Energética (“CNPE”),CNPE, a committee created in August 1997, advises the President of Brazil on the development of national energy policy.  The CNPE is chaired by the Minister of Mines and Energy and consists of sixeight government ministers, and three members selected by the President of Brazil.Brazil, another representative of the MME and the president of the EPE.  The CNPE was created to optimize the use of Brazil’s energy resources and to guarantee national energy supply. Brazilian Electricity Regulatory Agency — ANEEL ANEEL is an independent federal regulatory agency whose primary responsibility is to regulate and supervise the power industry in accordance with policies set forth by the MME, together with other matters delegated to it by the Brazilian government and the MME.  ANEEL’s current responsibilities include, among others,others:  (i) administering concessions for electric energy generation, transmission and distribution, including the approval of electricity tariffs,tariffs; (ii) enacting regulations for the electric energy industry,industry; (iii) implementing and regulating the exploitation of energy sources, including the use of hydroelectric power,power; (iv) promoting the public biddingtender process for new concessions,concessions; (v) settling administrative disputes among electricity generation entities and electricity purchaserspurchasers; and (vi) defining the criteria and methodology for the determination of transmission tariffs. National Electrical System Operator — ONS The ONS is a non‑profitnonprofit organization that coordinates and controls the production and transmission of energy by electric utilities engaged in the generation, transmission and distribution of electric energy, and private market participants such as importers, exporters, and Free Consumers.activities.  The primary role of the ONS is to oversee generation and transmission operations in the Interconnected Power System, or SIN; subject to regulation and supervision by ANEEL.  The ONS’ objectivesObjectives and principal responsibilities of the ONS include:  (i) operational planning for the generation industry,industry; (ii) organizing the use of the domestic Interconnected Power Systemnational grid and international interconnections,interconnections; (iii) guaranteeing that all parties in the industry have access to the transmission network in a non‑discriminatory manner,manner; (iv) assisting in the expansion of the electric energy system,system; (v) proposing plans to the MME for extensionsexpansions of the Basic Network,Network; and (vi) submitting rules for the operation of the transmission system for ANEEL’s approval. Electric Energy Trading Chamber — CCEE The Electric Energy Trading Chamber,Câmara de Comercialização de Energia Elétrica (“CCEE”),CCEE is a nonprofit organization that is subject to authorization, inspection and regulation by ANEEL.  The CCEE replaced the Wholesale Energy Market, or MAE. Market.  The CCEE is responsible, among other things, for (i) registering all the energy purchase agreements in the Regulated Market,Contratos de Comercialização de Energia no Ambiente Regulado (“CCEAR”),CCEARs and registeringall agreements that result from market adjustments and the volume of electricity contracted in the free market,Free Market and (ii) accounting for and clearing of short‑term transactions.  The CCEE consists of holders ofentities that hold concessions, and permissions authorized entitiesor authorizations within the electricity industry and Free and Special Consumers.  Its board ofdirectors is composed of four members appointed by these parties, together with one appointed by the MME.  The MME also acts as chairman of the board of directors. 41 Table of Contents Energy Research Company — EPE On August 16, 2004 the Brazilian government created the Energy Research Company,Empresa de Pesquisa Energética (“EPE”),EPE, a state-ownedstate‑owned company responsible for conducting strategic research on the energy industry, including with respect to electric energy, oil, gas, coal and renewable energy sources.  The research carried out by EPE is used by MME in its policymaking role in the energy industry. 45 Table of Contents Energy Industry Monitoring Committee — CMSE The New Industry Model Law created the Energy Industry Monitoring Committee (Comitê de Monitoramento do Setor Elétrico (“CMSE”), or CMSE, which acts under the direction of the MME.  The CMSE is responsible for monitoring supply conditions within the system and for indicating steps to be taken to correct problems. Concessions, Permissions and Authorizations The Brazilian constitution provides that the development, use and sale of electric energy may be undertaken directly by the Brazilian government or indirectly through the granting of concessions, permissions or authorizations.  Historically, the Brazilian electric energy industry has been dominated by generation, transmission and distribution concessionaires controlled by the Federalfederal or Statestate governments. Companies or consortia that wish to build or operate facilities for generation, transmission or distribution of electricity in Brazil must apply to the MME or to ANEEL, as representatives of the Brazilian government, for a concession, permission or authorization, as the case may be. Concessions Concessions grant rights to generate, transmit or distribute electricity in the relevant concession area for a specified period (as opposed to permissions and authorizations, which may be revoked at any time at the discretion of the MME, in consultation with ANEEL).  This period is usually 35 years for new generation concessions, and 30 years for new transmission or distribution concessions.  An existing concession may be renewed at the granting authority’s discretion. The Concession Law establishes, among other things, the conditions that the concessionaire must comply with when providing electricity services, the rights of consumers, and the obligations of the concessionaire and the granting authority.  Furthermore, the concessionaire must comply with regulations governing the electricity sector.  The main provisions of the Concession Law are summarized below: Adequate service.  The concessionaire must render adequate service with respect to regularity, continuity, efficiency, safety and accessibility. Use of land.  The concessionaire may use public land or request the granting authority to expropriate necessary private land for the benefit of the concessionaire.  In such case, the concessionaire shallmust compensate the affected private landowners. Strict liability.  The concessionaire is strictly liable for all damages arising from the provision of its services. Changes in controlling interest.  The granting authority must approve any direct or indirect change in controlling interests in the concessionaire. Intervention by the granting authority.  TheAs per Law No. 12,767, of December 27, 2012, as modified by Law No. 12,839 of July 2013, the granting authority may intervene in the concession, by means of a presidential decree,acting through ANEEL, to ensure the adequate performance of services, as well as full compliance with applicable contractual and regulatory provisions.  Within 30 days after the date of the decree, the granting authority’s representativeANEEL is required to commence an administrative proceeding in which the concessionaire is entitled to contest the intervention.  During the term of the administrative proceeding, a persongovernment appointed pursuant to thegranting authority’s decreemanager becomes responsible for carrying on the concession.  If theThe administrative proceeding is notmust be completed within 180 days after the date of the decree,one year (which may be extended for two more years).  In order for the intervention ceasesto cease and the concession is returned to the concessionaire.  The concession is also returnedreturn to the concessionaire, if the granting authority’s representative decides notconcessionaire’s shareholders are required to terminatepresent a detailed recovery plan to ANEEL and correct the concession and the concession term has not yet expired.irregularities identified by ANEEL. 42 Table of Contents Termination of the concession.  The termination of the concession agreement may be accelerated by means of expropriation and/or forfeiture.  Expropriation is the early termination of a concession for reasons related to the public interest that must be expressly declared by law.  Forfeiture must be declared by the granting authority after ANEEL or the MME has made a final administrative ruling that the concessionaire, among other things, (i) hasfailed to render adequate service or to comply with applicable law or regulation, (ii) no longer has the technical, financial or economic capacity to provide adequate service, or (iii) has not complied with penalties assessed by the granting authority.  The concessionaire may contest any expropriation or forfeiture in the courts.  The concessionaire is entitled to indemnification for its investments in expropriated assets that have not been fully amortized or depreciated, after deduction of any fines and damages due by the concessionaire. 46 Table of Contents Expiration.  When the concession expires, all assets, rights and privileges that are materially related to the rendering of the electricity services revert to the Brazilian government.  Following the expiration, the concessionaire is entitled to indemnification for its investments in assets that have not been fully amortized or depreciated as of the expiration. Renewal.  Law No. 12,783 of January 11, 2013 specified the conditions for the renewal of generation, transmission and distribution concessions obtained under articles 17, 19 or 22 of Law No. 9,074 of July 7, 1995.  Under Law No. 12.783, these concessions may be extended once, at the discretion of the Brazilian government, for up to 30 years, in order to ensure the continuity and efficiency of the services rendered and low tariffs.  In addition, Law No. 12,783 provided that holders of concessions that were due to expire in 2015, 2016 and 2017 could apply for early renewal in 2013, subject to certain conditions.  These conditions, in respect of distribution companies, have not yet been disclosed by the Brazilian government.  The renewal of generation concession is contingent on the satisfaction of the following conditions: (i) tariffs calculated by ANEEL for each hydroelectric plan; (ii) allocation of energy quotas to distribution companies in the National Interconnected System; and (iii) submission to the standards of service quality set by ANEEL.  For renewal, the assets remaining unamortized at the renewal date would be indemnified and the indemnification payment would not be considered to be annual revenue.  The remuneration relating to new assets or existing assets that were not indemnified would be considered annual revenue.  Resolution No. 521/12 published by ANEEL on December 14, 2012 also established that the generation concessions to be renewed under Law No. 12,783 must be partitioned into separate operating entities where the Installed Capacity of the original concessionaire entity exceeded 1 MW.  Law No. 12,783 also extinguished two sector charges (the CCC and the RGR Fund (see “—Regulatory Charges—RGR Fund and UBP” and “—Regulatory Charges—CDE Account”)) Penalties.  ANEEL regulations govern the imposition of sanctions against the participants in the electricity sector and classify the appropriate penalties based on the nature and importanceseverity of the breach (including warnings, fines and forfeiture).  For each breach, the fines can be up to two per cent2.0% of the revenue (net of value-addedvalue‑added tax and services tax) of the concessionaire in the 12-month12‑month period preceding any assessment notice.  Infractions that may result in fines relate to the failure of the agentconcessionaire to request ANEEL’s approval in the following cases, among others:  (i) execution of contracts between related parties in the cases provided by regulation; (ii) sale or assignment of the assets related to services rendered as well as the imposition of any encumbrance (including any security, bond, guarantee, pledge and mortgage) on them or any other assets related to the concession or the revenues of the electricity services; and (iii) changes in the controlling interests ofin the holder of the concession.  In cases of contracts executed between related parties that are submitted for ANEEL’s approval, ANEEL may seek to impose restrictions on the terms and conditions of these contracts and, in extreme circumstances, determine that the contract be rescinded. Permissions Permissionshashave a very limited usewithintheBrazilian electric sector.  Permissionselectricity sector.  Permissions are grantedtogranted to rural power generation cooperatives,which supply power to their members and occasionally to consumers that are not part of the cooperative, inareas not regularlyservedbylargedistributors.distributors.  Permissions represent an irrelevant share inare not a material portion of the Brazilian power matrix. Authorizations Authorizations are unilateral and discretionary acts carried out by the granting authority.  Unlike concessions, authorizations generally do not require a public bidding process.tender.  As an exception to the general rule, authorizations may also be granted to potential power producers after specific biddingauction processes for the purchase of power conducted by ANEEL. 47 Table of Contents In the power generation sector, independent power producers (IPPs)Independent Power Producers and self self‑generators hold an authorization as opposed to a concession.  IPPsIndependent Power Producers and self-generatorsself‑generators do not receive public service concessions or permits to render public services.  Rather, they are granted authorizations or specific concessions to explore water resources that merely allow them to produce, use or sell electric energy.  Each authorization granted to an IPPIndependent Power Producer or self-powerself‑power producer sets forth the rights and duties of the authorized company.  Authorized companies have the right to ask ANEEL to carry out expropriations on their behalf and to their benefit, are subject to ANEEL supervision and are subject to ANEEL’s prior approval in the event of a change in their controlling interests.  Moreover, early unilateral termination of the authorization entitles the authorized company to seek compensation from the granting authority for damages suffered. 43 Table of Contents An IPPIndependent Power Producer may sell part or all of its output to customers on its own account and at its own and risk.  A self‑generator may, upon specific authorization by ANEEL, sell or trade any exceedingexcess energy it is unable to consume.  IPPsIndependent Power Producers and self‑generators are not granted monopoly rights and are not subject to price controls, with the exception of specific cases.  IPPsIndependent Power Producers compete with public utilities and among themselves for large customers, pools of customers of distribution companies or any customers not served by a public utility. The New Industry Model Law Since 1995, the Federal GovernmentBrazilian government has taken a number of measures to reform the Brazilian electric energy industry.  These culminated, on March 15, 2004, in the enactment of the New Industry Model Law, which further restructured the power industry with the ultimate goal of providing consumers with a secure electricity supply at an adequate tariff. The New Industry Model Law introduced material changes to the regulation of the power industry, with a view to (i) providing incentives to private and public entities to build and maintain generation capacity and (ii) assuring the supply of electricity within Brazil at adequate tariffs through competitive public electricity public biddingauction processes.  The key features of the New Industry Model Law include: ·        Creation of a parallel environmenttwo “environments” for the trading of electricity, including:  (1)(i) the regulated market,Regulated Market, a more stable market in terms of supply of electricity; and (2)(ii) a market specifically addressed to certain participants (i.e., Free Consumers and commercialization companies), called the free market,Free Market, that permits a certain degree of competition. ·        Restrictions on certain activities of distributors, so as to require them to focus on their core business of distribution, to promote more efficient and reliable services to captive consumers.Captive Consumers. ·        Elimination of self-dealing,self‑dealing, in order to provide an incentive to distributors to purchase electricity at the lowest available prices rather thenthan buying electricity from related parties. ·        Maintenance of contracts entered into prior to the New Industry Model Law, in order to provide regulatory stability for transactions carried out before its enactment. The New Industry Model Law excludes EletrobrásEletrobras and its subsidiaries from the National Privatization Program, which is a program originally created by the Brazilian government in 1990 to promote the process of privatization of state-ownedstate‑owned companies. Regulations under the New Industry Model Law include, among other items, rules relating to auction procedures, the form of power purchase agreementsPPAs and the method of passing costs through to Final Consumers.  Under these regulations, all electricity-purchasing agentsparties that purchase electricity must contract all of their electricity demand under the guidelines of the new model.  Electricity-selling agentsNew Industry Model Law.  Parties that sell electricity must provide evidentiary support linkinghave “ballast” for their sales (i.e., the allottedamount of energy tosold in CCEE must be sold to existing previously purchased under PPAs and/or plannedgenerated by the seller’s own power generation facilities.plants).  Agents that do not comply with such requirements are subject to penalties imposed by ANEEL.ANEEL and CCEE. Beginning in 2005, all electricity generation, distribution and tradingtransmission companies, independent power producersIndependent Power Producers and Free and Special Consumers are required to notify the MME, by August 11st of each year, of their estimated electricity demand or estimated electricity generation, as the case may be, for each of the subsequent fiveyears.  Each distribution company is required to notify the MME, within the 60-day period preceding each electricity auction, of the amounts of electricity that it intends to contract in the auction.  Based on this information, the MME must establish the total amount of energy to be contracted in the regulated marketRegulated Market and the list of generation projects that will be allowed to participate in the auctions.  Distribution companies will also be required to specify the portion 48 Table of the contracted amount they intend to use to supply consumers qualified as Free Consumers.Contents Parallel EnvironmentEnvironments for the Trading of Electric Energy Under the New Industry Model Law, electricity purchase and sale transactions are carried out in two different segments:  (i) the regulated market,Regulated Market, which contemplates the purchase by distribution companies throughpublic auctions of all electricity necessary to supply their consumersconsumers; and (ii) the free market,Free Market, which contemplates the purchase of electricity by non-regulatednon‑regulated entities (such as Free Consumers and energy traders). 44 Table of Contents Electricity distribution companies fulfill their electricity supply obligations primarily through public auctions.  In addition to these auctions, distributionDistribution companies will be able tomay also purchase electricity outside the public biddingauction process from:  (i) generation companies that are connected directly to such distribution company, except for hydro generation companies with capacity higher than 30 MW and certain thermo generation companies,companies; (ii) electricity generation projects participating in the initial phase of the Proinfa Program, a program designed to diversify Brazil’s energy sources, andsources; (iii) the Itaipu power plant.plant; (iv) auctions administered by the distribution companies, if the market that they supply is no greater  than 500 GWh/year; and (v) Hydroelectric Power Plants whose concessions have been renewed by the government under Law No. 12,783 of 2013 (in this latter case, in “energy quotas” distributed among the distribution companies by the Brazilian government, at prices determined by MME/ANEEL).  The electricity generated by Itaipu continues to be sold by EletrobrásEletrobras to the distribution concessionaires operating in the South/Southeast/Midwest Interconnected Power System, although no specific contract was entered into by suchthese concessionaires.  The rates at which the Itaipu-generated electricity generated by Itaipu is traded are denominated in U.S. dollars and established pursuant to a treaty between Brazil and Paraguay.  As a consequence, Itaipu rates rise or fall in accordance with the variation of the U.S. dollar/real  exchange rate.  Changes in the price of Itaipu-generated electricity generated by Itaipu are, however, subject to the Parcel A costCost recovery mechanism discussed below under “—Distribution Tariffs.”Tariffs”. The Regulated Market In the regulated market,Regulated Market, distribution companies purchase their expected electricity requirements for their captive consumersCaptive Consumers from generators through public auctions.  The auctions are administered by ANEEL, either directly or indirectly through the CCEE. Electricity purchases are made through two types of bilateral agreements:  (i) Energy Agreements (Contratos de Quantidade de Energia); and (ii) Capacity Agreements (Contratos de Disponibilidade de Energia).  Under an Energy Agreement, a generator commits to supply a certain amount of electricity and assumes the risk that its electricity supply could be adversely affected by hydrological conditions and low reservoir levels, among other conditions, which could interrupt the supply of electricity.  In such cases, the generator would beis required to purchase the electricity elsewhere in order to comply with its supply commitments.  Under a Capacity Agreement, a generator commits to make a certain amount of capacity available to the regulated market.Regulated Market.  In such case, the generator’s revenue is guaranteed and the distributors must bear the risk of a supply shortage.  Together, these agreements comprise the energy purchase agreements in the Regulated Market,Contratos de Comercialização de Energia no Ambiente Regulado - CCEAR.CCEARs. According to the New Industry Model Law, within certain limits (as explained below), electricity distribution entities will beare entitled to pass through to their respective consumers all costs related tothe cost of electricity they purchasedpurchase through public auction as well as any taxes and industry charges. With respect to the granting of new concessions, the newly enacted regulations require bids for new hydroelectric generation facilitiesHydroelectric Power Plants to include, among other things, thea minimum percentage of electricity to be supplied to the regulated market.Regulated Market. The Free Market The free marketFree Market covers transactions between generation concessionaires, Independent Power Producers, (“IPPs”), self-generators,self‑generators, energy traders, importers of electric energy, Free Consumers and Special Consumers, as defined below.  IPPsConsumers.  Independent Power Producers are generation entities that sell the totality or part of their electricity to Free Consumers,distribution concessionaires and trading agents, among others.  The free marketFree Market will also include existing bilateral contracts between generators and distributors until they expire.  Upon expiration, such contracts must be executed under the New Industry Model Law guidelines. 49 A consumer that is eligibleTable of Contents Potentially Free Consumers will have to choose its supplier (a potentially Free Consumer) may only rescind its contractcomply with an agreement with the local distributor andto become Free Consumers.  If a Free Consumer by notifying such distributor at least 15 days before the date such distributor is required to state its estimated electricity needs for the next auction.  Further, such consumer may only begin acquiring electricity from another supplier in the year following the one in which the local distributor was notified.  Once a potentially Free Consumer has optedopts for the free market,contracting environment, it maywill only be able to return to the regulated systemenvironment after giving the distributor of its region five years’ advanceadvanced notice providedto the regional distribution company, although the distribution company may choose to reduce this notice period.  The notice period is intended to ensure that, if necessary, the distributor may reduce such notice period at its discretion.  This extended notice period seeks to assure that, if necessary, thedistributor is able to buy the additional energy in the regulated marketenvironment without imposing extra costs on theits captive market. 45 Table of Contents In addition to Free Consumers, certain consumersSpecial Consumers with capacity equal to or greater than 500 kW may choose to purchase energy in the free market,Free Market, subject to certain terms and conditions.  These consumers are called “Special Consumers”.  Special Consumers may only purchase energy fromfrom:  (i) small hydroelectric power plantsSmall Hydroelectric Power Plants with capacity between 1,000 kW and 30,000 kW,kW; (ii) generators with capacity limited to 1,000 kW,kW; and (iii) alternative energy generators (solar, wind and biomass enterprises) whose capacity supplied to the system does not exceed 30,000 kW.  A Special Consumer may terminate its contract with the local distributor on 180 days’ prior notice for contracts with indefinite terms.  For contracts with a definite term the consumer must fulfill the contract, and or for long‑term contracts the consumer may terminate its contract on three years’ prior notice.  The Special Consumer may return to the regulated system upon 180 days’ prior notice to the distributor of its region. State-ownedState‑owned generators may sell electricity to Free Consumers; however, unlike private generators, they may only do so through an auction process. Recent Developments in the Free Market On August 2, 2012, the MME enacted Act No. 455, providing for new rules regarding the registration of PPAs in the Free Market.  Currently, PPAs must be registered with the CCEE in advance on a monthly basis, but the electricity volume contracted may be adjusted on anex post basis after the consumption has taken place.  Under Act No. 455, from June 1, 2014 PPAs will need to be registered with the CCEE in advance on a weekly basis, and theex post volume adjustment will be prohibited.  As a result, parties will have to state their expected consumption volumeex ante, except when they have specifically indicated to the CCEE that the PPA in question refers to effective consumption. These restrictions in the freedom of negotiation between sellers and buyers may have an impact on the cost of energy purchased in the Free Market, and may reduce the benefit to us of trading in the Free Market. Auctions on the Regulated Market Electricity auctions for new generation projects in process are held (i) five years before the initial delivery date (referred to as “A-5” auctions)A‑5 auctions; or (ii) three years before the initial delivery date (referred to as “A-3”“A‑3” auctions).  Electricity auctions from existing power generation facilities take place (i) one year before the initial delivery date (referred to as “A-1”“A‑1” auctions) or (ii) approximately four months before the delivery date (referred to as “market adjustments”).  Invitations toAuction bid in the auctionsannouncements are prepared by ANEEL in compliance with guidelines established by the MME, which include a requirement to use the lowest bidenergy price as the criterion to determine the winner of the auction. Each generation company that participates in an auction executes a contract for purchase and sale of electricity with each distribution company, in proportion to the distribution companies’ respective estimated demand for electricity.  The only exception to these rules relates to the market adjustment auction, where the contracts are between specific selling and distribution companies.  The CCEAR of both “A-5”“A‑5” and “A-3”“A‑3” auctions have a term of between 15 and 30 years, and the CCEAR of “A-1”“A‑1” auctions have a term of between fiveone and 15 years.  Contracts arising from market adjustment auctions are limited to a two-yeartwo‑year term.  The total amount of energy contracted in such market adjustment auctions may not exceed 1.0% of the total amount of energy contracted by each distributor, except for the auctions held in 2008 and 2009, for which the total amount of contracted energy may not exceed 5.0%.distributor. With respect to the CCEAR related to electricity generated by existing generation facilities, there are three alternatives for the permanent reduction of contracted electricity:  (i) compensation for the exit of potentiallyPotentially Free Consumers from the regulated market,Regulated Market, (ii) a reduction, at the distribution company’s discretion, of up to 4.0% per year inover the annualinitial contracted amount from existing power generation, excluding the first year of supply, due to market deviations from estimated market projections, beginning two years after the initial electricity demand was declared and (iii) adjustments to the amount of electricity established in energy acquisition contracts entered into before March 17, 2004. 50 Table of Contents Since 2005, CCEE has conducted fifteen21 auctions for new generation projects, eight12 auctions for existing power generation facilities, two auctions for alternatealternative generation projects and fourfive auctions for biomass and wind power generation, qualified as “reserve energy.”energy”.  No later than August 1st of each year, generators and distributors must provide their estimated electricity generation or estimated electricity demand for the five subsequent years.  Based on this information, the MME establishes the total amount of electricity to be traded in the auction and decides which generation companies may participate in the auction.  The auction is carried out in two phases via an electronic system.  As a general rule, contracts entered into in an auction have the following termsterms:  (i) from 15 to 30 years from commencement of supply in cases of new generation projects,projects; (ii) from fiveone to 15 years beginning in the year following the auction in cases of existing power generation facilities,facilities; (iii) from 10 to 30 years from commencement of supply in cases of alternatealternative generation projects,projects; (iv) 15 years from commencement of supply in cases of biomass reserve energyenergy; and (v) 20 years from commencement of supply in cases of wind power reserve energy. 46 Table of Contents After the completion of the auction, generators and distributors execute the CCEAR, in which the parties establish the price and amount of the energy contracted in the auction.  Great part of ourOur CCEARs providesprovide that the price will be adjusted annually in accordance with the IPCA broad consumer price index (Indice Nacional de Preços ao Consumidor Amplo, calculated and published byInstituto Brasileiro de Geografia e Estatística– IBGE).IPCA.  However, we also use other indexes to adjust prices in our CCEARs, such as fuel prices.  Distributors grant financial guarantiesguarantees (principally receivables from the distribution service) to generators in order to secure their payment obligations under the CCEAR. The Annual Reference Value The regulation also establishes a mechanism, the Annual Reference Value, which limits the amounts of costs that can be passed through to Final Consumers.  The Annual Reference Value corresponds to the weighted average of electricity prices in the “A-5”“A‑5” and “A-3”“A‑3” auctions, calculated for all distribution companies. The Annual Reference Value creates an incentive for distribution companies to contract for their expected electricity demands at the lowest price in “A-5”“A‑5” auctions and “A-3”“A‑3” auctions.  Distributors that buy electricity at a price lower than the Annual Reference Value in these auctions are allowed to pass through the full amount of the Annual Reference Value to consumers for three years.  The Annual Reference Value is also applied in the first three years of power purchase agreements for new power generation projects.  After the fourth year, the electricity acquisition costs from these projects are allowed to be fully passed through.  The regulation establishes the following limitations on the ability of distribution companies to pass through costs to consumers:  (i) no pass‑through of costs for electricity purchases that exceed 103.0%105.5% of actual demand; (ii) limited pass‑through of costs for electricity purchases made in an “A-3”“A‑3” auction, if the volume of the acquired electricity exceeds 2.0% of the demand for electricity purchased in the “A-5” auctions;electricity; (iii) limited pass-throughpass‑through of electricity acquisition costs from new electricity generation projects if the volume contracted under the new contracts related to existing generation facilities is lower than 96.0% of the volume of electricity provided for in the expiring contract; and (iv) full pass-throughpass‑through of costs for electricity purchases from existing facilities in the “A-1”“A‑1” auction if the purchase is limited to 1%higher than the minimum limit of the charge verified in the year prior to the distributor’s notification of estimated electricity demand to the MME.  If the acquired electricity in the “A-1” auction exceeds 1.0% of the charge, pass-through of costs related to the excess charge amount to Final Consumers is limited to 70.0% of the average value of such acquisition costs of electricity generated by existing generation facilities for delivery commencing in 2007 and ending in 2009.96%. The MME establishes the maximum acquisition price for electricity generated by existing projects that is included in auctions for the sale of electricity to distributors; and, if distributors do not comply with the obligation to fully contract their demand, the pass-throughpass‑through of the costs from energy acquired in the short‑term market will be the lower of the spot price (Preço de Liquidação de Diferenças (“PLD”), or PLD, and the Annual Reference Value. Electric Energy Trading Convention ANEEL Resolutions No. 109 of 2004 and No. 210 of 2006 govern the Electric Energy Trading Convention (Convenção de Comercialização de Energia Elétrica).  This convention regulates the organization and administration of the CCEE as well as the conditions for trading electric energy.  It also defines, among other things,things:  (i) the rights and obligations of CCEE participants,participants; (ii) the penalties to be imposed on defaulting participants,participants; (iii) the structure for dispute resolution,resolution; (iv) the trading rules in both regulatedRegulated and free marketsFree Markets; and (v) the accounting and clearing process for short‑term transactions. Restricted Activities of Distributors Distributors in the Interconnected Power System are not permitted toto:  (i) conduct businesses related to the generation or transmission of electric energy,energy; (ii) sell electric energy to Free Consumers, except for those in their concession area and undersubject to the same conditions and tariffs as those that are appliedapply to captive consumers,Captive Consumers; (iii) hold, directly or indirectly, any interest in any other company, corporation or partnershippartnership; or (iv) conduct businesses that are unrelated to their respective concessions, except for those permitted by law or in the relevant concession agreement.  Generators are not allowed to control or hold relevant equity interests in excess of 10.0% in distributors. 4751   Table of Contents   Elimination of Self-DealingSelf‑Dealing Since the purchase of electricity for captive consumersCaptive Consumers is now performed through the regulated market,Regulated Market, “self‑dealing” (under which distributors were permitted to meet up to 30.0% of their electric energy needs through energy that was either self-producedself‑produced or acquired from affiliated companies) is no longer permitted, except in the context of agreements that were approved by ANEEL before the enactment of the New Industry Model Law. Challenges to the Constitutionality of the New Industry Model Law Political parties are currently challenging the New Industry Model Law on constitutional grounds before the Brazilian Federal Supreme Court.  In October 2007, the Brazilian Federal Supreme Court issued a decision ofregarding injunctions that had been requested in the Brazilian Supreme Court on injunctions presented on the matter, was published, denying the injunctions by a majority of votes.  To date, the Brazilian Federal Supreme Court has not reached a final decision, and we do not know when such a decision may be reached.  While the Brazilian Federal Supreme Court is reviewing the New Industry Model Law, its provisions remain in effect.  Regardless of the Brazilian Federal Supreme Court’s final decision, certain portions of the New Industry Model Law relating to restrictions on distributors engaging in businesses unrelated to the distribution of electricity, including sales of energy by distributors to Free Consumers and the elimination of self-dealing,self‑dealing, are expected to remain in full force and effect. If the Brazilian Federal Supreme Court deems all or a relevantmaterial portion of the New Industry Model Law is deemedto be unconstitutional, by the Brazilian Supreme Court, the regulatory scheme introduced by the New Industry Model Law may become void, which will create uncertainty as to how and when the Brazilian government will be able to reform the electric energy sector. Ownership Limitations ANEEL had established limits on the concentration of certain services and activities within the electric energy industry, which it eliminated through Resolution No. 378 of November 10, 2009. Pursuant to  Under Resolution No. 378, ANEEL will submitnow submits potential antitrust violations withinin the electric energy sector for analysis by the EconomicalEconomic Law Department of the Ministry of Justice (Secretaria(Secretaria de Direito Econômico – SDE).), or SDE.  ANEEL can also spontaneouslyhas the power to monitor potential antitrust activity, either at its own discretion or upon SDE’s request analyze potential antitrust actsof the SDE, by identifying:  (i) the relevant markets,market; (ii) the influence of the agentsparties involved in the exchange of energy on the submarkets where the parties operate,they operate; (iii) the actual exercise of market power in connection with market prices,prices; (iv) the participation of the parties in the power generation market,market; (v) the transmission, distribution and commercialization of energy in all submarkets,submarkets; and (vi)  thedistribution entities’ efficiency gains of the distribution agents during the tariffstariff review processes.process. In practical terms, ANEEL’s attributionrole is limited to supplying the SDE with technical information to support SDE’s technical opinion.opinions by the SDE.  SDE, on itsin turn, will observehas regard to ANEEL’s comments and appointmentsdecisions, and willmay only be able to disregard them upon a motivated decision.if it demonstrates its reasons for doing so. System Tariffs for the Use of the Distribution and Transmission Systems ANEEL oversees tariff regulations that govern access to the distribution and transmission systems and establishestablishes tariffs for use of these systems.systems and energy consumption.  Different tariffs apply to different categories of consumers in accordance with how they connect to the system and purchase energy.  The tariffs areare:  (i) network usage charges, which are charges for the use of the proprietary local network of distribution companies (“TUSD”) andTUSD; (ii) tariffs for the use of the transmission system, which isconsisting of the Basic Network and its ancillary facilities, (“TUST”).or TUST; and (iii) the TE. TUSD The TUSD is paid by generators and Free and Special Consumersconsumers for the use of the distribution system of the distribution concessionaire to which the relevant generator or Free or Special Consumerconsumer is connected.  The TUSD has twoconsists of three tariffs with distinct purposes:  (i) ·The TUSD Wire (TUSD Fio), which is set in R$/kW, divided into time segments according to remunerate the tariff category, is applied to the electricity demand contracted by the party connected to the system, andremunerates the distribution and transmission concessionaire for costs of operating, maintaining and upgrading the usedistribution system.  It also provides the distribution concessionaire with a legal margin.  52 Table of the proprietary local network, through theContents ·The TUSD Service,Charges (TUSD Encargos), which variesis set in accordance with each consumer’s energy peak load,R$/MWh, is applied to electricity consumption (in MWh) and (ii) to contemplate thecontemplates certain regulatory charges applicable to the use of the local network, throughsuch as the TUSD Charges, whichProinfa Program, theConta de Desenvolvimento Energético, or CDE Account, the Tax on the Supervision of Electrical Services, or TFSEE, the ONS and others.  These charges are set by regulatory authorities and linked to the quantity of energy consumed by each consumer.  The amount to be paidcarried by the agent connected tosystem. ·The TUSD Loss (TUSD Perdas) compensates for technical losses of energy on the transmission and distribution systems, as well as non‑technical losses of energy on the distribution system is calculated by multiplying the amount of electricity contracted withthe distribution concessionaire for each connection point, in kW, by two tariffs set by ANEEL: (i) a tariff in R$/kW, which includes the remuneration of the concessionaire and the TUST and (ii) a tariff in R$/MWh, which includes electric energy-related charges and other regulatory costs related to the distribution network. system. 48 Table of Contents TUST The TUST is paid by distribution companies, generatorsgeneration companies and Free and Special Consumers forwho connect directly to the Basic Network.  It applies to their use of the Basic Network and is revised annually according to (i) an inflation index and (ii) the annual revenue of the transmission companies as determined by ANEEL.  According to criteria established by ANEEL, owners of the different parts of the transmission network were required to transfer the coordination of their facilities to the ONS in return for receiving regulated payments from the transmission system users.  Network users, including generation companies, distribution companies and free and specialFree Consumers have signeddirectly connected to the transmission network, sign contracts with the ONS and the transmission companies (represented by the ONS) entitling them to the use of the transmission network in return for the payment of certain tariffs. Other parts TE The TE is paid by Captive Consumers for energy consumption, based on the amount of electricity actually consumed, and remunerates the network that are owned by transmission companies but which are not considered partcost of the Basic Network are made directly availableenergy, certain regulatory charges related to the interested users for a specified fee.use of energy, transmission costs related to Itaipu and certain transmission system losses related to the Captive Consumer market. Basis of Calculation of Distribution Tariffs Distribution tariff rates (including the TUSD) are subject to review by ANEEL which has the authority to adjust and review thesethe above tariffs in response to changes in energy purchase costs and market conditions.  When adjustingcalculating distribution tariffs, ANEEL divides the costs of distribution companies between (i) costs that are beyondnot under the control of the distributor, or Parcel A costs,Costs, and (ii) costs that are under the control of distributors,the distributor, or Parcel B costs.Costs.  The readjustment of tariffs is based on a formula that takes into account the division of costs between the two categories. Parcel A8costs Costs include, among others, the following factors: ·        costs of electricity purchased from Itaipu; ·        costs of electricity purchased pursuant to bilateral agreements that are freely negotiated between the parties; ·        costs of electricity purchased pursuant to CCEARs; ·        certain other charges for use and connection to the transmission and distribution systems; ·        the cost of regulatory charges; and ·        the costs associated with research and development and energy energy‑efficient consumption. Parcel B8costs Costs include, among others, the following factors: ·        a rate of return on investments in energy distribution assets; ·        the depreciation on those assets; 53 Table of Contents ·        the operating expenses related to the operation of those assets; and ·        non‑recoverable receivables; each as established and periodically revised by ANEEL. The tariffs are established taking into consideration Parcel A and Parcel B costsCosts and certain market components used by ANEEL as reference for adjusting the tariffs. 8Pursuant to ANEEL’s Resolution No. 457/2011, for the generating units embedded in our distribution companies, operating and maintenance costs have been allocated to Parcel A, and depreciation has been excluded from Parcel B. 49 Table of Contents Electricity distribution concessionaires are entitled to periodic revisions of their tariffs every four or five years.  These revisions are aimed at (i) at: ·assuring necessary revenues to cover efficient Parcel B operational costs and adequate compensation for investments deemed essential for the services within the scope of each such company’s concession, and (ii)  ·determining the “X factor”, which is based onconsists of three components:  (a) expected gains of productivity from increase in scale, (b) labor costs, and (c) investments.  In the current tariff cycle, ANEEL has changed the formula to calculate the X factor.  The X factor is now based on the opotential increases in productivity, which is based on the level ofcosts as compared to market growthgrowth; oservice quality; and increase in number of consumers and service quality.  In addition, it takes into account a target of efficient oan operating expenses.  The increasesexpense target. Increases in productivity and the operating expense target of efficient operating expenses will beare determined at each periodic review.  The service quality component will beis determined at each annual adjustment following the third periodic revision cycle. The X factor is used to adjust the proportion of the change in the IGP-MIGP‑M index that is used in the annual adjustments.  Accordingly, upon the completion of each periodic revision, application of the X factor requires distribution companies to share their productivity gains with Final Consumers. Each distribution company’s concession agreement also provides for an annual adjustment.  In general, Parcel A costsCosts are fully passed through to consumers.  Parcel B costs,Costs, however, are mostly restated for inflation in accordance with the IGP-MIGP‑M index. In addition, electricity distribution concessionaires are entitled to an extraordinary tariff review (revisão extraordinária) on a case-by-casecase‑by‑case basis, to ensure their financial stability and compensate them for unpredictable costs, including taxes that significantly change their cost structure. With the introduction of the New Industry Model Law, the MME has acknowledged that the variable costs associated with the purchase of electric energy may be included by means of the Parcel A Account or CVA, an account created to recognize some of our costs when ANEEL adjusts the tariffs of our distribution subsidiaries.  See “Item 5—5.  Operating and Financial Review and Prospects—Overview—Recoverable Costs Variations—Parcel A Costs.”Costs”. In November 2011, ANEEL established the methodology and procedures applicable to the periodic revisions for 2011 through 2014 for distribution concessionaires, based on the practices developed during a previous round of the periodic tariff reviews.  For information on the new methodology applicable to the third periodic revision cycle, see “Item 3.  Risk Factors—The tariffs that we charge for sales of electricity to captive consumersCaptive Consumers are determined by ANEEL pursuant to concession agreements with the Brazilian government, so our operating revenues could be adversely affected if ANEEL makes decisions relating to our tariffs that are not favorable to us.”us”. Government Incentives to the Energy Sector In 2000, a Federalfederal decree created the Thermoelectric Priority Program (Programa Prioritário de Termeletricidade (“PPT”), or PPT, for purposes of diversifying the Brazilian energy matrix and decreasing its strong dependency on hydroelectric plants.Hydroelectric Power Plants.  The incentives granted to the thermoelectric power plantsThermoelectric Power Plants included in the PPT are:  (i) guarantyguarantee of gas supply for twenty years, pursuant to MME regulations, (ii) an assurance that thecosts related to the acquisition of the electric energy produced by thermoelectric power plantsThermoelectric Power Plants will be transferred to tariffs up to the normative value established by ANEEL and (iii) guaranteed access to a special financing program for the electric energy industry from the Brazilian Economic and Social Development Bank, (“BNDES”).or BNDES. 54 Table of Contents In 2002, the Federal GovernmentBrazilian government established the Electric Energy Alternative Sources Incentive Program (Programa de Incentivo às Fontes Alternativas de Energia Elétrica), or Proinfa Program.  Under the Proinfa Program, Eletrobrás purchasesEletrobras purchased the energy generated by alternative energy sources for a period of up to 20 years, and this energy is to be acquired by distribution companies for delivery to Final Consumers.  In its initial phase, the Proinfa Program iswas limited to a total contracted capacity of 3,300 MW.  The objective of this initiative iswas to reach a contracted capacity of up to 10.0%10% of the total annual electricity consumption of electricity in Brazil within 20 years from 2002.  Energy to be sold in the program will not be produced by generation concessionaires, like us, nor by IPPs, but by an autonomous independent producer, which may not be controlled by or affiliated with a generation concessionaire or an IPP, or affiliated with their controlling entities.  In its initial phase, which ended on December 31, 2011, theThe Proinfa Program was limited tocharge is collected from Final Consumers on a total contracted capacity of 3,300 MW.monthly basis.  Although provided for in Law No. 10,438/10,438 of 2002, it is still uncertain whether the Federal GovernmentBrazilian government will regulate and implement the second phase of the Proinfa Program. 50 Table of Contents In order to create incentives for alternative generators, the Federal GovernmentBrazilian government has established that a reduction of not less than 50.0% must be applied50% applies to TUSD amounts owed by (i) small hydroelectric power plantsSmall Hydroelectric Power Plants with capacity between 1,000 kW and 30,000 kW, (ii) generators with capacity equalup to 1,000 kW and (iii) alternative energy generators (solar, eolicwind power and biomass generators) with capacity equalup to 30,000 kW.  The reduction is applicable to the TUSD due by the generation sourceentity and also by its consumer.  The amount of the TUSD reduction will beis included as “financial components” in the tariff readjustmentreadjustments or tariff revision.revisions. Regulatory Charges EER The Reserve Energy Charge (Encargo de Energia de Reserva (“EER”), or EER, is a regulatory charge assessed on a monthly basis designed to raise funds for energy reserves contracted by CCEE.  These energy reserves will be used to increase the safety of the energy supply in the Interconnected Power System.  The EER is collected on a monthly basis from Final Consumers of the Interconnected Power System on a monthly basis.  Exceptionally, in 2009, the EER was collected in a single installment in March.registered with CCEE. RGR Fund and UBP In certain circumstances, electric energy companies are compensated for certain assets used in connection with a concession if the concession is revoked or is not renewed.  In 1971,1957, the Brazilian congressgovernment created a reserve fund designed to provide funds for such compensation, (“RGRknown as the “RGR Fund”).  Public-industryPublic‑industry electric companies must make monthly contributions to the RGR Fund at an annual rate equal to 2.5% of the company’s fixed assets in service, not to exceed 3.0% of total operating revenues in any year.  The amount of this fee was most recently revised by ANEEL in February, 1999.  In recent years, no concessions have been revoked or have failed to be renewed, and the RGR has been used principally to finance generation and distribution projects.  The RGR should have phased out by 2010.  However, Law No. 12,431/12,431 of 2011 extended the imposition of this fee until 2035.  However, Law No. 12,783 of 2013 provides that, as of January 1, 2013, this charge is no longer levied on distribution companies or new generation and transmission concessionaires. The Federal Government has imposedIndependent Power Producers that use hydropower sources similar must also pay a fee on IPPs similar to the fee levied on public-industrypublic‑industry generation companies in connection with the RGR.  IPPsRGR Fund.  Independent Power Producers are required to make contributions for using a public asset (Uso de Bem Público(“UBP”), or UBP, according to the rules set out in the public tender for the relevant concession’s public bidding process.  Eletrobrásconcession.  Eletrobras received the UBP payments until December 31, 2002.  All paymentscharges related to the UBP since December 31, 2002 have been paid directly to the Federal Government. CCC Account Distribution companies (and also some transmission companies responsible for Free Consumers) must contribute to theConta de Consumo de Combustível (“CCC Account”).  The CCC Account was created in 1973 to generate financial reserves to cover fossil fuel costs in thermoelectric power plants in the event of a rainfall shortage which would require increased use of thermal plants.  The CCC currently subsidizes the distribution systems in isolated areas where distribution costs are higher than in the Interconnected Power System.  The annual CCC Account contributions are calculated on the basis of estimates of the cost of fuel needed by the thermoelectric power plants in the succeeding year.  The CCC Account is administered by Eletrobrás.  The CCC Account, in turn, reimburses electric companies for a substantial portion of the fuel costs of their thermoelectric power plants.Brazilian government. In February 1998, the Federal Government provided for the phasing out of the CCC Account.  During the 2003‑2006 period, subsidies from the CCC Account were phased out for thermal power plants constructed prior to February 1998 and belonging to the Interconnected Power System.  Thermal power plants constructed after that date were not entitled to subsidies from the CCC Account.  In April 2002, the Federal Government established that subsidies from the CCC Account would continue to be paid, for a period of 20 years, to those thermoelectric power plants located in isolated systems.  As of January 2010, according to Law No. 12,111/2009, the CCC Account reimburses electric companies not only for fuel costs in the isolated systems but also for costs incurred with power, operational activities, maintenance, social contribution and taxes related to the generation of energy. 51 Table of Contents CDE Account In 2002, the Federal GovernmentBrazilian government instituted the Electric Energy Development Account,Conta de Desenvolvimento Energético (“ or CDE Account”),Account, which is funded through annual payments made by concessionaires for the use of public assets, penalties and fines imposed by ANEEL and the annual fees paid by agents offering electric energy to Final Consumers, by means of a charge to be added to the tariffs for the use of the transmission and distribution transmission systems.  These fees are adjusted annually.  The CDE Account was originally created to supportsupport:  (i) the development of energy production throughout Brazil,Brazil; (ii) the production of energy by alternative energy sourcessources; and (iii) the universalization of electric energy services throughout Brazil.  In addition, the CDE Account subsidizes the operations of thermoelectric generation companies for the purchase of fuel in isolated areas not connected to the Interconnected Power System, which costs were supported by the CCC Account, before the enactment of Law No. 12,783/13.  As from January 24,2013 (Provisional Measure 605/13), the CDE Account subsidizes discounts for certain categories of consumers, such as Special Consumers, rural consumers, distribution concessionaires and permissionaires, among others.  By Decree 7,945 dated March 24, 2013, the Brazilian government decided to use the CDE Account to subsidize: (i) a portion of the distribution companies’ energy costs on thermal generation in 2013; (ii) the hydrological risks of the generation concessions renewed under Law No. 12,783 in 2013; (iii) the involuntary energy under contract shortage because some generation concessions did not seek to renew their contracts and the energy produced by those concessions could not be reallocated to distributors; and (iv) part of the ESS and the CVA, such that the impact of tariff adjustments in connection with these two accounts is limited to 3% of adjustments from March 8, 2013 to March 7, 2014.  The CDE Account will be in effect for 25 years from 2002 and2002.  It is regulated by the ANEEL and managed by Eletrobrás.Eletrobras. 55 Table of Contents ESS Resolution no. 173 of November 28, 2005 established a provision for the System Service Charge,Encargo de Serviço do Sistema (“ESS”),ESS, which since January 2006 has been included in price and fee readjustments for distribution concessionaires that are part of the National Interconnected Network (Sistema Interligado Nacional.Nacional).  This charge is based on the annual estimates made by ONS on October 31 of each year. In 2013, due to adverse hydrological conditions, the ONS dispatched a number of Thermoelectric Power Plants, leading to increased costs.  These dispatches caused a significant increase in the ESS‑SE.  Since the ESS‑SE charge applies only to distribution companies (although it can subsequently be passed on by them to consumers) and to Free Consumers, the CNPE decided, through Resolution No. 03/2013, to spread the cost by extending the ESS‑SE charge to all players in the electrical energy industry.  This decision increased the cost base of our subsidiaries in businesses other than distribution (since they cannot pass on the cost to consumers), principally our generation segment.  However, certain industry participants, including our generation subsidiaries, are contesting the validity of Resolution No. 03/2013 and have obtained a court injunction, which was confirmed by the Brazilian Federal Supreme Court, exempting them from the ESS‑SE.  Fee for the Use of Water Resources The New Industry Model Law requires that holders of a concession and authorization to use water resources must pay a fee of 6.75% of the value of the energy they generate by using such facilities.  This charge must be paid to the federal district, states and municipalities where the plant or the plant’s reservoir is located. ANEEL Inspection Fee (TFSEE)— TFSEE   The ANEEL Inspection Fee is an annual fee due by the holders of concessions, permissions or authorizations in the proportion of their dimension and activities.  Currently, the ANEEL Inspection Fee is deducted from the RGR Fund. Default on the Payment of Regulatory Charges The New Industry Model Law provides that failure to pay required contributions to the RGR Fund, Proinfa Program, CDE Account, CCC Account,regulatory agent, or certain other payments, such as those due from the purchase of electric energy in the regulated marketRegulated Market or from Itaipu, will prevent the defaulting party from proceeding with readjustments or reviews of its tariffs (except for extraordinary reviews)revisions) and will also prevent the defaulting party from receiving funds from the RGR Fund and CDE Account or CCC Account. Energy Reallocation Mechanism Centrally dispatched hydrogeneratorshydro generators are protected against certain hydrological risks by the MRE, which attempts to mitigate the risks involved in the generation of hydrological energy by mandating that hydrogeneratorshydro generators share the hydrological risks of the Interconnected Power System.  Under Brazilian law, each hydroelectric plantHydroelectric Power Plant is assigned an “assured energy”,Assured Energy, which is determined in each relevant concession agreement, irrespective of the volume of electricity generated by the facility.  The MRE transfers surplus electricity from those generators that have produced electricity in excess of their assured energyAssured Energy to those generators that have produced less than their assured energy.Assured Energy.  The effective generation dispatch is determined by ONS, which takes into account nationwide electricity demand and hydrological conditions.  The volume of electricity actually generated by the plant, whetherless than or in excess of the assured energy,Assured Energy, is priced pursuant to a tariff denominated “Energy Optimization Tariff”energy optimization tariff, which covers the operation and maintenance costs of the plant.  This revenue or additional expense must be accounted for monthly by each generator. ITEM 4B.UNRESOLVED STAFF COMMENTS None. 5256   Table of Contents   ITEM 4A.Unresolved Staff Comments None. ITEM 5.                       OPERATING AND FINANCIAL REVIEW AND PROSPECTSOperating and Financial Review and Prospects The following discussion should be read in conjunction with our audited consolidated financial statements and the notes thereto included elsewhere in this annual report. We prepared our consolidated financial statements included in this annual report in accordance with IFRS, as issued by IASB. Our consolidated annual financial statements as of and for the year ended December 31, 2010 are our first financial statements prepared in accordance with IFRS.  We have applied IFRS 1 – “First‑time Adoption of International Financial Reporting Standards” in preparing these financial statements, and the comparative figures in respect of 2009 have been restated to reflect the first time adoption. Overview We are a holding company and, through our subsidiaries, wewe:  (i) distribute electricity to consumers in our concession areas,areas; (ii) generate electricity from conventional and renewable sources and develop generation projects andprojects; (iii) engage in electricity commercialization; and (iv) offer electricity‑related services.  We have four broad initiatives to improve our financial performance:  (i) the expansion of our generation Installed Capacity through greenfield and brownfield investments; (ii) the acquisition of additional distributors; (iii) the consolidation of our commercialization business as a market leader; and (iv) the provisiondevelopment of electricity-related services.  our service business. Two very important drivers of our financial performance are the operating income margin and cash flows from our regulated distribution business.  In recent years, this business has produced reasonably stable margins, and its cash flows, while sometimes subject to short‑term variability, have been stable over the medium term. Nevertheless, there are factors beyond our control that can have a significant impact, positive or adverse, on our financial performance.  We account for fourface periodic changes in our tariff structure, resulting from the periodic review of our generation subsidiaries (BAESA, ENERCAN, Foz do Chapecó and Centrais Elétricas da Paraíba – EPASA) using the proportionate consolidation method.  Upon adoption of IFRS in 2010, our generation subsidiary CERAN has become fully consolidated.  The first generation unit of Foz do Chapecó became operational in October 2010, the second generation unit became operational in November 2010,tariffs.  In 2011, a new methodology was defined by ANEEL for the third generation unit became operationalcycle of periodic reviews and all our distributors, which had their periodic reviews in December 20102011, 2012 and 2013, had a reduction in average tariffs.  For information on the fourth and final generation unit became operational in March 2011.  The thermoelectric power plants Termoparaíba and Termonordeste, both powered by fuel oil from the EPASA complex, became operational in December 2010 and January 2011, respectively. Since August 1, 2011, CPFL Energias Renováveis has been fully consolidated in our financial statements. In September 2009, we acquired seven generation subsidiaries (Santa Clara I, Santa Clara II, Santa Clara III, Santa Clara IV, Santa Clara V, Santa Clara VI and Eurus VI), which are fully consolidated through our investment in CPFL Energias Renováveis.  They are schedulednew methodology applicable to start operations in the third quarterperiodic review cycle (2011 to 2014), see “Item 3.  Risk Factors—The tariffs that we charge for sales of 2012.  In July 2010, we acquired other six generation subsidiaries (Campo dos Ventos I, II, III, IV, São Domingos and Ventos de São Martinho), whichelectricity to Captive Consumers are also fully consolidated through CPFL Energias Renováveis.  Campo dos Ventos II is scheduleddetermined by ANEEL pursuant to start operations in 2013, and the five remaining companies of this complex are scheduled to start operations in 2014.  The Macacos I and São Benedito wind farms are scheduled to start operations in 2013 and 2014, respectively. Additionally, in October 2009, we established CPFL Bio Formosa, which is fully consolidated in our financial statements through CPFL Energias Renováveis.  The main purpose of CPFL Bio Formosa is the generation of thermoelectric energy through co‑generation plants powered by sugar-cane bagasse and straw.  It began operations in the third quarter of 2011.  Our indirect subsidiaries CPFL Bio Buriti, CPFL Bio Ipê and CPFL Bio Pedra are closely-held companies that were established on January 27, 2010concession agreements with the main purpose of generating thermoelectric energy and water stream through co-generation plants powered by sugar-cane bagasse and straw.  On August 26, 2010, CPFL Bio Pedra participated in the wind power reserve auction promoted byBrazilian government, so our operating revenues could be adversely affected if ANEEL in which it entered into an agreement for the supply of 24,3 MW medium of electricity for a term of 20 years beginning in 2013.  CPFL Bio Pedra and CPFL Bio Ipêmakes decisions relating to our tariffs that are schedulednot favorable to start operations in the second quarter of 2012.  CPFL Bio Buriti started operations in the second quarter of 2011. us”. In 2011, we entered into an agreement with ERSA to combine assets and projects relating to renewable energy sources, and established CPFL Energias Renováveis.  We have been fully consolidating CPFL Energias Renováveis in our financial statements since August 1, 2011.  In December 2011, through CPFL Energias Renováveis, we acquired 100% of the shares of Jantus S.L., or Jantus, a company engaged in generation of energy through renewable sources, especially wind power.  By acquuiringacquiring Jantus, we added the following projects to our portfolio:  (i) four wind farms in operation in the state of Ceará with installed capacityInstalled Capacity of 210 MW, and (ii) wind farm projectswith total installed capacityInstalled Capacity of 732 MW in the states of Ceará and Piauí, of which 412 MW has already been certified and eligible for participation in the next electricity auctions. 53 Table of Contents OnIn January 12, 2012, through our subsidiary CPFL Energias Renováveis, we entered into a Sale and Purchase Agreement for the acquisition of 100% of the shares of Atlântica I, Atlântica II, Atlântica IV and Atlântica V, companies engaged in generation of energy through wind sources, with an aggregate installed capacityInstalled Capacity of 120 MW.  ANEEL has approved transfer of the control of the Atlântica Complex to CPFL Renováveis, as published on March 26, 2012. In FebruaryMarch 2012, through our subsidiary CPFL EnergiasRenováveis, we entered into an agreement to purchase 100% of the electric energy and water steam co‑generation assets of SPE Lacenas Participações Ltda., including its subsidiary, the Ester Thermoelectric Power Plant.  The Ester Thermoelectric Power Plant holds authorization from ANEEL to exploit electric energy from biomass (sugar cane), with Installed Capacity of 40.0 MW.  Theseco-generation plants, located in the city of Cosmópolis, in the State of São Paulo, are fully operational.  The acquisition was completed on October 18, 2012. 57 Table of Contents In June 2012, through our subsidiary CPFL Renováveis, we executed a Sale and Purchase Agreement for the acquisition of 100% of the shares of BVP, the holding company of Bons Ventos, which hold authorizations to explore wind farms with an aggregate installed capacityInstalled Capacity of 157,5157.5 MW.  The acquisition BVPwas complete on June 19, 2012. In November 2012, Tanquinho started operations.  Tanquinho is still subjectthe first solar power plant in the state of São Paulo.  Tanquinho is located in the City of Campinas, with an Installed Capacity of 1.1 MWp.  It is located in an area of 13,700 square meters at Tanquinho Substation, which belongs to certain conditions, including approvalone of our distribution subsidiaries.  The Tanquinho plant is expected to generate approximately 1.6 GWh per year.  Our subsidiary CPFL Renováveis was responsible for building this project and is responsible for managing and operating the plant. In June 2013, through our subsidiary CPFL Renováveis, we acquired the Rosa dos Ventos Wind Farms, with 13.7 MW of Installed Capacity.  This acquisition was completed in February 2014. In August 2013, the Biomass Thermoelectric Plant Coopcana started operations, with installed power of 50 MW.  In September 2013, the Campo dos Ventos II Wind Farm with 30MW of Installed Capacity started operations, although construction of the transmission line is not yet complete, as described previously on “Item 4. Information on the Company—Overview”.  In November 2013, the Biomass Thermoelectric Plant Alvorada (“UTE Alvorada”) started operations, with installed power of 50 MW. In December 2013, our subsidiary CPFL Renováveis traded at the Second A‑5/2013 Energy Auction 26.1 average MW to be generated by the regulatory authorities.Pedra Cheirosa Complex located in the state of Ceará, corresponding to 51.3 MW of Installed Capacity.  The contracts arising from this trade shall be executed with the electric energy distributors that stated themselves to be energy buyers at that auction.  The duration of these contracts shall be 20 years, and the start of energy supply shall take place on January 1, 2018.  The batches were sold at the average price of R$125.04 per MWh, with annual adjustments by the IPCA. We have three broad initiatives to improve our financial performance:By the expansionbeginning of our installed capacity,2014, with the acquisition of additional distributors the Rosa dos Ventos Wind Farms, the commercial star-up of Atlântica Wind Farmsand when the development ofMacacos Iis expected to become fully operational, our commercialization and services business.  We have a portfolio of new hydroelectric generation projects that are becoming operational.  Of this new generation capacity, approximately 572 MW became operational in 2010 (taking into account our share of jointly-owned projects) and approximately 261 MW (of which our share was 147 MW), became operational in 2011.  Installed Capacity will increase to 3,113 MW.  We expect a further 885 MW (of which our share will be 558 MW) of new generation capacitythe Campo dos Ventos Complex, the São Benedito Complex to become operational byin 2016 and the end of 2014 throughPedra Cheirosa Complex to become operational in 2018, our plants under construction.Installed Capacity will increase to 3,292 MW. There are factors beyond our control that can have a significant impact, positive or adverse, on our financial performance.  We face periodic changes in our rate structure, resulting from the periodic revision of our rates.  For instance, the second cycle of periodic revisions, which took effect during 2007 and 2008 at each of our distribution companies, resulted in the reduction of our average rates.  For information on the new methodology applicable to the third periodic revision cycle (2011 to 2014), see “Item 3.  Risk Factors—The tariffs that we charge for sales of electricity to captive consumers are determined by ANEEL pursuant to concession agreements with the Brazilian government, so our operating revenues could be adversely affected if ANEEL makes decisions relating to our tariffs that are not favorable to us.” Background Regulated Distribution Tariffs Our results of operations are significantly affected by changes in regulated tariffs for electricity.  In particular, most of our revenues are derived from sales of electricity to captive Final Consumers at regulated tariffs.  In 2011,2013, sales to captive consumersCaptive Consumers represented 69.9%68.6% of the volume of electricity we delivered and 75.5%66.7% of our operating revenues, compared to 71.0%60.8% and 76.1%70.8%, respectively, in 2010.2012.  These proportions may decline if consumers migrate from captive to free status. Our operating revenues and our margins depend substantially on the tariff-settingtariff‑setting process, and our managementManagement focuses on maintaining a constructive relationship with ANEEL, the Brazilian government and other market participants so that the tariff-settingtariff‑setting process fairly reflects our interests and those of our consumers and shareholders.  For a description of tariff regulations, see “Item 4.  Information on the Company—The Brazilian Power Industry—Distribution Tariffs.”Tariffs”. Tariffs are determined separately for each of our eight distribution subsidiaries as follows: ·        Our concession agreements provide for an annual adjustment to take account of changes in our costs, which for this purpose are divided into costs that are beyond our control (known as Parcel A costs)Costs) and costs that we can control (known as Parcel B costs)Costs).  Parcel A costsCosts include, among other things, increased prices under long‑term supply contracts, and Parcel B costsCosts include, among others, thereturn on investment related to our concessions and their expansion, as well as maintenance and operational costs.  Our ability to fully pass through our electricity acquisition costs to Final Consumers is subject to:  (a) our ability to accurately forecast our energy needs and (b) a ceiling linked to a reference value, the Annual Reference Value.  The Annual Reference Value is the weighted average of electricity acquisition costs resulting from electricity prices of all public auctions carried out by ANEEL and CCEE in the regulated marketRegulated Market for electricity to be delivered five and three years from any such auctionand only applies during the first three years following the commencement of delivery of the acquired electricity.  See “Item 4.  Information on the Company—The Brazilian Power Industry—The New Industry Model Law” for a more detailed description of all the limitations on the ability of distribution companies to fully pass through their electricity acquisition costs to Final Consumers.  Under agreements that were in force before the enactment of these regulatory reforms, we pass through the costs of acquired electricity subject to a ceiling determined by the Brazilian government.  The annual adjustment of tariffs occurs every April for CPFL Paulista, every June for RGE, every October for CPFL Piratininga and every February for CPFL Santa Cruz, CPFL Leste Paulista, CPFL Sul Paulista, CPFL Mococa and CPFL Jaguari.  There is no annual adjustment in a year with a periodic revision. 5458   Table of Contents   ·        Our concession agreements provide for a periodic revision (revisão periódica), every five years for CPFL Paulista and RGE and every four years for CPFL Piratininga, CPFL Santa Cruz, CPFL Leste Paulista, CPFL Sul Paulista, CPFL Mococa and CPFL Jaguari, to restore the financial equilibrium of our tariffs as contemplated by the concession agreements and to determine a reduction factor (known as the X factor) in the amount of Parcel B costCost increases passed on to our consumers.  ANEEL’s Resolution No. 457/2011 has established the methodology applicable to the third periodic revision cycle (2011 to 2014).  For additional information, see “Item 3.  Risk Factors—The tariffs that we charge for sales of electricity to captive consumersCaptive Consumers are determined by ANEEL pursuant to concession agreements with the Brazilian government, so our operating revenues could be adversely affected if ANEEL makes decisions relating to our tariffs that are not favorable to us” and “Item 4.  Information on the Company—The Brazilian Power Industry—Distribution Tariffs.”Tariffs”. ·        Brazilian law also provides for an extraordinary revision (revisão extraordinária) to take account of unforeseen changes in our cost structure.  Since January 2009, our distribution companies no longer collect theThe last extraordinary revision that was institutedtook place on January 24, 2013 to adjust our tariffs as a result of the national energy rationing process that occurred in 2001.changes introduced by Law No. 12,783/13.  Law No. 12,783/13 reduced the CDE Account charge and eliminated the CCC and RGR charges, therefore reducing the Parcel A Costs (energy prices, charges for the use of the Basic Network and regulatory charges, which we pass on to our consumers).  Annual Adjustment — RTA Tariff increases apply differently to different consumer classes, with generally higher increases for consumers using higher voltages, to reduce the effects of historical cross-subsidiescross‑subsidies in their favor that were mostly eliminated in 2007.  The following table sets forth the average percentage increase in our tariffs resulting from each annual adjustment from 20092010 through the date of this annual report.  Rates of tariff increase should be evaluated in light of the Brazilian inflation rate.  See “—Background—Brazilian Economic Conditions.”Conditions”.   CPFL Paulista CPFL Piratininga RGE CPFL Santa Cruz CPFL Mococa CPFL Leste Paulista CPFL Sul Paulista CPFL Jaguari 2009               Economic adjustment(1) 13.58% 2.81% 10.44% 10.69% 10.52% 10.58% 11.80% 11.01% Regulatory adjustment(2) 7.64% 3.17% 8.51% 13.40% 0.66% 2.36% -0.16% 0.35% Total adjustment 21.22% 5.98% 18.95% 24.09% 11.18% 12.94% 11.64% 11.36% 2010(3)               Economic adjustment(1) 1.55% 8.59% 1.72% 1.90% 4.15% -6.32% 4.30% 5.81% Regulatory adjustment(2) 1.15% 1.52% 10.65% 8.19% -0.17% -6.89% 1.36% -0.65% Total adjustment 2.70% 10.11% 12.37% 10.09% 3.98% -13.21% 5.66% 5.16% 2011                 Economic adjustment(1) 6.11% (4) 8.58% 8.01% 6.84% 6.42% 6.57% 5.22% Regulatory adjustment(2) 1.27% (4) 8.63% 15.60% 2.66% 1.34% 1.45% 0.25% Total adjustment 7.38% (4) 17.21% 23.61% 9.50% 7.76% 8.02% 5.47% 2012                 Economic adjustment(1) (5) (5) (5) (4) (4) (4) (4) (4) Regulatory adjustment(2) (5) (5) (5) (4) (4) (4) (4) (4) Total adjustment (5) (5) (5) (4) (4) (4) (4) (4)   CPFL Paulista CPFL Piratininga RGE CPFL Santa Cruz CPFL Mococa CPFL Leste Paulista CPFL Sul Paulista CPFL Jaguari 2010(1)                 Economic adjustment(2) 1.55% 8.59% 1.72% 1.90% 4.15% ‑6.32% 4.30% 5.81% Regulatory adjustment(3) 1.15% 1.52% 10.65% 8.19% ‑0.17% ‑6.89% 1.36% ‑0.65% Total adjustment 2.70% 10.11% 12.37% 10.09% 3.98% ‑13.21% 5.66% 5.16% 2011                 Economic adjustment(2) 6.11% 4.45% 8.58% 8.01% 6.84% 6.42% 6.57% 5.22% Regulatory adjustment(3) 1.27% 0.98% 8.63% 15.60% 2.66% 1.34% 1.45% 0.25% Total adjustment 7.38% 5.43% 17.21% 23.61% 9.50% 7.76% 8.02% 5.47% 2012                 Economic adjustment(2) 1.96% 7.71% 0.49% 4.36% 7.20% ‑2.20% ‑4.41% ‑7.15% Regulatory adjustment(3) 1.75% 1.08% 11.02% 3.74% 1.80% 2.28% 0.69% 0.05% Total adjustment 3.71% 8.79% 11.51% 8.10% 9.00% 0.08% ‑3.72% ‑7.10% 2013                 Economic adjustment(2) 4.53% 9.69% ‑10.66% 12.15% ‑1.83% 7.96% 6.98% 10.76% Regulatory adjustment(3) 0.95% ‑2.27% 0.34% ‑2.82% 8.83% ‑1.47% ‑4.71% ‑8.06% Total adjustment 5.48% 7.42% ‑10.32% 9.32% 7.00% 6.48% 2.27% 2.71% 2014                 Economic adjustment(2) (4) (4) (4) 9.89% 2.00% ‑4.74% ‑3.16% 1.17% Regulatory adjustment(3) (4) (4) (4) 4.96% ‑4.07% ‑2.93% ‑2.35% ‑4.90% Total adjustment (4) (4) (4) 14.86% ‑2.07% ‑7.67% ‑5.51% ‑3.73%   (1)   The 2010 annual adjustment is based on the “Addendum to the Concession Contracts”, described below. (2)   This portion of the adjustment primarily reflects the inflation rate for the period and is used as a basis for the following year’s adjustment. (2)(3)   This portion of the adjustment reflects settlement of regulatory assets and liabilities we present in our regulatory financial information, primarily the CVA, and is not considered in the calculation of the following year’s adjustment. See note 36 to our financial statements included in this annual report. (3)           The 2010 annual adjustment is based on the “Addendum to the Concession Contracts”, described below.  (4)           ANEEL have postponed the third periodic revision cycle for these distribution companies, as indicated in the “Periodic Revisions” table below. (5)   Annual adjustments for CPFL Paulista, RGE and CPFL Piratininga occur in April, June and October, respectively.   5559   Table of Contents     On February 2, 2010, ANEEL approved a proposal for an addendum to the concession contracts for electric energy distributors (the “Addendum to the Concession Contracts”).  The Addendum to the Concession Contracts changes the methodology for calculating the annual tariff adjustment, excluding the effect of market variations resulting from the difference between the projected and actual energy sold (mainly related to regulatory charges) from the calculation base when calculating tariff adjustments.  See “Item 4. Information on the Company—The Brazilian Power Industry – Industry—Distribution Tariffs” for further information on the calculation of our tariffs.  We do not expect the new calculation methodology to materially affect our future results or financial condition. The new methodology was applied in calculating the tariff adjustments as of February 2010 for our eight distribution subsidiaries. Periodic Revisions — RTP The following table sets forth the percentage change in our tariffs resulting from the first, second and third cycles of periodic revisions. First cycle Second cycle Third cycle             Adjustment Total Adjustment Total Adjustment Total date adjustment Date adjustment date adjustment First cycle Second cycle Third cycle             Adjustment date Economic adjustment Adjustment date Economic adjustment Adjustment date Economic adjustment   (%)   (%)   (%)   (%)   (%)   (%) CPFL Paulista April 2003 20.66 April 2008 -14.00 April 2013 - April 2003 20.66 April 2008 ‑14.00 April 2013 5.48 CPFL Piratininga October 2003 10.14 October 2007 -12.77 October 2011 (1) October 2003 10.14 October 2007 ‑12.77 October 2011 ‑3.95(2) RGE April 2003 27.96 April 2008 2.34 June 2013 - April 2003 27.96 April 2008 2.34 June 2013 ‑10.32 CPFL Santa Cruz February 2004 17.14 February 2008 -14.41 February 2012 (1) February 2004 17.14 February 2008 ‑14.41 February 2012 4.16(1) CPFL Mococa February 2004 21.73 February 2008 -7.60 February 2012 (1) February 2004 21.73 February 2008 ‑7.60 February 2012 7.18(1) CPFL Leste Paulista February 2004 20.10 February 2008 -2.18 February 2012 (1) February 2004 20.10 February 2008 ‑2.18 February 2012 ‑2.00(1) CPFL Sul Paulist February 2004 12.29 February 2008 -5.19 February 2012 (1) CPFL Sul Paulista February 2004 12.29 February 2008 ‑5.19 February 2012 ‑3.78(1) CPFL Jaguari February 2004 - 6.17 February 2008 -5.17 February 2012 (1) February 2004 ‑6.17 February 2008 ‑5.17 February 2012 ‑7.09(1) (1)   As a result of ANEEL’s delay in determining the methodology applicable to the third periodic revision cycle, CPFL Piratininga’s periodic review, originally scheduled for October 23, 2011, was postponed to October 23, 2012.  For the same reason, the periodic review process for CPFL Santa Cruz, CPFL Jaguari, CPFL Mococa, CPFL Leste Paulista and CPFL Sul Paulista have been postponed fromwas concluded on February 3, 2013 to February 3, 2012, without the ANEEL’s assessment for distribution subsidiaries’ administrative appeal.  This was assessed by ANEEL in January 2014, with the following results:  (i) Dispatch 165 of January 28, 2014 alters the tariff revision index from 7.20% to February 3, 2013. 7.18% for CPFL Mococa, mainly because of a Regulatory Asset Base, or RAB, reduction; (ii) Dispatch 212 of January 30, 2014 alters the tariff revision index from 4.36% to 4.16% for CPFL Santa Cruz, mainly because of a RAB reduction; (iii) Dispatch 166 of January 28, 2014 alters the tariff revision index from ‑2.20% to ‑2.00% for CPFL Leste Paulista, mainly because of an increase in RAB and losses; (iv) Dispatch 211 of January 30, 2014 alters the tariff revision index from ‑3.72% to ‑3.78 % for CPFL Sul Paulista, mainly because of a RAB reduction; and (v) Dispatch 167 of January 28, 2014 alters the tariff revision index from 7.10% to -7.09% for CPFL Jaguari, mainly because of a RAB increase. (2)   CPFL Piratininga filed an administrative appeal questioning the regulatory losses in the periodic review process.  The appeal was assessed by ANEEL, and Dispatch 3,426, issued in October  8, 2013 altered the result of the periodic review process from ‑4.45% to ‑3.95%. Extraordinary Tariff Adjustment – RTE As established by Law No. 12.783/2013, all distributors had an RTE from January 24, 2013 in order to pass on to consumers the effects promoted by the renewal of generation and transmission concessions and the reduction in regulatory charges.  The extraordinary tariff adjustments are presented for distribution in the following table: Table of Contents   CPFL Paulista CPFL Piratininga RGE CPFL Santa Cruz CPFL Mococa CPFL Leste Paulista CPFL Sul Paulista CPFL Jaguari 2013                 Economic adjustment -15.3% -11.3% -12.0% -6.8% -7.6% -17.2% -18.4% -25.4% Regulatory adjustment -0.5% 1.1% 0.7% 3.7% 1.8% 2.3% 0.0% 0.1% Total adjustment -15.8% -10.2% -11.4% -3.1% -5.8% -14.9% -18.4% -25.3% Sales to Potentially Free Consumers The Brazilian government has introduced regulatory changes intended to foster the growth of open-marketopen‑market energy transactions by permitting qualifying consumers to opt out of the system of tariff regulation and become “free” consumersFree Consumers entitled to contract freely for electricity.  See “Item 4. Information on the Company—The Brazilian Power Industry—The Free Market.”Market”.  To date, as compared to the total number of our captive consumers,Captive Consumers, the number of potentiallyPotentially Free Consumers is relatively small, but they account for a significant amount of our electricity sales and revenues.  In 2010both 2013 and 2011,2012, approximately 22.6% and 17.6%, respectively,17.0% of our electricity sales were to supply potentiallyPotentially Free Consumers.  Most of our potentiallyPotentially Free Consumers have not elected tobecome Free Consumers.  We believe this is becausebecause:  (i) they consider the advantages of negotiating for a long-termlong‑term contract at rates lower than the regulated tariff are outweighed by the need to bear additional costs (particularly transmission costs) and the long-termlong‑term price riskrisk; and (ii) some of our potentiallyPotentially Free Consumers, who entered into contracts before July 1995, may only change to suppliers that purchase from renewable energy sources, such as small hydroelectric power plantsSmall Hydroelectric Power Plants or biomass.  Even if a consumer decides to migrate from the regulated tariff system and become a Free Consumer, it still has to pay us network usage charges, and such payments would mitigate the loss in operating income from any such migration.  We do not expect to seethat a substantial number of our consumers will become Free Consumers, but the prospects for migration between the different markets (captive and free) over the long term, and its implications for our financial results, are difficult to predict. 56 Table of Contents Prices for Purchased Electricity The prices of electricity purchased by our distribution companies under long‑term contracts executed in the regulated market areRegulated Market are:  (i) approved by ANEEL in the case of agreements entered into before the New Industry Model LawLaw; and (ii) determined in auctions for agreements entered into thereafter, while the prices of electricity purchased in the free marketFree Market are agreed by bilateral negotiation based on prevailing market rates.  In 2011,2013, we purchased 50,85357,692 GWh, compared to 52,38462,597 GWh in 2010.2012.  Prices under long‑term contracts are adjusted annually to reflect increases in certain generation costs and inflation.  Most of our contracts have adjustments linked to the annual adjustment in distribution tariffs, so that the increased costs are passed through to our consumers in increased tariffs.  Since an increasing proportion of our energy is purchased at public auctions, the success of our strategies in these auctions affects our margins and our exposure to price and market risk, as our ability to pass through costs of electricity purchases depends on the successful projection of our expected demand. We also purchase a substantial amount of electricity from Itaipu under take-or-paytake‑or‑pay obligations at prices that are governed by regulations adopted under an international agreement.  Electric utilities operating under concessions in the Midwest, South and Southeast regions of Brazil are required by law to purchase a portion of Brazil’s share of Itaipu’s available capacity.  In 2011,2013, we purchased 10,85510,719 GWh of electricity from Itaipu (21.3%(18.6% of the electricity we purchased in terms of volume), as compared to 10,83510,781 GWh (20.7%(17.2% of the electricity we purchased)purchased in 2010.terms of volume) in 2012.  See “Item 4.  Information of the Company—Purchases of Electricity—Itaipu.”Electricity”.  The price of electricity from Itaipu is set in U.S. dollars to reflect the costs of servicing its indebtedness.  Accordingly, the price of electricity purchased from Itaipu increases in Brazilianreaiswhen therealdepreciates against the U.S. dollar (and decreases when therealappreciates).  The change in our costs for Itaipu electricity in any year is subject to the Parcel A costCost recovery mechanism described below. In 2011, our installed capacity reached 2,644 MW.  CPFL Bioenergia, Foz do Chapecó and Termonordeste power plants started operations in August, October and December 2010, respectively.  In July 2010, we acquired Campo dos Ventos wind farms in the state of Rio Grande do Norte.  Also in 2010, we constituted CPFL Bio Ipê and CPFL Bio Pedra to develop electric energy generation projects from sugar cane bagasse in partnership with Grupo Pedra Agroindustrial.  Operations of Bio Ipê and Bio Pedra are expected to commence in 2012.  In 2011, Termoparaíba, CPFL Bio Formosa and CPFL Bio Buriti thermoelectric plants, as well as the fourth generating unit of Foz do Chapecó, started operations.  In February 2012, the construction of CPFL Bio Alvorada and CPFL Bio Coopcana biomass thermoelectric power plants began, and operations are scheduled to start in 2013.  Operations of Macacos I and São Benedito wind farms are scheduled to start in 2013 and 2014, respectively.  As a result of our electric energy generation projects in progress, our installed capacity will reach 3,301 MW, which represents an increase of 25% by 2014 (including the wind farms from the Bons Ventos complex). Most of the electricity we acquired in the free marketFree Market was purchased by our commercialization subsidiary CPFL Brasil, which resells electricity to Free Consumers and other concessionaries and licensees (including our subsidiaries).  See “—The Brazilian Power Industry—The Free Market.”Market”. 61 Table of Contents Recoverable Cost Variations—Parcel A Costs We use the CVA or the Parcel A account to recognize some of our costs in the distribution tariff, referred to as “Parcel A” costs,Costs, that are beyond our control.  When these costs are higher than the forecasts used in setting tariffs, we are generally entitled to recover the difference through subsequent annual tariff adjustments. 57 Table of Contents Under IFRS, regulatory assets and liabilities cannot be accounted forrecognized  because they do not comply with assets and liabilities requirements established by the Framework for the Preparation and Presentation of Financial Statements (Estrutura Conceitual para Elaboração e Apresentação das Demonstrações Contábeis) issued by IASB and the Brazilian Securities Commission,Comissão de Valores Mobiliários(“CVM”).IASB.  Therefore, we only account for rights or compensations when our captive clients effectively pay us.were billed. The costs of electricity purchased from Itaipu are indexed to the U.S. dollar exchange variation.  If the U.S. dollar appreciates against thereal, our costs will increase and, consequently, our revenuesincome will decrease in the same period.  These losses will be offset in the future, when the next annual tariff adjustments occur. Operating Segments As a result ofIn connection with our association with ERSA and the acquisition of Jantus’ shares,Jantus in 2011, we have created a separate operating segment to segregate our activities relating to renewable energy generation sources.  Therefore, sinceAs a result, our financial reporting was separated into four operating segments with effect fromAugust1, 2011:  (i) distribution; (ii) conventional generation sources; (iii) renewable generation sources; and (iv) commercialization.  Financial information relating to our renewable generation sources segment in 2011 consists of our historical renewable generation activities for the month ofAugust2011 (which activities were reported within our conventional generation segment for the first sevenmonths of 2011 and in prior periods2) and, with effect from August 1, 2011, we have been operating with four different reportable segments: distribution, conventional generation sources,the renewable generation sourcesassets acquired through our association with ERSA and commercialization.  SeeJantus.  In addition, commencing January 1, 2012, we began to analyze our services activities on a segregated basis.  As a result, as discussed in note 30 to our audited consolidated financial statements.  Because there is no information onstatements, we now present our financial results under five operating segments:  (i) distribution; (ii) conventional generation sources; (iii) renewable generation segment for 2010, the discussion below will focus on the distribution, conventional generation sourcessources; (iv) commercialization; and commercialization segments.(v) services. Our generationresults for the years 2013, 2012 and commercialization2011 discussed below have been restated to reflect our five reporting segments.  However, the discussion of the years 2012 and services segments currently represent2011 does not include a small percentagefull comparative analysis of our net revenues:  5.5% and 7.9% inthe variations between the two periods, since the ERSA’sassets only impacted the last five months of 2011 and 4.5%, and 8.4% in 2010, respectively.  However, the contribution of our  generation and commercialization and services segments to our net income was higher (23.3%and 10.1% in 2011, respectively).Jantus only December 2011. The profitability of our segments differs.  Our distributionDistribution segment primarily reflects primarily sales to captive consumersCaptive Consumers and TUSD charges paid by Free Consumers at prices determined by the regulatory authority.  The volume sold varies according to external factors such as weather, income level and economic growth.  This segment represents 86.6%79.1% of our net operating revenue, but its contribution to our net income is a bit smaller.  In 2011, 70.2%2013, 76.5% of our net income was derived from our distribution activities while 3.6%(in 2012, our distribution activities accounted for 68.7% of our net income consumed withinand 69.6% in 2011). Our conventional generation, renewable generation, commercialization and services segments currently represent a small percentage of our net revenues:  6.3%, 7.4%, 12.6% and 1.4% for the segment intitled “Other” inyear ended December 31, 2013, and 5.6%, 5.5%, 12.7% and 1.2% for the table below.year ended December 31, 2012, respectively.  The contribution of our conventional generation, renewable generation, commercialization and services segments to our net income differs (32.9%, ‑5.8%, 3.8%and 1.7% for the year ended December 31, 2013, respectively, and28.7%, 0.7%, 8.5% and 2.2% for the year ended December 31, 2012, respectively).  For the year ended December 31, 2011, the contribution of our conventional generation, renewable generation, commercialization and services segments to our net income was 24.2%, 5.9%, 12.2% and 1.0%, respectively.  Our conventional generation sources segment consists in substantial part of new hydroelectric plants,Hydroelectric Power Plants, and our renewable generation sources segment consists of wind farms, biomass thermoelectric projectsBiomass Thermoelectric Power Plants and small hydroelectric power plants.Small Hydroelectric Power Plants.  All of our generation sources require a high level of investment in fixed assets, and in the early years there is typically a high level of construction financing.  SinceOnce these projects became operational, they have resultedwill result in a higher margin (operating income as a percentage of revenue) than the distributionDistribution segment, but havewill also contributedcontribute to higher interest expenses and other financing costs.  For example, in 2011 and 2010the year ended December 31, 2013, our renewable generation sources segment provided 29.4% and 22.5%, respectively,9.1% of our operating income, but due to the relative significance of thesignificant financial expenses incurred to finance these projects, the segment’s contribution to net income was lower.  In 2011, 23.3% of our net income was derived from our generation activities.negative (-5.8%). We have been reporting our renewable generation sources segment according to IFRS rules since2Since August 1, 2011, asafter a resultseries of our association with ERSAcorporate restructuring, the renewable energy assets and Jantus. For this reason, we have no individual comparative information for 2010,projects previously held by the subsidiaries CPFL Geração and discussion of results and operations relating to our renewable generation sources segmentCPFL Brasil have been associated with discussion of results and operations of our conventionalanalyzed by Management as an energy generation from renewable sources segment. As the amounts were immaterial, these assets remained in the conventional energy segment for the first seven months of 2011. 62 Table of Contents As of December 31, 2011, 30.3%2013, 11.7% of the property, plant and equipment in the renewable generation sources segment was under construction. Our commercialization and services segment sells electricity and provides value-added services to Free Consumers and other concessionariesconcessionaires or licensees.  In 2011, 10.1%For the year ended December 31, 2013, 3.8% of our net income was derived from our commercialization activities, compared to 8.5% for the year ended December 31, 2012. Our services segment offers our consumers a wide range of electricity‑related services.  These services are designed to help consumers improve the efficiency, cost and reliability of the electric equipment they use.  For the year ended December 31, 2013, 1.7% of our net income was derived from the services activities.segment, compared to 2.2% of our net income for the year ended December 31, 2012. Our segments also purchase and sell electricity and value-addedvalue‑added services tofrom and fromto one another.  In particular, our generation (from both conventional and renewable sources), commercialization and services segments sell electricity and provide services to our distributionDistribution segment.  In order to avoid duplication of revenue and expense amounts, the results by segment in ourOur consolidated financial statements eliminate revenues and expenses that relate to sales from one subsidiary to another.  However, the analysis of results by segment would be inaccurate if the same eliminationsset‑offs were carried out with respect to salesbetween segments.  As a result, sales from one segment to another have not been eliminated or set‑off in the discussion of results by segment below.  See below: 58 Table of Contents   Distribution Generation Commercialization and Services Other(*) Elimination Total 2011             Net Revenue 11,048,924 706,133 1,007,780 1,191 - 12,764,028 (-) Intersegment Revenues 16,831 914,542 698,128 - (1,629,501) 0 Income from electric energy service 1,922,194 895,429 263,977 (31,053) - 3,050,547 Financial income 429,371 137,541 75,902 55,373 - 698,188 Financial expense (669,818) (554,434) (104,358) (58,167) - (1,386,778) Income before taxes 1,681,747 478,537 235,520 (33,847) - 2,361,957 Income tax and social contribution 571,204 110,584 75,689 22,096 - 779,573 Net Income 1,110,543 367,952 159,832 (55,943) - 1,582,384 Total Assets(**) 11,651,205 13,129,529 509,372 2,122,951 - 27,413,057 Capital Expenditures and other intangible assets 1,065,104 822,553 16,927 189 - 1,904,773 Depreciation and Amortization 498,225 295,960 5,742 1,277 - 801,203               2010             Net Revenue 10,471,192 538,217 1,012,525 1,795 - 12,023,729 (-) Intersegment Revenues 13,904 650,571 766,922 - (1,431,397) - Income from electric energy service 1,852,867 616,416 302,981 (32,949) - 2,739,315 Financial income 316,020 53,725 22,389 90,981 - 483,115 Financial expense (394,999) (323,441) (22,311) (96,307) - (837,058) Income before taxes 1,773,749 345,914 302,024 (36,315) - 2,385,372 Income tax and social contribution (604,865) (88,731) (95,840) (35,899) - (825,335) Net Income 1,168,884 257,183 206,184 (72,214) - 1,560,037 Total Assets(**) 11,689,503 7,568,600 349,047 449,655 - 20,056,805 Capital Expenditures and other intangible assets 1,127,637 645,040 27,853 10 - 1,800,540 Depreciation and Amortization 352,806 188,981 4,553 145,453 - 691,793 (*)           Other – Refers basically to the CPFL Energia figures after eliminations of balances with related parties (**)         The goodwill created in an acquisition and recorded in CPFL Energia was allocated to the respective segments We present below selected financial information of our fourfive reportable segments as of and for the period from August 1, 2011 toyears ended December 31, 2011:2013, 2012 and 2011:  Distribution Conventional Generation Sources Renewable Generation Sources Commercialization Other(*) Elimination Total Distribution Conventional generation sources Renewable generation sources Commercialization Services Other(*) Elimination Total 2011       2013   Net Revenue 11,048,924 609,755 96,378 1,007,780 1,191 - 12,764,028 11,563,700 601,980 802,011 1,579,893 84,622 1,649 ‑ 14,633,856 (-) Intersegment Revenues 16,831 839,029 75,513 698,128 - (1,629,501) - (‑) Intersegment Revenues 15,354 323,658 281,913 264,891 116,184 ‑ (1,002,001) ‑ Income from electric energy service 1,922,194 848,173 47,256 263,977 (31,053) - 3,050,547 1,550,951 559,784 214,750 52,060 13,333 (21,103) ‑ 2,369,775 Financial income 429,371 80,617 56,924 75,902 55,373 - 698,188 504,463 40,005 55,083 27,665 13,876 58,115 ‑ 699,208 Financial expense (669,818) (519,758) (34,676) (104,358) (58,167) - (1,386,778) (906,153) (338,783) (314,243) (22,601) (4,358) (84,513) ‑ (1,670,651) Income before taxes 1,681,747 409,032 69,504 235,520 (33,847) - 2,361,957 1,149,261 381,874 (44,410) 57,123 22,852 (47,500) ‑ 1,519,200 Income tax and social contribution 571,204 112,593 (2,008) 75,689 22,096 - 779,573 (423,712) (69,937) (10,607) (21,399) (6,881 ) (37,627) ‑ (570,164) Net Income 1,110,543 296,440 71,513 159,832 (55,943) - 1,582,384 725,549 311,937 (55,017) 35,724 15,970 (85,127) ‑ 949,036 Total Assets(**) 11,651,205 5,350,193 7,779,336 509,372 2,122,951 - 27,413,057 15,263,417 4,515,880 9,470,564 342,516 243,612 1,206,806 ‑ 31,042,796 Capital Expenditures and other intangible assets. 1,065,104 334,989 487,564 16,927 189 - 1,904,773 Capital Expenditures and other intangible assets 844,804 9,744 827,704 3,593 48,646 345 ‑ 1,734,836 Depreciation and Amortization 498,225 259,514 36,446 5,742 1,277 - 801,203 (564,538) (133,514) (348,355) (4,106 ) (4,632 ) (86) ‑ (1,055,231)   Distribution Conventional generation sources Renewable generation sources Commercialization Services Other (*) Elimination Total 2012 - restated                 Net Revenue 12,391,730 558,547 608,223 1,284,069 46,855 1,452 - 14,890,875 (-) Intersegment Revenues 22,138 269,688 210,260 602,332 124,968 - (1,229,386) - Income from electric energy service 1,369,809 494,885 215,139 255,193 26,276 (28,210) - 2,335,091 Financial income 558,130 32,809 56,461 39,389 4,777 15,397 - 706,963 Financial expense (632,278) (228,949) (254,333) (140,506) 8,475 (37,143) - (1,284,736) Income before taxes 1,295,661 421,423 17,268 154,076 39,528 (49,957) - 1,877,998 Income tax and social contribution (469,081) (72,756) (9,256) (52,000) (12,856) (54,987) - (670,937) Net Income 826,580 348,667 8,011 102,075 26,672 (104,944) - 1,207,062 Total Assets(**) 14,729,776 4,376,137 8,786,521 466,645 186,303 378,897 - 28,924,279 Capital Expenditures and other intangible assets 1,402,994 12,804 1,021,970 2,870 18,865 508 - 2,460,011 Depreciation and Amortization (544,192 ) (138,417) (289,372) (3,177) (3,693) (74) - (978,926) 63 Table of Contents   Distribution Conventional generation sources Renewable generation sources Commercialization Services Other (*) Elimination Total 2011 - restated                 Net Revenue 11,048,924 510,192 96,378 956,365 61,417 1,191 - 12,674,467 (-) Intersegment Revenues 16,831 334,847 75,513 613,690 74,436 - (1,115,317) - Income from electric energy service 1,845,507 497,012 47,256 246,039 17,938 (29,953) - 2,623,799 Financial income 492,584 71,981 56,924 69,768 6,134 55,373 - 752,764 Financial expense (669,818) (289,020) (34,676) (99,574) (4,784) (58,167) - (1,156,040) Income before taxes 1,668,273 363,041 69,504 216,232 19,289 (32,747) - 2,303,592 Income tax and social contribution (592,528) (70,766) 2,008 (68,430) (7,258) (22,096) - (759,070) Net Income 1,075,745 292,275 71,513 147,802 12,031 (54,843) - 1,544,522 Total Assets(**) 12,846,926 3,161,824 7,779,336 426,858 88,568 865,766 - 25,169,277 Capital Expenditures and other intangible assets 1,065,104 196,393 487,564 14,854 2,073 189 - 1,766,177 Depreciation and Amortization (498,225) (141,934) (36,446) (4,093) (1,649) (177) - (682,524) (*)   Other – Refers basically to the assets and transactions recorded at CPFL Energia figures after eliminationswhich are not related to any of balances with related partiesthe identified segments. (**) The goodwill created in an acquisition andIntangible assets (net of amortization) recorded inat CPFL Energia, waswere allocated to thetheir respective segmentssegments. 59 Table of Contents We also derive non‑material income at parent company level that is not related to or included in the results of our reportable segments.  General expenses and overhead indirect costsare generally allocated to the relevant subsidiary and are reflected in the operating results of our reporting segments.  Other expenses incurred by the parent company that can be directly allocated to a specific segment, such as the posting ofgoodwill, an intangible asset relating to a concession, and the amortization thereof, are also allocated to our reporting segments. Brazilian Economic Conditions All of our operations are in Brazil, and we are affected by general Brazilian economic conditions.  In particular, the general performance of the Brazilian economy affects demand for electricity, and inflation affects our costs and our margins. The Brazilian economic environment has been characterized 64 Table of Contents Some factors may significantly affect demand for electricity, depending on the category of consumers: ·Residential and Commercial Consumers.  These segments are highly affected by significant variationsweather conditions, labor market performance, income distribution, credit availability, amongst other factors.  Elevated temperatures and increases in income levels cause an increased demand for electricity and, therefore, increase our sales. ·Industrial consumers.  Consumption for industrial consumers is related to economic growth rates, with very low growth from 2001 through 2003 and an economic recovery since 2004.  This trend was interrupted by the internationalinvestments, mostly correlated to industrial production.  During periods of financial crisis, this category suffers the strongest impact. Inflation primarily affects our business by increasing operating costs and financial expenses to service our inflation‑indexed debt instruments.  We are able to recover a portion of these increased costs through the Parcel A Cost recovery mechanism, but there is a delay in 2009.  In 2010,time between when the Brazilian economic environment experienced strong growth as it recovered afterincreased costs are incurred and when the international financial crisis of 2008/2009.  In 2011, international economic trouble, specifically inincreased revenues are received following our annual tariff adjustments.  The amounts owed to us under Parcel A are indexed to the Euro Zone, was reflected in the reduced growthvariation of the Brazilian economy.SELIC rate until they passed through to our tariffs. Depreciation of therealincreases the cost of servicing our foreign currency denominated debt and the cost of purchasing electricity from the Itaipu power plant, a Hydroelectric Facility that is one of our major suppliers and that adjusts electricity prices based in part on its U.S. dollar costs. The following table shows inflation, the change in gross domestic product (inreais) and the variationmain performance indicators of thereal against the U.S. dollarBrazilian economy for the years ended December 31, 2011, 2010, 2009, 20082013, 2012 and 2007.2011.   Year ended December 31, 2011 2010 2009 2008 2007 Inflation (IGP-M)(1) 5.1% 11.3% -1.7% 9.8% 7.8% Inflation (IPCA)(2) 6.5% 5.9% 4.3% 5.9% 4.5% Growth (contraction) in gross domestic product (inreais) 2.7% 7.5% -0.2% 5.1% 5.4% Depreciation (appreciation) of thereal vs. U.S. dollar 12.6% -4.3% -25.5% 31.9% -17.2% Period-end exchange rate–US$1.00 R$1.876 R$1.666 R$1.741 R$2.337 R$1.771 Average exchange rate–US$1.00(3) R$1.671 R$1.759 R$1.990 R$1.833 R$1.930   Year ended December 31,   2013 2012 2011 Growth in GDP (in reais) 2.3% 1.0% 2.7% Unemployment rate ‑ % average 5.4% 5.5% 6.0% Credit to individuals (non‑earmarked resources) ‑ % GDP 15.5% 15.7% 15.2% Growth in Retail Sales 4.3% 8.4% 6.6% Growth (contraction) in Industrial Production 1.1% ‑2.6% 0.4% Inflation (IGP‑M)(1) 5.5% 7.8% 5.1% Inflation (IPCA)(2) 5.9% 5.8% 6.5% Average exchange rate–US$1.00(3) R$2.174 R$1.958 R$1.671 Period‑end exchange rate–US$1.00 R$2.343 R$2.044 R$1.876 Depreciation (appreciation) of the real vs. U.S. dollar 14.6% 9.0% 12.6%   Source:Sources: Fundação Getúlio Vargas,,the  Instituto Brasileiro de Geografia e Estatística and the Brazilian Central Bank. (1)   Inflation (IGP-M)(IGP‑M) is the general market price index measured by the Fundação Getúlio Vargas. (2)   Inflation (IPCA) is a broad consumer price index measured by the Instituto Brasileiro de Geografia e Estatística and the reference for inflation targets set forth by the CMN. (3)   Represents the average of the commercial selling exchange rates on the last day of each month during the period. Inflation primarily affects our businessThe Brazilian economic environment has been characterized by increasing operating costssignificant variations in economic growth rates, with very low growth from 2001 through 2003 (1.7% p.a.) and an economic recovery between 2004 and 2008 (4.8% p.a.).  This trend was interrupted by the international financial expenses to service our inflation-indexed debt instruments.  We are able to recover a portion of these increased costs throughcrisis in 2009.  Since then, Brazilian economic activity has been affected by the Parcel A cost recovery mechanism, but there is a delay in time between when the increased costs are incurredinternational scenario and when the increased revenues are received following our annual tariff adjustments.  The amounts owed to us under Parcel A are indexedindustrial performance showed moderate results due to the variationlower exports, unfavorable investors’ expectations and infrastructure deficiencies.  GDP grew at lower rates in this period, reaching an average growth rate of 2.6% between 2009 and 2013. However, income and employment maintained a significant performance, despite the SELIC rate until they passed through tohigher inflation observed in the first semester of 2013.  Retail sales, especially household appliances, and credit availability had a good performance as well.  The strength of domestic market, reflecting better income distribution, improvements in labor market and household consumption, benefits our tariffs.operations. Depreciation of thereal increases the cost of servicing our foreign currency denominated debt and the cost of purchasing electricity from the Itaipu power plant, a hydroelectric facility that is one of our major suppliers and that adjusts electricity prices based in part on its U.S. dollar costs. Some external factors may significantly affect our businesses depending on the category of consumers: ·Residential and Commercial Consumers.  These classes are highly affected by weather conditions and income distribution.  Elevated temperatures and increases in income levels cause an increased demand for electricity and, therefore, increase our sales. ·Industrial consumers.  Consumption for industrial consumers is related to economic growth, amongst other factors, correlated mostly to GDP.  During periods of financial crisis, this class suffers the strongest impact. 6065   Table of Contents   Results of Operations—20112013 compared to 20102012 InWe restated our balance sheets, as of January 1, 2012 and December 31, 2012, and the Statements of Income, of Comprehensive Income, of Change in Shareholders´ Equity and Cash Flows for the years ended December 31, 2012 and 2011 our performance progressed significantly, specially reflecting the current growth cycle in Brazil; the growth potentialas a result of the Brazilian internal market, which is reflectedadoption, as of January 1, 2013, of two newstandards issued by the IASB: IAS 19 (Employee Benefits – as revised in 2011)  and IFRS 11 (Joint Arrangements).  These newstandardswere applied retrospectively to 2012 and 2011 pursuant to IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors) for comparison purposes.  The adoption of these newstandardsimpacted several line items of our financial statements.  One of these impacts relate to the increase in the consumptionmethod of  energy in our distribution concession areas, andaccounting for the results of joint-ventures, which are now recognized using the equity method of accounting instead of the proportional consolidation method we used prior to the adoption of theIFRS 11.  See note 2.8 to our strategyconsolidated financial statements for a description of expanding thesestandardsand diversifyingtheir impact on our business.financial statements. Net Operating Revenues OurCompared to the year ended December 31, 2012, net operating revenues weredecreased 1.7% (or R$12,764 million257 million) in 2011,the year ended December 31, 2013, amounting R$14,634 million.  The decrease in operating revenue primarily reflected the decline in revenues in our eight distribution subsidiaries, due to the decrease in the average tariffs charged as a 6.2% increase comparedresult of Law 12,783/2013, which ANEEL ratified the result of the RTE, in 2013 for our distribution companies, applied to 2010.  Excludingconsumption from January 24, 2013 and tariff adjustments, impacting the electricity sales to Captive Consumers and TUSD revenue from Free Consumers in our concession areas. Also is included in net operating revenue the revenues relating to the construction of concession infrastructure (whichin the amount of R$1,004 million, which does not affect the resultresults, due to corresponding costs in the same amount), net operating revenues would be R$11,634 million, a 6.0%, or R$654 million, increase.  The increase in our net operating revenues primarily reflected higher revenues deriving from our distribution companies, which had increased sales to captive consumers (and, consequently, higher TUSD collections) and tariff adjustments.amount. The following discussion describes changes in our net operating revenues by destination and by segment, based on the items comprising our gross revenues. Sales by Destination Sales to final consumers OurCompared to the year ended December 31, 2012, our gross operating revenues from sales to Final Consumers weredecreased 9.0% in the year ended December 31, 2013, to R$14,907 million in 2011, a 7.0% increase compared19,339 million.  Our gross operating revenues reflect primarily sales to 2010.  TariffsCaptive Consumers at concession areas from our eight distribution subsidiaries, and are subject to tariff adjustment as shown below: The tariffs of the distribution companies are adjusted every year, in percentages specific to each year, and thecategory of consumer.  The month in which the tariff adjustment takes effect varies, with the increases inbecomes effective varies.  The adjustment at the largest subsidiaries taking effectoccurred in April (CPFL Paulista), June (RGE) and October (CPFL Piratininga).  In the year ended December 31, 2013, energy prices decreased by an average of 15.4%, mainly due to the result of the RTE in 2013, applied to consumption from January 24, 2013, partially offset by the net effect of the RTA at the following distributors:  CPFL Paulista (6.18%), RGE (‑10.64%) and CPFL Piratininga (6.91%).  See note 26 to our audited consolidated financial statements.  Average prices tofor Final Consumers in 20112013 were higher inlower for all consumer categories: ·        Industrial and Commercial Consumers.  For industrialResidential and commercial consumers that are captive consumers.  With respect to Captive Consumers (which represent 81.2%99.2% of the total volumeamount sold to these categories)this category in our consolidated statements), average prices increased by 4.8%decreased 18.7% and 4.3%14.3%, respectively, due to the annual tariff adjustments.  For those that areadjustment (RTA) and extraordinary tariff adjustment (RTE), as described above.  With respect to Free Consumers, the average pricesprice for the commercial consumers increased by 18.2% and 16.7%, respectively.7.6%. ·        Residential ConsumersIndustrial consumers.  Average prices increased by 5.2%decreased 10.8%, mainly due to tariff adjustments. Our increased salesadjustments (RTE and RTA), as described above.  With respect to Free Consumers, the average price for the industrial consumers decreased 7.7%.  The effect of the decrease in 2011 reflected the economic strengthaverage price for the industrial consumers was due to the tariff reduction by the extraordinary reviews (RTE) on the contracts for the use of our residential and commercial consumers.  Our industrial activities exhibited more modest economic growth, a reflectiondistribution system (TUSD) by Free Consumers. 66 Table of Contents The total volume of energy sold to final consumers in the lower growth rate of industrial GDP (1.6%) asyear ended December 31, 2013 increased 2.6% compared to total GDP (2.7%).  Volumesthe year ended December 31, 2012.  The volume sold to residential and commercial categories, which accounts for 62.8% for our sales to final consumers, increased 4.9%5.9% and 5.9%1.4%, respectively.  VolumesThe growth of these categories is resulted of good performance of income and the labor market, confirmed by historically low unemployment levels and the expansion of credit available to the consumer in recent years.  These factors reflected positively in sales on the retail and furniture and household appliances markets in this year. The volume sold to industrial consumers decreased 4.5%,increased 1.1% in the year ended December 31, 2013 compared to the year ended December 31, 2012, which represents 26.1% of our sales to Final Consumers, reflecting a decreasethe modest performance of 7.5%industrial production in salesthis period.  In 2013, the volume sold in this category to captive Final Consumers decreased 6.0%, which was partially offset by a 8.7%an increase of 14.5% in volume sales to this category in the free market.  IndustrialFree Market, mainly due to the growth of 19.6% our subsidiary CPFL Brasil, which positive result was arising from the successful sales drive directed towards industrial customers in the Free Market.  Additionally, industrial consumers in our distribution concession areas who purchasethat buy from other suppliers in the free marketFree Market also pay us a fee for the use of our network, and this revenue is reflected in our audited financial statements under “Other Operating Revenues.”Revenues”. Sales to wholesalers OurCompared to the year ended December 31, 2012, our gross operating revenues from sales to wholesalers wereincreased 20.8% (or R$1,298434 million) to R$2,522 million in 2011 (6.9%the year ended December 31, 2013 (13.0% of gross operating revenues), due mainly to (i) an increase of 7.3% (or R$30 million) in sales to Furnas as a result of the tariff increase of 7.8% in relation to the effect of the IGP‑M and (ii) an increase of 26.8% (or R$396 million) in sales of electricity to the other concessionaires andlicenseesmainly by the growth in sales of electricity from our conventional generation subsidiaries (R$72 million) and renewable generation subsidiaries (R$250 million). For more information on net operating revenues from our segments, see “—Sales  by Segment”. Other operating revenues Compared to the year ended December 31, 2012, our other gross operating revenues decreased 5.5% (or R$170 million) in the year ended December 31, 2013 to R$2,939 million (15.2% of our gross operating revenues), mainly due to (i) the decrease of 31.6% (or R$447 million) in TUSD revenue for making the electric grid available arising from the RTE in the year ended December 31, 2013, applied to consumption from January 24, 2013, (ii) the decrease of 25.7% (or R$347 million) in revenue relating to the construction of concession infrastructure, as a result of lower investments, (iii) partially offset by the increase of R$576 million with reference to accounting for the low income subsidy and discounts on tariffs reimbursed by funds from the CDE Account. Deductions from operating revenues We deduct certain taxes and industry charges from our gross operating revenue to calculate net revenue.  The state‑level value‑added tax (ICMS), federal PIS and COFINS taxes, and the research and development and energy efficiency programs (regulatory charges) are calculated based on gross operating revenue, while other regulatory charges vary depending on the regulatory effect reflected in our tariffs.  These deductions represented 24.3% of our gross operating revenue in the year ended December 31, 2013 and 29.9% in the year ended December 31, 2012.  Compared to the year ended December 31, 2012, these deductions decreased 26.0% (or R$1,652 million) to R$4,706 million in 2013, mainly due to:  (i) a reduction of 12.6% (or R$401 million) in ICMS, as a result of the drop of 13.3% in the our billed supply; (ii) a reduction of 8.8% (or R$147 million) in PIS and COFINS, basically due to the reduction in our gross operating revenues (the calculation base for these taxes); and (iii) by the net effect of the decrease of 73.2% (or R$1,105 million) in regulatory charges, as a result of changes in ANEEL regulations in Law 12,783 of 2013.  See explanatory note 26 to our audited financial statements. Sales by segment Distribution Compared to the year ended December 31, 2012, our net operating revenues from our Distribution segment decreased 6.7% (or R$835 million) to R$11,579 million in the year ended December 31, 2013.  This decrease wasprimarily reflected:  (i) the decline in the average tariffs charged as a result of Law 12,783/2013, which ANEEL ratified the result of the RTE in 2013 for our distribution companies, applied to consumption from January 24, 2013 and tariff adjustments, impacting the electricity sales to Captive Consumers (a decrease of R$2,154 million) and TUSD revenue from Free Consumers (a decrease of R$454 million) in our concession areas; (ii) the decrease R$354 million in revenue from construction of concession infrastructures, as a result of lower investments in improving and expanding of our distribution subsidiaries; and (iii) a decrease of R$139 million in sales to wholesalers, mainly due to a reduction in short-term energy sales in the CCEE as a result of decline in the amount of electric energy sold mainly by subsidiaries CPFL Paulista, CPFL Piratininga and RGE, partially offset by (a) an increase of 8.5% comparedR$576 million with reference to 2010.  Theaccounting for the low income subsidiary and discounts on tariffs reimbursed by funds from the CDE Account and (b) a decrease (which represents an increase wasin the operating revenues) of R$1,723 million in deductions from operating revenues mainly due to a 11.0%reduction of R$610 million in taxes (ICMS, PIS and COFINS) and by a net reduction of R$1,102 million in regulatory charges. 67 Table of Contents Generation (conventional sources) Net operating revenues from our generation from conventional sources segment in the year ended December 31, 2013 amounted to R$926 million, an increase of 11.8% (or R$97 million) compared to R$828 million in the year ended December 31, 2012.  This increase was mainly due to an increase of 16.2% (or R$72 million) in sales to our distribution subsidiaries, arising from an increase of 10.6% in the volume sold in this period. Generation (renewable sources) Net operating revenues from our generation from renewable sources segment in the year ended December 31, 2013 amounted to R$1,084 million, an increase of 32.4% (or R$265 million) compared to R$818 million in the year ended December 31, 2012.  This increase was mainly due to increased production by the new Biomass Thermoelectric Power Plants in operation since the second semester of 2012, as well as the good performance of the wind farms, besides the contribution of the acquisitions of Bons Ventos S.A. and the Ester Thermoelectric Power Plant, held in 2012. Commercialization Net operating revenues from our commercialization segment in the year ended December 31, 2013 amounted to R$1,845 million, a decrease of 2.2% (or R$42 million) compared to R$1,886 million in the year ended December 31, 2012.  The decrease was mainly due to a reduction of 25.4% (or R$186 million) in the volume sold to other concessionaires and licensees, partially offset by a 2.2% decreasean increase of 13.6% in average prices.price and an increase of R$128 million in sales toCCEE.  OtherServices Net operating revenues Our other gross operating revenues were from our services segment in the year ended December 31, 2013 amounted to R$1,572201 million, in 2011 (12.3%an increase of our net operating revenues),16.9% (or R$29 million) compared to R$1,387172 million in 2010.the year ended December 31, 2012.  The increase was mainly due to the increased sales by CPFL Serviços (both third parties and to other our subsidiaries), reflect from an effort to increase the range of TUSD collections from Free Consumers. 61 Table of Contents Deductions from operating revenues We deduct certain taxeselectricity‑related services, and regulatory charges from our gross operating revenues to calculate our net revenues.  One of these taxes is the value-added tax, or ICMS, levied by Brazilian states, and PIS/COFINS taxes levied by the Brazilian federal government.  These deductions amounted to 32.3% of our gross operating revenues in 2011 and 31.5% in 2010.  Most of these taxes and charges are based on the amount of gross operating revenues, while others vary depending on regulatory effects reflected in our tariffs.  See note 26 to our consolidated financial statements. Sales by segment Distribution  Net operating revenues from our distribution segment in 2011 amounted to R$11,066 million, an increase of 5.5% compared to R$10,485 million in 2010.  Excluding revenues relating to the construction of concession infrastructure (which was totally offset by construction costs), net operating revenues would be R$9,936 million, a 5.2%, or R$495 million, increase.  This increase was mainly due to (i) tariff adjustments, which resulted in an average increase of 6.4% of billed revenues and a 3.1% increase in the transactions volume sold (R$858 million), and (ii) a 17.6% increase, or R$200 million, in TUSD collections from Free Consumers, which were partially offset by (i) an increase of R$295 million in taxes on gross operating revenues, and (ii) an increase of R$197 million in the CCC and CDE contributions. Generation  Net operating revenues from our generation segment in 2011 amounted to R$1,621 million, an increase of 36.3% (R$432 million) compared to R$1,189 million in 2010.  This increase was mainly due to the commencement of commercial operations of Foz do Chapecó hydroelectric power plant in October 2010 and Termonordeste and Termoparaíba thermoelectric power plants in December 2010 and January 2011, respectively, and the consolidation of CPFL Energias Renováveis in August 2011.Total. Commercialization and Services Net operating revenues from our commercialization and services segment in 2011 amounted to R$1,706 million, a decrease of 4.1% compared to R$1,779 million in 2010.  The decrease was mainly due to the 13.3% decrease in the volume sold, which was partially offset by the 11.9% increase in average prices. Income from Electric Energy Service by Destination  Cost of Electric Energy Electricity purchased for resale.  resaleOur.  Compared to the year ended December 31, 2012, our costs to purchase electricity wereenergy for resale increased 11.0% (or R$4,907739 million) in the year ended December 31, 2013, to R$7,469 million in 2011 (50.5%(60.9% of our total operating costs and operating expenses).  The cost was 2.8% (R$143 million) lower than in 2010, primarily due to a 2.9% decrease in the volume of electricity we purchased once Foz do Chapecó and the EPASA plants commenced operations in October 2010 and December 2010, respectively. The cost of electricity purchased from Itaipu by our distribution companies was 3.6% (R$37 million) lower in 2011 as compared with 2010, due to the stability of the amount purchased and a reduction of prices.  The average price for electricity purchased from Itaipu, which represented 21.3% of the total volume we purchased in 2011, was on average 3.8% lower in 2011 than in 2010, mainly due to the 5.0% decrease in the US dollar average exchange rate in 2011. Costs to purchase electricity from other generation facilities were 2.6% (R$119 million) lower in 2011 as compared to 2010 due to a 1.1% increase in the average prices, which was offset by a 3.7% decrease in the volume of electricity sold at these facilities. 62 Table of Contents Electricity network usage charges. Our costs for electricity network usage charges were R$1,314 million in 2011.  This was 12.1% (R$141 million) higher than in 2010, mainly due to an increase of 20.4% in the average price, reflecting the greater exposure and variation in the PLD, tariff adjustments and the exchange rate variations in the purchase of Itaipu. Electricity network usage charges.  Compared to the year ended December 31, 2012, our charges for use of the transmission and distribution system decreased 52.2% (or R$120795 million) to R$728 million in the basicyear endedDecember 31, 2013, mainly as a result of:  (i) a reduction of R$568 million in the Basic Network  Charges due to the decrease in the tariffs of the transmission companies; and (ii) a reduction of R$157 million in the System Service Charges, net of reimbursement of costs by CDE Account.  For further information about electricity network usage charges, resulting fromsee the commencementexplanatory note 27 to our audited financial statements. 68 Table of operations of Foz do Chapecó and the EPASA plants in October 2010 and December 2010, respectively.Contents Other costs and operating expenses Our other costs and operating expenses comprise our operating cost, services rendered to third parties, costs related to construction of concession infrastructure, sales expenses, general and administrative expenses and other operating expenses, excluding costs relatedexpenses. Compared to construction of concession infrastructure. Ourthe year ended December 31, 2012, our other costs and operating expenses weredecreased 5.5% (or R$2,363235 million) to R$4,067 million in 2011, a 17.1% (R$344 million) increase from 2010.  This was primarilythe year ended December 31, 2013, mainly due to the following nonrecurring eventsimportant events:  (i) implementationa decrease of our early retirement programR$347 million in 2011,infrastructure construction costs for investments in improving and expanding distribution; (ii) a decrease of R$94 million of loss on disposal and decommissioning and other losses on noncurrent assets; (iii) a decrease of R$93 million in the aggregate amountallowancefor doubtful accounts arising basically from receivables from consumers at our distribution subsidiaries; (iv) a decrease of R$5154 million aiming at potential future gains; (ii) reversionin  outsourced services, results of reserves relating to PIS/COFINS taxes on sector chargesa drop in general operating expenses; (v) partially offset by an increase of CPFL PaulistaR$242 million in 2010,legal, judicial and indemnity expenses; (vi) an increase of R$64 million in the amountdepreciation and amortization, mainly as a result of R$40 million; (iii)the commencement of operations of Foz do ChapecóCPFL Renováveis’ new investments of R$59 million; and (vii) an increase of R$28 million in employee pension plans, as result of the EPASA plants, and consolidation of CPFL Energias Renováveis in October 2010, December 2010 and August 2011, respectively (R$86 million); (iv) non-operating revenues deriving from the sale of real estate in the city of Santos in 2010 (R$11 million); and (v) increase in ENERCAN’s reservesactuarial report for contingencies relating to taxes on services (ISS) (R$10 million).  Excluding these nonrecurring events, the increase in our other operating costs and operating expenses would be R$144 million, or 7.2%, which mainly reflects inflation adjustments.2013. Income from Electric Energy Service OurCompared to the year ended December 31, 2012, our income from electric energy service wasincreased 1.5% (or R$3,05135 million) to R$2,370 million in 2011.  This was 11.4% (R$311 million) higher than in 2010the year ended December 31, 2013, due to a 6.2% (R$740 million) increasethe reduction in our net revenues, as well as a 4.6% (R$429 million) increaseoperating revenue by the decrease in operating expenses andour cost of electric energy service costs.and by operating costs and expenses. Income from Electric Energy Service by Segment Distribution OperatingCompared to the year ended December 31, 2012, income from electric energy service from our distributionDistribution segment in 2011 amountedincreased 13.0% (or R$179 million) to R$1,9221,551 million in the year ended December 31, 2013.  Despite the decrease of 6.7% (or R$835 million) in net operating revenues, the cost and operational expenses decreased 9.2% (or R$1,014 million), which resulted in an increase in the income from electric energy service.  The main variations on cost and operational expenses were: ·Electricity costs.  Compared to the year ended December 31, 2012, electricity costs decreased 9.1% (or R$687 million), to R$6,851 million in the year ended December 31, 2013.  The cost of energy purchased for resale increased 2.1%, (or R$128 million), reflecting an increase of 3.7% compared with 2010.  Our operating incomeaverage prices, arising from the segment reflected the 5.5% increase in our net revenue, which was partially offset by: ·Electricity costs:  Our electricity costs were R$6,290 million, a 4.4% increase compared to 2010.  This reflects an increase of 2.1%greater exposure and variation in the volume of electricity purchased by us in 2011 compared to 2010,PLD, tariff adjustments and an increase of 2.3%the exchange rate variations in the average prices due to energy prices adjustments.purchase from Itaipu.  However, this increase does not significantly affect our operating income since it is reflectedpassed along through tariffs, either in the 2011 tariffs.2013 or in the 2014 tariff adjustment.  Charges for use of the transmission and distribution system decreased 54.5% (or R$814 million), mainly due to a reduction of R$574 million in the Basic Network  Charges due to the decrease in the tariffs of the transmission companies and a reduction of R$157 million in the System Service Charges, net of reimbursement of costs by CDE Account.  A significant part of the increase in these costs was not included in the distribution tariffs and will be passed along in the next tariff adjustment. ·        Other costs and operating expenses.  OurCompared to the year ended December 31, 2012, our other costs and operating expenses (other than electricity utility service costs) for the distributionDistribution segment amounteddecreased 9.3% (or R$327 million), to R$9733,177 million in the year ended December 31, 2013, mainly due to (i) a decrease of R$354 million in infrastructure construction costs for investments in improving and expanding distribution; (ii) a decrease of R$77 million of loss on disposal and decommissioning and other losses on noncurrent assets; (iii) a decrease of R$94 million in the allowance for doubtful accounts arising basically from receivables from consumers at our distribution subsidiaries; (iv) a decrease of R$43 million in outsourced services, results of a drop in general operating expenses; (v) partially offset by an increase of 20.0% comparedR$236 million in legal, judicial and indemnity expenses; and (vi) an increase of R$26 million in employee pension plans, as result of the actuarial report for 2013. 69 Table of Contents Generation (conventional sources) Compared to 2010.the year ended December 31, 2012, income from electric energy service from our conventional generation segment increased 12.7% (or R$63 million) to R$560 million in the year ended December 31, 2013.  This increase was primarilymainly due to (i) salary increases resulting from collective bargaining agreements negotiated in 2010 and 2011, (ii) implementation of our early retirement program in 2011, (iii) increase in costs with third-party service providers, and (iv) increase in reserves for contingencies relating to legal procedures. Generation Operating income from our generation segment in 2011 amounted to R$895 million, an increase of 45.3% compared to 2010.  This increase reflects the 36.3% increase in net revenues and the 26.7% in other costs and operating expenses.  The main reason for the increase in operating income from the segment was the commencement of operations of Foz do Chapecó hydroelectric power plant in October 2010 and Termonordeste and Termoparaíba thermoelectric power plants in December 2010 and January 2011, respectively.  The commencement of operations of these plants also contributed to an increase of 11.8% (or R$10797 million) in net operating revenue, offset by an increase of 10.4% (or R$35 million) in cost and operational expenses, primarily by (i) an increase of R$39 million in electricity purchased for resale arising from the increase in average prices; (ii) an increase of R$4 million in employee pension plans, as result of the actuarial report for 2013; and (iii) partially offset by a decrease of R$7 million in outsourced services, results of a drop in general operating expenses, which resulted in an increase in the income from electric energy service. Generation (renewable sources) Compared to the year ended December 31, 2012, income from electric energy service from our renewable generation segment decreased 0.2% (or R$0.4 million) to R$215 million in the year ended December 31, 2013.  Despite the increase of 32.4% (or R$265 million) in net operating revenues, the cost and operational expenses increased 44.1% (or R$266 million) mainly due to:  (i) an increase of R$199 million in electricity purchased for resale, as a result of the extraordinary  purchase of electricity in order to honor the electricity sale contracts of Coopcana, Alvorada and Complexo Atlântica, due to a change in the expected time of construction, (ii) an increase of R$42 million in depreciation and amortization expenses, considering due to CPFL Renováveis’ commencement of operations at greenfield plants, and (iii) an increase of R$18 million in personnelexpenseas a result ofthe effects of the consolidation2013’s collective labor, theexpenditure on severance pay and indemnities in 2013, a higher expedinture on pension funds and increases in employee benefits.  Commercialization Compared to the year ended December 31, 2012, income from electric energy service from our commercialization segment decreased 79.6% (or R$203 million), to R$52 million in the year ended December 31, 2013.  This decreased was due to a reduction of 2.2% (or R$42 million) in net operating revenues and by an increase of 9.9% (or R$162 million) in costs and expenses primarily due to an increase of R$159 million in electricity purchased for resale, arising from an increase of 21.5% in the average price, partially offset by a reduction of 9.5% in the volume of energy purchased. Services Compared to the year ended December 31, 2012, income from electric energy service from our service segment decreased 49.3% (or R$13 million), to R$13 million in the year ended December 31, 2013.  Despite the increase of 16.9% (or R$29 million) in net operating revenues, the cost and operational expenses increased 28.8% (or R$42 million) mainly due to an increase of R$17 million in personnel, as a result of an increase ofemployeesat CPFL Serviços and effects of the 2013’s collective labor, and by an increase of R$16 million materials and outsourced services, both arising from the expanding of CPFL Energias Renováveis.Serviços activities. Net Income Net Financial Expense Compared with the year ended December 31, 2012, our net financial expense increased 68.1% (or R$394 million), from R$578 million in 2012 to R$971 million in the year ended December 31, 2013, mainly due to:  (i) a decrease of R$8 million in our financial income and an increase of R$386 million in our financial expense. The reduction in financial income is because of the main following reasons:  (i) R$159 million in the adjustment in the estimated cash flow of the financial assets of concession in 2012; (ii) reduction of R$24 million inarrears of interest and fines, partially offset by:  (iii) an increase of R$116 million income from financial investments; and (iv) an increase of R$68 million inmonetaryrestatements of escrow deposits. 6370   Table of Contents   Commercialization and Services Operating income from our commercialization and services segment in 2011 amounted to R$264 million, a decreaseThe reasons of 12.9% (R$39 million) compared to 2010.  This decrease was mainly due to the 4.1% decrease, or R$74 million, in net revenues, and the increase of R$29 million in other operating costs, mainly due to the expansion of our activities relating to services. The decrease in net revenues and the increase in other operating costs was partially offset by a 4.7% (R$63 million) decrease in electricity costs (13.2% decrease in the volume of electricity purchased by us, partially offset by the 9.8% increase in the average price of electricity). Net Income Net Financial Expense Our net financial expense was R$689 million in 2011, compared to R$354 million in 2010.  The R$335 million increase is mainly due toexpenses are:  (i) an increase in our levelthe debt charges and monetary and exchanges variations (R$281 million), as a result of indebtednessthe increased indebtedness; and higher(ii) by the adjustment in the estimated cash flow of the financial indexes; (ii) a decreaseassets of capitalized borrowing costs due to the commencement of operations of CPFL Bionergia (in August 2010), Foz do Chapecó hydroelectric power plant (in October 2010) and Termonordeste and Termoparaíba thermoelectric power plants (in December 2010 and January 2011, respectively), through EPASA; and (iii) the consolidation of CPFL Energias Renováveis. These effects were partially offset by a R$200 million increase in our income from financial investments revenues due to higher cash and cash equivalents average balances.concession (R$67 million).  At December 31, 2011,2013, we had R$11,85715,013 million in debt denominated inreais, which accrued both interest and inflation correction based on a variety of Brazilian indexes and money market rates.  We also had the equivalent of R$1,7512,008 million of debt denominated in U.S. dollars.  In order to reduce the risk of exchange losses with respect to these U.S. dollars-denominateddollar‑denominated debts and variations in interest rates, we entered into long‑term currency swaps indexedhave the policy of using derivatives to the CDI rate for a significant portionreduce their risks of this debt.variations in exchange and interest rates.  The average CDI index variation rate posted an increase of 11.6%9.8% in 2011 when2013, compared to 9.8%8.4% in 2010,2012, and the TJLP remained stabledecreased 5% in 6.0%2013, compared to 5.8% in 2010 and 2011.2012. Income and Social Contribution Taxes We recorded aOur net charge of R$780 million for income and social contribution taxes decreased from R$671 million in 2011, comparedthe year ended December 31, 2012 to R$825570 million in 2010.  Ourthe year ended December 31, 2013.  The effective tax rate of 33.0%37.5% on pretax income in 2011the year ended December 31, 2013 was approximately equal tohigher than the combined statutoryofficial rate of 34.0%.34%, principally due to our inability to use certain tax loss carryforwards, as described in note 8.5 to our consolidated financial statements. Net Income DueCompared to the year ended December 31, 2012, and due to the factors mentioneddiscussed above, our net income wasdecreased 21.4% (or R$1,582258 million), to R$949 million in 2011, a slight increase of 1.4%, or R$22 million, compared to 2010.the year ended December 31, 2013. Net Income by Segment In 2011, 70.2%the year ended December 31, 2013, 76.5% of our net income was derived from our distributionDistribution segment, 23.3%32.9% from our generation from conventional sources segment, and 10.1%‑5.8% from our generation from renewable sources segment, 3.8% from our commercialization segment and 1.7% from our services segment.  Our other non‑reportable segments represented a net loss of 3.6%. Distribution NetCompared to the year ended December 31, 2012, net income from our distributionDistribution segment in 2011 amounted to R$1,111 million, a decrease of 5.0%decreased 12.2%, or (R$101 million), to R$ 58726 million compared with 2010.  The decrease in this segment reflected mainly the year ended December 31, 2013, as result of the increase of 13.2% or (R$181 million) in income from electric energy service, partially offset by an increase of R$161328 million increase in net financial expenses, mainly due to:  (i) a decrease of R$54 million in the financial income arising from the adjustment in the estimated cash flow of the financial assets of concession (R$159 million); (ii) a reduction of R$26 million in arrears of interest and fines, (iii)an increase of R$68 million income from financial investments; (iv) an increase of R$40 million in restatement of tax credits; and (v) an increase of R$28 million inmonetaryadjustment of escrow deposits,  partially offset by:  (i) an increase of R$274 million in our financial expense mainly arising from the debt charges and monetary and exchanges variations (R$173 million) as a result of the higher indebtedness; (ii) an increase in the adjustment in the estimated cash flow of the financial assets of concession (R$67 million); and (iii) a decrease of R$45 million in expense of income and social contribution taxes. Generation (conventional sources) Compared to the year ended December 31, 2012, net income from our generation from conventional sources segment decreased 10.5% (or R$37 million) to R$312 million in the year ended December 31, 2013, as result of: (i) the increase of 12.7% (or R$63 million) in income from electric energy service, partially offset by an increase of R$103 million in net financial expenses, mainly reflecting an increase of R$110 million in financial expenses (mainly due to higher indebtedness, whichan increase of R$120 million in debt charges and monetary and exchanges variations); (ii) an increase of R$7 million in financial income arising of income from financial investments; and (iii) a decrease of R$3 million in income and social contribution tax expenses. 71 Table of Contents Generation (renewable sources) Compared to the year ended December 31, 2012, net loss from our generation from renewable sources segment was partiallyR$55 million in the year ended December 31, 2013 (representing a R$63 million difference when compared to 2012 profit), as result of the decrease of 0.2% (or R$0.4 million) in income from electric energy service, added to an increase of R$61 million in net financial expenses, mainly reflecting an increase of R$110 million in the financial expenses and an increase of R$1 million in expense of income and social contribution taxes. Commercialization Compared to the year ended December 31, 2012, net income from our commercialization segment decreased 65.0% (or R$66 million), to R$36 million in the year ended December 31, 2013, reflecting the decrease of R$203 million in the income from electric service, offset by an increase of R$106 million in net financial income and by a reduction in expense of income and social contribution taxes in R$31 million. Services Compared to the year ended December 31, 2012, net income from our services segment decreased 40.1% (or R$11 million), to R$16 million in the year ended December 31, 2013, reflecting a decrease of R$13 million in income from electric energy service, added to a decrease of R$3.7 million in net financial expenses, offset by a decrease of R$6 million in expense of income and social contribution taxes. Generation Net income from our generation segment in 2011 amounted to R$368 million, a 43.1% increase compared with 2010, which reflects the commencement of operation of Foz do Chapecó and the EPASA plants, and the consolidation of CPFL Energias Renováveis in October 2010, December 2010 and August 2011, respectively.  This increase was mainly due to the 36.3% increase in net revenues, which was partially offset by a R$147 million increase in net financial expenses due to new financings. 64 Table of Contents Commercialization and Services Net income from our commercialization and services segment in 2011 amounted to R$160 million, a decrease of 22.5%, or R$46 million.  The decrease in this segment reflected the (i) R$39 million decrease in operating income, (ii) R$29 million increase in net financial expenses due to higher indebtedness, which was partially offset by lower income taxes (R$20 million). Results of Operations—20102012 compared to 20092011 In 2010, our performance progressed significantly, reflecting the current growth cycle in Brazil; the growth potential of the Brazilian internal market, which is reflected in the increase in the consumption of energy in our distribution concession areas;On August 1, 2011, we began consolidating the results of CPFL Renováveis in our strategyfinancial statements.  As a result, our results for 2011 only consolidate the results of expandingCPFL Renováveis for five months and diversifyingare not directly comparable with our business;results for 2012, which consolidate the results of CPFL Renováveis for a 12-month period. Since August 1, 2011, after a series of corporate restructuring processes, the renewable energy assets and projects previously held by the subsidiaries CPFL Geração and CPFL Brasil have been determined by Management to be part of our undertaking to improve our operating efficiency.energy generation from renewable sources segment. As the amounts were immaterial, these assets remained in the conventional energy segment for the first seven months of 2011. Our net income in 2010 was lower than in 2009 because our revenues in 2009 reflected tariff adjustments  following losses we incurred in 2008 due to the global financial crisis. Net Operating Revenues OurCompared to the year ended December 31, 2011, net operating revenues wereincreased 17.5% in the year ended December 31, 2012, to R$12,024 million in 2010, a 5.9% increase compared to 2009.  Excluding14,891 million.  This includes revenues relating to the construction of concession infrastructure (whichin the amount of R$1,352 million, which does not affect the resultresults, due to corresponding costs in the same amount), net operating revenues would be R$10,980 million, a 2.2%, or R$238 million, increase.amount.  The increase in our net operating revenuesrevenue primarily reflected higher revenues from ourthe distribution companies, attributabledue to an increase in sales to our captive clientsthe increased amount sold and in revenuestariff changes for Captive Consumers and TUSD revenue from TUSD paid by Free Consumers. The following discussion describes changes in our net operating revenues by destination and by segment, based on the items comprising our gross revenues. Sales by Destination Sales to final consumers OurCompared to the year ended December 31, 2011, our gross operating revenues from sales to Final Consumers wereincreased 6.8% in the year ended December 31, 2012 to R$13,929 million in 2010, a 3.2% increase compared15,914 million.  Our gross operating revenues primarily reflect sales to 2009.  Average prices in 2010 varied by consumer category.  While average prices increased among residentialCaptive Consumers at concession areas from our eight distribution subsidiaries, and rural consumers, they decreased among industrial, commercial, public administration and public services consumers.  Tariffsare subject to additional tariff adjustments. The tariffs on our distribution companies are adjusted every year, in percentages specific to each year, and thecategory of consumer.  The month in which the tariff adjustment takes effect varies, with the increases inbecomes effective also varies.  The adjustment at the largest subsidiaries taking effectoccurred in April (CPFL Paulista), June (RGE), and October (CPFL Piratininga). The  During the year ended December 31, 2012, energy prices increased by an average of 3.0%, mainly due to an increase in salestariffs at thefollowing distributors:  CPFL Paulista (2.89%), RGE (3.38%) and CPFL Piratininga (5.50%).  See note 25 to our audited consolidated financial statements.  Average prices for Final Consumers for the year ended December 31, 2012 were higher for all consumer categories in 2010 reflectedcomparison to average prices for Final Consumers for the economic recovery.  Volumesyear ended December 31, 2011: 72 Table of Contents ·Industrial and commercial consumers.  With respect to Captive Consumers (which represent 78.8% of the total amount sold to this category in our consolidated statements), average prices increased 4.1% and 3.2% for our industrial and commercial consumers, respectively, for the year ended December 31, 2012 as compared to the year ended December 31, 2011, due to the annual tariff adjustment.  With respect to Free Consumers, the average price for the industrial consumers increased 2.0% in the year ended December 31, 2012, as compared to the year ended December 31, 2011, while the average price for the commercial consumers decreased 2.8% over the same period.  The effect of the decrease in the average price for the commercial consumers was due to discounts on the TUSD charges applied to Free Consumers and other discounts for certain contracts. ·Residential consumers.  Average prices increased 3.7% from the year ended December 31, 2011 to the year ended December 31, 2012, mainly due to tariff adjustments. Economic dynamism in 2012 led to increases in volume sold by 6.9% and 7.0% for the year ended December 31, 2012 as compared to the year ended December 31, 2011, respectively and consequent sales increases of 10.9% and 9.8% for the year ended December 31, 2012 as compared to the year ended December 31, 2011, respectively, for residential and commercial consumers, increased 5.2%which represent 63% of our sales to Final Consumers, driven by the continuing high level of wage earnings and 5.5%, respectively.  Volumesa robust labor market (increased income and employment, access to credit, sales of electronics and appliances and retail sales).  The volume sold to industrial consumers increased 3.0%,for the year ended December 31, 2012 decreased 1.2% from the year ended December 31, 2011, reflecting an increasea drop of 0.5%9.7% in sales to captive Final Consumers, and 10%which was partially offset by an increase of 20.1% in sales in the free market.Free Market.  Sales to the industrial consumers, which represents 25.6% of our sales to Final Consumers, also showed a drop due to the migration of consumers to the Free Market and the weaker overall performance of the industrial sector nationwide (industrial GDP dropped by 2.6% during the year ended December 31, 2012), in turn due to the direct impact of the global economic slowdown.  Industrial customersconsumers in our distribution concession areas who purchasethat buy from other suppliers in the free marketFree Market also pay us a fee for the use of our network, and this revenue is reflected in our financial statements under “Other Operating Revenues.”  Average prices to Final Consumers in 2010 varied by the consumer category:Revenues”. ·Industrial and Commercial Consumers.  For industrial and commercial consumers that are captive consumers (which represent 82.1% of the total volume sold to this category), average prices decreased by 1.4% and 1.7%, respectively.  For those that are Free Consumers, average prices decreased by 4.5% and 2.8%, respectively. ·Residential Consumers.  Average prices increased by 1.0% due to tariff adjustments for our eight distribution subsidiaries. 65 Table of Contents Sales to wholesalers OurCompared to the year ended December 31, 2011, our gross operating revenues from sales to wholesalers wereincreased 73.2% (or R$1,196883 million) to R$2,088 million in 2010 (6.8%the year ended December 31, 2012 (9.8% of our gross operating revenues), a decreasedue mainly to:  (i) the sales of 7.9% comparedelectricity from CPFL Renováveis of R$562 million, in which we acquired an interest in August 2011; (ii) increased sales of electricity to 2009.  The decrease wasthe other concessionaires andlicenseesby our generation and commercialization subsidiaries (R$273 million); and (iii) increased sales in the CCEE (R$122 million) due to the 1.5% decrease in the volume of electricity sold and the 6.6% decrease inincreased average prices. Other operating revenues OurCompared to 2011, our other gross operating revenues wereincreased 15.0% (or R$1,387406 million) in 2012 to R$3,109 million in 2010 (11.5%(20.9% of our net operating revenues), mainly due to (i) the increase of 19.6% (or R$222 million) in revenue from building concession infrastructure, as a result of investments in improving and expanding distribution, (ii) the increase of 5.6% (R$75 million) in TUSD revenue for making the electric grid available, by of the migration of consumers to the Free Market, (iii) and the increase of R$52 million with reference to recording the low‑income subsidy provided with funding from the CDE. Deductions from operating revenues We deduct certain taxes and industry charges from our gross operating revenue to calculate net revenue.  The state‑level value‑added tax (ICMS), federal PIS and COFINS taxes, and the research and development and energy efficiency programs (regulatory charges) are calculated based on gross operating revenue, while other regulatory charges vary depending on the regulatory effect reflected in our tariffs.  These deductions represented29.9% of our gross operating revenue in 2012 and 32.5% in 2011.  Compared to the year ended December 31, 2011, these deductions increased 4.2% (or R$257 million) to R$6.358 million in the year ended December 31, 2012, owing primarily to the increase of:  (i) 7.1% (or R$211 million) in ICMS, mainly due to  the increase of our billed supply; (ii) 4.6% (or R$74 million) in PIS/COFINS, mainly due to the increase of our gross operating revenues, offset by the effect of booking credits to amortization in the amount of R$113 million (in the year ended December 31, 2011 the PIS and COFINS tax credits on amortization were recorded under Depreciation and Amortization Expenses, and are recorded as Deductions from Operating Revenue for the year ended December 31, 2012 for better accounting classification); (iii) partially offset by the net effect of the decrease of 1.8% (or R$28 million) in regulatory charges in the year ended December 31, 2012 as compared to the year ended December 31, 2011.  See explanatory note 25 to our financial statements. 73 Table of Contents Sales by segment Distribution Compared to the year ended December 31, 2011, our net operating revenues from our Distribution segment increased 12.2% (or R$1,348 million) to R$12,414 million in the year ended December 31, 2012.  This increase was mainly due to:  (i) an increase of R$829 million due to an increase of 4.2% in average tariffs charged and a 1.6% increase in the volume sold; (ii) a 6.6% increase (or R$89 million) in TUSD collections from Free Consumers; (iii) a 19.6% increase (or R$222 million) in revenue from construction of concession infrastructure due to investments in improving and expanding distribution; (iv) an increase of R$103 million resulting from sales in the CCEE due to the increased average prices; and (v) a decrease of 6.3% (or R$80 million) in the CCC and CDE Account charges (which was partially offset by an increase of 5.6%, or R$260 million, in taxes on gross operating revenues). Generation (conventional sources) Net operating revenues from our generation from conventional sources segment for the year ended December 31, 2012 amounted to R$828 million, a decrease of 2.0% (or R$17 million) compared to R$1,036845 million for the year ended December 31, 2011.  This decrease was mainly due to a reduction R$14 million in 2009.sales to wholesalers, arising primarily from a reduction of 6.9% in the volume sold. Generation (renewable sources) Net operating revenues from our generation from renewable sources segment for the year ended December 31, 2012 amounted to R$818 million.  For the five‑month period from August 1, 2011 to December 31, 2011, the net operating revenues for this segment amounted to R$172 million.  As described above, the net operating revenues data derived from our financial statements are not comparable during these periods because our results for 2011 only consolidate the results of CPFL Renováveis for five months and are not directly comparable with our results for 2012, which consolidate the results of CPFL Renováveis for a 12-month period. Commercialization Net operating revenues from our commercialization segment for the year ended December 31, 2012 amounted to R$1,886 million, an increase of 20.1% (or R$316 million) compared to R$1,570 million for the year ended December 31, 2011.  The increase was mainly due to the favorable impact of TUSD revenues from our Free Consumers7.8% increase in the volume sold and tariff adjustments.the 11.9% increase in average prices during this period. Deductions from operating revenuesServices We deduct certain taxes and regulatory charges from our gross operating revenues to calculate our net revenues.  One of these taxes is the value-added tax, or ICMS, levied by Brazilian states, and PIS/COFINS taxes levied by the Brazilian federal government.  These deductions amounted to 31.5% of our gross operating revenues in 2010 and 31.1% in 2009.  Most of these taxes and charges are based on the amount of gross operating revenues, while others vary depending on regulatory effects reflected in our tariffs.  See note 27 to our consolidated financial statements. Sales by segment Distribution  Net operating revenues from our distributionservices segment in 2010for the year ended December 31, 2012 amounted to R$10,485172 million, an increase of 7.2%26.5% (or R$36 million) compared to R$9,779136 million in 2009.  Excluding revenues relating tofor the construction of concession infrastructure (which was totally offset by construction costs), net operating revenues would be R$9,441 million, a 3.0%, or R$278 million, increase.  Thisyear ended December 31, 2011.  The increase was mainly due to:  (i) the increased sales by CPFL Serviços (both to third parties and to companies within the 42%CPFL group), reflecting an effort to increase our range of electricity‑related services; and (ii) the commencement of operations of CPFL Nect3in TUSD revenues collected from Free Consumers and the 2.7% increase in sales in our captive market. March 2012. Generation 3     CPFL Nect was formerly known as Chumpitaz Serviços S.A. 74 Net operating revenues from our generation segment in 2010 amounted to R$1,189 million, an increaseTable of 11.6% compared to R$1,065 million in 2009.  This increase was mainly due to the fact that the Baldin, Foz do Chapecó and EPASA plants became commercially operational in 2010.Contents Commercialization and Services Net operating revenues from our commercialization and services segment in 2010 amounted to R$1,779 million, a slight decrease of 0.3% compared to R$1,784 million in 2009.  The decrease was mainly due to a 3.6% decrease in volume sold, partially compensated by the increase in average prices. Income from Electric Energy Service by Destination Cost of Electric Energy Electricity purchased for resale.  resaleOur.  Compared to the year ended December 31, 2011, our costs to purchase electricity wereenergy for resale increased 24.4% (or R$5,0501,320 million) for the year ended December 31, 2012, to R$6,730 million in 2010 (75.2%(53.6% of our total operating costs and operating expenses).  The cost was 1.4% higher than in 2009, primarily, mainly due to (i) a 2.0%the increase of greater exposure and variation in the average price for electricity offset by (ii) a reduction of 0.6% due to a decreasePLD, tariff adjustments and the exchange rate variations in the volumepurchase of electricity we purchased.from Itaipu. The average price for electricity purchased from Itaipu by our distribution companies, which represented 20.7% of the total volume we purchased in 2010, was on average 10.7% lower in 2010 than in 2009, because of a 1.6% decrease in the tariffs established by ANEEL and a 11.6% decrease in the average rate of the dollar in 2009. The average prices of electricity sold from other generation facilities increased 4.8%.  The volume of electricity sold at these facilities remained constant. 66 Table of Contents Electricity network usage charges. chargesOur costs.  Compared to the year ended December 31, 2011, our charges for electricity network usage charges wereuse of the transmission and distribution system increased 21.0% (or R$1,172265 million) to R$1,523 million in 2010.  This was 13.3% higher than in 2009the year ended December 31, 2012, mainly due to thean increase of:  (i) R$148 million in the Basic Network charges, resulting from price changes from the Transmission companies; (ii) R$66 million in the ESS; and (iii) R$51 million in the EER.  The ESS and EER.  This increase mainly refers to the apportionment of costs relating to reserve energy and to the commencement of operations of thermoelectric power plants in 2010.  These chargesEER are reimbursed to our distribution companies through tariff adjustments when the actual charges are higher than forecasts used in setting tariffs.  A large proportion of these charges (97.0% in 2010) is attributable to our distribution segment.both regulatory charges. Other costs and operating expenses Our other costs and operating expenses comprise our operating cost, services rendered to third parties, costs related to construction of concession infrastructure, sales expenses, general and administrative expenses and other operating expenses, excluding costs relatedexpenses. Compared to construction of concession infrastructure. Ourthe year ended December 31, 2011, our other costs and operating expenses wereincreased 27.2% (or R$2,018920 million) to R$4,304 million in 2010, a 3.8% increase from 2009.  This wasfor the year ended December 31, 2012, mainly due primarily to:to the following important events:  (i) a 7.3%, or R$41222 million increase in personnelinfrastructure construction costs mainly due to salary increases resulting from collective bargaining agreements negotiatedfor investments in 2009improving and 2010, andexpanding distribution; (ii) a 20.2%, or R$78197 million increase in third‑party services costsdepreciation and amortization expenses, basically due to adjustmentsthe effect of CPFL Renováveis (R$142 million), the change in contractual pricesaccounting for the PIS/COFINS credit (R$55 million) (see details in our discussion of deductions from operating revenue), and anto the increase in amortization and depreciation of new investments, offset in part by the change in the depreciation rates stipulated by the ANEEL in 2012 (R$21 million) ‑ see explanatory notes 12 and 13 to our financial statements; (iii) a R$93 million increase in the number of third-party service providers, as well as maintenance costsprovision for doubtful accounts arising basically from receivables from consumers at our electricity network, telephone services, new personnel hiringsdistribution companies; (iv) a R$138 million increase in legal, judicial and system consultancy.  These costs were partially offset byindemnity expenses; (v) a R$52 million increase in the R$81 million actuarial gainwrite‑off charge relating to physical inventory of concession infrastructure assets as a result of our subsidiaries CPFL Paulista, CPFL Piratininga, CPFL Santa Cruz, CPFL Jaguari, CPFL Leste Paulista, CPFL Sul Paulista, CPFL Mococa and RGE’s  implementation of ANEEL Resolution No. 367 of June 2, 2009 (Manual de Controle Patrimonial do Setor Elétrico), or MCPSE, at a cost of R$45 million; and (vi) a R$37 million of difference between the 2011 net revenue and 2012 expense recognized from a private pension plans in 2010.  Actuarial gains or losses result fromentity as a consequence of the results of actuarial reports prepared by specialized companies and vary according to macroeconomic premises, particularly returns on assets.calculations for 2012. Income from Electric Energy Service OurCompared to the year ended December 31, 2011, our income from electric energy service wasdecreased 11.0% (or R$2,739289 million) to R$2,335 million in 2010.  This was 1.6% lower than in 2009for the year ended December 31, 2012, due to the 8.3%an increase of 24.9% (or R$2,505 million) in operating expenses and costs of electric utility service costs, although partiallyenergy services, offset by the 5.9%an increase of 17.5% (or R$2,216 million) in our net revenue.revenues. Income from Electric Energy Service by Segment Distribution OperatingCompared to the year ended December 31, 2011, income from electric energy service from our distributionDistribution segment in 2010 amounteddecreased 25.7% (or R$473 million) to R$1,8531,372 million for the year ended December 31, 2012.  Despite the increase of 12.2% (or R$1,348 million) in net operating revenues, the cost and operational expenses of our Distribution segment increased 19.8% (or R$1,824 million), which resulted in a slight decrease of 0.4% compared with 2009.  Our operatingin our income from the segment reflected the 7.2% increase in our net revenue, which was more than offset by:electric energy services.  The main variations on cost and operational expenses were: ·        Electricity costscosts.:  Our  Compared to the year ended December 31, 2011, electricity costs wereincreased 19.8% (or R$6,0231,248), to R$7,538 million a 4.6% increase compared to 2009.  This  reflectsfor the year ended December 31, 2012.  The cost of energy purchased for resale in the year ended December 31, 2012 increased 20.0% (or R$1,009 million) over the yearended December 31, 2011, reflecting an increase of 2.4%average prices, arising from greater exposure and variation in the volumePLD, tariff adjustments and exchange rate variations in the purchase of electricity purchased by usfrom Itaipu.  However, this increase is passed along to consumers through tariffs, either through the 2012 or in 2010 compared to 2009the 2013 tariff adjustment.  Charges for the use of the transmission and distribution system increased 19.1% (or R$239 million) in the year ended December 31, 2012 from the year ended December 31, 2011, mainly due to:  (i) an increase of 2.1%R$126 million in Basic Network charges, (ii) an increase of R$66 million in the average prices due to energy prices adjustments.  However, thisESS, and (iii) an increase doesof R$51 million in the EER.  A significant part of the increase in these costs was not significantly affect our operating income since it is included in the 2010 tariffs.distribution tariffs and will be passed along in the next tariff adjustment. 75 Table of Contents ·        Other costs and operating expenses.  OurCompared to the year ended December 31, 2011, our other costs and operating expenses (other than electricity utility service costs) for the distributionDistribution segment amountedincreased 19.6% (or R$574 million), to R$8113,504 million for the year ended December 31, 2012, mainly due to:  (i) an increase of 3.1% compared to 2009.  ThisR$100 million in the provision for doubtful accounts arising from receivables from consumers; (ii) an increase was primarilyof R$138 million in legal, judicial and indemnity expenses; (iii) R$45 million of losses upon sale of assets, deactivation of assets and other non‑current assets mainly due to salary increases resulting from collective bargaining agreements negotiated in 2009 and 2010 andimplementation of the asset control manual pursuant to ANEEL Resolution No. 367/2009; (iv) a R$41 million increase in net expenses from a private pension entity as a consequence of actuarial calculations for the year ended December 31, 2012, (v) a R$222 million increase in infrastructure construction costs for investments in improving and expanding distribution (without impact on the net result, as discussed above), offset by decrease of 5.7% (R$32 million) in expenses with third-party service providers.personnel due to the retirement program which occurred in the year ended December 31, 2011 (R$45 million). Generation (conventional sources) Operating incomeIncome from electric energy service from our generation segment amounted R$497 million in 2010 amountedthe year ended December 31, 2012, the same amount as in the year ended December 31, 2011, basically due to the reduction of R$61617 million in our net operating revenues, which was offset by:  (i) a decrease of 5.1% comparedR$28 million in our other costs and operating expenses, arising from the reduction in personnel (R$6 million), employee pension plans (R$4 million) and outsourced services (R$12 million), and (ii) an increase of R$11 million in energy purchased, mainly due to 2009.  The main reasonan increase of 20% in average prices over this period. Generation (renewable sources) Income from electric energy service from our renewable sources generation segment for the decrease in operatingyear ended December 31, 2012 amounted R$215 million.  For the five‑month period from August 1, 2011 to December 31, 2011, our income from the segment was the increase in costs relatingelectric energy service amounted R$47 million. Commercialization Compared to the purchase of electricity in the market to comply with contractual obligations assumed by EPASA and Chapecoense before they started operations. Commercialization and Services Operatingyear ended December 31, 2011, income from electric energy service from our commercialization and services segment in 2010 amountedincreased 3.7% (or R$9 million), to R$303255 million for the year ended December 31, 2012.  Despite the 20.1% (or R$316 million) increase in net operating revenues, costs and expenses also increased 23.2% (or R$307 million), mainly due to a 24.4% (or R$312 million) increase in the cost of electricity, due to an increase of 3.6% compared7.7% in the volume of energy purchased and the 15.5% increase in the average price over the same period. Services Compared to 2009.the year ended December 31, 2011, income from electric energy service from our service segment increased 46.5% (or R$8 million), to R$26 million for the year ended December 31, 2012.  This increase was mainly due to the 3.4% decrease26.5% (R$36 million) increase in electricity costs,resulting from a 3.8% decrease in the volume of electricity purchased by us.  This decrease was partiallyour net operating revenues, offset by the 0.5%23.4% (or R$28 million) increase in other costs and operating expenses, primarily attributed to personnel expenses arising from a 45% increase in the average pricenumber of electricity.employees hired in order to expand our activities. 6776   Table of Contents   Net Income Net Financial Expense OurCompared with the year ended December 31, 2011, our net financial expense wasincreased 43.3% (or R$354174 million), from R$403 million in 2010, comparedfor the year ended December 31, 2011 to R$310578 million in 2009.  The R$44 million increase isfor the year ended December 31, 2012, mainly due to:  (i) thea decrease of 6.1% (or R$46 million) in our financial income, results of (a) a decrease of R$141 million in revenue from our financial investments, partially offset by (b) an increase of R$96 million in the level of our indebtednessfinancial asset update; and (ii) the commencementan increase of operations11.1% (R$129 million) in our financial expense, mainly due to (a) an increase of Foz do Chapecó, which started accounting for the monetary restatement ofR$113 million in the debt charges and charge formonetary and exchange variations, composed of an increase of R$239 million from CPFL Renováveis, arising from new investments and acquisition, and by a decrease of R$141 million due to a reduction of CDI and TJLP, and (b) an increase of expense from interest and fines of R$28 million arising from network incorporation payment in the use of public utilities as financial expenses.  The increase in revenues from financial investments resulted from the cash margins and equivalents in 2010 as compared with 2009. subsidiary CPFL Paulista.  At December 31, 2010,2012, we had R$8,93713,038 million in debt denominated inreais, which accrued both interest and monetary correctioninflation corrections based on a variety of Brazilian indexesindices and money market rates.  We also had the equivalent of R$4702,435 million of debt denominated in foreign currencies (U.S. dollars and Japanese yen).U.S. dollars.  In order to reduce the risk of exchange losses with respect to these foreign-denominatedU.S. dollar‑denominated debts and variations in interest rates, we entered into long‑term currency swapshave a policy of using derivatives to hedge our risk to CDI index variation.  Certain of our subsidiaries opted to measure debts for a significant portion of this debt.  The rates of index variation posted a slight decrease in 2010 when compared to 2009,which we have fully tied derivative instruments.  Compared with the average CDI rateyear ended December 31, 2011, the balances of our derivatives instruments resulted in a decrease of 37.7% (or R$97 million), to R$159 million for the year at 9.8%ended December 31, 2012 ‑ see explanatory note34to our financial statements.  The average CDI index variation rate posted an increase of 8.4% in 20102012, compared to 9.9%11.6% in 20092011, and the average TJLP decreasing byremained stable at 5.8% in 2012, compared to 6.0% in 2010 compared to 6.1% in 2009.2011. Income and Social Contribution Taxes We recorded aOur net charge of R$825 million for income and social contribution taxes in 2010, compareddecreased from R$759 million for the year ended December 31, 2011 to R$784671 million in 2009.  Ourfor the year ended December 31, 2012.  The effective tax rate of 34.6%35.7% on pretax income in 2010for the year ended December 31, 2012 was approximately equal toa little higher than the combined statutoryofficial rate of 34.0%34%. Net Income DueCompared to the year ended December 31, 2011, and due to the factors mentioneddiscussed above, our net income wasdecreased 21.8% (or R$1,560337 million), to R$1,207 million in 2010, a decrease of 7.6%, or R$129 million, compared to 2009.for the year ended December 31, 2012. Net Income by Segment In 2010, 74.9%For the year ended December 31, 2012, 68.5% of our net income was derived from our distributionDistribution segment, 16.5%28.9% from our conventional generation segment, and 13.2%0.7% from our renewable generation segment, 8.5% from our commercialization segment and 2.2% from our services segment.  Our other non‑reportable segments represented a net loss of 4.6%. Distribution NetCompared to the year ended December 31, 2011, net income from our distributionDistribution segment in 2010 amounteddecreased 23.2%, or (R$249 million), to R$1,169827 million for the year ended December 31, 2012, mainly due to the decrease of 25.8% (R$476 million) in income from electric energy service, which was partially offset by a slight increasedecrease of 0.8% compared with 2009.  The increase in this segment reflected mainly the R$20103 million decrease in net financial expenses mainly due to a reduction in the remuneration rates applicable to the financial asset of concessions (resulting in an increase of R$91 million) and a decrease of R$123 million in income and social contribution taxes. Generation (conventional sources) Compared to the year ended December 31, 2011, net income from our generation from conventional sources segment increased 19.1% (or R$56 million) to R$349 million for the year ended December 31, 2012, as result of the above reasons described in respect of stabilizing income from electric energy service and by:  (i) a decrease of R$21 million in our net financial expenses (arising from the net effect of a reduction of R$39 million infinancial income and a decrease of R$60 million in financial expenses); (ii) an increase of R$38 million in interest in subsidiaries; and (iii) an increase of R$3 million in expenses for income and social contribution taxes. 77 Table of Contents Generation (renewable sources) The net income from our generation from our renewable sources segment for the year ended December 31, 2012 amounted to R$8 million.  For the five‑month period from August 1, 2011 to December 31, 2011, the net income for this segment amounted R$71 million.  This decrease is mainly due to the increase of CPFL Renováveis’ indebtedness, which was used for the acquisition of subsidiaries. Commercialization Compared to the year ended December 31, 2011, net income from our commercialization segment decreased 30.9% (or R$46 million) to R$102 million for the year ended December 31, 2012, reflecting the increase of R$9 million in income from electric services and the decrease in expenses related to income and social contribution taxes of R$16 million, offset by an increase of R$71 million in net financial expenses. Services Compared to the year ended December 31, 2011, net income from our services segment increased 121.7% (or R$15 million) to R$27 million for the year ended December 31, 2012, reflecting an increase of R$8 million in income from electric energy service, increase of R$12 million in net financial revenue, offset by an increase of R$6 million in income and social contribution taxes. Liquidity and Capital Resources On December 31, 2013, our working capital reflected asuperavit(excess of current assets over current liabilities) of R$2,359 million.  The main causes of thissuperavitwere arising from our operating cash generation and by a reduction of our outstanding indebtness due in the next 12 months (including accrued interest), as well by a decrease in regulatory charges and taxes and social contribution payable.  Sources of Funds Our main sources of funds derive from our operating cash generation and financings. Cash Flow For ease of reference, lists of items and amounts explaining any increases or decreases in the discussion below are listed in the same order that such line items appear in our applicable financial statements.  Our net cash provided by operating activities was R$2,518 million in the year ended December 31, 2013, compared to R$1,989 million in the year ended December 31, 2012. The increase of R$528 million primarily reflected: (i) an increase of R$282 million of net income adjusted for the reconciliation of net cash; (ii) a decrease of R$577 million in operating assets (which represents an increase in the cash provided by operating activities) basically due to a reduction of R$691 million in accounts receivables from consumers, concessionaries and licensees (reflecting the decline in our gross operating revenue, comparing 2013 to 2012), a reduction in escrow deposits and a reduction in dividends and interest on equity received, partially offset by an increase related to resources provided by the CDE Account in the amount of R$121 million; and (iii) a decrease of R$312 million in cash as result of a reduction in operating liabilities mainly due to a reduction of R$369 million in suppliers, in regulatory charges and in reserve for tax, civil and labor risks paid, and partially offset by an increase of R$63 million for other taxes and social contribution expenses, advances from Eletrobrás (resources provided by the CDE Account) and other operating liabilities, and (iv) an increase of R$19 million, which represents the net effect of payment of interest, income tax and social contribution.  Our net cash provided by operating activities was R$1,989 million in the year ended December 31, 2012, compared to R$2,263 million in the year ended December 31, 2011. The reduction of R$274 million primarily reflected: (i) an increase of R$120 million of net income adjusted for the reconciliation of net cash, which is primarily related to depreciation and amortization, allowance for doubtful accounts, the gain in pension plan costs and losses on the write‑off of noncurrent assets; (ii) a reduction of R$162 million in cash as a result of a reduction in operating liabilities, primarily due to taxes and contributions; and (iii) an increase of R$188 million in operating assets (which represents a decrease in the cash provided by operating activities) mainly in accounts receivables from consumers, concessionaires and licensees in the amount of R$430 million, basically due to the increase in sales (as measured by monthly billing December 2012 compared with December 2011), and offset substantially by a reduction of R$152 million of escrow deposits and R$75 million in recoverable taxes (which represents a decrease in the cash provided by operating activities). 78 Table of Contents Our net cash from financing activities was R$948 million in the year ended December 31, 2013 compared to R$1,143 million in the year ended December 31, 2012.  This reduction of R$194 million was due to an increase of R$2,762 million related to payments of loans, financing and debentures (net of derivatives), mainly from our distribution and generation subsidiaries (which represents a decrease in the cash), partially offset by the R$8 million decreasefollowing fund‑raising:  (i) the initial public offering of our indirect subsidiary CPFL Renováveis, which occurred in our operating income2013 (R$329 million); (ii) an increase of loans, financing and the R$2 million increase in expenses for income taxdebentures obtained (R$1,672 million); and social contributions. Generation Net income from our generation segment in 2010 amounted to R$257 million,(iii) a decrease of 22.5% compared with 2009.  This decrease was mainly due to:  (i) a 5.1% decreaseR$568 million in our operating income due todividend payments (which represents an increase in purchasescash generated). Our net cash from financing activities was R$1,143 million in the year ended December 31, 2012 compared to R$1,252 million of electricitycash generated in the year ended December 31, 2011.  This reduction of R$109 million was due mainly to comply with supply agreements entered intoevents in 2011 such as:  (i) debt refinancing; (ii) issuance of debentures, especially those made by subsidiary CPFL Brasil to fund the acquisition of Jantus (through our subsidiary CPFL Renováveis); and (iii) various borrowings by our subsidiaries being the highlight for the subsidiaries CPFL Paulista, CPFL Piratininga, RGE, CPFL Geração, CPFL Sul Paulista, CPFL Leste Paulista, CPFL Mococa and CPFL Jaguari, that  had not yet started operations, (ii)received approval for funding currency foreign working capital,(iv)partially offset by an increase of R$170 million in dividend payments (which represents a decrease in the cash). Indebtedness The following table sets forth our current and noncurrent liabilities (in millions) for the year ended December 31, 2013:   2013   Current Noncurrent       Secured debt 1,064 5,597 Unsecured debt 3,836 11,742 Total 4,900 17,339 Our total indebtedness dueincreased R$1,548 million, or 10.0%, from December 31, 2012 to new financingsDecember 31, 2013, mainly as result of: ·Debentures issuances in the total of R$3,290 million, by:  (i) CPFL Energia (R$1,290 million); (ii) CPFL Paulista (R$505 million), CPFL Piratininga (R$235 million) and RGE (R$170 million) to refinance debt maturing and reinforce working capital; and (iii) CPFL Geração (R$460 million) to prepay of promissory notes; ·A loan from BNDES through the monetary restatementFund for the Financing and Acquisition of Machinery and Equipment (Fundo para Financiamento e Aquisições de Máquinas e Equipamentos), or FINAME,and Financing and Entrepreneurship (Financiamento e Empreendimentos), or FINEM, in the public utilities.total amount of R$1,165 million primarily to fulfill the biannual investment plan for our largest distribution subsidiaries (R$303 million), as well as to fulfill the investment for our renewable generation subsidiaries (R$850 million); and Commercialization·Fund‑raising in the amount of R$1,261 million (which R$718 million in dollar‑denominated debt) at the most of our distribution subsidiaries and Services Net income fromat our commercializationindirect subsidiary CPFL Renováveis, to reinforce of working capital, debts payments, refinance debt maturing and services segment in 2010 amounted to R$207 million, a decrease of 1.5%.  The decrease in this segment reflectedfulfill the compensation of the increase of 3.6% of operating income byinvestment for our net financial expenses.renewable generation subsidiaries. 6879   Table of Contents   The main purpose of these financings will be to:  (i) finance the investments of our distribution companies; and (ii) invest in our renewables energy generation segment. In 2014 and 2015 we expect to continue to take advantage of the financing opportunities offered by the market through issuing debentures and debt for working capital both internally and externally, and those offered by the government through lines of financing provided by BNDES, to expand and modernize the electric system, to undertake new investments in the generation segment and to be prepared for possible consolidation in the sector. Moreover, fundraising seeks to maintain the liquidity of the group and a good debt profile through extending the average maturity of the debt and reducing its cost. Terms of Outstanding Debt Total debt outstanding at December 31, 2013 (including accrued interest) was R$17,021 million.  Of the total amount, approximately R$2,008 million, or 11.8%, was denominated in U.S. dollar.  We have entered into swap agreements in order to reduce our exposure to exchange rates that arises from part of these obligations.  The amount of R$1,837 million of our total outstanding debt is due in 12 months. Our major categories of indebtedness are as follows: ·BNDES.  At December 31, 2013, we had R$4,973 million outstanding under a number of facilities provided through BNDES.  These loans are denominated inreais.  The most significant part of these loans relates to (a) loans to our indirect generation subsidiaries CPFL Renováveis and CERAN (R$3,431 million), and (b) financing of investment programs of our distribution subsidiaries, primarily CPFL Paulista, CPFL Piratininga and RGE (R$1,512 million). ·Debentures.  At December 31, 2013, we had indebtedness of R$7,791 million outstanding under several series of debentures issued by CPFL Energia, CPFL Paulista, CPFL Piratininga, RGE, CPFL Santa Cruz, CPFL Brasil, CPFL Geração and CPFL Renováveis.  The terms of these debentures are summarized in note 17 to our audited financial statements. ·Working capital.  At December 31, 2013, we had R$1,669 million outstanding under a number of loan agreements indexed to the CDI relating to working capital for our distribution, generation and services subsidiaries. ·Otherreal‑denominated debt.  As of December 31, 2013, we had R$580 million outstanding under a number of otherreal‑denominated facilities.  The most significant part of these loans relates to CPFL Renováveis (R$515 million) and to our distribution subsidiaries (R$28 million).  The majority of these loans are restated based on CDI or IGP‑M, and bear interest at various rates. ·Other U.S. dollar‑denominateddebt.  At December 31, 2013, we had R$2,009 million outstanding under other loans denominated in U.S. dollars.  We have entered into swap agreements in order to reduce our exposure to exchange rates that arises from these obligations.  For more details on our loans, debentures and derivatives, please see notes 16, 17 and 34 to our audited consolidated financial statements. Financial and Operating Covenants We are subject to financial and operating covenants under our financial instruments and those of our subsidiaries.  These covenants include the following: ·We have limitations on our ability to sell or pledge assets or to make investments in third parties. ·BNDES financings.  BNDES financings require our subsidiaries CPFL Paulista, CPFL Piratininga, RGE, CPFL Santa Cruz, CPFL Leste Paulista and CPFL Sul Paulista:  (i) to only pay dividends and interest on shareholders’ equity, which sum exceeds the mandatory dividend provided by law, aftercompliance with all the contractual obligations; (ii) to fully comply with the restrictive covenants established in the contract; and (iii) to keep certain financial ratios within pre-established parameters, as follow:  80 Table of Contents oCPFL Paulista, CPFL Piratininga and RGE §Net indebtedness divided by EBITDA – maximum of 3.5 (excluding gain on disposal of assets); and §Net indebtedness divided by the sum of net indebtedness and net equity – maximum of 0.90. oCPFL Serviços §Net indebtedness divided by EBITDA – maximum of 4.00. oCPFL Geração §The loans from the BNDES raised by our subsidiary CERAN establish restrictions on the payment of dividends to our subsidiary CPFL Geração higher than the minimum mandatory dividend of 25% without the prior agreement of the BNDES. oCPFL Renováveis:  FINEM I and FINEM VI §Debt coverage ratio of 1.2; and §Own capitalization ratio of 25% or more. FINEM II and FINAME II §Restrictions on the payment of dividends if a debt service coverage ratio of 1.0 or more and general indebtedness ratio of 0.8 or less is not maintained. FINEM III §Maintaining Shareholders’ Equity (Shareholders’ Equity + Net Bank Debts) of more than 0.28, determined in the Company's annual consolidated financial statements; and §Maintaining a Net Bank Debt/EBITDA ratio of 4.0 or less, determined in the Company's annual consolidated financial statements. FINEM V §Maintaining the debt coverage ratio at 1.2; and §Maintaining the own capitalization ratio at 30% or more. FINEM VII and X §Maintaining the annual debt coverage ratio at 1.2; and §Distribution of dividends restricted to the Total Liabilities ratio divided by Shareholders’ Equity ex‑Dividend of less than 2.33. FINEM VIII and FINAME III §Maintaining a Debt Service Coverage Ratio of 1.2 or more; 81 Table of Contents §Maintaining a Net Indebtedness/EBITDA ratio of 7.5 or less in 2013, 6.0 in 2014, 5.6 in 2015, 4.6 in 2016 and 3.75 in 2017 onward, determined in the consolidated financial statements of CPFL Renováveis; and §Maintaining a Shareholders' Equity/(Shareholders’ Equity + Net Debt) ratio of 0.41 or more in 2013 to 2016 and 0.45 in 2017 onward, determined in the consolidated financial statements of CPFL Renováveis. FINEM IX §Maintaining the Debt Service Coverage Ratio at 1.3 or more. FINEM XI and FINAME I §Maintaining a Net Bank Debt/EBITDA ratio of 4.0 or less, determined in the Company's annual consolidated financial statements. FINEM XII §Maintaining the Debt Service Coverage Ratio of the SPEs at 1.3 or more after amortization starts; and §Maintaining the Consolidated Debt Service Coverage Ratio at 1.3 or more, determined in the consolidated interim financial statements of Eólica Holding, after amortization starts. PONTE II and III §Maintaining Shareholder’s Equity (Shareholders’ Equity + Net Bank Debts) of more than 0.41, determined in the CPFL Renováveis's annual consolidated financial statements; and §Maintaining a Net Bank Debt/EBITDA ratio of 7.5 or less in 2013 and 6.0 in 2014, determined in the interim consolidated financial statements of CPFL Renováveis. HSBC §From 2013, there is the obligation to maintain the ratio of Net Debt and EBITDA to Cash Accumulation at less than 5.00 in 2013 and 3.50 after that until discharge. NIB §Maintaining the half‑yearly debt coverage ratio at 1.2; §Maintaining a Total Debt to Shareholders’ Equity ratio of 30% or more; and §Maintaining the Financing Term Coverage Ratio at 1.7 or more. ·Banco do Brasil working capital financings. CPFL Paulista, CPFL Piratininga, RGE, CPFL Santa Cruz, CPFL Sul Paulista, CPFL Jaguari, CPFL Mococa and CPFL Leste Paulista oNet indebtedness divided by EBITDA ‑ maximum of 3.75; and oEBITDA divided by Financial Income (Expense) ‑ minimum of 2.25. ·Foreign currency loans.  The foreign currency loans from the Bank of America, J.P. Morgan, Citibank, Morgan Stanley, Scotiabank and Bank of Tokyo and Santander are subject to certain restrictive conditions under Law No. 4,131, and include clauses that require us to maintain certain financial ratios within pre‑established parameters.  The ratios required are as follows:  oNet indebtedness divided by EBITDA,  – maximum of 3.75; and 82 Table of Contents oEBITDA divided by Financial Income (Expense) – minimum of 2.25. ·Debentures.  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: oCPFL Energia, CPFL Paulista (6th and 7th issues), CPFL Piratininga (3rd, 6th and 7th issues), RGE (5th, 6th and 7th issues), CPFL Geração (3rd, 4th, 5th and 6th issues), CPFL Brasil and CPFL Santa Cruz Maintenance, by the Company, of the following ratios: §Net indebtedness divided by EBITDA – maximum of 3.75; and §EBITDA divided by Financial Income (Expense) – minimum of 2.25. oCPFL Renováveis ‑1st issuance of CPFL Renováveis:  §Operating debt coverage ratio ‑ minimum of 1.00; §Debt service coverage ratio ‑ minimum of 1.05; §Net indebtedness divided by EBITDA – maximum of 7.5 in 2013, 6.0 in 2014, 5.6 in 2015, 4.6 in 2016 and 3.75 from 2017; §EBITDA divided by Net financial expense‑ minimum of 1.75. ‑1st issuance of our indirect subsidiary PCH Holding 2 S.A:  §Maintaining the Debt Service Coverage ratio of our subsidiary Santa Luzia at 1.2 or more from September 2014; §Maintaining a Net Debt/EBITDA ratio of 7.5 or less in 2013, 6.0 in 2014, 5.6 in 2015, 4.6 in 2016 and 3.75 from 2017. For purposes of determining covenants, the definition of EBITDA for the subsidiaries of distribution takes into consideration inclusion of the main regulatory assets and liabilities.  In the Company’s case, it also takes into account consolidation based on the interest in the respective subsidiaries (for both EBITDA and assets and liabilities).  Other loan and financing agreements of the direct and indirect subsidiaries are subject to early settlement in the event of changes in the Company’s 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 Company’s current shareholders, unless at least one of the shareholders (Camargo Corrêa and Previ) remains directly or indirectly in the block of control by the Company. Certain debentures of subsidiaries and jointly‑owned subsidiaries are subject to early settlement in the event of changes in the Company’s 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 Company’s current shareholders. Furthermore, failure to comply with the obligations or restrictions mentioned could result in default in relation to other contractual obligations (cross default), depending on each loan and financing agreement. The Management of the Company and its subsidiaries monitor these ratios systematically and constantly to ensure that the contractual conditions are complied with.  In the opinion of the Management of the Company and itssubsidiaries andjoint-ventures, these restrictive covenants and clauses are adequately complied with at December 31, 2013. 83 Table of Contents For more information on our financial covenants, see explanatory notes 16 and 17 to our audited financial statements. Uses of funds Our cash flow used for investing activities was R$1,695 million in the year ended December 31, 2013 compared with R$3,361 million in the year ended December 31, 2012.  This decrease of R$1,666 million primarily reflects:  (i) a reduction of R$145 million in purchases of property, plant and equipment mainly by lower investments in power generation from renewable sources, anda reduction of R$581 millionin intangibles mainly from lower investments in improving and expanding distribution; and (ii) a decrease of R$879 million related to the acquisitions of the Atlântica Complex, Bons Ventos Wind Farm and the Ester Plant (SPE Lacenas) in 2012. Our cash flow used for investing activities was R$3,361 million in the year ended December 31, 2012 compared with R$2,351 million in the year ended December 31, 2011.  This increase of R$1,010 million primarily reflects:  (i) an increase of R$269 million related to the acquisitions of Santa Luzia and Jantus in 2011, and the acquisitions of the Atlântica Complex, Bons Ventos Wind Farm and Ester Plant (SPE Lacenas) in 2012, net of cash acquired; and (ii) an increase of R$694  million in purchases of property and equipment, primarily by investment in power generation from renewable sources, and in intangibles primarily by investment in distribution infrastructure. Funding Requirements and Contractual Commitments Our capital requirements are primarily for the following purposes: ·We make capital expenditures to continue improving and expanding our distribution system and to complete our renewable generation projects.  See “—Capital Expenditures” bellow for a discussion of our historical and planned capital expenditures; ·Repayment or refinancing maturing debt.  At December 31, 2013 we had outstanding debt maturing during the following 12 months aggregating R$1,837 million; and ·Dividends on a semiannual basis.  We paid R$816 million in 2013 and R$1,394 million in 2012.  See “Item 10.  Additional Information—Interest Attributable to Shareholders’ Equity”. In the second half of 2011, CPFL Energia began a pre‑funding strategy and paid off some of the debt that was due in 2012 earlier.  We continued to employ this strategy during 2013 in relation to debt due in 2014.  With this strategy, we reduced the nominal cost of our indebtedness in approximately 0.5% to 8.4% per year, with an average indebtedness term of 4.14 years.  Capital ExpendituresSources of Funds Our principal capital expendituresmain sources of funds derive from our operating cash generation and financings. Cash Flow For ease of reference, lists of items and amounts explaining any increases or decreases in the past several years have beendiscussion below are listed in the same order that such line items appear in our applicable financial statements.  Our net cash provided by operating activities was R$2,518 million in the year ended December 31, 2013, compared to R$1,989 million in the year ended December 31, 2012. The increase of R$528 million primarily reflected: (i) an increase of R$282 million of net income adjusted for the maintenancereconciliation of net cash; (ii) a decrease of R$577 million in operating assets (which represents an increase in the cash provided by operating activities) basically due to a reduction of R$691 million in accounts receivables from consumers, concessionaries and upgradinglicensees (reflecting the decline in our gross operating revenue, comparing 2013 to 2012), a reduction in escrow deposits and a reduction in dividends and interest on equity received, partially offset by an increase related to resources provided by the CDE Account in the amount of R$121 million; and (iii) a decrease of R$312 million in cash as result of a reduction in operating liabilities mainly due to a reduction of R$369 million in suppliers, in regulatory charges and in reserve for tax, civil and labor risks paid, and partially offset by an increase of R$63 million for other taxes and social contribution expenses, advances from Eletrobrás (resources provided by the CDE Account) and other operating liabilities, and (iv) an increase of R$19 million, which represents the net effect of payment of interest, income tax and social contribution.  Our net cash provided by operating activities was R$1,989 million in the year ended December 31, 2012, compared to R$2,263 million in the year ended December 31, 2011. The reduction of R$274 million primarily reflected: (i) an increase of R$120 million of net income adjusted for the reconciliation of net cash, which is primarily related to depreciation and amortization, allowance for doubtful accounts, the gain in pension plan costs and losses on the write‑off of noncurrent assets; (ii) a reduction of R$162 million in cash as a result of a reduction in operating liabilities, primarily due to taxes and contributions; and (iii) an increase of R$188 million in operating assets (which represents a decrease in the cash provided by operating activities) mainly in accounts receivables from consumers, concessionaires and licensees in the amount of R$430 million, basically due to the increase in sales (as measured by monthly billing December 2012 compared with December 2011), and offset substantially by a reduction of R$152 million of escrow deposits and R$75 million in recoverable taxes (which represents a decrease in the cash provided by operating activities). 78 Table of Contents Our net cash from financing activities was R$948 million in the year ended December 31, 2013 compared to R$1,143 million in the year ended December 31, 2012.  This reduction of R$194 million was due to an increase of R$2,762 million related to payments of loans, financing and debentures (net of derivatives), mainly from our distribution and generation subsidiaries (which represents a decrease in the cash), partially offset by the following fund‑raising:  (i) the initial public offering of our distribution networkindirect subsidiary CPFL Renováveis, which occurred in 2013 (R$329 million); (ii) an increase of loans, financing and debentures obtained (R$1,672 million); and (iii) a decrease of R$568 million in dividend payments (which represents an increase in cash generated). Our net cash from financing activities was R$1,143 million in the year ended December 31, 2012 compared to R$1,252 million of cash generated in the year ended December 31, 2011.  This reduction of R$109 million was due mainly to events in 2011 such as:  (i) debt refinancing; (ii) issuance of debentures, especially those made by subsidiary CPFL Brasil to fund the acquisition of Jantus (through our subsidiary CPFL Renováveis); and (iii) various borrowings by our subsidiaries being the highlight for our generation projects.  the subsidiaries CPFL Paulista, CPFL Piratininga, RGE, CPFL Geração, CPFL Sul Paulista, CPFL Leste Paulista, CPFL Mococa and CPFL Jaguari, that  received approval for funding currency foreign working capital,(iv)partially offset by an increase of R$170 million in dividend payments (which represents a decrease in the cash). Indebtedness The following table sets forth our capital expenditurescurrent and noncurrent liabilities (in millions) for the yearsyear ended December 31, 2011, 20102013:   2013   Current Noncurrent       Secured debt 1,064 5,597 Unsecured debt 3,836 11,742 Total 4,900 17,339 Our total indebtedness increased R$1,548 million, or 10.0%, from December 31, 2012 to December 31, 2013, mainly as result of: ·Debentures issuances in the total of R$3,290 million, by:  (i) CPFL Energia (R$1,290 million); (ii) CPFL Paulista (R$505 million), CPFL Piratininga (R$235 million) and 2009:RGE (R$170 million) to refinance debt maturing and reinforce working capital; and (iii) CPFL Geração (R$460 million) to prepay of promissory notes; ·A loan from BNDES through the Fund for the Financing and Acquisition of Machinery and Equipment (Fundo para Financiamento e Aquisições de Máquinas e Equipamentos), or FINAME,and Financing and Entrepreneurship (Financiamento e Empreendimentos), or FINEM, in the total amount of R$1,165 million primarily to fulfill the biannual investment plan for our largest distribution subsidiaries (R$303 million), as well as to fulfill the investment for our renewable generation subsidiaries (R$850 million); and ·Fund‑raising in the amount of R$1,261 million (which R$718 million in dollar‑denominated debt) at the most of our distribution subsidiaries and at our indirect subsidiary CPFL Renováveis, to reinforce of working capital, debts payments, refinance debt maturing and to fulfill the investment for our renewable generation subsidiaries. Year ended December 31, 2011 2010 2009 (in millions ofreais)          Distribution 1,065 1,128 746 Generation 823 645 570 Commercialization and other investments 17 29 40         Total R$1,905 R$1,802 R$ 1,356 79 Table of Contents The main purpose of these financings will be to:  (i) finance the investments of our distribution companies; and (ii) invest in our renewables energy generation segment. In 2014 and 2015 we expect to continue to take advantage of the financing opportunities offered by the market through issuing debentures and debt for working capital both internally and externally, and those offered by the government through lines of financing provided by BNDES, to expand and modernize the electric system, to undertake new investments in the generation segment and to be prepared for possible consolidation in the sector. Moreover, fundraising seeks to maintain the liquidity of the group and a good debt profile through extending the average maturity of the debt and reducing its cost. Terms of Outstanding Debt Total debt outstanding at December 31, 2013 (including accrued interest) was R$17,021 million.  Of the total amount, approximately R$2,008 million, or 11.8%, was denominated in U.S. dollar.  We have entered into swap agreements in order to reduce our exposure to exchange rates that arises from part of these obligations.  The amount of R$1,837 million of our total outstanding debt is due in 12 months. Our major categories of indebtedness are as follows: ·BNDES.  At December 31, 2013, we had R$4,973 million outstanding under a number of facilities provided through BNDES.  These loans are denominated inreais.  The most significant part of these loans relates to (a) loans to our indirect generation subsidiaries CPFL Renováveis and CERAN (R$3,431 million), and (b) financing of investment programs of our distribution subsidiaries, primarily CPFL Paulista, CPFL Piratininga and RGE (R$1,512 million). ·Debentures.  At December 31, 2013, we had indebtedness of R$7,791 million outstanding under several series of debentures issued by CPFL Energia, CPFL Paulista, CPFL Piratininga, RGE, CPFL Santa Cruz, CPFL Brasil, CPFL Geração and CPFL Renováveis.  The terms of these debentures are summarized in note 17 to our audited financial statements. ·Working capital.  At December 31, 2013, we had R$1,669 million outstanding under a number of loan agreements indexed to the CDI relating to working capital for our distribution, generation and services subsidiaries. ·Otherreal‑denominated debt.  As of December 31, 2013, we had R$580 million outstanding under a number of otherreal‑denominated facilities.  The most significant part of these loans relates to CPFL Renováveis (R$515 million) and to our distribution subsidiaries (R$28 million).  The majority of these loans are restated based on CDI or IGP‑M, and bear interest at various rates. ·Other U.S. dollar‑denominateddebt.  At December 31, 2013, we had R$2,009 million outstanding under other loans denominated in U.S. dollars.  We have entered into swap agreements in order to reduce our exposure to exchange rates that arises from these obligations.  For more details on our loans, debentures and derivatives, please see notes 16, 17 and 34 to our audited consolidated financial statements. Financial and Operating Covenants We planare subject to financial and operating covenants under our financial instruments and those of our subsidiaries.  These covenants include the following: ·We have limitations on our ability to sell or pledge assets or to make investments in third parties. ·BNDES financings.  BNDES financings require our subsidiaries CPFL Paulista, CPFL Piratininga, RGE, CPFL Santa Cruz, CPFL Leste Paulista and CPFL Sul Paulista:  (i) to only pay dividends and interest on shareholders’ equity, which sum exceeds the mandatory dividend provided by law, aftercompliance with all the contractual obligations; (ii) to fully comply with the restrictive covenants established in the contract; and (iii) to keep certain financial ratios within pre-established parameters, as follow:  80 Table of Contents oCPFL Paulista, CPFL Piratininga and RGE §Net indebtedness divided by EBITDA – maximum of 3.5 (excluding gain on disposal of assets); and §Net indebtedness divided by the sum of net indebtedness and net equity – maximum of 0.90. oCPFL Serviços §Net indebtedness divided by EBITDA – maximum of 4.00. oCPFL Geração §The loans from the BNDES raised by our subsidiary CERAN establish restrictions on the payment of dividends to our subsidiary CPFL Geração higher than the minimum mandatory dividend of 25% without the prior agreement of the BNDES. oCPFL Renováveis:  FINEM I and FINEM VI §Debt coverage ratio of 1.2; and §Own capitalization ratio of 25% or more. FINEM II and FINAME II §Restrictions on the payment of dividends if a debt service coverage ratio of 1.0 or more and general indebtedness ratio of 0.8 or less is not maintained. FINEM III §Maintaining Shareholders’ Equity (Shareholders’ Equity + Net Bank Debts) of more than 0.28, determined in the Company's annual consolidated financial statements; and §Maintaining a Net Bank Debt/EBITDA ratio of 4.0 or less, determined in the Company's annual consolidated financial statements. FINEM V §Maintaining the debt coverage ratio at 1.2; and §Maintaining the own capitalization ratio at 30% or more. FINEM VII and X §Maintaining the annual debt coverage ratio at 1.2; and §Distribution of dividends restricted to the Total Liabilities ratio divided by Shareholders’ Equity ex‑Dividend of less than 2.33. FINEM VIII and FINAME III §Maintaining a Debt Service Coverage Ratio of 1.2 or more; 81 Table of Contents §Maintaining a Net Indebtedness/EBITDA ratio of 7.5 or less in 2013, 6.0 in 2014, 5.6 in 2015, 4.6 in 2016 and 3.75 in 2017 onward, determined in the consolidated financial statements of CPFL Renováveis; and §Maintaining a Shareholders' Equity/(Shareholders’ Equity + Net Debt) ratio of 0.41 or more in 2013 to 2016 and 0.45 in 2017 onward, determined in the consolidated financial statements of CPFL Renováveis. FINEM IX §Maintaining the Debt Service Coverage Ratio at 1.3 or more. FINEM XI and FINAME I §Maintaining a Net Bank Debt/EBITDA ratio of 4.0 or less, determined in the Company's annual consolidated financial statements. FINEM XII §Maintaining the Debt Service Coverage Ratio of the SPEs at 1.3 or more after amortization starts; and §Maintaining the Consolidated Debt Service Coverage Ratio at 1.3 or more, determined in the consolidated interim financial statements of Eólica Holding, after amortization starts. PONTE II and III §Maintaining Shareholder’s Equity (Shareholders’ Equity + Net Bank Debts) of more than 0.41, determined in the CPFL Renováveis's annual consolidated financial statements; and §Maintaining a Net Bank Debt/EBITDA ratio of 7.5 or less in 2013 and 6.0 in 2014, determined in the interim consolidated financial statements of CPFL Renováveis. HSBC §From 2013, there is the obligation to maintain the ratio of Net Debt and EBITDA to Cash Accumulation at less than 5.00 in 2013 and 3.50 after that until discharge. NIB §Maintaining the half‑yearly debt coverage ratio at 1.2; §Maintaining a Total Debt to Shareholders’ Equity ratio of 30% or more; and §Maintaining the Financing Term Coverage Ratio at 1.7 or more. ·Banco do Brasil working capital expenditures aggregating approximatelyfinancings. CPFL Paulista, CPFL Piratininga, RGE, CPFL Santa Cruz, CPFL Sul Paulista, CPFL Jaguari, CPFL Mococa and CPFL Leste Paulista oNet indebtedness divided by EBITDA ‑ maximum of 3.75; and oEBITDA divided by Financial Income (Expense) ‑ minimum of 2.25. ·Foreign currency loans.  The foreign currency loans from the Bank of America, J.P. Morgan, Citibank, Morgan Stanley, Scotiabank and Bank of Tokyo and Santander are subject to certain restrictive conditions under Law No. 4,131, and include clauses that require us to maintain certain financial ratios within pre‑established parameters.  The ratios required are as follows:  oNet indebtedness divided by EBITDA,  – maximum of 3.75; and 82 Table of Contents oEBITDA divided by Financial Income (Expense) – minimum of 2.25. ·Debentures.  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: oCPFL Energia, CPFL Paulista (6th and 7th issues), CPFL Piratininga (3rd, 6th and 7th issues), RGE (5th, 6th and 7th issues), CPFL Geração (3rd, 4th, 5th and 6th issues), CPFL Brasil and CPFL Santa Cruz Maintenance, by the Company, of the following ratios: §Net indebtedness divided by EBITDA – maximum of 3.75; and §EBITDA divided by Financial Income (Expense) – minimum of 2.25. oCPFL Renováveis ‑1st issuance of CPFL Renováveis:  §Operating debt coverage ratio ‑ minimum of 1.00; §Debt service coverage ratio ‑ minimum of 1.05; §Net indebtedness divided by EBITDA – maximum of 7.5 in 2013, 6.0 in 2014, 5.6 in 2015, 4.6 in 2016 and 3.75 from 2017; §EBITDA divided by Net financial expense‑ minimum of 1.75. ‑1st issuance of our indirect subsidiary PCH Holding 2 S.A:  §Maintaining the Debt Service Coverage ratio of our subsidiary Santa Luzia at 1.2 or more from September 2014; §Maintaining a Net Debt/EBITDA ratio of 7.5 or less in 2013, 6.0 in 2014, 5.6 in 2015, 4.6 in 2016 and 3.75 from 2017. For purposes of determining covenants, the definition of EBITDA for the subsidiaries of distribution takes into consideration inclusion of the main regulatory assets and liabilities.  In the Company’s case, it also takes into account consolidation based on the interest in the respective subsidiaries (for both EBITDA and assets and liabilities).  Other loan and financing agreements of the direct and indirect subsidiaries are subject to early settlement in the event of changes in the Company’s 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 Company’s current shareholders, unless at least one of the shareholders (Camargo Corrêa and Previ) remains directly or indirectly in the block of control by the Company. Certain debentures of subsidiaries and jointly‑owned subsidiaries are subject to early settlement in the event of changes in the Company’s 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 Company’s current shareholders. Furthermore, failure to comply with the obligations or restrictions mentioned could result in default in relation to other contractual obligations (cross default), depending on each loan and financing agreement. The Management of the Company and its subsidiaries monitor these ratios systematically and constantly to ensure that the contractual conditions are complied with.  In the opinion of the Management of the Company and itssubsidiaries andjoint-ventures, these restrictive covenants and clauses are adequately complied with at December 31, 2013. 83 Table of Contents For more information on our financial covenants, see explanatory notes 16 and 17 to our audited financial statements. Uses of funds Our cash flow used for investing activities was R$2,9441,695 million in 2012 and approximatelythe year ended December 31, 2013 compared with R$2,3703,361 million in 2013.  Of total budgeted capital expenditures over this period,the year ended December 31, 2012.  This decrease of R$2,3091,666 million are expected to be invested in our distribution segment andprimarily reflects:  (i) a reduction of R$2,898145 million in ourpurchases of property, plant and equipment mainly by lower investments in power generation segment.  Partfrom renewable sources, anda reduction of these expenditures, particularly R$581 millionin generation projects, is already contractually committed.  See “—Liquidityintangibles mainly from lower investments in improving and Capital Resources—Funding Requirementsexpanding distribution; and Contractual Commitments.” Planned capital expenditures for development(ii) a decrease of our generation capacity,R$879 million related to the acquisitions of the Atlântica Complex, Bons Ventos Wind Farm and the Ester Plant (SPE Lacenas) in 2012. Our cash flow used for investing activities was R$3,361 million in the year ended December 31, 2012 compared with R$2,351 million in the year ended December 31, 2011.  This increase of R$1,010 million primarily reflects:  (i) an increase of R$269 million related financing arrangements, are discussedto the acquisitions of Santa Luzia and Jantus in more detail under “Item 4. Information on2011, and the Company—Generationacquisitions of Electricity.”  Liquiditythe Atlântica Complex, Bons Ventos Wind Farm and Capital Resources Ester Plant (SPE Lacenas) in 2012, net of cash acquired; and (ii) an increase of R$694  million in purchases of property and equipment, primarily by investment in power generation from renewable sources, and in intangibles primarily by investment in distribution infrastructure. Funding Requirements and Contractual Commitments Our capital requirements are primarily for the following purposes: ·        We make capital expenditures to continue improving and expanding our distribution system and to complete our renewable generation projects.  See “—Capital Expenditures” abovebellow for a discussion of our historical and planned capital expenditures; ·        Repayment or refinancing maturing debt.  At December 31, 20112013 we had outstanding debt maturing during the following 12 months aggregating R$1,428 million (excluding derivatives1,837 million; and interest); ·        Dividends on a semiannual basis.  We paid R$1,230816 million in 20112013 and R$1,4241,394 million in 2010.2012.  See “Item 10.  Additional Information—Interest Attributable to Shareholders’ Equity;” andEquity”. ·Funding for acquisitions.  In the second half of 2011, CPFL Energia began a pre‑funding strategy and paid off some of the debt that was due in 2012 earlier.  We continued to employ this strategy during 2013 in relation to debt due in 2014.  With this strategy, we paid R$863 million forreduced the acquisition of Jantus and Santa Luzia. On December 31, 2011, our working capital reflected a superavit (excess of current assets over current liabilities) of R$864 million.  The main cause of this superavit was the refinancingnominal cost of our current debtindebtedness in 2010 and the higher levelapproximately 0.5% to 8.4% per year, with an average indebtedness term of cash and cash equivalents in 2011.4.14 years.  The following table summarizes our contractual obligations determined in accordance with IFRS as of December 31, 2011.  The table does not include accounts payable reported on our balance sheet.   Payments due by period   Total Less than 1 year 1-3 years 4-5 years After 5 years   (in millions ofreais)  Contractual obligations as of December 31, 2011:           Debt obligations(1) 13,359 1,428 3,469 3,671 4,791 Purchase obligations:           Electricity purchase agreements(2) 127,107 8,205 15,283 15,200 88,418 Generation projects 3,426 819 698 287 1,622 Supplies 1,686 1,243 387 57 - Pension funding(3) 589 40 77 77 395             Total 146,167 11,734 19,914 19,292 95,227 69 Table of Contents (1)           Not including interest payments on debt or payments under swap agreements.  For the year ended December 31, 2012, we expect that the interest payments on debt and debentures will amount to R$218 million and we do not expect payments under swap agreements.  This is the contractual amount and is presented net of Fair Value adjustments and borrowing costs.  We expect to pay approximately R$1,039 million in interest payments in 2012.  Interest payments on debt for years following 2012 have not been estimated.  We are not able to determine such future interest payments because we cannot accurately predict future interest rates, our future cash generation, or future business decisions that could significantly affect our debt levels and consequently this estimate.  For an understanding of the impact of a change in interest rates applicable to our long‑term debt obligations, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Risk of Index Variation.” For additional information on the terms of our outstanding debt, see “—Terms of Outstanding Debt.” (2)           Amounts payable under long‑term energy purchase agreements, which are subject to changing prices and provide for renegotiation under certain circumstances.  The table represents the amounts payable for the contracted volumes applying the year-end 2011 price.  See “—Background—Prices for Purchased Electricity” and note 27 to our consolidated financial statements. (3)           Amounts due under a contract with the pension plan administrator (see note 18 to our consolidated financial statements). Sources of Funds Our main sources of funds derive from our operating cash generation and financings. Cash Flow NetFor ease of reference, lists of items and amounts explaining any increases or decreases in the discussion below are listed in the same order that such line items appear in our applicable financial statements.  Our net cash provided by operating activities was R$2,4892,518 million in 2011, asthe year ended December 31, 2013, compared to R$2,0291,989 million in 2010.the year ended December 31, 2012. The increase mainly reflectedof R$528 million primarily reflected: (i) an increase inof R$282 million of net income andadjusted for the reconciliation of net cash; (ii) a decrease of R$577 million in operating assets (which represents an increase in the adjustmentcash provided by operating activities) basically due to reconcile incomea reduction of R$691 million in accounts receivables from consumers, concessionaries and licensees (reflecting the decline in our gross operating revenue, comparing 2013 to cash, mainly related to2012), a reduction in escrow deposits and a reduction in dividends and interest and monetary restatement, which wason equity received, partially offset by an increase related to resources provided by the CDE Account in depositsthe amount of R$121 million; and (iii) a decrease of R$312 million in escrow.cash as result of a reduction in operating liabilities mainly due to a reduction of R$369 million in suppliers, in regulatory charges and in reserve for tax, civil and labor risks paid, and partially offset by an increase of R$63 million for other taxes and social contribution expenses, advances from Eletrobrás (resources provided by the CDE Account) and other operating liabilities, and (iv) an increase of R$19 million, which represents the net effect of payment of interest, income tax and social contribution.  NetOur net cash used for investmentprovided by operating activities was R$2,4881,989 million in 2011, asthe year ended December 31, 2012, compared to R$1,8022,263 million in 2010.  Thisthe year ended December 31, 2011. The reduction of R$686274 million increase mainly reflects a capitalprimarily reflected: (i) an increase of R$863120 million of net income adjusted for the acquisitionreconciliation of Jantus,net cash, which was partially offset byis primarily related to depreciation and amortization, allowance for doubtful accounts, the gain in pension plan costs and losses on the write‑off of noncurrent assets; (ii) a reduction of R$162 million in cash as a result of a reduction in operating liabilities, primarily due to taxes and contributions; and (iii) an increase of R$188 million in operating assets (which represents a decrease in the cash provided by operating activities) mainly in accounts receivables from ERSA subsidiaries.consumers, concessionaires and licensees in the amount of R$430 million, basically due to the increase in sales (as measured by monthly billing December 2012 compared with December 2011), and offset substantially by a reduction of R$152 million of escrow deposits and R$75 million in recoverable taxes (which represents a decrease in the cash provided by operating activities). 78 NetTable of Contents Our net cash generated byfrom financing activities was R$1,136948 million in 2011the year ended December 31, 2013 compared to R$1,143 million in the year ended December 31, 2012.  This reduction of R$194 million was due to an increase of R$2,762 million related to payments of loans, financing and debentures (net of derivatives), mainly from our distribution and generation subsidiaries (which represents a decrease in the cash), partially offset by the following fund‑raising:  (i) the initial public offering of our indirect subsidiary CPFL Renováveis, which occurred in 2013 (R$329 million); (ii) an increase of loans, financing and debentures obtained (R$1,672 million); and (iii) a decrease of R$568 million in dividend payments (which represents an increase in cash generated). Our net cash from financing activities was R$1,143 million in the year ended December 31, 2012 compared to R$1,252 million of cash generated in the year ended December 31, 2011.  This reduction of R$152109 million disbursedwas due mainly to events in 2010.  This increase is mainly due to new fund raisings, net of payment of maturing debts and2011 such as:  (i) debt refinancing; (ii) issuance of debentures, especially those made by our subsidiary CPFL Brasil to financefund the acquisition of Jantus (through our subsidiary CPFL Energias Renováveis); and (iii) various borrowings by our subsidiaries being the highlight for the subsidiaries CPFL Paulista, CPFL Piratininga, RGE, CPFL Geração, CPFL Sul Paulista, CPFL Leste Paulista, CPFL Mococa and CPFL Jaguari, that  received approval for funding currency foreign working capital,(iv)partially offset by an increase of R$170 million in dividend payments (which represents a decrease in the cash). Indebtedness The following table sets forth our current and noncurrent liabilities in IFRS(in millions) for the year ended December 31, 2011:2013:   2011   Current Noncurrent       Secured debt 414,473 2,616,571 Unsecured debt 4,084,964 11,744,538 Total 4,499,437 14,361,110 70 Table of Contents   2013   Current Noncurrent       Secured debt 1,064 5,597 Unsecured debt 3,836 11,742 Total 4,900 17,339   Our total indebtedness increased R$4,1891,548 million, or 44.5%10.0%, from December 31, 20102012 to December 31, 2011,2013, mainly as result of: ·        issuanceDebentures issuances in the total of debentures in a total amountR$3,290 million, by:  (i) CPFL Energia (R$1,290 million); (ii) CPFL Paulista (R$505 million), CPFL Piratininga (R$235 million) and RGE (R$170 million) to refinance debt maturing and reinforce working capital; and (iii) CPFL Geração (R$460 million) to prepay of R$1,320 million by our subsidiary CPFL Brasil to finance the acquisition of Jantus through our subsidiary CPFL Energias Renováveis;promissory notes; ·        A loan from BNDES through the consolidation of CPFL Energias Renováveis, Santa Luzia and Jantus in our financial statements, resulting in additional indebtedness of R$492 million (CPFL Energias Renováveis), R$136 million (Santa Luzia), R$152 (loans to the acquisition of Jantus) and R$517 million (debentures relating to the acquisition of Jantus).  ·additional financings of R$349 millionFund for the expansionFinancing and improvements in our distribution subsidiariesAcquisition of Machinery and for working capital through Banco do Brasil, Equipment (Fundo para Financiamento e Aquisições de Máquinas e Equipamentos), or FINAME,and fund raisings in the amount of R$1,162 million in U.S. dollar-denominated debt (net of prepaid settlements of yen-denominated debts). During 2012Financing and 2013, we expect to raise funding mainly to finance our scheduled investments in our distribution companies and new generation projects. We expect our main source of new financing in 2012 to be loans from BNDES as FINEM/FINAME credits for our distribution companies, loans for working capital from financial institutions and issuance of debentures. In June, 2011, our Board of Directors approved the issuance of debentures by certain of our subsidiariesEntrepreneurship (Financiamento e Empreendimentos), or FINEM, in the total amount of R$2,909 million.  Of this total amount, R$4841,165 million was issued by CPFL Paulista, R$680 million by CPFL Geração, R$160 million by CPFL Piratininga, R$70 million by RGE, R$65 million by CPFL Santa Cruzprimarily to fulfill the biannual investment plan for our largest distribution subsidiaries (R$303 million), as well as to fulfill the investment for our renewable generation subsidiaries (R$850 million); and R$130 million by EPASA.  We used the proceeds from these offerings for working capital, investment plans and to repay part of our indebtedness.  On June 2011, CPFL Brasil issued debentures ·Fund‑raising in the total amount of R$1,320 million.  These financings will have1,261 million (which R$718 million in dollar‑denominated debt) at the purpose of (i) funding capital expendituresmost of our distribution subsidiaries and at our indirect subsidiary CPFL Renováveis, to reinforce of working capital, debts payments, refinance debt maturing and to fulfill the investment for our renewable generation subsidiaries. 79 Table of Contents The main purpose of these financings will be to:  (i) finance the investments of our distribution companies; and (ii) raisinginvest in our renewables energy generation segment. In 2014 and 2015 we expect to continue to take advantage of the financing opportunities offered by the market through issuing debentures and debt for working capital forboth internally and externally, and those offered by the government through lines of financing provided by BNDES, to expand and modernize the electric system, to undertake new investments in our new renewablethe generation sources segment and (iii) raising capitalto be prepared for operationspossible consolidation in the sector. Moreover, fundraising seeks to maintain the liquidity of EPASA’s thermoelectric power plants.the group and a good debt profile through extending the average maturity of the debt and reducing its cost. Terms of Outstanding Debt Total debt outstanding at December 31, 20112013 (including accrued interest and derivative transactions)interest) was R$13,60817,021 million.  Of the total amount, approximately R$1,7512,008 million, or 12.9%11.8%, was denominated in U.S. dollar.  We have entered into swap agreements in order to reduce our exposure to exchange rates that arises from part of these obligations.  The amount of R$1,6531,837 million of our total outstanding debt is due in 12 months. Our major categories of indebtedness are as follows: ·        BNDES.  At December 31, 2011,2013, we had R$4,8034,973 million outstanding under a number of facilities provided through BNDES.  These loans are denominated inreais.  The most significant part of these loans relates to (a) loans to our indirect generation projects, especially Foz do Chapecó, BAESA, CERAN, ENERCAN andsubsidiaries CPFL Energias Renováveis and CERAN (R$3,4523,431 million), and (b) financing of investment programs of our distribution subsidiaries, primarily CPFL Paulista, CPFL Piratininga and RGE through lines of credit under the BNDES – FINEM loan facility (R$1,1901,512 million).  We also had financings relating to working capital in the amount of R$149 million. ·        Debentures.  At December 31, 2011,2013, we had indebtedness of R$5,1637,791 million outstanding under several series of debentures issued by CPFL Energia, CPFL Paulista, CPFL Piratininga, EPASA,RGE, CPFL Santa Cruz, CPFL Brasil, CPFL Geração and CPFL Leste Paulista, CPFL Sul Paulista, CPFL Jaguari, CPFL Brasil, BAESA, ENERCAN and RGE.Renováveis.  The terms of these debentures are summarized in note 17 to our audited consolidated financial statements. 71 Table of Contents ·        Working capital.  At December 31, 2011,2013, we had R$8571,669 million outstanding under a number of loan agreements indexed to the CDI relating to working capital for our distribution, companies.generation and services subsidiaries. ·        Otherreal-denominated ‑denominated debt.  As of December 31, 2011,2013, we had R$1,034580 million outstanding under a number of otherreal-denominated facilities‑denominated facilities.  The most significant part of these loans relates to CPFL Renováveis (R$174 million through515 million) and to our distribution companies and R$860 million through our generation companies)subsidiaries (R$28 million).  The majority of these loans are restated based on CDI or IGP-M,IGP‑M, and bear interest at various rates. ·        U.S. dollar-denominated debt.  CPFL Paulista entered into bilateral loans denominated in U.S. dollars.  As of December 31, 2011, the total outstanding principal amounts for these loans were R$46 million. ·Other U.S. dollar-denominateddollar‑denominateddebt.  At December 31, 2011,2013, we had R$1,7042,009 million outstanding under other loans denominated in U.S. dollars.  We have entered into swap agreements in order to reduce our exposure to exchange rates that arises from these obligations. In addition, we have U.S. dollar- denominated long‑term receivables, which amounted to R$24 million at December 31, 2011, which also mitigate our exposure to exchange rates.  For more details on our loans, debentures and derivatives, please see notes 16, 17 and 3334 to our audited consolidated financial statements. In addition, as a result of our association with ERSA and our acquisition of Jantus and Santa Luzia, we recorded R$1,295 million in consolidated assumption of debt. Financial and Operating Covenants We are subject to financial and operating covenants under our financial instruments and those of our subsidiaries.  These covenants include the following: ·        We have limitations on our ability to sell or pledge assets or to make investments in third parties. ·        Under the BNDES credit facilities:financings ·CERAN, ENERCAN, BAESA, Foz do Chapecó,.  BNDES financings require our subsidiaries CPFL Paulista, CPFL Piratininga, RGE, CPFL Santa Cruz, CPFL Mococa, CPFL Jaguari, CPFL Leste Paulista and CPFL Sul Paulista must firstPaulista:  (i) to only pay the amounts due under the loans before paying dividends to their respective holding company (CPFL Geração or CPFL Energia) in an amount higher than the mandatory dividends under Brazilian law.  In addition, before making these dividend payments and before paying interest on shareholders’ equity, BNDES must give its prior approval, andwhich sum exceeds the respective subsidiary must be in mandatory dividend provided by law, aftercompliance with all the contractual obligations; (ii) to fully comply with the restrictive covenants established in the contract; and (iii) to keep certain financial ratios within pre-established parameters, as follow:  80 Table of its financial covenants.Contents ·o   CPFL Energias Renováveis must maintain a debt coverage ratio equal to or higher than 1.2 during the amortization period and an own capitalization ratio equal to or higher than 25% during the amortization period. ·CPFL Paulista, CPFL Piratininga and RGE must maintain a net §Net indebtedness todivided by EBITDA ratio– maximum of less than 3.0, 2.53.5 (excluding gain on disposal of assets); and 2.5, respectively, and an §Net indebtedness todivided by the sum of net indebtedness and net equity equal– maximum of 0.90. oCPFL Serviços §Net indebtedness divided by EBITDA – maximum of 4.00. oCPFL Geração §The loans from the BNDES raised by our subsidiary CERAN establish restrictions on the payment of dividends to our subsidiary CPFL Geração higher than the minimum mandatory dividend of 25% without the prior agreement of the BNDES. oCPFL Renováveis:  FINEM I and FINEM VI §Debt coverage ratio of 1.2; and §Own capitalization ratio of 25% or lowermore. FINEM II and FINAME II §Restrictions on the payment of dividends if a debt service coverage ratio of 1.0 or more and general indebtedness ratio of 0.8 or less is not maintained. FINEM III §Maintaining Shareholders’ Equity (Shareholders’ Equity + Net Bank Debts) of more than 0.9, 0.80.28, determined in the Company's annual consolidated financial statements; and 0.5, respectively. §Maintaining a Net Bank Debt/EBITDA ratio of 4.0 or less, determined in the Company's annual consolidated financial statements. FINEM V §Maintaining the debt coverage ratio at 1.2; and §Maintaining the own capitalization ratio at 30% or more. FINEM VII and X §Maintaining the annual debt coverage ratio at 1.2; and §Distribution of dividends restricted to the Total Liabilities ratio divided by Shareholders’ Equity ex‑Dividend of less than 2.33. FINEM VIII and FINAME III §Maintaining a Debt Service Coverage Ratio of 1.2 or more; 81 Table of Contents §Maintaining a Net Indebtedness/EBITDA ratio of 7.5 or less in 2013, 6.0 in 2014, 5.6 in 2015, 4.6 in 2016 and 3.75 in 2017 onward, determined in the consolidated financial statements of CPFL Renováveis; and §Maintaining a Shareholders' Equity/(Shareholders’ Equity + Net Debt) ratio of 0.41 or more in 2013 to 2016 and 0.45 in 2017 onward, determined in the consolidated financial statements of CPFL Renováveis. FINEM IX §Maintaining the Debt Service Coverage Ratio at 1.3 or more. FINEM XI and FINAME I §Maintaining a Net Bank Debt/EBITDA ratio of 4.0 or less, determined in the Company's annual consolidated financial statements. FINEM XII §Maintaining the Debt Service Coverage Ratio of the SPEs at 1.3 or more after amortization starts; and §Maintaining the Consolidated Debt Service Coverage Ratio at 1.3 or more, determined in the consolidated interim financial statements of Eólica Holding, after amortization starts. PONTE II and III §Maintaining Shareholder’s Equity (Shareholders’ Equity + Net Bank Debts) of more than 0.41, determined in the CPFL Renováveis's annual consolidated financial statements; and §Maintaining a Net Bank Debt/EBITDA ratio of 7.5 or less in 2013 and 6.0 in 2014, determined in the interim consolidated financial statements of CPFL Renováveis. HSBC §From 2013, there is the obligation to maintain the ratio of Net Debt and EBITDA to Cash Accumulation at less than 5.00 in 2013 and 3.50 after that until discharge. NIB §Maintaining the half‑yearly debt coverage ratio at 1.2; §Maintaining a Total Debt to Shareholders’ Equity ratio of 30% or more; and §Maintaining the Financing Term Coverage Ratio at 1.7 or more. ·        Under our U.S. dollar-denominated debts, we must maintain a netBanco do Brasil working capital financings. CPFL Paulista, CPFL Piratininga, RGE, CPFL Santa Cruz, CPFL Sul Paulista, CPFL Jaguari, CPFL Mococa and CPFL Leste Paulista oNet indebtedness todivided by EBITDA ratio equal to or lower than 3.75,‑ maximum of 3.75; and an oEBITDA to financial income (expense) ratio equal to or higher thandivided by Financial Income (Expense) ‑ minimum of 2.25. ·        UnderForeign currency loans.  The foreign currency loans from the third issuanceBank of debenturesAmerica, J.P. Morgan, Citibank, Morgan Stanley, Scotiabank and Bank of CPFL Energia, we mustTokyo and Santander are subject to certain restrictive conditions under Law No. 4,131, and include clauses that require us to maintain a netcertain financial ratios within pre‑established parameters.  The ratios required are as follows:  oNet indebtedness todivided by EBITDA,  ratio equal to or lower than 3.75,– maximum of 3.75; and an EBITDA to financial income (expense) ratio equal to or higher than 2.25. 7282   Table of Contents   ·o   Under the third issuanceEBITDA divided by Financial Income (Expense) – minimum of debentures of CPFL Paulista, CPFL Paulista must maintain a net indebtedness to EBITDA ratio equal to or lower than 3.0 and an EBITDA to financial income (expense) ratio equal to or higher than 2.25, with the ratios calculated as defined in the CPFL Paulista debentures. Under the fifth issuance of debentures of CPFL Paulista, CPFL Paulista must maintain a net indebtedness to EBITDA ratio equal to or lower than 3.75, and an EBITDA to financial income (expense) equal to or higher than 2.25. ·        Under fifth issuance ofDebentures.  The debentures of RGE, RGE mustare subject to certain restrictive covenants and include clauses that require the Company and its subsidiaries to maintain a net indebtedness to EBITDA ratio equal to or lower than 3.75, and an EBITDA tocertain financial expenses ratio equal to or higher than 2.25, with the ratios calculatedwithin pre‑established parameters.  The main ratios are as defined in the RGE debentures.follows: ·o   Under the third issuance of debentures ofCPFL Energia, CPFL Paulista (6th and 7th issues), CPFL Piratininga CPFL Piratininga must maintain a net indebtedness to EBITDA ratio equal to or lower than 3.0,(3rd, 6th and an EBITDA to financial income (expense) ratio equal to or higher than 2.25, with the ratios calculated as defined in the CPFL Piratininga’s debentures. Under the fifth issuance of debentures of CPFL Piratininga, CPFL Piratininga must maintain a net indebtedness to EBITDA ratio equal to or lower than 3.75,7th issues), RGE (5th, 6th and an EBITDA to financial income (expense) ratio equal to or higher than 2.25. ·Under the third issuance of debentures of7th issues), CPFL Geração (3rd, 4th, 5th and 6th issues), CPFL Geração must maintain a netBrasil and CPFL Santa Cruz Maintenance, by the Company, of the following ratios: §Net indebtedness todivided by EBITDA ratio equal to or lower than 3.75,– maximum of 3.75; and an §EBITDA to financial expenses equal to or higher than 2.0, with the ratios calculated as defined in the CPFL Geração’s debentures. Under the fourth issuancedivided by Financial Income (Expense) – minimum of debentures of CPFL Geração, CPFL Geração must maintain a net indebtedness to EBITDA ratio equal to or lower than 3.75, and an EBITDA to financial income (expense) equal to or higher than 2.25. ·o   Under the secondCPFL Renováveis ‑1st issuance of debenturesCPFL Renováveis:  §Operating debt coverage ratio ‑ minimum of CPFL Brasil, CPFL Brasil must maintain1.00; §Debt service coverage ratio ‑ minimum of 1.05; §Net indebtedness divided by EBITDA – maximum of 7.5 in 2013, 6.0 in 2014, 5.6 in 2015, 4.6 in 2016 and 3.75 from 2017; §EBITDA divided by Net financial expense‑ minimum of 1.75. ‑1st issuance of our indirect subsidiary PCH Holding 2 S.A:  §Maintaining the Debt Service Coverage ratio of our subsidiary Santa Luzia at 1.2 or more from September 2014; §Maintaining a net indebtedness to Net Debt/EBITDA ratio equal toof 7.5 or lower thanless in 2013, 6.0 in 2014, 5.6 in 2015, 4.6 in 2016 and 3.75 and an EBITDA to financial income (expense) equal to or higher than 2.25.from 2017. ·UnderFor purposes of determining covenants, the first issuancedefinition of debenturesEBITDA for the subsidiaries of CPFL Santa Cruz, CPFL Santa Cruz must maintain a net indebtedness to EBITDA ratio equal to or lower than 3.75, and an EBITDA to financial income (expense) equal to or higher than 2.25.distribution ·Under the first issuance of debentures of BAESA (first and second series), BAESA must maintain a total indebtedness ratio of less than 75% of its assets. We are currently in compliance with our financial and operating covenants.  A breach of any of these covenants would give our lenders the right to accelerate our repayment obligations. In addition, a number takes into consideration inclusion of the main regulatory assets and liabilities.  In the Company’s case, it also takes into account consolidation based on the interest in the respective subsidiaries (for both EBITDA and assets and liabilities).  Other loan and financing instrumentsagreements of ourthe direct and indirect subsidiaries are subject to acceleration if, as a resultearly settlement in the event of changes in ourthe Company’s structure or in the corporate structure of ourthe subsidiaries ourthat result in the loss of the share control or of control over Management of the Company by the Company’s current shareholders, ceaseunless at least one of the shareholders (Camargo Corrêa and Previ) remains directly or indirectly in the block of control by the Company. Certain debentures of subsidiaries and jointly‑owned subsidiaries are subject to own a majorityearly settlement in the event of CPFL Energia’s voting equitychanges in the Company’s structure or in the corporate structure of the subsidiaries that result in the loss of the share control or of control over management.Management of the Company by the Company’s current shareholders. Furthermore, failure to comply with the obligations or restrictions mentioned could result in default in relation to other contractual obligations (cross default), depending on each loan and financing agreement. The Management of the Company and its subsidiaries monitor these ratios systematically and constantly to ensure that the contractual conditions are complied with.  In the opinion of the Management of the Company and itssubsidiaries andjoint-ventures, these restrictive covenants and clauses are adequately complied with at December 31, 2013. 83 Table of Contents For more information on our financial covenants, see explanatory notes 16 and 17 to our audited financial statements. Uses of funds Our cash flow used for investing activities was R$1,695 million in the year ended December 31, 2013 compared with R$3,361 million in the year ended December 31, 2012.  This decrease of R$1,666 million primarily reflects:  (i) a reduction of R$145 million in purchases of property, plant and equipment mainly by lower investments in power generation from renewable sources, anda reduction of R$581 millionin intangibles mainly from lower investments in improving and expanding distribution; and (ii) a decrease of R$879 million related to the acquisitions of the Atlântica Complex, Bons Ventos Wind Farm and the Ester Plant (SPE Lacenas) in 2012. Our cash flow used for investing activities was R$3,361 million in the year ended December 31, 2012 compared with R$2,351 million in the year ended December 31, 2011.  This increase of R$1,010 million primarily reflects:  (i) an increase of R$269 million related to the acquisitions of Santa Luzia and Jantus in 2011, and the acquisitions of the Atlântica Complex, Bons Ventos Wind Farm and Ester Plant (SPE Lacenas) in 2012, net of cash acquired; and (ii) an increase of R$694  million in purchases of property and equipment, primarily by investment in power generation from renewable sources, and in intangibles primarily by investment in distribution infrastructure. Funding Requirements and Contractual Commitments Our capital requirements are primarily for the following purposes: ·We make capital expenditures to continue improving and expanding our distribution system and to complete our renewable generation projects.  See “—Capital Expenditures” bellow for a discussion of our historical and planned capital expenditures; ·Repayment or refinancing maturing debt.  At December 31, 2013 we had outstanding debt maturing during the following 12 months aggregating R$1,837 million; and ·Dividends on a semiannual basis.  We paid R$816 million in 2013 and R$1,394 million in 2012.  See “Item 10.  Additional Information—Interest Attributable to Shareholders’ Equity”. In the second half of 2011, CPFL Energia began a pre‑funding strategy and paid off some of the debt that was due in 2012 earlier.  We continued to employ this strategy during 2013 in relation to debt due in 2014.  With this strategy, we reduced the nominal cost of our indebtedness in approximately 0.5% to 8.4% per year, with an average indebtedness term of 4.14 years.  Capital Expenditures Our principal capital expenditures in the past several years have been for the maintenance and upgrading of our Distribution Networks and for our generation projects.  The following table sets forth our capital expenditures for the years ended December 31, 2013, 2012 and 2011:   Year ended December 31,   2013 2012 2011   (in millions ofreais)          Distribution 845 1,403 1,065 Conventional Generation 10 13 196 Renewable Generation 828 1,022 488 Commercialization and other investments 52 22 17         Total 1,735 2,460 1,766 84 Table of Contents We plan to make capital expenditures aggregating approximately R$1,622 million in 2014 and approximately R$2,089 million in 2015.  Of total budgeted capital expenditures over this period, R$2,191 million are expected to be invested in our Distribution segment, R$1,147 million in our renewable generation segment and R$94 million in our conventional generation segment.  Part of these expenditures, particularly in generation projects, is already contractually committed.  See “—Liquidity and Capital Resources—Funding Requirements and Contractual Commitments”.  Planned capital expenditures for development of our generation capacity, and the related financing arrangements, are discussed in more detail under “Item 4.  Information on the Company—Generation of Electricity”. Dividends In August 2013, our Board of Directors, based on the results of the first semester, approved the declaration of interim dividend in the amount of R$363 million, equivalent to R$0.377282126 per share.  On March 26, 2014 our Board of Directors approved the additional proposed dividend in the amount of R$568 million based on the accumulated profit for the year 2013, equivalent to R$0.590062200per share, totaling R$931 million.  During 2013, we made a payment of R$816 million (R$453 millionrelating to dividends declared in 2012).  See note 24.4 to our audited financial statements.  We expect to pay the remaining R$568 million in the  first half of 2014 based on the accumulated profit of the second semester of 2013. Contractual Obligations The following table summarizes our contractual obligations and commitments as of December 31, 2013 (including our noncurrent contractual obligations).     Payments due by period   Total Less than 1 year 1‑3 years 4‑5 years After 5 years   (in millions ofreais)  Contractual obligations as of December 31, 2013:           Suppliers 1,885 1,885 - - - Debt obligations(1) 22,788 3,006 7,258 6,784 5,740 Public utilities(1) 634 4 16 16 598 Post-employment benefit(2) 1,075 77 160 160 678 Other 148 130 - - 18 Total of Balance Sheet items(1) 26,530 5,102 7,434 6,960 7,033 Electricity purchase agreements(3) 129,977 8,256 16,222 17,869 87,630 Generation projects(4) 964 729 20 215 - Supplies 1,788 605 575 124 484 Total of other commitments 132,729 9,590 16,817 18,208 88,114 Total of contractual obligations 159,259 14,692 24,251 25,168 95,147 (1)   Includes interest payments, including future interest projected cash flow based on undiscounted, through index projections.  These future interests are not recorded on our Balance Sheet. (2)   Estimated future contributions to the post-employment benefit. (3)   Amounts payable under long‑term energy purchase agreements, which are subject to changing prices and provide for renegotiation under certain circumstances.  The table represents the amounts payable for the contracted volumes applying the year‑end 2013 price.  See “—Background—Prices for Purchased Electricity” and note 34 to our consolidated financial statements. (4)   The power plant construction projects include commitments made basically to make funds available for construction and acquisition of concession related to the subsidiaries in the renewable energy segment. Research and Development and Electricity Efficiency Programs In accordance with applicable Brazilian law, since June 2000, companies holding concessions, permissions and authorizations for distribution, generation and transmission of electricity have been required to dedicate a minimum of 1.0% of their net operating revenue each year to research and development and electricity efficiency programs.  Small hydroelectric power plantsHydroelectric Power Plants and wind, sunsolar and biomass energy projects are not subject to this requirement.  Beginning in April 2007, our distribution concessionaires dedicated 0.5% of their net operating revenue to research and development and 0.5% to electricity efficiency programs, while our generation concessionaries dedicated 1.0% of their net operating revenue to research and development. 7385   Table of Contents   Our electricity efficiency program is designed to foster the efficient use of electricity by our consumers, to reduce technical and commercial losses and offer products and services that improve satisfaction and loyalty and enhance our corporate image.  Our research and development programs utilize technological research to develop products, which may be used internally, as well as sold to the public.  We carry out certain of these programs through strategic partnerships with national universities and research centers, and the vast majority of our resources are dedicated to innovation and development in new technologies applicable to our business. Our disbursements on research and development projects in 2009, 2010the years ended December 31, 2011, 2012 and 20112013 totaled R$156158 million, R$179159 million and R$213132 million, respectively. Our disbursement on research and development would have been R$162 million and R$165 million for the years ended December 31, 2011 and 2012, respectively.  These numbers have been adjusted due to a change in accounting practices.  For more information, please see note 2.8 to our audited financial statements. Off-BalanceOff‑Balance Sheet Arrangements None. As of December 31, 2013, we have no off‑balance sheet arrangements that have or are reasonably likely to have a material impact on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. We have used the following amounts of our current funding arrangements:        In 2013 (in thousands ofreais)  Modality Approval Company Debt Released Balance BNDES / Investment ‑ FINEM VI In 2012 CPFL Paulista 790,000 501,524 288,476 BNDES / Investment ‑ FINEM V In 2012 CPFL Piratininga 220,000 131,864 88,136 BNDES / Investment ‑ FINEM VI In 2012 RGE 274,997 231,148 43,849 BNDES / Investment ‑ FINEM VI In 2012 CPFL Renováveis 85,244 71,672 13,572 BNDES / Investment ‑ FINAME III In 2012 CPFL Renováveis 163,691 116,753 46,938 BNDES / Investment – FINEM XII In 2013 CPFL Renováveis 391,425 333,745 57,500 Trend Information We intend to invest in innovation and technology to increaseimprove the quality of our operationsservices and our operational efficiency, which are our perennial goals.  The Tauron Program – focused on smart metering for high and medium voltage consumers and on the excellence of workforce management by the use of tablets and new technologies we plan to use in our Tauron projects maysoftware – will increase our operational efficiency in the near future.  We have already deployed 13,000 smart meters in the field and two of our distribution companies are already operating under the new data dispatch system.  We expect to finish the project implementation by the end of 2014. Additionally, we seek to promote growth in each of our business segments:  distribution, conventional generation sources, renewable generation sources, and commercialization and services. We intend to continue to expand our distributionDistribution segment, either through market growth or through the acquisition of energy distribution companies (if there are companies in the market with characteristics and at a price that will be beneficial to us). Market growth is heavily influenced by economic growth, in particular, an increase in employment, income, retail sector sales and industrial production.  In addition, the market is also influenced by the entry of new clients and changes in weather and rainfall volume. The market shows positive signs of growth for 2012.  According to projections from the FOCUS report, published onMarch 16, 2012on January 13, 2014 by the Brazilian Central Bank, GDP is expected to grow 3.3%1.99% in 20122014 and 4.2%2.48% in 2013, which will impact2015.  Although these are moderate growth rates, there are positive signs for energy consumption.consumption in the next years.  This growth shouldwill be sustained not only by individualresidential and commercial economic growth (the increase in salaries, consumer purchasing power and credit availability), but alsosegments, favored by the recoverylow unemployment rate, the improving quality of the Brazilian power industry, which hadworkforce, the maintenance of social programs (e.g.Minha Casa, Minha Vida andMinha Casa Melhor) and large events, like the World Cup (in 2014) and the Olympic Games (in 2016).  Industrial performance, on the other hand, will remain in a modest growth in 2011 asslower pace of growth; despite the global economic recovery, the exchange rate depreciation and their consequent positive effects on exports, inflation is a result of appreciated exchangethreat that may lead to higher interest rates and high interest rates.lower investments.  Also, apossible reduction in the availability of BNDES loans and the inadequate infrastructure may restrain economic growth. 86 Table of Contents Our generation segment has shown high levels of growth in the last few years, with the acquisition and construction of new plants.  In 2011, the creation of CPFL Energias Renováveis marked an important moment for us.  We plan to continue to expand our generation activities, both in the conventional energy and the renewable energy (wind farms, small hydroelectric plantsSmall Hydroelectric Power Plants and biomass thermoelectric plants) sectors.  We are currently pursuing this strategy through CPFL Energias Renováveis, with an installed capacityInstalled Capacity of 6521,417 MW (of which our share is 411834 MW) and383 MW under construction (of which our share is 225 MW), as well as seeking out new projects. As of December 31, 2011,2013, we had an installed capacityInstalled Capacity of 2,6442,988 MW, which should reach 2,9223,113 MW9by the end of 20122014 after the Bio IpêMacacos I begin operations and Bio Pedra thermoelectric power plantsconsidering the addition of the Rosa dos Ventos Wind Farms under an acquisition completed in February 2014 andthe Santa Clara wind farms begin operations.completion of construction ofAtlântica Wind Farmsin March 2014.  In 2013 and 2014,2018, we expect to reach an installed capacityInstalled Capacity of 3,1413,292 MW, and 3,301 MW, respectively, when the Santa Góes small hydroelectric power plant, the Alvorada and Coopcana thermoelectric power plants, the Campo dos Ventos, II wind farm and the wind farms of the Macacos I, Atlântica (2013), Campo dos Ventos and São Benedito (2014) complexes begin commercialand Pedra Cheirosa Complex will have begun operations.  We also have a 2,7433,767 MW (of which our share is 1,7282,217 MW) portfolio to develop over the coming years through CPFL Energias Renováveis.  In addition, we will continue to seek out new projects in the conventional energy sector. 9This number includes four wind farms from the Bons Ventos complex which acquisition is still subject to the approval of ANEEL and other contractual conditions. 74 Table of Contents In the commercialization and services segment, our main objective is to maintain our leading position, in terms of market share, in order to guarantee our above-averageabove‑average profitability.  In addition, we expect to expand our portfolio of services, retain the loyalty of our customers and expand our services to new markets. Since our founding, we have employed a growth strategy based on operational excellence through innovation and technology, synergy, financial discipline and the accumulation of value.  We plan to continue this in the future in order to consolidate our strong position in the energy industry. Use of Estimates in Certain Accounting Policies In preparing our financial statements, we make estimates concerning a variety of matters.  Some of these matters are highly uncertain, and our estimates involve judgments we make based on the information available to us.  In the discussion below, we have identified several other matters that would materially affect our financial presentation if either (i) we used different estimates that we could reasonably have used or (ii) in the future we change our estimates in response to changes that are reasonably likely to occur. The discussion addresses only those estimates that we consider most important based on the degree of uncertainty and the likelihood of a material impact if we used a different estimate.  There are many other areas in which we use estimates about uncertain matters, but the reasonably likely effect of changed or different estimates is not material to our financial presentation.  Please see the notes to our audited consolidated financial statements included herein for a more detailed discussion of the application of these and other accounting policies. Impairment of Long-livedLong‑lived Assets Long-livedLong‑lived assets, which include property, plant and equipment, purchased intangible assets and investments, comprise a significant amount of our total assets and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  We carry balances on our balance sheet that are based on historical costs net of accumulated depreciation and amortization.  We are required under IFRS to periodically evaluate whether these assets are impaired, that is, whether their future capacity to generate cash does not justify maintaining them at their carrying values.  The methods used to assess impairment include tests based on the asset'sasset’s value in use.  In such cases, the assets (e.g. goodwill and intangible assets of concession) are segregated and grouped together at the lowest level that generates identifiable cash flows (the "cash“cash generating unit"unit”, or CGU).  If they are impaired, we are required to recognize a loss by writing off part of their value to expense in the current period.  The analysis we perform requires that we estimate the future cash flows attributable to these assets, and these estimates require us to make a variety of judgments about our future operations, including judgments concerning market growth and other macroeconomic factors as well as the demand for electricity.  Changes in these judgments could require us to recognize impairment losses in future periods.  Our evaluations in 2011, 20102013, 2012 and 20092011 did not result in any significant impairment of our property, plant and equipment or intangible assets and investments. 87 Table of Contents Impairment of Financial Assets A financial asset not measured at fair value through profit or loss is reassessed at each reporting date to determine whether there is objective evidence that it is impaired.  Impairment can occur after the initial recognition of the asset and have a negative effect on the estimated future cash flows. The Company and its subsidiaries consider evidence of impairment of receivables and held‑to‑maturity investment securities for both specific asset and at a collective level for all significant securities.  Receivables and held‑to‑maturity investment securities that are not individually significant are collectively assessed for impairment by grouping together the securities with similar risk characteristics. In assessing collective impairment the Company uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for Management's judgment as to whether the assumptions and current economic and credit conditions are such that the actual losses are likely to be higher or lower than suggested by historic trends. An impairment loss of a financial asset is recognized as follows: ·Amortized cost:  as the difference between the carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate.  Losses are recognized in profit or loss and shown in an allowance account against receivables.  Interest on the impaired asset continues to be recognized through the unwinding of the discount.  When a subsequent event indicates that the amount of impairment loss has decreased, this reduction is reversed to credit through profit or loss. ·Available‑for‑sale:  as the difference between the acquisition cost, net of any principal repayment and amortization of the principal, and the current fair value, less any impairment loss previously recognized in profit or loss.  Losses are recognized in profit or loss. In the case of financial assets registered at amortized cost and/or debt instruments classified as available‑for‑sale, if an increase (gain) is identified in periods subsequent to recognition of the loss, the impairment loss is reversed through profit or loss.  However, any subsequent recovery in the fair value of an impaired available‑for‑sale security is recognized in other comprehensive income. Pension Liabilities We sponsor pension plans and disability and death benefit plans covering substantially all of our employees.  The determination of the amount of our obligations for pension benefits depends on certain actuarial assumptions,, including discount rate, inflation, etc.  For further information about the actuarial assumptions see note 18  18 to our audited consolidated financial statements.  Moreover, the IAS 19 was revised and has been applied as from January 1, 2013 (and for comparative purposes, the balances at December 31 and January 1, 2012 and profit or loss from 2012 and 2011 were restated). Deferred Tax Assets and Liabilities We account for income taxes in accordance with IFRS, which requires an asset and liability approach to recording current and deferred taxes.  Accordingly, the effects of differences between the tax basis of assets and liabilities and the amounts recognized in our financial statements have been treated as temporary differences for the purpose of recording deferred income tax. We regularly review our deferred tax assets for recoverability.  If  evidences are not enough to prove that it is more likely than not that the Companywe will generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or time period within which the underlying temporary differences become taxable ordeductible, we could be required to establish a valuation allowance against all or a significant portion of our deferred tax assets resulting in a substantial increase in our effective tax rate and a material adverse impact on our operating results. 7588   Table of Contents   Reserves Provisionfor ContingenciesTax, Civil and Labor Risks We and our subsidiaries are party to certain legal proceedings in Brazil arising in the normal course of business regarding tax, labor, civil and other issues.matters. Accruals for contingenciesprovisionfor tax, civil and labor risks are estimated based on historical experience, the nature of the claims, and the current status of the claims.  The evaluation of these contingenciesrisks is performed by various specialists, inside and outside of the company.  Accounting for contingenciesprovision for tax, civil and labor risks requires significant judgment by managementManagement concerning the estimated probabilities and ranges of exposure to potential liability.  Management’s assessment of our exposure to contingenciesprovision for tax, civil and labor risks could change as new developments occur or more information becomes available.  The outcome of the contingenciesrisks could vary significantly and could materially impact our consolidated results of operations, cash flows and financial position. Financial instruments Financial instruments can be measured at fair values or at recognized costs, depending on certain factors.  Those measured at fair value were recognized based on quoted prices in an active market, or assessed using pricing models, applied individually for each transaction, taking into consideration the future payment flows, based on the conditions contracted, discounted to present value at market interest rate curves, based on information obtained from the BM&FBOVESPA and the National Association of Financial and Capital Market Institutions (Associação NacionalBrasileira das Instituições do Mercado FinanceiroEntidades dos Mercados Financeiros e de Capitais – ANDIMA) websites, when available.  Accordingly, the market value of a security corresponds to its maturity value (redemption value) marked to present value by the discount factor (relating to the maturity date of the security) obtained from the market interest graph in Brazilianreais.   Financial assets classified as available-for-saleavailable‑for‑sale refer to the right to compensation to be paid by the Federal GovernmentBrazilian government on reversion of the assets of the distribution concessionaires (financial asset of concession).  The methodology adopted for marking these assets to market is based on the tariff review process for distributors.  This review, conducted every four or five years according to the concessionaire, consists of revaluation at market price of the distribution infrastructure.  This valuation basis is used for pricing the tariff, which is increased annually up to the next tariff review, based on the parameter of the main inflation indexes. Although the Federal Government has not yetLaw No. 12,783/13 defined the methodology and criteria for valuation of the compensation on reversion of the assets our management believes that it will be based at least on the tariff pricing model.Regulatory Asset Base.  Accordingly, at the time of the tariff review, each concessionaire adjusts the position of the financial asset base for compensation at the amounts ratified by the regulatory authority and uses the IGP-M as best estimate for adjusting the original base to the fair value at subsequent dates, in conformity with the tariff review process. However, because the methodology and criteria for valuation of the compensation are still uncertain, we have prepared an analysis of sensitivity of our results toon reversion is prescribed through a potential change in our assumption regarding the adoption of the tariff pricing model, which includes adjustment based on the IGP-M. The sensitivity analysis describes the impact of payment of financial assets based on its historical cost. The sensitivity analysis is described in note 33.e.3 to our financial statements included in this annual report.valuation process carried out by ANEEL. Depreciation and Amortization of Intangible Assets We account for depreciation using the straight-linestraight‑line method, at annual rates based on the estimated useful life of assets, as established by ANEEL, in accordance with practices adopted in Brazil.  Amortization of intangible assets varies according to the way they are acquired: ·        Intangible assets acquired in a business combination:  We accountcombination.  The portion arising from business combinations that corresponds to the right to operate the concession is stated as an intangible asset.  Such amounts are amortized over the remaining term of the concessions, on a straight‑line basis or based on the net income curves projected for the amortization of the premium corresponding to the concession rights using the concessionaire’s projected net profit curve for the remaining concession term.concessionaires, as applicable. 76 Table of Contents ·        Investments in infrastructure (application of IFRIC 12 – Service Concession Arrangements):.  Since the concession term is contractually defined, intangible assets acquired as investment in infrastructure have a pre‑determined useful life.  We account for the amortization of these assets using a curve that reflects the consumption standard as compared to the expected profits. ·        Public utilities:utilities.  We account for the amortization of intangible assets relating to our use of a public asset using the straight-linestraight‑line method for the remaining term of the concession. 89 Table of Contents ITEM 6.                       Directors, Senior Management and Employees Directors and Senior Management Board of Directors Our Board of Directors is responsible for determining our overall strategic guidelines and, among other things, for establishing our general business policies and for electing our executive officers and supervising their management.  According to our bylaws, our Board of Directors consists of a minimum of seven members and a maximum of nine members.  Currently, our Board of Directors consists of seven members, of which one is independent (in accordance with the listing regulations of the New Market of the BM&FBOVESPA, or theNovo Mercado, and our bylaws).  In the event of a tie, the chairman will have the deciding vote.  The Board of Directors meets at least once a month, or whenever requested by the chairman in accordance with our bylaws. Under our bylaws, the board members are elected by the holders of our common shares at the annual general meeting of shareholders.  Board members serve one-yearone‑year terms, re-electionre‑election being permitted provided that they may be removed at any time by our shareholders at an extraordinary general meeting of shareholders.  Our current directors were elected at our shareholders’ meeting held on April 28, 2011.19, 2013.  Their terms will expire at our next annual shareholders’ meeting, scheduled to take place inon April 2012.29, 2014.  Our bylaws do not provide for a mandatory retirement age for our directors. Under Brazilian Corporate Law, if a director or an executive officer has a conflict of interest with the company in connection with any proposed transaction, the director or executive officer may not vote in any decision of the Board of Directors, or of the board of executive officers, regarding such transaction, and must disclose the nature and extent of the conflicting interest for transcription in the minutes of the meeting.  A director or an executive officer may not transact any business with the company, including accepting any loans, except on reasonable or fair terms and conditions that are identical to the terms and conditions prevailing in the market or offered by third parties.  As of December 31, 2011,2013, any transaction entered into between our shareholders or related parties and us that exceeds R$8.1 million,9,999,999.00, as adjusted annually by the IGP-MIGP‑M index, must be previously approved by our Board of Directors.  As of this date, there are no relevant agreements or other obligations between us and our directors. Under Brazilian Corporate Law, combined with a decision by CVM, noncontrollingnon-controlling shareholders have the right to designate at least one member of our board of directors for election to the board, provided that they hold at least 10.0% of the outstanding voting shares.  NoncontrollingNon-controlling shareholders that own greater than 5.0% of voting shares may request multiple voting (voto múltiplo (multiple voting)). The following table sets forth the name, age and position of each current member of our Board of Directors.  A brief biographical description of each of our directors follows the table. Name Age Position Murilo Cesar Lemos dos Santos Passos 64 66 Chairman Claudio Borin Guedes Palaia 37 39 Director Francisco Caprino NetoMarcelo Pires Oliveira Dias 51 38 Director Renê Sanda 50 48Vice‑Chairman Deli Soares Pereira 64 Director Ivan de Souza MonteiroMartin Roberto Glogowsky 51 60 Director Carlos Alberto Cardoso MoreiraMaria Helena dos Santos Fernandes de Santana 51 Director Ana Dolores Moura Carneiro de Novaes 50 54 Independent Director   77 Table of Contents Murilo Cesar Lemos dos Santos Passos -– Mr. Passos graduated in Chemical Engineering from the Federal University of Rio de Janeiro (UFRJ) in 1971.  Between 1970 and 1977, he held positions at the Ministry of Industry and Commerce – Industrial Development Council (CDI).  Between 1977 and 1992, he worked at Companhia Vale do Rio Doce and subsequently became the CEO and Head of Forestry Products, Environment and Metallurgy Area of Celulose Nipo-BrasileiraNipo‑Brasileira S.A (CENIBRA) and Florestas Rio Doce S.A..S.A.  Between 1993 and 2006, he was an executive officerCEO of Bahia Sul Celulose S.A. and, subsequently, of Suzano Papel e Celulose S.A.  He was a member of the Board of Directors of Brasil Agro Cia.  Brasileira de Propriedades Agrícolas between 2007 and 2010.  Currently, he is a member of the Management Committee of the Board of Directors of Suzano Papel e CeluloseS.A., Vice President of the Trustee Council of the Foundation for the National Quality Award (FNPQ), a member of the Superior Council of Ecofuturo Institute and a member of the Advisory Council of the Pulp and Paper Producers’ Association - BRACELPA.  He is also a member of the Board of Directors of São Martinho S.A., Odontoprev S.A. and Tegma Gestão Logística S.A.  Since 2010, he has been the Chairman of theour Board of DirectorsDirectors. 90 Table of CPFL Energia.Contents Claudio Borin Guedes Palaia -– Mr. Palaia graduated in Business Administration from Fundação Getúlio Vargas Business School of São Paulo in 1997.  He obtained an MBA degree from The Wharton School of the University of Pennsylvania in 2002.  He worked as an analyst of mergers and acquisitions at JP Morgan Bank in São Paulo and in New York from 1997 to 1998.  From 2002 to 2005, he was project leader in Camargo Corrêa Energia S.A., Camargo Corrêa S.A. (CCSA) and São Paulo Alpargatas.  From 2005 to 2007, he was an executive officer of Hormigón da Loma Negra C.I.A.S.A in Buenos Aires, Argentina.  Since 2008, he has been an executive officer of Camargo Corrêa Cimentos.  He is also a sitting member of the Board of Directors of São Paulo Alpargatas.  In 2009, he was an alternate member of the Board of Directors of CPFL Energia.  Since 2010, he has been a sitting member of the Board of Directors of CPFL Energia. Francisco Caprino NetoMarcelo Pires Oliveira Dias -– Mr. Caprino NetoDias graduated in Metallurgical EngineeringInternational Business from the Polytechnic School of the University of São Paulo (USP)American International in 1983 and completed a master’s degree programLondon in 1998.  Mr. Dias has also participated in the same areafollowing courses:  SAP, at Sap Brasil and Accounting at Arthur Andersen (2000), a Board of Directors’ Course at the same institution in 1992.Brazilian Institute for Corporate Governance ‑ IBGC (2003) and the Program on Negotiation for Senior Executives at the Harvard Business School (2005). He was the chairman of the Processes Engineering Department and advisor for the Control and Planning Department of Siderúrgica J.L. Aliperti S.A., as well as the coordinator of metallurgical process of Aços Villares S.A.  He was a sitting member of the Board of Directors of CPFL Paulista, CPFL Piratininga, CPFL Geração and RGE from 2005 to 2006.  Currently, he holds the position of executive officer and member of the Board of Directors of Camargo Corrêa Energia S.A. andhas been an Executive Officer at Camargo Corrêa Investimentos em Infraestrutura (CCII) since 2008.  He also served as New Business Superintendent (2000 to 2002) and New Business Officer (2002 to 2008) at Construções e Comércio Camargo Corrêa (CCCC). From 1998 to 2000, he was the Business Manager at Concessionária Nova Dutra.  He is also membercurrently Vice‑Chairman of the Board of Directors of VBCESC Energia S.A., Companhia de ConcessõConstruções Rodoviárias (CCR)e Comércio Camargo Corrêa S.A. (CCCC), Camargo Corrêa Investimentos em Infraestrutura S.A. (CCII) and A-PortCamargo Corrêa Energia S.A. Since April 2000, he(CCE).  He has beenserved, since 2010, as a member of the Board of Directors of CPFL Energia.Companhia de Concessões Rodoviárias (CCR).  He has been a member of our Board of Directors since 2013. Renê Sanda – Mr. Sanda graduated in Statistics from University of São Paulo (USP) in 19891986 and completed a master’s degree program in Statistics at the same institution in 1989.  In 1992, he completed an MBA program in Finance from the Brazilian Institute of Capital Markets (IBMEC) and participated in the Commercial and Investment Banking Program Professional Development Center at Citibank, in Fort Lauderdale.  He was an assistanta deputy general manager at BB New York between 2002 and 2006 and at Banco do Brasil Securities between 2005 and 2006.  From 2006 to 2010, he was the Risk Management OfficerDirector of Banco do Brasil.  He was a member of the Fiscal Council of Tele Amazônia Celular Participações, Telemig Celular Participações, CPFL Paulista and CPFL Geração.  He was a member of the Board of Directors of Petroflex S.A. Indústria e Comércio,, Banco do Brasil Securities LLC – New York, (USA), BB Securities Ltd. – London (UK) and Fundição Tupy.   HeCurrently he is an associate at Instituto Brasileiro de Governança Corporativa – IBGC.  Since 2010, he has been the Chief Investment Officer of Caixa de Previdência dos Funcionários do Banco do Brasil – PREVI.  He has been a sitting member of the Board of Directors of CPFL Energia since 2011. Deli Soares Pereira – Mr. SandaPereira graduated in Social Sciences from Universidade de São Paulo – USP in 1979, with a graduate degree in Economics and Labor Relations Management from Pontifícia Universidade Católica de São Paulo – PUC‑SP in 2009.  Since 2009, he has been a deputy member of the Boards of Directors of VALE S.A. and VALEPAR S.A.  He has served as a sitting member on the Boards of Directors of Tigre S.A. – Tubos e Conexões (2001 to 2003), SOLPART Participações S.A. (2006 to 2008), CPFL Piratininga, CPFL Paulista, CPFL Geração and CPFL Energia (2004 to 2006).  Mr. Pereira became a member of our Board of Directors in 2011.2013. Ivan de Souza MonteiroMartin Roberto Glogowsky – – Mr. MonteiroGlogowsky graduated in Electronic Engineering and Telecommunications from INATEL - MG in 1986.  He completed an MBA program in Finance from the Brazilian Institute of Capital Markets (IBMEC) in 1995 and an MBA program in Business Administration from Pontifical Catholic UniversityFundação Getúlio Vargas ‑ FGV in 1976 and in Law from Pontifícia Universidade Católica de São Paulo – PUC‑SP in 1979.  Since 2005, he has served as CEO of Rio de Janeiro (PUC‑RJ)Fundação CESP, having previously served as Chief Investment Officer (1999 to 2005).  He was vice president of Citibank (1977 to 1994) having held several positions in 2000.  Since 1983, he works at Banco do Brasil, where he was a local superintendent between 1996 and 1998, a state superintendent between 1998 and 1999, a commercial manager between 1999 and 2004, a commercial superintendent between 2004 and 2007 and the officercorporate as well as in charge of branches outside of Brazil between 2007 and 2009.  In May 2009, he was the Commercial Officerinvestment bank.  He served in the Capital Market area of Banco do BrasilSchahin Cury S.A. (1994 to 1997) and since June 2009, heBanco BBA Creditanstaltd (1997 to 1998).  He has been Chairman of the Vice-PresidentFiscal Council of Finance, Capital MarketsNet Serviços de Comunicação S.A. since 2005.  Furthermore, Mr. Glogowsky is an associate and Investor Relations of Banco do Brasil.  Since 2009, hehas been acertified member of the Decision Making Council of Caixa de Previdência dos Funcionários do Banco do BrasilBrazilian Corporate Governance Institute – PREVI.  HeIBGC and is also a member of the Board of DirectorsAbrapp – Brazilian Association of Banco Votorantim and BV Participações.  He has been an alternatePension Funds; he was a member of its National Technical Investment Commission (2005).  Since 2002, he has alternately served as Fiscal Council member and Board member in companies in the Board of Directors of Brasil Veículos since January 2011.  Mr. Monteiro becameCPFL group and he has been a member of our Boardboard of Directors in 2011.directors since 2013. 7891   Table of Contents   Carlos Alberto Cardoso MoreiraMaria Helena dos Santos Fernandes de Santana – Mr. MoreiraMs. Santana graduated in Business AdministrationEconomics from Pontifical Catholic University ofFaculdade de Economia, Administração e Contabilidade da Universidade de São Paulo (PUC-SP)‑ FEA‑USP in 1984.  He completed several courses, seminars and workshops in Private Pension Plan and Capital Markets at IBMEC, IBC, Abrapp and Wharton School.  Since June 2000, he has been1990; she was formerly the Investment and Finance OfficerChair of the Sistel de Seguridade Social Foundation - SISTEL.  From 1984Brazilian Securities and Exchange Commission – CVM (2007 to 1988, he was an Senior Investment Analyst of Credibanco, São Paulo.  Between 1988 and 1992, he was Vice President of Citibank N.A in São Paulo.  He was the Institutional Clients Officer of Banco BMC S.A. in São Paulo from 1992 to 1999.  He was also a member of the National Investment Technical Commission (Comissão Técnica Nacional de Investimentos–CNTI) of Abrapp, an alternate member of the Board of Directors of EMBRAER, and a sitting member of the Board of Directors of GTD and BR Foods.  From 2001 to 2002, 2004 to 2005 and 2008 to 2009, he was a permanent member of the Board of Directors of CPFL Energia S.A, and from 2007 to 2008 and 2010 to 2011, he was an alternate member of that Board.  He has been an executive officer of Bonaire Participações S.A.2012), where she had served as Commissioner since April 2008. In April 2011, he was once more elected as a permanent member of Board of Directors of CPFL Energia S.A. Ana Dolores Moura Carneiro de Novaes - Mrs. Novaes earned a Ph.D. in Economics from the University of California in 1990 and graduated in Law from the Pontifical Catholic University of Rio de Janeiro (PUC-RJ) in 2008.  In 1999, she obtained a CFA – Chartered Financial Analyst qualification awarded by the US Association for Investment and Management Research (AIMR).  She was an analyst of Equity Research at Banco de Investimentos Garantia between 1995 and 1997, and the Investment Officer at Pictet Modal Asset Management between 1998 and 2003.  She worked at the World Bank in Washington, D.C. from 1991 to 1994.2006.  She was also macroeconomics professor atChair of the Federal UniversityExecutive Committee of Pernambuco in the first halfInternational Organization of 1991 and at the Pontifical Catholic University of Rio de Janeiro in 2003.  Since 2008, she has been a partner at Galanto Consultoria of Rio de Janeiro, for services and consulting in corporate governance.  She has beenSecurities Commissions – IOSCO (2011 to 2012), a member of the Board of Directors of Companhia de Concessões Rodoviárias (CCR)the Brazilian Institute of Corporate Governance ‑ IBGC (2001 to 2005), Executive Superintendent of Corporate Relations of BM&F BOVESPA S.A. – Securities, Commodities and Futures Exchange and, since May 2002, and of Metalfrio since May 2009.  She2000, has also been a Consultant tomember of the AuditingLatin American Roundtable on Corporate Governance (Organization for Economic Co‑operation and Development ‑ OECD / World Bank Group).  She is currently Chair of the Corporate Governance Committee and member of the Board of Companhia Siderúrgica Nacional since August 2006.  Since April 2007, she has been aBrasileira de Distribuição – CBD and Chair of the Audit Committee and member of the Board of Directors of CPFL Energia.TOTVS S.A.  Ms. Santana has recently taken a position as Trustee of the International Financial Reporting Standards Foundation.  She has been a member of our Board of Directors since 2013. Executive Officers Our executive officers are responsible for our day-to-dayday‑to‑day management.  Under our bylaws, our board of executive officers is comprised of six members that are appointed by our Board of Directors for a two-yeartwo‑year term, with the possibility of re-election.re‑election.  Our current executive officers were elected at the Board of Directors’ meeting held on May 25, 2011, except for Carlos Márcio Ferreira and Carlos da Costa Parcias Junior, who were elected at the Board of Directors’ meeting held on August 31, 2011 and March 1, 2012, respectively. At the special shareholders’ meeting held on December 19, 2011, our shareholders approved our Board of Directors’ proposal for reorganizing positions within our management structure.  The proposal contemplated the suppression of the positions of Vice President of Distribution, Vice President of Generation and Vice President of Energy Management.  The duties associated with these positions were assigned to the Vice President of Operations in order to increase efficiency and reduce costs. April 24, 2013. The following table sets forth the name, age and position of each current executive officer.  A brief biographical description of each of our executive officers follows the table. Name Age Position Wilson Ferreira Júnior 52 54 Chief Executive Officer () Lorival Nogueira Luz JúniorGustavo Estrella 40 39 Chief Financial Officer and Head of Investor Relations Officer Carlos Márcio FerreiraHélio Viana Pereira 60 52 Operations Vice President of OperationsOfficer José Marcos Chaves de Melo 50 48 Administrative Vice President AdministrativeOfficer Carlos da Costa Parcias Junior 53 51 Business Development Vice President of Business DevelopmentOfficer Vacant - Corporate Affairs Vice President of Institutional RelationsOfficer 79 Table of Contents   Wilson Ferreira Junior -– Mr. Ferreira Junior graduated from Mackenzie University in Electrical Engineering  in 1981, and in Business Administration in 1983.  He attended a master’s degree program in Energy at the University of São Paulo (USP), for which he did not complete the thesis requirements, and several specialization programs, including:  Occupational Safety and Health Engineering (Mackenzie University, 1982), Marketing (Getúlio Vargas Foundation – FGV, 1988), and Electricity Distribution Management (Swedish Power Co., 1992).  At Companhia Energética de São Paulo (CESP), he held several senior positions and served as the Distribution Officer from 1995 to 1998.  He served as the CEO of RGE from 1998 to 2000, Chairman of the Board of Directors of Bandeirante Energia S.A. from 2000 to 2001, and President of the Brazilian Association of Electric Power Distributors (ABRADEE) from 2009 to 2010.  Mr. Ferreira Junior is currently the Vice President of the Brazilian Association of Infrastructure and Basic Industry (ABDIB) and a, member of the Board of Directors of the National Electrical System Operator (ONS). and since 2010, he is member of the Board of Directors of WEG S.A.  From 2002 to 2011, he was a member of the Board of Directors of CPFL Paulista, CPFL Piratininga, CPFL Geração and RGE.  From 2000 to 2011, he was the CEO of CPFL Paulista, and from 2001 to 2011, he was the CEO of CPFL Piratininga, CPFL Geração and CPFL Brasil.  He has also been the CEO of RGE, CPFL Santa Cruz, CPFL Jaguariúna, CPFL Bioenergia,Nect, and other subsidiaries of CPFL Energia.  Since 2002, he has been the CEO of CPFL Energia.  Mr. Ferreira Junior is currently the chairman of the Board of Directors of CPFL Energias Renováveis. Lorival Nogueira Luz JúniorGustavo Estrella -– Mr. Luz JúniorEstrella graduated from Universidade do Estado do Rio de Janeiro – UERJ in Business AdministrationAdministration.  He completed an MBA program in Finance from Armando Álvares Penteado Foundation (FAAP) in 1993.the IBMEC‑RJ.  He has completed several specialization programs in Brazil and abroad.  Mr. Luz Júnior has 20 year experience in the financial industry.  For almost 17 years, he has worked at Citibank as Corporate Bank Officer, Senior Relationship Manager, Senior TreasurerGrupo Lafarge and Loan Products Manager,at the companies Light and as an analyst of the financial controlling department in Brazil.  He was also the Treasury Executive OfficerBrasil Telecom.  Since 2001, he works at Credicard, the leading credit card company in Brazil, where he played an important role in the conversion of Credicard to a retail bank.  He had the same position at Banco Citicard until 2008.  From 2008 to 2009, he was the CFO and Investor Relations Officer of Estácio Participações, a holding company based in Brazil, belonging to the GP Investimentos’ group, active in the educational services sector,CPFL Energia, where he was responsible for the project planning, controllership, investor relations, treasury, mergersManager of Economic Planning and acquisitionsFinance, Director of Investor Relations and law departments.  Between 2010Director of Planning and 2011, he was the Treasury Executive Officer and Investor Relations’ Officer of Votorantim Industrial, one of the largest Brazilian industrial conglomerates.Control.  Since 2011,February 2013, he has been the Chief Financial Vice President Officer and Investor Relations Officer of CPFL Energia and the Finance and Investor Relations Director of CPFL Paulista, CPFL Piratininga, CPFL Geração, and RGE and CFO of other subsidiaries of the CPFL Energia group.  Mr. Estrella is currently vice‑chairman of the Board of Directors of CPFL Renováveis and member of the Board of Directors of RGE, CPFL Paulista, CPFL Piratininga and CPFL Geração.  92 Table of Contents Carlos Márcio FerreiraHélio Viana Pereira– In 1987, Mr. FerreiraPereira graduated in Electrical Engineering from the Itajubá Federal School of Engineering (EFEI) in 1976 and completed a specialization program in Industrial Quality Engineering at the State University of Campinas (Unicamp).  He completed post‑graduate studies in Electricity Business Management at the Getúlio Vargas Foundation (FGV) and Economicsthe University of São João da Boa Vista,Paulo (USP).  Mr. Pereira served as an engineer in the Eletrobrás Department of Rural Electrification from 1976 to 1978, as an engineer at the Underground Grid Studies Department and as a manager at the Public Lighting Division of the Companhia de Eletricidade de Brasília (CEB) from 1978 to 1981.  He held several senior positions and was the Operating Control Supervisor and Operations Manager of Companhia Energética de São Paulo with a degree in Business Administration and Accounting.  In 1993,(CESP) from 1984 to 1989.  At CPFL Paulista, he received a graduate degree from Fundação Getúlio Vargas in São Paulo (FGV/SP) in Controlling and Finance. Since 1991, he has participated every year in Executive Training Seminars, includingserved as the following programs:  the Senior Finance Executive Development Program at Champion International Corporation Corporate University, administered by professors from Harvard Business School and Dartmouth Tuck Business School, and Leader Development (CEOs) at UC Berkeley Executive Education.  From 1973 to 2004, he worked in the administrative and finance departments of International Paper do Brasil Ltda., a company in the paper and packaging industry.  During his time at International Paper do Brasil Ltda., Mr. Ferreira held the following positions: Manager of the ControllingPlanning and Modernization Department (1991from May to 1993); Strategic Planning Manager (1995 to 1996); Business Manager (1996 to 1998); Business DevelopmentAugust 2000.  He was also the Distribution Officer (1999 to 2000);of CPFL Paulista, CPFL Piratininga, RGE, CPFL Santa Cruz, CPFL Jaguariúna and Vice-Presidentother subsidiaries of ControllingCPFL Energia until 2011, and Finance (2000 to 2004), during which he was responsible for information technology, legal, accounting, strategic planning and mergers and acquisitions. At International Paper do Brasil Ltda, he has worked for three years in factories in the USA and in the main office in Stamford, Connecticut. In November 2004, he began working for Elektro (in Campinas, SP) asChief Executive Officer responsible for strategy coordinationof CPFL Paulista and implementation in the operations, distribution, commercial, finance, regulatory, legal, human resources and infrastructure areas.  In April 2007, he became the CEO of Elektro, a position which he heldCPFL Piratininga until 2011.2013.  Mr. FerreiraPereira is currently the Operations Vice President Officer at CPFL Energia the Chairman of the Board of Directors of RGE, CPFL Paulista and CPFL Piratininga.S.A. José Marcos Chaves de Melo -– In 1980, Mr. Melo graduated as an electronics technician from the Federal Center for Technological Education of Rio de Janeiro (CEFET-RJ)(CEFET‑RJ).  In 1986, he graduated in Mechanical Engineering from the University of Kansas.  Among his academic achievements, the following stand out:  Fulbright scholarship, American National Engineering Honor Society (Tau Beta Pi), the 2005 SAP Diamond Circle Award for OutstandingBusiness Contributions, and the 2006 Accenture World Innovation Award.  Mr. MeloChaves worked at Accenture do Brasil from 1987 to 2008, serving as senior executive from 1998 to 2008.  He was responsible for the execution of several projects with companies of the electricity sector for 12 years, oil and gas sectors for five years, steel sector for two years, and in the manufacturing sector for one year.  He has experience in several functional areas, such as information technology, supply chain, field work and assetsasset management.  During his career with Accenture, he has worked forserved companies such as Neoenergia, Light, CEMIG, Duke Energy, Petrobrás, Repsol-YPFRepsol‑YPF and CSN, the Electric Power Trade Board (CCEE) and ONS.  Mr. MeloChaves is currently the Administrative Officer of CPFL Paulista, CPFL Piratininga, RGE, CPFL Santa Cruz, CPFL Jaguariúna, CPFL Geração CPFL Bioenergia, and other subsidiaries of CPFL Energia.  Since 2008, heHe has been the Administrative Vice President Officer of CPFL Energia. Energia since 2008. 80 Table of Contents Carlos da Costa Parcias Junior –– Mr. Parcias Junior graduatedhas a Master’s degree in Economics from the Federal University of Rio de Janeiro (UFRJ) in 1984, and completed a master’s degree program in the same area at the Pontifical Catholic University of(PUC‑Rio, 1988) and Bachelor’s degree in Economics from the Rio de Janeiro (PUC-RJ)Federal University (UFRJ, 1984).  Since March 2012, Mr. Parcias is Business Development Vice President Officer at CPFL Energia.  During 2011 he was Director of Equity Investments in 1988.  SinceEnergy at Camargo Correa Holding Company.  From 2004 he has been an independent financial advisor,to 2010, Mr. Parcias had his own Independent Financial Advisory Firm, focusing inon mergers and acquisitions and private equity transactions.  From 2001 to 2003, he worked as an executive officerPreviously, Mr. Parcias held senior leadership positions in the financial industry:  CEO at Icatu Gestão de Participações which principal business isfocusing on alternative investment management.  He was an executive officermanagement (2001 to 2003); Head of Investment Banking at Banco de Investimentos Fleming Graphus from 1998(1998 to 2000; the2000); CEO at BBA-CapitalBBA‑Capital Asset Management (currently Itaú BBA) from 1993(1996 to 1998; an executive officer1998); Head of Capital Markets at BBA‑Creditanstalt Bank (1993 to 1995); Executive Office at JP Morgan from 1992Brazil (1992 to 1993; and advisor1993); Advisor to the presidencyPresidency at BNDES from 1990(1990 to 1992.  He was an executive officer at Camargo Corrêa Investimentos em Infraestrutura (CCII), the Camargo Corrêa group holding company, in 2011.  Since March 2012, he has been the Business Development Vice President Officer of CPFL Energia.1992). Fiscal Council Under Brazilian Corporate Law, theConselho Fiscal, or fiscal council, is a corporate body independent of the managementManagement and the company’sCompany’s external auditors.  Our fiscal council is permanent, although Brazilian Corporate Law allows fiscal councils to be either permanent or non‑permanent and may be composed of a minimum of three and a maximum of five members.  The primary responsibility of the fiscal council is to review management’sManagement’s activities and the company’s financial statements, and to report its findings to the company’s shareholders.  Brazilian Corporate Law requires fiscal council members to receive as remuneration at least 10.0% of the average annual amount paid to the company’s executive officers, excluding benefits and profit sharing.  NoncontrollingNon-controlling holders of common shares owning in aggregate at least 10.0% of the common shares outstanding may also elect one member of the fiscal council. Under Brazilian Corporate Law, our fiscal council may not include members who are on our Board of Directors, are on the board of executive officers, are employed by us or a controlled company or a company of the same group, or are spouses or relatives of any member of our managementManagement or Board of Directors.  Our fiscal council elected at our shareholders’ meeting held on April 28, 2011,19, 2013, with a mandate of one year, is composed of five members:  José Reinaldo MagalhãesWilliam Bezerra Cavalcanti Filho (Chairman), Daniela Corci Cardoso (Financial Expert), Adalgiso Fragoso de Faria, WiltonHelena Kerr do Amaral and Celene Carvalho de Medeiros Daher and Martin Roberto Glogowsky.Jesus. 93 Table of Contents In accordance with the listed company audit committee rules of the NYSE and the SEC, on June 8, 2005 our Board of Directors designated and empowered our fiscal council to perform the role of the audit committee in reliance on the exemption set forth in Exchange Act Rule 10A-3(c)10A‑3(c)(3). Advisory Committees The chairperson of each of the following committees reports on activities at the Board of Directors’ monthly meetings.  However, the committees do not have decision-makingdecision‑making authority and their recommendations are not binding upon the Board of Directors. Management Processes Committee.  Our Management Processes Committee is responsible for assisting the Board of Directors by:  (i) evaluating the validity of the information disclosed to the Board of the Directors, (ii) preparing proposals to improve business management procedures (iii) evaluating our risk profile and (iv)(iii) coordinating internal audits and preparing improvement proposals.  The members of this committee are Francisco Caprino Neto, Luiz Cláudio da Silva BarrosJoão Ernesto de Lima Mesquita and Martin Roberto Glogowsky. 81 Table of Contents Human Resources Management Committee.  Our Human Resources Management Committee is responsible for assisting the Board of Directors by:  (i) coordinating the CEO selection process, (ii) defining criteria for compensation of the executive officers, including long and short‑term incentive plans, (iii) defining performance goals of the executive officers, (iv) coordinating evaluation procedures of the executive officers, (v) preparation of the plan of succession for members of the executive officers and (vi) monitoring the execution of human resources policies and practices and preparing improvement proposals when necessary.  The members of this committee are Ivan de Souza Monteiro,Renê Sanda, Francisco Caprino Neto and Carlos Alberto Cardoso Moreira. Related Parties Committee.  Our Related Parties Committee is responsible for assisting the Board of Directors by:  (i) evaluating the selection procedures of suppliers and third-partythird‑party construction and other services from related parties and ensuring these transactions are conducted fairly and consistent with market practice and (ii) evaluating energy purchase or sale agreements with related parties ensuring these transactions are conducted fairly and consistent with market practice.  The members of this committee are Susana Hanna Stiphan Jabra, Daniela Corci CardosoFrancisco Caprino Neto, Fernando Santos do Nascimento and Luiz Cláudio da Silva Barros.Paola Rocha Ferreira. In addition to the advisory committees, our Board of Directors has created sevenad hoc commissions since 2006, (Corporatesuch as Corporate Governance Commission, Strategy Commission, Budget Commission, Risk Management Commission, Sustainability Commission, Financial Services Commission, Energy Acquisition Commission, Projects Evaluation Commission and IFRS Commission)Commission, etc., and may create others, if necessary. Strategy Commission.  Our Strategy Commission is responsible for assisting the Board of Directors with evaluating and improving our business strategy in order to meet our growth targets and long‑term objectives. Financial Services Commission.  Our Financial Activities Commission is responsible for ensuring compliance and efficiency in our existing financial practices, as well as evaluating new opportunities for financial transactions that could benefit the company.  Corporate Governance Commission.  Our Corporate Governance Commission is responsible for monitoring the implementation of our new corporate governance model and for suggesting potential improvements to the Board. Budget Commission.  Our Budget Commission is responsible for advising the Board of Directors on analyzing and setting our annual and long‑term budgets. Energy Acquisition Commission.  Our Energy Acquisition Commission is responsible for advising the Board of Directors on analyzing the acquisition of energy originated from alternative and competitive sources by the subsidiaries of commercialization.  Projects Evaluation Commission.  Our Project Commission is responsible for assisting the Board of Directors with evaluating new opportunities for distribution and generation of energy assets forecasted in the strategic planning. IFRS Commission.  Our IFRS Commission is responsible for advising the Board of Directors on validating its decisions in relation to the implementation of new accounting rules applicable to our financial statements as from 2010. Compensation Under Brazilian Corporate Law, our shareholders are responsible for establishing the aggregate amount we pay to the members of our Board of Directors and our executive officers.  Once our shareholders establish an aggregate amount of compensation for our Board of Directors and executive officers, the Human Resources Management Committee of our Board of Directors is then responsible for setting individual compensation levels. ForOn July 25, 2012, our Board of Directors approved a long‑term incentive plan based on “phantom stocks”.  Pursuant to this plan, if the year ended December 31, 2011,price of our shares reaches certain targets after an established grace period, the beneficiaries may receive bonus in cash. The members of the Board of Directors, Board of Executive Officers and Fiscal Council of CPFL Energia receive a portion of their compensation from CPFL Energia directly, and a portion from our subsidiaries on an allocation basis in return for services provided to such subsidiaries. The table below shows the aggregate compensation including cash and benefits-in-kind, that we paid directly by CPFL Energia to the members of our Board of Directors, Board of Executive Officers and Fiscal Council for 2013: 94 Table of Contents   Compensation for the year ended December 31, 2013 Management Bodies Board of Directors Fiscal Council Executive Officers Total Number of members 7.17 members(1) 6.25 members(1) 6.0 members(1)   Fixed annual compensation: (in thousands ofreais)  Wage 1,271 549 4,874 6,694 Direct or indirect benefits 3 2 28 33 Compensation for participation in committees ‑ ‑ ‑ ‑ Others 261 114 2,006 2,381 Variable compensation: ‑ ‑ ‑ ‑ Bonus ‑ ‑ 3,281 3,281 Profit sharing plan ‑ ‑ ‑ ‑ Compensation for participation in meetings ‑ ‑ ‑ ‑ Commissions ‑ ‑ ‑ ‑ Others ‑ ‑ ‑ 1,973(2) ‑ 1,973(2) Post‑employment benefits ‑ ‑ 452 452 Compensation based on stock options ‑ ‑ ‑ ‑ Compensation for each body(3) ‑ ‑ ‑ ‑ Total compensation 1,535 665 8,668 10,868 (1)   Represents the weighted average number of members. (2)   This amount reflects the reversal of provisions made in prior years for variable compensation that we expected to pay to our Management. (3)   Compensation amounts include charges and accruals. The table below sets forth the compensation of our Management received from our subsidiaries for the year ended December 31, 2013.   Year ended December 31, 2013   Board of Directors Fiscal Council Executive Officers   Fixed Fixed Total (fixed and variable)   (in thousands ofreais)  Subsidiaries(1) 227 ‑ 4,227 (1)   Compensation amounts include charges and accruals. The table below shows the aggregate compensation approved to be paid directly by CPFL Energia to the members of our Board of Directors, Board of Executive Officers and Fiscal Council for 2014 (excluding compensation to be paid to such individuals by our subsidiaries on an allocation basis):     Approved compensation for the year ended on December 31, 2014 Management Bodies Board of Directors Fiscal Council Executive Officers Total Number of members 8 members 6 members 6 members   Fixed annual compensation: (in thousands ofreais)  Wage 1,522 668 5,556 7,746 Direct or indirect benefits ‑ ‑ 107 107 Compensation for participation in committees ‑ ‑ ‑ ‑ Others 304 133 1,501 1,938 Variable compensation: ‑ ‑ ‑ ‑ Bonus ‑ ‑ 5,118 5,118 Profit sharing plan ‑ ‑ ‑ ‑ Compensation for participation in meetings ‑ ‑ ‑ ‑ Commissions ‑ ‑ ‑ ‑ Others ‑ ‑ 1,539 1,539 Post‑employment benefits ‑ ‑ 532 532 Compensation based on stock options ‑ ‑ ‑ ‑ Compensation for each body(1) ‑ ‑ ‑ ‑ Total compensation 1,826 801 14,353 16,980 (1)   Compensation amounts include charges and accruals. 95 Table of Contents In addition, the Brazilian CVM requires us to disclose the aggregate compensation paid by our group to all members of board of directors, executive officers and members of our fiscal council wascouncils of all companies in the consolidated CPFL group.  This aggregate compensation, including cash and benefits‑in‑kind, amounted to approximately R$3034.0 million for 2013, including R$132.0 million in variable compensation.  For the same period, the totalamount set aside or accrued by the companyCPFL group to provide pension, retirement or similar benefits was approximately R$784,000. 82 Table of Contents The approved compensation for our board of directors, board of executive officers and fiscal council for 2012 is R$351.0 million. The following tables set forth the compensation from CPFL Energia on a non‑consolidated basis of our management for the year ended December 31, 2011 and the approved compensation for 2012.  Our directors and officers receive additional compensation from our subsidiaries which is not reflected in these tables.   Compensation for the year ended December 31, 2011 Management Bodies Board of Directors Fiscal Council Executive Officers Total Number of members 7 members(1) 5.08 members(1) 5.58 members(1)   Fixed annual compensation: (in thousands ofreais)  Wage 983 575 2,130 3,688 Direct or indirect benefits - - 6 6 Compensation for participation in committees - - - - Others 197 115 1,573 1,885 Variable compensation:         Bonus - - 845 845 Profit sharing plan - - - - Compensation for participation in meetings - - - - Commissions - - - - Others - - 882 882 Post-employment benefits - - 208 208 Compensation based on stock options - - - - Compensation for each body(2) 1,180 690 5,644 - Total compensation       7,514 (1) Represents the weighted average number of members. (2) Compensation amounts include charges and accruals.     Approved compensation for the year ended on December 31, 2012 Management Bodies Board of Directors Fiscal Council Executive Officers Total Number of members 7 members 5 members 6 members   Fixed annual compensation: (in thousands ofreais)  Wage 1,131 596 4,255 5,982 Direct or indirect benefits - - 47 47 Compensation for participation in committees. - - - - Others 226 119 1,265 1,610 Variable compensation:         Bonus - - 4,199 4,199 Profit sharing plan - - - - Compensation for participation in meetings - - - - Commissions - - - - Others - - 3,032 3,032 Post-employment benefits - - 385 385 Compensation based on stock options - - - - Compensation for each body(1 1,357 715 13,183 - Total compensation       15,255 (1) Compensation amounts include charges and accruals. The table below sets forth the compensation of our management received from our subsidiaries for the year ended December 31, 2011. Year ended December 31, 2011 Board of Directors Fiscal Council Executive Officers Fixed Fixed Total (fixed and variable) (in thousands ofreais)  Subsidiaries(1) - - 15,953 (1) Compensation amounts include charges and accruals. 83 Table of Contents Share Ownership The total number of common shares owned by our directors and executive officers as of February 29, 2012March 31, 2014 was 50,211.102,300.  None of our directors or executive officers beneficially owns one percent or more of our common shares. Indemnification of Officers and Directors Neither the laws of Brazil nor our bylaws provide for specific indemnification of directors or officers.  We have held directors’ and officers’ liability insurance since February 2006. Employees As of December 31, 2011,2013, we had 7,913 8,391full time employees (including the employees of our jointly‑controlled subsidiaries).employees.  The following table sets forth the number of our employees and a breakdown of employees by category of activity as of the dates indicated in each area of our operations. As of December 31, As of December 31, 2011 2010 2009 2013 2012 2011 Distribution 6,043 6,040 5,653 4,503 5,466 6,043 Generation 527 351 275 Commercialization and Services 493 616 662 Conventional Generation 106 156 295 Renewable Generation 329 267 232 Commercialization 51 64 495 Services 1,822 1,589 - Corporate staff 850 917 860 1,580 935 850 Total 7,913 7,924 7,450 8,391 8,477 7,913   PartSome of our employees are members of unions, with which we have collective bargaining agreements.  We renegotiate these agreements annually with the 1716 principal unions that represent our various employee groups.  Salary increases are generally provided for on an annual basis.  We believe that we have good relationships with these unions, as evidenced by the fact that we have not had any labor strikes during the last 2325 years that materially affected our operations. We provide a number of benefits to our employees.  The most significant is the sponsorship of Fundação CESP, in partnership with ten other electrical companies, which supplements the Brazilian government retirement and health benefits available to the employees of our subsidiaries CPFL Paulista, CPFL Piratininga, CPFL Geração and CPFL Brasil. In accordance with Brazilian law and our compensation policy, our employees are eligible for our profit sharing program.  This amount is set in the collective bargaining agreements of each company, which are adjusted annually.  In 2011,2013, we reserved R$4741 million (R$4237 million of which are booked in current liabilities) for our employee profit sharing program. In addition, part of each employee’s compensation is linked to performance goals.  Employees are evaluated based on criteria such as quality of work product, adherence to safety protocols and productivity.  Our performance evaluation system is designed to evaluate required skill as well, and enables us to evaluate the development of our employees. 8496   Table of Contents   ITEM 7.                       Major Shareholders and Related Party TransactionsMAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS Major Shareholders The following table sets forth information relating to the beneficial ownership of our common shares by our major shareholders (beneficial owners of 5.0% or more of our common shares) as of February 29, 2012.December 31, 2013.  Percentages in the following table are based on 962,274,260 outstanding common shares.  Common Shares (%) Common Shares (%) BB Carteira Livre I FIA(1) 298,467,458 31.02 288,569,602 29.99 VBC Energia S.A.(2) 245,897,455 25.55 Energia São Paulo FIP(3) 115,118,250 11.96 ESC Energia S.A.(2) 234,092,930 24.33 Energia São Paulo FIA(3) 136,820,640 14.22 Bonaire Participações S.A.(4) 6,308,788 0.66 6,308,790 0.66 Bradespar S.A.(5) 50,541,820 5.25 50,541,820 5.25 BNDES Participações S.A.(6) 81,053,460 8.42 64,842,768 6.74 Executive officers and directors as a group 50,211 0.00 102,350 0.01 Total 797,437,442 82.87 781,278,900 81.20     (1)   BB Carteira Livre I – Fundo de Investimentos em Ações is an investment fund that belongs to PREVI, a pension fund sponsored by Banco do Brasil S.A.  The Brazilian government owns a majority of the voting capital of Banco do Brasil.  During 2009, the shareholder 521 Participações S.A., in compliance with the decision of its final controlling shareholder (Caixa de Previdência dos Funcionários do Banco do Brasil – “PREVI”), restructured its equity interests in order to reduce the administrative and financial costs on its indirect investments and transferred all its shares in the Company to its controlling shareholder, Fundo BB Carteira Livre I – Fundo de Investimento em Ações. (2)           VBCESC Energia S.A. is controlled by the Brazilian group Camargo Corrêa through several companies:  (i) Atila Holdings S.A., controlled by Construções e Comércio Camargo Corrêa S.A. and Camargo Corrêa Energia S.A.; (ii) Camargo Corrêa Energia S.A.; and (iii) Camargo Corrêa S.A. VBC Energia S.A. was also controlled by Votorantim Energia S.A. until January 2009.  a. (3)           Energia São Paulo Fundo de Investimento em ParticipaçAções is an investment fund whose ownership interest is controlled by four pension funds:  (i) Fundação CESP, primarily for employees of CPFL Energia, Companhia Energética de São Paulo (CESP), Eletropaulo Metropolitana Eletricidade de São Paulo S.A., Bandeirante Energia S.A. and Elektro Eletricidade e Serviços S.A., among other Brazilian electricity companies; (ii) Fundação SISTEL de Seguridade Social, primarily for employees of CPqD (Centro de Pesquisa e Desenvolvimento), Telecomunicações Brasileiras S.A. – Telebrás, Telemig Celular S.A., Tele Norte Celular Participações S.A., Amazônia Celular S.A.; among others telecommunications companies; (iii) Fundação Petrobras de Seguridade Social -‑ PETROS, primarily for employees of Petróleo Brasileiro S.A.; and (iv) Fundação SABESP de Seguridade Social — SABESPREV, primarily for employees of Companhia de Saneamento Básico do Estado de São Paulo — SABESP. (4)           Bonaire Participações S.A. is a holding company controlled by Energia São Paulo Fundo de Investimento em ParticipaçAções. (5)           Bradespar S.A. is a beneficial owner of our common shares, which it indirectly holds through Antares Holdings Ltda. and Brumado Holdings S.A.Ltda. (6)           BNDES Participações S.A. is a subsidiary of BNDES, a federal public bank linked to the Brazilian Ministry of Development, Industry and External Trade. Shareholders’ Agreement Voting Rights.  Our shareholders’ agreement, among VBC,ESC, PREVI (through BB Carteira Livre I FIA), Energia São Paulo FIP,FIA, Bonaire and us, as intervening and consenting party, governs control of CPFL and our subsidiaries.  Under the shareholders’ agreement, certain actions require the approval of at least VBCESC and PREVI (at least 80.0% of the shares subject to the shareholders’ agreement), including: ·        election of the CEO and removal of any executive officer (including the CEO); ·        definition of the dividend policy; ·        creation and dissolution of controlled companies; ·        acquisition and sale of investments in other entities; 85 Table of Contents ·        approval of our budget; ·        approval of our business plan; ·        capital increase within our pre‑approved authorized capital and determination of the issuance price of shares; ·        incurrence of indebtedness – including guarantees and collaterals in favor of controlled entities and invested companies – beyond the thresholds established in our budget or our business plan; 97 Table of Contents ·        execution of any agreement with a global amount in excess of R$3439 million, if not included in our annual budget; ·        granting of any kind of collateral or guarantee in favor of third parties; ·        execution of agreements with related parties in an amount in excess of R$8.19.7 million; ·        appointment of our independent auditors in certain specified cases; ·        authorization for the acquisition of our own shares for cancellation or for treasury; ·        amendment of concession agreements of any controlled entity; ·        approval of stock option plans; and ·        acquisition, sale or encumbrance of any fixed assets in an amount equal or over R$3439 million. The terms of our shareholders’ agreement relating to voting rights apply to our controlled companies and, to the fullest extent possible, to our investee companies. Corporate Governance.  Our Board of Directors consists of seven members, appointed as follows: ·        three appointed by VBC;ESC; ·        two appointed by PREVI; ·        one appointed by Energia São Paulo FIP/FIA/Bonaire; and ·        one independent, in accordance with the listing regulations of theNovo Mercado. Listing Rules. Our Fiscal Council consists of five members, appointed as follows: ·        two appointed by VBC;ESC; ·        two appointed by PREVI; and ·        one appointed by Energia São Paulo FIP/FIA/Bonaire. The number of members of the Board of Directors and the Fiscal Council nominated by each party to the shareholders’ agreement is related to the current stakes of the parties in the controlling shareholder block.  If a change in the stakes of any party in the enjoined shares occurs, the number of members for which such party has the right to nominate shall be adapted to reflect such modification so as to maintain unchanged the number of members nominated by the parties whose stakes relative to the total of enjoined shares have not been altered. If the noncontrollingnon-controlling shareholders, exercising their rights under the corporate law, elect the independent director required by the BM&FBOVESPA’sNovo Mercado Regulations, VBC,Listing Rules, ESC, PREVI and Energia São Paulo FIP/FIA/Bonaire must abstain from proposing a nominee for the position.  If the noncontrollingnon-controlling shareholders do not electthe independent director, VBC,ESC, PREVI and Energia São Paulo FIP/FIA/Bonaire shall by joint accord nominate such an independent director. 86 Table of Contents The shareholders’ agreement also establishes the framework of the Board of Directors and Board of Executive Officers of our subsidiaries.  According to the agreement, the executive officers of the Company must be part of the Board of Directors of our subsidiaries. 98 Table of Contents Transfer of Shares.  Our shareholders’ agreement provides for certain rights and obligations in the event of transfer of shares subject to the shareholders’ agreement, or subject shares, including: ·        Right of First Refusal.  The parties to the shareholders agreement have a right of first refusal to acquire subject shares in the event one of them decides to sell its shares to a third party. ·        Tag-alongTag‑along Rights.  A party that decides not to exercise its right of first refusal has the option to sell (pro rata), together with the selling party, its subject shares to the acquiring third party.  Tag‑along provisions do not apply to the disposition of subject shares by Energia São Paulo FIP/FIA/Bonaire while its stake within the controlling block is lower than 20.0%. ·        Preemptive Rights.  The parties have pro rata preemptive rights to subscribe for shares in the event of a capital increase. ·        Tag-alongTag‑along Rights of Energia São Paulo FIP/FIA/Bonaire.  In the event of a sale, assignment or transfer of subject shares by PREVI and VBCESC that results in an equity percentage lower than 20.0% and 30.0%, respectively, of the aggregate subject shares and, as long as Energia São Paulo FIP/FIA/Bonaire has not exercised its right of first refusal, it will have the right to sell its entire stake of subject shares together with PREVI or VBC,ESC, under the same terms and conditions. Change of Control.  In the event of direct or indirect change of control of any of the parties subject to the shareholders’ agreement, the remaining parties have the right to acquire all subject shares held, directly or indirectly, by the party undergoing the change of control, paying for such shares an amount to be determined by a recognized financial institution. Option Agreement Our controlling shareholders are also party to an agreement pursuant to which they have granted to each other options to purchase their respective shares in us.  In addition, this agreement provides for (i) certain notification requirements for secondary offerings of shares by such shareholders and (ii) priority to certain shareholders in the sale of shares in a secondary offering, if more than one shareholder participates in the offering and demand is less than the size of the offering. Related Party Transactions We acquired our interest in Semesa from VBC Energia S.A. in December 2001 for R$496 million.  The Semesa acquisition price is subject to adjustment, based on the assessment of Semesa’s Assured Energy.  The earliest that this assessment will take place is 2015. One of our principal shareholders is VBC.ESC.  The controlling shareholder of VBCESC currently is the Camargo Corrêa Group and prior to January 2009 both Camargo Corrêa and the Votorantim Group were controlling shareholders.Group.  Camargo Corrêa Group is one of the largest privately-heldprivately‑held industrial conglomerates in Brazil, with controlling equity interests in leading Brazilian engineering and construction, cement, footwear, and textiles companies.  Camargo Corrêa Group also shares equity control of important Brazilian steel and highway concession companies, and it has equity participations in a significant Brazilian financial conglomerate and in a global aluminum company. We acquired our interest in Semesa from VBC in December 2001 for R$496 million.  The Semesa acquisition price is subject to adjustment, based on the assessment of Semesa’s assured energy.  According to MME, the earliest that this assessment will take place is 2015. 87 Table of Contents We also conduct transactions with the shareholders of VBCESC and their affiliates, including the following: ·        Our distribution subsidiaries have entered into agreements for the supply of electricity with several entities affiliated with our shareholders.  All of these electricity supply agreements are regulated by ANEEL. ·        Our commercialization subsidiaries have entered into agreements for the supply of electricity with several entities affiliated with our shareholders. ·        CPFL Geração, through its subsidiariesjoint-ventures, BAESA, ENERCAN CERAN and Foz do Chapecó, and through its subsidiary, CERAN, has entered into transactions with Construçãoões e Comércio Camargo Corrêa S.A.,a member of the Camargo Corrêa Group, for the provision and financing of construction services to our generation subsidiaries. 99 Table of Contents Our subsidiaries CPFL Paulista, CPFL Piratininga, CPFL Geração and CPFL Brasil are sponsors of a pension fund administered by Fundação CESP, a pension fund services company that has an indirect ownership interest in one of our shareholders, Energia São Paulo FIP.FIA.  See note 31 to our Financial Statements concerning “Transactions with Related Parties.” Parties”. ITEM 8.                       Financial Information Consolidated Statements and Other Financial Information See Item “Financial18.  Financial Statements.” Legal Proceedings CPFL Paulista and CPFL Piratininga are parties to numerous lawsuits brought by industrial consumers alleging that certain tariff increases in the past were illegal in view of then prevailingthen-prevailing economic regulations that had established a price freeze that included electricity tariffs.  The aggregate potential liability was approximately R$103.767.5 million as of December 31, 2011.2013.  Superior courts have already decided many of these lawsuits partially against us, and as a result, we have provisioned the aggregate potential liability (approximately R$7.045 million) in respect of these suits. CPFL Paulista is a defendant in a civil public action filed by the Campinas Consumer Protection Office (Promotoria de Defesa do Consumidor).  The purpose of this civil public action is to suspend the effects of the tariff readjustment authorized by ANEEL for the year ended December 31, 2009.  CPFL Paulista obtained a preliminary suspension of the effects.  The civil public action still awaits final decision and, until then, the effects from the tariff readjustment authorized by ANEEL remain in force.  We believe that the risk of loss is remote. possible and therefore, no provision was recorded. CPFL Piratininga received a tax infraction notice regarding improper tax deductions from payments made to the Fundação CESP’s pension fund.  These payments originated from an agreement executed to pay a debt from Fundação CESP’s pension fund.  An appeal still awaits decision.  We believe that the possibilitylikelihood of loss is possible. possible and the aggregate amount of the claim was of approximately R$142 million as of December 31, 2013. CPFL Piratininga filed antwo annulment actionactions concerning an ICMS fiscal debtdebts against a notice of infraction and fee drawn by the state of São Paulo questioning the company’sits tax calculation method regarding the energy supply to two cities in the state.   AnA decision from lower courts is pending for one action and the other action is pending a decision on appeal.  In May 2013, we decided to adhere to a payment plan for the decision pending further appeal, still awaits decision.as the decision on initial appeal was not in our favor.  As of December 31, 2013, we had paid R$85 million out of a total amount of R$159 million.  The amount of the other claim was for approximately R$50 million as of December 31, 2013.  We believe that the risk of loss is possible and the aggregate amount of the claim was of approximately R$193 million at December 31, 2011. for this claim. We are also subject to legal proceedings relating to the authorization of certain of our hydroelectric plants,Hydroelectric Power Plants, including a class action proposed by the federal public attorney’s office of the Municipality of Caxias do Sul challenging the validity of the environmental licensing of the Rio das Antas Hydroelectric Complex,hydroelectric complex, and requesting injunctive relief against the construction of these plants.  The federal public attorney’s injunction request was denied in the lower courts and the district attorney moved against the denial, requesting a new injunction from the higher courts.  The higher courts denied the injunction relief.  The claim was deemed groundless by the lower courts.groundless.  An appeal from the federal public attorney’s office still awaits final decision.decision from the higher courts.  We believe that the possibility of a loss is remote. 88 Table of Contents Semesa and Furnas were named as defendants in a legal proceeding that sought remedial measures and the establishment of a nature reserve because of alleged harm caused by the construction and operation of the Serra da Mesa plant.  The amount sought from Semesa totaled R$101.4109.7 million.  CPFL Geração assumed all of the outstanding obligations and potential liabilities of Semesa in March 2007.  We believe that the risk of an adverse judgment with respect to this claim is possible.  Wepossible and a decision from the lower courts is pending.  As a result, we have not established a provision with regard to this claim.  If adverse judgment were entered against us, requiring us to purchase additional land and establish a preservereserve in the area surrounding our generation activities, the costs would be reflected in our property, plant and equipment. 100 Table of Contents CPFL Paulista is involved in a lawsuit challenging the deductibility of expenses recognized in 1997 related to a deficit from Fundação CESP’s pension fund.  Based on a favorable opinion that we received from the Brazilian Internal Revenue Office,Service, CPFL Paulista deducted those expenses for purposes of income tax payments.  In 2007, weWe have made a judicial depositdeposits in the amount of R$360414 million (adjusted(monetarily adjusted to R$582649 million in 2011),as of December 31, 2013) which allowsallow CPFL Paulista to proceed with the lawsuit without assuming the risk of any asset seizureforfeiture by the tax authority.  This dispute over expense deductibility also resulted in other lawsuits, and CPFL Paulista to raise defenses also entered into an agreement with a Brazilian bank to provide letters of credit through which the bank will guarantee an amount of R$265 million.lawsuits.  We believe that the possibility of loss is remote. possible. CPFL Paulista commenced a lawsuit against ANEEL seeking annulment of the methodology that has been applied in the periodic tariff adjustment processadjustments since the first periodic adjustment cycle (2003).in 2003.  The lower court expert investigation isdecided against CPFL Paulista, which has appealed the decision.  No decision on the appeal has been given to be concluded.date.  In addition, CPFL Paulista, CPFL Piratininga and RGE, as well as other Brazilian distribution companies, through ABRADEE, are plaintiffs in a lawsuit against ANEEL discussing the basis for remunerating the concession assets that has been used since the first periodic adjustment cycle.  We are still waiting for the production of evidence fromcurrently awaiting a court expert in connection withfinal decision on this lawsuit.claim.  If we succeed in any of these lawsuits,proceedings, the tariffs that these distribution companies charge will increase and, as a consequence, our results of operations will be positively affected. CPFL Geração received a tax infraction action concerning PIS and COFINS fiscal debts.  There is some divergence in the understanding of legislation, which resulted in a difference between the amount paid by CPFL Geração and the amount the tax authorities claim we owe.  An appeal still awaits decision.  We believe that the possibility of loss is possible and the aggregate amount of the claim was of approximately R$184 million as of December 31, 2013. RGE is the plaintiff in a lawsuit challenging Corporate Income Tax (IRPJ) and Social Contribution (CSLL) levied in relation to events that occurred in the period from 1999 to 2003, due to:  (i) excess amortization of goodwill in the 10‑year amortization period set forth in Law 9,532/97; (ii) excess depreciation of assets; and (iii) monetary adjustment applied on items of Parcel A, known as “CVA”, which were excluded from the calculation basis of corporate income tax and social contribution.  A court decision is still pending.  We believe that the risk of an unfavorable judgment with respect to this claim is possible, and the aggregate amount of our liability was approximately R$424 million as of December 31, 2013. CPFL Santa Cruz, CPFL Geração and RGE also received tax infraction actions concerning excess amortization of goodwill in IRPJ and CSLL, in the amounts of R$40 million, R$175 million and R$184 million as of December 31, 2013, respectively.  An appeal is still awaiting decision.  We believe that the possibility of loss is possible. We establish reserves in our balance sheetssheet provisions relating to potential losses from litigation based on estimates of such losses.  For this purpose, we classify such losses as remote, possible or probable.  IFRS practices and Brazilian law require us to establish reservesprovisions in connection with probable losses, and therefore, it is therefore our policy to establish reservesprovisions only in connection with those claims.  As of December 31, 2011,2013, our reservesprovisions for contingencies were approximately R$338 million.468 million, reflecting our ongoing contingency monitoring and risk control.  Our managementManagement believes that these proceedings will not have a material adverse effect on our financial condition, either individually or in the aggregate.  See note 21 21 to our audited consolidated financial statements for more information on the status of our litigation. Dividend Policy For our policy on dividend distributions, see “Item 10.  Additional Information—Allocation of Net Income and Distribution of Dividends.”Dividends”. 101 Table of Contents Significant Changes NoneChanges in consolidation and in pension plan due to revision of IFRS IFRS has revised their rule of consolidation.  The new standards (IFRS 10 and IFRS 11) were issued and took effect as from 2013.  Pursuant to the new standards, we will no longer proportionally consolidate a joint-‑venture.  We will instead record such entity by equity method, with no impact on our income statement.  For further information on these changes, please see note 2.8 to our audited consolidated financial statements. Another important change relates to IAS 19, as revised in 2011.  The revisions change the accounting methodology for defined benefit plans and termination benefits.  The new methodology requires recognition of any changes in defined benefit obligations and the fair value of plan assets, and thus eliminates the corridor approach permitted under the previous version of IAS 19.  The elimination of the corridor approach accelerates recognition of past service costs.  All actuarial gains and losses are recognized immediately in other comprehensive income so that the net pension plan asset or liability reflects the full amount of the plan deficit or surplus.  Additionally, instead of interest cost and expected returns on plan assets used in the previous version of IAS 19, we now record an amount for “net interest” in accordance with the revisions of IAS 19, as revised in 2011.  According to the revisions, net interest is calculated by applying the discount rate to the net amount of the defined benefit liability or asset.  The IAS 19 revisions also introduced certain changes in presentation of the defined benefit cost, including more extensive disclosures, such as the sensitivity to significant actuarial assumptions.  For further information on the impact of these changes, please see note 2.8 to our consolidated financial statements. These two new standards are effective from January 1, 2013. As the adoption of these accounting standards constitutes a change in accounting policies, the Company is retrospectively applying these standards in accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, and therefore the Company adjusted the Balance Sheets as of January 1, 2012 and December 31, 2012, and the Statements of Income, of Comprehensive Income, of Changes in Shareholders’ Equity and Cash Flows for the years ended on December 31, 2012 and 2011 for comparison purposes. ITEM 9.                       The Offer and Listing Trading Markets Our common shares are listed on the BM&FBOVESPA, and our ADSs are listed on the New York Stock Exchange.  Each ADS represents two shares.  The ADSs commenced trading on the NYSE on September 29, 2004.  As of December 31, 2011,2013, the ADSs represented 8.1%6.4% of our shares and 26.4%21.1% of our current global public float. On February 23, 2011, our Board of Directors:  (i) approved a change in the ratio of our ADSs, so that each ADS would represent two common shares of CPFL EnergiaEnergia; and (ii) submitted a proposal for a simultaneous reverse stock split and forward stock split of our common shares to our shareholders.  Our shareholders approved this proposal on our shareholders’ meeting of April 28, 2011.  Through the reverse stock split, 10 of our common shares became one common share and, simultaneously, through the forward stock split, each common share resulting from the reverse stock split became 20 common shares. 89 Table of Contents The purpose of the change in the ADS ratio, as well as the reverse and forward stock splits, is to (a)to:  (i) adjust the share base, and consequently decrease the administrative and operational costs of CPFL Energia; (b)(ii) improve the efficiency of our systems for recording, controlling and disclosing information to shareholders; (c)(iii) adjust the price of our common shares and ADSs, allowing access to our stock by new investors; and (d)(iv) increase the liquidity of our shares and ADSs through a decrease in their individual value. The shares resulting from the reverse and forward stock splits were credited on July 4, 2011, based on our shareholding position on June 28, 2011.  The new ADSs resulting from the change of our ADSs’ ratio were credited on July 5, 2011, based on our ADS holding position on July 1, 2011, resulting in the issuance of two additional ADSs for each existing ADS on July 1, 2011. 102 Table of Contents Price Information The table below sets forth reported high and low closing sale prices inreais  per common share for the periods indicated.  The table also sets forth prices in U.S. dollars per ADS based on information available from the New York Stock Exchange.  See “Item 3.  Key Information—Exchange Rates” for information with respect to exchange rates applicable during the periods indicated below.   Reais per Common share U.S. dollars per ADS   High Low High Low           2007 40.44 27.80 67.28 38.70 2008 41.95 26.83 76.40 35.27 2009 37.50 28.50 66.29 35.42 2010:         First Quarter 38.48 35.36 65.55 58.30 Second Quarter 40.10 34.84 68.90 57.31 Third Quarter 44.00 38.66 76.70 67.07 Fourth Quarter 41.35 39.30 76.91 70.15 2011:         First Quarter 46.39 39.70 87.41 73.35 Second Quarter 47.60 43.50 91.69 83.26 Third Quarter(*) 22.79 19.43 29.24 22.15 September(*) 21.75 20.44 26.49 22.15 October(*) 21.97 19.98 26.15 22.19 November(*) 23.45 21.48 26.75 24.44 December(*) 26.50 22.65 28.68 25.57 2012:         January(*) 26.04 25.11 29.65 28.01 February(*) 27.67 25.60 32.69 30.03 March(*) (up to March 27) 29.30 27.82 32.94 30.86   Reais per Common share U.S. dollars per ADS   High Low High Low 2009 (*) 18.75 14.25 22.10 11.81 2010 (*) 22.00 17.42 25.64 19.10 2011 (*) 26.50 19.43 30.56 22.15 2012 29.30 21.28 32.94 20.75 2013 23.57 18.39 22.78 15.49 2012:         First Quarter 29.30 25.11 32.94 28.01 Second Quarter 28.38 23.83 31.03 23.60 Third Quarter 25.65 21.36 25.72 20.84 Fourth Quarter 23.90 21.28 23.55 20.75 2013:         First Quarter 22.16 19.00 21.70 19.36 Second Quarter 23.57 18.76 22.78 16.90 Third Quarter 21.75 19.20 19.21 16.17 Fourth Quarter 20.09 18.39 18.40 15.49 October 20.09 19.10 18.40 16.88 November 19.46 18.46 17.12 15.91 December 19.40 18.39 16.39 15.49 2014:         January 18.87 17.70 15.95 14.74 February 17.85 15.42 15.08 12.85 March 18.67 15.79 16.57 13.46 April (up to April 2) 18.85 18.44 16.59 16.10   (*)   Prices afterwere adjusted to reflect the change in the ratio of our ADSs and the simultaneous reverse stock split and forward stock split of our common shares. Corporate Governance Practices In 2000, the BM&FBOVESPA introduced three special listing segments, known as Level 1, Level 2 and theNovo Mercado, aiming at fostering a secondary market for securities issued by Brazilian companies with securities listed on the BM&FBOVESPA, by prompting such companies to follow good practices of corporate governance.  The listing segments were designed for the trading of shares issued by companies voluntarily undertaking to abide by corporate governance practices and disclosure requirements in addition to those already imposed by Brazilian law.  These rules generally increase shareholders’ rights and enhance the quality of information provided to shareholders and stakeholders.  In order to maintain high standards of corporate governance, we have signed an agreement with the BM&FBOVESPA to list our securities on theNovo Mercado.   90 Table of Contents Our corporate governance guidelines apply to us and all of our subsidiaries and affiliated companies.  They aim at promoting interaction among our shareholders, Board of Directors, Fiscal Council and Board of Executive Officers.  Our managers have committed to focus on: 1.Disclosure (prompt and voluntary communication with market participants and our shareholders with respect to factors that guide our business and lead to the creation of value); 2.Fairness (fair treatment to our shareholders, our customers, suppliers, employees, creditors, government bodies, regulatory agencies, etc.); 3.Accountability (accountability of our managementManagement to our shareholders, and responsibility for their acts while in office); and 4.Compliance (commitment to the sustainability and continuity of our business in the long run, compliance with the legislation in force and observance of social and environmental matters). 103 Table of Contents We implemented this model in 2003 and redesigned it in 2006 in order to adjust our corporate governance structure to the current making-businessmaking‑business scenario and decision-makingdecision‑making process.  In 2012 the Board of Directors approved the updating of Corporate Governance Guidelines, regarding their application to its Controlled and Affiliated Companies.  Furthermore, it was registered that the members of the Board of Directors’ Advisory Committees shall no longer receive compensation. Our Board of Directors is our decision-makingdecision‑making body, responsible for determining our overall guidelines.  Our Board of Directors can request advice on strategic matters from three of our committees, such as executive remuneration, related party transactions, corporate risk management, follow-upfollow‑up on internal audits and business management processes.  Whenever necessary,ad hoc commissions are installed to advise the Board of Directors on specific issues, such as corporate governance, strategies, budget, corporate risk management, sustainability, purchase of energy, new operations and financial policies.policies, etc. A revision of these rules was under discussion between the companies listed in each segment and the BM&FBOVESPA, and it was approved during the second half of 2010 to provide for a further enhancement of the special corporate governance and disclosure rules.  The revised rules entered in force and effect on May 10, 2011, including those related to theNovo Mercado segment.  The main changes to the rules in the segment that we are listed include, among others:  (i) prohibition to include dispositions that restrict or create obligations to the shareholders which vote favorably to a suppression or amendment of dispositions of the bylaws; (ii) prohibition of the same individual to hold the positions of president of the board of directors and chief executive officer (or equivalent position as the main executive of the company); and (iii) obligation of the board of directors to issue a justified opinion on any tender offers for the acquisition of the shares representative of the corporate capital of the company.  On December 19, 2011, we amended our bylaws to incorporate these rules, among other changes.  In 2013 we amended our bylaws to include the creation of a "Reserve for Adjustment of the Concession Financial Assets", with subsequent amendment to items “a” and “c” and addition of items “d” and “e” of paragraph 2, Article 27. In accordance with Section 303A.11 of the NYSE Listed Company Manual, we have posted a summary of significant differences between the NYSE corporate governance standards and our corporate governance practices on our website, athttp://www.cpfl.com.br/ir.   ITEM 10.                    Additional Information Memorandum and Articles of Incorporation Corporate Purpose Our corporate purpose, as defined by our bylaws, includes: ·        developing and fostering enterprises in the electricity generation, distribution, transmission, sale industry and related activities; ·        providing services in the electricity, telecommunications and data transmission industries, as well as providing technical, operating, administrative and financial support services, especially to affiliated or subsidiary companies; and 91 Table of Contents ·        holding interest in the capital of other companies engaged in activities similar to those that we perform or which have as corporate purpose developing, fostering, sale industry, building, and/or operating projects concerning electricity generation, distribution, transmission and related services. Qualification of Directors Members of our board of executive officers must be Brazilian nationals and resident in Brazil, but such requirement does not apply to members of our Board of Directors.  Our directors and executive officers are prevented from voting on any transaction involving companies in which they hold more than 10.0% of the total capital stock or of which they have held a management position in the period immediately prior to their taking office. 104 Table of Contents Allocation of Net Income and Distribution of Dividends The discussion below summarizes the provisions of Brazilian law regarding the establishment of reserves by corporations and the distribution of dividends, including interest attributed to shareholders’ equity. Mandatory Distribution Brazilian Corporate Law generally requires that the bylaws of each Brazilian corporation specify a minimum percentage of the amounts available for distribution by such corporation for each fiscal year that must be distributed to shareholders as dividends, also known as the mandatory distribution. The mandatory distribution is based on a percentage of adjusted net income, not lower than 25.0%, rather than a fixed monetary amount per share.  Under our bylaws, at least 25.0% of our adjusted net income, as calculated under Brazilian Accounting Principles and adjusted under Brazilian Corporate Law, for the preceding fiscal year must be distributed as a mandatory annual dividend.  Adjusted net income means the distributable amount after any deductions for statutory reserves and reserves for investment projects. Brazilian Corporate Law permits the suspension of the mandatory distribution of dividends in any fiscal year in which the managementManagement bodies report to the shareholders’ meeting that the distribution would be inadvisable in view of the company’s financial condition.  The suspension is subject to approval by the shareholders meeting and review by members of the fiscal council.council, if it has been installed.  The law does not establish the circumstances in which payment of the mandatory dividend would be “inadvisable” based on the company’s financial condition.  In the case of publicly-heldpublicly‑held corporations, the board of directors must file a justification for such suspension with the CVM within five days of the relevant general meeting.  If the mandatory distribution is not paid, the unpaid amount must be attributed to a special reserve account.  If not absorbed by subsequent losses, those funds must be paid out as dividends as soon as the financial condition of the company permits.  Under Brazilian Corporate Law, the shareholders of a publicly-heldpublicly‑held company may also decide to distribute dividends in an amount lower than the mandatory distribution. Payment of Dividends We are required by Brazilian Corporate Law to hold an annual general shareholders’ meeting by no later than April 30 of each year, at which the shareholders have to decide on the payment of an annual dividend.  Additionally, interim dividends may be declared by our Board of Directors.  Pursuant to our charter, we are required to pay a mandatory annual dividend of at least 25.0% of our adjusted net income.  Any holder of record of shares at the time of a dividend declaration is entitled to receive dividends.  Dividends on shares held through a depositary are paid to the depositary for further distribution to the shareholders.  Under Brazilian Corporate Law, dividends are generally required to be paid to the holder of record on a dividend declaration date within 60 days following the date the dividend was declared, unless a shareholders’ resolution sets forth another date of payment, which, in either case, must occur prior to the end of the fiscal year in which such dividend was declared.  Pursuant to our bylaws, declared unclaimed dividends do not bear interest, are not monetarily adjusted and revert to us if unclaimed within three years after the date when we begin to pay such declared dividends. In general, shareholders who are not residents of Brazil must register their equity investment with the Brazilian Central Bank to have dividends, sales proceeds or other amounts with respect to their shares eligible to be remitted outside of Brazil.  The common shares underlying the ADSs are held in Brazil by Banco Bradesco S.A.,as thecustodian for the depositary, that is the registered owner on the records of the registrar for our shares.  The current registrar (since January 1, 2011) is Banco do Brasil S.A.  The depositary registers the common shares underlying the ADSs with the Brazilian Central Bank and, therefore, is able to have dividends, sales proceeds or other amounts with respect to the common shares remitted outside Brazil. 92 Table of Contents Payments of cash dividends and distributions, if any, are made inreaisto the custodian on behalf of the depositary, which then converts such proceeds into U.S. dollars for distribution to holders of ADSs.  In the event that the custodian is unable to convert immediately the Brazilian currency received as dividends into U.S. dollars, the amount of U.S. dollars payable to holders of ADSs may be adversely affected by depreciations of the Brazilian currency that occur before the dividends are converted.  Dividends paid to persons who are not Brazilian residents, including holders of ADSs, are not subject to Brazilian withholding tax, except for dividends declared based onprofits generated prior to December 31, 1995, which are subject to Brazilian withholding income tax at varying tax rates.  See “Taxation—Brazilian Tax Considerations.”Considerations”. 105 Table of Contents Holders of ADSs have the benefit of the electronic registration obtained from the Brazilian Central Bank, which permits the depositary and the custodian to convert dividends and other distributions or sales proceeds with respect to the common shares represented by ADSs into foreign currency and remits the proceeds outside of Brazil.  In the event the holder exchanges the ADSs for common shares, the holder will be entitled to continue to rely on the depositary’s certificate of registration for five business days after the exchange.  Thereafter, in order to convert foreign currency and remit outside Brazil the sales proceeds or distributions with respect to the common shares, the holder must obtain a new certificate of registration in its own name that will permit the conversion and remittance of such payments through the foreign exchange market. If the holder is not a duly qualified investor and does not obtain an electronic certificate of foreign capital registration, a special authorization from the Brazilian Central Bank must be obtained in order to remit from Brazil any payments with respect to the common shares through the foreign exchange market.  Without this special authorization, the holder may currently remit payments with respect to the common shares through the floating rate exchange market, although no assurance can be given that the floating rate exchange market will be accessible for these purposes in the future. In addition, a holder who is not a duly qualified investor and who has not obtained an electronic certificate of foreign capital registration or a special authorization from the Brazilian Central Bank may remit these payments by international transfer of Brazilian currency pursuant to CMN Resolution No. 3,568, dated May 29, 2008, and Brazilian Central Bank Circular No. 3,280, dated March 9, 2005, as amended.  In order to effect the international transfer of Brazilian currency the holder must have a special non‑resident bank account in Brazil, through which the subsequent conversion of such Brazilian currency into U.S. dollars is effected. Under current Brazilian legislation, the Brazilian government may impose temporary restrictions of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil’s balance of payments (see “Item 3.  Key Information—Risk Factors—Risks Relating to the ADSs and Our Common Shares”). Interest Attributable to Shareholders’ Equity Under Brazilian tax legislation, Brazilian companies are permitted to pay “interest” to holders of equity securities and treat such payments as an expense for Brazilian income tax purposes and for social contribution purposes.  Payment of such interest may be made at the discretion of our Board of Directors, subject to the approval of the shareholders at a general shareholders’ meeting.  In order to calculate this interest on shareholders’ equity, the TJLP is applied to shareholders’ equity for the applicable period.  The amount of any such notional “interest” payment to holders of equity securities is generally limited in respect of any particular year to the greater of: ·        50.0% of net income (after the deduction of the provisions for social contribution on net profits but before taking into account the provision for corporate income tax and the interest attributable to shareholders’ equity) for the period in respect of which the payment is made; or ·        50.0% of the sum of retained earnings and profit reserves as of the beginning of the year in respect of which such payment is made. 93 Table of Contents For accounting purposes, although the interest charge must be reflected in the statement of operations to be tax‑deductible, the charge is reversed before calculating net income in the statutory financial statements and deducted from shareholders’ equity in a manner similar to a dividend.  Any payment of interest in respect of common shares (including the holders of the ADSs) is subject to Brazilian withholding tax at the rate of 15.0%, or 25.0% in the case of a shareholder domiciled in a tax haven.  See “Taxation—Brazilian Tax Considerations.”Considerations”.  If such payments are accounted for, at their net value, as part of any mandatory dividend, the tax is paid by the company on behalf of its shareholders, upon distribution of the interest.  If we distribute interest attributed to shareholder’s equity in any year, and that distribution is not accounted for as part of mandatory distribution, Brazilian income tax would be borne by the shareholders.  For IFRS accounting purposes, interest attributable to shareholders’ equity is reflected as a dividend payment. 106 Table of Contents Under our bylaws, interest attributable to shareholders’ equity may be treated as a dividend for purposes of the mandatory dividend. We will distribute R$1,506931 million to our shareholders from our 20112013 net income.  Of this amount, R$748363 million, or R$ 0,7770231760.377282126 per common share, was paid as an interim dividend on September 30, 2011October 1, 2013 and R$758568 million, or R$0.788205126 0.590062200per common share is expected to be paid as supplemental dividend in the first half of 2012.2014.  Dividend Policy We intend to declare and pay dividends and/or interest attributed to shareholders’ equity in amounts of at least 50.0% of our adjusted net income, in semi-annualsemi‑annual installments.  The amount of any of our distributions of dividends and/or interest attributed to shareholders’ equity will depend on a series of factors, such as our financial conditions, prospects, macroeconomic conditions, tariff adjustments, regulatory changes, growth strategies and other matters our Board of Directors and our shareholders may consider relevant.  In addition, covenants contained in our debt instruments may limit the amount of dividends and/or interest attributable to shareholders’ equity that we may make.  Within the context of our tax planning, we may in the future determine that it is to our benefit to distribute interest attributable to shareholders’ equity in lieu of dividends. Our Board of Directors may approve the distribution of dividends and/or interest attributed to shareholders’ equity, calculated based on our annual or semi-annualsemi‑annual financial statements or on financial statements relating to shorter periods, or also based on accrued profits recorded or on profits allocated to non‑profits reserve accounts in the annual or semi-annualsemi‑annual financial statements.  The declaration of annual dividends, including dividends in excess of the mandatory distribution, requires approval by the vote of the majority of the holders of our common shares. Shareholder Meetings Actions to be taken at our shareholders’ meetings At our shareholder meetings, shareholders are generally empowered to take any action relating to our corporate purpose and to pass such resolutions as they deem necessary.  The approval of our financial statements and the determination of the allocation of our net profits with respect to each fiscal year takestake place at the annual shareholder meeting immediately following such fiscal year.  The election of our directors and members of our fiscal council, if the requisite shareholders request its establishment, typically takes place at the annual shareholders’ meeting, although under Brazilian law it may also occur at a special shareholders’ meeting. A special shareholders’ meeting may be held concurrently with the annual shareholders’ meeting.  The following actions may only be taken at a special shareholders’ meeting: ·        amendment of our bylaws; ·        cancellation of registration with the CVM as a publicly-heldpublicly‑held company; ·        authorization of the issuance of non-convertiblenon‑convertible debentures; ·        suspension of the rights of a shareholder who has violated Brazilian Corporate Law or our bylaws; 94 Table of Contents ·        acceptance or rejection of the valuation of in-kindin‑kind contributions offered by a shareholder in consideration for shares of our capital stock; ·        approval of our transformation into a limited liability company (sociedade limitada) or any other corporate form; ·        delisting of our common shares from theNovo Mercado;   107 Table of Contents ·        appointment of a financial institution responsible for our valuation, in the event that a tender offer for our common shares is carried out in connection with a corporate transformation or delisting of our common shares from theNovo Mercado;   ·        approval of any merger (fusão) or consolidation (incorporação) with another company or a spin-offspin‑off (cisão);   ·        approval of any dissolution or liquidation, the appointment and dismissal of the respective liquidator and the official review of the reports prepared by him or her; ·        authorization to petition for bankruptcy or judicial or extrajudicial restructuring (recuperação judicial or extrajudicial); and ·        approval of stock option plans to managers or employees of the Company and its subsidiaries. According to Brazilian Corporate Law, neither a company’s bylaws nor actions taken at a shareholders’ meeting may deprive a shareholder of some specific rights, such as: ·        the right to participate in the distribution of profits; ·        the right to participate equally and ratably in any remaining residual assets in the event of liquidation of the company; ·        the right to preemptive rights in the event of subscription of shares, convertible debentures or subscription warrants (bônus de subscrição), except in some specific circumstances under Brazilian law described in “—Preemptive Rights;” and ·        the right to withdraw from the company in the cases specified in Brazilian Corporate Law, described in “Withdrawal Rights.”Rights”. Quorum As a general rule, Brazilian Corporate Law provides that a quorum atfor purposes of a shareholders’ meeting shall consists of shareholders representing at least 25.0% of a company’s issued and outstanding voting capital on the first call and, if that quorum is not reached, any percentage on the second call.  A quorum for the purposes of amending our bylaws consists of shareholders representing at least two-thirdstwo‑thirds of our issued and outstanding voting capital on the first call and any percentage on the second call. As a general rule, the affirmative vote of shareholders representing at least the majority of our issued and outstanding common shares present in person or represented by proxy at a shareholders’ meeting is required to ratify any proposed action, with abstentions not taken into account.  However, the affirmative vote of shareholders representing one-halfone‑half of our issued and outstanding voting capital is required to: ·        reduce the percentage of mandatory dividends; ·        change our corporate purpose; ·        merge us with another company if we are not the surviving company, or of our consolidationconsolidate us with another company; 95 Table of Contents ·        spin off a portion of our assets or liabilities; ·        approve our participation in a group of companies (as defined in Brazilian Corporate Law); ·        apply for cancellation of any voluntary liquidation; and ·        approve our dissolution. 108 Table of Contents According to our bylaws and for so long as we are listed on theNovo Mercado, we may not issue preferred shares or founders’ shares and, to delist ourselves from theNovo Mercado, we will have to conduct a tender offer. Notice of our Shareholders’ Meetings Notice of our shareholders’ meetings must be published at least three times in theDiário Oficial do Estado de São Paulo, the official newspaper of the state of São Paulo, and in the newspaperValor Econômico.  The first notice must be published no later than 15 days before the date of the meeting on the first call, and no later than eight days before the date of the meeting on the second call.  However, in certain circumstances, the CVM may require that the first notice be published 30 days in advance of the meeting. Documents and Information The specific documents and information requested for the exercise of the voting rights of our shareholders shall be made available by electronic means at the Brazilian Securities Exchange CommissionCVM and the U.S. Securities and Exchange Commission websites, as well as at our investor relationship website.  The following matters require specific documents and information: ·        matters with Interest of Related Parties; ·        ordinary Shareholders’ Meeting; ·        election of members of the Board of Directors; ·        compensation of the Management of the Company; ·        amendment to the Company’s Bylaws; ·        capital Increaseincrease or Capital Reduction;capital reduction; ·        issuance of Debentures or Subscription Bonuses; ·        issuance of preferred Shares; ·        change of the mandatory dividend distribution; ·        acquisition of the control of another company; ·        appointment of Evaluators; and/or ·        any matter which entitles the shareholders to exercise their withdrawal right. Location of our Shareholders’ Meetings Our shareholders’ meetings take place at our head offices in the city of São Paulo, state of São Paulo.  Brazilian Corporate Law allows our shareholders to hold meetings outside our head offices in the event of force majeure, provided that the meetings are held in the City of São Paulo and the relevant notice contains a clear indication of the place where the meeting will occur. 96 Table of Contents Who May Call our Shareholders’ Meetings In addition to our Board of Directors, shareholders’ meetings may also be called by: ·        any shareholder, if our directors fail to call a shareholders’ meeting within 60 days after the date they were required to do so under applicable laws and our bylaws; 109 Table of Contents ·        shareholders holding at least five percent of our capital stock, if our directors fail to call a meeting within eight days after receipt of a request to call the meeting by those shareholders indicating the proposed agenda; and ·        our fiscal council, if one is in place, if the Board of Directors delays calling an annual shareholders’ meeting for more than one month.  The fiscal council may also call a special shareholders’ meeting any time if it believes that there are important or urgent matters to be addressed. Conditions of Admission Shareholders attending our shareholders’ meeting must provide their identification cards and produce proof of ownership of the shares they intend to vote. A shareholder may be represented at a shareholders’ meeting by a proxy, as long as the proxy is appointed less than a year before the shareholders’ meeting.  The proxy must be a shareholder, an officer of the corporation, a lawyer or a financial institution.  An investment fund must be represented by its investment fund officer.  The Company and/or its shareholders may also carry out a public proxy request directed to all shareholders with voting rights. Since 2008, the Company has been adopting a Manual for Participation in General Shareholders’ Meetings to provide, in a clear and summarized form, information relating to the Company’s Shareholders General Meeting and to encourage and facilitate the participation of all shareholders.  This manual includes a standard power of attorney, which may be used by shareholders who are unable to be present at the meetings to appoint an attorney-in-factattorney‑in‑fact to exercise their voting rights with regard to issues on the agenda. Voting Rights of ADS Holders ADS holders may instruct the depositary to vote the number of common shares that their ADSs represent.  The depositary will notify those holders of shareholders’ meetings and arrange to deliver our voting materials to them upon our request.  Those materials will describe the matters to be voted on and explain how the ADS holders may instruct the depositary how to vote.  For instructions to be valid, they must reach the depositary by a date set by the depositary. We cannot assure ADS holders that they will receive the voting materials or otherwise learn of an upcoming shareholders’ meeting in time to ensure that they can instruct the depositary to vote their common shares.  In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that ADS holders may not be able to exercise their right to vote and there may be nothing that they can do if their shares are not voted as they requested. Preemptive Rights Our shareholders have a general preemptive right to subscribe for shares in any capital increase according to the proportion of their shareholdings.  Our shareholders also have a general preemptive right to subscribe for any convertible debentures, rights to acquire our shares and subscription warrants that we may issue.  In accordance with our bylaws, in the case of a private placement, a period of at least 30 days following the publication of notice of the capital increase is allowed for the exercise of the preemptive right.  In the case of a public offering, the issuance may occur with or without the exercise of preemptive rights or with a reduced term for the exercise of preemptive rights.  Under Brazilian Corporate Law, holders are permitted to transfer or dispose of their preemptive right for consideration. 97 Table of Contents In addition, Brazilian Corporate Law allows for companies’ bylaws to give the board of directors the power to exclude preemptive rights or reduce the exercise period of such rights with respect to the issuance of new shares, debentures convertible into shares and subscription warrants up to the limit of the authorized share capital if the distribution of those shares is effected through a stock exchange, through a public offering or through an exchange of shares in a public offering the purpose of which is to acquire control of another company. 110 Table of Contents Withdrawal Rights Brazilian Corporate Law grants our shareholders the right to withdraw from the company in case they disagree with decisions taken in shareholder’s meetings concerning the following matters:  (i) the reduction of minimum mandatory dividends; (ii) the merger of the company or consolidation with another company; (iii) the change of the corporate purpose of the company; or (iv) a spinoff of the company (if such spin-offspin‑off changes the company’s corporate purpose, reduces mandatory dividends or results in the company joining a group of entities).; or (v) the acquisition by us of the control of another company for a price that exceeds the limits established in paragraph two of Article 256 of Brazilian Corporate Law; or (vi) a change in our corporate form.  Even shareholders who did not vote or were not present at the relevant meeting may exercise this withdrawal right. If our shareholders wish to withdraw from the company due to a merger, such right may only be exercised provided that the company’s shares have no liquidity in the market. The withdrawal right entitles the shareholder to the reimbursement of the value of its shares, upon request within 30 days of the publication of notice of the shareholders meeting.  After such term, the company’s managementour Management bodies may choose to call a general meeting to ratify or reconsider the decision which triggered the withdrawal rights, should the payment of such rights threaten the financial stability of the company. Material Contracts For information concerning our material contracts, see “Item 4.  Information on the Company” and “Item 5.  Operating and Financial Review and Prospects.”Prospects”. Exchange Controls and Other Limitations Affecting Security Holders There are no restrictions on ownership of our capital stock by individuals or legal entities domiciled outside Brazil.  However, the right to convert dividend payments and proceeds from the sale of common shares into foreign currency and to remit such amounts outside Brazil is subject to restrictions under foreign investment legislation which generally requires, among other things, that the relevant investment be registered with the Brazilian Central Bank.  These restrictions on the remittance of foreign capital abroad could hinder or prevent the custodian for the common shares represented by American Depositary Shares, or holders who have exchanged American Depositary Shares for common shares, from converting dividends, distributions or the proceeds from any sale of common shares into U.S. dollars and remitting such U.S. dollars abroad.  Delays in, or refusal to grant any required government approval for conversions of Brazilian currency payments and remittances abroad of amounts owed to holders of American Depositary Shares could adversely affect holders of American depositary receipts, –or ADRs. Resolution No. 1,927/1992 of the National Monetary Council, which is the restated and amended Annex V to Resolution No. 1,289/1997,1987, which we call the Annex V Regulations, provides for the issuance of depositary receipts in foreign markets in respect of shares of Brazilian issuers.  It provides that the proceeds from the sale of American Depositary Shares by holders of American depositary receipts outside Brazil are free of Brazilian foreign investment controls and holders of American Depositary Shares who are not resident in a tax haven jurisdiction (i.e. a country or location that does not impose taxes on income or where the maximum income tax rate is lower than 20.0%, or where the legislation imposes restrictions on disclosure of the shareholding composition or the ownership of the investment) will be entitled to favorable tax treatment. An electronic registration has been issued by the custodian in the name of Deutsche Bank, the depositary, with respect to the American Depositary Shares.  Pursuant to this electronic registration, the custodian and the depositary are able to convert dividends and other distributions with respect to the common shares represented by American Depositary Shares into foreign currency and to remit the proceeds outside Brazil.  If a holder exchanges American Depositary Shares for common shares, the holder may continue to rely on the custodian’s electronic registration for only five business days after the exchange.  After that, the holder must seek to obtain its own electronic registration with the Brazilian Central Bank under Law No. 4,131/1962 or Resolution No. 2,689/2000.  Thereafter,unless the holder has registered its investment with the Brazilian Central Bank, such holder may not convert into foreign currency and remit outside Brazil the proceeds from the disposition of, or distributions with respect to, such common shares.  A holder that obtains an electronic registration generally will be subject to lessfavorable Brazilian tax treatment than a holder of American Depositary Shares.  See “—Taxation—Brazilian Tax Considerations.”Considerations”. 98111   Table of Contents   Under Brazilian law, whenever there is a serious imbalance in Brazil’s balance of payments or reasons to foresee a serious imbalance, the Brazilian government may impose temporary restrictions on the remittance to foreign investors of the proceeds of their investments in Brazil, and on the conversion of Brazilian currency into foreign currencies.  Such restrictions may hinder or prevent the custodian or holders who have exchanged American Depositary Shares for underlying common shares from converting distributions or the proceeds from any sale of such shares, as the case may be, into U.S. dollars and remitting such U.S. dollars abroad. Taxation The following discussion summarizes the material Brazilian and U.S. federal income tax consequences of the acquisition, ownership and disposition of common shares or ADSs, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of common shares or ADSs.  The summary is based upon the tax laws of Brazil and regulations thereunder and on the tax laws of the United States and regulations thereunder as in effect on the date hereof, which are subject to change (possibly on a retroactive basis) and different interpretations. Holders of common shares or ADSs should consult their own tax advisors as to the tax consequences of the acquisition, ownership and disposition of common shares or ADSs. Although there is at presentcurrently no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may culminate in such a treaty.  No assurance can be given, however, as to whether or when a treaty will enter into force or how it will affect the U.S. holders (as defined below) of common shares or ADSs.  Prospective holders of common shares or ADSs should consult their own tax advisors as to the tax consequences of the acquisition, ownership and disposition of common shares or ADSs in their particular circumstances. Brazilian Tax Considerations The following discussion summarizes the material Brazilian tax consequences of the acquisition, ownership and disposition of our common shares or ADSs by a holder that is not domiciled in Brazil for purposes of Brazilian taxation, or a Non‑Brazilian Holder. Pursuant to Brazilian law, foreign investors may invest in the common shares under Resolution No. 2,689 of the National Monetary Council, or Resolution No. 2,689. Resolution No. 2,689 allows foreign investors to invest in almost all financial assets and to engage in almost all transactions available in the Brazilian financial and capital markets, provided that some requirements are fulfilled.  In accordance with Resolution No. 2,689, the definition of foreign investor includes individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered abroad. Pursuant to Resolution No. 2,689, foreign investors must:  (i) appoint at least one representative in Brazil with powersthe power to perform actions relating to the foreign investment; (ii) complete the appropriate foreign investor registration form; (iii) register as a foreign investor with the CVM; and (iv) register the foreign investment with the Brazilian Central Bank. Securities and other financial assets held by foreign investors pursuant to Resolution No. 2,689 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Brazilian Central Bank or the CVM.  In addition, securities trading is restricted to transactions carried out in the stock exchanges or organized over‑the-counterthe‑counter markets licensed by the CVM, except for transfers resulting from a corporate reorganization, occurring upon the death of an investor by operation of law or will or as a consequence of the delisting of the relevant shares from a stock exchange and the cancellation of the registration with the CVM. 99112   Table of Contents   Taxation of Dividends Dividends, includingStock dividends in kind, paid by usa Brazilian company to foreign investors, with respect both to foreign direct investments and to foreign investments carried out under the depositary in respectrules of the common shares underlying the ADSs or to a Non‑Brazilian Holder in respect of common sharesResolution No. 2,689/00, are generally will not be subject to Brazilian withholding income tax providedin Brazil, to the extent that theysuch amounts are paid out ofrelated to profits generated as of or after January 1, 1996.1996, as provided under article 10 of Law No. 9,249, dated December 26, 1995, or Law No. 9,249/95. In this context, it should be noted that Law No. 11,638, dated December 28, 2007, or Law No. 11,638/07, significantly altered the Brazilian corporate law in order to align the Brazilian generally accepted accounting standards more closely with the IFRS.  Nonetheless, Law No. 11,941, dated May 27, 2009, introduced the Transitory Tax Regime, or RTT, in order to render neutral, from a tax perspective, all the changes provided by Law No. 11,638/07.  Under the RTT, for tax purposes, legal entities should observe the accounting methods and criteria as in force on December 31, 2007. Profits determined pursuant to Law No. 11,638/07, or IFRS Profits, can differ from the profits calculated pursuant to the accounting methods and criteria as in force on December 31, 2007, or 2007 Profits. While it was general market practice to distribute exempted dividends with reference to the IFRS Profits, Normative Ruling No. 1,397 issued by the Brazilian tax authorities on September 16, 2013 (“Normative Ruling No. 1,397/13”) has established that legal entities should observe the accounting methods and criteria as in force on December 31, 2007 (e.g., the 2007 Profits), upon determining the amount of profits that could be distributed as exempted income to its beneficiaries. Any profits paid in excess of said 2007 Profits, or Excess Dividends, relatingshould, in the tax authorities’ view and in the specific case of non‑resident beneficiaries, be subject to the following rules of taxation:  (i) 15% withholding income tax, or WHT, in the case of beneficiaries domiciled abroad, but not in tax havens, and (ii) 25% WHT, in the case of beneficiaries domiciled in tax havens. Since tax authorities could attempt to charge income tax due over Excess Dividends paid over the past five years based on the provisions of Normative Ruling No. 1,397/13, and in order to try to mitigate potential lawsuits of taxpayers that could argue that Normative Ruling No. 1,397/13 is unlawful, the Brazilian government has recently introduced a whole new set of tax rules under Provisional Measure No. 627, dated November 11, 2013, which will be mandatory for all legal entities as of the year 2015, or the New Tax Regime, a provision that states that in case the Brazilian company paying the dividends voluntarily elects the New Tax Regime for the year 2014, tax authorities will not attempt to charge the income tax potentially due over the Excess Dividends paid up until the date the New Tax Regime was published.  As to profits generated prioraccumulated between 2008 and 2013 distributed after November 11, 2013, Normative Ruling No. 1,397/13 remains applicable as to December 31, 1995 arethe potential challenges on the validity of its provisions.  On the other hand, in case the Brazilian company paying the dividends does not elect the New Tax Regime for the year 2014, it could be subject to a tax assessment on any Excess Dividends potentially paid during the period from 2008 up until the end of 2014. Note that wording of the New Tax Regime is still tentative and can be altered during the process of its conversion into law.  In that case, the Brazilian withholding tax from 15.0% to 25.0% according tocompany cannot assure that the tax legislation applicable to each corresponding year in whichregime described above will be confirmed upon conversion of the profits have been earned.New Tax Regime into law. Taxation of Gains ADSs.  AccordingPursuant to applicable Brazilian law (LawLaw No. 10,833/2003), capital10,833, enacted on December 29, 2003, gains arising from transactions between two non‑resident parties, involvingon the disposition or sale of assets situatedlocated in Brazil areby a Non‑Brazilian Holder, whether to another non‑Brazilian resident or to a Brazilian resident, may be subject to withholding in Brazil income tax. With respect to the disposition of our common shares, as they are assets located in Brazil, the Non‑Brazilian withholdingHolder should be subject to income tax aton the gains assessed, following the rules described below, regardless of whether the transactions are conducted in Brazil or with a rateBrazilian resident. 113 Table of 15.0% (25.0% in case the seller is situated in a tax haven jurisdiction).  Arguably,Contents With respect to our ADSs, arguably the gains realized by a Non‑Brazilian Holder onupon the disposition of ADSs to another non‑Brazilian resident should not be taxed in Brazil, based on the ideabasis that ADSs wouldare not constitute assets“assets located in BrazilBrazil” for the purposes of Law No. 10,833/2003.  However, we10,833.  We cannot assure you, of howhowever, that the Brazilian tax authorities or the Brazilian courts would interpret the definition of assets located in Brazil in connectionwill agree with the taxation ofthis interpretation.  As a result, gains realized by a Non‑Brazilian Holder on the disposition of ADSs to another non‑Brazilian resident.  Thus, the gain on a disposition of ADSs by a Non‑Brazilian Holder to a Brazilian resident, in Brazil (or possiblyor even to a Non‑non‑Brazilian Holder),resident, in the event that courts determine that ADSs would constitute assets located in Brazil, may be subject to income tax in Brazil according to the rules applicable to our common shares, described below for the common shares. Non‑Brazilian Holders should consult their own tax advisor concerning the tax consequencesabove. As a general rule, gains realized as a result of a saledisposition of our common shares or ADSs are the positive difference between the amount realized on the transaction and the acquisition cost of our common shares or ADSs. Under Brazilian law, however, income tax rules on such gains may vary depending on the domicile of the Non‑Brazilian Holder, the type of registration of the investment by the Non‑Brazilian Holder with the Brazilian Central Bank and how the disposition is carried out, as described below. Gains realized on a disposition of shares carried out on a Brazilian stock exchange (which includes the organized over‑the‑counter market) are: ·exempt from income tax when realized by a Non‑Brazilian Holder that (1) has registered the investment in Brazil.  with the Brazilian Central Bank under the rules of Resolution 2,689, or a 2,689 Holder, and (2) is not a resident in a country or location which is defined as a “Favorable Tax Jurisdiction” for this purposes as described below; or Although there are grounds·subject to sustain otherwise,income tax at a rate of 15% in the case of gains realized by (A) a Non‑Brazilian Holder that (1) is not a 2,689 Holder and (2) is not a Favorable Tax Jurisdiction Resident; or by (B) a Non‑Brazilian Holder that (1) is a 2,689 Holder, and (2) is a Favorable Tax Jurisdiction Resident.  In this case, a withholding income rate of 0.005% shall be applicable and withheld by the intermediary institution (i.e., a broker) that receives the order directly from the Non‑Resident Holder, which can be later offset against any income tax due on the capital gain earned by the Non‑Resident Holder; and ·subject to income tax at a rate of up to 25% in case, of gains assessed by a Non‑Brazilian Holder that is not a 2,689 Holder, and is a Favorable Tax Jurisdiction Resident for this purpose (as described below).  In these cases, a withholding income tax of 0.005% of the sale value will be applicable and can be later offset with the eventual income tax due on the capital gain. In the case of redemption of securities or capital reduction by a Brazilian corporation, such as us, the positive difference between the amount effectively received by the Non‑Brazilian Holder and the corresponding acquisition cost is treated, for tax purposes, as capital gain derived from sale or exchange of shares not carried out on a Brazilian stock exchange, and is therefore subject to income tax at the rate of 15% or 25%, as the case may be. The deposit of our common shares in exchange for ADSs maywill be subject to Brazilian withholding income tax if the acquisition cost of the common shares is lower than (i)(1) the average price per common share on a Brazilian stock exchange on which the greatest number of such shares were sold on the day of deposit;deposit, or (ii)(2) if no common shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of common shares were sold in the 15 trading sessions immediately preceding such deposit.  In suchthis case, the difference between the acquisition cost and the average price of the common shares calculated as above will be considered to be a capital gain subject to withholding income tax at athe rate of 15.0%15% or 25.0% in25%, as the case may be.  In some circumstances, there may be arguments to claim that this taxation is not applicable, including the case of investors located in a tax haven jurisdiction (if the common shares are held by an investor registered under Resolution No. 2,689Non‑Brazilian Holder that is a 2,689 Holder and is not a resident in a tax haven jurisdiction, and the sale is performed at the stock exchange, however,“Favorable Tax Jurisdiction” for this purpose.  The availability of these arguments to any gain will be tax exempt from income tax in such transaction). The withdrawalspecific holder of our common shares upon cancellationwill depend on the circumstances of ADSs is not subject to Brazilian incomethe holder.  Prospective holders of our common shares should consult their own tax advisors as long as the regulatory rules are appropriately observed with respect to the registrationtax consequences of the investment before the Central Bank. Common Shares.  As a general rule, gains realized by Non‑Brazilian Holders on any dispositiondeposit of our common shares are subject to income tax at a rate of 15.0%, regardless of whether the sale or the disposition is made by the Non‑Brazilian Holder to a resident or non‑resident in Brazil, or if the transaction is conducted in Brazil or abroad, exceptexchange for the specific cases described below.ADSs. Gains realized on any disposition of common shares by Non‑Brazilian Holders who are resident in a jurisdiction that is deemed to be a “tax haven jurisdiction” under Brazilian law (i.e., a country that does not impose any income tax or that imposes tax at a maximum rate of less than 20.0%, or which laws impose restrictions on disclosure of ownership composition or securities ownership such that the identification of the beneficial owner of income is not permitted) are subject to income tax at a rate of 25.0%. Gains realized on sales or disposition of common shares carried out on the Brazilian stock exchange by Non‑Brazilian Holders who are not resident in a tax haven jurisdiction are exempt from income tax, if such Non‑Brazilian Holder is registered under Resolution No. 2,689.  If the Non‑Brazilian Holder is a resident of a tax haven or is not registered under Resolution No. 2,689, the gain realized on such sale or disposition of common shares is subject to income tax at a rate of 15.0%.  In these cases, a withholding income tax of 0.005% on the sale value shall be applicable and can be offset with the eventual income tax due on the capital gain. 100 Table of Contents Gains on the disposition of common shares are measured by the difference between the amount in Brazilian currency obtained from the sale or exchange of the shares and their acquisition cost in Brazilian currency, without any monetary adjustment.  However, for Non‑Brazilian Holders with a direct investment in common shares registered as foreign capital with the Central Bank, the acquisition cost should be measured in foreign currency, converted intoreais at the date of the sale.10 Exercise of Preemptive Rights.  Any exercise of preemptive rights relating to theour common shares or ADSs will not be subject to Brazilian taxation.  Any gain on the sale or assignment of preemptive rights relating to our common shares, including the sale or assignment carried out by the depositary, on behalf of holdersNon‑Brazilian Holders of ADSs, will be subject to Brazilian income taxation according to the same rules applicable to the sale or disposition of our common shares. 114 Table of Contents Interpretation of the Discussion on the Definition of “Favorable Tax Jurisdiction” On June 4, 2010, Brazilian tax authorities enacted Normative Instruction No. 1,037 listing (i) the countries and jurisdictions considered as Favorable Tax Jurisdiction or where local legislation does not allow access to information related to the shareholding composition of legal entities to their ownership or to the identity of the effective beneficiary of the income attributed to non‑residents, or Tax Haven Jurisdictions, and (ii) the privileged tax regimes, whose definition is provided by Law No. 11,727, of June 23, 2008.  Although we believe that the best interpretation of the current tax legislation could lead to the conclusion that the above mentioned “privileged tax regime” concept should apply solely for purposes of Brazilian transfer pricing and thin capitalization rules, we cannot assure you whether subsequent legislation or interpretations by the Brazilian tax authorities regarding the definition of a “privileged tax regime” provided by Law No. 11,727 will also apply to a Non‑Brazilian Holder on payments potentially made by a Brazilian source. We recommend prospective investors consult their own tax advisors from time to time to verify any possible tax consequences arising of Normative Ruling No. 1,037 and Law No. 11,727.  If the Brazilian tax authorities determine that the concept of “privileged tax regime” provided by Law No. 11,727 will also apply to a Non‑Resident Holder on payments potentially made by a Brazilian source the withholding income tax applicable to such payments could be assessed at a rate up to 25%. Interest Attributable to Shareholders’ Equity.  Law No. 9,249, dated December 26, 1995, as amended, allows a Brazilian corporation, such as us, to make distributions to shareholders of interest on shareholders’ equity, and treat those payments as a deductible expense for purposes of calculating Brazilian corporate income tax, and, since 1998, social contribution on net profit as well, as long as the limits described below are observed.  These distributions may be paid in cash.  For tax purposes, the deductible amount of this interest is limited to the daily pro rata variation of the TJLP, as determined by the Brazilian Central Bank from time to time, and the amount of the deduction may not exceed the greater of: ·50% of net income (after the deduction of social contribution on net profit but before taking into account the provision for corporate income tax and the amounts attributable to shareholders as interest on shareholders’ equity) for the period in respect of which the payment is made; and ·50% of the sum of retained profits and income reserves as of the date of the beginning of the period in respect of which the payment is made. Payment of interest on shareholders’ equity to a Non‑Brazilian Holder is subject to withholding income tax at the rate of 15%, or 25% if the Non‑Brazilian Holder is domiciled in a Favorable Tax Jurisdiction. These payments of interest on shareholders’ equity to a Non‑Brazilian Holder may be included, at their net value, as part of any mandatory dividend.  To the extent payment of interest on net equity is so included, we are required to distribute to shareholders an additional amount to ensure that the net amount received by them, after payment of the applicable income tax withholding, is at least equal to the mandatory dividend. Payments of interest on shareholders’ equity to shareholders who are either Brazilian residents or non‑Brazilian residents, including holders of ADSs, are subject to Brazilian income withholding tax at the rate of 15.0%, or 25.0% for shareholders domiciled in a low tax jurisdiction.  The amounts paid as interest on equity (net of the withholding income tax) may be considered as payment of mandatory dividends. The payment of interest on shareholders’ equity may be recommendeddecided by our Boardshareholders, at an annual shareholders meeting, on the basis of Directors and needs torecommendations of on board of directors.  No assurance can be approved by our general shareholders’ meeting.  We cannot assure yougiven that our Boardboard of Directorsdirectors will not recommend that future distributions of profits mayshould be made by means of interest on shareholders’ equity instead of by means of dividends. Tax on foreign exchange transactions The conversion of foreign currency into Brazilianreais as well asand the conversion of Brazilianreaisinto foreign currency are subject to a tax on foreign exchange transactions, (“or the IOF/Exchange”).Exchange.  The rate of suchthis tax varies according to the nature of the transaction, such as: ·Inflowtransaction.  Foreign exchange agreements entered into in connection with inflows of funds from foreign investors for investment in the Brazilian financial and capital markets:  6%; except that the rate will be 0% for the following transactions:  (i)related to investments carried out on by Non‑Brazilian stock, futures or commodities exchanges, as regulated by the National Monetary Council, except in case of derivative transactions with pre‑established earnings; (ii) purchase of shares in public offerings or subscription of shares of publicly-traded companies; (iii) purchase of quotas of private equity funds, emerging company funds or funds investing in emerging company funds; (iv) cancellation of depositary receipts for investment in shares traded on Brazilian stock exchanges; and (v) change in the foreign investment regime from direct investment to investment in shares traded on Brazilian stock exchanges, as regulated by the National Monetary Council. ·Outflow of funds to foreign investors of the funds investedHolders in the Brazilian financial and capital markets regardingare not currently subject to the above-mentioned transaction:  0%; ·RemittancesIOF/Exchange Tax.  This zero percent rate also applies to the outflow of funds arising from payments of dividends and interest on shareholders’ equity to foreign investors relatedNon‑Brazilian Holders with respect to investments in Brazilian financial and capital markets.  Other than these transactions, the above-mentioned transactions:  0%; ·Inflow of funds regarding loans contracted as from March 12, 2012, with an average maturity term equal or lower than 1,800 days (five years):  6%; and ·Otherrate applicable to most foreign exchange transactions (subjectis 0.38%.  Other rates may apply to exceptions provided inparticular transactions and the applicable legislation):  0.38%. The IOF/ExchangeBraziliangovernment may be changedincrease the rate at any time up to 25.0%, upon on the discretion of the President.  Any suchforeign exchange transaction amount.  However, any increase although immediately applicable, wouldin rates is only authorized to apply to future exchange transactions. 10This is our interpretation of the legislation in force.  This matter is still controversial, as there are recent rulings from the tax authorities providing that direct foreign investments registered with the Central Bank as RDE-IED (Registro Declaratório Eletrônico de Investimentos Estrangeiros Diretos) be converted into Brazilian currency at the date of the original investment. 101115   Table of Contents   Tax on transactions involving bonds and securities Brazilian law imposes a tax on transactions involving bonds and securities, (the “IOF/or the IOF/Bonds Tax”),Tax, including those carried out on Brazilian stock, futures or commodities exchanges.  The IOF/Bonds Tax is currently reduced to zero in almost all transactions, except redemptionincluding those carried out on a Brazilian stock exchange.  The rate of fixed yield investments lasting less than 30 days.  However, thisthe IOF/Bonds Tax applicable to transactions involving our common shares is currently zero, including, as of December 24, 2013, the rate of the IOF/Bonds Tax applicable to the transfer of our common shares with the specific purpose of enabling the issuance of ADSs.  The Brazilian government may be increasedincrease the rate of the IOF/Bonds Tax at any time to up to 1.5% per day byof the President,transaction amount, but only within respect to future transactions.  Currently, this tax is reduced to zero on all transactions involving stocks, except for shares underlying depositary receipts, in which case the IOF/Bonds Tax will apply at a 1.5% rate. The transaction value to be considered for purposes of the IOF/Bonds Tax basis will be calculated by multiplying the number of shares by its closing quotation on the date prior to the transaction or, if no trades occurred on such date, by the last closing quotation available.  In the case of public offerings, the quotation to be considered for purposes of IOF/Bonds Tax basis will be the price established on the bookbuilding procedure or, if applicable, the price established by the seller on the documents of the public offering. As of July 26, 2011, the IOF/Bonds Tax applies at a 1.0% rate per day on the adjusted notional value of transactions involving derivatives linked tocarried out after the exchange variation risk, when the purchase, sale or maturity of the derivatives resultsincrease in an increase of the net short position of the holder as compared to its net short position at the end of the previous business day, pursuant to agreements registered with the BM&FBOVESPA and/or over-the-counter market.rate enters into effect. Other Relevant Brazilian Taxes There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of common shares or ADSs by a Non‑Brazilian Holder except for gift and inheritance taxes levied by certain Brazilian states on gifts or inheritance bestowed by individuals or entities not resident or domiciled in Brazil or not domiciled within that state, to individuals or entities resident or domiciled within in that Brazilian state.  There are no Brazilian stamp,stamps, issue, registration or similar taxes or duties payable by holders of common shares or ADSs. U.S. Federal Income Tax Consequences This discussion is a summary of the material U.S. federal income tax consequences of the acquisition, ownership and disposition of common shares or ADSs.  This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, (the “Code”),or the Code, its legislative history, existing final, temporary and proposed Treasury regulations, administrative pronouncements by the U.S. Internal Revenue Service, (the “IRS”)or the IRS, and judicial decisions, in each case as of the date hereof, all of which are subject to change (possibly on a retroactive basis) and to different interpretations. This discussion does not purport to be a comprehensive description of all of the U.S. federal income tax consequences that may be relevant to a particular holder (including tax considerations that arise from rules of general application to all taxpayers or to certain classes of investors or that are generally assumed to be known by investors) and holders are urged to consult their own tax advisors regarding their specific tax situations.  This discussion applies only to holders of common shares or ADSs who hold the common shares or ADSs as “capital assets” (generally, property held for investment) under the Code and does not address the tax consequences that may be relevant to holders in special tax situations, including, for example: ·        brokers or dealers in securities or currencies; ·        U.S. holders whose functional currency is not the U.S. dollar; ·        holders that own or have owned stock constituting 10.0% or more of our total combined voting power (whether such stock is directly, indirectly or constructively owned); ·        tax-exempttax‑exempt organizations; ·        regulated investment companies; 102 Table of Contents ·        real estate investment trusts; ·        grantor trusts; ·        common trust funds; 116 Table of Contents ·        banks or other financial institutions; ·        persons liable for the alternative minimum tax; ·        securities traders who elect to use the mark-to-marketmark‑to‑market method of accounting for their securities holdings; ·        insurance companies; ·        persons that acquired common shares or ADSs as compensation for the performance of services; ·        U.S. expatriates; and ·        persons holding common shares or ADSs as part of a straddle, hedge or conversion transaction or as part of a synthetic security, constructive sale or other integrated transaction. Except where specifically described below, this discussion assumes that we are not a passive foreign investment company, (a “PFIC”)or a PFIC, for U.S. federal income tax purposes.  In addition, this discussion does not address tax considerations applicable to persons that hold an interest in a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) that holds common shares or ADSs, or any U.S. federal estate and gift, state, local or non‑U.S. tax consequences of the acquisition, ownership and disposition of common shares or ADSs.  This discussion does not address the Medicare tax on net investment income.  Each holder should consult such holder’s own tax advisor concerning the overall tax consequences to it, including the consequences under laws other than U.S. federal income tax laws, of an investment in common shares or ADSs. As used herein, the term “U.S. holder” means a beneficial owner of common shares or ADSs that is, for U.S. federal income tax purposes, (i) an individual who is a citizen or resident of the United States; (ii) a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust if (A) it is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all of the substantial decisions of the trust or (B) it has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.  As used herein, the term “non‑U.S. holder” means a beneficial owner of common shares or ADSs that is neither a U.S. holder nor a partnership (or an entity treated as a partnership for U.S. federal income tax purposes). If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) owns common shares or ADSs, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership holding common shares or ADSs.  Partnerships that are beneficial owners of common shares or ADSs, and partners in such partnerships, should consult their own tax advisors regarding the U.S. federal, state, local and non‑U.S. tax considerations applicable to them with respect to the acquisition, ownership and disposition of common shares or ADSs. For U.S. federal income tax purposes, a holder of an ADS will generally be treated as the beneficial owner of the common shares represented by the ADS.  However, see the discussion below under “Taxation of Distributions” regarding certain statements made by the U.S. Treasury Department concerning depositary arrangements. Taxation of Distributions The gross amount of any distributions of cash or property made with respect to common shares or ADSs (including distributions characterized as interest on shareholders’ equity for Brazilian law purposes and any amountswithheld to reflect Brazilian withholding taxes) generally will be taxable as dividends for U.S. federal income tax purposes to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. 103 Table of Contents A U.S. holder will generally include such dividends in gross income as ordinary income on the day such dividends are actually or constructively received.  Distributions in excess of our current and accumulated earningsand profits will be treated first as a non‑taxablenon-taxable return of capital, thereby reducing the U.S. holder’s adjusted tax basis (but not below zero) in common shares or ADSs, as applicable, and thereafter as either long‑termlong-term or short‑termshort-term capital gain (depending on whether the U.S. holder has held common shares or ADSs, as applicable, for more than one year as of the time such distribution is actually or constructively received). 117 Table of Contents If any cash dividends are paid inreais, the amount of a distribution paid inreaiswill be the U.S. dollar value of thereaisreceived, calculated by reference to the exchange rate in effect on the date of actual or constructive receipt, regardless of whether the payment inreais  is in fact converted into U.S. dollars at that time.  If thereaisreceived as a dividend are converted into U.S. dollars on the date of actual or constructive receipt, a U.S. holder should not recognize foreign currency gain or loss in respect of such dividend.  If thereais  received as a dividend are not converted into U.S. dollars on the date of actual or constructive receipt, a U.S. holder will have a tax basis in thereais  equal to their U.S. dollar value on the date of receipt.  If anyreais  actually or constructively received by a U.S. holder are later converted into U.S. dollars, such U.S. holder may recognize foreign currency gain or loss, which would be treated as ordinary gain or loss.  Such gain or loss generally will be treated as gain or loss from sources within the United States for U.S. foreign tax credit purposes.  U.S. holders should consult their own tax advisors concerning the possibility of foreign currency gain or loss if any suchreaisare not converted into U.S. dollars on the date of actual or constructive receipt. Dividends paid by us will not be eligible for the dividends received deduction allowed to corporations under the Code.  Subject to the below-mentionedbelow‑mentioned concerns by the U.S. Treasury Department regarding certain inconsistent actions taken by intermediaries and certain exceptions for short‑term and hedged positions, the U.S. dollar amount of dividends received by certain U.S. holders (including individuals) in a taxable year beginning on or before December 31, 2012 with respect to the ADSs will be subject to taxation at a maximum rate of 15.0%20.0% if the dividends represent “qualified dividend income.”income”.  Dividends paid on the ADSs will be treated as qualified dividend income if (i) the ADSs are readily tradable on an established securities market in the United States and (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a PFIC.  The ADSs are listed on the New York Stock Exchange, and will qualify as readily tradable on an established securities market in the United States so long as they are so listed.  However, no assurances can be given that the ADSs will be or will remain readily tradable.  See below for a discussion regarding our PFIC determination. Based on existing guidance, it is not entirely clear whether dividends received with respect to the common shares will be treated as qualified dividend income, because the common shares are not themselves listed on a U.S. exchange.  In addition, the U.S. Treasury Department has announced its intention to promulgate rules pursuant to which holders of common shares or ADSs and intermediaries through whom such securities are held will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends.  Because such procedures have not yet been issued, it is not clear whether we will be able to comply with them. U.S. holders of common shares or ADSs should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances. Subject to certain limitations (including a minimum holding period requirement), a U.S. holder may be entitled to claim a U.S. foreign tax credit in respect of any Brazilian income taxes withheld on dividends received with respect to the common shares or ADSs.  A U.S. holder that does not elect to claim a credit for any foreign income taxes paid or accrued during a taxable year may instead claim a deduction in respect of such Brazilian income taxes, provided that the U.S. holder elects to deduct (rather than credit) all foreign income taxes paid or accrued for the taxable year.  Dividends received with respect to the common shares or ADSs generally will be treated as dividend income from sources outside of the United States and generally will constitute “passive category income” for U.S. foreign tax credit limitation purposes for most U.S. holders.  The rules governing foreign tax credits are complex and U.S. holders should consult their own tax advisors regarding the availability of foreign tax credits in their particular circumstances.  The U.S. Treasury Department has expressed concern that intermediaries in connection with depositary arrangements may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. persons who are holding depositary shares.  Accordingly, U.S. holders should be aware that thediscussion above regarding the ability to credit Brazilian withholding tax on dividends and the availability of the reduced tax rate for dividends received by certain non-corporatenon‑corporate holders above could be affected by actions taken by parties to whom the ADSs are released and the IRS. 104 Table of Contents Distributions of additional shares to holders with respect to their common shares or ADSs that are made as part of a pro rata distribution to all our shareholders generally will not be subject to U.S. federal income tax. 118 Table of Contents Non‑U.S. holders generally will not be subject to U.S. federal income tax or withholding tax on distributions with respect to common shares or ADSs that are treated as dividend income for U.S. federal income tax purposes unless such dividends are effectively connected with the conduct by such holders of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a U.S. permanent establishment or fixed base). Taxation of Sales, Exchanges or Other Taxable Dispositions Deposits and withdrawals of common shares by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes. Upon the sale, exchange or other taxable disposition of common shares or ADSs, a U.S. holder will generally recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized in consideration for the disposition of the common shares or ADSs (including the gross amount of the proceeds before the deduction of any Brazilian tax) and the U.S. holder’s adjusted tax basis in the common shares or ADSs.  The initial tax basis of common shares or ADSs held by a U.S. holder will be the U.S. dollar value of thereais-denominated‑denominated purchase price determined on the date of purchase.  Such gain or loss generally will be treated as capital gain or loss and will be long‑term capital gain or loss if the common shares or ADSs have been held for more than one year at the time of the sale, exchange or other taxable disposition.  Although we do not believe that U.S. holders will be entitled to a credit or deduction with respect to any IOF/Exchange paid on common shares or ADSs (as discussed in “—Brazilian Tax Considerations—Taxation of Gains—Tax on foreign exchange transactions”), U.S. holders should be entitled to include the amount of the IOF/Exchange paid as part of their initial basis in such common shares or ADSs.  Under current law, certain non‑corporate U.S. holders (including individuals) may be eligible for preferential rates of U.S. federal income tax in respect of long‑term capital gains.  The deductibility of capital losses is subject to limitations under the Code. If Brazilian income tax is withheld on the sale, exchange or other taxable disposition of common shares or ADSs, the amount realized by a U.S. holder will include the gross amount of the proceeds of that sale, exchange or other taxable disposition before deduction of the Brazilian income tax withheld.  Capital gain or loss, if any, realized by a U.S. holder on the sale, exchange or other taxable disposition of common shares or ADSs generally will be treated as U.S. source gain or loss for U.S. foreign tax credit purposes.  Consequently, in the case of a gain from the disposition of common shares or ADSs that is subject to Brazilian income tax (see “—Brazilian Tax Considerations—Taxation of Gains”), the U.S. holder may not be able to benefit from the foreign tax credit for that Brazilian income tax (i.e., because the gain from the disposition would be U.S. source), unless the U.S. holder can apply the credit against U.S. federal income tax payable on other income from foreign sources.  Alternatively, the U.S. holder may take a deduction for the Brazilian income tax, provided that the U.S. holder elects to deduct all foreign income taxes paid or accrued for the taxable year. A non‑U.S. holder will not be subject to U.S. federal income tax or withholding tax on gain realized on the sale or other taxable disposition of common shares or ADSs unless (i) such non‑U.S. holder is an individual who is present in the United States  of America for 183 days or more in the taxable year of the sale and certain other conditions are met or (ii) such gain is effectively connected with the conduct by the non‑U.S. holder of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment or fixed base).  If the first exception (i) applies, the non‑U.S. holder generally will be subject to tax at a rate of 30% on the amount by which the gains derived from the sales that are from U.S. sources exceed capital losses allocable to U.S. sources.  If the second exception (ii) applies, the non‑U.S. holder generally will be subject to U.S. federal income tax with respect to the gain in the same manner as U.S. holders, as described above.  In addition, in the case of (ii), if such non‑U.S. holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable treaty) upon the actual or deemed repatriation of its effectively connected earnings and profits for the taxable year, subject to certain adjustments. 105 Table of Contents Passive Foreign Investment Company Rules Special U.S. federal income tax rules apply to U.S. persons owning shares of a PFIC.  In general, a non‑U.S. corporation will be classified as a PFIC for any taxable year during which, after applying relevant look through rules with respect to the income and assets of subsidiaries, either (i) 75.0% or more of the non‑U.S. corporation’s gross income is “passive income” or (ii) on average 50.0% or more of the gross value of the non‑U.S. corporation’s assets produce passive income or are held for the production of passive income.  For these purposes, passive income generally includes, among other things, dividends, interest, rents, royalties, gains from the disposition of passive assets and gains from commodities and securities transactions, other than certain active business gains from the sale of commodities (subject(subject to various exceptions)exceptions).  In determining whether a non‑U.S.corporation is a PFIC, a pro rata portion of the income and assets of each corporation in which it owns, directly or indirectly, at least 25.0% interest (by value) is taken into account. 119 Table of Contents The determination as to whether a non‑U.S. corporation is a PFIC is based on the composition of the income, expenses and assets of the non‑U.S. corporation from time to time and the application of complex U.S. federal income tax rules, which are subject to different interpretationsand involves uncertainty.  Based on our audited financial statements, the nature ofour business, and relevant market and shareholder data,we believe thatwe would not be classified as a PFIC forour last taxable year orour current taxable year (although the determination cannot be made until the end of such taxable year), andwe do not expect to be classified as a PFIC in the foreseeable future, based onour current business plans andour current interpretation of the Code and Treasury regulations that are currently in effect.  However, because the application of the Code and Treasury regulations are not entirely clear and because PFIC status depends on the composition of a non-U.S.non‑U.S. corporation’s income and assets and the market value of its assets from time to time, there can be no assurance that we will not be treated as a PFIC for any taxable year. If, contrary to the discussion above, we are treated as a PFIC, a U.S. holder would be subject to special rules (and may be subject to increased U.S. federal income tax liability and filing requirements) with respect to (a) any gain realized on the sale, exchange or other taxable disposition of common shares or ADSs and (b) any “excess distribution” made by us to the U.S. holder (generally, any distribution during a taxable year in which distributions to the U.S. holder on the common shares or ADSs exceed 125% of the average annual distributions the U.S. holder received on the common shares or ADSs during the preceding three taxable years or, if shorter, the U.S. holder’s holding period for the common shares or ADSs).  Under those rules, (a) the gain or excess distribution would be allocated ratably over the U.S. holder’s holding period for the common shares or ADSs, (b) the amount allocated to the taxable year in which the gain or excess distribution is realized and to taxable years before the first day on which the Companywe  became a PFIC would be taxable as ordinary income, (c) the amount allocated to each prior year in which  the Company waswe were a PFIC would be subject to U.S. federal income tax at the highest tax rate in effect for that year and (d) the interest charge generally applicable to underpayments of U.S. federal income tax would be imposed in respect of the tax attributable to each prior year in which  the Company waswe were a PFIC. If we are treated as a PFIC and, at any time, we invest in non‑U.S. corporations that are classified as PFICs (each, a “lower-tier“lower‑tier PFIC”), U.S. holders generally will be deemed to own, and also would be subject to the PFIC rules with respect to, their indirect ownership interest in that lower-tierlower‑tier PFIC.  If we are treated as a PFIC, a U.S. holder could incur liability for the deferred tax and interest charge described above if either (i) we receive a distribution from, or disposesdispose of all or part of itsour  interest in, the lower-tierlower‑tier PFIC or (ii) the U.S. holder disposes of all or part of its common shares or ADSs. In general, if we are treated as a PFIC, the rules described above can be avoided by a U.S. holder that elects to be subject to a mark-to-marketmark‑to‑market regime for stock in a PFIC.  A U.S. holder may elect mark-to-marketmark‑to‑market treatment for its common shares or ADSs, provided the common shares or ADSs, for purposes of the rules, constitute “marketable stock” as defined in Treasury regulations.  The ADSs will be “marketable stock” for this purpose if they are regularly traded on the New York Stock Exchange, other than in de minimis quantities on at least 15 days during each calendar quarter.  A U.S. holder electing the mark-to-marketmark‑to‑market regime generally would compute gain or loss at the end of each taxable year as if the common shares or ADSs had been sold at fair market value.  Any gain recognized by the U.S. holder under mark-to-marketmark‑to‑market treatment, or on an actual sale, would be treated as ordinary income, and the U.S. holder would be allowed an ordinary deduction for any decrease in the value of common shares or ADSs as of the end of any taxable year, and for any loss recognized on an actual sale, but only to the extent, in each case, of previously included mark-to-marketmark‑to‑market income not offset by previously deducted decreases invalue.  Any loss on an actual sale of common shares or ADSs would be a capital loss to the extent in excess of previously included mark-to-marketmark‑to‑market income not offset by previously deducted decreases in value.  A U.S. holder’s adjusted tax basis in common shares or ADSs would increase or decrease by gain or loss taken into account under the mark-to-marketmark‑to‑market regime.  A mark-to-marketmark‑to‑market election is generally irrevocable.  In addition, a mark-to-marketmark‑to‑market election with respect to common shares or ADSs would not apply to any lower-tierlower‑tier PFIC, and a U.S. holder would not be able to make such a mark-to-marketmark‑to‑market election in respect of its indirect ownership interest in that lower-tierlower‑tier PFIC.  Consequently, the PFIC rules could apply with respect to income of a lower-tierlower‑tier PFIC, the value of which would already have been taken into account indirectly via mark-to-marketmark‑to‑market adjustments in respect of common shares or ADSs. 106120   Table of Contents   A U.S. holder that owns common shares or ADSs during any taxable year that we are treated as a PFIC generally would be required to file IRS Form 8621.  U.S. holders should also be aware that8621, including in order to comply with a recently enacted legislation may broaden the current IRS Form 8621 filing requirement or impose anadded additional annual filing requirement for U.S. persons owning shares of a PFIC.  The legislation does not describe what information would be required to be included in either situation, but grants the Secretary of the U.S. Treasury Department power to make this determination.  U.S. holders should consult their independent tax advisors regarding the application of the PFIC rules to common shares or ADSs, the availability and advisability of making an election to avoid the adverse tax consequences of the PFIC rules should we be considered a PFIC for any taxable year and the application of the recently-enacted legislationreporting requirements that may apply to their particular situation. Backup Withholding and Information Reporting Dividends paid on, and proceeds from the sale, exchange or other taxable disposition of, common shares or ADSs to a U.S. holder generally may be subject to the information reporting requirements of the Code and may be subject to backup withholding of U.S. federal income tax (currently at a rate of 28.0%)   unless the U.S. holder (i) provides an accurate taxpayer identification number and certifies that it is a U.S. person and that no loss of exemption from backup withholding has occurred or (ii) establishes that it is an exempt recipient.  The amount of any backup withholding collected from a payment to a U.S. holder will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability and may entitle the U.S. holder to a refund, provided that certain required information is timely furnished to the IRS. In addition, U.S. holders should be aware that recently-enacted legislation imposes newadditional reporting requirements apply with respect to the holding of certain foreign financial assets, including stock of foreign issuers which is not held in an account maintained by certain financial institutions, if the aggregate value of all such assets exceeds US$50,000.  U.S. holders should consult their own tax advisors regarding the application of the information reporting rules to common shares or ADSs and the application of the recently-enacted legislationforeign financial asset rules to their particular situations. Non‑U.S. holders generally will not be subject to information reporting and backup withholding tax, but may be required to comply with certain certification and identification procedures in order to establish their eligibility for such exemption. Documents on Display Statements contained in this annual report regarding the contents of any contract or other document are not necessarily complete, and, where the contract or other document is an exhibit to the annual report, each of these statements is qualified in all respects by the provisions of the actual contract or other documents. We are subject to the information requirements of the Securities Exchange Act of 1934, as amended, applicable to a foreign private issuer, and accordingly, we file or furnish reports, information statements and other information with the SEC.  Reports and other information filed by us with the SEC can be inspected at, and subject to the payment of any required fees, copies may be obtained from, the public reference facilities of the SEC, 100 F Street, N.E., Washington, D.C. 20549.  Our filings will also be available at the SEC’s website at http://www.sec.gov. Reports and other information may also be inspected and copied at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.  As a foreign private issuer, however, we are exempt fromthe proxy requirements of Section 14 of the Exchange Act and from the short-swingshort‑swing profit recovery rules of Section 16 of the Exchange Act. 107 Table of Contents Our website is located at http://www.cpfl.com.br and our investor relations website is located at http://www.cpfl.com.br/ir.  (These URLs are intended to be an inactive textual reference only.  They are not intended to be an active hyperlink to our website.  The information on our website, which might be accessible through a hyperlink resulting from this URL is not, and shall not be deemed to be, incorporated into this annual report.) ITEM 11.                    Quantitative and Qualitative Disclosures aboutAbout Market Risk We are exposed to market risk from changes in both foreign currency exchange rates and rates of interest and indexation.  We have foreign exchange rate risk with respect to our debt denominated in U.S. dollars.  We are subject to market risk deriving from changes in rates which affect the cost of our financing. Table of Contents Exchange Rate Risk At December 31, 2011,2013, approximately 12.9%11.8% of our indebtedness were denominated in U.S. dollars.  Also at December 31, 2011,2013, we had swap agreements that offset the exchange rate risk with respect to R$1,7892,067 million of those amounts.  As our net exposure is an asset since the swap has higher balances than the liability, our exchange rate risk is associated with the risk of a drop in the value of the U.S. dollar.  The potential loss to us that would result from a hypothetical unfavorablefavorable 50.0% change in foreign currency exchange rates (an expected scenario provided by the BM&FBOVESPA), after giving effect to the swaps, would be approximately R$13.50.8 million, primarily due to the increase, in Brazilianreais,  in the principal amount of our foreign currency indebtedness.  The total increase in our foreign currency indebtedness would be reflected as an expense in our income statement.  For further information on other scenarios, please see note 34.c.1 to our consolidated financial statements. Risk of Index Variation We have indebtedness and financial assets that are denominated inreaisand that bear interest at variable rates or, in some cases, are fixed.  We also have swaps that convert some U.S. dollar-denominated indebtedness toreais at variable interest rates.  The interest or indexation rates include several different Brazilian money-marketmoney‑market rates and inflation rates.  At December 31, 2011,2013, the amount of such liabilities, net of such assets and after giving effect to swaps, was R$9,64910,662 million.  Further information for other scenario, please see note 34.c.2 to our consolidated financial statements. A hypothetical, instantaneous and unfavorable change of 100 basis points25% in rates applicable to floating rate financial assets and liabilities held at December 31, 2011,2013, would result in a net additional cash outflow of approximately R$96400 million.  This sensitivity analysis is based on the assumption of an unfavorable 100 basis point25% movement of the interest rates applicable to each homogeneous category of financial assets and liabilities.liabilities (an expected scenarioavailable in the Market).  A homogeneous category is defined according to the currency in which financial assets and liabilities are denominated and assumes the same interest rate movement within each homogeneous category (e.g., U.S. dollars).  As a result, our interest rate risk sensitivity model may overstate the impact of interest rate fluctuations for such financial instruments asconsistently unfavorable movements of all interest rates are unlikely. ITEM 12.                    Description of Securities Other than Equity Securities American Depositary Shares Fees and Expenses The following table summarizes the fees and expenses payable by holders of ADSs:  Persons depositing common shares or ADS holders must pay: For: US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) Issuance of ADSs, including issuances resulting from a distribution of common shares or rights or other property Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates US$2.00 (or less) per 100 ADS (to the extent not prohibited by the rules of any stock exchange on which the ADSs are listed for trading) Any cash distribution to you US$2.00 (or less) per 100 ADS (to the extent the depositary has not collected a cash distribution fee of US$2.00 per 100 ADS during the year) Depositary services Registration or transfer fees Transfer and registration of common shares on our common share register to or from the name of the depositary or its agent when you deposit or withdraw common shares. Expenses of the depositary Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) Converting foreign currency to U.S. dollars Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or common share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes As necessary Any charges incurred by the depositary or its agents for servicing the deposited securities No charges of this type are currently made in the Brazilian market 108 122   Table of Contents     Reimbursement of Fees and Direct and Indirect Payments by the Depositary The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them.  The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees.  The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entrybook‑entry system accounts of participants acting for them.  The depositary may generally refuse to provide fee-attractingfee‑attracting services until its fees for those services are paid. In 2011,2013, we received the following payments from the depositary:  (i) US$14,20024,011; (ii) US$9,641; (iii) US$15,000; and (iv) US$750,000 (or US$525,000 net of withholding income tax) for expenses incurred by us relating to the ADR program, including financial information, perception study, global shareholder identification and expenses relating to the thirdfifth year of the agreement between the depositary and us, respectively. ITEM 13.                    Defaults, Dividend Arrearages and Delinquencies None. ITEM 14.                    Material Modifications to the Rights of Security Holders and Use Of Proceedsof PROCEEDS None. ITEM 15.                    Controls and Procedures We have evaluated, with the participation of our chief executive officer and chief financial officer, the effectiveness of our disclosure controls and procedures as of December 31, 2011.2013.  There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.  Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.  Based upon our evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management,Management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. 109 Table of Contents Management’s Report on Internal Control over Financial Reporting Our managementManagement is responsible for establishing and maintaining adequate internal control over financial reporting.  Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  Our internal control over financial reporting includes those policies and procedures that:  (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our managementManagement and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. 123 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures may deteriorate. Our managementManagement has assessed the effectiveness of our internal control over financial reporting as of December 31, 20112013 based on the criteria established in “Internal Control — Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission, (“COSO”)or COSO in 1992.  Based on such assessment and criteria, our managementManagement has concluded that our internal control over financial reporting was effective as of December 31, 2011.2013. There are no changes in business process that could have a relevant impact on our December 31, 2013 financial statements. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of We have audited the internal control over financial reporting of CPFL Energia S.A. and subsidiaries (the “Company”) as of December 31, 2013, based on the criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011 has been audited2013, based on the criteria established in Internal Control - Integrated Framework (1992) issued by KPMG Auditores Independentes, an independent registered public accounting firm, as stated in their report included on page 117the Committee of this report.  In January 2011, we implemented a new versionSponsoring Organizations of the ERP system, the SAP ECC 6.0.  Treadway Commission. We have rigorously testedalso audited, in accordance with the new system before its implementation.  Our management believesstandards of the new system will generate productivity gains and improve our internal processes.  The changes in our business processes and internal control over financial reporting have been dully recorded and assessed by our management forPublic Company Accounting Oversight Board (United States), the year ended December 31, 2011. In August 2011, CPFL Energia  associated with ERSA.  Pursuant to SEC’s instructions, management may exclude an acquired business from its report on internal control over financial reporting if a registrant consummates a material purchase business combination duringconsolidated balance sheets of the relevant fiscal year.  On that basis, our management has not assessed the effectiveness of ERSA’s internal control over financial reportingCompany as of December 31, 2011.  ERSA (currently CPFL Energias Renováveis)’s total assets,2013 and 2012, and related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the two years in the amountperiod ended December 31, 2013 and our report dated March 24, 2014 expressed an unqualified opinion on those financial statements and included explanatory paragraphs related to (a) the accompanying financial statements that have been retrospectively adjusted as a result of R$6,544,169,changes in accounting policies related to employee benefits and total net revenues,accounting for joint arrangements and (b) the accounting for resources provided by the Energy Development Account (“CDE”) by the Company as a reduction in the amountcost of R$162,234, are included in our consolidated financial statements included in this annual report, representing 1% of net revenues of CPFL Energia.electric energy. /s/ Deloitte Touche Tohmatsu Auditores Independentes Campinas, São Paulo, Brazil March 24, 2014 ITEM 16.                         ITEM 16A.   AUDIT COMMITTEE FINANCIAL EXPERTAudit Committee Financial Expert As described in Item 16D below, we have given our fiscal council the necessary powers to qualify for the exemption from the audit committee requirements set forth in Exchange Act Rule 10A-3(c)10A‑3(c)(3).  Our Board of Directors recognizes that one member of our fiscal council, Daniela Corci Cardoso, qualifies as an audit committee financial expert and meets the applicable independence requirements for fiscal council membership under Brazilian law.  She also meets the New York Stock Exchange independence requirements that would apply to audit committee members in the absence of our reliance on the exemption set forth in Exchange Act Rule 10A-3(c)10A‑3(c)(3).  Some of the members of our fiscal council are currently employed by some of our principal shareholders or their affiliates. 110 Table of Contents ITEM 16B.   CODE OF ETHICSCode of Ethics We have adopted a Code of Ethics applicable to our employees and our directors and executive officers, which addresses such matters as conflicts of interest, corporate opportunities, confidentiality, fair dealing, protection and proper use of company assets, compliance with laws, rules and regulations (including insider trading laws) and encouraging the reporting of any illegal or unethical behavior.  Our Code of Ethics is available on our website at:  http://www.b2i.cc/Document/986/CPFL_CodEtica_20061227_eng.pdf. (This URL is intended to be an inactive textual reference only.  It is not intended to be an active hyperlink to our website.  The information on our website, which might be accessible through a hyperlink resulting from this URL, is not and shall not be deemed to be, incorporated into this annual report). We are currently working on the review of our Code of Ethics to incorporate suggestions of our employees and outside stakeholders.  We intend to submit the new version of our Code of Ethics to our board of directors and officers for approval in the first half of 2014.   If we amend the provisions of our code of ethics that apply to our chief executive officer, our chief financial officer, our principal accounting officer and persons performing similar functions, or if we furnish a waiver to any such persons, we will disclose such amendment or waiver on our website at the same address. 124 Table of Contents ITEM 16C.   PRINCIPAL ACCOUNTANT FEES AND SERVICESPrincipal Accountant Fees and Services Audit and Non‑Audit Fees The following table sets forth the fees billed to us by our independent registered and public accounting firm during the years ended December 31, 20112013 and 2010.2012.  Our independent accounting firm is KPMGwas Deloitte Touche Tohmatsu Auditores Independentes beginning in June 2007.for the years ended December 31, 2012 and 2013. Year ended December 31, Year ended December 31, 2011 2010 2013 2012 (in thousands ofreais)  (in thousands ofreais)  Audit fees R$3,628 R$3,092 R$4,101 R$3,802 Audit-related fees 659 491 Audit‑related fees R$1,880 R$2,371 Tax fees 166 143 R$115 R$112 All other fees - - ‑ Total R$4,453 R$3,726 R$6,096 R$6,285   “Audit Fees” are the aggregated fees billed by KPMGDeloitte Touche Tohmatsu Auditores Independentes for the audit of our consolidated and annual financial statements, reviews of interim financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements for the fiscal years of 20112013 and 2010,2012, respectively. “Audit-relatedAudit‑related fees” are fees charged by KPMGDeloitte Touche Tohmatsu Auditores Independentes for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements.statements for the years ended December 31, 2013 and 2012, respectively. “Tax fees” in the above table are for services related to tax compliance.compliance charged by Deloitte Touche Tohmatsu Auditores Independentes for the years ended December 31, 2013 and 2012, respectively. Audit Committee Approval Policies and Procedures Our fiscal council currently serves as our audit committee for purposes of the Sarbanes-OxleySarbanes‑Oxley Act of 2002.  Our fiscal council has not established pre‑approval policies or procedures for recommending the engagement of our independent auditors for services to our Board of Directors.  Pursuant to Brazilian law, our Board of Directors is responsible for the engagement of independent auditors.  Brazilian law prohibits our independent auditors from providing any consulting services to our subsidiaries, or to us, that may impair their independence. ITEM 16D.   EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESExemptions from the Listing Standards for Audit Committees Under the listed company audit committee rules of the NYSE and the SEC, we must comply with Exchange Act Rule 10A-3,10A‑3, which requires that we establish an audit committee composed of members of the Board of Directors that meets specified requirements.  We have designated and empowered our fiscal council to perform the role of the audit committee in reliance on the exemption set forth in Exchange Act Rule 10A-3(c)10A‑3(c)(3).  In our assessment, our fiscal council acts independently in performing the responsibilities of an audit committee under the Sarbanes-OxleySarbanes‑Oxley Act and satisfies the other requirements of Exchange Act Rule 10A-3.10A‑3. ITEM 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. ITEM 16F.Change in Registrant’s Certifying Accountant KPMG Auditores Independentes was appointed to act as our independent public accounting firm for a five‑year period to audit our consolidated financial statements for the fiscal years ended December 31, 2007, 2008, 2009, 2010 and 2011.  Pursuant to CVM regulations, Brazilian public companies are required to rotate their independent public accounting firm every five years.   Due to the limitations set forth in these regulations, we didnot seek to renew KPMG’s contract when it expired and KPMG could not attempt to stand for reelection.  On November 7, 2011, our Board of Directors approved the appointment of Deloitte Touche Tohmatsu Auditores Independentes to act as our independent public accounting firm beginning with a review of our quarterly information for the first quarter of 2012. 111125   Table of Contents   KPMG Auditores Independentes’s reports on our financial statements for the each of the five fiscal years ended on December 31, 2007, 2008, 2009, 2010 and 2011 did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.  During such five fiscal years, there were no disagreements with KPMG Auditores Independentes, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or scope of audit procedures, which disagreement, if not resolved to the satisfaction of KPMG Auditores Independentes, would have caused KPMG Auditores Independentes to make a reference to the subject matter of the disagreement in connection with its audit reports for such fiscal years. We have requested that KPMG Auditores Independentes furnish us with a letter addressed to the SEC stating whether or not it agrees with the above statements.  A copy of this letter is filed as Exhibit 15.1 to this Form 20‑F. We did not consult Deloitte Touche Tohmatsu Auditores Independentes during our two most recent fiscal years or any subsequent interim period as to the application of accounting principles to a specified transaction, either completed or proposed, the type of audit opinion that might be rendered on our financial statements or any matter that was either the subject of a disagreement (as defined in Item 16F(a)(1)(iv) of Form 20‑F) or a reportable event (as described in Item 16F(a)(1)(v) of Form 20‑F). ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS None. ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT None. ITEM 16G.   CORPORATE GOVERNANCECorporate Governance The following chart summarizes the ways that our corporate governance practices differ from those followed by domestic companies under the listing standards under the New York Stock Exchange: Section of the New York Stock Exchange Listed Company Manual New York Stock Exchange Listing Standard Ways that CPFL’s Corporate Governance Practices Differ from Those Followed by Domestic Companies Listed on the New York Stock Exchange 303A.01 A company listed on the New York Stock Exchange (a “listed company”) must have a majority of independent directors on its Board of Directors. “Controlled companies” are not required to comply with this requirement. CPFL is a controlled company, because more than a majority of its voting power is controlled by VBCESC Energia S.A., PREVI (throughthrough BB Carteira Livre I Fundo de Investimento em Ações)es andEnergia São Paulo FIPFIA (including through Bonaire Participações S.A.). As a controlled company, CPFL would not be required to comply with the majority of independent directors requirements if it were a U.S. domestic issuer. CPFL has one independent director, as defined by BM&FBOVESPA rules. 303A.03 The non-managementnon‑Management directors of a listed company must meet at regularly scheduled executive sessions without management. Management. The non-managementnon‑Management directors of CPFL do not meet at regularly scheduled executive sessions without management.Management. 303A.04 A listed company must have a Nominating/Corporate Governance Committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties. “Controlled companies” are not required to comply with this requirement. As a controlled company, CPFL would not be required to comply with the Nominating/Corporate Governance Committee requirements if it were a U.S. domestic issuer. Nonetheless, in order to improve its corporate governance practices, CPFL constituted thead hoc Corporate Governance Commission, composed of four members: the CEO and three members of the Board of Directors. This Commission is responsible for evaluating the effectiveness of CPFL’s corporate governance practices whenever necessary, proposing improvements to CPFL’s governance practices, and monitoring the implementation of CPFL’s corporate governance practices. 303A.05 A listed company must have a compensation committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties. “Controlled companies” are not required to comply with this requirement. As a controlled company, CPFL would not be required to comply with the compensation committee requirements. The Human Resources Management Committee of CPFL is an advisory committee of the Board of Directors. It has three members who are all Directors, none of whom is independent. According to its charter, this committee is responsible for assisting the Board of Directors by: (i) coordinating the CEO selection process, (ii) defining criteria for compensation of the executive officers, including long and short-termshort‑term incentive plans, (iii) defining performance goals of the executive officers, (iv) coordinating evaluation procedures of the executive officers, (v) preparation of the plan of succession for executive officers and (vi) monitoring the execution of human resources policies and practices and preparing improvement proposals when necessary. 303A.06 and 303A.07 A listed company must have an audit committee with a minimum of three independent directors that satisfy the independence requirements of Rule 10A-310A‑3 under the Exchange Act, with a written charter that covers certain minimum specified duties. In lieu of appointing an audit committee composed of independent members of the Board of Directors, CPFL has a permanent Conselho Fiscal, or fiscal council, in accordance with the applicable provisions of the Brazilian Corporate Law, and CPFL has granted the fiscal council with additional powers that meet the requirements of Exchange Act Rule 10A-3(c)10A‑3(c)(3). Under Brazilian Corporate Law, which enumerates standards for the independence of the fiscal council from CPFL and its management,Management, none of the members of the fiscal council may be: (i) members of the Board of Directors; (ii) members of the board of executive officers; (iii) employed by CPFL or an affiliate or company controlled by CPFL or (iv) a spouse or relative of any member of the company’s managementour Management or Board of Directors. Members of the fiscal council are elected at the company’s general shareholders meeting for a one-yearone‑year term of office. The fiscal council of CPFL currently has five members, all of whom comply with standards (i) to (iv) above. The responsibilities of the fiscal council, which are set forth in its charter, includes reviewing management’sManagement’s activities and the company’s financial statements, and reporting findings to the company’s shareholders. 303A.08 Shareholders must be given the opportunity to vote on all equity-compensationequity‑compensation plans and material revisions thereto, with limited exemptions set forth in the NYSE rules. Under Brazilian Corporate Law, shareholder pre-approvalpre‑approval is required for the adoption of any equity compensation plans. 303A.09 A listed company must adopt and disclose corporate governance guidelines that cover certain minimum specified subjects. CPFL has formal corporate governance guidelines that address the matters specified in the NYSE rules. CPFL’s corporate governance guidelines are available on http://www.cpfl.com.br/ir. 303A.10 A listed company must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. CPFL has a formal Code of Ethics that applies to its directors, officers, employees and controlling shareholders. CPFL’s Code of Ethics has a scope that is similar, but not identical, to that required for a U.S. domestic company under the NYSE rules. CPFL reports each year under Item 16B of our annual report on Form 20-F20‑F any waivers of the code of ethics in favor of our chief executive officer, our chief financial officer, our principal accounting officer and persons performing similar functions. We will disclose such amendment or waiver on our website. 303A.12 Each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards. CPFL’s CEO provides to the NYSE a Foreign Private Issuer Annual Written Affirmation, and he will promptly notify the NYSE in writing after any executive officer of CPFL becomes aware of any material non-compliancenon‑compliance with any applicable provisions of the NYSE corporate governance rules. 112 126   Table of Contents   ITEM 16H.Mine Safety Disclosure Not applicable. ITEM 17.                    Financial Statements Not applicable. ITEM 18.                    Financial Statements See pages F-1F‑1 through F-85,F‑101, incorporated herein by reference. ITEM 19.                    Exhibits No. Description 1.1 Amended and Restated Bylaws of CPFL Energia S.A. (together with an English version). 3.1 Shareholders Agreement dated March 22, 2002 as amended on August 27, 2002, November 5, 2003 and December 6, 2007 among VBC Energia S.A., 521 Participações S.A., Bonaire Participações S.A. and CPFL Energia S.A. 8.1 List of subsidiaries, their jurisdiction of incorporation and names under which they do business.business. 12.1 Certification Pursuant to Section 302 of the Sarbanes-OxleySarbanes‑Oxley Act of 2002.2002. 12.2 Certification Pursuant to Section 302 of the Sarbanes-OxleySarbanes‑Oxley Act of 2002.2002. 13.1 Certification Pursuant to Section 906 of the Sarbanes-OxleySarbanes‑Oxley Act of 2002.2002. 13.2 Certification Pursuant to Section 906 of the Sarbanes-OxleySarbanes‑Oxley Act of 20022002. 15.1 Letter from KPMG Auditores Independentes to the SEC, dated April 9, 2013 regarding the change in independent public accounting firm.   The amount of long‑term debt securities of CPFL Energia or its subsidiaries authorized under any outstanding agreement does not exceed 10.0% of CPFL Energia’s total assets on a consolidated basis.  CPFL Energia hereby agrees to furnish the SEC, upon its request, a copy of any instruments defining the rights of holders of its long‑term debt or of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed. 127 Table of Contents GLOSSARY OF TERMS ABRADEE:  Brazilian Association of Electric Energy Distributors (Associaç(Associação Brasileira de Distribuidores de Energia Elétrica)trica). Allowed Annual Revenue: Revenue received by electricity Transmission companies annually.  Such revenue is calculated based on the estimated investment to build, maintain and operate a Transmission system. ANEEL:  National Electric Energy Agency (Agê(Agência Nacional de Energia Elétrica)trica). Annual Reference Value:  Mechanism which limits the amounts of costs that can be passed through to Final Consumers.  The Annual Reference Value corresponds to the weighted average of electricity acquisition costs resulting from electricity prices of all public auctions carried out by ANEEL and CCEE in the regulated marketRegulated Market for electricity to be delivered five and three years from any such auction and only applies during the first three years following the commencement of delivery of the acquired electricity. Assured energyEnergy:  Amount of energy that generators are allowed to sell in long‑term contracts. Basic Network:  Interconnected transmissionTransmission lines, dams, energy transformers and equipment with voltage equal to or higher than 230 kV, or installations with lower voltage as determined by ANEEL. Biomass Thermoelectric Power Plant:  a generator which uses the combustion of organic matter for the production of energy. Capacity Agreement:  Agreement under which a generator commits to make a certain amount of capacity available to the Regulated Market.  In such case, the generator’s revenue is guaranteed and the distributors must bear the risk of a supply shortage. CCCCaptive consumers:  Fuel Usage Quota.Consumers that acquire energy from the distribution company or holder of a permit to whose network the consumer is connected.  These consumers are subject to regulated tariffs, which include the costs of transmission and distribution as well as the energy purchase costs. CCEAR:  Regulated Market (Contratos(Contratos de Comercialização de Energia no Ambiente Regulado)Regulado). CCEE:  Energy Trading Chamber (Câ(Câmara de Comercialização de Energia Elétrica)trica). The short‑term electricity market, established in 1998 through the Power Industry Law, which replaced the prior system of regulated generation prices and supply contracts, formerly known as the Wholesale Energy Market. CMCE:  Energy Industry Monitoring Committee (Comitê de Monitoramento do Setor Elétrico). CNPE:  National Energy Policy Council (Conselho(Conselho Nacional de Política Energética)tica). 113 Table of Contents DistributionNetwork:  Electric network system that distributes energy to end consumers within a concession area. Distributor:  An entity supplying electric energy to a group of consumers by means of a distribution network.Distribution Network. EnergyAgreement:  Agreement under which a generator commits to supply a certain amount of electricity and assumes the risk that its electricity supply could be adversely affected by hydrological conditions and low reservoir levels, which could interrupt the supply of electricity.  In such a case, the generator would be required to purchase electricity elsewhere in order to comply with its supply commitments. FinalConsumer:  A party that uses electricity for its own needs. FreeConsumers:  (i) Existing consumersConsumers with a minimum demand of at least 10 MW and supplied at voltage level equal to or greater than 69 kV; (ii) new consumers with demand of at least 3 MW at any voltage; (iii) groupswho opt to purchase energy, entirely or partially, from another authorized selling agent under the terms of consumers subject to agreement with the local distribution concessionaire; (iv) consumers who do not receive supply for more than 180 days from a local distribution concessionaire; and (v) certain others.current, applicable legislation. FreeMarket:  Market segment that permits a certain degree of competition.  The free marketFree Market specifically contemplates purchase of electricity by non‑regulated entities such as Free Consumers and energy traders. Gigawatt (GW):  One billion watts. Gigawatthour(GWh):  One gigawatt of power supplied or demanded for one hour, or one billion watt hours. 128 Table of Contents Highvoltage:  A class of nominal system voltages equal to or greater than 100,000 volts (100 kVs)2.3 kV and lessequal to or lower than 230,000 volts (230 kVs).230 kV. Hydroelectric Power Plantplant or hydroelectric facility:  A generator that uses water power to drive the electric generator. InitialSupply Contracts:  Initial energy supply agreements at prices and volumes approved by ANEEL, that distribution and generation companies are required to enter into per the 1998 Power Industry Law. Installed capacityCapacity:  The level of electricity which can be delivered from a particular generator on a full-loadfull‑load continuous basis under specified conditions as designated by the manufacturer. Interconnected Power System:  Systems or networks for the transmissionTransmission of energy, connected together by means of one or more links (lines and/or transformers). Independent Power Producer:  A legal entity or consortium holding a concession or authorization for power generation for sale for its own account to public utility concessionaires. IPCA: Broad consumer price index (Indice Nacional de Preços ao Consumidor Amplo, calculated and published byInstituto Brasileiro de Geografia e Estatística).  Kilovolt (kV):  One thousand volts. Kilowatt (kW):  One thousand watts. Kilowatthour (kWh):  One kilowatt of power supplied or demanded for one hour, or one thousand watt hours. Low Voltage: A class of nominal system voltages equal to or lower than 1,000 volts (1 kV). MCPSE: Electricity Sector Asset Control Manual (Manual de Controle Patrimonial do Setor Elétrico).  Medium Voltage: A class of nominal system voltages greater than 2.3 kV and equal or lower than 138 kV. Megawatt (MW):  One million watts. Megawatthour (MWh):  One megawatt of power supplied or demanded for one hour, or one million watt hours. Micro hydroelectric power plantsHydroelectric Power Plants:  Power projects with capacity lower than 1 MW. 114 Table of Contents MME:  Ministry of Mines and Energy (Ministério de Minas e Energia).   Megawatt‑peak (MWp): The measure of the nominal power of a photovoltaic solar device under laboratory lighting conditions. MRE:  Energy Reallocation Mechanism (Mecanismo de Realocação de Energia).   MVA: Mega Volt Ampère. ONS:  National System Operator (Operador Nacional do Sistema), an entity responsible for operational planning, administration of generation and transmissionTransmission and planning of transmissionTransmission investments in the power industry. Parcel A costsCosts:  Costs that include, among others, the following:  (i) costs of electricity purchased for resale pursuant to Initial Supply Contracts; (ii) costs of electricity purchased from Itaipu; (iii) costs of electricity purchased pursuant to bilateral agreements that are freely negotiated between parties; and (iv) certain other charges for the transmissionTransmission and distribution systems. Parcel B costsCosts:  Costs that are under control of distributors.  Such costs are determined by subtracting all of the Parcel A costs from the distribution company’s revenues, excluding ICMS and PIS/COFINS, a state and federal tax levied on sales.  Parcel B costs include, among others, the return on investment related to concessions and their expansion, as well as maintenance and operational costs. 129 Table of Contents Rationing Program:  The Brazilian government program to reduce electricity consumption that was in effect from June 1, 2001 to February 28, 2002 as a result of poor hydrological conditions that threatened the country’s electricity supply. Regulated marketMarket:  Market segment in which distribution companies purchase all the electricity needed to supply customers through public auctions.  The auction process is administered by ANEEL, either directly or through CCEE, under certain guidelines provided by the MME.  The regulated marketRegulated Market is generally considered to be more stable in terms of supply of electricity. Retail Distribution Tariff:  Revenue charged by distribution companies to its customers.  Each customer falls within a certain tariff level defined by law and based on the customer’s classification, although some flexibility is available according to the nature of each customer’s demand.  Retails tariffs are subject to annual readjustments by ANEEL. RTA: Annual Adjustment (reajuste tarifário annual).  RTE:  Extraordinary Tariff Adjustment (reajuste tarifário extraordinário).   RTP: Periodic Revision (revisão tarifária periódica)  Small hydroelectric power plantsHydroelectric Power Plants:  Power projects with capacity from 1 MW to 30 MW. Special consumerConsumer:  AConsumer or a group of consumers that uses at least 500 kV.  Special Consumers may only purchase energy from (i) small hydroelectric power plantsSmall Hydroelectric Power Plants with capacity between 1,000 kW and 30,000 kW, (ii) generators with capacity limited to 1,000 kW, and (iii) alternative energy generators (solar, wind and biomass enterprises) with system capacity injected in the system not greater than 30,000 kW.  A Special Consumer may terminate its contract with the local distributor with 180 days prior notice for contracts with indefinite terms. Substation:  An assemblage of equipment which switches and/or changes or regulates the voltage of electricity in a transmissionTransmission and distribution system. Thermoelectric power plantPower Plant:  A generator which uses combustible fuel, such as coal, oil, diesel natural gas or other hydrocarbon as the source of energy to drive the electric generator. Transmission:  The bulk transfer of electricity from generating facilities to the distribution system at load center station by means of the transmissionTransmission network (in lines with capacity between 69 kV and 525 kV). Transmission Tariff:  Revenue charged by a transmissionTransmission concessionaire based on the transmissionTransmission network it owns and operates.  Transmission tariffs are subject to periodic revisions by ANEEL. Volt:  The basic unit of electric force analogous to water pressure in pounds per square inch. Watt:  The basic unit of electrical power.   115130   Table of Contents   SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant, CPFL Energia S.A., hereby certifies that it meets all of the requirements for filing on Form 20-F20‑F and that it has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Campinas, state of São Paulo, Brazil, onMarch 30, 2012.onApril 4, 2014. CPFL ENERGIA S.A. By:     /s/ Wilson Ferreira Junior        Name:  Wilson Ferreira Junior Title:    Chief Executive Officer (principal executive officer) By:     /s/ Gustavo Estrella                 Name:  Gustavo Estrella Title:    Chief Financial Officer (principal financial officer) 131 CPFL ENERGIA S.A. By: /s/ Wilson Ferreira, Junior                                                   Name: Wilson Ferreira, Junior Title: Chief Executive Officer (principal executive officer) By:  /s/ Lorival Nogueira Luz Júnior Name: Lorival Nogueira Luz Júnior Title: Chief Financial Officer (principal financial officer) 116 Table of Contents KPMG Auditores IndependentesDeloitte Touche Tohmatsu Central Tel Av. Dr. José Bonifácio Coutinho Nogueira, 150 - 5º andar Campinas - SP - 13091-611 Brasil Tel: + 55 (19) 2129-8700 Av. Barão de Itapura, 950 - 6º andar              Fax 3707-3000 Fax:+ 55 (19) 2129-8728 3707-3001 www.deloitte.com.br  13020-431 - Campinas, SP - Brasil                  Internet www.kpmg.com.br Caixa Postal 737 13012-970 - Campinas, SP – Brasil REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Report of independent registered Public Accounting Firm TheTo the Board of Directors and Shareholders of CPFL Energia S.A. São Paulo - SP We have audited the accompanying consolidated balance sheets of CPFL Energia S.A.and subsidiaries (the “Company”) as of December 31, 20112013 and 2010,2012, and the related consolidated statements of income, shareholders’ equity and comprehensive income, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2011. We also have audited2013 and 2012. These financial statements are the Company’s internal control over financial reporting as of December 31, 2011, based on criteria established inInternal Control - Integrated Framework issued by the Committee of Sponsoring Organizationsresponsibility of the Treadway Commission (COSO). The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.Company's management. Our responsibility is to express an opinion on these consolidatedthe financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements includedmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,statements. An audit also includes assessing the accounting principles used and significant estimates made by management, andas well as evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.opinion. A company’sIn our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of CPFL Energia S.A. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for the years ended December 31, 2013 and 2012, in accordance with International Financial Reporting Standards - IFRS, issued by the International Accounting Standards Board - IASB. As discussed in note 2.8 to the consolidated financial statements, the accompanying  balance sheets at January 1, 2012 and at December 31, 2012, and the related statements of income, comprehensive income, changes in shareholders' equity and cash flows for the years ended December 31, 2012 and 2011, have been retrospectively adjusted as a result of changes in accounting policies related to employee benefits under the International Accounting Standard - IAS 19 (R) - Employee Benefits and accounting for joint arrangements, in accordance with the International Financial Reporting Standard - IFRS 11 - Joint Arrangements. We draw your attention to the matter described in note 27 regarding the accounting for resources provided by the Energy Development Account (“CDE”) by the Company as a reduction in the cost of electric energy. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting is a process designed to provide reasonable assurance regardingas of December 31, 2013, based on the reliabilitycriteria established in Internal Control - Integrated Framework (1992) issued by the Committee of financial reportingSponsoring Organizations of the TreadwayCommission and our report dated March 24, 2014 expressed an unqualified opinion on the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sCompany's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.reporting. /s/ Deloitte Touche Tohmatsu Auditores Independentes Campinas, São Paulo, Brazil March 24, 2014 117   Table of Contents CPFL Energia S.A.KPMG Auditores Independentes Av. Barão de Itapura, 950 - 6º 13020-431 - Campinas, SP - Brasil Report of independent registered public accounting firmCaixa Postal 737 13012-970 - Campinas, SP - Brasil Central Tel 55 (19) 2129-8700 Fax 55 (19) 2129-8728 Internet www.kpmg.com.br Report of Independent Registered Public Accounting Firm     BecauseThe Board of its inherent limitations, internal control overDirectors and Shareholders CPFL Energia S.A. We have audited the accompanying consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows of CPFL Energia S.A.and subsidiaries (the “Company”) for the year ended December 31, 2011. These consolidated financial reporting may not prevent or detect misstatements. Also, projectionsstatements are the responsibility of any evaluation of effectivenessthe Company’s management.  Our responsibility is to future periods are subject to the risk that controls may become inadequate because of changesexpress an opinion on these consolidated financial statements based on our audit. We conducted our audit in conditions, or that the degree of complianceaccordance with the policies or procedures may deteriorate.standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial positionresults of their operations and their cash flows of the CPFL Energia S.A. and subsidiaries as offor the year ended December 31, 2011 and 2010, and the results of their operations, cash flows, changes in their shareholders’ equity and comprehensive income for each of the years in the three-year period ended December 31, 2011,, in conformity with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). Also As described in our opinion,explanatory note 2.8, the Company maintained,adopted the provisions of IFRS 11 – Joint Arrangements and IAS 19 - Employee benefits in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established inInternal Control - Integrated Framework issued by2013, which included the Committee of Sponsoring Organizationsdisclosure of the Treadway Commission.January 1, 2012 balance sheet. CPFL Energia S.A. acquired ERSA Energias Renováveis S.A. (ERSA) during 2011, and management excluded from its assessment of the effectiveness of Company’s internal control over financial reporting as of December 31, 2011, ERSA’s internal control over financial reporting associated with total assets of R$ 6,544.2 million and total net revenues of R$ 162.2 million included in the consolidated financial statements of CPFL Energia S.A. and subsidiaries as of and for the year ended December 31, 2011. Our audit of internal control over financial reporting of Company also excluded an evaluation of the internal control over financial reporting of ERSA Energias Renováveis S.A.   /s/ KPMG Auditores Independentes São Paulo, Brazil April 9, 2013, except for explanatory note 2.8 to the consolidated financial statements as to which the date is March 29, 201224, 2014. 118 Table of Contents CPFL ENERGIA S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 20112013, 2012 AND 2010JANUARY 1, 2012 (In thousands of Brazilian reais – R$)           ASSETS   Dec 31, 2011   Dec 31,2010           CURRENT ASSETS         Cash and cash equivalents (note 5)   2,699,837   1,562,897 Consumers, Concessionaires and Licensees (note 6)   1,874,280   1,816,073 Financial Investments (note 7)   47,521   42,533 Recoverable Taxes (note 8)   277,463   193,020 Derivatives (note 33)   3,733   244 Materials and Supplies   44,872   25,223 Leases (note 10)   4,581   4,754 Other credits (note 12)   410,768   253,445  TOTAL CURRENT ASSETS   5,363,054   3,898,190           NONCURRENT ASSETS         Consumers, Concessionaires and Licensees (note 6)   182,300   195,738 Escrow Deposits (note 21)   1,128,616   890,685 Financial Investments (note 7)   109,965   72,823 Recoverable Taxes (note 8)   216,715   138,966 Derivatives (note 33)   215,642   82 Deferred Tax Credits (note 9)   1,176,535   1,183,460 Leases (note 10)   24,521   26,315 Financial asset of concession (note 11)   1,376,664   934,646 Private pension fund (note 18)   3,416   5,800 Investment at cost   116,654   116,654 Other credits (note 12)   279,461   222,100 Property, Plant and Equipment (note 13)   8,292,076   5,786,465 Intangible assets (note 14)   8,927,439   6,584,874 TOTAL NONCURRENT ASSETS   22,050,004   16,158,607           TOTAL ASSETS   27,413,057   20,056,797                       ASSETS   Dec 31, 2013   Dec 31, 2012 restated   Jan 1, 2012 restated               CURRENT ASSETS             Cash and cash equivalents (note 5)   4,206,422   2,435,034   2,663,425 Consumers, concessionaires and licensees (note 6)   2,007,789   2,205,024   1,860,733 Dividends and interest on shareholders´ equity receivable (note 12)   55,265   55,033   27,821 Financial investments   24,806   6,100   47,521 Recoverable taxes (note 7)   262,433   250,987   270,090 Derivatives (note 34)   1,842   870   3,733 Materials and supplies   21,625   36,826   40,852 Leases (note 9)   10,757   9,740   4,581 Financial asset of concession (note 10)   -   34,444   - Other credits (note 11)   673,383   510,880   404,784  TOTAL CURRENT ASSETS   7,264,323   5,544,938   5,323,541               NONCURRENT ASSETS             Consumers, concessionaires and licensees (note 6)   153,854   161,658   182,300 Loans to associates and joint ventures (note 31)   86,655   -   - Escrow deposits (note 21)   1,143,179   1,125,339   1,082,617 Financial investments   -   -   74,910 Recoverable taxes (note 7)   173,362   206,653   198,601 Derivatives (note 34)   316,648   486,438   215,642 Deferred taxes credits (note 8)   1,168,706   1,257,787   1,126,581 Leases (note 9)   37,817   31,703   24,521 Financial asset of concession (note 10)   2,787,073   2,342,796   1,376,664 Other credits (note 11)   296,096   343,814   233,526 Investments in joint ventures (note 12)   1,032,681   1,022,126   1,006,324 Investment at cost   116,654   116,654   116,654 Property, plant and equipment (note 13)   7,717,419   7,104,060   5,672,725 Intangible assets (note 14)   8,748,328   9,180,312   8,534,673 TOTAL NONCURRENT ASSETS   23,778,473   23,379,341   19,845,737               TOTAL ASSETS   31,042,796   28,924,279   25,169,278               The accompanying notes are an integral part of these consolidated financial statements.                                       F -1 Table of Contents   CPFL ENERGIA S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 20112013, 2012 AND 2010JANUARY 1, 2012 (In thousands of Brazilian reais – R$)           LIABILITIES AND SHAREHOLDERS’ EQUITY   Dec 31,2011   Dec 31,2010           CURRENT LIABILITIES         Suppliers (note 15)   1,240,143   1,047,385 Accrued Interest on Debts (note 16)   141,902   40,516 Accrued Interest on Debentures (note 17)   83,552   118,066 Loans and Financing (note 16)   896,414   578,867 Debentures (note 17)   531,185   1,509,958 Private pension fund (note 18)   40,695   40,103 Regulatory charges (note 19)   145,146   123,541 Taxes and Social Contributions Payable (note 20)   483,028   455,248 Dividends and Interest on Equity   24,524   23,813 Accrued liabilities   70,771   58,688 Derivatives (note 33)   -   3,982 Charge for the use of public utilities (note 22)   28,738   17,287 Other accounts payable (note 23)   813,338   410,869 TOTAL CURRENT LIABILITIES   4,499,437   4,428,323           NONCURRENT LIABILITIES         Accrued Interest on Debts (note 16)   23,627   29,155 Loans and Financing (note 16)   7,382,455   4,917,843 Debentures (note 17)   4,548.651   2,212,314 Private pension fund (note 18)   414,629   570,877 Taxes and Social Contributions Payable (note 20)   165   960 Deferred tax debits (note 9)   1,038,101   277,767 Reserve for contingencies (note 21)   338,121   291,265 Derivatives (note 33)   24   7,883 Charge for the use of public utilities (note 22)   440,926   429,632 Other accounts payable (note 23)   174,410   141,124  TOTAL NONCURRENT LIABILITIES   14,361,110   8,878,819           SHAREHOLDERS’ EQUITY (note 24)         Capital   4,793,424   4,793,424 Capital Reserves   229,956   16 Profit Reserves   495,185   418,665 Additional dividend proposed   758,470   486,040 Other comprehensive income   790,123   795,563     7,067,157   6,493,708 Net equity attributable to noncontrolling shareholders   1,485,352   255,948 TOTAL SHAREHOLDERS' EQUITY   8,552,510   6,749,656           TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   27,413,057   20,056,797           LIABILITIES AND SHAREHOLDERS’ EQUITY   Dec 31, 2013   Dec 31, 2012 restated   Jan 1, 2012 restated               CURRENT LIABILITIES             Suppliers (note 15)   1,884,693   1,689,137   1,284,317 Accrued interest on loans and financing (note 16)   125,829   138,293   136,169 Accrued interest on debentures (note 17)   162,134   94,825   79,057 Loans and financing (note 16)   1,514,626   1,419,034   764,097 Debentures (note 17)   34,872   310,149   516,355 Post-employment benefit obligation (note 18)   76,810   51,675   40,171 Regulatory charges (note 19)   32,379   110,776   139,916 Taxes and social contributions payable (note 20)   318,063   430,472   465,093 Dividends and interest on equity   21,224   26,542   24,524 Accrued liabilities   67,633   71,725   70,035 Derivatives (note 34)   -   109   - Public utilities (note 22)   3,738   3,443   3,112 Other accounts payable (note 23)   663,529   623,267   791,848 TOTAL CURRENT LIABILITIES   4,905,531   4,969,447   4,314,692               NONCURRENT LIABILITIES             Suppliers (note 15)   -   4,467   - Accrued interest on loans and financing (note 16)   43,396   62,271   23,627 Accrued interest on debentures (note 17)   32,177   -   - Loans and financing (note 16)   7,546,144   7,658,196   5,875,893 Debentures (note 17)   7,562,219   5,790,263   4,417,774 Post-employment benefit obligation (note 18)   350,640   831,184   305,773 Taxes and social contributions payable (note 20)   32,555   -   165 Deferred taxes debits (note 8)   1,117,146   1,155,733   1,038,101 Provisions for tax, civil and labor risks (note 21)   467,996   349,094   303,231 Derivatives (note 34)   2,950   336   24 Public utilities (note 22)   79,438   76,371   72,360 Other accounts payable (note 23)   103,886   135,788   159,161  TOTAL NONCURRENT LIABILITIES   17,338,547   16,063,703   12,196,111               SHAREHOLDERS’ EQUITY (note 24)             Capital   4,793,424   4,793,424   4,793,424 Capital reserves   287,630   228,322   229,956 Legal reserves   603,352   556,481   495,185 Earnings retained for investment   108,987   326,899   - Statutory reserve – financial asset of concession   265,037   -   - Additional dividend proposed   567,802   455,906   758,470 Other comprehensive income   397,668   (36,598)   563,005 Retained earnings   -   56,293   333,082     7,023,899   6,380,728   7,173,122 Net equity attributable to non-controlling shareholders   1,774,819   1,510,401   1,485,352 TOTAL SHAREHOLDERS' EQUITY   8,798,718   7,891,129   8,658,475               TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   31,042,796   28,924,279   25,169,278               The accompanying notes are an integral part of these consolidated financial statements. F -2 Table of Contents   CPFL ENERGIA S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011 2010 and 2009 (In thousands of Brazilian reais – R$, except for share andearnings per share amounts)share)                 2011   2010   2009   2013   2012 restated   2011 restated                         NET OPERATING REVENUE (note 26)   12,764,028   12,023,729   11,358,006   14,633,856   14,890,875   12,674,467                         COST OF ELECTRIC ENERGY SERVICES                         Cost of Electric Energy (note 27)   (6,220,970)   (6,222,490)   (6,014,509) Operating Cost (note 28)   (1,157,970)   (1,067,493)   (1,053,938) Services Rendered to Third Parties (note 28)   (1,138,626)   (1,050,980)   (620,944) Cost of electric energy (note 27)   (8,196,687)   (8,252,995)   (6,667,961) Operating cost (note 28)   (1,467,516)   (1,377,706)   (1,070,123) Services rendered to third parties (note 28)   (1,009,518)   (1,355,675)   (1,138,626)                         GROSS OPERATING INCOME   4,246,463   3,682,766   3,668,615   3,960,135   3,904,499   3,797,757                         Operating expenses (note 28)                         Sales expenses   (364,352)   (300,435)   (255,199)   (376,597)   (468,146)   (364,191) General and administrative expenses   (615,171)   (443,212)   (403,390)   (928,614)   (724,364)   (595,062) Other Operating Expense   (216,392)   (199,804)   (227,343) Other operating expense   (285,148)   (376,898)   (213,495)   (1,195,916)   (943,451)   (885,932)   (1,590,359)   (1,569,408)   (1,172,749)                         INCOME FROM ELECTRIC ENERGY SERVICE   3,050,547   2,739,315   2,782,683   2,369,775   2,335,091   2,625,008             INTEREST IN ASSOCIATES AND JOINT VENTURES (note 12)   120,868   120,680   81,859                         FINANCIAL INCOME (EXPENSE) (note 29)                         Income   698,188   483,115   351,360   699,208   706,963   752,764 Expense   (1,386,778)   (837,058)   (661,066)   (1,670,651)   (1,284,736)   (1,156,040)   (688,590)   (353,943)   (309,706)   (971,443)   (577,773)   (403,276)                         INCOME BEFORE TAXES   2,361,957   2,385,372   2,472,977   1,519,200   1,877,998   2,303,591                         Social contribution (note 10)   (209,872)   (221,235)   (208,348) Income tax (note 10)   (569,701)   (604,100)   (575,761) Social contribution (note 8)   (156,756)   (178,017)   (204,164) Income tax (note 8)   (413,408)   (492,919)   (554,905)   (779,573)   (825,335)   (784,109)   (570,164)   (670,936)   (759,069)                         NET INCOME   1,582,384   1,560,037   1,688,868   949,036   1,207,062   1,544,522                         Net income attributable to controlling shareholders   1,530,403   1,538,281   1,657,297   937,419   1,176,252   1,492,541 Net income attributable to noncontrolling shareholders   51,981   21,756   31,571 Net income attributable to non-controlling shareholders   11,618   30,810   51,981                         WEIGHTED AVERAGE NUMBER OF SHARES*. …….   962,274,260   961,494,872   959,827,876 EARNINGS PER SHARE.................................. …….   1.59   1.60   1.73 Earnings per share attributable to controlling shareholders: Basic (note 25)   0.97   1.22   1.55 Diluted (note 25)   0.95   1.20   1.55                         The accompanying notes are an integral part of these consolidated financial statements.   * Earnings per share are based on the number of shares resulting from the reverse and forward stock split of our common shares as if they had occurred at the beginning of  2009. F -3 Table of Contents     CPFL ENERGIA S.A. AND SUBSIDIARIES STATEMENTCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE PERIODYEARS ENDED IN DECEMBER 31, 2011, 20102013, 2012 AND 20092011  (In thousands of Brazilian reais – R$)     2011   2010   2009               NET INCOME   1,582,384   1,560,037   1,688,868 Other comprehensive income             - Gain / (Loss) in financial instruments   63,212   82,636   (11,382) - Tax on financial instruments   (21,322)   (28,096)   3,870 Comprehensive income for the year   1,624,274   1,614,577   1,681,356 Comprehensive income attributable to controlling shareholders   1,572,291   1,595,151   1,649,900 Comprehensive income attributable to non controlling shareholders   51,981   19,426   31,456                   2013   2012 restated   2011 restated               NET INCOME   949,036   1,207,062   1,544,522 Items that will not be reclassified subsequently to profit or loss:              Gains (losses) in actuarial plans   460,226   (572,225)   185,715 Comprehensive income for the year   1,409,262   634,837   1,730,237               Comprehensive income attributable to controlling shareholders   1,397,645   604,027   1,678,256 Comprehensive income attributable to non-controlling shareholders   11,618   30,810   51,981 F -4 Table of Contents   CPFL ENERGIA S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011 2010, 2009 (In thousands of Brazilian reais –- R$, except for share))                         Capital Capitalreserve Legal reserve Additional dividend proposed Other comprehensive income       Noncontrolling shareholders´ interest Total Shareholders' equity Deemed cost Financial instruments Retained earnings Total Other comprehensive income Other equity Balance at Januaray 1, 2009 4,741,175 16 277,428 606,105 661,975 137,895 (631,911) 5,792,683 2,445 255,718 6,050,846                         Net income for the period - - - - - - 1,657,297 1,657,297 - 31,571 1,688,868 Prescribed dividend - - - - - - 4,541 4,541 - - 4,541 Additional dividend aproved - - - (606,105) - - - (606,105) - (14,244) (620,349)                         - Gain (Loss) in financial instruments - - - - - (11,208) - (11,208) (174) - (11,382) - Tax on financial instruments - - - - - 3,811 - 3,811 59 - 3,870 - Realization of financial instruments -       - (702) 702 - - - - - Realization of deemed cost of fixed assets - - - - (39,552) - 39,552 - - - - - Tax on deemed cost realization - - - - 13,448 - (13,448) - - - -                         Allocation of income                       -Statutory reserve - - 64,323 - - - (64,323) - - - - - Interim dividend - - - - - - (571,671) (571,671) - (6,767) (578,438) - Dividend proposed - - - 655,017 - - (655,017) - - - - Other changes in noncontrolling shareholders - - - - - - - - - (1,177) (1,177)                                                 Balance at December 31, 2009 4,741,175 16 341,751 655,017 635,871 129,796 (234,278) 6,269,348 2,330 265,101 6,536,779                         Capital Increase 52,249 - - - - - - 52,249 -   52,249 Net income for the period - - - - - - 1,538,281 1,538,281 - 21,756 1,560,037 Prescribed dividend - - - - - - 6,406 6,406 -   6,406 Additional dividend aproved - - - (655,017) - - - (655,017) - (10,967) (665,984)                       - - Gain (Loss) in financial instruments - - - - - 86,167 - 86,167 (3,531)   82,636 - Tax on financial instruments - - - - - (29,297) - (29,297) 1,201   (28,096) - Realization of financial instruments - - - - - (835) 835 - - - - - Realization of deemed cost of fixed assets - - - - (39,605) - 39,605 - - - - - Tax on deemed cost realization - - - - 13,466 - (13,466) - - - -                       - Allocation of income                     - -S tatutory reserve - - 76,914 - - - (76,914) - - - - - Interim dividend - - - - - - (774,429) (774,429) - (6,181) (780,610) - Dividend proposed - - - 486,040 - - (486,040) - - - - Other changes in noncontrolling shareholders - - - - - - - - - (13,761) (13,761)                         Balance at December 31, 2010 4,793,424 16 418,665 486,040 609,732 185,831 0 6,493,708 - 255,948 6,749,656                         Net income for the period - - - - - - 1,530,403 1,530,403 - 51,981 1,582,384 Prescribed dividend - - - - - - 4,967 4,967 - - 4,967 Additional dividend aproved - - - (486,040) - - - (486,040) - (3,596) (489,636)                         - Gain in financial instruments - - - - - 63,212 - 63,212 - - 63,212 - Tax on financial instruments - - - - - (21,323) - (21,323) - - (21,323) - Realization of financial instruments - - - -   (602) 602 - - - - - Realization of deemed cost of fixed assets - - - - (39,098) - 39,098 - - - - - Tax on deemed cost realization - - - - 13,293 - (13,293) - - - - - Business Combination - CPFL Renováveis - 229,940 - - (20,922) - 20,922 229,940 - 1,184,531 1,414,471                         Allocation of income                       -Statutory reserve - - 76,520 - - - (76,520) - - - - - Interim dividend - - - - - - (747,709) (747,709) - (3,498) (751,207) - Dividend proposed - - - 758,470 - - (758,470) - - - - Other changes in noncontrolling shareholders - - - - - - - - - (13) (13)         -               Balance at December 31, 2011 4,793,424 229,956 495,185 758,470 563,005 227,118 0 7,067,157 - 1,485,352 8,552,510                                                                         The accompanying notes are an integral part of these financial statements                                                                                                                                           Net equity attributable to non- controllinng shareholders                 Profit reserves       Other comprehensive income               Capital Capital reserves Legal reserve Earnings retained for investment Statutory reserve financial asset of concession Additional dividend proposed Deemed Cost Post-employment benefit Retained earnings Total Other comprehensive income Other equity Total Shareholders' equity Balance at January 1, 2011 restated   4,793,424   16   418,665   -   -   486,040   609,732   (185,715)   371,546   6,493,708   -   255,948   6,749,656                                                       Total comprehensive income                                                     Net income for the restated year   -     -   -   -   -   -   -   -   1,492,541   1,492,541   -   51,981   1,544,522 Other comprehensive income - actuarial gain   -     -   -   -   -   -   -   185,715   -   185,715   -   -   185,715     -   -   -   -   -   -   -   185,715   1,492,541   1,678,256   -   51,981   1,730,237 Internal changes of shareholders'equity                                                     - Realization of deemed cost of fixed assets   -     -   -   -   -   -   (39,098)   -   39,098   -   (368)   368   - - Tax on deemed cost realization   -     -   -   -   -   -   13,293   -   (13,293)   -   125   (125)   - - Formation of legal reserve   -   -   76,520   -   -   -   -   -   (76,520)   -   -   -   - - Other changes in non-controlling shareholders   -     -   -   -   -   -   -   -   -   -   -   (13)   (13)     -   -   76,520   -   -   -   (25,805)   -   (50,715)   -   (243)   230   (13) Capital transactions with the shareholders                                                     - Prescribed dividend   -   -   -   -   -   -   -   -   4,967   4,967   -   -   4,967 - Interim dividend   -   -   -   -   -   -   -   -   (747,709)   (747,709)   -   (3,498)   (751,207) - Dividend proposed   -   -   -   -   -   758,470   -   -   (758,470)   -   -   -   - - Additional dividend aproved   -   -   -   -   -   (486,040)   -   -   -   (486,040)   -   (3,596)   (489,636) - Business Combination - CPFL Renováveis   -   229,940   -   -   -   -   (20,922)   -   20,922   229,940   20,922   1,163,609   1,414,471     -   229,940   -   -   -   272,430   (20,922)   -   (1,480,290)   (998,842)   20,922   1,156,515   178,595                                                       Balance at December 31, 2011 restated   4,793,424   229,956   495,185   -   -   758,470   563,005   -   333,082   7,173,122   20,679   1,464,673   8,658,475                                                       Total comprehensive income                                                     Net income for the restated year   -     -   -   -   -   -   -   -   1,176,252   1,176,252   -   30,810   1,207,062 Other comprehensive income - actuarial loss   -     -   -   -   -   -   -   (572,225)   -   (572,225)   -   -   (572,225)     -   -   -   -   -   -   -   (572,225)   1,176,252   604,027   -   30,810   634,837 Internal changes of shareholders'equity                                                     - Realization of deemed cost of fixed assets   -     -   -   -   -   -   (41,482)   -   41,482   -   (1,421)   1,421   - - Tax on deemed cost realization   -     -   -   -   -   -   14,104   -   (14,104)   -   483   (483)   - - Formation of legal reserve   -   -   61,296   -   -   -   -   -   (61,296)   -   -   -   - - Reserve of retained earnings for investment   -     -   -   326,899   -   -   -   -   (326,899)   -   -   -   - - Other changes in non-controlling shareholders   -     -   -   -   -   -   -   -   -   -   -   (334)   (334)     -   -   61,296   326,899   -   -   (27,378)   -   (360,817)   -   (938)   604   (334) Capital transactions with the shareholders                                                     - Prescribed dividend   -   -   -   -   -   -   -   -   3,921   3,921   -   -   3,921 - Interim dividend   -   -   -   -   -   -   -   -   (640,239)   (640,239)   -   -   (640,239) - Additional dividend proposed   -   -   -   -   -   455,906   -   -   (455,906)   -   -   (5,875)   (5,875) - Additional dividend aproved   -   -   -   -   -   (758,470)   -   -   -   (758,470)   -   (8,201)   (766,671) - Payment of capital by non-controlling shareholders in subsidiaries   -     -   -   -   -   -   -   -   -   -   -   3,563   3,563 - Business Combination - CPFL Renováveis   -   (1,634)   -   -   -   -   -   -   -   (1,634)   -   5,086   3,452     -   (1,634)   -   -   -   (302,564)   -   -   (1,092,224)   (1,396,423)   -   (5,427)   (1,401,850)                                                       Balance at December 31, 2012 restated   4,793,424   228,322   556,481   326,899   -   455,906   535,627   (572,225)   56,293   6,380,728   19,741   1,490,660   7,891,129                                                       Total comprehensive income                                                     Net income for the year   -   -   -   -   -   -   -   -   937,419   937,419   -   11,617   949,036 Other comprehensive income - actuarial gain   -   -   -   -   -   -   -   460,226   -   460,226   -   -   460,226     -   -   -   -   -   -   -   460,226   937,419   1,397,645   -   11,617   1,409,262 Internal changes of shareholders'equity                                                     - Realization of deemed cost of fixed assets   -   -   -   -   -   -   (39,336)   -   39,336   -   (1,895)   1,895   - - Tax on deemed cost realization   -   -   -   -   -   -   13,374   -   (13,374)   -   644   (644)   - - Earnings retained for investment   -   -   -   108,987   -   -   -   -   (108,987)   -   -   -   - - Formation of legal reserve   -   -   46,871   -   -   -   -   -   (46,871)   -   -   -   - - Transfer to statutory reserve   -   -   -   (326,899)   326,899   -   -   -   -   -   -   -   - - Statutory reserve for the year   -     -   -   -   (61,863)   -   -   -   61,863   -           - - Other changes in non-controlling shareholders   -     -   -   -   -   -   -   -   -   -   -   (68)   (68)     -   -   46,871   (217,912)   265,037   -   (25,962)   -   (68,033)   -   (1,251)   1,183   (68) Capital transactions with the shareholders                                                     - Prescribed dividend   -   -   -   -   -   -   -   -   5,172   5,172   -   -   5,172 - Interim dividend   -   -   -   -   -   -   -   -   (363,049)   (363,049)   -   (2,301)   (365,349) - Additional dividend proposed   -   -   -   -   -   567,802   -   -   (567,802)   -   -   -   - - Additional dividend aproved   -   -   -   -   -   (455,906)   -   -   -   (455,906)   -   (17,589)   (473,495) - Payment of capital by non-controlling shareholders in subsidiaries   -   -   -   -   -   -   -   -   -   -   -   3,566   3,566 - IPO of CPFL Renováveis   -   59,308   -   -   -   -   -   -   -   59,308   -   269,191   328,500     -   59,308   -   -   -   111,896   -   -   (925,679)   (754,475)   -   252,867   (501,605)                                                       Balance at December 31, 2013   4,793,424   287,630   603,352   108,987   265,037   567,802   509,665   (111,999)   -   7,023,899   18,490   1,756,326   8,798,718 The accompanying notes are an integral part of these financial statements   F -5 Table of Contents   CPFL ENERGIA S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2011, 20102013, 2012 AND 20092011 (In thousands of Brazilian reais – R$)   2011     2010     2009   2013   2012 restated     2011 restated OPERATING CASH FLOW                         Income (Loss) for the period, before income tax and social contribution   2,361,957   2,385,372   2,472,977 Income for the year, before income tax and social contribution   1,519,200   1,877,998   2,303,591                         ADJUSTMENT TO RECONCILE INCOME TO CASH PROVIDED BY OPERATING ACTIVITIES                         Depreciation and amortization   801,203   691,793   673,073   1,055,230   978,926   681,317 Reserve for contingencies   35,219   (29,598)   (13,623) Interest and monetary restatement   1,168,617   613,946   572,470 Pension plan costs   (82,953)   (80,629)   (3,066) Provision for tax, civil and labor risks   316,787   94,926   25,530 Allowance for doubtful accounts   70,324   163,811   - Interest and monetary adjustment   1,294,281   904,340   889,391 Post-employment benefit gain/loss   61,665   33,332   (3,202) Interest in associates and joint ventures   (120,868)   (120,680)   (81,859) Losses on the write-off of noncurrent assets   3,688   1,142   (686)   7,248   54,579   3,688 Deferred taxes (PIS and COFINS)   6,429   2,153   75,649   28,328   (64,005)   6,429 Other   -   536   -   (5,218)   21,919   -               4,226,977   3,945,147   3,824,885 REDUCTION (INCREASE) IN OPERATING ASSETS                         DECREASE (INCREASE) IN OPERATING ASSETS             Consumers, concessionaires and licensees   (9,184)   (34,085)   (96,260)   129,731   (435,899)   (5,749) Dividends and interest on shareholders´ equity receivable   112,607   79,730   30,073 Recoverable taxes   (12,971)   3,146   9,265   42,176   51,772   (22,882) Lease   (6,347)   (2,945)   (2,276)   1,648   (3,969)   (6,347) Escrow deposits   (164,165)   (52,109)   948   101,310   8,505   (143,339) Resources provided by the Energy Development Account - CDE   (145,571)   (24,972)   - Other operating assets   (61,086)   (78,202)   1,165   (30,725)   (41,289)   (30,275)                         INCREASE (DECREASE) IN OPERATING LIABILITIES                         Suppliers   122,783   (16,714)   (7,853)   191,089   388,975   144,177 Taxes and social contributions paid   (764,195)   (705,366)   (524,248) Other taxes and social contributions   54,230   (88,996)   47,212   (130,405)   (149,121)   61,811 Other liabilities with employee pension plans   (70,318)   (72,235)   (86,110) Interestondebts – paid   (981,682)   (573,170)   (546,705) Post-employment employee benefit   (85,546)   (79,450)   (70,318) Regulatory charges   21,596   59,792   (30,780)   (78,397)   (27,600)   21,873 Tax, civil and labor risks paid   (184,070)   (64,084)   - Advance from Eletrobrás – Resources provided by the CDE   9,246   -   - Other operating liabilities   65,832   5,382   (101,891)   10,820   (23,842)   49,491 CASH FLOWS PROVIDED BY OPERATIONS   2,488,653   2,029,213   2,439,261   4,170,890   3,623,904   3,853,400 Interests paid   (1,093,465)   (866,025)   (871,999) Income tax and social contribution paid   (559,879)   (768,578)   (718,163) NET CASH FROM OPERATING ACTIVITIES   2,517,546   1,989,301   2,263,238                         INVESTMENT ACTIVITIES             Acquisition of subsidiaries net of cash acquired   (862,938)   -   - Increase in investments on subsidiaries   -   (5,752)   (31,922) Increase in cash from corporate restructuring   253,178   -   - Acquisition of property, plant and equipment   (829,701)   (634,931)   (549,045) Financial investments   18,688   17,777   65,527 INVESTING ACTIVITIES             Acquisition of interests in subsidiaries, net of cash acquired.   -   (706,186)   (814,330) Payment of acquisition payables   -   (172,476)   (48,608) Increase cash for business combination   -   -   253,178 Increase in property, plant and equipment   (882,588)   (1,027,109)   (693,460) Financial investments, pledges, funds and tied deposits   41,392   (13,943)   16,908 Lease   (584)   (6,581)   8,314 Additions to intangible assets   (1,075,072)   (1,165,609)   (679,054)   (852,248)   (1,432,902)   (1,072,717) Lease   8,314   (3,931)   (15,527) Sale of noncurrent assets   -   828   1,092 Sale of non-financial asset   80,945   -   - Loans to associates and joint ventures   (81,456)   -   - Other   -   (10,269)   (29,972)   -   (1,374)   -                         GENERATION (UTILIZATION) OF CASH IN INVESTMENTS   (2,487,531)   (1,801,887)   (1,238,901) NET CASH FLOW USED IN INVESTING ACTIVITIES   (1,694,539)   (3,360,571)   (2,350,715) F -6 Table of Contents   FINANCING ACTIVITIES             Loans, financing and debentures obtained   5,536,932   2,571,002   2,552,433 Increment of cash due to increase of interest in subsidiary   1,118   -   - Payments of Loans, financing and debentures, and derivatives   (3,157,839)   (1,280,290)   (1,843,792) Dividend and interest on equity paid   (1,240,590)   (1,440,094)   (1,178,365) Other   (3,802)   (2,292)   (1,847) GENERATION (UTILIZATION) OF CASH IN FINANCING   1,135,819   (151,674)   (471,571) INCREASE IN CASH AND CASH EQUIVALENTS   1,136,940   75,652   728,790 OPENING BALANCE OF CASH AND CASH EQUIVALENTS   1,562,897   1,487,245   758,455 CLOSING BALANCE OF CASH AND CASH EQUIVALENTS   2,699,837   1,562,897   1,487,245                             FINANCING ACTIVITIES             IPO of CPFL Renováveis   328,500   -   - Loans, financing and debentures obtained   5,958,322   4,286,812   5,345,324 Loans, financing and debentures paid, net of derivatives paid   (4,499,451)   (1,737,088)   (2,853,127) Dividend and interest on shareholders’ equity paid   (838,990)   (1,406,846)   (1,240,590)   NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES   948,381   1,142,878   1,251,607   INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   1,771,388   (228,392)   1,164,130   OPENING BALANCE OF CASH AND CASH EQUIVALENTS   2,435,034   2,663,425   1,499,295   CLOSING BALANCE OF CASH AND CASH EQUIVALENTS   4,206,422   2,435,034   2,663,425               The accompanying notes are an integral part of these consolidated financial statements F -7 Table of Contents   CPFL ENERGIA S.A. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED ON DECEMBER 31, 2011, 20102013, 2012 AND 20092011 (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 in Brazil. The Company’s headquarters are located at Rua Gomes de Carvalho Street, 1510 - 14º floor- Room 142 - Vila Olímpia - São Paulo - SP - Brasil. The Company has direct and indirect interests in the following operational subsidiaries (information(unaudited information on the concession area, number of consumers, energy production capacity and associated data not examined by the independent auditors)data):                                   Energy distribution   Company Type   Equity Interest   Location (State)   Number of municipalities   Approximate number of consumers (in thousands)   Concession term   End of the concession   Company Type   Equity Interest   Consolidation criteria   Location (State)   Number of municipalities   Approximate number of consumers (in thousands)   Concession term   End of the concession                                                             Companhia Paulista de Força e Luz ("CPFL Paulista")   Publicly-quoted corporation   Direct 100%   Interior of S. Paulo   234   3,768   30 years   November 2027   Publicly-quoted corporation   Direct 100%   Full   Interior of São Paulo   234   4,004   30 years   November 2027 Companhia Piratininga de Força e Luz ("CPFL Piratininga")   Publicly-quoted corporation   Direct 100%   Interior of S. Paulo   27   1,483   30 years   October 2028   Publicly-quoted corporation   Direct 100%   Full   Interior of São Paulo   27   1,572   30 years   October 2028 Rio Grande Energia S.A. ("RGE")   Publicly-quoted corporation   Direct 100%   Interior of Rio Grande do Sul   253   1,314   30 years   November 2027   Publicly-quoted corporation   Direct 100%   Full   Interior of Rio Grande do Sul   255   1,398   30 years   November 2027 Companhia Luz e Força Santa Cruz ("CPFL Santa Cruz")   Private corporation   Direct 100%   Interior of São Paulo and Paraná   27   186   16 years   July 2015   Private corporation   Direct 100%   Full   Interior of São Paulo and Paraná   27   197   16 years   July 2015 Companhia Leste Paulista de Energia ("CPFL Leste Paulista")   Private corporation   Direct 100%   Interior of S. Paulo   7   52   16 years   July 2015   Private corporation   Direct 100%   Full   Interior of São Paulo   7   55   16 years   July 2015 Companhia Jaguari de Energia ("CPFL Jaguari")   Private corporation   Direct 100%   Interior of S. Paulo   2   34   16 years   July 2015   Private corporation   Direct 100%   Full   Interior of São Paulo   2   37   16 years   July 2015 Companhia Sul Paulista de Energia ("CPFL Sul Paulista")   Private corporation   Direct 100%   Interior of S. Paulo   5   75   16 years   July 2015   Private corporation   Direct 100%   Full   Interior of São Paulo   5   80   16 years   July 2015 Companhia Luz e Força de Mococa ("CPFL Mococa")   Private corporation   Direct 100%   Interior of São Paulo and Minas Gerais   4   42   16 years   July 2015   Private corporation   Direct 100%   Full   Interior of São Paulo and Minas Gerais   4   44   16 years   July 2015                           Installed power (MW) Energy generation (conventional and renewable sources)   Company Type   Equity Interest   Consolidation criteria   Location (State)   Number of plants / type of energy   Total   CPFL participation                               CPFL Geração de Energia S.A. ("CPFL Geração")   Publicly-quoted corporation   Direct 100%   Full   São Paulo, Goiás and Minas Gerais   1 Hydroelectric, 2 SHPs (a) e 1 Thermal   695   695 CERAN - Companhia Energética Rio das Antas ("CERAN")   Private corporation   Indirect 65%   Full   Rio Grande do Sul   3 Hydroelectric   360   234 Foz do Chapecó Energia S.A. ("Foz do Chapecó")   Private corporation   Indirect 51%   (d)   Santa Catarina and Rio Grande do Sul   1 Hydroelectric   855   436 Campos Novos Energia S.A. ("ENERCAN")   Private corporation   Indirect 48.72%   (d)   Santa Catarina   1 Hydroelectric   880   429 BAESA - Energética Barra Grande S.A. ("BAESA")   Publicly-quoted corporation   Indirect 25.01%   (d)   Santa Catarina and Rio Grande do Sul   1 Hydroelectric   690   173 Centrais Elétricas da Paraíba S.A. ("EPASA")   Private corporation   Indirect 52.75%   (d)   Paraíba   2 Thermals   342   180 Paulista Lajeado Energia S.A. ("Paulista Lajeado")   Private corporation   Indirect 59.93% (b)   Full   Tocantins   1 Hydroelectric   903   63 CPFL Energias Renováveis S.A. ("CPFL Renováveis")   Publicly-quoted corporation   Indirect 58.84%   Full   (c)   (c)   (c)   (c) CPFL Centrais Geradoras Ltda ("CPFL Centrais Geradoras") (e)   Limited company   Direct 100%   Full   São Paulo   9 SHPs   24   24                                 Commercialization of energy   Company Type   Core activity   Equity Interest   Installed powerConsolidation criteria Energy generation - operational Company Type Equity Interest Location (State) Number of plants / type of energy Total CPFL participation CPFL Geração de Energia S.A.("CPFL Geração") Publicly-quoted corporation Direct 100% São Paulo, Goiás and Minas Gerais 1 Hydroelectric, 2SHPs e 1 Thermal* 695 MW 695 MW Foz do Chapecó Energia S.A.("Foz do Chapecó") Private corporation Indirect 51% Santa Catarina and Rio Grande do Sul 1 Hydroelectric 855 MW 436 MW Campos Novos Energia S.A.("ENERCAN") Private corporation Indirect 48,72% Santa Catarina 1 Hydroelectric 880 MW 429 MW CERAN - Companhia Energética Rio das Antas ("CERAN") Private corporation Indirect 65% Rio Grande do Sul 3 Hydroelectric 360 MW 234 MW BAESA - Energética Barra Grande S.A.("BAESA") Publicly-quoted corporation Indirect 25,01% Santa Catarina and Rio Grande do Sul 1 Hydroelectric 690 MW 173 MW Centrais Elétricas da Paraíba S.A. ("EPASA") Private corporation Indirect 52.75% Paraíba 2 Thermals 342 MW 180 MW Paulista Lajeado Energia S.A.("Paulista Lajeado") Private corporation Indirect 59,93%** São Paulo 1 Hydroelectric 903 MW 63 MW CPFL Renováveis Energias S.A .("CPFL Renováveis") Publicly-quoted corporation Indirect 63% (***) (***) (***) (***) (*) SHP - Small Hydroelectric Power Plant (**) Paulista Lajeado has a 7% participation in the installed power of Investco S.A. (***) Further details about corporate reestructuring and CPFL Renováveis activities are described in note 1.1. F - 8 Table of Contents Commercialization and Services Company Type Core activity Equity Interest CPFL Comercialização Brasil S.A. ("CPFL Brasil")   Private corporation   Energy commercialization consultancy and advisory services to agents in the energy sector Direct 100% Full Clion Assessoria e Comercialização de Energia Elétrica Ltda. ("CPFL Meridional")   Limited company   Commercialization and provision of energy services   Indirect 100% Full CPFL Comercialização Cone Sul S.A. ("CPFL Cone Sul")   Private corporation   Energy commercialization   Indirect 100% Full CPFL Planalto Ltda. ("CPFL Planalto")   Limited company   Energy commercialization   Direct 100% Full F -8 Table of Contents Services Company Type Core activity Equity Interest Consolidation criteria CPFL Serviços, Equipamentos, Industria e Comércio S.A. ("CPFL Serviços")   Private corporation   Manufacturing, commercialization, rental and maintenance of electro-mechanical equipment and service provisionservices Direct 100% Full ChumpitazNECT Serviços S.A.Administrativos Ltda ("Chumpitaz"Nect")   Private corporationLimited company   Provision of administrativeAdministrative services   Direct 100% Full CPFL Atende Centro de Contatos e Atendimento Ltda. ("CPFL Atende")   Limited company   Provision of telephoneTelephone answering services   Direct 100%   Other Full Company Type Core activityCPFL Total Serviços Administrativos Ltda. ("CPFL Total")   Equity InterestLimited company Billing and collection services Direct 100% Full CPFL Jaguariuna S.A.Telecom S.A ("CPFL Telecom") Private corporation Telecommunication services Direct 100% Full CPFL Transmissão Piracicaba S.A ("CPFL Transmissão") Private corporation Energy transmission Indirect 100% Full Other Company Type Core activity Equity Interest Consolidation criteria CPFL Jaguariúna Participações Ltda ("CPFL Jaguariuna")   Private corporationLimited company   Venture capital company   Direct 100% Full CompanhiaCPFL Jaguari de Geração de Energia Ltda ("Jaguari Geração")   Private corporationLimited company   Venture capital company   Direct 100% Full Chapecoense Geração S.A. ("Chapecoense") (g)   Private corporation   Venture capital company   Indirect 51% CPFL Bio Anicuns S.A. ("Anicuns")   Private corporation Energy generation studies and projects Indirect 100% CPFL Bio Itapaci S.A ("Itapaci") Private corporation Energy generation studies and projects Indirect 100%(d) Sul Geradora Participações S.A. ("Sul Geradora")   Private corporation   Venture capital company   Indirect 99.95% Full CPFL Participações S.A ("CPFL Participações") (f) Private corporation Venture capital company Diretc 100% Full (a)     SHP – Small Hydropower Plant 1.1  Corporate restructuring (b)     Paulista Lajeado has a 7% participation in the installed power of Investco S.A.(5.93% share of its capital). (c)CPFL Energia Renováveis S.A. (CPFL Renováveis) On April 19, 2011,the Company signed an agreement with the shareholders of ERSA Energias Renováveis S.A. (Ersa) to merge renewable energy assetshas operations in São Paulo, Minas Gerais, Mato Grosso, Santa Catarina, Ceará, Rio Grande do Norte, Paraná and projects held inRio Grande do Sul states and its subsidiaries (in the case of CPFL, the assets of the subsidiaries CPFL Geração and CPFL Brasil) including wind farms, biomass and small hydroelectric power plants. After a series of planned restructurings, CPFL Geração and CPFL Brasil have joined the shareholders of ERSA, as majority shareholders, resulting in the creation of CPFL Energias Renováveis S.A. The objective of the association was to consolidate the experience of both groups in the renewable generation sources sector, thereby obtaining synergies by combining their operations and an improved structure for developing their business. On June 21 and November 1st, 2011, in Resolution 2,967/2011 and 3,182/2011, published in the Official Gazette of the Federal Executive – DOU, ANEEL authorized the restructuring which involved the following four stages for the CPFL Group companies involved in the project: Stage 1:  Transfer of CPFL Geração's small hydroelectric power plants - SHPs to the following SPCs (Special Purpose Companies) controlled by CPFL Geração:  MOHINI Empreendimentos e Participações Ltda. – “Mohini”; JAYADITYA Empreendimentos e Participações Ltda – “Jayaditya”; and CHIMAY Empreendimentos e Participações Ltda. – “Chimay”.  This stage was approved on July 18, 2011 by the subsidiaries CPFL Geração, CPFL Brasil and SMITA; Stage 2:  Increase of the capital of Smita Empreendimentos e Participações S.A. (SMITA) through the contribution by CPFL Geração and CPFL Brasil of their interestsmain activities are: (i) holding investments in renewable generation sources SPCs, including the Mohini, Jayadityasources; (ii) identification, development, and Chimay SPCs, which received theCPFL Geração`s small hydroelectric power plantsat stage 1.  This stage was alsoapproved on July 18, 2011 by the subsidiaries CPFL Geração, CPFL Brasilexploitation of generation potential sources; and SMITA;   Stage 3:  Merger(iii) commercialization of SMITA by ERSA, whereby CPFLGeração and CPFL Brasil became shareholders in that company, which took the name of CPFL Energias Renováveis S.A. This stage wasapproved on August 24, 2011 and CPFL Energia now indirectly holds 54.50% ofelectric energy. At December 31, 2013, CPFL Renováveis through its subsidiaries CPFL Geração (43.65%) and CPFL Brasil (10.85%). Consequently, CPFL Renováveis has been consolidated in the CPFL Energia’s consolidated financial statements since August 1, 2011. F - 9 Table of Contents Stage 4:  The acquisition of Jantus SL (“Jantus”) by the subsidiary CPFL Renováveis was completed on December 19, 2011; CPFL Renováveis receivedhad a capital contribution of R$ 823 million from the subsidiary CPFL Brasil to close the transaction.  As from that date, CPFL Energia indirectly holds a 63.00% interest in the subsidiary CPFL Renováveis, through CPFL Geração (35.49%) and CPFL Brasil (27.51%).  For further details of the accounting effects, see Note 14.4). CPFL Renováveis is an independent energy producerfocused exclusively on the Brazilian market for electric energy generated from electric from renewable sources, through the development, construction and operation of small (up to 30 MW) and medium (up to 200 MW) plants, such as small hydropower plants (SHPs), wind and biomass plants.  At December 31, 2011, CPFL Renováveis was comprised of aproject portfolio of projects for2,359 MW of installed capacity of 1,416.9(1,280.7 MW operational), as follows:   ·      Hydropower generation: 34 40 SHP’s (420 MW) being35SHP’s operational (306.7 (326.6MW) and 1 SHP5 SHP’s under construction (20 MW)development (93.4MW); ·      Wind power energy generation: 4 52 projects (1,567.9 MW) being16projects operational (210 (583MW) and 21 36projects under construction (550.2construction/development (984.9 MW); ·      Biomass power generation: 8 operational plants (370MW);   ·Solar energy generation:  31solar plant operational (1MW).  (d)Due to changes introduced by the new accounting standard (IFRS 11) as disclosed in note 2.8, the companies Chapecoense, Enercan, Baesa e Epasa are accounted for as joint venture and as from January 1, 2013 (and for comparative purpose the balances of December 31 and January 1, 2012 and profit or loss of 2012 and 2011 were restated) are no longer proportionally consolidated in the Company’s financial statements.  Their assets, liabilities and results are accounted for using the equity method of accounting.  (e)       CPFL Centrais Geradoras On August 29, 2013, it was approved at Partners Meeting of CPFL Centrais Geradoras the incorporation of the net assets that were spun-off: ·Small hydropower plants operations (135 MW)(“SHPs”) Rio do Peixe I and 4Rio do Peixe II and Hydroelectric generation plant (HGP) Santa Alice, previously held by our controlled distributor CPFL Leste Paulista; ·SHP Macaco Branco, previously held by our controlled distributor CPFL Jaguari; ·HGPs Lavrinha, São José and Turvinho, previously held by our controlled distributor CPFL Sul Paulista; F -9 Table of Contents ·HGPs Pinheirinho and São Sebastião previously held by our controlled distributor CPFL Mococa. The objective of the corporate restructuring was to comply with Decree 7,805/2012 an Law 12,783/2013 in relation to deverticalization of generators included in electric energy distribution companies.This transaction was also approved at theAnnual General Meetingof the  respective distribution companies on August 29, 2013, note 14.4. (f)   CPFL Participações CPFL Participações, a fully-owned direct subsidiary, is a private corporation, set up in 2013 with the objective of holding interests in other companies or entities. (g)  Chapecoense  The subsidiary Chapecoense fully consolidates the financial statements of its direct subsidiary, Foz de Chapecó. In relation to the concession terms that end in July 2015, on 26 June, 2012, our subsidiaries filed a request for extension of the concession contracts, under construction (195 MW). the present conditions, reserving the right to review the request in the event of changes in the current contractual conditions. Our subsidiaries confirmed the request for extension on October 10, 2012. To the date of approval of these financial statements, Management is not aware of the terms of the renewal.   ( 2 )PRESENTATION OF THE FINANCIAL STATEMENTS   2.1 Basis of preparationpresentation: The consolidated financial statements were prepared and are presented in full conformityaccordance with the International Financial Reporting Standards– - IFRS,, issued by the International Accounting Standard Board – IASB. The consolidated financial statements were authorized for issue by the Board of Directors on March 29, 2012.24, 2014.   2.2 Basis of measurementmeasurement: The financial statements have been prepared on the historic cost basis except for the following material items recorded in the balance sheets: i) derivative financial instruments measured at fair value, ii) financial instruments measured at fair value through profit or loss, and iii) available-for-sale financial assets measured at fair value, iv) property, plant and equipment adjusted to reflect the “deemed cost” on the transition date, and v) actuarial assets, recognition of which is limited to the present value of the economic benefits available in the form of reimbursements or future reductions in contributions to the plan.value.   2.3 Use of estimates and judgmentsjudgments: The preparation of the financial statements requires managementCompany Management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. By definition, the resulting accounting estimates are rarely the same as the actual results. Accordingly, Company Management reviews the estimates and assumptions on an ongoing basis.basis, based on previous experience and other relevant factors. Adjustments derivedresulting from revisionsreviews to accounting estimates are recognizedrecorded in the period in which the estimates are revisedreviewed and in any future periods affected. affected. Information about assumptions and estimate that are subject to a greater degree of uncertainty andinvolve the risk of resulting in a material adjustment if these assumptions and estimates suffer significant changes during the next financial yearin subsequent periods is included in the following notes:accounts: ·Note 6 – Consumers, concessionaires and licensees; ·Note 8 – Deferred taxes; F -10 Table of Contents   ·        Note 9 – Deferred tax credits and debits;Leases; ·Note 10 – Financial asset of concession; ·        Note 11 – Financial concession asset;Other Credits (Allowance for doubtful accounts); ·Note 13 – Property, plant and equipment and recognition of impairment losses; ·        Note 14 – Intangible assets;assets and recognition of impairment losses; ·        Note 18 – Private Pension Fund;Post-employment benefit obligation; ·        Note 21 – Provisions for contingencies,tax, civil and labor risks and escrow deposits; ·Note 26 – Operating revenue; ·Note 27 – Cost of electric energy; and ·        Note 3334 – Financial instruments and operating risks.instruments.   2.4 Functional currency and presentation currencycurrency: The Company’s functional currency is the Brazilian Real, and the individual and consolidated financial statements are presented in thousands of reais.  Figures are rounded only after addition of the amounts.  Consequently, when added, the amounts shown in thousands of reais may not matchtally with the rounded totals.   2.5 Basis of consolidation: (i) Business combinations The Company measures goodwill as the fair value of the consideration transferred including the recognizedrecorded amount of any non-controlling interest in the acquiree, less the net recognizedrecorded amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. If the excess is negative, a gain arising from the purchase agreement is recognized immediately in profit or loss for the period. (ii) Subsidiaries, associates and jointly-owned entities:joint ventures: The financial statements of subsidiaries and jointly-owned entities (joint ventures) are included in the consolidated financial statements from the date that total or shared control commences until the date that control ceases. Associates and joint ventures are accounted for using the equity method of accounting from the moment significant influence or joint control, respectively, is established. A jointly controlled operationjoint venture is a venture directlyjoint arrangement whereby the parties (two or indirectly controlled together with other investors, established by contractual agreement and requiringmore) that have joint control of the arrangement have rights to the arrangement’s net assets. A joint control exists when the decisions about the relevant activities require the unanimous consent for strategic financial and operating decisions. of the parties sharing the control. The accounting policies of subsidiaries, associates and jointly controlled entitiesjoint ventures taken into consideration infor consolidation and/or equity method of accounting, as applicable, are aligned with the Company's accounting policies. The consolidated financial statements include the balances and transactions of the Company and its subsidiaries. The balances and transactions of assets, liabilities, income and expenses have been fully consolidated for our subsidiaries. Prior to consolidation in the Company's financial statements, the financial statements of the subsidiaries CPFL Geração, CPFL Brasil, CPFL Jaguari Geração and CPFL Renováveis are fully owned subsidiaries and proportionately consolidated for the jointly-owned entities.with those of their subsidiaries. Intra-group balances and transactions, and any income and expenses derived from these transactions, are eliminated in preparing the consolidated financial statements.  Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group'sCompany’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. ObservingIn the conditions described above,case of subsidiaries, the amountportion related to non-controlling interestsshareholders is shownstated in shareholders' equity and stated after the statement ofprofit or loss and comprehensive income for the year in each yearperiod presented. The combined balancesBalances of the jointly-controlled entities at December 31, 2011, 2010 and 2009 arejoint ventures, as follows:well our interest in each of them is described in note 24.6. F -11   Table of Contents     December 31, 2011 December 31, 2010   December 31, 2009 Current assets 130,850   140,701     Non current assets 3,190,591   3,086,595     Current liabilities 270,721   162,333     Non current liabilities 2,056,144   2,224,208     Shareholders equity 994,577   840,755                 Gross operating revenues 656,527   397,462   260,630 Net operating revenues 603,745   365,394   240,275 Net income 83,069   36,363   83,240 (iii) Acquisition of non-controlling interest Accounted for as transactionsequity transaction, within the shareholders’ equity holders and therefore no goodwill is recognized as a result of such transactions.   2.6 Segment information: An operating segment is a component of the Company (i) that engages in operating activities from which it may earn revenues and incur expenses, (ii) whose operating results are regularly reviewed by Management to make decisions about resources to be allocated and assess the segment's performance, and (iii) for which discrete financial information is available. Company Management bases strategic decisions on reports, segmenting the business into: ·Until 2010, into (i) electric energy distribution activities (“Distribution”); (ii) electric energy generation activities from conventional sources (“Generation”); (iii) electric energy generation activities from renewable sources (“Renewables”); (iv) energy commercialization and service provision activities (“Commercialization”); (v) service activities; and (iv) other, basically corresponding to corporate services and(vi) other activities not listed in the previous items. ·A new operating segment was created in 2011, from August 1, as a result of the association with ERSA and the acquisition of Jantus shares, to segregate the activities related to renewable generation sources (see notes 1 and 14.4). Presentation of the operating segments includes items directly attributable to them, such as allocations required, including intangible assets.    2.7 Information on Corporate Interestscorporate interests: The Company's interests directly or indirectly held by the Company in the direct and indirect subsidiaries and jointly-owned entitiesjoint ventures are described in Notenote 1. Except for (i) the (i) jointly-owned entitiescompanies ENERCAN, BAESA, Foz do ChapecóChapecoense and EPASA, which, as from January 1, 2013 (adjusted for purposes of comparison for all periods presented), are no longer consolidated proportionately,proportionally and are accounted for using the equity method of accounting (note 3), and (ii) the investment in Investco recorded at cost by the subsidiary Paulista Lajeado thein Investco S.A., all other unitsentities are fully consolidated. As of December 31, 2011,2013 and 2012 and as of January 1, 2012 and for the three-years period ended December 31, 2013 the participation of non-controlling interests stated in the consolidatedfinancial statements refers to the third-party interests held by third-parties in the subsidiaries CERAN and Paulista Lajeado and since August, 2011 also CPFL Renováveis.   2.8 Value addedRestatement of 2012 and 2011 financial statements As mentioned in notes 3.8 and 3.9, accounting standards IAS 19 (2011) – Employee benefits and IFRS 11 – Joint arrangements, are effective from January 1, 2013. As the adoption of these accounting standards constitutes a change in accounting policies, the Company retrospectively applied these standards in accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors. For purposes of this adoption, the Company adjusted its Balance Sheets as of January 1, 2012 and December 31, 2012, and the Statements of Income, of Comprehensive Income, of Changes in Shareholders’ Equity and Cash Flows for the years ended on December 31, 2012 and 2011 for comparison purposes. We present below the adjustments to on our previously issued financial statements: The Company prepared individual and consolidated value added statements (“DVA”) as additional financial information.   F -12 Table of Contents ASSETS December 31, 2012 stated   Retrospective application - Joint arrangements   Retrospective application - Employee benefits   December 31, 2012 restated   January 1, 2012 stated   Retrospective application - Joint arrangements   Retrospective application - Employee benefits   January 1, 2012 restated                                 CURRENT ASSETS                               Cash and cash equivalents 2,477,894   (42,860)   -   2,435,034   2,699,837   (36,411)   -   2,663,425 Consumers, concessionaires and licensees 2,268,601   (63,577)   -   2,205,024   1,874,280   (13,547)   -   1,860,733 Dividends and interest on shareholders´ equity receivable 2,894   52,139   -   55,033   830   26,991   -   27,821 Financial investments 6,100   -   -   6,100   47,521   -   -   47,521 Recoverable taxes 263,403   (12,417)   -   250,987   277,463   (7,373)   -   270,090 Derivatives 870   -   -   870   3,733   -   -   3,733 Materials and supplies 49,346   (12,520)   -   36,826   44,872   (4,020)   -   40,852 Leases 9,740   -   -   9,740   4,581   -   -   4,581 Financial asset of concession 34,444   -   -   34,444   -   -   -   - Other credits 516,903   (6,022)   -   510,880   409,938   (5,154)   -   404,784 TOTAL CURRENT ASSETS 5,630,196   (85,257)   -   5,544,938   5,363,054   (39,514)   -   5,323,541                                 NONCURRENT ASSETS                               Consumers, concessionaires and licensees 162,017   (359)   -   161,658   182,300   -   -   182,300 Escrow deposits 1,184,554   (59,215)   -   1,125,339   1,128,616   (45,999)   -   1,082,617 Financial investments -   -   -   -   109,965   (35,055)   -   74,910 Recoverable taxes 225,036   (18,383)   -   206,653   216,715   (18,114)   -   198,601 Derivatives 486,438   -   -   486,438   215,642   -   -   215,642 Deferred taxes credits 1,318,618   (60,831)   -   1,257,787   1,176,535   (49,954)   -   1,126,581 Leases 31,703   -   -   31,703   24,521   -   -   24,521 Financial asset of concession 2,342,796   -   -   2,342,796   1,376,664   -   -   1,376,664 Post-employment benefit obligation 10,203   -   (10,203)   -   3,416   -   (3,416)   - Other credits 420,155   (76,340)   -   343,814   279,460   (45,934)   -   233,526 Investments in associates and joint ventures -   1,022,126   -   1,022,126   -   1,006,324   -   1,006,324 Investment at cost 116,654   -   -   116,654   116,654   -   -   116,654 Property, plant and equipment 9,611,958   (2,507,897)   -   7,104,060   8,292,076   (2,619,351)   -   5,672,725 Intangible assets 9,535,360   (355,048)   -   9,180,312   8,927,439   (392,766)   -   8,534,673 TOTAL NONCURRENT ASSETS 25,445,491   (2,055,948)   (10,203)   23,379,341   22,050,004   (2,200,850)   (3,416)   19,845,737                                 TOTAL ASSETS 31,075,687   (2,141,205)   (10,203)   28,924,279   27,413,057   (2,240,364)   (3,416)   25,169,278                                                                                                 LIABILITIES AND SHAREHOLDERS' EQUITY December 31, 2012 stated   Retrospective application - Joint arrangements   Retrospective application - Employee benefits   December 31, 2012 restated   January 1, 2012 stated   Retrospective application - Joint arrangements   Retrospective application - Employee benefits   January 1, 2012 restated                                 CURRENT LIABILITIES                               Suppliers 1,691,002   (1,865)   -   1,689,137   1,240,143   44,174   -   1,284,317 Accrued interest on loans and financing 142,599   (4,305)   -   138,293   141,902   (5,734)   -   136,169 Accrued interest on debentures 95,614   (789)   -   94,825   83,552   (4,495)   -   79,057 Loans and financing 1,558,499   (139,465)   -   1,419,034   896,414   (132,317)   -   764,097 Debentures 336,459   (26,309)   -   310,149   531,185   (14,830)   -   516,355 Post-employment benefit obligation 51,675   -   -   51,675   40,695   -   (524)   40,171 Regulatory charges 114,488   (3,712)   -   110,776   145,146   (5,230)   -   139,916 Taxes and social contributions payable 442,365   (11,894)   -   430,472   483,028   (17,935)   -   465,093 Dividends and interest on equity 26,542   -   -   26,542   24,524   -   -   24,524 Accrued liabilities 72,535   (810)   -   71,725   70,771   (736)   -   70,035 Derivatives 109   -   -   109   -   -   -   - Public Utilities 30,422   (26,979)   -   3,443   28,738   (25,626)   -   3,112 Other accounts payable 631,043   (7,776)   -   623,267   813,338   (21,491)   -   791,848 TOTAL CURRENT LIABILITIES 5,193,350   (223,904)   -   4,969,447   4,499,437   (184,220)   (524)   4,314,692                                 NONCURRENT LIABILITIES                               Suppliers 4,467   -   -   4,467   -   -   -   - Accrued interest on loans and financing 62,271   -   -   62,271   23,627   -   -   23,627 Loans and financing 9,035,534   (1,377,338)   -   7,658,196   7,382,455   (1,506,562)   -   5,875,893 Debentures 5,895,143   (104,880)   -   5,790,263   4,548,651   (130,877)   -   4,417,774 Post-employment benefit obligation 325,455   -   505,729   831,184   414,629   -   (108,856)   305,773 Taxes and social contributions payable -   -   -   -   165   -   -   165 Deferred taxes debits 1,155,733   -   -   1,155,733   1,038,101   -   -   1,038,101 Provisions for tax, civil and labor risks 386,079   (36,985)   -   349,094   338,121   (34,891)   -   303,231 Derivatives 336   -   -   336   24   -   -   24 Public Utilities 461,157   (384,787)   -   76,371   440,926   (368,566)   -   72,360 Other accounts payable 149,099   (13,312)   -   135,788   174,410   (15,248)   -   159,161 TOTAL NONCURRENT LIABILITIES 17,475,275   (1,917,301)   505,729   16,063,703   14,361,110   (2,056,144)   (108,856)   12,196,111                                 SHAREHOLDERS' EQUITY                               Capital 4,793,424   -   -   4,793,424   4,793,424   -   -   4,793,424 Capital reserves 228,322   -   -   228,322   229,956   -   -   229,956 Legal reserves 556,481   -   -   556,481   495,185   -   -   495,185 Earnings retained for investment 326,899   -   -   326,899   -   -   -   - Additional dividend proposed 455,906   -   -   455,906   758,470   -   -   758,470 Other comprehensive income 535,627   -   (572,225)   (36,598)   563,005   -   -   563,005 Retained earnings -   -   56,293   56,293   227,118   -   105,964   333,082   6,896,660   -   (515,932)   6,380,728   7,067,158   -   105,964   7,173,122 Net equity attributable to noncontrolling shareholders 1,510,401   -   -   1,510,401   1,485,352       -   1,485,352 TOTAL SHAREHOLDERS' EQUITY 8,407,061   -   (515,932)   7,891,129   8,552,511   -   105,964   8,658,475                                 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 31,075,687   (2,141,205)   (10,203)   28,924,279   27,413,057   (2,240,364)   (3,416)   25,169,278                                 F -13 Table of Contents                                                                                                 STATEMENT OF INCOME 2012 stated   Retrospective application - Joint arrangements   Retrospective application - Employee benefits   2012 restated   2011 stated   Retrospective application - Joint arrangements   Retrospective application - Employee benefits   2011 restated                                 NET OPERATING REVENUE 15,055,147   (164,272)   -   14,890,875   12,764,028   (89,561)   -   12,674,467 COST OF ELECTRIC ENERGY SERVICES                               Cost of electric energy (7,725,980)   (527,015)   -   (8,252,995)   (6,220,970)   (446,991)   -   (6,667,961) Operating cost (1,620,312)   292,278   (49,672)   (1,377,706)   (1,157,970)   167,597   (79,751)   (1,070,123) Services rendered to third parties (1,355,675)   -   -   (1,355,675)   (1,138,626)   -   -   (1,138,626)                                 GROSS OPERATING INCOME 4,353,181   (399,009)   (49,672)   3,904,499   4,246,463   (368,955)   (79,751)   3,797,757 Operating expenses                               Sales expenses (468,345)   200   -   (468,146)   (364,352)   161   -   (364,191) General and administrative expenses (732,823)   8,459   -   (724,364)   (615,171)   20,109   -   (595,062) Other Operating Expense (380,899)   4,001   -   (376,898)   (216,392)   2,897   -   (213,495)   (1,582,067)   12,660   -   (1,569,408)   (1,195,916)   23,167   -   (1,172,749)                                 INCOME FROM ELECTRIC ENERGY SERVICE 2,771,113   (386,349)   (49,672)   2,335,091   3,050,547   (345,787)   (79,751)   2,625,008                                 INTEREST IN ASSOCIATES AND JOINT VENTURES -   120,680   -   120,680   -   81,859   -   81,859                                 FINANCIAL INCOME (EXPENSE)                               Income 720,332   (13,369)   -   706,963   761,400   (8,636)   -   752,764 Expense (1,487,964)   203,228   -   (1,284,736)   (1,386,778)   230,738   -   (1,156,040)   (767,632)   189,859   -   (577,773)   (625,378)   222,102   -   (403,276)                                 INCOME BEFORE TAXES 2,003,481   (75,810)   (49,672)   1,877,998   2,425,169   (41,827)   (79,751)   2,303,591                                 Social contribution (198,987)   20,969   -   (178,017)   (215,517)   11,353   -   (204,164) Income tax (547,760)   54,841   -   (492,919)   (585,380)   30,474   -   (554,905)   (746,747)   75,811   -   (670,936)   (800,896)   41,827   -   (759,069)                                 NET INCOME 1,256,734   -   (49,672)   1,207,062   1,624,273   -   (79,751)   1,544,522                                 Net income attributable to controlling shareholders 1,225,924   -   (49,672)   1,176,252   1,572,292   -   (79,751)   1,492,541 Net income attributable to non-controlling shareholders 30,810   -   -   30,810   51,981   -   -   51,981                                 Earnings per share attributable to controlling shareholders:                               Basic 1.27   -   (0.05)   1.22   1.63   -   (0.08)   1.55 Diluted 1.26   -   (0.05)   1.20   1.63   -   (0.08)   1.55                         STATEMENT OF COMPREHENSIVE INCOME 2012 stated   Retrospective application - Employee benefits   2012 restated   2011 stated   Retrospective application - Employee benefits   2011 restated                         Net income 1,256,734   (49,672)   1,207,062   1,624,273   (79,751)   1,544,522 Items that will not be reclassified subsequently to profit or loss:                       Gain / (loss) in actuarial plans -   (572,225)   (572,225)   -   185,715   185,715                         Comprehensive income for the year 1,256,734   (621,897)   634,837   1,624,273   105,964   1,730,237                         Comprehensive income attributtable to controlling shareholders 1,225,924   (621,897)   604,027   1,572,292   105,964   1,678,256 Comprehensive income attributable to non controlling shareholders 30,810   -   30,810   51,981   -   51,981 F -14 Table of Contents                                 OPERATING CASH FLOW 2012 stated   Retrospective application - Joint arrangements   Retrospective application - Employee benefits   2012 adjustment   2011 stated   Retrospective application - Joint arrangements   Retrospective application - Employee benefits   2011 adjustment Income for the year, before income tax and social contribution 2,003,481   (75,811)   (49,672)   1,877,998   2,425,169   (41,827)   (79,751)   2,303,591 ADJUSTMENT TO RECONCILE INCOME TO CASH PROVIDED BY OPERATING ACTIVITIES                             - Depreciation and amortization 1,127,103   (148,177)   -   978,926   801,203   (119,886)   -   681,317 Provision for tax, civil and labor risks 95,226   (300)   -   94,926   35,219   (9,689)   -   25,530 Allowance for doubtful accounts 163,903   (92)   -   163,811   -   -   -   - Interest and monetary adjustment 1,099,913   (195,573)   -   904,340   1,105,405   (216,014)   -   889,391 Post-employment benefit gain/loss (16,340)   -   49,672   33,332   (82,953)   -   79,751   162,704 Interest in associates and joint ventures -   (120,680)   -   (120,680)   -   (81,859)   -   (81,859) Losses on the write-off of noncurrent assets 54,579   -   -   54,579   3,688   -   -   (3,688) Deferred taxes (PIS and COFINS) (64,005)   -   -   (64,005)   6,429   -   -   (6,429) Other 21,919   -   -   21,919   -   -   -   -   4,485,779   (540,632)   -   3,945,147   4,294,160   (469,275)   -   3,970,557                                 DECREASE (INCREASE) IN OPERATING ASSETS                               Consumers, concessionaires and licensees (486,380)   50,481   -   (435,899)   (9,184)   3,435   -   (5,749) Dividends and interest on shareholders´ equity receivable -   79,730   -   79,730   -   30,073   -   30,073 Recoverable taxes 48,558   3,214   -   51,772   (12,971)   (9,911)   -   (22,882) Lease (3,969)   -   -   (3,969)   (6,347)   -   -   (6,347) Escrow deposits 8,305   200   -   (8,105)   (164,165)   20,826   -   (143,339) Other operating assets (73,495)   7,234   -   80,729   (61,086)   30,811   -   (30,275)                       -   -     INCREASE (DECREASE) IN OPERATING LIABILITIES                     -   -     Suppliers 435,014   (46,039)   -   (481,053)   122,783   21,394   -   144,177 Other taxes and social contributions (146,600)   (2,521)   -   144,079   54,230   7,581   -   61,811 Post-employment benefit (79,450)   -   -   79,450   (70,318)   -   -   (70,318) Regulatory charges (29,057)   1,457   -   30,514   21,596   277   -   21,873 Other operating liabilities (132,398)   44,472   -   176,870   65,832   (16,341)   -   49,491 CASH FLOWS PROVIDED BY OPERATIONS 4,026,307   (402,403)   -   3,659,266   4,234,530   (381,130)   -   3,999,072 Interests paid (1,018,078)   152,053   -   (866,025)   (981,682)   109,683   -   (871,999) Income tax and social contribution paid (864,145)   95,567   -   (768,578)   (764,195)   46,032   -   (718,163) NET CASH FROM OPERATING ACTIVITIES 2,144,084   (154,783)   -   2,024,663   2,488,653   (225,415)   -   2,263,238                                 INVESTING ACTIVITIES                               Acquisition of subsidiaries net of cash acquired (706,186)   -   -   (706,186)   (814,330)   -   -   (814,330) Acquisition payables paid (172,476)   -   -   (172,476)   (48,608)   -   -   (48,608) Increase cash for business combination -   -   -   -   253,178   -   -   253,178 Increase in property, plant and equipment (1,034,589)   7,480   -   (1,027,109)   (829,701)   136,241   -   (693,460) Financial investments, pledges, funds and tied deposits (14,806)   863   -   (13,943)   18,688   (1,780)   -   16,908 Lease (6,581)   -   -   (6,581)   8,314   -   -   8,314 Additions to intangible assets (1,433,064)   162   -   (1,432,902)   (1,075,072)   2,355   -   (1,072,717) Other (558)   (816)   -   (1,374)   -   -   -   -                                 NET CASH FLOW USED IN INVESTING ACTIVITIES (3,368,260)   7,689   -   (3,360,571)   (2,487,531)   136,816   -   (2,350,715)                                 FINANCING ACTIVITIES                               Increment of cash due to increase of interest in subsidiary -   -   -   -   1,118   (1,118)   -   - Loans, financing and debentures obtained 4,294,254   (7,442)   -   4,286,812   5,536,932   (191,608)   -   5,345,324 Loans, financing and debentures paid, net of derivative paid (1,885,175)   148,087   -   (1,737,088)   (3,157,839)   304,712   -   (2,853,127) Dividend and interest on shareholders’ equity paid (1,406,846)   -   -   (1,406,846)   (1,240,590)   -   -   (1,240,590) Other -   -   -   -   (3,802)   3,802   -   - NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES 1,002,233   140,645   -   1,142,878   1,135,819   115,788   -   1,251,607 (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (221,943)   (6,449)   -   (228,392)   1,136,941   27,189   -   1,164,130 OPENING BALANCE OF CASH AND CASH EQUIVALENTS 2,699,837   (36,412)   -   2,663,425   1,562,897   (63,602)   -   1,499,295 CLOSING BALANCE OF CASH AND CASH EQUIVALENTS 2,477,894   (42,860)   -   2,435,034   2,699,837   (36,411)   -   2,663,425                                 F -15 Table of Contents ( 3 )  SUMMARY OF THE SIGNIFICANT ACCOUNTING POLICIES The main accounting policies used in preparing the Company’s financial statements are set out belowbelow. These policies have been applied consistently to all periods presented in these consolidated financial statements. F - 12 Table of Contents presented. 3.1 Service concession arrangements:Concession agreements IFRIC 12 “Concession Agreements”– Concession Agreements establishes general guidelines for the recognition and measurement of obligations and rights related to concession arrangementsagreements and applies to situations in which the granting power controls or regulates which services the concessionaire should provide with the infrastructure, to whom the services should be provided and at what price, and controls any significant residual interest in the infrastructure at the end of the concession period. TheseConsidering that these definitions havinghave been attended, to, the infrastructure of distribution concessionaires is segregated and moved forward fromat the time of construction complyingin accordance with the provisions of the of the IFRS standards, so that in the financial statements recordare recorded (i) an intangible asset corresponding to the right to operate the concession and collect from the users of public utilities, and (ii) a financial asset corresponding to the unconditional contractual right to receive cash (compensation)(indemnity) by transferring control of the assets to the grantor at the end of the concession.concession to the Grantor.           The value of the concession financial assets of the concession is determined at fair value, based on the remuneration of the concession assets, as established by the regulatory authority.Grantor. The financial asset is classified as available-for-sale and after initial recognition is restated and amortized annuallyremeasured in accordance with changes in the adjustment of its fair value,estimated cash flows, against Other Comprehensive Income – Financial Instrumentsfinance income or expense in equity.profit or loss for the year. The remaining amount is registered inrecorded as intangible assets and correspondsrelates to the right to charge consumers for electric energy distribution services, and is amortized in accordance with the consumption pattern that reflects the estimated economic benefit to the end of the concession. ProvisionServices related to the construction of infrastructure construction services is registeredare recorded in accordance with IAS 11 – Construction Contracts, against a financial asset corresponding to the amount subject to compensation.right to receive cash (indemnity). Residual amounts are classified as intangible assets and will beare amortized over the term of the concession period in accordance withproportion to a curve that reflects the consumption pattern in relation to the economic pattern against which the revenue from consumption of electric energy is collected.benefits. BecauseConsidering that (i) the tariff model that does not provide for a profit margin for the infrastructure construction activity,services, (ii) the way in which the subsidiaries manage  building the buildinginfrastructure by using a high level of outsourcing, and (iii) the fact that there is no provision for gainsprofit margin on construction in the Company‘s business plans, managementManagement is of the opinion that the margins on this operation are irrelevant, and therefore no additional valuemark-up to the cost is considered in the composition of the revenue. The revenue and construction costs are therefore presented in profit or loss for the year at the same amounts.   3.2 Financial instruments:instruments - Financial assets:assets Financial assets are recognized initially on the date that they are originated or on trade date at which the Company or its subsidiaries become one of the parties to the contractual provisions of the instrument. Derecognition of a financial asset occurs when the contractual rights to the cash flows from the asset expire or when the risks and rewards of ownership of the financial asset are transferred. The Company and its subsidiaries hold the following main financial assets:  i.      Classified at fairFair value through profit or loss: these are assets held for trading or designated as such upon initial recognition. The Company and its subsidiaries manage such assets and make purchase and sale decisions based on their fair value in accordance with their documented risk management and/or investment strategy. These financial assets are measured at fair value, and changes therein are recognized in profit or loss for the year. The main financial assets classified by the Company and its subsidiaries in this category are: (i) bank balances and financial investments (Note 5), (ii) marketable securities (Note 7) and (iii) derivatives (Note 34.d). ii.      Held-to-maturity: these are assets that the Company and its subsidiaries have the positive intent and ability to hold to maturity. Held-to-maturity financial assets are recognized initially at fairvalue and subsequent to initial recognition aresubsequently measured at recognizedamortized cost using the effective interest method, less any impairment losses. F - 1316 Table of Contents   The Company and its subsidiaries classified in this category: (i) the security receivable from CESP and (ii) the short-term financial investments required by financing contracts of the indirect subsidiary CPFL Renováveis (Note 7). iii.      Loans and receivables: these are assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value and subsequent to initial recognition,subsequently  measured at recognizedamortized cost using the effective interest method, less any impairment losses. The main financial assets of the Company and its subsidiaries classified in this category are: (i) consumers, concessionaires and licensees (Note 6), and (ii) other credits (Note 12). iv.      Available-for-sale: these are non-derivative financial assets that are designated as available-for-sale or that are not classified in any of the previous categories. Subsequent to initial recognition, interest calculated byusing the effective rateinterest method is recognized in profit or loss as part of the net operatingfinancial income. Changes for recognition atto fair value of these financial assets are recognized in the revaluation reserve in equity.other comprehensive income. The accumulated result in the other comprehensive income is transferred to profit or loss when the asset is realized. The main asset of the Company and its subsidiaries classified in this category isthe financial assets the concession which comprises the right tofor compensation at the end of the concession. The designation of this instrument as available-for-sale is due to its non-classification in the previous categories described. Since Management believes that the compensation will be made at least in accordance with the current tariff pricing model, this instrument cannot be recorded as loans and receivables as the compensation is not fixed or determinable, due to the uncertainty in relation to impairment for reasons other than deterioration of the credit. The main uncertainties relate to the risk of non-recognition of part of these assets by the regulatory authority and their respective replacement values at the end of the concession.concession by the Grantor.   - Financial liabilities:liabilities Financial liabilities are initially recognized on the date that they are originated or on the trade date at which the Company or its subsidiaries become a party to the contractual provisions of the instrument. The Company and its subsidiaries have the following main financial liabilities:  i.      Measured at fair value through profit or loss: these are financial liabilities that are: (i) held for short-term trading, (ii) designated at fair value in order to evaluatematch the effects of recognition of income and expenses to obtain more relevant and consistent accounting information, or (iii) derivatives. These liabilities are registeredrecorded at fair value and for any change in the subsequent measurement of thetheir fair value set throughis subsequently recorded in profit or loss. The Company and its subsidiaries classified the followingii.Other financial liabilities in this category: (i) certain foreign currency debts (Note 17) and (ii) derivatives (Note 34). ii.Not(not measured at fair value through profit or loss:loss): these are other financial liabilities that are not classified in any of the previous categories.category. They are measured initially at fair value lessnet of any attributable transaction cost and subsequently measured at recognizedamortized cost byusing the effective interest method. The main financial liabilities classified in this category are: (i) suppliers (Note 16), (ii) loans and financing (Note 17), (iii) debt charges (Note 17); (iv) debenture charges (Note 18); (v) debentures (Note 18); (vi) public utilities (Note 23); and (vii) other accounts payable (Note 24). The Company accounts for warrantiesguarantees when issued to non-controlled entities or when the warrantyfinancial guarantee is granted to joint ventures at a percentage higher than the Company's interest to cover commitments of jointly-controlled subsidiaries.joint ventures. Such warrantiesfinancial guarantees are initially measured at fair value, by recording (i) a liability corresponding to the risk assumed of non-payment of the debt, which is amortized against financial income simultaneously and in proportion with amortization of the debt, and (ii) an asset equivalent to the right to compensation by the guaranteed party or a prepaid expense under the warranties,guarantees, which is amortized by receipt of cash from other shareholders or on a straight-line basis against financial expenseat the effective interest rate over the term of the warranty.guarantee. After initial recognition, the warranties areliability related to the financial guarantee is assessedperiodically in termsat the higher of the probability of default of the counterparties guaranteed,amount determined in accordance with IAS 37.37 and the amount initially recognized, less accumulated amortization. F - 14 Table of Contents Financial assets and liabilities are offset and the net amount presented when, and only when, there is a legal right to offset the amounts and the intent to settle on a net basis or to realize the asset and settle the liability simultaneously.   - Capital Common shares are classified as equity. Additional costs directly attributable to share issues and share options are recognized as a deduction from equity, net of any tax effects.   F -17 Table of Contents 3.3 Lease agreements: The Company establishes atAt the inception of an agreement is determined whether such arrangement is or contains a lease. A specific asset is the subject of a lease if fulfillment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the lessor the right to control the use of the underlying asset. Leases in which substantially all the risks and rewards are with thelessor are classified as operating leases. Payments/receipts made under operating leases are recognized as expense/revenue in profit or loss on a straight-line basis, over the term of the lease. Leases which involve not only the right to use assets, but also substantially transfer the risks and rewards to the lessee, are classified as finance leases. In finance leases in which the Company or its subsidiaries act as lessee, the assets are capitalized to property, plant and equipment at the inceptioncommencement of the agreementlease against a liability measured at an amount equal to the lower of its fair value and the present value of the minimum future lease payments. The property,Property, plant and equipment isare depreciated in accordance withover the accounting policy applicable to that asset.shorter of the estimated useful life of the asset or the lease term. If the Company or its subsidiaries are the lessor in a finance lease, the investment is initially recognized at the construction/acquisition cost of the asset. In both cases, the financial income/expense is recognized in profit or loss over the term of the lease so as to produce a constant rate of interest on the remaining balance of the investment/liability.   3.4 Property, plant and equipment:  Items of property, plant and equipment are measured at acquisition, construction or formation cost less accumulated depreciation and, if applicable, accumulated impairment losses. Cost also includes any other costs attributable to bringing the assets to the place and in a condition to operate as intended by management,Management, the cost of dismantling and removing the items and restoring the site on which they are located and capitalized borrowing costs on qualifying assets. The assets were measured at the transition date (January 1, 2009) in accordance with the IFRS rules by segregation into two groups: - Assets measured at deemed cost at the transition date: model adopted for assets built and put into long-term service when it is not possible to reconstruct the cost formation or where the cost of the survey is of no benefit in presentation of the financial statements. The cost of these items at the transition date was therefore determined in accordance with market prices (“deemed cost”) and the revalued amounts are presented for both cost and accumulated depreciation. The effects of the deemed cost increased property, plant and equipment against equity, net of related tax effects. - Assets measured at historic cost: model adopted by the Company for recently built assets where the basis for cost formation can be easily confirmed and the values at historic cost approximate the respective market values. In such cases, the subsidiaries performed an analysis to ensure that the cost formation is in accordance with current accounting practices. F - 15 Table of Contents The replacement cost of items of property, plant and equipment is recognized if it is probable that it will involve economic rewardsbenefits for the subsidiaries and if the cost can be reliably measured, and the value of the replaced item is written off. Maintenance costs are recognized in profit or loss as they are incurred. Depreciation is calculated on a straight-line basis, at annual rates of 2% to 20%, taking into consideration the estimated useful life of the assets, as instructed and defined by the regulatory authority. In the case of generators subject to regulation by Decree 2003, of 1996 (the subsidiary CERAN and the jointly-controlled subsidiaries ENERCAN, BAESA and Foz do Chapecó), the assets are depreciated at the rates established by the regulatory authority, provided they do not exceed the term of the concession.Grantor. Gains and losses derived from disposalwrite off of an item of property, plant and equipment are determined by comparing the resources produced by disposal with the carrying amount of the asset, and are recognized net together with other operating income/expense. Assets and facilities used in the regulated activities are tied to these services and may not be removed, disposed of, assigned or pledged in mortgage without the prior and express authorization of ANEEL. ANEEL regulates the release of Public Electric Energy Utility concession assets, granting prior authorization for release of assets of no use to the concession,  intended for disposal andbut determines that the proceeds of the disposal be deposited in a tied bank account for use in theconcession.    3.5 Intangible assets:  Includes rights related to non-physical assets such as goodwill and concession explorationexploitation rights, software and rights-of-way. Goodwill that arises on the acquisition of subsidiaries is measured at the difference between the amount paid and/or payable for acquisition of a business and the net fair value of the assets and liabilities of the subsidiary acquired. F -18 Table of Contents Goodwill is measured at cost less accumulated impairment losses. Goodwill and other intangible assets, if any, with indefinite useful lives are not subject to amortization and are tested annually for impairment. Negative goodwill are registeredis recorded as gainsgain in profit or loss at the timeincome statement in the year of the business acquisition. Intangible assets corresponding to the right to operate concessions canmay have three separate origins, based on the following arguments:as follows:  i.      Acquisitions through business combinations: the portion of goodwill arising from business combinations that correspondedcorresponds to the right to operate the concession is stated as an intangible asset. Such amounts are amortized over the remaining term of the concessions, on a straight-line basis or based on the net income curves projected for the concessionaires, for the remaining term of the concession.as applicable.   ii.      Investments in infrastructure (Application of IFRIC 12 – Service concession arrangements)Concession agreements): Underunder the electric energy distribution concession arrangementsagreements with the subsidiaries, the intangible asset registeredrecorded corresponds to the concessionaires' right to collection usescharge the consumers for use of the concession infrastructure. Since the explorationexploitation term is defined in the agreement, intangible assets with defined useful lives are amortized over the term of the concession in proportion to a curve that reflects the consumption pattern in relation to the anticipated economic rewards.benefits. For further information see Notenote 3.1. Components of theThe infrastructure components are directly tied to the Company’s operationsCompany's operation and may not be removed, disposed of, assigned or pledged in mortgage without the prior and express authorization of ANEEL. In Resolution 20, of 3 February 1999, ANEEL regulates theauthorizes public electric energy utilities concessionaires to release of Public Electric Energy Utility concessionfrom their assets granting prior authorization for release ofproperty and assets considered to be of no use to the concession, intended for disposalin accordance with articles 63 and determines that the proceeds64 of the disposal be deposited in a tied bank account for use in the concession.Decree 41,019, of February 26, 1957, as amended by Decree 56,227 of April 30, 1965.   F - 16 Table of Contents iii.       Public utilities: upon certain generation concessions were granted against paymentthe concessionaires assumed an obligation to pay the federal government for use of a public utility. This obligation was registered onassets. On the signing date of signing the respective agreements at present value, against the Company’s subsidiaries recoded intangible assets account. These amounts,and the corresponding liabilities at fair value. The intangible assets, capitalized by interest incurred on the obligation tountil the start-update,start-up date, are amortized on a straight-line basis over the remaining term of theeach concession.      3.6 Impairment - Financial assets: A financial asset not measured at fair value through profit or loss is reassessed at each reporting date to determine whether there is objective evidence that it is impaired.  Impairment can occur after the initial recognition of the asset and have a negative effect on the estimated future cash flows. The Company and its subsidiaries consider evidence of impairment of receivables and held-to-maturity investment securities for both specific assetsasset and at a collective level for all significant securities. Receivables and held-to-maturity investment securities that are not individually significant are collectively assessed for impairment by grouping together the securities with similar risk characteristics. In assessing collective impairment the Company uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management's judgment as to whether the assumptions and current economic and credit conditions are such that the actual losses are likely to be greaterhigher or lesslower than suggested by historic trends. An impairment loss of a financial asset is recognized as follows: ·      Amortized cost: as the difference between the carrying amount and the present value of the estimated future cash flows discounted at the assetsasset’s original effective interest rate. Losses are recognized in profit or loss and reflectedshown in an allowance account against receivables. Interest on the impaired asset continues to be recognized through the unwinding of the discount. When a subsequent event indicates that the amount of impairment loss has decreased, this reduction isreversed to decrease, the decrease in impairment loss is reversedcredit through profit or loss. F -19 Table of Contents ·      Available-for-sale: byas the difference between the acquisition cost, net of any principal repayment and amortization of the principal, and the current fair value, less any impairment loss previously recognized in profit or loss. Losses are recognized in profit or loss. IfIn the case of financial assets recorded at amortized cost and/or debt instruments classified as available-for-sale, if an increase (gain) is identified in periods subsequent to recognition of the loss, thenperiods, the impairment loss is reversed with the amount of the reversal recognized inthrough profit or loss. However, any subsequent recovery in the fair value of an impaired equity instrument classified as available-for-sale financial asset is recognized in Other Comprehensive Income in equity.other comprehensive income. - Non-financial assets:assets Non-financial assets that have indefinite useful lives, such as goodwill, are tested annually for impairment to check thatassess whether the asset's carrying amount does not exceed theits recoverable value. Other assets subject to amortization are tested for impairment whenever events or changes in circumstance indicate that the carrying amount may be impaired. An impairment loss is recognized if the carrying amount of an asset exceeds its estimated recoverable amount, which is the greater of its value in use and its fair value less costs to sell. The methods used to assess impairment include tests based on the asset's value in use. In such cases, the assets (e.g. goodwill, and intangible assets of concession)concession asset) are segregated and grouped together at the lowest level that generates identifiable cash flowsinflows (the "cash generating unit", or CGU). If there is an indication of impairment, the loss is recognized in profit or loss. Except in the case of goodwill where the lossimpairment which cannot be reversed in the subsequent period, impairment losses are assessedreassessed annually for any possibility to reverse the impairment. Goodwill included in the carrying amount of an investment in an associate, as it is not recognized individually, is tested with the investment, as if it were a single asset.reversals.   F - 17 Table of Contents 3.7 Provisions A provision is recognized if, as a result of a past event, there is a legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. IfWhen applicable, provisions are determined by discounting the expected future cash flowsoutflows at a rate that reflects current market assessment and the risks specific to the liability.   3.8 Employee benefits TheCertain subsidiaries have post-employment benefits andincluding pension plans, recognized by the accrual method in accordance with IAS 19 “Employee benefits” (as revised 2011), and are regarded as sponsors of these plans.plans (note 2.8). Although the plans have particularities, they have the following characteristics:  i.      Defined distributioncontribution plan: a post-employment benefit plan under which the CompanySponsor pays fixed contributions into a separate entity and will have no liability for the actuarial deficits of thisthe plan. The obligations are recognized as an expense in profit or loss in the periods during which the services are rendered. ii.      Defined benefit plan: The net obligation is calculated as the difference between the present value of the actuarial obligation based on assumptions, biometric studies and interest rates in line with market rates, and the fair value of the plan assets as of the reporting date. The actuarial liability is calculated annually by independent actuaries, under the responsibility of Management, using the projected unit credit method. The subsidiaries use the corridor method to avoid fluctuations in the macroeconomic conditions distorting the profit or loss for the period. The accumulated differences between the actuarial estimates and the actual results are therefore not recognized in the financial statements unless they are in excess of 10% of the greater of the plan liabilities and assets. UnrecognizedActuarial gains and losses in excess of this limit are recognized in Other Comprehensive Income when they occur. Net Interest (income and expense) are calculated by applying the discount rate in the beginning of the period to the plan net liability or asset and the defined benefit obligation. When applicable, the cost of past services is recorded immediately in profit or loss for the year over the estimated remaining service time of the employees. loss. If the plan records a surplus and it becomes necessary to recognize an asset, recognition is limited to the total of any unrecognized past service costs and the present value of futureeconomic benefits available in the form of reimbursements or future reductions in contributions to the plan. F -20   Table of Contents 3.9 Joint ventures Until December 31, 2012, the Company consolidated joint ventures  proportionally. Since January 1, 2013, due to adoption of IFRS 11 - Joint Arrangements, the Company no longer consolidates proportionally ENERCAN, BAESA, Chapecoense and EPASA, for which the Company’s interests on these entities are accounted for using the equity method of accounting, which is the Company’s new accounting policy to record joint ventures. The company applied this new standard retrospectively for all periods presented. The effects of adoption of this pronouncement are shown in note 2.8. 3.10 Dividends and Interest on shareholders’ equity Under Brazilian law, the Company is required to distribute a mandatory minimum annual dividend of 25% of net income adjusted in accordance with the Company´s bylaws. According to international accounting practices, IAS 10 a provision may only be made for the minimum mandatory dividend, and dividends declared but not yet approved are only recognized as a liability in the financial statements after approval by the competent body. They will therefore be held in equity, in the “additional dividend proposed” account, as they do not meet the criteria of present liability criteria at the reporting date. As established in the Company's bylaws and in accordance with current Corporate law, the Board of Directors is responsible for declaring an interim dividendsdividend and interestInterest on shareholders’ equity determined in a half-yearly balance sheet. Interim dividends declaredAn interim dividend and interest on shareholders´shareholders’ equity declared at the base date of June 30 areis only recognizedrecorded as a liability in the Company's financial statement after the date of the Board's decision. In accordance with this accounting practice, interestInterest on shareholders’shareholders' equity is no longer showntreated in the statement of incomesame way as dividends and the effects are onlyis also stated in changes in shareholders’ equity. Withholding tax on interest on shareholders' equity and inis debited against shareholders’ equity when proposed by Management, as it fulfills the effective income tax and social contribution rates.obligation criteria at that time.   3.103.11 Revenue recognition Operating income in the course of ordinary activities of the subsidiaries is measured at the fair value of the consideration received or receivable. Operating revenue is recognized when persuasive evidence exists that the most significant risks and rewards have been transferred to the buyer, when it is probable that the financial and economic rewards will flow to the entity, that the associated costs can be reliably estimated, and the amount of the operating income can be reliably measured. F - 18 Table of Contents Revenue from distribution of electric energy is recognized when the energy is billed.supplied. Unbilled incomerevenue related to the monthly billing cycle is appropriated based on the actual amount of energy provided in the month and the annualized loss rate. Historically, the difference between the unbilled revenue and the actual consumption, which is recognized in the subsequent month, has not been material. Revenue from energy generation sales is accounted for based on the assured energy and at tariffs specified in the terms of the contract or the current market price, as applicable. Energy commercialization revenue is accounted for based on bilateral contracts with market agents and duly registered with the Electric Energy Commercialization Chamber - CCEE. No single consumer represents 10% or more of the total billing.billing of each subsidiary. Service revenue is recognized when the service is effectively provided, under a service agreement between the parties. Revenue from construction contracts is recognized bybased on the percentage of completion method (“fixed-price”), and losses, if any, are recognized in profit or loss as incurred.   F -21 Table of Contents 3.113.12 Income tax and Social contribution Income tax and Social contribution expense isare calculated and recognized in accordance with the legislation in force and comprisescomprise current and deferred tax.taxes. Income tax is recognizedand social contribution are recorded in profit or loss except to the extent that it relatesthey relate to an item recognizedrecorded directly in equity or in the Other Comprehensive Income in equity, whichother comprehensive income, where it is recognizedrecorded net of taxthese taxes effects. Current tax istaxes are the expected taxtaxes payable or receivable/to be offset on the taxable income or loss for the year.loss. Deferred tax is recognizedtaxes are recorded for temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the equivalent amounts used for tax purposes.taxes purposes and for taxes loss carryforwards. The Company and certain subsidiaries recorded in their financial statements the effects of taxtaxes loss carry forwardscarryforwards and deductible temporary non-deductible differences, based on projections of future taxable profits, approved annually by the Boards of Directors and examined by the Fiscal Council. The subsidiaries also recognized taxtaxes credits on merged goodwill, which isare amortized in proportion to the individual projected net incomes for the remaining term of each concession agreement. Deferred taxtaxes assets and liabilities are offset if there is a legally enforceable right to offset current taxtaxes liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity. Deferred income tax and social contribution assets are reviewed at each reporting date and are reduced to the extent that it isthey are no longer probable that the related taxtaxes benefit will be realized.   3.123.13 Earnings per share Basic earnings per share isare calculated by dividing the profit or loss for the year attributable to the Company`sCompany’s controlling shareholders by the weighted average number of common shares outstanding during the period.year. Diluted earnings per share is determinedare calculated by dividing the profit or loss for the year attributable to the controlling shareholders, adjusted by the above-mentionedeffects of instruments that potentially would have impacted the profit or loss for the year by the weighted average of the number of shares outstanding, adjusted forby the effects of all dilutive potential convertible notes for the reporting periods, in accordance with IAS 33.   3.133.14 Regulatory assets and liabilities In accordance with the interpretation of IASB/IFRIC, regulatory assets and liabilities cannot be recognized in the financial statements of the distribution subsidiaries, as they do not meet the requirements for assets and liabilities described in the Framework for the Preparation and Presentation of Financial Statements. The rights or offsetting are therefore only reflected in the financial statements, toafter they have been recognized in the extent thatenergy tariffs, based on the tariff reviews and/or adjustments made conducted by the Grantor and on consumption of electric energy is consumed by the captive customers.consumers.   3.143.15 Government grants – CDE (Energy Development Account) Government grants are only recognized when it is reasonably certain that the amounts will be received by the Company. They are recorded in profit or loss for the periods in which the Company recognizes as income the discounts granted in relation to the low-income subsidy and other tariff discounts and as expense the costs of hydrological risk, involuntary exposure and ESS charges. The subsidies received through funds from the CDE (Notes 26.3 and 27.1) have the main purpose to  to offset discounts granted and expenses already incurred in order to provide immediate financial assistance to the distribution companies, in accordance with IAS 20. 3.16 New standards and interpretations adopted A number of IASB standards were issued or revised in 2013 and are mandatory for accounting periods beginning on January 1, 2013: F -22 Table of Contents a)Amendments to IFRS 7 - Disclosures - Offsetting Financial Assets and Financial Liabilities The amendments to IFRS 7 require an entity to disclose information about rights of offset and related arrangements for financial instruments under an enforceable master netting agreement or similar arrangement. The Company first applied these amendments, retrospectively, in the current financial year.  However, as the Company and its subsidiaries are not party of any offset agreement, the application of the amendments had no significant impact on the disclosures or on the amounts recognized in the financial statements. b)New and revised standards on consolidation, joint arrangements, associates and disclosures (IFRS 10, IFRS 11 and IFRS 12). In the current financial year, the Company adopted the above-mentioned standards, except for IAS 27 (as amended in 2011), as it only refers to separate financial statements (not applicable for the Company and its subsidiaries). ·IFRS 10 - Consolidated Financial Statements IFRS 10 replaces the parts of IAS 27 related to consolidated financial statements and SIC 12 Consolidation — Special Purpose Entities. IFRS 10 changes the definition of control so that an investor has control over an investee if it (i) has power over the investee, (ii) is exposed or has rights, to variable returns from its involvement with the investee and (iii) has ability to affect the amount those returns through its power over the investee. An investor must possess all of the above elements to control an investee. Previously, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Management has analyzed these new concepts and concluded that they have no impact on its financial statements, so that those companies that were previously considered as subsidiaries, associate or jointly controlled entities continued to be classified in the same way after IFRS 10. ·IFRS 11 - Joint arrangements Previously, IAS 31 covered three types of joint arrangements - jointly controlled entities, jointly controlled operations and jointly controlled assets. IFRS 11 classifies joint arrangements into two types - joint operations and joint ventures.  Classification is based on the rights and obligations of the parties in relation to the arrangements, taking into account the structure, legal form and contractual terms of the arrangement and other relevant facts and circumstances.  Investments in joint ventures are accounted for using the equity method and proportional consolidation is no longer permitted. Investments in jointly controlled operations are accounted for in such a way that each operator recognizes its assets, liabilities, income and expense. Company management assessed the classification of the investments of Enercan, Baesa, Chapecoense and Epasa in accordance with IFRS 11 and concluded that all these investments, previously classified as jointly controlled entities under IAS 31 and consequently accounted for using the proportional consolidation method, should now be classified under IFRS 11 as joint  venture and accounted for using the equity method of accounting. The change in the method of accounting for these investments was applied in accordance with the relevant transition provisions specified in IFRS 11 and the comparative amounts were restated to reflect the change in the accounting for the investments (note 2.8). ·IFRS 12 - Disclosure of interests in other entities IFRS 12 is a new standard on disclosure applicable to entities with interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, application of IFRS 12 resulted in more extensive disclosures in the consolidated financial statements (for further details, see notes 2.5 and 24.6). F -23 Table of Contents c)  IFRS 13 - Fair Value Measurement   This pronouncement establishes a single framework for measuring fair value and disclosures about fair value measurement. It has a wide scope and applies to financial and non-financial instruments in cases where other IFRS standards require or permit measurement of fair value and disclosure of such measurement, except under certain circumstances. IFRS 13 provides a new definition of fair value, defined as the price that would be received to sell an asset or paid to transfer a liability in a transaction in the principal market or another more advantageous market at the measurement date, under current market conditions, irrespective of whether this price is directly observable or estimated by another valuation technique. Application is required prospectively from January 1, 2013. The standard also requires wide-ranging disclosures about fair value measurement.  For instance, quantitative and qualitative disclosures are required based on the fair value hierarchy for all assets and liabilities measured at fair value, or for which the fair value has been disclosed in the financial statements.  Comparative information need not be disclosed for periods before initial application. The Company's assessment is that application of the standard has had no relevant impact. d)Amendments to IAS 1 Presentation of Items of Other Comprehensive Income The requirements include the requirement to group other comprehensive income in two categories: a)items that will not be reclassified subsequently to profit or loss; and   b)items that will be reclassified subsequently to profit or loss when specific conditions are met. The requirements have been applied retrospectively and the presentation of items of other comprehensive income has therefore been amended to reflect these changes. Application of the amendments to IAS 1 has not resulted in any impact on profit or loss, other comprehensive income and total comprehensive income. e) Amendments to IAS 1 Presentation of the Financial Statements (clarification of the requirements for presenting comparative information) The Annual Improvements to IFRS 2009 - 2011 gave rise to various amendments to IFRS.  The most relevant for the Company were those related to presentation of the balance sheet at the beginning of the earliest comparative period presented and the related supporting notes. The amendments specify that a third column of the balance sheet shall be presented when: (a) an entity applies an accounting policy retrospectively or makes a retrospective restatement or reclassification of items in the financial statements; and (b) the retrospective application, restatement or reclassification has a material effect on the information in the third column of the balance sheet. It is not necessary to present the supporting notes for the amounts in the third balance sheet. As mentioned in note 2.8, the financial statements for 2012 and 2011 are being represented, in accordance with IAS 1. f)IAS 19 Employee Benefits (as revised in 2011) In the current year and applied retrospectively, the Company applied IAS 19 (as revised in 2011), for the first time. This amendment changes the accounting for defined benefit plans and termination benefits. The main changes require recognition of any changes in defined benefit obligations and the fair value of plan assets, and thus eliminate the corridor approach, permitted under the previous version of IAS 19, and accelerate recognition of past service costs. All actuarial gains and losses are recognized immediately in other comprehensive income so that the net pension plan asset or defined benefit obligation reflects the full amount of the plan deficit or surplus. Additionally, interest cost and expected returns on plan assets used in the previous version of IAS 19 arereplaced by recording an amount for "net interest" in accordance with IAS 19 (as revised in 2011), which is calculated by applying the discount rate to the net amount of the defined benefit obligation or plan assets. Furthermore, IAS 19 (as revised in 2011) introduced certain changes in presentation of the defined benefit cost, including more extensive disclosures, such as the sensitivity to significant actuarial assumptions. In accordance with IAS 1 and IAS 8, the Company adjusted the corridor in January 1, 2012 in Retained Earnings. The Company applied the relevant transition provisions and restated the comparative amounts retrospectively, , for the years ended December 31, 2012 and 2011, as mentioned in note 2.8. F -24 Table of Contents 3.17 New standards and interpretations not yet adopted CertainA number of new IFRS standards and amendments to the IFRS standards and interpretations were issued by the IASB and had not yet effectivecome into effect for the year ended December 31, 2011, are listed below: F - 19 Table of Contents ·IAS 1 Financial Statement Presentation2013. Consequently, the Company has not adopted them for the year ended December 31, 2013: ·a)IAS 12 – Income Taxes ·IAS 19 Employee Benefits ·IAS 27 – Consolidated and Separate Financial Statements ·IAS 28 – Investments in Associates ·IFRS 7 – Financial Instruments: Disclosures ·IFRS 9 Financial Instruments ·IFRS 10 Consolidated Financial Statements ·IFRS 11 Joint ArrangementsEstablished new requirements for classification and measurement of financial assets and liabilities. Financial assets are classified in two categories: (i) measured at fair value at initial recognition; and (ii) measured at amortized cost, based on the business model under which they are held and the characteristics of the contractual cash flows. ·IFRS 12 DisclosureWith regard to financial liabilities, the main change comparing to the requirements of InterestsIAS 39 is that any change in Other Entities ·IFRS 13 Fair Value Measurement fair value of a financial liability designated at fair value through profit or loss attributable to changes in the liability's credit risk to be stated in other comprehensive income and not profit or loss, unless such recognition results in incompatibility in profit or loss. The Company is analyzingadoption was tentatively established for annual periods beginning on or after January 1, 2015, but due to the impactimpairment project phase of IFRS 9 has not yet been completed, the IASB decided that this date would not allow entities sufficient time to prepare for application of the standard. The new date will be set when IFRS 9 nears completion. In relation to changes in financial assets, the distribution subsidiaries have relevant assets classified as available-for-sale, in accordance with the current requirements of IAS 39. These assets represent the right for compensation at the end of the subsidiaries' concession terms. These instruments are designated as available-for-sale due to their non-classification in any of other three categories established by IAS 39 (loans and receivables, fair value through profit or loss and held-to-maturity). If these instruments were classified in accordance with the new concepts of fair value or amortized cost, they would be designated and measured at "fair value through profit or loss".  These financial assets correspond to the amount of compensation at the end of the concession, and therefore fall into this category. Based on a preliminary evaluation of initial adoption of these new standardschanges, the Company estimates that there will be no relevant impacts on its financial statements.   b)Amendments to IAS 32 - Offsetting of Financial Assets and Liabilities The amendments to IAS 32 clarify the requirements for offsetting (reconciliation of accounts) of financial assets and financial liabilities and address inconsistencies in the current policy for application of the offsetting criteria. The amendments clarify the meaning of "currently has a legal right of set-off" and "simultaneous realization and settlement". The amendments to IAS 32 are required retrospectively for annual periods beginning on or after January 1, 2014. Based on a preliminary analysis, the Company does not expect relevant impacts on its financial statements.   F -25 Table of Contents c)Amendments to IFRS 10, IFRS 12 and IAS 27, Investment Entities  The amendments to IFRS 10 define an investment entity and require an entity that reports and falls into this category not to consolidate its subsidiaries, but to measure them at fair value through profit or loss. To classify as an investment entity, an entity shall: (i) obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services; (ii) commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and (iii) measures and evaluates the performance of substantially all of its investments on a fair value basis. Changes were consequently made to IFRS 12 and IAS 27 to introduce new disclosure requirements for investment entities. Based on a preliminary analysis, the Company does not expect relevant impacts on its financial statements. d)IFRIC 21 - Levies This interpretation addresses accounting for liabilities for levies if the liability is within the scope of IAS 37. It also addresses accounting for a levy liability for which the amount and term are known. Adoption is required for annual periods beginning on or after January 1, 2014. Based on a preliminary analysis, the Company does not anticipate relevant impacts on its financial statements. e)Addendum to IAS 19 - Defined Benefit Plans Employee contributions These amendments apply to employees or third-party contributions to the defined benefit plans. The objective of the amendments is to simplify accounting for contributions that do not relate to the years of service of the employee, e.g. employee contributions that are calculated in accordance with a fixed percentage of the salary. These amendments are effective from July 1, 2014. Based on a preliminary analysis, the Company does not expect relevant impacts on its financial statements. f)Amendments to IAS 36 - Recoverable amount disclosures for non-financial assets The amendments to IAS 36 address the disclosure of information about the recoverable amount of assets if based on fair value less costs of disposal. Retrospective application of the amendments is required for annual periods beginning after January 1, 2014. Based on a preliminary analysis, the Company does not expect relevant impacts on its financial statements. ( 4 )   DETERMINATION OF FAIR VALUES A number of the Group’sCompany’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. Accordingly, the Company measures fair value in accordance with IFRS 13, which define fair value as an estimate of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions.  F -26 Table of Contents - Property, plant and equipment and intangible assets The fair value of property, plant and equipment and intangible assets recognized as a result of a business combination is based on market values. The marketfair value of property is the estimated amount for which a property could be exchanged on the date of valuation between knowledgeable and willing parties under normal market conditions. The fair value of items of property, plant and equipment is based on the market approach and cost approaches using quoted market prices for similar items when available and replacement cost when appropriate. The fair values of intangible assets are calculated using quoted prices in an active market. Where there is no active market, the fair value will be what the Company would have paid for the intangible assets, on the acquisition date, in an arm’s length transaction between knowledgeable, willing parties based on the best information available. - Financial instruments Financial instruments measured at fair values were recognizedvalued based on quoted prices in an active market, or, if such prices were not available, assessed using pricing models, applied individually for each transaction, taking into consideration the future payment flows, based on the conditions contracted, discounted to present value at market interest rate curves, based on information obtained, when available, from the BM&F, BOVESPA&FBOVESPA S.A – Bolsa de Valores, Mercadorias e Futuros (“BM&FBOVESPA”) and ANDIMA websites, when available.“Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais – ANBIMA” (note 34). Financial assets classified as available-for-sale refer to the right to compensation, to be paid by the Federal Government regarding the assets of the distribution concessionaires when the concession contract is over. The methodology adopted for marking these assets to market is based on the tariff review process for distributors. This review, conducted every four or five years according to each concessionaire, consists of revaluation at marketinvolves assessing the replacement price offor the distribution infrastructure.infrastructure, in accordance with criteria established by the Grantor. This valuation basis is used for pricing the tariff, which is increased annually up to the next tariff review, based on the parameter of the main inflation indices. Although the methodology and criteriaProvisional Measure 579 of September 11, 2012, converted into Law nº 12783 on January 11, 2013, established that, for valuationconcession contracts that expire by 2017, calculation of the amount of compensation due on reversal of the assets will be based on the replacement value method, according to regulatory criteria to be established the Shareholders´Company whengranting authority. In the concession contract will get ended has not yet been defined by the Federal Government, company managementcase of concessions terms that expire after 2017, Management believes that, itas under Provisional Measure 579, compensation will be based at least on valuation of the tariff pricingassets using the new replacement value model. Accordingly, at the time of the tariff review, each concessionaire adjusts the position of the financial asset base for compensation at the amounts ratified by the regulatory authorityGrantor and uses the General Market Price Index - IGP-M as best estimate for adjusting the original base to the fairvalue at subsequent dates, in conformityaccordance with the Tariff Reviewtariff review process. F - 20 Table of Contents   ( 5 )   CASH AND CASH EQUIVALENTS     December 31, 2 2011   December 31, 2010               December 31, 2013   December 31, 2012 restated Bank balances   147,126   361,749 132,130   239,212         Short-term financial investments   2,552,710   1,201,148 4,074,292   2,195,822         Overnight investment (a) 46,809   18,173 Bank deposit certificates (b) 377,556   228,818 Repurchase agreements with debentures (b) 8,970   12,850 Investment funds (c) 3,640,957   1,935,982 Total   2,699,837   1,562,897 4,206,422   2,435,034                 a)Overnight investment, which earn daily interest by investment in repurchase agreements secured on debentures and interest of 20% of the variation in the Interbank Deposit Certificate - CDI. F -27 Table of Contents b)Short-term investments in Bank Deposit Certificates and secured debentures conducted with major financial investments are short-term transactions with institutions operatingthat operate in the Brazilian financial market, with daily liquidity, low credit risk and interest equivalent, on average, interest of 100%to 101% of the Interbank deposit rate (CDI).CDI. c)Amounts invested in an Exclusive Fund, involving investments subject to floating rates to the CDI and tied in federal government bonds, CDBs, secured debentures of major financial institutions, with daily liquidity, low credit risk and interest equivalent, on average, to 101% of CDI.   F - 21 Table of Contents ( 6 )   CONSUMERS, CONCESSIONAIRES AND LICENSEES In the consolidated financial statements, the balance derives mainly from the supply of electric energy. The following table shows the breakdown at December 31, 20112013 and 2010:  2012:                       Amounts   Past due   Total     Past due   Total   coming due   until 90 days   > 90 days   December 31, 2011   December 31, 2010 Amounts coming due   until 90 days   > 90 days   December 31, 2013   December 31, 2012 restated Current                                       Consumer classes                                       Residential   333,396   216,223   24,317   573,936   502,539 263,143   201,332   36,148   500,623   640,582 Industrial   142,520   52,821   32,133   227,474   232,943 107,916   46,494   25,543   179,953   225,681 Commercial   133,522   45,758   15,990   195,270   169,955 121,503   39,663   12,662   173,828   216,422 Rural   33,898   8,240   1,474   43,612   39,094 27,905   5,919   1,199   35,023   45,801 Public administration   28,758   4,954   889   34,601   32,614 29,558   3,939   409   33,906   45,111 Public lighting   27,988   1,957   12,325   42,270   41,749 25,357   3,053   9,724   38,134   49,753 Public utilities   36,275   4,456   829   41,560   40,055 36,362   4,430   390   41,182   49,335 Billed   736,357   334,409   87,957   1,158,723   1,058,949 611,744   304,830   86,075   1,002,649   1,272,683 Unbilled   427,661   -   -   427,661   465,077 627,852   -   -   627,852   597,556 Financing of Consumers' Debts   89,174   9,857   37,851   136,882   112,141 Financing of consumers' debts 64,586   7,533   56,663   128,782   137,246 Free energy   3,674   -   -   3,674   3,727 4,161   -   -   4,161   3,764 CCEE transactions   17,961   -   -   17,961   23,932 21,313   -   -   21,313   18,954 Concessionaires and Licensees   207,204   -   -   207,204   193,852 Provision for doubtful accounts   -   -   (85,318)   (85,318)   (80,692) Concessionaires and licensees 324,535   -   -   324,535   264,268 Allowance for doubtful accounts -   -   (125,758)   (125,758)   (112,239) Other   7,493   -   -   7,493   39,086 24,254   -   -   24,254   22,794 Total   1,489,523   344,266   40,490   1,874,280   1,816,073 1,678,446   312,363   16,980   2,007,789   2,205,024                                       Non current                                       Financing of Consumers' Debts   140,999   -   -   140,999   154,436 Financing of consumers' debts 120,042   -   -   120,042   136,368 Allowance for doubtful accounts (7,489)   -   -   (7,489)   (16,240) CCEE transactions   41,301   -   -   41,301   41,301 41,301   -   -   41,301   41,301 Concessionaires and licensees -   -   -   -   228 Total   182,300   -   -   182,300   195,738 153,854   -   -   153,854   161,658                                         Financing of Consumers' Debts -Refers to the negotiation of overdue receivables from consumers, principally public organizations.administration. 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 (VAT) revenue is received. Allowances for doubtful accounts are based on best estimates of the subsidiaries' managementManagement for unsecured amounts and losses regarded as probable. Electric Energy Trading Chamber (CCEE) transactions -The amounts refer to the sale of electric energy on the short-term market. The noncurrent amount receivable mainly comprises: (i) adjustments of entries made by the CCEE in response to certain legal adjustments, established as a result of suits brought by agentsdecisions (preliminary orders) in the sector; (ii) lawsuits challenging the CCEE accounting processes for the period from September 2000 to December 2002; and (iii)(ii) provisional accounting entries established by the CCEE. The subsidiaries consider that there is no significant risk on the realization of these assets and consequently no provisionvaluation allowance was posted in the accounts.recorded for these transactions. Concessionaires and licenseesLicensees- Refers basically to receivablesaccounts receivable in respect of the supply of electric energy to other concessionaires and licensees, mainly through ourby the subsidiaries CPFL Geração, CPFL Brasil and CPFL Brasil.Renováveis. Allowance for doubtful accounts Changes in the allowance for doubtful accounts are shown below: F - 2228 Table of Contents   At December 31, 2009 (81,974) Provision recognized (108,663) Recovery of revenue 56,995 Write-off of accounts receivable provisioned 52,951 At December 31, 2010 (80,692) Provision recognized (116,722) Recovery of revenue 46,049 Write-off of accounts receivable provisioned 66,047 At December 31, 2011 (85,318)   Consumers, concessionaires and licensees   Other Credits (note 11)   Total At January 1, 2011 restated (80,692)   -   (80,692) Allowance for doubtful accounts (116,718)   -   (116,718) Recovery of revenue 46,049   -   46,049 Write-off of accounts receivable reserved for 66,047   -   66,047 At December 31, 2011 restated (85,314)   -   (85,314) Allowance for doubtful accounts (165,620)   (22,000)   (187,620) Recovery of revenue 23,809   -   23,809 Write-off of accounts receivable reserved for 98,646   -   98,646 At December 31, 2012 restated (128,478)   (22,000)   (150,479) Allowance for doubtful accounts (111,768)   3,999   (107,769) Recovery of revenue 35,016   2,429   37,445 Write-off of accounts receivable reserved for 71,984   2,421   74,405 At December 31, 2013 (133,247)   (13,151)   (146,398)             Current (125,758)   (12,930)   (138,688) Noncurrent (7,489)   (221)   (7,710)     ( 7 )FINANCIAL INVESTMENTS In 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 (“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 by CPFL Brasil using the funds derived from the acquisition of energy produced by that company. At December 31, 2011, from the current balance of R$47,521, R$ 45,668 is related to parent company (R$42,533  at December 31, 2010), and noncurrent is R$ 2,854 (R$ 39,216 at December 31, 2010). 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. The amounts of R$ 72,056, R$8,272 and R$26,783 in non-current refer to financial investments required by financing contracts of the indirect subsidiaries CPFL Renováveis, BAESA and ENERCAN, respectively, and they are supposed to be maintained until such loans have been fully amortized. F - 23 Table of Contents ( 8 )RECOVERABLE TAXES   December 31, 2011   December 31, 2010 December 31, 2013   December 31, 2012 restated Current             Prepayments of social contribution - CSLL 7,347   1,425 3,054     2,690 Prepayments of income tax - IRPJ 1,349   2,791 5,767   10,889 IRRF on interest on equity 14,537   17,654 Income tax and social contribution to be offset 16,810   11,449 14,731   22,891 Withholding tax - IRRF 120,390   40,804 106,627   63,512 IRRF on interest on equity 31,345   30,347 ICMS to be offset 69,329   72,999 77,559   84,487 Social integration program - PIS 5,793   3,801 Social Integration Program - PIS 6,783   8,808 Contribution for Social Security financing- COFINS 22,103   13,437 30,123   36,426 National Social Security Institute - INSS 2,123   2,230 2,279   3,194 Other 874   13,736 972   435 Total 277,463   193,020 262,433   250,987             Noncurrent             Social contribution to be offset - CSLL 36,277   32,390 42,848   39,466 Income tax to be offset - IRPJ 1,001   1,001 11,851   10,707 Social integration program - PIS 3,299   2,855 ICMS to be offset 99,777   126,061 Social Integration Program - PIS 3,073   5,399 Contribution for Social Security financing- COFINS 62,302   - 14,116   24,621 National Social Security Institute - INSS 1,339   - ICMS to be offset 112,423   101,380 Other 74   1,340 1,698   399 Total 216,715   138,966 173,362   206,653         Social contribution to be offset – CSLL– In noncurrent, the balance refers primarily to the final favorable decision in a lawsuit filed by the subsidiary CPFL Paulista. The subsidiary CPFL Paulista is awaiting the outcomenormal course of the administrative procedures for ratification of the credit withpermission by the Federal Revenue Office,tax authority in order to systematically offset the credit. F -29 Table of Contents ICMS (VAT) to be offset -– mainly refers to the credit recorded on acquisition of a permanent asset.assets that result in the recognition of intangible assets and financial assets. PIS and CofinsCOFINS -– In noncurrent, the balance refers primarilybasically to credits recognized by the indirect subsidiaries EPASA andsubsidiary CPFL Renováveis in relation to the acquisition of equipment, which will be realized by depreciation of the equipment. Withholding tax - IRRF– The balance at December 31, 2013 relates mainly to the settlement of derivative instruments.   ( 98 )DEFERRED TAXES 9.1-8.1- Breakdown of tax credits and debits: F - 24 Table of Contents       December 31, 2011   December 31, 2010           Social contribution credit         Tax loss carryforwards   56,436   51,806 Tax benefit of merged goodwill   169,062   172,256 Temporarily non-deductible differences   (112,086)   (12,416) Subtotal   113,413   211,646           Income tax credit         Tax losses   165,736   143,866 Tax benefit of merged goodwill   565,106   583,724 Temporarily non-deductible differences   (699,549)   (33,620) Subtotal   31,293   693,969           PIS and COFINS credit         Temporary non-deductible differences   (6,272)   78           Total   138,434   905,693           Total tax credit   1,176,535   1,183,460 Total tax debit   (1,038,101)   (277,767)                     December 31, 2013   December 31, 2012 restated Social contribution credit/(debit)       Tax losses carryforwards 47,660   47,490 Tax benefit of merged goodwill 121,820   137,773 Deductible temporary differences (185,861)   (198,344) Subtotal (16,381)   (13,081)         Income tax credit / (debit)       Tax losses carryforwards 141,113   141,154 Tax benefit of merged goodwill 416,418   468,844 Deductible temporary differences (519,615)   (553,215) Subtotal 37,917   56,783         PIS and COFINS credit/(debit)       Deductible temporary differences 30,025   58,353         Total 51,560   102,054         Total tax credits 1,168,706   1,257,787 Total tax debits (1,117,146)   (1,155,733)   9.28.2 - Tax benefit of merged goodwill: Refers to the tax credit calculated on the merged goodwill onderived from the acquisition of subsidiaries, as shown in the following table, which has been incorporated and is recordedrecognized in accordance with CVM Instructions nº 319/99 and nº 349/01. The benefit is realized in proportion to amortization of the merged definite life intangible assetgoodwill that gave rise to it, in accordance with the projected net income of the subsidiaries during the remaining term of the concession, as shown in Notenote 14.     December 31, 2011   December 31, 2010     CSLL   IRPJ   CSLL   IRPJ CPFL Paulista   85,709   238,079   94,584   262,734 CPFL Piratininga   19,404   66,584   21,274   73,002 RGE   37,714   155,750   41,117   169,805 CPFL Santa Cruz   3,545   11,148   4,705   14,794 CPFL Leste Paulista   2,024   6,155   2,622   7,986 CPFL Sul Paulista   2,944   9,183   3,767   11,758 CPFL Jaguari   1,745   5,289   2,305   7,002 CPFL Mococa   1,121   3,483   1,456   4,527 CPFL Geração   -   28,167   -   30,877 CPFL Serviços   306   847   425   1,239 CPFL Renováveis   14,552   40,421   -   - Total   169,062   565,106   172,256   583,724                   F - 2530 Table of Contents                   December 31, 2013   December 31, 2012 restated Social contribution   Income tax   Social contribution   Income tax CPFL Paulista 68,938   191,495   77,253   214,590 CPFL Piratininga 16,148   55,414   17,662   60,609 RGE 31,342   129,436   34,268   141,518 CPFL Santa Cruz 1,757   5,525   2,655   8,349 CPFL Leste Paulista 939   2,863   1,493   4,545 CPFL Sul Paulista 1,386   4,332   2,151   6,712 CPFL Jaguari 824   2,516   1,299   3,950 CPFL Mococa 485   1,499   807   2,502 CPFL Geração -   23,282   -   25,613 CPFL Serviços -   57   186   455 Total 121,820   416,418   137,773   468,844                   9.38.3 - Accumulated balances on Deductible temporary nondeductible differences:       December 31, 2011   December 31, 2010     CSLL   IRPJ   PIS/COFINS   CSLL   IRPJ   PIS/COFINS Temporary non-deductible differences:                         Provision for contingencies   19,246   54,009   -   18,908   52,809   - Tariff review - remuneration base   2,628   7,301   2,977   -   -   - Private pension fund   2,218   7,159   -   3,051   9,473   - Allowance for doubtful accounts   7,656   21,306   -   6,895   19,155   - Free energy provision   4,365   12,128   -   3,730   10,362   - Research and Development and Energy Efficiency Programs   12,642   35,118   -   14,611   40,579   - Profit-sharing   2,842   7,886   -   2,338   7,160   - Depreciation rate difference - Revaluation   8,315   23,096   -   9,305   25,846   - Losses in financial investments   804   2,235   -   -   -   - Financial instruments   376   1,045   -   448   1,245   - Recognition of the concession - adjustment of intangible assets   (2,248)   (6,244)   -   (2,475)   (6,878)   - Reversal of regulatory assets and liabilities   (9,789)   (27,191)   (11,086)   (1,077)   (3,030)   (1,399) Actuarial losses on the transition of accounting practices   26,162   72,964   -   26,718   74,215   - Other adjustments changes in practices   18,595   51,652   -   9,673   26,868   - Business combination - CPFL Renováveis   (98,160)   (660,498)   -   -   -   - Accelerated depreciation   (807)   (2,243)   -   -   -   - Other   3,595   7,749   1,838   3,941   9,903   1,477                           Temporarily non-deductible differences - comprehensive income:                         Recognition of the concession - financial adjustment   (30,938)   (85,938)   -   (25,337)   (70,388)   - Property, plant and equipment - deemed cost adjustments   (79,590)   (221,082)   -   (83,145)   (230,939)   -                           Total   (112,086)   (699,549)   (6,272)   (12,416)   (33,620)   78                                                                             December 31, 2013   December 31, 2012 restated   Social contribution   Income tax   PIS/COFINS   Social contribution   Income tax   PIS/COFINS Deductible temporary differences                       Provision for tax, civil and labor risks 32,746   90,959   -   22,700   63,587   - Post-employment benefit obligation 2,004   5,566   -   1,387   4,850   - Allowance for doubtful accounts 13,379   37,163   -   13,274   36,871   - Free energy provision 5,429   15,081   -   4,884   13,569   - Research and Development and Energy Efficiency Programs 11,471   31,864   -   12,570   34,913   - Reserves related to personnel 3,522   9,785   -   3,151   8,741   - Depreciation rate difference 7,212   20,033   -   7,599   21,108   - Recognition of the concession - adjustment of intangible assets (IFRS) (1,798)   (4,995)   -   (2,024)   (5,621)   - Recognition of the concession - financial adjustment (IFRS) (36,093)   (100,258)   (22)   (43,062)   (119,617)   - Reversal of regulatory assets and liabilities (IFRS) 27,218   75,605   30,046   48,048   133,468   57,475 Actuarial losses (IFRS) 33,178   92,464   -   25,587   71,365   - Other adjustments changes in practices (IFRS) 13,758   38,081   -   12,247   34,020   - Accelerated depreciation (9)   (26)   -   (48)   (133)   - Other 4,719   9,606   -   9,509   20,211   878 Deductible temporary differences - Other comprehensive income:                       Property, plant and equipment - deemed cost adjustments (IFRS) (65,079)   (180,774)   -   (69,017)   (189,597)   - Deductible temporary differences - Business combination - CPFL Renováveis         -               Deferred taxes - asset:                       Fair value of property, plant and equipment (net of value added of assets) 27,050   75,138   -   28,644   79,566   - Deferred taxes - liability:                       Value added derived from determination of deemed cost (6,970)   (19,360)   -   (7,255)   (20,132)   - Value added of assets received from the former ERSA (93,120)   (258,667)   -   (96,452)   (267,924)   - Intangible asset - exploration right/authorization Jantus, Santa Luzia, Complex Atlântica and BVP (155,471)   (431,863)   -   (163,767)   (454,907)   - Other temporary differences (9,006)   (25,016)   -   (6,319)   (17,553)   - Total (185,861)   (519,615)   30,025   (198,344)   (553,215)   58,353                           The line “business combination” refers to the effectsF -of deferred tax debts on the intangible assets acquired in the CPFL Renováveis business combination. In August 2011, at the time of initial recognition of the business combination, R$ 378,606 was recorded for deferred income tax and social contribution on the appreciation of the net assets acquired at that date. Additionally, as a result of the acquisition of Jantus and Santa Luzia, the amounts of R$ 349,400 and R$ 29,977, respectively, were recorded in December 2011. The details of this transaction are provided in Note 14.4.31 Expected recovery estimates   The estimate of recovery of the deferred tax credits recorded in noncurrent assets, derived from temporary non-deductible differences and tax benefit of the merged goodwill, is based on the projections of future profit or loss, approved by the Board of Directors and reviewed by the Audit Committee, in accordance with the following table:       2012   142,764 2013   110,881 2014   105,473 2015   88,505 2016   78,724 2017 A 2019   195,601 2020 A 2022   158,691 2023 A 2025   121,563 2026 A 2028   94,836 2029 A 2031   79,497 Total   1,176,535 F - 26 Table of Contents 9.48.4 - Reconciliation of the amounts of income tax and social contribution reported in the income statements for 2011, 20102013, 2012 and 2009:2011:             2011   2010   2009     CSLL   IRPJ   CSLL   IRPJ   CSLL   IRPJ Income before taxes   2,361,957   2,361,957   2,385,372   2,385,372   2,472,977   2,472,977 Adjustments to reflect effective rate:                         - Amortization of intangible asset acquired   115,947   147,784   115,782   146,194   121,319   149,623 - Realization CMC   -   -   -   -   13,549   - - Tax incentives - PIIT   (13,480)   (13,480)   (6,058)   (22,380)   (483)   (483) - Effect of presumed profit system   (94,579)   (143,977)   (17,622)   (20,448)   (34,090)   (39,790) - Other permanent additions/(eliminations), net   65,674   30,485   28,427   (19,008)   2,256   (20,876) - Elimination Law 11.941/09 art. 4   135   541   -   -   (32,143)   (32,143) Calculation base   2,435,654   2,383,311   2,505,901   2,469,730   2,543,385   2,529,308 Statutory rate   9%   25%   9%   25%   9%   25% Tax credit result   (219,209)   (595,828)   (225,531)   (617,433)   (228,905)   (632,327) - Tax credit allocated   9,337   26,127   4,296   13,333   20,557   56,566 Total   (209,872)   (569,701)   (221,235)   (604,100)   (208,348)   (575,761)                           Current   (197,365)   (538,543)   (200,878)   (554,443)   (138,771)   (366,432) Deferred   (12,507)   (31,157)   (20,357)   (49,657)   (69,577)   (209,329)                           2013   2012 restated   2011 restated   Social contribution   Income tax   Social contribution   Income tax   Social contribution   Income tax Income before taxes 1,519,200   1,519,200   1,877,998   1,877,998   2,303,591   2,303,591 Adjustments to reflect effective rate:                       Equity in subsidiaries (120,868)   (120,868)   (120,680)   (120,680)   (81,859)   (81,859) Amortization of intangible asset acquired 101,886   131,161   107,888   137,747   115,947   147,784 Tax incentives - PIIT (Technological innovation incentive program) (10,882)   (10,882)   (11,895)   (11,895)   (13,480)   (13,480) Effect of presumed profit system (42,151)   (74,675)   (103,369)   (146,158)   (94,579)   (143,977) REFIS - Law n° 11.941/2009 - art 4° (12,739)   (12,739)   -   -   -   - Adjustment of excess and surplus revenue of reactive 74,318   74,318   32,260   32,260   -   - Tax incentive - Exploitation profit -   (53,200)   -   (41,756)   -   - Other permanent additions, net 50,489   15,871   125,606   101,119   143,835   110,792 Calculation base 1,559,254   1,468,187   1,907,810   1,828,636   2,373,455   2,322,852 Statutory rate 9%   25%   9%   25%   9%   25% Tax debit result (140,333)   (367,047)   (171,703)   (457,159)   (213,611)   (580,713) Tax credit (not recorded) / recorded, net (16,422)   (46,361)   (6,315)   (35,759)   9,446   25,808 Total (156,755)   (413,408)   (178,017)   (492,919)   (204,164)   (554,905)                         Current (147,107)   (374,874)   (228,710)   (610,418)   (180,242)   (492,047) Deferred (9,648)   (38,534)   50,692   117,499   (23,922)   (62,859)   Amortization of Intangibleintangible asset acquired– business combinations -Refers to the non-deductible portion of amortization of intangible assets derived from the acquisition of investees. Tax Credit Allocatedcredit (not recorded) / recorded, net– Credit Credits not recorded/recorded by the Company on tax loss carry forwardscarryforwards in the light of a revision of projections, which resulted in a margin recorded to complete the accounting entries.   9.58.5 Unrecognized tax credits The parent company has unassessed tax loss and social contribution carryforwards ofamounting to R$ 122,371121,621 that could be recognized in the future, in accordance with reviews of the annual projections of taxable income.  TheSome subsidiaries CPFL Renováveis and Sul Geradoraalso have income tax and social contribution assetscredits on tax loss carryforwards of R$ 72,158 and R$ 72,511, respectively, that were not recognized as it could not be reliable estimated whether future taxable profit will be available against which they can be utilized. In December 31, 2013, the main subsidiaries that have such credits of Income Tax and Social Contribution are CPFL Renováveis (R$ 125,072), Sul Geradora (R$ 72,523) e CPFL Jaguari Geração (R$ 1,779). There is also no prescriptive period for use of the tax loss carryforwards.   ( 109 )  LEASES   The subsidiary CPFL Brasil providesActivities to provide services and leases equipment relating to own power production,self-produced, are mainly performed by the subsidiary CPFL Serviços, in which it is the lessor, and the main risks and rewards of ownership of the assets are transferred to the lessees. The essence is to lease equipment of own power production in order to attend the customers who require higher consumption of electricity at peak hours (when tariffs are higher). In addition, the company offers maintenance and operation services. The subsidiary constructs the power generation plant with own sources at the customer’s place. Since the equipment is operating, the customer makes monthly fixed payments. These investments are recorded at the present value of the minimum lease payments receivable. These payments received are registeredrecorded as amortization of investmentthe minimum lease payments and the financial revenue is recorded in the profit or loss byin accordance with the terms ofeffective interest rate during the contracts.lease term. The investments produced financial revenueincome during 20112013 were R$ 14,615 (R$ 12,031 in 2012 and R$  5,625 (R$ 5,363  in 2010)2011). F - 2732 Table of Contents     December 31, 2011   December 31, 2010         Present value of the minimum payments receivable 101,153   102,769         Unrealized financial income (72,051)   (71,701)         Gross investment 29,102   31,068                         Current 4,581   4,754         Noncurrent 24,521   26,315                                           Within 1 year   1 to 5 years   Over 5 years   Total Present value of the minimum payments receivable 4,581   14,821   9,700   29,102                                     December 31, 2013   December 31, 2012 restated         Gross investment 93,398   93,541         Financial income unrealized (44,824)   (52,098)         Present value of minimum lease payments receivable 48,574     41,443                         Current 10,757   9,740         Noncurrent 37,817   31,703                           Within 1 year   1 to 5 years   Over 5 years   Total Gross investment 15,202   45,949   32,248   93,398 Present value of minimum lease payments receivable 10,757     26,090   11,727   48,574 At December 31, 2011,2013, there are no (i) unsecured residual amounts that benefit the lessor; (ii) provisions for uncollectible minimum lease payments receivable; or (iii) contingent payments recognized as revenue during the period.   ( 1110 ) FINANCIAL ASSET OF CONCESSION   At December 31, 2009January 1, 2011 restated 674,029934,646 AdditionsNoncurrent 179,501934,646 Marked to market 82,637 Disposal (1,521) At December 31, 2010 934,646 Additions 381,027 MarkedAdjustments to marketexpected cash flow 63,06463,212 Disposal (2,073)(2,221) At December 31, 2011 restated 1,376,664 Noncurrent 1,376,664 Additions 555,101 Effect of changing in amortization rates 294,785 Adjustments to expected cash flow 159,195 Disposal (10,211) Compensation SHP Rio do Peixe II 1,706 At December 31, 2012 restated 2,377,240 Current 34,444 Noncurrent 2,342,796 Additions 536,417 Adjustments to expected cash flow (66,620) Receipt (34,444) Disposal (12,659) Spin-off generation activity on the distribution (note 14.4) (12,862) As of December 31, 2013 2,787,073 Noncurrent 2,787,073 The balance refers to the fair value of the financial asset in relation to the right established in the concession arrangementsagreements of the energy distributors and transmitting to receive payment on reversal of the assets to the Grantor at the end of the concession. UnderFor the energy distribution, in accordance with the current tariff model, interest on theremuneration for this asset is recognized in profit or loss on billing ofto the consumers and it is realized on receipt of the electric energy bills. Additionally, the difference to adjust the balance to its expected cash flows is recorded against the financial income/expense account in profit or loss for the year, in accordance with the new replacement amount (BRR methodology). F -33 Table of Contents For the energy transmission, remuneration for this asset is recognized in accordance with the internal rate of return, which takes into account the investment made and the allowed annual income to be received during the remaining term of the concession. The differenceadjustment in the estimated cash flow includes an (i) expense of R$ 66,851 in relation to the adjustmentdistribution subsidiaries, recorded as financial expense; and (ii) income of R$ 231 in relation to market valuethe subsidiary CPFL Transmissão, recorded as other operating income, since it is recognized againstcomponent of the Other comprehensiveallowed annual income – Financial Instrumentsfor the use of network to ONS (National System Operator). The amount of R$ 36,917 (originally R$ 34,444 established in equity.current assets and updated until the receiving) was received in 2013, represented by the residual balance of the assets of the concession infrastructure, at replacement values on the transaction date, in relation to compensation for the concession for the Rio do Peixe II Plant, previously held by the subsidiary CPFL Leste Paulista. As mentioned in note 14, as a result of the corporate restructuring in June 2013, the generation assets of the subsidiaries CPFL Leste Paulista, CPFL Jaguari, CPFL Sul Paulista, and CPFL Mococa were spun off and transferred to CPFL Centrais Geradoras. The financial concession asset of R$ 12,862 related to the generation assets previously recorded for those subsidiaries was also transferred to the subsidiary CPFL Centrais Geradoras, forming part of the subsidiary's total fixed assets.   ( 1211 ) OTHER CREDITS   F - 28 Table of Contents   Current       Noncurrent     December 31, 2011   December 31, 2010   December 31, 2011   December 31, 2010 Current Noncurrent Receivables from venturers   27   17,155   -   - December 31, 2013   December 31, 2012 restated   December 31, 2013   December 31, 2012 restated Advances - Fundação CESP   15,518   7,995   -   - 9,113   7,784   -   - Advances to suppliers   37,951   16,677   -   - 17,159   17,917   -   - Pledges, funds and tied deposits   1,548   2,107   115,517   89,050 7,695     53,566   174,538   191,931 Fund tied to foreign currency loans   -   -   29,774   21,222 -     -   -   34,287 Orders in progress   156,524   50,860   -   - 273,496   221,883   -   - Reimbursement RGR   4,590   5,683   1,909   1,909 Advance energy purchase agreements   44,399   15,817   58,620   65,786 Outside services 6,929   8,214   -   - Advance to energy purchase agreements 14,614     47,832   30,981   40,254 Collection agreements 61,771   65,214   -   - Prepaid expenses   5,695   29,550   1,355   2,722 39,207   9,258   1,359   3,132 Collection agreements   57,377   66,882   -   - Receivables from Resources provided by the Energy Development Account - CDE 170,543     24,972   -   - Receivables - Business Combination -   -   13,950   13,950 Advances to employees 11,097   6,806   -   - Allowance for doubtful accounts (12,930)   (20,603)   (221)   (1,397) Other   87,139   40,719   72,287   41,412 74,689   68,040   75,488   61,657 Total   410,768   253,445   279,461   222,100 673,383   510,880   296,096   343,814                   Advances - Fundação CESP –Refers to advances to employee for welfare programs and operational maintenance of the entity. Pledges, Fundsfunds and Tied Deposits:tied deposits:collateral offered to guarantee CCEE operations and guarantees granted to jointly-owned subsidiaries.short-term cash investments required by the subsidiaries’ loans contracts. Fund Tied to Foreign Currency Loans: These are guarantees offered when negotiating or renegotiating loans. Orders in progress: Refers primarily to amountEncompasses costs and revenue related to ongoing decommissioning or disposal of intangible assets and the (i)service costs related to expenditure on projects in progress under the Energy Efficiency and Research and Development Program (P&D)programs, introduced by resolutions 300/2008 and (ii) Energy Efficiency Program (PEE), both established316/2008 applied until October 2012 and amended by ANEEL.resolution 504/2012 . On termination of the respective projects, balances are amortized against the respective liability recorded in Other Accounts Payable (note 23). 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. Advance Energy Purchase Agreements:to energy purchase agreements:Refers to prepayments of energy purchases by the subsidiaries, which will be liquidated on delivery of the energy to be supplied. Collection agreements -agreements:Refers to (i) agreements between the distributors and city halls and companies for collection  through the electric energy bills and subsequent pass-through  of amounts related to public lighting, newspapers, healthcare, residential insurance, etc.; ande (ii) receipts by  CPFL Brasil, through the CPFL Total, division, to be passed on subsequently to the customers who use the collection services provided by that division.subsidiary.  F - 2934 Table of Contents Receivables from Resources provided by the Energy Development Account - CDE – refer to: (i) low income subsidies totaling R$ 11,808; (ii) other tariff discounts granted to consumers amounting to R$ 70,254; and (iii) increases related to System Service Charge (“ESS”) – energy security, hydrological risk, involuntary exposure and CVA for System Service Charge ESS and energy, amounting to R$ 88,481. ( 12 )INVESTMENTS IN JOINT VENTURES                           Shareholders' equity interest   Equity in joint ventures Joint Ventures   December 31, 2013   December 31, 2012 restated   2013   2012 restated   2011 restated                       Baesa   153,175   148,606   4,618   (6,476)   10,025 Enercan   391,728   393,738   67,640   68,493   56,460 Foz do Chapecó   390,822   370,627   60,809   46,501   (3,375) EPASA   82,839   93,801   (10,961)   13,457   19,960 Net residual value of step up of assets 14,116     15,355   (1,238)   (1,294)   (1,210)     1,032,681   1,022,126   120,868   120,680   81,859 12.1 - Dividends and Interest on shareholders’ equity receivable:                           Dividends   Interest on Shareholders´ Equity   Total Investee December 31, 2013   December 31, 2012 restated   December 31, 2013   December 31, 2012 restated   December 31, 2013   December 31, 2012 restated Investco -   -   2,527   2,894   2,527   2,894 EPASA 14,891   14,891   -   -   14,891   14,891 BAESA 49   143   -   -   49   143 ENERCAN 16,054   18,549   -   -   16,054   18,549 Foz do Chapecó 21,744   18,556   -   -   21,744   18,556   52,738   52,139   2,527   2,894   55,265   55,033 12.2 – Joint Ventures Summarized financial information of the joint ventures at December 31, 2013 and 2012 and for the years ended on December 31, 2013, 2012 and 2011 are as follows: F -35 Table of Contents     December 31, 2013 Joint venture   Enercan   Baesa   Chapecoense   Epasa Current assets   97,961   58,980   144,018   171,387 Cash and cash equivalents   21,483   36,010   44,924   19,173 Noncurrent assets   1,296,035   1,267,818   3,200,402   644,508 Current liabilities   136,414   131,196   274,679   279,753 Financial liabilities   88,969   125,372   206,968   158,049 Noncurrent liabilities   453,592   583,045   2,303,424   374,763 Financial liabilities   416,513   573,781   2,295,940   374,696 Shareholders' equity   803,990   612,557   766,317   161,379                   Net operating revenue   465,617   277,940   669,126   585,535 Depreciation and amortization   (50,586)   (51,374)   (133,035)   (32,298) Interest income   14,480   4,386   12,049   972 Interest expense   (45,363)   (39,658)   (140,427)   (37,609) Expense or revenue income tax   (69,785)   (9,651)   (60,844)   10,750 Net income   138,453   18,026   119,233   (16,442) Equity Interests and voting capital   48.72%   25.01%   51%   52.75%                                         December 31, 2012 Joint venture   Enercan   Baesa   Chapecoense   Epasa Current assets   111,322   70,177   120,896   213,816 Cash and cash equivalents   27,386   34,272   32,051   8,579 Noncurrent assets   1,360,310   1,319,610   3,301,499   733,470 Current liabilities   138,187   129,139   274,462   276,773 Financial liabilities   86,314   119,157   211,392   244,030 Noncurrent liabilities   525,331   666,363   2,421,214   492,692 Financial liabilities   497,236   658,532   2,406,036   441,680 Shareholders' equity   808,114   594,285   726,719   177,821                   Net operating revenue   418,115   282,114   626,098   362,302 Depreciation and amortization   (60,670)   (120,060)   (135,267)   (34,718) Interest income   7,646   5,261   8,566   2,026 Interest expense   (55,072)   (50,436)   (163,288)   (47,118) Expense or revenue income tax   (78,065)   (34,387)   (43,557)   (13,198) Net income   140,575   (25,896)   91,178   25,510 Equity Interests and voting capital   48.72%   25.01%   51%   52.75%                       December 31, 2011 Joint venture   Enercan   Baesa   Chapecoense   Epasa Net operating revenue   396,762   286,089   449,271   214,645 Depreciation and amortization   (53,077)   (54,268)   (132,271)   (23,051) Interest income   10,629   6,551   12,029   2,954 Interest expense   (67,018)   (63,088)   (176,128)   (70,362) Expense or revenue income tax   (58,293)   (17,941)   2,989   (20,261) Net income   115,879   40,090   (6,619)   39,128 Equity Interests and voting capital   48.72%   25.01%   51%   52.75% F -36 Table of Contents The loans obtained from the BNDES by the joint ventures ENERCAN, BAESA and Foz do Chapecó establish restrictions on payment of dividends to the subsidiary CPFL Geração in excess of the mandatory minimum of 25% without the prior consent of the BNDES. 12.3 - Jointly controlled operations Through its fully-owned subsidiary CPFL Geração, the Company holds part of the assets of the Serra da Mesa hydropower plant, located on the Tocantins River, in Goias State. The concession and operation of the hydropower plant belong to Furnas Centrais Elétricas S.A. In order to maintain these assets operating jointly with Furnas, CPFL Geração as assured of a 51.54% interest in the installed power of 1,275 MW (657 MW) and the guaranteed mean energy of 671 MW (mean 345.8 MW). F -37 Table of Contents   ( 13 ) PROPERTY, PLANT AND EQUIPMENT                                   Land   Reservoirs, dams and water mains   Buildings, construction and improvements   Machinery and equipment   Vehicles   Furniture and fittings   In progress   Total At January 1, 2011 restated 39,628   332,443   1,170,666   1,320,599   3,266   12,386   314,659   3,193,646 Historic cost 41,563   530,347   1,480,466   2,009,449 �� 7,330   15,774   314,659   4,399,588 Accumulated depreciation (1,934)   (197,906)   (309,800)   (688,850)   (4,064)   (3,388)   -   (1,205,942)                                 Additions 2,214   3,712   19,892   7,333   705   382   666,136   700,374 Disposals (247)   (200)   (640)   (5,264)   (341)   (173)   17,379   10,513 Transfers 34,034   6,685   (2,076)   (7,883)   288   2,582   (33,631)   (2) Transfers - other assets -   -   -   5,373   -   -   (17,525)   (12,152) Depreciation (967)   (11,192)   (57,046)   (56,892)   (944)   (1,851)   -   (128,892) Business combination 57,180   -   973,636   831,749   165   949   45,938   1,909,617 Other -   -   (15)   (328)   (23)   (13)   (1)   (379)                                 At December 31, 2011 restated 131,843   331,446   2,104,415   2,094,687   3,117   14,262   992,954   5,672,725 Historic cost 134,745   540,560   2,527,002   2,946,214   8,152   19,867   992,954   7,169,494 Accumulated depreciation (2,900)   (209,114)   (422,587)   (851,526)   (5,035)   (5,607)   -   (1,496,770)                                 Additions 1,185   21,105   18,648   68,574   315   257   983,903   1,093,987 Disposals (1,192)   (2,086)   (4,002)   (6,020)   (775)   (371)   (68)   (14,514) Reversal of provision to environmental costs -     (66,763)   -   -   -   -   -   (66,763) Transfers (17,343)   701,548   (557,182)   1,232,197   3,077   3,071   (1,365,368)   - Reclassification and transfers to other assets - cost -     -   -   3,939   -   -   (55)   3,884 Reclassification of cost -   217,435   (333,674)   115,355   14   870   -   - Depreciation (3,885)   (15,523)   (74,024)   (188,218)   (1,085)   (2,332)   -   (285,067) Disposal of depreciation -   995   157   2,586   696   282   -   4,715 Reclassification and transfers to other assets - depreciation -     (71,606)   92,615   (20,970)   10   (50)   -   - Business combination -   -   65,470   606,620   -   (2)   23,006   695,093                                 At December 31, 2012 restated 110,609   1,116,551   1,312,422   3,908,751   5,370   15,986   634,372   7,104,060 Historic cost 117,394   1,459,396   1,677,795   5,044,085   10,772   23,956   634,372   8,967,768 Accumulated depreciation (6,786)   (342,845)   (365,372)   (1,135,334)   (5,402)   (7,969)   -   (1,863,708)                                 Additions -   926   2,551   1,000   373   38   926,029   930,916 Disposals -   -   -   (1,071)   (847)   (24)   (153)   (2,095) Reversal of provision to environmental costs -   -   (17,747)   -   -   -   -   (17,747) Transfers 4,203   13,988   172,530   373,362   19,531   543   (584,156)   - Reclassification and transfers to other assets - cost (15)   440   (200)   15,946   17   117   422   16,727 Reclassification of cost 1,286   (104,176)   (119,373)   230,290   3   (343)   (7,687)   - Depreciation (4,089)   (43,995)   (71,159)   (206,087)   (2,379)   (2,961)   -   (330,670) Disposal of depreciation -   -   -   103   527   15   -   645 Reclassification and transfers to other assets - depreciation -   (947)   38,524   (35,808)   22   377   -   2,169 Spin-off generation activity on the distribuition - cost 3,953   5,420   3,070   7,443   83   (10)   -   19,959 Spin-off generation activity on the distribuition - depreciation -   (1,680)   (2,225)   (2,595)   (38)   (6)   -   (6,544)                                 At December 31, 2013 115,946   986,527   1,318,394   4,291,334   22,661   13,732   968,826   7,717,419 Historic cost 126,820   1,375,993   1,718,629   5,671,053   29,928   24,277   968,826   9,915,527 Accumulated depreciation (10,874)   (389,466)   (400,235)   (1,379,719)   (7,267)   (10,545)   -   (2,198,107)                                 Average depreciation rate 2013 3.86%   3.16%   2.75%   3.91%   14.23%   9.38%         Average depreciation rate 2012 3.86%   2.83%   2.99%   4.15%   16.16%   6.50%         Average depreciation rate 2011 -   2.33%   4.23%   5.10%   20.00%   10.00%                                                                                 Consolidated                                       Land   Reservoirs, dams and water mains   Buildings, construction and improvements   Machinery and equipment   Vehicles   Furniture and fixtures   In progress   Total At December 31, 2009   53,346   949,598   1,265,088   1,633,723   2,038   5,792   1,303,454   5,213,039 Historic cost   54,541   1,192,883   1,537,339   2,298,439   4,927   8,174   1,303,454   6,399,757 Accumulated depreciation/amortization   (1,195)   (243,285)   (272,251)   (664,715)   (2,889)   (2,382)   -   (1,186,717)                                   Additions   -   3,851   3,471   (13,181)   1,457   2,044   754,298   751,940 Disposals   (48)   -   -   (15,508)   (355)   (37)   (417)   (16,365) Transfers   128,279   617,401   133,578   385,307   1,859   6,261   (1,272,685)   - Depreciation   (1,195)   (37,154)   (47,255)   (74,123)   (1,304)   (1,120)   -   (162,151)                                   At December 31, 2010   180,382   1,533,696   1,354,882   1,916,219   3,695   12,940   784,650   5,786,465 Historic cost   182,772   1,814,135   1,674,388   2,655,057   7,888   16,442   784,650   7,135,333 Accumulated depreciation/amortization   (2,390)   (280,439)   (319,506)   (738,838)   (4,193)   (3,502)   -   (1,348,868) Additions   2,214   3,712   19,892   7,333   705   382   802,376   836,614 Disposals   (247)   (200)   (640)   (8,023)   (341)   (173)   (174)   (9,799) Transfers   8,837   109,030   33,497   394,508   374   3,667   (549,914)   - Transfers - other assets   -   -   -   10,341   -   -   (17,525)   (7,184) Depreciation   (1,513)   (68,346)   (65,628)   (96,051)   (1,092)   (1,980)   -   (234,610) Business combination   57,180   -   973,636   831,749   165   949   45,938   1,909,617 Changes in interests   -   -   510   10,159   3   36   265   10,973                                   At December 31, 2011   246,853   1,577,892   2,316,149   3,066,235   3,509   15,823   1,065,615   8,292,076 Historic cost   250,757   1,926,695   2,757,021   4,006,925   8,798   21,695   1,065,615   10,037,506 Accumulated depreciation   (3,903)   (348,802)   (440,873)   (940,691)   (5,289)   (5,872)   -   (1,745,430)                                   Average depreciation rate   -   2.33%   4.23%   5.10%   20.00%   10.00%   -                                       F - 3038 Table of Contents   In the consolidated financial statements, the figure for construction in progress refers mainly to works in progress of theoperating subsidiaries and/or those under development, in particular, the projects of CPFL Renováveis, which has construction in progress ofamounting to R$ 943,831.905,444.   The following are allocated in business combinations: i) the property, plant and equipment of ERSA, amounting to R$ 956,447, which has been consolidated in CPFL Renováveis since August 2011; and ii) the assets of Jantus and Santa Luzia, amounting to R$ 715,864 and R$ 237,307, respectively, which have been consolidated since December 2011. As mentioned in item 3.4, assets not acquired recently were measured at deemed cost at the transition date, while the assets of recently-built plants are recognized at cost, which in Management’s opinion, approximates market value. Property, plant and equipment were valued at their market valuesbased on an appraisal carried out by an independent engineering company specializing in equity valuation. Added value of R$ 1,002,991 was determined at January 1, 2009 and recognized in the revaluation reserve in equity. The amortization of the value-added with an impact on the profit or loss for the years ended December 31, 2011, 2010 and 2009, determined based on the remaining useful life of the assets, was R$ 37,481, R$ 39,605 and R$39,552. In conformityaccordance with IAS 23, the interest on the loans and financing taken out by the projectssubsidiaries to finance the construction is capitalized during the construction phase. During 2011,2013 R$ 6,86148,339 was capitalized in the consolidated financial statements (R$ 84,83932,527 in 20102012 and R$56,106 6,861 in 2009)2011). For further details on interest capitalized see note 29. In 2013, the subsidiary CPFL Renováveis completed the review of constructionthe property, plant and equipment control of the subsidiary Bons Ventos (“BVP”), and, as a result of this process, transferred the intangible assets and fund raising costs, see notes 1, 16reclassified buildings and 17.improvements to machinery and equipment, both stated in the line “transfers”. The reclassification had no effect on the depreciation expense, as the useful lives of the assets were adequate.   Depreciation expenses are registered in Statement of Income at “depreciation and amortization” (note 28). At December 31, 2013, the total amount of fixed assets pledged as collateral for loans and financing, as mentioned in note 16, was approximately R$ 888,213, mainly relating to the subsidiary CPFL Renováveis (R$ 875,802). Impairment testing: The Company evaluated in respect ofFor all the reporting periods for indicationsyears the Company evaluates whether there are indicators of devaluationimpairment of its assets that might involve the need forwould require an impairment tests.test. The evaluation was based on external and internal information sources, taking into account variations in interest rates, changes in market conditions and other factors. The result of the assessment indicated no signs of impairment of these assets in any of the reporting periods and therefore no impairment losses were recognized.   ( 14 ) INTANGIBLE ASSETS       December 31, 2011   December 31, 2010     Historic cost   Accumulated amortization   Net value   Net value Goodwill   6,152   (37)   6,115   6,115 Intangible assets - Concession rights:                 Acquired in business combinations   6,016,243   (1,895,854)   4,120,388   2,041,944 Distribution infrastructure - operational   8,975,287   (5,390,879)   3,584,408   3,335,775 Distribution infrastructure - in progress   730,807   -   730,807   694,139 Public utility   407,286   (24,716)   382,570   397,984 Other intangible assets   174,390   (71,239)   103,150   108,917 Total intangible assets   16,310,165   (7,382,725)   8,927,439   6,584,874                   Historic cost           16,310,165   13,228,307 Accumulated amortization           (7,382,725)   (6,643,433)             8,927,439   6,584,874                               Goodwill   Concession rights   Other intangible assets   Total     Acquired in business combinations   Distribution infrastructure - operational   Distribution infrastructure - in progress   Public utility     At January 1, 2011 restated 6,115   2,024,083   3,335,775   694,139   35,839   76,765   6,172,716 Historical cost 6,152   3,720,098   8,336,914   694,139   38,679   127,897   12,923,879 Accumulated Amortization (37)   (1,696,015)   (5,001,139)   -   (2,840)   (51,132)   (6,751,163)                             Additions -   -   3,259   1,094,929   -   6,319   1,104,507 Amortization -   (195,300)   (389,740)   -   (1,418)   (15,185)   (601,643) Transfer - intangible assets -   (27,164)   636,009   (621,500)   -   12,655   - Transfer - financial asset -   -   -   (381,027)   -   (526)   (381,553) Transfer - other assets -   -   (895)   (55,734)   -   (5,373)   (62,002) Business combination -   2,302,122   -   -   -   -   2,302,122 Other -   -   -   -   -   526   526 At December 31, 2011 restated 6,115   4,103,740   3,584,408   730,807   34,421   75,182   8,534,673 Historical cost 6,152   5,995,056   8,975,287   730,807   38,679   141,498   15,887,479 Accumulated Amortization (37)   (1,891,315)   (5,390,879)   -   (4,258)   (66,315)   (7,352,804)                             Additions -   792,320   -   1,418,637   -   29,910   2,240,867 Amortization -   (284,714)   (390,133)   -   (1,419)   (18,713)   (694,979) Transfer - intangible assets -   -   961,030   (961,030)   -   -   - Transfer - financial asset -   -   (294,785)   (555,101)   -   -   (849,886) Disposals and transfer - other assets -   -   (44,091)   -   -   (6,272)   (50,363) At December 31, 2012 restated 6,115   4,611,347   3,816,428   633,313   33,001   80,108   9,180,312 Historical cost 6,152   6,815,774   9,183,730   633,313   38,679   156,661   16,834,309 Accumulated Amortization (37)   (2,204,427)   (5,367,301)   -   (5,678)   (76,553)   (7,653,996)                             Additions -   -   -   853,649   -   7,444   861,093 Amortization -   (296,978)   (413,994)   -   (1,419)   (14,196)   (726,587) Transfer - intangible assets -   -   412,930   (412,930)   -   -   - Transfer - financial asset -   -   (22,499)   (498,669)   -   -   (521,169) Disposals and transfer - other assets -   (1,989)   (29,115)   (1,232)   -   (12,433)   (44,769) Spin-off generation activity on the distribuition -   -   (553)   -   -   -   (553) At December 31, 2013 6,115   4,312,381   3,763,197   574,131   31,582   60,922   8,748,328 Historic cost 6,152   6,811,237   9,310,710   574,131   35,840   156,023   16,894,093 Accumulated depreciation (37)   (2,498,856)   (5,547,513)   -   (4,258)   (95,100)   (8,145,764)                               In the Statement of Income the amortization of intangibles is recorded under the following headings: (i) “depreciation and amortization” for the amortization of the intangible assets related to Distribution Infrastructure, Public Utilities and Other Intangible Assets; and (ii) “amortization of intangible concession asset” for amortization of the intangible asset acquired through business combination (note 28). F -39 Table of Contents In accordance with IAS 23, the interest on loans taken out by the subsidiaries is capitalized to qualifying intangible assets. During 2013, R$ 8,845 was capitalized in the financial statements (R$ 15,645 in 2012 and R$ 32,281 in 2011) at a rate of 8.32 p.a. (8.23% p.a. in 2012 and 9.95% p.a. in 2011). 14.1 Intangible asset acquired in business combinations The following table shows the breakdown of the intangible asset of the right to exploitexploitation rights of the concession acquired in business combinations:combinations:  F - 31 Table of Contents       December 31, 2011   December 31, 2010   Annual amortization rate December 31, 2013   December 31, 2012 restated   Annual amortization rate   Historic cost   Accumulated amortization   Net value   Net value   2011   2010   2009 Historic cost    Accumulated amortization    Net value   Net value   2013   2012 restated   2011 restated Intangible asset - acquired in business combinations Intangible asset - acquired in business combinations                         Intangible asset - acquired in business combinations                         Intangible asset acquired, not merged                                                       Parent Company                             Parent company                           CPFL Paulista   304,861   (120,118)   184,743   204,045   6.33%   6.53%   5.93% 304,861   (156,929)   147,933   166,305   6.03%   6.05%   6.33% CPFL Piratininga   39,065   (14,801)   24,264   26,603   5.99%   6.19%   6.19% 39,065   (18,872)   20,192   22,086   4.85%   5.58%   5.99% RGE 3,150   (1,207)   1,943   2,128   5.86%   6.90%   6.81% CPFL Geração   54,555   (20,895)   33,659   36,733   5.63%   5.80%   5.83% 54,555   (26,385)   28,170   30,793   4.83%   5.28%   5.63% RGE   3,150   (805)   2,345   2,560   6.81%   6.53%   6.53% CPFL Santa Cruz   9   (3)   6   8   21.17%   14.10%   - 9   (6)   3   5   16.40%   16.25%   21.17% CPFL Leste Paulista   3,333   (1,121)   2,212   2,887   20.30%   13.39%   - 3,333   (2,242)   1,091   1,673   17.45%   16.16%   20.30% CPFL Sul Paulista   7,288   (2,315)   4,973   6,356   18.98%   12.79%   - 7,288   (4,855)   2,434   3,668   16.94%   17.90%   18.98% CPFL Jaguari   5,213   (1,893)   3,320   4,503   22.68%   13.62%   - 5,213   (3,503)   1,710   2,570   16.49%   14.40%   22.68% CPFL Mococa   9,110   (3,079)   6,031   7,841   19.87%   13.92%   - 9,110   (6,472)   2,638   4,365   18.96%   18.29%   19.87% CPFL Jaguari Geração   7,896   (1,119)   6,777   7,422   8.17%   6.00%   - 7,896   (2,280)   5,616   6,174   7.07%   7.64%   8.17%   434,480   (166,149)   268,331   298,957             434,480   (222,750)   211,730   239,766                                       Subsidiaries                                                       ENERCAN   10,233   (3,023)   7,210   7,916   6.90%   6.93%   6.93% Barra Grande   3,081   (1,196)   1,884   2,069   5.98%   5.93%   5.93% Chapecoense   7,376   (301)   7,075   7,376   4.08%   -   - EPASA   499   (19)   479   499   3.85%   -   - Santa Clara Wind Farms   -   -   -   31,737   -   -   - Campo do Ventos Wind Farms   -   -   -   5,576   -   -   - CPFL Renováveis   2,318,580   (18,773)   2,299,807   -   3.82%   -   - 3,134,762   (283,905)   2,850,857   2,981,123   4.11%   3.42%   3.82% Other   14,478   (11,952)   2,527   3,248   4.99%   6.22%   6.22% Outros 14,478   (13,395)   1,083   1,805   4.99%   4.99%   4.99%   2,354,246   (35,263)   2,318,983   58,421             3,149,240   (297,300)   2,851,940   2,982,927                                                                   Subtotal   2,788,726   (201,412)   2,587,314   357,379             3,583,720   (520,050)   3,063,670   3,222,694                                                                   Intangible asset acquired and merged – Deductible Intangible asset acquired and merged – Deductible                         Intangible asset acquired and merged – Deductible                         Subsidiaries                                                       RGE   1,120,266   (758,359)   361,908   380,711   1.68%   1.69%   3.76% 1,120,266   (799,041)   321,225   342,449   1.89%   1.74%   1.68% CPFL Geração   426,450   (238,083)   188,367   206,491   4.25%   3.92%   6.22% 426,450   (270,752)   155,698   171,292   3.66%   4.00%   4.25% Subtotal   1,546,716   (996,442)   550,274   587,202             1,546,716   (1,069,793)   476,923   513,741                                                                   Intangible asset acquired and merged – Reassessed Intangible asset acquired and merged – Reassessed                         Intangible asset acquired and merged – Reassessed                         Parent company                                                       CPFL Paulista   1,074,026   (477,318)   596,709   658,503   5.75%   5.93%   5.93% 1,074,026   (594,074)   479,952   537,838   5.39%   5.48%   5.75% CPFL Piratininga   115,762   (43,859)   71,903   78,834   5.99%   6.19%   6.19% 115,762   (55,925)   59,836   65,448   4.85%   5.58%   5.99% RGE   310,128   (87,234)   222,894   243,296   6.58%   6.30%   6.33% 310,128   (125,428)   184,700   202,237   5.65%   6.69%   6.58% CPFL Santa Cruz   61,685   (36,987)   24,698   32,778   13.10%   13.07%   13.07% 61,685   (49,444)   12,241   18,498   10.14%   10.05%   13.10% CPFL Leste Paulista   27,034   (12,745)   14,289   18,507   15.59%   15.46%   15.48% 27,034   (20,419)   6,615   10,528   14.47%   13.91%   15.59% CPFL Sul Paulista   38,168   (17,611)   20,557   26,312   15.16%   15.17%   15.14% 38,168   (28,506)   9,662   15,015   14.02%   14.52%   15.16% CPFL Mococa 15,124   (11,734)   3,390   5,636   14.85%   14.56%   15.34% CPFL Jaguari   23,600   (11,246)   12,354   16,300   16.72%   15.75%   15.76% 23,600   (17,787)   5,813   9,182   14.28%   13.44%   16.72% CPFL Mococa   15,124   (7,286)   7,838   10,174   15.34%   15.87%   15.96% CPFL Jaguari Geração   15,275   (3,716)   11,559   12,659   7.20%   7.94%   7.94% 15,275   (5,697)   9,578   10,530   6.23%   6.73%   7.20%   1,680,801   (698,000)   982,800   1,097,363             Subtotal 1,680,801   (909,013)   771,788   874,912                                                                   Total   6,016,243   (1,895,854)   4,120,388   2,041,944             6,811,237   (2,498,856)   4,312,381   4,611,347                                                                     The intangible asset acquired in business combinations associated to the right to operate the concessions comprises: - Intangible asset acquired, not merged Refers mainly  Relates basically to the remaining goodwill onintangible asset of acquisition of the shares held by the noncontrolling shareholders. non-controlling interests prior to adoption of IFRS 3. - Intangible asset acquired and merged - Deductible F - 32 Table of Contents GoodwillIntangible asset on the acquisition of the subsidiaries that was merged with the respective net equities, without application of CVM Instructions nº 319/99 and nº 349/01, that is, without segregation of the amount of the tax benefit. - Intangible asset acquired and merged – Reassessed In order to comply with ANEEL instructions and avoid the goodwillintangible asset amortization resulting from the merger of a parent company causing a negative impact on dividends paid to the non-controlling shareholders, the subsidiaries applied the concepts of CVM Instructions nº 319/991999 and nº 349/01 on2001 to the intangible acquisition goodwill.asset. A reserve was therefore recorded to adjust the goodwill, set against the special equity F -40 Table of Contents reserves for goodwill on the merger of the subsidiaries,each subsidiary, so that the effect on the equity reflects the tax benefit of the merged goodwill.intangible asset. These changes affected the Company's investment in the subsidiaries, and in order to adjust this, a non-deductible goodwillintangible asset was recorded for tax.tax purposes. 14.2 Changes in intangible assets: The changes in intangible assets asFor the balances relating to the subsidiary CPFL Renováveis, amortization is recorded for the remaining terms of December 31, 2011 and 2010, are as follows:     Concession Rights     Goodwill   Acquired in business combinations    Distribution infrastructure - operational    Distribution infrastructure - in progress    Public utility   Other intangible assets    TOTAL Intangible asset at December 31, 2009   4,048   2,185,780   2,879,341   521,147   392,221   80,564   6,063,101 Additions   2,007   38,286   5,133   1,159,601   11,395   41,146   1,257,568 Amortization   -   (182,615)   (351,690)   -   (5,633)   (12,878)   (552,816) Transfer - intangible assets   -   -   806,904   (806,904)   -   -   - Transfer - financial asset   -   -   -   (179,501)   -   -   (179,501) Transfer - other assets   -   681   (3,919)   -   -   (237)   (3,475) Other   60   (188)   6   (204)   1   322   (3) Intangible asset at December 31, 2010   6,115   2,041,944   3,335,775   694,139   397,984   108,917   6,584,874 Additions   -   -   3,259   1,094,929   -   8,673   1,106,861 Amortization   -   (196,513)   (389,740)   -   (15,413)   (17,279)   (618,945) Transfer - intangible assets   -   (27,164)   636,009   (621,500)   -   12,655   - Transfer - financial asset   -   -   -   (381,027)   -   -   (381,027) Transfer - other assets   -   -   (895)   (55,734)   -   (10,341)   (66,971) Corporate reestructuring   -   2,302,122   -   -   -   -   2,302,122 Other   -   -   -   -   -   526   526 Intangible asset at December 31, 2011   6,115   4,120,388   3,584,408   730,807   382,570   103,150   8,927,439 At December 31, 2011, the totalrespective exploration authorizations, using the straight line method. For the other balances, the amortization rates for intangible assets acquired bythrough business combinations relate tocombination are based on the corporate restructuring of CPFL Renováveis (Note 14.4), as follows: (i) R$ 912,363 generated as a resultprojected income curves of the reverse acquisition; (ii) R$ 1,153,443 refers to business acquisitions by CPFL Renováveis since August 1, mainly in relation toconcessionaires for the acquisition of Jantus and Santa Luzia (R$ 1,115,815); and (iii) R$ 232,013 refers to existing balancesremainder of the acquiree at July 31, 2011. The subsidiary recognized the respective deferred tax effects on the intangible assets acquired in the line temporarily non-deductible differences (Note 9). In conformity with IAS 23, the interest on the loans taken out by the subsidiaries is capitalized to qualifying intangible assets. During 2011, R$ 32,281 was capitalized in the consolidated financial statements (R$ 48,099 in 2010concession term, and R$28,825 in 2009) at a rate of 9.95% p.a. (7.9% p.a. in 2010 and 6.3% p.a. in 2009).these projections are reviewed annually.   14.314.2 Impairment test The Company checked in respect ofFor all the reporting periods for indicationsyears the Company evaluates whether there are indicators of devaluationimpairment of its assets that might involve the need forwould require an impairment tests.test. The evaluation was based on external and internal information sources, taking into account variations in interest rates, changes in market conditions, the profitability of its operations and other factors. In analysis of impairment of intangible assets with an indefinite useful life (including goodwill), the Company used the value in use method to assess the recoverable value of each CGU. The cash flows were prepared in accordance with management's assessment of future trends in the electricity sector, based on external sources and historical data. F - 33 Table of Contents The result of the assessment indicated no signs of impairment of these assets in any of the reporting periodsyears and there is no impairment loss to be recognized.   14.4 Business combination (CPFL Renováveis)14.3Corporate restructuring CPFL Brasil and CPFL Geração CPFL Renováveis was created by the merger of the former indirect subsidiary SMITA by ERSA, throughIn order to simplify the corporate restructuring described in Note 1.1, in accordance withstructure and centralize the terms and conditions established in the Merger Protocol signed by both companies and described in the Relevant Fact disclosedenergy generation operations on August 23, 2011. As a result of this merger, the equity ofCPFLRenováveis increased by R$ 980,827, of which R$ 596,631 corresponds to the net equity of SMITA, determined at carrying value at July 31, 2011, and R$ 384,196 to the capital contribution made by the subsidiaries CPFL Geração and CPFL Brasil. The ratio of substitution of ERSA shares to SMITA shares, for merger purposes, was based on the economic value of the business of ERSA and SMITA and was freely negotiated, agreed and confirmed between independent parties and adequately reflects the best assessment of both the entities. ERSA issued 913,475,299 new common shares in the name of CPFL Geração and CPFL Brasil, which grant equal rights to those conferred by the common shares issued by ERSA in the past. CPFL Energia began to hold indirectly 54.50% of CPFL Renováveis, having assumed control on August 1, 2011, since which date it has fully consolidated the subsidiary. The association resulted in a business combination, as per IFRS 3, since the Company now controls CPFL Renováveis. The amount of the consideration transferred in this transaction was R$ 773,413. From an essentially accounting viewpoint, as it was the Company that acquired the control, although ERSA (accouting acquiree) is the merged company, this operation represented a reverse acquisition, and ERSA's net assets were therefore assessed at fair value. The evaluation report issued by specialists resulted in recording of value added in CPFL Renováveis attributed to the intangible concession asset of R$ 533,757 (note 14.1), net of deferred income tax and social contribution of R$ 378,606 (Note 9), set against the capital reserve in equity (Note 24). On account of its corporate interest, the Company registered the amount of R$ 290,898 in Investments, set against the capital reserve in equity. The effects registered in the investments of the subsidiaries CPFL Geração and CPFL Brasil were R$ 232,975 and R$ 57,922, respectively, Also as a result of the business combination, considering the ratio of exchange of interests of the subsidiaries CPFL Geração and CPFL Brasil in CPFL Renováveis (taking into account the acquisition of the indirect subsidiary Jantus, Note 14.4.1), a decrease of R$60,957 was recognized in the capital  reserve recorded by the Company (an increase of R$ 179,384 for the subsidiary CPFL Geração, the assets and a reductionliabilities related to the investment previously held by CPFL Brasil in subsidiary CPFL Renováveis were spun-off incorporated by CPFL Geração. Consequently, as from January 1, 2013, the date base of R$ 240,341 forthe spin-off, the subsidiary CPFL Brasil). The net amount registered in the reserve as of December 31, 2011 as a result of the business combination was therefore R$229,940 (Note 24). In relation to recognition of acquisition of CPFL Renováveis in the accounts of the subsidiaries CPFL Geração and CPFL Brasil, as these subsidiaries do not have operational control over CPFL Renováveis, and are therefore regarded as associated companies, holds directlythe following treatment was given for individual purposesentire interest in their respective financial statements: (i) in the case of CPFL Geração, a gain of R$ 412,359 was recognized in profit or loss, and (ii) CPFL Brasil recognized a gain of R$ 7,881 in profit or loss and goodwill of R$ 190,300. In the consolidated statements, since this operation refers to a transaction between owners (in their capacity as owners), these effects were adjusted for purposes of consolidation in CPFL Energia and recorded in equity.  The impacts of the reverse acquisition described above, based on the balance sheets at August 1, 2011, are as follows: F - 34 Table of Contents   SMITA   ERSA   Subtotal   Fair value - ERSA   CPFL Renováveis ASSETS                   Current assets                   Cash and cash equivalents 182,270   668,707   850,977   -   850,977 Other 21,305   34,298   55,603   -   55,603 Total current assets 203,575   703,005   906,580   -   906,580 Noncurrent assets                   Property, Plant and Equipment 760,260   956,444   1,716,704   -   1,716,704 IntangibleofConcession 44,600   32,916   77,516   1,113,544   1,191,060 Intangible - goodwill -   200,052   200,052   (200,052)   - Other 70,830   12   70,842   -   70,842 Total noncurrent assets 875,690   1,189,424   2,065,114   913,492   2,978,606 Total assets 1,079,265   1,892,429   2,971,694   913,492   3,885,186                                       LIABILITIES AND SHAREHOLDERS' EQUITY                   Current liabilities                   Loans and Financing 53,964   22,020   75,984   -   75,984 Other 28,502   57,185   85,687   1,129   86,816 Total current liabilities 82,466   79,205   161,671   1,129   162,800 Noncurrent liabilities                   Loans and Financing 367,380   467,170   834,551   -   834,551 Deferred tax debits 32,785   -   32,785   378,606   411,391 Other 3   76,508   76,511   -   76,511 Total noncurrent liabilities 400,168   543,678   943,846   378,606   1,322,453 SHAREHOLDERS' EQUITY 596,631   1,269,546   1,866,177   533,757   2,399,933 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,079,265   1,892,429   2,971,694   913,492   3,885,186 The net operating revenue, the income from the electric energy service(negative) and net profit of the acquiree (Ersa) from the acquisition date were fully consolidated in CPFL Renováveis and correspond to R$ 85,042, (R$ 7,679)  and R$ 11,062, respectively. If the acquisition date had been January 1, 2011, the net operating revenue, the income from the electric energy service and net profit of CPFL Renováveis would have beenR$ 306,894, R$ 103,684 and R$ 103,716 respectively. The minority interests in CPFL Renováveis at the acquisition datewas R$ 1,091,969 in accordance with the participation of 45.5% in the shareholders’ equity of CPFL Renováveis at August 1, 2011. 14.4.1 Acquisition of the indirect subsidiary Jantus On April 7, 2011, through the subsidiary CPFL Brasil, the Company signed a Purchase and Sale Agreement to acquire all the capital quotas of Jantus SL (“Jantus”), a company based in Spain. On September 21, 2011, CPFL Brasil assigned the Purchase Agreement to the subsidiary CPFL Renováveis. On December 20, 2011, CPFL Renováveis completed the acquisition of Jantus, which held 100% of the capital of SIIF Energies do Brasil Ltda.(“SIIF”) and SIIF Desenvolvimento de Projeto de Energia Eólica Ltda.(“SIIF Desenvolvimento”). Accordingly, by acquisition of the quotas, completed on December 21, 2011, CPFL Renováveis indirectly acquired all the capital of SIIF and SIIF Desenvolvimento, with a total of four wind power plants operating in the State of Ceará, with total installed capacity of 210 MW, as well as a portfolio of 412 MW in certified projects eligible for participation in the next energy auctions and 320 MW in uncertified projects. To put this transaction into effect, the subsidiary CPFL Brasil paid R$ 820,803 in cash to CPFL Renováveis in December 2011, which has issued new shares to CPFL Brasil; consequently, CPFL Energia now indirectly holds 63.00% of CPFL Renováveis, through its subsidiaries CPFL Geração (35.49%) and CPFL Brasil (27.51%) at December 2011, in accordance with the association agreement with Ersa shareholders. F - 35 Table of Contents CPFL Renováveis issued 385,268,687 new common shares in the name of CPFL Brasil, which grant equal rights to those conferred by the common shares issued by CPFL Renováveis in the past. 14.4.2 Acquisition of the indirect subsidiary Santa Luzia Energética S.A. On August 17, 2011, the Company and the indirect subsidiary CPFL Renováveis disclosed in Notices to the Market the acquisition of quotas representing 100% of the voting and total capital of Santa Luzia Energética S.A. (“Santa Luzia”), which had an SHP operating in the State of Santa Catarina, with installed power of 28.5 MW and mean assured energy of 18.4 MW. The Company completed the acquisition of Santa Luzia on December 29, 2011, and the transaction was settled on January 4, 2012. a)Additional information about the acquisition of the indirect subsidiaries Jantus and Santa Luzia:   Jantus   Santa Luzia   December 19. 2011   December 29. 2011       Cash and cash equivalents transferred as consideration by the acquirers:       Cash transferred or to be transferred to shareholders 468,916   - Accounts payable to shareholders -   151,534 Cash transferred to Jantus for settling debts and expenses of sellers responsibility 354,420   - Estimated of price adjustment to be paid to acquirees as contractually established, recorded as accounts payable at December 31, 2011 16,316   908 Total transfered consideration (paid) 839,652   152,442         b)Assets acquired and passives recognized on the acquisition date   In relation to the acquisition of Jantus and Santa Luzia, all the considerations transferred (paid) were allocatedspun-off debt, corresponding to the assets acquired and liabilities assumed at fair values, includingissue of debentures, the intangible assets associatedsubsidiary CPFL Geração issued new debentures to replace those issued by CPFL Brasil, with the exploitation rights of each authorization,same cost, amortization term and these will be amortized over the remaining terms of the authorizations linked to exploitation of the wind farms and SHPs acquired. Consequently, as the whole amount paid was allocated to identified assets and liabilities, no residual amount was allocated to goodwill in these transactions. Allocation of the amount paid was based on the economic and financial report issued by specialists contracted by Management of the parent company, and analyses by CPFL Renováveis itself.interest rate characteristics.   The subsidiaryrestructuring between the subsidiaries had no impact on the Company's financial statements. 14.4 – Corporate restructuring of CPFL Renováveis does not expect the amount allocated as the rightCentrais Geradoras, CPFL Leste Paulista, CPFL Sul Paulista, CPFL Jaguari and CPFL Mococa On July 31, 2013, to operate these acquisitions to be deductible for tax purposes at the acquisition date,comply de Decree 7,805/2012 and therefore recorded deferred income tax and social contributionLaw 12,783/2013 in relation to deverticalization of generation operation contained in distributors companies, the temporary difference betweenCompany put into effect the amounts allocatedcorporate restructuring which resulted in the spin-off of the generation assets of the distributors CPFL Leste Paulista, CPFL Jaguari, CPFL Sul Paulista and CPFL Mococa, which held the Rio do Peixe I, Rio do Peixe II,  Santa Alice, Macaco Branco, Lavrinha, São José, Turvinho,  Pinheirinho and São Sebastião SHPs. These assets were transferred to CPFL Centrais Geradoras and the tax bases for these assets.Company holds 100% of the capital of the direct subsidiary CPFL Centrais Geradoras. The initial accounting fornet equity of the acquisitiondistribution subsidiaries spun-off, as of Jantus and Santa Luzia was provisionally determined at DecemberJuly 31, 2011. The necessary market assessments and other calculations had not been finalized at the date on which the financial statements were completed, and were therefore based on management’s best estimates of these amounts,2013, is R$13,424, as permitted by IFRS 3.follows: F - 3641 Table of Contents Net assets Assets Cash and cash equivalents 2,227 Financial asset of concession 12,861 Intangible assets 553 Other assets 8 Liabilities Accrued liabilities 72 Deffered taxes debits 2,134 Profit sharing 20 Net assets 13,424   Jantus   Santa Luzia   December 19. 2011   December 29. 2011       Current assets       Cash and cash equivalents 6,781   45 Recoverable taxes 49,241   - Other 22,956   3,921         Noncurrent assets:       Recoverable taxes 103,725   - Fixed Assets 715,864   237,307 intangible assets 4,403   - Other 50,544   2,930         Liabilities:       Suppliers 47,425   4,114 Loans and debentures 80,731   11,413 Other 63,248   2,252         Noncurrent liabilities:       Loans and debentures 565,158   124,590 Deferred taxes 15,141   - Other 20,407   7,582         Acquired net assets 161,404   94,252         c)Net cash outflow on the acquisition of the subsidiaries:   Jantus   Santa Luzia Consideration transferred (paid) 839,652   152,442 Less: Fair value of identifiable acquired net assets (161,404)   (94,252) Amount allocated as a right of exploitation 678,248   58,190 Tax effects 349,400   29,977 Amount allocated to right of exploitation after tax effects 1,027,648   88,167           The deferred tax effectsrestructuring between the subsidiaries had no impact on the line temporarily non-deductible differences (Note 9), amounting to R$ 379,377, were recorded on the total intangible assetsCompany's financial statements. 14.5 – IPO of R$ 1,115,815 acquired. CPFL Renováveis d)ImpactThe initial public offer of the acquisition28 million common shares, second offer of the subsidiaries Jantus43.9 million common shares and Santa Luzia on the profit and losscomplementary offer of the Company and1.2 common shares of the subsidiary CPFL Renováveis, all registered, book-entry, with no face value and free and clear of any and encumbrance or lien, were completed on August 19, 2013. A total of 73.1 million shares were offered and issued, at R$ 12.51 each, amounting to R$914,686. The operation raised a gross amount (i) of R$364,687with the initial and complementary offer, which was recorded in the capital account up to the price per share equals capital divided by the total number of shares at March 31, 2013, date of the latest carrying information available prior to the offer and; the remaining amount was recorded in the capital reserve account; and (ii) R$ 549,999 million in the secondary share offering.  Fund-raising costs ofR$ 36,187 wereincurred in the transaction. As a result of the above-mentioned transaction, the indirect interest in CPFL Renováveis was reduced from 63% to 58.84% and a positive impact of R$ 59,308 related to the change in the interest was accounted for as an equity transaction in accordance with IFRS 10  and recorded directly in the shareholder’s equity, in a capital reserve account. 14.6 – Business combinations 2013 Rosa dos Ventos Geração e Comercialização de Energia S.A. - RDV   The consolidated result for the year and the result ofOn June 18, 2013, the subsidiary CPFL Renováveis includessigned a contract for acquisition of 100% of the assets of the Canoa Quebrada windfarms, with installed capacity of 10.5 MW, and Lagoa do Mato, with installed capacity of 3.2 MW, located on the coast of the State of Ceará. Both are operating commercially, and there is a contract with Eletrobrás, through PROINFA (Incentive Program for Alternative Sources of Electric Energy) for all the energy generated by these farms (physical information and energetic capacity measures not reviewed by the independent auditors). On February 27, 2014, the subsidiary CPFL Renováveis concluded the acquisition of Rosa dos Ventos Geração. The total purchase price is R$ 24,738 (R$ 15,585 in proportion103,367, which includes: (i) the amount of R$ 70,296 to be paid to the Company’s interest)seller; and (ii) assumption of Rosa dos Ventos’ net debt of R$ 33,071. These amounts may be adjusted by the Balance’s closing date, in relationaccordance with the share purchase agreement (note 38.8). 14.6.1  Additional information about acquisition a) Considerations to be transferred F -42 Table of Contents The estimated consideration to be transferred in cash is R$ 70,296. b) Assets acquired and liabilities to be recognized on the acquisition date The following amounts are the Company's best estimate for the acquisition of Rosa dos Ventos at fair value: Rosa dos Ventos (estimated) Current assets Cash and cash equivalents 1,992 Other current assets 6,350 Noncurrent assets Ficuciary investments 4,191 Property, plant and equipment 51,122 Intangible - exploitation rights 64,689 Current liabilities 2,972 Noncurrent liabilities Loans, Financings and Debentures 33,081 Deferred taxes on exploitation rights 21,995 Net assets acquired 70,296 To be transferred 70,296 In the acquisition price allocation process, the intangible asset of the right to explore the regulated activity is identified and supported by a financial valuation report. These amounts, are amortized on a straight-line basis over the remaining term of the authorizations to operate the venture acquired, which is estimated to be 20 years for Rosa dos Ventos. c) Outflow of net cash on acquisition of the subsidiary Rosa dos Ventos (estimated) To be transferred in cash 70,296   Less: Balance of cash and cash equivalent acquired (1,992)  Net cash 68,304 With regard to the additional business generated by Jantus. The consolidatedfinancial information on income and net income, on February 27, 2014 the acquisition of Rosa dos Ventos was concluded and the initial accounting will be prepared based on February 28, 2014.  As of December 31, 2013, this acquisition is therefore not accounted for in the year includes R$24,016 in relation to Jantus. Since Santa Luzia was acquired on December 29, 2011, it did not have a significant impact on profit or loss for the year.Company's books.      ( 15 ) SUPPLIERS  F - 3743 Table of Contents         December 31, 2013   December 31, 2012 restated Current   December 31, 2011   December 31, 2010               System Service Charges   33,794   32,406 61,880   138,973 Energy purchased   730,790   584,018 1,300,598   971,977 Electricity Network Usage Charges   150,013   160,099 91,603   166,565 Materials and Services   233,560   199,264 338,524   326,544 Free Energy   78,432   70,262 92,088   85,078 Other   13,555   1,335 Total   1,240,143   1,047,385 1,884,693   1,689,137               Noncurrent       Materials and Services -   4,467 -   4,467   ( 16 ) ACCRUED INTEREST ON DEBTS,LOANS AND FINANCING AND LOANS AND FINANCING                                       December 31, 2011   December 31, 2010   December 31, 2013   December 31, 2012 restated   Interest - Current and Noncurrent   Principal   Total   Interest - Current and Noncurrent   Principal   Total   Interest - Current and Noncurrent   Principal   Total   Interest - Current and Noncurrent Principal   Total       Current   Noncurrent           Current   Noncurrent     Current   Noncurrent Current   Noncurrent Measured at cost                                                                 Brazilian currency                                                                 BNDES - Power increases   34   3,690   4,802   8,526   55   5,040   8,498   13,593   6   1,229   -   1,235   16   3,601   1,217   4,834 BNDES - Investment   25,032   542,153   4,071,103   4,638,287   8,494   330,220   3,019,812   3,358,526 BNDES/BNB - Investment   24,555   872,606   4,067,082   4,964,242   22,923   637,305   3,809,188   4,469,416 BNDES - Purchase of assets   49   2,039   5,042   7,130   46   2,002   4,737   6,785   27   1,364   5,717   7,108   65   2,036   7,476   9,578 BNDES - Working capital   687   111,129   36,928   148,744   983   70,121   141,677   212,781   -   -   -   -   143   36,928   -   37,071 Furnas Centrais Elétricas S.A.   -   -   -   -   -   -   -   - Financial Institutions   119,804   221,142   1,507,927   1,848,874   50,269   144,397   1,251,864   1,446,530   128,752   556,267   1,503,543   2,188,562   153,720   725,379   1,406,468   2,285,567 Other   782   13,154   28,327   42,263   594   23,337   34,477   58,408   674   40,658   19,063   60,395   784   11,616   23,638   36,039 Subtotal   146,388   893,307   5,654,129   6,693,824   60,440   575,116   4,461,066   5,096,622   154,013   1,472,125   5,595,404   7,221,542   177,652   1,416,864   5,247,988   6,842,504                                                                 Foreign currency                                                                                                 BID   -   -   -   -   -   -   -   - Financial Institutions   444   3,107   42,769   46,320   432   3,751   40,750   44,932   -   -   -   -   452   2,170   44,423   47,045 Subtotal   444   3,107   42,769   46,320   432   3,751   40,750   44,932                                                                 Total at Cost   146,832   896,414   5,696,898   6,740,144   60,872   578,867   4,501,815   5,141,554   154,013   1,472,125   5,595,404   7,221,542   178,104   1,419,034   5,292,411   6,889,549                                                                 Measured at fair value                                                                 Foreign currency                                                                 Financial Institutions   18,697   -   1,685,557   1,704,254   8,799   -   416,027   424,827   15,213   42,501   1,950,740   2,008,454   22,460   -   2,365,786   2,388,245 Total   18,697   -   1,685,557   1,704,254   8,799   -   416,027   424,827 Total at fair value   15,213   42,501   1,950,740   2,008,454   22,460   -   2,365,786   2,388,245                                                                 Total   165,529   896,414   7,382,455   8,444,398   69,671   578,867   4,917,843   5,566,381   169,226   1,514,626   7,546,144   9,229,996   200,564   1,419,034   7,658,196   9,277,794                                                                   F - 3844 Table of Contents Measured at amortized cost   December 31, 2013   December 31, 2012 restated   Annual interest   Amortization   Collateral Brazilian currency                     BNDES - Power increases                     CPFL Renováveis   1,235   4,834   TJLP + 3.1% to 4.3%   72 to 75 monthly installments from September 2007 to July 2008   CPFL Energia guarantee and Promissory Note BNDES/BNB/FINEP/NIB - Investment                     CPFL Paulista                     FINEM III   -   26,885   TJLP + 3.3%   72 monthly installments from January 2008   CPFL Energia guarantee, receivables and Promissory Note FINEM IV   64,103   128,200   TJLP + 3.28% to 3.4%   60 monthly installments from January 2010   CPFL Energia guarantee and receivables FINEM V   137,092   170,651   TJLP + 2.12% to 3.3%   72 monthly installments from February 2012   CPFL Energia guarantee and receivables FINEM V   62,312   71,522   Fixed rate 5.5% to 8.0%   114 monthly installments from August 2011   CPFL Energia guarantee and receivables FINEM VI   283,851   149,873   TJLP + 2.06% to 3.08%   72 monthly installments from January 2014   CPFL Energia guarantee and receivables FINEM VI   217,319   190,349   Fixed rate 2.5%   114 monthly installments from June 2013   CPFL Energia guarantee and receivables FINAME   50,706   59,149   Fixed rate 4.5%   96 monthly installments from January 2012   CPFL Energia guarantee CPFL Piratininga                     FINEM II   -   15,971   TJLP + 3.3%   72 monthly installments from January 2008   CPFL Energia guarantee, receivables and Promissory Note FINEM III   26,719   53,434   TJLP + 3.28% to 3.4%   60 monthly installments from January 2010   CPFL Energia guarantee and receivables FINEM V   80,284   55,166   TJLP + 2.06% to 3.08%   72 monthly installments from January 2014   CPFL Energia guarantee and receivables FINEM V   51,525   29,591   Fixed rate 2.5%   114 monthly installments from June 2013   CPFL Energia guarantee and receivables FINEM IV   73,809   91,622   TJLP + 2.12% to 3.3%   72 monthly installments from February 2012   CPFL Energia guarantee and receivables FINEM IV   30,673   35,125   Fixed rate 5.5% to 8.0%   114 monthly installments from August 2011   CPFL Energia guarantee and receivables FINAME   24,044   28,048   Fixed rate 4.5%   96 monthly installments from January 2012   CPFL Energia guarantee RGE                     FINEM IV   40,805   81,606   TJLP + 3.28% to 3.4%   60 monthly installments from January 2010   CPFL Energia guarantee and receivables FINEM V   82,702   102,980   TJLP + 2.12% to 3.3%   72 monthly installments from February 2012   CPFL Energia guarantee and receivables FINEM V   20,516   23,385   Fixed rate 5.5%   96 monthly installments from February 2013   CPFL Energia guarantee and receivables FINEM VI   157,318   85,257   TJLP + 2.06% to 3.08%   72 monthly installments from January 2014   CPFL Energia guarantee and receivables FINEM VI   74,433   51,671   Fixed rate 2.5%   114 monthly installments from June 2013   CPFL Energia guarantee and receivables FINAME   12,065   14,074   Fixed rate 4.5%   96 monthly installments from January 2012   CPFL Energia guarantee FINAME   345   404   Fixed rate 10.0%   90 monthly installments from May 2012   Fiduciary alienation of assets CPFL Santa Cruz                     FINAME and Bank Credit Note   3,159   5,527   TJLP + 2% to 2.9%   54 monthly installments from December 2010 and 36 monthly installments from October 2010   CPFL Energia guarantee and receivables FINEM I   -   18,374   TJLP + 1.66% to 3.06%   28 monthly installments from January 2013   CPFL Energia guarantee FINEM I   -   4,330   TJLP + 1.66% to 3.06%   1 installment in April 2015   CPFL Energia guarantee CPFL Leste Paulista                     Bank Credit Note   2,688   4,090   TJLP + 2.90%   54 monthly installments from June 2011   CPFL Energia guarantee and receivables FINEM I   -   8,881   TJLP + 1.66% to 3.06%   28 monthly installments from January 2013   CPFL Energia guarantee FINEM I   -   1,685   TJLP + 2.06% to 3.06%   1 installment in April 2015   CPFL Energia guarantee CPFL Sul Paulista                     Bank Credit Note   2,911   4,430   TJLP + 2.90%   54 monthly installments from June 2011   CPFL Energia guarantee and receivables FINEM I   -   11,071   TJLP + 1.66% to 3.06%   28 monthly installments from January 2013   CPFL Energia guarantee FINEM I   -   1,242   TJLP + 2.06% to 3.06%   1 installment in April 2015   CPFL Energia guarantee CPFL Jaguari                     Bank Credit Note   1,547   2,639   TJLP + 2.90%   54 monthly installments from December 2010   CPFL Energia guarantee and receivables Bank Credit Note   2,136   2,138   TJLP + 3.10%   96 monthly installments from June 2014   CPFL Energia guarantee Bank Credit Note   607   531   UMBNDES + 2.1%   96 monthly installments from June 2014   CPFL Energia guarantee CPFL Mococa                     Bank Credit Note   1,824   3,040   TJLP + 2.90%   54 monthly installments from January 2011   CPFL Energia guarantee and receivables Bank Credit Note   2,747   2,750   TJLP + 3.10%   96 monthly installments from June 2014   CPFL Energia guarantee Bank Credit Note   781   683   UMBNDES + 2.1%   96 monthly installments from June 2014   CPFL Energia guarantee Bank Credit Note   577   -   UMBNDES + 1.99%   96 monthly installments from October 2015   CPFL Energia guarantee Bank Credit Note   2,305   -   TJLP + 2.99%   96 monthly installments from October 2015   CPFL Energia guarantee F -45 Table of Contents     December 31, 2013   December 31, 2012 restated   Annual interest   Amortization   Collateral CPFL Serviços                     FINAME   14,658   3,478   Fixed rate 2.5% to 10%   127 monthly installments from November 2012   CPFL Energia guarantee and equipment fiduciary alienation FINAME   87   101   TJLP + 4.20%   90 monthly installments from November 2012   CPFL Energia guarantee and equipment fiduciary alienation CERAN                     CERAN   409,365   458,569   TJLP + 3.69% to 5%   168 monthly installments from December 2005   Pledge of shares, credit and concession rights and revenue and CPFL Energia guarantee CERAN   54,956   54,067   UMBNDES + 5% (1)   168 monthly installments from February 2006   Pledge of shares, credit and concession rights and revenue and CPFL Energia guarantee CPFL Transmissão                     FINAME   4,667   -   Fixed rate 3.0%   96 monthly installments from July 2015   CPFL Energia guarantee CPFL Renováveis                     FINEM I   352,830   384,629   TJLP + 1.95%   168 monthly installments from October 2009 to July 2011   PCH Holding a joint debtor, Letters of guarantee FINEM II   31,997   35,395   TJLP + 1.90 %   144 monthly installments from June 2011   CPFL Energia guarantee, fiduciary alienation of assets and joint fiduciary assignment of credit rights FINEM III   605,263   616,796   TJLP + 1.72%   192 monthly installments from May 2013   CPFL Energia guarantee, plegde of shares, fiduciary alienation of assets and joint fiduciary assignment of credit rights FINEM V   113,106   124,508   TJLP + 2.8% to 3.4%   143 monthly installments from December 2011   PCH Holding 2 and CPFL Renováveis debtor solidarity. FINEM VI   76,673   71,741   TJLP + 2.05 %   173 to 192 monthly installments from October 2013 and April 2015   CPFL Renováveis pledge of shares, pledge of receivables FINEM VII   194,041   213,404   TJLP + 1.92 %   156 monthly installments from October 2010 to September 2023   Pledge of shares, fiduciary alienation and equipment fiduciary alienation FINEM VIII   50,811   39,024   TJLP + 2.02 %   192 monthly installments from January 2014   Pledge of shares and Reserve Account of SPE Assignment of Receivables FINEM IX   46,994   54,413   TJLP + 2.15 %   120 monthly installments from May 2010   Pledge of shares, fiduciary alienation and equipment fiduciary alienation FINEM X   1,108   1,428   TJLP + 0 %   84 monthly installments from October 2010   Pledge of shares, fiduciary alienation and equipment fiduciary alienation FINEM XI   138,101   149,558   TJLP + 1.87% to 1.9%   108 to 168 monthly installments from January 2012 and January 2013   CPFL Energia guarantee, fiduciary alienation of assets and joint fiduciary assignment of credit rights FINEM XII   333,745   -   TJLP + 2.18%   192 monthly installments from July 2014   CPFL Energia guarantee, fiduciary alienation of assets, joint fiduciary assignment of credit rights and pledge of shares FINAME I   190,396   217,318   Fixed rate 5.5%   102 to 108 monthly installments from January 2012 to August 2020   CPFL Energia guarantee, fiduciary alienation of assets and fiduciary assignment of credit rights FINAME II   31,168   36,662   Fixed rate 4.5%   102 monthly installments from June 2011   CPFL Energia guarantee, fiduciary alienation of assets and fiduciary assignment of credit rights FINAME III   129,659   59,025   Fixed rate 2.5%   108 monthly installments from January 2014   Pledge of CPFL Renováveis shares Pledge of shares and Reserve Account of SPE Assignment of receivables FINEP I   2,506   -   Fixed rate 3.5%   61 monthly installments from October 2014   Bank Garantee BNB   133,192   144,251   Fixed rate 9.5% to 10% p.a.   168 monthly installments from January 2009   Fiduciary alienation BNB   175,695   181,925   Fixed rate 10% p.a.   222 monthly installments from May 2010   CPFL Energia guarantee NIB   79,109   82,488   IGPM + 8.63% p.a.   Interest and principal quarterly paid started in June 2011 until September 2023   No guarantee Bridging BNDES II   84,507   -   TJLP + 3.02 %   1 installment in February 2014   Pledge of SPE shares Bridging BNDES III   194,242   -   TJLP + 3.02 %   1 installment in February 2014   Pledge of SPE shares CPFL Brasil                     FINEP   3,461   4,260   Fixed rate 5%   81 monthly installments from August 2011   Receivables                       BNDES - Other                     CPFL Serviços - Purchase of assets   2,196     4,316   TJLP + 1.72% to 2.15%   79 monthly installments from Octobert 2010   Fiduciary alienation of assets and CPFL Energia guarantee CPFL Serviços - Purchase of assets   4,911     5,262   Fixed rate 4.5% to 8.70%   125 monthly installments from March 2012   Fiduciary alienation of assets and CPFL Energia guarantee CPFL Piratininga - Working capital   -   2,290   TJLP + 5.0% (2)   24 monthly installments from February 2011   No guarantee CPFL Piratininga - Working capital   -   20,766   TJLP + 5.0% (2)   24 monthly installments from October 2011   Promissory Note CPFL Geração - Working capital   -   14,015   TJLP + 4.95%   24 monthly installments from July 2011   CPFL Energia guarantee F -46 Table of Contents     December 31, 2013   December 31, 2012 restated   Annual interest   Amortization   Collateral Financial Institutions                     CPFL Paulista                     Banco do Brasil - Law 8727   4,648   16,984   IGP-M + 7.42%   240 monthly installments from May 1994   Receivables (CPFL Paulista and São Paulo Government) Banco do Brasil - Working capital   105,124   104,612   107% of CDI   1 installment in April 2015   CPFL Energia guarantee Banco do Brasil - Working capital (*)   131,541   182,385   98.50% of CDI   4 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   93,769   174,749   99.00% of CDI   2 annual installments from March 2013   CPFL Energia guarantee Banco do Brasil - Working capital (***)   256,117   -   104.90% of CDI   2 annual installments from July 2017   CPFL Energia guarantee CPFL Piratininga                     Banco do Brasil - Working capital (*)   12,098   16,774   98.5% of CDI   4 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   12,256   22,573   99.0% of CDI   2 annual installments from March 2013   CPFL Energia guarantee Banco do Brasil - Working capital (****)   45,077   -   104.90% of CDI   2 annual installments from July 2017   CPFL Energia guarantee RGE                     Banco do Brasil - Working capital (*)   56,771   172,665   98.5% of CDI   4 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   35,339   62,992   99.0% of CDI   2 annual installments from March 2013   CPFL Energia guarantee CPFL Santa Cruz                     Banco do Brasil - Working capital (*)   -   10,044   98.5% of CDI   2 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   4,331   7,905   99.0% of CDI   2 annual installments from March 2013   CPFL Energia guarantee Banco do Brasil - Working capital (***)   33,807   -   104.90% of CDI   2 annual installments from July 2017   CPFL Energia guarantee CPFL Leste Paulista                     Banco do Brasil - Working capital (*)   -   10,326   98.5% of CDI   2 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   11,133   20,429   99.0% of CDI   2 annual installments from March 2013   CPFL Energia guarantee Banco IBM (***)   8,140   9,316   100.0% of CDI   14 semiannual installments from December 2012 and January 2013   CPFL Energia guarantee CPFL Sul Paulista                     Banco do Brasil - Working capital (*)   -   6,215   98.5% of CDI   2 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   5,970   10,950   99.0% of CDI   2 annual installments from March 2013   CPFL Energia guarantee Banco do Brasil - Working capital (***)   21,514   -   104.90% of CDI   2 annual installments from July 2017   CPFL Energia guarantee CPFL Jaguari                     Banco do Brasil - Working capital (*)   -   1,099   98.5% of CDI   2 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working Capital (**)   3,747   6,955   99.0% of CDI   2 annual installments from March 2013   CPFL Energia guarantee Banco do Brasil - Working capital (***)   2,970   -   104.90% of CDI   2 annual installments from July 2017   CPFL Energia guarantee Banco IBM - Working capital (***)   16,615   19,416   100.0% of CDI   14 semiannual installments from December 2012   CPFL Energia guarantee CPFL Mococa                     Banco do Brasil - Working capital (*)   -   5,210   98.5% of CDI   2 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   1,905   3,471   99.0% of CDI   2 annual installments from March 2013   CPFL Energia guarantee Banco do Brasil - Working capital (***)   19,464   -   104.90% of CDI   2 annual installments from July 2017   CPFL Energia guarantee Banco IBM - Working capital (***)   5,392   6,320   100.0% of CDI   14 semiannual installments from December 2012   CPFL Energia guarantee CPFL Serviços                     Banco IBM - Working capital (***)   7,325   8,248   CDI + 0.10%   11 semiannual installments from June 2013   CPFL Energia guarantee CPFL Geração                     Banco do Brasil - Working capital   628,005   624,326   107.0% of CDI   1 installment in April 2015   CPFL Energia guarantee CPFL Renovaveis                     Banco Safra   27,713   52,542   CDI+ 0.4%   Annual installment until 2014   No guarantee HSBC   343,190   397,523   CDI + 0.5%   8 annual installment from June 2013   Shares alienation Banco do Brasil - Promissory Note   -   331,538   108.5% of CDI   1 installment in January 2013   No guarantee Banco do Brasil - Promissory Note   144,428   -   108.5% of CDI   1 installment in January 2014   Shares alienation Banco Itaú - Working capital   150,175   -   105% of CDI   1 installment in June 2014   No guarantee F -47 Table of Contents     Measured at cost   December 31, 2011   December 31, 2010   Annual interest   Amortization   Collateral Brazilian currency                     BNDES - Power increases                     CPFL Geração   -   13,593   TJLP + 3.1% to 4.3%   36 to 84 monthly installments from February 2003 to December 2008   CPFL Energia and Paulista guarantee CPFL Renováveis   8,526   -   TJLP + 3.1% to 4.3%   72 to 75 monthly installments from September 2007 to July 2008   CPFL Energia guarantee and promissory notes                       BNDES/BNB - Investment                     CPFL Paulista - FINEM III   53,807   80,711   TJLP + 3.3%   72 monthly installments from January 2008   CPFL Energia guarantee and  receivables CPFL Paulista - FINEM IV   192,429   256,572   TJLP + 3.28% to 3.4%   60 monthly installments from January 2010   CPFL Energia guarantee and receivables CPFL Paulista - FINEM V   199,692   98,051   TJLP + 2.12% to 3.3%   72 monthly installments from February 2012   CPFL Energia guarantee and receivables CPFL Paulista - FINEM V   64,873   35,135   Fixed rate 5.5% to 8.0%   114 monthly installments from August 2011   CPFL Energia guarantee and receivables CPFL Paulista - FINAME   67,613   36,067   Fixed rate 4.5%   96 monthly installments from January 2012   CPFL Energia guarantee CPFL Piratininga - FINEM II   31,963   47,945   TJLP + 3.3%   72 monthly installments from January 2008   CPFL Energia guarantee and receivables CPFL Piratininga - FINEM III   80,207   106,944   TJLP + 3.28% to 3.4%   60 monthly installments from January 2010   CPFL Energia guarantee and receivables CPFL Piratininga - FINEM IV   109,734   55,099   TJLP + 2.12% to 3.3%   72 monthly installments from February 2012   CPFL Energia guarantee and receivables CPFL Piratininga - FINEM IV   35,611   13,081   Fixed rate 5.5% to 8.0%   114 monthly installments from August 2011   CPFL Energia guarantee and receivables CPFL Piratininga - FINAME   32,062   22,905   Fixed rate 4.5%   96 monthly installments from January 2012   CPFL Energia guarantee RGE - FINEM III   22,429   44,858   TJLP + 5.0%   60 monthly installments from January 2008 to December 2012   Receivables / Reserve account RGE - FINEM IV   122,492   163,321   TJLP + 3.28 to 3.4%   60 monthly installments from January 2010 to December 2014   Receivables / CPFL Energia guarantee RGE - FINEM V   109,962   59,967   TJLP + 2.12 to 3.3% a.a.   72 monthly installments from February 2012 to January 2018   Receivables / CPFL Energia guarantee RGE - FINEM V   23,308   9,710   5.5% a.a. Fixed rate   96 monthly installments from February 2013 to January 2021   Receivables / CPFL Energia guarantee RGE - FINAME   16,089   4,857   Fixed rate 4.5%   96 monthly installments from January 2012 to December 2019   CPFL Energia guarantee CPFL Santa Cruz   8,007   10,483   TJLP + 2.90%   54 monthly installments from December 2010   CPFL Energia guarantee CPFL Mococa   4,258   5,475   TJLP + 2.9%   54 monthly installments from January 2011   CPFL Energia guarantee and receivables CPFL Jaguari   3,732   4,825   TJLP + 2.9%   54 monthly installments from December 2010   CPFL Energia guarantee and receivables CPFL Leste Paulista   5,497   3,261   TJLP + 2.9%   54 monthly installments from June 2011   CPFL Energia guarantee and receivables CPFL Sul Paulista   5,952   4,735   TJLP + 2.9%   54 monthly installments from June 2011   CPFL Energia guarantee and receivables CPFL Geração   -   74,531   TJLP + 1.72%   192 monthly installments from May 2013   CPFL Energia guarantee BAESA   104,649   120,347   TJLP + 3.125% to 4.125%   144 monthly installments from September 2006   Pledge of shares, credit rights and revenue BAESA   23,356   24,244   UMBND + 3.125% (1)   144 monthly installments from November 2006   Pledge of shares, credit rights and revenue ENERCAN   240,780   273,992   TJLP + 4%   144 monthly installments from April 2007   Letters of guarantee ENERCAN   15,685   15,932   UMBND + 4%   144 monthly installments from April 2007   Letters of guarantee CERAN   55,288   53,845   UMBND + 5% (1)   168 monthly installments from December 2005   CPFL Energia guarantee CERAN   508,179   557,451   TJLP + 3.69% (Average of percentage)   168 monthly installments from February 2006   CPFL Energia guarantee Foz do Chapecó   1,044,312   996,013   TJLP + 2.49% to 2.95%   192 monthly installments from October 2011   Pledge of shares, credit and concession rights and revenue and CPFL Energia guarantee CPFL Bioenergia - FINEM   -   39,512   TJLP + 1.9%   144 monthly installments from June 2011   Mortgage, credit rights and CPFL Energia guarantee CPFL Bioenergia - FINAME   -   39,369   Fixed rate 4.5%   102 monthly installments from June 2011   Mortgage, credit rights and CPFL Energia guarantee CPFL Renovaveis - FINEM II   38,818   -   TJLP + 1.9%   144 monthly installments from June 2011   Guarantee of CPFL Energia, assets subject to fiduciary sale and fiduciary assignment of credit rights arrangements.  CPFL Renovaveis - FINAME III   37,356   -   Fixed rate 4.5%   102 monthly installments from June 2011   Guarantee of CPFL Energia, assets subject to fiduciary sale and fiduciary assignment of credit rights arrangements.  CPFL Renováveis - FINEM I   416,677   -   TJLP 1.95%   168 monthly installments from October 2009 to July 2011   PCH Holding debtor solidarity, letter of guarantee CPFL Renováveis - FINEM III   426,119   -   TJLP + 1.72% a 1.9%   156 to 192 monthly installments from January 2012 to May 2013   Guarantee of CPFL Energia, assets subject to fiduciary sale and fiduciary assignment of credit rights arrangements.  CPFL Renovaveis - FINEM IV   5,374   -   TJLP + 3.5%   46 monthly installments from April 2011   Guarantee of CPFL Energia, assets subject to fiduciary sale and fiduciary assignment of credit rights arrangements.  CPFL Renovaveis - FINEM V (Santa Luzia)   136,002   -   TJLP + 2.8% a 3.4%   143 months from December 2011   PCH Holding 2 and CPFL Renováveis debtor solidarity CPFL Renováveis - FINAME I   179,188   -   Fixed rate 5.5%   102 to 108 monthly installments from January 2012 to August 2020   Guarantee of CPFL Energia, assets subject to fiduciary sale and joint fiduciary assignment of credit rights arrangements.  Epasa - FINEM   102,782   -   TJLP + 1.82%   152 monthly installments from January 2012   CPFL Energia guarantee EPASA - BNB   109,137   95,613   Fixed rate 10%   132 monthly installments from January 2013   Bank guarantee CPFL Brasil - FINEP   4,868   3,675   5% Fixed rate   81 monthly installments from August 2011   Receivables     December 31, 2013   December 31, 2012 restated   Annual interest   Amortization   Collateral Other                     Eletrobrás                     CPFL Paulista   6,918   8,490   RGR + 6.0% to 6.5%   monthly installments from August 2006   Receivables and promissory notes CPFL Piratininga   390   555   RGR + 6%   monthly installments from August 2006   Receivables and promissory notes RGE   11,834   14,165   RGR + 6%   monthly installments from August 2006   Receivables and promissory notes CPFL Santa Cruz   2,173   2,806   RGR + 6%   monthly installments from January 2007   Receivables and promissory notes CPFL Leste Paulista   961   845   RGR + 6%   monthly installments from February 2008   Receivables and promissory notes CPFL Sul Paulista   1,072   1,366   RGR + 6%   monthly installments from August 2007   Receivables and promissory notes CPFL Jaguari   58   77   RGR + 6%   monthly installments from June 2007   Receivables and promissory notes CPFL Mococa   275   334   RGR + 6%   monthly installments from January 2008   Receivables and promissory notes Other   36,713   7,402             Subtotal Brazilian Currency - Cost   7,221,542   6,842,504                                   Foreign Currency                     Financial institutions                     CPFL Paulista                     C-Bond   -   3,310   US$ + 8% FIXED (4)   21 semiannual installments from April 2004   Revenue and Government SP guaranteed Discount Bond   -   17,879   US$ + Libor 6 months + 0.8125% (4)   1 installment in April 2024   Revenue and Government SP guaranteed PAR-Bond   -   25,856   US$ + 6% FIXED (4)   1 installment in April 2024   Revenue and Government SP guaranteed Subtotal Foreign Currency - Cost   -   47,045             Total Measured at cost   7,221,542   6,889,549                                   Foreign Currency                     Measured at fair value                     Financial Institutions                     CPFL Paulista                     BNP Paribas   -   215,534   US$ + 2.78% (3)   1 installment in June 2014   CPFL Energia guarantee and promissory notes J.P.Morgan   -   106,746   US$ + 2.74% (3)   1 installment in July 2014   CPFL Energia guarantee and promissory notes J.P.Morgan   -   106,156   US$ + 2.55% (3)   1 installment in August 2014   CPFL Energia guarantee and promissory notes Bank of America Merrill Lynch   -     317,501   US$ + 2.33% (3)   1 installment in July 2014   CPFL Energia guarantee and promissory notes Bank of America Merrill Lynch   251,037     226,077   US$ + 3.69 % (3)   1 installment in July 2016   CPFL Energia guarantee and promissory notes Bank of America Merrill Lynch   358,821     -   US$ + Libor 3 months + 1.48% (3)   1 installment in July 2016   CPFL Energia guarantee and promissory notes Societe Generale   -   48,535   US$ + 3.55% (3)   1 installment in August 2016   CPFL Energia guarantee and promissory notes HSBC   -   50,654   US$ + 2.37%(3)   1 installment in September 2014   CPFL Energia guarantee and promissory notes Scotiabank   58,748   52,444   US$ + 3.3125% (3)   1 installment in July 2016   CPFL Energia guarantee and promissory notes Morgan Stanley   121,420   107,877   US$ + Libor 6 months + 1.75% (3)   1 installment in September 2016   CPFL Energia guarantee and promissory notes Citibank   121,476   107,952   US$ + Libor 6 months + 1.77% (3)   1 installment in September 2016   CPFL Energia guarantee and promissory notes CPFL Piratininga                     BNP Paribas   -   63,855   USD + 2.62% (3)   1 installment in July 2014   CPFL Energia guarantee and promissory notes J.P.Morgan   -   212,169   USD + 2.52% (3)   1 installment in August 2014   CPFL Energia guarantee and promissory notes Societe Generale   -   63,685   USD + 3.55% (3)   1 installment in August 2016   CPFL Energia guarantee and promissory notes Scotiabank   76,733   68,498   US$ + 3.3125% (3)   1 installment in July 2016   CPFL Energia guarantee and promissory notes Citibank   19,384   17,233   US$ + Libor 6 months + 1.69%(3)   1 installment in August 2016   CPFL Energia guarantee and promissory notes Sumitomo Mitsui (***)   -   107,703   US$ + Libor 6 months + 1.75%(3)   1 installment in August 2016   CPFL Energia guarantee and promissory notes Santander   107,150   -   USD + 2.58% (3)   1 installment in July 2016   CPFL Energia guarantee and promissory notes CPFL Geração                     Citibank   151,427   134,642   US$ + Libor 6 months + 1.69%(3)   1 installment in August 2016   CPFL Energia guarantee and promissory notes RGE                     J.P. Morgan   113,630   101,214   US$ + 2.64% (3)   1 installment in July 2016   CPFL Energia guarantee and promissory notes Bank of Tokyo-Mitsubishi   42,343   -   US$ + Libor 3 months + 0.82%(6)   1 installment in April 2018   CPFL Energia guarantee and promissory notes Bank of Tokyo-Mitsubishi   192,741   -   US$ + Libor 3 months + 0.83%(6)   1 installment in May 2018   CPFL Energia guarantee and promissory notes Citibank   169,371   148,853   US$ + Libor 6 months + 1.45% (5)   1 installment in April 2017   CPFL Energia guarantee and promissory notes   F - 3948 Table of Contents       December 31, 2013   December 31, 2012 restated   Annual interest   Amortization   Collateral CPFL Santa Cruz                     J.P. Morgan   23,099   20,522   US$ + 2.38% (3)   1 installment in July 2015   CPFL Energia guarantee and promissory notes Santander   20,943   -   USD + 2.544% (3)   1 installment in June 2016   CPFL Energia guarantee and promissory notes CPFL Leste Paulista                     Scotiabank   29,309   25,920   US$ + 2.695% (3)   1 installment in July 2015   CPFL Energia guarantee and promissory notes Citibank   11,276   9,962   US$ + Libor 6 months + 1.52%(3)   1 installment in September 2014   CPFL Energia guarantee and promissory notes CPFL Sul Paulista                     J.P. Morgan   12,127   10,775   US$ + 2.38% (3)   1 installment in July 2015   CPFL Energia guarantee and promissory notes Scotiabank   12,309   10,912   US$ + 2.695% (3)   1 installment in July 2015   CPFL Energia guarantee and promissory notes Citibank   11,276   9,985   US$ + Libor 6 months + 1.52%(3)   1 installment in September 2014   CPFL Energia guarantee and promissory notes Santander   23,037   -   US$ + 2.544% (3)   1 installment in June 2016   CPFL Energia guarantee and promissory notes CPFL Jaguari                     Scotiabank   15,241   13,510   US$ + 2.695% (3)   1 installment in July 2015   CPFL Energia guarantee and promissory notes Citibank   10,334   9,162   US$ + Libor 6 months + 1.57%(3)   1 installment in August 2014   CPFL Energia guarantee and promissory notes Santander   32,461   -   US$ + 2.544% (3)   1 installment in June 2016   CPFL Energia guarantee and promissory notes CPFL Mococa                     Scotiabank   12,896   11,432   US$ + 2.695% (3)   1 installment in July 2015   CPFL Energia guarantee and promissory notes Citibank   9,866   8,737   US$ + Libor 6 months + 1.52%(3)   1 installment in September 2014   CPFL Energia guarantee and promissory notes Total Foreign Currency - fair value   2,008,454     2,388,245                                   Total   9,229,996   9,277,794                                   The subsdiaries hold swaps converting the operating cost of currency variation to interest tax variation in reais, corresponding to :     (1) 176.19% of CDI   (3) 95.50% to 106.85% of CDI   (6) 106.40% and 107.70% of CDI         (2) 106% to 106.5% of CDI   (5) 108 % of CDI             (4)As certain assets are dollar indexed, a partial swap of R$ 12,089 was contracted, converting the currency variation to 95.78% of the CDI.                           (*) Efective rate: CPFL Paulista and CPFL Piratininga - 98.5% of CDI + 2.88% RGE - 98.5% of CDI + 2.5% CPFL Santa Cruz, CPFL Sul Paulista, CPFL Leste Paulista, CPFL Mococa, CPFL Jaguari - 98.5% of CDI + 2.28%                           (**) Efective rate: CPFL Paulista - 99.0% of CDI + 2.38% and CPFL Piratininga - 99.0% of CDI + 2.4% RGE - 99.0% of CDI + 2.38% CPFL Santa Cruz, CPFL Sul Paulista, CPFL Leste Paulista, CPFL Mococa, CPFL Jaguari - 99.0% of CDI + 2.38%                           (***) Efective rate: CPFL Paulista, CPFL Santa Cruz, CPFL Leste Paulista, CPFL Mococa e CPFL Jaguari - 100% to 104% of CDI + 2.28% CPFL Serviços - CDI + 0.10 % + 1.88% CPFL Piratininga – 98.65% of CDI +0.10%             (****) Efective rate: CPFL Piratininga – 104.9% of CDI                   BNDES - Other                     CPFL Brasil - Purchase of assets   3,624   6,785   TJLP + from 1.94% to 2.5%   36 monthly installments from May 2009   Tied to the asset acquired CPFL Brasil - Purchase of assets   3,508   -   Fixed rate de 4.5% to 8.70%   96 monthly installments from March 2012   CPFL Energia guarantee CPFL Piratininga - Working capital   78,276   105,652   TJLP + 5.0% (2)   24 monthly installments from February 2011 to October 2011     No guarantee CPFL Geração - FINEM - Working capital   42,077   53,232   TJLP + 4.95%   24 monthly installments from July 2011   CPFL Energia guarantee CPFL Geração - FINAME - Working capital   28,389   53,896   TJLP + 4.95% (3)   23 monthly installments from February 2011   CPFL Energia guarantee                       Financial Institutions                     CPFL Paulista                     Banco do Brasil - Law 8727   26,589   34,874   IGP-M + 7.42%   240 monthly installments from May 1994   Receivables Banco do Brasil   105,435   104,890   107% of CDI   1 installment in April 2015   CPFL Energia guarantee Banco do Brasil - Working capital (*)   224,124   199,622   98.50% of CDI   4 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   160,528   -   99.00% of CDI   2 annual installments from March 2013   CPFL Energia guarantee CPFL Piratininga                     Banco do Brasil - Working capital (*)   20,613   18,360   98.5% of CDI   4 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   20,671   -   99% of CDI   2 annual installments from March 2013   CPFL Energia guarantee RGE                     Banco do Brasil - Working capital (*)   266,046   236,830   98.5% of CDI   4 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   59,438   -   99% of CDI   2 annual installments from March 2013   CPFL Energia guarantee CPFL Santa Cruz                     HSBC   -   45,206   CDI + 1.10%   1 installment in June 2011   CPFL Energia guarantee Banco do Brasil - Working capital (*)   18,551   16,337   98.5% of CDI   2 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   7,113   -   99% of CDI   2 annual installments from March 2013   CPFL Energia guarantee CPFL Sul Paulista                     Banco do Brasil - Working capital (*)   11,479   10,109   98.5% of CDI   2 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   9,948   -   99% of CDI   2 annual installments from march 2013   CPFL Energia guarantee CPFL Leste Paulista                     Banco do Brasil - Working capital (*)   19,073   16,798   98.5% of CDI   2 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   18,576   -   99% of CDI   2 annual installments from march 2013   CPFL Energia guarantee CPFL Mococa                     Banco do Brasil - Working capital (*)   9,623   8,476   98.5% of CDI   2 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   3,114   -   99% of CDI   2 annual installments from march 2013   CPFL Energia guarantee CPFL Jaguari                     Banco do Brasil - Working capital (*)   2,029   1,786   98.5% of CDI   2 annual installments from July 2012   CPFL Energia guarantee Banco do Brasil - Working capital (**)   6,298   -   99% of CDI   2 annual installments from march 2013   CPFL Energia guarantee CPFL Geração                     Banco Itaú BBA   -   103,371   106.0% of CDI   1 installment in February 2014   CPFL Energia guarantee Banco do Brasil   628,632   627,432   107.0% of CDI   1 installment in April 2015   CPFL Energia guarantee CERAN                     Banco Bradesco   -   22,439   CDI + 1.75%   1 installment in April 2012   No guarantee Foz do Chapecó                     Banco Alfa   3,911   -   111.45% of CDI   1 installment in January 2012   No guarantee CPFL Renovaveis                     Banco Safra   42,925   -   CDI+ 0.4%   Annual installment up to 2014   No guarantee Banco Safra   32,022   -   CDI+ 0.4%   Annual installment up to 2014   No guarantee BNB   152,136   -   TJLP+8.08%   168 monthly installments from January 2009   Fiduciary sale Other                     Eletrobrás                     CPFL Paulista   9,046   10,358   RGR + 6.0% to 6.5%   Monthly installments up to December 2022   Receivables and promissory notes CPFL Piratininga   707   925   RGR + 6%   Monthly installments up to July 2016   Receivables and promissory notes RGE   16,264   18,097   RGR + 6%   Monthly installments up to July 2016   Receivables and promissory notes CPFL Santa Cruz   3,381   3,947   RGR + 6%   Monthly installments up to April 2018   Receivables and promissory notes CPFL Leste Paulista   986   1,096   RGR + 6%   Monthly installments up to February 2022   Receivables and promissory notes CPFL Sul Paulista   1,629   1,837   RGR + 6%   Monthly installments up to July 2018   Receivables and promissory notes CPFL Jaguari   93   109   RGR + 6%   Monthly installments up to May 2017   Receivables and promissory notes CPFL Mococa   383   415   RGR + 6%   Monthly installments up to February 2022   Receivables and promissory notes Other   9,774   21,624             Subtotal Brazilian Currency - Cost   6,693,824   5,096,622                                   Foreign Currency                                                                 CPFL Paulista (6)                     Debt Conversion Bond   1,119   2,982   US$ + Libor 6 months + 0.875%   17 semiannual installments from April 2004   Revenue/Government SP guaranteed C-Bond   5,064   6,298   US$ + 8%   21 semiannual installments from April 2004   Revenue/Government SP guaranteed Discount Bond   16,403   14,570   US$ + Libor 6 months + 0.8125%   1 installment in April 2024   Escrow deposits and revenue/ Gov.SP guarantee PAR-Bond   23,734   21,082   US$ + 6%   1 installment in April 2024   Escrow deposits and revenue/ Gov.SP guarantee Subtotal Foreign Currency - Cost   46,320   44,932                                   Total Measured at cost   6,740,144   5,141,554             F - 4049 Table of Contents   Foreign Currency                     Measured at fair value                     Financial Institutions                     CPFL Paulista                     Banco ABN AMRO Real   -   424,827   Yen +1.49% (4)   1 installment in January 2012   No guarantee BNP Paribas   195,602   -   US$ + 2.78% (3)   1 installment in June 2014   Promissory notes and CPFL Energia guarantee J.P.Morgan   95,259   -   US$ + 2.74% (3)   1 installment in July 2014   Promissory notes and CPFL Energia guarantee J.P.Morgan   94,364   -   US$ + 2.55% (3)   1 installment in August 2014   Promissory notes and CPFL Energia guarantee Morgan Stanley   95,086   -   US$ + Libor 6 months + 1.75% (3)   1 installment in September 2016   Promissory notes and CPFL Energia guarantee Bank of America   196,645   -   US$ + 3.69 % (3)   1 installment in July 2016   Promissory notes and CPFL Energia guarantee Bank of America   282,012   -   US$ + 2.33% (3)   1 installment in July 2014   Promissory notes and CPFL Energia guarantee Societe Generale   42,106   -   US$ + 3.55% (3)   1 installment in August 2016   Promissory notes and CPFL Energia guarantee Citibank   95,165   -   US$ + Libor 6 months + 1.77% (3)   1 installment in September 2016   Promissory notes and CPFL Energia guarantee HSBC   44,782   -   US$ + Libor 6 months + 2.37% (3)   1 installment in September 2014   Promissory notes and CPFL Energia guarantee CPFL Piratininga                     Banco BNP Paribas   56,862   -   USD + 2.62% (3)   1 installment in July 2014   Promissory notes and CPFL Energia guarantee J.P.Morgan   188,538   -   USD + 2.52% (3)   1 installment in August 2014   Promissory notes and CPFL Energia guarantee Societe Generale   55,249   -   USD + 3.55% (3)   1 installment in August 2016   Promissory notes and CPFL Energia guarantee Citibank   15,190   -   US$ + Libor 6 months + 1.69% (3)   1 installment in August 2016   Promissory notes and CPFL Energia guarantee Sumitomo   94,845   -   US$ + Libor 6 months + 1.75% (3)(***)   1 installment in August 2016   Promissory notes and CPFL Energia guarantee CPFL Geração                     Citibank   118,524   -   US$ + Libor 6 months + 1.69% (3)   1 installment in August 2016   Promissory notes and CPFL Energia guarantee CPFL Leste Paulista       -             Citibank - Law 4131   8,972   -   US$ + Libor 6 months + 1.52% (3)   1 installment in September 2014   Promissory notes and CPFL Energia guarantee CPFL Sul Paulista       -             Citibank - Law 4131   8,972   -   US$ + Libor 6 months + 1.52% (3)   1 installment in September 2014   Promissory notes and CPFL Energia guarantee CPFL Jaguari       -             Citibank - Law 4131   8,233   -   US$ + Libor 6 months + 1.52% (3)   1 installment in August 2014   Promissory notes and CPFL Energia guarantee CPFL Mococa       -             Citibank - Law 4131   7,849   -   US$ + Libor 6 months + 1.52% (3)   1 installment in September 2014   Promissory notes and CPFL Energia guarantee Total Foreign Currency - fair value   1,704,254   424,827                                                         Total - Consolidated   8,444,398   5,566,381                                                         The subsdiaries hold swaps converting the operating cost of currency variation to interest tax variation in reais, corresponding to : (1) 143,9% of the CDI (3) 95,50% to 106,50% of the CDI (2) 106.3% of the CDI (6) Since there are dollar assets indexed (note 10), the subsidiary has a partial swap of R$24.268 to convert exchange variation into 105.95% of CDI (*) Efective rate: CPFL Paulista and CPFL Piratininga - 98.5% CDI + 2.88% RGE - 98.5% of CDI + 2,5%p.a. CPFL Santa Cruz, CPFL Sul Paulista, CPFL Leste Paulista, CPFL Mococa, CPFL Jaguari - 98.5% CDI + 2.,28% (**) Efective rate: CPFL Paulista - 99.0% of CDI + 0.5% and CPFL Piratininga - 99.0% of CDI + 2.4% RGE - 99,0% of CDI + 2.38% p.a. CPFL Santa Cruz, CPFL Sul Paulista, CPFL Leste Paulista, CPFL Mococa, CPFL Jaguari - 99.0% CDI + 2.88% (***)Efective rate CPFL Pitatininga - 98.65% of CDI + 0.10% In conformityaccordance with IAS 3932 and 32,39, the Company and its subsidiaries classified their debts,loans and financing, as segregated in the tables above, as (i) other financial liabilities not measured at fair value (or measured at amortized cost), and (ii) financial liabilities measured at fair value through profit orand loss. In 2011, the subsidiaries CPFL Paulista, CPFL Piratininga, CPFL Geração, CPFL Sul Paulista, CPFL Leste Paulista, CPFL Mococa and CPFL Jaguari raised funds in foreign currency for working capital and recorded them as financial liabilities measured at fair value. The objective of classification of financial liabilities on loans and financing measured at fair value is to compare the effects of recognition of income and expense derived from marking hedge derivatives to market, tied to the debts,loans and financing, in order to obtain more relevant and consistent accounting information. At December 31, 2011,2013, the total balance of the debtloans and financing measured at fair value was R$ 1,704,2562,008,454 (R$ 424,827 and R$1,095,1032,388,245 at December 31, 2010 and 2009 respectively), and the amounts corresponding to the amortized cost are as follows: F - 41 Table of Contents     Measured at cost   Measured at fair value Foreign Currency   Interest - Current and Noncurren   Principal   Total   Measured at fair value     Current   Noncurrent     CPFL Paulista                     BNP Paribas   2,610   -   192,020   194,630   195,602 J.P.Morgan   1,235   -   93,790   95,025   95,259 J.P.Morgan   990   -   93,790   94,780   94,364 Morgan Stanley   610   -   93,790   94,400   95,086 Bank of America   3,288   -   187,580   190,868   196,645 Bank of America   3,114   -   281,370   284,484   282,012 Societe Generale   608   -   40,564   41,172   42,106 Citibank   604   -   93,790   94,394   95,165 HSBC   299   -   45,019   45,319   44,782     13,357   -   1,121,714   1,135,071   1,141,020 CPFL Piratininga                     Banco BNP Paribas   639   -   56,274   56,913   56,862 J.P.Morgan   1,957   -   187,580   189,537   188,538 Societe Generale   798   -   53,226   54,024   55,249 Citibank   115   -   15,007   15,122   15,190 Sumitomo   715   -   93,415   94,130   94,845     4,224   -   405,502   409,726   410,684 CPFL Geração                     Citibank   903   -   117,237   118,140   118,526 CPFL Leste Paulista                     Citibank - Law 4131   54   -   8,939   8,993   8,972 CPFL Sul Paulista                     Citibank - Law 4131   54   -   8,939   8,993   8,972 CPFL Jaguari                     Citibank - Law 4131   47   -   7,821   7,868   7,849 CPFL Mococa                     Citibank - Law 4131   59   -   8,178   8,237   8,233     18,698   -   1,678,330   1,697,028   1,704,256                       2012). The changesChanges in the fair values of these debtsloans and financing are recognized in the financial income (expense)income/expense of the Company and its subsidiaries. The lossesLosses of R$ 7,359 (gain of R$ 4,96544,194 (R$ 95,435 at December 31, 2010) obtained by2012) on marking the debtsloans and financing to market, and derivativesless the effects of R$ 1,241 (loss of R$ 7,60718,080 (R$ 81,753 at December 31, 2010)2012) of marking to market the derivative financial instruments contracted as a hedge against foreign exchange variations (Note 32)(note 34), resultingresulted in a total net loss of R$ 8,60026,114 (R$ 2,642 at13,682 as December 31, 2010)2012). Main fund-raising in the period: Brazilian currency BNDES – Investment: FINEM V (CPFL Paulista) – The subsidiary received approval for financing of R$ 291,043 from the BNDES in 2010, part of a FINEM credit line, to be invested in implementation of the investment plan for the second half-year of 2010 and for 2011. R$ 129,030 was released in 2011.  There will be a final release in the first quarter of 2012 (at the time of the proof of adequate investments relating to fourth quarter of 2011) and any outstanding balance will be cancelled. FINAME (CPFL Paulista) – The subsidiary obtained approval for financing of R$ 92,183 from the BNDES in 2009, part of a FINAME credit line, to be invested in acquisition of equipment for the Electricity System in 2010and 2011. In 2011, the subsidiary received the amount of R$ 31,468 and the outstanding balance of R$ 24,123 was cancelled. The interest will be paid quarterly, and amortized monthly from January 15, 2012. F - 42 Table of Contents FINEM IV (CPFL Piratininga) –The subsidiary received approval for financing from the BNDES in 2010, of R$ 165,621 part of a FINEM credit line, to be used for the implementation of the investment plan for the second half-year of 2010 and for 2011. R$ 75,596 was released in 2011.  There will be a final release in the first quarter of 2012 (at the time of the proof of adequate investments relating to fourth quarter of 2011) and any outstanding balance will be cancelled. FINAME (CPFL Piratininga) -The subsidiary obtained approval for financing of R$ 48,116 from the BNDES in 2009, part of a FINAME credit line, to be invested in acquisition of equipment for the Electricity System in 2010 and 2011. In 2011, the subsidiary received the amount of R$ 9,133 and the outstanding balance of R$ 16,116 was cancelled. The interest will be paid quarterly, and amortized monthly from January 15, 2012. FINEM V (RGE) – The subsidiary received approval for financing of R$ 167,861 from the BNDES in 2010, part of a FINEM credit line, to be invested in implementation of the investment plan for the second half-year of 2010 and for 2011. The subsidiary received the amount of R$ 62,132 during the year. There will be a final release in the first quarter of 2012 (at the time of the proof of adequate investments relating to fourth quarter of 2011) and any outstanding balance will be cancelled. FINAME (RGE) -The subsidiary received approval for financing of R$ 32,419 from the BNDES in 2009, part of a FINAME credit line, to be invested in acquisition of equipment for the Electricity System in 2010 and 2011. The amount of R$ 11,211 was received in 2010 and the outstanding balance will be cancelled. The interest is paid quarterly, and amortized monthly from January 15, 2012. FINEM I (CPFL Renováveis) – CPFL Renováveis had these financing transactions with the BNDES, consolidated in the Company’s financial statements as from August 1, 2011 (Notes 1 and 14.4). FINEM III / FINAME I (CPFL Renováveis) – In 2010, the subsidiaries CPFL Geração and CPFL Brasil obtained approval for financing from the BNDES of R$ 574,098 and R$ 398,547, respectively, which will be used for the indirect subsidiaries Santa Clara I to VI and Eurus VI and CPFL Bio Formosa, CPFL Bio Pedra, CPFL Bio Ipê and CPFL Bio Buriti. The amount of R$ 587,894 was released in 2011 and the outstanding amount of R$384,751 is scheduled for release by April 2013. As a result of the corporate restructuring described in Notes 1 and 14.4, these debts have been recorded in the subsidiary CPFL Renováveis since August 1, 2011. FINEM V (CPFL Renováveis)- The indirect subsidiary Santa Luzia, acquired in the context of the business combination described in Note 14.4, had these transactions with the BNDES, which have been consolidated in the Company`s financial statements since December 2011.  FINEM (Epasa)–In August 2011, the indirect subsidiary EPASA signed a financing agreement of R$ 203,343 (R$ 107,263 in proportion to the Company’s participation) with the BNDES for the construction of the Termoparaíba and Termonordeste thermoelectric power plants. The amount of R$ 194,400 (R$ 102,546 in proportion to the Company’s participation) was released in 2011. The principal and interest will be paid monthly until August 2024. BNB – (EPASA) – In December 2009, the indirect subsidiary EPASA contracted a loan of R$ 214,278 (R$ 113,032 in proportion to the Company's participation) from Banco Nordeste do Brasil – BNB, tobe invested in the construction of the Termoparaíba and Termonordeste thermoelectric power plants.The amount ofR$ 19,163 was released in 2011 (R$ 10,109 in proportion to the Company’s participation). The outstanding balance of R$ 4,676 was cancelled. The interest will be paid quarterly to December 2012 and monthly from January 2013. There are no restrictive covenants for this financing agreement. Financial institutions: -Banco do Brasil – Working capital (CPFL Paulista, CPFL Piratininga, RGE, CPFL Santa Cruz, CPFL Sul Paulista, CPFL Leste Paulista, CPFL Mococa and CPFL Jaguari) - these subsidiaries obtained approval for financing of working capital, of which a total amount of R$ 267,870 was available (R$ 261,504 net of costs) in 2011. The interest will be capitalized monthly and amortized together with the installments of the principal. F - 43 Table of Contents Banco Alfa (Foz do Chapecó)–a credit line of R$ 50,000 (R$ 25,500 in proportion to the Company’s participation) was obtained from Banco Alfa in 2011, to reinforce working capital. Bank of América Merrill Lynch, Banco BNP Paribás, Banco J.P Morgan, Banco Societe Generale, Banco Citibank, Banco Morgan Stanley, Banco HSBC e Banco Sumitomo–Working capital (CPFL Paulista, CPFL Piratininga, CPFL Geração, CPFL Sul Paulista, CPFL Leste Paulista, CPFL Mococa and CPFL Jaguari)– These subsidiaries obtained approval for foreign currency working capital financing, of which R$ 1,418,155 (R$ 1,338,306 net of costs) wasavailable in 2011, to cover working capital. The interest will be paid half-yearly and the principal will be paid by September 2016. The maturities of the principal long-term balances of loans and financing taking into consideration only the amounts recorded at cost, are scheduled as follows:   2013   955,186 2014   1,759,874     2015   1,232,762 1,459,838 2016   1,097,396 1,973,541 2017   401,302 826,253 After 2017   1,928,708 2018 1,028,459 2019 520,103 2020 a 2024 1,389,080 2025 a 2029 304,869 Subtotal   7,375,228 7,502,143 Mark to market   7,227 44,001 Total   7,382,455 7,546,144       The main financial rates usedapplicable for restatement of Loansour loans and Financing and thefinancing their related breakdown of the indebtedness in local and foreign currency, after taking into consideration the effects of translation of the derivative instruments, are as shown below:                                 Accumulated variation - %   % of debt   Accumulated variation   % of debt Index   December 31, 2011   December 31, 2010   December 31, 2011   December 31, 2010   December 31, 2013   December 31, 2012   December 31, 2013   December 31, 2012 restated IGP-M   5.10   11.32   0.31   0.77   5.53   7.81   0.91   1.07 UMBND   12.86   3.76   1.12   1.69 UMBNDES   17.80   12.16   0.62   0.60 TJLP   6.00   6.00   52.87   58.23   5.00   5.75   39.03   34.79 CDI   11.59   9.75   19.78   33.80   8.02   8.40   45.42   50.70 Dollar   1.88   1.67   20.74   - Other   -   -   5.19   5.53           14.03   12.84           100   100           100.00   100.00                                   Main fund-raising in the year: Brazilian currency Investment: FINEM VI (CPFL Paulista) –The subsidiary received approval for BNDES financing of R$ 790,000 in 2012, part of a FINEM credit line, to be used in the investment plan. The amount of R$ 161,254 was received in 2013 and R$ 26,968 was received in the first quarter of 2014. The remaining outstanding balance will be cancelled. FINEM V (CPFL Piratininga) –The subsidiary received approval for BNDES financing of R$ 220,000 in 2012, part of a FINEM credit line, to be used in the company’s investment plan. The subsidiary received the amount of R$ 47,364 in 2013 and R$ 12,442 was received in the first quarter of 2014. The remaining outstanding balance  will be cancelled. F -50 Table of Contents FINEM VI (RGE) –The subsidiary received approval for financing of R$ 274,997 in 2012, part of a FINEM credit line, to be used in the company’s investment plan. In 2013, the subsidiary received the amount of R$ 94,639 and R$ 8,354 was received in the first quarter of 2014. The remaining outstanding balance  will be cancelled. CPFL Serviços – FINAME– In 2013, the subsidiary CPFL Serviços received approval for Banco Itaú BBA financing to be used in vehicles and equipment acquisition. In 2013 the subsidiary received the amount of R$ 11,800 and there are no restrictive covenants in this agreement. CPFL Renováveis – FINEM VIII– In 2013, Coopcana and Alvorada subsidiaries obtained a R$ 9,000 BNDES financing for construction work. The whole amount was released in 2013.  CPFL Renováveis – FINEM XII– In 2013, the indirect subsidiaries Campo dos Ventos II, Macacos, Costa Branca, Juremas and Pedra Preta received approval for BNDES financing of R$ 391,245. The subsidiaries received the amount of R$ 333,745  in 2013, and the outstanding balance of R$ 57,500 is scheduled for release by the end of 2014. CPFL Renováveis – FINAME III– In 2013, the indirect subsidiaries Coopcana, Alvorada and Ester obtained a BNDES financing of R$67,925. The outstanding balance of R$ 36,766 is scheduled for release until the second quarter of 2014. CPFL Renováveis – Bridging loans BNDES II and III– The indirect subsidiaries belonging to the Atlântica wind complex raised bridging loans amounting to R$ 263,714 from the BNDES in 2013, in order to meet the project requirements pending long-term financing. There are no restrictive clauses for this transaction, only pledge of the subsidiaries’ shares and corporate guarantee of CPFL Renováveis. Financial institutions: CPFL Paulista – Banco do Brasil – In 2013, the subsidiary raised R$ 250,000 (R$ 244,309 net of costs) from the Banco do Brasil to reinforce working capital and extend the debt profile. There are no restrictive clauses for this transaction. CPFL Piratininga - Banco do Brasil –In 2013, the subsidiary raised R$ 44,000 (R$ 42,998 net of costs) from the Banco do Brasil, to reinforce working capital. There are no restrictive clauses for this transaction. CPFL Santa Cruz - Banco do Brasil –In 2013, the subsidiary raised R$ 33,000 (R$ 32,249 net of costs) from the Banco do Brasil, to reinforce working capital. There are no restrictive clauses for this transaction. CPFL Sul Paulista - Banco do Brasil –In 2013, the subsidiary raised R$ 21,000 (R$ 20,522 net of costs) from the Banco do Brasil, to reinforce working capital. There are no restrictive clauses for this transaction. CPFL Jaguari - Banco do Brasil –In 2013, the subsidiary raised R$ 2,900 (R$ 2,834 net of costs) from the Banco do Brasil, to reinforce working capital. There are no restrictive clauses for this transaction. CPFL Mococa - Banco do Brasil –In July 2013, the subsidiary raised R$ 19,000 (R$ 18,567 net of issuance cost) from the Banco do Brasil, to reinforce working capital. There are no restrictive clauses for this transaction. CPFL Renováveis – Banco do Brasil (promissory note and working capital)- in 2012, the indirectly owned subsidiaries Atlântica I, Atlântica II, Atlântica IV, Atlântica V, Alvorada and Coopcana signed financing agreements with Banco do Brasil.  The funds, in the form of promissory notes totaling R$ 320,000, were used in the construction of four wind farms and two biomass power plants.  In January 2013, the amount of R$ 332,107 (principal of RS 320,000 and interest of R$ 12,107) was amortized and new promissory notes totaling R$ 230,000, maturing in May 2013, were issued on the same date and at the same cost of 108.5% of the CDI. The amount of R$ 94,399 was partially settled in May 2013 in respect of these new promissory notes, using the BNDES bridging loan, and the outstanding balance was settled in July 2013, using funds from a new issuance under the same conditions, totaling R$ 138,000.  There are no restrictive clauses for this transaction. CPFL Renováveis – Banco Itaú (Working Capital) - the indirect subsidiaries belonging to the Campos dos Ventos II wind complex raised the amount of R$ 35,000 from Banco Itaú in 2013 to build the project. There are no restrictive clauses for this transaction. The financing was settled in November 2013. F -51 Table of Contents CPFL Renováveis – Banco do Itaú (Promissory Notes) - In 2013, the subsidiary raised  R$ 150,000 from Banco Itaú, in the form of promissory notes, to reinforce working capital. There are no restrictive clauses for this transaction. CPFL Geração – promissory notes -In 2013, the subsidiary CPFL Geração issued the second series of promissory notes, in the form of 46 promissory notes with a unit face value of R$ 10,000, amounting to a total of R$ 460,000 (R$ 458,503 net of fundraising costs). Early settlement of the funds occurred in August 2013 as a result of the 6th debenture issue (note 17). Foreign currency Financial institutions CPFL Paulista – Bank of America Merrill Lynch (working capital) – In 2013, a loan of R$ 340,380with a CDI swap, was granted to the subsidiary CPFL Paulista.  Interest will be paid quarterly and the principal will be paid in full at end of the 3rd year on maturity. The funds were used to reinforce working capital and pay debts. CPFL Piratininga - Banco Santander(working capital) – In 2013, the subsidiary contracted foreign currency financing of R$ 100,000with a CDI swap. Interest will be paid half yearly and the principal will be paid in full at the end of the third year. The funds were used to reinforce working capital and pay debts. RGE - Bank of Tokyo Mitsubishi(working capital) – In 2013, the subsidiary contracted foreign currency financing of R$ 204,616with a CDI swap. The interest will be paid quarterly and the principal will be paid in full at the end of the 5th year. The funds are destined to reinforce working capital and pay off debts. Banco Santander (CPFL Santa Cruz, CPFL Sul Paulista and CPFL Jaguari) – In 2013, the subsidiaries contracted foreign currency financing amounting to a total of R$ 73,000 with a CDI swap. The interest will be paid half yearly and the principal will be paid in full at the end of the 3 rd year. The funds are destined to reinforce working capital.  RESTRICTIVE COVENANTS BNDES: Financing from the BNDES restricts the subsidiaries CPFL Paulista, CPFL Piratininga RGE, CPFL Santa Cruz, CPFL Mococa, CPFL Jaguari, CPFL Leste Paulista and CPFL Sul PaulistaRGE to: (i) not paying dividends and interest on shareholders’ equity totaling more than the minimum mandatory dividend laid down by law without  complying with all the contractual obligations; (ii) full compliance with the restrictive conditions established in the agreement; and (iii) maintaining certain financial ratios within pre-established parameters, as follows:calculated annually:   CPFL Paulista, CPFL Piratininga and RGE F - 44 Table of Contents ·        Net indebtedness divided by EBITDA – maximum of 3.0;3.5; ·        Net indebtedness divided by the sum of net indebtedness and net equityShareholder’s Equity – maximum of 0.90. CPFL PiratiningaServiços Maintaining, by the Company, the following index: ·        Net indebtedness divided by EBITDA – maximum of 2.5;4.0; ·Net indebtedness divided by the sum of net indebtedness and net equity – maximum of 0.80. RGE ·Net indebtedness divided by EBITDA – maximum of 2.5; ·Net indebtedness divided by the sum of net indebtedness and net equity – maximum of 0.5. CPFL Geração The loans from theBNDES raised by the indirect subsidiary CERAN andestablish:  ·Maintaining the jointly-owned subsidiaries ENERCAN, BAESA and Foz do Chapecódebt coverage ratio at 1.3 during the amortization period; F -establish restrictions52 Table of Contents ·Restrictions on the payment of dividends to the subsidiary CPFL Geraçãohigher than the minimum mandatory dividend of 25% without the prior agreement of the BNDES. Additionally, for the loan from BNDES raised for the subsidiary EPASA (FINEM), there is a covenant to debt coverage ratio in 1.1 times, during the period of depreciation. In case of failure of the ratio the distribution of dividends above the minimum required is prohibited until the index is re-established. CPFL Renováveis The main restrictive clauses of the FINEM I loans fromand FINEM VI ·Maintaining the BNDES are: i)Debtdebt coverage ratio of 1.2 during the amortization period;at 1.2. ii)·      Own capitalization ratio of 25% or more. FINEM II and FINAME II ·Restrictions on the payment of dividends if a debt service coverage ratio of 1.0 or more duringand general indebtedness ratio of 0.8 or less is not maintained. FINEM III ·Maintaining Shareholders’ Equity/(Shareholders’ Equity + Net Bank Debts) of more than 0.28, determined in the amortization period.Company's annual consolidated financial statements; ·Maintaining a Net Bank Debt/EBITDA ratio of 4.0 or less, determined in the Company's annual consolidated financial statements.   FINEM V ·Maintaining the debt coverage ratio at 1.2; ·Maintaining the own capitalization ratio at 30% or more. FINEM VII and X ·Maintaining the annual debt coverage ratio at 1.2. ·Distribution of dividends restricted to the Total Liabilities ratio divided by Shareholders’ Equity ex-Dividend of less than 2.33. FINEM VIII and FINAME III ·Maintaining a Debt Service Coverage Ratio of 1.2 or more; ·Maintaining a Net Indebtedness/EBITDA ratio of 7.5 or less in 2013, 6.0 in 2014, 5.6 in 2015, 4.6 in 2016 and 3.75 in 2017 onward, determined in the consolidated financial statements of CPFL Renováveis; ·Maintaining a Shareholders' Equity/(Shareholder’s Equity + Net Debt) ratio of 0.41 or more in 2013 to 2016 and 0.45 in 2017 onward, determined in the consolidated financial statements of CPFL Renováveis. FINEM IX ·Maintaining the Debt Service Coverage Ratio at 1.3 or more; FINEM XI and FINAME I ·Maintaining a Net Bank Debt/EBITDA ratio of 4.0 or less, determined in the Company's annual consolidated financial statements. FINEM XII ·Maintaining the Debt Service Coverage Ratio of the SPCs at 1.3 or more after amortization starts; ·Maintaining the Consolidated Debt Service Coverage Ratio at 1.3 or more, determined in the consolidated financial statements of Eólica Holding, after amortization starts; Bridging loans II and III ·Maintaining Shareholders’ Equity (Shareholders’ Equity + Net Bank Debts) of more than 0.41, determined in the consolidated financial statements of CPFL Renováveis; ·Maintaining a Net Bank Debt/EBITDA ratio of 7.5 or less in 2013 and 6.0 in 2014, determined in the consolidated financial statements of CPFL Renováveis; HSBC F -53 Table of Contents ·From 2013, there is the obligation to maintain the ratio of Net Debt and EBITDA to Cash Accumulation at less than 5.00 in 2013 and 3.50 after that until discharge. NIB ·Maintaining the half-yearly debt coverage ratio at 1.2. ·Maintaining a Total Debt and Shareholders’ Equity ratio of 30% or more; ·Maintaining the Financing Term Coverage ratio at 1.7 or more; Banco do Brasil – Working capitalCapital– CPFL Paulista, CPFL Piratininga, RGE, CPFL Santa Cruz, CPFL Sul Paulista, CPFL Jaguari, CPFL Mococa e CPFL Leste Paulista ·        Net indebtedness divided by EBITDA  –- maximum of 3.75; and 3.0. ·EBITDA divided by Financial Income (Expense) - minimum of 2.25.   Foreign currency fund raisingsloans - Bank of América, BNP Paribás,America, J.P Morgan, Societe Generale, Citibank, Morgan Stanley, HSBCScotiabank, Bank of Tokyo and SumitomoSantander (Law 4.131) The foreign currency loans from the Bank of America, BNP Paribás, J.P Morgan, Société Générale, Citibank, Morgan Stanley, HSBC and Sumitomo banksheld by Law 4.131 are subject to certain restrictive conditions,and include clauses that require the subsidiaries that obtained the loansCompany to maintain certain financial ratios within pre-established parameters.   The ratios required are as follows:follows: (i)Net indebtedness divided by EBITDA – maximum of3.75 and (ii)EBITDA divided by Financial Income (Expense) – minimum of2.25. OtherFor purposes of determining covenants, the definition of EBITDA for the distribution subsidiaries takes into consideration inclusion of the main regulatory assets and liabilities. In the Company’s case, it also takes into account consolidation of subsidiaries, associates and joint ventures based on the interest in the respective entities (for both EBITDA and assets and liabilities). Various loan and financing agreements of the direct and indirect subsidiaries are subject to early settlement in the event of changes in the Company’s structure or in the corporate structure of the subsidiaries that result in the loss of the share control or of control over managementManagement of the Company by the Company’s current shareholders.shareholders, unless at least one of the shareholders (Camargo Corrêa and Previ) remains directly or indirectly in the block of control. Furthermore, failure to comply with the obligations or restrictions mentioned could result in default in relation to other contractual obligations (cross default)., depending on each loan and financing agreement. The Management of the Company and its subsidiaries monitor these ratios systematically and constantly to ensure that the contractual conditions are complied with. In the opinion of the management,Management, these restrictive covenants and clauses are being adequately complied with.with at December 31, 2013. ( 17 )ACCRUED INTEREST ON DEBENTURES AND DEBENTURES F - 4554 Table of Contents                                                                                 December 31, 2013   December 31, 2012 restated       Interest - Current and Noncurrent   Current   Noncurrent   Total   Interest - Current and Noncurrent   Current   Noncurrent   Total Parent Company                                   3rd Issue Single series   -   -   -   -   7,082   150,000   150,000   307,082 4th Issue Single series   12,438   -   1,287,912   1,300,350   -   -   -   -       12,438   -   1,287,912   1,300,350   7,082   150,000   150,000   307,082 CPFL Paulista                                   5th Issue Single series   -   -   -   -   2,931   -   482,726   485,657 6th Issue Single series   31,674   -   658,134   689,808   26,304   -   657,800   684,105 7th Issue Single series   20,173   -   503,433   523,607   -   -   -   -       51,847   -   1,161,568   1,213,415   29,235   -   1,140,527   1,169,762 CPFL Piratininga                                   3rd Issue Single series   6,331   -   259,653   265,984   4,645   -   259,391   264,036 5th Issue Single series   -   -   -   -   969   -   159,537   160,506 6th Issue Single series   5,279   -   109,554   114,833   4,384   -   109,474   113,858 7th Issue Single series   9,388       234,229   243,616   -   -   -   -       20,998   -   603,436   624,433   9,998   -   528,403   538,400 RGE                                   3rd Issue 1st Series   -   -   -   -   184   33,333   -   33,517   2nd Series   -   -   -   -   3,383   46,667   -   50,050   3rd Series   -   -   -   -   767   13,333   -   14,100   4th Series   -   -   -   -   511   16,667   -   17,178   5th Series   -   -   -   -   511   16,667   -   17,178 5th Issue Single series   -   -   -   -   424   -   69,766   70,190 6th Issue Single series   23,995   -   498,564   522,559   19,928   -   498,306   518,234 7th Issue Single series   6,791   -   169,415   176,206   -   -   -   -       30,786   -   667,979   698,765   25,708   126,667   568,072   720,447 CPFL Santa Cruz                                   1st Issue Single series   416   -   64,799   65,215   292   -   64,753   65,045 CPFL Brasil                                   2nd Issue Single series   1,948   -   227,471   229,419   8,092   -   1,316,259   1,324,351 CPFL Geração                                   3rd Issue Single series   6,429   -   263,668   270,097   4,716   -   263,402   268,118 4th Issue Single series   5,809   -   678,288   684,097   4,169   -   677,908   682,077 5th Issue Single series   9,329   -   1,088,721   1,098,050   -   -   -   - 6th Issue Single series   16,254       458,612   474,866   -   -   -   -       37,821   -   2,489,289   2,527,110   8,885   -   941,310   950,195 CPFL Renováveis                                   1st Issue - SIIF 1st to 12th Series   814   34,872   474,172   509,858   1,774   33,483   481,051   516,308 1st Issue - PCH Holding 2 Single series   32,177   -   158,193   190,370   -   -   172,968   172,968 1st Issue - Renováveis Single series   5,065   -   427,402   432,467   3,760   -   426,921   430,681       38,056   34,872   1,059,766   1,132,695   5,534   33,483   1,080,940   1,119,957                                     Total     194,311   34,872   7,562,219   7,791,402   94,825   310,149   5,790,263   6,195,239                                       ( 17 )DEBENTURES  F - 4655 Table of Contents   December 31, 2011     December 31, 2010       Interest   Current   Noncurrent   Total Interest   Current   Noncurrent   Total Parent Company                             3rd Issue                             Single series 16,403   150,000   300,000   466,403 15,529   -   450,000   465,529                               CPFL Paulista                             3rd Issue                             1st Series 3,846   213,333   213,333   430,513 5,925   213,333   426,667   645,925 4th Issue                             Single series -   -   -   - 6,323   109,601   -   115,924 5th Issue                             Single series 4,704   -   482,363   487,067 -   -   -   -   8,551   213,333   695,696   917,580 12,248   322,934   426,667   761,849 CPFL Piratininga                             1st Issue                             1st Series -   -   -   - 10,733   200,000   -   210,733 3rd Issue                             Single series 7,310   -   259,129   266,439 7,013   -   258,868   265,881 4th Issue                             Single series -   -   -   - 1,845   -   278,043   279,888 5th Issue                             Single series 1,555   -   159,405   160,960 -   -   -   -   8,865   -   418,534   427,399 19,591   200,000   536,911   756,502 RGE                             2nd Issue                             1st Series -   -   -   - 2,019   28,370   -   30,389 3rd Issue                             1st Series 609   33,333   33,333   67,275 939   33,333   66,667   100,939 2nd Series 7,950   46,667   46,667   101,284 7,721   46,667   93,333   147,721 3rd Series 1,848   13,333   13,333   28,514 1,824   13,333   26,667   41,824 4th Series 1,226   16,667   16,667   34,560 1,335   16,667   33,333   51,335 5ª Series 1,226   16,667   16,667   34,560 1,335   16,667   33,333   51,335 4th Issue                             Single series -   -   -   - 10,633   184,623   -   195,256 5th Issue                             Single series 680   -   69,699   70,379 -   -   -   -                               CPFL Santa Cruz 13,539   126,667   196,366   336,572 25,806   339,660   253,333   618,799 1st Issue                             Single series 454   -   64,694   65,148 -   -   -   -                               CPFL Leste Paulista                             1st Issue                             Single series -   -   -   - 1,400   23,965   -   25,365                               CPFL Sul Paulista                             1st Issue                             Single series -   -   -   - 926   15,979   -   16,905                               CPFL Jaguari                             1st Issue                             Single series -   -   -   - 583   9,983   -   10,566                               CPFL Brasil                             1st Issue                             Single series             9,545   164,728   -   174,273 2st Issue                             Single series 12,940   -   1,315,580   1,328,520                                             CPFL Geração                             2nd Issue                             Single series -   -   -   - 24,327   424,266   -   448,593 3rd Issue                             Single series 7,423   -   263,137   270,560 7,121   -   263,137   270,258 4rd Issue                             Single series 6,666   -   677,527   684,193 -   -   -   -   14,089   -   940,664   954,753 31,448   424,266   263,137   718,851 EPASA                             2nd Issue                             Single series -   -   -   - -   -   204,406   204,406 3nd Issue                             Single series 3,670   5,480   62,364   71,514 -   -   -   -                               BAESA                             1st Series 299   3,150   11,812   15,261 357   3,165   15,030   18,552 2nd Series 245   2,584   9,691   12,520 294   2,569   12,207   15,070   544   5,734   21,503   27,781 651   5,734   27,237   33,622 Enercan                             1st Series 281   3,616   47,009   50,906 339   2,709   50,623   53,671 CPFL Renováveis                             1st Issue                             Single series 4,214   26,355   486,241   516,810 -   -   -   -                                 83,552   531,186   4,548,651   5,163,388 118,066   1,509,958   2,212,314   3,840,338                               The Company and its subsdiaries hold swap converting the local cost of currency variation to interest tax variation in reais, corresponding to (1) 104.4% of CDI (2) 105.07% of CDI F - 47 Table of Contents     Issued Annual Remuneration   Annual Effective rate   Amortization Conditions Collateral Parent Company     3rd Issue Single series 45,000- CDI + 0.45% (1)   CDI + 0.53% 3 annual installments from September 2012   Unsecured 4th Issue Single series 129.000 CDI + 0,40% CDI + 0.51% 1 installment in May 2015 Unsecured CPFL Paulista     3rd5th Issue Single series 1st Series-   64,000CDI +1.3% CDI + 1.41% 1 installment in June 2016 CPFL Energia guarantee 6th Issue Single series 104.4%660 CDI + 0.8% CDI + 0.87% 3 annual installments from July 2017 CPFL Energia guarantee 7th Issue Single series 50,500 CDI + 0.83% (6) CDI + 0.89% 4 annual installments from February 2018 CPFL Energia guarantee CPFL Piratininga 3rd Issue Single series 260 107% of CDI   104.4%107% of CDI + 0.05%0.67% 1 installment in April 2015 CPFL Energia guarantee 5th Issue Single series - CDI + 1.3% CDI + 1.41% 1 installment in June 2016 CPFL Energia guarantee 6th Issue Single series 110 CDI + 0.8% CDI + 0.91% 3 annual installments from July 2017 CPFL Energia guarantee 7th Issue Single series 23,500 CDI + 0.83% (6) CDI + 0.89% 4 annual installments from February 2018 CPFL Energia guarantee RGE 3rd Issue 1st Series - CDI + 0.6% (2) CDI + 0.71% 3 annual installments from December 2011 CPFL Energia guarantee 2nd Series - CDI + 0.6% (3) CDI + 0.71% 3 annual installments from December 2011 CPFL Energia guarantee 3rd Series - CDI + 0.6% (4) CDI + 0.71% 3 annual installments from December 2011 CPFL Energia guarantee 4th Series - CDI + 0.6% (5) CDI + 0.84% 3 annual installments from December 2011 CPFL Energia guarantee 5th Series - CDI + 0.6% (5) CDI + 0.84%   3 annual installments from December 2011   CPFL Energia guarantee 4th5th Issue Single series 175,000 110.3% of CDI700   110.3% CDI + 0.79%1.3%   2 annual installments from July 2010CDI + 1.43% 1 installment in June 2016   CPFL Energia guarantee 5th6th Issue Single series 4,840500 CDI +1.30% CDI + 1.40% 1 installment in June 2016 CPFL Energia guarantee CPFL Piratininga 1st Issue 1st Series0.8%   40,000 104.0% of CDI + 0.88%   104.0% CDI + 0.16% 23 annual installments from January 2010July 2017   CPFL Energia guarantee 3rd7th Issue Single series 260 107.0% of CDI 107.0% CDI + 0.67% April 1st, 2015 CPFL Energia guarantee 4th Issue Single series 280 109.09% of CDI 109.09% CDI +0.83% December 10, 2013 CPFL Energia guarantee 5th Issue Single series 1,600 CDI + 1.30% CDI + 1.41% June 1st, 2016 CPFL Energia guarantee RGE 2nd Issue 1st Series 2,620 IGP-M + 9.6% IGP-M + 9.73% April 1st, 2011 Unsecured 3rd Issue 1st Series 1 CDI + 0.60% (2)17,000   CDI + 0.71%0.83% (6) CDI + 0.88% 34 annual installments from December 2011February 2018   CPFL Energia guarantee 2nd Series   1 CDI + 0.60% (3)   CDI + 0.71% 3 annual installments from December 2011   CPFL Energia guarantee 3rd Series 1 CDI + 0.60% (4) CDI + 0.71% 3 annual installments from December 2011 CPFL Energia guarantee 4th Series 1 CDI + 0.60% (5) CDI + 0.84% 3 annual installments from December 2011 CPFL Energia guarantee 5ª Series 1 CDI + 0.60% (5) CDI + 0.84% 3 annual installments from December 2011 CPFL Energia guarantee 4th Issue Single series 185,000 110.30% of CDI 110.3% CDI + 0.82% July 1st, 2011 Unsecured 5th Issue Single series 700 CDI + 1.30% CDI + 1.43% June 1st, 2016 CPFL Energia guarantee CPFL Santa Cruz 1st Issue Single series 650 CDI + 1.40% CDI + 1.52% June 11, 2018 CPFL Energia guarantee CPFL Leste Paulista         1st Issue Single series 2,400 111.90% of CDI650   111.9% CDI + 0.65%1.4%   1 installment in July 1st, 2011CDI + 1.52%   CPFL Energia guarantee CPFL Sul Paulista 1st Issue Single series 1,600 111.00% of CDI 111% CDI + 0.6% 1 installment in July 1st, 2011 CPFL Energia guarantee CPFL Jaguari 1st Issue Single series 1,000 111.90% of CDI 111.9% CDI + 0.79% 1 installment in July 1st, 2011 CPFL Energia guarantee CPFL Brasil 1st Issue Single series 16,500 111% of CDI 111% CDI + 0.57% 1 installment in July 1st, 2011 CPFL Energia guarantee 2st Issue Single series 13,200 CDI + 1.40% CDI + 1.48% 2 annual installmentsinstalments from June 2017   CPFL Energia guarantee CPFL GeraçãoBrasil     2nd Issue Single series 425,250 109.8% of CDI2,280   109.8% CDI + 0.58%1.4%   July 1st, 2011CDI + 1.48% 2 annual instalments from June 2017 CPFL Energia guarantee CPFL Geração 3rd Issue Single series 264 107.0%107% of CDI   107.0%107% of CDI + 0.67%   1 installment in April 2015 CPFL Energia guarantee 4rd4th Issue Single series 6,800 100% do CDI + 1.40% p.a.1.4%   CDI + 1.49% 2 annual installmentsinstalments from June 2017   CPFL Energia guarantee 5th Issue EPASA 2nd Issue Single series 270 111% of CDI10,920   111% of CDI + 0.49%1.4%   12 monthly installmentsCDI + 1.48% 2 annual instalments from January 2012June 2017   CPFL Energia guarantee 3nd6th Issue Single series 130 113.5% do CDI46,000   113.5%CDI + 0.189% 0.75% (7)   48 monthly installmentsCDI + 0.75% 3 annual instalments from Setember 2012August 2018   CPFL Energia guarantee BAESA 1st Series 9,000 CDI + 0.3% CDI + 0.43% Quarterly with settlement in August 2016 Letters of Guarantee 2nd Series 8,100 CDI + 0.4% 106% CDI + 0.12% Annual with settlement in August 2016 Letters of Guarantee Enercan 1st Series 110 100% of CDI + 1.25% p.a 111.10% do CDI Quarterly with settlement in December 2025 No guarantees CPFL Renováveis     1st Issue - SIIF 1st to 12th Series Single series 528,649,076 TJLP + 1.00%432,299,666   TJLP + 1.00%1% TJLP + 1% + 0.22%   39 monthlyconsecutive semi-annual installments from 2009   Fiduciary salealienation 1st Issue - PCH Holding 2 Single series 1,581 CDI + 1.6% CDI + 1.6% 9 annual installments from 2015 to 2023 and monthly interest from June 2015 CPFL Renováveis guarantee 1st Issue - Renováveis Single series 43,000 CDI + 1.7% CDI + 1.7% Annual installments from May 2015 and interest semi-annual installments from November 2012 BVP and PCH Holding fiduciary assigment of dividends The Company and its subsdiariessubsidiaries hold swap convertingswaps that convert the local costprefixed component of currency variationinterest on the operation to interest taxrate variation in reais, corresponding toto: (1) 104.4% of CDI (3) 104.85% of CDI (5) 104.87% of CDI (7) 106.65% to 106.79% of CDI (2) 105.07% of CDI (4) 104.9% of CDI (6) 107.85% to 108.09% of CDI                         F - 48 Table of Contents Interest Interest on the debentures will be paid half yearly, except for the 1st series of the jointly-owned subsidiary BAESA, which will be paid quarterly. The maturities of the long-term balance of debentures are scheduled as followfollows:  2013   546,961 2014   207,154   2015   579,420 1,844,128 2016   761,716 86,573 2017   1,063,313 1,379,509 After 2017   1,390,087 2018 1,897,640 2019 1,125,341 2020 to 2024 1,108,874 2025 to 2029 120,156 Total   4,548,651 7,562,219   Fund raising during the year 4th  issue – CPFL Energia In 2011,the second quarter of 2013, CPFL Energia issued 129,000 of single series of unsecured, registered book-entry debentures, not convertible into shared, with a unit value of R$ 10, amounting to a total of R$ 1,290,000 (R$ 1,287,174 net of issuing costs) The debentures will mature simultaneously in May 2015. There are no restrictive clauses for this transaction. F -56 Table of Contents 7th issue - CPFL Paulista, CPFL Piratininga and RGE In 2013, the subsidiaries CPFL Paulista, CPFL Piratininga and RGE issued a single series of unsecured, registered book-entry debentures, not convertible into shares and guaranteed by the Company. The objective of the issue was to extend the indebtedness and reinforce the working capital of the subsidiaries: Subsidiary   Quantity   Unit per value R$ thousand   Total amount raised R$ thousand   Amount raised, net of issuance costs R$ thousand CPFL Paulista   50,500   10   505,000   503,251 CPFL Piratininga   23,500   10   235,000   234,139 RGE   17,000   10   170,000   169,347             910,000   906,737 5th issue - CPFL Santa Cruz, CPFL Brasil,Geração In order to cover the corporate restructuring mentioned in note 14.3, the 5th issue of 10,920 debentures of the subsidiary CPFL Geração was approved on March 28, 2013, with a unit value of R$ 100, and EPASA subscribed anda total amount of R$ 1,092,000, respecting the same characteristics as those originally issued by the subsidiary CPFL Brasil. The issue was paid up registered, book entry,by the former holders of the debentures issued by the subsidiary CPFL Brasil, the issue was paid up by the former holders of the debentures issued by the subsidiary CPFL Brasil, therefore there was no cash impact. 6th issue - CPFL Geração In August 2013, CPFL Geração issued 46,000 of single series unsecuredof registered book-entry debentures, not convertible into shares, with an additional fidejussory guarantee.a unit face value of R$ 10, and total value of R$ 460,000 (R$ 458,525 net of issue costs). The funds were used for the early redemption of CPFL Geração’s 2nd issue of promissory notes. Interests will be used to refinance the debts maturing in 2011, to reinforce working capital and for investment plans.  Interest is payable on the debentures half-yearly from the issue date.  Details of the issue are provided below:paid half yearly. Company   Issued   Nominal value per unit (R$ Thousand)   Total (R$ Thousand)   Net total of issuance costs (R$ Thousand) CPFL Paulista   4,840   100   484,000   482,165 CPFL Piratininga   1,600   100   160,000   159,324 RGE   700   100   70,000   69,666 CPFL Santa Cruz   650   100   65,000   64,670 CPFL Geração   6,800   100   680,000   677,305 CPFL Brasil   13,200   100   1,320,000   1,315,301 Epasa   130   100   130,000   129,524 Total           2,909,000   2,897,955                   RESTRICTIVE COVENANTS 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 EnergiaPaulista (6th and 7th issues), CPFL Piratininga (3rd, 6th and 7th issues), RGE (5th, 6th and 7th issues), CPFL Geração (3rd, 4th, 5th and 6th issues), CPFL Brasil and CPFL Santa Cruz Maintenance, by the Company, of the following ratios: ·        Net indebtedness divided by EBITDA – maximum of 3.75; ·        EBITDA divided by Financial Income (Expense) –- minimum of 2.25; The definition of EBITDA in the subsidiaries, for purposes of determination of covenants, mainly takes into consideration inclusion of the principal regulatory assets and liabilities. In the Company’s case, it also takes into account consolidation of subsidiaries, associates and joint ventures based on the interest held by the Company in those entities (both for EBITDA and for assets and liabilities). CPFL PaulistaRenováveis Third issuance- 1st Issue of CPFL Renováveis ·Operating debt coverage ratio - minimum of 1.00; F -57 Table of Contents ·Debt service coverage ratio - minimum of 1.05; ·      Net indebtedness divided by EBITDA –EBITDA- maximum of 3.0;7.5 in 2013, 6.0 in 2014, 5.6 in 2015, 4.6 in 2016 and 3.75 from 2017; ·      EBITDA divided by Financial Income (Expense) –Net financial expense - minimum of 2.25.1.75. F - 49 Table of Contents   Fifth issuance ·Net indebtedness divided by EBITDA – maximum- 1st issue of 3.75;indirectly controlled entity PCH Holding 2 S.A: ·      EBITDA divided by Financial Income (Expense) – minimumMaintaining the Debt Service Coverage ration of 2.25. CPFL Piratininga Third issuance ·Net indebtedness divided by EBITDA – maximum of 3.0;the subsidiary Santa Luzia at 1.2 or more from September 2014. ·      Maintaining a Net Debt/EBITDA divided by Financial Income (Expense) – minimumratio of 2.25; Fifth issuance ·Net indebtedness divided by EBITDA – maximum of 3.75; ·EBITDA divided by Financial Income (Expense) – minimum of 2.25. RGE Third issuance ·There are no restrictive covenants. Fifth issuance ·Net indebtedness divided by EBITDA – maximum of 3.75; ·EBITDA divided by Financial Income (Expense) – minimum of 2.25. CPFL Geração Third issuance ·Net indebtedness divided by EBITDA – maximum of 3.75; ·EBITDA divided by Financial Income (Expense) – minimum of 2.0. Forth issuance ·Net indebtedness divided by EBITDA – maximum of 3.75; ·EBITDA divided by Financial Income (Expense) – minimum of 2.25.7.5 or less in 2013, 6.0 in 2014, 5.6 in 2015, 4.6 in 2016 and 3.75 from 2017.   CPFL Brasil ·Net indebtedness divided by EBITDA – maximum of 3.75; ·EBITDA divided by Financial Income (Expense) – minimum of 2.25. CPFL Santa Cruz ·Net indebtedness divided by EBITDA – maximum of 3.75; ·EBITDA divided by Financial Income (Expense) – minimum of 2.25. BAESA ·Total indebtedness– restricted to 75% of their total assets. CPFL Renováveis The debentures of the indirect subsidiary Jantus are subject to restrictive clauses in respect of establishing liens and additional indebtedness, distribution of dividends and changes to their shareholding structure. F - 50 Table of Contents Certain debentures of subsidiaries and jointly-owned subsidiariesjoint ventures are subject to early settlement in the event of changes in the Company’s structure or in the corporate structure of the subsidiaries that result in the loss of the share control or of control over managementManagement of the Company by theCompany’s current shareholders. Failure to comply with the restrictions mentioned could result in default in relation to other contractual obligations (cross default).default),depending on each agreement. In the opinion of the managementThe Management of the Company and its subsidiaries monitor these ratios systematically and jointly-ownedconstantly to ensure that the contractual conditions are complied with. In the opinion of the Management of the Company and its subsidiaries, these restrictive covenants and clauses are being adequately complied with. with at December 31, 2013. ( 18 ) PRIVATE PENSION FUNDPOST-EMPLOYMENT BENEFIT OBLIGATION The subsidiaries CPFL Paulista, CPFL Piratininga and CPFL Geração, through Fundação CESP, the subsidiary RGE, through Fundação CEEE de Seguridade Social – ELETROCEEE and Bradesco Vida e Previdência, the 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: 18.1 – CharacteristicsCharacteristics: - CPFL PaulistaPaulista: The plan currently in force for the employees of the subsidiary CPFL Paulista through Fundação CESP 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 the subsidiary. b)   Mixed model, as from November 1, 1997, which covers: ·   benefits for risk (disability and death), under a defined benefit plan, in which the subsidiary assumes  responsibility for Plan’s actuarial deficit, and ·   scheduled retirement, under a definedvariable contribution plan, consisting of a benefit plan, which is a defined contribution plan up to the granting of the income, and does not generate any actuarial liability for the subsidiary CPFL Paulista. The benefit plan only becomes a defined benefit plan, consequently generating actuarial responsibility for the subsidiary, after the granting of a lifetime income, convertible or not into a pension. As a result of modification of the Retirement Plan modification occurred in October 1997, a liability was recognized as payable by the subsidiary CPFL Paulista in relation to the plan deficitcommitment  calculated at that time by the external actuaries of Fundação CESP.  The liability, toCESP, was established by the subsidiary CPFL Paulista, which will be settled in 260 installments (240 monthly and 20 annually) plus interest ofuntil 2027.  Such commitment is annually adjusted with at 6% p.a. interest and monetarily restatement at the IGP-DI rate (FGV),. At the end of each year, after appraisal by external actuaries, the balance of the commitment is amortized on a monthly basis. Underadjusted to reflect the Contractual Amendment signed withequilibrium of the equity of the Fundação CESP on January 17, 2008, the payment terms were amended to 238 monthly installments and 19 annual installments, aspension plans. The amount of the base date of December 31, 2007, with final maturity on October 31, 2027. The balance of the obligationcommitment at December 31, 20112013 is R$ 452,756840,602 (R$479,877 in 2010 and R$ R$508,706 in 2009). The contract amount 570,939 at December 31, 2012) which differs from the carrying amount of the post-employment benefit obligation that is recorded by the subsidiary, which is in conformityaccordance with IAS 19. F -58 Table of Contents Managers may opt for a Free Benefit Generator Plan – PGBL (defined contribution), operated by either Banco do Brasil or Bradesco.   - CPFL PiratiningaPiratininga: As a result of the spin-off of Bandeirante Energia S.A. (the subsidiary’s(CPFL Piratininga’s predecessor), the subsidiary CPFL Piratininga assumed the responsibility for the actuarial liabilities for its retired and discharged employees up to the date of the spin-off, as well as the responsibilities relating to the active employees transferred to CPFL Piratininga. F - 51 Table of Contents On April 2, 1998, the Supplementary Welfare Office – “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 (“BD”) - 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. In the event of death while working or the onset of a disability, the benefits incorporate the entire past service time. CPFL Piratininga has full responsibility 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 based on 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).time. The responsibility for covering the actuarial deficits of this Plan is equally divided between CPFL Piratininga and the participants. c) DefinedVariable Contribution Plan – implemented together with the Defined Benefit plan effective after March 31, 1998.  This is a defined-benefit type pension plan up to the granting of the income, and generates no actuarial liability for CPFL Piratininga. The pension plan only becomes a 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 As a result of the Retirement Plan modification occurred in September 1997, through a contractual instrument of adjustment of reserves to be amortized,commitment calculated at that time payable by Eletropaulo Metropolitana El.Eletricidade de São Paulo S.A. (the predecessor of Bandeirante) recognized an obligation to pay referring to the plan deficit determined at the timeS.A (Bandeirante´s predecessor) by the external actuaries of the Fundação CESP,  towas established by the subsidiary CPFL Piratininga which will be liquidated in 260 installments (240 monthly and 20 annually), amortized monthly, plus interest ofsettled until 2026.  Such  commitment is annually adjusted at  6% p.a. interest and monetarily restatement at the IGP-DI rate (FGV). UnderAt the Contractual Amendment, signed withend of each year, after appraisal by external actuaries, the balance of the commitment is adjusted to reflect the equilibrium of the equity of the Fundação CESP on January 17, 2008, the payment terms were amended to 221 monthly payments and 18 annual installments, as of December 31, 2007, with final maturity on May 31, 2026.pension plans. The balanceamount of the obligationcommitment at December 31, 20112013 is R$126.669 217,011 (R$133.170 in 2010 and R$ 150,444 in 2009). The contract amount 164,517 at December 31, 2012) which differs from the carrying amount of the post-employment benefit obligation that is recorded by the subsidiary, which is in conformityaccordance with IAS 19.   Managers may opt for a Free Benefit Generator Plan – PGBL (defined contribution), operated by either Banco do Brasil or Bradesco.   - RGERGE: A defined benefit type plan, with a benefit level equal to 100% of the adjusted average of the most recent salaries, less the presumed Social Security benefit, with a Segregated Net Asset administeredmanagement by ELETROCEEE. Only those whose work contracts were transferred from CEEE to RGE are entitled to this benefit. A defined benefit private pension plan was set up in January 2006 with Bradesco Vida e Previdência for employees admitted from 1997.   - CPFL Santa CruzCruz: F -59 Table of Contents The benefits plan of the subsidiary CPFL Santa Cruz, administeredmanaged by BB Previdência - Fundo de Pensão do Banco do Brasil, is a defined contribution plan. - CPFL JaguariúnaLeste Paulista, CPFL Sul Paulista, CPFL Mococa and CPFL Jaguari: In December 2005, the companies joined the CMSPREV private pension plan, administeredmanaged by IHPREV Pension Fund. The plan is structured as a defined contribution plan. - CPFL Geraçãoo: The employees of the subsidiary CPFL Geração belong to the same pension plan as CPFL Paulista. With the modification As a result of the Retirement Plan modification occurred in October 1997, at that point maintained by CPFL Paulista, in October 1997, a liability was recognized as payable by the subsidiary CPFL Geração, in relation to the plan deficitcommitment calculated at that time by the external actuaries of Fundação CESP, towas established by the subsidiary CPFL Geração, which will be amortized in 260  installments (240 monthly and 20 annually), plus interest ofsettled until 2027.  Such commitment is annually adjusted with at 6% p.a. interest and monetarily restatement at the IGP-DI rate (FGV). UnderAt the Contractual Amendment, signedwithend of each year, after appraisal by external actuaries, the balance of the commitment is adjusted to reflect the equilibrium of the equity of the Fundação CESP on January 17, 2008, the payment terms were amended to 238 monthly installments and 19 annual installments, as of December 31, 2007, with final maturity on October 31, 2027.pension plans. The balanceamount of the post-employment benefit obligation that is of the commitment at December 31, 20112013 is R$ 8,97217,310 (R$ 9,571 in 2010 and R$10,174 in 2009). The contract amount11,495 at December 31, 2012) which differs from the carrying amount recorded by the subsidiary which is in conformityaccordance with IAS 19. F - 52 Table of Contents   Managers may opt for a Free Benefit Generator Plan – PGBL (defined contribution), operated by either Banco do Brasil or Bradesco.   18.2 – Changes in the defined benefit plansplans:     December 31, 2011 CPFL Paulista CPFL Piratininga CPFL Geração Total liability RGE Total asset Present value of actuarial liabilities 3,505,727 884,091 76,649 4,466,467 234,457 234,457 Fair value of plan's assets (3,236,676) (839,877) (80,058) (4,156,611) (218,799) (218,799) Present value of liabilities (fair value of assets), net 269,051 44,214 (3,409) 309,856 15,658 15,658               Adjustments due to deferments allowed             Unrecognized actuarial gains 83,371 33,768 11,308 128,447 (19,074) (19,074) Net actuarial Liabilities (assets) recognized on balance sheet 352,422 77,982 7,899 438,303 (3,416) (3,416)                 December 31, 2010 CPFL Paulista CPFL Piratininga CPFL Geração Total liability RGE Total asset Present value of actuarial liabilities 3,088,723 784,933 67,543 3,941,199 207,759 207,759 Fair value of plan's assets (2,987,448) (785,231) (70,177) (3,842,856) (245,537) (245,537) Present value of liabilities (fair value of assets), net 101,275 (298) (2,634) 98,343 (37,778) (37,778)               Adjustments due to deferments allowed             Unrecognized actuarial gains 368,348 111,872 14,086 494,306 31,978 31,978 Net actuarial Liabilities (assets) recognized on balance sheet 469,623 111,574 11,452 592,649 (5,800) (5,800)                       December 31, 2013   CPFL Paulista   CPFL Piratininga   CPFL Geração   RGE   Total liabilities Present value of defined benefit obligation 3,599,853     919,441   82,167   245,371   4,846,832 Fair value of plan's assets (3,235,768)    (874,546)   (83,309)   (242,325)   (4,435,948) Present value of liabilities (fair value of assets), net 364,085     44,895   (1,142)   3,046   410,884 Effect of the limit on the assets to be accounted for -     -   1,142   -   1,142 Net actuarial liabilities recognized on balance sheet 364,085     44,895   -   3,046   412,025                                           December 31, 2012 restated   CPFL Paulista   CPFL Piratininga   CPFL Geração   RGE   Total liabilities Present value of defined benefit obligation 4,431,699   1,159,779   101,714   298,014   5,991,206 Fair value of plan's assets (3,774,468)   (985,557)   (93,360)   (271,878)   (5,125,263) Net actuarial liabilities recognized on balance sheet 657,231   174,222   8,354   26,136   865,942                     The changes in present value of the actuarialdefined benefit obligations and the fair values of the plan assets are as follows: F -60 Table of Contents                       CPFL Paulista   CPFL Piratininga   CPFL Geração   RGE   Total liabilities Present value of the defined benefit obligation at January 1, 2011 restated 3,088,723   784,933   67,543   207,759   4,148,958 Gross current service cost 1,043   3,781   136   1,221   6,181 Interest on actuarial obligation 304,730   77,929   6,673   20,742   410,074 Participants' contributions transferred during the year 65   1,472   13   701   2,251 Actuarial (gain)/loss 358,544   67,610   7,474   14,784   448,412 Benefits paid during the year (247,378)   (51,634)   (5,190)   (10,750)   (314,952) Present value of the defined benefit obligation at December 31, 2011 restated 3,505,727   884,091   76,649   234,457   4,700,924 Gross current service cost 1,186   4,349   144   1,176   6,855 Interest on actuarial obligation 350,009   88,813   7,663   23,599   470,084 Participants' contributions transferred during the year 171   1,545   35   947   2,698 Actuarial (gain)/loss 845,470   237,425   23,429   51,673   1,157,997 Benefits paid during the year (270,864)   (56,444)   (6,206)   (13,838)   (347,352) Present value of the defined benefit obligation at December 31, 2012 restated 4,431,699   1,159,779   101,714   298,014   5,991,206 Gross current service cost 1,485   6,099   167   359   8,110 Interest on actuarial obligation 380,340   99,150   8,740   25,727   513,957 Participants' contributions transferred during the year 60   1,582   12   927   2,581 Actuarial (gain)/loss (912,671)   (282,757)   (21,728)   (63,034)   (1,280,190) Benefits paid during the year (301,060)   (64,412)   (6,738)   (16,622)   (388,832) Present value of the defined benefit obligation at December 31, 2013 3,599,853   919,441   82,167   245,371   4,846,832   CPFL Paulista CPFL Piratininga CPFL Geração RGE Total liability Present value of actuarial liabilities at December 31, 2010 3,088,723 784,933 67,543 207,759 4,148,958 Gross current service cost 1,043 3,781 136 1,221 6,181 Interest on actuarial obligation 304,730 77,929 6,673 20,742 410,074 Participants' contributions transferred during the year 65 1,472 13 701 2,251 Actuarial (Gain)/loss 358,544 67,610 7,474 14,784 448,412 Benefits paid during the year (247,378) (51,634) (5,190) (10,750) (314,952) Present value of actuarial liabilities at December 31, 2011 3,505,727 884,091 76,649 234,457 4,700,924   CPFL Paulista   CPFL Piratininga   CPFL Geração   RGE   Total assets Present value of the acturial assets at January 1, 2011 restated (2,987,448)   (785,231)   (70,177)   (245,537)   (4,088,393) Expected return during the year (369,344)   (97,889)   (8,706)   (22,423)   (498,362) Participants' contributions transferred during the year (65)   (1,472)   (13)   (701)   (2,251) Sponsors' contributions (48,900)   (14,965)   (1,071)   (4,072)   (69,008) Actuarial (gain)/loss (78,297)   8,046   (5,281)   43,184   (32,348) Benefits paid during the year 247,378   51,634   5,190   10,750   314,952 Present value of the acturial assets at December 31, 2011 restated (3,236,676)   (839,877)   (80,058)   (218,799)   (4,375,410) Expected return during the year (324,813)   (85,126)   (8,074)   (22,185)   (440,198) Participants' contributions transferred during the year (171)   (1,545)   (35)   (947)   (2,698) Sponsors' contributions (47,708)   (14,655)   (1,041)   (5,132)   (68,536) Actuarial (gain)/loss (435,964)   (100,798)   (10,358)   (38,653)   (585,773) Benefits paid during the year 270,864   56,444   6,206   13,838   347,352 Present value of the acturial assets at December 31, 2012 restated (3,774,468)   (985,557)   (93,360)   (271,878)   (5,125,263) Expected return during the year (337,591)   (89,686)   (8,560)   (24,698)   (460,535) Participants' contributions transferred during the year (60)   (1,582)   (12)   (927)   (2,581) Sponsors' contributions (56,266)   (18,243)   (1,208)   (8,336)   (84,053) Actuarial (gain)/loss 631,557   156,110   13,093   46,892   847,652 Benefits paid during the year 301,060   64,412   6,738   16,622   388,832 Present value of the acturial assets at December 31, 2013 (3,235,768)   (874,546)   (83,309)   (242,325)   (4,435,948)   CPFL Paulista CPFL Piratininga CPFL Geração RGE Total asset Current value of actuarial assets at December 31, 2010 (2,987,448) (785,231) (70,177) (245,537) (4,088,393) Expected return during the year (369,344) (97,889) (8,706) (22,423) (498,362) Participants' contributions transferred during the year (65) (1,472) (13) (701) (2,251) Sponsors' contributions (48,900) (14,965) (1,071) (4,072) (69,008) Actuarial (gain)/loss (78,297) 8,046 (5,281) 43,184 (32,348) Benefits paid during the year 247,378 51,634 5,190 10,750 314,952 Current value of actuarial assets at December 31, 2011 (3,236,676) (839,877) (80,058) (218,799) (4,375,410)             18.3 Changes in the assets and liabilities recognized: F - 53 Table of Contents The changes in net liabilities are as follows: December 31, 2011                   CPFL Paulista CPFL Piratininga CPFL Geração Total liability RGE Total asset December 31, 2013 Actuarial liabilities /(assets) at the beginning of the year 469,623 111,574 11,452 592,649 (5,800) (5,800) Expense (Income) recognized in income statement (68,301) (18,627) (2,482) (89,410) 6,456 6,456 Net actuarial liabilities at the beginning of the year 657,231   174,222   8,353   26,136   865,942 Expense recognized in income statement 44,234   15,562   481   1,388   61,665 Actuarial gain (281,114)   (126,647)   (7,627)   (16,142)   (431,530) Sponsors' contributions transferred during the year (48,900) (14,965) (1,071) (64,936) (4,072) (4,072) (56,266)   (18,243)   (1,207)   (8,336)   (84,052) Actuarial liabilities /(assets) at the end of the year 352,422 77,982 7,899 438,304 (3,416) (3,416) Net actuarial liabilities at the end of the year 364,085   44,894   -   3,046   412,025 Other contributions 14,090 318 77 14,484 - - 14,458   394   69   504   15,425 Subtotal 366,512 78,300 7,976 452,788 (3,416) (3,416) Other contributions RGE - - - 2,536     Total liabilities 366,512 78,300 7,976 455,324     378,543   45,288   69   3,550   427,450                               Current       40,695    -                 76,810 Noncurrent       414,629   3,416                 350,640   December 31, 2010 December 31, 2012 restated CPFL Paulista CPFL Piratininga CPFL Geração Total liability RGE Total asset CPFL Paulista   CPFL Piratininga   CPFL Geração   Total liability   RGE Actuarial liabilities /(assets) at the beginning of the year 591,712 141,964 13,774 747,450 (9,725) (9,725) Expense (Income) recognized in income statement (70,769) (14,068) (1,192) (86,029) 5,400 5,400 Net actuarial liabilities at the beginning of the year 269,051   44,214   -   15,658   328,923 Expense/(Income) recognized in income statement 26,382   8,036   (3,676)   2,590   33,332 Actuarial loss 409,506   136,627   13,070   13,020   572,225 Sponsors' contributions transferred during the year (51,320) (16,322) (1,130) (68,772) (1,475) (1,475) (47,708)   (14,655)   (1,041)   (5,132)   (68,536) Actuarial liabilities /(assets) at the end of the year 469,623 111,574 11,452 592,649 (5,800) (5,800) Net actuarial liabilities at the end of the year 657,231   174,222   8,353   26,136   865,942 Other contributions 13,875 375 177 14,427 - - 14,593   387   79   1,857   16,917 Subtotal 483,498 111,949 11,629 607,076 (5,800) (5,800) Other contributions RGE - - - 3,905     Total liabilities 483,498 111,949 11,629 610,980     671,824   174,610   8,432   27,993   882,859                               Current       40,103   -                 51,675 Noncurrent       570,877   5,800                 831,184 F -61 Table of Contents                       December 31, 2011 restated   CPFL Paulista   CPFL Piratininga   CPFL Geração   RGE   Total do Passivo Net actuarial liabilities / (assets) at the beginning of the year 469,623   111,574   11,452   (5,800)   586,849 Expense/(Income) recognized in income statement 8,679   2,521   581   (14,984)   (3,203) Actuarial (gain)/loss (160,351)   (54,916)   (10,962)   40,514   (185,715) Sponsors' contributions transferred during the year (48,900)   (14,965)   (1,071)   (4,072)   (69,008) Net actuarial liabilities at the end of the year 269,051   44,214   -   15,658   328,923 Other contributions 14,090   318   77   2,536   17,020 Total liabilities 283,141   44,532   77   18,194   345,944                     Current                 40,171 Noncurrent                 305,773   As mentioned in note 2.8 and 3.8, the revision of IAS 19 eliminated the corridor approach (among other amendments), resulting in the need for recognition in full of the net actuarial liability at the date-base (actuarial report date). As a consequence of the adoption of IAS 19 (revised 2011) on January 1, 2012, the post-employment benefit liability previously recorded was reduced by R$ 105,964, against retained earnings. As described in note 3.16.f, an adjustment of R$185,715 was recorded as of January 1, 2011 in Retained Earnings. In relation to the estimated contributions for 2014, the Company does not anticipate significant changes in comparison with 2013, unless the actuarial assessment identifies the need to amend the contribution amounts originally budgeted for the pension plans. 18.4 Recognition of income and expense of privatefor defined benefit pension fund:plans: The external actuary’s estimate of the expense and/or revenue to be recognized in 2014 and the income/expense recognized in 2013, 2012 and the income recognized in 2011, and 2010 areis as follows:   2014 Estimated CPFL Paulista   CPFL Piratininga   CPFL Geração   RGE   Total Cost of service 1,160   3,937   152   (43)   5,206 Interest on actuarial obligations 404,925   104,090   9,250   27,748   546,013 Expected return on plan assets (365,720)   (100,048)   (9,459)   (27,961)   (503,188) Effect of the limit on the assets to be accounted for -   -   134   -   134 Total expense 40,365   7,979   77   (256)   48,165                   2012 Estimated                   CPFL Paulista CPFL Piratininga CPFL Geração RGE Consolidated 2013 Recognized Cost of service 1,186 4,349 144 1,176 6,855 1,485   6,098   167   359   8,109 Interest on actuarial obligations 350,009 88,813 7,663 23,599 470,084 380,340   99,150   8,740   25,727   513,957 Expected return on plan assets (361,169) (96,434) (8,978) (26,429) (493,010) (337,591)   (89,686)   (8,560)   (24,698)   (460,535) Amortization of unrecognized actuarial gains - - (268) - (268) Total income (9,974) (3,272) (1,439) (1,654) (16,339) Effect of the limit on the assets to be accounted for -   -   134   -   134 Total expense 44,234   15,562   481   1,388   61,665                                     2012 Recognized restated CPFL Paulista   CPFL Piratininga   CPFL Geração   RGE   Total Cost of service 1,186   4,348   144   1,176   6,854 Interest on actuarial obligations 350,009   88,812   7,663   23,598   470,082 Expected return on plan assets (324,813)   (85,124)   (8,074)   (22,184)   (440,195) Effect of the limit on the assets to be accounted for -   -   (3,409)   -   (3,409) Total expense/(income) 26,382   8,036   (3,676)   2,590   33,332                                     2011 Recognized restated CPFL Paulista   CPFL Piratininga   CPFL Geração   RGE   Total Cost of service 1,043   3,781   136   1,221   6,181 Interest on actuarial obligations 304,730   77,929   6,673   20,742   410,074 Expected return on plan assets (297,094)   (78,891)   (7,003)   (22,423)   (405,411) Effect of the limit on the assets to be accounted for -   (298)   775   (14,524)   (14,047) Total expense/(income) 8,679   2,521   581   (14,984)   (3,203)                     F - 54 Table of Contents   2011 Realized CPFL Paulista CPFL Piratininga CPFL Geração RGE Consolidated Cost of service 1,044 3,781 136 1,221 6,182 Interest on actuarial obligations 304,732 77,929 6,673 20,742 410,076 Expected return on plan assets (369,344) (97,889) (8,706) (22,423) (498,362) Amortization of unrecognized actuarial gains (4,733) (2,448) (585) - (7,766) Recognition of the asset (limited to paragraph 58-b of CPC 33) - - - 6,916 6,916 Total Expense (Income) (68,301) (18,627) (2,482) 6,456 (82,954)               2010 Realized CPFL Paulista CPFL Piratininga CPFL Geração RGE Consolidated Cost of service 1,061 3,550 142 1,153 5,906 Interest on actuarial obligations 292,456 75,534 6,345 18,349 392,684 Expected return on plan assets (364,286) (93,152) (7,679) (23,717) (488,834) Recognition of the asset (limited to paragraph 58-b of CPC 33) - - - 9,615 9,615 Total Expense (Income) (70,769) (14,068) (1,192) 5,400 (80,629) Since the changes in the RGE plan indicate the need to recognize an asset, and the amount to be recognized is restricted to the present value of the economic rewards available at the time, recognition in 2012 will require analysis of the possibility of recovery of the asset at the end of the year. The principalmain assumptions taken into consideration in the actuarial calculations atvaluations for the balance sheet date were:three years presented were as follow: F -62   Table of Contents   CPFL Paulista, CPFL Piratininga and CPFL GeraçãoDecember 31, 2013   RGEDecember 31, 2012 December 31, 2011 December 31, 2010 December 31, 2009 December 31, 2011 December 31, 2010 December 31, 2009             Nominal discount rate for actuarial liabilities: 10.35%11.72% p.a.   10.24% p.a.8.78% p .a.   10.24% p.a. 10,35% p.a. 10.24% p.a. 10.24%10.35% p.a. Nominal Return Rate on Assets: 11.72% p.a. (*) 8.78% p .a.   (**) (**) 10,24% p.a. 11.28% p.a. 11.28% p.a. Estimated Rate of nominal salary increase: 6.69%7.10% p.a.   6.08% p.a.6.69% p .a.   6.08% p.a. 6,69% p.a. 6.08% p.a. 6.08% p.a.6.69% p .a. Estimated Rate of nominal benefits increase: 0.0% p.a.p .a.   0.0% p.a.p .a.   0.0% p.a. 0,0% p.a. 0.0% p.a. 0.0% p.a.p .a. Estimated long-term inflation rate (basis for establishing nominal rates above) 4.60%5.00% p.a.   4.0% p.a.4.6% p .a.   4.0% p.a. 4,6% p.a. 4.0% p.a. 4.0% p.a.4.6% p .a. General biometric mortality table: AT-83 AT-83 AT-83 AT-83   AT-83   AT-83 Biometric table for the onset of disability: Mercer MERCER TABLEDisability   MERCER TABLEMercer Disability   MERCER TABLEMercer Light-Average Light-Average Light-AverageDisability Expected turnover rate: 0.300.3 / (Service time + 1)   0.300.3 / (Service time + 1)   0.300.3 / (Service time + 1) Likelihood of reaching retirement age: 0.30 / (Service time + 1)100% when a beneficiary of the Plan first becomes eligible   0.30 / (Service time + 1)100% when a beneficiary of the Plan first becomes eligible   null100% when a beneficiary of the Plan first becomes eligible             Likelihood of reaching retirement age: 100% when a beneficiary of the Plan first becomes eligible 100% when a beneficiary of the Plan first becomes eligible 100% when a beneficiary of the Plan first becomes eligible 100% when a beneficiary of the Plan first becomes eligible 100% when a beneficiary of the Plan first becomes eligible (*) CPFL Paulista and CPFL Geração 11,51% p.a, and11.51% p.a., CPFL Piratininga 11,72% p.a (**) CPFL Paulista11.72% p.a. and CPFL Geração 12,73% p.a, and CPFL Piratininga 12,71% p.aRGE 10.24% p.a.   18.5 Plan assets The following table showstables show the allocation (by asset segment) of the assets of the CPFL groupEnergia pension plans, at December 31, 2013, 2012 and January 1, 2012 managed by Fundação CESP at December 31, 2011 and 2010.ELETROCEEE. It also shows the distribution of the collateral resources established as a target for 2012,2014, in the light of the macroeconomic scenario in December 2011.2013. Assets managed by Fundação CESP:                 At December 31   Target At December, 31 Target to   2011   2010   2012 2013   2012   2011   2014 Fixed rate   68%   69%   68% 72%   72%   68%   70% Shares   27%   27%   27% CPFL Energia's share 6%   6%   6%   6% Other shares 16%   17%   21%   17% Real state   3%   2%   3% 4%   3%   3%   4% Other   2%   2%   2% 2%   2%   2%   3% Total   100%   100%   100% 100%   100%   100%   100%                             F - 55 Table of ContentsAssets managed by ELETROCEEE:                     At December, 31   Target to   2013   2012   2011   2014 Fixed rate 61%   63%   65%   61% Other shares 24%   23%   24%   20% Real state 14%   13%   9%   15% Other 2%   1%   2%   4% Total 100%   100%   100%   100%                                 The allocation target for 20122014 was based on the recommendations for allocation of assets made at the end of 20112013 by Fundação CESP and ELETROCEEE, in its Investment Policy. This target may change at any time during 2012,2014, in the light of changes in the macroeconomic situation or in the return on assets, among other factors. Fundação CESP’sThe asset management aims to maximize the return on investments, while seeking to minimize the risks of an actuarial deficit. Investments are therefore always made bearing in mind the liabilities that have to be honored. One of the main tools used by Fundação CESP to achieve its management objectives is ALM (Asset Liability Management – Joint Management of Assets and Liabilities), performed at least once a year, for a horizon ofmore than 10 years. ALM also assists in studying the liquidity of the pension plans, taking into consideration the benefit payment flow in relation to liquid assets. ELETROCEEE also uses ALM. F -63 Table of Contents The basis for determining the assumptions of estimated general return on the assets is supported by ALM. The main assumptions are macroeconomic projections for calculating the anticipated long-term profitability, taking into account the current benefit plan portfolios. ALM processes the ideal average long-term allocation of the plan’splans’ assets and the estimated profitability in the long term is based on this allocation and on the assumptions of the assets’ profitability. 18.6 Sensitivity analysis The significant actuarial assumptions for determining the defined benefit obligation are discount rate, anticipated salary increase and mortality. The following sensitivity analyses were based on reasonably possible changes in the assumptions at the end of the reporting period, with the other assumptions remaining constant. The sensitivity analysis may not represent the actual change in the defined benefit liability, as it is improbable that the change would occur to isolated assumptions, as certain assumptions may be correlated. Furthermore, in the presentation of the sensitivity analysis, the present value of the defined benefit obligation was calculated using the projected unit credit method at the end of the reporting period, the same method used to calculate the defined benefit obligation recognized in the balance sheet. See below the effects on the defined benefit obligation if the discount rate were 0.25 percentage points higher (lower) and if life expectancy were to increase (decrease) in one year for men and women:                                   Assumptions   Assumptions report (A) Increase / (Decrease) (B) Intended (A+B)   CPFL Paulista   CPFL Piratininga   CPFL Geração   RGE   Increase / (decrease) of total defined benefit plan obligation                                   Defined benefit plan obligation               3,599,853   919,441   82,167   245,371   4,846,832                                   Nominal discount (p.a.)   11.72%   -0.25%   11.47%   82,971   25,084   1,927   6,250   116,232         0.25%   11.97%   (79,622)   (23,839)   (1,847)   (5,982)   (111,290)                                   Life expectancy (years)   AT-83   -1   year   (63,175)   (12,197)   (1,430)   (3,381)   (80,183)         1   year   61,334   11,726   1,394   3,254   77,708                                   Investment risk Brazilian pension funds are subject to restrictions on investments in foreign assets. The major part of the resources of the Company’s benefit plans is invested in the fixed income segment and, within this segment, the greater part of the funds is invested in federal government bonds, indexed to the IGP, which is the index for adjustment of the actuarial liabilities of the Company’s plans (defined benefit plans). Management of the Company’s benefit plans is monitored by the Investment and Pension Management Committee, which includes representatives of active and retired employees, as well as members appointed by the Company. Among the duties of the Committee are the analysis and approval of investment recommendations made by the Fundação CESP investment managers. In addition to controlling market risks by the unplanned divergence methodology,as required by law, Fundação CESP uses the following tools to control market risks in the fixed income and variable income segments: VaR, Tracking Risk, Tracking Error and Stress Test. Test. Fundação CESP's Investment Policy imposes additional restrictions (beyond those established by law) which define the percentage of ‘diversificationdiversification for investments in assets issued or underwritten by the same legal entity, internally.entity.   ( 19 ) REGULATORY CHARGES F -64 Table of Contents     December 31, 2011   December 31, 2010       Fee for the Use of Water Resources   3,591   4,452 December 31, 2013   December 31, 2012 restated Fee for the use of water resources 1,590   570 Global Reverse Fund - RGR   28,060   16,484 15,983   24,653 ANEEL Inspection Fee   2,495   2,285 1,869   2,421 Fuel Consumption Account - CCC   65,121   58,288 -   34,432 Energy Development Account - CDE   45,879   42,033 12,937   48,700 Total   145,146   123,541 32,379   110,776           ( 20 ) TAXES AND SOCIAL CONTRIBUTIONS PAYABLE               December 31, 2013   December 31, 2012 restated Current         ICMS (State VAT)   117,895   171,066 PIS (Tax on Revenue)   10,156   13,438 COFINS (Tax on Revenue)   45,892   75,992 IRPJ (Corporate Income Tax)   62,771   99,801 CSLL (Social Contribution Tax)   29,659   35,899 PIS (REFIS)   4,100   - COFINS (REFIS)   18,886   - Other   28,704   34,275 Total   318,063   430,472           Noncurrent         PIS (REFIS)   5,807   - COFINS (REFIS)   26,748   - Total   32,555   -           Tax Recovery Program - REFIS - Law 11,941/2009 Law 12,865/2013 was published on October 10, 2013, reopening the period for enrollment in the Tax Recovery Program - REFIS, introduced by Law 11,941/2009. The subsidiaries CPFL Paulista and CPFL Piratininga formalized with the Brazilian Federal tax authority (Receita Federal do Brasil - RFB) their enrollment in the program for reduction and financing of federal taxes in relation to tax suits - PIS and COFINS on Sector Charges - CCC/CDE - non-cumulative system (Note 21), which had an accumulated balance to date of R$ 94,288. On November 21 and December 17, 2013, the subsidiaries CPFL Paulista and CPFL Piratininga, respectively, consolidated the debts included in the financing of the total amount of R$ 57,465, obtaining a discount on interest and fines of R$ 36,823, recorded in financial income (note 29). The financing will be amortized in 30 installments, monetarily restated at the SELIC rate.  The first installment of R$ 1,925 was paid on December 20, 2013. ( 21 )PROVISION FOR TAX, CIVIL AND LABOR RISKS AND ESCROW DEPOSITS F - 5665 Table of Contents     Current   Noncurrent     December 31, 2011   December 31, 2010   December 31, 2011   December 31, 2010 ICMS (State VAT)   300,518   247,891   -   - PIS (Tax on Revenue)   12,446   13,563   -   - COFINS (Tax on Revenue)   59,429   63,668   165   960 IRPJ (Corporate Income Tax)   71,531   86,853   -   - CSLL (Social Contribution Tax)   18,589   22,280   -   - Other   20,515   20,993   -   - Total   483,028   455,248   165   960 ( 21 )PROVISION FOR CONTINGENCIES AND ESCROW DEPOSITS December 31, 2011 December 31, 2010 December 31, 2013   December 31, 2012 restated Reserve for contingencies Escrow Deposits Reserve for contingencies Escrow Deposits Provision for tax, civil and labor risks   Escrow Deposits   Provision for tax, civil and labor risks   Escrow Deposits Labor                       Various 43,850 191,221 39,136 147,056 119,707   80,516   68,205   152,762                       Civil                       General Damages 13,114 122,252 11,126 75,033 Tariff Increase 8,948 4,419 10,813 9,200 Other 6,423 448 5,904 1,516 Various 149,735   174,961   26,972   160,826 28,485 127,119 27,843 85,750               Tax                       FINSOCIAL 18,930 53,964 18,714 53,322 25,682   73,633   18,968   54,074 Interest on Shareholders’ Equity - PIS and COFINS 11,713 11,713 10,666 10,666 PIS and COFINS - Non-Cumulative Method 91,477 - 87,672 - Income Tax 82,061 660,222 73,401 539,601 128,332   779,899   90,187   704,742 Interest on shareholders’ equity - PIS and COFINS -     -   12,517   12,517 PIS and COFINS - non-cumulative method -     -   94,677   - Other 44,580 68,370 29,059 39,143 20,555   33,785   10,505   22,010 248,761 794,268 219,513 642,732 174,568   887,318   226,855   793,343                       Other 17,027 16,008 4,773 15,148 Various 23,985   384   27,062   18,408               Total 338,121 1,128,616 291,265 890,685 467,996   1,143,179   349,094   1,125,339             The changes in the provisions for contingenciestax, civil and escrow depositslabor risks are shown below: F - 57 Table of Contents   December 31, 2009 Addition Reversal Payment Monetary Restatement Business combination Other December 31, 2010 December 31, 2012 restated Addition   Reversal   Payment   Monetary adjustment Reclassification (REFIS) December 31, 2013 Labor 42,752 28,769 (2,866) (29,504) - - (15) 39,136 68,205   158,324   (38,171)   (74,073)   5,422   -   119,707 Civil 27,974 9,402 (5,512) (4,019) - - (1) 27,843 26,972   224,073   (28,526)   (93,739)   20,955   -   149,735 Tax 223,779 31,393 (40,098) (22) 4,445 - 16 219,513 226,855   8,840   (7,753)   (13,181)   17,272   (57,465)   174,568 Others 6,139 - - (1,659) 293 - - 4,773 Reserve for Contingencies 300,644 69,564 (48,476) (35,204) 4,738 - - 291,265                 Escrow Deposits 794,177 80,226 (13,737) (14,380) 44,398 - - 890,685 Various 27,062   -   -   (3,077)   -   -   23,985                 349,094   391,237   (74,450)   (184,070)   43,649   (57,465)   467,996                                           December 31, 2010 Addition Reversal Payment Monetary Restatement Business combination Other December 31, 2011 Labor 39,136 17,868 (3,586) (9,940) - 372 - 43,850 Civil 27,843 16,653 (6,438) (9,574) - - - 28,485 Tax 219,513 18,284 (269) - 10,444 93 695 248,761 Others 4,773 13,950 - (1,743) 47 - - 17,027 Reserve for Contingencies 291,265 66,755 (10,293) (21,257) 10,491 465 695 338,121                 Escrow Deposits 890,685 192,881 (8,064) (12,113) 64,516 12 699 1,128,616                 The provisionsprovision for contingenciestax, civil and labor risks were based on appraisalassessment of the risks of losing litigation to which the Company and its subsidiaries are parties, where a loss is more likely than notprobable in the opinion of the legal advisers and the managementManagement of the Company and its subsidiaries. The principal pending issues relating to litigation, legal cases and tax assessments are summarized below: a)        Labor:The main labor suits relate to claims filed by former employees or unions for additional salary payments (overtime, salary parity, severance payments and other claims). b)       Civil:  Bodily injury –-mainly refer to claims for indemnities relating to accidents in the subsidiaries' electrical grids, damage to consumers, vehicle accidents, etc. Tariff increase:increase -Corresponds to various claims by industrial consumers as a result of tariff increases imposed by DNAEE Ordinances 38 and 45, datedon February 27 and March 4, 1986, when the “Plano Cruzado” economic plan price freeze was in effect. c)        TaxTax:  FINSOCIAL- relates to legal challenges of the rate increase and collection of FINSOCIAL during the period June 1989 to October 1991. Income tax -Tax- The provision of R$61,852 (R$53,356 in 2010) 108,782 (R$ 70,888 at December 31, 2012) recognized by the subsidiary CPFL Piratininga refers to the lawsuit in relation to the tax deductibility of CSLL in determination of corporate income tax - IRPJ. PIS and COFINS - JCP -- in 2009, the Company dropped its suit  disputing PIS and COFINS charged on Interest on shareholders’ equity  received, and paid the amounts in question, taking advantage of the benefitbenefits granted in Law n° 11,941/09 (REFIS IV), that is, an amnesty on the fine and legal charges and a reduction in interest. Due to the fine, interest and legal charges. The Company is awaiting finalization of the legal procedures, in order to offset2013, the Company wrote-off the related escrow deposits and the provisions. F -66 Table of the amounts.Contents PIS and COFINS – Non-cumulative method –- refers to the tax disputes in relation to the non-cumulative levying of PIS and COFINS on certain sector charges.  The Company enrolled in REFIS in 2013, and the amount of R$ 57,465 was reclassified to the group taxes, rates and contributions (note 20). Other - tax- Refers to other suits in progress at the judicial and administrative levels resulting from of the subsidiaries' operations, in relation to INSS, FGTS and SAT tax issues. d)   Possible losseslosses:- the Company and its subsidiaries are parties to other suits in which management,Management, supported by its external 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 in similar proceedings considered probable or remote. Consequently, no provision has been established for these. The claims relating to possible losses, at December 31, 20112013, were as follows: (i) R$ 340,833244,277 labor (R$ 341,608 in 2010); (ii) R$ 553,648 civil cases329,590 at December 31, 2012) related mainly to workplace accidents, risk premium, overtime, etc; (ii) R$ 413,850 civil (R$ 577,080 at December 31, 2012) are related mainly to bodilyinjury, environmental impactimpacts and tariff increases (R$ 604,603 in 2010);increases; and (iii) R$967,952 in 2,704,881 tax claims, principally Income tax,(R$ 1,493,646 at December 31, 2012), related mainly to ICMS, FINSOCIAL, and PIS and COFINS and Income taxes, being one of the main claims the deductibility of the expense recognized in 1997 in relation to the commitment assumed for the pension plan of the employees of the subsidiary CPFL Paulista with Fundação CESP amounting R$ 952,913, for which CPFL Paulista has an escrow deposit of R$ 648,861 and (iv) R$ 27,628 regulatory at December 31, 2013 (R$ 823.87212,088 at December 31, 2012). The possible regulatory loss refers mainly to collection of the system service charge - ESS, established in 2010)the CNPE Resolution 03 of March 6, 2013. In relation to which, through the Brazilian Association of Independent Electric Energy Producers - APINE and the Brazilian Association for Generation of Clean Energy - ABRAGEL, the Company's subsidiaries and joint ventures obtained an injunction suspending collection of the charge.  The Company's legal counsel classified the risk of loss as possible.  The total amount of the risk is R$ 15,540, which includes (i) R$ 14,817 for the indirect subsidiaries CPFL Renováveis (R$ 11,631) and Ceran (R$ 3,186), and (ii) R$ 723 for the indirect subsidiary Paulista Lajeado. The subsidiary CPFL Piratininga was party to a suit contesting the ICMS calculation methodology for the energy supply to the city of Santos (stated of São Paulo). A loss in this cases was considered possible by the Company’s external legal advisers, however, in view of the recent unfavorable decisions taken  by the appeals court of the state of São Paulo, together with the opportunity to take advantage of a reduction in fines and interest, the subsidiary decided to enroll in the Special ICMS Financing Program - PEP and recognized an expense of R$ 73,338. The subsidiaries CPFL Paulista and CPFL Piratininga were involved in lawsuits in relation to ICMS credits on fuel and lubricant purchases. A loss in these cases was considered possible by the Company’s external legal advisers, however, in view of the recent unfavorable decisions taken by the appeals court of the state of São Paulo, together with the opportunity to take advantage of a reduction in fines and interest, the subsidiaries decided to enroll in the special ICMS Financing Program - PEP and recognized an expense of R$ 32,090. The subsidiary CPFL Jaguari signed a legal agreement  tosettle a legal claim that the bankruptcy state of Banco Santos S/A had against the subsidiary.  The agreement was submitted to the competent judge and is in the process of legal ratification, and recognized an expense of R$ 19,048.  F - 58 Table of Contents Based on the opinion of their external legal advisers, Management of the Company and 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 a significant impact on future earnings.registered amounts represent recent forecast. Escrow depositsdeposits: –income tax: of the total amount of R$ 660,222,660,414, R$ 581,721648,861 (R$ 483,355617,051 at December 31, 2010)2012) refers to the dispute onconcerning the deductibility for federal tax purposes of expense recognized in 1997 in respect of the welfare deficitcommitment assumed to Fundação CESP in relation to the pension plan for employees of the subsidiary CPFL Paulista's employees’ pension plan in relation to Fundação CESP, due to the renegotiationPaulista, as this was renegotiated and renewal of debtrenewed in that year. OnAfter consulting the Brazilian Federal Revenue Office,authorities, the subsidiary obtained a favorable reply in Note MF/SRF/COSIT/GAB nº 157, of April 9, 1998 and took advantage of the tax deductibility of the expense, thereby generating a tax loss for that year. As a result of this measure,procedure, the subsidiary was assessed by the tax inspectors and as a condition for continuing the discussions in two cases, court decisions required deposits in guarantee.  In 2011, the subsidiary made an additional deposit of R$53,933.escrow deposits. The deductibility resulted in otherdispute gave rise to further assessments and in order to be able to continue the discussions, the subsidiary offered collateral in the form of bank guarantees amounting to R$ 272,026.as security. Based on the updated position of the legal counsel in charge of the case, Management classifies the risk of loss continues to be classified as remote.possible. F -67   Table of Contents ( 22 ) CHARGES FOR THE USE OF PUBLIC UTILITIES   Companies December 31, 2011 December 31, 2010 Number of remaining installments Interest rates CERAN 75,472 71,987 290 IGP-M + 9.6% p.a. ENERCAN 10,782 9,884 281 IGP-M + 8% p.a. BAESA 57,734 52,865 293 IGP-M + 8% p.a. Foz do Chapecó 325,676 312,183 301 IGP-M / IPC-A + 5.3% p.a. TOTAL 469,664 446,919               Current 28,738 17,287     Noncurrent 440,926 429,632               Subsidiary   December 31, 2013   December 31, 2012 restated   Number of remaining installments CERAN   83,176   79,813   267               Current   3,738   3,443     Noncurrent   79,438   76,371       ( 23 ) OTHER ACCOUNTS PAYABLE F - 59 Table of Contents     Current   Noncurrent                 December 31, 2011   December 31, 2010   December 31, 2011   December 31, 2010 Current   Noncurrent                 December 31, 2013   December 31, 2012 restated   December 31, 2013   December 31, 2012 restated Consumers and Concessionaires   66,284   63,635   -   - 43,804   59,917   -   - Energy Efficiency Program - PEE   122,601   63,698   4,369   32,039 218,419   168,520   11,537   11,772 Research & Development - P&D   139,247   110,418   22,370   29,680 164,180   134,463   4,842   24,790 National Scientific and Technological Development Fund - FNDCT   4,014   3,077   -   - 1,966   4,487   -   - Energy Research Company - EPE   1,648   1,206   -   - 982   2,242   -   - Fund for Reversal   -   -   17,750   17,750 Fund of reversal -   -   17,750   17,750 Advances   74,292   11,030   2,812   7,418 34,879   28,073   -   20 Provision for environmental expenditure   35,617   11,685   80,272   2,455 Provision for socio-environmental costs and decommissioning of assets -     -   34,471   46,215 Payroll   14,609   6,722   -   - 17,639   12,361   -   - Profit sharing   42,058   36,296   5,366   - 36,601   49,396   4,171   7,846 Collections agreement   70,096   56,260   -   - 73,240   76,371   -   - Guarantees   -   -   26,605   45,831 -   -   29,133   25,014 Accounts payable - business combination   174,136   -   -   - Advance CDE 9,246   -   -   - Account payable - bussiness combination 10,477   11,369   -   - Other   68,736   46,843   14,866   5,950 52,095   76,067   1,981   2,381 Total   813,338   410,869   174,410   141,124 663,529   623,267   103,886   135,788                   Consumers and concessionaires:refers to liabilities in connection with bills paid twice and adjustments toof billing to be offset or returned to consumers as well the participation of consumers in the “Programa de Universalização” program.  Liabilities to concessionaires refer principally to transactions relating to the partial spin-off of Bandeirante by the subsidiary CPFL Piratininga. Research and Development and Energy Efficiency ProgramsPrograms: : theThe subsidiaries recognizedrecognize liabilities relating to amounts already billed in tariffs (1% of the Net Operating Income)Revenue), but not yet invested in the Research and Development and Energy Efficiency Programs.  These amounts are subject to monthly restatement at the SELIC rates,rate, to realization. Advances:the balance included the amount of R$ 62,293 in relation to advance billing by the subsidiaries of CPFL Renováveis. Provision for environmental expensesocio-environmental costs and decommissioning of assets:: inIn noncurrent the amount of R$ 79,28134,471 refers to provisionsreserve recorded by the indirect subsidiary CPFL Renováveis in relation to socio-environmental licenses and as a result of events that have already occurred.occurred and obligations to remove assets arising from contractual and legal requirements related to leasing of land on which the wind farms are located. Such costs are provisionedreserved for against fixed assets whileand will be depreciated over the projects are under construction, and recognized directly in profit or loss after start-up.remaining useful life of the asset. Profit-sharing:Profit sharing:Mainly comprised by: (i)in conformityaccordance with a collective labor agreement, the Company and its subsidiaries introduced an employee profit-sharing program, based on achievement of operating and financial targets established in advance.advance; (ii)Long-Term Incentive Program: In July 2012, the Company’s Board of Directors approved the Long-Term Incentive Program for Executives, consisting of a plan to grant Phantom Stock Options and awards in funds, in accordance with the appreciation of the Company’s shares in relation to an amount calculated. F -68 Table of Contents The Plan does not cater for share distribution to the executives and only uses them for purposes of monitoring the targets laid down in the Company's Long-Term Strategic Plan, also approved by the Board of Directors. The plan will run from 2012 to 2018 and certain Company executives who are exercising their duties on the grant date will be eligible.  The grant is annual and the vesting period for conversion into premiums will be from the second, third or fourth year after the grant date, with an option for 1/3 of the shares per year. Any failure to meet expectations in a conversion may be accumulated in subsequent vestings, up to the limit of the respective grant. The Program provides for partial realization, if a minimum of 80% of the estimates of the Strategic Plan is reached, involving reduction of the award to the percentage reached, as well as the possibility of exceeding them, with a ceiling of 150% in accordance with the same criteria. Accounts payable - business combinations: combinationsThe: Relates to the amount of R$ 174,136 is registered in the consolidated statementspayable by the indirect subsidiary CPFL Renováveis in relation to the purchase of wind generation projects and the Santa Luzia SHP.for business acquisitions.   ( 24 ) SHAREHOLDER’S EQUITY The shareholders’ participationsinterest in the Company’s equity as of December 31, 20112013 and 20102012 are shown below:     Number of shares     December 31, 2013   December 31, 2012 Shareholders   Common shares   Interest %   Common shares   Interest % BB Carteira Livre I FIA   288,569,602   29.99   288,569,602   29.99 Caixa de Previdência dos Funcionários do Banco do Brasil - Previ   487,700   0.05   9,897,860   1.03 VBC Energia S.A.   -   -   9,897,860   1.03 Camargo Correa S.A.   837,860   0.09   12,642,390   1.31 ESC Energia S.A.   234,092,930   24.33   224,195,070   23.30 Bonaire Participações S.A.   6,308,790   0.66   6,308,790   0.66 Energia São Paulo FIA   136,820,640   14.22   115,118,250   11.96 BNDES Participações S.A.   64,842,768   6.74   81,053,460   8.42 Antares Holdings Ltda.   16,039,720   1.67   16,039,720   1.67 Brumado Holdings Ltda.   34,502,100   3.59   34,502,100   3.59 Members of Executive Board   102,350   0.01   47,610   0.00 Other shareholders   179,669,800   18.67   164,001,548   17.04 Total   962,274,260   100.00   962,274,260   100.00                   In a Relevant Fact dated 24 January, 2013, the Company was informed by its shareholders Bonaire Participações S.A. (“Bonaire”) and Energia São Paulo FIA the exercise of the call option to purchase all the additional shares, corresponding to 4% of the shares linked to the Company Shareholders' Agreement held by VBC Energia S.A. (“VBC”) and/or its successors, and by 521 Participações S.A (“521”), succeeded by BB Carteira Livre I (“BB CL I”), in accordance with the Purchase Option Instrument signed on July 17, 2002 by the Company´s shareholders, VBC, 521 and Bonaire. The shareholders VBC and their successors Camargo Corrêa S/A (“CCSA”) and ESC Energia S/A (“ESC”), and Caixa de Previdência dos Funcionários do Banco do Brasil (PREVI), successor and sole quotaholder of BB CL I, accepted the exercise of the Purchase Option and sold shares linked to the Company Shareholders’ Agreement. Consequently, CCSA disposed of 11,804,530 shares to Energia SP FIA and PREVI disposed of 9,897,860 shares to Energia SP FIA. In a Relevant Fact dated March 28, 2013, the Company disclosed that this transaction had been concluded and ownership of the shares linked to the Company Shareholders’ Agreement and total shared held by the Company’s controlling shareholders are as follows. F - 6069 Table of Contents     Number of shares     December 31, 2011   December 31, 2010 Shareholders   Common Shares   Interest %   Common Shares   Interest % VBC Energia S.A.   245,897,454   25.55   122,948,720   25.55 BB Carteira Livre I FIA   298,467,458   31.02   149,233,727   31.02 Energia São Paulo FIP   102,756,048   10.68   -   - Bonaire Participações S.A.   18,670,990   1.94   60,713,511   12.62 BNDES Participações S.A.   81,053,460   8.42   40,526,739   8.42 Brumado Holdings S.A.   34,502,100   3.59   17,251,048   3.59 Antares Holding LTDA   16,039,720   1.67   8,019,852   1.67 Board Members   212   -   112   0.00 Executive Officers   49,980   -   2,824   0.00 Other Shareholders   164,836,838   17.13   82,440,597   17.13 Total   962,274,260   100.00   481,137,130   100.00                                                           Number of shares - linked   Number of shares     Before disposal   After disposal   Before disposal   After disposal VBC Energia S.A.   9,897,860   -   9,897,860   - ESC Energia S.A.   224,188,344   234,086,204   224,195,070   234,092,930 Camargo Corrêa S.A.   11,804,530   -   12,642,390   837,860 BB Carteira Livre I FIA   196,276,558   196,276,558   288,569,602   288,569,602 Caixa de Previdência dos Funcionários do Banco do Brasil - Previ   9,897,860   -   9,897,860   - Energia São Paulo FIA   90,484,600   112,186,990   115,118,250   136,820,640 Bonaire Participações S.A.   10,000   10,000   6,308,790   6,308,790 Total of controlling shareholders   542,559,752   542,559,752   666,629,822   666,629,822   As such transaction was performed among the Company´s shareholders; there is no impact on the Company´s financial statements. 24.1 - Share reverse split and splitCapital reserves: As disclosed in the Relevant Facts of March 28 and April 28, 2011, and NoticeRefers basically to: a)R$ 228,322 related to the Shareholdersentry resulting from the CPFL Renováveis business combination; b)effect of May 10, 2011, the commonpublic offering of shares in the Company were grouped, at a proportion of 10 (ten) to 1 (one), with simultaneous splitting of each grouped share, at a proportion of 1 (one) to 20 (twenty), allowing a period of 60 days for the shareholders to adjust their stock positions on the BM&FBovespa S.A. The resulting shares were allocated and distributed to the holders of the shares on July 4, 2011. The share grouping and split did not involve changes to financial resources. The fractions of shares of the shareholders who opted not to adjust their positions were identified, separated and grouped by whole numbers, and sold by auction on the BM&FBovespa. 24.2 Corporate restructuring of the shareholder Bonaire Participações S.A. ·On August 17, 2011, in an Announcement to the Market, Energia São Paulo Fundo de Investimento em Participações (“Fund”) advised that, as a result of a capital decrease of the company Bonaire Participações S.A., by delivery of assets of its majority shareholder, the Fund now holds 102,756,048 common shares issued by the Company.  The Fund and Bonaire, in which it is the majority shareholder, now jointly hold 121,427,038 of the Company’s common shares. Accordingly, Bonaire and the Fund now jointly exercise the rights and obligations arising therefrom, and should accordingly be regarded as a single shareholder of the Company. ·On November 25, 2011, a Notice to the Shareholders communicated the decrease of R$ 86,412 in the capital of Bonaire, without cancellation of shares. On January 26, 2012, the period for opposition from creditors having elapsed, the capital was decreased by handing over 12,362,202 of the Company’s shares to the Fund. The Fund therefore now holds the total of 115,118,250 of the company’s common shares as of that date. 24.3 - Capital Reserve Refers to: (i) profits on the sale of treasury shares, resulting from shareholders exercising their right to withdraw at the time of the incorporation of the shares of minority shareholders in November 2005. (ii)subsidiary CPFL Renováveis, as mentioned in Note 14.4, the amount ofnote 14.5, amounting to R$ 229,940 was recorded59,308, as a result of the business combination ofdecrease in the subsidiary CPFL Geração's interest in CPFL Renováveis. F - 61 Table of Contents In accordance with IFRS 10, this effect was recognized as transactions between shareholders and recorded directly in Shareholder’s Equity. 24.4 - Profit Reserve  Comprises the amount of R$ 495,185.    24.524.2 – Other comprehensive incomeProfit reserves: Is comprised of: (a)Legal reserve, amounting to R$ 603,352. (b)Statutory reserve – deemed cost Refers to recognitionfinancial asset of the added value of the deemed cost attributed of the generators’ property, plant and equipment. In 2011, dueconcession: The distribution subsidiaries record an adjustment regarding to the change in the participationexpected cash flows from the financial asset of concession in profit or loss. Since the Company will only receive the cash related to such gain or loss at the end of the assets transferredconcession through the indemnification of the concession, these amounts have been retained as of December 31, 2012 as “earnings retained for investment”, within the shareholders’ equity.In accordance with the changes to the CPFL Renováveis, CPFL Geração realized, proportionally,Energia’s by laws, approved in the general meeting held on June 28, 2013, a statutory reserve named “Financial Asset of Concession” was created, based on article 194 of Law 6404/1976. This reserve was created with the purpose of aligning the cash flows to be received from the Grantor as the indemnification at the end of the concession terms to the accumulated result from the changes in the expected cash flows from the financial asset of the concession. Accordingly, the balance of the earnings retained for investments at December 31, 2012 was reclassified to the statutory reserve - financial asset of concession. The loss recorded for the year resulting from the changes in the expected cash flows from the concession, net of taxes effects, was also reclassified within equity from statutory reserve – financial asset of concession to retained earnings. The balance of this reserve as of December 31, 2013 amounts to R$ 265,037. (c)Earnings retained for investment: As of December 31, 2013, the balance of earning retained for investments amounts to R$108,987. 24.3 – Other comprehensive income: The accumulated comprehensive income is comprised of: (a)Deemed cost: Relates to recognition of the deemed cost of the generators' property, plant and equipment, in the amount of R$ 36,480509,665; (b)Post-employment benefit obligation: As mentioned in notes 2.8, 3.8 and 18, the amount of R$ 111,999 refers to the effects of (i) revision of IAS 19, which eliminated the corridor method and gave rise to the need to record the net actuarial liability in full at the base date of the revaluation reserve previously recognized as deemed cost, set against retained earnings. Similarly,actuarial report, and (ii) the subsidiary CPFL Brasil recorded a deemed cost revaluation reserve of R$15,558, in proportionactuarial calculations updated to its interest in CPFL Renováveis, set against retained earnings.December 31, 2013. F -70   At December 31, 2011, the effect Table of these changes in Other Comprehensive Income in these subsidiaries resulted in net realization of R$ 20,922.Contents   24.6 - Dividends24.4 – Dividends: The AGM/EGMAnnual and Extraordinary General Meeting held on April 28, 201119, 2013 approved the allocation of net income for 2010,the year of 2012 by declaring a dividenddeclared dividends of R$ 1,260,469 for 2010,1,096,145, of which R$ 774,429 corresponds640,239 relate to the interim dividend declared in June 2010, and R$ 486,040 to2012, plus an additional dividend.dividend of R$ 455,906.   Additionally, on August 10, 2011, inIn accordance with the Bylawsby-laws and based on the income for the first half-year of 2011,2013, the Company’s Board of Directors on August 14, 2013, approved the declaration of an interim dividend of R$ 747,709,363,049, attributing the valueamount of R$ 0.7770231760.377282126 to each share.share paid on October 1, 2013. During the year, theThe Company paid R$ 1,229,568815,514 in 2013 in respect of the dividends declared at December 31, 20102012 and June 30, 2011.2013. F - 62 Table of Contents   24.724.5 - Allocation of Net Income for the YearYear: The Company’s by-laws assure shareholders of a minimum dividend of 25% of net income, adjusted in accordance with the law. For this year, Company managementManagement is proposing distribution of the balance of the net income, by declaration of R$ 758,470567,802 in the form of dividends, corresponding to R$ 0.7882051260,590062200 per share, as shown below:   Net income - Parent company 937,419 Realization of prior years profit or loss 1,530,40356,293   Realization of other comprehensive income 25,962 Prescribed Dividend 5,172 Constitution/Realization of Statutory reserve 4,96761,863 Net Income Base for Allocation 1,086,708 Constitution of Legal Reserve (76,520)(46,871) RealizationConstitution of comprehensive incomeEarnings retained for investment 47,329 Net Income Base for Allocation 1,506,179(108,987) Interim Dividend (747,709)(363,049) Additional proposed dividend 758,470567,802   24.6 – Interest of non-controlling shareholders: Disclosure of interests in subsidiaries, as per IFRS 12, is as follows: 24.6.1 – Changes in the interest of non-controlling shareholders: F -71 Table of Contents                   CERAN   CPFL Renováveis   Paulista Lajeado   TOTAL At January 1, 2011 179,523   -   76,425   255,948 Equity Interests and voting capital 35.00%   37.00%   40.07%                     Net income attributable to non-controlling shareholders 16,840     26,860   8,281   51,981 Corporate reorganization -   1,184,531   -   1,184,531 Other -   5,132   (5,146)   (14) Dividends (5,141)   -   (1,953)   (7,094) At December 31, 2011 191,222   1,216,523   77,607   1,485,352 Equity Interests and voting capital 35.00%   37.00%   40.07%                     Net income attributable to non-controlling shareholders 19,744     3,037   8,029   30,810 Corporate reorganization -   5,086   -   5,086 Other -   3,309   (80)   3,229 Dividends (5,875)   -   (8,201)   (14,076) At December 31, 2012 205,091   1,227,955   77,355   1,510,401 Equity Interests and voting capital 35.00%   37.00%   40.07%                     Net income attributable to non-controlling shareholders 24,380     (19,851)   7,088   11,617 IPO of CPFL Renováveis -   269,192   -   269,192 Other -   3,566   (69)   3,497 Dividends (13,140)   -   (6,750)   (19,890) At December 31, 2013 216,331   1,480,864   77,624   1,774,819 Equity Interests and voting capital 35.00%   41.16% * 40.07%     * As mentioned in note 14.5, non-controlling shareholders held interests of 37% up to June 2013.             In 2013, as a result of the Initial Public Offering of CPFL Renováveis’s shares, there was a change in the interest CPFL Energia held in CPFL Renováveis. Such change did not result in loss of control, generating an effect of R$ 269,192 in the equity of the subsidiary's non-controlling shareholders. 24.6.2 – Summarized financial information for each of the Company's subsidiaries listing the interest of non-controlling shareholders The summarized financial information at December 31, 2013 and 2012 and for the years ended in 2013, 2012 and 2011 of subsidiaries in which non-controlling interests are as follows:               December 31, 2013   CERAN   CPFL Renováveis   Paulista Lajeado Current assets   110,430   1,040,470   26,529 Cash and cash equivalents   73,686   731,055   14,657 Noncurrent assets   1,090,695   8,454,767   116,739               Current liabilities   96,831   1,082,806   24,241 Financial liabilities   64,921   986,721   1,577 Noncurrent liabilities   486,207   4,834,189   - Financial liabilities   486,207   3,842,990   - Shareholders' equity   618,087   3,578,242   119,027 Controlling  shareholders´ interest   401,757   2,097,377   41,403 Non-controlling  shareholders´ interest   216,331   1,480,864   77,624               Net operating revenue   270,511   1,018,612   65,641 Depreciation and amortization   (47,050)   (348,355)   (6) Financial income   5,928   46,793   615 Financial expense   (44,957)   (305,051)   - Social contribution and income tax   (34,884)    (10,607)   (8,044) Net income   69,657   (55,017)   17,693 Net income attributable to controlling shareholders   45,277     (35,146)   10,603 Net income attributable to non-controlling shareholders   24,380     (19,871)   7,089 Equity Interests and voting capital   35.00%   41.16% * 40.07% * In accordance with note 14.5, the net equity to noncontrolling shareholders until June, 2013 was 37%.         F -72 Table of Contents               December 31, 2012   CERAN   CPFL Renováveis   Paulista Lajeado Current assets   83,784   888,206   17,868 Cash and cash equivalents   52,940   640,085   7,063 Noncurrent assets   1,133,839   7,918,457   117,092               Current liabilities   99,107   937,303   16,017 Financial liabilities   69,128   834,156   1,946 Noncurrent liabilities   532,542   4,568,243   525 Financial liabilities   532,542   3,566,025   - Shareholders' equity   585,974   3,301,117   118,418 Controlling  shareholders´ interest   380,883   2,073,162   41,063 Non-controlling  shareholders´ interest   205,091   1,227,955   77,355               Net operating revenue   250,595   806,420   47,829 Depreciation and amortization   (49,606)   (288,764)   (6) Financial income   5,147   40,991   693 Financial expense   (53,141)   (265,226)   - Social contribution and income tax   (29,201)    (9,256)   (3,447) Net income   56,411   8,261   20,039 Net income attributable to controlling shareholders   36,667   5,223   12,009 Net income attributable to non-controlling shareholders   19,744   3,038   8,029 Equity Interests and voting capital   35.00%   37.00%   40.07%               December 31, 2011   CERAN   CPFL Renováveis   Paulista Lajeado Net operating revenue   231,859   162,234   42,207 Depreciation and amortization   (49,338)   (36,815)   (6) Financial income   6,565   51,564   814 Financial expense   (61,646)   (24,732)   - Social contribution and income tax   (24,962)   2,008   (2,540) Net income   48,113   65,543   20,667 Net income attributable to controlling shareholders   31,274   38,683   12,386 Net income attributable to non-controlling shareholders   16,840   26,860   8,281 Equity Interests and voting capital   35.00%   37.00% * 40.07% * The net equity to non-controlling shareholders until November, 2011 was 45.5%.             ( 25 ) EARNINGS PER SHARE Basic earningsEarnings per share – basic and diluted Calculation of the basic and diluted earnings per share atfor the years ended December 31, 2013, 2012 and 2011 was based on the profit of R$1,530,403net income attributable to CPFL Energia (R$1,538,281 at December 31, 2010 and R$1,657,297 at December 31, 2009)controlling shareholders and the average weighted number of common shares outstanding during the year ended December 31, 2011,years. For the diluted earnings per share, it was considered the dilutive effects of instruments convertible into shares, as shown below:       December 31, 2011   December 31, 2010   December 31, 2009               Net income attributable to CPFL Energia   1,530,403   1,538,281   1,657,297               Weighted average number of common shares   December 31, 2011   December 31, 2010   December 31, 2009               Shares issued on January 1   481,137,130   479,910,938   479,910,938 Shares issued on April 26, 2010   -   1,226,192   - Share grouping ans split, without resources changes, in June 2011   481,137,130   -   - Number of outstanding shares at December 31   962,274,260   481,137,130   479,910,938               Weighted average number of common shares as of December 31   962,274,260   961,494,872   959,821,876               Earnings per share - attributable to CPFL Energia   1.59   1.60   1.73     December 31, 2013   December 31, 2012 restated   December 31, 2011 restated Numerator             Net income attributable to controlling shareholders   937,419     1,176,252   1,492,541 Denominator             Weighted average shares outstanding during the year   962,274,260     962,274,260   962,274,260 Net income per share - basic   0.97     1.22   1.55               Numerator             Net income attributable to controlling shareholders   937,419    1,176,252   1,492,541 Dilutive effect of convertible debentures of subsidiary CPFL Renováveis (*)   (25,016)    (17,537)   - Net income attributable to the Controlling Shareholders   912,403   1,158,715   1,492,541               Denominator             Weighted average shares outstanding during the year   962,274,260     962,274,260   962,274,260 Net income per share - diluted   0.95     1.20   1.55 (*) Proportional to the Company´s percentage interest in each period in the subsidiary           In accordance with IAS 33, calculation of the average weighted number of shares for 2010 took into account the share grouping and split that occurred in 2011 (note 24), as there was no change in financial resources. F -73   Diluted earnings per share In 2011, 2010 and 2009, Table of Contents The dilutive effect of the Company held no notes convertible into shares to be taken into accountnumerator in calculating the earnings per share. Therefore, basic andcalculation of diluted earnings per share for eachtakes into account the dilutive effects of the periods presented aredebentures convertible into shares issued by subsidiaries of the same.indirectly subsidiary CPFL Renováveis. Calculation of the effects was based on the assumption that these debentures would have been converted into common shares of the subsidiaries at the beginning of each year.   F - 63 Table of Contents   ( 26 ) OPERATING REVENUE     Number of Consumers (*)   GWh (*)   R$ Thousand                                     Revenue from Eletric Energy Operations   2011   2010   2009   2011 2010   2009   2011   2010   2009   Number of Consumers (*)   GWh   R$ thousand Revenue from eletric energy operations   2013   2012   2011   2013   2012 restated   2011 restated (*)   2013    2012 restated    2011 restated Consumer class                                                                     Residential   6,086,847   5,880,204   5,695,689   13,626 12,983   12,346   5,978,836   5,416,581   5,098,424   6,523,553   6,312,737   6,086,847   15,426   14,567   13,626   5,710,050   6,631,596   5,978,836 Industrial   59,485   78,261   77,166   14,718 15,413   14,970   4,128,340   4,123,723   4,127,319   58,565   59,057   59,485   14,691   14,536   14,718   3,605,079   4,086,080   4,128,340 Commercial   500,131   490,554   496,377   8,140 7,695   7,297   3,086,196   2,795,127   2,700,025   491,057   494,556   500,131   8,837   8,714   8,140   2,956,069   3,389,159   3,086,196 Rural   242,554   237,903   238,566   1,991 2,100   2,257   452,467   434,519   438,666   245,687   243,283   242,554   2,081   2,093   1,991   415,075   492,633   452,467 Public Administration   46,771   45,386   44,051   1,154 1,112   1,074   420,474   384,742   376,735 Public Lighting   8,616   8,096   7,933   1,495 1,444   1,408   328,882   303,862   293,463 Public Services   7,413   7,239   6,738   1,823 1,742   1,664   511,560   470,323   462,431 Public administration   49,443   48,467   46,771   1,234   1,220   1,154   407,094   451,241   420,474 Public lighting   9,596   9,166   8,616   1,586   1,525   1,495   284,346   345,058   328,882 Public services   7,961   7,729   7,413   1,820   1,864   1,823   486,609   543,216   511,560 (-) Adjustment of excess and surplus revenue of reactive   -     -   -   -   -   -   (59,731)   (24,643)   - Billed   6,951,817   6,747,643   6,566,520   42,946 42,489   41,016   14,906,755   13,928,877   13,497,063   7,385,862   7,174,995   6,951,817   45,674   44,519   42,946   13,804,591   15,914,341   14,906,755 Own Consumption           768   33   33   -   -   - Own comsuption               34   33   33   -   -   - Unbilled (Net)               -   -   (40,671)   1,304   43,217               -   -   -   73,536   136,905   (40,671) Emergency Charges - ECE/EAEE               -   -   18   7   (5) Reclassification to Network Usage Charge - TUSD - Captive Consumers   -   -   (7,213,990)   (5,843,561)   (6,025,716) Emergency charges - ECE/EAEE               -   -   -   (254)   1   18 Reclassification to network usage charge - TUSD - captive consumers               -     -   -   (5,287,096)   (7,558,153)   (7,213,990) Electricity sales to final consumers               42,979 42,522   41,049   7,652,112   8,086,627   7,514,559               45,709     44,552   42,979   8,590,776   8,493,094   7,652,112                                                                     Furnas Centrais Elétricas S.A.               3,026   3,026   386,776   347,472   353,554               3,026   3,034   3,026   441,961   411,798   386,776 Other Concessionaires and Licensees               6,832 7,217   7,016   820,652   731,493   854,852 Current Electric Energy               4,279 2,495   2,883   90,419   117,156   90,732 Electricity sales to wholesaler               14,137 12,738   12,925   1,297,846   1,196,121   1,299,138 Other concessionaires and licensees               10,918   9,333   6,964   1,874,482   1,478,832   753,141 Current electric energy               1,031   2,062   2,281   205,976   197,758   65,697 Electricity sales to wholesaler´s               14,975     14,429   12,271   2,522,419   2,088,388   1,205,613                                                                     Revenue due to Network Usage Charge - TUSD - Captive Consumers           7,213,990   5,843,561   6,025,716 Revenue due to Network Usage Charge - TUSD - Free Consumers               1,321,111   1,127,795   789,357 Reclassification to network usage charge - TUSD - captive consumers                           5,287,096     7,558,153   7,213,990 Reclassification to network usage charge - TUSD - free consumers                           965,737     1,412,275   1,337,400 (-) Adjustment of revenue surplus and excess responsive                           (14,587)    (7,489)   - Revenue from construction of concession infrastructure Revenue from construction of concession infrastructure                 1,129,826   1,043,678   615,557                           1,004,399     1,351,550   1,129,826 Other Revenue and Income                         251,097   258,896   246,983 Resources provided by the energy development account - CDE                           627,832     52,093   - Other revenue and income                           355,694   300,715   236,110 Other operating revenues                       9,916,025   8,273,930   7,677,613                           8,226,172   10,667,297   9,917,326                                 Total gross revenues                       18,865,982   17,556,678   16,491,310                           19,339,367   21,248,779   18,775,051                                                                 Deductions from operating revenues                                                                     ICMS                       (2,967,625)   (2,728,416)   (2,613,276)                           (2,777,486)   (3,178,771)   (2,967,625) PIS                       (282,915)   (265,444)   (263,951)                           (271,301)   (297,476)   (283,870) COFINS                       (1,303,411)   (1,224,934)   (1,216,563)                           (1,247,439)   (1,367,898)   (1,307,795) ISS                       (5,031)   (3,847)   (3,617)                           (5,545)   (4,926)   (5,031) Global Reversal Reserve - RGR                       (72,027)   (53,985)   (61,407) Fuel Consumption Account - CCC                       (737,017)   (593,630)   (386,949) Energy Development Account - CDE                       (524,844)   (470,981)   (449,417) Research and Development and Energy Efficiency Programs               (143,916)   (134,772)   (102,175) Global reversal reserve - RGR                           (3,791)   (101,136)   (72,027) Fuel consumption account - CCC                           (34,432)   (597,925)   (737,017) Energy development account - CDE                           (155,249)   (584,399)   (524,844) Research and development and energy efficiency programs                           (111,243)    (147,390)   (137,206) PROINFA                       (65,125)   (56,933)   (35,954)                           (99,244)   (77,886)   (65,125) Emergency charges (ECE/EAEE)                       (19)   (7)   5 Emergency charges - ECE/EAEE                           253   (1)   (19) IPI                       (24)   -   -                           (34)   (94)   (24)                       (6,101,954)   (5,532,949)   (5,133,304)                           (4,705,511)   (6,357,904)   (6,100,583)                                                                     Net revenue                       12,764,028   12,023,729   11,358,006                           14,633,856   14,890,875   12,674,467                                                                 (*) Information not examined by the independent auditors.                                                         (*) Unaudited information                                       In accordance with ANEEL’s Order nº 4,097 of December 30, 2010, concerning the basic procedures for preparation of the financial statements, the energy distribution subsidiaries reclassified part of the amount related to revenue from under the heading “Electricity sales to final consumers”, Commercialization activities, to “Other operating revenues”, Distribution activities, with the title “Revenue due to Network Usage Charge - TUSD captive consumers”. The detailstariff regulation procedure (Proret), approved by ANEEL Normative Resolution n° 463 of November 22, 2011, determined that revenuereceived as a result of excess demand and excess reactive power, from the contractual tariff review date for the 3rd periodic tariff review,should be accounted for as Special Obligations and will be amortized from the next tariff review. In accordance with ANEEL Order nº 4,991, of December 29, 2011, relating to the basic procedures for preparation of the financial statements, the distributors subsidiaries adjusted revenue of excess and surplus revenue of reactive, reducing the accounts of “Electricity sales to final consumers” and “Revenue due to Network Usage Charge - TUSD free consumers” against the item reducing of intangible assets (“Special Obligations”). The amount recorded was determined from the date of the subsidiaries' tariff review to December 31, 2013. On February 7, 2012, the Brazilian Association of Electric Energy Distributors (Associação Brasileira de Distribuidores de Energia Elétrica - ABRADEE) succeeded in suspending the effects of Resolution 463, whereby the request for advance final relief was granted and the order to account for income from excess demand and excess reactive as special obligations was suspended. The suspensive effect applied for by ANEEL in its interlocutory appeal was granted in June 2012 and the advance relief originally granted in favor of ABRADEE was suspended. The subsidiaries are awaiting the court’s decision on the final treatment of this income, and at F -74 Table of Contents December 31, 2013, these amounts are still recorded under Special Obligations, according to IAS 37, net disclosed in intangible assets of concession. 26.1 Periodic tariff revision (“RTP”) e Annual adjustment (“RTA”)                                       2013   2012   2011 Company   Month   Annual Tariff Review - RTA   Effect perceived by consumers (a)   Annual Tariff Review - RTA   Effect perceived by consumers (a)   Annual Tariff Review - RTA   Effect perceived by consumers (a) CPFL Paulista   April   5.48%   6.18%   3.71%   2.89%   7.38%   7.23% CPFL Piratininga   October   7.42%   6.91%   8,79% (b)   5,5% (b)   (d)   (d) RGE   June   -10.32%   -10.64%   11.51%   3.38%   17.21%   6.74% CPFL Santa Cruz   February   (c)   (c)   (c)   (c)   23.61%   15.38% CPFL Leste Paulista   February   (c)   (c)   (c)   (c)   7.76%   16.44% CPFL Jaguari   February   (c)   (c)   (c)   (c)   5.47%   6.62% CPFL Sul Paulista   February   (c)   (c)   (c)   (c)   8.02%   7.11% CPFL Mococa   February   (c)   (c)   (c)   (c)   9.50%   9.77% (a)   Represents the average effect perceived by consumers, in accordance with ANEEL resolutions, as a result of elimination from the tariff base of financial components added in the annual adjustment for the previous year (unaudited). (b)   On October 2, 2012 ANEEL approved the RTP de 2011 for the subsidiary CPFL Piratininga, with total repositioning of -5.43%, of which -4.45% relates to the economic repositioning and -0.98% to the financial components. This result was used as a calculation basis for the 2012 Annual Tariff Readjustment. On October 16, 2012 ANEEL’s Collegiate Board of Directors approved the 2012 Annual Tariff Review – RTA of the subsidiary.  Tariffs were increased by 8.79%, on average, of which 7.71% relates to the economic increase and 1.08% to the financial components. The 2012 RTA took into consideration the impact of 1/3 of the financial component of the 2011 RTP, which represents a reduction of 2.42%. If this effect had not been taken into account, the total increase of the 2012 RTA would have been 11.21%. With the ratification of the 2011 RTP and 2012 RTA, the average effect to be perceived by consumers is 5.50% in relation to the tariffs in force. The new tariffs are effective from October 23, 2012 to October 22, 2013. On October 22, 2013 ANEEL published Resolution 1,638, fixing the adjustments in the subsidiary’s tariffs from October 23, 2013.  The tariffs increased by 7.42%, on average, of which 9.69% relates to the annual economic adjustment and -2.27% to the pertinent financial components. The average effect perceived by captive consumers is a 6.91% tariff increase.  (c)  On January 31, 2012, ANEEL extended the effective term of the supply tariffs and TUSD of these subsidiaries, until the final processing of the tariff adjustmentsreview. The Periodic Tariff Review - RTP of February 2012 was only ratified in January 2013, but without immediate application of the tariffs. Based on the tariffs of the 2012 RTP, ANEEL ratified the Extraordinary Tariff Review (“RTE”), effective from January 24, 2013 to February 2, 2013. The tariffs ratified in the 2013 RTA, which incorporated the effects of the extension of the RTP, came into effect from February 3, 2013. (d)   On July 12, 2012, ANEEL opened the Public Hearing nº 54/2012 to obtain information for the distributors2011 Periodic Tariff Review - RTP of the subsidiary CPFL Piratininga and proposed a total tariff repositioning of  -5.04%, of which -3.40% relates to the economic repositioning and -1.64% to the financial components. After analysis agents’ comments, ANEEL formulated the final proposal, approved at the Board of Directors’ Meeting on October 2, 2012, with a total repositioning of -5.43%, of which -4.45% relates to the economic repositioning and -0.98% to the financial components. This result was used as a basis for calculation of the 2012 Annual Tariff Readjustment. On October 16, 2012 ANEEL’s Collegiate Board of Directors approved the 2012 Annual Tariff Review – RTA, of the subsidiary CPFL Piratininga. Tariffs were increased by 8.79%, on average, of which 7.71% relates to the economic increase and 1.08% to the financial components. The 2012 RTA took into consideration the impact of 1/3 of the financial component of the 2011 RTP, which represents a reduction of 2.42%. If this effect had not been taken into account, the total increase of the 2012 RTA would have been 11.21%. With the ratification of the 2011 RTP and 2012 RTA, the average effect to be perceived by consumers is 5.50% in relation to the tariffs ratified by the 2010 Annual Tariff Adjustment. The new tariffs are effective from October 23, 2012 to October 22, 2013. F -75 Table of Contents The RTP and RTA percentages for these subsidiaries are as follows:       RTA 2013   RTP 2012     With financial components   Effect perceived by consumers compared to RTA/11 (*)   With financial components   Effect perceived by consumers compared to RTE/13 (*) CPFL Santa Cruz   9.32%   -0.94%   8.10%   -4.66% CPFL Leste Paulista   6.48%   3.36%   0.08%   -1.25% CPFL Jaguari   2.71%   2.68%   -7.10%   -7.33% CPFL Sul Paulista   2.27%   2.21%   -3.72%   -5.02% CPFL Mococa   7.00%   5.10%   9.00%   6.34% (*) Unaudited information                 As mentioned in note 38.1, on February 3, 2014, ANEEL fixed the tariff adjustment of these subsidiaries as from that date. The subsidiaries filed a Request for Reconsideration in relation to the RTP, which was judged in January 2014 (note 38.7). 26.2 Extraordinary Tariff Review (“RTE”) In order to encompass the effects of Provisional Measure 579/2012, (converted into Law 12,783 in January 2013) – Extension of the concessions and other topics of interest, ANEELratified the result of the 2013 Extraordinary Tariff Review (“RTE”), applied for consumption from January 24, 2013. The extraordinary review encompassed the electric energy quotas of the generation plants that renewed their concession contracts. The total energy produced by these plants was divided into quotas for the distributors. The effects of the elimination of the Global Reversal Reserve - RGR and Fuel Consumption Account - CCC, the reduction in the Energy Development Account - CDE and the decrease in the transmission costs were also computed. This RTE has no impact on the net profit or loss.  ANEEL ratified the result of the 2013 extraordinary review for the distribution subsidiaries with the following resolutions. The average effects for the distributors’ consumers were:         2011   2010   2009 Company   Month   Total adjustment   Effect perceived by consumers (*)   Total adjustment   Effect perceived by consumers (*)   Total adjustment Effect perceived by consumers (*) Distributors   Resolution n°   Effect perceived by consumers (*) CPFL Paulista   April(**)   7.38%   7.23%   2.70%   -5.69%   21.22% 21.56%   1,433   -20.42% CPFL Piratininga   October   (**)   (**)   10.11%   5.66%   5.98% -2.12%   1,424   -26.70% RGE   June/April   17.21%   6.74%   12.37%   3.96%   18.95% 3.43%   1,411   -22.81% CPFL Santa Cruz   February   23.61%   15.38%   10.09%   -2.53%   24.09% 11.85%   1,452   -23.72% CPFL Jaguari   1,450   -25.33% CPFL Mococa   1,451   -24.38% CPFL Leste Paulista   February   7.76%   16.44%   -13.21%   -8.47%   12.94% 10.61%   1,449   -26.42% CPFL Jaguari   February   5.47%   6.62%   5.16%   3.67%   11.36% 9.40% CPFL Sul Paulista   February   8.02%   7.11%   5.66%   4.94%   11.64% 10.23%   1,453   -23.83% CPFL Mococa   February   9.50%   9.77%   3.98%   3.24%   11.18% 5.59%                         (*) Represents the average effect perceived by consumers, as a result of the elimination from the tariff base of financial components added in the annual adjustment for the previous year. (**) The tariff review has not been approved yet. (*) Unaudited information           F26.3 – Resources provided by the Energy Development Account - 64 TableCDE   Provisional Measure 579, of Contents September 11, 2012 (converted into Law 12,783 of January 11, 2013) determined that the resources related to the low income subsidy, as well as other tariff discounts should be fully subsidized by resources from the CDE. Income of R$ 627,832  was recorded in 2013, R$ 69,231 for the low income subsidy and R$ 558,600 for other tariff discounts, set against accounts receivable – Resources provided by the Energy Development Account - CDE (note 11) and accounts payable – CDE (note 23).   ( 27 ) COST OF ELECTRIC ENERGY Cost of Electric Energy   GWh (*)   R$ thousand Electricity Purchased for Resale   2011   2010   2009   2011   2010   2009 Itaipu Binacional   10,855   10,835   11,084   973,487   1,010,132   1,157,306 Current electric energy   5,002   3,373   3,101   142,450   198,789   57,748 PROINFA   1,032   1,133   958   169,144   182,674   169,706 Energy purchased in restricted framework   33,964   37,043   37,531   4,117,550   4,166,943   4,116,274 Credit of PIS and COFINS               (495,495)   (508,463)   (521,366) Subtotal   50,853   52,384   52,674   4,907,136   5,050,075   4,979,668                           Electricity Network Usage Charge                         Basic Network Charges               1,019,116   899,112   901,589 Transmission from Itaipu               90,140   88,568   84,281 Connection Charges               71,601   68,985   59,475 Charges of Use of the Distribution System               42,052   30,217   25,657 System Service Charges - ESS               187,056   174,230   80,727 Reserve Energy charges - EER               34,547   32,281   3,220 Credit of PIS and COFINS               (130,679)   (120,978)   (120,108) Subtotal               1,313,834   1,172,415   1,034,841                           Total               6,220,970   6,222,490   6,014,509                           (*) Information not examined by the independent auditors.                         F - 6576 Table of Contents                           GWh   R$ thousand Electricity Purchased for Resale 2013   2012 restated   2011 restated (*)   2013    2012 restated    2011 restated Itaipu Binacional 10,719   10,781   10,855   1,298,210   1,131,744   973,487 Current electric energy 2,974   2,662   4,878   726,936   244,921   141,497 PROINFA 1,019   1,070   1,032   233,152   215,400   169,144 Energy purchased of bilateral contracts and through action in the regulated market 42,980     48,085   38,301   6,786,524   5,814,982   4,670,702 Resources provided by the energy development account - CDE -     -   -   (827,578)   -     Credit of PIS and COFINS -     -   -   (748,526)   (677,043)   (545,161) Subtotal 57,692   62,597   55,065   7,468,718   6,730,004   5,409,669                         Electricity Network Usage Charge                       Basic network charges             559,631   1,127,319   979,613 Transmission from Itaipu             34,716   96,454   90,140 Connection charges             44,470   79,855   71,369 Charges of use of the distribution system             29,542     34,322   24,090 System service charges - ESS             554,865   252,708   187,056 Reserve energy charges             33,194   85,148   34,547 Resources provided by the energy development account - CDE             (458,792)    -   - Credit of PIS and COFINS             (69,655)    (152,815)   (128,523) Subtotal             727,969   1,522,991   1,258,292                         Total             8,196,687   8,252,995   6,667,961 (*) Unaudited information                       27.1 Resources provided by the CDE - Decree 7,945/2013 Due to the unfavorable hydropower conditions from the end of 2012, including the low levels of water reserves at the hydroelectric power plants, the output of the thermal plants was set at the highest level. In view of this and considering the concessionaires’ exposure in the short-term market, due largely to allocation of the physical energy and power guarantee quotas and repeal of the plants’ authorization by ANEEL, the energy cost of the distributors increased significantly in 2012 and 2013. As a result of this scenario and as the distribution concessionaires do not have control over these costs, on March 7, 2013, the Brazilian government issued Decree 7,945, which provided for certain changes in the contracting of energy and the objectives of the Energy Development Account - CDE charge. In relation to contracting of energy, Decree 7,945 (i) reduced the minimum term from three years to one, as from the start of the energy supply, for commercialization contracts for electric energy provided by existing ventures and (ii) increased the pass-through of the distributors’  electric energy acquisition costs to the final consumers from one hundred and three to one hundred and five percent of the total amount of electric energy contracted in relation to the distributor’s annual supply load. The Decree amended the objectives of the CDE, and introduced the pass-through of CDE funds to the distribution concessionaires in relation to the following costs: i.exposure in the short-term market of the hydroelectric power plants contracted under a system of physical guarantee of electric energy and power quotas, due to inadequate allocation of generation in the scope of the Energy Relocation Mechanism – MRE (Hydrological Risk); ii. exposure of the distributors in the short-term market, due to insufficient contractual support for the load distributed, in relation to the amount of replacement not recontracted as a result of non-participation in the extension of the electric energy generation concessions (Involuntary exposure); iii. the additional cost related to activation of thermoelectric plants without respecting the order of merit by decision of the Electrical Sector Monitoring Committee – CMSE (ESS – Energy Security);  iv. the full or partial amount of the accumulated positive balance in the CVA (compensation mechanism) account, for the system service charge and energy purchased for resale (CVA ESS and Energy). In relation to items (i), (ii) and (iii), in accordance with IAS 20 – Accounting for Government Grants and Disclosure of Government Assistance, the Company recorded the amount of R$ 726,234 in 2013. In relation to item (iv): ·in the tariff review for the subsidiaries CPFL Paulista and RGE, in Order 1,144, of April 18, 2013, and Authorization Resolution 1,535, of June 18, 2013, respectively, ANEEL granted (i) in the case of the F -77 Table of Contents subsidiary CPFL Paulista, full coverage of the positive balances of the CVA calculated on energy purchased and the ESS charge for 2012, as well as positive amounts of the CVA for energy purchased in the availability auction, in the accrual period of January 2013, totaling R$ 371,460 and (ii) in the case of the subsidiary RGE, partial coverage of the CVA balances calculated on energy purchased and the ESS charge, amounting to R$ 10,706. Both amounts were credited to the cost of electric energy under Resources provided by the CDE – decree 7,945/13, set against other credits in the line Receivable from resources provided by the Energy Development Account (note 11). ·partial coverage of the positive CVA balances calculated on energy purchased (reversal of an expense of R$ 167,901) and of the System Service Charge (“ESS”) charge (expense of R$ 122) for the period October 2012 to October 2013 was approved for the subsidiary CPFL Piratininga in the tariff adjustment process, through Ratification Resolution 1638 of October 23, 2013, amounting to a total of R$ 167,779. Both amounts were credited to the cost of electric energy under Resources provided by the CDE– decree 7945/13, set against other credits in the line Receivable from resources provided by the Energy Development Account (note 11); ·in the tariff review for the subsidiary CPFL Santa Cruz, approved by Ratification Resolution 1682, of January 30, 2014, ANEEL granted full coverage of the positive CVA balances calculated on energy purchased (reversal of an expense of R$ 15,514) and of the ESS charge (expense of R$ 5,323) for the period February 2013 to January 2014, amounting to a total of R$ 10,192. Both amounts were credited to the cost of electric energy under Resources provided by the CDE– decree 7945/13, set against other credits in the line Receivable from resources provided by the Energy Development Account (note 11); The resources provided by the CDE recognized in 2013 are shown in the following table, per distributor controlled by the Company:                           2013   Electricity purchased for resale   Electricity network usage charge   Total   Overcontracting   Quotas and hydrological risk   Electricity purchased - tariff review   System service charges - ESS   System service charges - ESS - tariff review   CPFL Paulista 161,087   10,868   327,252   217,464   44,207   760,878 CPFL Piratininga 76,735   395   167,901   88,166   (122)   333,076 CPFL Santa Cruz 8,689   (28)   15,514   16,082   (5,323)   34,934 CPFL Leste Paulista 1,092   (6)   -   6,487   -   7,573 CPFL Sul Palista -   (11)   -   3,621   -   3,610 CPFL Jaguari 2,537   98   -   4,631   -   7,267 CPFL Mococa -   (6)   -   2,717   -   2,711 RGE 53,593   (287)   2,153   72,310   8,553   136,322 Total 303,734   11,023   512,821   411,477   47,316   1,286,370                         F -78 Table of Contents   ( 28 ) OPERATING COSTS AND EXPENSES         Operating expenses               Operating costs   Services Rendered to Third Parties   Sales   General   Other   Total   2011   2010   2009   2011   2010   2009   2011   2010   2009   2011   2010   2009   2011   2010 2009   2011   2010 2009 Personnel 413,587   351,447   332,033   (2)   279   640   99,988   80,013   69,253   190,423   161,878   151,186   -   -   -   703,997   593,617   553,112 Employee Pension Plans (82,953)   (80,629)   (3,066)   -   -   -   -   -   -   -   -   -   -   -   -   (82,953)   (80,629)   (3,066) Materials 62,213   62,175   58,787   4,741   2,368   1,246   4,799   4,402   4,277   23,056   11,678   8,048   -   -   -   94,807   80,623   72,358 Outside Services 167,170   199,065   160,887   4,069   2,358   1,742   107,748   84,488   72,648   252,033   181,493   153,642   -   -   -   531,020   467,404   388,919 Depreciation and Amortization 534,763   475,647   451,712   -   -   -   34,139   9,212   10,944   46,867   24,167   23,518   -   152   -   615,769   509,178   486,174 Costs related to infrastructure construction -   -   -   1,129,826   1,043,678   615,557   -   -   -   -   -   -   -   -   -   1,129,826   1,043,678   615,557 Other: 63,190   59,788   53,585   (7)   2,297   1,759   117,678   122,320   98,077   102,792   63,996   66,996   216,392   199,652   227,343   500,045   448,053   447,760 Collection charges -   -   -   -   -   -   39,499   55,910   50,367   -   -   -   -   -   -   39,499   55,910   50,367 Allowance for doubtful accounts -   -   -   -   -   -   70,673   51,668   36,250   -   -   -   -   -   -   70,673   51,668   36,250 Leases and Rentals 15,878   15,068   15,633   -   -   -   147   1,676   65   9,597   9,764   4,866   -   13   -   25,623   26,521   20,564 Publicity and Advertising -   -   -   -   -   -   -   -   -   10,926   21,894   7,970   -   -   -   10,926   21,894   7,970 Legal, Judicial and Indemnities -   -   -   -   -   -   -   -   -   59,167   5,416   25,209   -   -   -   59,167   5,416   25,209 Donations, Contributions and Subsidies -   -   -   -   -   -   -   -   -   4,865   6,216   7,095   -   27   -   4,865   6,243   7,095 Inspection fee -   -   -   -   -   -   -   -   -   -   -   -   28,974   24,769   23,563   28,974   24,769   23,563 Free energy adjustment -   -   -   -   -   -   -   -   -   -   -   -   -   2,782   19,378   -   2,782   19,378 Intangible of concession amortization -  -  -  -  -  -  -  -  -  -  - -  185,434 182,615 186,899 185,434 182,615 186,899 Financial compensation for water resources utilization 23,782 24,045 -  -  -  -  -  -  -  -  -  -  -  23,782 24,045 -  Other: 23,529   20,675   37,952   (7)   2,297   1,759   7,359   13,066   11,395   18,237   20,706   21,856   1,984   (10,554)   (2,497)   51,102   46,190   70,465 Total 1,157,970   1,067,493   1,053,938   1,138,626   1,050,980   620,944   364,352   300,435   255,199   615,171   443,212   403,390   216,392   199,804   227,343   3,492,512   3,061,924   2,560,814                         Operating expenses               Operating costs   Services rendered to third parties   Sales   General   Other   Total   2013   2012 restated   2011 restated   2013   2012 restated   2011 restated   2013   2012 restated   2011 restated   2013   2012 restated   2011 restated   2013   2012 restated   2011 restated   2013   2012 restated   2011 restated Personnel 425,349   415,862   407,645   -   30   (2)   106,111   104,343   99,988   192,142   177,023   187,738   -   -   -   723,602   697,258   695,369 Post-employment benefit 61,665   33,332   (3,203)   -   -   -   -   -   -   -   -   -   -   -   -   61,665   33,332   (3,203) Materials 92,562   89,526   57,432   2,661   1,757   4,741   4,117   2,965   4,799   6,806   9,120   22,515   -   -   -   106,145   103,368   89,485 Outside services 178,809   174,326   159,678   2,464   2,356   4,069   100,301   107,603   107,748   205,450   256,949   246,719   -   -   -   487,024   541,233   518,215 Depreciation and Amortization 664,601   619,568   416,345   -   -   -   33,689   33,046   34,139   59,964   41,598   46,606   -   -   -   758,253   694,213   497,090 Costs related to infrastructure construction -   -   -   1,004,399   1,351,550   1,129,826   -   -   -   -   -   -   -   -   -   1,004,399   1,351,550   1,129,826 Other 44,531   45,093   32,225   (6)   (18)   (7)   132,379   220,188   117,516   464,253   239,673   91,484   285,148   376,898   213,495   926,304   881,834   454,713 Collection charges -   -   -   -   -   -   52,372   49,053   39,499   -   -   -   -   -   -   52,372   49,053   39,499 Allowance for doubtful accounts -   -   -   -   -   -   70,324   163,811   70,669   -   -   -   -   -   -   70,324   163,811   70,669 Leases and rentals 26,181   28,484   15,678   -   -   -   11   88   147   12,390   9,210   9,252   -   -   -   38,582   37,782   25,078 Publicity and advertising 871   106   13   -   -   -   212   26   26   13,179   22,604   10,926   -   -   -   14,262   22,736   10,965 Legal, judicial and indemnities -   -   1   -   -   -   -   -   -   429,883   187,420   49,526   -   -   -   429,883   187,420   49,526 Donations, contributions and subsidies -   -   -   -   -   -   8,003   5,815   5,654   3,935   2,337   3,874   -   -   -   11,938   8,151   9,529 Inspection fee -   -   -   -   -   -   -   -   -   -   -   -   27,422   30,136   27,024   27,422   30,136   27,024 Loss/(Gain) on disposal and decommissioning and other losses on noncurrent assets -   6,276   -   -   -   -   -   -   -   -   -   -   (39,253)   48,051   2,232   (39,253)   54,328   2,232 Intangible of concession amortization -   -       -   -       -   -       -   -       296,977   284,713   184,224   296,977   284,713   184,224 Financial compensation for water resources utilization 10,515   4,235   7,324   -       -   -       -   -       -   -       -   10,515   4,235   7,324 Other 6,963   5,991   9,209   (6)   (18)   (7)   1,457   1,394   1,521   4,866   18,104   17,906   2   13,997   16   13,282   39,468   28,645 Total 1,467,516   1,377,706   1,070,123   1,009,518   1,355,675   1,138,626   376,597   468,146   364,191   928,614   724,364   595,062   285,148   376,898   213,495   4,067,393   4,302,788   3,381,497   F - 6679 Table of Contents   ( 29 ) FINANCIAL INCOME AND EXPENSES     2011   2010   2009 2013   2012 restated   2011 restated Financial Income                                   Income from Financial Investments   356,413   156,420   94,356 Income from financial investments 316,617   200,860   341,946 Arrears of interest and fines   159,277   136,181   124,713 143,429   167,346   159,437 Restatement of tax credits   8,649   7,789   3,860 8,425   9,932   8,587 Restatement of Escrow Deposits   64,516   44,366   45,154 Monetary and Exchange Variations   57,139   42,548   22,171 Restatement of escrow deposits 118,406   50,605   60,463 Monetary and exchange adjustment 43,615   49,437   68,241 Adjustment to expected cash flow (note 10) -   159,195   63,212 Discount on purchase of ICMS credit   14,588   7,806   7,803 21,446   18,917   14,588 Interest on intercompany loans   407   5,894   2,460 PIS and COFINS of Interest on Shareholders' Equity   (18,926)   (18,253)   (18,476) PIS and COFINS on insterest on shareholders' equity (15,368)   (19,218)   (18,926) Other   56,125   100,364   69,319 62,637   69,889   55,216 Total   698,188   483,115   351,360 699,208   706,963   752,764                       Financial Expense                                   Debt Charges   (1,102,329)   (740,973)   (619,582) Monetary and Exchange Variations   (150,820)   (90,381)   (37,107) Debt charges (1,291,762)   (1,072,622)   (928,095) Monetary and exchange variations (182,022)   (120,342)   (152,296) Adjustment to expected cash flow (note 10) (66,851)   -   - (-) Capitalized borrowing costs   39,143   132,938   84,931 57,184   48,172   39,143 Public utilities   (57,319)   (31,578)   (8,651) (11,690)   (11,128)   (10,853) Other   (115,453)   (107,064)   (80,657) (175,511)   (128,816)   (103,940) Total   (1,386,778)   (837,058)   (661,066) (1,670,651)   (1,284,736)   (1,156,040)                       Net financial income (expense)   (688,590)   (353,943)   (309,706) Net financial expense (971,443)   (577,773)   (403,276)             Interest iswas capitalized at aan average rate of 8.24% p.a. in 2013 (7.85% p.a. in 2012 and 9.95% p.a. forin 2011) on qualifying intangible assets, and property, plant and equipment, in accordance with IAS 23. In 2010, R$ 84,839 of the total amount referred to energy generation projects that were in the process of development, especially Foz do Chapecó, EPASA and CPFL Bioenergia.   In the monetary and exchange variations caption it is included the effects of gains of R$ 211,282 (R$ 182,892 in 2012 and R$ 255,942 in 2011) on derivative instruments (note 34).   ( 30 ) SEGMENT INFORMATION The Company’s operating segments are separated by business segment (electric energy distribution,generation, renewable generation sourcesand commercialization), based on the internal financial information and management structure.structure and are separated by type of business: electric energy distribution, conventional generation, renewable generation, commercialization and services rendered. Profit or loss, assets and liabilities per segment include items directly attributable to athe segment, as well as those that can be allocated on a reasonable basis, if applicable. Average prices used between segments are based on similar market transactions. Note 1 shows the subsidiaries in accordance with their areas of operation and provides further information about each subsidiary and its business area. The segregated information by segment of activity is shown below, in accordance with the criteria established by Company management: F - 67 Table of Contents   Distribution   Generation   Commercialization   Other (*)   Elimination   Total                         2011                       Net revenue 11,048,924   706,133   1,007,780   1,191   -   12,764,028 (-) Intersegment revenues 16,831   914,542   698,128   -   (1,629,501)   0 Income from electric energy service 1,922,194   895,429   263,977   (31,053)   -   3,050,547 Financial income 429,371   137,541   75,902   55,373   -   698,188 Financial expense (669,818)   (554,434)   (104,358)   (58,167)   -   (1,386,778) Income before taxes 1,681,747   478,537   235,520   (33,847)   -   2,361,957 Income tax and social contribution 571,204   110,584   75,689   22,096   -   779,573 Net Income 1,110,543   367,952   159,832   (55,943)   -   1,582,384 Total Assets (**) 11,651,205   13,129,529   509,372   2,122,951   -   27,413,057 Capital Expenditures and other intangible assets 1,065,104   822,553   16,927   189   -   1,904,773 Depreciation and Amortization 498,225   295,960   5,742   1,277   -   801,203                         2010                       Net revenue 10,471,192   538,217   1,012,525   1,795   -   12,023,729 (-) Intersegment revenues 13,904   650,571   766,922   -   (1,431,397)   - Income from electric energy service 1,852,867   616,416   302,981   (32,949)   -   2,739,315 Financial income 316,020   53,725   22,389   90,981   -   483,115 Financial expense (394,999)   (323,441)   (22,311)   (96,307)   -   (837,058) Income before taxes 1,773,749   345,914   302,024   (36,315)   -   2,385,372 Income tax and social contribution (604,865)   (88,731)   (95,840)   (35,899)   -   (825,335) Net Income 1,168,884   257,183   206,184   (72,214)   -   1,560,037 Total Assets (**) 11,689,503   7,568,600   349,047   449,647   -   20,056,797 Capital Expenditures and other intangible assets 1,127,637   645,040   27,853   10   -   1,800,540 Depreciation and Amortization 352,806   188,981   4,553   145,453   -   691,793                         2009                       Net revenue 9,764,670   453,711   1,139,621   4   -   11,358,006 (-) Intersegment revenues 14,127   611,335   644,620   -   (1,270,082)   - Income from electric energy service 1,860,801   649,561   292,543   (20,222)   -   2,782,683 Financial income 262,914   30,884   20,113   37,449   -   351,360 Financial expense (361,852)   (222,990)   (9,764)   (66,460)   -   (661,066) Income before taxes 1,761,863   457,455   302,892   (49,233)   -   2,472,977 Income tax and social contribution (602,761)   (125,711)   (93,300)   37,663   -   (784,109) Net Income 1,159,102   331,744   209,592   (11,570)   -   1,688,868 Total Assets (**) 10,696,228   6,761,330   422,816   610,385   -   18,490,759 Capital Expenditures and other intangible assets 667,614   550,565   9,789   131   -   1,228,099 Depreciation and Amortization 344,499   175,825   3,882   148,867   -   673,073                                                 (*) Other - Refers basically to the CPFL Energia figures after eliminations of balances with related parties (**) The goodwill created in an acquisition and recorded in CPFL Energia was allocated to the respective segments Since August 1, 2011, as a result of the association with ERSA and acquisition of the shares of Jantus, described in Notes 1 and 14.4, Management has analyzed these operations separately, and a new operating segment was therefore created to segregate the activities related to renewable energies:energies. The segregated information by operating segment is shown below, in accordance with the criteria established by Company Management:                             2011 Distribution   Generation   Renewables   Commercialization   Other (*)   Elimination   Total Net revenue 11,048,924   609,755   96,378   1,007,780   1,191   -   12,764,028 (-) Intersegment revenues 16,831   839,029   75,513   698,128   -   (1,629,501)   - Income from electric energy service 1,922,194   848,173   47,256   263,977   (31,053)   -   3,050,547 Financial income 429,371   80,617   56,924   75,902   55,373   -   698,188 Financial expense (669,818)   (519,758)   (34,676)   (104,358)   (58,167)   -   (1,386,778) Income before taxes 1,681,747   409,032   69,504   235,520   (33,847)   -   2,361,957 Income tax and social contribution 571,204   112,593   (2,008)   75,689   22,096   -   779,573 Net Income 1,110,543   296,440   71,513   159,832   (55,943)   -   1,582,384 Total Assets (**) 11,651,205   5,350,193   7,779,336   509,372   2,122,951   -   27,413,057 Capital Expenditures and other intangible assets 1,065,104   334,989   487,564   16,927   189   -   1,904,773 Depreciation and Amortization 498,225   259,514   36,446   5,742   1,277   -   801,203                             (*) Other - Refers basically to the CPFL Energia figures after eliminations of balances with related parties (**) The goodwill created in an acquisition and recorded in CPFL Energia was allocated to the respective segments F -80   F - 68 Table of Contents   Distribution   Generation (conventional sources) (***)   Generation (Renewable sources) (***)   Commercialization   Services   Other (*)   Elimination   Total 2013                               Net revenue 11,563,700   601,980   802,011   1,579,893   84,622   1,649   -   14,633,856 (-) Intersegment revenues 15,354   323,658   281,913   264,891   116,184   -   (1,002,001)   - Income from electric energy service 1,550,951   559,784   214,750   52,060   13,333   (21,103)   -   2,369,775 Financial income 504,463   40,005   55,083   27,665   13,876   58,115   -   699,208 Financial expense (906,153)   (338,783)   (314,243)   (22,601)   (4,358)   (84,513)   -   (1,670,651) Income before taxes 1,149,261   381,874   (44,410)   57,123   22,852   (47,500)   -   1,519,200 Income tax and social contribution (423,712)    (69,937)   (10,607)   (21,399)   (6,881)   (37,627)   -   (570,164) Net Income 725,549   311,937   (55,017)   35,724   15,970   (85,127)   -   949,036 Total Assets (**) 15,263,417   4,515,880   9,470,564   342,516   243,612   1,206,806   -   31,042,796 Capital Expenditures and other intangible assets 844,804   9,744   827,704   3,593   48,646   345   -   1,734,836 Depreciation and Amortization (564,538)   (133,514)   (348,355)   (4,106)   (4,632)   (86)   -   (1,055,231)                                 2012 restated                               Net revenue 12,391,730   558,547   608,223   1,284,069   46,855   1,452   -   14,890,875 (-) Intersegment revenues 22,138   269,688   210,260   602,332   124,968   -   (1,229,386)   - Income from electric energy service 1,369,809   496,885   215,139   255,193   26,276   (28,210)   -   2,335,091 Financial income 558,130   32,809   56,461   39,389   4,777   15,397   -   706,963 Financial expense (632,278)   (228,949)   (254,333)   (140,506)   8,475   (37,143)   -   (1,284,736) Income before taxes 1,295,661   421,423   17,268   154,076   39,528   (49,957)   -   1,877,998 Income tax and social contribution (469,081)    (72,756)   (9,256)   (52,000)   (12,856)   (54,987)   -   (670,937) Net Income 826,580   348,667   8,011   102,075   26,672   (104,944)   -   1,207,062 Total Assets (**) 14,729,776   4,376,137   8,786,521   466,645   186,303   378,897   -   28,924,279 Capital Expenditures and other intangible assets 1,402,994   12,804   1,021,970   2,870   18,865   508   -   2,460,011 Depreciation and Amortization (544,192)   (138,417)   (289,372)   (3,177)   (3,693)   (74)   -   (978,926)                                 2011 restated                               Net revenue 11,048,924   510,192   96,378   956,365   61,417   1,191   -   12,674,467 (-) Intersegment revenues 16,831   334,847   75,513   613,690   74,436   -   (1,115,317)   - Income from electric energy service 1,845,507   497,012   47,256   246,039   17,938   (29,953)   -   2,623,799 Financial income 492,584   71,981   56,924   69,768   6,134   55,373   -   752,764 Financial expense (669,818)   (289,020)   (34,676)   (99,574)   (4,784)   (58,167)   -   (1,156,040) Income before taxes 1,668,273   363,041   69,504   216,232   19,289   (32,747)   -   2,303,592 Income tax and social contribution (592,528)    (70,766)   2,008   (68,430)   (7,258)   (22,096)   -   (759,070) Net Income 1,075,745   292,275   71,513   147,802   12,031   (54,843)   -   1,544,522 Total Assets (**) 12,846,926   3,161,824   7,779,336   426,858   88,568   865,766   -   25,169,277 Capital Expenditures and other intangible assets 1,065,104   196,393   487,564   14,854   2,073   189   -   1,766,177 Depreciation and Amortization (498,225)   (141,934)   (36,446)   (4,093)   (1,649)   (177)   -   (682,524)                                 (*) Other – refers basically to the assets and transactions recorded at CPFL Energia which are not related to any of the identified segments. (**) Intangible assets (net of amortization) recorded at CPFL Energia, were allocated to their respective segments.  (***) Since August 1, 2011, after a series of corporate restructuring, the renewable energy assets and projects previously held by the subsidiaries CPFL Geração and CPFL Brasil have been analyzed by Management as an energy generation from renewable sources segment. As the amounts were immaterial, these assets remained in the conventional energy segment for the first seven months of 2011. ( 31 ) TRANSACTIONS WITH RELATED PARTIES TRANSACTIONS The Company is controlled by the following Companies:Company’s controlling shareholders are as follows: ·  VBCESC Energia S.A. Controlled by the Camargo Corrêa group, with operations in a number of segments, such as construction, cement, footwear, textiles, aluminumaluminium and highway concessions, among others. ·  Energia São Paulo Fundo de Investimento em ParticipaçAções controlled Controlled by the following pension funds: (a) Fundação CESP, (b) Fundação SISTEL de Seguridade Social, (c) Fundação Petrobras de Seguridade Social - PETROS, and (d) Fundação SABESP de Seguridade Social - SABESPREV. ·  Bonaire Participações S.A. Company controlled by Energia São Paulo Fundo de Investimento em ParticipaçAções. ·  Fundo BB Carteira Livre I - Fundo de Investimento em Ações (“Fund") Fund controlled by PREVI - Caixa de Previdência dos Funcionários do Banco do Brasil. The direct and indirect participationsinterest in operating subsidiaries are described in Notenote 1. Controlling shareholders, subsidiaries and associated companies, jointly controlled corporationsjoint ventures and entities under common control and that in some way exercise significant influence over the Company are regarded asconsidered to be related parties. Balances and transactions involving related parties are shown in tables 31.1 and 31.2. 31.1) Transactions between related parties involving controlling shareholders, entities under common control or with significant influence: F - 6981 Table of Contents   ASSETS   LIABILITIES   REVENUE   EXPENSE December 31, 2011   December 31, 2010   December 31, 2011   December 31, 2010   2011   2010   2009   2011   2010   2009                                         Bank deposits and short-term investments                                       Banco do Brasil S.A. 91,025   141,372   -   -   5,385   13,147   7,030   6   494   4 Banco Nossa Caixa S.A. -   -   -   -   -   -   -   -   -   10                                         Loans and Financing, Debentures and Derivatives contracts (*)                                       Banco do Brasil S.A. -   -   1,644,812   1,409,587   -   3,612   -   181,110   110,671   78,832                                         Other financial transactions                                       Banco do Brasil S.A. -   -   3,184   4,012   1,819   1,458   1,819   4,867   4,005   3,215 Banco Nossa Caixa S.A. -   -   -   -   -   -   -   -   -   1,469                                         Energy sales in the free market                                       Camargo Corrêa Cimentos S.A. -   656   -   -   -   7,737   -   -   -   - Companhia Energetica do Ceara - Coelce -   -   -   -   39   -   -   -   -   - Companhia de Eletricidade do Estado da Bahia - Coelba 1,471   -   -   -   57   -   -   -   -   - Companhia Energética de Pernambuco - Celpe 890   -   -   -   52   -   -   -   -   - Companhia Energética do Rio Grande do Norte - Cosern 324   -   -   -   30   -   -   -   -   - Fras-le S.A 104   -   -   -   367   -   -   -   -   - Tavex Brasil S.A. -   -   -   -   22,458   19,983   18,549   -   -   - InterCement Brasil S/A 931   -   -   -   6,339   -   -   -   -   - Vale Energia S.A 7   -   -   -   30,548   -   -   -   -   -                                         Energy purchases in the free market                                       Afluente Transmissão de Energia Elétrica S.A. -   -   -   -   -   -   -   8   -   - NC Energia S.A. 1,784   42   -   -   19,091   18,745   24,961   -   -   1,146 Vale Energia S.A. -   -   -   -   -   -   -   523   20,277   26,613 Petrobras -   -   -   -   4,371   -   -   7,967   -   - Companhia Energética de Pernambuco - Celpe -   52   -   -   -   -   -   -   -   - Companhia de Eletricidade do Estado da Bahia - Coelba 360   342   -   -   3,002   2,834   -   -   -   - Companhia Energética do Rio Grande do Norte - Cosern -   -   183   -   -   -   -   -   -   - Vale S.A -   -   -   -   30,304   -   -   1,406   -   8,994 InterCement Brasil S/A -   -   -   -   -   -   -   319   -   - Concessionárias de Rodovias do Oeste de São Paulo -   -   -   -   -   -   -   9   -   -                                         Materials and service provision                                       Brasil Telecom S.A. -   -   15   19   -   -   -   944   834   831 Camargo Corrêa Cimentos S.A. -   -   -   -   327   -   -   -   -   20 Camargo Corrêa Geração de Energia S.A. -   -   -   -   21   -   42   -   -   - Banco do Brasil S.A. -   -   -   -   -   -   -   144   220   - Totvs S.A (**) -   -   128   -   -   -   -   719   -   - Construções e Comércio Camargo Corrêa S.A. -   -   12   -   -   -   -   -   -   - Ferrovia Centro-Atlântica S.A. – FCA -   -   -   -   -   -   -   5   -   - Camargo Corrêa Geração de Energia S.A. -   -   -   -   2   -   -   -   -   - BNY Mellon Serviços Financeiros Distribuidora de T -   -   -   -   -   -   -   3   -   - ThyssenKrupp Companhia Siderúrgica do Atlântico -   -   -   -   -   -   -   628   -   - Intercement Brasil S.A 758   -   -   -   3,162   -   -   -   -   - Industrias Romi S.A -   -   -   -   19   -   -   -   -   - Lupatech S.A -   -   -   -   -   -   -   9   -   - Petrobras 33   -   -   -   311   -   -   -   -   - Vale Fertilizantes S.A. -   -   -   -   19   -   -   -   -   - Telemar Norte Leste S.A 5   -   -   -   18   -   -   19   -   - Concessionárias de Rodovias do Oeste de São Paulo -   -   -   -   -   -   -   9   -   -                                                                                 Other revenue                                       Brasil Telecom S.A. 1,886   2,671   -   -   11,316   10,684   9,794   -   -   -                                         Property, plant and equipment acquisition                                       Construções e Comércio Camargo Correa S.A. 69,902   55,986   -   1,957   -   -   -   -   -   - Centrais Elétricas de Santa Catarina S.A - Celesc 519   -   1   -   -   -   -   28   -   - MRS Logística S.A. -   -   82   -   -   -   -   -   -   - Camargo Corrêa Cimentos S.A. 16,809   -   -   -   -   -   -   -   -   - Industrias Romi S.A. -   -   1,276   -   -   -   -   -   -   -                                         (*) Cost value, both for loans and for derivatives (**) At December 31, 2010, it does not classify as a related party. 31.2)Transactions between related parties involving subsidiaries and jointly-owned subsidiaries: F - 70  Table of Contents       ASSETS   LIABILITIES   REVENUE   EXPENSE Companies   December 31, 2011   December 31, 2010   December 31, 2011   December 31, 2010   2011   2010   2009   2011   2010   2009                                           Intercompany allocation of expense                                         Companhia Paulista de Força e Luz   -   -   2,034   -   -   -   -   2,034   1,598   1,440 Companhia Piratininga de Força e Luz   -   -   501   -   -   -   -   501   314   219 CPFL Comercialização Brasil S.A   -   -   -   -   -   -   -   -   239   182 CPFL Geração de Energia S.A.   -   -   -   -   -   -   -   -   -   (30)                                           Leasing and rental                                         Companhia Paulista de Força e Luz   -   -   -   -   -   -   -   13   70   77                                           Intercompany loans                                         CPFL Leste Paulista   2,610   -   -   -   26   -   -   -   -   - CPFL Jaguari                   9   -   -   -   -   - Centrais Elétricas da Paraiba S.A.   -   -   -   -   831   -   165   -   -   - CPFL Atende Centro de Cont. e Aten. Ltda   -   12,384   -   -   1,620   799   465   -   -   - CPFL Bioenergia S.A.   -   -   -   -   -   786   391   -   -   - CPFL Serv. Equip. Ind. e Com. S.A.   -   2,491   -   -   285   211   13   -   -   - Companhia Luz e Força de Mococa   -   -   -   -   -   139   -   -   -   - Chumpitaz Serviços S.A.   -   -   -   -   175   -   -   -   -   -                                           Dividend / Interest on shareholders' equity                                         Companhia Sul Paulista de Energia   8,126   -   -   -   -   -   -   -   -   - Companhia Jaguari de Energia   7,682   -   -   -   -   -   -   -   -   - Rio Grande Energia S/A   106,457   -   -   -   -   -   -   -   -   - CPFL Serv. Equip. Ind. e Com. S.A.   3,648   -   -   -   -   -   -   -   -   - Companhia Luz e Força de Mococa   -   3,648   -   -   -   -   -   -   -   - Companhia Luz e Força Santa Cruz   -   12,000   -   -   -   -   -   -   -   - Companhia Paulista de Força e Luz   -   237,000   -   -   -   -   -   -   -   - CPFL Comercialização Brasil S.A   -   75,000   -   -   -   -   -   -   -   - CPFL Geração de Energia S.A.   -   85,000   -   -   -   -   -   -   -   -                                           Materials and service provision                                         CPFL Comercialização Brasil S/A   190   -   -   -   -   -   -   -   -   - Companhia Luz e Força Santa Cruz   341   -   -   -   -   -   -   -   -   - Companhia Leste Paulista de Energia   7   -   -   -   -   -   -   -   -   - Companhia Jaguari de Energia   29   -   -   -   -   -   -   -   -   - Companhia Luz e Força de Mococa   28   -   -   -   -   -   -   -   -   - Rio Grande Energia S/A   532   -   -   -   -   -   -   -   -   - CPFL Geração Energia S/A   17   -   -   -   -   -   -   -   -   -                                           Advance to future capital increase                                         CPFL Jaguariúna S.A.   -   445   -   -   -   -   -   -   -   - 31.3)The main transactions are describedlisted below: a)        Bank deposits and short-term investments –– refer mainly to bank deposits and short-term financial investments with the Banco do Brasil, as mentioned in Notenote 5. The Company and its subsidiaries also have an Exclusive Investment Fund, managed, by BB DTVM, among others. b)       Loans and Financing Debentures and DerivativesDebentures– relate to funds raised from the Banco do Brasil in accordance with Notesnotes 16 and 17, contracted under the normal market conditions at the time.17. The Company also guarantees certain loans raised by its subsidiaries and joint ventures, as mentioned in Notesnotes 3.2, 16,  and 17. c)        Other Financial Transactions – the amounts in relation to Banco do Brasil are bank costs and collection expenses. The balance recorded in liabilities comprises basically the rights over the payroll processing of certain subsidiaries, negotiated with Banco do Brasil, which are appropriated as an income in the income statement of operations over the term of the contract. The Company also has an Exclusive Investment Fund managed by BB DTVM, which charges management fees under normal market conditions for such management. d)        Intangible, property, plantPurchase and equipment, materialssale of energy and service provisioncharges -– refersRefers to the acquisition of equipment, cables and other materials for use inenergy purchased or sold by distribution, commercialization and generation andcontracting of services such as construction and information technology consultancy. These operations were contracted under normal market conditions. F - 71 Table of Contents e)Energy sales to the free market– refers basically to energy sales to free consumers,subsidiaries through short or long-term contracts madeagreements and tariffs for the use of the distribution system (TUSD). Such transactions, in the free Market, are carried out under conditions regarded by the Company as beingsimilar to market conditions at the time of the negotiation, in accordance with internal policies established in advance by Company management.Management. In the regulated market, the prices charged are set by mechanisms established by the Grantor. e)Intangible assets, Property, plant and equipment, Materials and Service– refer to the acquisition of equipment, cables and other materials for use in distribution and generation, and contracting of services such as construction and information technology consultancy. f)         Energy purchasedAdvances –advances for investments in the free market – refers basically to energy purchased by the trading companies in accordance with short or long-term agreements made under conditions regarded by the Company as being market conditions at the time of the negotiation, in accordance with policies established in advance by Company management.research and development. g)        Other revenue– refers basically to revenue from rental of use of the distribution system for telephonytelephone services. h)        Purchase and saleIntercompany loan -refers to the agreement with contractual terms of energy in the regulated market - The subsidiaries that are public distribution service concessionaires charge tariffs for the use113.5% of the distribution system (TUSD) and sell energyCDI, initially scheduled for maturity on January 15, 2014, amended to related parties in their respective concession areas (captive consumers). The amounts charged are established in accordance with prices regulated by the regulatory agency. These distributors also purchase energy from related parties, mainly involving long-term agreements, in conformity with the rules established by the sector (principally by auction); these prices are also regulated and approved by ANEEL.January 16, 2017. Certain subsidiaries have supplementary retirement plan maintained with Fundação CESP and offered to the employees of the subsidiaries, as mentionedsubsidiaries. These plans hold investments in Note 18.Company’s shares (note 18). To ensure that commercial transactions with related parties are conducted under normal market conditions, the Company set up a “Related Parties Committee”, comprising representatives of the controlling shareholders, responsible for analyzing the main transactions with related parties. The Company guarantees certain loans raised by its subsidiaries as mentionedCPFL Paulista, CPFL Piratininga and CPFL Geração renegotiated with the joint ventures BAESA, ENERCAN and Chapecoense the original maturities of energy purchases due in  Notes 16September, October, November and 17.December 2013 to January 2014. The total remuneration of key management personnel in2011,2013, in accordance with CVM Decision nº 560/2008 and IAS 34, was R$ 29,694.33,680 (R$ 40,425 in 2012 and R$ 29,060 in 2011).This amount comprisesR$ 20,93536,382 (R$ 32,794in 2012 and R$ 20,361 in 2011) respect of short-term benefits, R$ 784973 (R$ 1,109 in 2012 and R$ 724 in 2011)for post-employment benefitsand a reversal of provision of R$ 3,675 (R$ 6,342 in 2012 and R$ 7,975 in 2011)for other long-term benefits, and refers to the amount recorded by the accrual method.  Transactions between related parties involving controlling shareholders, entities under common control or with significant influence and joint ventures: F -82 Table of Contents       Assets   Liabilities   Revenue   Expense   December 31, 2013   December 31, 2012 restated   December 31, 2013   December 31, 2012 restated   2013   2012 restated   2011 restated   2013   2012 restated   2011 restated Bank deposits and short-term investments                                       Banco do Brasil S.A. 115,968   82,111   -   -   6,331   7,687   4,013   52,398   1   6                                         Loans and financing, debentures and derivatives contracts (*)                                       Banco do Brasil S.A. -   -   1,767,934   1,778,338   -   -   -   88,646   129,222   176,490                                         Other financial transactions                                       Banco do Brasil S.A. -   -   -   1,224   1,224   1,633   1,819   6,031   5,483   4,867 Chapecoense Geração S.A. -   -   -   -   -   -   -   1,277   -   - ENERCAN - Campos Novos Energia S.A. -   -   -   -   -   -   -   1,021   -   - JBS S/A -   -   -   -   78   4,010   -   -   -   -                                         Advances                                       ENERCAN - Campos Novos Energia S.A. -   -   -   1,558   -   -   -   -   -   - EPASA - Centrais Elétricas da Paraiba -   -   -   572   -   -   -   -   -   - Chapecoense Geração S.A. -   -   -   1,272   -   -   -   -   -   - BAESA – Energética Barra Grande S.A. -   -   -   898   -   -   -   -   -   -                                         Energy purchase and sale and charges                                       Afluente Transmissão de Energia Elétrica S.A. -   -   24   -   -   -   -   1,048   1,375   8 Baguari I Geração de Energia Elétrica S.A. -   -   5   -   -   -   -   234   -   - BRASKEM S.A. -   -   -   -   20,916   -   -   -   -   - Caetite 2 Energia Renovável S.A. -   -   -   -   -   -   -   636   -   - Caetité 3 Energia Renovável S.A. -   -   5   -   -   -   -   642   -   - Calango Energia Renovável S.A. -   -   -   -   -   -   -   1,044   -   - Camargo Correa Cimentos S.A. -   -   -   -   -   7,561   -   -       - Companhia de Eletricidade do Estado da Bahia – COELBA 728   697   -   -   12,427   6,362   3,059   -   -   - Companhia Energética de Pernambuco - CELPE 545   1,031   -   -   19,096   6,351   52   -   -   - Companhia Energética do Ceara - COELCE (**) -   188   -   -   -   1,937   39   -   -   - Companhia Energética do Rio Grande do Norte - COSERN 223   657   191   -   8,125   2,624   30   1,070   -   - Energética Águas da Pedra S.A. -   -   120   -   -   -       3,746   3,512   - Estaleiro Atlântico Sul S.A. -   -   -   -   6,106   -       -   -   - Fras-le -   -   -   -   6   -   367   -   -   - Goiás Sul Geração de Enegia S.A. -   -   -   -   -   -       145   -   - Mel 2 Energia Renovável S.A. -   -   -   -   -   -       523   -   - MULTINER S/A -   -   -   -   207   -       -   -   - NC ENERGIA S.A. -   -   -   -   22,576   19,813   19,091   -   -   - Petrobrás -   -   -   -   -   3,207   4,371   -   34,143   7,967 Raposo Tavares -   -   -   -   21   -   -   -   -   - Rio PCH I S.A. -   -   220   -   5,501   4,732   -   1,565   1,353   - SE Narandiba S.A. -   -   -   -   -   -   -   117   141   - Serra do Facão Energia S.A. - SEFAC -   -   547   -   -   -   -   18,602   15,876   - Tavex Brasil S.A. (antiga Santista Têxtil Brasil S.A.) -   -   -   -   11,368   18,448   22,458   -   -   - ThyssenKrupp Companhia Siderúrgica do Atlântico -   -   178   -   346   -   -   6,280   5,841   - Vale Energia S.A. 6,960   6,594   -   -   89,671   77,041   30,548   -   -   477 VALE S.A. -   -   -   -   -   2,877   -   1,419   21,024   1,406 BAESA – Energética Barra Grande S.A. -   -   29,568   7,066   -   497   -   75,951   182,003   - Chapecoense Geração S.A. -   1,006   111,019   27,695   3,936   14,152   -   327,385   303,670   - ENERCAN - Campos Novos Energia S.A. 544   377   103,252   29,548   9,376   6,264   -   232,815   209,814   - EPASA - Centrais Elétricas da Paraiba 2   -   17,094   35,690   75,781   6,869   -   107,348   74,761   -                                         Intangible assets, Property, plant and equipment, Materials and Service                                     Barrocão Empreendimento Imobiliário SPE Ltda. -   -   -   -   67   -   -   -   -   - BNY Mellon Serviços Financeiros Distribuidora de T -   -   -   -   -   -   -   -   -   3 Boa Vista Empreendimento Imobiliário SPE Ltda. 2   -   -   -   50   35   -   -   -   144 Brasil Telecom -   -   -   127   -   -   11,316   -   737   872 Camargo Correa Cimentos S.A. -   -   -   -   -   -   350   -   -   - Celesc - Centrais Elétricas Sta Catarina -   -   -   -   -   -   -   1,078   -   - Cia.de Saneamento Básico do Estado de São Paulo - SABESP 85   -   36   -   1,002   42   -   27   43   - Concessionária do Sistema Anhanguera - Bandeirante S.A. -   -   -   -   -   -   -   50   50   - Concessionárias de Rodovias do Oeste de São Paulo -   -   -   -   -   262   -   -   -   9 Construções e Comércio Camargo Corrêa S.A. -   -   -   -   -   -   -   -   970   - Embraer -   -   -   -   36   -   -   -   -   - Ferrovia Centro-Atlântica S.A. 507   -   -   -   1,526   112   -   -   100   5 HM 11 Empreendimento Imobiliário SPE Ltda. -   -   -   -   9   -   -   -   -   - HM 12 Empreendimento Imobiliário SPE Ltda. -   -   -   -   9   12   -   -   -   - HM 25 Empreendimento Imobiliário SPE Ltda. -   -   -   -   63   -   -   -   -   - Hortolândia 4A Empreendimento Imobiliário SPE Ltda -   -   -   -   41   -   -   -   -   - Indústrias Romi S.A. 4   -   -   -   43   40   19   -   -   - InterCement Brasil S.A -   -   -   -   53   1,545   3,162   -   -   319 Itaúsa -   -   -   -   -   -   -   270   -   - Jaguariúna III Empreendimento Imobiliário SPE Ltda. -   -   -   -   56   -   -   -   -   - LUPATECH -   -   -   -   -   -   -   3   -   9 MRS Logística S.A -   -   -   -   168   -   -   -   -   - OI S.A. e Brasil Telecom S.A. -   -   -   131   -   -   -   -   653   - Petrobrás 9   -   -   -   208   30   311   -   -   - Recanto dos Sonhos Empreendimento Imobiliário SPE -   -   -   -   -   60   -   -   -   - Renovias Concessionária S.A. -   -   -   -   -   -   -   6   8   - Rodovias Integradas do Oeste - SP Vias 26   -   28   26   300   578   -   -   24   - SAMM - Sociedade de Atividades em Multimídia Ltda. 306   -   -   -   627   409   -   -   -   - Sumaré Matão Empreendimento Imobiliário SPE Ltda. -   -   -   -   -   45   -   -   122   - Telemar Norte Leste S.A -   -   -   -   -   -   18   -   -   19 TOTVS S.A. -   9   42   111   -   -   -   2,766   1,942   719 ThyssenKrupp Companhia Siderúrgica do Atlântico -   -   -   -   -   -   -   -   -   628 Vale Fertilizantes S.A. -   -   -   -   -   -   19   -   -   - BAESA – Energética Barra Grande S.A. 66   -   -   -   1,367   1,298   -   -   -   - ENERCAN - Campos Novos Energia S.A. -   -   -   -   1,367   1,298   -   -   -   - EPASA - Centrais Elétricas da Paraiba -   100   -   -   5,186   -   -   -   -   - Chapecoense Geração S.A. -   11   -   -   1,499   1,330   -   -   -   -                                         Other revenue                                       OI S.A. e Brasil Telecom S.A. -   2,009   -   -   -   12,051   -   -   -   -                                         Intercompany loans                                       EPASA - Centrais Elétricas da Paraíba S.A. 86,655   -   -   -   5,585   -   -   -   -   -                                         (*) Amortized cost                                       (**) Related party until December 31, 2012                                                                               ( 32 ) INSURANCE  F -83 Table of Contents The subsidiaries maintain insurance cover maintained by the subsidiaries ispolicies with coverage 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 responsibilities. The principal insurance policies in the financial statements are: Description   Type of cover   2013   2012 restated   2011 restated Non current assets   Fire, Lightning, Explosion, Machinery breakdown, Electrical Damage and Engeneering Risk   6,241,881   5,712,235   4,108,957 Transport   National Transport   634,171   180,766   260,617 Stored Materials   Fire, Lightning, Explosion and Robbery   262,883   50,935   50,922 Automobiles   Comprehensive Cover   5,327   6,536   3,684 Civil Liability   Electric Energy Distributors   166,000   128,000   282,983 Personnel   Group Life and Personal Accidents   163,597   172,736   155,265 Other   Operational risks and other   311,755   347,213   188,866 Total       7,785,615   6,598,421   5,051,293 Unaudited information                     ( 33 )RISK MANAGEMENT   The business of the Company and its subsidiaries mainly comprises the generation, commercialization and distribution of electric energy.  As public utilities concessionaires, the operations and/or tariffs of its principal subsidiaries are regulated by ANEEL. Risk management structure: TheBoard of Directors is responsible fordirecting the way the business is run, which includes monitoring of business risks, exercised by means of the corporate risk management model used by the Company. The responsibilities of the Executive Board are to develop the mechanisms for measuring the impact of the exposure and probability of its occurrence, supervising the implementation of risk mitigation measures and informing the Board of Directors. It is assisted in this process by: i) the Corporate Risk Management Committee, whose mission is to assist in identifying the main business risks, analyzing measurement of the impact and probability and assessing the mitigation measures used; ii) the Risk Management, Internal Control and Consolidated Processes Division, responsible for developing the Company’s Corporate Risk Management model in respect of strategy (policy, direction and risk maps), processes (planning, measurement, monitoring and reporting), systems and governance. The risk management policies are establishedto identify, analyze and treat the risks faced by the Company and its subsidiaries,and includes reviewing the model adopted whenever necessary to reflect changes in market conditions and in the Company's activities, with a view to developing an environment of disciplined and constructive control.  In its supervisory role, the Company’s Board of Directors also counts on the support of the Management Procedures Committee to provide guidance for the Internal Auditing work and in preparing proposals for improvements. The Internal Auditing team conducts both periodic and “ad hoc” reviews in order to ensure alignment of the procedures to directives and strategies set by the shareholders and management. The Fiscal Council’s responsibilities include certifying that Management has the means to identify and prevent, through the use of an appropriated information system, (a) the main risks to which the Company is exposed, (b) the probability that these will materialize and (c) the measures and plans adopted.The main market risk factors affecting the businesses are as follows: Exchange rate risk:This risk derives from the possibility of the subsidiaries to incur in losses and cash constraints due to fluctuations in currency exchange rates, increasing the balances of liabilities denominated in foreign currency. The exposure in relation to raising funds in foreign currency is largely covered by contracting swap operations, which allow the Company and its subsidiaries to exchange the original risks of the operation for the cost of the variation in the CDI. The quantification of this risk is presented in note 34. The Company’s subsidiaries’ operations are also exposed to exchange variations on the purchase of electric energy from Itaipu. The compensation mechanism - CVA protects the companies against possible losses. However, the compensation only comes into effect through consumption and the consequent billing F - 7284 Table of Contents   of energy after the next tariff adjustment in which such losses have been considered.Decree 7,945of March, 2013 established that the full or partial amount of the accumulated positive balance by the CVA in relation to the system service charge and energy purchased for resale (CVA ESS and Energy) should be passed on through the CDE, at the time of the tariff adjustment or review (note 27). DESCRIPTION   TYPE OF COVER   2011   2010               Non current assets   Fire, Lightning, Explosion, Machinery breakdown, Electrical Damage and Engeneering Risk   5,990,210   4,605,688 Transport   National Transport   260,617   197,712 Stored Materials   Fire, Lightning, Explosion and Robbery   50,922   18,729 Automobiles   Comprehensive Cover   4,394   3,531 Civil Liability   Electric Energy Distributors   300,163   20,134 Personnel   Group Life and Personal Accidents   155,265   68,532 Other   Operational risks and other   188,866   31,598               Total       6,950,436   4,945,924               Information not examined by the independent auditors.         Interest rate Risk:This risk derives from the possibility of the Company and its subsidiaries to incurr in losses due to fluctuations in interest rates that increase financial expenses on loans, financing and debentures. The subsidiaries have tried to increase the proportion of pre-indexed loans or loans tied to indexes with lower rates and little fluctuation in the short and long term. The quantification of this risk is presented in note 34. Credit risk:This risk arises from the possibility of the subsidiaries incurring losses resulting from difficulties in collecting amounts billed to customers. This risk is evaluated by the subsidiaries as low, as it is spread over the number of customers and in view of the collection policy and cancellation of supply to defaulting consumers. Risk of energy shortages:The energy sold by the subsidiaries is primarily generated by hydropower plants. A prolonged period of low rainfall, together with an unforeseen increase in demand, could result in a reduction in the volume of water in the power plants’ reservoirs, compromising the recovery of their volume, and resulting in losses due to the increase in the cost of purchasing energy or a reduction in revenue due to the introduction of another rationing program, as in 2001. In spite of the unfavorable hydrological conditions at the beginning of 2014, to accurately define the risk of energy shortages, it is necessary to wait for the end of the wet season in the main water basins. Risk of acceleration of debts:The Company and its subsidiaries have loans and financing agreements and debentures with restrictive clauses (covenants) normally applicable to these kinds of arrangement, involving compliance with economic and financial ratios, cash generation, etc. These covenants are monitored and do not restrict the capacity to operate normally. Regulatory risk: The electric energy supplied tariffs charged to captive consumers by the distribution subsidiaries are fixed by ANEEL, at intervals established in the Concession Agreements entered into with the Federal Government and in accordance with the periodic tariff review methodology established for the tariff cycle. Once the methodology has been ratified, ANEEL establishes tariffs to be charged by the distributor to the final consumers. In accordance with Law 8,987/1995, the fixed tariffs should insure the economic and financial balance of the concession contract at the time of the tariff review, which could result in lower results than expected by the electric energy distributors, albeit offset in subsequent periods by other adjustments. Risk Management for Financial instruments:The Company and its subsidiaries maintain operating and financial policies and strategies to protect the liquidity, safety and profitability of their assets. They accordingly control and follow-up procedures are in place on the transactions and balances of financial instruments, for the purpose of monitoring the risks and current rates in relation to market conditions. Risk management controls: In order to manage the risks inherent to the financial instruments and to monitor the procedures established by Management, the Company and its subsidiaries use the MAPS software system to calculate the mark to market, stress testing and duration of the instruments, and assess the risks to which the Company and its subsidiaries are exposed. Historically, the financial instruments contracted by the Company and its subsidiaries supported by these tools have produced adequate risk mitigation results. It must be stressed that the Company and its subsidiaries routinely contract derivatives, always with the appropriate levels of approval, only in the event of exposure that Management regards as a risk. The Company and its subsidiaries do not enter into transactions involving exotic or speculative derivatives. Furthermore, the Company meets the requirements of the Sarbanes-Oxley Law, and accordingly has internal control policies that aim for a strict control environment to minimize the exposure to risks.   ( 3334 ) FINANCIAL INSTRUMENTS The main financial instruments, classified in accordance with the group’s accounting practices, are: a) Financial assets a.1) Measured at amortized cost Loans and receivables December 31, 2011   December 31, 2010 Consumers, Concessionaires and Licensees (note 6) 2,056,580   2,011,811 Leases (note 10) 29,102   31,069 Other (note 12)       Receivables from BAESA's shareholders 27   17,155 Pledges, Funds and Tied Deposits 117,065   91,157 Fund Tied to Foreign Currency Loans 29,774   21,222 Services Rendered to Third Parties 10,962   12,641 Reimbursement RGR 6,499   7,592 Collection Agreements 41,297   48,228   2,291,305   2,240,873                 Held to maturity December 31, 2011   December 31, 2010 Financial investments (note 7) 120,578   81,750   120,578   81,750 a.2) Measured at fair value F - 7385   Table of Contents Measured at fair value through profit or loss December 31, 2011   December 31, 2010 Cash and cash equivalent (note 5) 2,699,837   1,562,897 Derivatives (note 33) 219,375   327 Financial investments (note 7) 36,908   33,607   2,956,119   1,596,830                 Available for sale December 31, 2011   December 31, 2010 Financial asset of concession (note 11) 1,376,664   934,646 b) Financial liabilities b.1) Measured at amortized cost   Consolidated   December 31, 2011   December 31, 2010 Suppliers (note 15) (1,240,143)   (1,047,385) Loans and financing - Principal and interest (note 16) (6,740,144)   (5,991,208) Debentures - Principal and interest (note 17) (5,163,388)   (3,840,338) Payables Dividends (Note 24) (24,524)   (23,813) Regulatory Charges (note 19) (145,146)   (123,541) Other (note 23)       Consumers, Concessionaires and Licensees (66,284)   (63,635) National Scientific and Technological Development Fund - FNDCT (4,014)   (3,077) Energy Research Company - EPE (1,648)   (1,206) Collection Agreements (70,096)   (56,260) Reversal Fund (17,750)   (17,750) Business combination (174,136)   -   (13,647,274)   (11,168,212) b.2) Measured at fair value through profit or loss F - 74  Table of Contents       Measured at fair value through profit or loss December 31, 2011   December 31, 2010 Held for trade       Derivatives (note 33) (24)   (11,865)         Initial recognition (1)       Loans and financing - certain debts (note 16) (1,704,254)   (424,827)   (1,704,279)   (436,692) (1) Due to the initial recognition at fair value of the above financial liability, the consolidated result was a loss of R$14.350 in 2011 (a loss of R$ 52 and R$ 56,609 in 2010 and 2009 respectively).                   December 31, 2013   December 31, 2012 restated   Note   Category   Measurement   Level (*)   Accounting balance   Fair value   Accounting balance   Fair value                                                                 Asset                               Cash and cash equivalent 5   (a)   (2)   Level 1   2,105,618   2,105,618   1,152,712   1,152,712 Cash and cash equivalent 5   (a)   (2)   Level 2   2,100,804   2,100,804   1,282,322   1,282,322 Consumers, concessionaires and licensees 6   (b)   (1)   n/a   2,161,643   2,161,643   2,366,682   2,366,682 Leases 9   (b)   (1)   n/a   48,574   48,574   41,443   41,443 Loans to associates and joint ventures     (b)   (1)   n/a   86,655   86,655   -   - Financial investments     (c)   (1)   n/a   -   -   3,939   3,939 Financial investments     (a)   (2)   Level 1   24,806   24,806   2,161   2,161 Derivatives 34   (a)   (2)   Level 2   318,490   318,490   487,308   487,308 Financial asset of concession 10   (d)   (2)   Level 3   2,771,593   2,771,593   2,377,240   2,377,240 Financial asset of concession 10   (b)   (1)   n/a   15,480   15,480   -   - Receivables from Resources provided by the Energy Development Account - CDE 11   (b)   (1)   n/a   170,543   170,543   24,972   24,972 Other finance assets (**)     (b)   (1)   n/a   250,933   250,933   356,146   356,146                   10,055,140   10,055,140   8,094,924   8,094,924                                 Liability                               Suppliers 15   (e)   (1)   n/a   1,884,693   1,884,693   1,693,604   1,693,604 Loans and financing - Principal and interest 16   (e)   (1)   n/a   7,221,542   6,416,990   6,889,549   6,766,129 Loans and financing 16 (****)   (a)   (2)   Level 2   2,008,454   2,008,454   2,388,245   2,388,245 Debentures - Principal and interest 17   (e)   (1)   n/a   7,791,402   7,859,140   6,195,239   6,396,903 Regulatory charges 19   (e)   (1)   n/a   32,379   32,379   110,776   110,776 Derivatives 34   (a)   (2)   Level 2   2,950   2,950   445   445 Public utility 22   (e)   (1)   n/a   83,176   83,176   79,813   79,813 Other finance liabilities (***)     (e)   (1)   n/a   148,220   148,220   172,136   172,136                   19,172,816   18,436,002   17,529,807   17,608,051 (*) Refers to the hierarchy for determination of fair value (**) Other financial assets include: (i) Pledges, funds and tied deposits, (ii) Fund tied to the foreign currency loan, (iii) Services rendered to third parties, (iv) Refund of RGR and (v) Collection agreements, as disclosed in note 11 (***) Other financial liabilities include: (i) Consumers and concessionaires, (ii) Nacional scietific and technological development fund - FNDCT, (iii) Energy research company - EPE, (iv) Collection agreement, (v) Reversal fund and (vi) Business acquisition, as disclosed in note 22. (****) As a result of the initial designation of this financial liability, the financial statements showed a gain of R$ 51,238 in 2013 (loss of R$ 88,206 in 2012) Key                 Category: Measurement:                         (a) - Measured at fair value through profit or loss (1) - Measured at amortized cost                     (b) - Loans and receivables (2) - Mensured at fair value                         (c) - Held to maturity                               (d) - Available for sale                               (e) - Other finance liabilities                                 c)a) Valuation of financial instruments As mentioned in note 4, the fair value of a security relates to its maturity value (redemption value) marked to present value by the discount factor (relating to the maturity date of the security) obtained from the market interest graph, in Brazilian reais. IFRS 7 requires classification at three levels of hierarchy for measurement of the fair value of financial instruments, based on observable and unobservable information in relation to valuation of a financial instrument at the measurement date. IFRS 7 also defines observable information as market data obtained from independent sources and unobservable information that reflects market assumptions. The three levels of fair value are: · Level 1: quoted prices in an active market for identical instruments; · Level 2: observable information other than quoted prices in an active market that are observable for the asset or liability, directly (i.e. as prices) or indirectly (i.e. derived from prices); · Level 3: inputs for the instruments that are not based on observable market data (unobservable inputs). The classification in accordance with the fair value hierarchy of the Company’s financial instruments, measured at fair value, is as follows:     December 31, 2011   December 31, 2010     Level 1   Level 2   Level 3   Level 1   Level 2   Level 3 Cash and cash equivalents (note 5)   2,699,837   -   -   1,562,897   -   - Derivatives   -   219,350   -   -   (11,538)   - Loans and financing (note 16)   -   (1,704,254)   -   -   (424,827)   - Financial investments (note 7)   36,908   -   -   33,607   -   - Financial asset of concession (note 11)   -   -   1,376,664   -   -   934,646     2,736,745   (1,484,904)   1,376,664   1,596,504   (436,365)   934,646 data. Since the distribution subsidiaries have classified their financial asset of concession assets as available-for-sale, as mentioned in Note 3.2, the relevant factors for measurement at fair value are not publicly observable. The fair value hierarchy classification is therefore level 3. The changes between years and the respective gains (losses) in Other comprehensivenet income are disclosedwas of R$ 66,851 (gain of R$ 159,195 in Note 11. The comparative information on marking to market the other financial instruments measured at amortized cost is described below: F - 75 Table of Contents ·It is assumed that financial instruments such as accounts receivable from consumers, concessionaires2012 and licensees and accounts payable to suppliers are already close to the respective market values. ·At December 31, 2011 and 2010, the market values of the financial instruments obtained by the methodology describedR$ 63,212 in Note 4, are as follows:     December 31, 2011   December 31, 2010     Accounting balance   Fair value   Accounting balance   Fair value Loans and financing (note 16)   (6,740,144)   (6,554,672)   (5,141,554)   (4,870,909) Debentures (note 17)   (5,163,388)   (5,350,263)   (3,840,338)   (3,891,397) Total   (11,903,532)   (11,904,935)   (8,981,892)   (8,762,306) In the case of specific electricity sector operations, where there are no similar transactions in the market and with low liquidity, mainly related to the regulatory aspects and credits receivable from CESP, the subsidiaries assumed that the market value is represented by the respective carrying amount. This is due to the uncertainties reflected in the variables which have to be taken into consideration in creating a pricing model.2011) (note 10). The Company recognizedrecognizes in “Investments at cost” in the consolidated financial statements the 5.93% interest held by the indirect subsidiary Paulista Lajeado Energia S.A. in the total capital of Investco S/A,S.A. (“Investco”), in the form of 28,154 common shares and 18.59318,593 preferred shares. Investco’sAs the shares of that company are not quoted on the stock exchange and the main objective of it operations is to generate electric energy for commercialization by the shareholders who hold the concession, the Company opted to recognize the investment at cost.   F -86 Table of Contents d)b) Derivatives The Company and its subsidiaries have athe policy of using derivatives as a hedge against theto reduce their risks of variations in exchange and interest rates, without any speculative purposes. The Company and its subsidiaries have an exchange hedgerate derivatives compatible with the exchange rate risks net exposure, to exchange risks, including all the assets and liabilities tied to exchange variation.rates. The hedgederivative instruments contractedentered into by the Company and its subsidiaries are currency or interest rate swaps with no leverage component, margin call requirements or daily or periodical adjustments. As terms of the majority of the derivatives contractedentered into by the Company and its subsidiaries are(note 16) have their terms fully aligned with the debts protected, and in order to obtain more relevant and consistent accounting information through the recognition of income and expenses, certainthese debts were designated at fair value, for accounting purposes. Other debts with different terms from thetheir respective derivatives contracted as a hedge continue to be recorded at amortized cost. Furthermore, the Company and its subsidiaries do not adopt hedge accounting for derivative operations. At December 31, 2011,2013, the Company and its subsidiaries had the following swap operations: F -87   F - 76 Table of Contents       Market values (book values)                           Market values (accouting balance)                         Company / strategy / counterparts   Asset   (Liability)   Market values, net   Values at cost, net   Gain (Loss) on marking to market   Currency / index   Maturity range   Notional   Negotiation market   Assets   Liabilities   Fair value, net   Values at cost, net   Gain/(Loss) on marking to market   Currecy / index   Maturity range   Notional   Negotiation market Derivatives for protection of debts designated at fair value Derivatives for protection of debts designated at fair value                                 Exchange rate hedge                                     CPFL Paulista                                     Morgan Stanley   32,868   -   32,868   30,240   2,628   dollar   September 2016   85,475   over the counter Bank of America Merrill Lynch   91,881   -   91,881   81,055   10,826   dollar   July 2016   497,080   over the counter Citibank   32,749   -   32,749   29,997   2,753   dollar   September 2016   85,750   over the counter Scotiabank   6,991   -   6,991   6,158   833   dollar   July 2016   49,000   over the counter                                       164,489   -   164,489   147,450   17,039                 Derivatives for protection of debts designated at fair value                             CPFL Piratininga                                     Santander   1,002   -   1,002   1,677   (675)   dollar   July 2016   100,000   over the counter Citibank   6,007   -   6,007   5,647   360   dollar   August 2016   12,840   over the counter Scotiabank   9,131       9,131   8,043   1,088   dollar   July 2016   64,000   over the counter                                       16,140   -   16,140   15,367   773                 Exchange variation hedge                                     CPFL Santa Cruz                                     J.P.Morgan   2,089       2,089   1,962   126   dolar   July 2015   20,000   over the counter Banco Santander   614       614   773   (159)   dolar   June 2016   20,000   over the counter                                       2,703   -   2,703   2,736   (33)                 CPFL Paulista                                     BNP Paribas   27,073   -   27,073   26,380   693   dollar   June 2014   160,000   Over the counter J.P.Morgan   13,064   -   13,064   12,768   296   dollar   July 2014   78,250   Over the counter J.P.Morgan   14,497   -   14,497   14,723   (225)   dollar   August 2014   76,700   Over the counter Morgan Stanley   5,683   -   5,683   6,303   (620)   dollar   September 2016   85,475   Over the counter Bank of America   36,568   -   36,568   37,863   (1,295)   dollar   July 2014   235,050   Over the counter Bank of America   26,841   -   26,841   25,810   1,031   dollar   July 2016   156,700   Over the counter Societe Generale   6,374   -   6,374   6,438   (64)   dollar   August 2016   33,173   Over the counter Citibank   5,628   -   5,628   6,099   (471)   dollar   September 2016   85,750   Over the counter HSBC   3,024   -   3,024   3,150   (126)   dollar   September 2014   41,050   Over the counter Subtotal   138,753   -   138,753   139,534   (781)                                                     CPFL Piratinga                                     BNP Paribas   8,731   -   8,731   8,840   (109)   dollar   July 2014   45,990   Over the counter J.P.Morgan   28,848   -   28,848   29,426   (578)   dollar   August 2014   153,400   Over the counter Bank of America   12,482   -   12,482   11,463   1,019   dollar   August 2016   80,250   Over the counter Societe Generale   8,364   -   8,364   8,448   (84)   dollar   August 2016   43,527   Over the counter Citibank   1,668   -   1,668   1,798   (130)   dollar   August 2016   12,840   Over the counter Subtotal   60,093   -   60,093   59,975   118                 CPFL Leste Paulista                                     Citibank/   3,067   -   3,067   3,026   41   dollar   September 2014   8,000   over the counter Scotiabank   3,082       3,082   2,930   151   dollar   July 2015   25,000   over the counter                                       6,149   -   6,149   5,956   193                 CPFL Sul Paulista                                                                         Citibank   726   -   726   749   (23)   dollar   September 2014   8,000   Over the counter   3,067   -   3,067   3,026   41   dollar   September 2014   8,000   over the counter JPMorgan   1,097   -   1,097   1,031   65   dollar   July 2015   10,500   over the counter Scotiabank   1,294   -   1,294   1,231   64   dollar   July 2015   10,500   over the counter Santander   675   -   675   851   (175)   dollar   June 2016   22,000   over the counter                                       6,133   -   6,133   6,138   (5)                 CPFL Leste Paulista                                     CPFL Jaguari                                     Citibank   726   -   726   749   (23)   dollar   September 2014   8,000   Over the counter   3,118   -   3,118   3,079   39   dollar   August 2014   7,000   over the counter Scotiabank   1,602   -   1,602   1,524   79   dollar   July 2015   13,000   over the counter Santander   952   -   952   1,199   (247)   dollar   June 2016   31,000   over the counter                                       5,672       5,672   5,801   (129)                 CPFL Mococa                                                                         Citibank   635   -   635   656   (21)   dollar   September 2014   7,000   Over the counter   2,684   -   2,684   2,647   36   dollar   September 2014   7,000   over the counter                                     CPFL Jaguari                                     Citibank   979   -   979   985   (6)   dollar   August 2014   7,000   Over the counter Scotiabank   1,356   -   1,356   1,289   67   dollar   July 2015   11,000   over the counter                                       4,040   -   4,040   3,937   103                 CPFL Geração                                                                         Citibank   13,876   -   13,876   14,381   (505)   dollar   August 2016   100,000   Over the counter   47,628   -   47,628   44,477   3,151   dollar   August 2016   100,000   over the counter                                                                         RGE                                     Citibank   34,918   -   34,918   33,603   1,315   dollar   July 2017   128,590   over the counter J.P. Morgan   13,636   -   13,636   12,873   763   dollar   July 2016   94,410   over the counter Bank of Tokyo-Mitsubishi   22,563   -   22,563   27,652   (5,089)   dollar   May 2018   204,616   over the counter   71,116   -   71,116   74,128   (3,012)                 Subtotal   215,788   -   215,788   217,029   (1,241)                   324,070   -   324,070   305,990   18,080                                                                                         Derivatives for protection of debts not designated at fair value                         Hedge interest rate variation(1)                                     CPFL Paulista                                     Bank of America Merrill Lynch   (2,690)    -   (2,690)   451   (3,141)   CDI   July 2019   660,000   over the counter J.P.Morgan   (1,544)   -   (1,544)   166   (1,710)   CDI   February 2021   300,000   over the counter Votorantin   (482)   -   (482)   58   (540)   CDI   February 2021   100,000   over the counter Santander   (501)   -   (501)   61   (562)   CDI   February 2021   105,000   over the counter                                       (5,217)   -   (5,217)   736   (5,953)                 Exchange variation hedge                                                                         CPFL Paulista                                     Itaú   45   -   45   48   (3)   dollar   April 2012   908   Over the counter Itaú   811   -   811   1,047   (236)   dollar   October 2012   19,783   Over the counter CPFL Geração                                     HSBC   2,790   -   2,790   2,567   223   dollar   January 2012 to December 2012   56,143   Over the counter                                     Interest rate variation hedge(1)                                                                         CPFL Energia                                     Citibank   2   (24)   (22)   (41)   19   CDI + spread   Sep 2011 to Sep 2014   450,000   Over the counter CPFL Piratininga                                     J.P.Morgan   (448)   -   (448)   75   (522)   CDI   July 2019   110,000   over the counter Votorantim   (571)   -   (571)   83   (654)   CDI   February 2021   135,000   over the counter Santander   (407)       (407)   63   (470)   CDI   February 2021   100,000   over the counter                                       (1,426)   -   (1,426)   221   (1,646)                 RGE                                                                         Santander   317   -   317   15   302   CDI + spread   Dec 2011 to Dec 2013   186,667   Over the counter Citibank   93   -   93   4   89   CDI + spread   Dec 2011 to Dec 2013   66,667   Over the counter                                     Hedge interest rate variation(2)                                                                         CPFL Piratininga                                     HSBC   (118)   -   (117)   5   (122)   TJLP   Jan 2013   14,817   Over the counter   -   (2,038)   (2,038)   341   (2,379)   CDI   July 2019   500,000   over the counter Santander   (127)   -   (128)   (1)   (127)   TJLP   Jan 2013   14,822   Over the counter Votorantim   -   (912)   (912)   92   (1,004)   CDI   February 2021   170,000   over the counter                                       -   (2,950)   (2,950)   432   (3,382)                 CPFL Geração                                                                         HSBC   (226)   -   (227)   (2)   (225)   TJLP   Dec 2012   28,257   Over the counter Votorantim   (780)   -   (780)   273   (1,053)   CDI   August 2020   460,000   over the counter                                     Derivatives for protection of debts not designated at fair value Derivatives for protection of debts not designated at fair value Exchange rate hedge                                     CPFL Geração CPFL Geração Votorantim   1,842   -   1,842   3,114   (1,272)   dollar   January 2014 to December 2014   46,340   over the counter                                                                         Subtotal   3,587   (24)   3,562   3,642   (81)                   (5,581)   (2,950)   (8,531)   4,776   (13,306)                                                                                         Total   219,375   (24)   219,350   220,672   (1,322)                   318,490   (2,950)   315,539   310,766   4,775                                                                                         Current   3,733   -                               1,842   -                             Non current   215,642   (24)                             Total   219,375   (24)                             Noncurrent   316,648   (2,950)                                                                                                     * For further details of terms and information about debts and debentures, see Notes 16 and 17 (1) The interest rate hedge swaps have half-yearly validity, so the notional value reduces in accordance with amortization of the debt. (2) The interest rate hedge swaps have monthly validity, so the notional value reduces in accordance with amortization of the debt. For further details of terms and information about debts and debentures, see notes 16 and 17 For further details of terms and information about debts and debentures, see notes 16 and 17 (¹) The interest rate hedge swaps have half-yearly validity, so the notional value reduces in accordance with amortization of the debt. (¹) The interest rate hedge swaps have half-yearly validity, so the notional value reduces in accordance with amortization of the debt.                   F - 77 Table of Contents As mentioned above, certain subsidiaries opted to mark to market debts for which they have fully tied hedgederivative instruments resulting in a loss of R$ 7,359 at December 31, 2011 (Note(note 16). The Company and its subsidiaries have recorded gains and losses on their derivatives. However, as these derivatives are used as a hedge, these gains and losses minimized the impact of variations in exchange and interest rates on the protected indebtedness.debts. For the years 2011, 20102013, 2012 and 2009,2011, the derivatives resulted in the following impacts on the consolidated result: F -88   Table of Contents             Gain (loss) Company   Hedged risk / Operation   Account   2011   2010   2009                       CPFL Energia   Interest rate variation   Swap transactions   161   (14)   136 CPFL Energia   Marking to market   Adjustment to fair value   (608)   20   228 CPFL Paulista   Exchange variation   Swap transactions   169,033   (3,269)   (230,440) CPFL Paulista   Marking to market   Adjustment to fair value   8,611   392   49,810 CPFL Piratininga   Interest rate variation   Swap transactions   6   3   - CPFL Piratininga   Marking to market   Adjustment to fair value   118   (254)   - CPFL Piratininga   Exchange variation   Swap transactions   59,514   -   - CPFL Geração   Exchange variation   Swap transactions   13,630   (16,094)   (274,350) CPFL Geração   Interest rate variation   Swap transactions   (468)   567   (1,305) CPFL Geração   Marking to market   Adjustment to fair value   2,495   1,710   11,157 RGE   Exchange variation   Other financial exp   -   -   (11,743) RGE   Interest rate variation �� Other financial exp   217   553   514 RGE   Marking to market   Derivative adjustment to fair value   168   (71)   198 CPFL Sul Paulista   Marking to market   Adjustment to fair value   (23)   -   - CPFL Sul Paulista   Exchange variation   Swap transactions   749   -   - CPFL Leste Paulista   Marking to market   Adjustment to fair value   (23)   -   - CPFL Leste Paulista   Exchange variation   Swap transactions   749   -   - CPFL Mococa   Marking to market   Adjustment to fair value   (21)   -   - CPFL Mococa   Exchange variation   Swap transactions   656   -   - CPFL Jaguari   Marking to market   Adjustment to fair value   (6)   -   - CPFL Jaguari   Exchange variation   Swap transactions   985   -   -             255,942   (16,457)   (455,795)                               Gain (Loss) Company   Hedged risk / transaction   2013   2012 restated   2011 restated CPFL Energia   Interest rate variation   323   356   161 CPFL Energia   Mark to market   (469)   451   (608) CPFL Paulista   Interest rate variation   933   -   - CPFL Paulista   Exchange variation   150,500   60,219   169,033 CPFL Paulista   Mark to market   (38,759)   50,866   8,611 CPFL Piratininga   Interest rate variation   303   207   6 CPFL Piratininga   Exchange variation   61,673   20,949   59,514 CPFL Piratininga   Mark to market   (20,454)   19,711   118 RGE   Interest rate variation   798   498   217 RGE   Exchange variation   43,058   9,130   - RGE   Mark to market   (11,380)   4,596   168 CPFL Geração   Interest rate variation   273   167   (468) CPFL Geração   Exchange variation   18,428   8,261   13,630 CPFL Geração   Mark to market   (4,344)   5,676   2,495 CPFL Santa Cruz   Exchange variation   1,962   (789)   - CPFL Santa Cruz   Mark to market   (486)   453   - CPFL Leste Paulista   Exchange variation   3,435   (87)   749 CPFL Leste Paulista   Mark to market   (462)   653   (23) CPFL Sul Paulista   Exchange variation   3,140   (226)   749 CPFL Sul Paulista   Mark to market   (658)   676   (23) CPFL Jaguari   Exchange variation   2,398   138   985 CPFL Jaguari   Mark to market   (595)   454   (6) CPFL Mococa   Exchange variation   1,966   130   656 CPFL Mococa   Mark to market   (301)   403   (21)         211,282   182,892   255,942                     e)c) Sensitivity Analysis In compliance with CVM Instruction n° 475/08 and IFRS 7, the Company and its subsidiaries performed sensitivity analyses of the main risks to which their financial instruments (including derivatives) are exposed, mainly comprising variations in exchange and interest rates, as shown below: e.1) Exchange variationbelow. If the risk exposure is considered an asset, the risk to be taken into account is a reduction in the pegged indexes, resulting in a negative impact on the income of the Company and its subsidiaries.  Similarly, if the risk exposure is considered a liability, the risk is of an increase in the pegged indexes and the consequent negative effect on income.  The Company and its subsidiaries therefore quantify the risks in terms of the net exposure of the variables (dollar, CDI, IGP-M and TJLP), as shown below: c.1) Exchange ratesvariation  Considering the level of net exchange rate exposure at December 31, 20112013 is maintained, the simulation of the consolidated effects by type of financial instrument for three different scenarios would be:    Instruments   Exposure   Risk   Exchange depreciation of 8%*   Exchange depreciation of 25%**   Exchange depreciation of 50%** Financial asset instruments   29,774   apprec. dollar   2,387   7,443   14,887 Financial liability instruments   (1,845,277)   apprec. dollar   (147,953)   (461,319)   (922,639) Derivatives - Plain Vanilla Swap   1,788,567   apprec. dollar   143,406   447,142   894,283     (26,937)       (2,160)   (6,734)   (13,469)                                             * In accordance with exchange graphs contained in information provided by the BM&F **In compliance with CVM Instruction 475/08 F -89   Table of Contents                           Exposure (R$ thousand)(1)   Risk   Exchange depreciation of 11,3% (*)   Exchange appreciation of 25,0% (**)   Exchange appreciation of 50,0% (**)                       Financial liability instruments   (2,065,377)       (232,935)   341,643   916,221 Derivatives - plain vanilla swap   2,067,289       233,150   (341,960)   (917,069)     1,912   Drop in the dollar   216   (316)   (848)                       Total   1,912       216   (316)   (848)                       (1) Exchange rate at December 31, 2013: R$ 2.34.         (*) As per foreign exchange rate curves obtained from information provided by the BM&F.The exchange rate considered was R$ 2.61. (**) In compliance with CVM Instruction 475/08, the percentage of exchange depreciation are related to the information provided by the BM&F. As the net exposure is an asset, the risk is of a drop in the dollar and the exchange rate is therefore appreciated by 25% and 50% in relation to the probable dollar.   e.2)c.2) Variation in interest rates IfAssuming (i) the scenario of net exposure of the financial instruments indexed to variable interest rates at December 31,2011 were to be 2013 is maintained, and (ii) the respective accumulated annual indexes as of that date were tofor 2013 remain stable (CDI 11,59% a.a;8.02% p.a; IGP-M 5,1% a.a.5.51% p.a.; TJLP  6,0% a.a.5.00% p.a.), the effects on the consolidatedCompany’s 2013 financial statements for the next company year would be a net financial expense of R$ 847,331.R$ 728,835 (CDI R$ 518,664, IGP-M R$ 4,563 e TJLP R$ 205,608). In the event of fluctuations in the indexes in accordance with the three scenarios described below, the effect on the net financial expense would as follows:   F - 78 Table of Contents                     Instruments   Exposure   Risk   Scenario I*   Raising index by 25%**   Raising index by 50%**   Exposure (R$ thousand)   Risk   Scenario I (*)   Raising index by 25% (**)   Raising index by 50% (**)                     Financial asset instruments   3,243,396   CDI variation   (51,246)   93,977   187,955   4,809,808       129,384   258,166   386,949 Financial liability instruments   (6,345,113)   CDI variation   100,253   (183,850)   (367,699)   (9,525,193)       (256,228)   (511,265)   (766,302) Derivatives - Plain Vanilla Swap   (1,627,092)   CDI variation   25,708   (47,145)   (94,290) Derivatives - plain vanilla swap   (1,751,749)       (47,122)   (94,025)   (140,928)   (4,728,809)       74,715   (137,017)   (274,034)   (6,467,134)   CDI apprec.   (173,966)   (347,123)   (520,281)                                         Financial assets instruments   48,522   IGP-M variation   (378)   619   1,237 Financial asset instruments   952       6   20   35 Financial liability instruments   (26,589)   IGP-M variation   207   (339)   (678)   (83,757)       (503)   (1,782)   (3,061)   21,933       (171)   280   559   (82,804)   IGP-M apprec.   (497)   (1,762)   (3,026)                                         Financial liability instruments   (4,999,714)   TJLP variation   (50,997)   (74,996)   (149,991)   (4,112,160)   TJLP apprec.   -   (51,402)   (102,804) Derivatives - Plain Vanilla Swap   57,874   TJLP variation   590   868   1,736   (4,941,840)       (50,407)   (74,128)   (148,255)                                         Total increase   (9,648,715)       24,137   (210,865)   (421,730)   (10,662,098)       (174,463)   (400,287)   (626,111)                                         (*) The CDI, IGP-M and TJLP indexes considered of 10.01%, 4.32% and 7.02%, respectively, were obtained from information available in the market. (**) In compliance with CVM Instruction 475/08 (*) The CDI, IGP-M and TJLP indexes considered of 10.71%, 6.11% and 5%, respectively, were obtained from information available in the market. (*) The CDI, IGP-M and TJLP indexes considered of 10.71%, 6.11% and 5%, respectively, were obtained from information available in the market. (**) In compliance with CVM Instruction 475/08, the percentage of raising index were applied to Scenario I indexes. (**) In compliance with CVM Instruction 475/08, the percentage of raising index were applied to Scenario I indexes.       e.3) Financial asset of concession As mentioned in Note 3.1,d) Liquidity analysis The Company manages liquidity risk by continuously monitoring forecast and actual cash flows, and by matching the Company adoptsmaturity profiles of its financial liabilities. The table below sets out details of the premise that thevaluecontractual maturities of thefinancial concession assetis determinedliabilities as at fair value,December 31, 2013, taking into account principal and interest, and is based on the remuneration ofundiscounted cash flow, considering the assets as established byANEEL.  Since the Federal Government has not yet defined the methodology and criteria for valuation of the financial asset, the Company estimates that, under remote circumstances, indemnification for the not amortized portion of the assets could be basedearliest date on the historic cost and not at the amount based on the respective fair value. Accordingly, if this remote scenario were to occur, it would involve derecognition of the portion of the financial concession asset (portion relating to the fair value recognized), entered against Other comprehensive Income – Financial Instruments in the amount of R$ 227,118 (net of tax effects). F - 79 Table of Contents ( 34 )RISK MANAGEMENT The business of the Company and its subsidiaries comprises principally generation, commercialization and distribution of electric energy. As public service concessionaires, the operations and/or tariffs of its principal subsidiaries are regulated by ANEEL. Risk management structure: The Board of Directors is responsible for allocating priorities in respect of the risks to be monitored by the Company, confirming the tolerance levels approved by the Executive Board and being aware of the corporate risk management model adopted by the Company.  The Executive Board is responsible for developing and implementing action and risk monitoring plans. The Risk Management and Internal Controls Department and the Corporate Risk Management Committee were set up to assist it in this process.  Since its creation, the Risk Management and Internal Controls Departmenthas drawn up theCorporate Risk Management Policy, approved by the Executive Board and the Board of Directors, set up the Corporative Risk Management Committee, comprising directors appointed to represent each Management Unit, and the internal rules, and is implementing the Corporate Risk Management model for the Group with regard to Strategy (guidelines, risk map and treatment), Processes (planning, execution, monitoring and reports), Systems, Organization and Governance. The risk management policies are establishedto identify, analyze and treats the risks faced by the Company and its subsidiaries,and includes reviewing the model adopted wherever necessary to reflect changes in market conditions and in the Group's activities, with a view to developing an environment of disciplined and constructive control.  The Group's Board of Directors is assisted in its supervisory role by the Internal Audit department. The Internal audit department conducts both the regular reviews and the ad hoc reviews of risk management controls and procedures, the results of which are reported to theBoard of Directors and the Fiscal Council. The main market risk factors affecting the businesses are as follows: Exchange rate risk:This risk derives from the possibility of the subsidiaries incurring losses and cash constraints on account of fluctuations in currency exchange rates, increasing the balances of foreign currency denominated liabilities.The exposure in relation to raising funds in foreign currency is largely covered by contracting swap operations, which allow the Company and its subsidiaries to exchange the original risks of the operation for the cost of the variation in the CDI. The operations of the Company’s subsidiaries are also exposed to exchange variations on the purchase of electric energy from Itaipu. The compensation mechanism - CVA protects the companies against possible losses. However, the compensation only comes into effect through consumption and the consequent billing of energy after the next tariff adjustment in which such losses have been considered. The quantification of this risk is measured in Note 33 (e). Interest Rate Risk:This risk derives 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. The subsidiaries have tried to increase the proportion of pre-indexed loans or loans tied to indexes with lower rates and little fluctuation in the short and long term. The quantification of this risk is measured in Note 33 (e). Credit Risk:This risk arises from the possibility of the subsidiaries incurring losses resulting from difficulties in collecting amounts billed to customers. This risk is evaluated by the subsidiaries as low, as it is spread over the number of customers and in view of the collection policy and cancellation of supply to defaulting consumers. Risk of Energy Shortages:The energy sold by the Company is primarily generated by hydropower plants. A prolonged period of low rainfall, together with an unforeseen increase in demand, could result in a reduction in the volume of water in the power plants’ reservoirs, compromising the recovery of their volume, and resulting in losses due to the increase in the cost of purchasing energy or a reduction in revenue due to the introduction of another rationing program, as in 2001. According to the Annual Energy Operation Plan – PEN of July 2011, drawn up by the Operador Nacional do Sistema Elétrico (National Electricity SystemOperator), the risk of any energy deficit is very low for 2012, and the likelihood of another energy rationing program is remote. F - 80 Table of Contents Risk of Acceleration of Debts:The subsidiaries have loan agreements, financing and debentures with restrictive clauses (covenants) normally applicable to these kinds of arrangements, involving compliance with economic and financial ratios, cash generation, etc. These covenants are monitored appropriately and do not restrict the capacity to operate normally. Regulatory risk: The tariffs charged to captive consumers by the distribution subsidiaries are fixed by ANEEL, at intervals established in the Concession Arrangements entered into with the Federal Government and in conformity with the periodic tariff review methodology established for the tariff cycle. Once the methodology has been ratified, ANEEL establishes tariffs to be charged by the distributor to the end consumers. In accordance with Law 8.987/1995, the fixed tariffs should insure the economic and financial balance of the concession contract at the time of the tariff review, however, the risk of application of the tariffs falls to the electric energy distributors.  Risk Management for Financial instruments:The Company and its subsidiaries maintain operating and financial policies and strategies to protect the liquidity, safety and profitability of their assets. Accordingly, control and follow-up procedures are in place to monitor the transactions and balances of financial instruments for risks and current rates in relation to market conditions. Risk management controls: In order to manage the risks inherent to the financial instruments and to monitor the procedures established by management, the Company and its subsidiaries use the MAPS software system to calculate the mark to market, stress testing and duration of the instruments, and assess the risks to which the Company and its subsidiaries are exposed. Historically, the financial instruments contracted by the Company and its subsidiaries supported by these tools have produced adequate risk mitigation results. It must be stressed that the Company and its subsidiaries have a formal policyto settle their respective obligations.           December 31, 2103   Note   Weighted average interest rates   Less than 1 month   1-3 months   3 months to 1 year   1-5 years   Over 5 years   Total Suppliers   15       1,411,664   469,103   3,927   -   -   1,884,694 Loans and financing - principal and interest   16   9.47%   218,198   619,234   1,224,148   6,889,731   2,596,400   11,547,712 Derivatives   34       (58)   (96)   95,410   (22,147)   5,195   78,303 Debentures - principal and interest   17   11.32%   60,935   153,698   589,730   8,332,385   2,025,039   11,161,786 Regulatory charges   19       32,379   -   -   -   -   32,379 Public utility   22   15.71%   335   670   3,016   23,475   606,184   633,681 Other   23       16,229   102,894   11,346   -   17,750   148,219 Consumers and concessionaires           13,281   29,653   869   -   -   43,804 National scientific and technological development fund - FNDCT           1,966   -   -   -   -   1,966 Energy research company - EPE           982   -   -   -   -   982 Collections agreement           -   73,240   -   -   -   73,240 Fund for reversal           -   -   -   -   17,750   17,750 Business combination           -   -   10,477   -   -   10,477 Total           1,739,682   1,345,502   1,927,577   15,223,444   5,250,569   25,486,773                                                                     F -90 Table of contracting derivatives, always with the appropriate levels of approval, only in the event of exposure that management regards as a risk. The Company and its subsidiaries do not enter into transactions involving exotic or speculative derivatives. Furthermore, the Company and its subsidiaries meet the requirements of the Sarbanes-Oxley Law, and accordingly have internal control policies that aim for a strict control environment to minimize the exposure to risks.Contents ( 35 ) COMMITTMENTS   The Company’s commitments in relation to long-term energy purchase agreements and plant construction projects are as of December 31, 2013, as follows:   Commitments as of December 31, 2011 Duration 2012   2013   2014   2015   Thereafter   Total                             Commitments at December 31, 2013   Duration   2014   2015   2016   2017   After 2017   Total Energy purchase contracts (except Itaipu) 2 to 20 years 7,173,331   6,533,066   6,475,342   6,204,172   79,893,621   106,279,532   Up to 35 years   6,934,427   6,476,494   6,953,001   7,419,250   80,708,487   108,491,659 Itaipu 20 years 1,031,450   1,106,930   1,168,110   1,225,400   16,295,450   20,827,340   Up to 31 years   1,321,531   1,364,646   1,427,711   1,403,059   15,968,203   21,485,151 Power plant construction projects (a) 2 to 31 years 818,697   506,758   191,276   139,861   1,769,610   3,426,202 Power plant constrution projets (a)   Up to 15 years   728,818   7,743   11,931   12,937   202,422   963,852 TOTAL   9,023,478   8,146,753   7,834,728   7,569,434   97,958,681   130,533,074       8,984,776   7,848,883   8,392,644   8,835,246   96,879,112   130,940,661                         (a) Power plant construction projects include commitments made by the Company corresponding to its proportional share on construction, concession acquisition and bank guarantees relating to the jointly-controlled under development companies.     (a)The power plant construction projects include commitments made basically to construction related to the subsidiaries in the renewable energy segment. F - 81 Table of Contents ( 36 ) REGULATORY ASSETS AND LIABILITIES The Company accounts forhas the following assets and liabilities for regulatory purposes, which are not recognizedrecorded in the consolidated financial statements, as mentioned in Note 3.13.statements.     December 31, 2011   December 31, 2010   December 31, 2009 December 31, 2013   December 31, 2012   January 1, 2012 Assets                       Consumers, Concessionaires and Licensees           Discounts TUSD (*) and irrigation 16,821   65,534   67,244             16,821   65,534   67,244 Consumers, Concessionaires and Licensees             Discounts TUSD (*) and Irrigation   67,244   54,407   12,753 Deferred costs variations           CVA (**) 547,402   897,364   404,148 547,402   897,364   404,148 Prepaid expenses           Overcontracting 170,084   74,885   27,364 Low income consumers' subsidy - losses -   2,064   17,922 Neutrality of the sector charges -   2,850   224 Tariff adjustment 13,309   2,696   467 Other financial components   -   -   199 41,608   92,582   53,180   67,244   54,407   12,952 225,001   175,078   99,157             Deferred Costs Variations             Liabilities           Deferred gains variations           Parcel "A"   -   333   1,290 (1,454)   (1,443)   (1,337) CVA (**)   404,148   333,622   374,336 (330,266)   (373,784)   (488,500)   404,148   333,954   375,626 (331,720)   (375,227)   (489,838)             Prepaid Expenses             Other accounts payable           Replacement reimbursement in PTR (***) (138,621)   (242,987)   - Discounts TUSD (*) and irrigation (193)   (363)   (127) Tariff review (16,692)   -   - Overcontracting   27,364   23,860   100,326 (29,928)   (28,919)   (48,367) Low income consumers' subsidy - Losses   17,922   34,994   55,506 Low income consumers' subsidy - gains (5)   (22,813)   (17,010) Neutrality of the sector charges   224   -   - (34,745)   (66,985)   (97,138) Other financial components   53,647   67,205   11,557   99,157   126,059   167,389             Liabilities                                     Deferred Gains Variations             Parcel "A"   (1,337)   (11,472)   (44,419) CVA (**)   (488,500)   (364,365)   (377,735)   (489,838)   (375,837)   (422,154)             Other Accounts Payable             Tariff review   -   -   (89,261) Discounts TUSD (*) and Irrigation   (127)   (1,923)   (991) Overcontracting   (48,367)   (61,391)   (17,541) Low income consumers' subsidy - Gains   (17,010)   (6,280)   (6,011) Neutrality of the sector charges   (97,138)   (63,905)   - Tariff Review – Provisional Procedure   (32,181)   -   - Tariff teview – provisional procedure -   -   (32,181) Other financial components   (5,739)   (29,666)   (12,138) (29,393)   (4,254)   (5,739)   (200,562)   (163,165)   (125,942) (249,576)   (366,321)   (200,562)                       Total net   (119,851)   (24,581)   7,871 207,928   396,428   (119,851)                       (*) Network Usage Charge - TUSD             (**) Deferred Tariff Costs and Gains Variations from Parcel "A" itens - ("CVA")         (*) Network usage charge - TUSD           (**) Deferred tariff costs and gains variations from parcel "A" itens - ("CVA")           (***) Periodic Tariff Review             The main characteristicsfeatures of thethese regulatory assets and regulatory liabilities are: a) TUSD Discounts and IrrigationIrrigation: The distribution subsidiaries recognizerecord regulatory assets and liabilities (for regulatory financial statement purpose only) in relation to the special discounts applied on the TUSD to the free consumers, in respect of electric energy supplied from alternative sources and on the tariffs for energy supplied for irrigation and aquaculture. b) Parcel “A”CVA: Corresponds to the variation in the non-manageable costs representing Parcel "A" of the concession arrangement between January 1 and October 25, 2001, during the rationing period. F - 8291   Table of Contents c) CVA Refers to 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. The amounts taken into consideration in the CVA are restatedmonetary adjustment  at the SELIC rate. d) Overcontractingc) Overcontracting: Electric energy distribution concessionaires are obliged to guarantee 100% of their energy and power market through contracts approved, registered and ratified by ANEEL, and are also assured that costs or income derived from overcontracting will be passed on to the tariffs, restricted to 3%5% of the energy load requirement. e)d) Subsidy - Low IncomeIncome: Refers to the subsidies granted to consumers entitled to the Social Electric Energy Tariff (Low Income) if they are enrolled in the Sole Register for Federal Government Social Programs (Cadastro Único para Programas Sociais do Governo Federal – CadÚnico), irrespective of their energy consumption. f)e) Neutrality of the Sector ChargesCharges: Refers to the neutrality of the sector charges in the tariff, calculating the monthly differences between the amounts billed and the amounts considered in the tariff. g) CPFL Piratiningaf) Tariff Review –review / Provisional ProcedureProcedure: The 2011 tariff review for the subsidiary CPFL Piratininga was scheduled for October 23, 2011. ANEEL’sAlthough it had not been finalized, ANEEL established in Order nº 4.991, of December 29, 2011, concerningthat for regulatory purposes, the basic proceduresregulatory assets and liabilities should be calculated on a best estimate basis. On October 16, 2012, ANEEL’s Collegiate Board approved the subsidiary’s annual Tariff Adjustment - RTA for preparation2012, taking into account the impact of 1/3 of the financial statements, requested recognitioncomponent of the best estimate2011 periodic tariff review - RTP. In Order nº 155, of January 23, 2013, ANEEL reviewed the accounting classification of the accountingProvisional Procedure and created the replacement reimbursement account in the periodical tariff review. On February 3, 2013, ANEEL’s Collegiate Board of Directors approved the 2012 Annual Tariff Review – RTA of the subsidiaries CPFL Santa Cruz, CPFL Leste Paulista, CPFL Sul Paulista, CPFL Jaguari and CPFL Mococa.  The RTA took into account the total impact of  the financial component of the 2011 RTP.  In Order 155, of January 23, 2013, ANEEL reviewed the nomenclature account of the Provisional Procedure and created the replacement reimbursement account in the periodical tariff reviewreview. The Requests for 2011.Reconsideration filed by the subsidiaries in relation to ANEEL’s decision on the RTP were judged in January 2014 and partially accepted. The effects were consequently taken into account in the 2014 RTA (note 38.7). h) g) Other Financial ComponentsComponents: Mainly refers to CCEAR exposure (Agreement for commercialization of electric energy in the regulated environment), financial guarantees, subsidies to cooperatives and licensees and TUSD G financial adjustment.adjustment (distribution system usage tariff billed to the generators). Additionally,Financial components were also granted in the tariff review of the distributors, to adjust previous tariff reviews or adjustments. ( 37 )NON CASH TRANSACTION F -92 Table of Contents                   December 31, 2013   December 31, 2012 restated   December 31, 2011 restated Transactions resulting from business combinations             Loans, financing and debentures   -   (556,706)   (781,892) Property, plant and eqiupment acquired through business combination   -   695,093   953,171 Intangible asset acquired in business combination, net of tax effects   -   514,644   738,554 Other net assets acquired through business combination   -   82,841   84,377     -   735,872   994,210 Cash acquired in the business combination   -   (28,278)   (6,826) Acquisition price payable   -   (1,408)   (173,054) Acquisition price paid   -   706,186   814,330               Other transactions             Provision for socio-environmental costs capitalized in property, plant and equipment   -   33,528   - Reversal of provisions for socio-environmental costs capitalized in property, plant and equipment   (17,747)   (66,773)   - Interest capitalized in property, plant and equipment   48,328   32,527   6,861 Interest capitalized in intangible concessoin asset - distribution infrastructure   8,845   15,645   32,281 F -93 Table of Contents ( 38 )RELEVANT FACT AND SUBSEQUENT EVENT 38.1 Annual Tariff Adjustments – CPFL Santa Cruz, CPFL Leste Paulista, CPFL Sul Paulista, CPFL Jaguari and CPFL Mococa On January 30, 2014, ANEEL published the following Resolutions fixing the tariff adjustments of the distribution subsidiaries of CPFL Santa Cruz, CPFL Leste Paulista, CPFL Sul Paulista, CPFL Jaguari and CPFL Mococa as from that date. The details of these tariff adjustments are shown below:     Resolution n°   Annual Tariff Review - RTA   Effect perceived by consumers (*) CPFL Santa Cruz   1.682/14   14.86%   26.00% CPFL Leste Paulista   1.681/14   -7.67%   -5.32% CPFL Jaguari   1.680/14   -3.73%   3.70% CPFL Sul Paulista   1.677/14   -5.51%   0.43% CPFL Mococa   1.679/14   -2.07%   -9.53% (*) Unaudited information             38.2 Loans and Financing 38.2.1 CPFL Piratininga On January 31, 2014, the subsidiary CPFL Piratininga contracted foreign currency financing of R$ 151,875 from Banco Citibank (Law 4,131).  The amount was released on the same date. Interest will be paid semi-annually  and the principal will be paid in full at the end of the third year. The funds will be used to reinforce working capital and settle debts. 38.2.2 CPFL Geração On January 31, 2014, the subsidiary CPFL Geração made an early settlement of the foreign currency debt of R$ 151,875 contracted with Citibank, originally scheduled for payment in a single installment in August 2016.  38.2.3 Approval for funding On February 27, 2014, the Board of Directors approved a funding up to the amount of R$2,467,500 to the subsidiariesCPFL Paulista, CPFL Piratininga, RGE, CPFL Leste Paulista, CPFL Jaguari, CPFL Mococa andCPFL Geração, through: (i) issuance of debentures with maturity up to 6 years; and (ii) loans (Law 4,131) and/or refinancing maturing foreign debt with underlying CDI swaps, Bank Credit Note “Cédula de Crédito Bancário” and/or other working capital transactions. 38.3  Capital increase – EPASA At the Extraordinary General Meeting of the joint venture EPASA, held on January 31, 2014, it was approved a capital increase of R$ 65,000. An amount of R$ 34,288 was subscribed and paid up by the subsidiary CPFL Geração in proportion to its interest in EPASA's capital.  As per corporate law legislation, the other shareholders have been impacted by regulatory adjustments duean  option to fitexercise the current and previous tariff reviews.preference to subscribe shares to be issued within 30 days of signing of the Notice to Shareholders, published on February 1, 2014. At the same meeting, the subsidiary CPFL Geração stated its interest in subscribing the remaining shares, if the other shareholders did not exercise the right to preference within the stipulated period.   ( 37 )F -SUBSEQUENT EVENTS94 Table of Contents 37.1 Acquisition of Atlântica I Parque Eólico S.A., Atlântica II Parque Eólico S.A., Atlântica IV Parque EólicoAfter this period, the shareholders Eletricidade do Brasil S.A. and Atlântica V Parque EólicoOZ&M Incorporação e Participação Ltda. partially exercised the share subscription rights granted to them under the terms of the capital increase, subscribing and paying up R$ 14,000 and R$ 1,000, respectively. In accordance with the Notice to Shareholders published on February 1, 2014, Eletricidade do Brasil S.A. also expressed its interest in subscribing the remaining shares, within the period stipulated in a further Notice to Shareholders published on March 12, 2014. The other shareholders are assured by the Shareholders Agreement  the right to exercise the option to purchase any remaining shares subscribed and paid up by the subsidiary CPFL Geração within 12 months from the date on which the remaining shares are paid up, in order to recompose their diluted interest. 38.4  Provisional Measure 627, of November 11, 2013   In an announcementOn November 11, 2013 and Brazilian Government issued the Provisional Measure (MP) 627 and on September 16, 2013, the Internal Federal tax authority issued the Normative Ruling (IN) 1,397. The MP and IN introduced changes to the market datedfederal tax rules, including repeal of the Transitional Tax Regime (RTT) from January 13, 2012,1, 2015. However, companies have the option of early adoption of MP 627 from calendar year 2014. In the event of early adoption, taxpayers will be exempt from any exposure in relation to the RTT up to the date on which MP 627 was issued. Management of the Company advisedand its subsidiaries are assessing the impacts of these changes and the best time for adopting them, also taking into consideration that the indirectMP has not yet been converted into a law, and it may be amended prior to its conversion into law that time. A preliminary analysis by the Company and its subsidiaries indicates that there are and there will be no relevant effects to be taken into consideration in the financial statements. 38.5  Association between CPFL Renováveis and Dobrevê Energia S.A. ("DESA") On February 17, 2014, the subsidiary CPFL Renováveis had signedand DESA entered into an association agreement. The Association will occur through the merger by CPFL Renováveis of WF2 Holding S.A. - (“WF2”), which will hold all the shares issued by DESA at the merger date.  As a result of the merger, the net equity of CPFL Renováveis will be increased by a new issue of, corresponding to 12.63% of its common shares. The interest may be adjusted as a result of audits to be conducted and compliance with preceding conditions. The subsidiary CPFL Geração will continue to be the major shareholder of CPFL Renováveis, holding more than 50% of its capital. The conclusion of the association is conditional on compliance with certain preceding conditions common in similar transactions, including approval by ANEEL, by the Conselho Administrativo de Defesa Econômica ("CADE") and by certain creditors of DESA and WF2. Also it is conditional on a satisfactory outcome of the legal, accounting and financial, engineering and environmental audits to be conducted by both CPFL Renováveis, in relation to DESA's operations, and DESA in relation to the operations of CPFL Renováveis. 38.6 CDE contribution – Decree 8,203/2014 Decree 8,203 of March 7, 2014 approved the CDE contribution to offset the involuntary  exposure of the distribution concessionaires in the short-term market as a result of the inability to purchase agreementin the auction of energy produced by existing ventures held in December 2013.  In accordance with resolution n° 515/2014, the following amounts received on March 11, 2014 (CPFL Paulista, CPFL Piratininga and CPFL Santa Cruz), on March 19, 2014 (RGE) and receivable (CPFL Leste Paulista) from the CDE are as follows: F -95 Table of Contents Distribution companies R$ thousand CPFL Leste Paulista 1,057 CPFL Paulista 59,677 CPFL Piratininga 53,967 CPFL Santa Cruz 6,274 RGE 45,899 Total 166,875 38.7   2012 Periodic Tariff Review (RTP) - Administrative Appeal In relation to the RTP, the subsidiaries CPFL Mococa, CPFL Santa Cruz, CPFL Leste Paulista, CPFL Sul Paulista and CPFL Jaguari filed a request for consideration in relation to ANEEL's decision. The request was judged in January 2014, with the company Cobra Instalaciones Y Servicios S.A., withfollowing results: (i) order 165 of January 28, 2014 changed the objectivereview of acquiring7.20% for the subsidiary CPFL Mococa to 7.18% on account of the reduction in the remuneration base; (ii) order 212 of January 30, 2014 changed the review of 4.36% of the subsidiary CPFL Santa Cruz to 4.16% on account of the reduction in the remuneration base; (iii) order 166 of January 28, 2014 changed the review of -2.20% of the subsidiary CPFL Leste Paulista to -2.00% on account of the increase in the remuneration base and losses; (iv) order 211 of January 30, 2014 changed the review of -3.72% for the subsidiary CPFL Sul Paulista to -3.78% on account of the reduction in the remuneration base; and (v) order 167 of January 28, 2014 changed the review of -7.10% of the subsidiary CPFL Jaguari to -7.09% on account of the increase in the remuneration base. 38.8 Completion of acquisition by the subsidiary CPFL Renováveis In a Communication to the Market dated February 27, 2014, the subsidiary CPFL Renováveis communicated completion of the acquisition of 100% of the shares of Atlântica I Parque Eólico S.A., Atlântica II Parque Eólico S.A., Atlântica IV Parque Eólico S.A. and Atlântica V Parque Eólico S.A. (“companies”). The companies hold authorizations to generate electric energy from wind sources under the independent production system, for a period of 35 years, by installation of their respective wind power plants, with joint installed power of 120 MW. The purchase agreement is subject to approval by ANEEL and other conditions inherent to this type of negotiation. Once the conditions have been fulfilled, the subsidiary CPFL Renováveis will hold all the companies’ shares. F - 83 Table of Contents The other additional information required by IFRS 3 cannot be disclosed, as the transaction is in the process of finalization. 37.2 Acquisition of BonsRosa dos Ventos GeradoraGeração e Comercialização de Energia S.A. On February 24, 2012, CPFL Renováveis disclosed in a Relevant Fact the signing of an agreement to purchase shares in the company BVP S.A., which holds 100% of the shares of Bons Ventos Geradora de Energia S.A.. Bons Ventos has an authorization from ANEEL to operate the wind power plants Taíba Albatroz, Bons Ventos, Enacel and Canoa Quebrada, with total installed capacity of 157.5 MW. ("Rosa dos Ventos") (Note 14.6).   The total acquisition cost isprice after the adjustments as per the purchase agreement was R$ 1,062 million, as follows:103,367, including: (i) R$ 600 million to be70,296 paid to the vendors (consideration transferred);sellers; and (ii) assumption of athe net debt of R$ 462 million, which33,071; these figures may be restated byadjusted until the closing date, according to the contract. ( 39 )CONDENSED UNCONSOLIDATED FINANCIAL STATEMENTS Since the condensed unconsolidated financial information required by Rule 12-04 of Regulation S-X is not required under IFRS issued by the International Accounting Standards Board - IASB, such information was not included in the original financial statements filed with the Brazilian Securities and Exchange Commissions – CVM. In order to attend the specific requirements of the acquisition,Securities and Exchange Commission (the “SEC”), Management has incorporated the condensed unconsolidated information in these financial statements as part of the Form 20-F. The condensed unconsolidated financial information of CPFL Energia, as of December 31, 2013, December 31, 2012 and January 1, 2012 and for the years ended on December 31, 2013, 2012 and 2011 presented herein were prepared considering the same accounting policies as described in note 3 to Company’s consolidated financial statements, except for the fact that the investment caption presented in Company’s unconsolidated condensed financial statements were measured under the equity method, instead of being measured at fair value or at cost, as required by International Financial Reporting Standards - IFRSs issued by the IASB, applicable to Separate Financial Statements. As mentioned in notes 3.8 and 3.9, due to adoption of IAS 19 (R1) - Employee Benefits and IFRS 11 - Joint Arrangements, the Company is restating the balances as of December 31, 2012 and January 1, 2012 and F -96 Table of Contents the Income Statement and the Statements of Comprehensive Income of 2012 and 2011 for purposes of comparison.  In the condensed unconsolidated balance sheets of CPFL Energia, the impacts of such restatement were: (i) a reduction of R$ 515,932 in investment set against comprehensive income in the shareholders’ equity as of December 31, 2012; and (ii) an increase of R$ 105,964 in Investment set against retained earnings in shareholders’ equity as of January 1, 2012. In the condensed unconsolidated statement of income of CPFL Energia, the impact was a reduction in interest in subsidiary of R$ 49,672 in 2012 and R$ 79,751 in 2011, and no effect in our cash flow. UNCONSOLIDATED BALANCE SHEETS                         ASSETS December 31, 2013   December 31, 2012 restated   January 1, 2012 restated Cash and cash equivalents 990,672   141,835   549,189 Dividends and Interest on Equity 697,702     401,473   125,913 Other credits 31,858   31,603   89,286 Total current assets 1,720,232   574,911   764,388 Deferred Taxes Credits 165,798   177,411   193,874 Investment 6,419,924   5,988,616   6,720,879 Other credits 83,857   26,831   34,616 Total non current assets 6,669,579   6,192,858   6,949,369 Total assets 8,389,811   6,767,769   7,713,757                         LIABILITIES AND SHAREHOLDERS' EQUITY December 31, 2013   December 31, 2012 restated   January 1, 2012 restated Accrued interest on debentures 12,438   7,082   16,403 Debentures -   150,000   150,000 Dividends and Interest on Equity 15,407     16,856   15,575 Other accounts payable 18,400   21,221   18,279 Total current liabilities 46,246   195,159   200,258 Debentures 1,287,912   150,000   300,000 Reserve for tax, civil and labor risks 260     12,524   11,713 Other accounts payable 29,358   29,358   28,665 Total non current liabilities 1,319,667   191,882   340,378 Shareholders' equity 7,023,899   6,380,728   7,173,122 Total liabilities and shareholders' equity 8,389,811     6,767,769   7,713,757 F -97 Table of Contents UNCONSOLIDATED STATEMENTS OF INCOME               2013   2012 restated   2011 restated NET OPERATING REVENUE 1,649   1,452   1,191 General and administrative expenses and other (22,626)   (29,585)   (175,980) Income from electric energy service (20,977)   (28,134)   (174,789) Interest in subsidiaries 1,022,779   1,281,414   1,688,817 Financial income/(expense) (26,860)   (22,084)   585 Income before taxes 974,942   1,231,197   1,514,613 Social contribution and Income tax (37,523)   (54,945)   (22,072) Net Income 937,419   1,176,252   1,492,541               2013   2012 restated   2011 restated Net Income 937,419   1,176,252   1,492,541 Items that will not be reclassified subsequently to profit or loss:           Equity on comprehensive income of subsidiaries 460,226    (572,225)   185,715 Comprehensive income for the year 1,397,645   604,027   1,678,256 UNCONSOLIDATED STATEMENTS OF CASH FLOWS             OPERATING CASH FLOW 2013   2012 restated   2011 restated Income before taxes 974,942   1,231,197   1,514,613 Adjustment to reconcile income to cash provided by operating activities           Interest in subsidiaries (1,022,779)   (1,281,414)   (1,688,817) Depreciation and amortization 76   65   145,359 Interest and monetary adjustment 81,189   30,028   36,496 Other 267   7   - Changes in operating assets and liabilities           Dividends and Interest on Equity received 792,146    1,199,996   1,692,403 Recoverable taxes 21,797   47,539   28,249 Other operating assets and liabilities (1,990)    8,820   937 Cash Flows provided by operations 845,648   1,236,238   1,729,240 Payments of interest on debts (76,561)    (45,080)   (51,984) Payment of taxes and social contributions (27,551)    (39,976)   (39,730) Net cash from operating activities 741,536   1,151,182   1,637,526 Investing activities           Capital increase in subsidiaries (1,563)   (66,701)   (11,752) Financial investments, pledges, funds and tied deposits 4,710   49,263   46,202 Increment of cash due to increase of interest in subsidiary (59,342)   (55)   - Other (8,635)   2,291   (4,056) Net cash from used in investing activities (64,830)   (15,202)   30,394 Financing activities           Loans, financing and debentures obtained 1,287,180   -   - Payments of loans, financing and debentures, net of derivatives (299,535)   (149,827)   (121) Payments of dividend and interest on shareholders’ equity (815,514)   (1,393,507)   (1,229,568) Net cash from provide by (used in) financing activities 172,131   (1,543,334)   (1,229,689) (Decrease)/increase in cash and cash equivalents 848,837   (407,354)   438,231 Opening balance of cash and cash equivalents 141,835   549,189   110,958 Closing balance of cash and cash equivalents 990,672   141,835   549,189             Following is the information relating to CPFL Energia's unconsolidated condensed financial statements presented above: a.Cash and cash equivalents: F -98 Table of Contents           December 31, 2013   December 31, 2012 restated Bank balances 936   741 Investment funds 989,737   141,095 Total 990,672   141,835         Amounts invested in an Investment funds, involving investments subject to floating rates tied to the CDI in federal government bonds, CDBs, secured debentures of major financial institutions, with daily liquidity, low credit risk and interest equivalent, on average, to 101% of CDI. b.Dividends and interest on equity:                               Dividends   Interest on Shareholders´ Equity   Total Subsidiaries   December 31, 2013   December 31, 2012 restated   December 31, 2013   December 31, 2012 restated   December 31, 2013   December 31, 2012 restated CPFL Paulista   389,872   254,294   34,879   12,683   424,751   266,978 CPFL Piratininga   117,816   88,211   11,267   5,879   129,083   94,090 CPFL Santa Cruz   19,764   14,481   3,916   2,043   23,681   16,524 CPFL Leste Paulista   10,323   -   940   -   11,263   - CPFL Sul Paulista   21,095   5,153   2,165   1,130   23,260   6,282 CPFL Jaguari   11,422   -   723   -   12,145   - CPFL Mococa   15,919   -   1,166   -   17,085   - RGE   -   -   25,039   -   25,039   - CPFL Jaguari Geração   4,709   -   -   -   4,709   - CPFL Planalto   5,101   5,101   -   -   5,101   5,101 CPFL Serviços   9,080   7,139   1,601   646   10,681   7,785 CPFL Atende   1,389   1,102   624   357   2,013   1,459 Nect Serviços   7,696   3,253   -   -   7,696   3,253 CPFL Total   792   -   404   -   1,196   -     614,977   378,735   82,725   22,738   697,702   401,473 c.Other credits:                   Current Noncurrent   December 31, 2013   December 31, 2012 restated   December 31, 2013   December 31, 2012 restated Recoverable taxes 29,874   25,311   -   - Due from relative parties   -   -   8,948   - Escrow deposits -   -   92   12,579 Advance for future capital increase -     -   59,397   55 Loans and financing guarantee’s subsidiaries -     -   14,389   13,145 Other 1,984   6,291   1,032   1,052 Total 31,858   31,602   83,857   26,831                 An advance for a future capital increase by the Company to the subsidiary CPFL Piratininga was approved on December 26, 2013. An amount of R$ 50,000 was contributed up to December 31, 2013. d.Investment:  The financial information of subsidiaries, joint ventures and of the associates are accounted for using the equity method of accounting which differ from of the Separate Financial Statements, under IFRS, which will be measured at cost or fair value. F -99 Table of Contents         Investment Shareholders Equity Interest   Equity in Subsidiaries Subsidiaries   Number of shares (thousand)   December 31, 2012   December 31, 2012 restated   2013   2012 restated   2011 restated CPFL Paulista   177,909   1,186,113   418,421   620,412   423,757   552,234 CPFL Piratininga   53,031,259   384,609   215,944   82,985   142,535   295,454 CPFL Santa Cruz   371,772   100,369   107,664   (143)   24,182   35,343 CPFL Leste Paulista   895,733   60,578   67,149   6,826   9,646   16,245 CPFL Sul Paulista   463,482   51,432   68,867   6,743   19,622   18,759 CPFL Jaguari   212,126   23,261   43,952   (6,631)   10,694   13,765 CPFL Mococa   121,761   34,145   38,345   15,482   7,100   7,683 RGE   807,168   1,254,557   1,289,756   126,851   320,757   276,608 CPFL Geração   205,487,716   2,116,833   2,534,388   239,561   318,149   290,789 CPFL Jaguari Geração (*)   40,108   48,356   48,102   8,962   10,185   10,501 CPFL Brasil   2,999   35,246   (81,923)   36,426   105,627   147,668 CPFL Planalto (*)   630   (115)   587   (702)   5,058   14,137 CPFL Serviços   66,620   77,078   73,056   7,445   9,140   6,860 CPFL Atende (*)   1   13,746   15,187   624   2,775   1,093 Nect (*)   2,059   5,999   4,646   5,796   5,750   1,800 CPFL Total (*)   19,005   20,893   21,555   3,226   2,683   - CPFL Jaguariuna (*)   189,620   2,512   2,187   325   209   (121) CPFL Telecom   19,900   (1,311)   2   (1,313)   (3)   - CPFL Centrais Geradoras   14,976   16,041   -   1,065   -   - CPFL Participações   10   10   -   -   -   - Subtotal - by shareholders' equity of the subsidiary       5,430,352     4,867,886   1,153,940   1,417,867   1,688,817 Intangible asset of concession       989,572   1,120,730   -   -   - Amortization of intangible assets of the concession       -   -   (131,161)   (136,453)   - Total       6,419,924   5,988,616   1,022,779   1,281,414   1,688,817 (*) Number of quotes                         Dividends received — The net cash provided by operating activities is comprised mainly by dividends received from the Company’s subsidiaries. The dividends received are comprised as follows:                   2013   2012   2011 CPFL Paulista   -   305,920   772,436 CPFL Piratininga   -   116,634   322,453 CPFL Santa Cruz   -   15,936   31,709 CPFL Leste Paulista   -   10,738   14,224 CPFL Sul Paulista   -   16,681   8,267 CPFL Jaguari   -   17,586   5,827 CPFL Mococa   -   6,131   6,489 RGE   151,184   362,471   57,689 CPFL Geração   523,424   250,066   205,039 CPFL Brasil   109,530   73,409   247,083 CPFL Jaguari Geração   4,000   9,991   8,926 CPFL Planalto   -   7,595   12,261 CPFL Serviços   -   3,648   - CPFL Atende   1,459   337   - Chumpitaz   -   1,710   - CPFL Total   2,549   1,143   - TOTAL   792,146   1,199,996   1,692,403 Restriction of transfer of funds from subsidiaries - CPFL Paulista, CPFL Piratininga, CPFL Leste Paulista, CPFL Sul Paulista, CPFL Mococa, CPFL Jaguari, RGE, CPFL Geração, ENERCAN, CERAN, BAESA and Foz do Chapecó qualify as concessionaires.As such, any transfer of funds to the respective parent company, in the form of loans or advances, requires approval by ANEEL. This regulatory restriction does not apply to cash dividends determined in accordance with the share purchase contract.Brazilian corporate law.   These wind power plants are locatedAs described in note 16, the Statesubsidiaries CPFL Paulista, CPFL Piratininga, RGE, CPFL Santa Cruz, CPFL Leste Paulista, CPFL Sul Paulista, and CERAN have restrictions relating to the payment of Ceará and are in full commercial operation. The total energy is contracted to Eletrobrás for 20 years, through PROINFA. dividends, due F -100   Finalizing the acquisition and paying the price are subject to meeting pre-conditions established in the share purchase agreement and obtaining the pertinent prior authorizations, including the agreement of ANEEL, the financing banks and the antitrust organizations, including the Brazilian Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica – CADE). The other additional information required by IFRS 3 cannot be disclosed, once the transaction is in the process of finalization. F - 84 Table of Contents ( 38 )ADDITIONAL INFORMATION to the debt covenants. In addition the joint ventures ENERCAN, BASEA, FOZ do Chapecó and EPASA also have restriction analogous to those described in note 12.2. CONSOLIDATED STATEMENTS OF ADDED VALUEe. Accrued interest on debentures and debentures:FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009 (In thousands of Brazilian reais – R$)   2011   2010   2009                 1- Revenues 19,267,606   18,421,036   16,963,483   1.1 Operating revenues 17,736,155   16,513,001   15,875,755   1.2 Revenue from infrastructure construction 1,129,826   1,043,678   615,557   1.3 Revenues related to the construction of own assets 472,298   916,026   508,421   1.4 Provision for doubtful accounts (70,673)   (51,669)   (36,250)                 2 - (-) Inputs (9,375,269)   (9,535,417)   (8,461,851)   2.1Electricity Purchased for Resale (6,926,552)   (6,914,197)   (6,695,256)   2.2Material  (892,429)   (1,095,907)   (590,704)   2.3Outsourced Services (1,095,227)   (1,185,662)   (825,670)   2.4Other  (461,061)   (339,651)   (350,221)                 3 - Gross Added Value (1 + 2) 9,892,338   8,885,619   8,501,632                 4 – Retentions (845,819)   (720,528)   (697,869)   4.1Depreciation and Amortization (661,770)   (537,913)   (510,970)   4.2Amortization of intangible assets (184,049)   (182,615)   (186,899)                 5 – Net Added Value Generated (3 + 4) 9,046,518   8,165,091   7,803,763                 6 - Added Value Received in Transfer 722,754   521,084   378,423   6.1Financial Income 722,754   521,084   378,423   6.2Equity in Subsidiaries -   -   -                 7 - Added Value to be Distributed (5 + 6) 9,769,273   8,686,175   8,182,186                 8 – Distribution of Added Value             8.1Personnel and Charges 595,432   498,110   533,508   8.1.1 Direct Remuneration 417,847   379,198   357,309   8.1.2 Benefits 146,586   89,235   147,277   8.1.3 Government severance indemnity fund for employees - F.G.T.S. 30,999   29,677   28,922   8.2Taxes, Fees and Contributions 6,162,977   5,681,647   5,251,649   8.2.1 Federal 3,183,133   2,940,759   2,628,151   8.2.2 State 2,970,299   2,731,991   2,615,272   8.2.3 Municipal 9,545   8,897   8,226   8.3Interest and Rentals 1,428,479   946,381   708,161   8.3.1 Interest 1,401,429   931,649   698,622   8.3.2 Rental 27,051   14,732   9,539   8.4Interest on capital 1,582,384   1,560,037   1,688,868   8.4.1 Dividends (including additional proposed) 1,504,710   1,260,244   1,228,914   8.4.2 Retained profits 77,674   299,793   459,954                   9,769,273   8,686,175   8.182,186   Issued Annual Remuneration Annual Effective rate Amortization Conditions Collateral 3rd Issue Single series - CDI + 0.45% (¹) CDI + 0.53% 3 annual installments from September 2012 Unsecured 4th Issue Single series 129.000 CDI + 0,40% CDI + 0.51% 1 installment in May 2015 Unsecured (¹) Swap converts the prefixed component of interest on the operation to interest rate variation in reais, corresponding to 104.4% of CDI.                                             December 31, 2013   December 31, 2012 restated       Interest   Current   Noncurrent   Total   Interest   Current   Noncurrent   Total                                     3rd Issue Single series   -   -   -   -   7,082   150,000   150,000   307,082 4th Issue Single series   12,438   -   1,287,912   1,300,350   -   -   -   - F - 85 f.Other accounts payable: The mainly account to pay that the Company has in non-current is due to loans and financing guarantee’s subsidiaries.