MESSAGE FROM
THE MANAGEMENT

In this interview, the Chairman of the Board of Directors, Andre Dorf, and the CEO, Gustavo Sousa, outline an overview of 2016, including a market analysis, as well as the challenges and opportunities concerning sustainability, and the outlook for 2017.

In 2016, CPFL Renováveis became the the first company in the segment to reach of 2 GW capacity in operation in Brazil

In a challenging scenario at the political-economic level in Brazil, how was 2016 for CPFL Renováveis?

Andre Dorf: Despite the adverse political and economic situation, we maintained our leadership in Brazil, reaching 2 GW of installed capacity and delivering three projects throughout the year, with an emphasis on the wind complexes in Rio Grande do Norte. Results such as these were only possible with a mature management, and a clear vision and strategies based on sustainable principles. Today, the Company has a solid technical-corporate structure that guarantees us a good standing and reputation.
From a sector standpoint, the economic situation made it difficult to implement important projects for the industry such as transmission lines. This has increased the risk of some projects in renewable sources due to the difficulty in distributing energy, which has been quite a challenge for generators. But we hope this will be resolved as soon as possible with new investments in that area.

Gustavo Sousa: As Andre already mentioned, when we take stock of 2016, we have many reasons to celebrate. Despite the difficulties experienced by the market in the last year, we still managed to achieve our corporate goals. The long-term contracts we signed for our projects allows us the guarantee we need to go through adverse economic times with stable results.
Conversely, we still depend on financing for new projects, and credit restriction in the market affects us. However, our reputation and scale assure us important differentials. In 2016, in partnership with the National Bank for Economic and Social Development (BNDES), we were granted the country’s first financing for projects of renewable resources intended to the free market, a project finance category, which further emphasizes our pioneering spirit.

At the end of the year, China’s state-owned State Grid Corporation of China acquired the controlling interest of CPFL Energia. How does this affect CPFL Renováveis?

Andre Dorf: It is too soon to make comments on the impact of State Grid into the CPFL Group. It is an important company in the global electricity sector, with presence in renewable sources. Since we are present in all segments of the Brazilian energy sector, CPFL Renováveis acts together with the other Group companies, exchanging experience and creating various integrated business models. The same should happen with our new shareholders.

Gustavo Sousa: State Grid is the largest company in the global power sector and will certainly have a lot to contribute. We must wait for the consolidation of this operation so that we can plan future actions more clearly. For our part, we have to keep “the house in order”, that is, all our processes must be very well aligned, standardized and in compliance with laws and regulations, maintaining excellence in international standards.

Today, what are the main challenges for an organization like CPFL Renováveis?

Andre Dorf: Regulatory issues have always posed a challenge for the electricity industry, but that is changing. Currently, the institutional and regulatory environment is more mature and many critical aspects have already been addressed. On the other hand, the market downturn can affect us, just as financing challenges have impacted business across the energy sector in recent years. In earlier times, there was great need for new energy. Today, this demand has dropped. We need to be creative to find and take advantage of new market opportunities.

Gustavo Sousa: The main challenges involve the macroeconomic environment, which affects both the country as a whole, and regulatory issues. Additionally, we have the internal challenges of a Company that in only five years has become a market leader. An example we can point out is the work we did in 2016 to implement a more comprehensive management of our potential risks following the assumptions of our strategic planning.

And what were the highlights for the Company’s management in 2016?

Andre Dorf: A relevant event was the consolidation of our project management, which has taken place in 2013. Thanks to this effort, we have once again delivered all our projects earlier than anticipated and within budget. We are a lean and efficient Company and, with just over 400 employees we managed to run a portfolio of more than 2 GW of installed capacity in operation, distributed throughout eight states and 91 plants. This is our great highlight.

Gustavo Sousa: We had a lot of positive points in 2016, particularly that of reaching the 2GW mark, as Andre mentioned, as well as the maturity of our team. We can say that, today, we have a rather experienced team with great knowledge about the sector where we operate. Furthermore, we have invested in communication, which promotes an encouraging engagement with our stakeholders. As proof that we are on the right track, our internal climate research, which is conducted every two years, showed an evolution from 61% to 70% of favorability among employees.

And what are the future prospects for the Company?

Andre Dorf: Before answering this question directly, I think it is important to talk about the context of our segment. Throughout the past years, we have seen great improvements in the initiatives that fight against global warming around the globe. In 2015, we had the Climate Change Conference in Paris, adding the United States and China to join. In 2016, the discussions expanded in Marrakesh demonstrating that the subject was consolidated as a global concern for the future of the next generations.
Today, Brazil also has clear targets for reducing greenhouse gas emissions. As a result, other initiatives are beginning to emerge and gain momentum, especially within the energy sector. Therefore, much has been invested in the development of other forms of electric power generation and, in this respect, wind complexes have evolved a lot. We are aware of the maturing of the segment, particularly with the entry of large players, including international ones, who realize that the risks to invest in this area are increasingly smaller. In our view, these prospects can only be positive, after all generating electricity from renewable sources is the core of our business. Even with the market downturn, we have the technical-financial ability and creativity to make competitive projects viable in an ever-growing area.

Gustavo Sousa: It is expected that the energy market will resume growth, which should generate new opportunities with greater regulatory stability. The government is planning a decontracting auction for 2017, with an aim at enabling the discontinuation of projects with delivery difficulties. On our side, we continue to develop the contracted projects and we are prepared both to meet the energy demand and to invest in new opportunities.
Additionally, we remain committed to the UN Global Compact and Sustainable Development Goals (SDGs), working to ensure access to reliable, sustainable, modern and affordable energy for all.