Slide 1: ‘Oo fo) N > < a) WY) -
‘Oo 1 fo) N > < a) WY) -
Slide 2: Disclaimer
This document has been prepared by EDP Group (the "Company") solely for use at the presentation to be made on the 5th of May 2016 and its purpose is merely of informative nature and, as such, it may be amended and supplemented. By attending the meeting where this presentation is made, or by reading
Slide 3: Presenters
António Mexia, CEO Miguel Stilwell de Andrade, Board Member João Manso Neto, CEO EDP Renováveis Miguel Setas, CEO EDP Brasil Nuno Alves, CFO António Mexia, CEO
Slide 4: EDP 2014-2016
EDP 2014-2016 António Mexia, CEO
Slide 5: Energy demand slow down, rate declines and volatility
WEAK GLOBAL Energy demand slow down 1 ECONOMIC Further declines on interest rates GROWTH Strong volatility in Forex markets DECLINE OF Changes in fossil fuels demand/supply balance: ENERGY 2 COMMODITY Slow down on global demand, mostly driven by Asia PRICES New competitive sources: increas
Slide 6: Electricity demand, interest rates and FX markets
1 Electricity Demand: Iberia and Brazil(1) Benchmark Interest rates(2) Foreign Exchange Markets(2) (TWh) (%, EoP) (EUR/USD, EUR/BRL, EoP) EUR 5Y Mid-Swap Iberia Brazil CAGR ∆ bps +24% USD 5Y Mid-Swap EUR/ 1.39 Brazil Selic 1.12 USD 1.1% +325 14.3% 526 541 537 513 11.0% -23% 1.8% EUR/ 4.00 301 295 29
Slide 7: Commodity and Iberian electricity market prices
2 Commodities and Iberian Electricity Market Real Forward Prices@May-14 Forward Prices@Apr-16(1) Brent ($/bbl) Gas NBP (€/MWh) Iberian pool price (€/MWh) -49% -35% -12% 99 99 26 48 21 42 43 50 17 Coal ($/ton) CO2 (€/ton) -46% 2014 2016E 2017E +24% 87 75 Clean Dark 6 7 0 6 6 47 6 Spread Clean Spark S
Slide 8: Declining cost of wind and solar improves renewables competitiveness
3 Wind and Solar Unsubsidised Levelised Cost of Energy in US(1) Wind Installed Capacity in US and Brazil(2) (USD/MWh, unsubsidized) GW, 2013-15 PPAs Awarded in 2013-2015 Wind Solar 15GW 8GW Regulated 74 auctions for PPAs +22% 77 -19% 60 61 9 -58% +152% 50 -51% 3 32 -33% 2012 2015 2012 2015 2013 2015
Slide 9: Strict discipline on capital allocation
4 Impairment charges as % of Avg. Equity Book Value – European Integrated Utilities(1) (2012-15) Major drivers of impairments in the sector 2015 2014 2013 2012 Accumulated impairment charges 2012-15 (€bn) over the period: Past acquisitions at high valuation multiples 92% Unhedged upstream/commod
Slide 10: New market design in EU is essential
Carbon Price Higher CO2 price needed to promote coal-to-gas switching and to accelerate emissions reduction Signal Further control over volume & pricing of CO2 allowances should be developed in Europe Investments Low spot power prices: lack of incentives for investments needed for decarbonisat
Slide 11: Strategic Priorities
Strategic Priorities Balance between Growth & I II Controlled Risk Financial Deleverage Focused growth: long-term Keeping low risk profile contracted renewables and reinforcing presence in our regulated networks core markets and optimization Deleverage commitment: of capital allocation improve
Slide 12: Focus on wind with PPAs or feed-in-tariffs
I EDP Group Installed Capacity(1): EDP Group Net Capacity Additions(1): Jan-14 to Mar-16 Dec-13 to Mar-16 Wind Hydro Solar Others Other OECD Dec-13 Mar-16 countries Installed +7% Wind additions 100% PPAs, 20% 15% Capacity 23.5 25.1 63% Feed-in Tariffs or Hedged (GW) +1.1GW % 65% Renewables 69% 72% +
Slide 13: 1.1GW of wind PPAs signed since Jan-14
I Capacity under construction EDPR PPA contracts signed/awarded between Jan-14 and Apr-16 (%) USA Mexico Brazil Canada Hydro in Portugal: +1,019MW to be commissioned in 2H16/1Q17 Pumping and ancillary services as key profitability drivers 9% 12% Hydro in Brazil (PPA prices inflation updated): St
Slide 14: Execution of several value accretive deals
I 7 deals executed/agreed in 2014-1Q16 in North America and Europe EDPR’s Asset Total proceeds of €1.5bn exceed by ~2.0x the €0.7bn target for 2014-17 €1.5bn Rotation Average implied EV/MW: €1.5m €1bn of deals executed/agreed in 2014-2015 (€1.4bn since 2012): CTG – EDP Brasil: sale of 50% st
Slide 15: 2015: Financial leverage penalized by adverse markets
I Net Debt/EBITDA (1) Main drivers Impact (x) Reported Pro-forma 2015: Adverse energy markets/weather (Iberia/Brazil/EDPR) 4.3 Adverse forex: USD +27%, BRL -24% (Dec-15 vs. Dec-13) (2) 4.0 4.0 4.0 Full consolidation of Pecém debt (since May-15) 3.8 EDPR asset rotation + CTG partnership: timi
Slide 16: Rating upgrade and improved credit markets
II Senior Debt Credit Rating: European Integrated Utilities Avg. cost of new bonds issued(1) Mar-14 to Apr-16 (%) Average bond maturity Up/downgrades since Mar-14 Rating Note as of Apr-16 Company 7 years 8 years S&P Moody's Fitch S&P / Moody's / Fitch EDF A+ / A1 / A -50% 4.7% ENGIE -- A
Slide 17: GSF insurance agreement and Pecém turnaround
II Insurance agreement on GSF risk: impact on cash flows under Turnaround of Pecém Power Plant – Evolution of Net Profit extreme weather conditions (R$m) (R$m) Before agreement After agreement 22 30 EXTREMELY WET 0 -236 -30 -60 -282 EXTREMELY DRY 2013 2014 2015 -90 Availability Availability in -120
Slide 18: Long position on clients and flexible generation
II Iberian Liberalised Activities EBITDA (€m; €/kW) EBITDA (€m) EBITDA/kW Diversified and flexible generation portfolio 416 364 Hedging mostly through sales to clients 347 closed between 12 to 18 months ahead 49 54 Active short term market optimisation 46 2015 performance penalized by weak h
Slide 19: Tariff deficit securitizations in Portugal
II Spain: Net change in system’s regulatory receivables(1) Portugal: Net change in system’s regulatory receivables(2) (€bn) (€bn) Demand(3) (YoY Chg.) -0.1% +1.1% +1.0% Avg. Tariff (YoY Chg.) 2.8% 3.3% 2.5% 2.7 Higher increase of avg. residential 0.7 tariff in 2015 compensated weaker 0.5 demand in 2
Slide 20: Market diversification and long-term contracted profile
II EBITDA(1): Country Breakdown – Market Diversification EBITDA(1): Risk Profile Breakdown (%) (%) LT contracted and regulated activities Rest of Europe Liberalized 3% 5% 6% 9% 9% 7% 11% 9% 15% 19% 17% 17% 25% 24% 19% 89% 91% 91% 47% 45% 44% 2011 2013 2015 2011 2013 2015 Reinforcement of market dive
Slide 21: OPEX III cost saving target almost achieved
III Costs Savings under OPEX III Efficiency Programme(1) OPEX IV Efficiency Programme Breakdown of cost saving target (€m) (%) By Business Unit By Category 170 Iberia EDPR Brazil HR O&M Client Services & MKT IT & Other 40 +31% 130 Target for 2015 Achieved O&M savings (generation and distribution)
Slide 22: Operating costs 2015 vs 2013
III Operating Costs(1): 2015 vs. 2013 CAGR Iberia(2) Brazil EDPR (€m) Headcount (R$m) Including Pecém Excluding Pecém OPEX/MW (€k) 8,517 8,126 -5% -1% 4% -1% -2% +9% 966 43.9 941 888 878 923 Avg. Ex-ForEx Annual Inflation(3) 41.9 2013 2015 2013 2015 2013 2015 Ex-Pecém consolidation, EDP Brasil 1
Slide 23: Guidance for 2016 EBITDA and net profit reaffirmed
IV Adjusted EBITDA European Integrated Utilities: Adjusted EPS chg. 2016E Consensus vs. 2014 (1) (€m) (%) CAGR Current ~3% 20% Forecast Peer 9 CAGR Previous Forecast (May-14) 3,431 ~5% >3,600 1% Peer 10 Peer 6 Peer 5 2014(1) 2016E Peer 4 Adjusted Net Profit Peer 7 (€m) CAGR Current Peer 2 Forecast ~
Slide 24: Sustainable and predictable dividend policy
IV Total Shareholder Return EDP vs. SX6E (Jan-14/Apr-16)(1) DPS change 2015 vs. 2010: European Integrated Utilities(2) (%) (%) EDP DJ Euro Stoxx Utilities Peer 4 26% 160 158 EDP Investor Day Peer 10 14-May-14 Peer 8 9% Peer 7 +28% Peer 9 130 128 Peer 3 Peer 5 +15% Peer 6 Peer 2 -100% Peer 1 100 98 J
Slide 25: Focused investments, earnings growth, lower risk
+6x +61% FOCUSED EARNINGS INVESTMENTS… 38% GROWTH… 0.25 0.16 6% % of Wind in EDP Group EPS (€) Installed Capacity 2005 2015 2005 2015 Accumulated Capex in Wind 2006-15 €13bn Accumulated Net Profit 2006-15 €10bn +85% IMPROVED SUSTAINABLE EFFICIENCY… -10p.p. DIVIDEND… 0.185 0.10 38% 28% Opex/Gross Pro
Slide 26: Iberian Business
IBERIAN BUSINESS Miguel Stilwell de Andrade, Executive Board Member
Slide 27: Balanced and diversified low risk portfolio
´ Iberian operations(1) – EBITDA breakdown (%) # Clients(2) (mn): 27% 6% 2% Hydro Generation & Supply Coal & CCGT Electricity: 6.6 Supply ~50% Gas: 1.5 Nuclear & Other 65% Electricity Portugal ~50% Electricity: 6.8 5% Gas: 1.3 66% 12% Gas Portugal Regulated Networks Electricity Spain 17% (Distributi
Slide 28: Iberian business key points
1 Improving market environment 2 Distinctive high-quality generation portfolio 3 Leveraging on scale of client portfolio to improve profitability 4 Solid track record in risk management 5 Stable regulatory frameworks and balanced financial systems 6 Further efficiency improvements 32
Slide 29: Demand and supply balance in Iberia
1 Demand growing ~1% CAGR 2016E-20E… … Supply progressively adjusting • Coal fired production: Shutdowns / growing • Moderate economic growth restrictions due to SOx and NOx emission limits Balance • Uncertainties on nuclear extensions post 2020 • Increasing electrification of the between economy (a
Slide 30: Avg. €50/MWh power price in Iberia
1 Assumptions – Average 2017-2020E Gas increasingly the dominant marginal technology in Power price Iberia; Oil-linked LT gas contracts maintaining significant ~ 50 €/MWh weight in Iberian market Iberia Heavy marginal generation taxes/levies in Iberia: Brent ~ 60 $/bbl distinctive vs. other elec
Slide 31: Portfolio residual useful life of 29 years
2 EDP versus Peers - Generation portfolio in Iberia Avg. Residual Life of Conventional portfolio – EDP vs. Peers (% of MW) (As of Dec-16E; Years) EDP Peers 23Y 29Y CCGT 27% 36% Hydro 39 Coal 33 18% Nuclear 1% 18% 13 Coal 40% with 15% 8 pumping CCGT 26 Hydro 54% 32% 26 Nuclear 12 EDP Peers 8 Iberia P
Slide 32: EV/EBITDA multiple by technology vs residual life
2 EV/EBITDA valuation multiple - Relative comparison by technology vs. residual life(1) (Peers portfolio EV/EBITDA = 100%) EDP Iberian Peers Weight in portfolio 200 150 15-20% Premium Avg. Peers 100 Portfolio 50 54% 32% 27% 36% 1% 15% 18% 18% 0 Hydro CCGT Nuclear Coal Avg. Resid. 39 33 26 26 12 8 13
Slide 33: CMEC receivable final adjustment
2 CMEC Receivable in EDP Balance sheet (€ million) Final adjustment: ~570 Initial CMEC assumed price(1) of €61/MWh in 2017, going up to €70/MWh in 2024 Lower price assumptions supports higher final adjustment Final receivable due in constant annual payments until 2027 2016 Final Adjustment 2
Slide 34: Hedging with clients protects against price volatility
2 ´ EDP – Expected exposure to power prices(1) (Nuclear and Hydro production in an avg. hydro year) Power price-exposed Hedged CMEC Hydro realized price: ~10%(1) premium ~14TWh to baseload price; increasing role of ancillary services and premium hourly profiling Natural hedging provided by the i
Slide 35: Peak/off-peak spreads and pumping volumes
2 Wind and hydro production in a context of price volatility EDP expected pumping volumes(1) (Illustrative day: 21.02.2016) (Annual volume in an avg. hydro year, in TWh) €45 AVG. PEAK PRICE 4.6 €24/MWh AVG DAY PRICE 3.6 €17 AVG PUMPING 1.1 PRICE 1 3 5 7 9 11 13 15 17 19 21 23 €25 Pumping Wind Hydro
Slide 36: Coal plants load factors and DeNOx
2 Coal plants – Avg. load factors Efficiency vs. Transportation costs DeNOx equipment in Iberia (2014-15, %) (2016E) (10 GW of Coal Capacity) Peers’ plants EDP’s plants By 2016E <2020E No upgrade expected 86 12 Transp. Costs (€/MWh) 60 8 14% 52 33% 4 86% 49% SINES 19% 0 Sines Spain Sector 31 33 35 3
Slide 37: Long term gas sourcing contracts
2 EDP – Portfolio of Long Term Gas Sourcing Contracts (bcm/Year) -30% Clients Sound client portfolio Portugal/ Spain 3.6 Key suppliers of backup services CCGTs Efficient management Portugal vs. Spain Wholesale Potential arbitrage opportunities 2015 2020E Gas sourcing portfolio renegotiations
Slide 38: Electricity customers choosing EDP in free market
3 Electricity supply market in Portugal: Market Share evolution 2015 vs. 2011 EDP SU Last Resort Supplier Other free market suppliers EDP Comercial Intense market competition with several campaigns launched by local and By # of clients (millions) By Energy sold international players 6.1 6.1 High
Slide 39: Increase revenue per customer through new services
3 2011-15 2016-20E Maintain high penetration rate of electricity/gas # of Clients Iberia (CAGR) 48% 3% dual offer Increase penetration rates of other aggregated Energy Client Surveys Portugal 2015/1Q16 services: maintenance (Funciona), insurance (Fatura Segura), Solar PV, Energy Efficiency Custo
Slide 40: Client retention and higher efficiency improve EBIT margin
3 Increasing penetration of More SMS sent to clients Improving EBIT Margin in Electronic Invoicing (million of SMS) Iberia … +67% +357% >1% 40% 10 0.6% 24% 2 2015 2020E 2015 2020E 2015 2020E Increasing … converging to international # of Paper Invoices: -3.3% CAGR Digitalisation benchmark for supply:
Slide 41: Hydro production covered by sales to clients
4 EDP Conventional electricity production vs. sales to clients in Iberia (Avg. annual volume, in TWh) Main drivers in 2016-20E Sales to clients/ Own production +1.93x +1.03x Until 2017, CMEC mitigates merchant exposure 39 39 Post CMECs, integration between 37 37 Last Resort Supply generation and
Slide 42: Regulatory framework in Portugal and Spain
5 ´ Annual RoRAB in Portugal indexed to 10Y sovereign yield, with a RoRAB cap & floor defined for a 3 year period Regulatory Return on Regulated Highlights period Asset Base Revenues RoR 6.3%(1) RAB: €3bn Electricity 3 years up €1,222m Floor/Cap: Portugal to Dec-17 (2016) Accepted cost base upda
Slide 43: Electricity system debt Spain and Portugal
5 Electricity system debt – Spain and Portugal Portugal: Electricity System Regulatory Receivables (€ bn) (€ bn) 5.3 5.2 Spain Portugal 4.8 4.9 4.3 System debt Owed to 3.0 3.7 25.0 5.2 2.4 3.0 (2015E) other creditors 2.5 System debt chg. -2.0 -0.3 (2016E) Owed to <1.0 Securitisation 2.4 2.3 2.2 FADE
Slide 44: Demand, tariffs and social tariff in Portugal
5 2014 2015 2016 Demand(1) +/-1% on demand growth = +/-€30m on system receivables -0.1% +1.1% +1.0% (YoY Chg.) Weak demand in 2014 was balanced by 2015 tariff update Avg. Retail Committed retail tariff CAGR: +1.5%-2.0% + CPI until 2020 2.8% 3.3% 2.5% Tariff (YoY chg.) Access tariff: inversel
Slide 45: Allowed revenues of regulated networks
5 2016E Allowed Revenues 2017E Allowed Revenues 2015 RAB - €3bn Quasi-Fixed(1) Pass- through(2) Low Cost of 24% Voltage 87% Capital 16% 37% 25% 34% 63% Costs 13% +/-1% on Depreciation demand: +/- High/Medium Variable ~€2m on Subject to efficiency Voltage revenues incentives Next regulatory period
Slide 46: Regulated networks capex and smart meters
5 Regulated networks – Capex breakdown (€ million) Gas Spain Electricity Spain Gas Portugal Electricity Portugal • Over 60% of clients with smart >60% SMART METERS ~380 360 meters installed by 2020E • DTCs(1): installation of 38K units 5% until 2020 2015 2020E • Selective capex enhancing SMART GRIDS
Slide 47: Flat operating costs in 2015-20
6 EDP Iberian operations (1) – OPEX/Gross profit (%) -2pp Corporate-wide: OPEX IV saving programme, natural retirements support 29 27 1.8% CAGR headcount reduction Generation: O&M optimisation, following CMEC phasing out; Additional costs from new hydro capacity 2015 2020E Supply: Portfolio gr
Slide 48: Iberian business summary
1 Networks€1.8bn Selective capex in smart grids; optimisation of maintenance CAPEX G&S Maintenance €0.5bn capex in generation G&S Expansion €0.3bn 2016-20 2 OPEX/ Further efficiency improvements Gross Profit (%) -2pp 2015-20 3 Sales to clients / Risk-controlled approach through hedging leveraging on
Slide 49: EDP Renováveis
EDP RENOVÁVEIS João Manso Neto, CEO EDP Renováveis
Slide 50: EDPR at a glance
#4 worldwide wind player EDP Group company focused 77.5% on wind and solar investments EDP SHAREHOLDING Leader in the most competitive WIND 4,412 MW 5,091 MW renewable technology ONSHORE Worldwide portfolio 12 COUNTRIES Young assets with long residual life 6 YEARS AVG. LIFE 204 MW Quality asset base
Slide 51: EDPR On Review, Market, Business Plan 2016-2020
1 EDPR On Review 2 Renewable market and competitiveness 3 EDPR Business Plan 2016-2020 56
Slide 52: EDPR 2014-2015 on target
1. Selective growth 2. Operational excellence 3. Self-funded business 2014-2015 on target 2014 to date Capacity Additions Load Factor (MW) (2015; MW) Target: Asset Rotation RoE 29% €0.7bn below avg. wind year Business Plan 2014-17 PT +1.1 GW NA Availability 2014-15 (2015; %) Proceeds already cash-in
Slide 53: Value accretive investments supported strong growth
Value accretive investments over the last 2 years… …supported strong growth Adj. EBITDA growth1 Target CAGR 13-172 MW Growth in Robust Contributing to +20% +9% 2014-15 Asset ROIC YoY EBITDA growth +10% yoy 9.0% to 9.5% +13% €1.07bn avg. MW growth 1st year full operations (vs. 10% in avg. MW) €0.9bn
Slide 54: Lower core opex from efficiency
Lower Core Opex on the back of superior efficiency and optimization Unique drivers for Opex efficiency Operating costs breakdown1 Core Opex/MW2 (€k) (%; €m) (Supplies & Services and Personnel Costs) M33 & Distinctive O&M strategy -2% Self-perform that keeps in-house high strategy valued-added activi
Slide 55: Retained cash flow and asset rotation
Retained Cash Flow1: strong cash generation capabilities A self-funding and value accretive model (€ billion) 2014-2015 Asset Rotation 2014 to date2 Avg. Selling IRR €2.0bn c.6.5% €0.6bn in 2015 (cost of equity) RoE last 2 years: decreasing 200bps €1.2bn 1.3 GW NA Reinvesting IRR double digit PT (eq
Slide 56: Renewable market and competitiveness
1 EDPR On Review 2 Renewable market and competitiveness 3 EDPR Business Plan 2016-2020 61
Slide 57: Wind competes with all energy sources
Wind already competes with all sources of energy… …and Solar PV is structurally set to increase its attractiveness Levelised Cost of Energy1 (LCoE) Indexed LCoE2 (€/MWh) (€/MWh, 2016) (10%) (22%) Wind Onshore 90 -168 Long-lasting technology with 95-117 92-100 61-106 69-98 decreasing LCoE 76-86 50-70
Slide 58: Growth drivers and worldwide renewables additions
Solid growth drivers in addition to its competitiveness 2016-2020: Renewables Worldwide Additions(1) (GW) Environmental concerns Wind 128 Onshore • New global agreement under COP21 • CO2 reduction targets in EU, US and China Solar PV 66 • Replacement of old/retiring capacity (namely Coal) Utility So
Slide 59: US wind and solar additions
Wind Onshore & Solar PV (utility scale) Wind and Solar PV (utility scale) to sum 70% of additions thru 2030 Regulatory support certainty (PTCs/ITCs) Technological progress 152 GW 70 GW Other 2% 7% Coal retirement Solar PV 26% (non-utility) 29% RPS demand Solar PV 37% (utility) 27% c.7 GW expected an
Slide 60: Europe short and medium term opportunities
Europe short term opportunities to… …escalate medium term, supported by: EU 2030 targets 2016-2020: Wind and Solar additions in Europe • 40% cut in greenhouse gas emissions compared to 1990 levels Expected additions in EDPR geographies • ≥27% share of renewable energy consumption 60% Wind Onshore De
Slide 61: Brazil and Mexico growth
EDPR’s strategy… …for growth in selective countries with strong fundamentals Strong renewable BRAZIL MEXICO electricity demand +13% Wind the main +10% Mainly from CAGR 15-20 growth driver CAGR 15-20 wind onshore Good natural resources (load factor) c.50% Top-notch 34%-45% Competitive Load factor win
Slide 62: EDPR Business Plan 2016-2020
1 EDPR On Review 2 Renewable market and competitiveness 3 EDPR Business Plan 2016-2020 67
Slide 63: Business plan 2016-2020 pillars
1. Selective growth 2. Operational excellence 3. Self-funding business 2016-2020 2016-2020 2016-2020 Prioritize quality investments c.700 Technical expertise to >97.5% Investing in visible growth €4.8bn in our core markets MW/year maximize production availability opportunities investments High visib
Slide 64: New business plan with higher capacity additions
Increasing 2014-17 Business Plan… …into a new Business Plan with stronger capacity additions and technological mix Capacity Additions Capacity Additions (MW; %) (MW; %) Solar PV Drivers Emerging 10% Markets 20% Brazil 10% Wind Onshore: fully competitive technology Europe 20% 500 MW/year United Europ
Slide 65: US PTC phase-down and front-loaded projects
Production Tax Credits scheme phase-down EDPR to deliver front-loaded projects maximizing projects returns Capacity additions (GW) Project MW State Secured Start of construction… …end of construction secured under negotiation/identified 2016 Projects 2016 2017 2018 2019 2020 2021 Hidalgo 250 Texas 2
Slide 66: Mexico and Canada
CANADA MEXICO 100 MW wind farm in Ontario Completion of 200 MW1 20-year supply contract wind farm with 25-year PPA 200 MW Eólica de Coahuila Under development Under construction 2019 project 100 MW 2016 project Nation Rise Wind Farm All projects with PPAs already awarded Platforms for future growth
Slide 67: Europe: Portugal, France, Italy, Spain
Europe to represent c.15% of EDPR growth plan Portugal France Capacity Additions (MW) Completion of Ventinvest projects Identified & pipeline projects Spain 20-year feed-in tariff 15-year feed-in tariff Portugal +0.2 GW +0.2 GW Italy Italy Spain Known projects & pipeline opportunities Projects award
Slide 68: Brazil projects
BRAZIL 120 MW Baixa Feijão > 45 % load factor project completed in 1Q16 117 MW awarded in 2011 JAU + Aventura 120 MW Baixa do Feijão mid/high double digit IRR 140 MW 257 MW Babilônia 2017-18 projects PPA price inflation linked awarded in 2013-15 Increased profitability due to higher Projects with PP
Slide 69: 2016-20 additions by technology and market dynamics
EDPR 2016-20 additions breakdown Different markets dynamics US: ITC scheme1 By technology (MW) Start of construction… United States 2016 … 2020 2021 2022 2023 Solar …end of construction PV The core growth market 10% Full ITC (30% capex) boosted by ITC extension Wind +3.5 GW Onshore 2016-2020 26% ITC
Slide 70: Offshore: United Kingdom and France
UNITED KINGDOM FRANCE Le Tréport Moray Firth 500 MW + 500 MW 1.1 GW Iles d’Yeu et de max. Noirmoutier Consent granted for offshore wind development; Partnership with Engie allows de-risking Partnership with CTG (up to 30%) and complementary skills Next step: CfD1 allocation Selected in May-14 for th
Slide 71: Load factor, availability and production
Delivering second-to-none metrics based on unique wind assessment know-how… …to maximize asset value Load Factor Technical Availability Production (%) (%) (TWh) +3pp +10% 97.6% > 97.5% CAGR 30% 21.4 2015 (P50) 2020E 2015 2020E 2015 2020E Accretive contribution from Predictive maintenance and O&M Gro
Slide 72: Operating costs breakdown
Operating Costs breakdown (2016-2020) Core Opex1 per MW Strong focus on efficiency -1% and cost control benefiting from Levies & Other CAGR economies of scale and… 2015 2020E …supported by a superior and higher efficient O&M strategy… Core Opex Core Opex1 per MWh -3% ~80% CAGR …leading to improvemen
Slide 73: Unique O&M strategy
Unique comprehensive O&M strategy at the end of initial contract warranty EDPR portfolio by O&M contract type (%; MW) Modular Maintenance Model (M3) lower costs Segregate & insource main maintenance EDPR ISP1 OEM2 activities Full ~50% 100% scope ~70% Self-perform (SP) 90%-70% Insource more activitie
Slide 74: EBITDA growth drivers
EBITDA growth supported by new and accretive capacity additions along with increased efficiency EBITDA growth (vs. 2015 Adjusted) Expected EBITDA growth drivers (€ million) +8% MW Addition Efficiency Other Items1 CAGR +11% +0.5% -3.5% CAGR CAGR CAGR New MW Ex-MW growth US 10-yr PTCs €1.07bn in opera
Slide 75: Retained cash flow and investment plan
Quality portfolio generating robust Retained Cash Flow A rigorous investment plan set to deliver solid returns Retained Cash Flow Cumulative for 2016-2020 2016-2020 (€ billion) 6.8 Capex and Financial Investments €4.8bn Onshore + Solar PV > 90% Offshore < 10% 3.9 New Asset Rotation up to €0.6bn (bas
Slide 76: Self-funding leveraging net profit
Self-funding leveraging Net Profit Net Financial Expenses +5% CAGR 2015-20 CAGR 2015-20 Increasing below EBITDA +8% Non-controlling Interests business growth Net Profit +16% Lower cost of Debt Declining IRR on Asset Rotation Growth funded through Asset Rotation and Retained Cash Flow Accretive Busin
Slide 77: EDPR plan summary
1 GWh Selective and profitable growth generating higher production CAGR 2015-2020 +10% 2 EBITDA Higher efficiency and accretive capacity additions CAGR 2015-20201 +8% 3 RCF Quality portfolio with sound cash flow generation 2020E €0.9bn 4 Net Profit Increasing profitability for EDPR shareholders CAGR
Slide 78: EDP Brasil
EDP BRASIL Miguel Setas, CEO EDP Brasil
Slide 79: Corporate profile, environment, strategic focus
1 Corporate profile 2 Macro, Energy and Regulatory Environment 3 2016-2020 strategic focus 85
Slide 80: EDP Brasil market positioning
1 EDP Brasil Market Positioning in Brazilian Electricity Market EDP - Energias Free Float de Portugal Largest private trading company (sales)(2) 51% 49% 4th 10.6 TWh of energy sold Energias do Brasil Largest private generation group (installed capacity)(3,4) 2.7 GW of installed capacity and 1.8
Slide 81: Generation assets and distribution concessions
1 Generation assets(1) Distribution Concessions Footprint in 7 States EDP Bandeirante: Generation mix: 69% Hydro, 4% Small Hydro, 27% Coal 28 cities in the state of São Paulo Santo Antônio do Jari 1.8 million customers Cachoeira Caldeirão 373 MW (50%) 219 MW (50%)(2) Concession until 2028
Slide 82: Macro, Energy and Regulatory Environment
1 Corporate profile 2 Macro, Energy and Regulatory Environment 3 2016-2020 strategic focus 88
Slide 83: GDP, inflation and Selic
2 GDP(1) Inflation rate(2) Selic Benchmark interest rate(3) (%) (%) (%) 14.25% 10.7% 10.90% 11.65% 9.90% 6.4% 7.14% 3.9% 5.8% 5.9% 3.0% 4.4% 1.9% 0.1% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 -3.8% 2011 2012 2013 2014 2015 Utilities: Utilities: Increased relevance of roll-over risk Defensiv
Slide 84: Reservoirs, thermal dispatch and spot price
2 Historical reservoirs level(1) Thermal dispatch(1) Spot price(1) (Average %, Southeast(2)) (Avg. GW, National Interconnected System) (R$/MWh, Southeast(2)) Average GSF(3) 113% 108% 689 15.9 15.4 100% 73% 91% 85% 88% 62% +28% 58% 12.3 11.9 51% 86 in 7.8 263 287 31% 30% 167 May-16 4.5 29 35 2011 201
Slide 85: GSF losses and regulatory receivables
2 EDP Brasil: GSF losses(1) EDP Brasil Regulatory Receivables (R$m) (R$m) 735 394 602 295 318 -7 2014 2015 1Q16 2014 2015 1Q16 Credit facility and sectorial funds: R$22bn to GSF risk framework mitigation: positive impact of compensate non-manageable cost R$41m in 2015 and R$10m in 1Q16 Extraor
Slide 86: 2016-2020 strategic focus
Agenda 1 Corporate profile 2 Macro, Energy and Regulatory Environment 3 2016-2020 strategic focus 92
Slide 87: Strategic focus and commitment to execution
3 A Commissioning of Cachoeira Caldeirão and São Manoel hydro plants on time and on cost Commitment to Investments in distribution execution New projects pipeline (medium sized hydro and thermal power plants) B Operational Operational stability of Pecém I coal plant excellence and Close th
Slide 88: Superior execution on time and on cost
A Hydro projects under construction and committed 50% EDP 50% EDP 33% EDP EDP Brasil Stake 33% CTG 50% CTG 50% CTG 33% Furnas Capacity (100%) (MW) 373 219 700 Capex (R$bn) 1.1 1.2 2.7(1) Debt/ Equity 67%/33% 55%/45% 50%/50% Startup of Commercial Sep, 2014 2Q16 May, 2018 Operation Official: Jan, 2015
Slide 89: Pecém availability and EBITDA
B Availability index EBITDA evolution (%) (R$m) Number of failures 523 79 88% 90% 76% 62% 23 201 14 13 46 -106 2013 2014 2015 1Q16 2013 2014 2015 1Q16 Dec-14: Agreement for the acquisition of the remaining 50% closed in May-15 Accounting gain in 2015 of R$885m Target to maintain minimum 90% availabi
Slide 90: Non-technical losses vs regulatory target
B EDP Bandeirante Non-Technical Losses (low voltage) EDP Escelsa Non-Technical Losses (low voltage) (%) (%) ANEEL’s target: ANEEL’s target: 9.83% 7.87% 13.9 -1.55p.p 15.9 17.9 -2.98p.p 12.2 14.9 10.6 2013 2014 2015 2013 2014 2015 Significant reduction of non technical losses in a year with tariff in
Slide 91: Strict cost control
B Opex 2013-15(1) (R$m) Opex Opex/Gross margin ex Pecém I -3% +16% OPEX -4.4% in real terms (increased by 12.6% in the past 2 years, below cumulative inflation of +8% 17.8%) ,200 1,116 991 963 1.039 70% ,000 60% Decrease of Opex/Gross Margin 800 50% 600 38% 38% 36% Zero Base Budget: 110 initia
Slide 92: Regulatory return in distribution
C Inflation Tariff annually adjusted by Return WACC: From 7.5% to 8.09% protected inflation in real terms Ke: From 11.36% to 12.26% The increase in regulatory WACC Increase starting point Component B guaranteed the stability of the B Losses component (regulated gross profit) Yearly reduc
Slide 93: Overcontracting in distribution
C Distributors overcontracting: Regulated PPA energy purchases / regulated energy sales to clients (1) Solutions under discussion (%, 2016E) 125% Reduction of energy contracts 120% Migration of special costumers EDP Bandeirante 115% Avg. Overcontracting in Brazil: 113.5% Availability contracts to be
Slide 94: Disposals and acquisitions
D Disposals: Acquisitions: 45% of EDP Renováveis Brasil 50% of Pecém I coal plant Cash proceeds: R$190m Installed capacity: 360 MW Capital gain: R$69m Equity investment: R$300m Closed in 4Q15 Badwill gain: R$885m Closed in May-15 Pantanal Mini-Hydros APS Soluções Installed capacity:
Slide 95: Generation sales contracted
D Generation sales breakdown (% of TWh) PPA contracted Uncontracted Controlled exposure to spot market: by 2020 5% 7% 8% 351 avg. MW from which 271 avg. MW at 13% 22% Enerpeixe (60% owned by EDP Brasil) 95% 93% 92% 87% Long-term PPAs protected by inflation with an 78% average price of R$177/MWh (Dec
Slide 96: Leverage, amortization and debt issuances
E Net debt/EBITDA(1) Gross debt amortization schedule(1) (R$m) (R$m) Net Debt 5,036 1,926 1.7x 1,186 1,297 4,000 1,150 2,335 2,531 1.7x 810 847 2,000 1.4x 1.3x 0 1.2x 2013 2014 2015 Cash 2016 2017 2018 2019 After 2020 Fully funded Debt issuances in 2014/2015 Issuances in 2016 YTD (R$ million) 2014 2
Slide 97: Capital increase conditions and use of proceeds
E Conditions Use of proceeds # shares Up to 130,434,782 common shares Subscription R$11.50 Price 1 To strengthen the Capital Structure Volume Up to R$1,500m 2 To reduce financial costs Indicative Timeline Notice to Shareholders: 3-May Capital Increase Process To meet medium-long term operation
Slide 98: Dividends and payout ratio
E Dividends and Payout ratio (R$m, %) Prudence in the last 2 years: 370 370 370 303 150% 300 108% 98% 197 75% 100% In 2014 and 2015 the Company applied 200 the policy of São Paulo Stock Exchange’s 100 25% 50% 25% (BM&F Bovespa) “Novo Mercado” 0 0% segment: minimum payment of 25% of 2011 2012 2013
Slide 99: EDP Brasil targets
1 Installed Commitment to execution Capacity 3.0 GW 2018 2 Operational excellence and superior efficiency 3 Net Debt/EBITDA < 2.5x Regulatory focus 4 Portfolio optimization Dividend 5 Policy (Payout) ≥ 50% Capital discipline and shareholder return Delivering on strategy to achieve targets and consol
Slide 100: Financials
FINANCIALS Nuno Alves, CFO Always present. Always future.
Slide 101: Free cash flow allocation 2014-2015
Free Cash Flow allocation: Annual Average 2014-2015 (€bn) €0.1bn/year net debt Taxes 3.5 reduction from organic FCF Net Interest 0.2 Maintenance Capex Minorities 0.8 Other impacts on debt: WC ex-Reg Receiv. hybrid bond issue: -€0.2bn & other 0.6 Regulated Receivables: -€0.1bn 0.2 Adver
Slide 102: Net investments and EDPR asset rotation
Net Investments(1): 2016E-20E Breakdown of accumulated Net Investments(1): 2016E-20E (€bn) (%) 1.7 Hydro and Thermal 1.6 Generation (2) Brazil Brazil (2) 1.2 Networks 8% and 21% 1.1 1.0 Net Expansion other Investments 30% 9% 0.6 Iberia Iberia 13% 22% 0.6 0.6 0.6 Maintenance Avg. Avg. Avg. 2014-15 20
Slide 103: 2016E-20E Outlook
2016E-20E Outlook CAGR 2015(1) 2016E 2015-20E EBITDA €3.6bn > €3.6bn ~3% Net Profit €850m ~ €900m ~4% EBITDA and Net Profit 2016 outlook: in line with previous guidance and current consensus EBITDA and Net Profit 2020 outlook: supported by growth in wind and slight market recovery (1) 2015 EBITDA an
Slide 104: EBITDA growth 2015-20
EBITDA Growth 2015-20(1) (%) CAGR CAGR ex-Forex Avg. capacity +8% CAGR in 2015-20 additions EDPR 3% with long term PPAs or feed-in tariffs, mostly in US 3.6 8% 37% EBITDA in local currency +4% CAGR, eroded by EDPR 30% EDP Brasil conservative assumption on EUR/BRL 13% 4% EDP Brasil 16% 0% Slight impr
Slide 105: EBITDA breakdown by geography and segment
EBITDA breakdown by geography and by segment 2015-2020E (%) LT Contracted 14% Generation & 12% 25% 17% 28% 28% 6% Supply Iberia 16% Rest of 6% 3% Europe 16% 15% EDPR 30% 19% 18% 37% EDP Brasil 16% 13% 46% 44% Regulated 26% 22% Networks Iberia (1) (1) 2015 2020E 2015 2020E Weight of regulated and LT
Slide 106: Regulatory receivables of Portuguese system
Regulatory Receivables of the Portuguese electricity system (€bn) 5.3 5.3 4.9 Steady decline of Portuguese electricity system Owned debt based on gradual increase of net tariff to other 3.0 3.7 3.0 2.7 creditors surplus 1.9 Assumption of lower volume of securitization deals: avg. €0.8bn/year in
Slide 107: Cost of debt projections
Net debt and monthly interest cost by Dec-2015 by currency Avg. cost of debt 2015-20E (%) (%) Net debt Interest Interest weight cost rate trend -30bp -20bp 4.7% EUR 67% 3.4% ~ 4.4% ~ 4.2% USD 24% 4.6% BRL 8% 11.3% 2015 Avg. Avg. 2016E-17E 2018E-20E Average cost of debt projections assuming upward tr
Slide 108: Free cash flow allocation 2016E-20E
Free Cash Flow allocation: 2016E-20E average (€bn) Taxes Avg. €0.4bn/year net debt reduction Net Interest 3.9 from organic FCF Maintenance Capex 0.4 Minorities 0.6 Additional avg. €0.4bn/year net WC ex-Reg Receiv. debt reduction from decline on & other 0.6 regulatory receivables 0.4 0.2 CTG deals
Slide 109: Improvement in credit ratios
Net Debt/EBITDA(1) FFO/Net Debt(1) (x) (%) Reported Reported (2) 4.0 24% 3.8 21% 17.5% 3.4 3.0 (2) 16.1% 2015 2018E 2020E 2015 2018E 2020E Improvement in credit ratios supported by organic Free Cash Flow growth (1) Adjusted by regulatory receivables. (2) 2015 figures have been adjusted: EBITDA = €3.
Slide 110: Geographical diversification and risk profile
EBITDA breakdown by business profile: 2005-2020E (%) Liberalized Regulated & LT Contracted Net Debt/EBITDA(1) EDP risk profile 2020: 4.5 4.1 4.0 3.0 3.1 75% weight of regulated/long term contracted 18% 12% 12% 25% EBITDA compares well vs. European Integrated 47% Utilities’ peer group 25% merchan
Slide 111: Net debt position and debt by instrument
EDP consolidated net debt position: Mar-16 EDP consolidated debt by instrument: Mar-16 (€ million) (%) Commercial Paper 7% raised at EDP Brasil 16,997 4% Bank loans and capital markets; Bank Loans Ring-fenced policy essentially ‘non-recourse’ to 28% EDP Brasil 1,221 EDP S.A. EDP Renováveis 789 68% B
Slide 112: Currency mix
Currency mix at EDP Group level in 2015 (%) Others 3% 2% 3% 7% 15% 16% BRL 23% 22% 13% USD EUR 60% 67% 68% (1) (2) Net Assets Net Debt EBITDA EDP Brasil fully funded in local currency (USD hedged to BRL at Pecém project level) USD debt raised at EDP level to fund EDPR US operations Exposure of N
Slide 113: Sources of liquidity
(€ million) Sources of liquidity (Mar-16) Maximum Number of Instrument Utilised Available Maturity Amount counterparties Revolving Credit Facility 3,150 21 0 3,150 Jun-2019 Financial liquidity by Mar-16: €5.4bn Revolving Credit Facility 500 16 250 250 Fev-2020 Targeting to cover 12-24 months of
Slide 114: Debt maturity profile
EDP consolidated debt maturity profile as of Mar-16 (€ bn) EDP SA & EDP Finance BV Hybrid Bond Other Subsidiaries Commercial Paper Avg. debt maturity by Mar-16: 4.8 years(1) 4.0 New debt issues focused on: 3.5 3.0 Bond markets 7-10 years 2.5 Banking loans > 5 years 2.0 1.5 1.0 0.5 0.0 2016 2017
Slide 115: Financial targets summary
1 Net Investment Net Expansion Investments focused on wind PPAs, mostly US €1.4bn Annual avg. 2016E-2020E 2 EBITDA Regulated and LT contracted EBITDA > 75% +3% CAGR 2015(1)-20E 3 Net Debt/EBITDA Reduction of financial leverage ~3.0x 2020E 4 Avg. Cost of Debt Decline in marginal cost of funding ~4.2%
Slide 116: EDP 2020
EDP 2020 António Mexia, CEO
Slide 117: Market positioning with low risk approach
Uncertainty levels + Market Positioning vs. market relevance Iberia: hedging and long position in clients Energy Prices Brazil & US: generation mostly with PPAs Political uncertainties Spain, Brazil, Portugal: Political & Regulatory All financially balanced electricity systems Developments U
Slide 118: Strategic pillars: growth, deleveraging, low risk
1 Focused Growth Long-term contracted renewable assets in core markets 2 Continue Financial Reinforce visibility on medium term Free Cash Flow Balancing growth Deleveraging & financial deleverage 3 Keep Low Risk Profile Strong weight of regulated and LT contracted activities Focus on profitability &
Slide 119: Net investments breakdown and capacity additions
1 Breakdown of accumulated Net Investments(1): 2016-20E LT Contracted renewables capacity additions: 2016-20E(2) (% of €bn) (% of new MW) Hydro Brazil Solar Wind Wind Europe to be secured 30% other markets Wind Brazil & Mexico 84% Regulated Networks 54% Regulated & LT Contracted 55% LT Contracted Re
Slide 120: EDPR asset rotation strategy and CTG partnership
2 Net Investments/EBITDA (%) EDPR Asset Rotation Strategy Net investments 2016-20 include €1.6bn target of Asset Rotation proceeds (~60% already executed/signed in 2016) 55% Value crystallisation of existing assets 49% Creating value by reinvesting proceeds at higher IRRs 39% 43% Partnership w
Slide 121: EDP Brasil shareholder structure and capital increase
2 EDP Brasil Shareholder Structure EDP - Energias EDP Brasil capital increase: Free Float de Portugal 51% 49% 1 To strengthen the Capital Structure Energias do Brasil Brazil Financial 2 To reduce financial costs Markets CDI Interest Rate May-16(1) 14.13% To meet medium-long term operational and 3 BR
Slide 122: Average residual useful life of generation
3 Average Residual Useful Life of EDP’s Generation – 2020E European Utilities: 2017E Net Debt/EBITDA vs. Residual Asset Life(2) by Technology(1) Hydro CCGT Wind & Solar Coal with DeNOx Nuclear 7.0 Net Debt / EBITDA 2017E (x) 6.0 (33%) 30 TERNA 5.0 RWE 2005(2) SRG (13%) 22 21 Avg. Residual Life A2A I
Slide 123: Shift to renewables PPAs enhancing risk profile
3 Weight of Long-term Contracted generation on EBITDA: 2005-20E (% of total EBITDA) PPA/CMECs Portugal EDPR Improved geographical diversification 44% 46% 40% 40% Higher weight of renewable assets with 16% 3% long useful life 24% Regulated networks in Iberia and Brazil 36% 37% as the other key
Slide 124: Reduction of CO2 emissions by more than 30% by 2020
3 EDP Group installed capacity by technology(1) Specific CO2 emissions (GW) (ton CO2/MWh) (2) Hydro Wind CCGT Other +137% +20% -55% -31% 29.9 0.60 24.9 11% 14% 12% 0.40 15% 12.6 44% 0.27 39% 76% 40% 71% 12% 6% 48% 32% 32% 42% 2005 2015 2020E 2005 2015 2020E % LT 54% 68% 63% Contracted(3) Reduction o
Slide 125: Contributing to global sustainability agenda
4 Achieve 75% of clean capacity by 2020 Generate Surpass 90% of smart meters in Iberia by 2030 Economic Provide energy efficiency products to reduce overall consumption by 1 TWh before 2020(1) Value Invest €200m in innovative projects by 2020 Manage Reduce CO2 specific emissions by 75% unt
Slide 126: OPEX IV target accumulated savings
4 OPEX IV Annual Cost Savings 2016-20E(1) OPEX IV Efficiency Programme Breakdown of cost saving target (€m) (%) By Business Unit By Category 200 Iberia EDPR Brazil HR O&M Client Services & MKT IT & Other 130 80 2016E 2018E 2020E OPEX/Gross profit to decrease from 27% in 2015 to 26% by 2020 Target ac
Slide 127: EDP dividend policy 2016-20E
5 EDP dividend policy for 2016-20E (€/share) +3% 0.190 0.185 2015 2016E 2020E Target payout ratio 65-75% Dividend floor to increase by 3% to €0.19/share from 2016 EPS growth to deliver sustainable dividend increases 137
Slide 128: EDP 2020 targets summary
1 Net Investments: avg. €1.4bn/year 2016-20 EBITDA Focused Growth +3% LT Contracted Renewables(1): +3.9GW 2016-20 CAGR 2015(2)-20 2 Continue Financial FFO/Net Debt: ~24% by 2020 Net Debt/EBITDA ~3.0x Deleveraging Avg. cost of debt: 4.2% by 2020 2020 % EBITDA 3 Keep Low Risk Renewables: ~76
Slide 129: Always present. Always future.
Always present. Always future. YEARS