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This Report
The Annual report of EDP – Energias de Portugal, S.A.
(“EDP”), which incorporates a chapter regarding
Corporate Governance, is prepared in accordance with
the provisions set out on Portuguese Companies Code
and Securities Code and in compliance with the
provisions set out on CMVM’s Regulations no. 4/2013
and no. 5/2008, concerning Corporate Governance and
Disclosure Requirements of the publicly traded
companies and under the terms of the Corporate
Governance Code of the Portuguese Corporate
Governance Institute, revised in 2020. The financial
statements presented in the report are prepared in
accordance with the International Financial Reporting
Standards (IFRS), adopted in the European Union.
EDP Group has opted to anticipate the reporting of the
annual financial report under the European Single
Electronic Format (ESEF). Therefore, pursuant to Articles
245 and 250-A of the Portuguese Securities Code, the
documents included in this Annual Report were prepared
in the ESEF Format and in accordance with the
specifications provided for by the Commission
Delegated Regulation (EU) 2018/815 of 17 December
2018, and in accordance with the subsequent
amendments, also taking into account the guidance
provided by the European Securities and Markets
Authority (ESMA) through the updated version
of the ESEF Reporting Manual.
Pursuant article 508º-G of the Portuguese Companies
Code, in the wording introduced by Decree-Law no.
89/2017, dated 28th July, EDP publishes autonomously
the Sustainability Report, in which it will be included
sufficient information for understanding the evolution,
the performance, the position and the impact of the
Group activities regarding the following questions:
environmental, social, referent to employees, to gender
equality, to non-discrimination, to human rights respect,
to corruption combat and to bribery attempts.
Additionally, EDP publishes a set of reports available at
:
•
Annual Report of the General and Supervisory Board;
•
Sectoral reports, in particular: Ethics Ombudsman’s
Report, Safety Summary and Stakeholders’ Report;
•
Annual and sustainability reports of the companies
EDP España, EDP - Energias do Brasil and EDP
Renováveis;
•
Sustainability Report, which endorses the issues
set by GRI methodology and explains the relation
between organizational processes and material
issues for EDP’s activities.
At EDP, we are in the business of innovating. Our 4 decade long track record
has turned us into better energy providers and pioneers of the green evolution.
Change has been our driver as we
deliver an agile network with more efficient,
smart and sustainable solutions. As leaders in the energy transition, we see
investment in renewables as an active way to engage with future generations,
promoting decarbonisation in energy production and consumption.
We are playing our part for a more balanced and sustainable world;
one that is inclusive, diverse and humane.
We’re changing tomorrow now.
01 EDP
1
1
Message From the Chairman
12
Our Year
16
EDP Group Profile
24
02 Strategic Approach
37
Global Energy Trends
38
Strategic Priorities
44
Risk Management
51
03 Performance
65
Group’s Financial Analysis
66
Business Area Analysis
70
Share Performance
79
Markets and Regulation of the Year
83
Risk Management of the Year
101
04 Corporate Governance
107
05 Remunerations Report
271
06 Financial Statements
293
07 Annexes
453
G
FROM DISRUPTION
TO EVOLUTION
Pioneering
the new
green normal
Changing tomorrow now.
Message From the Chairman
1
2
Our Year
16
Main Events
16
Key Metrics
18
A Company
20
Recognition
22
EDP Group Profile
24
Who We Are
24
Where We Are
26
How We Are Organized
28
Vision, Values and Commitments
32
Stakeholders
33
12
“Our ability to adapt and grow through this
difficult period is no accident. It is testament to
the strength of the business that has been built
over many years, transforming EDP from
a Portuguese utility company into a global
leader in the Energy Transition.”
13
ANNUAL REPORT 2020
Dear Shareholder,
There is no question that 2020 has been an extraordinary year for the world and we have all had to adapt to living our lives
very differently. Thus, I would like to begin by thanking EDP’s stakeholders, starting with our teams and suppliers, who
have risen to meet the challenges posed by the pandemic and continued to deliver on EDP’s promises. Also, a word to our
customers and partners for their trust in EDP and to our shareholders for their continued support. Our ability to adapt and
grow through this difficult period is no accident. It is testament to the strength of the business that has been built over
many years, transforming EDP from a Portuguese utility company into a global leader in the Energy Transition.
A Green Recovery
While the pandemic brought much of the world to a halt, it also accelerated some of the changes that were already
underway. Commitments from countries, sectors and companies to net zero continued at pace over the course of 2020.
From the European Union, to China, Japan and Canada, more countries signed up to net zero pledges, committing to
decarbonising their economies in the coming decades. 2021 was set in motion with the United States re-joining the
Paris Climate Agreement – it promises to be a decisive year on climate, culminating in governments, organizations and
civil society coming together at COP26 in November. Action on emissions reduction has also been tied to the recovery of
the global economy as it emerges from COVID. The EU, with a commitment to climate neutrality by 2050, has launched
the European Green Deal Investment Plan (EGDIP). This will see the mobilization of € 1 trillion to finance the transition
to a low carbon economy between 2021-30. On a global basis, if we want to limit the temperature increase to 1.5ºC,
we will collectively need to be adding more than 500 GW of renewables per year between now and 2030. That presents
a considerable opportunity for EDP. The expertise, operational capabilities, and competitive cost base that we have
developed in more than a decade of leadership in renewables means we are well placed to play a leading role in helping
the different countries where we are present meet their climate goals.
As the world has raised the bar on Climate Change, so too has EDP.
An ambitious strategic plan
Our 2021-25 strategic plan is underpinned by three axes: Accelerated and Sustainable Growth; a Future-Proof
Organization, powered by increased investment in innovation and digital transformation; and ESG Excellence and
Attractive Returns.
MESSAGE FROM
THE CHAIRMAN
OF THE EXECUTIVE BOARD OF DIRECTORS
Miguel Stilwell de Andrade
14
Accelerated and Sustainable Growth
Our bold and ambitious plan further reinforces our position as a leader in the energy transition, with an unprecedented
investment of € 24 billion. We will accelerate our renewables growth, namely in Europe and North America, seeking to
double our installed capacity in wind and solar in the next 5 years, adding 4 GW per year. We will continue to grow and
create value in our low-risk networks portfolio in Portugal, Spain and Brazil – a critical enabler of the energy transition –
investing more than € 3 billion to maximize value through grid modernization and operational excellence in distribution,
and superior execution of projects in transmission in Brazil. Finally, we will be investing € 0.9 billion in Client Solutions,
with a clear focus on efficiency and end-to-end digital transformation, coupled with ambitious targets in exciting new
growth avenues, namely, our commitment to growing our decentralized solar contracted capacity tenfold by 2025.
A future-proof organization
In 2020, we were recognized as Top Employer and as a Family Responsible Company (EFR). We were also privileged to
be included for the first time in Bloomberg's Gender-Equality Index, acknowledging our investment in our people and our
inclusive culture. We will continue to foster a global and flexible organization, supported by agile and resilient teams.
We will make significant investments in innovation and the digital transformation of the business, totaling € 2 billion.
Our ability to adapt to a sector in profound transformation will be strengthened by our commitment to keep empowering
and connecting our team around the world, while promoting talent and diversity.
ESG Excellence and Attractive Returns
We have increased our efforts to reduce emissions and decarbonise our portfolio and now expect to be totally coal-free by
2025 and all green by 2030, anticipating our carbon neutral targets by 20 years. This superior green positioning will enable
EDP to continue to lead the energy transition and create superior value for our shareholders.
The decarbonisation of our portfolio is well underway. In 2020, EDP announced the closure of most of its coal-fired power
plants in Iberia and in September we joined the Powering Past Coal Alliance, the first global alliance to accelerate the end
of coal power generation. We are also part of the Race to Zero, a global coalition set up by UN Global Compact, the Science
Based Targets initiative, and We Mean Business, to support a zero-carbon recovery that prevents future threats, creates
decent jobs, and unlocks inclusive, sustainable growth. Lastly, it goes without saying that sustainable development has
been one of the main axes of our strategy. Through EDP’s investments and a thorough social responsibility approach,
we have continued to contribute to 9 out of the 17 Sustainable Development Goals of the United Nations Agenda for 2030.
We have also demonstrated a clear commitment to the 10 principles of the United Nations Global Compact, in line with
best practices in areas such as human rights, labor and the environment.
A strong track record in execution
Our 2019-22 Strategic Update outlined a set of divestment projects aimed at deleveraging, de-risking and value
crystallization, with the overarching goal of enabling growth in renewables and increasing our alignment with the energy
transition. The plan included an ambitious deal framework for the execution of over € 2 billion of disposals to promote the
reshuffling and optimization of the Iberian portfolio. The successful implementation of the sale of six hydro power plants,
in Portugal, and a portfolio of 2 CCGTs and B2C clients, in Spain, allowed EDP to also pursue growth in Iberian grids. EDP
acquired Viesgo, in combination with a rights issue of € 1billion at EDP level, more than doubling our presence in electricity
distribution in Spain, reinforcing our low risk profile, as well as increasing our renewables portfolio with 0.5 GW capacity
in Iberia. Our balance sheet was further supported by the continuation of our asset rotation program, which allows EDP to
recycle capital and improve project returns by developing and then selling down interests in projects. In 2020, we sold an
80% stake in a 563 MW wind and solar portfolio in the United States and a majority interest in a 242 MW operating onshore
wind portfolio in Spain.
Despite the challenges presented by the pandemic, EDP’s recurring net profit increased by 6%, to € 901 million, supported
by our global presence, the growth in renewable energy generation and a low-risk profile. On top of this, the hard work
of our teams enabled us to achieve most of the 2022 targets in 2020, leading to a 43% increase in EDP’s share price
performance, 30 percentage points above our European peers. This effort was done while maintaining high levels of
employee engagement and I am proud to say that in 2020 EDP was recognized as a best-in-class company for people
& organizational practices worldwide.
15
ANNUAL REPORT 2020
A year of innovation and expansion
We recognize that to remain at the forefront of the sector, we must continue to evaluate and test new energy generation
alternatives, investing in potential clean technologies. We believe in the long-term potential of hydrogen in the
decarbonisation of power and recently created a new business unit, H2BU, to reinforce the integration of green hydrogen
in our portfolio. In this context, we joined the Choose Renewable Hydrogen initiative last May, which seeks to promote and
defend Europe’s commitment to green hydrogen, generated from renewable powered electrolysis rather than fossil fuels.
In parallel, EDP launched a new unit to lead and promote storage projects, which aims to reach 1 GW capacity by 2026.
In 2020 the company delivered the first power to the Portuguese grid from WindFloat Atlantic. WindFloat Atlantic hosts the
world’s largest floating wind project, with three 8.4 MW turbines – enough to power 60,000 homes. The project opens the
way for the cost-effective deployment of floating wind farms located in deep water at scale, demonstrating how our culture
of continuous innovation supports our growth targets.
We have continued to expand around the world through 2020, whether directly or via our new joint venture for offshore
wind between EDPR and Engie, Ocean Winds. Formed in March, Ocean Winds incorporated the marine wind pipelines of
both companies with 1.5 GW under construction and a further 5 GW under development. Benefitting from the experience
and resource of both parent companies, Ocean Winds is targeting between 5 to 7 GW in operation or under construction
plus 5 to 10 GW at an advanced stage of development by 2025.
Through our supply business we also took some important steps to promote the adoption of electric mobility at both
national and European levels. Besides providing more and better charging options to its customers, EDP is now the
exclusive energy partner of the “Electric Vehicle Users Association” in Portugal. The company has also joined Charge Up
Europe in efforts to foster the development of the European charging network. Both initiatives are part of our efforts to
enable the energy transition to which we, as a company, are deeply committed.
A team for the future
In January this year, our shareholders elected a new Executive Board. As we start this new cycle, I would like to extend my
thanks to all the members of the previous Executive Board, their contribution has been fundamental to EDP’s growth and
positioning. This renewed Board, which presents a wealth of diverse experience and expertise, will most certainly continue
to build on their legacy. We are committed to deliver on our 2021-2025 strategy, securing EDP’s growth and ensuring value
creation for all our stakeholders.
A special word of thanks to the General and Supervisory Board and their collaboration throughout a very demanding year
for EDP. The institutional respect and governance mechanisms enabled the company to pursue its purpose and deliver on
our commitments. In this context, I would also like to reinforce the fundamental role assumed by our shareholders and the
confidence they placed in EDP, namely in the capital increase that took place in August 2020.
As a company, we are taking steps to protect the future of humanity and believe we not only have a responsibility to
demonstrate real action ourselves, but more importantly an opportunity to set the bar for industry to meet.
I want to conclude by thanking EDP’s team, namely the 12,180 employees who are working tirelessly to realize our bold
and aspirational ambitions. In a year where our communities have been tested and stretched, they have shown profound
dedication, professionalism and resilience. I have been privileged to play a role in EDP’s evolution over the past 20 years
and I am honored to be leading this team in this next cycle.
16
APR
—
MAY
—
JUN
JAN
—
FEB
—
MAR
MAIN
EVENTS
1.2. Our year
1.2.1.
28 FEB
Fitch affirms EDP at
“BBB-” and revises
outlook to positive
7 APR
EDP issues a €0.75 bn 7-year
Green Bond at 1.625%
16 APR
EDP’s Annual General
Shareholders’ meeting
18 MAY
EDP to sell 2 CCGT plants and B2C
supply business in Spain for €0.5 bn
17
ANNUAL REPORT 2020
OCT
—
NOV
—
DEC
JUL
—
AUG
—
SEP
11 AUG
Registration of Share
Capital increase of EDP
2 SEP
EDP announced $0.7 bn
Asset Rotation deal for wind and
solar portfolio in North America
17 SEP
EDP issues a $0.85 bn
7-year green bond at 1.71% coupon
13 OCT
EDP secures a PPA for two solar
projects in the U.S. totalling
approximately 100 MW
14 DEC
EDP awarded with long-term
CfD for 220 MW at auction in
Poland
6 JUL
Appointment of Miguel
Stilwell de Andrade as
interim CEO of EDP
14 JUL
Anticipation of the
shutdown process of coal
power plants in Iberia
15 JUL
EDP enters into an agreement
with Macquarie to acquire
Viesgo for €2.7 bn and
launches a €1 bn rights issue
10 AUG
EDP announces €0.5 bn
asset rotation deal for wind
farms in Spain
18
2019
2019
3,731 M€
1
512 M€
28%
0.14€
28%
0.21€
2020
2020
3,950 M€
801 M€
EBITDA
NET PROFIT
2
1
– Includes restatement due to changes in results in Joint Ventures and Associates.
2
– net profit attributable to EDP equity shareholders.
3
– considers capex of EDP group, organic financial investment €806
M
(31 Dec 2019: €318
M
) and asset rotation -€1,678M (31 Dec 2019: -€970M).
Opex/gross profit (%)
2019
13,827 M€
2020
12,243 M€
NET DEBT
Adjusted net debt/EBITDA (x)
Net profit per share (euros)
2019
1,607 M€
2020
2,037 M€
NET INVESTMENTS
3
Gross investments
em renováveis (MM€)
1.5 MM€
2.9 MM€
Financial data
KEY
METRICS
1.2.2
3.6x
3.2x
Operational data
316 KM
1,125 KM
Operating network (km)
Under construction network (km)
+180% VS 2019
-15% VS 2019
TRANSMISSION
GENERATION
23,680
MW
64,318 GWH
1,228 MW
2,051 MW
Installed capacity
Produção Net generation
Installed capacity - equity
Capacity under construction
-11% vs 2019
1
-4% VS 2019
+11% VS 2019
+209% VS 2019
SUPPLY
80,273 GWH
8,615 (‘000)
17,070 GWH
691 (‘000)
Electricity customers
Electricity customers
Gas supplied
Gas customers
-3% VS 2019
-12% VS 2019
3
-12% VS 2019
-57% VS 2019
3
76,123 GWH
11,274 (‘000)
Electricity distributed
Electricity supply points
-4% VS 2019
+8% VS 2019
2
DISTRIBUTION
1
– Considers the sale of 1,683MW in December to ENGIE.
2
– Considers the acquisition of 699 thousand supply points in Spain from Viesgo.
3
– Considers the sale of 1,140 thousand electricity clients and 898 thousand gas clients in December to Total.
20
A
COMPANY
1.2.3
4 TWH
37%
79%
115
COMMITTED TO THE
COMPETITIVENESS
CUSTOMERS AND SUPPLIERS
Saved energy by costumers since 2015
+17% vs 2019
Customers with electronic invoice
+8 P.P. vs 2019
Customer satisfaction
+2 P.P. vs 2019
Accidents at work with suppliers
1
+40% vs 2019
25%
12,180
25%
41
24 H/P
17
HUMAN AND
INCLUSIVE
OUR PEOPLE
Female employees
0 P.P. vs 2019
Employees
+4% vs 2019
Female employees in management position
0 P. P. vs 2019
Nationalities
-3 vs 2019
Average trainning per employee
-31% vs 2019
Accidents at work with employees
1
-41% vs 2019
1
– Workers who are not employees but whose work and/or workplace is controlled by the organization
21
ANNUAL REPORT 2020
60%
111 M€
1,132
192
MORE
DIGITAL
DIGITALIZATION AND INNOVATION
Smart meters in Iberia
+32 P.P. vs 2019
Investment in RD+i
-32% vs 2019
Automated activities
+34% vs 2019
Concluded MVPs
+109% vs 2019
1,051
14,457
21 M€
AWARE OF
EXPECTATIONS
COMMUNITY
Beneficiary entities
-75% vs 2019
Volunteering time
-38% vs 2019
Volunteer investment
-18% vs 2019
79%
146 T/GWH
86%
94%
1,413 KTCO
2
MORE
SUSTAINABLE
PLANET
Renewable installed capacity
+6 P.P. vs 2019
Specific CO
2
emissions
-33% vs 2019
Recovered waste
-5 P.P. vs 2019
Assets certified by ISO 14001
-2 p.p. vs 2019
Avoided CO
2
emissions in clients
+21% vs 2019
22
1.2.4
RECOGNITION
EDP acknowledged as
one of the world's most
sustainable utilities
in the Dow Jones Sustainability
Index World for the 13
th
consecutive year and in the
Dow Jones Sustainability
Index Europe for 11 years
Másfamilia
Foundation awards
EDP Renewables
excellence level
as a family-responsible
company
EDP Brasil among the
three best companies
receiving the ANEEL
Quality Award
in the Highest Growth
Concessionaires
category 2019/2018
EDP Renewables
enters the Bloomberg
Gender-Equality Index
for the first time
in recognition of the fact
that it is one of the world’s
most committed companies
to gender equality
EDP wins the Best
Investor Relations Office,
Best Financial Report
and Best Sustainability
Communications prizes
at the IR Magazine
Awards-Europe
EDP Renewables
recognised as a
Top Workplace by the
Houston Chronicle
which recognises
Houston-based
organizations with the
best working conditions
23
ANNUAL REPORT 2020
Miguel Setas, chairman
of EDP Brasil, receives the
Order of Ipiranga medal
the state of São Paulo’s
highest honour
Spark Agency
names EDP one of
the Top 10 most
attractive companies
to work for
in Portugal
EDP Distribuição’s
Sharing Cities Project
(H2020) is distinguished
by the European Union
EDP wins award for
the EDP ON App
project, in the Internal
Channel category
(Intranet, Digital Workplace
& App) at the European
Excellence Awards
EDP acknowledged as
one of the most ethical
companies in the world
by Ethisphere for the
9
th
consecutive year
EDP Comercial
distinguished by
Eurelectric in the
Innovation category for its
E-mobility project: EV.X
an e-mobility solution in
“Innovative Households’
Services”
EDP Renewables
receives AENOR
certification
for its management protocols
during the COVID-19 pandemic
24
W
I
N
D
H
Y
D
R
O
C
C
G
T
C
O
A
L
S
O
L
A
R
O
U
T
R
O
S
64 TWh
74%
Installed capacity
Net electricity
generation
Renewable
sources
1.3. EDP group profile
1.3.1.
Generation is the first activity in the value chain
of the electricity sector. Power plants transform
the various energy sources into electricity. These
energy sources may be of renewable origin (water,
wind and sun) or non-renewable (coal, natural gas,
nuclear and cogeneration).
In the transmission the energy generated is
delivered to the transport network, which is made
of very high voltage lines and which then channels
the energy to the distribution network. This is a new
business segment being developed in Brazil.
47%
30%
8%
2%
1%
12%
1,125 KM
Transmission network
under construction
TRANSMISSION
316 KM
Operating network
WHO
WE ARE
EDP is a multinational utility vertically integrated and
present throughout the whole value chain of electricity
and in the activity of gas supply. Over its more than
40 years of history, EDP has been cementing a relevant
presence in the world energy panorama. Highlighting
its renewable energy portfolio, it is well positioned for
the challenges of the energy transition.
24 GW
GENERATION
25
ANNUAL REPORT 2020
DISTRIBUTION
SUPPLY
In the distribution activity the transported
energy is channeled to the distribution grid.
The distribution network allows the flow of energy
to the supply points. Electricity distribution
networks are composed of high, medium and low
voltage lines and cables. Substations, processing
stations and public lighting installations as
well as the necessary connections to consumer
installations and power stations are also an integral
part of the distribution networks.
In the supply activity the distributed energy arrives
at the supply point and is sold by the supplier.
Throughout the electricity and gas value chain,
supply is the closest activity to the customer
and responsible for the relationship with final
consumers.
8,615,444
Electricity customers
76 TWh
Electricity
distributed
374,691 KM
312,433 KM
4,050,442
62,258 KM
4,565,002
Network
Distribution
overhead lines
Customers in
liberalized market
Distribution
underground lines
Customers in
last resort
691,370
Gas customers
656,952
Customers in liberalized market
34,418
Customers in last resort
26
NORTH
AMERICA
Canada
USA
Mexico
SOUTH
AMERICA
Brazil
Colombia
Peru
WHERE
WE ARE
1.3.2
Conventional generation
Renewable generation
Transport
Distribution
Supply
Offices
Employees
Portugal
Spain
Canada
Colombia
USA
Mexico
Brazil
Peru
China
Poland
Romania
Italy
United Kingdom
Belgium
France
Greece
Ireland
Mozambique
Nigeria
5,825
58
15
1
3,232
14
2,084
36
758
2
1
4
49
10
90
EDP is present in 19 countries
and 4 continents counting
with 12,180 employees.
27
ANNUAL REPORT 2020
AFRICA
Mozambique
Nigeria
ASIA
China
EUROPE
Portugal
Spain
France
Belgium
Ireland
United Kingdom
Italy
Greece
Poland
Romania
12,180
Employees
19
Countries
we are in
28
HOW WE ARE
ORGANIZED
1.3.3
Business areas
EDP operates in 3 business areas:
OF GROUP'S EBITDA
12%
OF GROUP'S CAPEX
4%
Hedging portfolio and growth
in new downstream
CLIENT SOLUTIONS &
ENERGY MANAGEMENT
NETWORKS
Portfolio stabilizer
OF GROUP'S EBITDA
23%
OF GROUP'S CAPEX
22%
Key growth platform
RENEWABLES
65%
74%
OF GROUP'S EBITDA
OF GROUP'S CAPEX
29
ANNUAL REPORT 2020
Meadow Lake, Indiana, USA
30
Governance
HOW WE ARE
ORGANIZED
1.3.3
Shareholder's Structure
EDP's governance structure is based on the dual model
and consists of the General Meeting, Executive Board
of Directors, General and Supervisory Board and the
Statutory Auditor.
The separation of management and supervision roles
is embodied in an Executive Board of Directors, which
is responsible for the management of the company's
business, and a General and Supervisory Board,
the highest supervisory body.
The dual model of corporate governance in place in EDP has
allowed effective separation of the company's supervision
and management in pursuit of EDP's goals, interests and its
shareholders, employees and other stakeholders, thereby
contributing to achieving a degree of trust and transparency
necessary for its adequate functioning and optimisation.
Furthermore, this model has proved appropriate to the
company's shareholder structure as it allows supervision
by key shareholders on the General and Supervisory Board.
3.13%
Norges Bank
7.20%
Oppidum
2.19%
Sonatrach
2.27%
Qatar Investment Authority
55.41%
Remaining Shareholders
0.49%
EDP (Treasury Stock)
21.55%
China Three Gorges
2.70%
AllianceBernstein L.P.
5.06%
Blackrock, Inc.
31
ANNUAL REPORT 2020
EDP Corporate Bodies
General and Supervisory Board
•
Luís Filipe Marques Amado
Chairman
•
Dingming Zhang
Vice-Chairman
China Three Gorges Corporation
•
Shengliang Wu
China Three Gorges International Corp.
•
Ignacio Herrero Ruiz
China Three Gorges (Europe), S.A.
•
Li Li
China Three Gorges Brasil
Energia Ltda.
•
Eduardo de Almeida Catroga
China Three Gorges (Portugal),
Sociedade Unipessoal, Lda.
•
Felipe Fernández Fernández
DRAURSA, S.A.
•
Fernando Maria Masaveu Herrero
•
Mohammed Issa Khalfan
Alhuraimel Alshamsi
Senfora BV
•
Nuno Manuel da Silva Amado
Banco Comercial Português, S.A.
•
Karim Djebbour
Société National pour la
Recherche, la Production, le
Transport, la Transformation et la
Commercialisation des Hydrocarbures
(Sonatrach)
•
Maria Celeste Ferreira
Lopes Cardona
•
Ilídio da Costa Leite de Pinho
•
Jorge Avelino Braga de Macedo
•
Vasco Joaquim Rocha Vieira
•
Augusto Carlos Serra
Ventura Mateus
•
João Carvalho das Neves
•
María del Carmen
Fernández Rozado
•
Laurie Lee Fitch
•
Clementina Maria Dâmaso
de Jesus Silva Barroso
•
Luís Palha da Silva
Statutory Auditor
•
Pricewaterhouse Coopers &
Associados - Sociedade de
Revisores de Contas, Lda.,
João Rui Fernandes Ramos
•
Aurélio Adriano Rangel Amado
Alternate Statutory Auditor
Executive Board of Directors (2018-2020)
•
António Luís Guerra Nunes Mexia
1
•
João Manuel Manso Neto
1
•
António Fernando Melo
Martins da Costa
•
João Manuel Veríssimo
Marques da Cruz
•
Miguel Stilwell de Andrade
•
Miguel Nuno Simões
Nunes Ferreira Setas
•
Rui Manuel Rodrigues
Lopes Teixeira
•
Maria Teresa Isabel Pereira
•
Vera de Morais Pinto
Pereira Carneiro
•
Miguel Stilwell de Andrade
•
Miguel Nuno Simões
Nunes Ferreira Setas
•
Rui Manuel Rodrigues
Lopes Teixeira
•
Vera de Morais Pinto
Pereira Carneiro
•
Ana Paula Garrido
Pina Marques
Executive Board of Directors elected on 19 January 2021
1
– By judicial decision issued on July 6th 2020, the identified directors weres suspended from their respective functions under judicial procedure NUIPC 184/12.5TELSB
32
1.3.4
A global energy company, leading the
energy transition to create superior value.
INNOVATION
With the aim of creating value
in the many areas in which we
operate.
SUSTAINABILITY
Aiming to improve the quality
of life of current and future
generations.
HUMANIZATION
Building genuine and trusting
relationships with our employees,
customers, partners and
communities.
SUSTAINABILITY
We assume the social and
environmental responsabilities
that result from our performance
thus contributing towards the
development of the regions in
which we operate.
We avoid specific greenhouse
gas emissions with the energy we
produce.
We ensure the participatory,
competent and honest governance
of our business.
CLIENTS
We place ourselves in our clients’
shoes whenever a decision has to
be made.
We listen to our clients and answer
in a simple and clear manner.
We surprise our clients by
anticipating their needs.
PEOPLE
We join conduct and professional
rigour to enthusiasm and initiative,
emphasizing team work.
We promote the development of
skills and merit.
We believe that the balance
between private and professional
life is fundamental in order to be
successful.
RESULTS
We fulfil the commitments that we
embraced in the presence of our
shareholders.
We are leaders due to our capacity
of anticipating and implementing.
We demand excellence in
everything that we do.
VALUES
COMMITMENTS
VISION
33
ANNUAL REPORT 2020
STAKEHOLDERS
MANAGEMENT
1.3.5
In the context of extraordinary challenges worldwide,
the need to maintain a dialogue with a broad range of
stakeholders to face shared challenges has gained even
more strategic relevance.
The importance of this activity is increasingly central
to the global business landscape. However, EDP's
commitment to this subject is not new and was even a
pioneer. Almost a decade ago, EDP set up the Institutional
Relations and Stakeholders Department, whose purpose
is to contribute to the execution of its business plan,
improve its reputation among priority stakeholders and
continue to achieve international excellence in this area.
Incorporating this vision as a necessary and essential
condition for the business itself, allows the EDP Group to
ensure the strength and sustainability of its results.
Given the great capillarity of this activity, both at a
strategic and operational level, employees from different
business areas are counterparts for the stakeholders. It
is, therefore, essential to ensure that they have access to
awareness-raising actions. A good example is the one
carried out in 2020, through the provision of e-learning on
Stakeholder Management, which had the participation of
more than half of the employees in Portugal.
Efficient stakeholder management implies that the
views of interested parties are heard, considered, and
incorporated into the company's activity. In this sense,
EDP frequently conducts consultations with a wide range
of stakeholders, hearing several segments in Spain,
Brazil, and the United States of America in 2020.
In Portugal, investors and suppliers were enquired either
through online surveys or through individual interviews.
Finally, we are pleased with the international recognition
that the commitment and permanent deepening of
the EDP Group's relationship with its stakeholders has
received. Namely by the fact that EDP was considered
Best in Class, for the fourth consecutive year, in the
Stakeholder Engagement and Policy Influence criteria of
the Dow Jones Sustainability Index.
Employees and trade
unions
Suppliers
Customers
Scientific community
Competition
Financial entities
Shareholders
investors
NGO
Local communities
Local government
Government public
bodies regulation
Parliament and
political parties
International
institutions
SOCIAL &
TERRITORIAL
ENVIRONMENT
VALUE CHAIN
MARKET
DEMOCRACY
O
A
C
T
FROM TOMORROW TO BEYOND
Changing tomorrow now.
Powering
a sustainable
lifestyle for
a brighter future
Global Energy Trends
38
Strategic Priorities
44
Strategic Update 2019-22
44
Strategic Plan 2021-2025
48
Strategic Guidelines Compliance
50
Risk Management
52
38
Strategic
Approach
2.1. Global energy trends
Decarbonize requires a change in paradigm
Global
carbon emissions from the energy sector in 2019 remained constant compared to 2018
and are estimated to have
dropped significantly in 2020 due to the Covid-19 pandemic. The International Energy Agency (IEA) estimates in its current
policy scenario (Stated Policies Scenario) of the World Energy Outlook 2020 (WEO20) that between 2019 and 2040 carbon
emissions will remain stable, which represents a downward revision of expected emissions. Even so, this trajectory in
emissions is well above what is necessary to limit the global temperature increase to 1.5°C compared with the pre-industrial
values as defined in the Paris Agreement.
This stagnation of emissions is expected to occur despite the expected increase in primary energy consumption by 19%
by 2040, essentially due to the reduction in coal consumption and the increase in the use of renewable energy. In this
scenario, it is estimated
that in 2040, fossil fuels will still represent 73% of primary energy consumption
, with renewable
energy sources accounting for 22% and nuclear energy the remaining 5%.
The global commitment to fight climate change increased during 2020, and it is estimated that almost 75% of the world’s
Gross Domestic Product (GDP) is produced in countries, regions or cities that have already established or are setting
a
goal of achieving carbon neutrality
. Some of the regions that have already set targets for achieving carbon neutrality
by 2050 include the European Union, Canada, Japan, South Africa, South Korea and, more recently, the United States,
with China and Brazil having defined a carbon neutrality target by 2060. It is worth to highlight that, for the United States,
the new President Joe Biden has fulfilled his promise of re-signing the Paris Agreement on his first day as president.
Despite all the positive signs, there are still several world regions, such as India and Russia, that have not established
carbon neutrality as an objective to be achieved. The need to accelerate decarbonization worldwide and align with the
trajectory defined by the Paris Agreement was reinforced in December 2020 by António Guterres, Secretary-General
of the United Nations, who asked all world leaders to declare a state of climate emergency.
39
ANNUAL REPORT 2020
Source: International Energy Agency,
World Energy Outlook 2020 (
2040 figures based on Stated Policies Scenario)
Decarbonization as an economic engine
2020 was marked by the global development of the
Covid-19 pandemic
. Several countries have implemented containment
measures to try to control the contagion, including lockdowns, limitations on mobility and reduced opening hours for commerce
and services. These measures had significant economic impacts, and it is
estimated that world GDP has fallen by more than
4% in 2020
and that the recovery in some regions may not occur before 2025, and also social impacts, with an increase in
unemployment and the widening of inequalities.
In order to support the
economic recovery
, stimulus packages for economic development have been implemented all over the
world. In particular,
investment in renewable energy sources, energy efficient and low carbon technologies and digitalization
have been identified as one of the main vectors in the allocation of funds, in order to promote a new model of economic growth
and a more resilient society. In fact, it should be noted that environmental sustainability and economic growth are no longer
seen as a trade-off but rather as complementary aspects of an integrated model for prosperity.
In July 2020, the European Council approved the creation of the “Next Generation” economic recovery fund, with € 750 billion,
and the restructuring of the European Union’s multi-annual financial budget for 2021-2027, of around € 1,100 billion. Of the total
of
€ 1,800 billion, at least 30% should be allocated to investments that contribute to reducing climate change
. The agreement
was finally settled on 11 December 2020.
Additionally, the fight against
energy poverty
should be an aspect to be considered in stimulus packages, through the creation
of specific funding lines for vulnerable consumers, with a special focus on the application of
energy efficiency
measures.
Funding building renovation and purchasing efficient equipment, supported by the development of education measures
for the population, will enable consumers to reduce their energy needs, free the family budget and improve thermal comfort.
The internalization in the energy markets of
the environmental and social costs of carbon emissions
, for example through
a price associated with these emissions, supports a strong price signal needed to encourage investment in energy efficiency
and low carbon technologies. This strategy has already been implemented in some European countries, although its
implementation is sometimes complex. In order to ensure that the carbon price does not distort energy markets by reducing
its effectiveness, it should be designed with the widest possible geographical scope and common to all economic and energy
sectors, taking into account the emissions associated with each energy source on
the polluter-pays principle
. The potential
negative impact in economic and distributional terms should be minimized or even reversed by efficient recycling of tax
revenues, through the creation of funding lines for low carbon technologies and the reduction of other taxes (such as income
taxes). The possible loss of competitiveness of industries facing international competition must be tackled through specific
compensations or the taxation of imported products on the basis of their associated emissions.
26%
32%
23%
5%
14%
Sources of primary energy in the World
Coal
Oil
Natural Gas
Nuclear
Renewables
2019
19%
28%
25%
5%
22%
2040
40
The role of the consumer in the energy transition
Energy efficiency
is key for decarbonization, as it
benefits the environment
,
reduces energy costs and external energy dependence
. The continuous
improvement in the efficiency of energy uses explains the
decoupling
that has been observed in the last years between economic growth
and energy demand.
Energy efficiency should also be considered as the main instrument to fight
energy poverty
, through measures such as
funding the renovation of
buildings and the acquisition of efficient appliances
, and supported by
educational programs, thus allowing vulnerable consumers to reduce their
energy needs and improve thermal comfort.
In the previous years,
the electricity consumption in the World has been
growing twice as much as the total energy consumption
. Electrification
of other energy uses is a trend that has come to stay, the discussion is
on the magnitude and the speed of this process.
In effect, electrification has two major benefits: reduction of energy
consumption and higher renewables penetration.
On one hand, electric
technologies, such as electric vehicles and heat pumps, are more efficient
than conventional alternatives, which translates into a reduction in total
energy consumption. As an example, the efficiency of an electric vehicle
is at around 80%, against 25% from an internal combustion engine vehicle.
On the other hand, the electricity sector will continue to be responsible for
the highest levels of renewables’ penetration, as there is plenty of potential
to install new renewable capacity in a cost-effective manner.
Several policies might be taken to accelerate the electrification of demand, such as:
•
Change the mechanism to finance renewables,
as despite electricity consumption represents only around 25%
of energy demand, the electricity consumers bear most of its cost (more than 80% in Portugal and Spain);
•
Redesign the tariff structure,
as there is an enormous disparity between the structure of costs in the electricity sector,
which is mostly fixed, and the tariff structure, which is essentially variable, thus penalizing the marginal cost of
electricity to end consumers;
•
Devote energy efficiency funds
to the acquisition of efficient electric appliances, in particular for
vulnerable
consumers.
Electricity
demand
Energy
efficiency
41
ANNUAL REPORT 2020
Source: International Energy Agency,
World Energy Outlook 2020
The decarbonization of energy supply
Despite the low contribution of renewable energy sources in terms of primary
energy, this is not the case in the electricity sector. Indeed,
renewable energy
sources are expected to grow from 27% in 2019 to 47% in 2040 in the
electricity generation mix
, according to the scenario of current policies
(
Stated Policies Scenario
) from the IEA, with special emphasis on
investments in wind energy and photovoltaic solar energy. It is also important
to highlight the role of this last technology for
selfconsumption
, which allows
not only to reduce grid losses, but has also a crucial role
for the
electrification of rural areas
in the World.
Furthermore, the other sectors have much lower uses of renewable energy,
with the transport sector being the fastest growing sector, resulting from
the use of biofuels. In the buildings sector, there is even an expectation
of reduction, motivated by the increasing electrification and consequent
reduction of the use of biomass.
The
investment in wind energy (onshore and offshore) and solar
will be
responsible for most of renewables’ growth in the electricity sector, due to
their increasing competitiveness. Indeed, in most of the regions in the World,
subsidies are no longer needed
to promote the adoption of onshore wind
and solar. What is required is
long-term stability of revenues
, either through
competitive auctions or corporate contracts for the acquisition of energy, to
allow the reduction of risk associated with these investments, with clear
benefits for the society.
Renewables
19%
1%
33%
28%
24%
5%
43%
31%
31%
13%
52%
38%
Total
Transports
Buildings
Industry
Electrification rate in the World (%)
2019
2040 - Stated Policies Scenario
2040 - Sustainable Development Scenario
42
Source: International Energy Agency,
World Energy Outlook 2020
The
green hydrogen
has been in the spotlight of the new technologies
for the energy transition, due to its
potential to decarbonize sectors where
electrification is not feasible nor cost-effective
, such as some industrial
energy uses and heavy-duty vehicles. There are several ways to produce
hydrogen, but electrolysis (using electricity produced from renewable sources)
is the one more aligned with the decarbonization.
The European Union has already defined the objective to reach 40 GW of
electrolyzers capacity by 2030, and this target was already transposed into national
plants in various Member States, such as Portugal which committed to install 2-2.5
GW of electrolyzers by 2030 and Spain with 4 GW.
To incentivize green hydrogen it is required, in a first phase, to
devote
funds to support innovation, to develop both the process of hydrogen
production and the technologies that use hydrogen at consumer level
.
Furthermore, it is required a
stable regulatory framework
and a
tax reform
based on the “polluter pays” principle
, to reflect the externality cost of
pollution on consumers of fossil fuels.
Green Hydrogen
14%
27%
3%
24%
7%
22%
47%
8%
22%
8%
Primary Energy
Electricity
Transports
Buildings
Industry
Share of renewables
2019
2040 - Stated Policies Scenario
43
ANNUAL REPORT 2020
The enablers of the energy transition
The increase in the share of intermittent renewable generation needs to
be complemented with the use of flexible technologies, as generation
and demand need to match in any moment. Within this package of flexible
technologies, some of them are already part of the electricity system –
such as
hydro with pumping
and
interconnections
-, but others are still in
a development phase, as it is the case of
batteries
and
hydrogen
. The
digitalization will also allow a higher participation of
demand management
,
by remotely adjusting the consumption of appliances that have some inertia,
like electric vehicles and water heaters.
It is worth to highlight that to promote the economic viability of flexible
technologies, the
current electricity markets need to be adapted
. The
marginalist market has been revealing insufficient to remunerate technologies
that provide firm capacity, in such a way that a number of countries (for
example Germany, France, the UK, Italy, Poland, several US markets, etc.)
have implemented
capacity remuneration markets
. Furthermore, the
ancillary
services market
– which is by excellence the market that remunerates
flexibility – also needs to be adapted in many geographies, in particular,
to allow the remuneration of the short-term frequency service.
The
digitalization of the economy
(and of the energy sector) is a trend that
was already taking place, but was significantly accelerated during the last
year, given the restrictions imposed by the Covid-19 pandemic. As
digitalization has been considered a critical factor to build a more resilient
society against external shocks, the European Union defined that at least
20% of the expenditure of the “Recovery and Resilience Facility”, endowed
with €672.5 billion, needs to be devoted to foster the digital transition.
For the electricity sector in particular, digitalization will allow the
change
in paradigm towards a more decentralized system
, where consumers have
an increasing active role. To highlight that networks have a key role in
digitalization, as they enable
the integration of intermittent renewables,
the remote management of energy consumption and the use of
decentralized storage units
(like electric vehicles), allowing also a
reduction in the operation and maintenance costs
of networks.
Only with an energy transition that considers environmental, economic and social impacts, it is possible to guarantee
the collaboration of all market agents to successfully implement the required reforms and achieve the ambitious
decarbonization targets.
Flexibility
Digitalization
44
2.2. Strategic Priorities
2.2.1. Strategic Update 2019-22
Energy transition is underway and at an increasingly fast pace representing major challenges for the sector to which
is added a context of change in the processes and in the way companies act with their stakeholders(including people,
customers and investors) resulting from the growing digitalization and the cultural leap that has already begun.
This context introduces uncertainty and volatility in the business, implying a proactive management of risks and
opportunities.
45
ANNUAL REPORT 2020
In this sense, EDP strategically positions itself with a low-risk and cross-diversified resilient profile, creating conditions
for the execution of a strategy to create value in the face of the challenges of a context of low ecological footprint levered
in sustainable growth, as well as the expected changes in context.
In the beginning of 2019 EDP presented an update of its strategic plan up to 2022. In it, EDP conveyed its vision, the
strategic pillars as well as the repositioning of its business segments. It has also presented its key strategic initiatives
and the goals for the 2019-22 period.
Vision
EDP’s Vision is to assume the leadership of the energetic transition, ensuring the creation of superior value.
With the
strategic architecture that has been followed, it is already well positioned to lead the energy transition: we count with
2.5 times more renewable installed capacity than the average of the other integrated players; our asset base is 'young',
having an average residual life of 25 years which allows us to have visibility over the coming years.
This vision shapes the company up to 2030 and will guide the company through:
46
Strategic Pillars 2019-22
To achieve this ambitious vision, EDP defined 5 strategic pillars:
•
accelerated and focused growth;
•
continuous portfolio optimization;
•
solid balance and low rik profile;
•
efficient and digitally enabled;
•
attractive shareholder remuneration.
Accelerated and focused growth
is based on an expectation of an increase in EBITDA of around 5% per year until 2022
with a clear commitment to create growth opportunities in renewable energies, and accelerating investment reaching a
CAPEX ~ 12Bn between 2019 -22.
EDP wants to maintain a
continuous portfolio optimization
through a strategy of renewable assets rotation and the disposal
of non-strategic assets. The asset rotation accelerates organic growth and the crystallization of value. The sale of selected
assets has a dual function: i) to balance EDP's risk profile, with divestments tending to be made in merchant areas and ii)
freeing up capital to strengthen the Group's balance sheet.
The objective to maintain a
solid balance sheet and a low risk profile
is based on an effort for stronger financial
deleveraging aiming at consolidating the investment grade.
The bet on an increasingly
efficient and digitally enabled
company will boost EDP’s of the future. On the efficiency side,
we intend to maintain the tight cost control that has been implemented through zero base budget programs and employee
downsizing. Enhancing this efficiency is EDP's commitment to digital that will allow the organization to be more agile,
flexible and global. This bet becomes clear with the increasing IT investment but also through the training of the
organization's employees.
Additionally, we have a commitment to provide an
attractive remuneration and superior value to our shareholders through
a distinctive history in renewable energies, strong profit growth and an attractive dividend policy is one of EDP's priorities.
Plataforms
This ambitious strategic plan also involves a transformation in the way we look and organize the company. A simpler and
more focused structure allows the sharing of best practices and enhances efficiency throughout the organization.
Thus, in order to enable the organization to deliver on the commitments made in the strategic plan and respond more
effectively to the energy transition, EDP presented its 3 operating platforms:
•
Renewables
includes hydro, wind and solar generation. This is the group’s flagship development platform.
•
Networks
includes electricity distribution in Portugal, Spain and Brazil. It also includes the transmission business
in Brazil. This platform is intended to function as portfolio stabilizer for the group.
•
Client Solutions and Energy Management
, includes the services provided to customers, energy trading and thermal
generation. This platform represents a small part of the group’s portfolio and besides aiming at hedging Iberia
generation, it also represents a growth vehicle through new downstream.
47
ANNUAL REPORT 2020
Sustainable Development
EDP’s vision also reflects its commitment to sustainable development, fully assuming a structuring role in energy,
supporting more balanced growth models from an economic, environmental and social point of view. This vision was
recently reinforced in the Strategic Plan 2019-22, that besides establishing objectives and goals for 2022, establishes
a transparent ambition for 2030 focused in the decarbonization in order to place EDP in the leadership in the energetic
transition. Furthermore, the company is still maintaining its commitment in ensuring that its activity actively contributes
to the United Nations Sustainable Development Goals.
48
2.2.2. Business Plan 2021-25
In 2021 EDP will present its Strategic Plan until 2025, communicating the strategic vision and pillars as well as the key
strategic initiatives and goals for the period 2021-25.
EDP's Vision will remain as defined in the previous Plan, consisting in taking the lead in the energy transition and being
aligned with the creation of superior value, based on 3 strategic pillars:
•
accelerated and Sustainable Growth;
•
step-up green growth;
•
distinctive and resilient portfolio;
•
solid balance sheet;
•
future-proof organization;
•
global, agile and efficient;
•
talented and empowered people;
•
innovative and digitally driven;
•
attractive returns and ESG excellence;
•
ESG Reference,
•
Green leadership positioning;
•
strong return visibility.
Based on this vision and strategy, EDP sets to achieve the following objectives:
KEY INITIATIVES
KEY FIGURES AND TARGETS
Accelerated and
sustainable growth
Step-up growth in renewables, accelerating ownership and
asset rotation strategies
Focus investments on RES & Networks in EU and USA
Target a BBB rating in the short term
(maintaining a sustainable leverage)
•
€24Bn CAPEX in energy transition
1
•
20 GW gross additions
1
•
€8Bn asset rotation
•
€4.7Bn EBITDA by 2025
•
>20% FFO/net debt2 by 2025
Future
proof organization
Evolve organization to be more global, agile and efficient
Strengthen focus in innovation and promote
a digitally enabled organization
•
€100Mn3 like-for-like OPEX savings
•
€2Bn TOTEX in digital and innovation
1,3
Attractive returns
& ESG excellence
Step-up a green leadership positioning
and being a reference in ESG
Deliver a sustainable EPS growth
and an attractive dividend policy
•
Coal-free by 2025
•
Carbon neutral by 2030
•
€1.2Bn net income by 2025
•
€0.19/share dividend floor
1
2021-25.
2
FFO/ND formula consistent with Rating agencies methodologies considering EDP definition of EBITDA Recurring
49
ANNUAL REPORT 2020
3
€1Bn TOTEX in Innovation, €1Bn CAPEX in Digital.
This new plan reinforces the commitment to sustainable development, fully assuming the structural role of energy in
supporting more balanced growth models from the social and environmental point of view. As a complement to a business
model focused on decarbonisation, EDP remains committed to ensuring that its activity actively contributes to the
seventeen Sustainable Development Goals defined by the United Nations and states the commitment to become carbon
neutral by 2030.
ESG OUTLOOK 2025-2030
2020
2025
2030
Environment
Revenues aligned with EU taxonomy (%)
Scope 1 & 2 emissions (gCO
2e
/kWh)
Renewables generation (%)
Coal installed capacity (%)
Total waste (kt)
58
157
74
8
309
~70
~100
~85
0
118
>80
0
100
0
30
Social
Employee engagement (top tier company)
Female overall (%)
Accident Frequency Rate
1
SDGs social investment (EUR Mn)
2
ü
25
1.74
12.4
ü
30
1.55
50
ü
35
<1
100
Governance
Female on leadership (%)
Top management ESG & equity linked compensation
3
Cybersecurity (rating)
Top quartile in ESG rating performance
5
25
ü
800
ü
30
üü
ü
35
üü
ü
1
Number of accidents per million hours worked (included employees and contractors).
2
Excluding 2020 onwards, values accumulated since 2021.
3
Applicable to Board of Directors and top management; changes in Board of Directors dependent of General Shareholders Meeting.
4
Cybersecurity BitSight rating ≥740. 5 – includes DJSI, FTSE4Good, MSCI and Sustainalytics
keep advanced
4
50
OBJECTIVES
Step-up growth in renewables
with >7gw gross additions
Leverage on asset rotation
model as a key complement
to our strategy
Deliver superior execution of
transmission projects in Brazil
Recycle capital to accelerate
growth in renewables
Reduce exposure to iberia/
merchant/thermal
Accelerate improvement of risk profile
Commitment to solid
investment grade
Reduce net debt by ~€2B
~90% capex in regulated/
lt contracted
Reinforce efficiency/cost
reduction programs
Implement digital
transformation plan
Foster a more flexible and
global organization
Distinctive green positioning
Sustainable EPS growth to
deliver DPS increase
Dividend floor of €0.19
1
Recurring figures.
2
Adjusted Net Debt/EBITDA.
2.2.3. Strategic guidelines compliance 2019-2022
Accelerated
and focused
growth
Continuous
portfolio
optimization
Solid balance
sheet and
low-risk
profile
Efficient
and digitally
enabled
Attractive
shareholder
remuneration
STRATEGIC AXES
EBITDA 2022
(>5% CAGR)
CAPEX
(2019-22)
€3.7B
1
€5.2B
>€4B
~€12B
Asset Rotations
Disposals
€2.6B
€2.7B
>€4B
>€2B
3.2x
1
72%
Net Debt/
EBITDA 2022
2
EBITDA Regulated
/ LT Contracted
<3.0x
>75%
€362M
-1%
€400M
Cumulative
OPEX savings
CAGR OPEX
like-for-like
Digital CAPEX
~€300M
-2%
€800M
€0.8B
1
81%
1
Net Profit
2022
(~7% CAGR)
Payout Ratio
>€1B
75–85%
STATUS 2020
TARGET 2022
OBJECTIVES
TARGET 2022
SDG
Leading
the energy
transition
Committed
with
society and
environment
STRATEGIC AXES
Renewable installed capacity
Solar installed capacity
(centralised and distributed)
CO
2
eq specific emissions
variation vs. 2005
Internalise the TCFD recommendations
Customers with value-added services
Customers with electric
mobility solutions
Saved energy by costumers
(since 2015)
Smart meters
Customers’ satisfaction index
Electrification of EDP’s light duty fleet
Carbon neutrality in EDP´s
office buildings
Climate change adaptation plans
Investment in access to electrification
7
13
7
12
7
11
7
11
12
7
9
7
13
9
13
7
11
11
13
7
17
Average waste recovery rate
Single-use plastics eliminated
Environmental accidents
and penalties
Female employees
Fatal accidents (employees
and service providers)
Investment in the community
(since 2015)
Participation in voluntary actions
Participation in voluntary actions
75%
100%
0
30%
0
€200M
20%
20,000H
12
8
13
15
7
13
12
5
8
11
8
11
78%
>1,000 MW
-65%
100%
30%
100k
5TWh
>70%
>75%
>20%
100%
100%
€20M
STATUS 2020
92%
20%
0
25%
3
€158M
19%
14,457H
79%
490 MW
-77%
67%
21%
19k
4TWh
60%
79%
11%
22%
25%
€4.6M
51
ANNUAL REPORT 2020
52
2.3. Risk management
Risk governance model
EDP Group follows a risk governance model based on the concept of 3 lines of defence internal to the organization,
which are complemented by an external fourth line of defence, external audit and regulation/ supervision.
For every line of defence there are clearly defined responsible bodies and forums for debate and decision, formally
established to materialize each line of defence at corporate and Business Units levels, avoiding duplication of efforts
and/ or the existence of gaps and promoting the cooperation and collaboration between different areas.
RISK GOVERNANCE MODEL OF 3 LINES OF DEFENCE
1
ST
LINE: BUSINESS
(RESPONSIBILITY
FOR RISK)
2
ND
LINE: RISK
(SUPPORT THE ANALYSIS
AND MONITORING OF RISKS)
3
RD
LINE: AUDIT
(INDEPENDENT SUPERVISION)
MISSION
Daily of running business,
including proactive
management of risks
, aligned
with established risk policies.
Support in the identification,
analysis, evaluation and
monitoring of risk
(to support
business).
Performance and coordination
of auditing exercises, seeking
the improvement of processes
of risk management, control
and corporate governance.
AREAS INVOLVED
1
BUs.
Corporate departments
(with decision-making
responsibility).
Risk management
(corporate and BUs).
Planning and control.
Compliance.
Sustainability
Internal audit (corporate
and BUs).
RATIONAL
Who benefits the most
from
risk
should be the responsible
for taking it.
Given the (natural) incentive
for business to take risk,
it is
beneficial to have an
independent function
specialized in risk.
It is beneficial to have an
independent entity
responsible
for the verification and
evaluation of processes of risk
management and control.
1
Not exhaustive
Risk management is represented by the Risk Management Department at corporate level, as well as by several risk units
across the Business Units (lead by their respective risk-officer) that functionally report to the corporate Risk Management
Department, guaranteeing a fluid articulation and communication concerning key risk sources and mitigation actions.
In addition, Risk Committees are held at corporate level and in key Business Units, gathering top management and relevant
specialists for analysis, debate and advice on key risk exposures for the Group, respective limits and other mitigation
actions.
53
ANNUAL REPORT 2020
A more detailed description about the intervening bodies in the risk governance model at EDP Group, as well as attributed
responsibilities, is available in the Corporate Governance Chapter, part I, section 52.
Key risks
EDP Group seeks to have a comprehensive perspective over the key risks it is exposed to, at strategic, business, financial
and operational level, establishing processes to assure follow-ups and proactive management.
The year of 2020 was pinpointed by the COVID-19 pandemic, which led to relevant economic and social impacts. Risk
management reinforced its importance, with an essential role in the pandemic management.
ILLUSTRATION OF TOPICS
(NOT EXHAUSTIVE)
RECENT EVOLUTION/ EXPECTED
IN THE SHORT-TERM
STRATEGY
Surrounding
context
•
Geopolitical instability.
•
Social and economic crisis.
•
Technological disruption.
•
Change of competitive paradigm.
•
Climate change.
•
Strong instability of the global
geopolitical context, GDP growth
forecasts decreased and anticipation
of world economic crisis.
•
Continuous rise of the global
investment in renewable technologies,
with impact in geographies where EDP
Group is present.
54
ILLUSTRATION OF TOPICS
(NOT EXHAUSTIVE)
RECENT EVOLUTION/ EXPECTED
IN THE SHORT-TERM
Internal
strategy
•
Investment strategy.
•
Relationship with stakeholders.
•
Corporate planning.
•
Continuing strategy of asset rotation.
•
Attribution of the position of Global
Leader within integrated utilities by the
Dow Jones Sustainability Index.
•
Execution of the sale of hydro assets
accounting for 1,7GW in Douro river, in
Portugal.
•
Acquisition of Viesgo, that will be part
of EDPR and of the grids business in
Spain.
•
Sale of part of the commercial
portfolio in Spain to Total.
BUSINESS
Energy markets
•
Fluctuations of pool price,
commodities and CO
2
.
•
Volatility of the generation volume
of renewable energies (i.e., hydro,
wind and solar).
•
Volatility of energy consumption.
•
Changes in sales margins.
•
Rise of wind and solar renewable
capacity.
•
Hydro volumes in Brazil in line with
historical average.
•
Low hydro profiles in Portugal,
resulting from the sale of small hydro
and rising investment in wind and solar
energy.
•
Decrease of pool price as result of
COVID-19 pandemic.
•
Continuous postponement of
necessary market design reforms
(given the misalignment of marginal
market).
Regulation
•
Changes in taxes and sectorial
charges.
•
Changes in tariff regimes of
regulated activities.
•
Legislatives amendments.
•
Changes in regulations (e.g.,
environmental/ climatic).
•
Regulatory impacts in Portugal with
materialization in the results of the
Group.
•
Preparation for the new regulatory
period in 2021, for the distribution
business in Portugal.
FINANCIAL
Financial
markets
•
Fluctuation of interest rate.
•
Fluctuation of exchange rate.
•
Inflation.
•
Fluctuation of the value of
financial assets held by the Group.
•
Pandemic situation led to the
maintenance of a continuous
decreasing trend of interest rates in
USA and historically low in the euro
area.
•
Expansionary monetary policies
intensified for USD and EUR.
•
Key exposures to exchange rates of
BRL and USD.
•
Depreciation of USD by monetary
policy relatively more expansionist
when comparing with euro area.
Expressive depreciation of BRL,
resulting from capital flight from
emerging countries during the
pandemic.
Credit and
counterparties
(energy and
financial)
•
Default of financial counterparties.
•
Default of energy counterparties
(contracts to buy/ sell energy).
•
Default of clients (B2B and B2C).
•
Pandemic situation reverted the
positive trend of credit cycle.
•
State support to the economy allowed
the lighten the immediate rise of
defaults after an abrupt decline of
economic activity.
•
Pace of economic upturn will be
crucial to the level of doubtful loans in
2021.
55
ANNUAL REPORT 2020
ILLUSTRATION OF TOPICS
(NOT EXHAUSTIVE)
RECENT EVOLUTION/ EXPECTED
IN THE SHORT-TERM
FINANCIAL
Liquidity
•
One-off insufficiencies of treasury.
•
Downgrade of financial rating (and
consequent rise of financing costs
and limitation of access to
financing).
•
Abundant liquidity and reduced cost of
capital, particularly in Europe and
United States of America.
•
EDP Group’s financial liquidity enough
to cover refinancing need beyond
2022.
•
Consolidation of rating investment
grade (business profile improved after
portfolio reshuffling).
Social liabilities
•
Capitalization of the Pension Fund
of Defined Benefit.
•
Additional costs with current and
anticipated retirements.
•
Costs with medical expenses.
•
First effect of decreasing value of
assets during the pandemic cancelled
in the following months, resulting in a
slightly superior deficit.
OPERATIONAL
Development/
construction of
physical assets
•
Delay in commissioning date of
assets (COD) and inherent loss of
profit.
•
Deviations in the cost of
investment (CAPEX).
•
Continuous investment in transmission
in Brazil (until now developed
according with the plan) and
development of solar and wind
capacity through EDP Renewables.
Operation of
physical assets
•
Damages in physical assets and
third parties.
•
Malfunctions by component or
installation defect.
•
Unavailability due to external
events (e.g., atmospheric events).
•
Technical and non-technical
losses of distribution grid.
•
Maintenance of the risk of increased
impact and severity of extreme events
in Iberia, with significant damage of
assets of distribution and generation
of energy in Portugal.
Processes
•
Irregularities in the processes’
execution (regarding commercial
activities, suppliers’ selection and
management, billing, etc.).
-
Human
resources
•
Work accidents.
•
Unethical conduct.
•
People management.
•
Relationship with unions and other
stakeholders.
•
Trend of decreasing index of frequency
of accidents in EDP Group.
Information
systems
•
Unavailability of information and
communication systems.
•
Integrity and security of
information.
•
Occurrence of cyber-attack and
reinforcement of security measures.
•
Maintenance of level of exposure (e.g.,
large-scale cyber-attacks, date
protection directives) partially
compensated by a continuous
reinforcement of mitigation measures
(cyber range, SOC, cyber risk
insurance, training sessions).
Legal
•
Losses arising from lawsuits
related with tax, labour,
administrative, civil, or others
(penalties, compensation and
agreements).
-
A more detailed description of each risk is available in the Corporate Governance Chapter, part I, section 53.
56
Emerging risks
Besides closely monitoring key risks inherent to its activity, the Group maps key trends (at global and sectorial level)
that may be translated into threats and opportunities, and proactively develops adequate mitigation strategies.
Due to their impact throughout the last years, one should highlight (1) the challenge of adjustment of the wholesale
market design to current market conditions, (2) the changing paradigm of decentralized resources, (3) the industrial
revolution and digitalization of the electric sector, (4) the growing threat of cyber risks and (5) the (possible) increasing
frequency and severity of extreme climatic events.
DESCRIPTION
IMPACT
MITIGATION MEASURES
WHOLESALE
MARKET DESIGN
(IN EUROPE)
Uncertainty around the
evolution of the wholesale
market design, given the
current challenges:
•
Marginal remuneration
system not adjusted to the
current context of growing
penetration of fixed cost
technologies (renewables,
backup, storage).
•
Growing penetration of
technologies with 0 marginal
cost (reducing prices and
increasing prices’ volatility).
•
Uncertainty around the
returns of the conventional
generation, in particular as
backup capacity
(relevant
in a perspective of ensuring
security of supply).
•
Volatile context, not
suitable for long-term
investments
necessary to
the modernization,
decarbonization and
security of supply.
Active and constructive
participation in several forums, at
European and national level, for
the adoption of adequate and
equilibrated market design
solutions
for various
stakeholders, in particular:
•
Adoption of energy auctions for
long-term contracts to promote
renewables.
•
Recognition of the need for
capacity remuneration
mechanisms.
•
Support to price signals of CO2
at European level.
Reinforcement of focus on long-
term contracts
(renewable and
conventional generation), to
reduce risk and increase
competitiveness in the supply
offer to final clients.
DISTRIBUTED
RESOURCES
Growing proliferation of
distributed resources,
including:
•
Decentralized production (in
particular, solar PV) for self-
consumption.
•
Electric vehicles.
•
Active demand side
management.
•
Storage.
Threat relative to:
•
(Possible
) reduction of
margins for traditional
generation
due to a
reduction of the volume of
energy generated centrally.
•
Reduction of the
contribution of consumers
in self-consumption for the
costs of the system
(grids
and others) and
consequent need for tariff
increases.
•
Changing dynamics of
energy flows in the grid.
Opportunity for the sale of
new products and services.
Proactive role in the
commercialization of innovative
products and solutions, with
benefit in margin and client
retention:
•
Sale of solar panels for self-
consumption (and batteries).
•
Commercialization of solutions
associated with electric mobility
(e.g., green electric mobility).
•
Solutions of energy efficiency
(e.g., Re:dy with application to
the electric car, solar
decentralized generation,
heating, control of outdoor
spaces).
Active regulatory management
, in
particular related with tariff
structure,
enabling the existence
of efficient price signals and
incentives.
57
ANNUAL REPORT 2020
DESCRIPTION
IMPACT
MITIGATION MEASURES
4
TH
INDUSTRIAL
REVOLUTION
(AND
DIGITALIZATION)
Proliferation of new
technologies with disruptive
potential for the electric sector,
including (among others):
•
Blockchain.
•
IoT.
•
AI/ machine learning.
•
Virtual/ augmented reality.
•
Robotic Process Automation
(RPA).
New market entrants such
as aggregators, services of
design science research
(DSR) or
solutions for
clients.
Opportunities for
operational and business
optimization
, e.g.:
•
Operation and
maintenance of assets
(generation and grids).
•
Pricing and segmentation.
•
Innovation of product and
client services.
•
Optimization of back-office
and shared services.
Follow-up on best practices and
developments at digital level
applicable to the energy sector.
Release of dedicated department
to EDP Group digitalization
(Digital Global Unit – DGU)
, as
result of EDPX project, developed
with the collaboration between
internal and external specialists
to accelerate ideas and test
digital solutions:
•
Assets/ operations (e.g.,
predictive maintenance, asset
management, task force
digitalization, energy/ trading
management).
•
Client (innovation of products
and services, namely
electrification).
•
Group (agile/ project-based
solutions, optimization/
automation of internal
processes).
CYBER-RISKS
Exposure to several cyber
risks, due to a growing
sophistication and integration
of technologies.
Financial, operational and
reputacional loss,
due to (among others):
•
Loss/ interruption of
operations (e.g., dispatch/
plants, billing, client
service).
•
Damage/ destruction of
assets (grids, plants, other
systems).
•
Violation/ destruction of
data (personal and others).
•
Continuous improvement of the
security of internal systems.
•
Security Operations Center
(SOC)
dedicated to continuously
monitor the security of OT/ IT
infrastructure of the Group.
•
Internal cyber range
to simulate
and test the reaction of
employees to cyber-attacks.
•
Security courses and
awareness programs
on key
principles of information
security.
•
Cyber insurance.
EXTREME
CLIMATE EVENTS
Structural climate changes
1
(in particular, temperature and
precipitation), with
impact in
the frequency and severity of
extreme climatic phenomena
(floods, droughts, storms,
wildfires).
•
Damage to physical assets
and loss of profit.
•
Impact on quality of
service
(distribution grid).
•
(Possible)
structural
changes in hydro
generation
(average and
volatility).
•
Geographic and technological
diversification.
•
Active role fighting against
climate change
(namely
promoting decarbonization and
energy efficiency).
•
Adoption of TCFD
2
recommendations, and
mapping of the main climate
risks for EDP
according to
transition and physical risks
categorization.
•
Existence of dedicated areas
and plans for Crisis
Management and Business
Continuity
(at corporate level
and for key Business Units).
1
More detail on the TCFD framework of climate risks available in EDP Group Sustainability Report
2
Task Force for on Climate-related Financial Disclosures
58
Risk Appetite
The EDP Group is exposed to a number of risks due to its dimension and diversity of businesses and geographies in which it
operates, hence it recognizes risks as an integral and unavoidable component of its activity, both as threats as
opportunities.
Acknowledging this fact, the Group establishes explicitly and implicitly its risk appetite for all internal and external
stakeholders, both at corporate and Business Units level, as well as for the various categories of risks, through
a set of mechanisms:
•
the periodical development and approval of the Group’s Business Plan by the Executive Board of Directors,
which is communicated to all stakeholders, and where key strategic orientations are set for the upcoming 3 to 5 years;
•
the rigorous evaluation of risk related to investment and divestment opportunities proposed by the Business Units
and approved by the Executive Board of Directors, including the estimation of returns adjusted to risks vs. established
hurdles. This evaluation is supported by the opinion of the Investments Committee, which includes specialists from
relevant areas of expertise;
•
the development of a wide set of risk management policies, both at corporate and Business Unit level, which establish
guidelines, methodologies of evaluation and exposure limits for key risks
1
;
•
the periodical development of risk mapping exercises, based on objective, quantitative and comparable criteria,
allowing an analysis of the exposure to key risks, as well as the adoption of preventive treatment actions for excessive
exposure to risks (regarding the established tolerance of risk);
•
he establishment of a wide set of mechanisms for periodical reporting of key risks, at Group and Business Unit level,
thus allowing a regular monitoring of the evolution of actual and emerging risks, and comparison of the exposure to
different risk profiles within the established limits;
•
the adoption of a risk governance model based on 3 independent lines of defence (business, risk/ compliance and
internal audit), which guarantees the implementation of the established strategies and alignment with risk appetite;
•
the definition of an internal framework for risk appetite, approved by Executive Board of Directors.
The framework of risk appetite in EDP Group is structured around 4 pillars:
•
the governance model identifies the key actors in the process of risk appetite and their responsibilities;
•
the risk appetite statement defines statements of risk appetite with indicators and risk thresholds for each. In terms of
positioning, The Group establishes a fundamental pillar in its strategy for the maintenance of a controlled risk profile,
expressed transversally across 3 natures of risk,
•
the monitoring and follow-up, defining the key processes of monitoring, update and action plan;
•
and the technological platform, embodied in a risk appetite dashboard that allows the follow up of risk appetite in EDP
Group. The Group is exposed to a number of risks inherent to its dimension and diversity of business and geographies
where its present, recognizing the risk assumption as an integrant and inevitable component of its activity, as a threat
and opportunity.
1
Including, among others, the Enterprise Risk Management Policy, the Risk Appetite Framework Policy, the Limits Structure of the Energy Management
Business Unit, the Financial Management Policy, the Counterparty Policy, the Insurable Risk Management Policy, the Occupational Health and Safety
Policy, the Information Security Policy, and the Principles, Structure, and Procedures for Crisis Management and Business Continuity.
59
ANNUAL REPORT 2020
Risk appetite statement of EDP Ggroup
1
ST
LEVEL STATEMENT
2
ND
LEVEL STATEMENT
KRI (OBJECTIVE)
BALANCED BUSINESS
Controlled risk utility,
with a strong share
of regulated/ LT
contracted activities,
diversified both
geographically and
across the value chain,
with a strong growth
focus on renewables.
GEOGRAPHICAL CONCENTRATION
•
Geographical diversification and focus in
geographies/ markets with reduced country risk.
EBITDA per market / country
EBITDA per emerging country
EBITDA of all emerging countries
EBITDA of non-Investment Grade
countries
Market share per market / country
BUSINESS SEGMENTS
•
Diversified portfolio across the value chain
(generation, grids and retail) with a strong growth
focus in medium to long-term viable renewable
generation.
EBITDA per technology
Residual life of generation assets
CAPEX in low TRL (Technology Readiness
Level)
REGULATED/ LT CONTRACTED
•
Activity focused mainly in regulated or long-term
contracted operations.
EBITDA regulated / LT contracted
Gross Margin@Risk
Contracted residual life of generation
assets
ST ENERGY MARKET POSITIONING
•
Controlled short-medium term energy market risk
and limited proprietary trading exposure.
Value@Risk of portfolio
Net position (long / short) per market
Value@Risk of proprietary trading
REGULATORY MONITORING
•
Foresight of possible high impacting regulatory/
political changes in current portfolio and potential
new geographies.
Regulatory rating
SOLID FINANCIALS
Credible business plan
with sound financials,
aiming for a solid
investment grade
rating and sustainable
dividend policy.
RATING
•
Alignment between business and financial profiles
to target a solid Investment Grade.
LT rating
FFO / ND
ND / EBITDA
ND / EBITDA adjusted
Business profile scoring
EBITDA of grids
EBITDA per emerging country
EBITDA regulated / LT contracted
DIVIDENDS
•
Predictability and sustainability of dividend policy
as a fundamental element of the shareholders’
value proposition.
Payout ratio
Payout ratio P95%
LIQUIDITY
•
Maintenance of liquidity reserves enough to cover
cash needs in short-medium term in times of
stress.
Survival period
Debt redemption per year
Liquidity in cash
FINANCIAL MARKETS RISK
•
Proactive management of the exposure to
financial markets, namely FX and IR, controlling
the impacts on the business activity. Investments
are financed in local currency if possible.
FX: Loss in net investment (P95%)
FX: EBT@Risk
FX: Equity in non-EUR not covered by NIH
IR: Floating ratio per currency
IR: EBT@Risk
IR: Debt NPV change vs. duration target
CREDIT & COUNTERPARTY
•
Controlled exposure to credit & counterparty risk,
favouring higher rated counterparties.
Total EL of aggregate portfolio
Due debt as % of sales
Exposure in Top10 counterparties
Exposure to non-Investment Grade
counterparties
60
1
ST
LEVEL STATEMENT
2
ND
LEVEL STATEMENT
KRI (OBJECTIVE)
SOLID FINANCIALS
Credible business plan
with sound financials,
aiming for a solid
investment grade
rating and sustainable
dividend policy.
INVESTMENT PLAN EXECUTION
•
Investment in projects with an attractive risk
adjusted profitability, limited market exposure and
short time to cash.
IRR / WACC
Contracted NPV for generation
EBITDA in very high country risk scoring
Average portfolio project payback
CAPEX gap to target
SOCIAL LIABILITIES
•
Full coverage of funded social liabilities, through a
diversified asset portfolio of limited duration gap,
with new pension plans as defined contribution.
Funded Pensions coverage ratio
Value@Risk asset-liability position
Duration mismatch
LEADER IN
INNOVATION,
SUSTAINABILITY &
REPUTATION
Leader in innovation,
sustainability and trust
for all stakeholders.
ENVIRONMENTAL SUSTAINABILITY
•
Reference in the energy transition, with
performance recognized by independent
international entities.
Reduction of CO
2
emissions
Renewable installed capacity
INVOVATION
•
Follow-up on key technological developments in
order to remain competitive and optimize value
creation.
CAPEX digital
CAPEX em TRL baixo
REPUTATION & ETHICS
•
Assurance of top reputation among peers and an
exemplar ethics track record.
Scoring in ESG indexes
(DJSI, MSCI, CDP,
Sustainalytics)
RepRisk scoring
Ethisphere certification
CLIENT SATISFACTION
•
Assurance of distinctive levels of global client
satisfaction.
Client satisfaction scoring
Number of complaints
EMPLOYEE SATISFACTION
•
Maximization of employee engagement and
healthy working environment, within a flexible
organization
Engagement scoring of employees
Enablement scoring of employees
OPERATIONAL
EXCELLENCE
Prudent operational
management, following
best-practices and
preventing business
disruption.
PHYSICAL ASSETS
•
Generation: development prefers well-established
technical solutions and suppliers. Operation
strives to strike a balance between minimizing
maintenance costs and programmed unavailability
and the risk of costs or loss of profit associated to
unprogrammed unavailability.
•
Distribution: development strives maximization
of grid resilience (and guarantee n-1 redundancy).
Operation geared towards overcoming targets
of service quality.
Average unavailability
QoS indicators (TIEPI, SAIDI)
INSURABLE RISKS
•
Extensive coverage of insurable risks at Group and
BU level, with coverage, exclusions, premiums,
stop-losses and caps suited to each specific
context. Relationship with brokers and insurance
companies centralized in specialized area.
Gross and net insurance losses
associated with risks
Loss ratio
SUPPLIERS
•
Systematic evaluation of suppliers’ risks, including
the evaluation based on a broad set of
sustainability criteria (including financial),
relationship owned by a dedicated BU.
Scoring of key suppliers
HEALTH & SAFETY
•
Zero tolerance for health and safety incidents with
employees, external contractors or other third
parties. Development of preventive policies and
measures and conduct of awareness actions,
supported by dedicated area.
Frequency rate of incidents with EDP and
external employees and third parties
Severity rate of incident with EDP and
external employees and third parties
61
ANNUAL REPORT 2020
1
ST
LEVEL STATEMENT
2
ND
LEVEL STATEMENT
KRI (OBJECTIVE)
OPERATIONAL
EXCELLENCE
Prudent operational
management, following
best-practices and
preventing business
disruption.
INFORMATION SYSTEMS
•
Continuous monitoring of possible threats and
emerging risks for information systems. Proactive
development of initiatives and internal tests to
ensure the integrity and availability of the various
systems of the Group and data.
Disaster recovery tests result
# threats detected by SOC
LEGAL/ COMPLIANCE
•
Strict compliance with laws, norms and internal
and external regulation, ensured by dedicated
compliance area and periodical follow-up of
ongoing contingencies by dedicated area.
Volume of legal contingencies
by geography
Volume de legal provisions
CRISIS AND BUSINESS CONTINUITY
•
Preventive action framed by corporate and BU
level policies, including the structured
performance of business continuity practices
(impact analysis, risk analysis and evaluation,
definition of strategies and continuity plans, and
exercises execution), and of crisis management,
enabling the Group to have an effective answer in
case of crisis in its different phases (pre, during,
post crisis).
% BUs with plans/ procedures
for business continuity
% BUs with plans/ procedures
for crisis management
A
N
FROM A JUST TRANSITION
TO SUSTAINABLE COMMUNITIES
Innovating
to power
the planet
Changing tomorrow now.
Group’s Financial Analysis
66
Business Area Analysis
70
Renewables
70
Networks
74
Client Solutions and Energy Management
76
Share Performance
79
Markets and Regulations of the Year
83
Risk Management of the Year
101
66
Performance
3.1. Group’s Financial Analysis
Income Statement
EURO MILLION
2020
2019
Δ
%
Δ
ABS.
Gross Profit
5,092
5,217
-2%
-125
Operating Costs
1,524
1,518
0%
+6
Other Revenues/(Costs)
379
6
-
+373
Joint Ventures and Associates
3
25
-87%
-22
EBITDA
3,950
3,731
6%
+219
EBIT
2,206
1,863
18%
+343
Net Profit for the period
1,161
899
29%
+262
Net Profit attributable to EDP shareholders
801
512
56%
+289
Non-controlling interest
361
388
-7%
-27
67
ANNUAL REPORT 2020
•
EBITDA
amounted to 3,950 million euros in 2020, an im provement of
6% vs. 2019, including significant extraordinary effects in 2020 of 293
million euros and adverse ForEx impact (-205 million euros) mainly due
to a 25% depreciation of the Brazilian Real against the Euro. If disregarded
these effects, EBITDA would have been 3,657 million euros, an increase
of 3% vs. 2019, largely reflecting lower EBITDA in wind and solar on
deconsolidation of renewables assets sold during 2019 in accordance
to the execution of our asset rotation strategy, and weaker wind resources.
These factors were partially mitigated by the normalisation of hydro
resources, successful hedging strategy in energy management in Iberia
and higher gains on our asset rotation strategy.
•
In
Renewables
, 14% increase vs. 2019 to 2,613 million euros
(+316 million euros vs. 2019), impacted by the extraordinary effects
of (i) the gain with the sale of six hydro plants in Portugal in December
2020 (216 million euros) and (ii) the gain booked in fourth quarter 2020
on GSF legal settlement in Brazil (66 million euros). Excluding these
effects, EBITDA amounted to 2,326 million euros (+2% vs. 2019)
as the strong recovery of hydro resources in Iberia along with our hedging
strategy and higher gains on the execution of our asset rotation strategy
(+120 million euros YoY), more than offset the de-consolidation effect
of wind assets sold (-102 million euros) and the ForEx impact
(-70 million euros) mainly the Brazilian Real.
•
In
Networks
, 9% decline YoY to 910 million euros (-87 million euros),
reflecting (i) in Brazil, the ForEx impact (-90 million euros) overshadowed
the growth in EBITDA in local currency (+7% vs. 2019) driven by positive
tariff adjustments and advances on the commissioning of the
transmission projects, (ii) in Portugal, the lower rate of return on RAB,
on the back of the evolution of the 10-year government yields in the last
12 months.
•
In
Client Solutions and Energy Management
, 1% decline vs. 2019 to
474 million euros (-6 million euros), driven by (i) the strong performance
of the energy management activities in Iberia, as our successful hedging
strategy and price volatility in the year prompted for an increase in hedging
results, which was offset by (ii) in Brazil the ForEx impact (-44 million euros).
•
Opex costs
remained broadly flat at 1,524 million euros, on tight cost
control and successful implementation of ongoing savings programs,
mainly in Iberia, while supporting the requirements needed to accelerate
growth.
•
Other net operating revenues/(costs)
changed by 373 million euros,
to a net operating revenue of 379 million euros, mainly on aforementioned
capital gains on disposals and gains from our asset rotation.
EBITDA
€3,950M
+6%
VS
. 2019
68
•
EBIT
was 18% higher vs. 2019, at 2,206 million euros, positively impacted
by (i) lower impairments mainly in thermal vs. 2019, to 236 million euros
in 2020, (ii) lower depreciation charges arising from the classification as
assets held for sale of operations disposed in late 2020 and ForEx impact
(-51 million euros vs. 2019) and (iii) the abovementioned EBITDA
performance; these effects were only slightly mitigated by the negative
impact of higher provisions vs. 2019.
•
Financial results
were broadly stable amounting to -671 million euros, reflecting
the 60 bps decline in average cost of debt to 3.3% (
vs
. 3.9% in 2019) and
1% decrease in the average debt, which was offset by the 70 million euros
cost related to the repurchase of some outstanding debt in 2020.
•
Income tax expense
amounted to 309 million euros in 2020, representing
an effective tax rate of 20%.
•
Non-controlling interests
fell to 361 million euros in 2020 (-7% vs. 2019),
mainly explained by the decline in net profit contribution from EDP Brasil,
on the back of the Brazilian Real depreciation.
•
Net profit attributable to EDP equity holders
amounted to 801 million
euros in 2020 (vs. 512 million euros in 2019). Nevertheless, if disregarded
in 2019 the impact on net profit from (i) the extraordinary contribution for
the energy sector (-66 million euros), (ii) impairments and provisions (-283
million euros), (iii) other items (+7 million euros); and in 2020 (i) the
extraordinary contribution for the energy sector (-63 million euros), (ii)
impairments (-252 million euros), (iii) the liability management costs (-55
million euros), (iv) curtailment (-38 million euros), (v) other items (-18
million euros), (vi) net gains from disposals (+325 million euros); net profit
would have increased 6% to 901 million euros.
Investment Activity
Expansion Capex, €2,400m (+39% vs. 2019)
Expansion capex was 83% of total capex and was mostly dedicated to the
construction of new renewables capacity mostly in North America and
Europe and transmission lines in Brazil:
•
Capex in new wind & solar capacity amounted to 2,098 million euros in
2020, of which 56% was applied in North America, 34% in Europe and 10%
in Brazil;
•
Capex in transmission lines in Brazil amounted to 173 million euros in
2020, as the execution of the expansion capex plan for developing 6
transmission lines is proving ahead of schedule.
Maintenance Capex, €508m (-5% vs. 2019)
•
Maintenance capex amounted to 508 million euros in 2020 and was mostly
absorbed by networks in Iberia and Brazil (66% of total).
Net Profit
Attributable to
EDP Shareholders
€801M
+56%
VS
. 2019
Capex
€2,909M
+29%
VS
. 2019
EBIT
€2.206M
+18%
VS
. 2019
69
ANNUAL REPORT 2020
•
The execution of our asset rotation strategy was strong during 2020:
•
In February we completed the sale of last year’s asset rotation deal
of a 137 MW wind farm in Brazil (254 million euros proceeds);
•
In 2020 we announced and closed the following asset rotation deals:
(i) 80% shareholding position in a portfolio of 563 MW in US
(423 million euros proceeds), (ii) 242 MW in Spain (505 million euros),
the transfer of Rosewaters wind farm under a Build & Transfer agreement
signed in Feb-19 (74 million euros) and conclusion of the establishment
of the JV with Engie (207 million euros gain).
Net Debt
As of December 2020, net debt stood at 12.2 billion euros, 11% lower
vs
.
December 2019, impacted by: (i) the strong performance of our recurring
organic cash flow (1.8 billion euros); (ii) our core expansion activity with the
significant step up of our expansion investment (3.2 billion euros, including
financial investments) partially offset by proceeds from asset rotations in
the period (1.7 billion euros); and (iii) the execution of our portfolio reshaping,
contemplating 2.8 billion euros of disposals of merchant assets (6 hydro
plants and 2 CCGTs and B2C energy supply in Spain), the 2.1 billion euros
acquisition of Viesgo, along with a new partnership with MIRA that was
supported by 1 billion euros in proceeds from the Aug-20 capital rights issue.
Funding Policy
•
Centralized funding management with about 80% of the Group gross financial debt at level of EDP - Energias de
Portugal, S.A. and EDP Finance BV, while the remainder is divided between EDP Brasil (ring fenced vs. the rest of the
Group), EDP España (following the acquisition of Viesgo in Dec-20) and project finance, at the level of some of EDP
Renováveis’ subsidiaries.
•
In 2020 the average cost of debt stood at 3.3% (-60 bps vs. 2019), mainly driven by a proactive debt management
over the past quarters and declining benchmark interest rates, particularly in Brazil.
•
Fixed interest rate debt represents 68% of overall gross financial debt.
1
After FX-derivatives
Net Debt
€12,243m
-11%
VS
. 2019
57%
34%
10%
0%
Gross Debt by Currency in Dec-20
1
Euro
Dollar
Real
Other
2020
Asset Rotation
€1.678M
70
Bond Issues
All EDP issuances in 2020 were green (one green hybrid bond and two senior green bonds), detailed as follows:
Rating
Regarding EDP’s rating, in February 2020, Fitch affirmed EDP’s rating and revised the company’s Outlook to positive.
Also, following the announcement of Viesgo acquisition deal and 1 billion euro capital increase, all three main rating
agencies stated that the acquisition represents a strong fit with EDP’s current activities. Moody’s and S&P both affirmed
EDP’s ratings in July 2020 and October 2020, respectively.
LONG-TERM
SHORT-TERM
OUTLOOK
S&P
BBB-
A-3
Stable
Moody's
Baa3
P3
Stable
Fitch
BBB-
F3
Positive
3.2. Business area analysis
3.2.1. Renewables
Financial Analysis
EBITDA from Renewables division (wind, solar and hydro technologies),
advanced by 14% YoY to 2,613 million euros, supported by:
•
Extraordinary effects: gain with the sale of six hydro plants in Portugal
(216 million euros) and gain booked on GSF legal settlement in Brazil
(66 million euros).
•
On hydro, excluding the abovementioned impacts, EBITDA increased 5
%
vs
. 2019 to 671 million euros on the back of the strong recovery of hydro
resources in Iberia (+16p.p. to 3% short of long-term average in Portugal),
along with our hedging strategy, which was partially offset in Brazil
by the ForEx impact due to Brazilian Real devaluation versus the Euro.
•
On wind & solar, EBITDA was broadly stable at 1,655 million euros due
to the mixed impacts of (i) higher asset rotation gains (+120 million euros
vs
. 2019), 434 million euros), (ii) de-consolidation of assets sold last year
(-102 million euros vs. 2019) and (iii) lower wind resources in the year
(-5p.p. vs. 2019, 8% short of P50).
ISIN CODE
CURRENCY
AMOUNT
COUPON
MATURITY
PTEDPLOM0017
EUR
750.000.000
1.700%
20/07/2080
PTEDPNOM0015
EUR
750.000.000
1.625%
15/04/2027
XS2233217558
USD
850.000.000
1.710%
24/01/2028
Renewables
EBITDA
€2,613m
+14% VS. 2019
71
ANNUAL REPORT 2020
Operational Analysis
Hydro Generation
Iberia
•
EDP's hydro production portfolio in the Iberian Peninsula includes a total of 5.5GW of installed capacity, of which
43% includes pumping.
•
Hydro generation in 2020 increased 33% year on year (+ 3.3TWh), to 13.2TWh, reflecting an increase in water resources
in 2020 (IPH of 0.97 in Portugal, which compares with an IPH of 0.81 in 2019).
•
In Dec-20, following the strategy of proactive management of the Group's portfolio, EDP concluded the sale of a
portfolio of 6 hydroelectric plants in Portugal, located in the hydrographic basin of the Douro River (Miranda, Bemposta,
Picote, Foz Tua, Baixo Sabor e Feiticeiro), of which 3 run-of-river plants (1.2GW) and 3 reservoirs with pumping (0.5GW),
thus leading to an impact of -1.7GW on installed capacity.
Brazil
•
The Hydro generation portfolio in Brazil includes a total of 1.6 GW of installed capacity and 0.6 GW of equity installed
capacity.
•
In 2020, the hydrological scenario remained below the historical average, directly impacting the Group's plants,
which were exposed to an 80% GSF. In this context, EDP maintains a strategy to protect its portfolio by contracting
and / or purchasing energy to mitigate risks related to GSF and fluctuating PLD through “hedge”, in addition to the
Company's seasonal allocation of greater energy allocation for the second semester.
•
In 2020, the volume of energy sales, considering the consolidated companies, was 6,602 GWh, a reduction of 37.5%,
due to the lower volume of bilateral contracts established with market agents and with the trader.
72
Wind and Solar Generation
The Group's wind and solar generation portfolio corresponds to a total of 12.2GW of installed capacity, an increase
of 0.8GW (+ 7%) explained by the growth of the portfolio of EDP Renováveis (“EDPR”) net of deconsolidations resulting
from the asset rotation strategy.
•
In 2020, EDPR added a total of 1,580MW, including 486MW from the acquisition of Viesgo's renewable wind business
concluded in December 2020.
•
Regarding the EBITDA portfolio, EDPR built: 884 MW of onshore wind technology, of which 154 MW in Europe (10 MW
in Spain, 4 MW in Portugal, 73 MW in France, 10 MW in Belgium and 58 MW in Poland), 625 MW in the United States and
105MW in Brazil; and, 200MW of solar pv technology in Mexico.
•
Following the asset rotation strategy, EDPR concluded the following sales: total participation in a portfolio of 137MW
in Brazil and a portfolio of 237MW in Spain; as well as the sale of 80% in a portfolio of 563MW in the United States (of
which 200MW will start operating in 2021 only) and of 102MW of a Build and Transfer wind project in the United States.
•
In Jan-20, EDPR signed an agreement with ENGIE to form a new entity, Ocean Winds Offshore, a joint venture controlled
50/50 by both parties. Since its incorporation in Jun-20, this entity has become the exclusive investment vehicle of the
EDP Group and ENGIE for offshore wind opportunities (fixed and floating) worldwide, with EDPR and ENGIE
incorporating their offshore wind assets and their projects under development in this new entity.
•
With regard to the equity portfolio, the variation was + 0.1GW (+ 21%) due to the asset rotaion operation carried out in
the United States, with 20% (73MW in 363MW) being consolidated using the equity method; the acquisition of 35MW
referring to minority financial interests held by Viesgo; and the entry into operation of 14 MW of offshore wind
technology, related to the floating project Windplus in Portugal.
•
Wind and solar generation decreased by 5% in 2020, reflecting the lower wind index (8% below the expected average
volume) as well as the lower average installed capacity, resulting from the asset rotation transactions carried out in
2019 (997MW in Europe from June to 19 and 137MW in Brazil to Dec-19) which resulted in -1.9TWh.
73
ANNUAL REPORT 2020
•
At the end of 2020, EDPR had 2.4GW of capacity under construction, of which 1.6GW related to onshore wind, 404MW
related to solar pv and 311MW related to equity investments in offshore projects. Regarding onshore wind, 722MW
were under construction in Europe (85MW in Spain, 135MW in Portugal, 30MW in France, 292MW in Poland, 136MW
in Italy and 45MW in Greece), 708MW in the United States (corresponding to 5 projects), 62MW for a project in
Canada and 155MW in Brazil. Solar pv projects respect to 204MW in Brazil and 200MW in the United States (project
contemplated in the asset rotation of 563MW in the United States concluded in Dec-20). Finally, in relation to offshore
wind, on December 31, 2020, 267MW were under construction in the United Kingdom (Moray East) and 43MW in
Belgium (SeaMade).
Risk outlook
•
Demand risk (Portugal and Spain)
: pandemic situation led to a significant reduction in demand, and a change
in the consumption profile due to the governmental measures taken to control contagions.
•
Hydro volumes:
uncertainty regarding hydro generation levels, but with lower exposure for 2021 due to the hydro
assets’ sale
.
•
Asset operation and availability:
uncertainty regarding damage of assets and/ or loss of profit. Potential failure
of human resources, specialized technicians that ensure the dispatch, monitoring and maintenance of the assets,
in a serious pandemic situation
.
•
Prices of PPAs through auctions:
rising trend of increase of capacity through auctions and directly by contracting
corporate PPAs.
•
Political/ regulatory support for renewable energies:
uncertainty regarding long-term regulatory frameworks
(incentives, capacity, among others).
•
Generation merchant prices:
uncertainty regarding wholesale prices (particularly long-term), green certificates
and RECs (Renewable Energy Credits).
•
Generation volumes:
annual volatility in wind and solar generation.
•
Counterparty:
possible default on contract obligations (long-term contracts of power purchase, contracts to buy
equipment, among others).
•
FX:
evolution of key currencies (USD, BRL, CAD, RON, PLN, GBP, COP). Strong volatility in all currencies, translated into
a general market devaluation.
•
Regulatory in Brazil:
uncertainty in business support mechanisms due to the exceptional pandemic situation. Possible
inclusion of regulation on procedures and reporting of serious occurrences, prolonged unavailability of service supply,
and reform of the electricity system with impact on generation, distribution, and supply.
•
Hydro volume in Brazil:
uncertainty
regarding
hydro generation levels with impact in case of
mismatch between energy
generation and energy sold in LT contracts - differences settled at volatile spot price (PLD).
•
Price (Spot PLD):
transversal impact to the business of generation, distribution, and supply.
•
Political/ social risk in Brazil:
uncertainties regarding structural reforms and effects caused by the COVID-19 pandemic
with macroeconomic and business impact.
74
3.2.2. Networks
Financial Analysis
EBITDA from Networks division declined by 9% vs. 2019 to 910 million euros,
due to:
•
In Brazil (distribution and transmission), strong ForEx impact
(-90 million euros), overshadowing local currency 7% EBITDA growth
in the period backed by positive tariff updates and the comissioning of new
transmission lines.
•
In Portugal, 1% decline vs. 2019 given the lower rate of return on RAB,
on the back of the evolution of the 10-year government yields in the last
12 months and higher costs with vegetation management.
•
In Spain, 8% rise vs. 2019, reflecting (i) the reversion of contingencies
relative to past disposals and Human Resources restructuring costs,
partially mitigated by (ii) the new regulatory terms and lower adjustments
to past year’s revenues.
Operational Analysis
Distribution
Iberia
•
The Distribution network in the Iberian Peninsula reached 280,841 km in 2020, corresponding to an increase
of 13% compared to 2019, which essentially results from the incorporation of Viesgo's 31,624km portfolio.
•
At the end of 2020, EDP reached 4.6 million smart meters installed in the entire distribution network in the Iberian
Peninsula, having 0.7 million of Viesgo's portfolio. Smart meters are aligned with the efficiency strategy, digitalization
and innovation, and, consequently are considered a strong bet in the group, especially in Portugal seeing that there
was an increase of 23%, against 2019 in the residential market.
Networks
EBITDA
€910m
-9% VS. 2019
75
ANNUAL REPORT 2020
•
In 2020, there was a decrease in the volumes of electricity distributed in the Iberian Peninsula (-4% vs 2019), resulting
in a total of -2.2 TWh. Variation is mainly explained by the effect of lower demand on higher tension levels associated
with the slowdown in the economy due to the pandemic.
•
The Installed Capacity Equivalent Interruption Time (ICEIT) in Portugal registered a slight increase compared to 2019,
with 60 minutes, but still below the regulator’s benchmark. In Spain, EDP maintained the good performance recorded
in previous periods, registering a 15 minute TIEPI corresponding to a 44% reduction.
•
In terms of losses in the electricity distribution network in Portugal, there was a slight increase in the losses indicator,
which reached 9.84% in 2020 (+ 0.03pp vs 2019), thus remaining above the regulatory reference of 7.80%. This increase
is mainly due to the energy mix that was aggravated by the COVID19 effect. In Spain, there was also a slight increase
in the losses indicator, which stood at 3.85% (+ 0.06pp vs 2019).
Brazil
•
The Distribution network reached 93,850 km's of network in 2020, corresponding to an increase of 1% vs 2019.
•
In the year, the volume of energy distributed decreased 4.6%, (-3.4% at EDP SP and -6.3% at EDP ES). This reduction
reflects the negative effects of the new coronavirus pandemic (“COVID-19”), resulting in a reduction in industrial
production and retail trade. In addition, climatic conditions, marked by milder temperatures, also contributed to this
result.
•
The number of free customers increased by 25.6% (165 customers at EDP SP and 99 customers at EDP ES), due to the
migration of captive customers to the free market.
•
In both distributors, service quality indicators are below the established regulatory targets. At EDP SP and EDP ES,
there was an improvement in both indicators (DEC and FEC), reflecting the improvement actions involving preventive
maintenance, “DEC Down Project” (treatment of repeat offenders, improvement of internal processes and acquisition
of new ones). technologies) and use of digital platforms for field teams.
Transmission Brazil
•
In December 2020, 2 of the 6 Transmission lots were in operation and 1,125 km were still under development.
•
This year and in spite of the temporary stoppage of the works, due to the difficulties brought by the pandemic,
in the beginning of August the last section of Lot 11, in the state of Maranhão, was completed, with 12 months ahead
of the regulatory deadline, as well as advances in the works in the other lots.
Risk outlook
•
Low voltage network concessions (Portugal):
uncertainty regarding the renewal of framework, possible fragmentation
and increase in system costs.
•
Asset operation and availability:
uncertainty regarding damage of assets and/ or loss of profit.
•
Business continuity:
across-the-board and prolonged interruption of operations by extreme events (e.g., natural
disasters)
•
Regulatory in Brazil:
uncertainty in business support mechanisms due to the exceptional pandemic situation. Possible
inclusion of regulation on procedures and reporting of serious occurrences, prolonged unavailability of service supply,
and reform of the electricity system with impact on generation, distribution, and supply.
76
•
Price (Spot PLD):
transversal impact to the business of generation, distribution, and supply.
•
Political/ social risk in Brazil:
uncertainties regarding structural reforms and effects caused by the COVID-19 pandemic
with macroeconomic and business impact.
3.2.3. Client Solutions & Energy Management
Financial Analysis
EBITDA from our Client Solution and Energy Management division (thermal
generation, supply and energy management), declined 1% vs. 2019 to 474
million euros, impacted by:
•
In Brazil, performance was penalised by ForEx impact (-44 million euros),
while Pecém contribution reflected its PPA inflation updated remuneration
based on availability.
•
In Iberia, strong performance of energy management, that benefitted from
increased volatility in energy markets and normalization of the operating
conditions in supply, with demand showing signs of recovery and higher
services penetration.
Operational Analysis
Thermal generation
Iberia
•
The Iberian thermal generation portfolio has an installed capacity of 4.3GW, with most of the capacity being CCGT
(67% or 2.9GW) and coal production (29% or 1.2GW). The remaining thermal capacity is divided between nuclear
(0.2GW), cogeneration and waste.
•
Thermal generation decreased 18% compared to 2019 (-3.4TWh), due to the decrease in both coal generation
(-2.9TWh) and CCGT generation (-0.4TWh). Nuclear generation remained stabler.
Client Solutions &
Energy Management
EBITDA
€474m
-6%
VS
. 2019
77
ANNUAL REPORT 2020
•
In Dec-20, following the strategy of proactive management of the Group's portfolio, EDP concluded the sale of tw CCGT
plants (Castejón I & III), located in Navarra, in the north of Spain, having an impact -0.8 GW in installed capacity.
•
The early closure of the Sines plant, which stopped producing energy on December 24th, led to a decrease of 1.2 GW
in thermal capacity and also contributed to the decrease in coal generation previously mentioned in -2, 2 TWh,
whose production in 2020 was explained by the burning of residual coal storage.
•
Coal capacity will continue to decline in 2021, with the closure of the Soto 3 plant (346MW) in Spain.
Brazil
•
In Brazil, EDP has 720MW of installed thermal capacity corresponding to Pecém plant.
•
The average availability of the plant was 91.9% above the Reference Availability.
Supply
78
Iberia
•
For EDP, the relationship with the customer is crucial, so it has given strong relevance to the improvement of the quality
of the services provided at the same time as the expansion of its value proposal through new services, in order to
accompany the current energy transition. EDP has been building a notorious position in the energy market, with the
aim of being an engaging and innovative company, in which customers take turns. As a reflection of this commitment
to customer relations, in 2020 EDP achieved a level of global customer satisfaction of 79% in line with the defined goal.
•
In Iberia, EDP has been increasingly reinforcing its focus on the cross offer of products and services integrated
with energy, as well as offering service packages, in order to offer greater value to its customers.
•
At the end of 2020, EDP Comercial's electricity customer portfolio had 4 million customers, mainly in the residential
and SME segment, where it registered a volume of 10.2TWh of commercialized energy. In the gas sector, despite the
slight decrease in the total number of customers, it is worth noting the increase in the volume of gas sold in the B2B
segment, which allowed EDP Comercial to close the year 2020 with a total volume of gas sold of 4.3 TWh.
•
In Spain, the decrease of approximately 10%, recorded in the volume of energy sold by EDP on the free market, is mainly
explained by the sale of the B2C customer portfolio at the end of November 2020, as well as by the decrease recorded
in the volume of electricity sold in the B2B segment for 8.4TWh.
•
In the services sector, the strong bet on a portfolio with a diversity of energy efficiency solutions, microgeneration,
electrical mobility and technical assistance, once again allowed EDP's client portfolio to be strengthened in the Iberian
Peninsula. Among the main traditional services, the highlights are the Funciona service portfolio, which grew 18% for the
460 thousand customers and for the EDP Saúde service, which registered a total number of 135 thousand customers in
Portugal. Regarding the bet on new services, more focused on energy efficiency and transition, the highlight is Solar
B2C, which in Portugal registered an increase of 6 thousand installations to a total of 14.7 thousand solar installations.
Brazil
•
In the year, the total volume of energy was 25,554 GWh, an increase of 6.3%. The year 2020 was marked by the
pandemic and regression of the world economy and EDP adopted initiatives and emergency resources in order to
support its consumers and business partners. Throughout 2020, the price of energy went through volatility, which
brought good business opportunities with solid partners and consequently a slight increase in the energy transaction.
•
The focus on distributed generation continues to mark the year in which EDP closed 65.4 MWp in solar energy
projects - 34.5 MWp already installed for clients such as Banco do Brasil, TIM, Claro, Globo and Johnson & Johnson
and 30.8 MWp in development.
Risk outlook
•
Commodities prices:
pool price decrease, and mismatch with expected price, due to a decrease in demand, increase in
renewables penetration, and coal phase-out.
•
Retail margin/ share:
uncertainty regarding the evolution of retail margin or loss of market share, supply of new
products, and services.
•
Demand risk:
significant decrease in energy demand as result of the pandemic situation.
•
Over contracting:
increased risk of over contracting due to the decrease in demand.
•
Price (Spot PLD):
transversal impact to the business of generation, distribution, and supply.
•
Political/ social risk in Brazil:
uncertainties regarding structural reforms and effects caused by the COVID-19 pandemic
with macroeconomic and business impact.
79
ANNUAL REPORT 2020
•
Regulatory in Brazil:
uncertainty in business support mechanisms due to the exceptional pandemic situation. Possible
inclusion of regulation on procedures and reporting of serious occurrences, prolonged unavailability of service supply,
and reform of the electricity system with impact on generation, distribution, and supply.
3.3. Share Performance
Share
EDP market price was 5.156€ per share at the end of 2020, 33.4% above the 3.864€ per share at the end of 2019. Based
on the payment of dividends to shareholders held on May 14
th
, 2020 (0.19€ per share), which implied a dividend yield of
4.9% (considering 2019’s year-end closing price), in 2020 EDP generated a total shareholder return (TSR) of 43.2%,
assuming automatic reinvestment of the dividends received into new shares.
Market Performance
In 2020, European Equities benchmark index, Eurostoxx 600, yielded a TSR of +0.8%
significantly impacted by the
deterioration of economic outlook and fears caused by the Covid-19 pandemic mainly in the first quarter. This effect was
offset throughout the rest of the year as economies setup strong fiscal and economic plans for recovery, Central Banks cut
interest rates and extended Quantitative easing programs and the development of vaccines in a record-breaking timeframe
that triggered optimism in stock markets.
The Utilities Sector outperformed the Eurostoxx600 and exhibited total return of +14.1% return in 2020
as investors
sought more defensive stocks during the market downturn. Furthermore, the continuation of low-interest rates environment,
the setup of the European recovery plan with a strong focus on decarbonizing the economies, the Democratic win in the US
elections with ambitious plans regarding the electrification of the economy and increased demand from investors for stocks
with high ESG standards and with a clean energy focus, prompted Utilities most exposed to Renewables to outperform.
In 2020, Portugal’s benchmark equity Index PSI20 exhibited a negative TSR of 2.7%. This performance stem from the ripple
effects of a general deterioration in market sentiment of European Equities.
EDP’s TSR of +43.2% in 2020 outperformed both European and Utilities benchmark Indexes.
During 2020, despite the
uncertainty and new reality brought by the Covid-19, EDP has moved forward on strategic targets delivery, while continuing
to benefit from lower refinancing costs. In the equity market EDP did a €1 bn equity rights issue announced in July and
concluded in August, to finance the acquisition of Viesgo, the first capital increase of EDP in 16 years, with the issue of
309,143,297 new shares at a subscription price of €3.30 per share.
60
70
80
90
100
110
120
130
140
150
160
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-2
Total Shareholder Return
EDP
EUROSTOXX UTILITIES
EUROSTOXX 600
PSI20
+43.2%
+14.1%
+0.8%
-2.7%
80
Factors influencing the change in EDP share price
The performance of EDP’s share price in 2020 was impacted by several factors. On one hand, the macro situation on the
back of Covid-19 pandemic led to an increasingly support of a green recovery both in Europe and US, coupled with a raise
of ESG-focused funds. On the other hand, the execution and strong delivery of EDP’s Strategic Plan growth targets in the
first two years of this plan.
INTERNAL
FACTORS
Focused growth
•
In renewables, the addition of 1.6 GW during 2020 and securing
6.2 GW of long-term contracts for new renewables capacity
to be commissioned in 2019-2022, representing 87% of our target
for 2019-2022.
•
Establishment and transfer of the assets to the 50/50 joint
venture with Engie for offshore wind.
•
In networks in Brazil, the execution of 82% of planned capex in
transmission, in 6 lines totalling 1,441 km under
licensing/construction.
Portfolio
optimization
•
Two asset rotation deals agreed: 242 MW in Spain and 450 MW
net in the United States.
•
Portfolio reshaping in Iberia: conclusion of the disposal of 1.7 GW
hydro portfolio in Portugal for €2.2 billion, sale of 2 CCGT plants
and B2C Supply business in Spain for €0.5 billion and acquisition
of Viesgo for €2.7 billion.
Debt
management
•
Issuance of €0.75 billion green hybrid bond in Jan-20 at 1.75%
yield.
•
Two green bonds: €0.75 billion green bond in Apr-20, with 7 years
maturity and 1.719% yield and $0.85 billion green bond in Sep-20,
with 8 years to maturity and 1.716% yield.
Efficiency
•
OPEX reduction by 3% on like-for-like base, excluding growth
in 2020.
ESG
recognitions
•
#2 in Dow Jones Sustainability Index 2020 ranking and A-score
on climate change and water security for CDP ranking.
Decarbonization
•
33% reduction in Specific CO
2
emissions (vs. 2019) and shutdown
anticipation of coal power plants in Iberia (Sines and Soto 3).
EXTERNAL
FACTORS
Covid-19
pandemic
•
Covid-19 pandemic led to a negative impact on electricity demand
and power prices, although with limited impact at EDP level.
Regulatory
Environment
European
Union
•
Higher visibility on member states overall energy policy, focused
on renewables on the back of the Green Deal. Approval of 2030
CO
2
reduction target of -55%.
USA
•
Extension of several tax credits for renewables projects and
election of a Democratic Administration with majority in the
Congress, with ambitious renewables plans.
Brazil
•
Regulatory support namely Covid account in distribution and GSF
solution in generation.
Portugal
•
Retroactive cut on the alleged overcompensation regarding CMEC
plants’ participation in the ancillary services market in 2009 -
2013.
Interest rates
•
Low market interest rates are triggering the decline in marginal
cost of debt.
Forex Markets
•
Devaluation of the Brazilian Real, due to economic downturn on
the back of Covid-19 pandemic.
Energy markets
CO
2
•
The increase in the price of CO
2
allowances in the European
market has been supportive to electricity wholesale prices.
Gas prices
•
Decline in gas prices contributed negatively for the electricity
wholesale prices in Europe.
ESG Trends
•
The rise of sustainable investing has increased the focus in
companies that comply with ESG factors (Environmental, Social
and Governance), like EDP.
81
ANNUAL REPORT 2020
Dividend
In the Strategic Update held in London on March 12
th
, 2019, EDP reiterated its dividend policy, comprising a dividend floor
of 0.19€ per share on the dividend going forward. The announced dividend policy dictates that the dividend should continue
to evolve in tandem with recurring net profit per share within a payout ratio interval of 75% to 85%.
Accordingly, for the 2019 financial year the Executive Board of Directors of EDP submitted to the approval of the General
Shareholders’ Meeting of April 16
th
, 2020, a proposal for the allocation of 2019 profits, including 694.7 million euros to be
distributed to shareholders in the form of dividends. The proposal was approved by a majority of votes (99%) at the
General Meeting and a gross dividend of 0.19€ per share was paid on the May 14
th
, 2020.
1)
2018 Payout based on Net Profit excluding regulatory impacts (-€208m), impairments at coal plants in Iberia (-€21m), restructuring costs (-€21m),
net gain on disposals (+€64m), debt prepayment fees and others (-€26m) and the extraordinary contribution for the energy sector (-€65m).
2)
2019 Payout based on Net Profit excluding impairments (-€224m), the provision for Fridão (-€59m), provision reversal at S. Manoel and the gain on the
revaluation of Feedzai (+€28m), restructuring costs (-€8m), provision for the sharing of some gains with customers and gains following the change in
medical plan of employees in Brazil (-€12m) and the extraordinary contribution for the energy sector (-€66m).
Analyst’s Recommendations
There are currently 21 Equity sell side analysts with active coverage of EDP. During 2020, the weight of Buy
recommendations by equity sell side analysts was stable at 67%, Hold recommendations increased from 24% to 29%,
whereas Sell recommendations decreased from 10% to 5%. The average Price Target as of December 31
st
, 2020, was €5.2
per share, according to Bloomberg.
€0.155
€0.170
€0.185
€0.185
€0.185
€0.185
€0.185
€0.190
€0.190
€0.190
€0.190
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018(1)
2019(2)
Dividend per Share (€)
Dividend
yield
Payout
55%
58%
60%
67%
67%
65%
74%
72%
62%
87%
81%
5.0%
6.8%
7.7%
8.1%
6.9%
5.7%
5.6%
6.6%
6.6%
6.2%
4.9%
82
Source: Bloomberg
Volumes
EDP‘s ordinary shares are publicly traded not only in its main market (Euronext Lisbon), but also in other 27 stock exchanges
(including Turquoise and Chi-X Europe) and 7 Over-the-Counter markets (including BATS Chi-X Europe and BOAT).
Source: Bloomberg.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Dec-19
Feb-20
Apr-20
Jun-20
Aug-20
Oct-20
Dec-20
Analysts' Recommendations
67%
24%
10%
BUY
HOLD
SELL
67%
29%
5%
28.3
38.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
0
5
10
15
20
25
30
35
40
2019
2020
Average daily trading volume per type of market in 2020
(million shares)
Euronext
Other Exchanges
OTC
+46%
+94%
+5%
+35%
83
ANNUAL REPORT 2020
3.4. Markets and regulation
Fuels in the world and Europe
The last year was characterized by
a strong volatility in the markets
, reflecting the uncertainties caused by the Covid-19
pandemic, with fluctuations according to the waves of pessimism and optimism, as new developments arose regarding the
virus dissemination, the vaccines discovery and policies to contain the pandemic.
In early 2020, the
Brent price
was around $55 per barrel (bbl), having fallen steeply to $16/bbl in April, the lowest value since
1999. By this time, the price of oil futures in the United States
(
West Texas Intermediate
– “WTI”) reached negative values,
for the first time in the History,
due to the sharp decline in oil demand, which in turn led to a lack of oil storage capacity.
At the same time, the
price war between Saudi Arabia and Russia
contributed to exacerbate the fall in oil prices, having
ended with an agreement from the Organization of the Petroleum Exporting Countries and their allies (the group OPEC+) to
reduce the oil production during 2020. At the end of the Spring, as lockdown measures were softened and already with a
lower pace of oil production, the Brent price began to recover, having reached $52/bbl by the end of the year. On average,
the oil price in 2020 stood at $41/bbl, significantly lower than the $64/bbl in 2019.
The
price of natural gas
was also characterized by steep volatility during 2020. It is worthwhile noting that the natural gas
price has usually a
seasonal profile
, being higher during the Winter, reflecting higher gas demand for heating uses.
Nevertheless, the Covid-19 pandemic led to the shutdown of many industries, which caused a sharp decline in natural gas
demand during the Spring 2020, and consequently in the natural gas price, which
reached record low levels
. The price of
natural gas in the United Kingdom hub
(“NBP”) reached levels even lower than in the United States (Henry Hub – “HH”),
for the first time in a decade
. After the Summer, the NBP price has been steadily increasing, in such a way that in
December
the price was 6 times higher than in May, on a combination of temperature effect, higher demand in the Asian countries
and overall optimism in the markets
, with the approval of the first vaccines against the Covid-19. On average, the NBP price
was €9/MWht in 2020, which represents a 30% reduction compared with the previous year. In the United States, the HH
price fell 22% to €6/MWht in 2020.
The average
coal price in 2020 stood at $50/ton, significantly lower than in 2019, with $61/ton.
During the period between
January and October 2020, the coal price ranged within $45 to $55/ton, but during November and December the price went
up, reaching $68/ton by the end of the year.
This price escalation in the last 2 months of the year was caused by the rise in
the natural gas prices and the shortfall in coal supply, which in turn was partly due to the increase in demand of Asian
economies, which are already recovering at full speed.
The European
CO
2
price
was, on average,
€25/ton in 2020, the same level of the previous year
. Nevertheless, once again,
the average hides the significant volatility that occurred during 2020, with the price at depressed levels during the peak of
lockdown measures in Europe (March and April) – at around €15 to €20/ton -, but reaching
the historical high record in
December, at above €32/ton
, surpassing the previous maximum that was reached in 2006, shortly after the beginning
of the CO
2
market. The rise in the price of CO
2
allowances during the second half of 2020 reflects the
policies that are
being designed in Europe to accelerate the decarbonization trajectory
, which necessarily implies the reduction of supply of
allowances.
84
Source: Reuters
Energy and environmental policy in Europe
The new European Commissioner, which
took possession in November 2019, presented an ambitious “European Green Deal” in 11
December 2019, aiming to reaffirm the European leadership in the fight against climate change and to become the first continent to
be carbon neutral by 2050. Among other actions, this plan includes:
The
European Climate Law
, proposed in March 2020 by the European
Commission, aims to establish in law the
European Union’s commitment to
achieving carbon neutrality by 2050
. In order to demonstrate its
commitment, the European Council agreed in December 2020 to
revise
the 2030 emissions’ reduction target to 55% of greenhouse gas emissions
compared to 1990
, including carbon sinks. However, this agreement has
yet to be approved by the European Parliament, which has already advocated
for a revision to a 60% reduction.
Following the approval of the Clean Energy for all Europeans legislative
package in 2018, the
Member States submitted their National Energy
and Climate Plans for assessment by the European Commission
.
The plans together, prepared while considering the previous 40% emission
reduction target, point to a 41% reduction by 2030. Thus, it will be essential
that these plans are revised to ensure fulfilment with the new objectives
that will be signed.
Higher climate
ambition
64
61
14
8
25
41
50
9
6
25
Oil - Brent
($/bbl)
Coal - API#2
($/ton)
Natural gas - NBP
(€/MWht)
Natural gas - Henry
hub (€/MWht)
CO2 (€/ton)
Evolution of average price of fuels and CO
2
2019
2020
85
ANNUAL REPORT 2020
Increasing climate ambition requires an appropriate regulatory framework,
that promotes the investments in clean technologies. Thus
, the European
Commission has proposed the revision of items of legislation, such as the
Energy Efficiency Directive, the Renewable Energy Directive, the Energy
Taxation Directive, and the emissions trading scheme, among others.
At the end of 2020, the European Commission launched various public
consultations, to gather the views of the various social stakeholders, and it is
expected that the several review processes will take place during 2021.
According to the European Commission’s impact assessment of the review
of the emissions’ reduction target by 2030,
the target related to the share
of renewable energy in final energy consumption should increase from the
current 32% to 38-40% and the target for energy efficiency should increase
from 32.5% to 36-37% in the case of final energy
and 39-41% in the case of
primary energy. These objectives will have to be taken into account by
Member States during their review of the National Energy and Climate Plans,
which is due to take place in 2023. The revisions of the Energy Taxation
Directive and the emissions trading scheme should support compliance with
these targets, promoting the polluter-pays principle and internalizing the
costs derived from the impacts of the use of fossil fuels.
Achieving the proposed targets requires the development and integration of
new technologies. With this regard,
the European Commission has proposed
a set of strategies, such as the Hydrogen Strategy and the Offshore
Renewable Energy Strategy.
The
Hydrogen Strategy
aims to promote the use of hydrogen, particularly
if
produced from renewable energy
, as an essential element for the
decarbonization of energy uses in which electrification is not feasible or is
not the most cost-effective solution
. This strategy sets a target of reaching
6 GW of electrolyzers by 2024 and 40 GW of electrolyzers by 2030 to produce
renewable hydrogen.
The Offshore Renewable Energy Strategy aims to support the use of
offshore renewable resources as a way to complement the investment in
onshore renewables.
Currently, the European Union is already an industrial
leader in marine technologies, with 12 GW of offshore wind already installed,
and with the target of reaching 60 GW of offshore wind and 1 GW of ocean
energy by 2030 (300 GW and 40 GW up to 2050, respectively).
Regulatory
Framework
New Sustainable
Industrial Clusters
86
Recognizing that climate transition is a plan for the whole society, but that
there are inequalities between regions and Member States, the European
Commission will create a
Just Transition Mechanism, which will provide
at least 100 billion euros during the 2021-2027 period.
This mechanism
will support regions with high carbon intensity, as well as citizens more
vulnerable to the climate transition, creating programmes for the
development of new skills and job opportunities in other economic sectors.
In December 2020, the European Parliament and the European Council
reached an agreement over the creation of a Just Transition Fund, with an
endowment of 17.5 billion euros to finance clean investments, such as in
renewable energy, storage, energy efficiency and sustainable and intelligent
mobility.
The
fight against energy poverty
is another of the European Commission’s
priorities. Several initiatives are being designed to mitigate energy poverty,
taking into account that it results from a combination of low income, high
energy costs and low energy efficiency. In particular,
the buildings
renovation is key for the European Commission
, given its potential to create
jobs and boost the economy, improve energy efficiency and consequently
reduce energy costs, and improve overall life standards for the population.
The
European Green Deal
will also redefine the priorities for public and
private investment, in order to reach the commitment for carbon neutrality
by 2050, which is estimated to require at
least 1 trillion euros of sustainable
investments during the next decade
. In December 2020, the European
Parliament and the European Council agreed that the Just Transition Fund
should not support projects in fossil fuels and that the European Regional
Development Fund may finance natural gas projects up to 2025 in regions
that are more reliant on coal, as long as they comply with the criteria for
sustainability established in the European taxonomy: activities that carry
out the environmental objective of adapting to climate change, provided that
this activity gives rise to emissions below 270gCO
2
/kWh. This agreement
is aligned with what was defined by the European Investment Bank (EIB),
which only considers projects as eligible for financing which emit less
than 250g CO
2
/kWh.
To put sustainable finance at the core of the financial system, the European
Union developed an Action Plan for Financing Sustainable Growth, with ten
actions, one of which is the so-called Sustainability
Taxonomy
, which was
approved by the Member States in December 2019.
This agreement
concerns the existence of a common classification system for sustainable
investments that contributes to climate change mitigation and adaptation
and also the exclusion of coal from sustainable financial products.
Therefore, the Sustainability taxonomy is a foundation for the development
of other objectives of the European Union, such as the European Standard
for green bonds and changes on monetary policies from Central Banks.
Sustainable
Finance
Just Transition
87
ANNUAL REPORT 2020
Iberia
Macroeconomic context
The sanitary crisis caused by the pandemic also had a dramatic impact on the economy, with the shutdown of many
activities due to lockdown measures, in particular those related with the tourism sector, which is particularly relevant
for the Iberian economies. In 2020, the
Portuguese economy contracted 7.6%
, being mostly penalized by the lockdown
that occurred between March and May, which led to a
historical decline in GDP of 16.4% in the second quarter
year-on-year.
For
Spain
, which was one the European countries most severely hit by the pandemic,
GDP declined by 11% in 2020
. Both
countries suffered from a steep fall in private consumption, investment and worsening of the trade balance, while public
consumption was the only component of GDP that had a slight increase during 2020.
In 2020,
the inflation rate
(based on the harmonized consumer price index)
went back to negative levels in Portugal and
Spain
, and below the Euro Zone average, which stood at 0.3%.
Portugal had an average inflation rate of -0.1%,
dragged by
the fall in the price of energy products, which more than offset the increase in prices of food products.
Spain was also in
deflationary territory in 2020, with a 0.3% price decline
, reflecting also the fall in the price of energy products, but partially
offset by the rise in the prices of clothing and food products.
Source: Eurostat
The negative performance of economic activities was reflected in the
labor market
, but in a much lower degree than the
impact on GDP. In 2020, Portugal registered a
fall of 2%
year-on-year on
employment
and an
unemployment rate of 6.8%
(vs. 6.5% in 2019). In
Spain
, the information available regarding the fourth quarter reveals a
decline of 3.1% in the
employment
vs. the previous 12 months, with an
unemployment rate of 16.1%
, which is 2.4 p.p. higher year-on-year.
Evolution of the electricity sector
In 2020, electricity consumption in Portugal and Spain fell significantly, once again explained by the lockdown measures
in the second quarter of 2020, which mostly affected electricity demand from business clients:
•
Portugal: -3.1%
annual demand reduction (-3.7% adjusted for temperature and business days effects),
while in the second quarter demand fell 11% year-on-year;
•
Spain: -5.1%
annual demand reduction (-5.0% adjusted for temperature and business days effects),
while in the second quarter demand fell 13% year-on-year.
-3
-2
-1
0
1
2
3
4
5
6
jan/07
jan/09
jan/11
jan/13
jan/15
jan/17
jan/19
Evolution of inflation in Portugal and Spain
(%, 2007 - 2020)
Portugal
Spain
88
Source: REN, REE
Regarding electricity generation, the
hydro resources were close to the historical average in Iberia
in 2020,
as the production index (IPH) stood at 0.97 in Portugal and 1.0 in Spain. These values compare with a dry hydro regime
in the previous year, with an IPH of 0.81 and 0.9, in Portugal and Spain, respectively. The improved hydro resources led
to an increase of almost 30% in hydro generation in Iberia, from 36 TWh in 2019 to 47 TWh in 2020, which in turn led to
lower thermal generation from gas and coal plants
.
The jointly effect of high CO
2
price with low gas cost led to a
fuel switching from coal to gas for electricity production
i
n Iberia. In 2020, electricity generation from coal plants was 7 TWh, which is less than half the amount in 2019 and less
than a fifth of 2018. Therefore, as of today, most of coal plants in Iberia is about to close, on a combination of weak outlook
for economic conditions with stricter environmental restrictions that became effective in 2021.
The
general decrease in fossil fuel prices, together with the fall in demand and the increase of renewables generation
led
to a
reduction in the wholesale electricity price in Iberia
to €34/MWh, standing below other European markets, such as Italy
and the UK. In markets with higher penetration of technologies with low or null variable cost (like renewables and nuclear),
such as Scandinavia and France, continue to register some of the lowest wholesale prices in Europe.
Source: Reuters
2019
2020
Electricity generation mix in Portugal and Spain
(TWh)
Coal
Gas
Nuclear
Hydro
Wind
Solar
Other
2019
2020
Portugal
Spain
49
247
49
239
52
48
48
39
39
38
39
38
34
32
11
30
Italy
UK
Iberia
France
Nordpool
Germany
Wholesale electricity prices in European markets (€/MWh)
2019
2020
89
ANNUAL REPORT 2020
Regulatory Framework
Portugal
The most relevant legislative pieces released during 2020 are described below, being additional to the legal and regulatory
framework already in place.
The Resolution of the Council of Ministers nº 53/2020, released on July 10
th
, approves the National Energy and Climate
Plan for 2030 (PNEC 2030), reinforcing the national targets for 2030 aligned with a trajectory of climate neutrality by 2030
(reduction between 45% and 55% of the greenhouse gas emissions vs. 2005; 47% share of renewable sources in final
energy gross demand; 35% reduction in primary energy demand due to energy efficiency measures; reaching 15% of
electricity interconnection capacity). PNEC 2030 also establishes a reinforcement in renewables capacity (in particular,
solar PV and wind), promotes hybridization and the increase storage capacity (namely through hydro with pumping),
as well as the phase-out of coal. It is also recognized the role of renewable gases for the decarbonization of the economy
(namely hydrogen and biomethane) as well as the role of electric mobility.
On August 14
th
, the Resolution of the Council of Ministers nº63/2020,
was released, approving the National Strategy on
Hydrogen, which defines the following targets for 2030: (i) 10% to 15% of green hydrogen injection into the natural gas grid;
(ii) 2% to 5% green hydrogen in the industrial energy consumption; (iii) 1% to 5% of green hydrogen in road transport energy
consumption; (iv) 1.5% to 2% of green hydrogen in final energy consumption; (v) 2 GW to 2.5 GW of electrolyzers installed
capacity. This Resolution also sets the plan to promote the auctions of hydrogen to inject into the natural gas grid.
On August 28
th
, the Decree-Law nº62/2020 was published, reviewing the legal framework of the National Gas System (SNG),
except for gases derived from petroleum, and its respective regulatory environment, transposing Directive 2019/692/EU
(Internal Natural Gas Market), from the European Parliament and Council, of July 13
th
, 2019. This document now covers
renewable and low carbon gases, as well as rules on the related activities, and establishes possible support mechanisms
to these gases.
Regarding
electricity generation
, the Ministerial Order nº42/2020, of February 14
th
, established the CO
2
added tax for each
product. This tax is fixed based on prices of greenhouse gas emission licenses auctions made in the scope of the EU
Emissions Trading Scheme (EU ETS), with the calculated value for 2020 being 23.619 €/ton of CO
2
. On December 4
th
,
the Ministerial Order nº 277/2020 established a value of 23.921 €/ton of CO
2
for 2021.
Within the scope the competition balance mechanism (“
clawback
”) foreseen in Decree-Law nº 74/2013 of June 4
th
,
changed by the Decree-Law nº 104/2019 of August 9
th
, several legislative pieces were published:
•
Dispatch nº 6740/2020, of June 30
th
, sets the provisional value regarding the clawback mechanism at 2.24 €/MWh
in 2020, to the power plants covered by this mechanism, but not subject to extra market events (taxation of energy
products and electricity (ISP), Special Contribution over the Energy Sector (CESE) and Social Tariff), this means,
some renewable players in the market;
•
Dispatch nº 10177/2020, of October 22th, sets the final compensation within the scope of clawback in 2019,
considering the ISP as the sole extra-market event, at 0.68 €/MWh for coal plants and 2.24 €/MWh for the remaining
plants covered by this mechanism (hydro, CCGT and plants under the special regime that are exposed to the market).
On August 17
th
, the Decree-Law nº 60/2020 was published, establishing the mechanism for guarantee of origin for the low
carbon and renewable gases, updating the targets of renewable energy sources.
90
On October 2
nd
, the Ministerial Order nº 233/2020 was published, revoking the Ministerial Order nº 251/2012, of August 20
th
,
which established the capacity payment incentives. This new diploma, revoked the investment incentive mechanism that
was available for some hydro plants (the availability mechanism was already suspended), taking into account the
Government’s understanding that is was incompatible with European rules and aligned with one of the recommendations
of the Parliamentary Commission of Inquiry on the Payment of Excessive Rents to Electricity Producers (CPIPREPE).
The same document announces the adoption of a new mechanism, according to the legal European framework. Afterwards,
on October 30
th
, the Rectification nº 42/2020 was published, amended the Ministerial Order nº 233/2020, ,
which excludes
from the scope of the revocation the exchanges where this incentive is contractually assured, maintaining the provisions
of the Ministerial Order nº 251/2012. The practical effect from this change is that the 3 hydro plants not owned by EDP
will continue to receive the investment incentive.
Regarding
renewable energy
, it is worth to highlight the publication of Dispatch nº 5921/2020, of May 29
th
, which (framed
by Decree-Law nº76/2019) determined the launch of a second auction to attribute reserve of capacity to solar PV plants.
On August 21
st
, the Ministerial Order nº 203/2020 was released, amended
the Ministerial nº 102/2015 of April 7
th
, which
establishes the criteria for the authorization of over-equipment of wind farms, defining that ERSE’s analysis is not needed
if the plant that will be over-equipped opts for the general regime of remuneration of the energy generated, instead of the
45 €/MWh tariff.
In
electricity distribution
, it is worth to highlight the ERSE’s Instruction nº4/2020, of August 11
th
, which approves the change
in the image and name of EDP Distribuição to E-REDES, which will be gradually implemented throughout 2021.
On November 30
th
, the Dispatch nº11814/2020 was published, creating a working group that has four months to elaborate
the procedure parts and the draft standard contract for the concession of the operation of the low voltage electricity
distribution networks. In
electricity retail
, to highlight that the State Budget Law of 2020 granted legislative authorization
for the Government to change the VAT Code, thus allowing the existence of different VAT rates for each level of
consumption. With this regard, on September 24
th
the Decree-Law nº74/2020 was published, changing the VAT rate that
applies to different demand levels and contracted power levels in normal low voltage consumers.
The State Budget Law of 2020 also defined the deadline for the extension of transitory tariffs to final electricity clients in the
medium and low voltage levels, as well as natural gas clients in low pressure levels. On April 1
st
, the Ministerial Order
nº83/2020 implemented this extension, setting the following calendar: (i) 31.12.2025: for normal low voltage electricity
supply and low pressure gas supply with annual demand ≤ 10,000 m
3
; (ii) 31.12.2022: for special low voltage electricity
supply and low pressure gas supply with annual demand > 10,000 m
3
; (iii) 31.12.2021: for medium voltage electricity supply.
On February 14
th
, the Directive nº2-A/2020 from ERSE was published, approving the regime of risks’ management and
guarantees of the National Electricity System.
On June 19
th
, the Dispatch nº6453/2020 was published, setting the requirements for the exemption of levies related to the
costs of general economic interest (CIEG), that are applied to projects of self-consumption and energy communities (CER).
The consumers that produce and inject energy into the grid will benefit from total exemption of CIEG levy in the projects
within communities and 50% in individual self-consumption projects.
On September 10
th
, the Decree-Law nº 64/2020 was published, setting guidelines regarding energy efficiency, transposing
Directive 2018/2002/EU, from the European Parliament and Council, of December 11
th
2018. A new target for Portugal is
defined, aiming at reaching cumulative energy savings of, at least, 0.8% of final energy demand during the 2021-2030
period.
On October 1
st
, the Decree-Law nº79/2020 was published, extending the application of the mechanism of linearization of the
cost of energy acquired to producers under the special regime (PRE). This Decree-Law allows the deferral of the overcost
with the production in special regime up to December 31
st
, 2025, for a 5-years period.
On November 26
th
, the Decree-law nº 100/2020 established a larger scope of eligibility criteria to the social tariff of
electricity and natural gas, according to State Budget Law of 2020. It covers now the economically vulnerable clients
that benefit from unemployment allowance, from disability social pension under the special disability protection regime
or the complement of the social benefit for inclusion.
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ANNUAL REPORT 2020
On December 10
th
, the Decree-Law nº 101-D/2020 was published, establishing the requirements to improve energy
performance of buildings and regulating the System of Energy Certification of Buildings, transposing the Directive
2018/844/EU and partially the Directive 2019/944/EU.
On December 22
nd
, the Regulation nº 1129/2020 from ERSE approved the Commercial Relations Regulation, now common
to both the Electricity and Gas Sectors.
Given the
Covid-19 pandemic
, a various number of legislative pieces were approved, with the aim of adjusting the activities
of the energy sector to the new social context, namely by defining measures to protect consumers and to ensure
continuous supply:
•
Directive nº5-A/2020 from ERSE, on April 2nd, approved a reduction in the price of electricity tariff in the regulation
market of 5 €/MWh, following the fall in wholesale electricity prices in MIBEL (reduction of around 3% of total electricity
bill for low voltage consumers with ≤ 41.4 kVA);
•
Law nº7/2020, of April 10th, established an exceptional and transitory regime for the non-interruption of supply of
essential services, such as electricity and natural gas;
•
ERSE’s Regulation nº6/2020, of May 12th, approved an amend to the Tariff Code of the electricity sector, which set an
extension of the 2018-20 regulatory period up to the end of 2021;
•
Law nº 18/2020, of May 29th, which made the first change on Law nº 7/2020, extending the period of measures
to support families within the context of the Covid-19 sanitary crisis, forbidding the suspension of essential services,
as electricity and natural gas, up to September 30th 2020. This restriction applied to families that suffered from
unemployment, reduction of the household income higher or equal than 20% or Covid-19 infection.
Regarding the
electricity sector tariff debt
, the tariffs foresee an
ex-ante
debt by the end of 2021 of €2,757 million, which is
roughly the same amount as of the end of 2020. This flat debt level will be achieved in conjugation with a tariff reduction
between 0.6% and 2.2% in 2021, according to the voltage level. An annual reduction of the tariff debt total amount has been
observed since 2015, year which it reached its peak, according to the sector’s sustainability target.
Spain
Regarding regulatory developments, 2020 was characterized by the further implementation of the Royal Decree-Law 1/2019,
which resulted in the transfer to the
Comisión Nacional de los Mercados y la Competencia
(CNMC) of several duties that
until then were approved by legal ordinances or were in the hands of the Government or the
Ministerio para la Transición
Ecológica
.
Therefore, during 2020, several CNMC Circulares were approved, which regulate the following subjects,
and which substitute current regulations in each of the subjects:
•
Circular
1/2020: methodology for the remuneration of natural gas system operator;
•
Circular
2/2020 approves the new rules of the balance of natural gas system;
•
Circulares
3/2020 and 7/2020: calculation methodology for the access tariffs in electricity, which is foreseen to come
into force in April 2021;
•
Circular
4/2020: methodology for the remuneration of distribution of natural gas;
•
Circular
6/2020: calculation methodology for the access tariffs in transport, distribution and regasification of natural
gas activities, which came into force in October 2020 for regasification and will begin in October 2021 for transport and
distribution activities.
92
It is still pending from the Government the approval for the new calculation methodology of the charges on electricity
consumption, that are aimed to finance other costs of this sector (namely the ones from the energy policies), following
the come into force of the methodology of access tariffs in electricity. In December, a Royal Decree was approved, which
defines the charges over gas consumption to support the energy policies costs and the calculation methodology of the
access tariffs of underground storage.
In December, the Government released a proposal for a future law that creates the
Fondo Nacional de Sostenibilidad para el
Sistema Eléctrico
(Power System Sustainability Fund), which aims to alleviate the electricity sector from the costs coming
from the feed-in-tariffs of renewables, cogeneration and waste (RECORE) granted to plants under specific remuneration
regime. With this future law, which is expected to come into force throughout 2021
, RECORE will be financed by consumers
of electricity, natural gas and petroleum products, which will lead to more competitive electricity prices
with respect to
other energy vectors.
In 2020, the Government continued developing the
Marco Estratégico de Energía y Clima
(Climate & Energy Strategic
Framework), which contains
the Integrated Energy and Climate Plan (NIECP)
presented by the Spanish State to the
European Commission, following the requirements of the Regulation of Governance of the Energy Union and Climate Action.
Within the scope of this Framework, various public consultations were performed throughout 2020, regarding roadmaps
of technologies and services that will contribute to the energy transition, such as storage and energy communities.
To highlight the
Hydrogen Roadmap
, which was already approved by the Government, and that defines as targets for
2030 the
installation of 4 GW of electrolyzers
and that 25% of industrial hydrogen consumption should be renewable.
Furthermore, in September, the Government released a public consultation about the need to implement
capacity
remuneration mechanisms
in Spain and which measures would be necessary to ensure a healthy level of firm capacity
in the Spanish electricity system, in order to take into account these requirements in the NIECP scenarios.
To ensure the fulfillment of European targets on renewables, as defined in the PNIEC, it was approved a
new economic
regime for renewable energies (REER)
, on top of the specific regime already in place.
REER foresees the realization
of auctions at around 3,000 MW/year for granting a fixed remuneration of new renewable plants
, with a certain degree
of exposure to wholesale electricity market. The difference between the price received by a plant and the market price
will be borne by the suppliers and consumers that buy electricity in the spot market.
There were also meaningful changes regarding the
concession of access to transport and distribution networks from
renewable plants
. The Royal Decree-Law 23/2020 defines a moratorium for the concession of new accesses to the grid
from electricity plants (excluding the ones in selfconsumption regime) until the approval of the new rules to grant access
to the transport and distribution grid. In the same document, requirements for the fulfillment of deadlines in projects
with access already granted were introduced, aiming to reduce the speculation on the accesses to the grid. Finally,
in December it was approved a new decree that will regulate the access and connection to the grid, being expected
to come into force in the first months of 2021.
It is estimated that the
Spanish electricity system registers a tariff deficit in 2020 due to the contraction of demand
,
caused by the Covid-19 pandemic, even taking into account that it is possible to allocate up to 1 billion euros from revenues
of the auctions of CO
2
allowances to cover the costs of the electricity system in 2020, according to Royal Decree-Law
34/2020. Notwithstanding, it is expected that part of this tariff deficit will be financed by the State Budget and by the
surpluses from previous years of the electricity system.
Recently, it was known that in
the fiscal year of 2019 there was a tariff deficit of 528 million euros
, which already includes
the revenues from the CO
2
allowances, but was financed by the surpluses of previous years.
Furthermore, regarding the electricity market, it is worth to highlight the change in the procedures of operation of the
electricity system to allow the
participation of demand in ancillary services
.
In order to reduce the electricity price to industrial consumers, it was finally
approved the Electro-Intensive Consumer
Statute
, foreseen in Royal Decree-Law 20/2018, which establishes that these consumers may receive some support to
compensate for the cost of renewables, cogeneration and non-mainland systems, which are included in the access tariffs.
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ANNUAL REPORT 2020
Regarding the
protection of vulnerable electricity consumers
, one needs to bear in mind that the social and economic
context in 2020 was particularly critical due to the Covid-19 pandemic. As such, the Government approved various
measures to
reduce the impact of the fixed cost in the electricity bill
for vulnerable clients and to
forbid the cut of
electricity supply
during the state of emergency. Other mechanisms were created to support industrial and commercial
clients, allowing some flexibility in their contracts of electricity supply. According to Royal Decree-Law 11/2020, the cost
with these incentives will be financed by the State Budget.
EDPR Markets
Macroeconomic context
In the European Union (EU), the provisional figures released by Eurostat point to a GDP decline in 2020 of 6.4%, compared
with the previous year, heavily suffering from the impact of the lockdown measures to face the COVID-19 pandemic. Almost
all Member States of the EU registered steep declines in their economic activity, particularly those countries more severely
hit by the virus propagation as well as those economies that more reliant on tourism (such as Italy, Spain and France).
As described in Chapter 2, we are now at a pivotal moment, as national governments are designing stimulus packages to
revive their economies. The recovery from the pandemic is showing a higher public and political willingness to set
ambitious climate mitigation targets, which can strengthen the case for accelerating the transition to a climate-neutral
society.
In the United States, GDP contraction was less pronounced than in the EU, standing at -3.5% in 2020, still the worst
performance since 1946. Nevertheless, the US economy was surprisingly resilient in the second half of 2020, with positive
GDP growth in the 2 last quarters of the year. To support the economy, Joe Biden has drawn up a $1.9tn stimulus package
that involves immediate economic relief to the most vulnerable households, accelerate vaccination plan and the creation of
longer-term policies aimed at stimulating the economy, creating jobs and fighting the global crisis, among other measures.
Inflation in the Eurozone stood at 0.3% in 2020, dragged by depressed prices of energy goods. In the USA, consumer prices
rose 1.4% in 2020, mainly pushed by food prices (+3.9%).
The evolution of renewables around the world in 2020
Wind
Global wind additions are likely to witness considerable growth in 2020
1
, with analysts
2
forecasting around 60-72 GW
of new capacity, vs 60.4 GW in 2019. For example, according to the latest market outlook published by the Global Wind
Energy Council (GWEC), wind could increase as much as 71.3 GW in 2020, despite the impact of the COVID-19 pandemic.
However, as China announced in January 2021 the staggering figure of nearly 72 GW of wind additions in 2020
(nearly tripling the amount of capacity in 2019), worldwide wind additions are now expected to be much higher,
probably around 100-112 GW.
3
All forecasts highlight wind industry resilience during the pandemic crisis. Despite that national lockdowns led to a
slowdown of construction activity (essentially caused by supply chain disruptions and logistical challenges)
in the first half of the year, deployment accelerated in the second half.
The offshore wind sector has also proved to be resilient. According to preliminary data, around 6.9 GW could have been
connected, around 4 GW in China, and 2.9 GW in Europe.
1
At the time of preparation of this report, data from the global wind energy council (GWEC), the American wind energy association (AWEA)
or wind Europe, have not been released
2
Experts consulted include: GWEC, IHS Markit, Bloomberg New Energy Finance, International Energy Agency, Wood Mackenzie, Wind Europe and US
Energy Information Administration (EIA), among others.
3
Most of the experts consulted had forecast that China would install around 30 GW of wind in 2020, therefore, 40 GW below the final figure
94
In Europe, the wind industry experienced disruptions in the first semester but total additions were nevertheless comparable
to previous years. According to Wind Europe, 3.9 GW of onshore wind facilities were connected in the first six months
of the year, slightly over the average of the previous three years (3.7 GW) while offshore installations were slightly below
the three-year average (1.2 GW in 2020 vs 1.5 GW in 2017-2019). Overall, preliminary results are particularly encouraging
considering that wind installations are typically higher in the second half of the year, mainly due to the strongest activity in
summer months, suggesting that total 2020 additions could easily surpass the 10 GW threshold (probably around 12 GW).
In 2020, wind power contributed to 15% of Europe’s total electricity generation, its highest-ever share, according to a report
released by Enappsys Ltd.
In the United States, developers commissioned 16.9 GW of new onshore wind capacity, far more than the previous record
of 13.2 GW achieved in 2012, according to the American Clean Power Association. These impressive results are partly
explained by the rush of wind developers to connect their projects before the phase-out of the full value of the US
production tax credit (PTC) at the end of 2020.
China remained the undisputed world’s wind power leader, adding 71.6 GW of wind energy, more than doubling the previous
record (29.4 GW in 2015) according to the National Energy Administration (NEA). Despite challenges posed by COVID-19
pandemic, developers in China were rushing to complete projects before the phase-out of the current remuneration scheme.
It has been a particularly good year for offshore wind installations as it is estimated that around 3.5-4 GW of offshore wind
facilities have been added. However, given astonishing total figure of 71.6 GW (that includes both onshore and offshore
facilities), offshore additions could be much higher. After this surge of new installations, China may become the largest
offshore wind operator worldwide in 2020 or 2021 the latest.
Solar PV
Solar PV grew robustly around the world in 2020 despite the turmoil caused by the COVID-19 crisis. Although final data
are still being collected, experts points out that around 106-132 GW of new facilities could have been connected in 2020
4
.
Therefore, 2020 final figure is expected to be in line with 2019 data (108 GW) or, more likely, above.
In Europe, 18.2 GW of solar PV capacity was added, up 11% from the 16.2 GW installed in 2019, according to Solar Power
Europe. With this surge in new installations, the European solar PV industry proved its resilience during the coronavirus
pandemic as 2020 was the second-best year for installations, only behind 2011 when 21.4 GW were installed. Over the past
12 months, Germany led the way with 4.8 GW of new installations, followed by 2.8 GW in the Netherlands and 2.6 GW in
Spain. Poland more than doubled its additions to 2.2 GW, and France installed 0.9 GW.
In the US, utility-scale solar additions more than doubled from 2019 levels, as 11.2 GW were connected in 2020, according
to the Energy Information Administration (EIA). With those additions, there are now more than 47 GW of solar PV operating
in the US, enough to power 11 million American homes.
China remains the largest market. According to the National Energy Administration, the country added 48 GW of solar PV
additions, exceeding all expectations. This figure largely surpasses the 30.1 GW added in 2019, although it remains below
the 2017 record of 52.8 GW.
4
Experts consulted included: BNEF, IHS, Wood Mackenzie, IEA, The Solar Energy Industries associations (SEIA) among others
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ANNUAL REPORT 2020
Regulatory Framework
EU Regulatory Developments:
In the context of the COVID-19 pandemic, economic recovery is a key priority for Europe, and the focus is on a green
and sustainable recovery. Investment in the green and digital transition will be supported by the NextGeneration
EU Recovery and Resilience Fund (RRF). The RRF was adopted by the Parliament and the Council in February 2021.
The scheme comprises two support mechanisms:
•
Grants:
For 70% of the total of €312.5 billion available in grants, the allocation key will consider Member States’
population, the inverse of its GDP per capita and its average unemployment rate over the past 5 years (2015-2019)
compared to the EU average. For the remaining 30%, instead of the unemployment rate, the observed loss in real
GDP over 2020 and the observed cumulative loss in real GDP over the period 2020-2021 are considered
•
Loans:
Member States can also request a loan worth up to 6.8% of their 2019 Gross National Income
96
To access these funds, Member States are commanded to submit National Recovery and Resilience Plans by 30 April 2020,
addressing the challenges and country-specific recommendations identified by the European Commission. The proposed
reforms and investments should be implemented by 2026.
Spain
•
Publication of the new remuneration parameters for the period 2020-22 (Rinv)
The remuneration of existing renewables in Spain is regulated by the RD 413/2014 and Ministerial Order IET 1045/2014.
This remuneration framework was introduced in 2014 and retroactively applied to the installations that were already
in operation. This scheme grants wind farms with a fixed payment per installed MW (Rinv) based on a regulated rate of
return (currently set at 7.398% pre-tax, around 5.2% post tax). In order to calculate the remuneration, the regulation uses
standard assets (standard parameters per technology and date of operation, such as standard load factor, production
and costs) to account for the investment and operating costs of the plants, and the revenues obtained in the wholesale
market. This scheme is defined in regulatory periods of 6 years where most regulatory parameters may be revised,
and semi-regulatory of 3 years for interim revisions of some of the parameters. The annual premium to be received
(Rinv) is defined at the beginning of the regulatory semi-period, with the estimated wholesale revenues based on a
regulatory pool price projection. There is an adjustment mechanism for Rinv of subsequent years to take into account
the deviations between the forecasted and actual pool prices. The current regulatory period covers 2020-2026,
with regulatory parameters updated and Rinv values for 2020-2022 published in Ministerial Order TED/171/2020.
•
New RES scheme (REER)
A new scheme (REER) has been defined to promote new RES and ESS capacity (including new investment on existing
assets for enlargement, repowering and hybridisation), closing the RD 413/2014 scheme to new capacity. RD 960/2020
provides the regulatory framework for this scheme where a CfD is awarded via competitive auctions. The awarded CfD
is linked to a minimum and maximum energy, so it is possible to exit the scheme once the minimum energy is reached,
and is limited to a maximum duration (10-15 years). The awarded price is a pay-as-bid and may be adjusted to market
prices. The first auction mechanism is defined through Ministerial Order TED/1161/2020, and a specific resolution
published on December 12
th
called for the first auction, which took place on 26
th
January 2021. For this first auction
mechanism, a market adjustment factor of 5% applies for non-dispatchable technologies, and 25% for dispatchable
technologies.
Poland
Volumes and Budget for 2021 auction published by the Ministry of Climate on December 28
th
:
•
the volume for PV and wind installations above 1 MW is 38.8 TWh, which could result in 600 MW in wind
(increased form initial 300 MW) and 800 MW in PV (previously 700 MW)
•
the volume for PV installations below 1 MW is set at 14.7 TWh that could result in 1 GW of small scale solar PV,
according to Government estimation
•
this auction has been already approved by the EC
New regulation on aviation obstacles published on February 11
th
, establishes that all projects with no permit of use as
of the publication of the law shall have their blades painted in white, while operational will have to implement the changes
in the next “renovation”.
Romania
On December 9th, Order no. 213/2020, approving the single imbalance price was finally published on the Official Gazette
(in force since 1
st
February), after years of high imbalance costs for renewables due to the combination of a dual-price
scheme and lack of competition in the system.
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ANNUAL REPORT 2020
USA
On 21 December 2020, the US Congress passed the “Consolidated Appropriations Act, 2021”, which included extensions
on the solar and wind production tax credit (PTC) and investment tax credit (ITC), energy efficiency incentives, and research
& development "enhancements" for clean energy technologies,
•
The legislation extends the PTC and ITC for land-based wind for one-year at 60% of the project’s full value, extends the
solar ITC for two years at 26%, and gives offshore wind projects for the first time a 30% ITC for projects that began
construction starting January 1st, 2017 through December 31
st
, 2025.
Mexico
On February 1
st
, 2021, Reform to the Electric Industry Law (LIE) was sent to Congress under “preferential” status requiring
a vote within 60 days:
•
would prioritize dispatch according to the following order (and not economics): CFE hydro, other CFE,
private renewables, private gas;
•
would eliminate clean energy auctions established by the LIE for CFE procurement;
•
would make legacy hydroelectric generation eligible for CELs;
EDPR NA Regulatory and Market Environment:
EDP Renewables operates in most of the electricity markets in the U.S., Canada, and Mexico. The nature of regulations
and market rules vary from market to market with different degrees of influence from Federal and State/Provincial
regulators in each market. The opportunities and constraints for EDPR assets and prospects are significantly defined
by these regulations and market rules.
Regional Transmission Organizations (“RTO”), Independent System Operators (“ISO”) exist throughout much of North
America to operate a region's electricity grid, administer the region's wholesale electricity markets, and provide reliability
planning for the region's bulk electricity system. RTOs carry additional responsibility for the region’s transmission network.
U.S. markets with RTOs and ISOs fall under greater Federal influence through the Federal Energy Regulatory Commission
(“FERC”) which results in more transparent tariff and market rules. Regulation and market rules for regions not in RTO/ISO
footprints tend to be influenced by various combinations of entities including State regulators, vertically integrated utilities,
municipal governments, and Federal Agencies.
In general, EDPR seeks to build assets in North American markets where long-term contracts are available for the bulk
of the output of its generation facilities. In addition to electrical power, our facilities can produce capacity and ancillary
services in regions with demand for these products. Many states have enacted Renewable Portfolio Standards (“RPS”),
which require obligated entities to provide a certain percentage of their energy supply from qualifying renewable sources,
similar to the Renewable Energy Directive in the EU. Over the last few years, North American states have expanded these
targets such that renewable portfolio standards in over ten states require 50% or more of their energy supply to be delivered
via renewable resources in the next ten to twenty years. Certain facilities within the EDPR wind and solar portfolio, given
their location, produce renewable energy credits (“REC”), certificates of clean energy (“CEL”)
and other environmental
attributes which are typically sold, along with the energy, capacity, and ancillary services, from the plants under long-term
contracts. These RECs generated via renewable production may also be sold separately from the wind and solar generation,
if not already included in the long-term contracts. The party owning the RECs is solely entitled to the benefits of the
environmental attributes.
98
U.S. federal, state and local governments have established various incentives to support the development of renewable
energy projects. Included in these incentives are the Investment Tax Credit (“ITC”), Production Tax Credit (“PTC”), cash
grants, and tax equity financing. Pursuant to the U.S. federal Modified Accelerated Cost Recovery System, wind and solar
projects are fully depreciated for tax purposes over a five-year period even though the useful life of such projects is
generally much longer than five years.
Owners of utility-scale wind facilities are eligible to claim the ITC upon initially achieving commercial operation or PTCs for
generation from qualifying facilities. The PTC is awarded based on the volume of electricity produced by the wind facility
during the first ten years of commercial operation. This incentive was established by the U.S. Congress as part of the 1992
Energy Policy Act and has been extended several times through the American Recovery and Reinvestment Act of 2009, the
American Taxpayer Relief Act of 2013, the Tax Increase Prevention Act of 2014, the Consolidated Appropriation Act of 2016,
and most recently as part of the $1.4 trillion omnibus and COVID-19 relief package. The ITC and PTC levels for a given
facility depend on that facility’s start of construction date and commissioning date and remain fixed at this level for the first
ten years of operation.
Brazil
Macroeconomic Framework
In Brazil, as well as other geographies previously described, the 2020 year was marked by the pandemic of COVID-19,
which brought a significant reduction in economic activities, due to the need of lockdowns and social distance to contain
the disease, implying various challenges to the economy and changing production and consumption patterns.
From January to September 2020, GDP
5
decreased by 5.0% in relation to the same period last year. In this comparison,
agriculture grew 2.4%, while industry (-5.1%) and services (-5.3%) registered falls. From a GDP demand approach, household
consumption expenditure, State consumption expenditure and gross fixed capital formation fell -6.3%, -4.9% and -5.5%,
respectively.
In 2020, when compared to 2019, the industrial sector
6
showed negative results in all four major economic categories,
in 20 of the 26 branches and in 60.6% of the 805 products surveyed. Among all activities, motor vehicles / trailers
and bodies (-28.1%) had the most significant negative impact. On the other hand, given the lockdown of the population,
the activities of food products (4.2%) and coke and petroleum products and biofuels (4.4%) stood out positively.
Despite this context and considering that since April an important part of commerce stood close, the restricted retail
volume
7
grew 1.2%, accumulated until November 2020 when compared to the same period of 2019. The reopening, mainly
in the third quarter, brought a strong recovery. The activities that showed the greatest growth in the retail trade were
furniture and household appliances (11.6%) and pharmaceutical, medicinal, orthopedic and perfumery articles (7.7%). In the
expanded retail trade, which includes vehicles, motorcycles, parts and pieces and building material, sales volume decreased
-1.9%. Vehicle sales accumulated a drop of 15.1%, while construction materials grew 10.1%.
The labor market
8
also showed a significant drop. The cumulative index until November 2020 shows a reduction of 9.4% in
the employed people, compared to the same period in 2019. However, compared to the immediately previous quarter, there
was a 4.8% increase in the number of employed people (+3.9 million), the highest growth in the historical series, signaling a
recovery.
5
Source: Instituto brasileiro de Geografia e Estatística – IBGE. Quarterly Nacional Accounts. July-Sep 2020
6
Source: Instituto brasileiro de Geografia e Estatística – IBGE. Industrial Monthly Research Physical Production – Brazil. December 2020
7
Source: Instituto brasileiro de Geografia e Estatística – IBGE. Monthly Commercial Research – Brazil. November 2020
8
Source: Instituto brasileiro de Geografia e Estatística – IBGE. PNADC – Brazil. November 2020
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ANNUAL REPORT 2020
Energy Sector Framework
The year 2020 was characterized by the high impact of demand in price setting and in the dispatch of power plants (COVID
effect). The year started with high PLD due to the delay of the wet period. Nevertheless, the drastic drop in consumption
motivated by the lockdowns, together with the improvement of hydro resources, contributed to the recovery of the
reservoirs, which reached about 60% of Stored Energy (EARM) at the end of the wet period, while in turn causing a fall in the
PLD to the regulated floor level during the month of April. This price scenario with low volatility remained until September,
when the increase in consumption, due to the increase in temperature and the recovery of the economy, along with an
unfavorable hydrology, caused an inversion of the energy scenario. Thus, from this date onwards, there was a rapid
reduction in reservoirs and an increase in the load factors of thermal power plants, with a substantial impact on PLD,
which reached the regulatory ceiling in November. At the end of December, the level of Stored Energy in the reservoirs
stood at 24%, with the average affluence verified over the year reaching 75% of the Long Term Average (MLT) of Affluent
Natural Energy (ENA). This scenario influenced the average PLD for the year, of R$ 176.85/MWh for the SE/CO and
R$ 134.42/MWh for the Northeast. The average GSF was 79.9%, reaching a low of 61.6% in November.
Regulatory Framework
As well as in other segments, regulatory agenda was marked by the impacts from the pandemic. It was necessary to build a
regulatory framework to protect distribution companies from the demand contraction, driven by the measures to control
COVID-19. In this way, the main regulatory topics were focused on the seek for solutions to mitigate the impact of the crisis,
in parallel with measures to modernize the sector, as well as other specific regulatory subjects.
The main topics that we highlight are:
(i) Creation of COVID Account
COVID Account was created by Decree 10.350/2020, aiming to provide financial liquidity to the electricity sector and
to mitigate tariff impacts on consumers. This theme was discussed by ANEEL in the first phase of Public Hearing
35/2020, resulting in the publication of Normative Resolution 885/2020. The dynamic of COVID account was based
on the anticipation of Regulatory Assets from companies and that would be a passed through in the tariffs for 5 years,
from 2021 onwards. By means of a credit operation done by a pool of banks, resources were given to distribution
companies by an equivalent amount of their Regulatory Assets. The total amount of COVID account passed through
EDP distribution companies were R$ 574 million.
(ii) Economic Rebalance from the Pandemic
In August, ANEEL presented a set of criteria for the extraordinary tariff revision, by means of a second phase of the Public
Consultation 035/2020, as a proposal to rebalance the economic equilibrium of distribution companies, regarding the
impacts from the pandemic. In December, after analyzing contributions provided by the agents, ANEEL reopened the
discussion about the economic rebalance in a third phase of a Public Consultation, presenting an improved criteria with
respect to the previous proposal, besides presenting a proposal for treating the involuntary oversupply of energy during the
period of the pandemic, as well as an allocation of the loan spread of COVID Account. Agents could provide contributions to
this discussion up to 01/02/2021, being expected that ANEEL regulates this subject during the first half of 2021.
(iii) Tax credit treatment of PIS/COFINS
After favorable opinion of the legal process, Receita Federal differed the request for the use of credits by EDP SP.
In March, ANEEL opened the Tomada de Subsídios nº5/2020, aiming to discuss the tax credits from legal processes.
The agents made contributions about this subject during the first half of the year and the process in under definition
by ANEEL, which will make a Public Consultation, with expected solution for the first half of 2021. EDP ES was pioneered
in considering, as provisional and exceptional case, the anticipation of the reversion of tax credits in the tariffs, allowing
a 4.8% reduction in the tariff impact index.
100
(iv) Provisional Measure 998/2020
In September, it was published the Provisional Measure 998/2020, which presents measures to reduce the consumers tariff,
by allowing the allocation of resources of I&D to the tariffs, through the Energy Development Account (CDE). Besides, the
Provisional Measure aims to promote specific changes to the regulatory model of the electricity sector, such as the gradual
extinction of subsidies to incentivized sources, the enlargement of the subsidy to the Fossil Fuels Consumption Account
(CCC), the possibility of contracting power (capacity), reinforcement of the rules for supply, make CNPE responsible for
authorizing the exploration of grant of Angra 3 nuclear plant and the definition of its energy price. The Provisional Measure
was approved in the Senate on February 5th and followed to the President of Republic.
(v) Expectative of solution for GSF
In September, it was published the Law nº14.052/20, which is the legal basis for the allocation of GSF in the free market,
being initiated the specific regulation by ANEEL. On December 1st, 2020, as a result of Public Consultation, ANEEL approved
this regulation. Given that contributions received require an improvement of the calculation methodology of CCEE, ANEEL
established a 90-days period – from the publication of the resolution – for the update of data and the setting of financial
values, followed later by the publication of regulatory assets by agent and the request to be included in this solution. After
this phase, if agents accept this proposal, it would imply the removal of legal disputes concerning this, as well as the
payment of the values established. The process is in a final stage and EDP Brasil awaits the ratification of the final value
by ANEEL to conclude the process. Meanwhile, EDP Brasil has already booked R$ 388.9 million as a result of 2020.
(vi) Hourly PLD
The implementation of hourly prices in the short-term market came into force in January 2021. In 2020, the operation with
semi-hourly dispatch was defined, without its effective use for the process price setting. EDP Brasil has prepared the
implementation of hourly prices throughout the year, using new tools for monitoring demand and to estimate energy prices,
improving methodologies of risk and volatilities, promoting relations with clients in the free market and offering solutions to
clients through EDP Smart.
(vii) Distributed Generation Incentives
The incentives to Distributed Generation (DG) did not move significantly forward in 2020, despite the discussions in the
Public Hearing 25/2019 of ANEEL and in the laws that establish the guidelines for public policies concerning DG. In
December 2020, the Court Account (TCU) issued a recommendation for the removal of subsidies and the definition of a
public policy of DG. Furthermore, the Nacional Council for Energy Policy (CNPE) published a resolution with the guidelines to
define a new public policy of DG, namely the need to respect previous rules, to make gradual transitions of new rules, grid
remuneration and subsidies’ transparency. The topic has not yet reached a conclusion and is expected to continue to be
addressed throughout 2021.
101
ANNUAL REPORT 2020
3.5. Risk management in the year
The risk management at EDP Group looks for acting in an integrated way across 5 fundamental pillars:
RECURRENT ACTIVITIES
DEVELOPMENTS IN 2020
PRIORITIES FOR 2021
IN-DEPTH
KNOWLEDGE
ABOUT KEY
SOURCES OF
RISK EXPOSURE
Mapping of key risks
(and
representation in a structured
taxonomy).
Quantitative analysis of
exposures
(based on average
and maximum loss).
Identification of scenarios with
disruptive potential and risks
for
Business Continuity.
Presence in national and
international forums
on the
resilience of critical assets.
Development of a risk map
with the key risks of 2021.
Performance of an interim
process
to evaluate the
execution of the
2021 risk map
and readjust the value at risk.
Update the annual exercise
of risk map
with the key risks
of 2022.
Deepen TCFD recommendations,
concretizing the scenarization
and quantification.
Strengthening of management
practices for operational risk.
Improvement of supply chain
risk management.
Collaboration with national and
international entities
on critical
infrastructure resilience and
disaster risk prevention.
DEFINITION OF
MANAGEMENT
STRATEGY
Support the clarification and
reflection around risk-return
trade-offs
(and risk appetite) in
key management decisions.
Periodical update of the risk
appetite statement
disclosed in
the Annual Report.
Support in defining specific
strategies
for Business
Continuity.
Consolidation of risk-return
methodologies
(marginal cost
of risk).
Approval of a Risk Appetite
Statement for EDP Group, as
well as a Risk Appetite
Framework via policy
, framing
responsibilities, governance,
and main processes.
Independent assessment of
operational risk practices and
Business Continuity
against
relevant internal/external
regulations, and benchmark
against market practices.
Establishment of the Operational
Risk Appetite Statement
and
update of the framework.
Alignment of EDP Group's Risk
Appetite Statement
with the
new
Business Plan
for 2022-25.
ACTIVE
PARTICIPATION
OF RISK IN KEY
DECISIONS AND
MANAGEMENT
PROCESSES
Risk advice/ support for the
Business Plan and Budget
exercises.
Support for investment
decisions
(incl. participation
in Investment Committee).
Support the definition of
coverage strategies
for key
exposures.
Analysis and advice on topics
with possible impact
in the risk
profile of the Group.
Follow-up and control of key
exposures
(through periodical
reports at Group level and for the
most relevant BUs).
Update and standardization of
risk policies.
Risk analysis and asset
composition
for the Group’s
Pension Fund.
Support the strengthening,
standardization and
formalization of practices for
Crisis Management and
Business Continuity.
Analysis of the risk impact of a
change in assets geometry
in
the risk profile of EDP Group.
Analysis of vertical integration
of generation and retail
as a
mean to mitigate risk.
Strategic risk reflection
for the
EDP Group
Business Plan
until
2025.
Consolidation of practices
for Crisis Management and
Business Continuity.
102
RECURRENT ACTIVITIES
DEVELOPMENTS IN 2020
PRIORITIES FOR 2021
Periodical Risk Committees
(for debate of key sources
of risk exposure and treatment
measures).
Monitoring and support of
impact analysis and risk
assessment
, as part of Business
Continuity.
Establishment of a Committee
to monitor Business Continuity
and Crisis Management
activities.
FORMALIZATION
OF RISK
GOVERNANCE
MODEL
Establishment of policy and
principles for risk management
at EDP Group.
Monitoring the adoption of the
model for Crisis Management
and Business Continuity.
Continuous disclosure of the
risk governance model, and
integration of the corporative
structure with risk-officers of
BUs
giving visibility over key
risk topics to top management.
Establishment of structures
and governance for Crisis
Management
for the EDP
Group.
Support the dynamization
of risk-officers network
and consolidation of the risk
management function
(in BUs
with more recent risk governance
models).
Definition of policy and practices
to support operational risk
management.
Monitoring
the updating
or
development of Crisis
Management plans.
PROMOTION OF
A SOLID RISK
CULTURE,
TRANSVERSAL
TO THE
ORGANIZATION
Development of a wide set of
initiatives for awareness,
customized for different
audiences:
•
Sessions for top management.
•
Courses at EDP University for
specialists, senior and
intermediate managers.
•
Specialized courses for all
employees (e.g., ethics, health
and safety, cyber security).
•
Business Continuity meetings
and newsletter.
Development of multiple
sessions dedicated to risk:
•
Top management
(executive
and non-executives): three
Risk Committees dedicated to
the analysis of the main risk
topics with executive top
management; participation in
two sessions of the Financial
Matters Committee, in two
plenary sessions, and one
session of the Strategy and
Performance Committee also
highlighting the main risk
topics (incl. strategy,
business, financial and
operational risks) with the
General and Supervisory
Board.
•
Risk-officers meeting
:
development of a workshop
with the risk-officers network
of EDP Group, to share best
practices.
•
Business Continuity meeting
:
holding a session with the
Group's network of
interlocutors to share best
practices.
Consolidation of the risk culture
strengthening programs.
Development of a risk-officers
meeting
to share best-practices.
Development of a Business
Continuity meeting
to share
best-practices.
Raising awareness
on resilience,
operational risk and Business
Continuity.
D
V
E
S
T
Y
FROM DIVERSIFICATION
TO VALUE CREATION
Changing
the world is
a team effort
Changing tomorrow now.
PART I - Information On Ownership Structure,
Organization And Corporate Governance
108
A. Ownership Structure
108
I.
Capital Structure
108
Ii. Shareholding And Bonds Owned
109
B. Corporate Bodies And Committees
119
I.
General Meeting
119
Composition of the General Meeting
119
Exercise of Voting Rights
119
II.
Management And Supervision
121
Composition
121
Operations
161
Committees of Managing or Supervisory Body
162
III
. Supervision
168
Composition
168
Operation
168
Powers and Duties
169
IV.
Statutory Auditor
169
V.
External Auditor
170
C. Internal Organization
173
I.
Articles And Association
173
II.
Whistleblowing
173
III.
Internal Control and Risk Management
174
IV.
Investor Relations
194
V.
Website
196
D. Remuneration
197
I.
Power To Set Remuneration
197
II.
Remuneration Committee
197
III.
Remuneration Structure
198
IV.
Disclosure of Remuneration
201
V.
Agreements Affecting Remuneration
204
VI
.
Stock Purchase Options or Stock Options
204
E. Transactions with Related Parties
206
I.
Mechanisms and Procedures of Control
206
II.
Business Information
208
PART II - Assessment of Corporate Governance
209
1.
Corporate Governance Code in Effect
209
2.
Compliance with the Corporate Gorvenance Code
209
3.
Other Information
240
Annex I.
Corporate Bodies’ Biography
241
Annex II.
Attendance list of the General and Supervisory Board
261
Annex III.
Attendance list of the Executive Board
263
Annex IV.
Positions held in other Companies
264
Annex V.
Attendance list of Financial Matters
266
108
Corporate
Governance
PART I
Information on Ownership Structure,
Organisation and Corporate Governance
A. Ownership Structure
I. Capital Structure
1. Capital Structure
The share capital of EDP – Energias de Portugal, S.A. (Company, EDP or EDP – Energias de Portugal, S.A.) is in the amount
of 3,965,681,012 Euros and is fully paid up, according to Article 4 of EDP's Articles of Association, being represented by
3,965,681,012 ordinary shares, which have a face value of 1 Euro each.
On August 11, 2020, EDP's share capital was increased, with the issue of 309,143,297 new shares, being before that date
the share capital of EDP of 3,656,537,715 Euros.
109
ANNUAL REPORT 2020
The geographical and investor type breakdown of the EDP shareholder structure on December 31
st
, 2020 was as follows:
Source: Interbolsa
2. Restrictions on Share Transferability
In statutory terms, the shares are not subject to any limitations in terms of transferability, given that, according to the
Portuguese Securities Code, shares traded in the market are fully transferable.
3. Treasury stock
As at 31 December 2020, EDP owned 19,557,741 treasury stock shares, corresponding to 0.49% of the share capital.
During 2020, the company Energia RE sold 1,513,000 shares of EDP, and therefore all treasury stock shares are currently
held by EDP - Energias de Portugal, S.A.
In the General Shareholders’ Meeting that took place on 16 April 2020, shareholders resolved on the granting of
authorization to the Executive Board of Directors for the acquisition and sale of own shares by EDP and subsidiaries of EDP
for an eighteen-month period as from the proposal approved in the General Meeting.
4. Change of company control
EDP is not a party to any significant agreements that come into effect, are amended or cease in the event of a change of
company control following a takeover bid (except normal market practice in terms of debt issue).
5. Defensive measures
EDP has not taken any measures to prevent takeover bids that would put the interests of the Company and its shareholders
at risk. The supplementary rules on this matter remain thus in force.
In this regard, it is important to note that, pursuant to Article 14 (3) of EDP's current Articles of Association, votes cast
by a shareholder on his own behalf or representing another will not be considered if they exceed 25% of all the votes
corresponding to the share capital.
8%
11%
36%
21%
24%
Breakdown of shareholder structure
by geography
PORTUGAL
SPAIN
EUROPE
USA
REST OF THE WORLD
95%
5%
Breakdown of shareholder structure
by investors type
INSTITUTIONAL
PRIVATE PERSONS
110
Although EDP's Articles of Association impose this limitation on the exercise of voting rights, this limitation is not a
measure to prevent successful takeover bids.
In fact, the inability of the limitation on voting rights to prevent the success of a takeover bid is the result of EDP's current capital
structure and of the compliance of the deliberative quorum of two-thirds of the votes cast, which is set out in EDP's Articles of
Association for an amendment to the company agreement on this matter with Article 182 - A (2) of the Securities Code.
No defensive measures have been taken aimed at or resulting in serious erosion of EDP's assets in the event of transfer
of control of the company or a change in the composition of the Executive Board of Directors, thereby prejudicing the free
transferability of the shares and free appraisal by the shareholders of the performance of the members of the Executive
Board of Directors.
6. Shareholder agreements
According to the Article 7 of EDP's Articles of Association, shareholder agreements regarding the Company must be
communicated in full to the Executive Board of Directors and the General and Supervisory Board by the shareholders
that have signed them in the 30 (thirty) days following their conclusion.
According to information provided to the Company by the shareholders, the Executive Board of Directors is aware of the
existence of a single shareholder agreement, which was entered into on 11 April 2007 by Parpública, Caixa Geral de
Depósitos, S.A. ("CGD") and Société Nationale pour la Recherche, la Production, le Transport, la Transformation et la
Commercialisation des Hydrocarbures ("Sonatrach").
Under the terms of this shareholder agreement, which were announced publically, Parpública and CGD made the following
commitments:
•
to support the continued membership of Sonatrach (or of a person indicated by it) in EDP’s General and Supervisory
Board, provided that Sonatrach maintains a shareholding of at least 2% (two percent) of EDP's share capital and the
strategic partnership remains in effect; and
•
to refrain from promoting, supporting and/or voting in favour of any change in EDP's Articles of Association
that prevents the continued membership of Sonatrach (or of a person indicated by it) in EDP's General and
Supervisory Board.
Although Parpública has sold its shareholdings in EDP's share capital and CGD does not own a qualifying shareholding in EDP's
share capital, according to information at EDP's disposal this does not represent automatic cessation of the effects of the
shareholder agreement. EDP has not been informed of any agreement to revoke or amend the said shareholder agreement.
111
ANNUAL REPORT 2020
II. Shareholdings and Bonds Owned
7. Qualifying holdings
Pursuant to Article 8 (1) (b) of CMVM Regulation 5/2008, we are providing the following information on qualifying holdings
owned by EDP shareholders as at December 31
st
, 2020 and attributable voting rights in accordance with Article 20 (1) of the
Securities Code.
SHAREHOLDER
NR. OF
SHARES
% CAPITAL WITH
VOTING RIGHTS
CHINA THREE GORGES CORPORATION (1)
China Three Gorges (Europe), S.A.
854,736,441
21.55%
Total
854,736,441
21.55%
China Three Gorges (Europe), S.A. is fully owned by China Three Gorges International Ltd, which is fully owned by China
Three Gorges International Corporation. China Three Gorges Corporation holds 100% equity of China Three Gorges
International Corporation and is in turn fully owned by People Republic of China. China Three Gorges communicated that
on January 14
th
, 2021 decreased its shareholding position to 19.03% of EDP’s share capital
(
).
OPPIDUM CAPITAL, S.L.
Oppidum Capital, S.L.
285,414,883
7.20%
Total
285,414,883
7.20%
According to paragraph 1(b) of article 20 of the Portuguese Securities Code, the voting rights inherent to the share
capital held by Oppidum Capital, S.L. is imputable to Fernando Masaveu Herrero. Oppidum Capital, S.L. is 55.9% owned
by Masaveu Internacional, S.L. and 44.1% owned by Liberbank, S.A. In turn, Masaveu Internacional, S.L. is 100% held by
Corporación Masaveu, S.A., which is in turn 41.38% held by Fundación María Cristina Masaveu Peterson, 10.73% by
Flicka Forestal, S.L. and 0.03% by Fernando Masaveu Herrero. Fernando Masaveu Herrero controls Fundación María
Cristina Masaveu Peterson, Flicka Forestal, S.L. and Peña Maria, S.L. Additionally, Fernando Masaveu Herrero’s spouse
holds 18,467 shares of EDP and three descendants of Fernando Masaveu Herrero, namely Pedro Masaveu Compostizo,
Jaime Masaveu Compostizo and Elias Masaveu Compostizo hold each 542 shares of EDP. In this sense, in total, 7.20%
of the voting rights of EDP, corresponding to 285,414,883 shares, should be imputable to Fernando Masaveu Herrero.
BLACKROCK, INC
BlackRock, Inc.
BlackRock Holdco 2, Inc.
BlackRock Financial Management, Inc.
BlackRock International Holdings, Inc.
BR Jersey International Holdings L.P.
BlackRock (Singapore) Holdco Pte. Ltd.
BlackRock HK Holdco Limited
BlackRock Lux Finco S.a.r.l.
BlackRock Japan Holdings GK
BlackRock Japan Co., Ltd.
BlackRock, Inc.
Trident Merger, LLC
BlackRock Investment Management, LLC
BlackRock, Inc.
BlackRock Holdco 2, Inc.
BlackRock Financial Management, Inc.
BlackRock International Holdings, Inc.
BR Jersey International Holdings L.P.
BlackRock Holdco 3, LLC
BlackRock Cayman 1 LP
112
SHAREHOLDER
NR. OF
SHARES
% CAPITAL WITH
VOTING RIGHTS
BLACKROCK, INC
BlackRock Cayman West Bay Finco Limited
BlackRock Cayman West Bay IV Limited
BlackRock Group Limited
BlackRock Finance Europe Limited
BlackRock Investment Management (UK) Limited
BlackRock Holdco 2, Inc.
BlackRock Financial Management, Inc.
BlackRock International Holdings, Inc.
BR Jersey International Holdings L.P.
BlackRock Holdco 3, LLC
BlackRock Cayman 1 LP
BlackRock Cayman West Bay Finco Limited
BlackRock Cayman West Bay IV Limited
BlackRock Group Limited
BlackRock International Limited
BlackRock, Inc.
BlackRock Holdco 2, Inc.
BlackRock Financial Management, Inc.
BlackRock Holdco 4, LLC
BlackRock Holdco 6, LLC
BlackRock Delaware Holdings Inc.
BlackRock Institutional Trust Company, National Association
BlackRock, Inc.
BlackRock Holdco 2, Inc.
BlackRock Financial Management, Inc.
BlackRock Holdco 4, LLC
BlackRock Holdco 6, LLC
BlackRock Delaware Holdings Inc.
BlackRock Fund Advisors
BlackRock, Inc.
BlackRock Holdco 2, Inc.
BlackRock Financial Management, Inc.
BlackRock, Inc.
BlackRock Holdco 2, Inc.
BlackRock Financial Management, Inc.
BlackRock International Holdings, Inc.
BR Jersey International Holdings L.P.
BlackRock (Singapore) Holdco Pte. Ltd.
BlackRock HK Holdco Limited
BlackRock Asset Management North Asia Limited
113
ANNUAL REPORT 2020
SHAREHOLDER
NR. OF
SHARES
% CAPITAL WITH
VOTING RIGHTS
BLACKROCK, INC
BlackRock, Inc.
BlackRock Holdco 2, Inc.
BlackRock Financial Management, Inc.
BlackRock International Holdings, Inc.
BR Jersey International Holdings L.P.
BlackRock Holdco 3, LLC
BlackRock Cayman 1 LP
BlackRock Cayman West Bay Finco Limited
BlackRock Cayman West Bay IV Limited
BlackRock Group Limited
BlackRock Finance Europe Limited
BlackRock Investment Management (UK) Limited
BlackRock Asset Management Deutschland AG
BlackRock, Inc.
BlackRock Holdco 2, Inc.
BlackRock Financial Management, Inc.
BlackRock International Holdings, Inc.
BR Jersey International Holdings L.P.
BlackRock Holdco 3, LLC
BlackRock Canada Holdings LP
BlackRock Canada Holdings ULC
BlackRock Asset Management Canada Limited
BlackRock, Inc.
BlackRock Holdco 2, Inc.
BlackRock Financial Management, Inc.
BlackRock Capital Holdings, Inc.
BlackRock Advisors, LLC
BlackRock, Inc.
BlackRock Holdco 2, Inc.
BlackRock Financial Management, Inc.
BlackRock International Holdings, Inc.
BR Jersey International Holdings L.P.
BlackRock Holdco 3, LLC
BlackRock Cayman 1 LP
BlackRock Cayman West Bay Finco Limited
BlackRock Cayman West Bay IV Limited
BlackRock Group Limited
BlackRock Finance Europe Limited
BlackRock Advisors (UK) Limited
BlackRock, Inc.
BlackRock Holdco 2, Inc.
BlackRock Financial Management, Inc.
BlackRock International Holdings, Inc.
114
SHAREHOLDER
NR. OF
SHARES
% CAPITAL WITH
VOTING RIGHTS
BLACKROCK, INC
BR Jersey International Holdings L.P.
BlackRock (Singapore) Holdco Pte. Ltd.
BlackRock (Singapore) Limited
BlackRock, Inc.
BlackRock Holdco 2, Inc.
BlackRock Financial Management, Inc.
BlackRock International Holdings, Inc.
BR Jersey International Holdings L.P.
BlackRock Holdco 3, LLC
BlackRock Cayman 1 LP
BlackRock Cayman West Bay Finco Limited
BlackRock Cayman West Bay IV Limited
BlackRock Group Limited
BlackRock Finance Europe Limited
BlackRock (Netherlands) B.V.
Total
200,481,297
5.06%
The qualified shareholding refers to the communication from BlackRock, Inc. on 7 December 2020.
NORGES BANK
Norges Bank
123,958,104
3.13%
Total
123,958,104
3.13%
Norges Bank, the Central Bank of Norway, acts on behalf of the State of Norway, the legal owner of all shares. According
to company's communication, Norges Bank held 123,958,104 shares as of December 31
st
, 2020 and 686,695 collateral
shares.
ALLIANCEBERNSTEIN
AllianceBernstein L.P.
107,030,000
2.70%
Total
107,030,000
2.70%
SONATRACH
Sonatrach SpA
87,007,433
2.19%
Total
87,007,433
2.19%
QATAR INVESTMENT AUTHORITY
Qatar Holding LLC
89,915,722
2.27%
Total
89,915,722
2.27%
The company Qatar Holding LLC is wholly owned by Qatar Investment Authority.
EDP (TREASURY STOCK)
19,557,741
0.49%
REMAINING SHAREHOLDERS
2,197,579,391
55.41%
Total
3,965,681,012
100.00%
Note: Pursuant to Article 14 (3) of the Articles of Association of EDP, votes cast by a shareholder, on its own account or on behalf of another
shareholder, that exceed 25% of the votes corresponding to the share capital, shall not be taken into account. For the purpose of determining the
percentage of 25% of the votes that can be cast by a shareholder, the voting rights of other entities that are imputable to it under the terms of paragraph
1 of Article 20 of the Securities Code are considered.
115
ANNUAL REPORT 2020
8. Financial instruments owned by members of the management and supervisory bodies
Financial instruments owned by members of the Executive Board of Directors
By 31 December 2020, the financial instruments held by members of Executive Board of Directors, as required by Article
447 (5) of the Companies Code are shown below.
EDP - ENERGIAS DE PORTUGAL, S.A.
EDP - ENERGIAS DO
BRASIL, S.A.
EXECUTIVE BOARD OF
DIRECTORS
(1)
No. SHARES
31-12-2020
No. SHARES
31-12-2019
No. BONDS
31-12-2020
No. BONDS
31-12-2019
No. SHARES
31-12-2020
No. SHARES
31-12-2019
António Luís Guerra Nunes
Mexia
(2)
101,093
91,000
-
-
1
1
João Manuel Manso Neto
1,375
1,268
-
-
-
-
António Fernando Melo Martins
da Costa
58,915
54,299
-
-
-
-
João Manuel Veríssimo
Marques da Cruz
(3)
-
-
-
2
-
-
Miguel Stilwell de Andrade
151,904
140,000
-
-
-
-
Miguel Nuno Simões Nunes
Ferreira Setas
8,104
7,382
-
-
6,000
6,000
Rui Manuel Rodrigues Lopes
Teixeira
(3)
39,033
31,733
-
-
-
-
Maria Teresa Isabel Pereira
25,415
71,281
-
-
-
-
Vera de Morais Pinto Pereira
Carneiro
7,000
-
-
-
-
-
(1)
The members of the Executive Board of Directors are not holder of any share of EDP Renováveis, S.A.
(2)
The shares of EDP - Energias de Portugal, S.A. include 2,355 shares held by the ascendant Maria da Graça de Calça e Pina Teixeira Guerra Nunes
Mexia.
(3) According to the information published on CMVM's website on January 28th , 2020
(
), EDP proceeded, with effect on March 2nd, 2020, with the early redemption of 692
Notes representing the issuance referred to as “€750,000,000 Fixed to Reset Rate Subordinated Notes due 2075” (ISIN: PTEDPUOM0024 / Common
Code: 129176784), by the global nominal amount of 69,200,000.00 Euros, together with interest accrued and outstanding (including, if applicable,
deferred interest) up to (but excluding) March 2nd, 2020. As a consequence, as of March 2nd, the two Notes of this Issue held by the Director João
Marques da Cruz were early redeemed (
).
(4) According to the information made available to EDP, the member of the Executive Board of Directors Rui Manuel Rodrigues Lopes Teixeira (person
discharging managerial responsibilities) held, on December 31, 2019 and on June 30, 2020, 30,243 shares representing EDP – Energias de Portugal, S.A.
share capital, as reported in the 2019 Annual Report and Accounts, if you subtract from the 31,733 shares, the 1,490 shares held by the respective
spouse. For the purposes of assessing the 30,243 shares, 100 shares (which after subscription of rights resulting from the capital increase operation are
108 shares) that are deposited in a joint account of the person discharging managerial responsibilities with his spouse, and on behalf of the latter, were
considered included in this calculation but under the terms of which the person discharging managerial responsibilities can freely dispose and transact.
Accordingly, and within the scope of the rights subscription resulting from the capital increase operation, the following two transactions by the person
discharging managerial responsibilities should be considered: (i) one in which the initial position is 30,143 shares and of which 2,564 shares were
attributed, being one of them in allotment, totaling 32,707 shares; and, (ii) another in which the initial position is 100 shares and of which 8 shares were
attributed, making a total of 108 shares; in this sense, and following the capital increase, the Director holds 32,815 shares (32,707 + 108).
In the 2019
Annual Report, it was reported that the Director's spouse - Lina Lago da Silva Dantas Martins - held 1,490 EDP shares, resulting from two purchase
transactions - carried out on May 20, 2016 and on October 3, 2016, respectively of (i) 820 shares for a unit price (excluding costs) of 2.936 Euros and (ii)
670 shares for a unit price (excluding costs) of 2.947 Euros. In the rights subscription period arising from the capital increase, EDP was informed that the
Director's spouse, it is admitted that by donation, had in her portfolio, since February 2, 2010 (date on which the respective operations were carried out),
four additional blocks of shares: (i) 150 shares acquired for a unit price (costs excluded) of 2,825 Euros; (ii) 1,311 shares acquired at a unit price (costs
excluded) of 2,826 Euros; (iii) 1,500 shares acquired at a unit price (costs excluded) of 2,826 Euros; and, (iv) 1,279 shares acquired at a unit price (costs
excluded) of 2,826 Euros. Adding the 1,490 shares (reported in the 2019 Annual Report) with the four blocks of shares totaling 4,240 shares, a total of
5,730 shares should be attributable to the Director's spouse, before the capital increase (and the respective subscription rights subscription). Following
the rights subscription resulting from the capital increase operation, 488 shares were attributed to the Director's spouse, one of which in allotment, that
adding to the aforementioned 5,730 shares represents a total of 6,218 shares. EDP was also informed that, in the context of an inheritance, the Director's
spouse additionally became co-holder, since May 8, 2020, of a bank account at Novo Banco in which securities representing the EDP share capital are
deposited. The Director’s spouse is co-holder of the aforementioned bank account with a first-degree parent (head of household) and two second-degree
collateral individuals. In such bank account, there were deposited 890 shares before the capital increase, 75 of which were attributed to the exercise of
the respective subscription rights, totaling 965 shares. To the extent that such bank account results from an undivided inheritance in which the Director's
spouse is not a first-degree parent (head of household), it was excluded such shareholding position from the reporting scope of the Director and
respective spouse.
116
Following the capital increase of EDP - Energias de Portugal, SA, registered on 11 August 2020, and in which subscription
rights were attributed to shareholders, the exercise of the respective subscription rights was reported by the following
members of the Executive Board of Directors : (i) António Luís Guerra Nunes Mexia, (ii) João Manuel Manso Neto, (iii)
António Fernando Melo Martins da Costa, (iv) Miguel Stilwell de Andrade, (v) Miguel Nuno Simões Nunes Ferreira Setas,
(vi) Rui Manuel Rodrigues Lopes Teixeira and (vii) Maria Teresa Isabel Pereira.
Additionally, on September 4
th
, 2020, Director Vera de Morais Pinto Pereira Carneiro has acquired 7,000 shares
representative of EDP - Energias de Portugal, S.A. share capital, for the price of 4.259 Euros per share, transaction that has
been subject to public disclosure on October 14
th
, 2020.
On October 30
th
, 2020, Director Maria Teresa Isabel Pereira has disposed of 52,228 shares representative of EDP - Energias
de Portugal, S.A. share capital, for the price of 4.242 Euros per share, transaction that has been subject to public disclosure
on November 4
th
, 2020.
Director Ana Paula Marques, elected at the Extraordinary General Shareholders’ Meeting of January 19
th
, 2021, does not
hold EDP financial instruments, including of EDP - Energias do Brasil, S.A. and of EDP Renováveis S.A.
Financial instruments owned by members of the General and Supervisory Board
On 31 December 2020, the financial instruments owned or imputable to the members of the General and Supervisory Board,
as required by Article 447 (5) of the Companies Code, are shown below.
EDP
-
ENERGIAS
DE
PORTUGAL,
S.A.
GENERAL AND SUPERVISORY BOARD
(1)
No. SHARES
31-12-2020
No. SHARES
31-12-2019
No. BONDS
31-12-2020
No. BONDS
31-12-2019
Luís Filipe Marques Amado
-
-
-
-
China Three Gorges Corporation
(2)
854,736,441
850,777,024
-
-
Dingming Zhang
(representing China Three Gorges Corporation)
-
-
-
-
China Three Gorges International Corp.
854,736,441
850,777,024
-
-
Shengliang Wu
(representing China Three Gorges International Corp.)
-
-
-
-
China Three Gorges (Europe), S.A.
854,736,441
850,777,024
-
-
Ignacio Herrero Ruiz
(representing China Three Gorges (Europe), S.A.)
-
-
-
-
China Three Gorges Brasil Energia Ltda.
-
-
-
-
Li Li (representing China Three Gorges Brasil
Energia Ltda.)
-
-
-
-
China Three Gorges (Portugal),
Sociedade Unipessoal, Lda.
-
-
-
-
Eduardo de Almeida Catroga
(representing China Three Gorges (Portugal))
-
-
-
-
DRAURSA, S.A.
-
-
-
-
Felipe Fernández Fernández
(representing Draursa,S.A.)
(3)
1,350
1,350
-
-
Fernando Maria Masaveu Herrero
(4)
285,434,976
265,065,136
-
-
Senfora BV
(5)
54,095,476
76,787,292
-
-
Mohammed Issa Khalfan Alhuraimel Alshamsi
(representing Senfora BV)
-
-
-
-
Banco Comercial Português, S.A.
(6)
76,627,022
75,615,918
-
-
Nuno Manuel da Silva Amado
(representing Banco Comercial Português, S.A.)
-
-
-
-
Sonatrach
87,007,433
87,007,433
-
-
117
ANNUAL REPORT 2020
EDP
-
ENERGIAS
DE
PORTUGAL,
S.A.
GENERAL AND SUPERVISORY BOARD
(1)
No. SHARES
31-12-2020
No. SHARES
31-12-2019
No. BONDS
31-12-2020
No. BONDS
31-12-2019
Karim Djebbour (representing Sonatrach)
-
-
-
-
Maria Celeste Ferreira Lopes Cardona
-
-
-
-
Ilídio da Costa Leite de Pinho
-
-
-
-
Jorge Avelino Braga de Macedo
-
-
-
-
Vasco Joaquim Rocha Vieira
3,515
3,203
-
-
Augusto Carlos Serra Ventura Mateus
-
-
-
-
João Carvalho das Neves
(7)
8,060
7,429
0
5
María del Carmen Fernández Rozado
-
-
-
-
Laurie Lee Fitch
-
-
-
-
Clementina Maria Dâmaso de Jesus Silva Barroso
-
-
-
-
Luís Maria Viana Palha da Silva
5,479
5,050
-
-
(1)
The members of the General and Supervisory Board do not hold any shares of EDP - Energias do Brasil, S.A. nor EDP Renováveis, S.A.
(2)
China Three Gorges communicated that on January 14th, 2021 decreased its shareholding position to 19.03% of EDP’s share capital
(
).
(3)
The shares of EDP - Energias de Portugal, S.A. are held by his spouse, Maria Teresa Fernández Veja, and were identified following a process of division
of an inheritance.
(4)
According to paragraph 1(b) of article 20 of the Portuguese Securities Code, the voting rights inherent to the share capital held by Oppidum Capital,
S.L. is imputable to Fernando Masaveu Herrero. Oppidum Capital, S.L. is 55.9% owned by Masaveu Internacional, S.L. and 44.1% owned by Liberbank,
S.A. In turn, Masaveu Internacional, S.L. is 100% held by Corporación Masaveu, S.A. Corporación Masaveu, S.A. is 41.38% held by Fundación María
Cristina Masaveu Peterson, 10.73% by Flicka Forestal, S.L. and 0.03% by Fernando Masaveu Herrero. Fernando Masaveu Herrero controls Fundación
María Cristina Masaveu Peterson, Flicka Forestal, S.L. and Peña Maria, S.L. Additionally, Fernando Masaveu Herrero’s spouse holds 18,467 shares of
EDP’s share capital and three descendants of Fernando Masaveu Herrero, namely Pedro Masaveu Compostizo, Jaime Masaveu Compostizo and Elias
Masaveu Compostizo hold each 542 shares of EDP's share capital. In this sense, in total, 7.20% of the voting rights of EDP, corresponding to
285,434,976 shares of EDP’s share capital, should be imputable to Fernando Masaveu Herrero.
(5)
The number of shares reported corresponds to the amount in the market notification of February 27
th
, 2020
(
)
(6)
The number of shares reported corresponds to the amount in the market notification of August 19
th
, 2020
(
)
(7)
As part of the periodic requests for information to persons discharging managerial responsibilities, EDP recently became aware that João Carvalho
das Neves did not held, at least since 31 December 2014, bonds of EDP - Energias de Portugal, S.A. or of any company of the EDP Group. João Carvalho
das Neves has been a member of the General and Supervisory Board since 21 April 2015, and since such date and throughout the respective period the
ownership of 5 bonds has been erroneously reported.
Following the capital increase of EDP - Energias de Portugal, SA, registered on 11 August 2020, and in which subscription
rights were attributed to shareholders, the exercise of the respective subscription rights by the members of the General
and Supervisory Board were reported, as follows: (i) China Three Gorges (Europe), SA, (ii) Fernando Maria Masaveu Herrero,
(iii) Banco Comercial Português, S.A., (iv) Vasco Rocha Vieira, (v) João Carvalho das Neves and (vi) Luís Maria Viana
Palha da Silva.
9. Special powers of the managing body with regard to decisions to increase share capital
The Executive Board of Directors has the powers enshrined in the law and Articles of Association to perform its duties,
which are indicated in detail in item 21.
In what concerns the approval of decisions on share capital increases, and according to Article 4 (3) of the Articles
of Association, the Executive Board of Directors has the power to approve one or more share capital increases up to an
aggregate limit of 10% of the current share capital via the issue of shares to be subscribed by new entries in cash, in
accordance with the issue terms and conditions that it defines. The draft decision must be submitted to the General and
Supervisory Board subject to a majority of two-thirds of votes of the respective members.
The General Shareholders’ Meeting held on April 16, 2020 resolved to grant powers to the Executive Board of Directors to
increase the share capital of EDP, for one or more times, for a period of 5 years, up to the limit of 10% of the share capital,
an option that was exercised by the Executive Board of Directors. On 11 August 2020, EDP's capital increase was registered,
with the issue of 309,143,297 new shares, and EDP's share capital is currently of 3,965,681,012.00 Euros, represented by
3,965,681,012 shares with a par value of 1 Euro each.
118
10. Significant business relationships between owners of qualifying holdings and the company
In pursuit of its activity and regardless of its relevance, EDP conducts business with and enters into transactions under
normal market conditions for similar operations with several entities, beyond which are included qualified shareholders
of EDP or companies related to those.
Thus, with reference to the 2020 exercise, it should be pointed out the performance of the following operations between
companies of EDP Group and owners of qualifying holdings in EDP’s share capital:
•
EDP Group, through EDP España, provided electricity and gas supply services as well as the installation of solar panels
to the company Cementos Tutela Veguín in the amount of approximately 29.5 million Euros (Cementos Tutela Veguín
is a subsidiary of the Group Masaveu, which, in turn, holds 55.9% of the company Oppidum Capital, SL);
•
EDP Group provided payment management services to Liberbank in the amount of approximately 338,462.44 Euros.
The EDP Group also entered into a lease, in the total amount of 16,852.08 Euros, for a property owned by Liberbank,
located in Oviedo, Spain, during the first three quarters of 2020, during which the headquarters of a of the EDP Group
companies was undergoing renovation works (Liberbank holds 44.1% of Oppidum Capital, SL). During the first quarter
of 2020, within the scope of an issue of fixed to reset rate subordinated debt instruments, Liberbank provided the EDP
Group with Co-lead Manager services, having earned 39,375.00 Euros for these services;
•
EDP Group provided electricity and natural gas supply services to the Millennium BCP Group in the amount of
approximately 7.5 million Euros. Banco Comercial Português provided EDP Group with underwriter services in the
share capital increase of EDP carried out during the third quarter of 2020, having joined a union with five other entities
and earned from these services 3,978,518.62 Euros. During the first quarter of 2020, within the scope of an issue of
fixed to reset rate subordinated debt instruments, Banco Comercial Português provided EDP Group with Joint Lead
Manager and Joint Bookrunner services, jointly with eight other financial entities, having earned by such services
433,125 Euros. In March 2020, SU Eletricidade, SA, the last resort trading company of the Portuguese electricity system,
wholly owned by EDP, agreed to the sale of a tariff deficit for 2020, with Banco Comercial Português, S.A. acquiring the
respective credits for approximately 201,2 million Euros and received a commission of approximately 400,000 Euros.
In July 2020, SU Eletricidade, S.A. agreed to sell a tariff deficit related to 2020, with Banco Comercial Português, S.A.
acquiring the respective credits for approximately 51.7 million Euros and receiving a commission of approximately
100,000 Euros. In December 2020, SU Eletricidade, S.A. agreed to the sale of a tariff deficit related to 2021,
with Banco Comercial Português, S.A. acquiring the respective credits for approximately 49.4 million Euros
and receiving a commission of approximately 98,000.00 Euros;
•
EDP Group acquired from Sonatrach natural gas, under long-term supply contracts, and for the combined cycle
plant Soto 4, established as a result of the partnership agreement between EDP and Sonatrach of October 2007,
having been approximately 107.3 million Euros were paid;
As for the surrounding governance guidelines, on July 29, 2010, the General and Supervisory Board approved the first
version of the “Regulation on Conflicts of Interest and Transactions with Related Parties”, which was subject to review
during 2015, having been a new version approved on 29 October 2015. On 17 May 2010, the Executive Board of Directors
approved the rules on identification, in-house reporting and procedure in the event of conflicts of interest applicable to all
EDP Group employees who play a decisive role in transactions with related parties.
Without prejudice to this set of rules concerning the prevention, identification and resolution of potential relevant corporate
conflicts of interest, to present a very high level of demand, between late 2020 and early 2021, a revision process of the
current internal rules related to this matter is being conducted, considering the changes introduced in terms of transactions
between related parties by Law no. 50/2020, of 25 August and the purpose of following the best practices in this matter.
The currently in force version is available for consultation at EDP’s website (
).
The General and Supervisory Board noted in relation to 2020, in view of the cases analysed and the information provided
by the Executive Board of Directors, that no evidence was found that the potential conflicts of interest underlying the
transactions made by EDP may have been settled contrary to the interests of the Company.
119
ANNUAL REPORT 2020
The Corporate Governance and Sustainability Committee is responsible for supervising enforcement of the aforementioned
rules and reports on its work to the General and Supervisory Board.
B. Corporate Bodies and Committees
I. General Meeting
A) Composition of The General Meeting
11. Name and position of officers of the General Meeting and their term of office
Pursuant to Article 12 of EDP’s Articles of Association, the members of the Board of the General Meeting are composed
by a Chairman, a Vice-Chairman and the Company Secretary, who is appointed by the Executive Board of Directors.
During 2020, the composition of the Board of the General Meeting was as follows:
BOARD OF THE GENERAL MEETING
CHAIRMAN
LUÍS MARIA VIANA PALHA DA SILVA
(1)
Vice Chairman
Rui Pedro Costa Melo Medeiros
(2)
Company Secretary
Ana Rita Pontífice Ferreira de Almeida Côrte-Real
(3)
(1)
The Chairman of the Board of the General Meeting was elected at the General Shareholders’ Meeting of April 24, 2019 for the remainder of the 2018-
2020 period.
(2)
The Vice-Chairman of the Board of the General Meeting was elected at the General Shareholders’ Meeting on April 5, 2018 for the 2018-2020 period.
(3)
Appointed by the Executive Board of Directors on 5 April 2018 for the position of Company Secretary, having also been appointed, on such date, Joana
Gomes da Costa Monteiro Dinis, for the position of Alternate Company Secretary. The Company Secretary and the Alternate Company Secretary were
also appointed, on January 19, 2021, by the Executive Board of Directors, following the Extraordinary General Meeting held on such date.
The Chairman of the General Meeting is automatically a member of the General and Supervisory Board, pursuant to Article
21 (2) of EDP’s Articles of Association.
The Chairman of the General Meeting has the in-house human and logistic resources appropriate to his/her needs, including
the support of the General Secretariat and Legal Department, the Investor Relations Office, the Communication Department
and the Brand Department plus external support from a specialised entity hired by EDP to collect, process and count the
votes. The logistic and administrative resources for the General Meeting are provided by the Company and the organisation
is supervised by the Chairman of the Board of the General Meeting.
B) Exercise of Voting Rights
12. Restrictions on Voting Rights
Pursuant to Article 14 (2) of EDP's Articles of Association, each share corresponds to one vote.
According to Article 14 (9) of EDP’s Articles of Association, the holders of rights representing shares under ADR (American
Depositary Receipt) programs may instruct the respective depositary bank in order to see their voting rights exercised or,
alternatively, grant proxy to a representative designated by EDP for such purpose, in compliance with applicable legal
or statutory provisions; the depository contract should regulate terms and ways for exercising the voting rights, as well
as for cases in which such instructions do not exist.
According to Article 14 (10) of the Articles of Association, EDP's shareholders can only participate and vote at the General
Meeting, personally or through a representative, if on the date of registration, 00:00 hours (GMT) of the fifth day of trading
prior to that of the General Meeting, they own at least one share.
120
Proof of ownership of the shares is provided by sending the Chairman of the General Meeting, by the fifth day of trading
prior to that of the General Meeting, a statement issued, certified and sent by the financial intermediary responsible for
registering the shares, indicating the number of shares registered and the date of registration. It may be sent by email
(Article 14 (13) of EDP's Articles of Association).
Participation in the General Meeting also requires the shareholder to express this intention to the Chairman of the General
Meeting and the financial intermediary at which the individual registration account has been opened, by the end of the
sixth day of trading prior to that of the General Meeting. The communication may be sent by email (Article 14 (11) of EDP's
Articles of Association).
Shareholders who have expressed their intention to participate in a General Meeting pursuant to the Articles of Association
and have transferred ownership of the shares between the fifth day of trading prior to that of the General Meeting and the
end thereof, must inform the Chairman of the General Meeting and the CMVM immediately (Article 14 (11) of EDP's Articles
of Association).
EDP shareholders may exercise their right to vote by correspondence, postal or electronic, on each of the items on the
agenda by means of a communication addressed to the Chairman of the Board of the General Meeting, as provided for in
number 6 and number 11 of article 14 of the Articles of Association.
Pursuant to Article 14 (7) of EDP's Articles of Association, voting rights may also be exercised electronically, in accordance
with the requirements necessary to ensure their authenticity, which must be defined by the Chairman of the General Meeting
in the invitation to the meeting.
Shareholders can find the necessary forms for postal or electronic votes at EDP's website (
).
EDP has taken several measures to encourage shareholders to exercise their voting rights, such as elimination of financial
obstacles that may affect their exercise. These measures include:
•
general circulation of the notice of meeting of the General Meeting with an express indication of the channels available
for the exercise of voting rights and in publications on the CMVM website (
) and EDP’s website
(
), in the Justice Ministry and in the Interbolsa Platform (My Interbolsa) and on the NYSE Euronext Lisbon
newsletter;
•
payment of the costs of issuing declarations of ownership of shares for all shareholders who participate in the General
Meeting.
As per EDP’s Articles of Association, votes cast by a shareholder in his own name or as a representative of another
exceeding 25% (twenty-five percent) of all the votes representing the share capital are not considered. This limitation
applies to all decisions of the General Meeting, including those for which the law or EDP's Articles of Association provide
for a qualified majority of the Company's share capital.
Pursuant to Article 14 (4) of EDP’s Articles of Association, votes for which, under Article 20 (1) of the Securities Code or
any legal rule that amends or replaces it, he is responsible will be considered cast by the same shareholder.
Pursuant to Article 15 (2) and (3) of the Articles of Association, EDP's shareholders are obliged to provide the Executive
Board of Directors, in writing and in a complete, objective, clear, truthful form, and in a manner acceptable to the board,
all information that it requests from them on facts concerning them and related to Article 20 (1) of the Securities Code.
Noncompliance with this obligation shall result in prevention of the exercise of voting rights pertaining to the shares
owned by the shareholder in question.
If the limitation on the counting of votes affects a number of shareholders, it will operate in proportion to the ordinary
shares owned by each one (Article 14 (5) of the Articles of Association).
121
ANNUAL REPORT 2020
Furthermore, pursuant to Article 20 (1) of the Securities Code, or any legal rule that amends or replaces it, shareholders
who become owners of a shareholding of 5% (five percent) or more of the voting rights or share capital, must inform the
Executive Board of Directors thereof within five business days of the date on which ownership occurred. They cannot
exercise their voting rights until they have made this communication (Article 15 (1) of EDP's Articles of Association).
13. Maximum percentage of voting rights that can be exercised by a single shareholder
or shareholders that are related in some of the relations of Article 20 (1)
See Item 12.
14. Decisions of shareholders who, under the Articles of Association, can only be made
by a qualified majority other than those provided for by law
Decisions by the General Meeting are taken by a majority of votes cast, unless the law or the Articles of Association require
a qualified majority (Article 11 (3) of the Articles of Association).
Article 10 (1) of the Articles of Association defines the performance of functions in any corporate body is incompatible with:
•
the status of a legal person that is a competitor of EDP or a company in a control or group relation with EDP
•
the status of a legal person or an individual related to a legal person that is a competitor of EDP
•
the exercise of functions, of any nature or for any reason whatsoever, notably by appointment to a corporate office,
by employment contract or by services provision agreement, at a legal person that is a competitor of EDP or at a legal
person related to a legal person that is a competitor of EDP.
Nevertheless, Article 10 (4) defines that the incompatibilities set forth in the foregoing paragraphs may also not apply
to the performance of functions as a member of the general and supervisory board, to the extent permitted by law, subject
to authorization given by prior resolution, with the favor of two thirds of the votes cast at the elective general shareholders’
meeting. The competition relation must be expressly referred to and precisely identified in the appointment proposal, and
the authorization resolution may be subject to conditions, notably to a holding of no more than 10% of EDP’s share capital.
It should also be highlighted that, according to Article 10 (10) of EDP’s Articles of Association, it should not be deemed to be
a competitor of EDP the legal person shareholder that individually holds at least 20% of the share capital of EDP, and that,
directly or through a legal person which is in a domain relationship with it, enters into and maintains a medium or long term
strategic partnership of business cooperation in the activities of generation, distribution or supply of electricity or natural
gas, approved in accordance with legal and statutory provisions, with prior favourable opinion of the General and
Supervisory Board.
In all other cases, the deliberative quorum set out in Article 383 (2) of the Companies Code applies.
II. Management and Supervision
A) Composition
15. Corporate governance model
EDP's governance structure is a dual model one and consists of the General Meeting, Executive Board of Directors,
General and Supervisory Board and the Statutory Auditor.
The separation of management and supervision roles is embodied in an Executive Board of Directors, which is responsible
for the management of the Company’s business, and a General and Supervisory Board, the highest supervisory body.
122
The division of competences, inherent to such model, between the Executive Board of Directors and the General and
Supervisory Board, has been assuring an effective management of the Company, benefitted by a constant and attentive
supervision. The dual model of corporate governance in place at EDP since July 2006 has allowed for an effective
separation of the Company’s supervision and management in pursuit of the goals and interests of EDP and its shareholders,
employees and other stakeholders, thereby contributing to achieving the degree of trust and transparency necessary for its
adequate functioning and optimization.
It is also important to note that this governance model has proven to be adequate to the size and shareholder structure
of the Company, allowing for constant supervision both by the reference shareholders and by the independent members,
through the respective intervention in the General and Supervisory Board. Considering the transversal competences of the
General and Supervisory Board and the specificities of the activities of the five Specialized Committees, the integration of
members of the General and Supervisory Board and of the Executive Board of Directors of EDP should, according to the
Selection Procedure of the members of the General and Supervisory Board and of the Executive Board of Directors, ensure
diverse skills, professional experiences, diversity of knowledge, gender and cultures, taking into account the specificities
of the Company's business. Along with the concern for the individual adequacy of each member, it is also sought that the
composition of the governing bodies and corporate bodies demonstrate a collective adequacy, bringing together the
professional and personal skills necessary for the proper performance of the functions of each body of EDP. Likewise,
in determining the respective number of members, the size of the Company, the complexity of its activity and its
geographical dispersion are considered, in addition to the costs and the desirable speed of operation of the administration.
According to Article 11 (2) (b) of the Articles of Association, it is the responsibility of the General Meeting of EDP to elect
and dismiss the members of the Executive Board of Directors and the General and Supervisory Board, as well as their
Chairmen and Vice-Chairmen, if any, and the Statutory Auditors, based on a proposal by the General and Supervisory Board
(or by delegation to the Financial Matters Committee / Audit Committee). The General Meeting also appoints the members
of the Environment and Sustainability Board, on proposal of the Executive Board of Directors, and Remuneration Committee
of the General Meeting.
For a better understanding of EDP's corporate governance, EDP's website (
) allows shareholders and the
general public to view the up-to-date Articles of Association in Portuguese and English, the Internal Regulation of the
Executive Board of Directors, General and Supervisory Board and its committees, documents that have been modified in
order to accommodate best practices, notably the principles and recommendations set forth by the Corporate Governance
Code issued by the Portuguese Institute for Corporate Governance.
Worth noting also that EDP has since 2010 a Corporate Governance Manual, whose primary objective consists of registering
and sharing the provisions of the Executive Board of Directors and of General and Supervisory Board regarding best
practices recommendations applicable to EDP on corporate governance. The Manual has a dynamic nature. It should
therefore continue to be revised periodically, considering the contributions of all interested parties in the continuous
development of EDP’s governance model.
The Manual for the Corporate Governance of EDP is available to shareholders and general public at its website
(
).
Considering that good practices of corporate governance are embedded in the Company’s organizational culture,
EDP sought to go beyond the legal requirements and regulations for this area, particularly concerning information reporting,
given EDP's meticulousness and goals regarding the quality of its corporate governance practices. The Corporate
Governance Manual therefore sought to serve the following purposes, in order to achieve this basic goal:
•
to reflect critically on recommendations on best practices in order to contribute actively in optimising EDP's practices;
•
to select the recommendations deemed most appropriate to EDP’s governance model, focusing on measures taken
and indicating potential measures for full adoption of good practices;
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ANNUAL REPORT 2020
•
to identify recommendations that are not appropriate to EDP’s interests and give reasons for this position and indicate
other ways of achieving such goals;
•
to help targets of the recommendations to reflect on the best governance practices to be followed at EDP;
•
to draft a formal document that will help compliance with reporting obligations on corporate governance practices, such
as the annual report required by law;
•
describe EDP’s governance practices that are not set out in the Corporate Governance Code but achieve the goal shared
by the General and Supervisory Board and the Executive Board of Directors to develop and increase the quality of EDP’s
governance processes.
In what concerns prevention and fighting against harassment at work, and complementing the commitments already taken
on by EDP in its Code of Ethics, available at EDP’s website (
), the Good Conduct Code for the Prevention and
Fight Against Harassment at Work entered into force as of 21 November 2017 and it is applicable to all EDP Group’s
employees. According to this Code, other service providers and suppliers are explicitly required to uphold or adhere to the
principles established, in accordance with their obligations under qualification procedures or current contracts.
Additionally, the Integrity Policy approved by the Executive Board of Directors has implemented the mandatory execution
to all subsidiary, controlled or affiliated as well as to all employees and business partners of duties which aim to avoid
unlawful conducts, in particular those associated with the practice of corruption acts, money laundering and terrorism
financing. EDP Group is committed to promote an exempt, honest, integrated, professional and fair action and requires that
its employees and contracted third-parties behave in accordance with such commitment, complying with the legislation and
regulation in force. The EDP Group Companies has implemented and has disseminated prevention, detection and control
measures towards any form of corruption, prevarication, conduct on conflict of interest, influence peddling, money
laundering, terrorism financing and other illegal acts. In this regard, the EDP Group Companies may adopt more demanding
additional measures, according to local needs, ensuring at all times the compliance with the local applicable legislation.
Additionally, the Compliance Department which independence is guaranteed through the reporting to the Executive Board of
Directors and to the General and Supervisory Board / Financial Matters Committee / Audit Committee of EDP is responsible
to biennially review this Policy or whenever any relevant legislative change occurs, submitting those amendments to the
Executive Board of Directors for approval. The Integrity Policy of EDP Group are available at EDP’s website (
).
EDP intends to continue to assume a precursor and excellence role with regard to the promotion of best government
practices, in the hope that this initiative may also contribute to enrich the debate on these matters in the general context of
the organization and functioning of public limited companies, particularly in Portugal.
The EDP Group has been publicly distinguished with several recognitions regarding the behaviors observed in terms of
promoting integrity, ethics and sustainability.
Among these recognitions, the following stand out:
•
the results of the ETHISPHERE ranking, which, for the past nine years, has considered EDP as one of the “World Most
Ethical Companies”;
•
the maximum rating for “bribery prevention” in the FTSE4Good index;
•
a prominent position in the “Codes of Conduct / Compliance / Corruption and Bribery” criterion of the Dow Jones
Sustainability Indexes, which have presented EDP as one of the most sustainable companies in the world since 2008,
integrating the respective indexes (DJSI World and DJSI Europe);
124
•
the presence in the Ethibel EXCELLENCE Investment Register, which presents a group of companies that have
an above average performance in the respective sector of activity, with the assessment being carried out based
on sustainability criteria;
•
inclusion in the Ethibel Sustainability Index (ESI) Excellence Europe, which includes only companies included in the
Investment Registers;
•
obtained ISO 37001 (Anti-bribery Management Systems) certification by EDP Energias do Brasil.
Finally, in 2020, an independent assessment of the Corporate Compliance Management System was carried out, in
accordance with the International Standard on Assurance Works ISAE 3000 Magazine - International Standard on Assurance
Engagements other than Audits or Reviews of historical financial information, which allowed us to conclude that it is in a
state of advanced maturity, following the best examples and best practices at international level, as per reasonableness
opinion attached to this Annual Report.
16. Articles of Association rules on procedural and material requirements for the appointment and
replacement of members of the Executive Board of Directors and General and Supervisory Board
It is the role of the General Meeting to elect and remove members of the Executive Board of Directors and the General and
Supervisory Board, including their chairmen.
In the event of permanent or temporary absence of any of the members of the Executive Board of Directors, the General and
Supervisory Board arranges for his/her replacement and the appointment must be ratified by the next General Meeting,
under Article 22 (1) (g) of the Company’s Articles of Association.
In the event of permanent absence of any of the members of the General and Supervisory Board, the substitutes on the list
submitted to the General Meeting must be summoned by the Chairman of this Board to replace him/her, following the order
on the list. Pursuant to Article 21 (5) (g) of EDP's Articles of Association, the substitutes on the list must all be independent.
If there are no substitutes, they will be elected by the General Meeting.
17. Composition of the Board of Directors, Executive Board of Directors and General and
Supervisory Board
The shareholders elected the members of the General and Supervisory Board and the Executive Board of Directors at the
General Meeting of 5 April 2018, for the three-year period from 2018 to 2020. At the General Shareholders’ Meeting held on
24 April 2019, the Chairman of the Board of the General Shareholders’ Meeting was elected that, as per statutory inherence,
is an independent member of the General Supervisory Board for the remaining of the current mandate due to the resignation
of Mr. António Vitorino.
It should also be noted that, at the Extraordinary General Shareholders’ Meeting held on January 19, 2021, the shareholders
elected the members of the Executive Board of Directors for a term-of-office, referring to the 2021-2023 triennium.
General and Supervisory Board
In the exercise of its duties – see Article 441 of the Companies Code and Article 22 of EDP’s Articles of Association -
the main mission of the General and Supervisory Board is to constantly advise, monitor and supervise the management
activities of EDP, cooperating with the Executive Board of Directors and the various other corporate bodies in pursuit
of the Company’s interests, pursuant to the Companies Code and the company’s Articles of Association. It is elected
by the shareholders at the General Meeting.
Pursuant to Article 21 (1) of the Articles of Association, the General and Supervisory Board consists of no fewer than nine effective
members, but always more than the number of members of the Executive Board of Directors. The majority of the elected members
of the General and Supervisory Board must be independent, pursuant to Article 21 (4) of the Articles of Association.
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ANNUAL REPORT 2020
During 2020, the General and Supervisory Board was composed by the following members:
GENERAL AND SUPERVISORY BOARD
INDEPENDENT
MEMBERS
FIRST
APPOINTMENT
DATE
CHAIRMAN
LUÍS FILIPE MARQUES AMADO
INDEPENDENT
21/04/2015
Vice-Chairman
China Three Gorges Corporation represented
by Dingming Zhang
20/02/2012
China Three Gorges International Corp. represented
by Shengliang Wu
05/04/2018
China Three Gorges (Europe), S.A. represented
by Ignacio Herrero Ruiz
20/02/2012
China Three Gorges Brasil Energia Ltda. represented by Li Li
05/04/2018
China Three Gorges (Portugal), Sociedade Unipessoal, Lda.
represented by Eduardo de Almeida Catroga
21/04/2015
DRAURSA, S.A. represented by Felipe Fernández Fernández
21/04/2015
Fernando Maria Masaveu Herrero
20/02/2012
Senfora BV represented by Mohammed Issa Khalfan
Alhuraimel Alshamsi
21/04/2015
Banco Comercial Português, S.A. represented
by Nuno Manuel da Silva Amado
21/04/2015
Société National pour la Recherche, la Production,
le Transport, la Transformation et la Commercialisation des
Hydrocarbures (Sonatrach) represented by Karim Djebbour
12/04/2007
Maria Celeste Ferreira Lopes Cardona
Independent
20/02/2012
Ilídio da Costa Leite de Pinho
Independent
20/02/2012
Jorge Avelino Braga de Macedo
Independent
20/02/2012
Vasco Joaquim Rocha Vieira
Independent
20/02/2012
Augusto Carlos Serra Ventura Mateus
Independent
06/05/2013
João Carvalho das Neves
Independent
21/04/2015
María del Carmen Fernández Rozado
Independent
21/04/2015
Laurie Lee Fitch
Independent
05/04/2018
Clementina Maria Dâmaso de Jesus Silva Barroso
Independent
05/04/2018
Luís Maria Viana Palha da Silva
Independent
24/04/2019
The representatives of the companies China Three Gorges Corporation and China Three Gorges International Corp. initiated their term of office
on 11 May 2012, following the entry into force of the Strategic Partnership Agreement concluded on 30 December 2011.
Executive Board of Directors
The Executive Board of Directors is responsible for managing the Company's activities and representing the Company,
pursuant to Article 431 of the Companies Code and Article 17 of the Articles of Association and was elected by the
shareholders at a General Meeting.
Pursuant to Article 16 (2) of the Articles of Association of EDP, the Executive Board of Directors must have a minimum
of five and a maximum of nine members.
The members of the Executive Board of Directors may not exercise executive functions in more than two companies not
integrating EDP Group, and the exercise of the referred functions shall be subject to prior appraisal by the Executive Board
of Directors, according to Article 6 of the Internal Regulation of such body.
126
At the Shareholders’ General Meeting that took place on 5 April 2018, the following members of the Executive Board
of Directors were elected for the mandate of the 2018-2020 triennium:
EXECUTIVE BOARD OF DIRECTORS
FIRST
APPOINTMENT
DATE
CHAIRMAN
ANTÓNIO LUÍS GUERRA NUNES MEXIA
(1)
30/03/2006
João Manuel Manso Neto
(2)
30/03/2006
António Fernando Melo Martins da Costa
30/03/2006
João Manuel Veríssimo Marques da Cruz
20/02/2012
Miguel Stilwell de Andrade
(3)
20/02/2012
Miguel Nuno Simões Nunes Ferreira Setas
21/04/2015
Rui Manuel Rodrigues Lopes Teixeira
21/04/2015
Maria Teresa Isabel Pereira
05/04/2018
Vera de Morais Pinto Pereira Carneiro
05/04/2018
Members elected at the General Meeting of March 30, 2006 to hold office from June 30, 2006, date of entry into force of new Articles of Association
of the Company and the two-tier corporate governance model
(1)
On 6 July 2020, in the context of the judicial procedure investigating the early termination of Power Purchase Agreements regime and transition to the
Costs of Maintenance for Contractual Balance regime, and also of the extension of the hydro public domain right of use Mr. António Luís Guerra Nunes
Mexia was suspended from his executive functions. The procedure continues in the inquiry phase.
(2)
On 6 July 2020, in the context of the judicial procedure investigating the early termination of Power Purchase Agreements regime and transition to the
Costs of Maintenance for Contractual Balance regime, and also of the extension of the hydro public domain right of use Mr. João Manuel Manso Neto
was suspended from his executive functions. The procedure continues in the inquiry phase.
(3)
Appointed Interim Chairman of the Executive Board of Directors, on 6 July 2020, following the suspension of Mr. António Mexia.
At the Extraordinary General Shareholders’ Meeting held on January 19, 2021, the members of the Executive Board of
Directors were elected for the 2021-2023 term:
EXECUTIVE BOARD OF DIRECTORS
FIRST
APPOINTMENT
DATE
CHAIRMAN
MIGUEL STILWELL DE ANDRADE
20/02/2012
Miguel Nuno Simões Nunes Ferreira Setas
21/04/2015
Rui Manuel Rodrigues Lopes Teixeira
21/04/2015
Vera de Morais Pinto Pereira Carneiro
05/04/2018
Ana Paula Garrido Pina Marques
19/01/2021
18. Independent members of the Executive Board of Directors and General and Supervisory Board
EDP's Articles of Association (Article 9 (1), Article 10 (1), Article 11 (2) (d), Article 21 (4), Article 22 (1) (a), Article 23 and Article
27) and the Internal Regulation of the General and Supervisory Board (Article 8), both available on its website (
),
lay down the rules on independence and incompatibilities for members of any of the Company's corporate bodies.
The criteria of independence set out in EDP's Articles of Association are in line with those laid down in 414 (5) of the
Companies Code and determine that independence means an absence of direct or indirect relations with the Company
or one of its bodies and an absence of any circumstances that might affect impartiality of analyses or decisions, e.g.
because the people in question own or are acting on behalf of owners of a qualifying shareholding of 2% (two percent)
or more of the share capital of EDP or have been re-elected for more than two terms of office continuously or intermittently.
Pursuant to Article 9 (1) of EDP's Articles of Association, independence is “absence of direct or indirect relations with the
Company or one of its bodies and an absence of any circumstances that might affect impartiality of analyses or decisions,
e.g. because the people in question own or are acting on behalf of owners of a qualifying shareholding of 2% (two percent)
or more of the share capital of EDP or have been re-elected for more than two continuous or intermittent mandates".
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ANNUAL REPORT 2020
In view of the need to clarify the aforementioned Article 414 (5) of the Company Code, as there are diverging legal opinions,
Associação de Emitentes de Valores Cotados em Mercado (“AEM”) requested an opinion from the CMVM , whose opinion
was that the capacity as independent is only lost if, “on the basis of the criterion of number of terms of office, in a situation
likely to affect his/her impartiality in analyses or decisions if the members of the supervisory bodies of public limited
companies, having been elected for a first term of office and re-elected continuously or intermittently for a second and third
term, are re-elected (for the third time, therefore) for a fourth term of office.”
Pursuant to its Internal Regulation, the General and Supervisory Board has in place a specific procedure regarding
compliance with a large number of rules on incompatibilities and independence applicable to positions on this board
(Articles 7 and 8 of the General and Supervisory Board Internal Regulation). This procedure includes the following aspects:
•
acceptance of a position as member of the General and Supervisory Board is subject to a written statement setting out
specifically (i) the inexistence of any incompatibility under the law or Articles of Association; (ii) compliance with the
independence requirements set out in its Internal Regulation, if the person has been elected as an independent member;
(iii) the members' obligation to report to the Chairman of the General and Supervisory Board or, for the Chairman,
directly to the board any subsequent event that might generate incompatibility or loss of independence;
•
every year, the members of the General and Supervisory Board must renew their statements as to the inexistence
of incompatibility and, if applicable, the compliance with the independence requirements.
Also every year, the General and Supervisory Board conducts a general assessment of compliance with the rules
of incompatibility and independence by its members.
At the same time, the Internal Regulation of the General and Supervisory Board has broadened the independence criteria
applicable to its members, going beyond the provisions of Article 414 (5) of the Companies Code and Article 9 of EDP's
Articles of Association, and so people who directly or through their spouse or relative or similar in a straight line and
to the collateral third degree, inclusive, are in one of the following situations cannot have independent status:
•
being holder, director, having contractual ties or acting on behalf or on the account of owners of a qualifying
shareholding of 2% (two percent) or more of the share capital or voting rights in EDP or the same percentage
in a company of which it is a subsidiary;
•
being a holder, director, having contractual ties or acting on behalf or on the account of owners of a qualifying
shareholding of 2% (two percent) or more of the share capital or voting rights in a company that is a competitor of EDP
•
having been re-elected for more than two consecutive or non-consecutive terms of office;
•
having exercised for twelve years, on a consecutive or non-consecutive basis, functions in any corporate body of the
Company exception made to, from the end of its functions in any body and its new appointment, at least a three-year
period has elapsed;
•
having, in the last three years, provided services or had a significant commercial relation with the Company or one of its
Subsidiaries; and
•
being a remuneration beneficiary paid by the Company or one of its Subsidiaries other than the remuneration deriving
from the execution of its functions as a member of the General and Supervisory Board.
The rules of independence covering members of the General and Supervisory Board are particularly important regarding
the following requirements:
•
the board must consist of a majority of independent members (Article 434 (4) and Article 414 (5) and (6) of the
Companies Code and Article 21 (4) of EDP's Articles of Association);
128
•
the Financial Matters Committee/Audit Committee is entirely composed of independent members of the General and
Supervisory Board (Article 23 (2) of EDP Articles of Association and Article 3 (1) of the Financial Matters
Committee/Audit Committee’s Internal Regulation);
•
the Remuneration Committee of the General and Supervisory Board must comprise a majority of independent members
(Article 27 (1) and Article 28 of the Articles of Association (1) (b) of the General and Supervisory Board's Internal
Regulation);
•
the United States of America (USA) Business Affairs Monitoring Committee must be composed mainly of independent
members (Article 3 (1) of the Internal Regulation of the Business Monitoring Committee in the United States of
America).
In compliance with the above procedure, at the start of their terms of office, the members of the General and Supervisory
Board stated that they were not in any of the situations of incompatibility set out in the Companies Code (Article 414-A (1)
(a) to (e), (g) and (h) (ex vi Article 434 (4)) and Article 437 (1)) or under Article 9 (1), Article 10 (1), article 11 (2) (d) and
Article 21 (4) of the Articles of Association and, where applicable, that they complied with the independence requirements
of the Internal Regulation of the General and Supervisory Board. Of the incompatibility situations for the exercise of the role
of member of the General and Supervisory Board, pursuant to the Article 414-A of the Companies’ Code, it is considered the
exercise of functions of administration or supervisory in five companies. Therefore, one may not be elected or designated a
member of the General and Supervisory Board if holds office of administrator or supervisor in five companies.
At the end of 2020, the members of the outgoing General and Supervisory Board renewed their statements on
incompatibilities and independence.
The above statements are available to the public at EDP's website, at
The independent members of the General and Supervisory Board are shown in the chart in Item 17 above.
19. Qualifications of the members of the General and Supervisory Board and Executive Board
of Directors
See Annex I of this Report.
20. Family, work-related and business relationships of the members of the General and
Supervisory Board and Executive Board of Directors with shareholders owning a qualifying
shareholding of over 2% of the voting rights
As for the General and Supervisory Board, there are professional relationships between Board members and shareholders
attributed a qualifying holding of more than 2% of voting rights, as described below:
•
the members of the General and Supervisory Board Dingming Zhang, Shengliang Wu, Ignacio Herrero Ruiz, Eduardo
de Almeida Catroga and Li Li are managers of China Three Gorges Corporation which, through its subsidiary China
Three Gorges (Europe), S.A., had, on 31 December 2020, a 21.55% shareholding in EDP;
•
the member of the General and Supervisory Board Fernando Masaveu Herrero is chairman of the management body
of Masaveu International, S.L. which owns 55.9% of Oppidum, S.L., a company that on 31 December 2020 held a 7.20%
shareholding in EDP. Fernando Masaveu Herrero is also chairman of the administration body of Oppidum, S.L;
•
the member of the General and Supervisory Board Felipe Fernández Fernández is a manager of Liberbank, S.A.
which owns 44.1% of Oppidum, S.L., a company that on 31 December 2020 held a 7.20% shareholding in EDP;
•
the member of the General and Supervisory Board Karim Djebbour is a manager of Société National pour la Recherche,
la Production, le Transport, la Transformation et la Commercialisation des Hydrocarbures (Sonatrach) which has a
2.19% shareholding in EDP.
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ANNUAL REPORT 2020
21. Organisation chart, delegation and division of powers
Powers of the General and Supervisory Board
Pursuant to Article 22 of the Articles of Association, the General and Supervisory Board is especially responsible for:
•
permanently monitor the management of EDP and its subsidiaries and provide management advice and assistance
to the Executive Board of Directors, particularly with regard to strategy, goals and compliance with the law;
•
issue opinions on the annual report and accounts;
•
permanently oversee the work of the Statutory Auditor and External Auditor and, with regard to the former, issue an
opinion on their election or appointment, dismissal, independent status and other relations with the Company;
•
oversee, on a permanent basis, and evaluate internal accounting and auditing procedures, the efficacy of the risk
management system, internal control system and internal auditing system, including the way in which complaints
and queries are received and processed, whether originating from employees or not,
130
•
propose to the General Meeting the removal from office of any member of the Executive Board of Directors;
•
monitor the definition of criteria and responsibilities required or appropriate for the structures and internal bodies
of the Company or Group and their impact and draft follow-up plans;
•
provide for the replacement of members of the Executive Board of Directors in the event of permanent or temporary
absence, as required by law;
•
issue an opinion on their annual vote of confidence in the directors set out in Article 455 of the Company Code,
on its own initiative or when requested to do so by the CEO;
•
monitor and assess matters of corporate governance, sustainability, internal codes of ethics and conduct and
compliance with these codes and systems for appraising and resolving conflicts of interest, including those associated
with the Company's relations with its shareholders, and issue opinions on these matters;
•
obtain the financial or other resources that it reasonably deems necessary for its work and ask the Executive Board of
Directors to take any measures or make any corrections that it considers pertinent, with the power to hire independent
consultants, if necessary;
•
receive regular information from the Executive Board of Directors on significant business relations between
the Company or its subsidiaries and shareholders with a qualifying holding and persons related to them;
•
appoint the Remuneration Committee and Financial Matters Committee/Audit Committee;
•
represent the Company in its relations with the directors;
•
supervise the work of the Executive Board of Directors,
•
oversee compliance with the law and Articles of Association;
•
select and replace the Company's External Auditor, giving the Executive Board of Directors instructions for engagement
or dismissal;
•
monitoring the bookkeeping, accounts and supporting documents and the status of any assets or securities held
by the Company, as and when it deems appropriate;
•
supervise the preparation and disclosure of financial information,
•
call the General Meeting when it deems appropriate,
•
approve its Internal Regulation, which includes rules on relations with the other corporate bodies,
•
exercise any other powers that may be granted by law, the Articles of Association or by the General Meeting.
Under the corporate governance model in place at EDP, the General and Supervisory Board also has a power of particular
importance. Although it does not have management powers, pursuant to Article 442 (1) of the Company Code, Article 17 (2)
of the Articles of Association lays down that the approval of EDP's strategic plan and performance of the operations
indicated below by EDP or its subsidiaries are subject to a prior favourable opinion from this board (see also Article 15
of the Internal Regulation of the General and Supervisory Board):
•
acquisitions and sales of assets, rights or shareholdings of significant economic value;
•
financing operations of significant value;
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ANNUAL REPORT 2020
•
opening and closure of establishments, or important parts thereof, and substantial extensions or limitations
of Company activity;
•
other transactions or operations of significant economic or strategic value;
•
formation or termination of strategic partnerships or other forms of lasting cooperation;
•
plans for splits, mergers or conversions;
•
amendments to the Articles of Association, including changes of registered office and share capital increases
when on the Executive Board of Directors' initiative.
The Chairman of the General and Supervisory Board is granted particular powers, and, pursuant to Article 5 of the General
and Supervisory Board Internal Regulation, is responsible for:
•
convening and presiding over meetings of the General and Supervisory Board:
•
representing the General and Supervisory Board institutionally:
•
coordinating the work of the General and Supervisory Board and ensuring the correct operation of its committees,
being entitled to attend any meeting and being kept informed of their activities:
•
proposing to the plenary General and Supervisory Board the members, the Chairman and, when appropriate,
the Vice-Chairman of each committee:
•
ensuring that the members of the General and Supervisory Board punctually receive the information they need
for their duties:
•
requesting from the Executive Board of Directors relevant information for the General and Supervisory Board
and its committees to perform their duties and ensuring that the members of the General and Supervisory Board
receive it in good time:
•
taking the necessary measures to ensure that the General and Supervisory Board adequately monitors the activity
of EDP and the Executive Board of Directors in particular:
•
monitoring implementation of the General and Supervisory Board’s budget and managing the material and human
resources assigned to it:
•
ensuring correct implementation of General and Supervisory Board decisions.
The Chairman of the General and Supervisory Board or, in his/her absence or incapacity, a member selected by the board
for that purpose, may attend meetings of the Executive Board of Directors whenever s/he sees fit and take part in the
discussion of matters to be submitted to the General and Supervisory Board, without having any voting rights pursuant
to Article 21 (10) of EDP's Articles of Association.
The members of the Financial Matters Committee/Audit Committee have a duty to attend the meetings of the Executive
Board of Directors when the accounts are appraised (see Article 10 of the Financial Matters Committee/Audit Committee
Internal Regulation).
132
Worth also noting that the General and Supervisory Board annually performs:
•
a self-assessment of its activity and performance and those of its committees, the conclusions of which are set
out in its annual report (see Article 12 of the General and Supervisory Board Internal Regulation);
•
an independent assessment of the activity and performance of the Executive Board of Directors, the conclusions
of which are submitted to the General Meeting and are presented in an annex to the annual report of the General
and Supervisory Board.
On the initiative of the General and Supervisory Board, EDP has voluntarily established a formal, impartial process to assess
the activity of this board and of the Executive Board of Directors. Experience of recent years has allowed the General and
Supervisory Board to make some changes in the process to make it more effective and efficient. During the 2020 financial
year, the method used comprises the following stages:
•
carry out the collective evaluation process of the General and Supervisory Board, its Specialized Committees and the
Executive Board of Directors to an external entity, in order to have individual questionnaires to the General and
Supervisory Board members support in completing and validating the treatment of information to support the evaluation
process;
•
in the beginning of 2021, each member of the General and Supervisory Board have answered a questionnaire prepared
by specialized consultants, answering to quantitative and qualitative matters, in particular on matters related to the
composition, organization and functioning, activity performance of the General and Supervisory Board, relationship
between the General and Supervisory Board and the Specialized Committees and other EDP corporate bodies as well as
to proceed with the analysis of matters related with the composition, organization of the Executive Board of Directors,
its activity performance and the relationship between the Executive Board of Directors and the General and Supervisory
Board including to other interlocutors;
•
reports were produced on the General and Supervisory Board evaluation, on its Specialized Committees and on the
Executive Board of Directors, which were available for assessment in the General and Supervisory Board meeting;
•
in its meeting, the General and Supervisory Board issues its assessment opinions and they are included in this board's
annual report;
•
at the General Meeting, the Chairman of the General and Supervisory Board presents the board's opinion in the item
of the agenda for assessment of the Executive Board of Directors.
Powers of the Executive Board of Directors
The Executive Board of Directors is a collegial body. No director is allowed to represent more than one other director at each
meeting.
The powers of the Executive Board of Directors, in accordance with the Article 17 (1) of the Articles of Association, include:
•
setting the goals and management policies of EDP and the EDP Group;
•
drawing up the annual business and financial plans;
•
managing corporate business and undertaking all actions and operations associated with the corporate object that
do not fall within the responsibilities of other company bodies;
•
representing the Company in and out of court, actively and passively, with the power to waive, transact and admit guilt
in any legal proceedings and make arbitration agreements;
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ANNUAL REPORT 2020
•
buying, selling or by any other means disposing or encumbering rights or immovable assets
•
setting up companies and subscribing, purchasing, encumbering and selling shareholdings;
•
deciding on the issue of bonds and other securities in accordance with the law and the Articles of Association,
in compliance with the annual quantitative limits set by the General and Supervisory Board;
•
establishing the technical and administrative organisation of EDP and the Internal Regulation, particularly in relation
to personnel and their remuneration;
•
appointing proxies with such powers as it sees fit, including the power to delegate;
•
appointing the Company Secretary and alternate;
•
hiring and dismissing the External Auditor on recommendation of the General and Supervisory Board;
•
exercising any other powers that may be granted to it by law or by the General Meeting;
•
establishing its own Internal Regulation.
As executed in 2020, proposals to amend EDP's Articles of Association regarding share capital increases submitted by the
Executive Board of Directors require a favourable prior opinion from the General and Supervisory Board, pursuant to Article
17 (2) (g) of the Articles of Association.
The Chairman of the Executive Board of Directors sends the Chairman of the General and Supervisory Board the notices
of meetings, support documents and minutes of the meetings and, on request, provides appropriate, timely information,
which is accessible to all the members of the General and Supervisory Board.
When so requested by other members of the corporate bodies, the Executive Board of Directors also provides all the
required information in a timely and appropriate fashion. There is an information sharing portal for the Executive Board
of Directors and General and Supervisory Board, which is accessible to all their members.
The Chairman of the Executive Board of Directors is granted particular powers by Article 18 of the Articles of Association.
These powers are:
•
representing the Executive Board of Directors;
•
coordinating the work of the Executive Board of Directors and convening and presiding over its meetings;
•
ensuring proper execution of the decisions of the Executive Board of Directors.
The Chairman of the Executive Board of Directors is entitled to attend the meetings of the General and Supervisory Board,
whenever considered appropriate, except when these concern decisions on the supervision of the work of the Executive
Board of Directors and, in general, any situations that may involve a conflict of interest, pursuant to Article 18 (2) of the
Articles of Association.
In the Executive Board of Directors there is a functional division of management areas to each of its members.
The college of directors is responsible for making decisions on all matters within its remit. Delegated powers are
not granted to directors individually, because of the board's particular nature.
As previously explained, the activity and performance of the Executive Board of Directors are assessed continuously
and independently by the General and Supervisory Board on an annual basis.
134
Until 7 July 2020, the allocation of management areas and corporate departments to the members of the Executive Board
of Directors in office was as follows:
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From 7 July 2020 to 19 January 2021, the allocation of management areas and corporate departments to the members
of the Executive Board of Directors in office was as follows:
136
Since 19 January 2020, the allocation of management areas and corporate departments to the members of the Executive
Board of Directors in office is as follows:
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EDP's functional structure
Group's organisational model
The Executive Board of Directors is responsible for defining the EDP Group's organisational model and splitting
competences among the different Business Units, the Shared Services companies (EDP Global Solutions - Gestão Integrada
de Serviços, S.A. and EDP Real Estate Global Solutions – Imobiliária e Gestão de Participações, S.A.) and the central
structure. This structure consists of a Corporate Centre that provides assistance to the Executive Board of Directors
in defining and monitoring the execution of strategies, policies and goals.
Apart from the Corporate Centre, EDP has Business Units, allowing for optimisation and greater efficiency
of the organisational structure.
The Executive Board of Directors is also assisted by specialised committees, which ensure more effective monitoring
of matters and contribute to the decision-making process.
On 31 December 2020, the Corporate Center structure was the following:
CORPORATE CENTER • BUSINESS UNITS
OFFICES
Corporate Governance Support Area
General Secretariat
Rita Ferreira de Almeida
Legal Office Department
Alexandra Cabral
Office of the Chairman of the Executive Board of Directors
Teresa Lobato
Internal Audit Department
Azucena Viñuela Hernández
Compliance Department
Rita Sousa
Office of the Ethics Ombudsman
Maria Manuela Silva
Strategic Area
Energy Planning Department
Ana Margarida Quelhas
Business Analysis Department
Pedro Vasconcelos
Risk Management Department
António Castro
Markets and Regulation Department
Maria Joana Simões
Studies and Competition Department
Ricardo Ferreira
Sustainability Department
António Castro
Financial Area
Financial Management Department
Paula Guerra
Consolidation, IFRS Reporting Global Coordination Department
Miguel Ribeiro Ferreira
Management Planning and Control Department
João Gouveia Carvalho
Investor Relations Department
Miguel Henriques Viana
Resources Area
Digital Global Unit
José Ferrari Careto
People Experience Unit
Paula Carneiro
Transformation & Talent Unit
Martim Salgado
EDP University
Carlos Mata
Marketing and Communication Area
Brand, Marketing and Communication Coordination Department
Paulo Campos Costa
Institutional Relations and Stakeholders Department
Ana Sofia Vinhas
Business Units
Energy Management Business Unit
Pedro Neves Ferreira
138
The
General Secretariat
provides administrative and logistical assistance to the Executive Board of Directors
and harmonisation of the corporate governance policies within the Group.
The
Legal Office Department provides legal
advice to EDP and to EDP Group’s companies with their head offices
in Portugal, in order to ensure the effective operation of the Corporate Centre, compliance with applicable legislation.
The
Office of the Chairman of the Executive Board of Directors
assists the CEO in all matters within his/her remit
in order to help maximise the effectiveness of decisions and instructions.
The mission of the
Internal Audit
Department is to conduct internal audits as an independent and objective assurance
and consulting activity and contribute to improve the processes of risk management, control and governance.
The
Compliance Department
is responsible for promoting and coordinating the implementation of Compliance mechanism
within the Group aiming to improve and protect the value and the operations of the Group and contribute to improve the risk
management procedures, control and governance of EDP Group and ensure the implementation of the Internal Financial
Reporting Control System (SCIRF).
The Ethics Ombudsman's Office
is responsible for supporting the General and Supervisory Board and the Executive Board
of Directors regarding the definition, communication, implementation and assessment of objectives, policies and
management instruments of corporate ethics. Additionally, it manages the processes of claims of ethical nature, regarding
the commitments established concerning confidentiality and protect rights associated with these procedures.
The mission of the
Energy Planning Department
is to coordinate studies for the Group's energy portfolio development
strategy in order to assist the Executive Board of Directors in building an integrated view of the portfolio and contributing
to the planning of its development in the different regions in which EDP operates.
The
Business Analysis Department
coordinates studies to assist with the Group's overall business strategy and performs
development operations via investments, divestitures and/or partnerships in order to assist the Executive Board of Directors
in optimising EDP's business portfolio and promoting and taking new business opportunities.
The
Risk Management Department
coordinates studies to assess the Group’s risk, in order to assist the Executive Board of
Directors in monitoring and mitigating risk and to supply integrated analyses of return-risk.
The
Regulation and Markets Department
studies and executed the regulatory strategy of the sector essentially in Portugal
but also with Mibel, coordinates projects on energy regulation for the Group, with the aim of supporting the Executive Board
of Directors in decision-making and ensuring regulatory compliance by the companies covered.
The
Studies and Competition Department
coordinates studies within a strategic context within the regulatory and
competition framework, with the aim of providing the Executive Board of Director in the development of a global vision
on a legal and market level as well as to coordinate litigation actions on such fields.
The
Sustainability Department's
mission is to analyse, propose and guarantee the Group's sustainability strategy in order
to assist the Executive Board of Directors in policies and goals and to ensure their implementation.
The remit of the
Financial Management Department
is to propose and implement the Group's financial management policy
and analyse and monitor management of its pension fund in order to optimise and guarantee financial sustainability and
control financial liabilities in accordance with Group policy.
The
Consolidation, IFRS Reporting and Taxation Global Coordination Department
is in charge of the Group's IFRS reporting
in order to ensure compliance with deadlines and accounting and tax processing that is appropriate and consistent in
operations at all the Group companies.
The
Management Planning and Control Department
is responsible for the Group's management planning and oversight,
to ensure alignment with strategic goals and monitor implementation of the business plan.
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The
Investor Relations Department
communicates with analysts and investors in Group companies to ensure the
sustainability of EDP’s image and reputation and fulfil the information requirements of regulators and financial supervisors.
The
Digital Global Unit
is in charge of managing the Group's information and communication systems in the Iberian
Peninsula and analysing and proposing the Group's ICT strategy in order to align it with the strategy and create value
by providing solutions that foster efficacy, efficiency and innovation in EDP's processes.
The
People Experience Unit
proposes to design the People Management strategy of EDP Group, aligned with the
Transformation and Talent Unit, and ensure the implementation of transversal policies and procedures, with the objective to
promote outstanding experiences to all employees, contributing therefore to the sustainability of the business.
The
Transformation and Talent Unit
is responsible to propose and ensure, aligned with the People Experience Unit, the
execution of the transformation strategy and talent management of EDP group employees, in line with the culture of EDP
Group, in order to contribute for the sustainability of the business and reinforce the reference profile of EDP Group.
EDP University
assures availability, retainment and sharing of knowledge in the Group in order to reinforce a common
culture, foster employees' vocational development and facilitate the appearance of new talents and full use of their skills.
Brand, Marketing and Communication Global Coordination Department
, whose competences are analyse, propose,
coordinate and assure a strategy of global communication for EDP Group, aimed at maximising the value of the brand
through a unique vision of the positioning of communication, independently of operating areas or geographies.
The
Institutional Relations and Stakeholders
assures an integrated and consistent narrative with EDP’s stakeholders,
aligned with the adopted vision and strategy, aimed at maximizing the potential of communication with stakeholders and in
order to contribute to a fluid and systematized information regarding EDP and its actions.
The
Energy Management Business Unit (UNGE)
is responsible for negotiating physical and forward purchases of fuel and
contracting transport on behalf of the appropriate EDP Group companies. It is also responsible for spot and forward
purchases and sales in the electricity market of a physical or financial nature, such as energy derivatives and foreign
exchange operations. It also decides on operation and dispatch programs for the EDP Group power stations whose energy
management is its responsibility in order to optimise its portfolio and supply energy to customers of the EDP Group's
retailers. It also manages the EDP Group's CO2 allowance operations and green certificates.
On 19 January 2021, changes were made to the existing departments and their respective powers, under the following
terms:
•
Merger of the General Secretariat and the Legal Department into a single department,
General Secretariat and Legal
Department
, which will have the following powers: perform the administrative and logistical function to support the
Executive Board of Directors and provide legal advice to Group companies based in Portugal, with the aim of ensuring
the efficient operation of the Corporate Center and compliance with applicable legislation, as well as ensuring
harmonization of corporate governance policies in the Group.
•
Extinction of the Brand, Marketing and Communication Global Coordination Department and empowerment of the
Communication
and
Brand Departments
with the following powers:
i)
Communication Department
: develop an integrated communication strategy that transmits the Group's culture,
improving the degree of motivation and involvement of employees with the company. Establish a relationship with
the media that maximizes the positive impact of the brand and minimizes possible negative impacts;
ii)
Brand Department
: define and develop the EDP Group's Brand strategy and the EDP Group's sponsorship and brand
activation Policy, ensuring alignment with the Group's values and vision.
140
Specific EDP committees (Functional Structures)
The EDP organizational model provides for management committees that contribute in two ways to the Company's
decision-making process:
•
they input information to assist the Executive Board of Directors in its decision-making reflecting opinions
and information from the areas in the organisation most affected by the proposal in question;
•
they are used by an organisational unit (belonging to the Corporate Centre, a Business Unit or shared service unit
to assist in gathering information, alignment, decisions and implementation of policies and practices with an impact
on a number of areas in the organization.
Considering the principle of continuous improvement that the EDP Group follows and the committees' importance in the
Group's organizational model, the Executive Board of Directors approved, on 27 February 2019, a change in structure
of the committees and appointed its members.
On 31 December 2020, the Committees structure configuration was as follows, without prejudice to the respective
composition having undergone some adaptations, due to the reallocation of the management areas that occurred
in July 2020:
STRATEGIC CORPORATE
COMMITTEES
FUNCTIONAL CORPORATE COMMITTEES
BUSINESS COMMITTEES
Risk Committee
Innovation Committee
Generation Committee
Sustainability Committee
Ethics Committee
Distribution Networks Committee
Energy Planning Committee
Information Disclosure Committee
Iberian Commercial Committee
Investments Committee
Stakeholders Committee
Regulation Committee
Procurement Committee
Prices and Volumes Committee
Accident Prevention and Safety Committee
Iberian Commercial and Market
Committee
Pension Plan and Fund Management
Committee
Corporate Development Committee
Human Resources and Diversity Committee
Digital and Information Technology
Committee
Compliance Committee
I - Strategic Corporate Committees
Risk Committee
The main duties of the Risk Committee are:
•
share information on the EDP Group's key risks and risk profile;
•
discuss the result of significant risk assessment projects undertaken in conjunction with the Business Units;
•
discuss and issue opinions or recommendations on policies, procedures, significant risks, risk limits and extraordinary
risk situations;
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ANNUAL REPORT 2020
•
promote and monitor maintenance of the inventory of the most significant risks (risk portal);
•
approve the periodical reporting model to be submitted by the Business Units or the Risk Management Department
and other mechanisms for reporting and monitoring EDP’s risks.
The Risk Committee's membership is as follows:
RISK COMMITTEE
CHAIRMAN: CHAIRMAN EBD
Secretary: Head of CC Risk Management
Member EBD (besides the Chairman):
Member EBD (Renewables, Regulation, Comp., Energy Plann. and UNGE Area)
Member EBD (IT, Organ. Develop., Sustainability, Risk and Ethics Area)
Member EBD (Financial Area)
Member EBD (HR, Sãvida and Brazil Area)
Member EBD (Generation and Spain Area)
CC and BU members (besides the Secretary):
Head of CC Energy Planning
Head of CC Financial Management
Head of CC Regulation and Markets
Head of UNGE
Head of CC Management Planning and Control
Ad-hoc members:
Board Member of EDP Produção
Board Member of EDP Distribuição
Board Member of EDP Comercial
Board Member of EDP Internacional
Board Member of EDP Global Solutions
General Management of EDP España
Rep. EDP Renováveis
Rep. EDP Energias do Brasil
The Risk Committee held four meetings in 2020.
Sustainability Committee
The Sustainability Committee's responsibilities are as follows:
•
share information and discuss the implications of major legislative packages in the field of sustainability;
•
share the Group's environmental performance indicators and benchmarks;
•
discuss and give opinions on the annual Operational Environment and Sustainability Plans (POSA) and the annual
consolidated budget;
•
discuss and give opinions on the annual action plans and the EDP Group's goals and targets;
•
monitor the progress of approved action plans and the activities of the EDP Group companies' sustainability
management structures.
142
The Sustainability Committee's membership is as follows:
SUSTAINABILITY COMMITTEE
CHAIRMAN: CHAIRMAN EBD
Secretary: Head of CC Sustainability
Members of EBD (besides the Chairman):
Member EBD (IT, Organ. Develop., Sustainability, Risk and Ethics Area)
CC and BU members (besides the Secretary):
Board Member of EDP Produção (Envir. and Sustainability Area)
Board Member of EDP Distribuição (Envir. and Sustainability Area)
Board Member of EDP Sol. Comerciais (Envir. and Sustainability Area)
Board Member of EDP Global Solutions (Envir. and Sustainability Area)
Board Member of EDP Inovação
Head of CC Risk Management
Head of CC Investors Relation
Head of CC People Experience Unit
Head of CC Universidade EDP
Head of CC Brand, Marketing and Communication Global Coord.
Head of CC Institutional Relations and Stakeholders
Head of CC Energy Planning
Rep. CC Risk Management
Rep. Fundação EDP
Rep. EDP España (Envir., Sust. and Stakeholders)
Rep. EDP Comercial
Rep. EDP Renováveis
Rep. EDP Energias do Brasil
Rep. Fundación EDP
Rep. UNGE
The Sustainability Committee held one meeting in 2020.
Energy Planning Committee
The main tasks of the Energy Planning Committee are:
•
share up-to-date information on the different markets and businesses in which the EDP Group operates
(Iberia, wind, Brazil) and the performance of its portfolio in these geographies;
•
analyse the impact of energy and environment policies, as well as different regulatory frameworks with reference
to the planning of the sector and portfolio of EDP;
•
inform and propose about stances on several matters regarding strategic planning.
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The Energy Planning Committee's membership is as follows:
ENERGY PLANNING COMMITTEE
CHAIRMAN: CHAIRMAN EBD
Secretary: Head of CC Energy Planning
Members of EBD (besides the Chairman):
Member EBD (Renewables, Regulation, Comp., Energy Plann. and UNGE Area)
Member EBD (Financial Area)
Member EBD (HR, Sãvida and Brazil Area)
Member EBD (Generation and Spain Area)
Member EBD (Trading Area)
CC and BU members (besides the Secretary):
Board Member of EDP Produção
Board Member of EDP Distribuição
Board Member of EDP Comercial
Board Member of EDP Renováveis
General Management of EDP España
Head of CC Business Analysis
Head of CC Management Planning and Control
Head of CC Regulation and Markets
Head of CC Studies and Competition
Head of CC Risk Management
Head of CC Sustainability
Head of CC Investors Relation
Head of UNGE
Rep. EDP Renováveis (Regulation and Markets)
Rep. EDP Energias do Brasil (Energy Planning)
Rep. EDP España (Regulation)
Ad-hoc members:
Board Member of EDP Internacional
Board Member of EDP Inovação
The Energy Planning Committee held one meeting in 2020.
144
Investments Committee
The Investments Committee discusses and issues opinions on proposed investment and disinvestment projects and WACC
proposals for the Business Units.
The Investments Committee's membership is as follows:
INVESTMENTS COMMITTEE
CHAIRMAN: MEMBER EBD (ÁREA FINANÇAS)
Secretary: Rep. CC Business Analysis
CC and BU members (besides the Secretary):
Head of CC Business Analysis
Head of CC Management Planning and Control
Head of CC Energy Planning
Head of CC Risk Management
Ad-hoc members:
Head of CC Consolidation, IFRS Report and Tax Global Coordination
Head of CC Investors Relation
The Investments Committee held seventy-eight meetings in 2020.
Regulation Committee
The remit of the Regulation Committee is as follows:
•
share regulatory practices in the Iberian Peninsula and the rest of Europe and those followed in Brazil;
•
analyse the European Commission's energy strategy and policies and the implementation of directives by the internal
market and the competition and policies, legislation, regulations and organisation of the energy sectors in Portugal
and Spain;
•
analyse prices evolutions and the implications of tariff policies and decisions on regulated activities;
•
discuss and clarify the regulatory developments and modification, as well as the respective impacts.
The Regulation Committee's membership is as follows:
REGULATIONS COMMITTEE
CHAIRMAN: MEMBER EBD (RENEWABLES, REGULATION, COMP., ENERGY PLANN. AND UNGE AREA)
Secretary: Head of CC Regulation and Markets
Members of EBD (besides the Chairman):
Member EBD (Distribution, International and Labelec Area)
Member EBD (Trading Area)
CC and BU members (besides the Secretary):
Board Member of EDP Distribuição
Board Member of EDP Energias do Brasil
Board Member of EDP Energias do Brasil
Board Member of EDP Comercial
Board Member of EDP Serviço Universal
Board Member of EDP Produção
Board Member of EDP Gás SU
Board Member of EDP Soluções Comerciais
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ANNUAL REPORT 2020
REGULATIONS COMMITTEE
Rep. Cabinet of the EBD Chairman
Head of CC Energy Planning
Head of CC Management Planning and Control
Head of CC Institucional Relations and Stakeholders
Head of CC Investors Relation
Head of CC Business Analysis
Head of UNGE
Rep. UNGE (Regulation)
Rep. EDP España (Regulation)
Rep. EDP Distribuição (Regulation)
Rep. EDP Comercial
Rep. EDP Energias do Brasil (Regulation)
Rep. EDP Renováveis (Regulation and Markets)
Rep. CC Studies and Competition
Rep. CC Regulation and Markets
Rep. EDP Serviço Universal (Regulation)
Rep. EDP Produção
Rep. EDP Gás SU
Rep. European Compliance Project
Rep. CC Risk Management
Rep. CC Investors Relation
The Regulation Committee held nine meetings in 2020.
Prices and Volumes Committee
The Prices and Volumes Committee's main duties are:
•
share relevant, up-to-date information on recent developments in the Iberian electricity and gas markets;
•
discuss and align historical information and forecasts shared by business areas;
•
issue an opinion on the forward curve representing the EDP Group's best estimate on the growth of the wholesale
market for a one to two-year horizon;
•
propose adjustments to management of the Iberian wholesale margin (in terms of risk coverage, commercial activity,
placement of gas contracts, etc).
146
The Prices and Volumes Committee's membership are as follows:
PRICES AND VOLUMES COMMITTEE
CHAIRMAN: MEMBER EBD (RENEWABLES, REGULATION, COMP., ENERGY PLANN. AND UNGE AREA)
Secretary: Head of CC Energy Planning
Members of EBD (besides the Chairman):
Member EBD (Financial Area)
Member EBD (Generation and Spain Area)
Member EBD (Trading Area)
CC and BU members (besides the Secretary):
Board Member of EDP Produção (Regulation and Markets)
Board Member of EDP Produção (Spain)
Board Member of EDP Comercial (B2C)
Board Member of EDP Comercial (B2B)
Board Member of EDP Comercial (New Downstream)
Board Member of EDP Renováveis
General Management of EDP España
Head of CC Risk Management
Head of CC Management Planning and Control
Head of CC Regulation and Markets
Head of CC Studies and Competition
Head of CC Business Analysis
Head of CC Investors Relation
Head of UNGE
Head of DMB UNGE
Head of DME UNGE
Rep. EDP España (Regulation)
Rep. EDP España (Projects)
Rep. EDP España (Gas Supply)
Rep. EDP Produção (Planning and Control)
Rep. EDP España (Planning, Control and Trading Business Development)
Rep. EDP Renováveis (Regulation and Markets)
Rep. EDP Produção (Regulation and Markets)
The Prices and Volumes Committee held four meetings in 2020.
Market and Commercial Iberian Committee
The Market and Commercial Iberian Committee's responsibilities are as follows:
•
share information on the energy trading market and Iberian business for the supply of electricity, gas and services
in all market segments (purchase of natural gas, gas sales balance sheet, customer losses, prices, competition, etc);
•
analyse the market situation and competitiveness of prices in the different electricity and gas market in segments
Portugal and Spain;
•
propose preferential segments for the placement of gas and price policies in different segments, strategies for
gas auctions, gas placement or purchase goals in gas trading, measures to retain strategic customers, adaptation
or correction of current commercial policies and setting or revision of intra-group transfer prices;
•
monitor the implementation of the above measures.
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The Market and Commercial Iberian Committee’s membership are as follows:
MARKET AND COMMERCIAL IBERIAN COMMITTEE
CHAIRMAN: MEMBER EBD (RENEWABLES, REGULATION, COMP., ENERGY PLANN. AND UNGE AREA)
Secretary: Head of UNGE
Members of EBD (besides the Chairman):
Member EBD (Generation and Spain Area)
Member EBD (Trading Area)
CC and BU members (besides the Secretary):
Board of Directors of EDP Comercial
Board Member of EDP Serviço Universal
General Management of EDP España (Trading)
Rep. UNGE (Trading)
Rep. UNGE (Supplies)
Rep. UNGE (Middle and Backoffice)
Rep. UNGE (Electricity Markets)
Rep. EDP España (Sales B2B)
Rep. EDP España (Marketing and Sales B2C)
Rep. EDP España (Planning, Control and Trading Business Development)
Rep. EDP Comercial (Sales B2B)
Rep. EDP Comercial (Energy Management)
Rep. EDP Sucursal Espanha
The Market and Commercial Iberian Committee held nine meetings in 2020.
II - Functional Corporate Committees
Innovation Committee
The responsibilities of the Innovation Committee are as follows:
•
discuss and propose strategic areas of innovation in the EDP Group;
•
follow the governance model and EDP’s innovation results Discuss and propose changes;
•
monitor the EDP Group's ongoing innovation initiatives and EDP Group projects in progress and propose
corrective action.
148
The Innovation Committee's membership is as follows:
INNOVATION COMMITTEE
CHAIRMAN: CHAIRMAN EBD
Secretary: Board Member of EDP Inovação
Members of EBD (besides the Chairman):
Member EBD (Trading Area)
CC and BU members (besides the Secretary):
Board Member of EDP Produção
Board Member of EDP Distribuição
Board Member of EDP Comercial
Board Member of EDP Energias do Brasil
Board Member of Labelec
General Management of EDP España
Rep. EDP Renováveis (Technical Area)
Head of CC Energy Planning
Head of CC Business Analysis
Head of CC Brand, Marketing and Communication Global Coord.
Head of CC Universidade EDP
Rep. EDP España
Rep. Fundação EDP
Ad-hoc members:
Head of CC Sustainability
Head of CC Transformation & Talent Unit
Head of CC Digital Global Unit
Head of CC People Experience Unit
The Innovation Committee held one meeting in 2020.
Ethics Committee
The Ethics Committee, which was set up after approval of the EDP Group's Code of Ethics, is appointed by the General and
Supervisory Board, on a proposal of the Executive Board of Directors, and following an opinion of the Corporate Governance
and Sustainability Committee and its responsibilities are as follows:
•
draft and propose its Internal Regulation to the Corporate Governance and Sustainability Committee of the General
and Supervisory Board;
•
submit corporate ethics instruments, policies, goals and targets to the Corporate Governance and Sustainability
Committee;
•
receive and examine cases of infringement prepared by the Ethics Ombudsman and issue an opinion on them;
•
issue an opinion, when requested to do so by any of the managing bodies of the EDP Group companies and entities
on practices or codes of conduct in the fields of ethics or professional conduct within the framework of specific,
legal or regulatory needs;
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ANNUAL REPORT 2020
•
analyse decisions made by the Ethics Committee of EDP Energias do Brasil, S.A. and the Ethics Committee
of EDP Renováveis, S.A.;
•
assess the quarterly reports on the EDP Group’s or Business Units performance in implementing the Code of Ethics
•
annually review the adequacy of the Code of Ethics and the procedures resulting from it to the needs of the EDP Group
and, under the proposal of the Ethics Ombudsman, prepare the respective report.
The Ethics Committee's membership is as follows:
ETHICS COMMITTEE
CHAIRMAN: CHAIRMAN EBD
Secretary: Ethics Ombudsman
Members of EBD (besides the Chairman):
Member EBD (Renewables, Regulation, Comp., Energy Plann. and UNGE Area)
Member EBD (IT, Organ. Develop., Sustainability, Risk and Ethics Area)
Member EBD (Distribution, International and Labelec Area)
Member EBD (Financial Area)
Member EBD (HR, Sãvida and Brazil Area)
Member EBD (Generation and Spain Area)
Member EBD (Global Solutions, Real Estate, Legal Office, GS, Audit and Compliance Area)
Member EBD (Trading Area)
CC and BU members (besides the Secretary):
Board Member of EDP Produção
Board Member of EDP Distribuição
Board Member of EDP Comercial
Board Member of EDP Soluções Comerciais
Board Member of EDP Global Solutions
Board Member of EDP Renováveis
Board Member of EDP Serviço Universal
Board Member of EDP Energias do Brasil
Head of CC People Experience Unit
Head of CC Compliance
Head of CC Digital Global Unit
Head of CC Risk Management
Rep. EDP España
The Ethics Committee held four meetings in 2020.
Information Disclosure Committee
The Information Disclosure Committee's has two main duties:
•
analysing and assessing information that is or should be provided periodically by EDP during preparation of reports
and other press releases for the market;
•
assessing the mechanisms for monitoring and disclosing information about EDP.
150
The Information Disclosure Committee's membership are as follows:
INFORMATION DISCLOSURE COMMITTEE
CHAIRMAN: MEMBER EBD (FINANCIAL AREA)
Secretary: Head of CC Investors Relation
CC and BU members (besides the Secretary):
Head of CC General Secretariat
Head of CC Management Planning and Control
Head of CC Financial Management
Head of CC Consolidation, IFRS Report and Tax Global Coordination
Head of CC Brand, Marketing and Communication Global Coord.
Rep. CC Brand, Marketing and Communication Global Coord. (Brand)
Rep. CC Brand, Marketing and Communication Global Coord. (Communication)
Rep. EDP Energias do Brasil (Investors Relation)
Rep. EDP Energias do Brasil (Accounting, Consolidation and Taxation)
Rep. EDP Renováveis (Investors Relation)
The Information Disclosure Committee held one meeting in 2020.
Stakeholders’ Committee
The duties of the Stakeholders’ Committee are as follows:
•
evaluate the alignment and consistency of stakeholder relationship strategies in the different markets and geographical
areas where the EDP Group operates;
•
discuss priorities and propose guidelines and a management model for the Group's relations with stakeholders;
•
assess compliance with the Group's stakeholder management policy.
The Stakeholders Committees’ membership is as follows:
STAKEHOLDERS COMMITTEE
CHAIRMAN: CHAIRMAN EBD
Secretary: Head of CC Institucional Relations and Stakeholders
Members of EBD (besides the Chairman):
Member EBD (Renewables, Regulation, Comp., Energy Plann. and UNGE Area)
Member EBD (Distribution, International and Labelec Area)
Member EBD (HR, Sãvida and Brazil Area)
Member EBD (Generation and Spain Area)
Member EBD (Trading Area)
CC and BU members (besides the Secretary):
Board Member of EDP Renováveis
Board Member of Fundação EDP
Board Member of EDP Produção
Board Member of EDP Comercial
Board Member of EDP Comercial
Board Member of EDP Soluções Comerciais
Head of CC Energy Planning
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STAKEHOLDERS COMMITTEE
Head of CC People Experience Unit
Head of CC Brand, Marketing and Communication Global Coord.
Head of CC Sustainability
Rep. EDP España
Rep. EDP Energias do Brasil
Rep. EDP Renováveis
The Stakeholders’ Committee held one meeting in 2020.
Procurement Committee
The main responsibilities of the Procurement Committee are:
•
discuss and align strategic guidelines of EDP Group's procurement activity;
•
validate proposals for amendments to policy and the procurement organizational model of the EDP Group;
•
validate the procurement annual plan to be approved by the Executive Board of Directors;
•
promote the alignment of the Business Units regarding procurement, ensuring the articulation between
top management teams;
•
propose Sponsors and members of the categories of groups and committees oversee the implementation
of optimization strategies of categories;
•
discuss and propose targets for "Performance indicators" and supervise the performance of the procurement
activity at global and local level.
The Procurement Committee's membership are as follows:
PROCUREMENT COMMITTEE
CHAIRMAN: MEMBER EBD (FINANCIAL AREA)
Secretary: Rep. EDP Global Solutions (UPG)
Members of EBD (besides the Chairman):
Member EBD (Generation and Spain Area)
Member EBD (Global Solutions, Real Estate, Legal Office, GS, Audit and Compliance Area)
Member EBD (Trading Area)
BU members (besides the Secretary):
Board Member of EDP Produção
Board Member of EDP Distribuição
Board Member of EDP Global Solutions
Board Member of EDP Energias do Brasil
Rep. EDP Renováveis
The Procurement Committee held one meeting in 2020.
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Prevention and Safety Committee
The Prevention and Safety Committee has the following main responsibilities:
•
issue an opinion on proposals for setting the EDP Group’s goals in terms of prevention and safety at work;
•
analyse the Annual Report and issue an opinion on the EDP Prevention and Safety Action Plan;
•
assess the main occupational safety indicators and propose ways of improving them;
•
issue opinions on the regulatory documents of the safety management system that cover the EDP Group as a whole
or cut across different sectors.
The Prevention and Safety Committee's membership is as follows:
PREVENTION AND SAFETY COMMITTEE
CHAIRMAN: MEMBER EBD (IT, ORGAN. DEVELOP., SUSTAINABILITY, RISK AND ETHICS AREA)
Secretary: Rep. CC Sustainability
CC and BU members (besides the Secretary):
Board Member of EDP Produção
Board Member of EDP Distribuição
Board Member of EDP Global Solutions
Board Member of EDP Soluções Comerciais
Board Member of EDP Real Estate
Head of CC Universidade EDP
Head of CC Sustainability
Rep. EDP Comercial
Rep. EDP Global Solutions (Occupational Health)
Rep. EDP España
Rep. EDP Energias do Brasil
Rep. EDP Renováveis
The Prevention and Safety Committee held two meetings in 2020.
Pension Plan and Fund Committee
The Pension Plan and Fund Committee's main responsibilities are:
•
share significant information with an impact on management of the pension fund;
•
analyse the performance of assets under management, fund profitability and management mandates
and the performance of the different asset managers;
•
monitor the value of the fund's liabilities and level of financing;
•
issue an opinion on investment policy and/or management mandates, actuarial assumptions used in calculating
the fund's liabilities and members' contributions to the fund.
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The Pension Plan and Fund Committee's membership is as follows:
PENSION PLAN AND FUND MANAGEMENT COMMITTEE
CHAIRMAN: MEMBER EBD (FINANCIAL AREA)
Secretary: Head of CC Financial Management
CC and BU members (besides the Secretary):
Head of CC People Experience Unit
Head of CC Risk Management
Head of CC Consolidation, IFRS Report and Tax Global Coordination
Rep. CC People Experience Unit (Labour Relations)
The Pension Plan and Fund Committee held four meetings in 2020.
Corporate Development Committee
The Corporate Development Committee's duties are as follows:
•
promote and monitor group-wide programs arising from the organisational and operational priorities
established at the corporate level;
•
promote and analyse organisational benchmark studies;
•
analyse, discuss and issue opinions on proposed changes to the management model of Group processes
and monitor their implementation;
•
coordinate the optimisation of processes of corporate interest;
•
assess and issue opinions on the support tools and organisational efficiency to meet the common needs
of the EDP companies in terms of organisation and operation.
The Corporate Development Committee's membership are as follows:
CORPORATE DEVELOPMENT COMMITTE COMMITTEE
CHAIRMAN: MEMBER EBD (IT, ORGAN. DEVELOP., SUSTAINABILITY, RISK AND ETHICS AREA)
Secretary: Head of CC Transformation & Talent Unit
Members of EBD (besides the Chairman):
Member EBD (HR, Sãvida and Brazil Area)
CC and BU members (besides the Secretary):
Board Member of EDP Produção (OD Area)
Board Member of EDP Distribuição (OD Area)
Board Member of EDP Comercial (OD Area)
Board Member of EDP Soluções Comerciais (Process)
Board Member of EDP Energias do Brasil (OD Area)
Board Member of EDP Global Solutions (Processos)
Board Member of EDP Real Estate (OD Area)
Board Member of EDP Labelec
General Management of EDP España (OD Area)
Head of CC People Experience Unit
Head of CC Digital Global Unit
Rep. EDP Renováveis (OD)
Rep. CC Transformation & Talent Unit (Organization)
Rep. CC Transformation & Talent Unit (Process)
Rep. EDP Brasil (OD & Process)
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Human Resources and diversity Committee
The Human Resources and Diversity Committee's responsibilities are as follows:
•
discuss and align the definition of people management strategy of the EDP Group;
•
discuss and align policies for best practices in diversity and inclusion, proposing the incorporation and compliance
with the Group's policy;
•
analyze key indicators for the different potential segments, and discuss and align development policies
and instruments;
•
discuss and share initiatives aimed at cultural alignment and promoting a culture of meritocracy;
•
discuss and issue an opinion on the annual budget of Human Resources EDP Group and monitor its progress.
The Human Resources and Diversity Committee's membership are as follows:
HUMAN RESOURCES AND DIVERSITY COMMITTEE
CHAIRMAN: CHAIRMAN EBD
Secretary: Head of CC People Experience Unit
Members of EBD (besides the Chairman):
Member EBD (Renewables, Regulation, Comp., Energy Plann. and UNGE Area)
Member EBD (IT, Organ. Develop., Sustainability, Risk and Ethics Area)
Member EBD (Distribution, International and Labelec Area)
Member EBD (Financial Area)
Member EBD (HR, Sãvida and Brazil Area)
Member EBD (Generation and Spain Area)
Member EBD (Global Solutions, Real Estate, Legal Office, GS, Audit and Compliance Area)
Member EBD (Trading Area)
CC and BU members (besides the Secretary):
Board Member of EDP Produção (Human Resources Area)
Board Member of EDP Distribuição (Human Resources Area)
Board Member of EDP Soluções Comerciais (Human Resources Area)
Board Member of EDP Comercial (Human Resources Area)
Board Member of EDP Global Solutions (Human Resources Area)
Board Member of EDP Renováveis (Human Resources Area)
Board Member of EDP Fundação EDP (Human Resources Area)
Board Member of EDP Serviço Universal (Human Resources Area)
Board Member of EDP Inovação (Human Resources Area)
Board Member of EDP Real Estate (Human Resources Area)
Board Member of EDP España (Human Resources Area)
Board Member of EDP Energias do Brasil (Human Resources Area)
Board Member of Labelec (Human Resources Area)
Board Member of Sãvida (Human Resources Area)
Head of CC Brand, Marketing and Communication Global Coord.
Head of CC Transformation & Talent Unit
Head of CC Digital Global Unit
Head of CC Universidade EDP
Head of CC Institucional Relations and Stakeholders
Head of CC Sustainability
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HUMAN RESOURCES AND DIVERSITY COMMITTEE
Ethics Ombudsman
Ad-hoc members:
Rep. EDP Energias do Brasil
Rep. EDP Renováveis (Human Resources Area)
Rep. EDP España (Human Resources Area)
The Human Resources and Diversity Committee held one meeting in 2020.
Digital and Information Technology Committee
The Digital and Information Technology Committee's duties are as follows:
•
align the global strategy with Core Information technologies, including information safety
•
define and consolidate the digital and information technology budget, including information safety
•
monitor the main Digital and information technology projects.
The Digital and Information Technology Committee's membership is as follows:
INFORMATION TECHNOLOGY COMMITTEE
CHAIRMAN: MEMBER EBD (IT, ORGAN. DEVELOP., SUSTAINABILITY, RISK AND ETHICS AREA)
Secretary: Head of CC Digital Global Unit
CC and BU members (besides the Secretary):
Board Member of EDP Produção (IT Area)
Board Member of EDP Distribuição
Board Member of EDP Comercial (IT Area)
Board Member of EDP Soluções Comerciais (IT Area)
General Management of EDP España (IT Area)
Board Member of EDP Energias do Brasil (IT Area)
Board Member of EDP Global Solutions (IT Area)
Board Member of EDP Inovação
Board Member of EDP Serviço Universal
Board Member of EDP Inovação (EDP Ventures)
Head of CC Transformation & Talent Unit
Head of CC People Experience Unit
Head of UNGE
Rep. EDP Renováveis (IT Area)
EBD Advisor
The Digital and Information Technology Committee held two meetings in 2020.
Compliance Committee
The Compliance Committee and has the following responsibilities:
•
to promote the compliance of the Group’s Compliance Governance Model, policies and other compliance
internal procedures;
•
to support and monitor the process of creation, decision-making and implementation of the global program
of compliance;
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•
to support and monitor the process of creation, decision-making and implementation of the local and transversal
compliance specific programs in the scope of the compliance global program;
•
to follow the activities of the plan of compliance;
•
to follow the handling of complaints and investigation procedures;
•
to propose measures to solve the non-compliance cases and monitor its resolution.
The Compliance Committee is composed as follows:
COMPLIANCE COMMITTEE
CHAIRMAN: CHAIRMAN EBD
Secretary: Head of CC Compliance
Members of EBD (besides the Chairman):
Member EBD (Renewables, Regulation, Comp., Energy Plann. and UNGE Area)
Member EBD (IT, Organ. Develop., Sustainability, Risk and Ethics Area)
Member EBD (Distribution, International and Labelec Area)
Member EBD (Financial Area)
Member EBD (HR, Sãvida and Brazil Area)
Member EBD (Generation and Spain Area)
Member EBD (Global Solutions, Real Estate, Legal Office, GS, Audit and Compliance Area)
Member EBD (Trading Area)
CC and BU members (besides the Secretary):
Head of CC General Secretariat
Head of CC Legal Office
Head of CC Risk Management
Rep. European Compliance Project
III - Business committees
Generation Committee
The Generation Committee's main duties are:
•
exchange information on business performance in each region, including the critical environments (regulations, etc.);
•
develop a uniform view of the business and maintain multi-region benchmarking (organisation, processes
and management information);
•
foster (best) common practices in selected processes or activities;
•
share unique or specialized assets (human, technological, knowledge).
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The Generation Committee's membership is as follows:
GENERATION COMMITTEE
CHAIRMAN: MEMBER EBD (GENERATION AND SPAIN AREA)
Secretary: Rep. EDP Produção
Members of EBD (besides the Chairman):
Member EBD (HR, Sãvida and Brazil Area)
CC and BU members (besides the Secretary):
Board of Directors of EDP Produção
Board Member of EDP Energias do Brasil
Head of UNGE
Head of CC Energy Planning
Head of CC Sustainability
Rep. EDP España (Projects)
Rep. EDP España (Regulation)
Ad-hoc members:
Rep. EDP Energias do Brasil (Hydroelectric)
Rep. EDP Energias do Brasil (Sustainability)
Rep. EDP Energias do Brasil (Coal)
Rep. EDP España (Generation; called back)
Rep. EDP España (Sustainability)
Rep. EDP Produção (Natural Coal)
Rep. EDP Produção (Sustainability)
Rep. EDP Produção (Coal)
Rep. EDP España (Sponsor subcommittee Hydroelectric Generation)
Rep. EDP Produção (Sponsor subcommittee Sustainability)
Rep. EDP Produção (Sponsor subcommittee Natural Gas)
Rep. EDP Produção (Sponsor subcommittee Coat Generation)
The Generation Committee held two meetings in 2020.
Distribution Networks Committee
The Distribution Networks Committee's duties are as follows:
•
exchange information on business performance in each geography, and promote the share of best practices
between distribution networks companies;
•
develop a uniform view of the business, analysis business metrics and multi-geographical benchmarks;
•
Identify and propose new initiatives to accelerate the adoption of best practices.
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The Distribution Networks Committee’s membership is as follows:
DISTRIBUTION NETWORKS COMMITTEE
CHAIRMAN: MEMBER EBD (DISTRIBUTION, INTERNATIONAL AND LABELEC AREA)
Secretary: Board Member of EDP Distribuição
Members of EBD (besides the Chairman):
Member EBD (Generation and Spain Area)
CC and BU members (besides the Secretary):
Board of Directors of EDP Distribuição
Board Member of EDP Energias do Brasil (Distribuição Area)
Board Member of Labelec
Rep. EDP España (Distribuição Area)
Rep. EDP Distribuição
General Rep. EDP Energias do Brasil (Espírito Santo)
General Rep. EDP Energias do Brasil (São Paulo)
Ad-hoc members:
Board Member of EDP Inovação
Head of CC Universidade EDP
The Distribution Networks Committee held two meetings in 2020.
Iberian Commercial Committee
The Iberian Commercial Committee's duties are as follows:
•
present the business evolution in each geography and in Iberia, including the respective critical circumstances
(regulation, etc.);Discuss, align and issue opinions on key-issues (such as objectives, marketing plans, etc.)
for the Executive Board of Directors or General and Supervisory Board approval for trading companies;
•
discuss, align and issue opinions on key-matters (such as objectives, marketing plans, etc.) for the approval
of the Executive Board of Directors or the Board of Directors of power suppliers companies;
•
develop an uniform and integrated vision of the business in Iberia and keep a multi-geographical benchmarking
(marketing, products, commercial and management information);
•
promote the adoption of (best) practices common to a select range of process and activities.
The Iberian Commercial Committee’s membership is as follows:
IBERIAN COMMERCIAL COMMITTEE
CHAIRMAN: MEMBER EBD (TRADING AREA)
Secretary: General Management of EDP España
Members of EBD (besides the Chairman):
Member EBD (Renewables, Regulation, Comp., Energy Plann. and UNGE Area)
Member EBD (Generation and Spain Area)
CC and BU members (besides the Secretary):
Board Member of EDP Serviço Universal
Board Member of EDP Gás SU
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IBERIAN COMMERCIAL COMMITTEE
Board of Directors of EDP Comercial
Board Member of EDP Soluções Comerciais
Head of CC Digital Global Unit
Head of CC Brand, Marketing and Communication Global Coord.
Rep. EDP España (Sales B2B)
Rep. EDP España (Sales B2C)
Rep. EDP España (Brand, Marketing and Communication)
Rep. CC Brand, Marketing and Communication Global Coord. (Brand)
Rep. CC Brand, Marketing and Communication Global Coord. (Communication)
Ad-hoc members:
Rep. EDP Comercial (Services B2B)
Rep. EDP Comercial (Sales B2B PT)
Rep. EDP Comercial (Sales B2C PT)
Customer Ombudsman
The Customer Ombudsman is an independent entity that was created in 2008 to reinforce the EDP Group's customer
care policy. Its responsibilities, pursuant to Article 9 of the EDP Group Companies' Customer Ombudsman Regulation,
are as follows:
•
receive and examine complaints filed by customers and directly related to actions or omissions by EDP Group
companies;
•
enter into dialogue with customers making a complaint;
•
arbitrate disputes and conflicts between customers and EDP Group companies;
•
issue opinions on matters relating to the activity of EDP Group companies, if requested to do so by any of their
corporate bodies;
•
propose measures to improve quality of service and customer satisfaction;
•
contact third parties to obtain specialist information so that recommendations can be made to the EDP Group
companies on measures to be taken to improve their customer relations.
The Customer Ombudsman's term of office is three years (Article 5 (2) of the EDP Group Companies' Customer
Ombudsman Regulation). In the performance of his duties, the Customer Ombudsman has an independent Customer
Ombudsman Office and an annual budget (Article 20 of the EDP Group Companies' Customer Ombudsman Regulation).
Branch in Spain
EDP – Energias de Portugal, Sociedad Anonima, Sucursal en España (EDP Spanish Branch) aims to manage and
coordinates the energy interests of the EDP Group's dependent subsidiaries in Spain. Its management and supervisory
bodies ensure optimisation of synergies and creation of value in operations and activities in Spain. It is also the
organisational platform to lead the Iberian integration for support services. In this regard, EDP Spanish Branch owns
all the corporate holdings in EDP España, S.A.U., EDP Servicios Financieros España S.A.U. and EDP International
Investments & Services, S.L. (32.97% of EDP Servicios Financieros España, S.A.U. and 67.03% of EDP Sucursal),
as well as 82.56% of EDP Renováveis, S.A share capital.
EDP Spanish Branch has offices in Madrid and Oviedo. It is represented in relations with third parties by permanent
representatives, who have been appointed members of the EDP Executive Board of Directors for that purpose.
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The Branch's steering, coordination, management and representation structure consists of an Executive Committee
and Management Committee. The Executive Committee is composed of five permanent EDP representatives, one Corporate
General Director (Group Controller for activities in Spain), and front line managers in charge of the Business Units in Spain.
This committee basically serves as the coordinator of the permanent representatives' activities. The Management Committee
is chaired by the Group Controller and is a natural extension of the management departments at the EDP Corporate Centre, i.e.
Environment, Sustainability and Innovation Department, Legal Department, Internal Audit Department, Financial, Management
and Human Resources Department, a Procurement Department and Information Technology Department, Projects and
Prevention Department, a Fundação EDP España Department and a Communication, Marketing, and Trademark Department
for Spain and foreign subsidiaries, ensuring and regrouping homogeneously these position across Spain.
The Branch is represented in a EDP Iberian committee called Iberian Commercial and Market Committee.
On 31 December 2020, the directorate, coordination, management and representation of the Branch had the following
composition:
EDP ENERGIAS DE PORTUGAL, SOCIEDAD ANONIMA, SUCURSAL EN ESPAÑA
GOVERNING, COORDINATION, MANAGING STRUCTURE AND REPRESENTATION OF THE BRANCH
(*)
Executive Committee
Permanent Representative of EDP
António Mexia (Presidente)
Permanent Representative of EDP
Rui Teixeira
Permanent Representative of EDP
João Manso Neto
Permanent Representative of EDP
António Martins da Costa
Permanent Representative of EDP
Miguel Stilwell de Andrade
Chairman of the Board of Directors of EDP España
Manuel Menéndez Menéndez
Corporate General Director
Miguel Ribeiro Ferreira
First Line Manager at EDP Energía
-
First Line Manager at EDP Renováveis
Duarte Bello
General Director for Communication, Marketing and Trademark
Paulo Campos Costa
Steering Committee
Legal Department Directorate
Pelayo Echevarria
Administration, Budget and Human Resources Directorate
Félix Arribas
Projects and Prevention Directorate
Marcos Antuña
Information Systems Directorate
Luis Ángel Rguez Villalba
Internal Audit Directorate
Azucena Viñuela
Environment, Sustainability, Innovation and Quality Directorate
Yolanda Fdez Montes
Purchases Directorate
José María Ruiz Correa
EDP España Foundation Directorate
Vanda Martins
Communication, Marketing and Trademark Directorate for Spain
and Foreign Subsidiaries
Rafael Solis Hernández / Carmen Fernández
González
Secretary General
José Luis Martínez Mohedano
Data referring to 31 December 2020.
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B) Operation
22. Location where the operating regulations of the General and Supervisory Board
and Executive Board of Directors can ser consulted
The operations of the General and Supervisory Board and Executive Board of Directors are governed by their Internal
Regulation, available at EDP's website, at
23. Meetings and attendance rate of each member of the General and Supervisory Board
and Executive Board of Directors
Ordinary meetings of the General and Supervisory Board are held at least once every quarter and extraordinary meetings
take place whenever convened by the Chairman, on his/her own initiative or at the request of any of its members, the
Executive Board of Directors or its Chairman, pursuant to Article 24 (1) of the Articles of Association and Article 20 (1)
of the Internal Regulation of the General and Supervisory Board.
The General and Supervisory Board met nineteen times in 2020 and minutes were kept of all the meetings. Information
on the attendance of each member of the board is provided in Annex II to this Report.
Pursuant to the provisions of Article 20(1) of the Articles of Association and Article 7(1) of the Executive Board of Directors
Internal Regulation, this body will have ordinarily met at least twice a month, as fortnightly meetings were compulsory.
Nevertheless, the Executive Board of Directors meets weekly, as a rule.
The Executive Board of Directors met seventy-four times in 2020 and minutes were kept of all the meetings. Information
on the attendance of each member of the board is provided in Annex III of this Report.
24. Company bodies with powers to evaluate performance of executive directors
The Remuneration Committee of the General and Supervisory Board is responsible for, namely, the annual evaluation
of the Executive Board of Directors, taking into account, among other factors, the fulfillment of the Company's strategy
and the previously set goals, plans and budgets for the purpose of considering and determining the variable remuneration
of the Chairman and of the other members of the Executive Board of Directors. It also evaluates the individual performance
of each member of the Executive Board of Directors, including this evaluation the contribution of each member to the mode
of operation of this body and the relationship between the various corporate bodies of the Company.
Additionally, the General and Supervisory Board evaluates the Executive Board of Directors accordingly with the
abovementioned Item 21.
25. Pre-determined criteria for performance evaluation of executive directors
These criteria for evaluating the performance of the Members of the Executive Board of Directors are set out in points
69 and 71 of the Corporate Governance Report.
26. Positions held at other Group or non-group companies by each member of the General
and Supervisory Board and Executive Board of Directors
The positions held by members of the General and Supervisory Board and Executive Board of Directors in other EDP Group
or non-group companies are shown in Annex I and IV of this Report.
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C) Committees of the managing or supervisory body
27. Committees set up in the General and Supervisory Board and Executive Board of Directors
The Internal Regulation of the General and Supervisory Board as well as the provisions of the law and of the Articles
of Association regarding the Financial Matters Committee/Audit Committee provide for the establishment of standing
committees and ad hoc committees, composed of some of its members, without prejudice to its responsibility for the
exercise of its duties as a corporate body. These committees may be set up whenever it sees fit and appropriate and have
specific duties delegated to them. It should be noted that, in the case of the Financial Matters Committee / Audit
Committee, the respective existence derives from the law, taking into account the governance model in force at EDP.
The main remit of the standing and ad hoc committees is the specific and continuous monitoring of the matters entrusted
to them, in order to ensure informed resolutions by the General and Supervisory Board or provide it with information on
certain matters.
The committees' activity is coordinated by the Chairman of the General and Supervisory Board, who ensures proper
articulation of the committees with the plenary board through their chairmen, who keep him informed by sending notices
and the minutes of meetings.
The General and Supervisory Board believes that the committees are important to the regular functioning of the Company
as they can perform certain delegated duties, especially monitoring the Company's financial information, reflecting on its
governance system, assessing the performance of directors and evaluating its own overall performance.
The General and Supervisory Board holds five specialized committees: the Financial Matters Committee/Audit Committee,
the Remuneration Committee, the Corporate Governance and Sustainability Committee, the Strategy and Performance
Committee and the United States of America Business Affairs Monitoring Committee.
28. Membership of the executive committee and/or name of managing director(s)
Not applicable to EDP's governance model.
29. Duties of each committee and summary of work performed while carrying them out
A. The Committees of the General and Supervisory Board
Financial Matters Committee/Audit Committee
The Financial Matters Committee/Audit Committee is made up of five independent members with the appropriate
qualifications and experience, including at least one member with a degree in the area of the committee’s duties and
specific knowledge of auditing and accounting, as confirmed by the Curriculum Vitae of Chairman, which can be viewed
in Annex I of the current Report.
On 31 December 2020, the Financial Committee/Audit Committee was composed as follows:
FINANCIAL MATTERS COMMITTEE / AUDIT COMMITTEE
FIRST
APPOINTMENT
DATE
CHAIRMAN
LUÍS FILIPE MARQUES AMADO
06/04/2018
Vice-Chairman
João Carvalho das Neves
22/04/2015
Clementina Maria Dâmaso de Jesus da Silva Barroso
06/04/2018
Maria Celeste Ferreira Lopes Cardona
18/04/2012
María del Carmen Ana Fernández Rozado
22/04/2015
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ANNUAL REPORT 2020
In accordance with the law, the Articles of Association and the Internal Regulation of the Financial Matters Committee/Audit
Committee, this Committee is mainly responsible for permanently monitor and supervise the following:
•
financial matters and accounting practices;
•
internal audit practices and procedures;
•
internal mechanisms and procedures of the Internal Control System for Financial Reporting (ICSFR);
•
matters relating to risk management and control system;
•
the activities and mechanisms of the compliance management system;
•
the activity and independence of the Statutory Auditor (SA) / Statutory Auditor Company of EDP.
The composition, role and functioning of the Financial Matters Committee/Audit Committee are in line with the applicable
legislation and regulation, including the European Commission Recommendation of 15 February 2005 (2005/162/EC), the
European Commission Recommendation of 30 April 2009 (2009/385/EC) as well as the recommendations provided for by
the Corporate Governance Code of the Portuguese Institute for Corporate Governance, having the respective Internal
Regulation been updated in December 2020.
The Financial Matters Committee/Audit Committee held sixteen meetings in 2020, as envisaged in its Activity Plan.
The main matters addressed in those meetings were: the supervision of financial and business information and the
monitoring of the activity of Internal Audit, the Internal Control System for Financial Reporting (SCIRF), the Compliance
Management System and the Risk Management System. In this context, it also monitored and supervised litigation
procedures, the performance of the EDP Group Pension Fund, the contractual relationship and the assessment of the
objective conditions for the independence of the Statutory Auditor, the communications of irregularities received and the
relationship with the Audit committees of subsidiaries.
Remuneration Committee of the General and Supervisory Board
The Remuneration Committee appointed by the General and Supervisory Board, pursuant to Article 27 of EDP’s Articles
of Association, defines the remuneration of the Executive Board of Directors as well as any supplements.
The Remuneration Committee of the General and Supervisory Board is composed by members of the General and
Supervisory Board with the appropriate qualifications and experience, who are all independent from the managing body.
This committee always has at least one representative at the General Meetings of Shareholders.
On 31 December 2020, the General and Supervisory Board Remunerations Committee was composed as follows:
REMUNERATION COMMITTEE OF THE GENERAL AND SUPERVISORY BOARD
FIRST
APPOINTMENT
DATE
CHAIRMAN
SHENGLIANG WU
13/12/2018
Fernando Maria Masaveu Herrero
22/04/2015
Ilídio da Costa Leite de Pinho
22/05/2012
João Carvalho das Neves
22/04/2015
Vasco Joaquim Rocha Vieira
22/04/2015
In accordance with article 26-B (1) of the Portuguese Securities Code, as amended by Law no. 50/2020, of 25 August, the
Remuneration Committee of the General and Supervisory Board must submit a remuneration proposal of the members of
the Executive Board of Directors to the Annual General Shareholders’ Meeting for approval.
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Throughout 2020, and considering its powers, the Remuneration Committee of the General and Supervisory Board held six
meetings, having (i) approved the annual statement on the remuneration policy for the Members of the Executive Board of
Directors to be submitted to the General Shareholders’ Meeting, (ii) the determination of the annual variable remuneration
for the year 2019, as well as the multiannual remuneration of the members of the Executive Board of Directors, (iii) the
approval of the termination and non-competition agreements of Dr. António Luís Guerra Nunes Mexia and Dr. João Manuel
Manso Neto and (iv) the elaboration of a proposal for a transitional extension of the remuneration policy in force for
members of the Executive Board of Directors to be elected for the mandate corresponding to the 2021-2023 triennium,
until the Annual General Shareholders’ Meeting of 2021 is held. Regarding the multiannual remuneration, although
calculated annually, this only becomes effective if, at the end of the mandate, at least 90% of the targets have been
achieved. These variable remuneration calculations were validated and certified by an external entity.
Corporate Governance and Sustainability Committee
The Corporate Governance and Sustainability Committee is made up of members of the General and Supervisory Board,
the majority of whom are independent, with the appropriate qualifications and experience for their duties.
On 31 December 2020, the Corporate Governance and Sustainability Committee member composition was the following:
CORPORATE GOVERNANCE AND SUSTAINABILITY COMMITTEE
FIRST
APPOINTMENT
DATE
CHAIRMAN
LUÍS FILIPE MARQUES AMADO
22/04/2015
Augusto Carlos Serra Ventura Mateus
06/04/2018
Felipe Fernández Fernández
22/04/2015
Ignacio Herrero Ruiz
13/12/2018
Jorge Avelino Braga de Macedo
22/04/2015
Li Li
23/01/2020
Maria Celeste Ferreira Lopes Cardona
18/04/2012
The Corporate Governance and Sustainability Committee is a specialised committee of the General and Supervisory Board.
Its purpose is to permanently monitor and supervise all matters related with the following:
•
corporate governance;
•
strategic sustainability;
•
internal codes of ethics and conduct;
•
systems for assessing and resolving conflicts of interests, in particular pertaining to relations between EDP
and its shareholders;
•
internal proceedings and relationship between the Company and Subsidiary or Group companies and their employees,
clients, providers and remaining stakeholders.
The topics covered in-depth at the five meetings held in 2020 of the Corporate Governance and Sustainability Committee,
in compliance with its specific duties, were the following: analysis of potential relevant situations in terms of conflicts
of interest and related parties, assessment of opinions issued by the Ethics Committee, analysis of the stakeholders
management in general and relationship policy with clients in particular assessment of the human resources and
succession plans, study of sustainability objectives for the Group and analysis of the strategic plan for EDP Group
Foundations.
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ANNUAL REPORT 2020
Strategy and Performance Committee
The Strategy and Performance Committee is made up of members of the General and Supervisory Board, with adequate
qualifications and experience for the exercise of their respective functions.
On 31 December 2020, the Strategy and Performance Committee was composed by the following members:
STRATEGY AND PERFORMANCE COMMITTEE
FIRST
APPOINTMENT
DATE
CHAIRMAN
EDUARDO DE ALMEIDA CATROGA
18/06/2015
Augusto Carlos Serra Ventura Mateus
18/06/2015
Fernando Masaveu Herrero
18/06/2015
Ignacio Herrero Ruiz
13/12/2018
Jorge Avelino Braga de Macedo
18/06/2015
Karim Djebbour
18/06/2015
Laurie Lee Fitch
06/04/2018
Mohammed Issa Khalfan Alhuraimel Alshamsi
02/11/2017
Nuno Manuel da Silva Amado
18/06/2015
Shengliang Wu
06/04/2018
Vasco Rocha Vieira
06/04/2018
The Strategy and Performance Committee supervises the following matters:
•
the short-, medium- and long-term scenarios and strategies;
•
the strategic implementation, business planning and the respective budgets;
•
the investments and divestment;s
•
debt and funding;
•
strategic alliances;
•
market and competitiveness evolution;
•
regulation;
•
analysis of the performance of the Group and the Business Units;
•
the benchmarking of the Company group performance compared with the companies at the top of the sector;
•
the assessment of the competitiveness of the EDP business portfolio.
In 2020, the Strategy and Performance Committee held nine meetings, with the following topics, among others, monitoring
the preparation of the Business Plan 2019-2022; the performance of EDP's share in the capital market; the financing and
capital structure of the EDP Group; monitoring the EDP Group's strategic and business risks; the status of investment
projects and operational efficiency projects; monitoring the execution of the Business Plan 2019-2022; the performance
of the value of EDP Group shares in the capital market; the financing and capital structure of the EDP Group; monitoring
the EDP Group's strategic and business risks; monitoring EDP's Energy Outlook 2020 and the prospects for the hydrogen
market; the status of investment projects and operational efficiency projects; monitoring the profitability by geography
and by business unit of the EDP Group; monitoring the partnership between EDP Renováveis and Engie in the offshore wind;
analysis of EDP's strategy and performance and, in particular, of EDP Brasil's activities, the group's marketing and
distribution activities and business support areas; the monitoring of the 2021-2025 Business Plan and the Group's Budget
for 2021.
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United States of America Business Affairs Monitoring Committee
The United States of America Business Affairs Monitoring Committee was created on 16 March 2020.
The United States of America Business Affairs Monitoring Committee is composed of members of the General and
Supervisory Board, most of whom are independent, with adequate qualifications and experience for the exercise of their
respective functions.
As of 31 December 2020, the United States of America Business Affairs Monitoring Committee was composed of the
following members:
UNITED STATES OF AMERICA BUSINESS AFFAIRS MONITORING COMMITTEE
FIRST
APPOINTMENT
DATE
CHAIRMAN
LUÍS FILIPE MARQUES AMADO
16/03/2020
Augusto Carlos Serra Ventura Mateus
16/03/2020
Clementina Maria Dâmaso de Jesus da Silva Barroso
16/03/2020
Felipe Fernández Fernández
16/03/2020
João Carvalho das Neves
16/03/2020
Jorge Avelino Braga de Macedo
16/03/2020
Vasco Joaquim Rocha Vieira
16/03/2020
The mission of the United States of America Business Affairs Monitoring Committee is to monitor and assess the activity
undertaken by companies wholly or majority held by and/or subsidiary of EDP Group in the United States of America, namely
regarding:
•
the strategic/business plans, assessing the different developing scenarios in which they rest and their implementation;
•
the annual budget;
•
the investment, divestment, merger, acquisition and restructuring projects of significant value businesses;
•
financing transactions,;
•
alliances /strategic partnerships entered into and the specific actions deriving therefrom;
•
requests for prior opinion or waiver of prior opinion presented by the EBD;
•
the compliance of the assumed commitments regarding public safety.
The Committee is also responsible for defining compliance procedures on the obligations assumed by EDP regarding the
development of the business of companies wholly or majority held by and/or subsidiary of EDP Group in the United States
of America with respect to the General and Supervisory Board activity.
In 2020, the Business Monitoring Committee in the United States of America held six meetings, which addressed, among
other issues, the monitoring of EDPR's action strategy in the USA; the investment and divestment projects in progress at
EDPR North America; monitoring the EDP Group's financial information in the USA; monitoring the EDP Group's financial
information in the USA; the monitoring of EDP Renováveis' strategic partnership with Engie in the offshore wind segment in
the USA; the acquisition of the C2 solar project distributed in the USA; the acquisition of solar and wind equipment for safe
harbor qualification in 2020; the monitoring of the 2021-2025 Business Plan and the 2021 Group Budget of EDPR North
America.
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ANNUAL REPORT 2020
B. Other company bodies
Environment and Sustainability Board
The Environment Board was set up as a company body in 1991. Its name was changed to Environment and Sustainability
Board by decision of the Annual General Meeting of 30 March 2006.
As a corporate body, the Environment and Sustainability Board has powers to advise the Executive Board of Directors
on environment and sustainability matters. In particular, it provides advice and support in defining the Company’s
environmental and sustainability strategy and drafting opinions and recommendations on the environmental impact
of projects planned by the EDP Group (Article 28 (1) of EDP’s Articles of Association).
The members of the Environment and Sustainability Board, pursuant to Article 28 (2) of EDP’s Articles of Association,
have acknowledged competence in the field of environmental protection and sustainability.
The members of the Environment and Sustainability Board elected at the Annual General Meeting of Shareholders
on 5 April 2018 for a 2018-2020 triennium mandate were the following:
ENVIRONMENTAL AND SUSTAINABILITY BOARD
CHAIRMAN
JOSÉ MANUEL VIEGAS
António José Tomás Gomes de Pinho
Joana Pinto Balsemão
Joaquim Poças Martins
Pedro Oliveira
The Environment and Sustainability Board held two meetings in 2020.
Remuneration Committee of the General Meeting
The remuneration of the corporate bodies, with the exception of the members of the Executive Board of Directors, is defined
by the Remuneration Committee elected by the General Meeting (Article 11 (2) (d) of EDP’s Articles of Association). With
the changes introduced by Law no. 50/2020, of 25 August, this Committee will be responsible for submitting a remuneration
policy proposal for approval by the General Shareholders’ Meeting (article 26-B of the Portuguese Securities Code).
Pursuant to the Articles of Association, the majority of the members of the Remuneration Committee of the General
Meeting must be independent.
On the Shareholders’ General Meeting dated 5 April 2018, the members of the Remuneration Committee of the General
Meeting were re-elected for the 2018-2020 triennium, having the following composition:
REMUNERATION COMMITTEE OF THE GENERAL MEETING
CHAIRMAN
LUÍS MIGUEL NOGUEIRA FREIRE CORTES MARTINS
José Gonçalo Maury
Jaime Amaral Anahory
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III. Supervision
A) Composition
30. The supervisory body
EDP's two-tier model of corporate governance has made possible an effective separation between supervision
and management of the Company. The General and Supervisory Board is the highest supervisory body.
31. Membership Financial matters committee - effective members and term of office
The duties of the Financial Matters Committee / Audit Committee are described in Item 29 of the Corporate Governance
Report.
The Financial Matters Committee / Audit Committee is made up of five independent members with the appropriate
qualifications and experience, including at least one member with a degree in the area of the committee’s duties and
specific knowledge of auditing and accounting, as confirmed by the Curriculum Vitae of the Vice-Chairman, which, as
previously stated, can be consulted in Annex I of this Report.
This Committee is always presided by the General and Supervisory Board Chairman in the case he is an independent member.
The Financial Matters Committee / Audit Committee currently has the following composition:
FINANCIAL MATTERS COMMITTEE / AUDIT COMMITTEE
FIRST
APPOINTMENT
DATE
CHAIRMAN
LUÍS FILIPE MARQUES AMADO
06/04/2018
Vice-Chairman
João Carvalho das Neves
22/04/2015
Clementina Maria Dâmaso de Jesus da Silva Barroso
06/04/2018
Maria Celeste Ferreira Lopes Cardona
18/04/2012
María del Carmen Ana Fernández Rozado
22/04/2015
32. Independent members of the Financial Matters Committee
See Item 31 of this Report.
33. Qualifications of members of the Financial Matters Committee
See Annex I of this Report.
B) Operation
34. Location at which the operating procedures of the Financial Matters Committee/Audit
Committee can be viewed
The Financial Matters Committee / Audit Committee's work is governed by Internal Regulation, available at EDP's website at
35. Meetings and attendance rate of each member of the Financial Matters Committee / Audit
Committee
In 2020, the Financial Matters Committee/Audit Committee met, as previously stated, sixteen times and minutes of its
meetings were kept. Information on the attendance rate of the Committee's members is given in Annex V of this Report
as well as in the Annual General and Supervisory Board Report.
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ANNUAL REPORT 2020
36. Positions held in other companies within and outside the Group by each Financial Matters
Committee / Audit Committee member
See Annex I of this Report.
C) Powers and Duties
37. Procedures and criteria governing the supervisory body's involvement in hiring additional
services from the external auditor
The proposal for hiring additional services of the Statutory Auditor is presented by the Executive Board of Directors to the
Financial Matters Committee / Audit Committee and any contracting requires the prior authorisation of that Committee.
Internal Regulation on the Provision of Services by the Statutory Auditor of EDP are in force, in this regard, and the
implications on the hiring of additional services are described in Item 46.
There are other internal regulations adopted by the Executive Board of Directors that ensure all EDP Group companies
comply with the rules contained in the referred Internal Regulation.
38. Other duties of the supervisory bodies and, if applicable, of the Financial Matters
Committee/Audit Committee
The duties of the Financial Matters Committee / Audit Committee pursuant to the Law, the Articles of Association and the
Internal Regulation of the Financial Matters Committee / Audit Committee are described in Item 29 as well as in the Annual
General and Supervisory Board Report.
IV. Statutory Auditor
39. The statutory auditor and the certified auditor representing it
On 5 April 2018, PricewaterhouseCoopers & Associados - Sociedade de Revisores de Contas, Lda., statutory auditor
company number 183, represented by João Rui Fernandes Ramos (auditor number 1333), was elected for the 2018-2020
triennium, having also on such date, Aurélio Adriano Rangel Amado (auditor number 1074) been elected as Alternate
Statutory Auditor for the 2018 – 2020 triennium.
40. Number of years for which the statutory auditor has worked consecutively with the company
and/or Group
The statutory auditor PricewaterhouseCoopers & Associados - Sociedade de Revisores de Contas, Lda has worked
with the Company since 5 April 2018.
41. Other services provided to the company by the statutory auditor
The Statutory Auditor is the company body responsible for the examination of the accounting documents. It is elected
by the General Meeting for a three-year term, pursuant to Article 25 of EDP’s Articles of Association and Article 446
of the Portuguese Company Code.
According to the Companies Code and the Company’s Articles of Association, the Statutory Auditor is responsible
for checking (see Article 446 (3) of the Company Code):
•
the regularity of the Company’s books, accounting records and their supporting documents;
•
the cash and all assets or securities belonging to the company or received by it as guarantees, deposits or for
any other purpose, whenever and however it sees fit;
170
•
the accuracy of the accounting documents;
•
whether the company's accounting policies and valuation criteria result in an accurate assessment of its assets
and results.
A description of the services provided by the Statutory Auditor can be found on Item 46.
V. External Auditor
42. The external auditor and certified auditor partner representing it
Since the General Shareholders’ Meeting held on 5 April 2018, date of its respective election, is PriceWaterhouseCoopers
was appointed External Auditor, being João Rui Fernandes Ramos the partner in charge of overseeing and performing
audits of the EDP Group's accounts, being PriceWaterhouseCoopers registered before the CMVM with the number
20161485.
The External Auditor performs the necessary audit work to ensure the reliability of the financial reporting and credibility
of the accounting documents.
The External Auditor's duties include checking compliance with remuneration policies and systems, the efficacy
of internal control mechanisms and reporting of any significant deficiencies to the General and Supervisory Board.
EDP takes measures specifically aimed at ensuring the independence of the External Auditor, in view of the scope
of services provided by audit firms.
43. Number of years for which the external auditor and certified auditor partner representing
it have worked consecutively with the company and/or group
EDP's External Auditor is as from its election on 5 April 2018, PriceWaterhouseCoopers, having been appointed
João Rui Fernandes Ramos as the partner in charge on such date.
44. Policy on and frequency of rotation of external auditor and certified auditor partner
representing it
The rotation of the External Auditor and certified auditor partner representing it depends on the strict assessment
by the Financial Matters Committee / Audit Committee of the independence and quality of the work done and consideration
of the independence of the Statutory Auditor and External Auditor and the advantages and costs of replacing them.
Considering the rules referring to the mandatory rotation of the External Auditor and of the Statutory Auditor, pursuant to
Article 54 (3)(4) of the By-Laws of the Association of the Statutory Auditors, and the fact that the mandate of KPMG has
terminated on 31 December 2017, such rotation was fulfilled for the service provision of Statutory Auditor and External
Auditor for the triennium of 2018-2020.
In this sense, and under a Financial Matters Committee / Audit Committee proposal, the General and Supervisory Board
resolved to launch a consultation process in order to select the Statutory Auditor of EDP Group for the 2018-2020 mandate,
as well as to create two specific Committees to develop the consultation process, specifically, (i) Monitoring and Analysis
Committee, with the purpose of monitoring the tender process and analyzing the proposals, as well as to prepare a
summary of the respective conclusions, to report to the Assessment Committee and (ii) Assessment Committee , with the
aim of assessing the results presented by the Monitoring and Analysis Committee and preparing a proposal to the Financial
Matters Committee / Audit Committee.
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ANNUAL REPORT 2020
From the work performed and from the assessment conducted to the presented proposals, both accomplished with
autonomy and without third parties influence, two proposals were selected in accordance with the selection criteria
identified in the consultancy program which were presented to the Annual Shareholders General Meeting, which took
place on 5 April 2018, having been elected PriceWaterhouseCoopers as statutory audit for the 2018-2020 triennium.
To the extent that PricewaterhouseCoopers & Associados - Sociedade de Revisores de Contas, Lda. was elected for the
mandate corresponding to the 2018-2020 term, in the second half of 2020, the General and Supervisory Board and the
Financial Matters Committee / Audit Committee started preparing the process for the presentation, at the 2021 Annual
General Shareholders’ Meeting, of a proposal for the reelection of the EDP statutory auditor for the 2021-2023 triennium.
Such work was carried out by the Financial Matters Committee / Audit Committee, under the delegation granted by
the General and Supervisory Board. This work is concluded, and considering that, according to paragraphs 3 and 4
of article 54 of the Statute of the Order of Statutory Auditors, in publicly traded entities the maximum period of exercise
of statutory audit functions by the statutory auditor accounts is for two or three terms, depending on whether they are,
respectively, four or three years, the referred Committee submitted to the supervisory body the presentation, to the EDP
2021 Annual General Meeting, of a proposal for the renewal of PriceWaterHouseCoopers to the position of EDP's statutory
auditor for the term corresponding to the 2021-2023 triennium.
The General and Supervisory Board approved this proposal at the meeting held on 26 November 2021
45. Body responsible for assessing the external auditor and frequency of assessment
The Financial Matters Committee / Audit Committee presents annually to the General and Supervisory Board the report
on the assessment of the activity and independence of the External Auditor and EDP’s Statutory Auditor. The result of the
appreciation is published in the report of the General and Supervisory Board.
46. Non-Audit Services done by the external auditor for the company and/or subsidiaries
and internal procedures for approving hiring of these services and reasons for hiring them
Proposals to hire non-audit services from the External Auditor and Statutory Auditor are presented by the Executive Board
of Directors to the Financial Matters Committee / Audit Committee and their hiring requires prior authorisation from this
Committee.
The Regulation on Services Provided by EDP's Statutory Auditor and External Auditor determines, regarding the contracting
of non-audit services, that the Financial Matters Committee / Audit Committee may deny authorisation of those services
if one such service is prohibited and/or involves a possible threat to the independence of the Statutory Auditor.
The above-mentioned regulations are available on the EDP’s website
In 2020, the following services were performed by the External Auditor:
Audit services and statutory audit
•
necessary services (including internal control procedures required as part of audits) for the issue of the External
Auditor's annual on the accounts:
•
services required for compliance with local legislation (including internal control procedures required as part of audits)
for the issue of Legal Certifications of Accounts.
Other assurance of reliability services
Services with a specific or limited purpose or scope, namely:
•
necessary services for the issue of the interim reports and quarterly information on the accounts;
•
assurance of reliability on the Internal Control System on Financial Reporting;
172
•
assurance of reliability on the Sustainability information;
•
assurance of reliability on annual financial information of regulated activities;
•
comfort letters issuance;
•
opinion over carve-out and mergers under the terms of Portuguese Companies Code.
Other services
Upgrade of the SAF-T (PT) file viewing application currently installed at EDP, in order to incorporate a set of new functions.
The reasons for hiring these services were essentially related with i) better understanding of the Group's business, ensuring
appropriate knowledge of the relevant information, which promotes greater agility and efficiency in providing solutions and ii)
it was considered that the hiring of such services was not considered a threat to the independence of the External Auditor
and did not foster any situation of personal interest in relation to the guarantee of independence given by the External Auditor.
The services that are not related with Audit and statutory audit of accounts requested by Group entities to the External
Auditor and to other entities belonging to the same network, amounted to 2,364,633 Euro.
47. Annual remuneration paid by the company and/or subsidiary or group companies
to the auditor and other natural or legal persons belonging to the same network and breakdown
of percentage for the following services:
PriceWaterhouseCoopers is responsible for conducting an independent External Audit of all the EDP Group companies
in Portugal, Spain, Brazil (only in EDP Renováveis) and USA, as well as in other countries in which the Group operates.
In the subgroup of EDP Brasil independent external auditing is conducted by KPMG.
In 2020, the recognised, specialised costs of the fees of PriceWaterhouseCoopers and KPMG for audit and statutory audit
of accounts, other assurance of reliability services and other services than auditing for Portugal, Spain, Brazil, United States
of America and other countries were as follows:
PRICEWATERHOUSE COOPERS
EUROS
PORTUGAL
SPAIN
BRAZIL
USA
OTHER
COUNTRIES
TOTAL
Audit and
statutory
audit of
accounts
2,473,892
1,072,645
166,671
1,066,435
839,806
5,619,449
Other
assurance
of reliability
services (*)
1,894,873
247,994
4,000
-
40,842
2,187,709
Total of
audit and
assurance
of reliability
services
4,368,765
1,320,639
170,671
1,066,435
880,648
7,807,158
99%
Tax
consultancy
services
-
-
-
-
-
-
Other
services
16,000
-
27,591
-
-
43,591
Total of
other
services
16,000
-
27,591
-
-
43,591
1%
Total
4,384,765
56%
1,320,639
17%
198,262
2%
1,066,435
14%
880,648
11%
7,850,749
100%
(*) Includes assurance of reliability services of the exclusive competence and responsibility of the Statutory Auditor and External Auditor in accordance
with the regulations on services provided approved by the General and Supervisory Board.
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ANNUAL REPORT 2020
The audit and statutory audit of accounts in Portugal include 1,708,900 Euro related with statutory audit fees, on a company
and in consolidated basis, of EDP - Energias de Portugal, S.A.
KPMG
EUROS
BRAZIL
TOTAL
Audit and statutory audit of accounts
704,181
704,181
Other assurance of reliability services
60,767
60,767
Total of audit and assurance of reliability services
764,948
764,948
91%
Tax consultancy services
-
-
Other additional services
72,566
72,566
Total of other services
72,566
72,566
9%
Total
837,514
100%
837,514
100%
C. Internal Organisation
I. Articles of Association
48. Rules on amendments to the company’s Articles of Association
EDP's Articles of Association do not set forth special rules on their amendment and the general rule set out in 3 Article
386 (3) of the Companies Code therefore applies, i.e. decisions to amend the Articles of Association must be approved
at a General Meeting by two-thirds of the votes cast.
EDP's Articles of Association may also be amended under the powers of the Executive Board of Directors to move EDP's
registered office (Article 2 (1) of EDP's Articles of Association) and increase EDP's share capital (Article 4 (3) of EDP's
Articles of Association) provided that a favourable prior opinion of the General and Supervisory Board is obtained (article
17 (2) paragraph g) of EDP's Articles of Association). Pursuant to the general rule set out in Article 410 (7) of the Company
Code, by reference to Article 433 of this code, these decisions by the Executive Board of Directors must be passed by a
majority of the votes of the directors present or represented.
II. Whistleblowing
49. Whistleblowing policy and channels
The EDP Group has consistently implemented measures to ensure the good governance of its companies, including
the prevention of incorrect practices, particularly in matters related to accounting, internal accounting controls, auditing,
complaints, denouncements or other irregularities and fight against corruption, banking and financial crime and, for this
purpose, updated in April 2020, the Whistleblowing Procedures Regulation.
EDP provides Group employees, shareholders, Statutory Auditor or to any other stakeholders with a channel that enables
them to report irregularities on such matters directly and confidentially to the Financial Matters Committee / Audit
Committee of the General and Supervisory Board.
With the creation of this channel for reporting irregularities, EDP aims at:
•
ensuring that any stakeholder can freely communicate his/her concerns in these fields to the Financial Matters
Committee / Audit Committee;
•
facilitating the early detection of irregular situations that, if they occurred, might cause serious damage to the EDP
Group, its employees, customers, shareholders and stakeholders.
174
The contact with the Financial Matters Committee / Audit Committee is made through a platform that supports the
operation of the channel, with security and encryption mechanisms for all information, allowing to establish an interaction
with the respective author, maintaining anonymity.
The communications of irregularities are treated as confidential information, namely by the General and Supervisory Board,
the Financial Matters Committee / Audit Committee and the persons in charge of the operational management of the
mechanisms and procedures for receiving, retaining and handling irregularity communications. Knowledge of its existence
and the conclusions of the analysis will be limited to those who need this information to carry out their professional tasks.
The Company may not dismiss, threaten, suspend, suppress, harass, withhold or suspend payments of wages and /
or benefits, demote, transfer or otherwise take any disciplinary or retaliatory action related to the terms and conditions
of a work contract of an employee, agent or representative of the Company, insofar as that person legally reports an
irregularity or provides some information or assistance in the scope of the analysis of the reported irregularities presented.
The Financial Matters Committee / Audit Committee informed the General and Supervisory Board of the work carried out
with regard to the mechanism for reporting irregularities in the financial year of 2020, concluding that, during that financial
year, they received, treated and closed by the Financial Matters Committee / Audit Committee three reports of irregularities.
The communications received refer to three complaints that fall within the “covered matters” defined in the Whistleblowing
Procedures Internal Regulation, being the competence of the such Specialized Committee to instruct, conduct and
supervise the investigation processes regarding the complaints received. Regarding the three communications received,
from the analysis carried out by the Committee for Financial Matters / Audit Committee, it was concluded that the such
communications were not valid and the existence of irregularities was not confirmed, so the respective procedures were
closed and filed, having their authors been informed in accordance with the Whistleblowing Procedures Internal Regulation.
EDP makes available, at its website, greater detail regarding the Whistle Blowing Procedures’ Regulation to adopt in what
concerns to Communication of Erroneous Procedures
III. Internal Control and Risk Management
50. People, bodies or committees responsible for internal audits or implementation of internal
control systems
The EDP Group's Compliance Management System, aligned with the risk management model, is founded on an internal
control system based on the “three lines of defense”, in order to properly identify and manage the risks arising from the
activity, under the terms of the which:
•
the
First line of defense
(Business): it has, among others, the responsibility for the daily and proactive management
of compliance risks, in line with the established regulations. The top management of each functional, business or
support unit and all employees who are part of them are identified;
•
the
Second line of defense
(Compliance): it has, among others, the responsibility of ensuring business support
in the identification, analysis, evaluation, mitigation and monitoring of risk, as well as challenging and questioning
the potential risks that may arise. The Compliance Department supported by the Compliance Departments of EDP
España, EDP Energias do Brasil and EDP Renováveis, and the performance of a network of Compliance Partners
and Compliance Business Partners;
•
the
Third line of defense
(Internal Audit): it has, among others, the responsibility for carrying out independent audits
to the Compliance Management System. These audits may also be carried out by independent external entities with
recognized capacity for that purpose.
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ANNUAL REPORT 2020
As defined, this model allows the rationalization of resources and efforts, promotes coordination between functions and
homogenization of language and links all Business Units / Departments through a common infrastructure, which shares
the same information systems and processes.
The Group's Compliance Management System considers the particularities of the size and activity of each Business Unit
and geography. In this sense, the compliance function is supported by a structure composed of the Compliance
Department, the Local Compliance Departments (subgroups / geographies), Compliance Partners and Compliance Business
Partners, which complement the network dedicated to compliance management in the EDP Group, allowing for an
optimization of resources and the effective diffusion / implementation of compliance mechanisms at the various levels of
the organization.
In addition, EDP Group has implemented a Compliance Management System approved by the Executive Board of Directors
and the Financial Matters Committee / Audit Committee, in line with the best international practices, namely with the ISO
19600: 2014 Compliance Management Systems - Guidelines and with the COSO (Committee of Sponsoring Organizations of
the Treadway Commission) framework for risk management, internal control and fraud prevention. The aforementioned
Compliance Management System reinforces the special importance that the Group attaches to compliance with legislation
and regulations, good professional and industry practices, as well as respect for the principles and values contained in the
Code of Ethics and the Integrity Policy which are fundamental instruments to achieve the objectives and proceed with the
rigorous execution of the respective strategy.
On the other hand, it shows the EDP Group's commitment to ensure (i) an adequate identification, assessment and
management of compliance risks, in order to minimize the risk of sanctions, namely financial and reputational, and (ii)
the confidence of the stakeholders, reinforcing the competitiveness of the EDP Group.
The Compliance Management System allows the harmonization of guidelines and methodologies for compliance
management, across the organization and different regulatory spheres, ensuring alignment with other internal policies
and procedures, namely with the Integrity Policy and the Code of Conduct EDP Group Ethics, seeking the continuous
improvement of the actions developed.
The compliance function's mission is to promote a culture of compliance and integrity, by identifying relevant compliance
risks and by disseminating and coordinating the implementation of mechanisms that promote compliance, providing
proactive and systemic advice to the entire organization.
Through the work developed over the years, EDP Group's Compliance Management System currently has different
mechanisms, such as specific policies and procedures, channels for communicating internal and external irregularities,
periodic training / awareness initiatives and monitoring instruments that enable the identification of situations to analyze
in a logic of continuous improvement, responding to internal and external challenges.
The Compliance Department's activity is essentially based on four pillars, namely:
•
identification and analysis of compliance risks;
•
promotion and coordination of the implementation of policies, procedures and other mechanisms, in order to mitigate
the identified compliance risks;
•
monitoring of procedures and other compliance mechanisms adopted, in order to assess the maintenance of their
adequacy;
•
periodic reporting to the Executive Board of Directors and the Financial Matters Committee / Audit Committee of the
most relevant topics that may represent a significant risk for the Group.
176
The Compliance Department also has as main responsibilities to contribute to the improvement of risk management
processes associated, in an external plan, with legal and regulatory compliance and, in an internal plan, with compliance
with the regulations and other internal regulations in force, also ensuring implementation of the Internal Control System for
Financial Reporting (SCIRF).
In the performance of its duties, the Compliance Department reports hierarchically to the Executive Board of Directors and
functionally to the Financial Matters Committee / Audit Committee.
For its part, the Executive Board of Directors establishes a culture of tone at the top in Compliance matters, approving,
disseminating and ensuring the implementation of EDP's Compliance Management System in line with the Group's strategic
objectives.
The General and Supervisory Board, through the Financial Matters Committee / Audit Committee, monitors and supervises
the implementation of the referred compliance culture and approves the business plan of the Compliance Department, also
ensuring the follow-up of the respective execution.
The Compliance Management System is based on a Global Compliance Program composed of different Specific
Compliance Programs.
The Global Compliance Program is developed at corporate level and covers all activities, businesses and geographies,
defining the organization and functioning model of the Compliance Function and identifying the most relevant specific
regulatory spheres, for which the development of a Specific Compliance Program is foreseen.
EDP Group adopted a model for structuring its Compliance Management System, applicable both to the Global Compliance
Program and to Specific Compliance Programs, based essentially on nine phases, which can be classified into three
action levels.
COMPLIANCE MANAGEMENT SYSTEM
PREVENTION
•
Implementation of a governance model
•
Identification and management of compliance risks
•
Development of Internal Compliance Standards, Policies and Procedures
•
Promotion of Training and Awareness / Communication actions
DETECTION
•
Monitoring, follow-up and supervision mechanisms and corresponding definition of improvement action plans
•
Management of communication channels / issues
•
Audits and respective definition of action plans
CONTINUOUS IMPROVEMENT
•
Monitoring the implementation of improvement action plans
•
Definition of investigation procedures / application of corrective measures
Based on the defined governance model, the EDP Group's Compliance Management System develops from a risk
assessment, which is reviewed periodically or whenever there are material changes in the legal and regulatory context or in
the organizational context, and that allows the identification of the most relevant normative themes or scopes for the
organization, resulting in the structuring and development of Specific Compliance Programs, through a process that goes
through different sequential phases: (i) planning, (ii) conceptual structuring and design , (iii) support for implementation;
(iv) monitoring of implementation and (v) ongoing maintenance and continuous improvement.
The identification of these most relevant topics is carried out based on the identification and assessment of the legal and
regulatory requirements applicable to the activities carried out by the Group, whose analysis is organized into normative
blocks (corporate governance, energy sector, reporting, environment, health and safety; information, among others).
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As a function of risk assessment, global and specific policies, procedures and methodologies are developed for each
normative scope, through which the fundamental principles in compliance management are formalized and detailed control
rules and mechanisms implemented, reflecting on the activities developed internally or by third parties on behalf of EDP,
and which are key elements for the dissemination of a culture of compliance across the Group.
Another fundamental element for the development of Specific Compliance Programs is the training and awareness actions
carried out both at the transversal level of the Group and specific to certain Business Units or regulatory areas.
The compliance function ensures the follow-up and monitoring of the development, operation and implementation of
Specific Compliance Programs. For its part, and in accordance with the respective annual activity plan, the Audit function
conducts specific audit work, addressing compliance issues. In addition, the Compliance Management System is still
subject to independent external review, as per reasonableness opinion attached to this Annual Report.
The results of the monitoring and any recommendations for internal and / or external auditing are considered for the
purpose of improving compliance management, in a perspective of continuous improvement.
The compliance function also ensures the reporting of the activities carried out to the Executive Board of Directors and
to the Financial Matters Committee / Audit Committee.
Without prejudice to other mechanisms previously developed, since the definition of the methodological approach to
compliance management in the EDP Group, it was possible to structure the different relevant compliance issues at the
corporate and local level, reflecting this work in the evolution of the different Specific Programs of Compliance, with
emphasis on the following areas:
•
Integrity / Corruption Prevention
. The systematization of this Specific Compliance Program had as fundamental
element the definition of an Integrity Policy in which the commitments, general principles of action and the duties
of the entities of the Group, its employees and business partners were defined, with regard to prevention illicit acts,
complementing the set of norms and compliance mechanisms that already exist both at the corporate level (namely
the Code of Conduct for Suppliers, the Code of Conduct for Senior Management and Senior Financial Officers, the
Regulation on conflicts of interest and business between related parties and the Social Investment Policy, in addition
to the EDP Group's own Code of Ethics and the irregularity communication channels made available), as in the different
companies of the group, namely the models of prevention and control of criminal liability in EDP Spain and EDP
Renováveis and EDP's corruption prevention Compliance program Brazil (which in turn include a significant set of
specific compliance policies and procedures). The EDP Group's Integrity Policy, meanwhile revised in 2020 and
disclosed to all employees (in the case of a mandatory reading document, with record of the respective
acknowledgment) and available at EDP’s website (
), reinforces the tolerance policy zero regarding the
adoption of practices that could be perceived as acts of corruption or bribery, clarifies the ban on facilitation payments
and details the principles related to the prevention of conflicts of interest, donations and sponsorships, contributions
to political parties and prevention of money laundering. capital and combating the financing of terrorism, as well as
guidelines regarding the conduct of third party integrity due diligences, the relationship with public officials and
politically exposed people, the acceptance and assignment of offers and invitations to events and the monitoring
international sanctions. Within the scope of the reporting of irregularities, the principle of non-retaliation remains and
the different channels available internally and externally are listed. These principles and guidelines were implemented
in specific procedures;
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•
Specific Compliance Program for Money Laundering and Fight the Financing of Terrorism
. In 2020, the Integrity Policy
as well as the other procedures and compliance mechanisms associated with this program were subject to internal
training for employees, and were also internally disclosed for consultation at EDP's internal communication channels.
As part of the structuring of the Specific Compliance Program for Money Laundering and Combating the Financing of
Terrorism, specific internal regulations and a transversal procedure related to the reporting of suspicious transactions
were implemented by the obliged entities. The corporate Irregularities Communication Channel, implemented since
2006 to report potential irregularities in financial matters, was subject to reformulation and now also provides a specific
communication channel for potential irregularities related to money laundering and combating violations. Financing of
Terrorism. The obliged companies, proceeded to designate a Responsible for Normative Compliance, according to the
legal requirements, whose performance is articulated with the governance model defined in the scope of this program.
The restructuring of this channel was the subject of internal and external communication, through its dissemination on
the EDP Group's Intranet and Internet sites;
•
Protection of Personal Data
. This program aims to ensure the adequacy of the EDP Group entities to the applicable legal
requirements in terms of Data Protection, under which Data Protection Officers were appointed in situations subject to
this legal obligation and specific teams were identified, with the responsibility to promote the dissemination, knowledge,
training and implementation of the compliance program in the respective areas of activity, with the coordination of the
Compliance Department. A set of cross-cutting methodologies and procedures that internally regulate the risk
assessment process and conducting impact assessments of personal data processing operations, the development
of Privacy by Design procedures, matters such as the response to the exercise of rights, the management of
subcontractors, the handling of personal data breaches is complemented by specific procedures and control activities
defined at the level of the business areas. In 2020, the Executive Board of Directors approved the EDP Group's Personal
Data Protection Policy, which is widespread and transversal to all the Group's Business Units, which reinforces EDP's
commitments and position in terms of privacy and protection personal data and defines the principles of action to
ensure compliance. This policy embodies the values and principles that were already followed by EDP and that are
reflected in its operation and in the various privacy policies that govern the treatment of data carried out by the different
Business Units. Within the scope of the communication and training plans defined annually at the level of each
geography, different specific initiatives were carried out and directed according to the exposure of employees to the
risks associated with the processing of personal data;
•
Competition
.
The Specific Competition Compliance Program aims to reinforce the guarantee of compliance by the
EDP Group companies, in Portugal, with the legal requirements in terms of competition, namely with regard to contracts
signed and the performance of its employees in accordance with the highest standards of the ethics, integrity and
competitive Compliance, contributing to the sustainability and development of the markets in which EDP operates.
A similar approach to preventing and mitigating practices that potentially restrict competition is being implemented
for the rest of the geographies, without prejudice to the codes and manuals already applied. This Specific Competition
Compliance Program is, like the others, subject to a continuous improvement scrutiny, having been revised in 2020,
with emphasis on: (i) the governance model which establishes the relationship, roles, attributions and responsibilities
of the various stakeholders; (ii) the EDP Group's competition manual, addressing the rules of conduct to be observed;
(iii) the revision of internal policies and procedures, namely in terms of wholesale and retail offers and access to
networks and safeguarding compliance with the competition rules applicable to the concentration of companies;
(iv) online training programs to raise employee awareness of the basic concepts of competition, the main rules of
conduct to be observed and the impact of non-compliance with competition rules and (v) the specific channel for
communication by employees any doubts or confidential reports of breaches of competition rules;
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•
Prevention of Criminal Legal Risks
. The Criminal Legal Risk Prevention Program was implemented in a first phase in
companies in Spain (also including a specific program at EDP Renováveis), following different reforms of criminal law in
this country, which introduced and deepened the concept of criminal liability of individuals with respect to certain
crimes, also defining the requirements to be considered when implementing compliance models. The Compliance
programs implemented in this area at EDP provide the organization with a management system that includes
supervision and control measures to prevent the occurrence of crimes or mitigate the risk of their occurrence,
highlighting the issues of preventing corruption, bribery and other similar offenses (which allows the capture of
synergies with other Compliance programs with a transversal scope at the level of the EDP Group, such as the Integrity
Compliance / Corruption Prevention Program).
These compliance programs have been evolving and adapting over time, both in terms of changes in the context of EDP
companies and their businesses, and in terms of legal and regulatory changes with an impact on this matter. They also have
their own government models, in line with the compliance management model in general and provide for the identification
of criminal risks applicable to the activity and their mitigation through policies, procedures, specific control activities for that
purpose and other mechanisms of control. Complementary compliance (training, awareness, communication channels,
among others).
From the established governance model, and with the objective of identifying, assessing, monitoring and controlling
the risks to which the EDP Group is exposed, the role, in addition to the Compliance Department, the Risk Management
Department and the Internal Audit Department.
The Risk Department is primarily responsible for coordinating risk assessment studies for the Group, with the aim of
supporting the Executive Board of Directors in their control and mitigation and providing integrated risk-return analyzes,
as detailed in the chapter respective, which activity is detailed in items 52 to 54 of this Annual Report.
In turn, internal audit is an objective and independent activity, of guarantee and advisory, aimed at adding value and
improving operations of EDP Group, assisting the organization in pursuing its objectives, through a systematic and
disciplined approach in assessing and improving the effectiveness of risk management, control and governance
procedures.
The internal audit function has the mission of increasing and protecting the value of EDP, providing assurance, advisory
and insight, covering several fields of action.
The EDP Group's internal audit is a corporate function performed by the Internal Audit Department (DAI), which has a double
dependency, on the one hand hierarchical structure of the Executive Board of Directors and, on the other, functional of the
Financial Matters Committee / Audit Committee, which supervises its activity and which reports the respective exercise.
The EDP Group's Internal Audit Departments are present in Portugal, Spain, the United States of America and Brazil,
depending functionally on DAI.
In addition to conducting operational and regulatory audits to Business Units in Portugal and auditing information systems
at the Iberian level, DAI's main duties are to propose audit policies and objectives, in accordance with the law and with the
best international practices, ensuring the harmonization of internal audit methods, processes and manuals and with a view
to implementing the respective support tools, establishing and managing the systematic planning of internal audits at the
Group level.
Regarding the areas that make up the DAI, although each area has (operational and regulatory audits and information
systems audits) its specific duties, multidisciplinary and the growing interaction between the operational audit and
information systems audit teams (with an Iberian scope) have allowed synergies in the analysis of information and
data extracted from computer systems to support business processes and, therefore, a better quality of the conclusions
obtained, a closer proximity to the business and an increasing monitoring of the degree of evolution of the projects
most relevant.
180
On the other hand, DAI's commitment to quality and the continuous improvement of the processes and activities it carries
out led to the creation of the Quality and Continuous Improvement Office at DAI, which, in a fundamentally methodological
aspect, ensures an internal service with a view to increasing value added in relation to the internal audit activity in the
EDP Group.
The Internal Audit Departments, as well as all professionals assigned to this function, govern their performance
by the Fundamental Principles for the Practice of Internal Auditing, the Code of Ethics and the International Standards
for the Professional Practice of Internal Auditing approved by The Institute of Internal Auditors (IIA).
EDP Group has internal auditors experienced in several areas (e.g. finance, accounting, legal, information systems),
with a deep knowledge of the Group, allowing a multipurpose and transversal analysis of the issues in question and
of the activities carried out. In addition to specific training and experience in the area, the employees assigned to the
information systems audit area know the systems implemented in the Group and follow market trends, allowing them
to obtain a broad view of the systems and processes with the greatest technological risk. and of greater relevance
for the different Business Units.
The internal audit activities are developed based on plans aligned with the objectives and mission of the function, in which
the audit works that comprise them have as main inputs the consultation with the government bodies and the alignment
with the Group's Strategic Plan and with the sustainability objectives, the prioritization of processes based on the risk
analysis carried out by DAI, the interactions with the external auditor throughout the year and the consideration of topics
of interest that it has identified in the scope of the SCIRF audit and the financial audit, international trends and best
practices in matters of internal audit, and the identification and assessment of the control environment existing in the
various lines of defense that affect each process, in a perspective of Combined Assurance.
DAI's lines of activity are the analysis of the effectiveness and efficiency of operations, reliability and integrity
of information, both financial and operational, compliance with internal procedures and standards, compliance
with external standards, auditing of information systems and integrity of assets.
The changing macroeconomic, social and political context, as well as the growing technological transformations
and the news and changes that have been affecting the energy sector in general and the EDP Group in particular have
forced a constant adaptation of the internal audit activity in order to maintain an ability to respond adequately to the
challenges ahead, aiming to maximize the added value that this activity can and should offer to its stakeholders.
DAI has been monitoring the extent and development of the Group's activity in new markets, business lines and
geographies, incorporating in its business plan, actions aimed at evaluating and reinforcing the existing internal control
environment.
The continuous auditing model has evolved consistently, consolidating the methodology, continuing existing audits,
implementing new audits to evaluate different business areas, some with real-time analysis, with a set of new indicators
and automation of communication exceptions to the audited entity at the time they are detected. It is a robust monitoring
and evaluation model, very relevant for the automatic processing of a high volume of data, allowing to obtain efficiency
gains in terms of internal control and in the prevention and detection of irregularities.
Within the scope of information systems audits, actions have been carried out covering a number of areas of high criticality,
considering, in particular, the digitization program underway at the EDP Group, which has been a lever for strengthening and
growing business processes, the increase in processes / activities analyzed by continuous auditing and the expansion of
routine automation in order to speed up the monitoring of the Group's information systems.
In recent years, the existing competencies in the field of information systems and data analytics have been strengthened
by recruiting employees who are specialists in these matters in an internal audit perspective, complementing the profiles
already existing in the information systems and operational audit teams.
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The relationship with the various stakeholders is developed, mainly, through periodic meetings with the Financial Matters
Committee / Audit Committee and the members of the Executive Board of Directors, interactions with the Business Units,
both at the level of the Boards of Directors and with those in charge of the audited areas, interactions with other areas of the
Group, such as risk, sustainability, legal advice, human resources, regulation, strategy, management control, compliance,
information systems, in order to identify risk areas and to ensure the update on the various matters of the organization.
DAI carries out, annually, a process of self-assessment of the Group's internal audit activity, which consists of a reflection
and analysis on the structure, composition, skills, relationship, reports, methodologies, DAI procedures and work carried out
throughout the year, among others, and includes a global conclusion expressed by the responsible person of DAI's activity in
line with the best practices of the function.
On the other hand, DAI's activity and performance is evaluated annually by the Financial Matters Committee / Audit
Committee based, among others, on the analysis of the interaction that the Commission develops throughout the year
with DAI and on the analysis of information and documentation made available by it regarding the process of its self-
assessment.
DAI's activity has been subject to external evaluations since 2010 by the IIA (every 5 years, as established in the
International Standards for the Professional Practice of Internal Auditing) and, since that date, the opinion of the evaluation
teams has been that the internal audit activity "Generally Complies" with the International Standards for the Professional
Practice of Internal Auditing and the IIA Code of Ethics, this qualification being the highest granted by the IIA.
The last external evaluation took place in 2020, in all locations where the internal audit function is developed, with the aim
of obtaining joint independent certification, with the opinion issued in the external evaluation reports being that the internal
audit activity “generally complies” with the Standards and Code of Ethics issued by the IIA in all locations (Portugal, Spain,
United States and Brazil), in all its aspects (government, personnel, management and procedures).
It is also worth mentioning, and in line with the information described above, the competence of the General and Supervisory
Board, which, under legal terms, permanently monitors and evaluates the internal procedures related to accounting and
auditing matters, as well as the effectiveness of the risk management system, the internal control and compliance, including
the reception and handling of complaints and related doubts, whether or not from employees.
This competence is attributed
to the Financial Matters Committee / Audit Committee, which is responsible, among other tasks, for permanently monitoring
and supervising: (i) financial matters and accounting practices; (ii) internal audit practices and procedures; (iii) the internal
mechanisms and procedures of the Financial Reporting Internal Control System (SCIRF); (iv) matters relating to the risk
management and control system; (v) the activities and mechanisms of the compliance management system and (vi) the
activity and independence of the Statutory Auditor / Company of Statutory Auditors.
51. Description of hierarchical and/or functional dependency on other company bodies
or committees
In the performance of their duties, the Internal Audit Department (DAI) and the Compliance Department (DCO) report
hierarchically to the Executive Board of Directors, and functionally to the Financial Matters Committee / Audit Committee
of the General and Supervisory Board.
The Risk Management Department reports hierarchically to the Executive Board of Directors.
52. Other company areas with risk control duties
The risk management is an integral part of the common practices of business management and it is the responsibility
of all, from the Executive Board of Directors right down to the individual staff member. Each one is responsible for knowing
the risks existing in their area of intervention and for managing them in accordance with their role, expertise and delegated
responsibilities.
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The EDP Group manages its meaningful risks in a portfolio approach, optimizing the risk/ return trade-off transversely
across its business areas, aiming to create value and to stand out in the markets where it operates. The EDP Group also
works towards a permanent progress of its risk management processes in order to reflect the evolution of its needs
and to maintain its alignment with international risk management best practices.
The integration of risk management in the most relevant business and decision-making processes is promoted as part
of i) strategic development, ii) investment decisions, iii) business plan and iv) operations management, with the purpose
of ensuring stability in results and optimize its response to changes in context and opportunities.
The risk management process is structured around 3 lines of defense (business operation, risk management/ compliance
and internal and external auditing), each led independently and ensuring an adequate level of segregation relative to one
another. The functions of risk identification, analysis, evaluation, treatment and monitoring are followed
by a set of bodies with clearly established roles and responsibilities, typified by Group policies that are approved and ratified
by the competent bodies of the Group:
•
the General and Supervisory Board (GSB)
, in particular the Financial Committee/ Audit Committee, is responsible
for monitoring on a permanent basis and evaluating internal procedures for accounting and auditing, in addition
to the efficacy of the risk management system, the internal control and the internal auditing systems, including the way
in which complaints and queries are received and processed, whether originating from employees or not. The General
and Supervisory Board is additionally involved in the Group's Strategic Plan, ensuring, implicitly, an alignment between
management and shareholders regarding risk appetite;
•
the Executive Board of Directors (EBD)
is the highest body responsible for risk-related decision-making, supervision and
management control. It is responsible for the approval of the business plan, for setting the management objectives and
policies of the EDP Group. It is responsible, among other duties, for defining the Group's risk exposure, in line with the
best practices in risk management procedures and policies (namely, the respective exposition limits by risk category),
as well as the allocation of resources, depending on the risk-return profile of the various options available;
•
the Risk Management Department, headed by the Chief Risk-Officer
, establishes an integrated and holistic view of the
Group's risk position (top-down perspective), supporting the prioritization and coordination of cross-cutting initiatives,
offering a segregated and business-independent view regarding key risks. Its main responsibilities are: i) to maintain
and update an inventory of the Group's most significant risks and fostering their implementation in the various Business
Units and Corporate Departments; ii) to promote and monitor the implementation of the management and control
actions regarding the Group's most significant risks; iii) to systematically measure specific risks and conduct risk-return
analyses, noting and reporting adjustment needs when necessary; iv) to define main concepts, methods and risk
measures and Key Risk Indicators (KRI), supplementary to the Key Performance Indicators (KPI); v) to develop and
support projects and initiatives aimed at the effective improvement of the management process of significant risks;
and vi) to support the Executive Board of Directors in the risk management and business continuity areas;
•
the Management of Business Units and Corporate Departments
is the first responsible for an integrated risk
management in each of their business areas. Its main responsibilities are: i) to propose and approve (through the
respective Board of Directors) the definition of key principles for risk management, aligned with the orientations defined
by corporate policies; ii) to ensure that the risks within the scope of their activity are identified, analyzed and evaluated
broadly, rigorously and consistently throughout the Group, using established methodologies; iii) to optimize the risk/
return trade-off of their activity, aligned with the orientations established by the Executive Board of Directors, regarding
the definition and implementation of risk management strategies, implementation of effective initiatives in treatment
costs of key risks, the clear and equilibrated allocation between parties in case of internal or external contract
of products or services and the definition of mechanisms and levels of residual risk transference (insurance); iv)
to monitor and report periodically their risk position, by the definition and regular monitoring of KRIs, risk reports
and the evaluation of existing risk controls; and v) to highlight key aspects of risk management to their respective
risk-officers, Risk Management Department and appropriate decision makers;
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•
local structures for risk management (risk-officers)
assume a key role on operationalizing risk management. Typically,
they report hierarchically to a member of the respective Board of Directors, and in coordination with EDP Group Chief
Risk-Officer, acting independently from business operation. In large and/ or particularly complex Business Units local
replicas of risk management corporate structure exist, articulated with the Risk Management Department.
Their responsibilities include: i) to identify and characterize through quantification and qualification the materiality
of key risks (both threats and opportunities), within the scope of their activity and in articulation with the business; ii)
to perform studies on key strategic issues and associated risks, in close articulation with the business and the Risk
Management Department; iii) to support the Board of Directors and Departments on decision making, in the perspective
of risk; iv) to advise on mitigation and hedging strategies for key risks; v) to monitor and report key risks to decision
makers and Risk Management Department, to implement policies and procedures, including the follow-up of
expositions vs. established risk limits, the systematic register of incidents and quasi-incidents, including the
characterization of events and its quantitative impact; vi) to develop and promote methodologies to analyze, evaluate
and treat actual and emerging risks and support its implementation; vii) to coordinate initiatives regarding crisis
management and business continuity; viii) to coordinate the existing Risk Committees (if applicable); and ix)
to provide adequate risk related information to the Risk Management Department, decision makers, and remaining
relevant stakeholders.
Model for risk function report at EDP Group (and communication with the corporate center)
184
Furthermore, there are a number of regular forums for the discussion, analysis and issue of opinions on risk-related topics:
•
EDP Group Risk Committee
has the main objective of supporting the decisions of the Executive Board of Directors in
the identification, assessment, management and control of risk, in terms of: i) supporting the identification of significant
risks and the characterization of the EDP Group's risk profile; ii) discussing relevant risk analysis and evaluation projects
results developed with Business Units and Corporate Departments; iii) advising and/ or recommending risk
management strategies (e.g., regarding policies, procedures and limits); and iv) monitoring and controlling the evolution
of significant risks. This Committee is held at half-yearly intervals (at least). It is composed of the key decision makers
and those responsible for the Group's risk management (the Executive Board of Directors, the Corporate Centre and
selected Business Units);
•
the Individual Risk Committees
are set up and held at Business Unit levels when the degree of complexity of risk
management justifies such, taking on a structure replicated from the Group's Risk Committee. These Committees
are composed of the key decision makers and those responsible for risks of each Business Unit, typically coordinated
by the respective risk officer.
53. The main types of economic, financial and legal risk to which the company is exposed
in its business
The taxonomy of risks for the EDP Group combines in an integrated approach and in common language the various
mapped risks existing in relation to the Group's several Business Units, structured around four major families: strategic,
business, financial and operational.
In 2020, the pandemic situation caused by the COVID-19 virus had a transversal impact on business, financial and
operational risks. In particular, the main impacts for EDP Group were at the business level, with the reduction in energy
consumption caused by the confinement and deceleration of economic activity, and at the level of the financial markets,
with the depreciation of exchange rates.
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Strategic risks
The EDP Group closely monitors and reports on strategic risks, since it considers that these risks may have a significant
impact if they occur. The strategic risks can be broken down into two different types:
•
risks of the surrounding context
, associated with external developments that may have a negative material impact
on the Group, in particular but not limited to, severe macro-economic, social/ or political crisis in core geographies for
the Group, technological disruptions of various kinds, profound changes resulting from climate change and disruptive
changes in competitive paradigm:
•
regarding the risk of a macro-economic
, social and/ or political crisis in the geographies where the Group is present,
the stability of public deficit and of the interest rate of public debt in Portugal and Spain, as well as the stability
of political context, suggest a material reduction of the probability of actual occurrence of these risks. However,
some geographies where EDP operates, namely Brazil, are living challenging macroeconomic cycles, which may
be materialized in increased volatility of financial markets with direct impact in EDP operations;
•
regarding technological disruption
, the EDP Group has sought to position itself at the forefront of technological
development in the sector, looking at this issue not as a threat but as a central vehicle for promoting growth in the
future. The EDP Group has accordingly actively and transversely invested in and investigated the promotion of new
technologies in the various stages of the value chain (namely EDP Inovação activity level, and through the
development of the digital acceleration program EDPX in 2018, resulting in the creation of a unit dedicated to
digitalization – Digital Global Unit);
•
regarding climate change
, such changes may have a significant and across-the-board impact on the various
stakeholders over the medium to long term (e.g., in terms of average temperatures, average sea levels, structural
changes in water and/or wind volumes, or the incidence of extreme climatic events). In this regard, the Group has
decisively invested over the recent years in strengthening its portfolio of renewable energy as well as in a concerted
strategy of environmental sustainability, which has been internationally recognized, not only in order to reduce its
ecological footprint, but also to ensure its resilience to the possible materialization of risks deriving from
climate change;
•
regarding disruptive changes to the competitive paradigm
, the Group recognizes the risks associated with changes
to the business model paradigm (e.g., in relation to distributed generation). The EDP Group addresses this risk
through meticulous analyses and prospective investments, allowing to proactively anticipate and adapt the business
model to possible market development trends.
•
strategy risks
, associated with investment decisions, relationships with key partners (shareholders and others),
internal governance and corporate planning (in its various forms):
•
regarding investment decisions
, EDP's growth strategy implies the constant evaluation and decision-making
in relation to investment options that allow it to implement the strategy established and approved by its shareholders.
Accordingly, a meticulous and consistent process is defined across the Group, with pre-established criteria
1
for analysis, decision-making and monitoring of projects. This process is conducted at the corporate level by the
Business Analysis Department, locally supported by the various Business Units. Additionally, Investment Committees
regularly meet to discuss, monitor and advice on i) investment analysis and decisions; ii) compliance with investment
implementation schedules; and iii) evaluation of impact of detected or potential deviations. These forums are
performed both at the Business Unit level and at the corporate level, involving decision-makers and key experts
of the Group in the relevant fields;
1
Particularly related to the definition of minimum return levels, up to date and geography/ business line-specific discount rates as well as to the
resilience to multiple adverse scenarios of delays, overruns, fluctuations in key business variables, political environment and regulations
186
•
regarding the relationship with partners
(shareholders and others), the EDP Group has a solid and stable core of
shareholders, which is aligned with and actively participates in the Group's strategy. On the other hand, the EDP Group
is guided by strict criteria at all levels for the selection of its partners in the various countries and business areas in
which it operates, the management of which is led by the Executive Board of Directors, Business Units and
Institutional Relations and Stakeholders Department;
•
regarding internal governance
, the Group considers that the design and implementation of its various corporate
bodies ensures compliance with the best international practices on this topic (see previous section for more
information);
•
regarding corporate planning
(particularly in terms of brand and communication, investor relations, human resources,
information systems, business strategy, and others) the Group believes that the current structures and processes
allow it to adequately manage these risks.
Business risks
The business risks encompass all risk factors intrinsically related with the remuneration of the core activities of the
EDP Group in the generation, distribution and sale of energy in the various countries and markets where it operates.
The business risks can be broken down into two different types:
•
energy market risks
, related to electricity prices (pool) and other commodities, renewable energy generating volumes
(hydro, wind and solar power), energy consumption (associated with demand) and supply margins:
•
regarding price of electricity
, the impact is limited by the fact that a significant share of generation is contracted
in the long term, especially in relation to EDP Renováveis and most of the installed capacity in Brazil. Currently,
generation subject to market price fluctuations includes: i) all ordinary status generation in Portugal and Spain; ii)
generation in Brazil in excess of or in deficit to the PPA; and iii) part of the wind energy farms of EDP Renováveis in
Spain, US, Poland and Romania. The Energy Management Business Unit (UNGE) is responsible for proactively acting
in the MIBEL
2
and other forward markets (including OTC) in order to optimize the margin of market generation
and limit the respective risk, according to the delegation of powers clearly established and ensuring periodic
P@R - "Profit at Risk" reporting, based on a proprietary model. Energy Management Business Unit (UNGE)'s
operations are adequately framed by a specific risk policy, including exposure limits;
•
regarding the price of other commodities
(mostly fuel and CO
2
), subject to fluctuation due to supply and demand
dynamics or changes in international legislation and relevant only to power plants exposed to market risk, this risk
is monitored and proactively managed by the Energy Management Business Unit (UNGE), which negotiates and
manages coal and gas contracts and CO2 allowances. It is also responsible for mitigation of the fuel prices risk
via hedging (including foreign exchange risk in USD, in coordination with the Financial Management Department);
2
Iberian Electricity Market
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ANNUAL REPORT 2020
•
regarding renewable energy generation volumes
, the EDP Group has a degree of material exposure to this risk,
particularly in relation to water volume (Wind Energy Capability Index
3
tends to be less volatile than the Hydroelectric
Capability Index
4
, on an annual basis), arising from its increasing focus on a generation portfolio with ever greater
renewable energy, as well as its hydro portfolio in Portugal and Brazil. It should be noted that although this risk may
introduce some volatility in annual results, it has a significantly lower impact on the long-term value of EDP’s
generation assets portfolio, since it i) diversifies inter-annually; ii) diversifies through technologies, somehow
compensating volume vs. price with the remaining technologies (lower hydro productivity is, in part, compensated
by higher thermal production at typically higher prices) and iii) is uncorrelated with the market. On the other hand,
exposure in Brazil is significantly mitigated by i) the fact that there is hydrological diversification throughout
the country (through financial coupling mechanisms); as well as ii) the fact that a PPA on fixed energy generation
is established; and iii) the fact that the Group joined, in the end of 2015, the hydro risk renegotiation mechanism,
which combined with the cap on PLD price limits the exposure to the deficit of allocated energy relative to energy sold
in PPA (for the Regulated Environment);
•
regarding energy consumption
(electricity and gas), the EDP Group is subject to fluctuations in the amounts
of energy sold depending, among others, on factors such as economic activity and annual temperatures, as well as
extraordinary events (such as the COVID-19 pandemic in 2020). Besides such economic cycle fluctuations and
energy efficient solutions, consumption can also be affected by situations of rationing (as happened in Brazil in
2001). Given the difficulty to mitigate this risks, EDP chooses to manage it through diversification across multiple
technologies, countries and business lines;
•
regarding sales margins
, the current customer migration to the free market enhances the competitiveness of offers
from suppliers and can add additional volatility in terms of market shares and unit margins. Moreover, there is risk
associated with deviations in actual consumption from the forecasting model adopted by the Group. These risks are
managed by the Group's energy sales companies, with particular emphasis on initiatives to i) strengthening the core
offer (e.g., through combined electricity and gas products); and ii) introducing innovative products and services
(e.g., Funciona and Re:dy). In addition, the Prices and Volumes Committee evaluates and regularly makes
recommendations for the dynamic management of this risk;
•
regulatory risks
, related to changes in legislation and regulations that the Group is required to comply with in the
various countries and markets in which it operates (in particular, but not limited to, sectoral packages, regulatory
frameworks, environmental legislation and taxes, and other). This risk is managed proactively by the EDP Group,
through monitoring and thorough preparation of the various dossiers and adopting a constructive and cooperative
attitude in their discussion. This allows the materialization of options out of synch with reality in the different market
contexts in which the Group operates to be anticipated and minimized.
Financial risks
The financial risks encompass the market risk factors linked to the (non-operational) energy business of the EDP Group
in the various countries and markets where it operates. Financial risks can be divided into four different types:
•
financial markets risks
, associated with fluctuations in international markets in interest rates, exchange rates,
inflation and valuation of financial assets held by the Group:
•
regarding interest rates
, the risk is mainly associated with the percentage of debt at floating rates, as well as any
increases in costs associated with fixed rate debt refinancing needs in a context of rising current interest rates.
This risk is managed and mitigated by the Group's Financial Management Department, which ensures compliance
with the risk profile, using the procedures and tools provided by the Group's risk policies. Periodic reports on the
evolution of these variables and sources of risk are prepared.
3
Ratio between the yearly wind energy output vs. reference year
4
Ratio between the yearly hydro energy output vs. reference year
188
•
regarding foreign currency exchange rates
, the risk is associated with fluctuations in the cost of the purchase and
sale of electricity and fuel and with the cost of investments denominated in foreign currencies, as well as fluctuations
in the value of net assets, debt and income denominated in foreign currencies. The EDP Group acts proactively in
order to ensure a broadly balanced net structural exposure (assets - liabilities) in USD, GBP and CAD. On the other
hand, the geographical diversification (and exposure to multiple currencies) contributes for the reduction of annual
result volatility. The remaining risks are managed and mitigated by the Group's Financial Management Department, in
conjunction with the Energy Management Business Unit (UNGE), EDP Renováveis and EDP Energias do Brasil, in the
same way as above;
•
regarding inflation
, the risk is mainly associated with the fluctuation of operating revenues and costs in the various
countries where the EDP Group operates. In terms of mitigation, the revenue models of regulated activities as well
as part of the PPAs include inflation pegging components in order to preserve adequate revenue for the business
activity. A significant component of the Group's current business activities is also focused on markets with stable
inflation rates. For the remaining risk, as well as active management of the various supply and services contracts,
the EDP Group addresses this risk from an integrated perspective, mitigating it through an appropriate debt profile
(fixed rate/floating rate) aligned with the revenues profile;
•
regarding the valuation of financial assets
, EDP adopts a conservative risk policy with reduced levels of exposure,
based on a reduced weight of strategic financial assets and short-term cash investments mainly based on bank
deposits (without market risk). This risk mainly results from the possibility of devaluation of the financial assets that
EDP holds (traded on securities markets). It is managed according to the procedures and tools provided by the
Group's risk policies;
•
counterparty and credit risks
, associated with unexpected changes in the compliance capacity with obligations by
customers, financial counterparties (mainly associated with deposits in financial institutions and financial derivatives)
and energy counterparties:
•
regarding financial counterparties
, this risk is managed through: i) a careful selection of counterparties; ii)
an appropriate diversification of risk over multiple counterparties; iii) an exposure based on financial instruments
of reduced complexity, high liquidity and of a non-speculative nature; and iv) regular monitoring of the positions held;
•
regarding energy counterparties
, this risk is reduced for operations in an organized market. For operations in over-
the-market markets and fuel purchases, the Energy Management Business Unit (UNGE), which is responsible for
monitoring and the interface with wholesale markets, monitors transactions by applying exposure and negotiation
limits that have been established and approved in advance by a higher management according to the counterparty
rating (external whenever possible, or internally rated if the former is unavailable), and using clearing houses
for clearing. The counterparty risk is also associated with the sale of long-term energy agreements (PPA),
which is minimized by the fact that a significant proportion of counterparties in this context are sovereign entities
(governments or state-owned electricity systems). Meticulous scrutiny and approval criteria are likewise applied
for private counterparties;
•
regarding customers
, the Group is exposed to default risk in Portugal, Spain and Brazil. The average level of risk
in Spain is structurally mitigated in terms of expected loss due to a mix of customers with greater weight of the B2B
segment (which has less relative weight of average default). The risk in Brazil is mitigated through financial collateral
to mitigate the loss (for the Free Contracting Environment), and through the partial recovery of non-compliance by the
regulated tariff (for the Regulated Contracting Environment). This is monitored by E- Redes and EDP Comercial
(in Portugal) and EDP España, which are responsible for carrying out the meter reading cycles and cutting off the
service/taking legal action and debt recovery. In addition, mitigation tools such as credit insurance and setting
up bank collateral are used, whenever this is deemed necessary:
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ANNUAL REPORT 2020
•
liquidity/solvency risk
, associated with specific cash shortfalls, difficulties in access/ cost of credit and rating r
eduction risk:
•
regarding possible sporadic cash shortfalls
, there is a risk of possible default of the EDP Group in meeting all its
short-term liabilities in the committed time periods, or just being able to do so under unfavorable conditions. This risk
is mitigated through careful liquidity management, by means of: i) centralization (cash pooling) of all the Group's
liquidity at the holding company except for Brazil; ii) keeping adequate levels of liquidity (cash and firmly committed
credit lines) based on detailed forecasting of cash requirements (reviewed in 2016 to cover two years of refinancing);
iii) an appropriate strategy to diversify funding sources; and iv) the diversification of debt type and maturity profiles;
•
regarding access to and the cost of credit
, the EDP Group has achieved, despite the adverse economic context,
all funding necessary for the usual roll over of debt and to finance the Group's business. EDP's Group has
successfully continued with its strategic commitment to reduce leverage (expressed as Net Debt/EBITDA excluding
Regulatory Assets) over forthcoming years. Additionally, the Group has acted towards increasing
the average maturity of its debt and reducing its average cost;
•
regarding the risk of a ratings decline
, the EDP Group can be impacted in its access to and cost of financing
by adverse changes in its rating profile (assigned by international agencies). EDP proactively manages this risk
by maintaining a low risk profile and maintaining stable contractual standards, which assure that its liquidity
position does not depend on mechanisms as financial covenants or rating triggers;
•
social liabilities' risk
, associated with obligations relating to the capitalization of the Defined Benefit Pension Fund of
the Group for Portugal, Spain and Brazil (which has a risk associated with the market value of its assets), and additional
costs associated with early retirement as well as medical expenses. The liabilities for employee social benefits
are calculated annually by an Independent Actuary on the basis of IFRS-IAS assumptions (taking various factors
into account, including interest rate, demographic aspects, economic variables and the applicable requirements).
The Defined Benefit Pension Fund is regularly monitored by the Pension Fund Committee that meets at an established
frequency, in terms of the value of its assets and the variations in terms of its liabilities (e.g., actuarially related).
Operational risks
The operational risks encompass the risk factors other than those linked to the energy and financial business of the EDP
Group in the various countries and markets where it operates, associated with the planning, construction and operation
of physical assets, implementation of processes, human resources, information systems and litigation. The operational
risks can be broken down into five different types:
•
physical assets risks
, related to unforeseen occurrences in projects under development/construction, damage
to physical assets in operation and (technical and non-technical) operating losses, associated with the operation
of the assets (mainly in distribution):
•
regarding projects under development/ construction and assets in operation
, the EDP Group is exposed to incidents
derived from external causes (e.g., atmospheric phenomena, fire, damage to structures, burglary and theft,
environmental pollution) or internal causes (e.g., damage caused by defects of origin and/or faulty installation),
which can result in, among others, threats to the physical integrity of the Group's employees or third parties, repair or
replacement costs of equipment, asset unavailability and consequential loss of profit or compensation to third
parties. These risks are initially managed and mitigated by the various operational areas of the Group's Business
Units, which propose and implement in an articulated manner the best practices in terms of the different policies,
standards and operating procedures, inspection and regular preventive maintenance as well as crisis management
plans and business continuity for catastrophic events. To this regard, it should be noted the revision of crisis
management and business continuity policies in 2015, in order to ensure the continuous alignment with international
best practices. Secondly, a significant portion of the remaining risk is mitigated through a comprehensive range of
insurance policies (particularly in terms of property damage, civil liability, and the environment), insured in an
integrated manner through a special area for this field - the Insurable Risks' Unit. This approach ensures consistency
in the risk management policies, guarantees the dissemination of best practices and strengthens the negotiating
190
position of the Group. The existing insurance policies contribute to significantly mitigate the impact of large-scale
events (e.g., associated with extreme and comprehensive weather phenomena, non-availability of revenue generating
assets or significant compensation to third parties) as well as much less frequent incidents with catastrophic impact
(e.g., earthquakes);
•
regarding operating losses
, the EDP Group is, firstly, liable for regulatory penalties if it does not meet the objectives
set for distribution efficiency (technical losses) and also, on the other hand, for the loss of revenue associated with
increased consumption of non-invoiced energy (non-technical losses). The various energy distribution Business Units
(EDP Distribuição, EDP España, Espírito Santo and São Paulo) are responsible for this risk. Programs are continuously
developed to monitor and mitigate this risk (including the launch of comprehensive programs to combat fraud);
•
process execution risks
, associated with irregularities in the implementation of various processes (particularly, but not
limited to, commercial activities, supplier selection and management, billing and collection from customers, planning
and budgeting of activities). This risk is monitored by the various Business Units. Its mitigation regarding financial
reporting is controlled through the group-wide Financial Reporting Internal Control System (SCIRF), which systematically
assess both quantitatively and qualitatively the existence and adequacy of the design and documentation of the various
existing processes, as well as their internal control mechanisms, based on annual cycles;
•
human Resources Risks
, associated with incidents impacting on the physical integrity of employees, the impact
of unethical conduct and labor and trade union relations:
•
regarding incidents
impacting on the physical integrity of employees, the Group directs its activity around a zero
accidents culture, with awareness of employees concerning the risks involved in the various activities, as well as
continuous identification and implementation of best practices for the prevention and meticulous analysis of
incidents;
•
regarding potentially unethical conduct
by employees or other associated entities, the EDP Group regularly develops
a training course (for all employees) on ethical models of conduct and behavior in the presence of transgressions
in the ethical domain. This risk is monitored by the Office of the EDP Ethics Ombudsman, which is an independent
entity responsible for collecting, analyzing and assessing in the Ethics Committee all allegations of unethical conduct,
under strict conditions of confidentiality and protection of the respective sources. Moreover, the EDP Group Ethics
Committee is responsible for establishing the action lines to mitigate and penalize unethical conduct, whenever
necessary, according to the facts collected and reported by the Ombudsman. Risks associated with the non-
compliance of processes or corruption are also followed by the Compliance Department.
•
information systems risks
, associated with both the non-availability of information systems, as well as failure in the
integrity and security of their data, due to a growing sophistication and integration of the several informatic systems
and technologies. These risks are managed by dedicated areas within each the Business Unit (centralized in the Digital
Global Unit for Portugal and Spain). To mitigate IT risks, there were established in collaboration with Business Units
(end-users) critical levels and maximum unavailability timings allowed for each key application. Disaster recovery
redundant systems have also been sized and implemented to address the business specifications (particularly strict
for critical systems related with, for example, the implementation of financial transactions, communication and grid
operation and trading of energy). Business Units with operational information systems (i.e., EDP Produção and EDP
Distribuição) have specialized teams to guarantee the security and integrity of systems. Additionally, regarding cyber
security there has been developed a number of mitigation measures, namely i) the creation of a Security Operations
Center (SOC) dedicated to the continuous monitoring of the security of IT/ OT infrastructures, ii) the creation of a cyber
range to simulate and test the reaction of employees in case of cyber-attack, iii) insurance coverage of cyber risks,
and iv) the development of training and other awareness initiatives about the key principles of information security;
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ANNUAL REPORT 2020
•
legal risks
, associated with losses arising from non-compliance with existing tax, labor, administrative, or civil
legislation, or any other, that has an economic (penalties, compensation and agreements) and reputation impact.
EDP Group analyses, monitors and reports the aggregate exposure and material developments to all relevant bodies,
whether at the level of the Board of Directors or the General and Supervisory Board. In addition to overall exposure
and by country, all cases deemed to be of a material nature (contingency over EUR 2.5 million) are collected, analyzed
and reported individually. All ongoing processes are evaluated and classified individually by legal advisors as probable,
possible or remote, according to their probability of resulting in a negative impact on the EDP Group. EDP and its
subsidiaries' board of directors, based on the information provided by legal advisors and on the analysis of pending
law suits, recognizes provisions to cover the losses estimated as probable, related with litigations in progress.
This treatment includes not only ongoing disputes (litigation in courts and out-of-court), but also the main contingencies
in dispute and not materialized (and which may also translate into a negative impact, through the materialization
of a dispute).
54. Identification, analysis, evaluation, treatment and monitoring of risks
Given the size of EDP Group and its geographical diversity, it is important to define a common process for all Business Units
that recognizes and manages the heterogeneity of businesses and activities in which the Group operates. Accordingly,
risk management in the EDP Group can be divided into five major integrated and structured phases (identification, analysis,
evaluation, treatment and monitoring), complemented by a previous phase of establishment of context, and adequate levels
of communication between all stakeholders:
192
•
the
identification
of risks concerns the survey and update of the main risks associated with the Group's business, as
well as their representation in a structured repository - the taxonomy of risks. Each of the Business Unit and Corporate;
•
departments is primarily responsible for this exercise, within their scope. The Risk Management Department, in
coordination with risk-officers, is responsible for the validating and integrating the different exercises and for obtaining
and maintaining a global perspective (at the EDP Group level). The Group updated its top-down global risk map, based
on interviews and in conjunction with the Group's main risk-owners. More recently, it also developed a reference
taxonomy of risks, promoting a common language and facilitating the structure of different exercises for risk
identification across all Business Units;
•
the
analysis
of risks concerns the establishment of criteria to assess its nature and order of relative magnitude,
as well as the analysis of individual and aggregated exposition according to the defined criteria. Each Business Unit
and Corporate Department is primarily responsible for this exercise, within their scope of activity, being supported
by the Risk Management Department, in coordination with risk-officers, namely through the development of adequate
methodologies. This standardization and systematization of analysis and assessment criteria helps make risks of a
heterogeneous nature comparable, informs the various decision makers of the orders of magnitude of the various risks
and guides the prioritization of management and mitigation initiatives and the definition of clear risk management
policies at various levels (including the definition of limits). In addition to this perspective, risk-return analyses are
performed systematically (based on EBITDA@Risk, CF@Risk or other methods) associated with the main strategic
guidelines and decisions of the Group (e.g., regarding the Group's Strategic Plan, key investment decisions or other
topics deemed to be relevant);
•
the
evaluation
of risks is related to the comparison between the risk profile and the risk appetite
of the Group (stated both implicitly or explicitly), as well as on the definition of adequate strategies for treatment,
when necessary. This exercise is responsibility of the Executive Board of Directors and Business Units, supported by
the risk-officers, who act in coordination with the business operation (or risk-owners) and the Risk Management
Department (leaded by the Chief Risk-Officer). It is important to highlight the recent formalization of EDP Group's risk
appetite statement, with the external objective of structuring a holistic narrative around the strategic pillar of controlled
risk, as well as the internal objective of promoting a reflection on the risk-return trade-off of strategic options;
•
the
treatment
of risks concerns the adequate implementation of the risk strategies previously established, including
the definition of adequate mechanisms of control. This exercise is responsibility of each Business Unit and Corporate
Department, within the scope of their activity;
•
the
monitoring
of risks ensures the effectiveness of action on identified risks, both in terms of control and periodic
reporting of the Group's position as regards several risk factors, as well as the effective implementation of the policies,
standards and procedures established for risk management. This role is ensured by the Boards of Directors of the
various Group Business Units. The Risk Management Department and risk-officers are responsible for promoting and
enhancing risk control and management measures, disseminating best practices and supporting the disclosure of
concepts, methods, risk measures and key risk indicators (KRI). Additionally, the Risk Management Department,
supported by the network of risk-officers, develops a set of bi-weekly or quarterly reports sent to the Executive Board
of Directors and to the Board of Directors of each Business Unit.
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ANNUAL REPORT 2020
55. Main features of the risk management and internal control systems in place in the company
for the disclosure of financial information
EDP Group has incorporated, into its management, the Internal Control System of Financial Reporting (SCIRF), based on
criteria established by the regulatory framework of internal control issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO 2013), in relation to business processes and entity level controls, and the Control
Objectives for Information and Related Technologies (COBIT), in relation to the general controls of information technology.
According to the adopted methodology and approved responsibilities model, activities were carried out related to the
development, monitoring and maintaining of the internal control system, within the competence of those responsible that
participating in it at the corporate level, business unit level, and shared services unit companies.
The monitoring and maintenance work were carried out through: (i) corporate ii) business units and shared services
companies.
The activities at corporate level were as follows:
•
planning and monitoring cycle, maintenance and review of reference models, conceptual and methodological support to
business and shared services unit companies;
•
defining SCIRF 2020 scope based on the consolidated financial information, supported on materiality and risk criteria on
a "top down" (Compliance Department) and "bottom up" basis, from which the companies and Corporate Centre
Departments and respective processes considered relevant were identified. Autonomously, they were covered by the
scope, the most relevant companies in Portugal, Spain and Brazil Geographies and in aggregate, the units that make up
EDP Renewables, SA, EDP Renewables Europe, SL and EDP Renewables North America, LLC;
•
support for business and shared services unit companies in the documentation and review of new controls and
redesigned of the existing, resulting from the inclusion of new topics, by materiality and/or risk and legal, structural,
procedural and/or accounting changes;
•
identification of relevant computer applications that support SCIRF and analysis of "service organizations", for
monitoring the issuance of the ISAE 3402 International Standard on Assurance Engagements, reports corresponding
to an independent assessment of the control environment used by EDP's information technology service providers;
•
monitoring the cycle evaluation process, by the External Auditor, in terms of work planning, interaction with business
and shared services unit companies;
•
attendance and support provided to business and shared services unit companies, resolution of identified non-
compliances and reporting to those internal responsible and supervisors;
•
launch and monitoring of the self-certification process, through which those responsible for the internal control of the
business and shared services unit companies, declare their explicit recognition about the (i) sufficiency or insufficiency
of the controls documentation in terms of updating and adjustment, (ii) its execution and maintenance of evidence, (iii)
actions approval and implementation related to the resolution of non-compliance and (iv) compliance with the Code of
Ethics;
•
completion of the self-assessment process for SCIRF 2020 cycle, through which the Executive Board of Directors,
represented by the Chairman and the member of the Executive Board of Directors responsible for the financial areas,
emit a responsibility report on the safety and reliability degree of consolidated financial statements preparation
and presentation.
194
The activities at business units and shared services companies level of EDP Group were as follows:
•
analysis of the results of the scope model application to the financial statements on an individual basis and inclusion
of new topics and relevant applications, following the risk analysis bottom up;
•
application on “stand alone” scope level for the EDP España, EDP Renewables and EDP Brasil subgroups, with the
profile of materiality and risk appropriate to their size;
•
identification, review and appointment of SCIRF responsible, depending on the result of the scope model application
and on the review and/or update due to organizational, structural, legislative and operational changes in the business
and shared services unit companies;
•
documentation of new controls and redesign of the controls documented in previous cycles, subject to revision due to
changes at different levels of the business and shared services unit companies;
•
implementation of actions necessary for the resolution of non-compliances identified in the assessment tests made by
the External Auditor;
•
self-certification by which the SCIRF leaders assess, at all levels of the chain, the sufficiency and updating of
documentation and maintenance of evidence in the execution of control activities;
•
self-assessment by the President of the Board and by the board member in charge of the financial matters of EDP
España, EDP Renewables and EDP Brasil subgroups, through the issue of responsibility reports on the degree of safety
and reliability of the preparation and presentation of financial statements;
•
evaluation of the SCIRF 2020 was made by the Group's External Auditor, PriceWaterhouseCoopers, according to the
"ISAE 3000 - International Standard on Assurance Engagements" in all geographies covered by the scope model and
with the support of KPMG, in the specific case of EDP Brasil.
The External Auditor issued an independent report on the Group's Internal Control System of Financial Reporting related to
the financial statements of December 31, 2020, without reservations nor qualifications, presented in the annex "Reporting
Principles", concluding with a reasonable degree of assurance regarding the effectiveness of internal controls system on
financial reporting of EDP Group.
IV. Investor Relations
56. Composition, duties and information provided by these services and their contact information
The essential role of the Investor Relations Department is to act as the interlocutor between EDP's Executive Board of
Directors and investors and the financial markets in general. It is responsible for all the information provided by the EDP
Group, in terms of disclosure of privileged information and other market communications and publication of periodic
financial statements.
In carrying out its duties, the department is in constant contact with investors and financial analysts, providing
all the information that they request, while observing the applicable legal and regulatory provisions.
EDP's Investor Relations Department comprises six people and is coordinated by Miguel Viana. It is located
at the Company’s head office:
Avenida 24 de Julho, n.º 12, 4.º Piso – Poente
1249-300 Lisboa
Telefone: +351 21 001 2834
E-mail:
ir@edp.com
Site:
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ANNUAL REPORT 2020
The following chart shows the communication channels through which EDP provides its shareholders with information on
each type of documentation.
CHANNELS
IN PERSON
(1)
WWW.EDP.COM
E-
MAIL
IR PHONE NUMBER
(2)
BY MAIL
(3)
WWW.CMVM.PT
ELEMENTS REQUIRED BY LAW OR REGULATION
(4)
Notice of meeting
√
√
√
√
√
√
Executive Board of Directors' proposals
√
√
-
√
√
√
Amendment of the Articles of Association
√
√
-
√
√
√
Other proposals
√
√
-
√
√
-
Annual Report
√
√
√
-
-
√
Management and supervisory positions held
in other Group companies by company officers
√
√
-
√
-
√
ADDITIONAL ELEMENTS
Ballots for voting by proxy
√
√
√
√
√
-
Ballots for voting by mail
√
√
√
√
√
-
Ballots for voting by e-mail
√
√
√
√
√
-
Clarification of any issues
√
√
√
√
√
-
EDP Articles of Association and Regulations
√
√
√
√
√
√
1)
At EDP's headquarters
2)
IR phone number +351 21 001 2834
3)
Written notice from the Chairman of the Executive Board of Directors regarding Annual General Meetings
4)
Art. 289 of Companies Code and Regulation of CMVM 5/2008
57. Representative for market relations
During 2020, the representative for market relations was the Director Miguel Stilwell de Andrade.
Following the election of the new Board of Directors for the mandate 2021-2023, on the Extraordinary General Shareholders’
Meeting of January 19
th
, 2021, the new representative for CMVM and market relations is the Director Rui Manuel Rodrigues
Lopes Teixeira.
58. Percentage of and response time to queries received in the year or pending
from previous years
EDP's goal is for communication with the market to consist of objective, transparent information that is understandable
to all stakeholders. In order to achieve such intent, and bearing in mind the importance of keeping a trustworthy and
sustainable behavior, EDP has adopted a financial reporting policy based on transparent and consistent information
properly conveyed to investors and analysts.
On 12 March 2019, EDP presented its “Strategic Update” in London, where it was announced the business plan for the
period 2019-22. Additionally, during 2020, EDP participated in numerous events with analysts and investors to inform
the market of the Company's strategy and operational and financial performance. These included roadshows, presentations
to analysts and investors, meetings and conference calls.
Overall, approximately 100 market communications were made in 2020. The Investor Relations Department received several
requests for information during the year and the average response time to queries was less than 24 hours.
The Company's efforts have been rewarded at a number of events. In 2020, EDP was nominated for the “IR Magazine
Europe Awards 2020”, having been considered the third best company for Investor Relations in the Utilities sector.
196
V. Website
59. Website Address
EDP's website (
) provides comprehensive legal or corporate governance information, updates on the Group's
activity and complete financial and operational data in order to facilitate searches and access to information by
shareholders, financial analysts and others.
The information made available through this channel in Portuguese and English includes data on the Company, financial
statements and accounts, privileged information, the Articles of Association and Internal Regulation of corporate bodies,
the Group’s shareholder structure, preparatory documentation for General Meetings, historical performance of EDP share
prices, a calendar of Company events, the names of members of the corporate bodies and the representative for market
relations, contact information for the Investor Relations Department and other information of potential interest about the
Group. EDP's website also allows visitors to consult accounting documents for any financial year since 1999.
60. Location of information about the company, its status as a public limited company,
head office and other details mentioned in Article 171 of the Company Code
The information set out in Article 171 of the Companies Code is available at EDP's website on:
61. Location of the Articles of Association and regulations of bodies or committees
The Articles of Association and regulations of bodies and committees are available at EDP's website on:
62. Location of information on the names of members of the corporate bodies, market relations
representative, investor relations office or equivalent body, their duties and forms of access
The names of members of the corporate bodies, market relations representative, investor relations office or equivalent
body, their duties and forms of access are available at EDP's website on:
63. Location of accounting documents, which must be available for at least five years and the
six-monthly calendar of company events disclosed at the start of each half year, including
General Meetings, disclosure of annual, six-monthly and, if applicable, quarterly accounts
The accounting documents and calendar of company events are available at EDP's website on:
64. Location of notice of meeting for General Meetings and all their preparatory and subsequent
information
The notice of meeting for General Meetings and all their preparatory and subsequent information are available at EDP's
website on
65. Location of history of decisions made at the company's General Meetings, the share
capital represented and result of votes for the previous three 3 years
The history of decisions made at the Company's General Meetings, the share capital represented and result of votes are
available at EDP's website on:
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ANNUAL REPORT 2020
D. Remuneration
I. Power to set Remuneration
66. Power to set the remuneration of corporate bodies and company directors
As set forth in EDP's Articles of Association, the remuneration of the members of the governing bodies has been fixed by a
Remuneration Committee appointed by the General Shareholders’ Meeting, with the exception of the remuneration of the
members of the Executive Board of Directors, which have been fixed by a Remuneration Committee appointed by the
General and Supervisory Board.
These Committees have been submitting annually to the General Shareholders’ Meeting a declaration on the remuneration
policy of the members of the governing bodies, under the terms of paragraph 1 of article 2 of Law no. 28/2009, of 19 June.
With the changes introduced by Law no. 50/2020, of 25 August, these Committees will be responsible for submitting
a remuneration policy proposal for approval by the General Shareholders’ Meeting (article 26-B of the Portuguese
Securities Code).
The Remuneration Committee of the General Meeting takes into account, for the purposes of the proposed remuneration
policy for the members of the General and Supervisory Board, the General Meeting Board and the Statutory Auditor, namely,
its fixed nature, as well as the mandatory rules on the respective determination, in particular the provisions of Article 440(2)
of the Portuguese Companies Code, which sets out the criteria for determining the remuneration of the General and
Supervisory Board, , of Article 374-A of the Portuguese Companies Code and the provisions of Law no. 50/2020 , of 25
August, on the remuneration of the members of the Board of the General Meeting, and of Article 60 of Decree-Law no.
224/2008, of 20 November, on the remuneration of the Statutory Auditor.
II. Remuneration Committee
67. Membership of the Remuneration Committee, including names of the natural or legal persons
hired to assist and declaration on independence of each member and consultant
The membership of the Remuneration Committee of the General Meeting and of the Remuneration Committee appointed
by the General and Supervisory Board is set out in Item 29.
In 2020, the Remuneration Committee of the General and Supervisory Board hired an external consultant –
Mercer (Portugal), Lda. – to support it in the validation and certification of the calculation of the annual
and multi-annual variable remuneration of the Executive Board of Directors.
In January 2021, the General and Supervisory Board also hired Mercer (Portugal), Lda. To provide services concerning the
certification of the evaluation process of the abovementioned body, of its Specialized Committees and of the Executive Board
of Directors. The referred certifications may be consulted at the 2020 Annual Report of the General and Supervisory Board.
68. Knowledge and experience of remuneration policy of the members of the Remuneration
Committee
The Remuneration Committee of the General and Supervisory Board is composed of members of the General and
Supervisory Board with qualifications and experience in remuneration policy, according to Annex I of the current Report.
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III. Remuneration Structure
69. Remuneration policy of management and supervisory bodies
Executive Board of Directors
The Remuneration policy for the members of the managing body has been fixed by the Remuneration Committee appointed
by the General and Supervisory Board. This committee defined the remuneration of the directors, intending for it to
reflect the performance of each member of the Executive Board of Directors in each year of their term of office
(annual variable remuneration) and their performance during the whole period of the term by setting a variable component
that is consistent with the maximisation of EDP's long-term performance (variable multi-annual remuneration).
The remuneration policy statement, as approved by the shareholders, lays down that the total variable component can reach
twice the fixed component during a term of office, thereby placing a maximum limit of two-thirds of the remuneration
depending on fulfilment of strict Company performance goals. The variable remuneration depends on the management's
compliance with a performance level of 90% of the business plan, and the maximum values permitted by the Company's
remuneration policy will only be earned if a level of compliance of 110% is reached.
Variable remuneration is divided into annual, which may only reach 80% of fixed remuneration, and multi-annual, which may
reach 120% of the fixed remuneration. The multi-annual remuneration, although calculated annually, only becomes effective
if, at the end of the term, on average, at least 90% of set goals have been achieved, assessed by the performance of the
Company, by its comparison with strategic benchmarks and by the individual contribution of each member of the Executive
Board of Directors for that result.
If the remuneration goals are fully met in a term of office, 60% of the directors' variable remuneration is deferred for no less
than three years.
If we compare this percentage with that set out for credit institutions and financial companies, pursuant to Directive
2010/76/EU of the European Parliament and of the Council of 24 November, as it is a paradigm that was widely
analyzed and discussed in Europe, we find that EDP's policy on variable remuneration is equivalent to the strictest used
by these entities.
In accordance with the remuneration policy of the members of the Executive Board of Directors proposed by the
Remuneration Committee of the General and Supervisory Board, the variable multi-annual remuneration may be a maximum
of 120% of gross annual remuneration, and it will be paid three years after the financial year in question.
Payment of the multiannual variable remuneration is conditional on the non-realization of intentional unlawful acts, known
after the completion of the evaluation and that jeopardize the sustainability of the performance of the Company, and it is
made after it is determined and approved by the Remuneration Committee of the General and Supervisory Board.
The remuneration policy statement approved by the General Meeting on 16 April 2020 sets out the following:
•
fixed annual remuneration
– EUR 800,000 gross for the CEO, EUR 560,000 gross for the administrator responsible for
finance matters and for the Chief Executive Officer of EDP Renováveis Group and EUR 480,000 for each of the remaining
members of the Executive Board of Directors. The directors' retirement savings plans are maintained during their term
of office, at a net amount of 10% of their fixed annual remuneration. The characteristics of these retirement savings
plans are set out in legislation currently in force, applicable to these financial products;
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ANNUAL REPORT 2020
•
annual variable remuneration
– for each member of the Executive Board of Directors, its value is limited to 80%
of their gross annual fixed remuneration. The amount is determined on the basis of the following indicators for each
year in office: (i) performance of the EDP Group's Total Shareholder Return against Eurostoxx Utilities and PSI-20,
(ii) earnings per share, (iii) net debt to EBITDA ratio, (iv) operational cash flow excluding regulatory receivables,
(v) residual income and (vi) EBITDA (annual growth rate) vs. peers. The weighted average of these indicators is given
an overall weight of 80% for all members of the Executive Board of Directors, when determining their annual variable
remuneration. The other 20% are based on a qualitative assessment by the Remuneration Committee of the General
and Supervisory Board;
•
multi-annual variable remuneration
– also for each member of the Executive Board of Directors, this component may
be between 0% and 120% of their fixed annual remuneration based on an annual accumulated assessment of the
directors' performance in achieving economic sustainability for the EDP Group. The award of this multi-annual
remuneration, although calculated on an annual basis, only takes effect if, at the end of the term of office, at least 90%
of the strategic objectives have been achieved. These will be assessed on the basis of performance and comparison
with defined strategic benchmarks, as well as the individual contribution of each member of the Executive Board of
Directors to such performance. This payment component is fixed on the basis of the following factors verified during
the term: (i) performance of total return for the Group's shareholders against Eurostoxx Utilities and PSI-20, (ii)
performance of earnings per share, (iii) performance of Net Debt to EBITDA ration in the term of office, (iv) performance
of the sustainability index applied to the EDP Group, and (v) performance of operational cash flow excluding regulatory
receivables. The weighted average of these indicators is given an overall weight of 65% for all members of the Executive
Board of Directors, when determining their multi-annual variable remuneration. 35% of the remuneration that is
determined by the qualitative individual assessment of the Executive Board of Directors by the Remuneration
Committee of the General and Supervisory Board is reserved. Payment of the multiannual variable remuneration is
deferred in time, for a period not less than three years, getting the appropriate payment conditional on the non-
realization of intentional unlawful acts, known after the completion of the evaluation and that jeopardize the
sustainability of the performance of the Company, being paid after the clearance and Remuneration Committee
of the General and Supervisory Board approval.
General and Supervisory Board
Pursuant to the provision of the Article 440 of the Companies’ Code, the remuneration of the members of the General
and Supervisory Board is fixed, in view of their duties.
This remuneration policy has been annually reviewed, and with such periodicity is subject to appreciation of the
Shareholders’ General Meeting.
The remuneration of the Chairman of the General and Supervisory Board was fixed on the basis of the full-time performance
of his duties, unlike the rest of the members of such body.
This Committee has defined the remuneration policy for the members of the General and Supervisory Board, having as a
guiding principle that such should be simple, transparent, moderate, adapted to the work conducted and the economic
situation of the Company but also competitive and equitable in order to guarantee the purpose of creating value for
shareholders and remaining stakeholders.
Based on these principles, the Committee has defined the following remuneration policy guidelines for 2020:
•
a differentiation between the remuneration of the members of the General and Supervisory Board and those
of the members of the Executive Board of Directors shall be maintained, and there will be no variable component
or any other remunerative supplement for the General and Supervisory Board;
200
•
it shall be taken into account the performance merit and the complexity of the functions performed by the members
of each body, so that the cohesion, stability and development of the Company is not endangered;
•
as to the General and Supervisory Board Chairman, it shall be particularly considered that the Chairman office’s
functions comprehend a strong component of institutional representation. In addition, under Article 23 (3) of the
Articles of Association, the General and Supervisory Board Chairman, being independent, should also preside the
Financial Matters Committee/Audit Committee;
•
in what regards the Vice Chairman, it shall be considered the duties and works performed by him in other committees;
•
it is also important to distinguish other specific positions in the General and Supervisory Board, namely the participation
of the members of the General and Supervisory Board in other committees, as well as the functions in those
committees;
•
finally, it should be considered that, historically, the remuneration of the Chairman of the General Shareholders’ Meeting
Board is similar to the remuneration attributed to a Committee Chairman. Therefore, the remuneration of the Chairman
of the General Shareholders’ Meeting Board shall be aligned accordingly.
The shareholders approved the statement of remuneration policy for the 2020 financial term on the Shareholders’ General
Meeting of 16 April 2020.
70. How remuneration is structured to allow alignment of the interests of the members of the
managing body with the company's long-term interests and how it is based on assessment of
performance and discourages excessive risk-taking
As set out in the remuneration policy described in Item 69, remuneration is structured to allow alignment of the interests
of the members of the Executive Board of Directors with the Company's long-term interests.
The time period considered for the payment of the variable component of the remuneration (gap of three years regarding
the exercise at stake), the subjection of this payment to the non-performance of unlawful willful actions known after the
assessment and that jeopardize the sustainability of the Company’s performance, to which is added i) the utilization of
qualitative criteria looking forward for a strategic perspective and of medium term in the development of the Company,
ii) the existence of a maximum limit for the variable remuneration and iii) the relative weight of this component in the total
value of the remuneration, represent decisive elements to promote a performance of the Company’s management focused
not only in short term goals, but also that integrates in its performance the Company’s and the shareholders’ interests
in a medium and long term perspective.
The members of the managing body have not concluded any agreements with the Company or third parties that have
the effect of mitigating the risk of variability of their remuneration fixed by the Remuneration Committee.
71. Reference to a variable remuneration component and any impact of performance evaluation
on this component
As described above in Item 69, remuneration policy in force involves three components: i) fixed remuneration,
ii) annual variable remuneration and iii) multi-annual variable remuneration.
The indicators used to assess the performance of the Executive Board of Directors in order to determine annual
and multi-annual variable remuneration are as follows:
Annual performance indicators
The annual performance indicators aim to evaluate the Executive Board of Directors in a short-term perspective. For such,
stock exchange indexes are considered, as well as financial performance indicators, compared against the annual budget
proposed by the Executive Board of Directors and approved by the General and Supervisory Board, having each of the
budgets the business plan as a starting point. This type of performance evaluation allows the measurement of the level
of fulfilment of short-term objectives assumed by the Executive Board of Directors towards the shareholders.
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ANNUAL REPORT 2020
Multi-annual performance indicators
The multi-annual performance indicators aim to evaluate the Executive Board of Directors in a long-term perspective. To
that effect, stock exchange and financial performance indicators are considered, and compared against the most recent
Business Plan proposed by the Executive Board of Directors and approved by the General and Supervisory Board. This type
of performance evaluation allows the measurement of the level of fulfilment of long-term objectives assumed by the
Executive Board of Directors towards the shareholders. The internal Business Plan of EDP Group is the document sustaining
the mid and long-term financial objectives of EDP, presented to the capital markets. The Business Plan for the 2019-2022
period has obtained a favorable prior opinion by the General and Supervisory Board on 11 March 2019 and was the basis for
the Strategic Update presented to the market, regarding the main financial objectives for the Company until 2022.
For further information, please see Chapter 5 – Remuneration Report.
72. Deferral of payment of variable component of remuneration and its length
The multi-annual variable remuneration is calculated every year and only becomes effective at the end of the term of office
if at least 90% of the strategic goals have been achieved, as assessed on the basis of Company performance and its
comparison with the strategic benchmarks and the individual contribution of each member of the Executive Board of Directors.
All multi-annual eventual variable remuneration is paid three years after the financial year in question.
73. Criteria on allocation of variable remuneration in shares and executive directors' maintenance
of these shares, any agreements concluded concerning these shares, such as hedging or risk
transfer contracts, their limit and their association with total annual remuneration
The members of the Executive Board of Directors do not own Company shares under variable remuneration mechanisms.
74. Criteria on allocation of variable remuneration in options, period of deferral and price
of exercise
EDP has no variable remuneration option schemes.
75. Main parameters and basis of any annual bonus system and any non-monetary benefits
Company directors do not receive any significant remuneration in the form of non-monetary benefits.
76. Main characteristics of supplementary pension or early retirement schemes for directors
and date of approval individually at a General Meeting
The remuneration fixed by the Remuneration Committee of the General and Supervisory Board includes a retirement
savings plan-type standard financial product for the members of the Executive Board of Directors, through the application
of a net amount correspondent to 10% (ten percent) of their fixed annual remuneration. It was granted in accordance
with the Remuneration Policy Statement approved by resolution of the General Shareholders’ Meeting dated 16 April 2020.
This regime does not entail any cost to EDP in the future, as it is merely a subscription to a financial product while the
members of the managing body hold their positions and is not covered by Article 402 (1) of the Company Code.
IV. Disclosure of Remuneration
77. Annual aggregate and individual remuneration paid to the members of the company's
managing body by the company, including fixed and variable remuneration and its different
components
The total gross amount paid by EDP to the members of the Executive Board of Directors in 2020 was 12,837,782 Euros.
202
The chart below shows the gross amounts of remuneration paid individually to the members of the Executive Board
of Directors in office during the 2020 financial year:
EUROS
GROSS
REMUNERATION
PAID
BY
EDP
FIXED
VARIABLE
ANNUAL
(2019)
António Luís Guerra Nunes Mexia
970,213
554,020
João Manuel Manso Neto
654,804
393,862
António Fernando Melo Martins Costa
555,910
328,380
João Manuel Veríssimo Marques da Cruz
296,155
(*)
210,234
Miguel Stilwell de Andrade
660,379
391,174
Miguel Nuno Simões Nunes Ferreira Setas
281,718
(*)
221,849
Rui Manuel Rodrigues Lopes Teixeira
565,443
330,684
Maria Teresa Isabel Pereira
582,128
330,684
Vera de Morais Pinto Pereira Carneiro
582,128
332,988
(*) To these amounts accrues those paid by Group companies (please see item 78)
The remuneration of the Chairman and directors of the Executive Board of Directors include the amounts associated
with the retirement savings plan.
The amounts of the variable remuneration were fixed on the basis of the tax treatment applicable in the director's country
of tax residence. The amounts paid by EDP subsidiaries refer solely to their period of residence abroad.
As results of the policy in force, the compensation is structured to allow the alignment of the Executive Board of Directors
members' interests with the long-term interests of the Company. In this way, taking into account the objective calculations
associated with the approved remuneration model, the multi-annual variable component imputable to the third year
of the 2015-2017 mandate was paid:
EUROS
GROSS
REMUNERATION
PAID
BY
EDP
MULTI-ANNUAL
VARIABLE
(2017)
*
António Luís Guerra Nunes Mexia
848,143
Nuno Maria Pestana de Almeida Alves
621,924
João Manuel Manso Neto
607,812
António Fernando Melo Martins Costa
429,760
João Manuel Veríssimo Marques da Cruz
309,471
Miguel Stilwell de Andrade
514,934
Miguel Nuno Simões Nunes Ferreira Setas
340,711
Rui Manuel Rodrigues Lopes Teixeira
502,838
*
Multi-annual variable remuneration regarding the performance evaluation for the 2015-2017 period, year of 2017
Amounts paid for any reason by other subsidiary or Group companies or companies under
common control
The chart below shows the gross amounts of remuneration paid by other subsidiary or Group companies or companies t
o a member of the Executive Board of Directors under common control.
EUROS
GROSS
REMUNERATION
PAID
BY
EDP
FIXED
VARIABLE
(2019)
COMPANIES
IN
A
CONTROL
RELATIONSHIP
João Manuel Veríssimo Marques da Cruz
240.000
0
EDP - Ásia Soluções Energéticas, Lda.
Miguel Nuno Simões Nunes Ferreira Setas
(*)
179.435
0
EDP - Energias do Brasil, S.A.
(*)
Annual fixed remuneration and the variable remuneration – annual and multi-annual - were adjusted, aiming to the correction of deviations resulting
from exchange rates and tax adjustments, in the respective amounts of 12,798.68 EUR e 15,086.00 EUR, so that the Director effectively receives the
amount defined by the Remuneration Committee of the General and Supervisory Board.
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ANNUAL REPORT 2020
79. Remuneration in the form of profit-sharing and/or payment of bonuses and reasons for these
bonuses or profit sharing
EDP has no schemes in place for payment of remuneration in the form of profit-sharing and/or payment of bonuses.
80. Compensation paid or owed to former executive directors for termination in the financial year
For information regarding Item 80, please see Chapter 5 – Remuneration Report.
81. Annual aggregate and individual remuneration paid to the members of the company's
supervisory bodies
1. General and Supervisory Board
The total gross amount paid by EDP to the members of the General and Supervisory Board in 2020 was 1,863,000 Euros.
The chart below shows the remuneration paid during the 2020 financial year to the members of the General and Supervisory
Board:
EUROS
FIXED
Luís Filipe Marques Amado
515,000
China Three Gorges (Portugal), Sociedade Unipessoal, Lda.
(*)
57.000
China Three Gorges Corporation
95,000
China Three Gorges International Corp.
57,000
China Three Gorges (Europe), S.A.
67,000
China Three Gorges Brasil Energia Ltda
57,000
Banco Comercial Português, S.A.
57,000
DRAURSA, S. A.
57,000
SONATRACH
57,000
Senfora BV
57,000
Fernando Maria Masaveu Herrero
67,000
Maria Celeste Ferreira Lopes Cardona
80,000
Ilídio Costa Leite Pinho
57,000
Jorge Avelino Braga Macedo
67,000
Vasco Joaquim Rocha Vieira
67,000
Augusto Carlos Serra Ventura Mateus
67,000
João Carvalho das Neves
115,000
María del Carmen Fernández Rozado
70,000
Laurie Lee Fitch
57,000
Clementina Maria Dâmaso de Jesus Silva Barroso
70.000
Luís Maria Viana Palha da Silva
70,000
(*)
Remuneration paid to the representative Eduardo de Almeida Catroga
2. Other Company Bodies
Environment and Sustainability Board
The members of the Environment and Sustainability Board are paid in attendance vouchers of EUR 1,750 per meeting.
In 2020, the members of the Environment and Sustainability Board did not receive any remuneration.
204
Remuneration Committee of the General Meeting
The members of the Remuneration Committee of the General Meeting received the following remuneration in 2020:
EUROS
FIXED
Luís Miguel Nogueira Freire Cortes Martins
15,000
José Gonçalo Ferreira Maury
10,000
Jaime Amaral Anahory
10,000
82. Remuneration of the Chairman of the General Meeting
The Chairman and Secretary of the General Meeting do not earn any remuneration in that capacity, given that they
are remunerated as a member of the General and Supervisory Board and Company Secretary, respectively.
In 2020, the Vice-Chairman of the General Meeting received the amount of EUR 3,000.
V. Agreements Affecting Remuneration
83. Contractual limitations for compensation payable to directors for dismissal without due cause
and their association with the variable component of remuneration.
In addition to the two situations reported in paragraph 80 above, EDP has no existing contracts providing for payments in
the event of dismissal or termination by mutual agreement of directors.
84. Description and amounts of agreements between the company and members of the
managing body and directors, as set out in Article 248-B (3) of the Securities Code, providing
for compensation in the event of dismissal without due cause or termination of employment
following a change of company control
Considering Article 248-B (3) of the Securities Code, EDP has no directors other than the members of the General and
Supervisory Board and of the Executive Board of Directors. In addition to these members, there are no managers who have
regular access to privileged information and participate in decisions on the Company's management and business strategy.
Furthermore, we reiterate that, in addition to the two situations reported in paragraph 80 above, EDP has no existing
agreements providing for payments in the event of dismissal or termination by mutual agreement of directors.
VI. Stock Purchase Option Plans or Stock Options
85. Plan and its beneficiaries
There are no stock options for Company employees.
86. Description of the plan (conditions for award, clauses on non-saleability of shares, shares
price criteria, price of options in financial year, period in which options can be exercised,
characteristics of shares or options, incentives for purchase of shares or exercise of options)
There are no stock options for Company employees.
87. Stock options of company employees
There are no stock options for Company employees.
88. Control mechanisms set out in any employee share scheme so that they do not exercise
their voting rights directly
The Company has no such control mechanisms.
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ANNUAL REPORT 2020
E. Transactions with Related Parties
I. Mechanisms and Procedures of Control
89. Company mechanisms for monitoring transactions with related parties
The General and Supervisory Board approved in 2009 objective, transparent rules on the identification, prevention
and resolution of relevant corporative conflicts of interest called Framework on Handling of Conflicts of Interest.
Following a resolution made by the General and Supervisory Board, on 17 May 2010 the Executive Board of Directors approved
the rules on identification, in-house reporting and procedure in the event of conflicts of interest applicable to all EDP Group
employees who play a decisive role in transactions with related parties. As part of its improvement of governance practices,
on 29 July 2010, the General and Supervisory Board approved EDP's Regulation on Conflict of Interest and Transactions
between Related Parties, which was reviewed in 2015 and a new version was approved on 29 October 2015. However,
considering the changes introduced by Law No. 50/2020, of 25 August, as well as the constant adoption of best practices
by the Company, between late 2020 and early 2021, a review of the internal rules that regulate conflicts of interest and
business between related parties is being conducted. The currently in force version is available for consultation at EDP’s
website (
).
The Corporate Governance and Sustainability Committee is responsible for supervising enforcement of the aforementioned
rules and reports on its work to the General and Supervisory Board.
90. Transactions that underwent controls in the year
Attentive to the current reporting obligations, the Executive Board of Directors, during 2020, submitted to the General
and Supervisory Board the information concerning the transactions between related parties. Such information concerned
the transactions listed below:
•
EDP Group, through EDP España, provided electricity and gas supply services as well as the installation of solar panels
to the company Cementos Tutela Veguín in the amount of approximately 29.5 million Euros (Cementos Tutela Veguín
is a subsidiary of the Group Masaveu, which, in turn, holds 55.9% of the company Oppidum Capital, SL);
•
EDP Group provided payment management services to Liberbank in the amount of approximately 338,462.44 Euros.
The EDP Group also entered into a lease, in the total amount of 16,852.08 Euros, for a property owned by Liberbank,
located in Oviedo, Spain, during the first three quarters of 2020, during which the headquarters of a of the EDP Group
companies was undergoing renovation works (Liberbank holds 44.1% of Oppidum Capital, SL). During the first quarter
of 2020, within the scope of an issue of fixed to reset rate subordinated debt instruments, Liberbank provided the EDP
Group with Co-lead Manager services, having earned 39,375.00 Euros for these services;
•
EDP Group provided electricity and natural gas supply services to the Millennium BCP Group in the amount of
approximately 7.5 million Euros. Banco Comercial Português provided EDP Group with underwriter services in the
share capital increase of EDP carried out during the third quarter of 2020, having joined a union with five other entities
and earned from these services 3,978,518.62 Euros. During the first quarter of 2020, within the scope of an issue of
fixed to reset rate subordinated debt instruments, Banco Comercial Português provided EDP Group with Joint Lead
Manager and Joint Bookrunner services, jointly with eight other financial entities, having earned by such services
433,125 Euros. In March 2020, SU Eletricidade, SA, the last resort trading company of the Portuguese electricity
system, wholly owned by EDP, agreed to the sale of a tariff deficit for 2020, with Banco Comercial Português, S.A.
acquiring the respective credits for approximately 201, 2 million Euros and received a commission of approximately
400,000 Euros. In July 2020, SU Eletricidade, S.A. agreed to sell a tariff deficit related to 2020, with Banco Comercial
Português, S.A. acquiring the respective credits for approximately 51.7 million Euros and receiving a commission of
approximately 100,000 Euros. In December 2020, SU Eletricidade, S.A. agreed to the sale of a tariff deficit related to
2021, with Banco Comercial Português, S.A. acquiring the respective credits for approximately 49.4 million Euros and
receiving a commission of approximately 98.000,00 Euros;
206
•
EDP Group acquired from Sonatrach natural gas, under long-term supply contracts, and for the combined cycle plant
Soto 4, established as a result of the partnership agreement between EDP and Sonatrach of October 2007, having
been approximately 107.3 million Euros were paid.
The General and Supervisory Board noted that, with basis on the cases analyzed and information provided by the Executive
Board of Directors for 2020, there was no evidence that the potential conflict of interests in EDP operations were resolved
contrarily to the company’s interests.
At the same time, it is important to highlight Article 17(2) of EDP Articles of Association, that defines a number of matters
subject to prior opinion from the General and Supervisory Board. This corporate body has competences to set the
parameters for measuring the economic or strategic value of the operations that must be submitted for its opinion,
and these were approved by the referred Board on the 6 April 2018.
In this context, during the financial year of 2020, 18 transactions were submitted to prior opinion of the General and
Supervisory Board, with an average amount of 936 million Euros, and the transaction with a maximum amount was of
2,700 million Euros. Regarding the waiver of prior opinion, 18 transactions were submitted to the General and Supervisory
Board, with an average amount of 304 million Euros, and the transaction with maximum amount was of 825 million Euros.
With regard to the transactions subject to a favorable prior opinion, or to the respective waiver, of the General and
Supervisory Board, the following ones had underlying a related party:
•
in March 2020, SU Eletricidade, SA, the last resort trading company of the Portuguese electricity system, wholly owned
by EDP, agreed to the sale of a tariff deficit for 2020, with Banco Comercial Português, S.A. acquiring the respective
credits for approximately 201.2 million Euros and received a commission of approximately 400,000.00 Euros;
•
during the first quarter of 2020, within the scope of an issue of fixed to reset rate subordinated debt instruments,
Banco Comercial Português provided EDP Group with Joint Lead Manager and Joint Bookrunner services, jointly with
eight other financial entities, having earned by such services 433,125 Euros;
•
in July 2020, SU Eletricidade, S.A. agreed to sell a tariff deficit related to 2020, with Banco Comercial Português, S.A.
acquiring the respective credits for approximately 51.7 million Euros and receiving a commission of approximately
100,000 Euros;
•
Banco Comercial Português provided EDP Group with underwriter services in the share capital increase of EDP carried
out during the third quarter of 2020, having joined a union with five other entities and earned from these services
3,978,518.62 Euros; and,
•
in December 2020, SU Eletricidade, S.A. agreed to the sale of a tariff deficit related to 2021, with Banco Comercial
Português, S.A. acquiring the respective credits for approximately 49.4 million Euros and receiving a commission of
approximately 98,000.00 Euros;
Also under this context, during the 2020 financial year, two operations were submitted to the prior opinion of the United
States of America Business Affairs Monitoring Committee, with an average amount of 27 million dollars, and the transaction
with maximum amount was of 57 million dollars. Regarding the waiver of prior opinion, 8 transactions were submitted to the
United States of America Business Affairs Monitoring Committee, with an average amount of 226 million dollars, and the
transaction with maximum amount was of 418 million dollars. Regarding the transactions subject to a favorable prior
opinion, or to the respective waiver, of the United States of America Business Affairs Monitoring Committee, none of the
transactions had underlying a related party. With regard to the waiver of prior opinion, none of the transactions had
underlying a related party. Regarding the waiver of prior opinion, none of the transactions had underlying a related party.
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91. Procedures and criteria applicable to the supervisory body's prior assessment of transactions
between the company and holders of qualifying shareholdings or entities related to them in
any way
The current rules on the issue and waiving of a prior opinion from the General and Supervisory Board were approved on 6
April 2018, along with the procedures for communication and clarifications between it and the Executive Board of Directors.
Pursuant to EDP's Articles of Association, the General and Supervisory Board fixes the parameters for measuring the
economic or strategic value of operations submitted to it for an opinion and sets up speedy mechanisms for issuing an
opinion in urgent cases or when the nature of the subject so warrants and the situations in which this opinion can be waived
(Article 21 (7)). The mechanism for waiving a prior opinion from the General and Supervisory Board may only be used in
cases of exceptional urgency or if the nature of the subject so warrants, as set out in EDP's Articles of Association and the
General and Supervisory Board Internal Regulation in effect in 2011 (current Article 15 (5)).
With reference to this prior opinion mechanism, the General and Supervisory Board has set out strict rules on transactions
between related parties in order to prevent conflicts of interest.
For legal transactions or situations between related parties –reviewed in 2021 -
that are likely to cause a conflict of interest
between those involved that will have an impact on the interests of EDP, the Executive Board has to request the preliminary
opinion of the General and Supervisory Board or its waiver, and also has to provide the following information:
a)
within this scope, it should be highlighted what is defined in the Regulation on Conflict of Interest and Transactions
between Related Parties in what concerns the procedures and criteria applicable to the supervision for previous evaluation
of business between the Company and qualified shareholders or any entities with whom the latter are related:
•
a brief description of the operations and obligations assumed by the parties;
•
a statement the procedures adopted for selecting the counterparty, particularly if the operation was based
on a tender/consultation or limited tendering procedure;
•
in the case of a limited tendering procedure, the reasons for such decision and the measures adopted to mitigate
any risks from potential conflicts of interests;
•
in the case of a tender/consultation, statement of the type of contact established with potential stakeholders
and identify such;
•
in the event competitive offers existed, information on the terms of the different proposals and the reason
for the choice made;
•
identification of the parameters to measure the operation performed under "normal market conditions
for similar transactions";
•
measures taken to prevent or resolve potential conflicts of interests;
•
evidence, if applicable, of the multiannual nature of the operation, in which case the starting date of the selected
tender/contract should be reported together with the date on which the supplies and/or services provided shall be
provided or carried out.
208
b)
with respect to legal business or cases that exist between related parties that are likely to give rise to a conflict of
interests between those involved, which could impact the interests of EDP, these should be subject to a preliminary
opinion from the General and Supervisory Board:
•
if the Corporate Governance and Sustainability Committee can meet before the General and Supervisory Board
meeting, an opinion from this Committee should be requested, which should be presented to the General and
Supervisory Board for decision making purpose;
•
if it is not possible for the Corporate Governance and Sustainability Committee to meet, the assessment of the
potential conflict of interests must be made directly by the General and Supervisory Board within its decision-making
authority.
c)
with respect to legal business or cases that exist between related parties that are likely to give rise to a conflict
of interests between those involved, which could impact the interests of EDP, which are subject to a request for waiver
of the preliminary opinion from the General and Supervisory Board, at least three Members of the Committee should
be consulted, and the majority have to be independent.
d)
when considering the request by the Executive Board, in the event of a request to waiver the preliminary report,
the Corporate Governance and Sustainability Committee, the General and Supervisory Board or the Chairman
of this Board, may recommend to the Executive Board that appropriate measures must be taken to address
the potential conflict of interest.
II. Business Information
92. Location of accounting documents providing information on transactions with related parties,
pursuant to IAS 24, or reproduction of the information
Information on transactions with related parties, pursuant to IAS 24, is set out in Note 43 of the consolidated and individual
financial statements.
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ANNUAL REPORT 2020
PART II
Assessment of Corporate Governance
1. Corporate Governance Code in effect
EDP – Energias de Portugal, S.A. (EDP) is a listed company whose securities are admitted to trading on the NYSE Euronext
Lisbon stock market.
Following the entry into force of the Protocol between the CMVM and the Portuguese Institute for Corporate Governance
(
Instituto Português de Corporate Governance
- IPCG), on 13 October 2017, the Corporate Governance Code issued by
CMVM was revoked, and changes were made to the Corporate Governance Code issued by the IPCG, available at
The choice of EDP to adopt the Corporate Governance Code issued by the IPCG, from the moment it entered into force,
and under the current version, reflects the concern of ensuring at all times the implementation of best corporate governance
practices.
According to the CMVM Circular, dated 11 January 2019, this Report is structured in accordance with Article 1(4) of CMVM
Regulation 4/2013, and therefore abides by the model in its Annex I, not including the sections not applicable to EDP’s
governance model.
2. Assessment of compliance with the Corporate Governance Code in effect
The following table sets out IPCG’s corporate governance principles and recommendations as included in the Corporate
Governance Code, along with the identification, for each case, of EDP’s compliance or non-compliance with said principles
or recommendations or, as the case may be, that the provisions to not apply to the Company. Complimentary information
has been included where the description of the Company’s shareholder structure and governance model does not exhaust
the scope of the underlying explanation of the respective principles or recommendations.
210
Compliance statement
PRINCIPLES AND
RECOMMENDATIONS
ADOPTED
NOT ADOPTED
NOT APPLICABLE
COMMENTS
REPORT
DESCRIPTION
CHAPTER I · GENERAL PROVISIONS
General Principle: Corporate Governance should promote and enhance the performance of companies, as well as of the
capital markets, and strengthen the trust of investors, employees and the general public in the quality and transparency
of management and supervision, as well as in the sustained development of the companies.
I.1. Company’s relationship with investors and disclosure
Principle:
Companies,
in particular its directors,
should treat shareholders
and other investors
equitably, namely by
ensuring mechanisms and
procedures are in place for
the suitable management
and disclosure of
information
Regarding the disclosure of information, it is
important to refer the existence of, on one hand,
information flow mechanisms and, on the other
hand, of corporate bodies and specialized
committees purposefully favoring information
sharing. On that regard, EDP relies on an
information sharing platform between the
Executive Board of Directors and the General
and Supervisory Board as well as between the
Specialized Committees, accessible to all
members of such bodies and committees.
Such information tool allows all members to have
knowledge of the most important documents,
namely minutes and supporting documents to
resolutions. The Executive Board of Directors
provides to all other corporate body members all
the requested information in a timely and
appropriate manner. Furthermore, the Investor
Relations Department aims to ensure the
communication with analysts and investors of the
Group companies in order to guarantee the
sustainability of the Company’s image and EDP’s
notoriety, as well as to answer all information
requests of regulatory entities and financial
supervisory authorities. Moreover, the
Stakeholders and Institutional Relations
Department ensures the institutional
communication of the Company through an
integrated and consistent narrative before the
Group’s stakeholders, in line with the adopted
vision and strategy in order to maximize the
communication potential of the Group towards its
stakeholders and to contribute to a fluid and
systematized information flow about the Group
and its activities. In addition to these Departments,
EDP also has an Information Disclosure
Committee whose two main functions are: (i) to
analyze and assess the information provided or to
be provided periodically by EDP when preparing its
reports or other releases to the market, and (ii) to
assess the control and disclosure information
mechanisms of EDP. Finally, EDP has established a
Corporate Centre that assumes a supporting role
to the Executive Board of Directors in the definition
and control of the execution of the defined
strategies, policies and objectives. The Corporate
Centre is organized by Corporate Departments and
Business Units, allowing a better optimization and
efficiency of the organizational structure.
Item 15 |
Item 21 |
Item 22 |
Item 27 |
Item 29 |
Item 52 |
Items 55 to 65
Recommendation I.1.1
. The
Company should establish
mechanisms to ensure, in a
suitable and rigorous form,
the timely disclosure of
information to its governing
bodies, shareholders,
investors and other
stakeholders, financial
analysts, and to the markets
in general.
ADOPTED
Item 15 |
Item 21 |
Item 22|
Item 27 |
Item 29 |
Item 52 |
Items 55 to 65
I.2. Diversity in the composition and functioning of the company’s governing bodies
Principle I.2.A
Companies ensure diversity
in the composition of its
governing bodies, and the
The respect for diversity within the governing bodies
and in the appointment procedures constitutes one
of the structuring elements of EDP’s corporate
purpose. The Internal Regulations of the corporate
Items 11 | I
tems 15 to 17
and 30 to 33 |
Annex I
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PRINCIPLES AND
RECOMMENDATIONS
ADOPTED
NOT ADOPTED
NOT APPLICABLE
COMMENTS
REPORT
DESCRIPTION
adoption of requirements
based on individual merit,
in the appointment
procedures that are
exclusively within the
powers of the shareholders.
bodies, corporate entities and Specialized
Committees which form part of EDP’s structure
set forth several provisions related to reputation,
independence and incompatibilities applicable to the
members of those bodies. Regarding the General
and Supervisory Board and the Executive Board of
Directors, EDP has a specific policy entitled “Policy
on Selection of the Members of the General and
Supervisory Board and Executive Board of Directors”
according to which the integration of several skills,
professional experiences and knowledge, as well as
genre and cultural diversity should always be
assured, taking into account the specificities of the
Company’s business. Such policy establishes that
the election proposal of any candidate to be
submitted to the Shareholders’ General Meeting
should be duly substantiated in what concerns the
candidate’s profile and function to be performed, so
as to enable the shareholders to verify the adequacy
of the candidate’s profile, knowledge and curriculum
to the functions to be performed. Under the
abovementioned policy, some of the general
selection criteria are: (i) promotion of equality of
rights and opportunities in a context of diversity; (ii)
enhancement of diversity, notably regarding age,
gender, geographical origin, skills, competences,
qualifications and experience; (iii) promotion of the
increase in the number of members of the under-
represented gender; and (iv) prevention of potential
conflicts of interest. Said selection policy also
foresees the competences that the members of the
Executive Board of Directors and of the General and
Supervisory Board should possess, among which we
highlight the following: (i) technical-professional
competences suitable for the function; (ii) integrity,
ethics and professional and personal values; (iii)
sufficient knowledge of the legal, regulatory and
statutory rules applicable to its functions and to the
Company; (iv) sufficient availability to comply with
the respective legal and statutory functions; (v)
fulfilment of the independence requirements
established by law and in the Articles of Association;
(vi) commitment with the provisions set forth in
policies, codes and Internal Regulations of the
Company; (vii) commitment towards compliance
with the best corporate governance practices; (viii)
competences and experience in company
management, risk management and supervision
suitable for the function and (ix) industry knowledge
and experience in the sector. In particular, regarding
gender diversity, it is convened by compliance with
Law 62/2017, of 1 August, related to the balanced
representation between men and women in
governing and supervisory bodies in public sector
entities and listed companies. Furthermore, EDP has
a diversity policy according to which it undertakes to
(i) promote mutual respect and equal opportunity,
(ii) acknowledge the differences as a source of
strengthening human potential and valuing diversity
in organizing, managing and in the strategy, and (iii)
adopt positive discrimination and awareness
measures, not only internally but also towards the
community in order to have an effective and efficient
implementation of the diversity policy. Additionally,
in 2019, a new corporate department -
Principle I.2.B
Companies should be
provided with clear and
transparent decision
structures and ensure a
maximum effectiveness of
the functioning of their
governing bodies and
commissions.
Item 21 |
Items 27 to 31
Principle I.2.C
Companies ensure that the
functioning of their bodies
and committees is duly
recorded, namely in
minutes, to allow an
understanding not only of
the meaning of the
decisions taken, but also of
their grounds and opinions
expressed by their
members.
Item 23 |
Item 27 |
Item 35
Recommendation I.2.1.
Companies should
establish standards and
requirements regarding the
profile of new members of
their governing bodies,
which are suitable
according to the roles to be
carried out. Besides
individual attributes (such
as competence,
independence, integrity,
availability, and experience),
these profiles should take
into consideration general
diversity requirements, with
particular attention to
gender diversity, which may
contribute to a better
performance of the
governing body and to the
balance of its composition.
ADOPTED
Items 11 |
Items 15 to 17 |
Items 30 to 33 |
Annex I
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ADOPTED
NOT ADOPTED
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DESCRIPTION
Transformation and Talent Unit was created, aiming
to propose and ensure the execution of the
transformation strategy and talent management of
EDP group employees, in line with the culture of EDP
Group, in order to contribute for the sustainability of
the business and reinforce the reference profile of
EDP Group. The Transformation and Talent Unit
department should be aligned with the People
Experience Unit Department that proposes to design
the People Management strategy of EDP Group and
ensure the implementation of transversal policies
and procedures, with the objective to promote
outstanding experiences to all employees,
contributing therefore to the sustainability of the
business and therefore for the alignment with EDP’s
corporate purpose. Under the terms of Law no.
62/2017, of 1 August, and in full compliance with
applicable law, EDP shareholders have resolved on 5
April 2018 to appoint new members of the
management and supervisory bodies of the
Company for the 2018-2020 triennium, in a way that
safeguards a 20% representation of persons of each
sex in the Executive Board of Directors and the
General and Supervisory Board. The members of the
Executive Board of Directors for the 2021-2023
triennium were appointed at the Extraordinary
General Shareholders Meeting held on 19 January
2021, with representation at that body now standing
at 40%, above legal requirements. As foreseen in
EDP’s Gender Equality Policy, available at
and at
, gender
equality is of civilizational importance, as a corollary
of the equality of rights, freedoms, guarantees,
opportunities and recognition between genders. It
also enables the enhancement of skills and
knowledge through the inclusion of all, promoting a
better and more motivating work environment and,
consequently, greater levels of productivity and
retention of talent.
Recommendation I.2.2.
The company’s managing
[I.2.2.(1)] and supervisory
boards [I.2.2.(2)], as well as
their committees [I.2.2.(3)],
should have internal
regulations — namely
regulating the performance
of their duties, their
Chairmanship, periodicity of
meetings, their functioning
and the duties of their
members — disclosed in full
on the company’s website.
Minutes [I.2.2.(4)] /
[I.2.2.(5)] / [I.2.2.(6)] of the
meetings of each of these
bodies should be drawn out.
ADOPTED
The General and Supervisory Board, the Executive
Board of Directors, the Financial Matters
Committee / Audit Committee (FMC/AC), the
Corporate Governance and Sustainability
Committee (CGSC), the Strategy and Performance
Committee (SPC), the Remuneration Committee
(RC) and the United States of America Business
Affairs Monitoring Committee (BAMC) have
specific Internal Regulations that establish its
functioning (in particular the exercise of the
respective duties, chairmanship, periodicity of
meetings, functioning, duties of their members and
duty to draft detailed minutes of the respective
meetings). In relation to the applicable specific
articles, please see the chart below:
Internal Regulation EBD
[I.2.2 (1)]
Duties
4.º
Chairmanship
5.º
Periodicity of meetings
7.º
Functioning
7.º
Duties of their members
4.º
Duty to draft Minutes
9.º [I.2.2 (4)]
Items 22 and 23 |
Items 27 to 29 |
Item 34 |
Item 61
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ANNUAL REPORT 2020
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RECOMMENDATIONS
ADOPTED
NOT ADOPTED
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REPORT
DESCRIPTION
Internal Regulation GSB
[I.2.2 (2)]
Duties
2.º
Chairmanship
5.º
Periodicity of meetings
4.º
Functioning
4.º
Duties of their members
11.º
Duty to draft Minutes
26.º [I.2.2 (5)]
Internal Regulation FMC/AC
[I.2.2 (3)]
Duties
2.º
Chairmanship
5.º
Periodicity of meetings
4.º
Functioning
4.º
Duties of their members
10.º
Duty to draft Minutes
4.º [I.2.2 (6)]
Internal Regulation RC
[I.2.2 (3)]
Duties
2.º
Chairmanship
5.º
Periodicity of meetings
4.º
Functioning
4.º
Duties of their members
10.º
Duty to draft Minutes
4.º [I.2.2 (6)]
Internal Regulation CGSC
[I.2.2 (3)]
Duties
2.º
Chairmanship
5.º
Periodicity of meetings
4.º
Functioning
4.º
Duties of their members
10.º
Duty to draft Minutes
4.º [I.2.2 (6)]
Internal Regulation SPC
[I.2.2 (3)]
Duties
2.º
Chairmanship
5.º
Periodicity of meetings
4.º
Functioning
4.º
Duties of their members
10.º
Duty to draft Minutes
4.º [I.2.2 (6)]
Internal Regulation BAMC
[I.2.2 (3)]
Duties
2.º
Chairmanship
5.º
Periodicity of meetings
4.º
Functioning
4.º
Duties of their members
9.º
Duty to draft Minutes
4.º [I.2.2 (6)]
Recommendation I.2.3.
The composition [I.2.3.(1)]
and the number of annual
meetings [I.2.3.(2)] of the
managing and supervisory
bodies, as well as of their
committees, should be
disclosed on the company’s
website.
ADOPTED
[I.2.3.(1)]
governance/governing-bodies-0
[I.2.3.(2)] This information is made available at
EDP’s website, is disclosed at EDP’s Annual Report
as well as on the General and Supervisory Board
Annual Report.
Item 59
Recommendation I.2.4.
A policy for the
communication of
irregularities
(whistleblowing) should be
adopted that guarantees
the suitable means of
communication and
treatment of those
ADOPTED
The Whistleblowing Procedures Regulation is in
force and has been reviewed in 2020. Such
Regulation sets forth reception mechanisms and
procedures, irregularities communication retention
and processing on several matters received by the
Company. Under the terms of this Regulation, the
communication of irregularities is handled as
confidential information, namely by the General
Item 15 |
Item 49 |
Items 50 to 55
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PRINCIPLES AND
RECOMMENDATIONS
ADOPTED
NOT ADOPTED
NOT APPLICABLE
COMMENTS
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DESCRIPTION
irregularities, with the
safeguarding of the
confidentiality of the
information transmitted and
the identity of its provider,
whenever such
confidentiality is requested.
and Supervisory Board, by the Financial Matters
Committee / Audit Committee and by the
supporting employees that are responsible
for the operational management of reception,
retention and handling mechanisms and
procedures of the irregularity’s communication.
Further information is available at
communication-channel, and the Whistleblowing
Procedures Regulation is available at
04/Regulations%20Whistleblowing%20Procedures.
pdf.
Without prejudice to other mechanisms used in
different geographies, EDP has an additional
channel, the Ethics Ombudsperson channel, which
allows all employees, clients, suppliers or other
interested parties to report ethics violations and ask
ethical questions, where the addressee is the Ethics
Ombudsperson. For further information:
ombudsperson.
In 2020, the Integrity Policy as well as the remaining
procedures and compliance mechanisms
associated to this program where the object of
training directed at the employees, and have been
internally disclosed for review in EDP’s internal
communication channels. Within the scope of the
Anti-Money Laundering and Terrorist Financing
Compliance Program, obliged entities have
implemented specific internal regulations and a
horizontal procedure for the communication of
suspicious operations-
The Irregularities Communication Channel, which
was initially set up in 2006 to enable the reporting
of potential financial irregularities, has been
restructured in 2020 to include the possibility of
reporting potential violations related to money
laundering and terrorist financing.
pt/comunicacaodeirregularidadespt
I.3. Relationships between the company bodies
Principle:
Members of the company’s
boards, especially directors,
should create, considering
the duties of each of the
boards, the appropriate
conditions to ensure
balanced and efficient
measures to allow for the
different governing bodies
of the company to act in a
harmonious and
coordinated way, in
possession of the suitable
amount of information to
carry out their respective
duties.
EDP’s Article of Association expressly set forth
that all corporate bodies of the Company should, to
the extent of their competences, create the
necessary conditions for a harmonious, articulated
and informed performance of their duties, with
reporting and information sharing mechanisms
implemented in accordance with recommendation
I.1.1. In addition, the Internal Regulations of the
General and Supervisory Board, the Executive
Board of Directors and of the specialized
committees contain several provisions that set
forth the need to report, namely to supervisory
bodies, information regarding annual activity plans,
resolutions and minutes.
Items 21 to 45
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RECOMMENDATIONS
ADOPTED
NOT ADOPTED
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DESCRIPTION
Recommendation I.3.1.
The bylaws, or other
equivalent means adopted
by the company, should
establish mechanisms that,
within the limits of
applicable laws,
permanently ensure the
members of the managing
and supervisory boards are
provided with access to all
the information and
company’s collaborators, in
order to appraise the
performance, current
situation and perspectives
for further developments of
the company, namely
including minutes,
documents supporting
decisions that have been
taken, calls for meetings,
and the archive of the
meetings of the managing
board, without impairing the
access to any other
documents or people that
may be requested for
information.
ADOPTED
This recommendation is also complied with in light
of article 5 of the Internal Regulation of the
Executive Board of Directors. Currently, EDP also
has an internal instrument that systematizes the
operating principles and rules to be observed in the
interaction of the Executive Board of Directors with
the General and Supervisory Board, developing the
legal framework, the Articles of Association and
the Internal applicable to such matters.
Items 21 to 45
Recommendation I.3.2.
Each of the company’s
boards and committees
should ensure the timely
and suitable flow of
information, especially
regarding the respective
calls for meetings and
minutes, necessary for the
exercise of the
competences, determined
by law and the bylaws, of
each of the remaining
boards and committees.
ADOPTED
All Internal Regulations set forth reporting and
information sharing mechanisms. In particular,
it should be highlighted the relevance of the
information sharing platform between the General
and Supervisory Board and the Executive Board
of Directors. Regarding the applicable provisions,
one should highlight:
•
Articles of Association: Article 22 (L);
•
Internal Regulation of the Executive Board
of Directors: Articles 5 (1) (e) and 9 (4);
•
Internal Regulation of the General and
Supervisory Board: Article 5 (1) (c) and (e),
and Article 11 (1) (a); Article 14 (1) (m) and
Article 17;
•
Internal Regulation of the Financial Matters /
Audit Committee: Article 5 (1) (f),
Article 10 (1) (a) and Article 13;
•
Internal Regulation of the Remuneration
Committee: Article 5 (1) (d);
Article 10 (1) (a) and (2);
•
Internal Regulation of the Corporate
Governance and Sustainability Committee:
Article 5 (1) (e); Article 10 (1) (a), (2),
and (3) (c); Articles 12 and 13;
•
Internal Regulation of the Strategy
and Performance Committee: Article 5 (d);
Article 10(1) (a), (2), and (3) (c);
and Article 13 (2);
•
Internal Regulation of the United States
of America (USA) Business Affairs
Monitoring Committee: Article 5 (d);
article 10 (1) (a).
Items 21 to 45
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ADOPTED
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DESCRIPTION
I.4. Conflict of interests
Principle:
The existence of current
or potential conflicts of
interest, between members
of the company’s boards or
committees and the
company, should be
prevented. The non-
interference of the
conflicted member in the
decision process should be
guaranteed.
Since 17 May 2010, the Executive Board of
Directors approved rules on identification, internal
reporting and actions to be carried out should a
case of conflict of interests occur. This Regulation
is applicable to all EDP Group employees that have
a decision-making role on the completion of a
transaction with related parties. The Internal
Regulations of EDP’s bodies and committees set
forth provisions by which the members of such
bodies and committees should inform the
respective body or committee on facts that could
constitute or give cause to a conflict between
his/hers interests and the corporate interest. In
accordance with the Internal Regulation in force
regarding this matter, which terms are currently
under review, the Corporate Governance and
Sustainability Committee should report to the
General and Supervisory Board its activities in
matter of conflict of interests.
All corporate bodies and Specialized Committees’
Internal Regulations set forth a specific provision
on the conduct to be adopted by the respective
body or committee member in case of an effective
or apparent conflict of interests, as well as a duty
to provide information or clarifications.
The respective articles that specifically set
forth this recommendation are the following:
•
Internal Regulation GSB: Article 10
•
Internal Regulation EBD: Article 8
•
Internal Regulation FMC/AC: Article 9
•
Internal Regulation RC: Article 9
•
Internal Regulation CGSC: Article 9
•
Internal Regulation SPC: Article 9
•
Internal Regulation BAMC: Article 8
Item 10 |
Item 18 |
Item 20 |
Item 21 |
Item 91
Recommendation I.4.1.
The members of the
managing and supervisory
boards and the internal
committees are bound, by
internal regulation or
equivalent, to inform the
respective board or
committee whenever there
are facts that may
constitute or give rise to a
conflict between their
interests and the company’s
interest.
ADOPTED
Item 10 |
Item 18 |
Item 20 |
Item 21 |
Item 91
Recommendation I.4.2.
Procedures should be
adopted to guarantee that
the member in conflict does
not interfere in the decision-
making process, without
prejudice to the duty to
provide information and
other clarifications that the
board, the committee or
their respective members
may request.
ADOPTED
Item 10 |
Item 18 |
Item 20 |
Item 21 | Item 91
I.5. Related party transactions
Principle:
Due to the potential risks
that they may hold,
transactions with related
parties should be justified
by the interest of the
company and carried out
under market conditions,
subject to principles
of transparency and
adequate supervision.
Regarding this matter, in addition to applicable law
and the statutory provisions, an internal regulatory
framework for conflicts of interest and transactions
between related parties is in force, which terms are
currently under review, being the currently in force
diploma available at EDP’s website.
.
Pursuant to the Articles of Association and
legislation in force, the Executive Board of Directors
is responsible for the management of the company
and, for related party transaction purposes, the
deemed decision-makers are: (i) members of
management boards (executive and non-executive)
of EDP and group subsidiaries identified as such by
the Executive Board of Directors, by virtue of their
direct or indirect authority and responsibility for the
planning, management and control of EDP Group
activities as part of their duties with certain EDP
Group Subsidiaries, (ii) EDP Group senior
management, including top-level directors and other
staff with equivalent duties or ranking in the EDP
Group, provided that the company’s Executive Board
of Directors identifies them as such by virtue of their
Item 10 |
Items 89 to 92
Recommendation I.5.1.
The managing body should
disclose in the corporate
governance report or by
other means publicly
available the internal
procedure for verifying
transactions with related
parties.
ADOPTED
Item 10 |
Items 89 to 92
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direct or indirect authority and responsibility for the
planning, management and control of EDP Group
activities and (iii) EDP Group employees on the
permanent payroll of the EDP Group, on fixed or
infinite individual employment contracts, including
those suspended temporarily, within the scope of
their duties and powers; (iv) all other employees
working for EDP Group, including under secondment,
on a long-term or occasional basis and regardless of
the nature of the contract, on temporary assignment
or under a service provision contract, as well as
those on work placement or vocational training
programs, to the extent determined by the specific
legal relationship established. All decision-making
persons should therefore report any information
deemed relevant over transactions performed or to
be performed with related parties, with controlled
companies or with the own decision-makers. There
are also identified in the applicable Internal
Regulation, transactions of significant relevance,
specifying the type and scope of the transactions
subject to prior opinion.
Furthermore, article 17 (2) of EDP’s Articles of
Association sets forth a range of matters subject to
favorable prior opinion of the General and
Supervisory Board, with the Board retaining power to
set the parameters, in terms of economic or
strategic value of the transactions, that should be
subject to opinion, namely regarding acquisitions
and disposals of goods, rights or shareholdings of a
significant amount, under the terms of article 21 (7)
of EDP’s Articles of Association and article 15 of the
General and Supervisory Board Internal Regulation.
The General and Supervisory Board is responsible
for, under the scope of the annual and interim
management EDP report assessment, and taking
into consideration the activity performed by the
Corporate Governance and Sustainability
Committee, analyze and issue an opinion regarding
transactions with related parties.
In effect, the General and Supervisory Board
contains a Specialized Committee, the Corporate
Governance and Sustainability Committee, whose
attributions include reviewing related party
transactions. Its Internal Regulation clarifies that the
final decision is up to the General and Supervisory
Board, in accordance with article 12 (1) (k).
EDP also displays a set of rules on the issuance and
waiver of prior opinion by the General and
Supervisory Board, as well as the communication
procedures between the General and Supervisory
Board and the Executive Board of Directors. In
addition, the Executive Board of Directors should,
within 20 days of the end of each quarter, inform the
General and Supervisory Board of all “significant
transactions”, being set forth in the respective
regulation the elements that should be submitted on
such communication (see Article 22 (1) (l) of the
Articles of Association and article 12 (1) (l) of the
General and Supervisory Board Internal Regulation).
The General and Supervisory Board intervention in
the assessment made to such transaction is always
preceded of the analysis and scrutiny of the
Executive Board of Directors.
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Also under the terms of the Internal Regulation in
force regarding this matter, the General and
Supervisory Board and, more specifically, the
Corporate Governance and Sustainability Committee
analyzes all transactions in the amount equal or
superior to: (i) EUR 75M, for subordinated and
standard loans; (ii) EUR 75M for purchase, sale,
marketing or supply of electricity and natural gas
(and connected products and services) and (iii) EUR
5M for all other transactions.
Recommendation I.5.2.
The managing body should
report to the supervisory
body the results of the
internal procedure for
verifying transactions with
related parties, including the
transactions under analysis,
at least every six months.
ADOPTED
Item 10 |
Items 89 to 92
CHAPTER II – SHAREHOLDERS AND GENERAL MEETINGS
Principle II.A
As an instrument for the
efficient functioning of the
company and the fulfilment
of the corporate purpose of
the company, the suitable
involvement of the
shareholders in matters of
corporate governance is a
positive factor for the
company’s governance.
Item 5 |
Item 6 |
Item 7 |
Item 10 |
Items 12 to 16 |
Item 56
Principle II.B
The company should
stimulate the personal
participation of
shareholders in general
meetings, which is a space
for communication by the
shareholders with the
company’s boards and
committees and also of
reflection about the
company itself.
Item 5 |
Item 6 |
Item 7 |
Item 10 |
Items 12 to 16 |
Item 56
Principle II.C
The company should
implement adequate means
for the participation and
remote voting by
shareholders in meetings.
Item 5 |
Item 6 |
Item 7 |
Item 10 |
Items 12 to 16 |
Item 56
Recommendation II.1.
The company should not
set an excessively high
number of shares to confer
voting rights [II.1.(1)], and it
should make its choice
clear in the corporate
governance report every
time its choice entails a
diversion from the general
rule: that each share has a
corresponding vote [II.1.(2)].
ADOPTED
[II.1.(1)] EDP establishes in Article 14 (1) and (2) of
its Articles of Association that to each share
corresponds one vote and that all shareholders
with voting rights may participate in the
Shareholders’ General Meeting provided that they
have such capacity on registration date. [II.1.(2)] -
Not applicable.
Item 5 |
Item 6 |
Item 7 |
Item 10 |
Items 12 to 16 |
Item 56
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Recommendation II.2.
The company should not
adopt mechanisms that
make decision making by
its shareholders
(resolutions) more difficult,
specifically, by setting a
quorum higher than that
established by law.
ADOPTED
Article 11 (3) of EDP’s Articles of Association
establishes that Shareholders’ General Meeting
resolutions are adopted by a majority of voting
cast, unless a legal or statutory provision requires
a qualified majority.
Item 5 |
Item 6 |
Item 7 |
Item 10 |
Items 12 to 16 |
Item 56
Recommendation II.3.
The company should
implement adequate means
for the participation and
remote voting by
shareholders in meetings.
ADOPTED
While EDP has always favored maximizing
shareholder participation in general meetings,
which entails direct interaction with the holders
of its share capital, which constitutes a positive
factor for the proximity with its shareholding
structure, for the efficient functioning of the
Company and for the pursuit of its corporate
purpose, the COVID-19 pandemic context has
inevitably altered that understanding. EDP has
held two General Shareholder Meetings in a state
of emergency, in 16 April 2020 and 19 January
2021, and this has required the implementation
of procedures to allow the meetings to take place
remotely, as per the convening notices available
at
meetings
The quorum in the aforementioned Annual and
Extraordinary General Shareholders’ Meetings
were respectively of 67,3% in April 2020 and of
73,9068% in January 2021.
Due to these exceptional circumstances, all
voting rights were exercised remotely, either by
post or by electronic means, as provided in Article
384(8) and (9) of the Portuguese Companies
Code, Article 22 of the Portuguese Securities
Code, and in Article 14(6) and (8) of EDP’s
Articles of Association.
Holding the General Shareholders’ Meeting
remotely has allowed all duly registered
Shareholders to access the live audio and video
feed of the meeting. To that effect, a hyperlink
to a digital platform was sent the day prior to the
meeting to the registered e-mail address of each
shareholder who had communicated its intent
to attend.
Besides being able to ask questions in writing,
through the platform, about the topics included in
the Agenda which warranted clarification during
the meeting, shareholders were allowed to submit
questions in advance, up to two days prior to the
respective General Shareholder Meeting dates.
In the Extraordinary General Shareholders’
Meeting held in 19 January 2021, and in order to
allow for the complete clarification of the
shareholder’s questions before they exercised
their voting rights – without prejudice to the
timely disclosure of documents supplementing
the Agenda and the abovementioned alternative,
shareholders were allowed to submit questions
within the scope of information rights as
foreseen in Article 290 of the Portuguese
Companies Code, up to eight days before the
meeting, so that shareholders have all the
questions they had before the exercise of voting
rights were fully clarified.
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Recommendation II.4.
The company should also
implement adequate means
for the exercise of remote
voting, including by
correspondence and
electronic means.
ADOPTED
EDP’s Articles of Association enable the exercise
of voting rights by post (Article 14 (6)), they also,
on the other hand, determine the procedure for the
exercise of postal vote, including by electronic
means, in accordance with requirements that
ensure its authenticity (Article 14 (6) to (8).
At EDP’s website (
) shareholders
may find the necessary drafts for postal and
e-mail voting.
Due to the abovementioned exceptional
circumstances, all voting rights in the General
Shareholder Meetings held in April 2020 and
January 2021 were exercised remotely, either by
post or by electronic means, as provided in Article
384(8) and (9) of the Portuguese Companies
Code, Article 22 of the Portuguese Securities
Code, and in Article 14(6) and (8) of EDP’s
Articles of Association.
Holding the General Shareholder Meeting
remotely has allowed all duly registered
Shareholders to access the live audio and video
feed of the meeting.
EDP has been actively seeking technological
solutions that are safe and ensure audio quality,
transparency and voting secrecy, which are
compatible with the Portuguese legal framework,
in order to implement real-time electronic voting.
Item 5 |
Item 6 |
Item 7 |
Item 10 |
Items 12 to 16 |
Item 56
Recommendation II.5.
The bylaws, which specify
the limitation of the number
of votes that can be held or
exercised by a sole
shareholder, individually or
in coordination with other
shareholders, should
equally provide that, at least
every 5 years, the
amendment or maintenance
of this rule will be subject to
a shareholder resolution —
without increased quorum
in comparison to the legally
established — and in that
resolution, all votes cast will
be counted without
observation of the imposed
limits.
NOT ADOPTED
Considering the current shareholder structure of
the Company, this recommendation does not have
any practical applicability. However, over the past
few years, the subject of statutory limitation on
voting rights has already been discussed by the
General Shareholders Meeting of EDP on three
occasions, the last of which on 24 April 2019.
The shareholders have thus been called on to
decide on limiting the number of votes. The
continued existence of the limitation has prevailed,
and the reflection on the adjustment of the relevant
ceiling for counting voting rights has been
precisely to progressively increase this level.
The shareholding dynamics of the Company has
thus proven to be perfectly in tune with the sense
advocated in this recommendation, and to be
sufficiently apt for pursuing its goals, avoiding rigid
formulas for this review set down in the Articles of
Association, which has also fostered a particularly
intense scrutiny of this clause by shareholders, and
does not constitute an impediment to adequate
functioning of the market for corporate control.
These circumstances confirm that the voting cap
does not prevent the relevant shareholders’
involvement in EDP’s corporate governance,
again bearing in mind that three resolutions
of the General Shareholders’ Meeting have been
adopted, from 2011 to 2019, regarding this
statutory limitation.
In effect, the voting limitation set forth in article 14
of the Articles of Association reflects the express
wish of EDP’s shareholders through the General
Meeting resolutions, in the defense of the
Company’s specific interests: (i) the increase of
the limit from 5% to 20% was approved by the
shareholders at the General Meeting of 25 August
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2011, involving the participation of 72.25% of the
share capital and the approval of a majority of
94.16% of the votes cast; (ii) a subsequent
increase to the current 25% cap was approved at
the General Meeting of 20 February 2012, involving
the participation of 71.51% of the share capital and
the approval by a majority of 89.65% of votes cast
and (iii) the removal of the voting cap set out in the
Articles of Association was rejected by a majority
of 56.61% of votes cast, with the participation of
64.29% of the share capital.
Recommendation II.6.
The company should not
adopt mechanisms that imply
payments or assumption of
fees in the case of the
transfer of control or the
change in the composition of
the managing body, and
which are likely to harm the
free transferability of shares
and a shareholder
assessment of the
performance of the members
of the managing body.
ADOPTED
As provided for in EDP’s Corporate Governance
Manual, there are no known measures in place that
prevent free transmission of shares and free
performance assessment of the members of the
Executive Board of Directors. Identically, EDP has
not entered into any agreements that come into
force, are altered or are terminated in case a
change of control or a change to the management
board occurs, as provided for in the Remuneration
Policy Statement of the Executive Board of
Directors
Items 4 and 5
CHAPTER III – NON-EXECUTIVE MANAGEMENT, MONITORING AND SUPERVISION
Principle III.A
The members of governing
bodies who possess non-
executive management
duties or monitoring and
supervisory duties should,
in an effective and judicious
manner, carry out
monitoring duties and
incentivize executive
management for the full
accomplishment of the
corporate purpose, and
such performance should
be complemented by
committees for areas that
are central to corporate
governance.
Items 15 to 19 |
Item 21 |
Item 29
Principle III.B
The composition of the
supervisory body and the
non-executive directors
should provide the
company with a balanced
and suitable diversity of
skills, knowledge, and
professional experience.
The election proposal of any candidate of the
General and Supervisory Board and of the
Executive Board of Directors to be submitted to the
General Shareholder Meeting should be duly
substantiated, considering the candidate’s profile
and function to be performed so as to enable the
verification of the adequacy of the candidate’s
profile, knowledge and curriculum. Among the
established criteria are (i) the promotion of equality
of rights and opportunities in a context of diversity;
(ii) the enhancement of diversity, notably in
matters of age, gender, geographical origin,
skills, competences, qualifications and experience;
(iii) the promotion of the increase in the number
of members of the under-represented gender;
(iv) prevention of potential conflicts of interest.
As provided in recommendation I.2.1, a selection
policy is in force which sets forth specifically
the skills that the members of such bodies
should possess.
Item 21 |
Item 29 |
Item 31 | Item 68
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Principle III.C
The supervisory body
should carry out a
permanent oversight of the
company’s managing body,
also in a preventive
perspective, following the
company’s activity and, in
particular, the decisions of
fundamental importance.
Items 15 to 19 |
Item 21 |
Item 29
Recommendation III.1.
Without prejudice to the legal
powers of the chair of the
managing body, if he or she is
not independent, the
independent directors should
appoint a coordinator, from
amongst them, namely, to: (i)
act, when necessary, as an
interlocutor near the chair of
the board of directors and
other directors, (ii) make sure
there are the necessary
conditions and means to
carry out their functions; and
(iii) coordinate the
independent directors in the
assessment of the
performance of the
managing body, as
established in
recommendation V.1.1.
NOT APPLICABLE
This recommendation is not applicable in light of the Company’s
governance model in force.
Recommendation III.2.
The number of non-executive
members in the managing
body [III.2.(1)], as well as the
number of members of the
supervisory body [III.2.(2)]
and the number of the
members of the committee
for financial matters [III.2.(3)]
should be suitable for the size
of the company and the
complexity of the risks
intrinsic to its activity, but
sufficient to ensure, with
efficiency, the duties which
they have been attributed.
The formation of such
suitability judgment should
be included in the corporate
governance report.
ADOPTED
[III.2(1)] This sub-recommendation is not
applicable in light of the governance model in
force at the Company. [III.2.(2)] The General and
Supervisory Board is composed of a minimum of
nine members, but always higher than the number
of directors, under Article 21 (1) of the Articles of
Association. [III.2.(3)] The Financial Matters
Committee / Audit Committee should be
composed by at least three independent members
according to Article 3 of the Financial Matters
Committee / Audit Committee Internal Regulation,
which is entirely proportional to the Company’s
features.
Item 15 | 17 |
Item 21 |
Item 29 |
Recommendation III.3.
In any case, the number of
non-executive directors
should be higher than the
number of executive
directors.
NOT APPLICABLE
This recommendation is not applicable in light of the Company’s
governance model in force.
Recommendation III.4.
Each company should
include several non-
executive directors that
corresponds to no less than
one third, but always plural,
who satisfy the legal
requirements of
independence. For the
purposes of this
recommendation,
NOT APPLICABLE
This recommendation is not applicable in light of the Company’s
governance model in force.
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an independent person is
one who is not associated
with any specific group of
interest of the company, nor
under any circumstance
likely to affect his/her
impartiality of analysis or
decision, namely due to:
i. having carried out
functions in any of the
company’s bodies for more
than twelve years, either on
a consecutive or non-
consecutive basis;
ii. having been a prior staff
member of the company or
of a company which is
considered to be in a
controlling or group
relationship with the
company in the last
three years;
iii. having, in the last three
years, provided services or
established a significant
business relationship with
the company or a company
which is considered to be in
a controlling or group
relationship, either directly
or as a shareholder,
director, manager or officer
of the legal person;
iv. having been a beneficiary
of remuneration paid by the
company or by a company
which is considered to
be in a controlling or
group relationship other
than the remuneration
resulting from the exercise
of a director’s duties;
v. having lived in a non-
marital partnership or
having been the spouse,
relative or any first degree
next of kin up to and
including the third degree
of collateral affinity of
company directors or of
natural persons who are
direct or indirect holders
of qualifying holdings, or
vi. having been a qualified
holder or representative of
a shareholder of qualifying
holding.
Recommendation III.5.
The provisions of (i) of
recommendation III.4 does
not inhibit the qualification
of a new director as
independent if, between the
termination of his/her
functions in any of the
company’s bodies and the
new appointment, a period
of 3 years has elapsed
(cooling-off period).
NOT APPLICABLE
This recommendation is not applicable in light of the Company’s
governance model in force.
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NOT ADOPTED
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DESCRIPTION
Recommendation III.6.
The supervisory body, in
observance of the powers
conferred to it by law,
should assess and give its
opinion on the strategic
lines [III.6.(1)] and the risk
policy prior to its final
approval by the
management body [III.6.(2)].
ADOPTED
EDP’s current governance model foresees the
attribution to the General and Supervisory Board of
a significant function in this respect. While it does
not have managerial attributes, as provided in
Article 422(1) of the Portuguese Companies Code,
Article 17(2) of EPD’s Articles of Association
provides (as does Article 15 of the Internal
Regulation of the General and Supervisory Board)
that the Company’s strategic plan as well as the
performance, by EDP or any of its subsidiaries, of
the following transactions are subject to prior
favorable opinion of this body: (i) acquisition and
sale of assets, rights or shareholdings of
significant economic value, (ii) contracting
financing operations of significant value, (iii) the
opening and closure of establishments, or
important parts thereof, and important increases or
reductions in activity, (iv) other transactions or
operations of significant economic or strategic
value, (v) the commencement or termination of
strategic partnerships or other forms of lasting
cooperation, (vi) plans for divisions, mergers or
transformations, and (vii) changes to the EDP’s
Articles of Association, including moving the head
office and increasing the share capital proposed by
the Executive Board of Directors.
Also relevant are the specific attributions of the
Financial Matters Committee / Audit Committee
regarding financial and accounting matters,
internal auditing practices and procedures, the
functioning of the Internal Control System of
Financial Reporting (SCIRF), matters relating to risk
management procedures and compliance
mechanisms, as well as the work and
independence of the Company’s statutory auditors.
Item 21 |
Item 24 |
Item 29 |
Items 49 to 55
Recommendation III.7.
Companies should have
specialized committees,
separately or cumulatively,
on matters related to
corporate governance
[III.7.(1)], appointments
[III.7.(2)], and performance
assessment [III.7.(3)]. In the
event that the remuneration
committee provided for in
article 399 of the
Commercial Companies
Code has been created and
should this not be
prohibited by law, this
recommendation may be
fulfilled by conferring
competence on such
committee in the
aforementioned matters
ADOPTED
Item 21 |
Item 29
CHAPTER IV – EXECUTIVE MANAGEMENT
Principle IV.A
As a way of increasing the
efficiency and the quality of
the managing body’s
performance and the
suitable flow of information
in the board, the daily
management of the
company should be carried
Item 17 |
Item 18 |
Item 19 | Item 21
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DESCRIPTION
out by directors with
qualifications, powers and
experience suitable for the
role. The executive board is
responsible for the
management of the
company, pursuing the
company’s objectives and
aiming to contribute
towards the company’s
sustainable development.
Principle IV.B
In determining the number
of executive directors, it
should be taken into
account, besides the costs
and the desirable agility in
the functioning of the
executive board, the size of
the company, the
complexity of its activity,
and its geographical
spread.
Item 17 |
Item 18 |
Item 19 |
Item 21
Recommendation IV.1.
The managing body should
approve, by internal
regulation or equivalent, the
rules regarding the action of
the executive directors
applicable to their
performance of executive
functions in entities outside
of the group.
ADOPTED
The Internal Regulation of the Executive Board of
Directors expressly addresses this issue. In
particular, Article 6 provides that board members
cannot hold executive functions in more than two
companies outside of the EDP Group, and the
performance of such functions must be subject to
prior appraisal by the Executive Board of Directors.
Item 17 |
Item 18 |
Item 19 |
Item 21
Recommendation IV.2.
The managing body should
ensure that the company
acts consistently with its
objects and does not
delegate powers, namely, in
what regards: i) the
definition of the strategy and
main policies of the
company [IV.2.(1)]; ii) the
organization and
coordination of the business
structure [IV.2.(2)]; iii)
matters that should be
considered strategic in virtue
of the amounts involved, the
risk, or special
characteristics [IV.2.(3)].
NOT APPLICABLE
This recommendation is not applicable in light
of the Company’s governance model in force.
In fact, in accordance with the dual governance
model, the Executive Board of Directors does
not delegate any powers provided for in this
recommendation.
Item 17 |
Item 18 |
Item 19 |
Item 21
Recommendation IV.3.
In the annual report, the
managing body explains in
what terms the strategy and
the main policies defined
seek to ensure the long-
term success of the
company and which are the
main contributions resulting
therein for the community
at large.
ADOPTED
Item 21 |
Items 50 to 55 |
Sustainability
Report
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ADOPTED
NOT ADOPTED
NOT APPLICABLE
COMMENTS
REPORT
DESCRIPTION
CHAPTER V – EVALUATION OF PERFORMANCE, REMUNERATION AND APPOINTMENTS
V.1 Annual evaluation of performance
Principle
The company should
promote the assessment
of performance of the
executive board and of its
members individually, and
also the assessment of the
overall performance of the
managing body and its
specialized committees.
Item 21 |
Item 24 and 25 |
Item 27 |
Item 29 |
Item 52 | Item 54
Recommendation V.1.1.
The managing body should
annually evaluate its
performance [V.1.1(1)]
as well as the performance
of its committees [V.1.1(2)]
and executive directors
[V.1.1(3)], taking into
account the
accomplishment of the
company’s strategic plans
and budget plans, the risk
management, the internal
functioning and the
contribution of each
member of the body to
these objectives, as well as
the relationship with the
company’s other bodies and
committees.
ADOPTED
[V.1.1.(1)] Under the terms of Article 5(4) of the
Internal Regulation of the Executive Board of
Directors, the Chairman of the board should ensure
the adoption of adequate mechanisms for the
annual evaluation of the functioning of the
Executive Board of Directors and the performance
of each of its members. In addition, EDP has
voluntarily implemented a formal and objective
evaluation procedure of the Executive Board of
Directors’ activity that allows it to evaluate the
compliance level of the adopted measures. This is
a distinctive practice adopted by the General and
Supervisory Board which is aligned with the
evaluation criteria of the Dow Jones Sustainability
Index and matches the recognition of the
continuous excellence efforts of corporate
governance practices that the General and
Supervisory Board and the Executive Board of
Directors have been undertaking. It should be
noted that this evaluation process, its content,
questionnaire format, and respective conclusions
was analyzed and certified by an external
consultant. At the beginning of each year, the
General and Supervisory Board members are
invited to answer a questionnaire that allows to
assess each personal perception regarding the
performance of the Executive Board of Directors.
In this questionnaire several topics are analyzed:
(i) composition and organization; (ii) performance
of the Executive Board of Directors’ activity; (iii) the
relationship between the Executive Board of
Directors and the General and Supervisory Board;
(iv) the relationship between the Executive Board
of Directors and other parties. The purpose of the
questionnaire is to be an objective reflection
support that may be used by the General and
Supervisory Board to prepare an evaluation
opinion on the performance of the Executive
Board of Directors that will then be presented
to EDP shareholders to be voted. Such evaluation
is available at the Annual Report of the General
and Supervisory Board – Statement of the
Evaluation Process of the Executive Board
of Directors of EDP.
Item 21 |
Item 24 and 25 |
Item 27 |
Item 29 |
Item 52 | Item 54
V.2 Remuneration
Principle V.2.A
The remuneration policy of
the members of the
managing and supervisory
boards should allow the
Items 66 to 88
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company to attract qualified
professionals at an
economically justifiable
cost in relation to its
financial situation, induce
the alignment of the
member’s interests with
those of the company’s
shareholders — taking into
account the wealth
effectively created by the
company, its financial
situation and the market’s
— and constitute a factor of
development of a culture of
professionalization,
sustainability, promotion of
merit, and transparency
within the company.
Principle V.2.B
Directors should receive
compensation:
i) that suitably remunerates
the responsibility taken, the
availability and the
expertise placed at the
disposal of the company;
ii) that guarantees a
performance aligned with
the long-term interests of
the shareholders and
promotes the sustainable
performance of the
company; and
iii) that rewards
performance.
Items 69 and 70
Recommendation V.2.1.
The company should create
a remuneration committee,
the composition of which
should ensure its
independence from the
management, which may
be the remuneration
committee appointed
under the terms of article
399 of the Portuguese
Companies Code.
ADOPTED
The Remuneration Committee appointed by the
General and Supervisory Board is independent
from management and aims to set the
remuneration of the Executive Board of Directors,
in accordance with Article 27 of the Articles of
Association and Article 28 (b) of the Internal
Regulation of the General and Supervisory Board.
The majority of the Remuneration Committee of
the General Meeting members, responsible for
setting the remuneration of all corporate bodies,
exception made to the Executive Board of
Directors, should be independent.
On the other hand, the Remuneration Committee of
the General Shareholders Meeting is attributed
with setting the compensation of the corporate
bodies other than the Executive Board of Directors.
The remuneration policies of both Remuneration
Committees are submitted annually to the General
Shareholders Meeting for appraisal.
With the changes introduced by Law no. 50/2020,
of 25 August, these Committees will be
responsible for submitting a remuneration
policy proposal for approval by the General
Shareholders’ Meeting (article 26-B of the
Portuguese Securities Code).
Item 29
Recommendation V.2.2.
The remuneration should be
set by the remuneration
committee or the general
meeting, on a proposal from
that committee.
ADOPTED
Item 29
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Recommendation V.2.3.
For each term of office, the
remuneration committee or
the general meeting, on a
proposal from that
committee, should also
approve the maximum
amount of all
compensations payable to
any member of a board or
committee of the company
due to the respective
termination of office. The
said situation as well as the
amounts should be
disclosed in the corporate
governance report or in the
remuneration report.
ADOPTED
As stated in Article 12 of its Internal Regulation, the
Remuneration Committee shall (i) annually define
the remuneration policy of the Chairman of the
Executive Board of Directors and of its remaining
members, namely in line with corporate
governance best practices, setting criteria of the
variable component of the remuneration, (ii)
determine the several components of the fixed
and variable remuneration, namely possible
benefits and complements, in particular the
retirement pension benefits due to old age or
disability, (iii) set remunerations according to the
defined policy, allowing the Company to attract, at
a justifiable economic cost, qualified professionals,
induce the alignment with shareholders’ interests
and constitute a development factor of a culture of
professionalization, promotion of merit and
transparency within the Company, (iv) determine
that a significant part of the multi-year variable
remuneration is deferred in time, at least for a
period of three years, the payment of which shall
be conditional upon not willfully undertaking
unlawful acts which become known after
completion of the assessment and which
jeopardize the sustainability of the Company's
performance, (v) evaluate, annually, the executive
management body considering, among other
factors, compliance with the Company’s strategy
and previously defined objectives, plans and
budgets, in order to ponder and determine the
variable remuneration of Chairman of the Executive
Board of Directors and of the Directors, (vi) assess
the individual performance of each member of the
Executive Board of Directors, including in this
assessment the contribution of each member to
the operating efficiency of the body and to the
relationship with the different bodies of the
Company, (vii) monitor the contractual changes of
the mandates of the Chairman of the Executive
Board of Directors and the Directors that impact
their remuneration, particularly in the event of
suspension or termination of those mandates, (viii)
set the maximum amount of compensation
payable to the Chairman of the Executive Board of
Directors and the Directors in the event of
termination of office, (ix) evaluate the
consequences, within the scope of the adopted
remuneration policy, of the possible remuneration
to be paid to the Chairman of the Executive Board
of Directors or the Directors for holding office in
participated or subsidiary companies, (x) submit
before the annual General Shareholders Meeting a
statement on the remuneration policy for the
members of the Executive Board of Directors,
as adopted by the Committee (xi) establish the
necessary mechanisms to coordinate its activity
with the Remuneration Committee elected by the
General Shareholders Meeting to set the
remunerations for the remaining social bodies,
and (xii) monitor the definition of the remuneration
policies of the directors of subsidiaries.
The Remuneration Report identifies two
extraordinary situations that resulted in the
attribution of remuneration installments to be paid
between 2021 and 2023, resulting from non-
Item 29 |
Items 66 to 88
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compete agreements entered into with directors
of EDP Group officers with the approval of the
Remuneration Committee of the General and
Supervisory Board, pursuant to article 429 of the
Commercial Companies Code, article 27 of EDP's
Articles of Association and article 12 (h) of the
Internal Regulations of the Remuneration
Committee of the General and Supervisory Board
at a meeting held on 13 November 2020, and the
General and Supervisory Board, at the meeting held
on 26 November 2020, expressed its agreement to
the respective execution and granted powers to
two members of the Remuneration Committee of
the General and Supervisory Board to represent the
Company in the signing of such agreements.
Recommendation V.2.4.
In order to provide
information or clarifications
to shareholders, the chair
or, in case of his/her
impediment, another
member of the
remuneration committee
should be present at the
annual general meeting, as
well as at any other,
whenever the respective
agenda includes a matter
linked with the
remuneration of the
members of the company’s
boards and committees or,
if such presence has been
requested by the
shareholders.
ADOPTED
Article 5 (2) of the Remuneration Committee
Internal Regulation expressly sets forth that in
order to provide information or clarification to
shareholders, the Chairman, or in his absence,
other Remuneration Committee member, shall
ensure the presence in the Annual Shareholders’
General Meeting or in any other General
Shareholders Meeting if the agenda covers any
matter related to the remuneration of the members
of the Company’s bodies or committees, or if such
presence is required by shareholders.
Item 29
Recommendation V.2.5.
Within the company’s
budgetary limitations, the
remuneration committee
should be able to decide,
freely, on the hiring, by the
company, of necessary or
convenient consulting
services to carry out the
committee’s duties.
ADOPTED
Both the Remuneration Committee of the General
and Supervisory Board and the Remuneration
Committee elected by the General Shareholders
Meeting freely decide on the hiring by the Company
of the necessary or convenient consultancy
services for the exercise of the respective
functions, as provided, namely, in Article 4 (6) of
the Remuneration Committee of the General and
Supervisory Board Internal Regulation.
Item 29 | Item 67
Recommendation V.2.6
The remuneration
committee should ensure
that those services are
provided independently and
that the respective
providers do not provide
other services to the
company, or to others in
controlling or group
relationship, without the
express authorization of the
committee.
ADOPTED
In accordance with Article 4 (5) of its Internal
Regulation, the Remuneration Committee of the
General and Supervisory Board ensures that the
consultancy services on remuneration matters are
provided with independence and that the
respective service providers are not hired for the
provision of any other services to the Company or
any other controlled by the Company or subsidiary
of the Company without express consent of the
Committee.
Item 29 | Item 67
Recommendation V.2.7
Taking into account the
alignment of interests
between the company and
the executive directors, a
part of their remuneration
ADOPTED
The adoption of this recommendation results in
particular of item 69 of this chapter.
Items 69 and 70
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should be of a variable
nature, reflecting the
sustained performance of
the company, and not
stimulating the assumption
of excessive risks.
Recommendation V.2.8
A significant part of the
variable component should
be partially deferred in time,
for a period of no less than
three years, being
necessarily connected to
the confirmation of the
sustainability of the
performance, in the terms
defined by a company’s
internal regulation.
ADOPTED
The adoption of this recommendation results in
particular of items 69 and 70 of this chapter.
Item 69 |
Items 70 and 72
Recommendation V.2.9
When variable remuneration
includes the allocation of
options or other
instruments directly or
indirectly dependent on the
value of shares, the start of
the exercise period should
be deferred in time for a
period of no less than three
years.
NOT APPLICABLE
There are no stock option plans or other direct or
indirect instruments dependent on the value of
shares.
Items 85 to 88
Recommendation V.2.10
The remuneration of non-
executive directors should
not include components
dependent on the
performance of the
company or on its value.
NOT APPLICABLE
This recommendation is not applicable in light of the Company’s
governance model in force.
V.3. Appointments
Principle.
Regardless of the manner
of appointment, the profile,
the knowledge, and the
curriculum of the members
of the company’s governing
bodies, and of the executive
staff, should be suited to
the functions carried out.
Items 17 to 19
Recommendation V.3.1.
The company should, in
terms that it considers
suitable, but in a
demonstrable form,
promote that proposals for
the appointment of the
members of the company’s
governing bodies are
accompanied by a
justification in regard to the
suitability of the profile, the
skills and the curriculum
vitae to the duties to be
carried out.
ADOPTED
The Selection Policy in force for the members of
the General and Supervisory Board was
implemented in accordance with the best practices
and is aimed at implementing transparent and
objective selection procedures. The appointment
of the members of the General and Supervisory
Board and of the Executive Board of Directors
Members results from a transparent and objective
selection procedure that evaluates the adequacy of
the candidates, both individually and collectively,
taking into consideration the legal and statutory
competences of such corporate bodies, despite
the fact that it is an attribution of the General
Shareholders Meeting. In the scope of the
selection process, the integration of a range of
skills, professional experiences, diversity of
Items 17 to 19
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knowledges, gender and culture must be ensured,
bearing in mind the specificities of the companies’
businesses. The election proposal of any
candidate of the General and Supervisory Board
and of the Executive Board of Directors to be
submitted to the General Shareholder Meeting
should be duly substantiated, so that shareholders
may assess the candidates’ profile, knowledge and
curriculum in light of the functions to be carried
out. Noe also the specific competences set forth in
the Corporate Governance and Sustainability
Committee Internal Regulation, in particular the
powers to monitor, together with the Executive
Board of Directors, the selection criteria, the
provision of necessary competences to the internal
bodies and structures of the Company, its
subsidiaries and other entities in which the
Company has the right to appoint members
corporate bodies, and their repercussions
in the respective composition, all in articulation
with EDP’s Selection Policy and the criteria
set out therein of merit, adequacy to function
and diversity.
In this regard, EDP effectively promotes that the
presentation of resolution proposals by
shareholders is made in accordance with the
Selection Policy in force, by which said proposals
are required to be duly grounded.
Recommendation V.3.2.
The overview and support
to the appointment of
members of senior
management should be
attributed to a nomination
committee unless this is
not justified by the
company’s size.
NOT APPLICABLE
This recommendation is not applicable in light of the Company’s
governance model in force.
Recommendation V.3.3.
This nomination committee
includes a majority of
nonexecutive, independent
members.
NOT APPLICABLE
This recommendation is not applicable in light of the Company’s
governance model in force.
Recommendation V.3.4.
The nomination committee
should make its terms of
reference available, and
should foster, to the extent
of its powers, transparent
selection processes that
include effective
mechanisms of
identification of potential
candidates, and that those
chosen for proposal are
those who present a higher
degree of merit, who are
best suited to the demands
of the functions to be
carried out, and who will
best promote, within the
organisation, a suitable
diversity, including gender
diversity.
ADOPTED
The Corporate Governance and Sustainability
Committee, in coordination with the Executive
Board of Directors, shall oversee the preparation of
the succession plans regarding the internal
structures and bodies of the Company and its
subsidiaries, as well as of other entities in which
the Company has the right to appoint members of
their corporate bodies. In this respect, a stated
objective is to identify in advance potential
additional human resources needs, in order to
ensure the continuity of the Company's operations.
Under the selection procedure of the candidates, it
is considered advisable to resort to external
independent consultants with specific expertise on
these matters, which should comply with the
criteria and skills sets forth in the Selection Policy
in force when selecting candidates. The Corporate
Governance and Sustainability Committee should
carry out a periodic review on the execution and
compliance of the Selection Policy and should
propose any changes deemed necessary, reporting
Items 17 to 19
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its conclusions on the adoption of the policy to the
General and Supervisory Board. The members to
be appointed for the General and Supervisory
Board and the Executive Board of Directors shall
be individuals of recognized national and/or
international prestige, with professional knowledge
and experience which are adequate to the exercise
of the respective functions. The curricula of
candidates to the corporate bodies should be
made available on the institutional website of the
Company. Along with the concern for each
member's individual adequacy, it is also intended
that the composition of the corporate bodies
demonstrates a collective adequacy, by gathering
as a whole the professional and personal qualities
required for the proper performance of the
functions of each of EDP’s corporate bodies.
Likewise, in order to determine the number of
members of the Executive Board of Directors, the
costs and the desirable operational agility of the
management, the size of the Company, the
complexity of its activity and the geographical
dispersion shall be pondered.
CHAPTER VI – INTERNAL CONTROL
Principle.
Based on its mid and long-
term strategies, the
company should establish a
system of risk management
and control, and of internal
audit, which allow for the
anticipation and
minimization of risks
inherent to the company’s
activity.
Items 50 to 55
Recommendation VI.1.
The managing body should
debate and approve the
company’s strategic plan
[VI.1.(1)] and risk policy,
which should include the
establishment of limits on
risk-taking [VI.1.(2)].
ADOPTED
[VI.1.(1)] The Executive Board of Directors is the
highest responsible for the risk management
decision-making, supervision and control, and is in
charge to set objectives and management policies
within the EDP Group. Among other attributions, the
Executive Board of Directors is responsible for the
Business Plan, definition of risk policies, namely the
respective exposure limits by risk category and by
resources allocation, according to the risk profile. On
the other hand, the General and Supervisory Board
permanently monitors and assesses the efficiency
of the risk management system. As set forth in
Article 17(2) of the Company’s Articles of
Association, the approval of the Company’s
strategic plan and the execution of relevant
transactions by the Company its subsidiaries
are subject to favorable prior opinion of the
General and Supervisory Board.
[VI.1.(2)] As stated in Article 4 (2) (k) of its Internal
Regulation, the Executive Board of Directors should
“ensure that the Company risks are identified,
assessed, controlled and managed, define risk
objectives, set risk profiles of the Company and
coordinate the decisions related to material risks
management.”. In this regard, the definition of EDP’s
strategic objectives on risk assumption matters
should be subject to the appraisal of the General and
Supervisory Board and the Financial Matters
Items 50 to 55
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Committee/Audit Committee, following a proposal
of the Executive Board of Directors, namely within
the scope of the appraisal of the Company’s
business plan. Furthermore, the Executive Board of
Directors should develop a continuous effort to
improve the internal control and risk management
systems, assessing its efficiency and implementing
measure deemed adequate to reinforce the assured
quality levels. It should also be noted that,
periodically, the Executive Board of Directors reports
to the General and Supervisory Board and to the
Financial Matters Committee/Audit Committee
on the identification and evolution of the main
risks related to EDP’s activity, quantifying its impact
and the probability of occurrence of the risks
deemed relevant.
Recommendation VI.2.
The supervisory board
should be internally
organised, implementing
mechanisms and
procedures of periodic
control that seek to
guarantee that risks which
are effectively incurred by
the company are consistent
with the company’s
objectives, as set by the
managing body.
ADOPTED
In accordance with Article 12(2)(i) of its Internal
Regulation, the Financial Matters Committee/Audit
Committee shall, in carrying out its functions, pay
special attention to the identification, evaluation,
risk management and control and evaluations of
the internal level of compliance as well as the
continuous monitoring of performance and risk
management system efficiency of the Company,
jointly with the Executive Board of Directors,
following namely the risk control policies, the key
risk indicators (KRI) identification and the
integrated risk evaluation methodologies, having
the possibility to request to the Risk Management
Department and to the Corporate Risk Department
the information deemed convenient, and should
implement necessary mechanisms and procedures
adequate to that effect.
Pursuant to Article 12(3) of its Internal Regulation,
the Financial Matters Committee/Audit Committee
is additionally authorized to (i) propose to the
General and Supervisory Board the contracting of
specialist services and independent consultants in
accordance with the appropriate budgets, (ii) carry
out other inquires in departments of the Company
and its subsidiaries or group companies, when
necessary in order to enable it to fulfil its duties,
(iii) obtain all the information it requires in order to
carry out its duties, either directly or indirectly
through the Chairman of the General and
Supervisory Board, (iv) Attend meetings of the
Executive Board of Directors, where attendance at
meetings at which the annual accounts are to be
considered is mandatory, (v) assess, annually, the
activity and performance of the Internal Audit
Department as well as the work conditions
adequacy namely the human resources and
technical means levels, (vi) assess, annually, the
activity and performance of the Compliance
Department as well as the work conditions
adequacy namely the human resources and
technical means levels, (vii) review, annually, in
coordination with the Executive Board of Directors,
the Internal Audit Basic Standard, (viii) review,
annually, in coordination with the Executive Board
of Directors, the Compliance System Regulation,
and (ix) monitor on a permanent basis the
communication of the Company to the Statutory
Auditors Association the conclusion of contracts,
on behalf of the Company, the nature and duration
of the service to be provided.
Items 50 to 55 |
Annual Report
of the General and
Supervisory Board
Recommendation VI.3.
The internal control
systems, comprising the
functions of risk
management, compliance,
and internal audit should be
structured in terms
adequate to the size of the
company and the
complexity of the inherent
risks of the company’s
activity. The supervisory
body should evaluate them
and, within its competence
to supervise the
effectiveness of this
system, propose
adjustments where they are
deemed to be necessary.
ADOPTED
Item 50 |
Items 53 and 54 |
Annual Report of
the General and
Supervisory Board
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Recommendation VI.4.
The supervisory body
should provide its view on
the work plans and
resources allocated to the
services of the internal
control system, including
the risk management,
compliance and internal
audit functions, and may
propose the adjustments
deemed to be necessary.
ADOPTED
Item 50 |
Items 53 and 54 |
Annual Report of
the General and
Supervisory Board
Recommendation VI.5.
The supervisory body
should be the recipient of
the reports prepared by the
internal control services,
including the risk
management functions,
compliance and internal
audit, at least regarding
matters related to the
approval of accounts, the
identification and resolution
of conflicts of interest, and
the detection of potential
irregularities.
ADOPTED
In accordance with Article 12(1)(k) of its Internal
Regulation, the Financial Matters Committee/Audit
Committee shall supervise and monitor the
accounts review and the individual and
consolidated accounting documents namely taking
into consideration eventual remarks of the
Portuguese Securities Market Commission
(CMVM) and assess the content of the certification
of accounts and audit annual reports with the
Statutory Auditor, being the Financial
Matters/Audit Committee the first recipient of such
documents, namely regarding eventual
reservations for recommendation presentation
purposes to the General and Supervisory Board
and the Executive Board of Directors. It shall also
receive the reports prepared by the internal control
services, including risk management, compliance
and internal auditing, at least whenever they relate
to the preparation of accounts, the identification or
solution of conflicts of interest, and the detection
of potential irregularities. In also ensures the
activity and independence of the Statutory Auditor,
as foreseen in Annex II of its Internal Regulation
and in applicable laws and regulations, in order to
assess its independence and compliance with
applicable laws, regulations and agreements, as
well as principles and best practices applicable to
auditing companies and their representatives with
the audited entities.
Item 50 |
Items 53 and 54 |
Annual Report of
the General and
Supervisory Board
Recommendation VI.6.
Based on its risk policy, the
company should establish a
risk management function,
identifying (i) the main risks
it is subject to in carrying
out its activity [VI.6.(1)]; (ii)
the probability of
occurrence of those risks
and their respective impact
[VI.6.(2)]; (iii) the devices
and measures to adopt
towards their mitigation
[VI.6.(3)]; and (iv) the
monitoring procedures,
aiming at their
accompaniment [VI.6.(4)].
ADOPTED
EDP has set several internal rules that set forth
provisions on risk management strategies and
policies. On the Group Business Risk Management
Manual of EDP it should be highlighted the specific
chapters on business risk management structures,
on risks management procedures, on business risk
management tools and on periodic updating.
Regarding EDP’s Risk Appetite Execution
document, the objective is to formalize and to
disclose EDP’s risk approach, as a relevant
element of alignment and transparency towards
shareholders and other stakeholders, as well as
further explain the controlled risk pillar. For further
information please see:
rnance/risk-management
ocurement/risk-management-supply-chain#risk-
analysis
[VI.6.(1)] Items 53 and 54 of this Report set forth
the main risks that EDP is subject to in the
performance of its activity.
Item 50 |
Items 53 and 54
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[VI.6.(2)] Under item 53 of this Report, EDP
identifies the probability of occurrence of each
risk associated with its activity and the respective
impact.
[VI.6.(3)] Regarding the instruments and measures
adopted in order to mitigate risk, EDP adopts such
sub-recommendation as set out in items 53 and
54 of this Report.
[VI.6.(4)] The adoption of this sub-recommendation
regarding the monitoring procedures is set forth in
item 54 of this Report being the respective risk
management structured in six main phases, being
the “monitorization” phase the penultimate one.
Recommendation VI.7.
The company should
establish procedures for the
supervision, periodic
evaluation, and adjustment
of the internal control
system, including an annual
evaluation of the level of
internal compliance and the
performance of that
system, as well as the
perspectives for
amendments of the risk
structure previously
defined.
ADOPTED
As referred in the comments to recommendation
VI.I, the Executive Board of Directors of EDP should
develop a continuous effort on improving the
internal risk control and management systems,
assessing their efficiency and implementing the
adequate measures to reinforce the quality
assurance levels. It should also be noted that,
periodically, the Executive Board of Directors
reports to the General and Supervisory Board and
to the Financial Matters Committee / Audit
Committee on the identification and evolution of
the main risks associated with EDP’s activity,
quantifying the impact and the occurrence
probability of the deemed relevant risks.
The Financial Matters Committee/Audit
Committee should according to Article 12 (2) (h) of
its Internal Regulation, monitor with special
attention the risk identification, evaluation, control
and management and to assess the internal
compliance standards, as well as to continuously
monitor the risk management system performance
and efficiency with the Executive Board of
Directors, accompanying namely the risk control
policies, the key risk indicators (KRI) identification
and the integrated risk assessment methodologies,
having the possibility to request to the Risk
Management Department and to the Risk
Committee the information deemed relevant. In
addition to Article 12 (1) (d) of the respective
Internal Regulation provision which specifically
sets forth the Financial Matters Committee/Audit
Committee competence to supervise the risk
management, the internal control and internal audit
systems efficiency, it should be noted that the
Financial Matters Committee/Audit Committee is
authorized to propose to the General and
Supervisory Board and to the Executive Board of
Directors the measures aimed to guarantee the
integrity of financial information and improve the
operation of financial information internal control
systems, risk and compliance management
systems, in accordance with Article 12 (3) (a).
It is also important to point out that, according to
Article 12 (3) (f) of the respective Internal
Regulation, the Financial Matters Committee/Audit
Committee should annually evaluate the activity
and performance of the Internal Audit Department,
as well as the working conditions namely on
human resources and technical means adequacy.
Items 50 to 55
236
PRINCIPLES AND
RECOMMENDATIONS
ADOPTED
NOT ADOPTED
NOT APPLICABLE
COMMENTS
REPORT
DESCRIPTION
CHAPTER VII – FINANCIAL INFORMATION
VII.1 Informação financeira
Principle VII.A
The supervisory body
should, with independence
and in a diligent manner,
ensure that the managing
body complies with its
duties when choosing
appropriate accounting
policies and standards for
the company, and when
establishing suitable
systems of financial
reporting, risk management,
internal control, and internal
audit.
The General and Supervisory Board is responsible
for the monitoring and permanent assessment of
internal proceedings related to accounting and
auditing matters as well the monitoring of the risk
profile of the Company, the risk management
system efficiency, the internal control system and
the internal auditing system including the reception
and processing of claims and complaints whether
or not arising from employees under Article 14 (1)
(e) of the General and Supervisory Board Internal
Regulation. In particular, the Financial Matters
Committee/Audit Committee has the authority to
(i) verify if the accounting policies and metrical
criteria adopted by the Company are consistent
with the general accounting principles accepted
and adequate to the correct presentation of its
assets, liabilities and results (under Article 12 (1)
(a)) of the Financial Matters Committee/Audit
Committee Internal Regulation and (ii) supervise
the internal audit, financial reporting control
(SCIRF), risk, and compliance management
systems, under Article 12 (1) (d) of such
Committee Internal Regulation.
Item 15 |
Item 17 |
Item 21 |
Item 29 |
Items 30 to 41
Principle VII.B
The supervisory body
should promote an
adequate coordination
between the internal audit
and the statutory audit of
accounts.
The General and Supervisory Board is responsible
for the monitoring and permanent assessment of
internal proceedings related to accounting and
auditing matters as well the monitoring of the risk
profile of the Company, the risk management
system efficiency, the internal control system and
the internal auditing system including the reception
and processing of claims and complaints whether
or not arising from employees under Article 14 (1)
(e) of its Internal Regulation. In particular, the
Financial Matters Committee/Audit Committee has
the authority to (i) verify if the accounting policies
and metrical criteria adopted by the Company are
consistent with the general accounting principles
accepted and adequate to the correct presentation
of its assets, liabilities and results (under Article 12
(1) (a)) and (ii) supervise the internal audit,
financial reporting control (SCIRF), risk, and
compliance management systems, under Article
12 (1) (d). The Internal Regulation of the Financial
Matters Committee/Audit Committee specifically
sets forth the competence to monitor, with special
care, the activity and contractual relations with the
Statutory Auditor, without interfering with its
performance, being allowed to formulate
recommendations or request clarifications within
the context of the relationship between the General
and Supervisory Board, the Executive Board of
Directors and the Statutory Auditor regarding
financial information, as well to monitor and
evaluate, pursuant to applicable law, the objectivity
and independence of the Statutory Auditor, namely
regarding the provision of non-audit services, under
Article 12 (2) (j).
Item 15 |
Item 17 |
Item 21 |
Item 29 |
Items 30 a 41
237
ANNUAL REPORT 2020
PRINCIPLES AND
RECOMMENDATIONS
ADOPTED
NOT ADOPTED
NOT APPLICABLE
COMMENTS
REPORT
DESCRIPTION
Recommendation VII.1.1.
The supervisory body’s
internal regulation should
impose the obligation to
supervise the suitability of
the preparation process and
the disclosure of financial
information by the
managing body, including
suitable accounting
policies, estimates,
judgments, relevant
disclosure and its
consistent application
between financial years, in a
duly documented and
communicated form.
ADOPTED
The Internal Regulation of the Financial Matters
Committee/Audit Committee sets forth in Article
12 (2) (f) the competence to supervise the
adequacy of the preparation and financial
disclosure of information process as well as to
prepare a report addressed to the General and
Supervisory Board which includes the analysis of
the Financial Matters Committee/Audit Committee
of such process, namely on the adequacy of
accounting policies, estimates, judgements and
relevant disclosure procedures and its consistent
implementation between financial years.
Item 21 |
Item 27 |
Item 29 |
Item 46 |
Item 50 |
Item 55
VII.2 Statutory audit of accounts and supervision
Principle.
The supervisory body
should establish and
monitor clear and
transparent formal
procedures on the
relationship of the company
with the statutory auditor
and on the supervision of
compliance, by the auditor,
with rules regarding
independence imposed by
law and professional
regulations.
Article 14 (1) (d) of the General and Supervisory
Board Internal Regulation sets forth that this body
should permanently monitor the activity of the
Statutory Auditor and give its opinion on the
respective election or appointment, its exoneration,
its independency and its other relationships with
the Company. Particularly, the Financial Matters
Committee/Audit Committee is responsible for the
(i) proposal to the General and Supervisory Board
of the hiring and the dismissal of the Statutory
Auditor as well as its remuneration under Article 12
(1) (j), (ii) issuance of a reasoned opinion, in
accordance with applicable law, on the renewal
and extension of the Statutory Auditor’s mandate
to be submitted to the General and Supervisory
Board under Article 12 (1) (i), (iii) monitoring, with
special care, the activity and contractual relations
with the Statutory Auditor, without interfering with
its performance, being allowed to formulate
recommendations or request clarifications within
the context of the relationship between the General
and Supervisory Board, the Executive Board of
Directors and the Statutory Auditor regarding
financial information, as well to monitor and
evaluate, pursuant to applicable law, the objectivity
and independence of the Statutory Auditor, namely
regarding the provision of non-audit services, under
Article 12 (2) (j) and (iv) supervise the activity and
the independence of the Statutory Auditor and
compliance with applicable laws, regulations and
agreements, as well as principles and best
practices applicable to auditing companies and
their representatives with the audited entities
under Article 12 (1) (k).
Item 29 |
Item 42 |
Items 44 to 46 |
Item 50
Recommendation VII.2.1.
By internal regulations, the
supervisory body should
define, according to the
applicable legal regime, the
monitoring procedures
aimed at ensuring the
independence of the
statutory audit.
ADOPTED
The duties of the Financial Matters Committee /
Audit Committee are set forth in Article 12 of its
Internal Regulation, and they include supervising
the activity and the independence of the Statutory
Auditor in accordance with applicable laws and
regulations, in order to assess its independence
and compliance with applicable laws, regulations
and agreements, as well as principles and best
practices applicable to auditing companies and
their representatives with the audited entities. It
should also approve the provision of audit and non-
auditing services by the Statutory Auditor to the
Items 39 to 41
238
PRINCIPLES AND
RECOMMENDATIONS
ADOPTED
NOT ADOPTED
NOT APPLICABLE
COMMENTS
REPORT
DESCRIPTION
Company or its subsidiaries, ensuring an adequate
prior review of any threats to the independence of
the Statutory Auditor that the provision of such
services may entail, as well as any safeguards to
be applied in order to mitigate them. Within the
scope of its attributions, the Financial Matters
Committee / Audit Committee must monitor, with
special care, the activity and contractual relations
with the Statutory Auditor, without interfering with
its performance, being allowed to formulate
recommendations or request clarifications within
the context of the relationship between the General
and Supervisory Board, the Executive Board of
Directors and the Statutory Auditor regarding
financial information, as well to monitor and
evaluate, pursuant to applicable law, the objectivity
and independence of the Statutory Auditor, namely
regarding the provision of non-audit services.
Consider also that Article 12 (1) (f) sets out the
competence to supervise the adequacy of the
preparation and financial disclosure of information
process, as well as to prepare a report addressed
to the General and Supervisory Board which
includes the analysis of the Financial Matters
Committee/Audit Committee of such process,
namely on the adequacy of accounting policies,
estimates, judgements and relevant disclosure
procedures and its consistent implementation
between financial years. Furthermore, EDP has an
Internal Regulation on Services Provided by the
Statutory Auditor which defines and promotes
criteria and methodologies to ensure the
independence of the Statutory Auditor when
providing audit and non-audit services to EDP or to
its subsidiaries. This Regulation is available at
EDP’s website:
governance/governing-bodies/statutory-auditor
The supervisory procedures aiming to ensure the
independence of the Statutory Auditor are set forth
in the aforementioned Regulation, as well as in
Annex II of the Internal Regulation of the Financial
Matters Committee / Audit Committee, which
specifically sets forth the annual evaluation
process of the Statutory Auditor of the Company.
Recommendation VII.2.2.
The supervisory body
should be the main
interlocutor of the statutory
auditor in the company and
the first recipient of the
respective reports [VII.2.2
(1)], having the powers,
namely, to propose the
respective remuneration
[VII.2.2 (2)] and to ensure
that adequate conditions
for the provision of services
are ensured within the
company.
ADOPTED
[VII.2.2 (1)] The Financial Matters Committee/Audit
Committee is responsible for assessing the
contents of the annual accounts’ certification
reports (Article 12 (1) (k) of its Internal Regulation),
and [VII.2.2 (2)] for monitoring, with special care,
the activity and contractual relations with the
Statutory Auditor, without interfering with its
performance, being allowed to formulate
recommendations or request clarifications within
the context of the relationship between the General
and Supervisory Board, the Executive Board of
Directors and the Statutory Auditor regarding
financial information, as well to monitor and
evaluate, pursuant to applicable law, the objectivity
and independence of the Statutory Auditor, namely
regarding the provision of non-audit services, under
Article 12 (2) (j). Furthermore, this Internal
Regulation sets forth the specific competences of
the Financial Matters Committee/Audit Committee
to propose, to the General and Supervisory Board,
the hiring and dismissal of the Statutory Auditor.
Item 21 |
Item 29
239
ANNUAL REPORT 2020
PRINCIPLES AND
RECOMMENDATIONS
ADOPTED
NOT ADOPTED
NOT APPLICABLE
COMMENTS
REPORT
DESCRIPTION
Recommendation VII.2.3.
The supervisory body
should annually assess the
services provided by the
statutory auditor, their
independence and their
suitability in carrying out
their functions and propose
their dismissal or the
termination of their service
contract by the competent
body when this is justified
for due cause.
ADOPTED
The Internal Regulation of the Financial Matters
Committee/Audit Committee establishes specific
prerogatives and competences to annually assess
the activity pursued by the Statutory Auditor
namely on (i) submitting to the General and
Supervisory Board proposals on the hiring and
dismissal of the Statutory Auditor, as well as its
remuneration under Article 12 (1) (j), (ii) issuing a
reasoned opinion in accordance with the
applicable law on the renewal or extension of the
Statutory Auditor’s mandate, to be presented to the
General and Supervisory Board under Article 12 (1)
(i), (iii) monitoring, with special care, the activity
and contractual relations with the Statutory
Auditor, without interfering with its performance,
being allowed to formulate recommendations or
request clarifications within the context of the
relationship between the General and Supervisory
Board, the Executive Board of Directors and the
Statutory Auditor regarding financial information,
as well to monitor and evaluate, pursuant to
applicable law, the objectivity and independence of
the Statutory Auditor, namely regarding the
provision of non-audit services, under Article 12 (2)
(j) and (iv) supervise the activity and the
independence of the Statutory Auditor and
compliance with applicable laws, regulations and
agreements, as well as principles and best
practices applicable to auditing companies and
their representatives with the audited entities
under Article 12 (1) (k). During this exercise, the
annual evaluation of the Statutory Auditor of EDP
has been carried out under the terms set forth in
Annex II of the Internal Regulation of the Financial
Matters Committee /Audit Committee.
Item 21 |
Item 29 |
Item 45
240
3. Other information
The following documents are attached to this Report, forming an integral part thereof:
Annex I
– Brief curricula of the members of the General and Supervisory Board and the Executive Board of Directors
Annex II
- Attendance list of the meetings of the General and Supervisory Board
Annex III
- Attendance list of the meetings of the Executive Board of Directors
Annex IV
- Positions held in other companies
Annex V
– Attendance lists for:
(i)
The Financial Matters Committee/Audit Committee
(ii)
The Remuneration Committee
(iii)
The Corporate Governance and Sustainability Committee
(iv)
The Strategy and Performance Committee
(v)
The United States of America Business Affairs Monitoring Committee
241
ANNUAL REPORT 2020
ANNEX I
General and Supervisory Board
Luís Filipe
Marques Amado
STATUS
Independent
POSITION
Chairman of the General and
Supervisory Board
COMMITTEES
Chairman of the Corporate
Governance and Sustainability
Committee
Chairman of the Financial
Matters Committee/Audit
Committee
SKILLS AND EXPERIENCE
•
Degree in Economics - Lisbon University (76)
•
Auditor - Court of Auditors
•
Auditor - National Defence Institute (89-90)
•
Deputy - National Assembly of Portugal (el. 91/95/99/05/09)
•
Deputy Secretary of State - Internal Administration Minister (95-97)
•
Secretary of State - Foreign Affairs and Cooperation Minister (97-02)
•
National Defense Minister (05-06)
•
State and Foreign Affairs Minister (06-11)
•
Non-Executive Board Member - Sociedade de Desenvolvimento
da Madeira (13-19)
•
Chairman of the Board of Directors - Banco Internacional
do Funchal, S.A. (12-16)
•
Chairman of the General Meeting Board - Banco Cabo-Verdiano
de Negócios, S.A. (13-14)
•
Chairman of the Board of Directors - Banco Cabo-Verdiano
de Negócios, S.A. (15-17)
•
Non-executive member of the Board of Directors - Francisco Manuel
dos Santos Foundation (13-17)
PAST APPOINTMENTS IN EDP
•
General and Supervisory Board Vice Chairman (April 2015 - April 2018)
•
General and Supervisory Board Chairman (since April 2018)
CURRENT EXTERNAL APPOINTMENTS
•
Curator - Oriente Foundation (12)
•
Curator - Francisco Manuel dos Santos Foundation (18)
•
Member of Global Advisory Board - SONAE (18)
•
Chairman of the General Meeting Board - Tabaqueira, S.A. (18)
•
Invited Professor - ISCSP (12)
•
Invited Professor - Paris School of International Affairs (16)
242
Dingming Zhang
STATUS
Non-independent
POSITION
Vice Chairman of the General
and Supervisory Board
SKILLS AND EXPERIENCE
•
Bachelor’s degree in Power System and Automation - Huazhong
University of Science and Technology (1984)
•
Master’s degree in Management - Huazhong University of Science
and Technology (2001)
•
Deputy Director of Power Production Department - China Three Gorges
Corporation (2002)
•
Executive Vice President - China Yangtze Power Company (2002-11)
•
Director - Guangzhou Development Industry (2006-11)
PAST APPOINTMENTS IN EDP
•
General and Supervisory Board Vice Chairman, in representation
of China Three Gorges (February 2012 - April 2015)
•
General and Supervisory Board Member, in representation
of CWEI (Europe), S.A. (April 2015 - April 2018)
•
General and Supervisory Board Member, in representation of China
Three Gorges International Corporation (April 2018 - December 2018)
•
General and Supervisory Board Vice Chairman, in representation
of China Three Gorges Corporation, since December 2018
CURRENT EXTERNAL APPOINTMENTS
•
Vice-President - China Three Gorges Corporation (18)
Shengliang Wu
STATUS
Non-independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Chairman of the
Remuneration Committee
Member of the Strategy and
Performance Committee
SKILLS AND EXPERIENCE
•
Bachelor’s degree in Engineering - Wuhuan University (92)
•
Master’s degree in Technical Economics and Management -
Chongqing University (00)
•
Secretary of Corporate Affairs Department -
Gezhouba Hydropower Plant (98-00)
•
Deputy Director of the Board - China Yangtze Power Company (02-03)
•
Director of Capital Operating Department - China Yangtze Power
Company (04-06)
•
Executive Vice-President - Beijing Yangtze Power Capital (06-11)
•
Deputy Director of Strategic Planning Department -
China Three Gorges Corporation (11-15) Executive Vice-President -
China Three Gorges International Corporation (15)
•
Chairman - China Three Gorges (Europe), S.A. (15-20)
PAST APPOINTMENTS IN EDP
•
General and Supervisory Board Member, in representation
of China Three Gorges International (Europe), S.A.
(February 2012 – April de 2015)
•
General and Supervisory Board Member,
in representation of China Three Gorges (Portugal),
Sociedade Unipessoal, Lda. (April 2015 - April 2018)
•
General and Supervisory Board Member, in representation
of China Three Gorges (Europe), S.A (April 2018 - December 2018)
•
General and Supervisory Board Vice-Chairman in representation of
China Three Gorges International Corporation, since December 2018
CURRENT EXTERNAL APPOINTMENTS
•
Chairman-China Three Gorges International Limited
243
ANNUAL REPORT 2020
Ignacio Herrero Ruiz
STATUS
Non-independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Corporate
Governance and Sustainability
Committee
Member of the Strategy and
Performance Committee
SKILLS AND EXPERIENCE
•
Degree in Economics - Carlos III University (Madrid) (97)
•
Mergers and Acquisitions Department - Citigroup (97-98)
•
Mergers and Acquisitions Department -
Deutsche Bank Investment (98- 03)
•
Mergers and Acquisitions Department - Credit Suisse (03-16)
PAST APPOINTMENTS IN EDP
•
General and Supervisory Board Member,
in representation of China Three Gorges (Europe), S.A.,
since December 2018
CURRENT EXTERNAL APPOINTMENTS
•
Executive Vice-Chairman at China Three Gorges Corporation
(Europe), S.A. (16)
Li Li
STATUS
Non-independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Corporate
Governance and Sustainability
Committee
SKILLS AND EXPERIENCE
•
Bachelor’s degree in International Business with a major
in Hydropower Engineering
•
First-class Constructor in China
•
Assistant Engineer at Planning Department - CWE (84-85)
•
Assistant Engineer/Engineer - CWE Tunisian Branch (85-89)
•
Engineer at Hydropower Department - CWE (89-93)
•
Engineer - CWE Romanian Branch (94-95)
•
Senior Engineer at Hydropower Department - CWE (95-99)
•
Project Manager
(the Odaw Drainage Channel)
- CWE (99-00)
•
Deputy General Manager - CWE (00-01)
•
Project Manager
(the Water Mains)
- CWE (01-03)
•
Deputy/General Manager at International Business
Department - CWE (03-11)
•
Vice-Chairman - CWE (11-15)
•
Chairman - CWE (15-17)
•
Executive Director - CWE (17-19)
PAST APPOINTMENTS IN EDP
•
General and Supervisory Board Member, in representation
of China Three Gorges Brasil Energia Ltda., since December 2019
CURRENT EXTERNAL APPOINTMENTS
•
Deputy Chief Economist - China Three Gorges Brazil (since 2019)
244
Eduardo de Almeida
Catroga
STATUS
Non-independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Chairman of the Strategy and
Performance Committee
SKILLS AND EXPERIENCE
•
Degree in Finance - Instituto Superior de Economia e Gestão (66)
•
Program for Management Development Course -
Harvard Business School (79)
•
Honorary Doctor - Lisbon University
•
Minister of Finance - Portuguese Government (93-95)
•
Invited Full Professor - MBA of Instituto Superior de Economia e Gestão
•
Director with executive and non-executive functions in particular
as Chief Executive Officer and Chairman on several national
and international companies in several fields namely chemical,
agrochemical, major consumer products, energy and investment
banking
PAST APPOINTMENTS IN EDP
•
Independent member of the General and Supervisory Board
(June 2006 - February 2012)
•
Chairman and independent member of the General and Supervisory
Board (February 2012 - April 2015)
•
Chairman and Member of the General and Supervisory Board,
in representation of China Three Gorges Corporation
(April 2015 - April 2018)
•
General and Supervisory Board Member, in representation of China
Three Gorges (Portugal), Sociedade Unipessoal, Lda., since April 2018
CURRENT EXTERNAL APPOINTMENTS
•
Chairman (non-executive) of the Board of Directors -
Finantipar, holding which controls Finantia Bank (17)
•
Investment Committee Member - Portugal Venture Capital Initiative
managed by the European Investment Fund (08)
245
ANNUAL REPORT 2020
Felipe Fernández
Fernández
STATUS
Non-independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Corporate
Governance and Sustainability
Committee
SKILLS AND EXPERIENCE
•
Degree in Administrative and Economic Sciences -
Bilbao University (75)
•
Professor of Business and Economic Faculty - Oviedo University (84-90)
•
Director of Economics and Regional Planning -
Principality of Asturias (84-90)
•
Counsellor of Organisation of the Territory and Housing -
Principality of Asturias (90-91)
•
Counsellor of countryside and fishing - Principality of Asturias (91-93)
•
Manager on several companies in numerous fields
PAST APPOINTMENTS IN EDP
•
General and Supervisory Board Member in representation of Cajastur
Inversiones S.A., (February 2012 - April 2015)
•
General and Supervisory Board Member, in representation of DRAURSA,
S.A., since April 2018
CURRENT EXTERNAL APPOINTMENTS
•
Board of Director Member - Liberbank (11)
•
Chairman of Board of Directors - Lico Leasing (17)
•
Executive Commission Member - Lico Leasing (18)
•
Board of Director Member - Tudela Veguín (11)
•
Masaveu Inmobiliaria (14)
•
Cimento Verde do Brasil (14)
•
Board of Director Member - Molecular Oncology Medicine Institute
of Asturias (14)
246
Fernando María
Masaveu Herrero
STATUS
Non-independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Remuneration
Committee
Member of the Strategy and
Performance Committee
SKILLS AND EXPERIENCE
•
Law Degree - Navarra University (92)
•
Manager on several companies of Masaveu Group in numerous
fields such as energy, finance, transport, environment and real state,
among others
PAST APPOINTMENTS IN EDP
•
General and Supervisory Board Member, since February 2012
(re-elected in April 2015 and April 2018)
CURRENT EXTERNAL APPOINTMENTS
•
Chairman - Masaveu Corporation
•
Chairman - Cementos Anónima Tudela Veguín
•
Chairman - Masaveu International
•
Board Member - Bankinter
•
Executive Committee Member - Bankinter
•
Board Member – EGEO Internacional and EGEO SGPS
•
Board Member - Olmea Internacional
•
Chairman - Maria Cristina Masaveu Peterson Foundation
•
Chairman - San Ignacio de Loyola Foundation
•
Patron - Asturias Princess Foundation
•
Executive Committee Member - Asturias Princess Foundation
•
Chairman of the Board of Directors - Oppidum Capital and subsidiaries
•
Patron – Friends of the Prado Museum Association
Mohammed Issa
Khalfan Al-Huraimel
Al-Shamsi
STATUS
Non-independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Strategy and
Performance Committee
SKILLS AND EXPERIENCE
•
Bachelor’s degree in Business Administration -
American University of Sharjah (01)
•
MBA - HEC School of Management (05)
•
Consultant - McKinsey & Company (05-07)
•
Director of Strategy & Policy - UAE Prime Minister's Office (09-11)
•
Board Member - Tabreed District Cooling (14)
•
Board Member - Jiangsu Suyadi (12-14)
•
Board Member - Shariket Kahraba Hadjret-En-Nous (14-16)
•
Board Member - SMN Power Company (13-16)
PAST APPOINTMENTS IN EDP
•
General and Supervisory Board Member, in representation of Senfora
BV, since October 2017 (re-elected in April 2018)
CURRENT EXTERNAL APPOINTMENTS
•
Director of Utilities Investments - Mubadala Investments Company (11)
247
ANNUAL REPORT 2020
Nuno Manuel
da Silva Amado
STATUS
Non-independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Strategy and
Performance Committee
SKILLS AND EXPERIENCE
•
Degree in Companies Organization and Management –
Institute of Labour and Business Sciences (80)
•
Advanced Program in Management - INSEAD (04)
•
Audit and Consulting Department - KPMG Peat Marwick (80-85)
•
Citibank (85-90)
•
Banco Fonsecas & Burnay (90-92)
•
Board of Director Member - Deutsche Bank Portugal (93-97)
•
Executive Committee Member - Banco de Comércio e Indústria (97-04)
•
Vice-Chairman of the Executive Committee -
Crédito Predial Português (00-04)
•
Vice-Chairman of the Board of Directors and Chairman
of the Executive Committee - Banco Santander Totta, SGPS (06-12)
•
Chairman of the Executive Committee -
Banco Comercial Português (12-18)
PAST APPOINTMENTS IN EDP
•
General and Supervisory Board Member, since May 2013
(re-appointed in April 2015 and April 2018)
CURRENT EXTERNAL APPOINTMENTS
•
Chairman - Banco Comercial Português (18)
Karim Djebbour
STATUS
Non-independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Strategy and
Performance Committee
SKILLS AND EXPERIENCE
•
Degree in Agronomic Engineering - (83)
•
Degree in Assessment Economic and Financial Project -
C.E.F.E.B Paris (89)
•
Several positions - Banque de l’Agriculture et du Développement
Rural (84-91)
•
Sub-director - Ministry of Economy (91-93)
•
General Manager Assistant in Project Financing,
Finance Director - SONATRACH’s branch, General Manager (93-99)
•
CEO - Brown and Root Condor (07)
•
General Manager - SONATRACH Investissements
et Participations SIP (08)
•
Chief of Staff of the CEO - Sonatrach (14-15)
PAST APPOINTMENTS IN EDP
•
General and Supervisory Board Member,
in representation of Sonatrach, since April 2018
CURRENT EXTERNAL APPOINTMENTS
•
Official in the General Directorate - Sonatrach Group (15)
248
Maria Celeste
Ferreira Lopes
Cardona
STATUS
Independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Corporate
Governance and Sustainability
Committee
Member of the Financial
Matters Committee/Audit
Committee
SKILLS AND EXPERIENCE
•
Law Degree - Lisbon University (81)
•
Master degree in Law - Lisbon University (94)
•
Doctorate in Law - Lisbon University (15)
•
Assistant Professor - Lisbon University (82)
•
Tax Studies Center Member (83)
•
Portuguese Representative - Organization for Economic
Cooperation and Development (85)
•
Justice Minister - Portuguese Government (02-04)
•
Non-Executive Member of the Board of Directors -
Caixa Geral de Depósitos, S.A. (04-08)
PAST APPOINTMENTS IN EDP
•
Independent General and Supervisory Board Member
since February 2012 (re-elected in April 2015 and April 2018)
CURRENT EXTERNAL APPOINTMENTS
•
Lawyer (82)
•
Consultant - M. Cardona Consulting, Unipessoal, Lda. (93)
•
Supervisory Board Member - SIBS (12)
•
Associate Professor - Lusíada University (17)
249
ANNUAL REPORT 2020
Ilídio da Costa
Leite de Pinho
STATUS
Independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Remuneration
Committee
SKILLS AND EXPERIENCE
•
Electronic and Machinery Engineering degree -
Porto Industrial Institute (64)
•
Non-Executive member, in representation of the National Industry,
of the Board of Directors - ICEP (86-91)
•
President - Municipal Council of Vale de Cambra (73-83)
•
President - General Meeting of Vale de Cambra (93-97)
•
Founder of COLEP Group
•
Founder of Nacional Gás and its associates
•
CEO of several companies and associations
•
Member of the Board of Trustees of Aveiro University
•
Honoris Causa
Doctorate
by Aveiro University
PAST APPOINTMENTS IN EDP
•
Independent General and Supervisory Board Member
since February 2012 (re-elected in April 2015 and April 2018)
CURRENT EXTERNAL APPOINTMENTS
•
CEO - Grupo Ilídio Pinho (94)
•
Chairman - Ilídio Pinho Foundation
Jorge Avelino Braga
de Macedo
STATUS
Independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Corporate
Governance and Sustainability
Committee
Member of the Strategy and
Performance Committee
SKILLS AND EXPERIENCE
•
Law Degree - Lisbon University (71)
•
International Relations Master degree - Yale University (73)
•
Doctorate in Economics - Yale University (79)
•
Professor - Princeton University (80-86)
•
Minister of Finances - Portuguese Government (91-93)
•
Chairman of the European Affairs Parliamentary Committee (94-95)
•
President - Tropical Research Institute (04-15)
•
Consultant - European Bank for Reconstruction
and Development (96-99)
•
Consultant - United Nations (82-84)
•
Consultant - World Bank (84-88)
•
Trainee - International Monetary Fund (78-79)
PAST APPOINTMENTS IN EDP
•
Independent General and Supervisory Board Member
since February 2012 (re-elected in April 2015 and April 2018)
CURRENT EXTERNAL APPOINTMENTS
•
Economics Professor - Nova University of Lisbon (76)
•
Director - Globalization and Governance Center -
Economy Faculty - Universidade Nova de Lisboa (08)
•
Distinguished Fellow - Board of Governors of the International Centre
for International Governance Innovation in Waterloo (14)
•
Chairman of the General Meeting Board - Sociedade de
Desenvolvimento da Madeira (12)
250
Vasco Joaquim
Rocha Vieira
STATUS
Independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Remuneration
Committee
Member of the Strategy and
Performance Committee
SKILLS AND EXPERIENCE
•
Degree in Civil Engineering - Military Academia (56-64)
•
Course of General Staff at the Army (69-70)
•
Complementary Course of General Staff at the Army (70-72)
•
Course of Command and Direction for Official General (82-83)
•
Course of National Defence (84)
•
Brigadier (84)
•
General (87)
•
Governor of Macao (91-99)
•
Minister of the Republic for the Azores (86-91)
•
Deputy Secretary of Communications and Public Works -
Macao Government (74-75)
•
Chief of Army Staff (76-78)
•
National Military Representative at NATO Supreme Headquarters
Allied Powers in Europe (78-82)
PAST APPOINTMENTS IN EDP
•
Independent General and Supervisory Board Member since February
2012 (re-elected in April 2015 and April 2018)
CURRENT EXTERNAL APPOINTMENTS
•
Council Member of the Order of Engineers
•
Member of the Representatives General Meeting
of the Order of Engineers
•
Member of Engineering Academy
•
ISCSP School Board Member
•
Member of the Strategy Board of the Portuguese-Chinese
Chamber of Commerce and Industry
251
ANNUAL REPORT 2020
Augusto Carlos
Serra Ventura
Mateus
STATUS
Independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Corporate
Governance and Sustainability
Committee
Member of the Strategy and
Performance Committee
SKILLS AND EXPERIENCE
•
Economics Degree - Higher Economics and Management Institute (72)
•
Invited Professor - Higher Economics and Management Institute (72-14)
•
Industry Secretary of State (95-96)
•
Minister of Economy (96-97)
PAST APPOINTMENTS IN EDP
•
Independent General and Supervisory Board Member since May 2013
(re-elected in April 2015 and April 2018)
CURRENT EXTERNAL APPOINTMENTS
•
Consultant on macroeconomics fields, economic policies, strategy
and business (86)
252
João Carvalho
das Neves
STATUS
Independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Remuneration
Committee
Vice-Chairman of the
Financial Matters
Committee/Audit Committee
SKILLS AND EXPERIENCE
•
Degree in Companies Organization and Management (81) and MBA
in Management - Economics and Management College Institute
of the University of Lisbon (85)
•
Doctorate in Management / Finance - Manchester Business
School Manchester University (92)
•
Executive: Deputy controller - Cometna SA (81-85)
•
Trainer and General Director - CIFAG/IPE (85-92)
•
General Manager - CIFAG/IPE (87-02)
•
Associate Consultant - Coopers & Lybrand (92-93)
•
Judicial Manager: Torralta (93-97); Casino Hotel de Tróia (94-95);
TVI (97-98)
•
Partner and Statutory Auditor - Neves, Azevedo Rodrigues e Batalha,
SROC (98-08)
•
Chairman of the Management Department - ISEG (07-08)
•
Director - BPN (08)
•
CEO and CFO - SLN (08-09)
•
Chairman - Central Administration of Health System (11-14)
•
Professional appointments: Certified accountant (81)
•
Statutory Auditor (95)
•
FRICS - Fellow of Royal Institution of Chartered Surveyors (08)
•
Recognised European Valuer (REV) by TEGoVA (18)
PAST APPOINTMENTS IN EDP
•
Independent General and Supervisory Board Member since April 2015
(re-elected in April 2018)
CURRENT EXTERNAL APPOINTMENTS
•
Professor - Management Department - ISEG (92), where he is also
a Director of the Post-graduate degree in Management and Real Estate
Evaluation - ISEG (00) and in Health Institution Management (20),
as well as School Board Member - ISEG Lisbon University (14)
•
Management Consultant in Management through the company
Zenaction Business Consulting (14)
•
Independent non-executive member - Montepio - Valor SGOIC (17)
•
Pro-Bono: Member of Valuation Professional Group - RICS Portugal
(20), Member of the European Business Valuation Standards Board -
TEGoVA (20) and Member of the Board - ERES European Real Estate
Society (19)
253
ANNUAL REPORT 2020
María del Carmen
Fernández Rozado
STATUS
Independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Financial
Matters Committee/Audit
Committee
SKILLS AND EXPERIENCE
•
Degree in Economics and Business Administration and Political
Sciences and Sociology - Complutense University of Madrid (78)
•
PhD in Public Finance - Complutense University of Madrid (98)
•
PADE Management Program MBA - IESE Business School (04-05)
•
State Tax Inspector (84)
•
Account Auditor (88)
•
Deputy head of the State Tax Inspection Office (96-99)
•
Chief-Inspector in Spanish Ministry of Economy and Finance (85-86)
•
Deputy Head of the State Tax Inspection Office (87-96) – Chief of Staff
of the State Tax Inspections (96-99) | Member of the Spanish Energy
Commission (Regulatory Body for the Spanish Energy System) (99-11)
•
President of the Task Force for Renewable Energies, Sustainability
and Carbon Markets - ARIAE (99-11)
•
Member of the Advisory Board - Ernst & Young (12-13)
PAST APPOINTMENTS IN EDP
•
Independent General and Supervisory Board Member since April 2015
(re-elected in April 2018)
CURRENT EXTERNAL APPOINTMENTS
•
Consultant, Professor and Speaker
•
Independent Board member and Chairman of the Audit Committee -
ACS Group (Spain 17)
•
Member of the Advisory Board - Beragua Capital
•
Professor in different universities and business schools
Laurie Lee Fitch
STATUS
Independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Strategy and
Performance Committee
SKILLS AND EXPERIENCE
•
B.A. in Arabic - American University (91)
•
M.A. - Georgetown University’s School of Foreign Service (94)
•
Assistant Vice-President - Bank of New York (94-99)
•
Associate - Schroders plc (99-00)
•
Associate - UBS Warburg (00-02)
•
Managing Director and Director of International Equity Research
- TIAA-CREF (02-06)
•
Senior Analyst and Partner - Artisan Partners (06-11)
•
Managing Director and Co-Head, Global Industrial Group, Investment
Division - Morgan Stanley (12-16)
PAST APPOINTMENTS IN EDP
•
General and Supervisory Board Member since April 2018
CURRENT EXTERNAL APPOINTMENTS
•
Partner at PJT Partners (16)
•
Member of the Audit and Finance & Operations subcommittees -
Tate Board of Trustees (15)
•
Chairs the Advisory Board of Georgetown University’s Center
for Contemporary Arab Studies (13)
•
Trustee of The American University in Cairo (19)
254
Clementina Maria
Dâmaso de Jesus
Silva Barroso
STATUS
Independent
POSITION
Member of the General and
Supervisory Board
COMMITTEES
Member of the Financial
Matters Committee/Audit
Committee
SKILLS AND EXPERIENCE
•
Degree in Management - Advanced Institute of Labour
and Business Sciences (ISCTE) (76-81)
•
Master in Business Management - Economy and Management
Superior Institute (ISEG) (84-85)
•
Several positions - Banco Espírito Santo e Comercial Lisboa (88-90)
•
Board of Directors Member and General Director - INDEG ISCTE (99-13)
•
Chairman of the Board of the General Meeting - Science4You, S.A. (14-20)
•
Doctorate in Advanced Company Management - ISCTE (15)
PAST APPOINTMENTS IN EDP
•
General and Supervisory Board Member since April 2018
CURRENT EXTERNAL APPOINTMENTS
•
Invited Professor - ISCTE (82)
•
Auxiliary Professor (20)
•
Statutory auditor and external auditor (90)
•
Non-Executive Director and Audit Committee Member -
CTT Bank, S.A. (15)
•
Board Member - Portuguese Corporate Governance Institute (16)
255
ANNUAL REPORT 2020
Luís Maria Viana
Palha da Silva
STATUS
Independent
POSITION
Member of the General and
Supervisory Board
SKILLS AND EXPERIENCE
•
Degree in Economics - Higher Institute of Economics (78)
•
Degree in Management - Portuguese Catholic University (81)
•
CFO - Covina - Companhia Vidreira Nacional, S.A.R.L (87-91)
•
Member of the Board of Directors - IPE - Investimentos
e Participações Empresariais, SGPS, S.A. (91)
•
Secretary of State for Trade (91-95)
•
CFO - CIMPOR - Cimentos de Portugal, SGPS, S.A. (97-01)
•
CFO and CEO - Jerónimo Martins (01-11)
•
Advanced Management Program - University of Pennsylvania (05)
•
Vice-Chairman of the Board of Directors -
Galp Energia, SGPS, S.A. (12-15)
•
Member of the Board of Directors - Oi, S.A. (15-18)
•
Chairman of the Board - AEM – Associação dos Emitentes Portugueses
•
Non-executive Member of the Board of Directors - NYSE Euronext
•
Member of the Audit Committee - NYSE Euronext
•
Chairman - APETRO – Associação Portuguesa de Empresas
Petrolíferas
PAST APPOINTMENTS IN EDP
•
Chairman of the Board of the General Shareholders’ Meeting
and General and Supervisory Board Member of EDP since April 2019
CURRENT EXTERNAL APPOINTMENTS
•
Chairman of the Board of Directors and Delegate Board Member -
Pharol, SGPS, S.A., (since 2015)
•
Director in its affiliates Bratel B.V. and Bratel S.à.r.l.
•
Non-executive Board Member - Nutrinveste, SGPS, S.A.
256
Executive Board of Directors
António Luís Guerra
Nunes Mexia
POSITION
President of the Executive
Board of Directors, elected
in March 2006
(reappointed in April 2009,
February 2012, April 2015
and April 2018)
SKILLS AND EXPERIENCE
•
Degree in Economy - Geneva University (80)
•
Assistant of the Economy Department
•
Professor at Nova University of Lisbon and Portuguese Catholic
University (82-95)
•
Portuguese Institute for foreign Trade Vice-Chairman of the Board
of Directors (88-90)
•
Board of Directors Member - Banco Espírito Santo de Investimentos
(90-98)
•
Board of Directors Chairman - Gás de Portugal and Transgás (98-00)
•
Board of Directors Vice-Chairman - Galp Energia (00-01)
•
Executive Chairman - Galp Energia (01-04)
•
Minister of Public Works, Transport and Communications -
Portuguese Government (04-05)
•
President - Eurelectric (15-17)
João Manuel
Manso Neto
POSITION
Member of the Executive
Board of Directors, elected
in March 2006
(reappointed in April 2009,
February 2012, April 2015
and April 2018)
SKILLS AND EXPERIENCE
•
Degree in Economy - Higher Institute of Economics (81)
•
Postgraduate in European Economy -
Portuguese Catholic University (82)
•
Course - American Bankers Association (82)
•
Advanced Management Program for Overseas Bankers - Wharton
School (85)
•
Financial and Commercial Retail South Central Director -
Banco Português do Atlântico (81-95)
•
Financial Directorate, Large Institutional Businesses
and Treasury General Director, Board Member - BCP -
Investment Bank and Vice Chairman of BIG Bank Gdansk (95-02)
•
Board Member - Grupo Banco Português de Negócios (02-03)
•
General Director and Board Member - EDP Produção (03-05)
257
ANNUAL REPORT 2020
António Fernando
Melo Martins
da Costa
POSITION
Member of the Executive
Board of Directors,
elected in March 2006
(reappointed in April 2009,
February 2012, April 2015
and April 2018)
SKILLS AND EXPERIENCE
•
Degree in civil engineering - Porto University (76)
•
MBA - Porto Business School (89)
•
Executive Course - INSEAD, Fontainebleau - (95)
•
PADE - AESE (00)
•
Advanced Management Program - Wharton School (03)
•
Assistant Professor - Engineering Institute of Oporto (76-89)
•
Hydraulic Production - EDP (81-89)
•
General Director - Banco Millennium BCP and Executive Board Member
of several insurance, pension and financial asset management
companies - BCP Group (89-03)
•
Executive Director - Eureko BV, Chairman - Eureko Polska
and Executive Vice-Chairman - PZU Poland (99-02)
•
Director and Board of Directors Vice-Chairman - EDP Brasil (03-07)
•
Vice-Chairman - Portuguese Chamber of Commerce in Brazil (03-07)
•
Chairman - Brazilian Electricity Distributors Association (03-07)
•
Chairman and CEO - EDP Renováveis USA (07-09)
•
Member of the Board of Directors - EDP Renováveis (08-11)
•
Chairman - Chamber of Commerce of USA in Portugal
•
Chairman of the Strategic Board– Proforum | Vice-Chairman- APGEI
•
Member – General and Supervisory Board – Porto Business School
•
Member – General Board – AESE
•
Member – Consulting Board – INDEG ISCTE
CURRENT EXTERNAL APPOINTMENTS
•
Member of the Strategic Board – ISEG MBA (21)
•
Member of the Board of Trustees – Alfredo de Sousa Foundation (21)
João Manuel
Veríssimo
Marques da Cruz
POSITION
Member of the Executive
Board of Directors Member
elected in February 2012,
(reappointed in April 2015
and April 2018)
SKILLS AND EXPERIENCE
•
Degree in Management - Technical University of Lisbon (84)
•
MBA - Technical University of Lisbon (89)
•
Post-graduation in Marketing and Airlines Marketing -
International Air Travel Association/Bath University (92)
•
Several positions including General Director - TAP Air Portugal (84-99)
•
Director - TAPGER (97-99)
•
Director - EMEF and other companies - Grupo CP (00-02)
•
Executive Committee Chairman - Air Luxor (02-05)
•
President - External Trade Institute of Portugal (05-07)
CURRENT EXTERNAL APPOINTMENTS
•
Portuguese Representative of the Supervisory Board of the European
Union Chamber of Commerce in China (19)
258
Miguel Stilwell
de Andrade
POSITION
Member of the Executive
Board of Directors elected
in February 2012, (reappointed
in April 2015 and April 2018)
SKILLS AND EXPERIENCE
•
Degree in Mechanic Engineering – Strathclyde University (98)
•
MBA – Massachusetts Institute of Technology -
Sloan School of Management (03)
•
Analyst, Mergers and Acquisitions – UBS Investment Bank (UK) (98-00)
•
Associate and Project Manager at Corporate Development /
M&A Department – EDP (00-05)
•
Head of Corporate Development / M&A Department – EDP (05-09)
•
Non-executive member of Board of Directors – EDP Inovação (07-12)
•
Member of the Board of Directors – EDP Distribuição (09-12)
•
Non-executive member of Board of Directors –
EDP Gás Distribuição (09-12)
•
Chairman – InovGrid ACE (09-11)
•
CEO – EDP Comercial (12-18)
•
CEO – EDP Espanha (12-18)
•
CFO – EDP Group (18-21)
•
Interim Chairman of the Executive Board of Directors – EDP (20-21)
•
Chairman of the Executive Board of Directors – EDP (21)
CURRENT EXTERNAL APPOINTMENTS
•
Member of the General Board –
AEM - Association of Listed Companies (21)
Miguel Nuno
Simões Nunes
Ferreira Setas
POSITION
Member of the Executive
Board of Directors, elected
in April 2015 (reappointed
in April 2018)
SKILLS AND EXPERIENCE
•
Degree in Physics Engineering - Higher Technical Institute (93)
•
Masters in Electronic and Computing Engineering -
Higher Technical Institute (95)
•
MBA - Nova University of Lisbon (96)
•
Consultant - McKinsey & Company (95-98)
•
Corporate Director - GDP - Gás de Portugal (98-00)
•
Board Member - Setgás (99-01)
•
Executive Board Member - Lisboagás (00-01)
•
Strategic Marketing Director - Galp Energia (01-04)
•
Board Member - Comboios de Portugal (04-06)
•
Chief of Staff of the Chairman of the Executive Board of Directors
Chairman - EDP (06-07)
•
Board Member - EDP Comercial (07-08)
•
Board Member - EDP Inovação (07-08 / 12-14)
•
Vice-Chairman - EDP Brasil (08-13)
CURRENT EXTERNAL APPOINTMENTS
•
Vice-Chairman of the Board – BCSD Portugal (21)
259
ANNUAL REPORT 2020
Rui Manuel
Rodrigues
Lopes Teixeira
POSITION
Member of the Executive
Board of Directors, elected in
April 2015 (reappointed in
April 2018)
SKILLS AND EXPERIENCE
•
Degree in in Naval Engineering - Higher Technical Institute (95)
•
MBA - Nova University of Lisbon (01)
•
Advanced Management Program - Harvard Business School (13)
•
Assistant Director of the Naval Commercial Department -
Gellweiler (96-97)
•
Project manager - Det Norske Veritas (97-01)
•
Consultant - McKinsey & Company (01-04)
•
Corporate Control and Planning Director - EDP (04-07)
•
Board Member - EDP Renováveis (07-15)
CURRENT EXTERNAL APPOINTMENTS
•
Does not hold any other office or was appointed to any executive
position outside EDP Group
Maria Teresa Isabel
Pereira
POSITION
Member of the Executive
Board of Directors, elected in
April 2018
SKILLS AND EXPERIENCE
•
Law Degree - Law School, Lisbon University (93)
•
Lecturer in Law of Obligations - Law School, Lisbon University (93-97)
•
Post-graduation in Information Society Law - Lisbon Law School (00-01)
•
Lawyer registered at the Portuguese Bar Association (97)
•
Jurist - Proet Projectos (EDP Group) (94-98)
•
Legal Director - ONI SGPS (98-05)
•
Legal Director and General Secretariat, Company Secretary -
EDP (06-18)
CURRENT EXTERNAL APPOINTMENTS
•
Does not hold any other office or was appointed to any executive
position outside EDP Group
260
Vera de Morais
Pinto Pereira
Carneiro
POSITION
Member of the Executive
Board of Directors elected
in April 2018
SKILLS AND EXPERIENCE
•
Economics Degree - Nova University of Lisbon (96)
•
Post-graduation in Economics - Nova University of Lisbon (98)
•
MBA - INSEAD, Fontainebleau (00)
•
Associate - Mercer (96-99)
•
Founder - Innovagency Consulting (01-03)
•
Television Service Director - TV Cabo - PT Multimedia (03-07)
•
Television Service Director - MEO (07-14)
•
Executive Vice-Chairman and General Director (Portugal and Spain) -
Fox Networks Group (14-18)
CURRENT EXTERNAL APPOINTMENTS
•
Member of the Board - Portuguese Institute of Corporate Governance
(19)
•
Member of the Board of Charge up Europe (20)
•
Chairman - Portuguese-Chinese Chamber of Commerce and Industry
(21)
At the Extraordinary General Shareholders Meeting held in 19 January 2021, other than (i) Miguel Stilwell de Andrade, (ii)
Miguel Nuno Simões Nunes Ferreira Setas, (iii) Rui Manuel Rodrigues Lopes Teixeira, and (vi) Vera de Morais Pinto Pereira
Carneiro, whose biographies may be found above, the following person was also appointed to the Executive Board of
Directors for the triennium 2021-2023:
Ana Paula Garrido
Pina Marques
POSITION
Member of the Executive
Board of Directors, elected
in January 2021
SKILLS AND EXPERIENCE
•
Economics Degree - Faculdade de Economia do Porto (96)
•
MBA - INSEAD, France and Singapore (02)
•
Executive Education Programs at IMD in Lausanne and Harvard
Business School (08 and 09)
•
Marketing at Procter & Gamble (96-98)
•
SMEs Business Unit at Optimus (98)
•
Marketing Director of the Mobile Residential Business Unit
at Optimus (03-07)
•
Brand and Communication Director at Optimus (05-07)
•
Marketing and Sales Director of the Mobile Residential Business
Unit at Optimus (08-09)
•
Executive Board Member of Optimus (10-13)
•
President of APRITEL (Portuguese Association of Telecom
Operators) (11-14)
•
Executive Board of Directors Member (13-20)
•
Vice-President at NOS, SGPS, S.A. (19-20)
•
Non-Executive Board Member - SportTV (19-21)
CURRENT EXTERNAL APPOINTMENTS
•
Chairman of the Governing Board –
ELECPOR - Portuguese Association of Electric Companies (21)
•
Member of the General Board – COTEC Portugal -
Business Association for Innovation (21)
261
ANNUAL REPORT 2020
ANNEX II
Meetings of the General and Supervisory Board and each member's attendance:
NAME
23
JAN
20
FEB
9
MAR
16
MAR
16
APR
07
MAY
4
JUN
25
JUN
6
JUL
13
JUL
LUÍS FILIPE MARQUES
AMADO – CHAIRMAN
P
P
P
P
P
P
P
P
P
P
Dingming Zhang –
Vice-Chairman
R
A
R
R
A
A
A
R
A
A
Augusto Mateus
P
P
P
P
P
P
P
P
P
P
Clementina Barroso
P
P
A
A
P
P
P
P
P
P
Eduardo de Almeida
Catroga
P
A
P
P
P
P
P
R
P
P
Felipe Fernández
Fernández
P
P
P
P
P
P
P
P
P
P
Fernando Masaveu
Herrero
P
P
P
P
P
P
A
P
P
P
Ilídio Pinho
P
P
P
A
R
R
R
R
R
R
Ignacio Herrero Ruiz
P
A
P
P
P
P
P
P
P
P
João Carvalho das Neves
P
P
P
P
P
P
P
P
P
P
Jorge Braga de Macedo
A
P
P
P
P
P
P
P
P
P
Karim Djebbour
P
A
P
P
A
A
P
P
P
P
Laurie Fitch
P
P
P
P
P
P
P
P
P
P
Luís Palha da Silva
P
P
P
P
P
P
P
P
P
P
Maria Celeste Cardona
P
P
P
A
P
P
P
P
P
P
María del Carmen Rozado
P
P
P
P
P
P
P
P
P
P
Mohammed Al-Shamsi
P
A
P
P
A
A
P
P
P
A
Nuno Amado
P
A
P
P
P
P
P
P
P
P
Shengliang Wu
R
A
P
P
P
A
P
P
P
P
Vasco Rocha Vieira
P
P
P
P
P
P
P
P
P
A
Li Li
A
A
R
R
A
A
A
P
A
A
262
NAME
15
JUL
30
JUL
3
SEP
24
SEP
29
OCT
17
NOV
26
NOV
9
DEC
17
DEC
%
LUÍS FILIPE MARQUES AMADO –
CHAIRMAN
P
P
P
P
P
P
P
P
P
100
Dingming Zhang – Vice-Chairman
A
R
A
R
A
A
R
R
A
0
Augusto Mateus
P
P
P
P
P
P
P
P
P
100
Clementina Barroso
P
P
P
P
P
P
P
P
P
89
Eduardo de Almeida Catroga
P
P
P
P
P
P
P
P
P
89
Felipe Fernández Fernández
P
P
A
P
P
P
P
P
P
95
Fernando Masaveu Herrero
P
P
P
P
P
P
P
P
P
95
Ilídio Pinho
R
R
R
R
R
R
R
R
R
16
Ignacio Herrero Ruiz
P
P
P
P
P
P
P
P
P
95
João Carvalho das Neves
P
P
P
P
P
P
P
P
P
100
Jorge Braga de Macedo
P
P
P
P
P
P
P
P
P
95
Karim Djebbour
P
P
P
P
P
P
A
P
P
79
Laurie Fitch
P
P
P
P
P
P
P
P
P
100
Luís Palha da Silva
P
P
P
P
P
P
P
P
P
100
Maria Celeste Cardona
P
P
P
P
P
P
P
P
P
95
María del Carmen Rozado
P
P
P
P
P
P
P
P
P
100
Mohammed Al-Shamsi
P
A
A
P
A
P
A
A
A
47
Nuno Amado
P
P
P
P
A
A
P
P
P
84
Shengliang Wu
P
R
R
R
A
A
R
R
A
42
Vasco Rocha Vieira
P
P
P
P
P
P
P
P
P
95
Li Li
A
P
P
P
A
P
P
P
P
42
P = Present; A = Absent; R = Represented
Total meetings in 2020: 19
Average participation: 79%
263
ANNUAL REPORT 2020
ANNEX III
Meetings of the Executive Board of Directors and each member's attendance:
NAME
07-
JAN
14-
JAN
21-
JAN
28-
JAN
04-
FE
B
11-
FE
B
14-
FE
B
18-
FE
B
20-
FE
B
02-
MAR
09-
MAR
10-
MAR
17-
MAR
24-
MAR
26-
MAR
31-
MAR
02-APR
07-APR
09-APR
António Mexia
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
João Manso
Neto
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
António Martins
da Costa
P
P
P
P
P
P
A
P
P
P
P
P
P
P
P
P
P
P
P
João Marques
da Cruz
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Miguel Stilwell
de Andrade
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Miguel Setas
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Rui Teixeira
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Maria Teresa
Pereira
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Vera Pinto
Pereira Carneiro
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P = Present; A = Absent; R = Represented
NAME
14-APR
21-APR
23-APR
28-APR
30-APR
05-
MA
Y
07-
MA
Y
12-
MA
Y
16-
MA
Y
19-
MA
Y
26-
MA
Y
03-
JUN
09-
JUN
16-
JUN
18-
JUN
23-
JUN
26-
JUN
30-
JUN
06-
JUL
António Mexia
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
-
João Manso
Neto
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
-
António Martins
da Costa
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
João Marques
da Cruz
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Miguel Stilwell
de Andrade
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Miguel Setas
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Rui Teixeira
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Maria Teresa
Pereira
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Vera Pinto
Pereira Carneiro
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P = Present; A = Absent; R = Represented
264
NAME
07-
JUL
10-
JUL
13-
JUL
14-
JUL
15-
JUL
15-
JUL
21-
JUL
28-
JUL
04-A
UG
07-A
UG
25-A
UG
28-A
UG
31-A
UG
01-
SE
P
03-
SE
P
08-
SE
P
15-
SE
P
22-
SE
P
29-
SE
P
António Mexia
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
João Manso
Neto
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
António Martins
da Costa
P
P
P
P
P
P
P
P
A
P
P
P
P
P
P
P
P
P
P
João Marques
da Cruz
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Miguel Stilwell
de Andrade
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Miguel Setas
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Rui Teixeira
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Maria Teresa
Pereira
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Vera Pinto
Pereira Carneiro
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P = Present; A = Absent; R = Represented
NAME
06-OCT
13-OCT
20-OCT
23-OCT
27-OCT
29-OCT
03-
NOV
10-
NOV
17-
NOV
24-
NOV
30-
NOV
30-
NOV
02-
DE
C
09-
DE
C
15-
DE
C
22-
DE
C
28-
DE
C
%
António NAME
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100%
João Manso Neto
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100%
António Martins da
Costa
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
97,3%
João Marques da
Cruz
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
100%
Miguel Stilwell de
Andrade
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
100%
Miguel Setas
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
100%
Rui Teixeira
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
100%
Maria Teresa Pereira
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
100%
Vera Pinto Pereira
Carneiro
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
100%
P = Present; A = Absent
Total meetings in 2020: 74
Average participation: 99,7%
265
ANNUAL REPORT 2020
ANNEX IV
Positions held by the members of the Executive Board of Directors in other companies belonging or not to the EDP Group:
ANTÓNIO
MEXIA
JOÃO
MANSO
NETO
ANTÓNIO
MARTINS
DA
COSTA
JOÃO
MARQUES
DA
CRUZ
MIGUEL
STILWELL
ANDRADE
MIGUEL
SETAS
RUI
TEIXEIRA
TERESA
PEREIRA
VERA
PINTO
PEREIRA
CNET – Centre for New Energy
Technologies, S.A.
-
-
-
CBD
-
-
-
-
-
Comercializadora Energética Sostenible, S.A.U.
-
-
-
-
-
-
R
-
-
EDP - Ásia Soluções Energéticas Lda.
-
-
-
CBD
-
-
-
-
-
EDP - Energias de Portugal Sociedade
Anónima, Sucursal en España
PR
PR
PR
-
PR
-
PR
-
-
EDP - Energias do Brasil, S.A.
CBD
-
-
C
C
VP/MD
-
-
-
EDP - Estudos e Consultoria, S.A.
-
-
-
-
-
-
CBD
EDP - Gestão da Produção de Energia, S.A.
-
-
-
-
-
CBD
-
-
-
EDP - Soluções Comerciais, S.A.
-
-
-
-
-
-
-
-
CBD
EDP Comercial - Comercialização
de Energia, S.A.
-
-
-
-
-
-
-
-
CBD
EDP España, S.A.U.
-
C
-
-
C
-
VP/MD
-
C
EDP Espírito Santo Distribuição
de Energia S.A.
-
-
-
-
-
CBD
-
-
-
EDP Finance BV
R
R
R
R
R
R
R
R
R
EDP Gás.Com -
Comércio de Gás Natural, S.A.
-
CBD
-
-
-
-
-
-
D
EDP Global Solutions -
Gestão Integrada de Serviços, S.A.
-
-
-
-
-
-
-
CBD
-
EDP Iberia, S.L.
-
-
-
-
-
-
CBD
-
-
EDP Internacional, S.A.
-
-
-
CBD
-
-
-
-
-
EDP International Investments and Services SL
-
-
-
CBD
-
-
-
-
-
EDP IS - Investimentos e Serviços,
Sociedade Unipessoal, Lda.
-
-
-
-
M
-
-
-
-
EDP Real Estate Global Solutions -
Imobiliária e Gestão de Participações, S.A.
-
-
-
-
-
-
-
CBD
-
EDP Renewables Europe SL
-
CBD
-
-
-
-
-
-
-
EDP Renováveis Brasil, S.A.
-
CBD
-
-
-
-
D
-
-
EDP Renováveis Servicios Financieros S.A.
-
CBD
-
-
-
-
-
-
-
EDP Renováveis, S.A.
CBD
VP/MD
-
-
-
-
C
-
C
EDP São Paulo Distribuição de Energia S.A.
-
-
-
-
-
CBD
-
-
-
EDP Solar España, S.A.U.
-
-
-
-
-
-
-
-
R
EDP Transmissão Aliança SC S.A.
-
-
-
-
-
CBD
-
-
-
EDP Transmissão MA I S.A.
-
-
-
-
-
CBD
-
-
-
EDP Transmissão MA II S.A.
-
-
-
-
-
CBD
-
-
-
EDP Transmissão S.A.
-
-
-
-
-
CBD
-
-
-
EDP Transmissão SP-MG S.A.
-
-
-
-
-
CBD
-
-
-
EDP Ventures Brasil S.A.
-
-
-
-
-
CBD
-
-
-
EDP Ventures España, S.A.
-
-
-
-
-
-
CBD
-
-
Empresa Hidroeléctrica do Guadiana, S.A.
-
-
-
-
-
CBD
-
-
-
Energest S.A.
-
-
-
-
-
CBD
-
-
-
266
ANTÓNIO
MEXIA
JOÃO
MANSO
NETO
ANTÓNIO
MARTINS
DA
COSTA
JOÃO
MARQUES
DA
CRUZ
MIGUEL
STILWELL
ANDRADE
MIGUEL
SETAS
RUI
TEIXEIRA
TERESA
PEREIRA
VERA
PINTO
PEREIRA
Energia Ásia Consultoria, Lda.
-
-
-
CBD
-
-
-
-
-
Energia RE, S.A.
-
-
D
-
CBD
-
-
-
-
Hydro Global Investment Limited
-
-
-
CBD
-
-
-
-
-
Investco S.A.
-
-
-
-
-
CBD
-
-
-
Labelec - Estudos, Desenvolvimento e
Actividades Laboratoriais, S.A.
-
-
-
CBD
-
-
-
-
-
Lajeado Energia S.A.
-
-
-
-
-
CBD
-
-
-
Pecém Operação e Manutenção de
Unidades de Geração Elétrica S.A.
-
-
-
-
-
CBD
-
-
-
Porto do Pecém Geração de Energia S.A.
-
-
-
-
-
CBD
-
-
-
Sãvida - Medicina Apoiada, S.A.
-
-
-
-
-
CBD
-
-
-
SCNET – Sino-Portuguese Centre for Energy
Technologies (Shangai) co., Ltd.
-
-
-
D
-
-
-
-
-
Transporte GNL, S.A.U.
-
-
-
-
-
-
R
-
-
Companhia de Electricidade de Macau –
CEM, S.A.
-
-
-
VP
-
-
-
-
-
OMIP – Operador do Mercado Ibérico
(Portugal), SGPS, S.A.
-
D
-
-
-
-
-
-
-
Operador del Mercado Ibérico de Energía,
Polo Español, S.A. (OMEL)
-
C
-
-
-
-
-
-
-
Information updated as of 31 December 2020.
D = Director; C = Counsellor; M = Manager; CBD = Chairman of the Board of Directors; R = Representative
RP – Permanent Representative; VP = Vice-President; VP/CD = Vice-President and Managing Director
267
ANNUAL REPORT 2020
ANNEX V
Meetings of the Financial Matters Committee/Audit Committee and each member's attendance:
NAME
22
JAN
13
FEB
20
FEB
9
APR
5
MAY
7
MAY
18
JUN
23
JUL
31
AUG
LUÍS FILIPE MARQUES AMADO -
PRESIDENTE
P
P
P
P
P
P
P
P
P
João Carvalho das Neves - Vice-Presidente
P
P
P
P
P
P
P
P
P
Clementina Dâmaso Barroso
P
P
P
P
P
P
P
P
P
Maria Celeste Cardona
P
P
P
P
P
P
P
P
P
Maria del Carmen Rozado
P
P
P
P
P
P
P
P
P
NAME
3
SEP
10
SEP
24
SEP
26
OCT
29
OCT
19
NOV
10
DEC
%
LUÍS FILIPE MARQUES AMADO - PRESIDENTE
P
P
P
P
P
P
P
100
João Carvalho das Neves - Vice-Presidente
P
P
P
P
P
P
P
100
Clementina Dâmaso Barroso
P
P
P
P
P
P
P
100
Maria Celeste Cardona
P
P
P
P
P
P
P
100
Maria del Carmen Rozado
P
P
P
P
P
P
P
100
P = Present; A = Absent; R = Represented
Total meetings in 2020: 16
Average participation: 100%
Meetings of the Remuneration Committee and each member's attendance:
NAME
28
FEB
15
APR
31
JUL
5
NOV
13
NOV
17
DEC
%
SHENGLIANG WU - PRESIDENTE
P
P
P
A
P
P
83
Fernado Masaveu Herrero
A
P
P
R
P
P
67
Ilídio Pinho
A
A
P
R
R
P
33
João Carvalho das Neves
P
P
P
P
P
P
100
Vasco Rocha Vieira
P
P
P
P
P
P
100
P = Present; A = Absent; R = Represented
Total meetings in 2020: 6
Average participation: 77%
Meetings of the Corporate Governance and Sustainability Committee and each member's attendance:
NAME
19
FEV
06
MAR
29
JUL
28
OCT
16
DEC
%
LUÍS FILIPE MARQUES AMADO - PRESIDENTE
P
P
P
P
P
100
Augusto Mateus
P
P
P
P
P
100
Felipe Fernández Fernández
P
P
P
A
P
80
Jorge Braga de Macedo
P
P
P
P
P
100
Maria Celeste Cardona
P
P
P
P
P
100
Ignacio Herrero Ruiz
P
P
A
A
P
60
Li Li
R
A
P
A
R
20
P = Present; A = Absent; R = Represented
Total meetings in 2020: 5
Average participation: 80%
268
Meetings of the Strategy and Performance Committee and each member's attendance:
NAME
22
JAN
19
FEV
06
MAY
29
JUL
23
SEP
28
OCT
25
NOV
10
DEC
%
EDUARDO DE ALMEIDA CATROGA - PRESIDENTE
P
P
P
P
P
P
P
P
100
Augusto Mateus
P
P
P
P
P
P
P
P
100
Fernando Masaveu Herrero
A
P
P
P
P
P
P
P
88
Ignacio Herrero Ruiz
P
P
P
A
A
P
P
A
63
Jorge Avelino Braga de Macedo
A
P
P
P
P
P
P
P
88
Karim Djebbour
P
A
A
A
P
A
A
A
25
Laurie Fitch
P
P
P
P
P
P
P
P
100
Mohammed Al-Shamsi
P
A
A
A
A
A
A
A
13
Nuno Amado
P
P
P
P
P
p
P
P
100
Shengliang Wu
A
P
A
A
A
A
P
A
25
Vasco Rocha Vieira
P
P
P
P
P
P
P
P
100
P = Present; A = Absent; R = Represented
Total meetings in 2020: 8
Average participation: 73%
Meetings of the United States of America (USA) Business Affairs Monitoring Committee and each member's attendance:
NAME
19
MAY
28
JUL
22
SEP
27
OCT
24
NOV
8
DEC
%
SHENGLIANG WU - PRESIDENTE
P
P
P
P
P
P
100
Fernado Masaveu Herrero
A
P
P
P
P
P
83
Ilídio Pinho
P
P
P
P
P
P
100
João Carvalho das Neves
P
P
P
A
P
A
67
Vasco Rocha Vieira
P
P
P
P
P
P
100
P = Present; A = Absent; R = Represented
Total meetings in 2020: 6
Average participation: 93%
Fostering
excellence
to meet the
world's needs
Changing tomorrow now.
A. Remuneration policy applicable to the members
of the Executive Board of Directors, approved
by the Remuneration Committee appointed
by the General and Supervisory Board
273
B. Remuneration policy applicable to the members
of the Corporate Bodies approved by the Remuneration
Committee of the General Shareholders’ Meeting
282
C. Particulars of the remuneration of the members
of the General and Supervisory Board
284
D. Particulars applicable to the remuneration
of the Statutory Auditor
285
E. Particulars applicable to the remuneration
of the Environmnent and Sustainability Board
287
F. Particulars applicable to the remuneration of the
Remuneration Committee of the General Meeting
287
G. Particulars applicable to the remuneration
of the Chairman of the General Meeting
287
H. Evolution of remuneration and performance
288
272
Remuneration
Report
EDP has rooted in its organizational culture the challenge and ambition to implement and achieve, at all times, the best
corporate governance practices, and seeks, with transparency and rigor, to go beyond the legal and regulatory requirements
applicable in this area. Despite the understanding of the Portuguese Securities Commission (CMVM) that the remuneration
report only needs to be released and submitted to shareholders, for the first time, at the annual general shareholders’
meeting subsequent to the year in which the new remuneration policy is approved, as of 2022, EDP sought, under the terms
of Article 245.º - C of the Portuguese Securities Code, to anticipate, already in 2021, to provide a version aiming to the
effective compliance of such legal requirement. This commitment seeks to materialize our culture towards our
Shareholders and the market in general.
Pursuant to the terms of Article 245-C of the Portuguese Securities Code, as amended by Law no. 50/2020, of 25 August,
this Remuneration Report envisages to provide a wide-ranging view of the remuneration attributed to the members of the
corporate bodies of EDP – Energias de Portugal, S.A., including all benefits, regardless of their form, due or attributed during
the financial year of 2020.
As set forth in EDP's Articles of Association, the remuneration of the members of the governing bodies has been fixed
by a Remuneration Committee appointed by the General Shareholders’ Meeting, with the exception of the remuneration
of the members of the Executive Board of Directors, which have been fixed by a Remuneration Committee appointed
by the General and Supervisory Board.
These Committees have been submitting annually to the General Shareholders’ Meeting a declaration on the remuneration
policy of the members of the governing bodies, under the terms of paragraph 1 of article 2 of Law no. 28/2009, of 19 June.
Recently, this framework has been amended pursuant to the transposition of EU Directive no. 2017/828 of the European
Parliament and of the Council of 17 May 2017, as regards the encouragement of long-term shareholder engagement.
With the changes enacted by Law no. 50/2020, of 25 August, namely in light of Article 26-B of the Portuguese Securities
Code, these Committees will be responsible for submitting a remuneration policy proposal for approval by the General
Shareholders’ Meeting (article 26-B of the Portuguese Securities Code), as from 2021 these Committees will be responsible
for submitting a remuneration policy proposal for approval by the General Shareholders’ Meeting.
273
ANNUAL REPORT 2020
A. Remuneration policy applicable to the members of the Executive Board of
Directors, approved by the Remuneration Committee appointed by the General
and Supervisory Board
Procedures for adoption of the policy
The remuneration policy for the members of the managing body has been set by the Remuneration Committee appointed by
the General and Supervisory Board. This committee defined the remuneration of the directors, intending for it to reflect the
performance of each member of the Executive Board of Directors in each year of their term of office (annual variable
remuneration) and their performance during the whole period of the term by setting a variable component that is consistent
with the maximisation of EDP's long-term performance (variable multi-annual remuneration).
The remuneration policy is reviewed annually, and submitted for approval at the General Shareholders’ Meeting.
The remuneration policy for the financial year 2020 has been approved at the General Shareholders’ Meeting held
on 16 April 2020.
It should be noted that, at the Extraordinary General Shareholders’ Meeting held on 19 January 2021, the Remuneration
Committee appointed by the General and Supervisory Board submitted a proposal to extend the current remuneration policy
of the Executive Board of Directors, as approved on 16 April 2020, to the members of the Executive Board of Directors to be
appointed for the triennium 2021-2023, until such time as the 2021 Annual General Shareholders’ Meeting is held. This
proposal (which was approved), was grounded on the understanding of the Remuneration Committee that the extension,
for a few weeks, of the term of the current remuneration policy, constituted a solution which promoted the legitimacy and
efficiency of the policy, until a new policy can be presented which is in line with EDP’s strategy as conformed by the new
Executive Board of Directors, and also that is aligned with the policy to be submitted to the General and Supervisory Board.
Qualititative component of the remuneration
The remuneration policy statement, as approved by the shareholders, lays down that the total variable component can reach
twice the fixed component during a term of office, thereby placing a maximum limit of two-thirds of the remuneration
depending on fulfilment of strict Company performance goals.
The variable remuneration depends on the management's compliance with a performance level of 90% of the business plan,
and the maximum values permitted by the Company's remuneration policy will only be earned if a level of compliance of
110% is reached.
Variable remuneration is divided into annual, which may only reach 80% of fixed remuneration, and multi-annual, which may
reach 120% of the fixed remuneration. The multi-annual remuneration, although calculated annually, only becomes effective
if, at the end of the term, on average, at least 90% of set goals have been achieved, assessed by the performance of the
Company, by its comparison with strategic benchmarks and by the individual contribution of each member of the Executive
Board of Directors for that result.
If the remuneration goals are fully met in a term of office, 60% of the directors' variable remuneration is deferred for no less
than three years.
If we compare this percentage with that set out for credit institutions and financial companies, pursuant to Directive
2010/76/EU of the European Parliament and of the Council of 24 November, as it is a paradigm that was widely analyzed
and discussed in Europe, we find that EDP's policy on variable remuneration is equivalent to the strictest used by these
entities.
In accordance with the remuneration policy of the members of the Executive Board of Directors proposed by the
Remuneration Committee of the General and Supervisory Board, the variable multi-annual remuneration may be
a maximum of 120% of gross annual remuneration, and it will be paid three years after the financial year in question.
274
Payment of the multiannual variable remuneration is conditional on the non-realization of intentional unlawful acts, known
after the completion of the evaluation and that jeopardize the sustainability of the performance of the Company, and it is
made after it is determined and approved by the Remuneration Committee of the General and Supervisory Board.
The remuneration policy statement approved by the General Meeting on 16 April 2020 sets out the following:
•
Fixed Annual Remuneration
– EUR 800,000 gross for the CEO, EUR 560,000 gross for the administrator responsible
for finance matters (CFO) and for the CEO of EDP Renováveis Group, and EUR 480,000 gross for each of the remaining
members of the Executive Board of Directors. The directors' retirement savings plans are maintained during their term
of office, at a net amount of 10% of their fixed annual remuneration. The characteristics of these retirement savings
plans are set out in legislation currently in force, applicable to these financial products;
•
Annual Variable Remuneration
– for each member of the Executive Board of Directors, its value is limited to 80%
of their gross annual fixed remuneration. The amount is determined on the basis of the following indicators for each
year in office: (i) performance of the EDP Group's Total Shareholder Return against Eurostoxx Utilities and PSI-20,
(ii) earnings per share, (iii) net debt to EBITDA ratio, (iv) operational cash flow excluding regulatory receivables, (v)
residual income and (vi) EBITDA (annual growth rate) vs. peers. The weighted average of these indicators is given
an overall weight of 80% for all members of the Executive Board of Directors, when determining their annual variable
remuneration. The other 20% are based on a qualitative assessment by the Remuneration Committee of the General
and Supervisory Board. The annual performance indicators are aimed at assessing the activity of the members of the
Executiver Board of Directors on a short-term basis. To that effect, they take into account stock market performance as
well as financial performance indicators, which are then compared against the annual budget proposed by the Executive
Board of Directors and approved by the General and Supervisory Board, where each of the annual budgets is based on
the Business Plan in effect at the time. This kind of performance assessment allows to evaluate the actual fulfilment by
the Executive Board of Directors of the short-term objectives assumed towards their shareholders.
KPI
WEIGHT
BENCHMARK
DESCRIPTION
QUANTITATIVE
COMPONENT
(80%)
Total
shareholder
return (TSR)
vs Eurostoxx
utilities and
PSI20
25%
50% - PSI 20
50% - SX6E
Comparison between EDP's Total Shareholder Return
(TSR) and the TSR of two major indexes (SX6E which
encompasses the most important companies within the
Eurozone); and the PSI 20 (the Portuguese stock market
index). The indexes are equally-weighted and the
comparison is made using current year-end prices,
assuming dividend reinvestment during the year.
Earnings per
Share
20%
2020 Budget
Comparison between earning per share of the year under
analysis and the one defined in the annual budget
previously approved by the General and Supervisory
Board.
Net debt to
EBITDA
15%
2020 Budget
Comparison between the net debt over EBITDA ratio and
the ratio defined in the annual budget approved by the
General and Supervisory Board.
Operating
cash flow
excluding
regulatory
receivables
13%
2020 Budget
Comparison between this year’s operating cash flow,
excluding the impact from regulatory receivables, and the
one defined in the annual budget approved by the General
and Supervisory Board.
Residual
Income
3,5%
2020 Budget
Comparison between the net income minus the product
between EDP's cost of capital and its net worth, excluding
non-controllable interests, and the amount previously
defined in the annual budget approved by the General and
Supervisory Board.
275
ANNUAL REPORT 2020
KPI
WEIGHT
BENCHMARK
DESCRIPTION
EBITDA
(annual
growth rate)
vs peers
3,5%
Peers
Comparison between the annual growth of EBITDA of
EDP with the average annual growth of EBITDA of its
peers
QUALITATIVE
COMPONENT
(20%)
Individual
Performance
Assessment
20%
-
Individual assessment by the Remuneration Committee of
the General and Supervisory Board, based on the
individual performance for the period of each member of
the Executive Board of Directors.
Total
100%
(1)
Excludes regulatory receivables
The resulting amount of the quantitative and qualitative component is then weighted, as mentioned above, by a coefficient
of 80% of the annual fixed remuneration, linearly calculated as follows:
•
if performance reaches less than 90% of the defined objectives, there will be no annual variable remuneration
attribution;
•
if the performance is between 90% and 95% of the defined objectives, an amount within the range of 8% and 24%
of the fixed remuneration of each member of the Executive Board of Directors is due;
•
if performance is between 95% and 100% of the defined objectives, an amount within the range of 24% and 52,8%
of the fixed remuneration of each member of the Executive Board of Directors is due;
•
if performance is between 100% and 105% of the defined objectives, an amount within the range of 52,8% and 68%
of the fixed remuneration of each member of the Executive Board of Directors is due;
•
if performance is between 105% and 110% of the defined objectives, an amount within the range of 68% and 80%
of the fixed remuneration of each member of the Executive Board of Directors is due;
•
if performance meets the defined objectives in more than 110% of the defined objectives, an amount equal to 80%
of the fixed remuneration of each member of the Executive Board of Directors is due.
25.0%
20.0%
15.0%
13.0%
3.5%
3.5%
20.0%
Annual Performance Indicators (%)
TSR VS. SX6E E PSI20
EPS
NET DEBT / EBITDA
OPERATING CASH FLOW (1)
RESIDUAL INCOME
EBITDA GROWTH RATE VS. PEERS
DESEMPENHO INDIVIDUAL
276
Under the terms of the statement on the remuneration policy for the 2020 financial year approved by shareholders at the
General Shareholders’ Meeting on 16 April 2020, the annual performance of the Executive Board of Directors is also
assessed by means of establishment of minimum and maximum thresholds for each indicator separately.
In graphic terms:
•
Multi-annual variable remuneration
– for each member of the Executive Board of Directors, this component’s value may
fall between 0% and 120% of their gross fixed annual remuneration, depending on the accumulated values of the
directors’ annual performance assessments, in light of the realization of the EDP Group’s economic sustainability.
The determination of this multi-annual remuneration is made annually, however, it becomes due and effective only if,
at the end of their term of office, at least an average of 90% of the defined objectives have been accomplished, when
comparing the Company’s performance against the strategic benchmarks, and bearing in mind each director’s specific
contributions to those goals. In particular, this amount is determined on the basis of the following indicators for each
term of office: (i) performance of the EDP Group's Total Shareholder Return against Eurostoxx Utilities and PSI-20, (ii)
earnings per share, (iii) net debt to EBITDA ratio, (iv) performance of EDP in the Sustainability Index, and (v) operational
cash flow excluding regulatory receivables. The weighted average of these indicators is given an overall weight of 65%
for all members of the Executive Board of Directors, when determining their multi-annual variable remuneration. The
other 35% are based on a qualitative internal assessment of the Executive Board of Directors, which is made by the
Remuneration Committee of the General and Supervisory Board. The multi-annual performance indicators aim to
evaluate the Executive Board of Directors in a long-term perspective. To that effect, stock exchange and financial
performance indicators are considered, and compared against the most recent Business Plan proposed by the
Executive Board of Directors and approved by the General and Supervisory Board. This type of performance evaluation
allows the measurement of the level of fulfilment of long-term objectives assumed by the Executive Board of Directors
towards the shareholders. The internal Business Plan of EDP Group is the document sustaining the mid and long-term
financial objectives of EDP, presented to the capital markets. The Business Plan for the 2019-2022 period has obtained
a favorable prior opinion by the General and Supervisory Board on 11 March 2019 and was the basis for the Strategic
Update presented to the market, regarding the main financial objectives for the Company until 2022.
277
ANNUAL REPORT 2020
KPI
WEIGHT
BENCHMARK
DESCRIPTION
QUANTITATIVE
COMPONENT
(65%)
Total
shareholder
return (TSR)
vs Eurostoxx
utilities and
PSI20
18,5%
50% - PSI 20
50% - SX6E
Comparison between EDP's Total Shareholder Return
(TSR) and the TSR of two major indexes (SX6E which
encompasses the most important companies within the
Eurozone); and the PSI 20 (the Portuguese stock market
index). The indexes are equally-weighted and the
comparison is made using current year-end prices,
assuming dividend reinvestment during the year.
Earnings per
Share
18,5%
Business Plan
Comparison between earnings per share of the year
under analysis and the one defined in the pluriannual
business plan previously approved by the General and
Supervisory Board.
Net debt to
EBITDA
15,0%
Business Plan
Comparison between the net debt over EBIDTA ratio and
the ratio defined in the pluriannual business plan
approved by the General and Supervisory Board.
Sustainability
Performance
Indicator
8%
Historic | Peers |
Qualitative
This indicator evaluates EDP sustainability performance
taking into account: absolute metrics' evolution over past
periods, peer comparison and qualitative performance
evaluation of the Remuneration Committee of the
General and Supervisory Board.
Operating
cash flow
excluding
regulatory
receivables
5%
Business Plan
Comparison between this year’s operating cash flow,
excluding the impact from regulatory receivables, and
the one defined in the pluriannual business plan
approved by the General and Supervisory Board.
QUALITATIVE
COMPONENT
(35%)
Individual
Performance
Assessment
35%
-
Individual assessment by the Remuneration Committee
of the General and Supervisory Board, based on the
individual performance for the period of each member of
the Executive Board of Directors.
Total
100%
(1) Excludes regulatory receivables
18,5%
18,5%
15,0%
8,0%
5,0%
35,0%
Multi-Annual Performance Indicators
(%)
TSR VS. SX6E E PSI20
EPS
NET DEBT / EBITDA
SUSTAINABILITY PERFORMANCE
OPERATING CASH FLOW (1)
DESEMPENHO INDIVIDUAL
278
The resulting amount of the quantitative and qualitative component is then weighted, as mentioned above, by a coefficient
of 120% of the annual fixed remuneration, linearly calculated as follows:
i)
if performance is less than 90% of the defined objectives, there will be no multiannual variable remuneration
attribution;
ii)
if performance is between 90% and 95% of the defined objectives, an amount within the range of 12% and 36% of the
fixed remuneration of each member of the Executive Board of Directors is due;
iii)
if performance is between 95% and 100% of the defined objectives, an amount within the range of 36%
and 79,2% of the fixed remuneration of each member of the Executive Board of Directors is due;
iv)
if performance is between 100% and 105% of the defined objectives, an amount within the range of 79,2%
and 102% of the fixed remuneration of each member of the Executive Board of Directors is due;
v)
if performance is between 105% and 110% of the defined objectives, an amount within the range of 102%
and 120% of the fixed remuneration of each member of the Executive Board of Directors is due;
vi)
if performance meets the defined objectives in more than 110%, an amount equal to 120% of the fixed remuneration of
each member of the Executive Board of Directors is due.
In graphic terms:
•
Payment of the multi-annual remuneration is deferred for a period of no less than three years, and effective payment
is conditional on the non-realization of intentional unlawful acts, known after the completion of the evaluation and that
jeopardize the sustainability of the performance of the Company, and it is made after it is determined and approved
by the Remuneration Committee of the General and Supervisory Board.
•
The remuneration policy is therefore structured to promote the allignment of interests between the members of the
Executive Board of Directors and the Company’s long term goals. The timeframe for payment of the multi-annual
variable remuneration (three years from the end of the respective financial year), the conditioning of such payment
to the non-realization of intentional unlawful acts, known after the completion of the evaluation and that jeopardize
the sustainability of the performance of the Company, as well as (i) using qualitative criteria oriented to a strategic
and mid-term perspective of the Company’s development, (ii) setting a maximum limit for the variable remuneration,
and (iii) the relative weight of this component in the global remuneration packages, together constitute the fundamental
elements in promoting Company management that does not focus exlusively on short-term objectives, rather
integrating in its performance the long-term interests of the Company and its shareholders.
279
ANNUAL REPORT 2020
Annually, the following is a list of the maximum potencial amount to be attributed to the members of the Executive Board
of Directors, assuming integral accomplishment of the defined objectives entailing payment of the maximum amounts set
for annual and multi-annual variable remuneration, as described above:
(i)
chairman of the Executive Board of Directors: EUR 2,570,213;
(ii)
chief Financial Officer and Chief Executive Officer of EDP Renováveis Group: EUR 3,598,298;
(iii)
remaining members of the Executive Board of Directors: EUR 9,252,766;
(iv)
total: EUR 15,421,277.
Qualitative component
Pursuant to the terms of the remuneration policy in force during the 2020 financial year, the directors’ remuneration has a
qualitative element, both in the annual leg (of 20%, duly pondered by each directors’ individual performance assessment
and considering the respective period), and in the multi-annual leg (of 35% duly pondered by each directors’ individual
performance assessment and considering the respective period).
To that effect, the General and Supervisory Board annually undertakes not only the self-assessment of its activity
and performance, and that of its Committees, the conclusions of which can be found in the respective annual report
(see Article 12 of the Internal Regulation of the General and Supervisory Board), but also the independent evaluation
of the acitivity and performance of the Executive Board of Directors, the conclusions of which are presented to the General
Shareholders’ Meeting and can be found attached to the General and Supervisory Board’s annual report.
Through the initiative of the General and Supervisory Board, EDP has voluntarily instituted a formal and objective
assessment procedure of the activities of this body and of the Executive Board of Directors. The experience of the last few
years has allowed the General and Supervisory Board to introduce some changes to the methodology, considering its
efficiency and effectiveness. During the financial year of 2020, the adopted methodology included the following milestones:
•
the collective assessment exercise of the General and Supervisory Board, its Committees, and of the Executive Board
of Directors, was conducted by an external entity, with the goal of having each member of the supervisory body carry
out an individual questionnaire, supporting and validating the information to be provided to the evaluation process;
•
at the start of 2021, each member of the General and Supervisory Board answered a questionnaire prepared by
specialized consultants, answering both qualitative and quantitative questions; in particular, those questions related to
the performance and activity of the General and Supervisory Board, as well as its relationship with its Committees and
other corporate bodies of EDP; additionally, there were queries about the composition and organization of the
Executive Board of Directors, the performance of its activity, the relationship between the Executive Board of Directors
and the General and Supervisory Board;
•
assessment reports of the General and Supervisory Board, its Committees and of the Executive Board of Directors
were produced and made available for review of the General and Supervisory Board;
•
the General and Supervisory Board issued its assessment opinions, which are included in this body’s annual report;
•
at the General Meeting, within the item of the agenda destined to the assessment of the Executive Board of Directors,
the Chairman of the General and Supervisory Board presents its opinion on the matter.
In 2020, the Remuneration Committee of the General and Supervisory Board hired an external consultant – Mercer
(Portugal), Lda. – to support it in the validation and certification of the calculation of the annual and multi-annual variable
remuneration of the Executive Board of Directors.
280
In January 2021, the General and Supervisory Board also hired Mercer (Portugal), Lda. to provide services concerning the
certification of the evaluation process of the abovementioned body, of its Specialized Committees and of the Executive
Board of Directors. The referred certifications may be consulted at the 2020 Annual Report of the General and Supervisory
Board.
Disclosure of remuneration
The total gross amount paid by EDP to the members of the Executive Board of Directors in 2020 was 12,837,782 Euros.
The chart below shows the gross amounts of remuneration paid individually to the members of the Executive Board of
Directors in office during the 2020 financial year.
EUROS
GROSS
REMUNERATION
PAID
BY
EDP
(*)
FIXED
VARIABLE
ANNUAL
(2019)
António Luís Guerra Nunes Mexia
970,213
554,020
João Manuel Manso Neto
654,804
393,862
António Fernando Melo Martins Costa
555,910
328,380
João Manuel Veríssimo Marques da Cruz
296,155
(*
*
)
210,234
Miguel Stilwell de Andrade
660,379
391,174
Miguel Nuno Simões Nunes Ferreira Setas
281,718
(**)
221,849
Rui Manuel Rodrigues Lopes Teixeira
565,443
330,684
Maria Teresa Isabel Pereira
582,128
330,684
Vera de Morais Pinto Pereira Carneiro
582,128
332,988
(*)
The remuneration of the members of the Executive Board of Directors include the amounts regarding retirement pension plans.
(**)
Does not include the amounts paid by other Group companies
EUROS
GROSS
REMUNERATION
PAID
BY
EDP
MULTI-ANNUAL
VARIABLE
(2017)
*
António Luís Guerra Nunes Mexia
848,143
Nuno Maria Pestana de Almeida Alves
621,924
João Manuel Manso Neto
607,812
António Fernando Melo Martins Costa
429,760
João Manuel Veríssimo Marques da Cruz
309,471
Miguel Stilwell de Andrade
514,934
Miguel Nuno Simões Nunes Ferreira Setas
340,711
Rui Manuel Rodrigues Lopes Teixeira
502,838
*
Multi-annual variable remuneration regarding the performance evaluation for the 2015-2017 period, year of 2017
The amounts of the variable remuneration were fixed on the basis of the tax treatment applicable in the director's country
of tax residence. The amounts paid by EDP subsidiaries refer solely to their period of residence abroad.
281
ANNUAL REPORT 2020
The chart below shows the gross amounts of remuneration paid by other subsidiary or Group companies or companies to
a member of the Executive Board of Directors under common control.
EUROS
GROSS
REMUNERATION
PAID
BY
EDP
FIXED
VARIABLE
(2019)
COMPANIES
IN
A
CONTROL
RELATIONSHIP
João Manuel Veríssimo Marques da Cruz
240.000
0
EDP - Ásia Soluções Energéticas, Lda.
Miguel Nuno Simões Nunes Ferreira Setas
(*)
179.435
0
EDP - Energias do Brasil, S.A.
(*)
Annual fixed remuneration and the variable remuneration – annual and multi-annual - were adjusted, aiming to the correction of deviations resulting
from exchange rates and tax adjustments, in the respective amounts of 12,798.68 EUR e 15,086.00 EUR, so that the board member effectively receives
the amount defined by the Remuneration Committee of the General and Supervisory Board.
Inexistence of additional benefits
EDP has not set a specific retirement benefit plan for its directors. The remuneration fixed by the Remuneration Committee
of the General and Supervisory Board includes a retirement savings plan-type standard financial product for the members of
the Executive Board of Directors, through the application of a net amount correspondent to 10% (ten percent) of their fixed
annual remuneration. It was granted in accordance with the Remuneration Policy Statement approved by resolution of the
General Shareholders’ Meeting dated 16 April 2020. The product carries no liability for EDP in the future, as it corresponds
simply to a financial product that is subscribed during their term of office, and is therefore not encompassed in Article
402(1) of the Portuguese Companies Code.
The members of the Executive Board of Directors do not own Company shares under variable remuneration mechanisms.
Company directors do not receive any significant remuneration in the form of non-monetary benefits.
EDP has no schemes in place for payment of remuneration in the form of profit-sharing and/or payment of bonuses.
EDP’s directors have not entered into any agreements, with the Company or any third parties, with the effect of mitigating
the inherent variability risk of the remuneration the Company has set for them.
Other than as described in this Remuneration Report, there are no agreements in force at EDP which foresee payments in
case of dismissal or termination by mutual agreement of any director.
Exceptional payments related to termination and non-compete clauses agreements
The year of 2020 was characterized by an exceptional context in terms of the Company’s governance, as António Luís
Guerra Nunes Mexia, Chairman of the Executive Board of Directors for the mandate between 2018 and 2020, and João
Manuel Manso Neto, Director of the Company in the same mandate, were suspended from the exercise of functions
by a court decision in the context of the judicial procedure regarding the termination of the Power Purchase Agreements
and the transition to the framework of contractual balance maintenance costs, as well as the extension of use right of the
Public Hydro Domain.
Within this context, it should be noted that on 20 November 2020 António Luís Guerra Nunes Mexia and João Manuel
Manso Neto entered into termination and non-competition agreements with EDP.
282
Under the terms of the aforementioned agreements, EDP would maintain the obligation to pay to the Directors the monetary
amount due as remuneration for the mandate between 2018 and 2020, including the respective fixed and variable
components, annual and multi-annual, whose assessment is the responsibility of the Remuneration Committee of the
General and Supervisory Board, under the terms of the remuneration policy statement approved by this Committee and
submitted to the General Shareholders’ Meeting. To the extent that the aforementioned Directors, due to the performance of
their duties over a fourteen-year period, had access to the knowledge and to extensive inside information and particularly
sensitive information in terms of competition regarding EDP Group's strategy and business, non-competition agreements
were also executed with reference to the post-termination period. According to the analysis that preceded the execution of
the termination and non-compete agreements, the interests of the signing parties were duly safeguarded, as the final terms
were fair and based in market best practices.
As consideration for the non-compete obligation, EDP undertakes to pay António Luís Guerra Nunes Mexia, over a three-year
period, the amount of EUR 800,000 and to maintain, during the same period, the payment of health and life insurance
premiums as well as the Retirement Savings Plan (PPR) Life Insurance, the premium of which represents 10% of the annual
fixed remuneration and to João Manuel Manso Neto, over a three-year period, the amount of EUR 560,000 and to maintain,
during the same period, the payment of the Retirement Savings Plan (PPR) Life Insurance, the premium of which represents
10% of the annual fixed remuneration. The termination and non-compete agreements were approved by the Remuneration
Committee of the General and Supervisory Board, pursuant to Article 429 of the Commercial Companies Code, Article 27 of
the Articles of Association of EDP and Article 12 (h) of the Internal Regulation of the Remuneration Committee of the
General and Supervisory Board, at a meeting held on 13 November 2020, with the General and Supervisory Board, at the
meeting held on November 17, 2020, having expressed its agreement to the respective conclusion and empowered two
members of the Remuneration Committee of the General and Supervisory Board to represent the Company at the signing of
such agreements.
B. Remuneration policy applicable to the members of the Corporate Bodies
approved by the Remuneration Committee of the General Shareholders’ Meeting
The Remuneration Committee of the General Meeting takes into account, for the purposes of the proposed remuneration
policy for the members of the General and Supervisory Board, the General Meeting Board and the Statutory Auditor, namely,
its fixed nature, as well as the mandatory rules on the respective determination, in particular the provisions of Article 440(2)
of the Portuguese Companies Code, which sets out the criteria for determining the remuneration of the General and
Supervisory Board, , of Article 374-A of the Portuguese Companies Code and the provisions of Law no. 50/2020 , of 25
August, on the remuneration of the members of the Board of the General Meeting, and of Article 60 of Decree-Law no.
224/2008, of 20 November, on the remuneration of the Statutory Auditor.
Principles underlying the remuneration policy for the members of the Corporate Bodies
(other than the Executive Board of Directors)
The Remuneration Committee of the General Meeting has defined the remuneration policy of the members of the General
and Supervisory Board under the guiding principle that it should be simple, moderate, adapted to the work being performed
and the economic situation of the Company, but also equitable and competitive, so as to ensure value creation to the
shareholders and other stakeholders of the Company.
The decisions of the Remuneration Committee of the General Meeting are based on the following guiding lines:
•
definition of a simple, clear, transparent policy which is alligned with EDP’s culture, so that the remuneratory practices
can be based in uniform, consistente, fair and balanced criteria;
•
definition of a policy consistente with risk control and management, effective to avoid excessive exposure to risk and
conflicts of interest, seeking coherence with the Company’s long-term objectives and values;
283
ANNUAL REPORT 2020
•
assessment and promotion of scrupulous performance, where merit should be duly rewarded, but ensuring the
homogeneity that allows for the necessary cohesion of the General and Supervisory Board, without losing sight
of the economic and financial situation of the Company and of the country, even if EDP is working on a global scale;
•
allignment with the remuneration of the memebers of the corporate bodies of the biggest companies by market
capitalization and European peers, naturally adapted to the Portuguese market;
•
the most recente recommendations issued by the European Union and the Securities Market Commission;
•
allignment of the remuneration with the specific responsibilities inherent to the respective function;
•
allignment of the remuneration with the time that the function requires.
The remuneration policy of the members of EDP’s Corporate Bodies shall, in essence, be simple, transparent, moderate,
adapted to the work being performed and the economic situation of the Company, but also equitable and competitive,
so as to ensure value creation to the shareholders and other stakeholders of the Company.
This remuneration policy is reviewed annually, and with such periodicity, a statement that describes its general lines is
submitted to the appreciation of the General Shareholders’ Meeting, pursuant to a proposal made by the Remuneration
Committee. When defining this remuneration policy, proposals are submitted which are aimed at ensuring remuneration
is adequate and it reflects the risk profile and long-term objectives of EDP, while remaining compliant with applicable laws
and national and international guidelines and recommendations.
Remuneration structure of the members of the Corporate Bodies (other than the
Executive Board of Directors)
Based on these criteria and considering the challenges ahead for the next term of office, the Committee has defined the
following remuneration policy guidelines:
•
a differentiation between the remuneration of the members of the General and Supervisory Board and those of the
members of the Executive Board of Directors shall be maintained, and there will be no variable component or any other
remunerative supplement for the General and Supervisory Board.
•
it shall be taken into account the performance merit and the complexity of the functions performed by the members
of each body, so that the cohesion, stability and development of the Company is not endangered;
•
as to the Chairman of the General and Supervisory Board, it shall be particularly considered that the Chairman office’s
functions are time consuming and comprehend a strong component of institutional representation. In addition, under
Article 23 (3) of the Articles of Association, the General and Supervisory Board Chairman, being independent, should
also preside the Financial Matters Committee/Audit Committee.
•
in what regards the Vice Chairman, it shall be considered the duties and works performed by him in other committees.
•
it is also important to distinguish other specific positions in the General and Supervisory Board, namely the participation
of the members of the General and Supervisory Board in other committees, as well as the functions in those
committees.
•
finally, it should be considered that, historically, the remuneration of the Chairman of the General Shareholders’ Meeting
Board is similar to the remuneration attributed to a Committee Chairman. Therefore, the remuneration of the Chairman
of the General Shareholders’ Meeting Board shall be aligned accordingly.
The shareholders approved the statement of remuneration policy for the 2020 financial year on the Shareholders’ General
Meeting of 16 April 2020.
284
C. Particulars of the remuneration of the members of the General and
Supervisory Board
Pursuant to the provision of the Article 440 of the Companies’ Code, the remuneration of the members of the General
and Supervisory Board is fixed, in view of their duties.
This remuneration policy has been annually reviewed, and with such periodicity is subject to appreciation of the
Shareholders’ General Meeting, with the policy for financial year 2020 having been approved on the General Shareholders’
Meeting of 16 April 2020.
The remuneration of the Chairman of the General and Supervisory Board was set on the basis of the full-time performance
of his duties, unlike the rest of the members of such body.
Remuneration limits
Accordingly, the Committee has submitted to the shareholders the following remuneration proposal for the financial year
starting on 1 January 2020 and until the end of the respective terms of office:
A.
GENERAL AND SUPERVISORY BOARD
B.
ANNUAL
REMUNERATION
1
Chairman:
EUR 515,000.00
Vice-Chairman:
EUR 72,000.00
Member:
EUR 47,000.00
FINANCIAL MATTERS COMMITTEE/AUDIT COMMITTEE:
ACCRUAL TO THE BASE REMUNERATION OF MEMBER
ANNUAL
REMUNERATION
1
Chairman:
+ EUR 73,000.00
2
(total EUR 120,000.00)
Vice-Chairman:
+ EUR 58,000.00
(total EUR 105,000.00)
Member:
+ EUR 23,000.00
(total EUR 70,000.00)
OTHER COMMITTEES: MEMBERS OF THE GENERAL AND SUPERVISORY
BOARD WHO ACCUMULATE FUNCTIONS IN ONE OR MORE COMMITTEES:
ANNUAL
REMUNERATION
1
For each Committee acting as Chairman:
+ EUR23,000.00
For each Committee acting as Vice-Chairman:
+ EUR 15,000.00
For each Committee acting as Member:
+ EUR10,000.00
Regarding the remunerations set out above, the following additional rules shall be applied:
a)
the Chairman of the General and Supervisory Board and the Chairman of the Financial Matters Committee/Audit
Committee shall be entitled to no additional remuneration if they participate in additional Committees.
1
Gross amounts.
2
Not applicable to this term of office.
285
ANNUAL REPORT 2020
b)
no other member of the General and Supervisory Board may accumulate the remuneration of more than two
Committees beyond the base remuneration.
Disclosure of remuneration
The total gross amount paid by EDP to the members of the General and Supervisory Board in 2020 was EUR 1,863,000.
The chart below shows the remuneration paid during the 2020 financial year to the members of the General and Supervisory
Board:
MEMBERS OF THE GENERAL AND SUPERVISORY BOARD
FIXED
EUROS
Luís Filipe Marques Amado
515,000
China Three Gorges (Portugal), Sociedade Unipessoal, Lda.
(*)
57.000
China Three Gorges Corporation
95,000
China Three Gorges International Corp.
57,000
China Three Gorges (Europe), S.A.
67,000
China Three Gorges Brasil Energia Ltda
57,000
Banco Comercial Português, S.A.
57,000
DRAURSA, S. A.
57,000
SONATRACH
57,000
Senfora BV
57,000
Fernando Maria Masaveu Herrero
67,000
Maria Celeste Ferreira Lopes Cardona
80,000
Ilídio Costa Leite Pinho
57,000
Jorge Avelino Braga Macedo
67,000
Vasco Joaquim Rocha Vieira
67,000
Augusto Carlos Serra Ventura Mateus
67,000
João Carvalho das Neves
115,000
María del Carmen Fernández Rozado
70,000
Laurie Lee Fitch
57,000
Clementina Maria Dâmaso de Jesus Silva Barroso
70.000
Luís Maria Viana Palha da Silva
70,000
(*) Remuneration paid to their representative, Prof. Eduardo de Almeida Catroga
D. Particulars applicable to the remuneration of the Statutory Auditor
Contractual nature
On 5 April 2018, PricewaterhouseCoopers & Associados - Sociedade de Revisores de Contas, Lda., statutory auditor
company number 183, represented by João Rui Fernandes Ramos (auditor number 1333), was elected for the 2018-2020
triennium, having also on such date, Aurélio Adriano Rangel Amado (auditor number 1074) been elected as Alternate
Statutory Auditor for the 2018 – 2020 triennium.
The Committee has resolved that the remuneration of the Statutory Auditor shall correspond to the amounts set out in the
“Agreement for the Provision of Auditing Services” entered into between EDP and PricewaterhouseCoopers & Associados –
Sociedade de Revisores Oficiais de Contas, Lda.
286
Scope of activity and services provided
PriceWaterhouseCoopers is responsible for conducting an independent External Audit of all the EDP Group companies
in Portugal, Spain, Brazil (only in EDP Renováveis) and USA, as well as in other countries in which the Group operates.
In the subgroup of EDP Brasil, independent external auditing is conducted by KPMG.
All services provided by the Statutory Auditor during the 2020 financial year are laid out in item 46 of chapter 4 of this
Annual Report.
Fees incurred
PRICEWATERHOUSECOOPERS
EUROS
PORTUGAL
SPAIN
BRAZIL
USA
OTHER
COUNTRIES
TOTAL
Audit and
statutory
audit of
accounts
2,473,892
1,072,645
166,671
1,066,435
839,806
5,619,449
Other
assurance
of reliability
services (*)
1,894,873
247,994
4,000
-
40,842
2,187,709
Total of
audit and
assurance
of reliability
services
4,368,765
1,320,639
170,671
1,066,435
880,648
7,807,158
99%
Tax
consultancy
services
-
-
-
-
-
-
Other
services
16,000
-
27,591
-
-
43,591
Total of
other
services
16,000
-
27,591
-
-
43,591
’1%
Total
4,384,765
56%
1,320,639
17%
198,262
2%
1,066,435
14%
880,648
11%
7,850,749
100%
(*) Includes assurance of reliability services of the exclusive competence and responsibility of the Statutory Auditor and External Auditor in accordance
with the regulations on services provided approved by the General and Supervisory Board.
The “audit and statutory audit of accounts” line in Portugal include 1,708,900 Euro related with statutory audit fees, on an
individual and consolidated basis, of EDP - Energias de Portugal, S.A.
KPMG
EUROS
BRAZIL
TOTAL
Audit and statutory audit of accounts
704,181
704,181
Other assurance of reliability services
60,767
60,767
Total of audit and assurance of reliability services
764,948
764,948
91%
Tax consultancy services
-
-
Other additional services
72,566
72,566
Total of other services
72,566
72,566
9%
Total
837,514
100%
837,514
100%
The non-audit services requested by Group companies, in Portugal and in Brazil, to the Statutory Auditor and other entities
of its network amount to EUR 2,364,633.
287
ANNUAL REPORT 2020
E. Particulars applicable to the remuneration of the Environmnent and
Sustainability Board
The remuneration policy in force foresees that the members of the Environment and Sustainability Board are paid in
attendance vouchers of EUR 1,750 per meeting.
In 2020, the members of the Environment and Sustainability Board did not receive any remuneration.
F. Particulars applicable to the remuneration of the Remuneration Committee
of the General Meeting
The members of the Remuneration Committee of the General Meeting received the following remuneration in 2020:
EUROS
FIXED
Luís Miguel Nogueira Freire Cortes Martins
15,000
José Gonçalo Ferreira Maury
10,000
Jaime Amaral Anahory
10,000
G. Particulars applicable to the remuneration of the Chairman of the General
Meeting
The Chairman and Secretary of the General Meeting do not earn any remuneration in that capacity, given that they
are remunerated as a member of the General and Supervisory Board and Company Secretary, respectively. In 2020,
the Vice-Chairman of the General Meeting received the amount of EUR 3,000.
288
H. Evolution of remuneration and performance
Note: Excluding ForEx effect; constant FX rate (average of 2015 to 2017) of 3.72 EUR/BRL, applied to the period 2016 to 2020.
10.87
11.87
11.30
11.54
12.84
2016
2017
2018
2019
2020
Remuneration of the Executive Board of Directors
(€ million)
1.90
1.90
1.83
1.84
1.86
2016
2017
2018
2019
2020
Remuneration of the General and Supervisory Board
(€ million)
-7.5%
+5.0%
+11.6%
+34.4%
+43.2%
2016
2017
2018
2019
2020
Total Shareholder Return
(%) -
SOURCE BLOOMBERG
3,157
3,132
3,295
3,364
3,676
2016
2017
2018
2019
2020
Average Employees' Remuneration
(€)
8
8
9
9
9
Annual Variable
Remuneration
Fixed Remuneration
EBD Members
Multi-Annual Variable
Remuneration
Driving
change to set
new standards
Changing tomorrow now.
Financial Statements
31 December 2020
294
(Page left intentionally blank)
295
Thousand Euros
Notes
2020
2019
*
7
12,448,205
14,333,009
Cost of energy sales and other
7
-7,356,487
-9,115,859
5,091,718
5,217,150
Other income
8
1,077,689
691,886
Supplies and services
9
-856,519
-897,543
Personnel costs and employee benefits
10
-667,313
-620,196
Other expenses
11
-635,180
-652,473
26
-63,690
-33,207
-1,145,013
-1,511,533
Joint ventures and associates
21
3,257
25,011
3,949,962
3,730,628
Provisions
36
-112,093
-101,530
Amortisation and impairment
12
-1,631,831
-1,765,619
2,206,038
1,863,479
Financial income
13
226,702
387,817
Financial expenses
13
-897,326
-1,057,591
Profit before income tax and CESE
1,535,414
1,193,705
Income tax expense
14
-309,112
-225,901
Extraordinary contribution to the energy sector
(
CESE
)
15
-65,109
-68,477
-374,221
-294,378
Net profit for the period
1,161,193
899,327
Attributable to:
Equity holders of EDP
800,692
511,751
Non-controlling Interests
33
360,501
387,576
Net profit for the period
1,161,193
899,327
30
0.21
0.14
LISBON, 24 FEBRUARY 2021
THE CERTIFIED ACCOUNTANT
THE MANAGEMENT
THE EXECUTIVE BOARD OF DIRECTORS
N.º 17,713
EDP - Energias de Portugal
Consolidated Income Statements
for the periods ended at 31 December 2020 and 2019
* Includes restatement due to changes in results in Joint Ventures and Associates as described in note 2a)
Revenues from energy sales and services and other
Impairment losses on trade receivables and debtors
Earnings per share (Basic and Diluted) - Euros
The following notes form an integral part of these condensed financial statements
296
Equity holders
Non-controlling
Equity holders
Non-controlling
Thousand Euros
of EDP
Interests
of EDP
Interests
800,692
360,501
511,751
387,576
Actuarial gains/(losses) (iii)
-78,961
4,226
-170,330
-30,559
Tax effect from the actuarial gains/
(
losses
)
25,671
-1,436
53,752
10,387
Fair value reserve with no rec
y
cling
(
financial assets
)
(
ii
)
-5,203
-
6,429
-
Tax effect from the fair value reserve with no rec
y
cling
(
financial assets
)
(
ii
)
927
-
-1,514
-
-57,566
2,790
-111,663
-20,172
Items that may be reclassified to profit or loss (i)
Currency translation reserve
-508,945
-472,807
-70,687
-3,590
Fair value reserve (cash flow hedge) (ii)
-61,451
-6,196
354,667
3,437
Tax effect from the fair value reserve
(
cash flow hedge
)
(
ii
)
17,898
-197
-92,451
-793
Fair value reserve of assets measured at fair value
throught other comprehensive income with rec
y
cling
(
ii
)
1,404
-755
-
71
value throught other comprehensive income with rec
y
cling
(
ii
)
-442
-
-
-
Share of other comprehensive income of
j
oint ventures and associates, net of taxes
-8,312
-6,644
-17,188
-5,825
-559,848
-486,599
174,341
-6,700
-617,414
-483,809
62,678
-26,872
183,278
-123,308
574,429
360,704
(i) See Consolidated Statement of Changes in Equity
(ii) See Note 32
(iii) See Note 35
LISBON, 24 FEBRUARY 2021
THE CERTIFIED ACCOUNTANT
THE MANAGEMENT
THE EXECUTIVE BOARD OF DIRECTORS
N.º 17,713
Net profit for the period
Other comprehensive income for the period (net of income
tax)
Total comprehensive income for the period
EDP - Energias de Portugal
Consolidated Statements of Comprehensive Income
for the periods ended at 31 December 2020 and 2019
2020
2019
Tax effect of Fair value reserve of assets measured at fair
Items that will never be reclassified to profit or loss (i)
The following notes form an integral part of these condensed financial statements
297
Thousand Euros
Notes
2020
2019
Assets
Property, plant and equipment
16
20,163,221
19,676,222
Right-of-use assets
17
1,030,193
828,503
Intangible assets
18
4,998,235
4,223,823
Goodwill
19
2,306,303
2,119,862
Investments in joint ventures and associates
21
940,362
1,098,512
Equity instruments at fair value
22
184,748
170,806
Investment property
23
21,378
29,944
Deferred tax assets
24
1,139,543
1,084,046
Debtors and other assets from commercial activities
26
2,747,012
3,424,220
Other debtors and other assets
27
1,020,788
932,578
Non-Current tax assets
28
251,770
389,037
Collateral deposits associated to financial debt
34
22,848
21,690
Total Non-Current Assets
34,826,401
33,999,243
Inventories
25
323,945
368,334
Debtors and other assets from commercial activities
26
3,545,611
2,858,160
Other debtors and other assets
27
850,753
881,779
Current tax assets
28
414,302
415,735
Collateral deposits associated to financial debt
34
9,221
39,786
Cash and cash equivalents
29
2,954,302
1,542,722
Non-Current Assets held for sale
41
22,248
2,255,887
Total Current Assets
8,120,382
8,362,403
Total Assets
42,946,783
42,361,646
Equity
Share capital
30
3,965,681
3,656,538
Treasury stock
31
-54,025
-61,220
Share premium
30
1,196,522
503,923
Reserves and retained earnings
32
3,673,785
4,247,195
800,692
511,751
9,582,655
8,858,187
Non-controlling Interests
33
3,495,754
3,773,826
Total Equity
13,078,409
12,632,013
Liabilities
Financial debt
34
14,023,940
13,124,615
Employee benefits
35
1,138,237
1,128,155
Provisions
36
992,865
926,426
Deferred tax liabilities
24
814,474
503,746
Institutional partnerships in North America
37
1,933,542
2,289,784
Trade payables and other liabilities from commercial activities
38
1,435,006
1,644,307
Other liabilities and other payables
39
1,739,448
1,177,119
Non-current tax liabilities
40
122,743
138,212
Total Non-Current Liabilities
22,200,255
20,932,364
Financial debt
34
2,262,823
3,446,854
Employee benefits
35
204,067
183,514
Provisions
36
260,154
126,091
Trade payables and other liabilities from commercial activities
38
3,952,213
3,859,623
Other liabilities and other payables
39
590,117
623,771
Current tax liabilities
40
398,634
478,594
Non-Current Liabilities held for sale
41
111
78,822
Total Current Liabilities
7,668,119
8,797,269
Total Liabilities
29,868,374
29,729,633
Total Equity and Liabilities
42,946,783
42,361,646
LISBON, 24 FEBRUARY 2021
THE CERTIFIED ACCOUNTANT
THE MANAGEMENT
THE EXECUTIVE BOARD OF DIRECTORS
N.º 17,713
EDP - Energias de Portugal
Consolidated Statements of Financial Position
as at 31 December 2020 and 31 December 2019
Consolidated net profit attributable to equity holders of EDP
Total Equity attributable to equity holders of EDP
The following notes form an integral part of these condensed financial statements
298
E
q
uit
y
Fair value
Fair value
attributable
Reserves
reserve
reserve
Currency
to equity
Non-
Total
Share
Share
Legal
and retained
(cash flow
(financial
translation
Treasury
holders of
controlling
Thousand Euros
Equity
capital (i)
premium (i)
reserve (ii)
earnings
hedge) (ii)
assets) (ii)
reserve (ii)
stock (iv)
EDP
Interests (iii)
Balance as at 31 December 2018
12,900,327
3,656,538
503,923
739,024
4,817,541
-213,315
10,287
-483,410
-62,410
8,968,178
3,932,149
Comprehensive income:
Net profit for the period
899,327
-
-
-
511,751
-
-
-
-
511,751
387,576
Changes in the fair value reserve
(cash flow hedge) net of taxes
264,860
-
-
-
-
262,216
-
-
-
262,216
2,644
Changes in the fair value reserve of
assets measured at fair value through
other comprehensive income, net of
4,986
-
-
-
-
-
4,915
-
-
4,915
71
taxes
Share of other comprehensive
income of joint ventures and associates
net of taxes
-23,013
-
-
-
-8,706
-8,532
-
50
-
-17,188
-5,825
Actuarial gains/(losses)
net of taxes
-136,750
-
-
-
-116,578
-
-
-
-
-116,578
-20,172
-74,277
-
-
-
-
-
-
-70,687
-
-70,687
-3,590
Total comprehensive income for the period
935,133
-
-
-
386,467
253,684
4,915
-70,637
-
574,429
360,704
Dividends paid
-690,675
-
-
-
-690,675
-
-
-
-
-690,675
-
Dividends attributable to non-controlling
interests
-136,515
-
-
-
-
-
-
-
-
-
-136,515
Share-based payments
1,231
-
-
-
41
-
-
-
1,190
1,231
-
Sale without loss of control of
windfarms in Europe
-289,186
-
-
-
-
172
-
-
-
172
-289,358
Changes resulting from acquisitions/sales,
equity increases/decreases and other
-88,302
-
-
-
4,852
-
-
-
-
4,852
-93,154
Balance as at 31 December 2019
12,632,013
3,656,538
503,923
739,024
4,518,226
40,541
15,202
-554,047
-61,220
8,858,187
3,773,826
Comprehensive income:
Net profit for the period
1,161,193
-
-
-
800,692
-
-
-
-
800,692
360,501
Changes in the fair value reserve
(cash flow hedge) net of taxes
-49,946
-
-
-
-
-43,553
-
-
-
-43,553
-6,393
Changes in the fair value reserve of
assets measured at fair value through
other comprehensive income, net of
-4,069
-
-
-
-
-
-3,314
-
-
-3,314
-755
taxes
Share of other comprehensive
income of joint ventures and associates
net of taxes
-14,956
-
-
-
-16,453
-1,356
-
9,497
-
-8,312
-6,644
Actuarial gains/(losses)
net of taxes
-50,500
-
-
-
-53,290
-
-
-
-
-53,290
2,790
-981,752
-
-
-
-
-
-
-508,945
-
-508,945
-472,807
Total comprehensive income for the period
59,970
-
-
-
730,949
-44,909
-3,314
-499,448
-
183,278
-123,308
Dividends paid
-690,739
-
-
-
-690,739
-
-
-
-
-690,739
-
Dividends attributable to non-controlling
interests
-132,436
-
-
-
-
-
-
-
-
-
-132,436
Share Capital increase
1,001,742
309,143
692,599
-
-
-
-
-
-
1,001,742
-
Share-based payments
7,354
-
-
-
159
-
-
-
7,195
7,354
-
Changes resulting from acquisitions/sales,
equity increases/decreases and other
200,505
-
-
-
222,833
-
-
-
-
222,833
-22,328
Balance as at 31 December 2020
13,078,409
3,965,681
1,196,522
739,024
4,781,428
-4,368
11,888
-1,053,495
-54,025
9,582,655
3,495,754
(i) See note 30
(ii) See note 32
(iii) See note 33
(iv) See note 31
LISBON, 24 FEBRUARY 2021
THE CERTIFIED ACCOUNTANT
THE MANAGEMENT
THE EXECUTIVE BOARD OF DIRECTORS
N.º 17,713
Exchange differences arising on
consolidation
EDP - Energias de Portugal
Consolidated Statements of Changes in Equity
for the periods ended at
31 December 2020 and 2019
Exchange differences arising on
consolidation
The following notes form an integral part of these condensed financial statements
299
Thousand Euros
2020
2019
2020
2019
*
Operating activities
Profit before income tax and CESE
1,535,414
1,193,705
817,731
655,758
Adjustments for:
Amortisation and impairment
12
1,631,831
1,765,619
40,726
28,856
Provisions
36
112,093
101,530
301
-133
Joint ventures and associates
21
-3,257
-25,011
-
-
Financial
(
income
)
/expenses
13
670,624
669,774
-791,838
-685,775
(
Gains
)
/ Losses on disposal and scope effects except Asset Rotations
-234,818
32,440
-699
-3,676
Changes in working capital:
Trade and other receivables
5,928
131,007
-139,245
75,690
Trade and other payables
16,411
-116,077
-54,349
-54,321
Personnel
-101,616
-339,684
6,018
156
Regulatory assets
-47,293
-251,160
-
-
Other changes in assets/liabilities related with operating activities
-523,418
-342,802
-135,624
35,352
Income tax and CESE
-172,788
-284,929
71,184
46,697
Net cash flows from operations
2,889,111
2,534,412
-185,795
98,604
Net (gains) / losses with Asset Rotations
-433,900
-313,452
-
-
Net cash flows from operating activities
2,455,211
2,220,960
-185,795
98,604
Investing activities
Cash receipts relating to:
Sale of assets/subsidiaries with loss of control i
)
3,835,863
502,982
-
-
Other financial assets and investments ii
)
130,227
563,867
1,613,045
116
Other financial assets at amortised cost
-
-
527,282
474,188
85,579
-
-
-
Property, plant and equipment and intangible assets
12,484
30,885
6,123
221
Other receipts relating to tangible fixed assets
6,683
4,894
-
-
Interest and similar income
26,940
61,308
55,349
76,964
Dividends
48,478
43,127
883,690
601,205
Loans to related parties
326,071
605,313
600,260
508,490
4,472,325
1,812,376
3,685,749
1,661,184
Cash payments relating to:
Acquisition of assets/subsidiaries iii
)
-1,097,339
-3,133
-
-
Other financial assets and investments iv
)
-431,182
-739,100
-7,919
-146,156
Other financial assets at amortised cost
-
-
-122,442
-
-38,825
-112,284
-
-
Property, plant and equipment and intangible assets
-2,409,812
-2,348,542
-45,272
-38,341
Loans to related parties
-780,652
-254,339
-46,160
-325,850
-4,757,810
-3,457,398
-221,793
-510,347
Net cash flows from investing activities
-285,485
-1,645,022
3,463,956
1,150,837
Financing activities
Receipts relating to financial debt
(
include Collateral Deposits
)
5,927,683
4,099,892
1,942,863
1,657,992
(
Payments
)
relating to financial debt
(
include Collateral Deposits
)
-6,463,566
-3,443,363
-4,365,029
-1,729,425
Interest and similar costs of financial debt including hedge derivatives
-570,155
-557,270
-349,697
-266,144
Receipts/
(
payments
)
relating to loans from non-controlling interests
216,858
-29,922
-
-
Interest and similar costs relating to loans from non-controlling interests
-9,831
-21,177
-
-
Receipts/
(
payments
)
relating to loans from related parties
-
-
406,597
-361,418
-
-
-3,145
-4,988
Governmental grants received
37
-
-
-
Share capital increases/
(
decreases
)
(
includes the subscribed by non-controlling interests
)
v
)
920,598
-61,722
996,392
-
Receipts/
(
payments
)
relating to derivative financial instruments
12,776
-4,946
-68,248
35,365
Dividends paid to equity holders of EDP vi
)
-690,739
-690,675
-691,026
-690,963
Dividends paid to non-controlling interests
-112,001
-134,726
-
-
Treasury stock sold/
(
purchased
)
7,195
-
-
-
-1,007
-20,386
-
-
Lease
(
payments
)
vii
)
-80,364
-75,754
-11,853
-12,533
Receipts/
(
payments
)
from institutional partnerships in North America viii
)
248,728
105,627
-
-
Net cash flows from financing activities
-593,788
-834,422
-2,143,146
-1,372,114
Changes in cash and cash equivalents
1,575,938
-258,484
1,135,015
-122,673
Effect of exchange rate fluctuations on cash held
-170,198
-1,999
223
-534
Cash and cash equivalents reclassified as held for sale
5,840
-
-
-
Cash and cash equivalents at the beginning of the period
1,542,722
1,803,205
1,037,393
1,160,600
Cash and cash equivalents at the end of the period ix)
2,954,302
1,542,722
2,172,631
1,037,393
i)
ii
)
iii
)
iv)
v
)
vi
)
vii
)
viii
)
ix)
*
LISBON, 24 FEBRUARY 2021
THE CERTIFIED ACCOUNTANT
THE MANAGEMENT
THE EXECUTIVE BOARD OF DIRECTORS
N.º 17,713
Includes the reclassification arising from the change in accounting policy as described in note 2a).
Changes in cash resulting from consolidation perimeter variations iii)
Changes in cash resulting from consolidation perimeter variations i)
Interest and similar costs of loans from related parties including hedge derivatives
Receipts/(payments) related with transactions with non-controlling interest without
change of control
Relates essentially to the receivement of the sales of Babilônia Holding, S.A. and its subsidiaries (see note 27), the transfers of offshore companies to OW Offshore
Relates, the sale of Camirengia Hidroeléctricos, S.A. (Portugal), the receivement of Baser Comercializadora de Referencia, S.A and EDP Comercializadora, S.AU
(
S
p
ain
),
as well the sell of com
p
anies located in S
p
ain and North America
(
see note 6
);
Relates essentially to the receivement of the sale of Zephyr fund
(
see note 22
)
and the receivement of notes
(
see note 27
)
;
Relates, mainly, to the impact with the acquisition of Viesgo Group companies
(
see note 6
)
;
Relates essentially to payments made for the capital increases in North America companies, the Investment Funds in Brazil and acquisition of participation in the
Mercer and Dunas funds
(
see note 22
)
;
See details of Cash and cash equivalents in note 29 and the Consolidated and Company Reconciliation of Changes in the responsibilities of Financing activities in note
52 of the Financial Statements.
Relates essentially to the capital increase made by the company
(
see note 30
)
;
See Note 32;
Includes capital and interest;
On a consolidated basis, refers to the receipts and payments net of transaction costs
(
transactions included in note 37
)
;
EDP - Energias de Portugal
Consolidated and Company Statements of Cash Flows
for the periods ended at
31 December 2020 and 2019
Notes
Group
Company
The following notes form an integral part of these condensed financial statements
300
Thousand Euros
Notes
2020
2019
Revenues from energy sales and services and other
7
2,863,316
2,968,760
Cost of energy sales and other
7
-2,555,001
-2,739,070
308,315
229,690
Other income
16,646
19,387
Supplies and services
9
-159,748
-152,951
Personnel costs and employee benefits
10
-79,382
-72,800
Other expenses
-18,917
-24,630
Impairment losses on trade receivables and debtors
6
10
-241,395
-230,984
66,920
-1,294
Provisions
-301
133
Amortisation and impairment
12
-40,726
-28,856
25,893
-30,017
Financial income
13
1,486,782
1,252,845
Financial expenses
13
-694,944
-567,070
Profit before income tax
817,731
655,758
Income tax expense
14
60,420
65,158
Net profit for the period
878,151
720,916
LISBON, 24 FEBRUARY 2021
THE CERTIFIED ACCOUNTANT
THE MANAGEMENT
THE EXECUTIVE BOARD OF DIRECTORS
N.º 17,713
EDP - Energias de Portugal, S.A.
Company Income Statements
for the periods ended at 31 December 2020 and 2019
The following notes form an integral part of these condensed financial statements
301
Thousand Euros
2020
2019
878,151
720,916
Items that will never be reclassified to profit or loss (i)
Actuarial gains/(losses)
628
-538
Tax effect from the actuarial gains/(losses)
-159
122
Changes in reserves and retained earnings by liquidation of financial assets
-
-248
469
-664
Items that may be reclassified to profit or loss (i)
Fair value reserve (cash flow hedge) (ii)
176,802
-90,247
Tax effect from the fair value reserve (cash flow hedge) (ii)
-39,780
20,306
137,022
-69,941
137,491
-70,605
1,015,642
650,311
(i) See Company Statement of Changes in Equity
(ii) See Note 32
LISBON, 24 FEBRUARY 2021
THE CERTIFIED ACCOUNTANT
THE MANAGEMENT
THE EXECUTIVE BOARD OF DIRECTORS
N.º 17,713
Other comprehensive income for the period (net of income tax)
Total comprehensive income for the period
Net profit for the period
EDP - Energias de Portugal, S.A.
Company Statements of Comprehensive Income
for the periods ended at 31 December 2020 and 2019
The following notes form an integral part of these condensed financial statements
302
Thousand Euros
Notes
2020
2019
*
Assets
16
27,958
28,925
Right-of-use assets
17
106,911
110,947
Intangible assets
18
115,223
93,353
Investments in subsidiaries
20
14,396,105
15,684,346
Investments in joint ventures and associates
2
2
Equity instruments at fair value
1,252
1,252
Investment property
23
87,289
71,163
Deferred tax assets
24
123,626
142,907
730
692
Other debtors and other assets
27
3,203,422
3,289,149
Total Non-Current Assets
18,062,518
19,422,736
Debtors and other assets from commercial activities
26
733,926
583,828
Other debtors and other assets
27
853,407
1,551,140
Current tax assets
28
51,314
109,676
Cash and cash equivalents
29
2,172,631
1,037,393
Total Current Assets
3,811,278
3,282,037
Total Assets
21,873,796
22,704,773
Equity
Share capital
30
3,965,681
3,656,538
Treasury stoc
k
31
-54,025
-55,124
Share premium
30
1,196,522
503,923
Reserves and retained earnings
32
2,786,784
2,619,244
Net profit for the period
878,151
720,916
Total Equity
8,773,113
7,445,497
Liabilities
Financial debt
34
8,134,429
8,494,071
Employee benefits
8,366
6,696
Provisions
2,051
1,794
363
1,144
Other liabilities and other payables
39
497,290
348,890
Total Non-Current Liabilities
8,642,499
8,852,595
Financial debt
34
3,349,143
4,980,058
Employee benefits
1,075
69
Provisions
848
926
38
662,559
715,314
Other liabilities and other payables
39
423,337
681,279
Current tax liabilities
40
21,222
29,035
Total Current Liabilities
4,458,184
6,406,681
Total Liabilities
13,100,683
15,259,276
Total Equity and Liabilities
21,873,796
22,704,773
* Includes the reclassification arising from the change in accounting policy as described in note 2a).
LISBON, 24 FEBRUARY 2021
THE CERTIFIED ACCOUNTANT
THE MANAGEMENT
THE EXECUTIVE BOARD OF DIRECTORS
N.º 17,713
Trade payables and other liabilities from commercial activities
Trade payables and other liabilities from commercial activities
Debtors and other assets from commercial activities
EDP - Energias de Portugal, S.A.
Company Statements of Financial Position
as at 31 December 2020 and 31 December 2019
Property, plant and equipment
The following notes form an integral part of these condensed financial statements
303
EDP - Energias de Portugal, S.A.
Company Statements of Changes in Equity
for the periods ended at 31 December 2020 and 2019
Reserves
Fair value
and retained
reserve
Total
Share
Share
Legal
earnings
(cash flow
Treasury
Thousand Euros
Equity
capital (i)
premium (i)
reserve (ii)
(ii)
hedge) (ii)
stock (iii)
Balance as at 31 December 2018
7,484,917
3,656,538
503,923
739,024
2,643,075
-1,328
-56,315
Comprehensive income:
Net profit for the period
720,916
-
-
-
720,916
-
-
Changes in the fair value reserve
(
cash flow hedge
)
net of taxes
-69,941
-
-
-
-
-69,941
-
Changes in reserves and retained earnings by liquidation of
financial assets
-248
-
-
-
-248
-
-
Actuarial gains /
(
losses
)
net of taxes
-416
-
-
-
-416
-
-
Total comprehensive income for the period
650,311
-
-
-
720,252
-69,941
-
-690,963
-
-
-
-690,963
-
-
Share-based
p
a
y
ments
1,232
-
-
-
41
-
1,191
Balance as at 31 December 2019
7,445,497
3,656,538
503,923
739,024
2,672,405
-71,269
-55,124
Com
p
rehensive income:
Net profit for the period
878,151
-
-
-
878,151
-
-
Changes in the fair value reserve
(
cash flow hedge
)
net of taxes
137,022
-
-
-
-
137,022
-
Actuarial gains /
(
losses
)
net of taxes
469
-
-
-
469
-
-
Total comprehensive income for the period
1,015,642
-
-
-
878,620
137,022
-
Share Capital increase
1,001,742
309,143
692,599
Dividends paid
-691,026
-
-
-
-691,026
-
-
Share-based payments
1,258
-
-
-
159
-
1,099
Balance as at 31 December 2020
8,773,113
3,965,681
1,196,522
739,024
2,860,158
65,753
-54,025
(i) See note 30
(
ii
)
See note 32
(
ii
)
See note 31
LISBON, 24 FEBRUARY 2021
THE CERTIFIED ACCOUNTANT
THE MANAGEMENT
THE EXECUTIVE BOARD OF DIRECTORS
N.º 17,713
Dividends paid
The following notes form an integral part of these condensed financial statements
304
Notes to the Consolidated and Company Financial Statements
COVID 19 - Macroeconomic, Regulatory, Operational, Accounting Impact and Stakeholders
308
1.
Economic activity of EDP Group
313
2.
Accounting policies
313
3.
Recent accounting standards and interpretations issued
328
4.
Critical accounting estimates and judgements in preparing the financial statements
329
5.
Financial risk management policies
338
6.
Consolidation perimeter
344
7.
Revenues and cost of Energy Sales and Services and Other
346
8.
Other income
348
9.
Supplies and services
349
10.
Personnel costs and employee benefits
349
11.
Other expenses
350
12.
Amortisation and impairment
350
13.
Financial income and expenses
351
14.
Income tax
353
15.
Extraordinary contribution to the energy sector (CESE)
355
16.
Property, plant and equipment
356
17.
Right-of-use assets
358
18.
Intangible assets
359
19.
Goodwill
360
20.
Investments in subsidiaries (Company basis)
362
21.
Investments in joint ventures and associates
364
22.
Equity instruments at fair value
369
23.
Investment property
370
24.
Deferred tax assets and liabilities
370
25.
Inventories
374
26.
Debtors and other assets from commercial activities
375
27.
Other debtors and other assets
378
28.
Tax assets
380
29.
Cash and cash equivalents
381
30.
Share capital and share premium
381
31.
Treasury stock
382
32.
Reserves and retained earnings
383
33.
Non-controlling interests
385
34.
Financial debt
386
35.
Employee benefits
390
36.
Provisions
398
37.
Institutional partnerships in North America
403
38.
Trade payables and other liabilities from commercial activities
404
39.
Other liabilities and other payables
406
40.
Tax liabilities
407
41.
Non-Current assets and liabilities held for sale
407
42.
Derivative financial instruments
408
43.
Commitments
416
44.
Related parties
418
45.
Fair value of financial assets and liabilities
424
46.
Relevant or subsequent events
426
47.
EDP Branch in Spain
427
48.
Environmental matters
428
49.
Business combinations
429
50.
Investigation process about CMEC and DPH
433
51.
Operating segments
434
52.
Consolidated and Company Reconciliation of Changes in the responsibilities of Financing activities
440
53.
Explanation added for translation
441
Annex I - Companies in the Consolidation perimeter
442
The following notes form an integral part of these condensed financial statements
305
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
•
•
•
•
COVID 19 - Macroeconomic, Regulatory, Operational, Accounting Impact and Stakeholders
Dispatch 26/2020 of the Portuguese Authority of Energy and Geology (DGEG), published in 17 March 2020, taking into account the decisions
came from the Council of Ministers on 13 March 2020 where a set of extraordinary and urgent measures to respond to the epidemic situation
created by the new Covid-19 were approved, and joining DGEG to this effort, come to simplify and facilitate some measures related to the billing
of fees regarding to processes of Small Production Units (UPP) and Self-consumption production units (UPAC), namely, payment of fees
associated with administrative
p
rocedures.
On 18 March 2020, Regulation 255-A / 2020 of the Energy Services Regulatory Agency (ERSE) was published, which sets out the exceptional
conditions for the energy supply services to avoid interruptions in electricity supply, piped natural gas and liquefied petroleum gas (LPG), namely:
Regarding the contingency plans adopted by the providers of essential public services and anticipating possible payment difficulties
motivated by isolation, lack of access to alternative means of payment from home or by an abrupt and unexpected loss of income by
consumers, ERSE determines that the period of notice of interruption of supply to domestic customers (BTN) is extended by an additional 30
da
y
s
;
Establish exceptional rules regarding the instalment payment of debts generated in this exceptional period of 30 days, which may be
extended b
y
ERSE itself;
Fractional payment of invoices, with no interest being charged by companies for a period of 30 days, due to the difficulty of paying
consumers to their ener
gy
su
pp
liers;
The distribution system operators must give priority, in their actions to guarantee the supply of energy, to priority facilities, specially in
hospitals and other health facilities, including those facilities that are exceptionally mobilized for this regime, as well as facilities public
securit
y
and civil
p
rotection.
In the context of COVID-19 pandemic, a set of laws has been approved with the purpose to adapt the sector's activity to the situation experienced,
establishing, in particular, consumer protection, procedures and business continuity measures.
In late 2019, in the Chinese city of Wuhan, a virus, SARS-COV-2, that can cause a serious respiratory infection like pneumonia was first identified
in humans. During the year 2020, the disease caused by the virus, the COVID-19, was classified by the World Health Organization (WHO) as a
pandemic. COVID-19 has forced the world to change its habits and is having several social, economic, regulatory, operational, accounting and
public health impacts.
Macroeconomic Impac
t
The current global crisis with the COVID-19 pandemic incorporates significant risks to the economy and society, remaining an uncertainty
regarding the duration of the epidemic crisis and its long term economic impacts.
In global macroeconomic terms, COVID-19 has impacted the EDP Group's activity in its various geographies and across the value chain. However,
a prudent strategy to hedge energy and financial market risks, the maintenance of robust liquidity levels as well as an active management of
suppliers and critical supplies, have allowed to significantly mitigate the impacts of this crisis.
EDP Group's energy business has been impacted by the drop in demand associated with the lockdown, as well as by a strong decline in pool
prices in the various geographies due to the falling prices in fuel (gas, oil, coal, CO2), partly already felt a few months before the COVID-19 crisis
in Europe. The risk price hedging strategy, with very high levels of fixed-price coverage has allowed to contain the impacts of the fall in pool
prices in generation business in the several geographies of EDP Group and specially in the Iberian market. The decrease in business
consumption had an impact in commercialization business, however it was partially offset by an increase in residential consumption. The energy
distribution business in Iberia had very little impact from the drop in consumption. With the progressive end of the "lockdown", there was a
general improvement in consumption levels and prices, however still below pre-crisis levels, with uncertainty about the potential effects of this
2nd wave and the duration and stren
g
ht of the economic recover
y
.
Regarding the financial markets, there was a very significant increase in the volatility of exchange and interest rates, in addition to a sharp drop in
capital markets, however fully recovered after March minimums. In this context, the most relevant impact on EDP is the sharp devaluation of the
Brazilian real.
In terms of exposure to credit risk, there was an increase in commercial debt, which in the meantime has fallen after peak with regulatory
measures to protect the economy (credit default). However, the uncertainties associated with this 2nd wave and duration of the economic
recovery still incorporate some risks, especially in the sectors of activity most affected by the crisis. Even so, the existence of a very diverse
portfolio of customers and standard debt recovery policies and processes allows to mitigate these impacts.
The EDP Group has been strengthening its financial position and is taking the appropriate mitigation measures from the first signs, making it
better prepared to absorb the potential impacts that may result from this pandemic. The issue of the 750 million Euros Hybrid Green Bond and
the repurchase of a Hybrid Bond in the same amount in January, the sale of tariff deficit in the amount of 825 million Euros in March, the issue of
a 750 million Euros bond loan in April, the sale of tariff deficit in the amount of 273 million Euros in July, the issue of the 850 million American
Dolars Green Bond in September and the sale of tariff deficit in the amount of 271 million Euros in December, as well as the sale of the hydro
p
ower
p
lants
p
ortfolio in Portu
g
al in the amount of 2.2 billion Euros, in December, reinforce the Grou
p
's li
q
uidit
y
p
osition.
Regulatory Impac
t
306
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
•
•
•
•
•
•
•
•
•
Local operation and response to breakdowns and incidents in the infrastructures of the National Electricity Transport Network;
Operation of the National Dispatch of the National Transport Network and Natural Gas Storage Infrastructures in Bucelas;
Local operation and response to breakdowns and incidents in the infrastructures of the National Natural Gas Transport Network;
Local operation and response to breakdowns and incidents in the underground natural gas storage infrastructures in Carriço;
Local operation and response to breakdowns and incidents at the Terminal of liquefied natural gas in Sines, including the reception, storage
and re
g
asification of li
q
uefied natural
g
as
(
GNL
)
;
Operation and response to malfunctions and incidents of the computer systems that support previous activities;
On 8 April 2020, ERSE Regulation No. 356-A / 2020 was published, which approves the regulation that establishes exceptional measures within
the scope of the SEN and SNGN by the Epidemiological Emergency COVID-19 (additional measures to ERSE Regulation no. 255-A / 2020,
published on 18 March 2020). In this context, ERSE approves additional regulations in which it extends, until 30 June 2020, the validity period of
Regulation no. 225-A / 2020 and operates provisions for fractioned payment of electricity and natural gas bills until 12 monthly payments and
also establishes other rules for a
pp
lication to com
p
anies not covered b
y
Re
g
ulation No. 225-A / 2020.
On 10 April 2020, Law no. 7/2020 of the Assembly of the Republic was published, which establishes an exceptional and transitional regime for
non-interruption of the provision of essential services. It is determined that during the state of emergency and in the following month, the
suspension of the provision of essential services, such as electricity and natural gas, is not allowed and that, in the event of outstanding amounts
related to the provision of these services, it should be drawn a payment plan, by agreement between the supplier and the customer, starting in the
second month following the state of emergency. Because Law No. 7/2020 was published with inaccuracies, on 30 April 2020, Statement of
Rectification No. 18/2020 was published, which rectifies, among others, the article that imposes obligations in terms of telephone lines available
to customers.
On 29 May 2020, Law No. 18/2020 was published, which makes the first amendment to Law No. 7/2020, of 10 April 2020, extending the
deadlines for measures to support families in the context of current public health crisis generated by COVID-19. Thus, this Law determines that
the suspension of the supply of essential services such as electricity and natural gas should not be allowed until 30 September 2020, and the
suspension ban precluded applies when motivated by a situation of unemployment, drop in household income equal to or greater than 20%, or
with COVID-19 (applying from 1 June). In the event that there are outstanding amounts related to the provision of these services, a payment plan
should be drawn u
p
, b
y
a
g
reement between the su
pp
lier and the customer, startin
g
in the second month thereafter from 30 Se
p
tember 2020.
On 22 June 2020, Ordinance No. 149/2020 was published, which defines and regulates the terms under which the aforementioned drop in
income is demonstrated for the purpose of not suspending the provision of essential services.
On 8 July 2020, Dispatch 40/2020 of DGEG was published, which determines the closure of the facilities to the public until 27 July, suspension of
submission of new requests and deadlines of the Terms of Reference relating to the Agreements to be signed with the Network Operators for the
allocation of the injection capacity reserve in the RESP.
Similar measures have been implemented in other countries where the Group is present.
On 26 May 2020, ERSE Regulation 496/2020 was published, approving the amendment to the Electric Sector Tariff Regulation (TR), determining
that the regulatory parameters approved in ERSE Directive 2/2018, of 4 January, for the 2018-2020 regulatory period, are exceptionally applicable
until 31 December 2021, that is, for another year due to the current context of uncertainty created by the pandemic.
Operation of the Operation Center of the National Electricity Transport Network in Vermoim;
DGEG Dispatch 27/2020, published on 20 March 2020, determines the execution of exceptional and temporary measures in the scope of
licensing of the electricity sector, in response to the epidemiological situation arising from COVID-19, namely, the suspension, until the end of
April, beginning with the date of the present order, of the submission of new requests for the allocation of Capacity Reserve Titles, Agreements
for the allocation of reception capacity in the Electric Public Network (RESP), Registrations for UPP or UPAC, Electricity Production Licenses
within the scope of Production in Ordinary Regime (PRO), Cogeneration and Production in Special Regime (PRE) and Licenses for the
establishment of network infrastructures (lines and extensions, stations transformers, substations), except those of public or private service that
fit in situations considered emergency by DGEG, for public health reasons or similar).
On 22 March 2020, Dispatch 3547-A / 2020, of the Ministry of Environment and Climate Action, was published, which regulates the declaration of
the state of emergency, ensuring the functioning of supply chains for essential goods and public services, as well as the operating conditions
under which they must operate.
In order to ensure the continuity and non-interruption of the electricity distribution service, the distribution system operators, municipalities and
concessionaires for low voltage distribution must ensure, within the scope of their responsibilities, all necessary measures to ensure regular
management , operation and maintenance of networks, maintenance of lines, transformer stations and auxiliary installations, and defining the
necessary teams, including operators, team leaders, operation and maintenance technicians and other elements assigned to emergency
res
p
onse, to ensure the followin
g
functions:
Operation of the National Dispatch of the National Electricity Transport Network in Sacavém;
Maintenance of protection bands and fuel management in situations of imminent risk.
307
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
v) Fair value of financial instrument
s
Operational Impac
t
i) Impairment losses of trade receivables (expected credit losses
)
ii) Provision for employee benefit liabilitie
s
iii) Impairment losses on non-financial asset
s
iv) Investment in joint ventures and associate
s
The rapid and effective implementation of EDP's business continuity plans in its various Business Units allowed the continuity of operations
during the period of confinement, without significant interruptions in the supply of energy or services to customers.
EDP's operational and investment activities are dependent on local and global supply chains, with active management of critical supplies being
carried out to minimize potential impacts of breakages in these chains.
Accounting Impac
t
EDP Group has not applied any different classifications from those normally used in its income statement, as a result of COVID-19. To assess
possible accounting impacts arising from COVID-19, the Group reassessed the estimates it considers relevant and which may have been
impacted by this fact. Thus, on 31 December 2020, the Group carried out a series of analyses of these relevant estimates. Given that, due to the
current scenario of uncertainty, the update of the basic assumptions for these estimates still, at this date, complex. Nevertheless, we can
hi
g
hli
g
ht the anal
y
sis made re
g
ardin
g
the followin
g
to
p
ics:
EDP Group determines impairment losses of trade receivables by reference to provision matrices based on the simplified approach foreseen by
IFRS 9. In view of the measures enacted by the governments of the different countries in which the Group operates and the potential change in
the quality of the customers' credit portfolio, the EDP Group carried out an analysis of the assumptions used in determining the expected credit
losses and their confrontation with the best information available to date, such as the evolution of the Group's exposure as at 31 December 2020.
Given the existing uncertainties regarding the impact on the credit risk of the respective customer portfolio, the Group has carried out an analysis
of a set of scenarios in order to reflect its best expectation in the respective impairment calculation matrices, and will continue monitoring the
evolution of this topic, in order to adjust the assumptions that may prove necessary. As at the reporting date, the Group has recognised
impairment losses in the amount of approximately 19 million Euros. This increase has resulted essentially from the increase in accounts
receivable balances on 31 December 2020, which are the basis for the impairment calculation matrices, as well as the adjustments made to the
impairment loss assumptions, based on the country and the segment in which customers are included (residential customers and business
customers), in order to reflect the specific situation generated by the pandemic.
Some significant actuarial assumptions used to determine the present value of the defined benefit obligation have been updated, due to COVID-
19. Therefore, given the evolution of the stock markets, the discount rate used in the valuation of past service liabilities has been reviewed. In this
sense, considering the evolution of interest rates that support the determination of the discount rate during the year, on 31 December 2020 the
EDP Group has considered the discount rate of 0.70% to 0,80% for Portugal (31 December 2019: 0.95%) and the discount rate of 6.78% to 7.67%
for Brazil (31 December 2019: 7.56%). Moreover, there was a significant reduction in the fair value of the Plans Assets in Portugal in the first
quarter, which has been partially recovered in the second semester, translated into a reduction in the value of the Plan Assets of approximately
40 million Euros compared to 31 December 2019. The sensitivity analysis regarding the assumptions considered at 31 December 2020 can be
found in note 35.
As a result of COVID-19, the Group has carried out an analysis in order to identify any evidence of impairment, in particular on Goodwill, Property,
Plant and Equipment and intanglible assets and to determine the methods and assumptions to be used to estimate the recoverable value of such
assets in accordance with IAS 36 – Impairment of assets, including the sensitivity analyses. Where necessary, an impairment test was carried
out to compare the carrying amount and the recoverable amount of the cash-generating units (CGUs). With the exception of the situations
described in notes 12 and 19, it has been confirmed the full recoverability at 31 December 2020 of the carrying amounts of the non-financial
assets.
Investments in
j
oint ventures and associates are accounted for under the equity method in the consolidated financial statements. The results for
the period already include the effects resulting directly from the pandemic, with no materially relevant impacts having been determined.
Valuation volatility in financial and commodity markets due to COVID-19 pandemic and the consequently economic slowdown, impact the
measurement of the instruments held by the Group and measured at fair value (see note 22), since the fair value of financial instruments
incorporates data that reflect the way in which market participants would take into account the impact of COVID-19. Neverthless, the Group did
not consider necessary to make changes to the valuation methods applied and therefore there are no additional financial instruments
cate
g
orised as “Level 3”
(
that is, valued based on in
p
uts that are not based on observable market data
)
.
308
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
•
Employees
•
Customers
•
Suppliers and job creation
The EDP Group has reviewed the deferred tax asset positions in order to ensure their recoverability through future taxable income and has
monitored changes to legislation, revisions to tax rates and other tax measures taken in response to the crisis. Where required, any tax relief has
been recognised and the timing of the reversal of deductible temporary differences and the recoverability of deferred tax assets have been
monitored according to IAS 12 – Income taxes
(
see note 24
)
.
ix) Subsequent event
s
The EDP Group had special attention to the events occurred during the period from 31 December 2020 until the approval of the financial
statements by the Board of Directors, given the uncertainties related to the health crisis and the constantly changing environment (see note 46).
vi) Derivatives – “Own use” and hedging relationships
vii) Provisions for risks and charge
s
As a result of COVID-19, certain activities were more impacted than others, therefore the Group has reviewed whether any current obligations
were likely to give rise to the recognition of provisions at 31 December 2020. In particular, the assumptions underlying the assessment of the
possible presence of onerous contracts have been updated and the Group has concluded that there are no situations for which it would be
necessary to recognise additional provisions as a result of COVID-19, pursuant to IAS 37 – Provisions, contingent liabilities and contingent
assets.
viii) Recoverability of deferred tax asset
s
The investment in recent years in digitalization was critical in this response to the pandemic, allowing the EDP Group to have 72% of the Group's
workers teleworking. The EDP Group also reinforced internal communication and created an internal medical support line for more than 45,000
people.
For employees who are at the front line to insure the continuity of energy supply, the Group reinforced its cleaning and disinfection activities,
delivered personal protective equipment and worked in alternate shifts, without contact and redundancy of the teams.
The Group takes care of its customers, not only ensuring the supply of energy, but also suspending energy cuts, making the deadline and
payment method more flexible (without interest) and reinforcing digital contact means and call centers.
For its customers who are healthcare professionals and are at the frontline battling the pandemic, the Group is granting discounts on electricity
prices in Portugal and Spain. These discounts also benefit the integrated continuing care units and residential structures around disability,
childhood and community, as well as hotels required to provide support to hospitals.
The Group is contributing to maintain the economic activity and employment and helping suppliers to overcome this phase of the economic
slowdown. Thus, the Group has maintained the goal of hiring 700 people in 2020 and the investment plan of more than 9 billion Euros between
2020 and 2022 (remaining period of the Business Plan). Regarding suppliers, the Group anticipated payments to more than 1,200 Small and
Medium Enterprises (SME) in early April and made payments on a set of SME invoices of up to 500 thousand Euros, totalling about 100 million
Euros, b
y
the end of Ma
y
.
EDP's Executive Board of Directors has decided that the non-mandatory return regime for teams currently working in teleworking in Portugal will
remain in effect until 31 March 2021.
The EDP Group assumed the commitment to its stakeholders from the first moment and has acted in the fight against the pandemic, having
elaborated an integrated plan to address and mitigate the impacts of COVID-19 on their operations and performance, as well as to support and
protect the interests of all its stakeholders, of which the following initiatives stand out:
The impact of COVID-19 on issues related to risk management was limited and did not affect, directly and materially, the measurement of
derivative instruments and the outcome of the assessment of the effectiveness of exchange rate, interest rate and commodity risk hedges.
Regarding derivatives designated as cash
flow hedges,
the Group has not identified significant situations that have resulted
in the
discontinuation of hedge accounting or in the recognition of a higher ineffective portion in existing hedging relationships. The Management has
no intention to chan
g
e the settlement of these contracts.
Stakeholder
s
309
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
•
Communities
•
Shareholders
The Group upholded the execution of the business plan and the commitment to the dividend distribution in May 2020.
This set of measures reflects the Group's resilience and commitment to all its stakeholders.
From the first moment, the Group made a commitment to the Communities, delivering medical equipment worth approximately 5.8 million Euros,
of which approximately 4 million Euros in partnership with China Three Gorges (CTG) (50 fans, 200 monitors and medical support equipment),
and personal protective equipment worth approximately 500 thousand Euros.
Additionally, the Group i) created a social fund to support community projects and vulnerable communities; ii) donated essential goods to homes
and Non-Governmental Organizations (NGO) and personal protective equipment for homes; iii) helped to finance the production of a new invasive
ventilator model, the development of platforms and applications to promote public health; and iv) provided electronic equipment for schools in
the context of adapting schools to digital platforms. This set of measures totalled an investment of approximately 1.7 million Euros.
310
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
1.
Economic Activity of EDP Group
2.
Accounting Policies
a)
Basis of presentation
Accounting policies have been applied consistently by all Group companies and in all periods presented in the consolidated and company
financial statements.
As described in note 3, the Group adopted in the preparation o
f
company and consolidated financial statements as at 31 December 2020, the
accounting standards issued by IASB and IFRIC interpretations effective since 1 January 2020. The accounting policies used by the Group in
preparing the consolidated financial statements described in this note were adopted in accordance. The new standards and interpretations
recently issued but not yet effective and that the Group has not yet applied on its consolidated financial statements, are detailed in note 3.
The financial statements have been prepared on a going concern basis and under the historical cost convention, modified by the application o
f
the fair value accounting to derivative financial instruments, financial assets at fair value through profit or loss and financial assets at fair value
through other comprehensive income except those for which fair value is not available. Assets and liabilities that are hedged under hedge
accounting are stated at fair value in respect of the hedged risk. Non-current assets and disposal groups held for sale are stated at the lower of
carrying amount and fair value less costs to sell. Liabilities for defined benefit plans are recognised at the present value of the obligation net of
p
lan assets fair value.
In accordance with IFRS 3 - Business Combinations, i
f
the initial purchase price allocation o
f
assets, liabilities and contingent liabilities acquired is
identified as provisional, in the subsequent 12 months after the business combination transaction, the legal acquirer should make the final
allocation of the purchase price related to the fair value of the assets, liabilities and contingent liabilities acquired. These adjustments with impact
on the amount of goodwill determined and booked in previous periods, originate a restatement of the comparative information, which is reflected
on the Statement of financial position, with effect from the date of the business combination transaction.
The preparation o
f
financial statements in conformity with IFRS requires the Executive Board o
f
Directors to make
j
udgments, estimates and
assumptions that affect the application of the accounting policies and the reported amounts of assets, liabilities, income and expenses. The
estimates and related assumptions are based on historical experience and other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments regarding the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates. The issues involving a higher degree of judgment or complexity, or
where assumptions and estimates are considered to be significant, are presented in note 4 - Critical accounting estimates and judgments in
p
re
p
arin
g
the financial statements.
The accompanying consolidated and company financial statements o
f
EDP - Energias de Portugal, S.A. reflect the results o
f
the company's
operations and its subsidiaries (EDP Group or Group) and the Group's interest in its joint ventures and associated companies, for the periods
ended on 31 December 2020 and 2019 and EDP S.A.'s Executive Board of Directors approved them on 24 February 2021, after that they are
subject to General Meeting approval. The financial statements are presented in thousand Euros, rounded to the nearest thousand.
In accordance with Regulation (EC) 1606/2002 o
f
the European Council and Parliament, o
f
19 July 2002, as transposed into Portuguese
legislation through Decree-law
35/2005 of 17 February 2005, with changes updated by the Decree-law 158/2009 of 13 July and Decree-law
98/2015 of 2 June, the company's financial statements and the Group's consolidated financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS), as endorsed by the European Union (E.U). IFRS comprise accounting standards issued by the
International Accounting Standards Board (IASB) as well as interpretations issued by the International Financial Reporting Interpretations
Committee (IFRIC) and their predecessor bodies. The EDP Group's consolidated and company financial statements for the years ended 31
December 2020 and 2019 were
p
re
p
ared in accordance with IFRS as ado
p
ted b
y
the E.U. and effective durin
g
2020.
EDP - Energias de Portugal, S.A. (hereinafter referred to as EDP), currently with head office in Lisbon, Avenida 24 de Julho 12 and with its shares
listed on the Euronext Lisbon stock exchange, results from the transformation of Electricidade de Portugal, E.P., incorporated in 1976 following
the nationalization and consequent merger of the main companies in the electricity sector in Portugal. During 1994, as established by Decree-laws
7/91 and 131/94, the EDP Group (EDP Group or Group) was set up following the split of EDP, which led to a number of directly or indirectly wholly
owned subsidiaries of EDP.
The Group’s businesses are currently focused on the generation, transmission, distribution and supply o
f
electricity and supply o
f
gas.
Additionally, the Group also operates in related areas such as engineering, laboratory tests, professional training, energy services and property
management.
EDP Group operates essentially in the European (Portugal, Spain, France, Poland and Romania) and American (Brazil and North America) energy
sectors.
311
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
b)
Basis of consolidation
Change of Accounting Policy at the individual basi
s
On a step acquisition process resulting in the acquisition o
f
control the revaluation o
f
any interest previously held is booked against the income
statement when goodwill is calculated. On a partial disposal resulting in loss of control over a subsidiary, any participation retained is revalued at
market value on the sale date and the gain or loss resulting from this revaluation is booked against the income statement, as well as any gain or
loss resulting from the disposal.
Jointly controlled entitie
s
EDP Group classifies an arrangement as a
j
oint arrangement when the
j
ointly control is contractually established. Joint control exists only when
decisions about the relevant activities require the unanimous consent of the parties that collectively control the arrangement. After determining
the existence of joint control, the Group classifies joint arrangements into two types - joint operations or joint ventures.
A
j
oint operation is a
j
oint arrangement whereby the parties that have
j
oint control o
f
the arrangement (i.e.
j
oint operators) have rights to the
assets and obligations for the liabilities relating to the arrangement, so the assets and liabilities (and related revenues and expenses) in relation to
its interest in the arrangement are recognised and measured in accordance with relevant IFRS applicable.
The accompanying consolidated financial statements reflect the assets, liabilities and results o
f
EDP, S.A. and its subsidiaries (Group or EDP
Group) and the equity and results attributable to the Group, through the investments in associates and jointly controlled entities.
EDP Group applies prospectively as from 1 January 2010, IFRS 3 (revised) for the accounting of business combinations.
Controlled entitie
s
Investments in subsidiaries where the EDP Group has control are fully consolidated from the date the Group assumes control over their financial
and operating activities and/or over their assets and liabilities until the moment that control ceases to exist.
An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to
affect those returns through its power over the investee, independently of the percentage of voting rights held.
Accumulated losses are attributed to non-controlling interests in the corresponding proportions held, implying that the Group can recognise
negative non-controlling interests.
With the relevance o
f
this agreement and the growing expectations for offshore renewable business, EDP Group decided to change the way it
controls these investments, changing the presentation of results with Joint Ventures and Associate companies in Consolidated Income
Statement. Previously to this change, EDP Group presented a caption in Consolidated Income Statement, in which reflected only the results with
Joint Ventures and Associates, being the results from acquisitons or disposals recorded as financial income or expenses.
With this change, and considering the interests o
f
Joint Ventures and Associates, and in special the referred vehicle for offshore wind activity, are
an extension of EDP Group operating activity, through which conducts its operation and strategy, EDP Group starts including after the other
operation income and costs caption, a single caption related to Joint Ventures and Associates, integrating the results from these companies as
well as the results from acquisitions and/or disposals in these investments.
On 1 January 2020, EDP SA changed its accounting policy for recognizing balances related to the Group's financial system, starting to recognise
the balances of assets and liabilities in cash and cash equivalents and financial debt respectively. Prior to this change, the company recognized
these balances in other debtors and other assets and other creditors and other liabilities.
With reference to 31 December 2019, at company level, the effect o
f
this change implied the reclassification o
f
a balance from the caption o
f
other debtors and other assets to the caption of cash and cash equivalents in the amount of 612,064 thousand Euros and the reclassification of a
balance of the caption of other creditors and other liabilities for the caption of financial debt in the amount of 711,836 thousand Euros.
With reference to 31 December 2019, at company level, the effect o
f
this change implied the reclassification in Statement o
f
Cash Flows o
f
a
positive balance of 63,933 thousand Euros from the line Receipts/(payments) relating to loans from related parties to the line of cash and cash
equivalents. On 1 January 2019, at the company level, this change implied the increase of Cash and Equivalents at the beginning of the period to
1,160,600 thousand Euros.
Change in results presentation of Joint Ventures and Associated companie
s
In January 2020, EDP Group signed a strategic memorandum with ENGIE to the creation o
f
a new company - a Joint Venture with equal control for
both sides - as an exclusive investment veihicle for worlwide opportunities in wind offshore projects (fixed and floating projects), combining
development and industrial skills of both companies. As part of the deal, EDP Group and ENGIE are preparing their offshore wind projects and the
projects in progress of this new company, starting with a total of 1.5 GW in construction and 3.7 GW in development, working together to create a
global leader in this sector.
312
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
The recoverable amount o
f
the goodwill is assessed annually, regardless o
f
the existence o
f
any impairment triggers. Impairment losses are
recognised in the income statement. The recoverable amount is determined based on the value in use of the assets, calculated using valuation
methodologies supported by discounted cash flow techniques, considering market conditions, the time value of money and the business risks.
Goodwill is not adjustable due to changes in the initial estimate o
f
the contingent purchase price and the difference is booked in the income
statement.
Purchases of non-controlling interests and dilutio
n
In acquisitions (dilutions not resulting in a loss o
f
control o
f
non-controlling interests), the difference between the fair value o
f
the non-controlling
interests acquired and the consideration paid, is accounted against reserves. The acquisitions of non-controlling interests through written put
options related with investments in subsidiaries held by non-controlling interests, are recorded as a liability for the fair value of the amount
payable, against non-controlling interests. The fair value of the liability is determined based on the contractual price which may be fixed or
variable. In case of a variable price, the changes in the liability are recognised against the income statement as well as the effect of the financial
discount of the liabilit
y
(
unwindin
g)
.
Goodwill
Following the transition to International Financial Reporting Standards (IFRS) on 1 January 2004 and as permitted under IFRS 1 - First-time
Adoption of International Financial Reporting Standards, the EDP Group decided to maintain the goodwill resulting from business combinations
that occurred prior to the transition date, calculated in accordance with the Group's previous accounting policies.
Costs directly attributable to the acquisition of a subsidiary are booked directly in the income statement.
As from the transition date to IFRS (1 January 2004), total positive goodwill arising from acquisitions is recognised as an asset carried at
acquisition cost and is not subject to amortisation. Goodwill arising on the acquisition of subsidiaries, joint ventures and associates is defined as
the difference between the cost of acquisition and the corresponding share of the fair value of the net assets acquired.
The EDP Group has the possibility to boo
k
non-controlling interests at fair value or at cost, implying that the full amount o
f
goodwill can be
booked in the financial statements, including the portion attributable to the non-controlling interests, against non-controlling interests, if the first
option is chosen. Goodwill arising on the acquisition of subsidiaries, joint ventures and associates is defined as the difference between the cost
of acquisition and the total or corresponding share of the fair value of the net assets acquired, depending on the option taken.
Negative goodwill arising on an acquisition is recognised directly in the income statement in the period when the business combination occurs.
- Interchange of managerial personnel; and
- Provision of essential technical information.
The consolidated financial statements include the Group's attributable share o
f
total reserves and profits or losses o
f
associates, included under
the equity method. When the Group’s share of losses exceeds its interest in an associate, it's carrying amount is reduced to zero and recognition
of further losses is discontinued, except to the extent that the Group has a legal or constructive obligation to cover such losses on behalf of the
associate.
Investments in subsidiaries,
j
oint ventures and associates not classified as held for sale or not included in a disposal group which is classified as
held for sale are accounted for at cost in the company's financial statements, and are subject to periodic impairment tests, whenever indication
exists that certain financial investment may be impaired.
Entities over which the Group has significant influenc
e
Investments in associates are included in the consolidated financial statements under the equity method from the date the Group acquires
significant influence to the date it ceases. Associates are entities over which the Group has significant influence, but not control, over its financial
and operating policies.
The existence of significant influence by the Group is usually evidenced by one or more of the following:
- Representation on the Executive Board of Directors or equivalent governing body of the investee;
- Participation in policy-making processes, including participation in decisions about dividends or other distributions;
- Existence of material transactions between the Group and the investee;
Accounting for investments in subsidiaries, joint ventures and associates in the company's financial statement
s
A
j
oint venture is a
j
oint arrangement whereby the parties that have
j
oint control o
f
the arrangement (i.e.
j
oint ventures) have rights to the net
assets of the arrangement, so these investments are included in the consolidated financial statements under the equity method.
The consolidated financial statements include the Group's attributable share o
f
total reserves and profits or losses o
f
j
oint ventures, included
under the equity method. When the Group’s share of losses exceeds its interest in a joint venture, it's carrying amount is reduced to zero and
recognition of further losses is discontinued, except to the extent that the Group has a legal or constructive obligation to cover such losses on
behalf of that entity.
313
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
c)
Foreign currency transactions
d)
Derivative financial instruments and hedge accounting
Foreign currency non-monetary assets and liabilities accounted for at historical cost are translated using the exchange rates at the dates o
f
the
transactions. Foreign currency non-monetary assets and liabilities stated at fair value are translated into Euros at the exchange rates at the dates
the fair value was determined.
Derivative financial instruments are recognised on the trade date at fair value. Subsequently, the fair value o
f
derivative financial instruments is
remeasured on a regular basis, being the gains or losses on re-measurement recognised directly in the income statement, except for derivatives
designated as cash flow hedging instruments. Recognition, in the income statement, of the resulting gains and losses on re-measurement of
hedging derivatives depends on the hedge model used.
The fair value o
f
derivative financial instruments corresponds to their market value, i
f
available, or to quotes indicated by external entities through
the use of valuation techniques accepted by the market, which are compared in each date of report to fair values available in common financial
information platforms, namely Bloomberg and Reuters.
Hedge accounting
The Group uses financial instruments to hedge interest rate risk, exchange rate ris
k
and price ris
k
resulting from its operational and financing
activities. Derivatives not qualified for hedge accounting under IFRS 9 are accounted for as trading instruments.
Balances and transactions eliminated on consolidatio
n
Inter-company balances and transactions, including any unrealised gains and losses on transactions between Group companies, are eliminated in
preparing the consolidated financial statements. Unrealised gains and losses arising on transactions with associates and jointly controlled
entities are eliminated to the extent of the Group's interest in those entities.
Business combinations achieved in stage
s
In a business combination achieved in stages, on the date o
f
obtaining control, the excess o
f
the aggregate o
f
(i) the consideration transferred; (ii)
the amount of any non-controlling interest recognised in the acquiree; and (iii) the fair value of the previously held equity interest in the acquired
business; over the net of amounts of the identifiable assets acquired and liabilities assumed, is recognised as goodwill.
I
f
applicable, the negative difference, after evaluating the consideration transferred, o
f
the amount o
f
any non-controlling interest recognised in
the acquiree and the fair value of the previously held equity interest in the acquired business; over the net value of the identifiable assets acquired
and liabilities assumed, is recognised in the income statement. The Group recognises the difference between the fair value of the previously held
equity interest in the acquired business and the carrying value in consolidated results in Other income. Additionally, the Group reclassifies the
deferred amounts in other comprehensive income relating to the previously held equity interest to the income statement or consolidated reserves,
accordin
g
to their nature.
Foreign currency transactions are translated at the exchange rates at the dates o
f
the transactions. Monetary assets and liabilities denominated
in foreign currency are translated into Euros at the exchange rates at the balance sheet date. These exchange differences arising on translation
are recognised in the income statement as financial results.
Investments in foreign operation
s
The financial statements o
f
the foreign subsidiaries,
j
oint ventures and associates o
f
the Group are prepared using their functional currency,
defined as the currency of the primary economic environment in which they operate. In the consolidation process, the assets and liabilities of
foreign subsidiaries are translated into Euros at the official exchange rate at the balance sheet date.
Regarding the investments in foreign operations that are consolidated using the full consolidation method and equity method, the exchange
differences between the amount of equity expressed in Euros at the beginning of the period and the amount translated at the official exchange
rates at the end of the period, on a consolidated basis, are booked against reserves.
Foreign currency goodwill arising on the acquisition o
f
these investments is remeasured at the official exchange rate at the balance sheet date
directly against reserves.
The income and expenses o
f
foreign subsidiaries are translated into Euros at the approximate exchange rates at the dates o
f
the transactions.
Exchange differences from the translation into Euros of the net profit for the period, arising from the differences between the rates used in the
income statement and those prevailing at the balance sheet date are recognised in reserves.
On disposal o
f
a foreign subsidiary, the related exchange differences previously recognised in reserves, are accounted for in the income
statement.
314
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
e)
Debtors and Other assets
Loans and trade receivables are generally held to collect contractual cash flows and are expected to give rise to cash flows representing solely
payments of principal and interest, thus they meet the criteria for amortised cost measurement under IFRS 9.
The accumulated foreign exchange gains and losses regarding the net investment and the related hedging instrument recognised in equity are
transferred to the income statement when the foreign currency subsidiary is sold, as part of the gain or loss resulting from the disposal.
Effectivenes
s
For a hedge relationship to be classified as such, in accordance with IFRS 9, its effectiveness must be demonstrated. Therefore, the Group
performs prospective tests at the inception date and at each balance sheet date, in order to demonstrate its effectiveness, showing that any
adjustments to the fair value of the hedged item attributable to the risk being hedged are offset by adjustments to the fair value of the hedging
instrument. Any ineffectiveness is recognised in the income statement when it occurs.
The financial assets are classified based on the business model for managing the financial assets ("business model test") and their contractual
cash flow characteristics ("SPPI test"). EDP Group classifies its financial assets, at the initial recognition, in accordance with the aforementioned
requirements introduced by IFRS 9, on the following categories:
Financial assets at amortised cos
t
A financial asset is measured at amortised cost if: (i) it is held within a business model whose objective is to hold assets in order to collect its
contractual cash flows; and (ii) the contractual cash flows represent solely payments of principal and interest. Financial assets included within
this category are initially recognised at fair value and subsequently measured at amortised cost. Any gain or loss arising on derecognition is
recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are
presented as separate line item in the statement of profit or loss.
Cash flow hedg
e
Changes in the fair value of derivatives qualified as cash flow hedges are recognised in reserves.
The cumulative gains or losses recognised in reserves are reclassified to the income statement when the hedged item affects the income
statement.
When a hedging relation o
f
a future transaction is discontinued, the changes in the fair value o
f
derivative recognised in reserves remain
recognised in reserves until the future hedged transaction occurs. When the future transaction is no longer expected to occur, the cumulative
gains or losses recognised in reserves are recorded immediately in the income statement.
Net investment hedg
e
The net investment hedge model is applied on a consolidated basis to investments in subsidiaries in foreign currencies. This model allows that
the exchange differences recognised in the currency translation reserve to be offset by the foreign exchange differences in foreign currency loans
or currency derivatives contracted, recognised in Currency translation reserve - Net investment hedge. For cross currency interest rate swaps, the
cross currency basis spread and forward points are not designated into the hedge relationship, but deferred as a hedging cost in other
comprehensive income, in Currency translation reserve - Net investment hedge - Cost of hedging, and recognized in profit or loss over the period
of the hed
g
e. The ineffective
p
ortion of the hed
g
in
g
relationshi
p
is reco
g
nised in the income statement.
(iv) The effect of credit risk does not dominate the value changes that result from that economic relationship; and
(v) The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually hedges
and the
q
uantit
y
of the hed
g
in
g
instrument that the entit
y
actuall
y
uses to hed
g
e that
q
uantit
y
of hed
g
ed item.
Fair value hedg
e
Changes in the fair value o
f
derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with
any changes in the fair value of the hedged assets and liabilities or group of hedged assets and liabilities that are attributable to the hedged risk.
For cross currency interest rate swaps, the currency basis spread is excluded from the hedge designation, but considered as a hedging cost in
other comprehensive income, in cost of hedging reserve. When the hedging relationship ceases to comply with the requirements for hedge
accounting, the accumulated gains or losses concerning the fair value of the risk being hedged are amortised over the residual period to maturity
of the hed
g
ed item.
(i) The hedging relationship consists only of hedging instruments and hedged items that are eligible as per determined in IFRS 9;
(ii) At the inception of the hedge there is formal documentation of the hedging relationship and the Group's risk management objective and
strategy for the hedge;
(iii) There is an economic relationship between the hedged item and the hedging instrument;
Hedging derivatives are recorded at fair value, being the gains and losses recognised in accordance with the hedge accounting model applied by
the Group. Hedge relationship exists when:
315
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
As soon as the loss event occurs in terms o
f
IFRS 9, the impairment allowance would be allocated directly to financial asset affected, that is, the
asset’s carrying amount is reduced and the amount of the loss is recognised in profit or loss. If, in a subsequent period, the amount of the
impairment loss decreases, the previously recognised impairment loss is reversed in profit or loss, if the decrease can be related objectively to an
event occurring after the impairment loss was recognised.
Trade receivables, including contract asset
s
EDP Group applies the simplified approach and records lifetime expected losses on all trade receivables and contract assets, including those with
a significant financing component. The estimated ECL are calculated based on actual credit loss experience over a period that, per business and
type of customers, is considered statistically relevant and representative of the specific characteristics of the underlying credit risk. When
applicable, EDP Group estimated the ECL rates separately for corporates and individuals.
Considering the particularities o
f
each business, exposures are segmented based on common credit ris
k
characteristics such as credit ris
k
grade,
geographic region and/or industry - for corporates; and type of product purchased - for individuals, as applicable. Actual credit loss experience is
adjusted by scalar factors to reflect differences between economic conditions during the period over which historical data was collect, current
conditions and EDP Group's view of economic conditions over the expected lives of the receivables.
EDP Group recognise an impairment loss based on the Expected Credit Loss (ECL) model, before the objective evidence o
f
a loss event from past
actions. This model is the basis for the recognition of impairment losses on held financial assets that are measured at amortised cost or at fair
value through other comprehensive income (which includes cash and cash equivalents, trade receivables, loans and debt securities).
The impairment methodology applied depends on whether there has been a significant increase in credit ris
k
since initial recognition. I
f
the credit
risk on a financial asset does not increase significantly since its initial recognition, EDP Group measures the loss allowance for that financial
asset at an amount equal to 12-month expected credit losses. If the credit risk increases significantly since its initial recognition, EDP Group
measures the loss allowance for that financial asset at an amount equal to lifetime expected credit losses.
Regardless o
f
the above, a significant increase in credit ris
k
is presumed i
f
there is an objective evidence that the financial asset is impaired,
including if there is observable data that comes to the attention of the holder of the asset about the following loss events, among others:
significant financial difficulty of the issuer or obligor; restructuring of an amount due to the Group in terms that it would not consider otherwise; a
breach of contract, such as a default or delinquency in interest or principal payments; or it becoming probable that the borrower will enter
bankruptc
y
or other financial reorganisation.
Changes in the business model assessment over tim
e
Financial assets are not reclassified subsequent to their initial recognition. However, i
f
the Company changes its business model for managing
financial assets, it will classify newly originated or newly purchased financial assets under the new business model, but will keep the
classification of existing assets under the previous business model.
Recognition and derecognition of financial asset
s
Purchases and sales o
f
financial assets are recognised on the trade date, which is the date on which the Group commits to purchase or sell these
financial assets.
Financial assets are derecognised when: (i) the Group contractual rights to receive their future cash flows have expired, (ii) the Group has
transferred substantially the risks and rewards of ownership, or (iii) although retaining some, but not substantially all the risks and rewards of
ownership, the Group has transferred control over the assets.
Impairmen
t
Financial assets measured at fair value through other comprehensive income (FVOCI
)
A financial asset is measured at fair value through other comprehensive income i
f
(i) the objective o
f
the business model is achieved by both
collecting contractual cash flows and selling financial assets; and (ii) the asset’s contractual cash flows represent solely payments of principal
and interest. Financial assets included within this category are initially recognised and subsequently measured at fair value, with the changes in
the carrying amount booked in other comprehensive income, except for the recognition of impairment gains or losses, interest revenue and
foreign exchange gains and losses, which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss
p
reviousl
y
reco
g
nised in other com
p
rehensive income is reclassified to
p
rofit or loss.
Financial assets measured at fair value through profit or loss (FVTPL
)
Financial assets that do not meet the criteria to be classified under the previously referred categories, are classified at fair value through profit or
loss, deemed to be a residual category under IFRS 9.
Regardless o
f
the business model assessment, EDP Group can elect to classify a financial asset at fair value through profit or loss i
f
doing so
reduces or eliminates a measurement or recognition inconsistency (“accounting mismatch”).
316
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
f)
Trade payables and other liabilities
g)
Equity instruments
The difference between the carrying amount o
f
a financial liability (or part o
f
a financial liability) extinguished or transferred to another party and
the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
A financial instrument is classified as an equity instrument when there is no contractual obligation at settlement to deliver cash or other financial
asset to another entity, regardless of its legal form, and there is a residual interest in the assets of an entity after deducting all its liabilities.
Remeasurement of the lease liabilities (rents due from lease contracts
)
EDP Group remeasures the lease liabilities (rents due from lease contracts), and adjusts the corresponding right-of-use assets, by discounting the
revised lease payments, using an unchanged discount rate, if either:
• there is a change in future lease payments resulting from a change in an index or a rate used to determine those payments; or
• there is a change in the amounts expected to be payable under a residual value guarantee.
I
f
there is a lease modification that do not qualifies to be accounted as a separate lease, EDP Group remeasures the lease liabilities (rents due
from lease contracts) and adjusts the corresponding right-of-use assets, by discounting the revised lease payments, using a revised discount rate
at the effective date of the modification.
The variable lease payments that do not depend in an index or a rate are not included in the measurement o
f
the lease liabilities (rents due from
lease contracts), nor the right-of-use asset. Those payments are recognised as cost in the period in which the event or condition that gives rise to
the payments occurs.
Derecognition of financial liabilitie
s
EDP Group derecognises a financial liability (or a part o
f
a financial liability) from its statement o
f
financial position when, and only when, the
obligation specified in the contract is discharged or cancelled or expired. An exchange between an existing borrower and lender of debt
instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new
financial liability. Similarly, a substantial modification of the terms of an existing financial liability, or a part of it, is accounted for as an
extinguishment of the original financial liabilit
y
and the recognition of a new financial liabilit
y
.
An instrument is classified as a financial liability when there is a contractual obligation for the issuer to liquidate capital and/or interests, through
delivering cash or other financial asset, regardless of its legal form. Financial liabilities are recognised at the issuance date (trade date): (i) initially
at fair value less transaction costs; and (ii) subsequently at amortised cost, using the effective interest method. All financial liabilities are booked
at amortised cost, with the exception of the financial liabilities hedged at fair value hedge, which are stated at fair value on risk component that is
being hedged.
Initial measurement of the lease liabilities (rents due from lease contracts
)
As provided by IFRS 16, EDP Group measures the lease liabilities (rents due from lease contracts) on the commencement date based on the
present value of the future payments of that lease contracts, discounted using EDP Group's incremental borrowing rate for each portfolio of
leases identified.
EDP Group determines the lease term as the non
‐
cancellable period o
f
a lease, together with both: (i) periods covered by an option to extend the
lease, if the lessee is reasonably certain to exercise that option; and (ii) periods covered by an option to terminate the lease, if the lessee is
reasonably certain not to exercise that option.
EDP Group applies the recognition exemption provided by IFRS 16 for the leases which lease term is 12 months or less, or that are for a low-value
asset.
After the commencement date, the lease liabilities (rents due from lease contracts) are increased to reflect interest on the liability and reduced to
reflect the lease payments made.
Other receivables and financial asset
s
For receivable assets related to regulatory assets, loans, financial entities and State carried at amortised cost and FVOCI, EDP Group performes
an analysis based on the general approach. On making its assessment, the company has to make assumptions about risk of default and expected
loss rates, which requires judgement. The inputs used for risk assessment and for calculation of the loss allowances for financial assets includes:
(i) credit ratings (as far as available) from external credit rating companies such as Standard and Poors, Moody’s and Fitch; (ii) significant
changes in the expected performance and behaviour of the borrower, including changes in the payment status of borrowers in the Group and
changes in the operating results of the borrower; (iii) public market data, namely on probabilities of default and loss given default expectations;
and
(
iv
)
macroeconomic information
(
such as market interest rates or
g
rowth rates
)
.
317
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
h)
Property, plant and equipment
Number of
years
Buildings and other constructions
8 to 50
Plant and machinery:
- Hydroelectric generation
30 to 75
- Thermoelectric generation
25 to 45
- Renewable generation
30 to 35
- Electricity distribution
10 to 40
- Other plant and machinery
4 to 25
Transport equipment
4 to 25
Office equipment and tools
2 to 16
Other property, plant and equipment
3 to 50
Land is not depreciated. Depreciation of tangible assets is calculated on a straight-line basis over their estimated useful lives, as follows:
According to IFRS, the estimate o
f
the useful life o
f
assets should be reviewed whenever a change in the expected economic benefits flowing
from the assets occurs as well as when the technical use planned for the assets differs from previous estimates. Changes occurring in the
depreciation charge for the year are accounted prospectively.
Capitalisation of borrowing costs and other directly attributable cost
s
Borrowing costs that are directly attributable to the acquisition or construction o
f
assets are capitalised as part o
f
the cost o
f
these assets. A
qualifying asset is an asset that needs a substantial period of time to be ready for its intended use or sale. The amount of interest costs eligible
for capitalisation is determined by applying a capitalisation rate to the expenditures on those assets. The capitalisation rate corresponds to the
weighted average of the borrowing costs applicable to the outstanding borrowings during the period. The capitalisation of borrowing costs begins
when expenditure for the assets is being incurred, borrowing costs have been incurred and activities necessary to prepare all or part of the assets
for their intended use or sale are in progress. Capitalisation ceases when substantially all the activities necessary to prepare the qualifying assets
for their intended use or sale are completed. Other expenses directly attributable to the acquisition and construction of the assets, such as cost of
consumed materials and
p
ersonnel costs, are also ca
p
italised as
p
art of the cost of the assets.
EDP Group classifies the equity instruments that are held for trading at fair value to profit or loss. For all other equity instruments, management
has the ability to make an irrevocable election on initial recognition, on an instrument-by-instrument basis, to present changes in fair value in other
comprehensive income.
I
f
this election is made, all fair value changes, excluding dividends that are a return on investment, will be included in other comprehensive
income. There is no recycling of amounts from other comprehensive income to profit and loss (for example, on sale of an equity investment)
being, at that time, transferred to retained earnings.
Property, plant and equipment is stated at acquisition cost less accumulated depreciation and impairment losses. On transition to IFRS, on 1
January 2004, the Group decided to consider as deemed cost the revalued amount of Property, plant and equipment in accordance with the
Group's previous accounting policy, which was comparable in general terms to the depreciated cost determined in accordance with IFRS.
Subsequent costs are recognised as property, plant and equipment only when it is probable that future economic benefits associated with the
item will flow to the Group. Repair and maintenance costs are charged in the income statement as incurred, according to the accrual principle.
The Group carries out impairment tests whenever events or circumstances may indicate that the boo
k
value o
f
an asset exceeds its recoverable
amount, being any impairment recognised in the income statement.
The recoverable amount is the higher o
f
fair value less costs to sell and value in use, the latter being calculated by the present value o
f
the
estimated future cash flows obtained from continued use of the asset and its sale at the end of its useful life.
Costs directly attributable to the issuance o
f
equity instruments are recognised in equity, as a deduction to the amount issued. Amounts paid or
received relating to sales or acquisitions of equity instruments are recognised in equity, net of transaction costs.
Distributions related to equity instruments are deducted from equity, as dividends, when declared.
Preference shares issued by the Group are considered as an equity instrument when there is no contractual obligation to redeem the shares and
dividends are paid at the discretion of the Group. Preference shares issued by subsidiaries, classified as equity instruments and held by third
parties, are recognised as non-controlling interests.
Equity instruments at fair valu
e
318
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
i)
Intangible assets
j)
Leases / Right-of-use assets
Depreciation of right-of-use assets is calculated on a straight-line basis over their estimated useful lives, considering the lease contract terms.
Remeasurement of right-of-use asset
s
I
f
EDP Group remeasures the lease liability (rents due from lease contracts) (see f)), the corresponding right-of-use assets shall be adjusted
accordingly.
EDP Group presents the information related to lease contracts in the caption Right-of-use assets, in a separate line in the Statement o
f
Financial
Position. These assets are accounted for at cost less accumulated depreciation and impairment losses. The cost of these assets comprises the
initial costs and the initial measurement of the lease liabilities (rents due from lease contracts), deducted from the prepaid amounts and any
incentives received.
Portuguese concession rights to use the public hydric domain are booked as intangible assets and depreciated on a straight-line basis over the
concession period, which does not exceed 74 years. EDP Group records as concession rights the financial compensations for the use of public
domain assets, whenever these compensations are paid and for all the Group subsidiaries.
The accounting policy related to intangible assets assigned to concessions in the scope o
f
IFRIC 12 is described in z), Group concession
activities.
Industrial property and other right
s
Industrial property and other rights are amortised on a straight-line basis over the estimated useful life o
f
the assets, which does not exceed 6
years.
The costs o
f
purchasing software and the costs incurred by the Group to implement it are capitalised and amortised on a straight-line basis over
the expected useful life of the asset.
Costs incurred by the Group directly related to the development o
f
software, that are expected to generate economic benefits beyond one year,
are recognised as intangible assets. Such costs include employee costs directly associated to the project and are amortised on a straight-line
basis over its estimated useful life.
Software maintenance costs are charged to the income statement when incurred.
Concession rights on distribution of electricit
y
The concession rights on distribution o
f
electricity in Brazil are recorded as intangible assets and amortised on a straight-line basis over the
concessions period, not exceeding 30 years.
Concession rights to use the public hydric domai
n
Investment government grants are initially booked as Trade payables and other liabilities from commercial activities - Non Current only when
there is reasonable certainty that the grant will be received and that the Group will fulfil the grant term conditions. Grants that compensate the
Group for expenses incurred are booked in the income statement on a linear basis, on the same period in which the expenses are incurred. Grants
that compensate the Group for the acquisition of assets are recognised in the income statement over the related assets useful life.
Transfers of assets from customer
s
Transfers o
f
assets from customers concession arrangement and out o
f
the scope o
f
IFRIC 12, in accordance with IFRS 15, are related to
payments of performance obligations fulfilled over the useful life of the underlying asset. Accordingly, when they are received from the
customers, they are booked as liabilities instead of revenue. The assets are recognised by the estimated construction cost and are depreciated
over their useful lives. The liabilities are recognised as revenue based on the corresponding useful life of the underlying asset.
The Group's intangible assets are booked at acquisition cost less accumulated amortisation and impairment losses.
The Group performs impairment tests whenever events or circumstances may indicate that the boo
k
value o
f
the asset exceeds its recoverable
amount, being any impairment recognised in the income statement. The recoverable amount is the higher of fair value less costs to sell and value
in use, the latter being calculated by the present value of the estimated future cash flows obtained from continued use of the asset and its sale at
the end of its useful life.
Acquisition and development of softwar
e
Investment government grant
s
319
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
k)
Investment property
l) Inventories
m)
Employee benefits
The increase in past service costs arising from early retirements (retirements before the normal retirement age) or plan amendments is
recognised in the income statement when incurred.
The Group recognises as operational results, in the income statement, current and past service costs. Net interest on the net defined benefit
liability (asset) is recognised in financial results.
The assets o
f
the plan comply with the recognition criteria established by IFRIC 14 - IAS 19 and the minimum funding requirements established by
law or by contract.
Some EDP Group companies grant post-employment benefits to employees under defined benefit and defined contribution plans, namely pension
plans that grant complementary retirement benefits for age and early retirement pensions.
Defined benefit plan
s
In Portugal, the defined benefit plan is assured by (i) a closed pension fund managed by an external entity, covering responsibilities with benefits
that are complementary to those provided under the Social Security System (namely retirement and early retirement pensions); and (ii) by a
complementary specific provision, recognised in the statement of financial position. Benefits are generally determined and assigned through the
combination of one or more factors, such as age, years of service and the relevant base retribution (pensionable salary).
In Brazil, EDP São Paulo and EDP Espírito Santo have defined benefit plans managed by a closed complementary welfare entity, external to EDP
Group, covering responsibilities associated with retirement and early retirement pensions, according to factors such as age, years of service and
the relevant base retribution.
The Group’s pension liability for each plan is calculated by independent experts annually, for each plan, at the balance sheet date, using the
projected unit credit method. The discount rate used in the calculation is determined based on market interest rates of high quality corporate
bonds denominated in the currency in which the benefits will be paid and that have similar maturity to the related pension liability.
Actuarial gains and losses presented in consolidated statement o
f
comprehensive income comprise: (i) the actuarial gains and losses resulting
from increases or decreases in the present value of the defined benefit obligation because of changes in actuarial assumptions and experience
adjustments; (ii) the return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset); and (iii) any
change in the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability (asset).
In Spain, the defined benefit plan is partially covered by insurance policies, and complemented by a specific provision, recognised at the balance
sheet. Benefits are generally determined and assigned through the combination of one or more factors, such as age, years of service and the
relevant base retribution (pensionable salary).
Investment property is amortised on a straight-line basis over the estimated useful life of the assets (between 8 and 50 years).
Inventories are measured at the lower o
f
acquisition cost and net realisable value. The cost o
f
inventories includes purchases, conversion and
other costs incurred in bringing the inventories to their present location and condition. The net realisable value is the estimated selling price in the
ordinary course of business less the estimated selling costs.
The cost of inventories is determined by using the weighted average cost method.
CO2 Licenses held by the Group for trade purposes are booked as inventories and measured at fair value, at each balance sheet date, against the
income statement.
Pensions
The Group classifies as investment property, property held for capital appreciation and/or for rental purposes.
Investment property is recognised initially at acquisition or production cost, including directly attributable transaction costs, and is subsequently
measured at cost less accumulated depreciation and any impairment losses.
Subsequent expenditures on investment property are only added to the cost o
f
the asset when it is probable that additional future economic
benefits will arise when compared to initial recognition.
320
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
n) Provisions
o)
Recognition of revenue from contracts with customers
Provisions for dismantling and decommissioning in electric power plant
s
The Group accounts for provisions for dismantling and decommissioning o
f
assets at the end o
f
the assets’ useful life when there is a legal,
contractual or constructive obligation. Therefore, such provisions have been booked for the electric power plants to cover the cost of restoring
the location and land to their original condition. The provisions are calculated at the present amount of the expected future liability and are
accounted for as part of the cost of the related property, plant and equipment being depreciated on a straight-line basis over the useful life of
those assets.
Decommissioning and dismantling provisions are remeasured on an annual basis based on the best estimate o
f
the settlement amount. The
unwinding of the discount at each balance sheet date is charged to the income statement.
EDP Group recognises revenue to depict the transfer o
f
control o
f
promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for these goods or services, as provided in the 5 steps methodology
introduced by IFRS 15, namely: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the
transaction price; (iv) allocate the transaction price to performance obligations; and (v) recognise revenue when (or as) the entity satisfies a
performance obligation.
Revenue in EDP Group arises essentially from electricity generation and distribution and energy (electricity and gas) supply activities.
Revenue related to the
sale of energy and access tariffs
to energy distribution networ
k
is measured at fair value o
f
the consideration received or
receivable, net of value added tax, rebates and discounts and after elimination of intra-group sales.
In Brazil, the liability is being covered by provisions booked in EDP Group company’s statement of financial position.
Measurement and recognition of the medical benefits liabilities are similar to the defined benefit pension plans liabilities, explained above.
Other benefit
s
In addition, EDP Group grants other benefits, supporting charges arising from responsibilities for disability benefit’s complements, survival
benefits, life insurance, antiquity and retirement benefits, power tariff discounts, among others.
Benefits included in each Plan for Portugal and Brazil are detailed in EDP’s Collective Labor Agreement, published in the Labor Bulletin o
f
8
October 2014 and in the website of the Plan management entity Enerprev (
www.enerprev.com.br), respectively.
Provisions are recognised when: (i) the Group has a present legal, contractual or constructive obligation; (ii) it is probable that settlement will be
required in the future; and (iii) a reliable estimate of the obligation can be made.
Medical benefit
s
Some EDP Group companies provide medical benefits under which employees and immediate eligible family members have favourable
conditions in medical assistance and health care services, namely:
- Concerning EDP Group companies in Portugal, through the provision o
f
medical assistance that is complementary to the one provided under the
National Health System, provided using infrastructures owned and managed internally;
- Concerning EDP Group companies in Spain and Brazil, through the share o
f
costs in eligible medical and health expenses, in an external agreed
network.
The medical benefits plans are classified as defined benefit plans.
In Portugal, the medical benefit and death benefits plan is assured by (i) a closed fund managed by an external entity, created in December 2016,
and (ii) a complementary specific provision, recognised in EDP Group company’s statement of financial position.
Defined contribution plan
s
In Portugal, Spain and Brazil, some companies have defined contribution social benefit plans that complement those granted by the Social
Security System, under which they pay an annual contribution to the plans, calculated in accordance with the rules established in each plan. These
contributions represent a percentage of the fixed and variable remuneration of the employees included in this plan and are accounted for as cost
for the period in which they are due.
Other benefits granted
In Spain, the medical care and death subsidy benefits plan is partially covered by insurance policies, and complemented by a specific provision,
booked in EDP Group company’s statement of financial position.
321
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
As provided by IFRS 15, EDP Group presents a contract liability i
f
the Group has an obligation to transfer goods or services to a customer for
which the Group has received consideration (or an amount of consideration is due) from the customer.
Contract asset
s
As provided by IFRS 15, EDP Group presents a contract asset if the Group has a right to consideration that is conditional on something other than
the passage of time. This is common when the Group has transferred goods or services to a customer usually before invoicing and the payment
is due, excluding any amounts presented as a Trade receivables (unconditional rights to consideration).
Incremental costs of obtaining a contrac
t
EDP Group establishes certain contracts with third parties for the promotion (sale) o
f
energy and related services. These third parties act as sales
agents and are paid through sales commissions. The Group recognises incremental costs of obtaining contracts with customers as an asset if
the entity expects to recover these costs over the respective contracts. The costs incurred by an entity to obtain a contract with a customer are
considered as incremental costs whenever it is clear that the entity would not incur these costs if the contract had not been obtained (for
example, a sales commission
)
.
Additionally, it should be noted that, in energy distribution and supply activities, there is a tarif
f
adjustment mechanism through which gains or
losses of a certain year are recognised in the period to which they relate and recovered in the future years tariffs – Tariff Adjustments (see w)).
EDP Group recognises the revenue related with
services rendered
over time in accordance with IFRS 15, given that the customer simultaneously
receives and consumes the benefits provided by the Group.
EDP Group also sells products and services as a part o
f
an
integrated commercial offer ("bundled")
. In a bundled sale arrangement, the Group
accounts the sale of each product and/or service separately if they are distinct, that is, if the product or service is separately identifiable in the
context of the integrated offer and the customer benefits from it. The consideration paid is allocated between the goods or services separately
identifiable based on their relative stand-alone selling prices. The stand-alone selling price is determined based on EDP Group price lists on goods
or services sold separatel
y
or, if the
y
are not listed, based on the market valuation approach.
In what concerns variable transaction prices, EDP Group only recognises revenue when it is highly probable that there will not be any significant
reversal of the recognised revenue, when it becomes certaint.
EDP Group considers the facts and circumstances when analysing the terms o
f
each contract with customers, applying the requirements that
determine the recognition and measurement of revenue in a harmonized manner, when considering contracts with the same characteristics and
in similar circumstances.
Contract liabilitie
s
Regarding the
electricity generation
, the transfer of control occurs when the energy is generated and injected into the transport/distribution grids.
The electricity generated is sold under free market conditions or through the establishment of medium/long term power purchase agreements.
The
energy distribution
is a regulated activity, which is remunerated through tariffs set by each country Regulatory Body (ERSE in Portugal, CNE in
Spain and ANEEL in Brazil). In Portugal and Spain, revenue arises mainly from the sale of access tariffs, as well as from the recovery, from the
commercialisation entities, of the costs related to the global management activity of the system. In Brazil, revenue results from the electricity
sales to final consumers, in the regulated market, based on the tariffs determined by ANEEL, which are included the use of the distribution and
transport system tariff, among other components. In Portugal and Brazil, these activities are subject to public service concession arrangements
(
see z
))
.
Following the Directive 13/2018, o
f
15 December 2018, on tariffs to be in force in 2019, and the premisses o
f
IFRS 15, E-Redes – Distribuição de
Eletricidade, S.A. acts as an agent in the purchase and sale of access to the transmission network (CVART) and therefore, as from this date
onwards the associated amounts of costs and revenues are recorded at net value in the caption Revenues and cost of Energy Sales and Services
and Other.
The
energy supply
is carried out in regulated and non-regulated markets. In non-regulated market, revenue is recognised based on commercial
agreements. In regulated market, revenue is recognised according to the tariffs determined by each country Regulatory Body.
For contracts with customers in which the sale o
f
energy and access tariffs are generally expected to be the only performance obligation, EDP
Group recognises the revenue at a point in time when control of the asset is transferred to the customer, generally on delivery of the goods.
Revenue recognition includes two components: (i) energy sales already invoiced, based on actual consumption readings and/or in estimated
consumption based on the historical data of each consumer; and (ii) estimates of energy supplied and not yet invoiced (energy into energy
meter). Differences between estimated and actual amounts are recorded in subsequent periods.
322
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
p)
Financial results
q)
Income tax
r)
Earnings per share
s)
Share based payments
Deferred taxes are calculated in accordance with the balance sheet liability method, considering temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and their respective tax basis, using the tax rates enacted or substantively
enacted at the balance sheet date for each jurisdiction and that are expected to be applied when the temporary differences are reversed.
Deferred tax liabilities are recognised for all taxable temporary differences except for goodwill not deductible for tax purposes, differences arising
on initial recognition of assets and liabilities that affect neither accounting nor taxable profit and differences relating to investments in
subsidiaries, to the extent that these will probably not be reversed in the future. Deferred tax assets are recognised to the extent that it is probable
that future taxable profits will be available to absorb deductible temporary differences for taxation purposes.
The Group offsets, as established in IAS 12, the deferred tax assets and liabilities if, and only if:
(i) the entity has a legally enforceable right to offset current tax assets against current tax liabilities; and
(ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable
entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle
the liabilities simultaneously, in future periods in which deferred tax liabilities or assets are expected to be settled or recovered.
When accounting for interest and penalties related to income taxes, EDP Group considers whether a particular amount payable or receivable is, in
its nature, a taxable income and, if so, applies IAS 12 to this amount. Otherwise, IAS 37 is applied.
Financial results include interest costs on borrowings, interest income on funds invested, dividend income, foreign exchange gains and losses,
realised gains and losses, changes in fair value of derivative financial instruments related to financing activity classified by the Group, within IFRS
9, as held for trading and consequently measured at fair value through profit or loss, and changes in the fair value of hedged risks, when
applicable.
Interest is recognised in the income statement on an accrual basis. Dividend income is recognised on the date the right to receive is established.
Considering the accounting model provided by IFRS 16, the financial results start to include the interest expenses (unwinding) calculated on the
lease liabilities (rents due from lease contracts).
Income tax recognised in the income statement includes current and deferred tax. Income tax is recognised in the income statement except to
the extent that it relates to items recognised directly in equity, in which case it is also recognised in equity.
Deferred taxes arising from the revaluation o
f
assets measured at fair value through other comprehensive income and cash flow hedge
derivatives recognised in equity are recognised in the income statement in the period the results that originated the deferred taxes are
recognised.
Current tax is the tax expected to be paid on the taxable income for the period, using tax rates enacted at the balance sheet date and any
adjustment to tax payable in respect of previous years.
Therefore, EDP Group understands that the incremental costs to obtain a contract are eligible for capitalisation, accounting for a contract asset
under the caption Debtors and other assets of commercial activities - Non-current. This asset shall be recognised in the income statement as
amortisation, on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates.
Considering the analysis carried out on the set of goods and services provided by the EDP Group to which these commissions relate, the useful
life allocated to them varies between 6 and 8
y
ears.
Regarding the new interpretation to IAS 12 – Income tax, IFRIC 23, the Group has reassessed, as at 1 January 2019, all the pending litigations or
disputes with tax authorities regarding income tax and no changes in the estimates made previously by management were identified.
Basic earnings per share are calculated by dividing the consolidated and the company net profit attributable to the equity holders o
f
EDP, S.A. by
the weighted average number of ordinary shares outstanding during the period, excluding the average number of shares held by the Group and by
EDP, S.A., respectively.
For the diluted earnings per share calculation, the weighted average number o
f
ordinary shares outstanding is adjusted to consider conversion o
f
all dilutive potential ordinary shares, such as convertible debt and stock options granted to employees. The dilution effect corresponds to a
decrease in earnings per share resulting from the assumption that the convertible instruments are converted or the options granted are exercised.
The stoc
k
options remuneration program enables the Group's employees to acquire parent company shares. The exercise price o
f
the options is
calculated based on the listed price of the shares at the grant date.
323
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
t)
Non-current assets held for sale and discontinued operations
u)
Cash and cash equivalents
v)
Operating segments
The Group presents the operating segments based on internal management information.
w)
Tariff adjustments
(ii) whose operating results are reviewed regularly by the entity's chie
f
operating decision maker in order to make decisions about resources to be
allocated to the segment and assess its performance;
(iii) for which discrete financial information is available.
Classification and measurement o
f
regulatory assets, which qualify as financial assets in EDP Group’s financial statements, is analysed based on
the business model used in the management of the assets and the characteristics of the contractual cash flows (see e)).
In this sense, deviations and tarif
f
deficits exclusively recovered or returned through electricity and gas tariffs, applicable to customers in
subsequent periods, are recognised at amortised cost.
On the other hand, deviations or deficits that can be recovered, either through electricity rates (receipt o
f
capital and interest) or through sales
with recourse to third parties (bilateral contracts or securitization operations) are recognised at fair value through comprehensive income. This
classification results from the existing history of sales to third parties and from the management's perspective regarding the existing assets.
In regulated activities, the regulator establishes, through the tarif
f
adjustment mechanism, the criteria to recognise gains or losses o
f
one period
in future periods. The tariff adjustments accounted for in the EDP Group financial statements represent the difference between the amounts
invoiced by Portuguese regulated companies (based on the applicable tariffs published by ERSE in December of the previous year) and the
regulated revenue calculated based on actual costs. The assets or liabilities resulting from the tariff adjustments are recovered or returned
through the electricit
y
and gas tariffs charged to customers in subsequent periods.
Non-current assets or groups o
f
non-current assets held for sale (groups o
f
assets and related liabilities that include at least one non-current
asset) are classified as held for sale when their carrying amounts will be recovered mainly through sale, the assets or groups of assets are
available for immediate sale and its sale is highly probable.
The Group also classifies as non-current assets held for sale, non-current assets or groups o
f
assets acquired exclusively for its subsequent
resale, that are available for immediate sale and its sale is highly probable.
Prior to their classification as held for sale, the measurement o
f
all non-current assets and all assets and liabilities included in a disposal group, is
adjusted in accordance with the applicable IFRS standards. Subsequently, these assets or disposal groups are measured at the lowest between
their carrying amount and fair value less costs to sell.
Cash and cash equivalents include balances with maturity of less than three months from the balance sheet date, including cash and deposits in
banks. This caption also includes other short-term, highly liquid investments that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value, and specific demand deposits in relation to institutional partnerships that are funds required to
be held in escrow sufficient to pay the remaining construction related costs of projects in institutional equity partnerships.
In accordance with IFRS 8, an operating segment is a Group component:
(i) that engages in business activities from which it may earn revenues and incur expenses;
On a company basis, EDP S.A. classifies as Cash and cash equivalents the current account balances with Group companies formalized through
Cash Pooling Agreements (Group's financial system).
The fair value o
f
the options granted, determined at the grant date, is recognised in the income statement against equity during the vesting period,
based on their market value calculated at the grant date.
In case the option is exercised, the Group acquires shares in the market to grant them to employees.
Shareholders o
f
EDP Brasil structured and implemented a Share based Compensation Policy, which began in June 2016. The referred policy
comprises two types of programs to be granted to certain employees (incentive and retention programs), being the eligible beneficiaries and
assignment requirements subject to the conditions established.
324
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
x)
CO2 Licenses and greenhouse gas emissions
y)
Statement of Cash Flow
z)
Group concession activities in the scope of IFRIC 12
Decree-Law 87/2011 o
f
18 July establishes the unconditional right o
f
regulated operators in the natural gas sector to recover tarif
f
adjustments
and related interest expenses, notwithstanding the form of the future payment or situations of insolvency and cessation of operations, and allows
the transfer to third parties of the right to receive tariff adjustments. The EDP Group recorded in the income statement, under the caption
Revenues from energy sales and services and other - Gas, the effects of the recognition of tariff adjustments of Natural Gas, against Debtors and
other assets from commercial activities and Trade pa
y
ables and other liabilities from commercial activities.
The Group holds CO2 Licenses in order to deal with gas emissions resulting from its operational activity and Licenses for trading. The CO2 and
gas emissions Licenses held for its own use are booked as intangible assets at the acquisition cost. CO2 licenses consumption is recorded in
accordance with the weighted average price of the CO2 and gas emissions Licenses held for consumption in that year.
The Licenses held by the Group for trading purposes are booked under Inventories (see l)).
This model is applicable when the concession includes simultaneously guaranteed remuneration and remuneration based on the level o
f
use o
f
the infrastructure within the concession.
Intangible assets within concessions are amortised over their respective useful lives during the concession period.
The Statement o
f
Cash Flow is presented under the indirect method, by which gross cash flows from operating, financing and investing activities
are disclosed.
Decree-Law 165/2008 o
f
21 August recognised the unconditional right o
f
the regulated operators o
f
the electric sector to recover the tarif
f
adjustments under a regime identical to the one used for the tariff deficits. Consequently, EDP Group booked under the income statement caption
Revenues from energy sales and services and other - Electricity and network access, the effects resulting from the recognition of tariff
adjustments, against Debtors and other assets from commercial activities. According to the referred Decree-Law, the tariff adjustments
determined annually, will be recovered by the regulated operators even in case of insolvency or cease of operations. ERSE is the entity responsible
to establish the method to ensure that the entity entitled to these rights continues to recover the tariff adjustments until its complete payment.
The Decree-Law also allows the transfer of the right to receive the tariff adjustment to third parties, in whole or in part, through future electricity
tariffs.
Financial Asset Model
The Group carries out impairment tests to the intangible assets within concessions whenever events or circumstances may indicate that the boo
k
value of an asset exceeds its recoverable amount, being any impairment recognised in the income statement.
Grants received from customers related to assets within concessions are delivered to the Group on a definitive basis, and, therefore, are not
reimbursable. These grants are deducted from the value of the assets allocated to each concession.
The concession contracts that currently exist in EDP Group are mainly based in the Intangible Asset Model, namely in the electricity special
regime production concessions (PRE) in Portugal and in the Mixed Model, namely in the electricity distribution concessions in Portugal and in
Brazil.
This model is applicable when the operator has an unconditional right to receive certain monetary amounts regardless o
f
the level o
f
use o
f
the
infrastructure within the concession and results in a financial asset recognition, booked at amortised cost.
Intangible Asset Model
This model is applicable when the operator, within the concession, is remunerated on the basis o
f
the level o
f
use o
f
the infrastructure (demand
risk) and results in an intangible asset recognition.
Mixed Model
The Group classifies cash flows related to interest and dividends paid as financing activities and interest and dividends received as investing
activities.
EDP Group applies IFRIC 12 to the public-private concession contracts in which the public entity controls or regulates the services rendered
through the utilisation of certain infrastructure as well as the price for such services and also controls any significant residual interest in the
infrastructure. The infrastructures allocated to concessions are not recognised by the operator as property, plant and equipment or as financial
leases, as the operator does not control the assets. These infrastructures are recognised according to one of the following accounting models,
depending on the t
y
pe of remuneration commitment of the operator assumed b
y
the grantor within the terms of the contract:
325
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
aa)
Institutional partnerships in North America
ab)
Disposal of assets under Asset Rotation strategy
3.
Recent Accounting Standards and Interpretations Issued
●
Standards, amendments and interpretations issued effective for the Group
The amendments that have been issued and that are already effective and that the Group has applied on its financial statements, with no
significant impacts, are the following:
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
The amendments in Interest Rate Benchmar
k
Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) have been issued by International Accounting
Standards Board (IASB) in September 2019 and endorsed by the EU on 15 January 2020, and became effective as of 1 January 2020 and must
be applied retrospectively.
The amendments clarify that entities would continue to apply certain hedge accounting requirements assuming that the interest rate
benchmark on which the hedged cash flows and cash flows from the hedging instrument are based will not be altered as a result of interest rate
benchmark reform. The amendments for IFRS 9 include a number of reliefs that apply to all hedging relationships of interest rate risk that are
affected by interest rate benchmark reform. The reliefs are intended to be narrow in their effect. Accordingly, entities will cease to apply the
relief when the earlier of the following occurs: (i) uncertainty regarding timing and amount of the resulting cash flows is no longer present; or (ii)
hed
g
in
g
relationshi
p
terminates.
The control and management of these wind farms are a responsibility of EDP Group and they are fully consolidated in these financial statements.
The financial instruments held by the institutional investors issued by the partnerships represent compound financial instruments as they contain
characteristics of both financial liabilities and equity. The Group has determined that at the funding dates, the fair values of the original proceeds
is equal to the fair values of the liabilities at that time and no value was assigned to the equity component. Subsequently, these liabilities are
measured at amortized cost.
This liability is reduced by the value o
f
tax benefits provided and cash distributions made to the institutional investors during the contracted
period. The value of the tax benefits delivered, primarily accelerated depreciation and ITC are recognised as Income from institutional
partnerships on a pro-rata basis over the useful life of the underlying projects (see note 8). The value of the PTC's delivered are recorded as
generated. This liability is increased by an interest accrual that is based on the outstanding liability balance and the targeted internal rate of return
agreed.
After the flip date, the institutional investor retains a non-significant interest for the duration o
f
the structure. This non-controlling interest is
entitled to distributions ranging from 2.5% to 10% and taxable income allocations ranging from 5% to 10%. EDPR NA has an option to purchase
the institutional investor’s residual interest at fair market value during a defined period following the flip date. Post flip non-controlling interests is
the portion of equity that is ascribed to the institutional investor in the institutional equity partnership at flip date. This amount is reclassified from
the total equit
y
attributable to the Parent to non-controlling interests caption in the period in which the flip date takes place.
IFRIC 12 - Concessions has been amended as a result o
f
the adoption o
f
IFRS 15, thus EDP Group has transferred from the caption Intangible
assets to the caption Debtors and other assets from commercial activities - Non current, the amounts related to the assets under construction for
the electricity distribution concessions in Portugal and in Brazil, since they qualify as contractual assets (see o)).
The Group has entered in several partnerships with institutional investors in North America, through operating agreements with limited liability
companies that apportion the cash flows generated by the wind farms between the investors and the Company and allocates the tax benefits,
which include Production Tax Credits (PTCs), Investment Tax Credits (ITC) and accelerated depreciation, largely to the investor.
The institutional investors purchase their minority partnership interests for an upfront cash payment with an agreed targeted internal rate o
f
return
over the period that the tax credits are generated. This anticipated return is computed based on the total anticipated benefit that the institutional
investors will receive and includes the value of PTC’s / ITC's, allocated taxable income or loss and cash distributions received.
The Asset rotation strategy allows EDP Group to crystallize the value o
f
a project by selling with loss o
f
control, and reinvesting the proceeds in
another projects, targeting greater growth. Typically, the developer retain the role of O&M supplier. The gains on disposals under this strategy are
recognised in the caption Other income.
326
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
●
●
●
●
●
●
●
●
●
●
●
●
4.
Critical Accounting Estimates and Judgements in Preparing the Financial Statements
The RND’s operation, which is part of the HT and MT, is carried out through a public service concessions’ attribution, by the Portuguese State. On
the other hand, the right to distribute low voltage electricity is attributed to the Portuguese mainland municipalities. The legislation that
establishes the basis of each concession sets up that the ownership or possession of the goods assigned to these concessions revert to the
concessionaires at the end of their respective concessions. They also establish that in return for the assets returned to grantors, whether State or
municipalities, compensation corresponding to the assets’ book value assigned to the concession, net of amortisations, financial contributions
and non-refundable subsidies will be paid. Therefore, the assets’ estimated residual value at the end of each concession constitutes a financial
asset, and the remaining fair value component of the concession assets is an intangible asset to be amortised over its useful life. Hence, the end
date of each concession is one of the main assumptions to determine the amount of the financial and intangible assets.
IFRS requires the use o
f
j
udgement and the making o
f
estimates in the decision process regarding certain accounting treatments, with impact in
total assets, liabilities, equity, costs and income. The actual effects may differ from these estimates and judgements, namely in relation to the
effect of actual costs and income.
The main accounting estimates and
j
udgements used in applying the accounting policies are discussed in this note in order to improve the
understanding of how its application affects the Group’s reported results and disclosures. A broader description of the accounting policies
employed by the Group is disclosed in note 2 - Accounting policies.
Considering that in many cases there are alternatives to the accounting treatment adopted by EDP Group, the reported results could differ i
f
a
different treatment was chosen. The Executive Board of Directors believes that the choices made are appropriate and that the financial
statements present fairly the Group operations in all material respects.
Financial asset related with infrastructure concession contracts in Portugal
The caption “Amounts receivable from concessions - IFRIC 12”, refers to the financial assets receivable by EDP Group companies that operate
infrastructures under concession contracts, and arises from the unconditional right to receive this amount regardless of the utilisation level of the
infrastructures covered by the concession. In these companies is included E-Redes – Distribuição de Eletricidade, S.A. as the National Distribution
Network’s (RND) concessionaire, which comprises the medium and high voltage network (MT and HT), and low voltage distribution networks (LT),
being these concessions exercised exclusivel
y
through public service concession contracts.
IFRS 3 (Amended) - Reference to the Conceptual Framework;
IAS 16 (Amended) - Proceeds before Intended Use;
IAS 37 (Amended) - Onerous Contracts – Cost of Fulfilling a Contract;
Annual Improvement Project (2018-2020);
IFRS 16 (Amended) - Covid 19 - Related Rent Concessions.
IFRS 4 (Amended) - Deferral of effective dates to apply two optional solutions (temporary exemption from IFRS 9 and overlay approach); and
Amendments to IFRS 9, IFRS 7, IFRS 4 and IFRS 16 - Interest Rate Benchmark Reform (Phase 2).
IFRS 3 (Amended) - Definition of a business;
Amendments to References to the Conceptual Framework in IFRS; and
Standards, amendments and interpretations issued but not yet effective for the Group
The standards, amendments and interpretations issued but not yet effective for the Group (whose effective application date has not yet occurred
or, despite their effective dates of application, they have not yet been endorsed by the EU) for which no signifcant impact is expected, are the
following:
IFRS 17 - Insurance Contracts;
IAS 1 (Amended) - Classification of Liabilities as Current or Non-current;
IAS 1 (Amended) and IAS 8 (Amended) - Definition of material;
The EDP Group adopted, retroactively, the requirements o
f
IBOR Reform to the existing hedging relationships on 1 January 2020 and to those
that were subsequently designated, and that are directly affected. In particular, a hedge relationship is considered to be directly affected if the
respective reform creates uncertainty regarding: (i) the reference interest rate designated in a hedge relationship to hedge a given risk or, (ii) the
term or amount of the flows associated with the reference interest rate of the hedged item or the hedged instrument. The reform will impact fair
value measurement, the effects of hedge accounting and the net financial results when the alternative rates are defined. As of 31 December
2020, no changes were made to the contracts with respect to IBOR Reform. The EDP Group is monitoring the contractual relationships affected
by IBOR Reform in order to minimize the uncertainty regarding the applicable interest rates and the timing of the flows associated with the
reference interest rate.
As of this date, no si
g
nificant im
p
acts are ex
p
ected.
327
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Measurement of the fair value of financial instruments
Fair values are based on listed market prices, i
f
available. Otherwise, fair value is determined either by the price o
f
similar recent transactions
under market conditions, or determined by external entities, or based on valuation methodologies, supported by discounting future cash flows
techniques, considering market conditions, time value, yield curves and volatility factors. These methodologies may require the use of
assumptions or judgements in determining fair values.
Consequently, the use o
f
different methodologies and different assumptions or
j
udgements in applying a particular model, could generate
different financial results from those reported.
Additionally, financial instruments’ classification as debt or equity requires
j
udgement in the interpretation o
f
contractual clauses and in the
evaluation of the existence of a contractual obligation to deliver cash or other financial assets (see note 42).
Impairment
Impairment of long term assets and Goodwill
Impairment tests are performed whenever there is a trigger that the recoverable amount o
f
property, plant and equipment and intangible assets is
less than the corresponding net book value of the assets.
On an annual basis, the Group reviews the assumptions used to assess the existence o
f
impairment in goodwill resulting from acquisitions o
f
shares in subsidiaries. The assumptions used are sensitive to changes in macroeconomic indicators and business assumptions used by
management. The investments in subsidiaries, on a company basis, and in associates are reviewed when circumstances indicate the existence of
impairment.
Considering the uncertainties regarding the recoverable amount o
f
property, plant and equipment, intangible assets and goodwill as they are
based on the best information available, changes in the assumptions could result in changes on the determination of the amount of impairment
and, consequently, in results (see notes 12 and 19).
In May 2017 Law 31/2017 was approved, which lays down the principles and general rules concerning the organisation o
f
public tendering
procedures for the awarding, by contract, of the municipal LT concessions’ operation in the Portuguese mainland. This Law foresees the
simultaneous launch, in 2019, of public tender procedures for all municipalities that do not opt for direct management of the electricity
distribution activity, as well as to all municipalities whose current concession contracts reach their end before 2019, and do not opt for direct
management. In these cases, both parts shall enter into a written agreement extending the term of their respective concessions until the new
concession contracts enter into force. The awarding decisions will be taken by municipalities or by the territorial area’s intermunicipal entity
attached to the referred
p
roceedin
g
s.
Thus, it is expected that this legislation and the concessions renewal proceedings will have a significant impact on the amount o
f
the financial
and intangible assets determined E-Redes – Distribuição de Eletricidade, S.A., namely through the concessions’ termination anticipation, that
currently extend beyond 2019. However, at this date it is not possible to predict the end date of the concession contracts currently in force, as the
process is still in an initial phase, by doing studies and legislation. With reference to 31 December 2020, financial assets and intangible assets
were determined based on the end dates of each of the contracts currently in force, and do not consider any changes arising from the already
mentioned legislation. The use of different assumptions could result in different amounts of financial and intangible assets, with the
conse
q
uential im
p
act in the Statement of Financial Position
(
see note 26
)
.
Measurement criteria of the concession financial receivables under IFRIC 12 in Brazil
In 2012, the Provisional Measure 579/12 was published in Brazil, meanwhile converted into Law 12.783/13, which determines that the amount o
f
the indemnisation payable to the distribution companies regarding the assets not amortised or depreciated at the end of each concession, should
be determined based in the methodology of the Value of Replacement as New (VNR). The indemnisation amount variation is booked against
Revenues from energy sales and services and other. This amount corresponds to the difference between the residual value determined based on
the value of replacement as new and the residual value determined based on the historical cost.
ANEEL reviews the VNR, through the valuation report o
f
the Regulatory Remuneration Base, every three years for EDP Espírito Santo and every
four years for EDP São Paulo, as established in the concession contracts. Within these periods the distribution companies use their best estimate
for the VNR. The use of different assumptions could result in different values of financial assets, with the consequent impact in the Statement of
Financial Position (see note 26).
328
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Brazil
On 25 November 2014, ANEEL made addendums to the concession contracts with brazilian electric distribution companies to reduce significant
uncertainties regarding to the recognition and realization of regulatory assets/liabilities that existed since 2010, when the IFRS were adopted in
Brazil. As a consequence, the CPC ("Comitê de Pronunciamentos Contábeis") issued on 28 November 2014, the OCPC 08 (Recognition of Certain
Assets
and
Liabilities
in
Accounting
and
Financial
Reports
of
Electric
Distribution)
which
determines
how
to
treat
these
regulatory
assets/liabilities in the financial statements.
Therefore, on 10 December 2014, EDP Brasil signed the Fourth and Fifth Addendum to the Concession Agreement, where it was established that,
in the case of concession termination, the outstanding balances of any failure of payment or reimbursement by the tariff (assets and liabilities),
will be considered on the indemnity calculation, based on the regulator pre-established regulations.
EDP Group considers, based on the issued legislation (Portugal and Brazil), that the requirements for the recognition o
f
tarif
f
deficits as
receivables and payables against the income statement of the period have been satisfied (see notes 7, 26 and 38).
Tariff adjustments
Portugal
Tarif
f
adjustments in Portugal represent the difference between costs and income o
f
the National Electricity, estimated at the beginning o
f
each
period for purposes of calculating the tariff, and the actual costs and income of the System established at the end of each period. The tariff
adjustments assets or liabilities are recovered or returned through electricity and gas tariffs to customers in subsequent periods.
Decree-Law 237-B/2006 of 19 December, and Decree-Law 165/2008 of 21 August, recognised an unconditional right of the operators of the
electricity sector to recover the tariff adjustments and related interest expenses, notwithstanding the form of the future payment or situations of
insolvency and cessation of operations. Additionally, the legislation allows the transfer to third parties of the right to receive tariff adjustments.
Therefore, under this legislation, regulated companies may provide to third parties, in whole or in part, the right to receive the tariff adjustments
through the electricity tariffs. In accordance with the accounting policy in force, the EDP Group books under the caption Revenues from energy
sales and services and other - Electricity and network access, the effects of the recognition of tariff adjustments in the electricity sector, against
Debtors and other assets from commercial activities and Trade payables and other liabilities from commercial activities.
The Group reviews annually the reasonableness o
f
the assets' useful lives that are used to determine the depreciation rates o
f
assets assigned to
the activity. When applicable, the Group changes the depreciation charge of the year, prospectively, based on such review.
Useful lives of generation assets - Hydro independent generator in Brazil
The hydro generation assets in Brazil for independent generators are amortised during their estimated useful lives, considering the existing facts
and circumstances at the date of preparation of the financial statements. This includes, among other issues, EDP's best expectations of the
useful lives of such assets, which are consistent with the useful lives defined by ANEEL, the respective contractual residual indemnification
values at the end of each concession period, as well as related technical and legal opinions. The remaining period of amortisation and the
indemnification values at the end of the concessions ma
y
be influenced b
y
changes in the regulator
y
legal framework in Brazil
(
see note 16
)
.
Lease Liabilities (Rents due from lease contracts)
The Group recognises right-of-use assets (ROU assets) and lease liabilities (rents due from lease contracts), i
f
the contract conveys the right to
control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control
the use of an identified asset, the Group assesses whether: i) the contract involves the use of an identified asset; ii) it has the right to obtain
substantially all of the economic benefits from the use of the asset throughout the period of use; and iii) it has the right to direct the use of the
asset. EDP Group uses judgement on its assessment, namely concerning the termination and extension contract options and the determination of
the incremental borrowin
g
rate to be a
pp
lied for each
p
ortfolio of leases identified
(
see notes 17 and 39
)
.
Review of the useful life of the assets
329
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Other assumptions and
j
udgements could lead to a different consolidation perimeter o
f
the Group, with direct impact on the consolidated
financial statements (see note 6).
Business combination
Under IFRS 3 (Business Combination) in a business combination, the acquirer shall recognise and measure in the consolidated financial
statements the assets acquired and liabilities assumed at fair value at the acquisition date. The difference between the purchase price and the
fair value of the assets and liabilities acquired leads to the recognition of goodwill or a gain from a purchase at a low price (bargain purchase).
The fair value determination o
f
the assets acquired and liabilities assumed is carried out internally or by independent external evaluators, using
the discounted cash flows method, using the replacement cost or other fair value
determination techniques, which rely on the use of
assumptions including macroeconomic indicators such as inflation rates, interest rates, exchange rates, discount rates, sale and purchase prices
of energy, cost of raw materials, production estimates and business projections. Consequently, the determination of the fair value and goodwill or
gain from a purchase at a low price is subject to numerous assumptions and judgments and therefore changes could result in different impacts
on results
(
see note 49
)
.
Provisions for dismantling and decommissioning of power generation units
EDP considers to exist legal, contractual or constructive obligations to dismantle and decommission property, plant and equipment assets
allocated to electricity generation operations. The Group records provisions in accordance with existing obligations to cover the present value of
the estimated cost to restore the locations and land where the electricity generation units are located. EDP Group provisions include the
calculation of the present value of the expected future liabilities.
The use of different assumptions and judgement from those referred could lead to different financial results than those considered (see note 36).
Entities included in the consolidation perimeter
In order to determine which entities must be included in the consolidation perimeter, EDP Group evaluates whether it is exposed, or has rights, to
variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee ("de facto"
control).
This evaluation requires the use o
f
j
udgement and assumptions in order to conclude whether the Group is in fact exposed to the variability o
f
returns and has the ability to affect those returns through its control over the investee.
The use of different estimates and assumptions could affect the Group’s revenue and, consequently, its reported results (see note 8).
Income taxes
The Group is subject to income taxes in several
j
urisdictions. Certain interpretations and assumptions are required in determining the global
amount of income tax.
There are several transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course o
f
business. One
of the most significant judgements in this area relates to the tax treatment of the new accounting standards, namely IFRS 16. It is the Group's
understanding that, in general, the tax treatment follows the accounting treatment, and therefore, no significant tax adjustments have been made
to
the
accounting
records
arising
from
the
implementation
of
the
new
standards.
Different interpretations and assumptions could result in a
different level of income taxes, current and deferred, recognised in the period
(
see note 14
)
.
Pensions and other employee benefits
Determining pension and other employee benefits liabilities requires the use o
f
assumptions, including actuarial projections, estimated rates o
f
return on investments, discount rates and pension and salary growth and other factors that can impact the cost and liability of pension plans,
medical plans and other benefits. Changes in the assumptions could materially affect the amounts determined (see note 35).
Revenue recognition
Energy sales revenue is recognised when the monthly energy invoices are issued, based on actual meter readings or estimated consumption
based on the historical data of each consumer. Revenue relating to energy to be invoiced, regarding consumption up to the balance sheet date but
not measured, is booked based on estimates that take into consideration factors such as consumption in prior periods and analysis relating to
the energy balance of the operations.
330
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
a
)
b
)
In the Financial statements as at 31 December 2017, EDP Group has included its best estimate o
f
the CMEC final adjustment, by recognising an
asset in the amount of 256.5 million Euros against deferred income, based on Decrew-Law 240/2004,of 27 December, and on the document done
jointly by EDP and REN and the legal opinions obtained on this subject.
As regards the approval o
f
the 2014 revisibility, the fact that it did not take into account in the calculation o
f
the revisibility the costs incurred
with the social tariff and CESE.
The annual revisibility o
f
2015 was approved by the Government member responsible for the energy sector in 20 October 2020 in the amount o
f
62.7 million Euros, after deducting an amount of 72.9 million Euros related to the alleged overcompensation of CMEC, due to their participation in
the ancillary services market, in the period between 2009 and the first quarter of 2014. EDP Produção challenged the order for ratifying the annual
revisibility for the year 2015 on 19 January 2021, as it did not agreed with the assumption of overcompensation within the scope of its
performance in the system services market, between 2009 and 2014 and, consequently, do not agree with the deduction of the underlying value
(72.9 million Euros) in that revisibility. It should also be noted that EDP Produção has already contested the imposition of a fine by the
Competition Authority on matters of the same scope. The challenge also covered the non-consideration of the Social Tariff and CESE amounts
paid by the centrals operating under the CMEC regime and also the non-approval of the annual revisibilities from 2016 to 2017, which still await
the res
p
ective a
pp
roval b
y
the Government member res
p
onsible for the area of ener
gy
.
ii) Contractual stability compensation – Final Adjustmen
t
The CMEC’s Final Adjustment is calculated in accordance with number 7 o
f
article 3rd and Annex IV o
f
Decree-Law 240/2004, o
f
27 December.
The State budget for 2017 (Law 42/2016) determined, in its article 170, that the final adjustment amount shall be calculated and justified in a
study done and presented by ERSE. This entity had the technical support of EDP Produção/REN, legally enforced.
Accordingly, the technical group EDP/REN has presented to ERSE its report on the CMEC final adjustment calculation, which was achieved by
strictly following the calculation methodology described in Decree-Law 240/2004, of 27 December. This calculation, performed by the technical
group EDP/REN was presented to ERSE and comes to a range of amounts between 256.5 and 271 million Euros.
At the end o
f
September 2017, ERSE has also presented to the Government its report on the calculation o
f
the CMEC final adjustment, reaching an
amount of 154 million Euros, which was provisionally considered in the document of tariffs and prices for 2018.
Contractual stability compensation - CMEC
i) Contractual stability compensation – Annual revisibility mechanis
m
The approval in 2004 o
f
the Decree-Law 240/2004, o
f
27 December, determined the early Power Purchase Agreements (PPA) extinction, and the
adoption of a contractual stability compensation (CMEC), which EDP Produção entered into after signing the Contractual stability on 27 January
2005, approved by the competent Government member (Order 4672/2005, of 4 March). This mechanism includes three types of compensation:
initial compensation, annual adjustment (or revisibility) and final adjustment.
During period I (2007/2017) o
f
the contractual stability compensation mechanism, there was a correction on an annual basis, resulting from
positive or negative deviations between the estimates made for the initial stability compensation calculation and actual amounts arising from an
efficient performance, using the "Valorágua" model, as established in the Decree-Law 240/2004. Later, Order 4694/2014 was published to define
the guidelines of the annual revisibility calculation with respect to the revenues from the ancillary services market, regarding power plants under
CMEC.
Revisibility amounts for the years 2007 to 2014 were determined and approved by the Member o
f
the Government responsible for the energy
sector, and were contested by EDP Produção:
As regards the approval o
f
the 2011 and 2012 revisibilities, the fact that it did not consider the costs incurred with the social tarif
f
in the
calculation of the revisibilities; and
Fair value measurement of contingent consideration
Contingent consideration from a business combination or a sale o
f
a financial investment is measured at fair value at the acquisition date as part
of the business combination or at the date of the sale in the event of a sale of a financial investment. This contingent consideration is
subsequently remeasured at fair value at each report date. Fair value is based on discounted cash flows. The main assumptions consider the
probability of achieving each objective and the discount factor, corresponding to the best estimates of management at each report date. Changes
in assumptions could have significant impact on the values of contingent assets and liabilities recognised in the financial statements (see notes
27 and 39
)
.
331
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
On 5 October 2018, the Spanish legislature, by the sixth and seventh additional lines on Article 21 o
f
Royal Decree-Law 15/2018, suspended the
7% tax on electricity generation approved in 2012 for a period of six months, from the beginning of October 2018 to the end of March 2019. This
tax suspension corresponds to the suspension of the off-market event verified within the European Union, which is considered in the clawback
calculation.
The amount payable should consider an estimate o
f
the impact that the off-market events in the EU (such as the above-mentioned tax changes in
Spain) would have in pool prices, as well as off-market events in Portugal that would affect the competitiveness of electricity generators
operating in Portugal. Consequently, a net competition advantage would allegedly arise to generators operating in Portugal.
Under this mechanism regulation – commonly known as clawbac
k
– Social tarif
f
and CESE were approved by Dispatch 11566-A/2015, o
f
3
October 2015, as off-market events that should be considered as competitive disadvantages of generators operating in Portugal.
Dispatch 7557-A/2017, o
f
25 August, superseded Dispatch 11566-A/2015 (which defined the variables for the computation formula o
f
the amount
to be paid by each of the power-generating plants under Decree-Law 74/2013, of 4 June, for each injected MWh) in its entirety. It states that ERSE,
after consulting DGEG, shall present proposals for a new definition of the variables, as well as reference terms for the new study.
Subsequently, the Dispatch 9371/2017, o
f
24 October 2017, partially nulled the Dispatch 11566-A/2015, o
f
3 October 2015 from the SSE, in
relation to the decisions presented under its numbers 11 and 12 (the deduction of social tariff and CESE costs in the unit price). ERSE was asked
to consider in 2018 UGS tariff, the recovery, in benefit of the consumers, of the amounts allegedly unproperly included in previous years’ tariffs
(2016 and 2017). Dispatch 9955/2017, of 17 November, defines a new amount for the estimate of the off-market events’ impact in EU, which is -
4.75 €/MWh, with retroactive effects as at August 24. Following these Dispatches, the document of prices and tariffs for 2018 has included a
clawback amount of around 90 million Euros to be returned to tariffs, which includes power plants operating under CMEC and estimated
g
eneration.
Based on its interpretation o
f
the Law, as well as on legal opinions obtained in the meantime, EDP Produção considers that the Decree-Law
74/2013, of 4 of June, aims to reestablish a situation of competition balance between generators operating in Portugal and their peers operating
in other European countries, which means to consider as off-market events all the taxes and contributions that fall only over generators located
outside of Portugal (particularly in Spain), as well as all the taxes and contributions that fall only over generators located in Portugal.
Consequently, in the Group’s understanding, Dispatch 9371/2017 and 9955/2017 have completely distorted the clawback mechanism, having
filed its le
g
al action in Januar
y
2018.
In the Financial statements as at 31 December 2018, EDP Group has included the clawbac
k
amount as calculated by EDP Produção, regarding the
legislation in place in each period, namely Decree-Law 74/2013, of 4 of June, Order 225/2015, Ordinance 9371/2017 and Dispatch 9955/2017. It is
important to notice that this mechanism is not applicable to power plants in 2018 still operating under CMEC regime. However, this situation was
subsequently changed and disputed by EDP Produção.
On 3 May 2018, EDP was notified (through a DGEG’s letter from 25 April 2018) that the CMEC final adjustment had been officially approved,
according to ERSE’s proposal, in the amount of 154 million Euros. EDP reflected this reality in its financial statements as of 31 December 2018,
recognising a provision by the difference in the final adjustment amounts already recognised in the Group's revenues. On 31 December 2020 EDP
maintains the provision in its accounts (see note 36).
Considering that the administrative act contained in the Dispatch o
f
approval o
f
the SSE o
f
25 April 2018 lacks technical, economic and legal
basis, and that, in particular, it does not apply the calculation methodology contained in Decree-Law 240/2004, of 27 December, and which would
lead to the determination of an amount close to the one determined by the technical group, on 3 September 2018, EDP Produção has legally
contested it.
"Clawback" - Regulatory mechanism to ensure the competitive balance in the wholesale electricity market in Portugal
Following some tax changes occurred in Spain, which affected electricity generators operating in this country, Decree-Law 74/2013, o
f
4 June,
was approved in Portugal, which aimed to rebalance the competition between electricity generators operating in Portugal and other players
operating in Europe.
Pursuant to relate diploma and its regulations, in order to restore such balance, the power plants operating on a market regime situated in
Portugal, which were not covered by the PPA or CMEC regime, should pay an amount per MWh produced.
332
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
-
-
-
-
On 30 June 2020, Dispatch 6740/2020 was published by the SEE which establishes the CIT (corporate income tax) – advanced payment to be
applied in 2020 to electric power producers covered by the "Clawback" mechanism. The value of CIT (corporate income tax) – advanced payment
for the year 2020 is set at € 2.24/MWh for plants that are not subject to extra market internal events, that is, only to some renewable energy
producers in the market with the exception of the power generation centers included in the scope of internal extra-market events identified.
Social Tariff Scheme
Following the periodic litigation assessment, EDP Group will file a complaint with the European Commission to assess the compliance o
f
the
Social Tariff funding mechanism, fully supported by ordinary regime generators, with the rules and principles of European Union law. On this, since
2011, EDP has already been charged more than 460 million Euros (including ERSE’s estimate for 2021). EDP does not question the existence of
the Social Tariff, and agrees with its purpose, but cannot, in light of the current regime, conform with the terms in which the legislator enshrined
its method of financing.
On 22 October 2020, Dispatch 10177/2020, issued by the SEE Office, was published, which determines the final compensation o
f
the “Clawback”
for the year 2019, considering the ISP regime as the only internal off-market event within the National Electrical System (SEN), thus determining a
value of € 2.24 / MWh for hydro, gas and PRE on the market and 0.68€/MWh for coal power plants. This determination is not consistent with that
contained in Dispatch 12424-A/2019, of 27 December, which identifies ISP, CESE and Social Tariff as internal off-market events for 2019. EDP
Produ
ç
ão challenged Order 10177/2020 on 22 Januar
y
2021.
On 1 April 2019, the suspension o
f
the tax on the production o
f
electric energy in Spain was terminated, and it became effective again. From that
moment, the "clawback" invoiced to EDP Produção was resumed, based on a value of 4.75€/MWh.
On August 9, Decree-Law 104/2019 was published, which makes the first amendment to Decree-Law 74/2013, o
f
4 June, by changing the scope
of the clawback mechanism. Previously, “ordinary producers of electricity and other producers not covered by the guaranteed remuneration
regime were subject to clawback ”. With the publication of this diploma, the CMEC centrals are now included in the scope of the clawback.
Considering that this scope contradicts the Decree Law 240/2004, of 27 of December, EDP Produção proceeded to its challenge.
The same Decree-Law introduced the possibility to define CIT (corporate income tax) – advanced payment, and on 26 September 2019 was
published the Order 8521/2019, which set the amounts of advanced payment related to the clawback mechanism at 2.71€ / MWh for coal-fired
power plants and 4.18€/MWh for other power plants.
In the Tarif
f
and Price Document for 2020, published on 16 December 2019, ERSE considered the unit values defined in Dispatch 8521/2019,
correcting only the value applicable to coal to 1.23 € / MWh, due to the increase in the ISP tax percentage and CO2 addition planned for 2020. EDP
Produção presented on 10 March of 2020 an action seeking a declaration of nullity or annulment of that administrative act by ERSE.
On 27 December 2019, Dispatch 12424-A / 2019 was published, which identifies as national extra-market events to be considered in the Study to
be prepared by ERSE until April 2020 (with reference to 2019) under the Clawback, the taxation of petroleum and energy products used in the
production of electricity (ISP), CESE and the Social Electricity Tariff.
On 20 March 2020 ERSE Directive 4/2020 was published, which approves the operational rules o
f
the commercial relationship between the
Transmission System Operator (ORT) and the producers covered by the application of Decree-Law 74/2013, of 4 June, with the amendment given
by Decree-Law 104/2019, of 9 August, revoking Directive 15/2016, of 14 September 2016, regarding the “Clawback” regime. The main change of
this Directive is: i) to allow the breakdown of the amount of exchanges with CMEC and, ii) the monthly aggregation by balance sheet area, instead
of b
y
power generation center.
Following the temporary suspension of the tax on electricity production in Spain:
Order 895/2019 of 23 January, establishing the suspension of the "Clawback" was approved for a period of 6 months as from 1 October 2018;
The Tarif
f
and Price Document for 2019, published on 17 December 2018, estimates a Clawbac
k
value o
f
€ 4.18/MWh, to be applied after the
end of the suspension period (more specifically from 6 April 2019);
ERSE informed EDP Produção that any clawback invoicing relating to the referred suspension period should be deleted or canceled;
The State Budget Law for 2019 provided that "the Government shall, until the end o
f
the first quarter o
f
2019, review the regulatory mechanism
designed to ensure the balance of competition in the wholesale electricity market in Portugal, provided for under DL 74/2013, of 4 June,
adapting it to the new rules of the Iberian Electricity Market, with the aim of creating harmonized regulatory mechanisms that reinforce
competition and protect consumers".
333
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
-
- The increase o
f
the market price o
f
the secondary bandwidth service, as a result o
f
the limited supply by CMEC plants, favoring market-based
power plants.
Innovative Features
On 9 July 2018, EDP has been notified, within the scope o
f
a stakeholder hearing promoted by the DGEG, to present its opinion on the possibility
of DGEG proposing to the Secretary of State for Energy an amount associated with the alleged "innovative features" introduced in CMEC regime
regardind PPA, to a maximum amount of 357.9 million Euros. According to DGEG, this amount shall be associated with the lack of legal scope for
tests on the availability of the CMEC plants (285 million Euros) and the ancillary services, mentioned above (72.9 million Euros).
On 26 September 2018, EDP Produção was notified o
f
the Order o
f
the SEE o
f
29 August, which considers as an "innovative features" the topic
"procedures for calculating the verified availability coefficient", quantified at 285 million Euros. This Order refers to the alleged lack of legal
forecast of availability tests of CMEC plants. Considering that the Order in question lacks technical, economic and legal basis, on 8 October 2018
EDP Produção has submitted an administrative appeal.
Subsequently, EDP Produção received a letter from ERSE dated 12 November 2018 and became aware o
f
the Order o
f
the SEE o
f
4 October,
which, following the Order of 29 August, declared the annulment of the annual adjustments in the part in which they considered the alleged
"innovative features" concerning the procedures for calculating the coefficient of availability. In the Tariff and Price Document for 2019, ERSE
considered the refund of an amount of 90 million Euros for a portion of the 285 million Euros referred to, expecting that the remaining portion will
be paid for a number of years that allow the CMEC to have zero tariff impact by including the 86.5 million Euros in the tariffs of 2020, 86.5 million
Euros in tariffs of 2021 and 21.9 million Euros in 2022.
On 3 September 2018 the Autoridade da Concorrência (AdC) adopted a Note of Illegality, under which it intended to attribute to EDP Produção a
behavior of abuse of a dominant position in the secondary regulation band market. AdC claimed that EDP Produção restricted the offer of a
segment of the Electricity System (the secondary regulation band or teleregulation service) between 2009 and the first quarter of 2014, limiting
the capacity offer of its plants under CMEC regime to benefit market power plants, in order to benefit twice, to the detriment of consumers. The
same authority stressed that the adoption of a Note of Illegality does not determine the final result of this investigation, which began in
September 2016. On 28 November 2018, EDP Produção exercised its right to be heard and to defend itself in relation to the wrongful act was
imputed and the sanctions it could incur, that is, it responded to the Note of Illegality.
On 18 September 2019, AdC informed EDP Produção o
f
its decision to condemn, imposing a fine o
f
48 million Euros, for alleged abuse o
f
dominant position in the secondary regulation band market in mainland Portugal between 2009 and the first quarter of 2014.
According to AdC, EDP Produção would have manipulated its offer o
f
tele-regulation service or secondary regulation band, limiting the capacity
offer of its CMEC power plants to offer it through its market power plants, benefiting in two ways:
Highest compensation paid to CMEC plants (annual revisability), as their lower participation in the provision o
f
secondary regulation band
service would be below what would be expected (according to competitive market criteria);
Ancillary Services
On 30 October 2019, EDP Produção filed an appeal against this decision before the Competition, Regulation and Supervision Court (TCRS),
awaiting the AdC's counter-allegations. On 20 May 2020, EDP Produção was notified of an order from TCRS, which, among other things, admitted
its Appeal of Judicial Contestation, establishing a purely return effect and determining the payment of the fine imposed within 20 days. In this
context, EDP Produção submitted requests, invoking supervening facts to demonstrate the considerable damage associated with a putative
payment of the fine, and arguing defects in the decision that determined the attribution of a merely devolutive effect to the Judicial Challenge
Appeal, and is waiting for a court decision on whether the fine can be replaced by some form of collateral, until there is a decision of the Court. On
16 July 2020, EDP Produção was notified of the TCRS's order which, in particular, suspended the advance payment of the fine. On 18 November
2020, EDP Produção was notified of the judgment of the Lisbon Court of Appeal that upheld the appeal filed by the Public Prosecutor's Office and
revoked the referred TCRS order. EDP Produção appealed to the Constitutional Court on 30 November 2020, regarding the constitutionality of the
interpretation given by the Lisbon Court of Appeal to the rule that defines the regime applicable to the decision that determines the effect of the
judicial challenge of the AdC's condemnatory decisions.
On 20 October 2020, EDP Produção became aware, by letter sent by DGEG, of the dispatch of the SEE regarding the approval of the revisibility for
the year 2015, which is deducted in the amount of 72.9 million Euros, relating to the alleged overcompensation. In this respect, the EDP Group has
registered a provision in the amount of 72.9 million Euros (see note 36), and carried out an administrative appeal against the order of SEE, as
referred to in point above (Contractual stability compensation – Annual revisibility).
The complaint, which calls on the European Commission to request the Portuguese Government to review the national legislation on the financing
of the social electricity tariff and, if necessary, to initiate an infringement action under the article 258 of the Functioning of the European Union
Treaty (TFEU), was submitted by EDP Produção, Greenvouga and Empresa Hidroeléctrica do Guadiana on 4 December 2020, and the European
Commission confirmed on 13 January 2021 that it had received it.
The EDP Group considers that EDP Produção did not abuse any dominant position, having acted strictly in accordance with the legal framework in
force.
334
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
In the regulated accounts sent to ERSE in April 2018, E-Redes – Distribuição de Eletricidade, S.A. identified the amount to be returned into tariffs
related to the depreciation of the properties that were sold in the period 2012-2017. ERSE did not consider this amount in the 2019 rates and
submitted the topic for further analysis.
In the Tariffs for 2020, ERSE recognized the principle o
f
profit sharing with the system and assumed the return into the tariffs o
f
approximately
16.6 million Euros referring to half of the net gains obtained from the sale of real estate by E-Redes – Distribuição de Eletricidade, S.A. between
2009 and 2018, having mentioned that the position to be taken by the respective grantors of the Concession Contract for the National Distribution
Network (RND) and the electricity distribution network concessions in BT may determine the revision of this amount.
EDP Produção notified the Portuguese State to clarify that at no time did EDP express its intention to not proceed with the construction o
f
power
plants and to return all the investment already made, including the consideration paid on the provisional award, and, as well, to compensate it for
other losses and damages resulting from the non-compliance, to be settled in a timely manner. As at 31 December 2019 the Group reclassified
these Assets under construction to Other debtors and other assets and valued in accordance with the principles defined in IFRS 9 (see note 27).
Currently, the arbitral proceedings, initiated by EDP Produção on 1 February 2019 are in progress. ERSE and the Ministry presented their
challenges, respectively, on 5 and 8 of April 2019. A preliminary hearing is expected in the first quarter of 2021, with only a final decision expected
for the second half of 2021.
Sale of real estate by E-Redes – Distribuição de Eletricidade, S.A.
In the 2009-2018 period, E-Redes – Distribuição de Eletricidade, S.A. disposed a set o
f
real estate that were unused, in the amount o
f
approximately 52 million Euros, obtaining a total net value of gains of 33.9 million Euros (35.7 million Euros of gains and 1.7 million Euros of
losses).
On 22 October 2013, EDP Produção requested to the Minister o
f
the Environment, Land Management and Energy, based on a change o
f
circumstances, to postpone the signing of the concession contract for the AHF. This request was formally rejected on 2 May 2014, and the terms
of the concession contract, were subsequently negotiated between EDP Produção and the Portuguese Environmental Agency (APA) and a
specific date for the respective signature for 30 September 2015, which was revoked by the Government without rescheduling a new date.
In 2016, following the beginning o
f
the XXI Constitutional Government, the Government Program provided the reassessment o
f
the PNBEPH. In
this context, it was agreed to suspend for three years the execution of the Contract for the implementation of the AHF, as well as the annulment
of the implementation Contract regarding AHA, through a Memorandum of Understanding signed on 5 December 2016, concluded by an
agreement between the Portuguese State and EDP Produção on 11 April 2017.
This deferral decision was taken based on public interest reasons, considering the evolution o
f
installed power and energy demand since 2008
(conclusion date of the Implementation Contract) until 2016. It is not clear that the AHF would be an energy surplus that would offset the
environmental impacts resulting from its implementation.
On 16 April 2019 EDP Produção received, by email, an official letter from the Ministry o
f
the Environment and Energy Transition, dated 11 April
2019, informing the State's conclusion that there is no need for implementation of AHF to meet national targets for Renewable Energy Source and
Greenhouse Gas Reduction, as well as "that the State does not find any reason to inhibit the construction of the Fridão Hydro Power Plant".
Simultaneously, the Minister of the Environment and Energy Transition (MATE) announced at the National Assembly, in a hearing at the
Environment, Land-use Planning, Decentralization, Local Power and Housing Committee, that the State's decision was not to build the AHF and
that "the State will always comply with the contract but believes there are no reasons for any repayment of the amount that was given to the State
ten years ago". It acknowledged, however, that there was no agreement with EDP on this matter.
Without having received any response to the gracious complain filed on 1 February 2019, EDP Produção challenged in court the Orders o
f
29
August and 4 October and the Tariff and Price Document for 2019.
In the Electricity Tariffs and Prices Document for 2020, approved by ERSE on 16 December 2019, that entity charged again 86.5 million Euros, as it
had foreseen the previous year.
Although the EDP Group considers that there were no innovative features weighted in CMEC adjustments, this aspect was reflected in these
financial statements as of 31 December 2018, by recognising a provision of 285 million Euros. In 2019 EDP made the payment of 92,458
thousand Euros and during 2020 made the payment of 110,963 thousand Euros (see note 36), using this provision, so that at 31 December 2020
this provision amounts 81,579 thousand Euros.
Hydro power plants of Fridão and Alvito
On 17 December 2008, EDP Produção and the Portuguese State signed the Contract for the Implementation o
f
the National Program for High
Hydroelectric Potential Power Plants (PNBEPH) regarding the Hydro Power Plants of Fridão (AHF) and Alvito (AHA), with the payment, by EDP
Produção of 231.700 thousand Euros. Of this amount, 217,798 thousand Euros relates to the right to implement and exploit the AHF.
EDP Produção followed up on the procedures for the implementation o
f
these projects, having, in the case o
f
the AHF, obtained a Favorable
Environmental Impact Declaration and an Environmental Compliance Report of the Execution Project (RECAPE).
335
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
5.
Financial Risk Management Policies
As for the subsidiaries o
f
EDP Energias do Brasil, the management o
f
the financial risks inherent to the variation o
f
interest rates, exchange rates
and
commodities
is
carried
out
locally,
according
to
the
rules
set
by
EDP
Energias
do
Brasil's
Management
and
aligned
with
the
principles/policies set by EDP Group for this geographical area.
Exchange-rate risk management
EDP Group operates in different geographies, therefore becoming exposed to exchange rate ris
k
in US Dollar (USD), Brazilian Real (BRL), Polish
Zloty (PLN), Romanian Leu (RON), Canadian Dollar (CAD), Pound Sterling (GBP) and Colombian Pesos (COP). Currently, these exposures result
essentially from investments of EDP Group in wind parks (and solar) in the USA, Poland, Romania, Canada and United Kingdom, respectively. The
exposure to Brazilian Real results essentially from investments of EDP Group in EDP Energias do Brasil and EDP Renováveis Brasil. The majority
of these investments were financed with debt contracted in the respective local currency which allows to mitigate the exchange rate risk related
to these assets, and such financin
g
is com
p
lemented in certain cases with derivatives to hed
g
e exchan
g
e-rate risk on net investment.
The policy implemented by the EDP Group consists o
f
undertaking derivative financial instruments to hedge exchange rate ris
k
with similar terms
to those of the hedged asset or liability. The operations are revalued and monitored throughout their useful lives and, periodically, their
effectiveness in controlling and hedging the risk that gave rise to them is assessed.
Investments in the Brazilian subsidiaries o
f
EDP Energias do Brasil, whose net assets expressed in Brazilian Real expose EDP Group to the
exchange rate risk from it's conversion to Euros, are monitored through analysis of the evolution of the BRL/EUR exchange rate.
In the hedge relationships, the main source o
f
ineffectiveness is the effect o
f
the counterparties’ and the Group’s own credit ris
k
on the fair value
of the forward foreign exchange contracts and cross currency interest rate swaps, which is not reflected in the change in the fair value of the
hedged cash flows attributable to the change in exchange rates.
The Group monitors regularly the financial risks to which it has exposure to. During 2020, considering the COVID-19 pandemic and the impacts on
the markets, namely on interest and foreign exchange rates to which the Group has exposure to, there was a revaluation of the risks involved,
having concluded that the current Financial Risk Management Policies already incorporate worst case scenarios sufficiently conservative and
therefore adequate to the Group profile, not being necessary its revision. However, given that the pandemic duration and global impacts are still
unknown, the EDP Group continues to monitor the risks, seeking to anticipate and manage possible impacts not currently contemplated.
Exchange-rate and interest rate risk management
Financial risk management
The EDP Group’s business is exposed to a variety o
f
financial risks, including the effect o
f
changes in market prices, foreign exchange and interest
rates. The Group’s exposure to financial risks arises essentially from its debt portfolio, its investments and from the volatility of commodity
prices, resulting in interest and exchange rate exposures as well as commodity market price exposure. The status and evolution of the financial
markets are analysed on an on-going basis in accordance with the Group’s risk management policy.
The management o
f
financial risks o
f
EDP, S.A. and other EDP Group entities is undertaken centrally by EDP, S.A., in accordance with policies
approved by the Executive Board of Directors. The Financial Department, the Energy Management Business Unit and the Risk Management
Department identify, evaluate and submit to the Board, for approval, hedging mechanisms appropriate to each exposure. The Executive Board of
Directors is responsible for the definition of general risk management principles and the establishment of exposure limits.
Subsequent to the publication o
f
the Tariffs for 2020, in 17 December 2019, the Government approved an Order that stipulates that the total value
of the gains generated by the sale of real estate by E-Redes – Distribuição de Eletricidade, S.A. between 2009 and 2018, and which were subject
to remuneration for the tariffs, “reverts entirely to the grantor ”, and should be “fully reflected in the electricity tariffs”.
On 17 March 2020, E-Redes – Distribuição de Eletricidade, S.A. initiated an arbitration process at the Commercial Arbitration Center, which the
State, represented by the Ministry for the Environment and Climate Action (MAAC), submitted its response on 3 July 2020. In January 2021, the
first preliminary hearing was held, then the pleading phase began, in which E-Redes – Distribuição de Eletricidade, S.A. presented its initial petition
and the State is due to respond. It is already scheduled for July 2021 a second session of prior hearing.
E-Redes – Distribuição de Eletricidade, S.A. acted in a transparent manner and within the framewor
k
o
f
regulatory efficiency standards dictated by
ERSE itself, as is evident from the values that have always been evidenced in the published Reports and Accounts and in the Regulated Accounts
presented.
On 15 December 2020, the Regulator published the tariffs for 2021 and it was considered the return to the system o
f
the remaining amount o
f
16.6 million Euros referring the net gains obtained from the sale of properties in the period between 2009 and 2018, in accordance with the
Dispatch sent by MAAC, despite the ongoing arbitration process.
336
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
+10%
-10%
+10%
-10%
USD
-22,673
27,712
-68,188
83,341
Thousand Euros
+10%
-10%
+10%
-10%
USD
-4,499
5,498
-167,397
204,596
50 bp
50 bp
50 bp
50 bp
Thousand Euros
increase
decrease
increase
decrease
Cash flow effect:
Hedged debt
-10,052
10,052
-
-
Unhedged debt
-1,362
1,362
-
-
Fair value effect:
Cash flow hedging derivatives
-
-
6,392
-6,392
Trading derivatives (accounting perspective)
5,159
-5,159
-
-
-6,255
6,255
6,392
-6,392
Based on the Group's debt portfolio, except for Brazil, and the related derivative financial instruments used to hedge the related interest rate risk, a
50 basis points change in the reference interest rates at 31 December 2020 and 2019 would lead to an increase/(decrease) in the EDP Group
results and/or equity as follows:
Dec 2020
Profit or loss
Equity
In the floating rate financing context, the EDP Group enters, when considered appropriate, into interest rate derivative financial instruments to
hedge the cash flows associated with future interest payments, which have the effect of converting floating interest rate loans into fixed interest
rate loans.
Long-term debt engaged at fixed rates is, when appropriate, converted into floating rate debt through interest rate derivative financial instruments
designed to level them to current and expected market conditions.
All the operations are undertaken on liabilities in the EDP Group’s debt portfolio and mainly involve perfect hedges, resulting in a high level o
f
correlation between changes in fair value of the hedging instrument and changes in fair value of the interest rate risk or future cash flows.
In the hedge relationships, the main source o
f
ineffectiveness is the effect o
f
the counterparty’s and the Group’s own credit ris
k
on the fair value
of the interest rate swaps, which is not reflected in the change in the fair value of the hedged cash flows attributable to the change in interest
rates.
The EDP Group has a portfolio o
f
interest rate derivatives with maturities up to 15 years. The Group’s Financial Departments undertake sensitivity
analyses of the fair value of financial instruments to interest rate fluctuations. As at 31 December 2020, after the hedging effect of the derivatives
70% of the Group's liabilities are at fixed rate.
Sensitivity analysis - Interest rates (excluding the Brazilian operations)
Profit or loss
Equity
This analysis assumes that all other variables, namely interest rates, remain unchanged.
Interest rate risk management
The aim o
f
the interest rate ris
k
management policies is to manage the impact on financial charges, from contracted debt, related to the exposure
to interest rate risk from market fluctuations.
Sensitivity analysis - exchange rate
Regarding the financial instruments that result in an exchange rate ris
k
exposure, a fluctuation o
f
10% in the EUR/USD exchange rate, as at 31
December 2020 and 2019, would lead to an increase/(decrease) in the EDP Group results and/or equity as follows:
Dec 2020
Profit or loss
Equity
Dec 2019
337
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
50 bp
50 bp
50 bp
50 bp
Thousand Euros
increase
decrease
increase
decrease
Cash flow effect:
Hedged debt
-12,302
12,302
-
-
Unhedged debt
-6,054
6,054
-
-
Fair value effect:
Cash flow hedging derivatives
-
-
7,297
-7,332
Trading derivatives (accounting perspective)
-244
206
-
-
-18,600
18,562
7,297
-7,332
Thousand Euros
+ 25%
- 25%
Financial instruments - assets
2,676
-2,437
Financial instruments - liabilities
-75,183
70,936
Derivative financial instruments
-306
306
-72,813
68,805
Thousand Euros
+ 25%
- 25%
Financial instruments - assets
9,905
-9,436
Financial instruments - liabilities
-132,773
121,285
Derivative financial instruments
-
-
-122,868
111,849
Dec 2019
Counterparty credit risk management
EDP Group’s policy in terms o
f
counterparty ris
k
on financial transactions (see note 2 e)) is managed through an analysis o
f
the technical
capacity, competitiveness, credit rating and exposure to each counterparty, avoiding significant concentrations of credit risk. Counterparties in
derivative financial instruments are institutions with high credit rating so the risk of counterparty default is not considered to be significant.
Therefore, guarantees and other collaterals are not typically required for these transactions.
EDP Group has documented its financial operations in accordance with international standards. Derivative financial instruments are mainly
contracted under ISDA Master Agreements.
The amount receivable from customers is mainly generated by operations in Portugal, Spain and Brazil, with a diversified customer base, both
geographically and in terms of segments (business clients, private and public sector) and size (Supply companies, Business to Business (B2B)
and Business to Consumer (B2C)). EDP is present in 19 countries and 4 continents, with more than 8.6 million customers in the electricity sector
and 0.7 million customers in the gas sector, and usually the contractual relationship with the counterparty tends to be long-lasting.
A Brazilian subsidiary is mainly exposed to the USD/BRL exchange rate, arising from USD debt for which the exposure was completely offset by
cross currency interest rate swaps.
Brazil - Sensitivity analysis - Interest rates
Based on the portfolio o
f
operations, a 25% change in the interest rates, to which the Brazilian subsidiaries are exposed to, would have an impact
to EDP Energias do Brasil Group, at 31 December 2020 and 2019, in the amount of:
Dec 2020
This analysis assumes that all other variables, namely exchange rates, remain unchanged.
Brazil - Exchange and interest rate risk management
Stress tests and sensitivity analysis are carried out for purposes o
f
ris
k
management in the Brazilian subsidiaries. Through these two tools, the
financial impact in different market scenarios is monitored.
For sensitivity analysis, the exposure o
f
portfolio o
f
operations is evaluated through 25% and 50% changes in the main ris
k
factors, currency and
interest rates. The stress test is performed on the fair value of the operations and uses as premise the interest rate curve projections of the
Brazilian basic macroeconomic scenario.
Brazil - Sensitivity analysis - exchange rate
Dec 2019
Profit or loss
Equity
338
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Dec 2020
Dec 2019
Corporate and private sector:
Supply companies
74,119
99,019
B2B
415,342
489,589
B2C
326,927
403,616
Other
196,966
114,706
1,013,354
1,106,930
Public sector:
Debt with payment agreement
1,238
7,778
Debt without payment agreement
114,639
98,547
115,877
106,325
1,129,231
1,213,255
Thousand Euros
Portugal
Spain
Brazil
USA
Other
Group
Corporate and private sector
498,733
96,125
393,449
17,162
7,885
1,013,354
Public sector
25,450
66,466
23,914
-
47
115,877
524,183
162,591
417,363
17,162
7,932
1,129,231
Thousand Euros
Portugal
Spain
Brazil
USA
Other
Group
Corporate and private sector
503,135
89,616
489,013
10,585
14,581
1,106,930
Public sector
42,380
8,212
54,021
-
1,712
106,325
545,515
97,828
543,034
10,585
16,293
1,213,255
In accordance with accounting policies - note 2 e), impairment losses are determined using the simplified approach precluded in IFRS 9, based on
life time expected losses.
- In Brazil, it refers mainly to: (i) the amounts from sale o
f
electricity to wholesale dealers and supply companies, (ii) accounts receivable relating
to energy traded in the Electric Energy Trading Chamber - CCEE; and (iii) charges for the electricity network access;
- In EDPR EU, main customers are utilities and regulated entities in the different countries. Credit ris
k
is not significant due to the limited average
collection period for customer balances and the quality of its debtors. Additional counter-party risk comes from the countries with renewables
incentives, which it is usually treated as regulatory risk;
- In EDPR NA, main customers are regulated utility companies and regional market agents in the US. As it occurs in Europe, credit ris
k
is not
significant due to the limited average collection period for customer balances and the quality of the debtors. However, the exposure due to the
mark-to-market of long term contracts may be significant. This exposure is managed by a detailed assessment of the counter-party before
signing any long term agreement and by a requirement of collaterals when financial soundness of the counterparty deteriorates.
Regarding the remaining receivables from companies and individual customers, resulting from the current activity o
f
EDP Group, the credit ris
k
is
essentially the result of customers defaults, whose exposure is limited to the supply made until the possible date of supply disruption. A very
criterious credit risk analysis made for new costumers, as well as the large number of customers and their diversity in terms of sectors of activity
are some of the main factors that mitigate the concentration of counterparty credit risk.
Amounts receivable from public sector customers include amounts receivable from renegotiated debt with payment agreements, which, as the
counterparty is a public entity and has already recognised the debt through payment protocols, present a lower risk. These amounts also include
debt without payment agreements arising from the normal power supply activity similar to that described for the corporate and individual sector.
Thousand Euros
Trade receivables by geographical market for the Group EDP, is as follows:
Dec 2020
Dec 2019
The amounts receivable from supply companies are concentrated mainly in Portugal, Brazil and EDP Renováveis Group, as follows:
- In Portugal, these counterparties present a significantly reduced days sales outstanding, about 20 days, and these entities are subject to the
sector regulation that establishes collaterals to reduce credit risk. The collateral provided is updated based on the average of the last quarter
monthly sales, which reinforces a low risk profile;
The maximum exposure to customer credit risk by counterparty type is detailed as follows:
339
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Dec 2020
Dec 2019
Contract assets related to energy sales:
Contract assets receivable from energy sales contracts
1,032,629
1,050,707
1,032,629
1,050,707
Amounts receivable from the electric sector:
Amounts receivable from tariff adjustments - Electricity
563,580
425,396
Amounts receivable relating to CMEC
697,171
777,065
Amounts receivable from concessions - IFRIC 12
1,115,215
1,012,048
2,375,966
2,214,509
3,408,595
3,265,216
Following
Thousand Euros
Dec 2021
Dec 2022
Dec 2023
Dec 2024
Dec 2025
years
Total
Bank loans
290,686
125,412
114,399
101,447
70,349
388,105
1,090,398
Bond loans
1,553,226
1,174,693
1,924,294
2,358,190
1,501,892
4,154,972
12,667,267
Hybrid Bond
36,066
-
-
-
-
1,750,000
1,786,066
Commercial paper
381,468
15,690
91,680
47,070
295,412
-
831,320
Other loans
2,992
994
1,202
1,011
1,031
22,503
29,733
Interest Payments (i)
216,649
431,936
394,302
241,934
166,677
398,409
1,849,907
2,481,087
1,748,725
2,525,877
2,749,652
2,035,361
6,713,989
18,254,691
The EDP Group undertakes management o
f
liquidity ris
k
through the engagement and maintenance o
f
credit lines and financing facilities, with a
firm underwriting commitment with international reliable financial institutions, as well as term deposits, allowing immediate access to funds.
These credit lines are used to complement and backup national and international commercial paper programmes, allowing the EDP Group’s short-
term financing sources to be diversified (see note 34). Considering the COVID-19 pandemic, the Group assessed the potential impacts on
additional liquidit
y
needs, having concluded that the current Liquidit
y
Risk Management Polic
y
remains adequate.
The table below shows the contractual undiscounted cash flows and the estimated interests due, computed using the rates available at 31
December 2020:
i) The coupons of the hybrid bonds were included taking into consideration the earliest possible call date.
Energy market risk management
In the sphere o
f
its operations in the Iberian market for both electricity and gas, EDP Group purchases fossil fuels to generate electric energy
which is sold in organized markets (OMIE and OMIP) as well as to third parties or, in the gas business, sells natural gas to clients either through
EDP Group’s trading companies or directly to third parties. As a result, the Group is fully exposed to energy market risks.
As a result o
f
its energy management operations, EDP Group has a portfolio o
f
operations related to electricity and gas businesses. The portfolio
is managed through the engagement of operations with financial and physical settlement on the forward energy markets. The objective of the
operations is to reduce volatility of the financial impact resulting from the managed positions and to benefit from arbitration or positioning within
the trading limits approved by the Executive Board of Directors. The financial instruments traded include swaps (electricity, coal and gas) and
futures to fix prices.
As at 31 December 2020, in accordance with the methodology for determining impairment losses on amounts receivable from the electric sector,
no impairment loss has been booked. The risk levels for amounts receivable from the electric sector have been considered to be the same as the
country risk levels for Brazil, Portugal and Spain, which have high credit ratings.
The maximum exposure to credit risk of Contract assets related to energy sales and Amounts receivable from the electric sector is as follows:
Thousand Euros
Liquidity risk management
Regarding third-party receivables generated by the Group’s day-to-day business, the credit ris
k
arises essentially from customers default, whose
exposure is limited to the Low Tension Eletricity supplied with usual delays in payments. The very criterious credit risk analysis made for new
costumers, as well as the large number of customers and their diversity in terms of sectors of activity are some of the main factors that mitigate
the concentration of counterparty credit risk.
EDP Group believes that the amount that best represents the Group's exposure to credit ris
k
corresponds to the carrying amount o
f
customers
and of Contract assets related to energy sales net of the impairment losses recognised. The Group believes that the credit quality of these
receivables is adequate and that no significant impaired credits exist that have not been recognised as such and provided for.
340
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Dec 2020
Dec 2019
Business
Portfolio
Electricity
Trading
5,000
536
Electricity
Trading + Hedging
80,412
87,680
Gas
Hedging
38,725
10,541
Diversification effect
-26,668
-10,971
97,469
87,786
Dec 2020
Dec 2019
Credit risk rating (S&P)
AAA to AA-
4.44%
1.97%
A+ to A-
26.08%
28.46%
BBB+ to BBB-
60.95%
61.24%
No rating assigned
8.53%
8.33%
100.00%
100.00%
The Group’s goal in managing capital is to safeguard the Group’s capacity to continue operating as a going concern, grow steadily to meet
established objectives and maintain an optimum capital structure to reduce equity cost.
In conformity with other groups operating in this sector, the Group controls its financing structure based on several control mechanisms and
ratios.
P@R Distribution
by business segment
Regarding credit risk, the quantification o
f
exposure considers the amount and type o
f
transaction (e.g. swap or forward), the rating o
f
the
counterparty risk that depends on the probability of default and the expected value of credit to recover, which varies depending on the guarantees
received or the existence of netting agreements. The EDP Group's exposure to credit risk rating is as follows:
EDP is not an entity subject to regulation in terms o
f
capital or solvency ratios. Therefore, capital management is carried out within the financial
risk management process of the entity.
Additionally, management describes this aspect o
f
its strategic objectives, policies and processes to manage risks, including the financial risks, in
the chapters of the Annual Report of 2020:
02 Strategic Approach
2.2.2 Strategic Guidelines Compliance - Continue Financial Deleveraging; and
2.3 Risk Management: Key Risks - Financial; Risk Appetite - Financial.
04 Corporate Governance
53 The main t
yp
es of economic, financial and le
g
al risk - Financial risks.
In the hedge relationships, the main source o
f
ineffectiveness is the effect o
f
the counterparty’s and the Group’s own credit ris
k
on the fair value
of the derivative financial derivatives, which is not reflected in the change in the fair value of the hedged cash flows attributable to the change in
market prices.
Energy management activity is subject to a series o
f
variables which are identified and classified based on their common uncertainty
characteristics (or risk). Such risks include market price evolution risk (electricity and fuel) with impact in the expected energy volume generated,
as well as credit risk of the counterparties.
Monitoring the price, volume and credit risks includes their quantification in terms o
f
positions at ris
k
which can be adjusted through market
operations. This quantification is made by using specific models that value positions to determine the maximum loss that can be incurred, with a
given probability and a determined time frame.
Risks are managed in accordance with the strategies defined by the Executive Board o
f
Directors, which are subject to a periodic review based on
the evolution of the operations, to change the profile of the positions and adjust them to the established management objectives.
Risks are monitored by means o
f
a series o
f
actions involving daily monitoring o
f
the different ris
k
indicators, o
f
the operations grouped in the
systems and the prudence limits defined by management area and risk component, as well as regular backtesting and supplementary validation
of the models and assumptions used. This monitoring not only ensures the effectiveness of the strategies implemented, but also provides
elements to enable initiatives to be taken to correct them, if necessary.
The main price and volume ris
k
indicator used is the margin at ris
k
(P@R), which estimates the impact o
f
the variation o
f
the different ris
k
factors
(price of electricity and hydrological) on the next 24 month’s margin, P@R corresponding to the difference between an expected margin and a
margin of a pessimistic scenario with a probability to occur of 5% (confidence interval of 95%) considering a time frame of 2 years. Both the
volumes which are certain and those, which although uncertain, are expected, namely production of the plants and the corresponding
consumption of fuel, are considered. The P
@
R distribution b
y
business segment is as follows:
Capital management
341
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
6.
Consolidation Perimeter
●
●
●
●
●
●
●
●
●
●
●
●
●
●
Fresco Investments S.a.r.l.;
●
Viesgo HoldCo, S.A.;
●
IE2 Inversiones Globales Empresariales, S.L.;
●
IE2 HoldCo, S.A.;
●
Viesgo Infraestructuras Energéticas, S.L.;
●
Viesgo Distribución Eléctrica, S.L.; e
●
IE2 Innovación, S.L.;
●
Barras Eléctricas Galaico-Asturianas, S.A.
●
●
●
●
Sale of companies without loss of control:
A EDPR France Holding, S.A.S. sold 15% of its financial interest in Transition Euroise Roman II, S.A.S.
EDPR France Holding, S.A.S. acquired 100% of the company Société D'Exploitation du Parc Eolien Source de Sèves, S.A.R.L.;
EDP Renewables Italia Holding, S.R.L. acquired 100% o
f
the companies Aliseo, S.r.l. and VRG Wind 153, S.r.l. and 60% o
f
the companies Energia
Emissioni Zero 4, S.r.l., Wind Energy San Giorgio, S.r.l. and Giglio, S.r.l.;
EDP Renewables Polska, Sp. z o.o. acquired 100% of the companies Wind Field Wielkopolska, Sp. z.o.o., R.Wind, Sp. z o.o., FW Warta, Sp. z o.o.
and Neo Solar Farm, S
p
. z o.o.;
Korean Floating Wind Power Co., Ltd. acquired 90% of the company East Blue Power Co., Ltd.;
EDP Renováveis S.A. and EDP Renewables Europe S.L. acquired 100% of the company Parque Solar Los Cuervos, S. de R.L. de C.V.;
OW Offshore S.L. acquired 100% of the company Delphis Holdings Limited.;
EDP Renewables Polska HoldCo, S.A. acquired 100% of the company Budzyn, Sp. z o.o.;
EDP Renováveis, S.A. acquired 100% o
f
the company Solar Power Solutions, S.A.S. E.S.P. which holds 100% o
f
the companies Elipse Energía,
S.A.S. E.S.P., Omega Energía, S.A.S. E.S.P. and Kappa Energía, S.A.S. E.S.P.;
EDP Grid Gestão de Redes Inteligentes de Distribuição, S.A. acquired 100% of the company UFV SP V Equipamentos Fotovoltaicos Ltda.;
A EDP Renewables Europe, S.L.U. acquired 85% o
f
the companies Sunlight Solar, Kft. and ESC ER
Ő
M
Ű
, Kft. and 100% o
f
the companies Wind
Shape, Ltd., Drummarnock Wind Farm Limited, Wind 2 Project 1 Limited, Moorshield Wind Farm Limited, Altnabreac Wind Farm Limitede and
Ben Sca Wind Farm Limited;
EDP Renováveis, S.A. acquired, indirectly, 2 companies in North America; and
A EDP Renováveis Brasil, S.A. acquired 100% of the companies Central Solar Lagoa I, S.A. and Central Solar Lagoa II, S.A.
Additionally, the following companies were acquired:
A EDP Iberia, S.L. acquired the Viesgo Group (ver nota 49), through the establishment o
f
a long-term partnership with Macquarie Super Core
Infrastructure Fund SD Holdings S.À.R.L. (MSCIF) for electricity distribution business in Spain, which will be 75.1% owned by EDP and 24.9% by
MSCIF. Thus, EDP Iberia, S.L. acquired 75.1% of Fresco International S.a.r.l., which directly and indirectly holds 100% of:
Sale of companies with loss of control:
In the fourth quarter of 2020, EDP Renováveis, S.A., through a subsidiary in North America, sold 80% of a portfolio of 5 companies, for the
amount of 231,714 thousand Euros, equivalent to 264,646 thousand American dollars. In accordance with the Shareholders Agreement and
other relevant contracts, it has been established a shared control of the Companies which led to a loss of control over the companies and their
consolidation by the equity method. This disposal with loss of control generated a gain which has been registered within the "Other income"
caption of the consolidated financial statements in the amount of 99,359 thousand Euros (see note 8).
During the year of 2020, the following changes occurred in the EDP Group consolidation perimeter:
Companies acquired:
The following acquisitions were classified as asset purchases, out of scope of IFRS 3 – Business Combinations, due to the substance of these
transactions, the type of assets acquired and the very early stage of the projects:
Within the scope of the above transaction, EDP Iberia, S.L. has also acquired 100% of Viesgo Producción, S.L.
EDP Renewables Europe, S.L.U. also acquired 100% o
f
the companies Viesgo Europa S.L.U. and Viesgo Renovables, S.L.U. wich holds 100% o
f
the companies Viesgo Mantenimiento, S.L.U., S.E.E. - Sul Energía Eólica, S.A. and IE2 Portugal, SGPS, S.A., 90% of the company Parque Eólico
do Barlavento, S.A., 75% of the company Northeolic Monte Buño, S.L., 50% of the companies Compañía Eólica Aragonesa, S.A. and Unión de
Generadores de Energía, S.L., 49% of the company Eos Pax IIa, S.L., 47% of the company San Juan de Bargas Eólica, S.L., 45% of the company
Eólica de São Julião, Lda., 36% of the company Geólica Magallón, S.L. and 23% of the company Elecdey Carcelén, S.A. Additionally, the
aforementioned companies IE2 Portugal, SGPS, S.A. and S.E.E. - Sul Energía Eólica, S.A. own 100% of the company Eoliser - Serviços de Gestão
p
ara Par
q
ues Eólicos, Lda.
(
see note 49
)
.
342
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
●
●
●
●
●
●
●
Companies incorporated:
●
Vanosc Energie, S.A.S.;
●
Transition Euroise Roman II, S.A.S.;
●
Mordel Limited;
●
EDPR Offshore South Korea Co., Ltd.;
●
Comercializadora Energética Sostenible, S.A.;
●
Transporte GNL, S.A.;
●
EDP Clientes, S.A.;
●
EDP Renewables Hungary Kft.;
●
●
32 companies incorporated in North America.
Other changes:
●
●
OW FS Offshore, S.A.;
●
4THEWIND VI, B.V.;
●
Les Eoliennes Flottantes du Golfe du Lion, S.A.S.;
●
4THEWIND VII, B.V.;
●
Éoliennes en Mer Dieppe - Le Tréport, S.A.S.;
●
4THEWIND VIII, B.V.;
●
Éoliennes en Mer Îles d'Yeu et de Noirmoutier, S.A.S.;
●
Ancoris Beheer Nederland, B.V.;
●
Les Eoliennes en Mer Services, S.A.S.;
●
EDPR Japan Godo Kaisha;
●
OW France, S.A.S.;
●
EDPR Offshore South Korea Co., Ltd.;
●
Relax Wind Park IV, Sp. z o.o.;
●
Mora
y
East Holdings Limited;
●
Morska Farma Wiatrowa Neptun, Sp. z o.o.;
●
Mora
y
Offshore Windfarm
(
East
)
Limited;
●
B-Wind Polska, Sp. z o.o.;
●
Delphis Holdings Limited;
●
C-Wind Polska, Sp. z o.o.;
●
Mora
y
West Holdings Limited;
●
Ocean Wind UK Ltd;
●
Mora
y
Offshore Windfarm
(
West
)
Limited;
●
Mordel Limited;
●
Korean Floating Wind Power Co., Ltd.;
●
Moray Offshore Renewable Power Limited;
●
East Blue Power Co. Ltd.;
●
B&C Wind Polska sp. z o.o. s.c.;
●
Windplus, S.A.;
●
Ventum Ventures III Holding, B.V.;
●
Ventos do Atlântico - Pro
j
etos de Energía Eólica Ltda;
●
4THEWIND I, B.V.;
●
Electrabel Offshore Energ
y
, CVBA;
●
4THEWIND II, B.V.;
●
SeaMade, N.V;
●
4THEWIND III, B.V.;
●
●
4THEWIND IV, B.V.;
●
●
4THEWIND V, B.V.;
A joint control partnership has been executed following the strategic memorandum of understanding dated May 2019 and signed between EDP
Renováveis and ENGIE by which a co-controlled 50/50 joint venture in fixed and floating offshore wind segment, OW Offshore S.L., has been
established, including its subsidiaries:
Companies sold and liquidated:
The companies Frontier Beheer Nederland, B.V. and Frontier, C.V., in which OW Offshore, S.L. held, directly or indirectly, a 30% financial interest,
were liquidated;
Companies merged:
Merger o
f
EDPR RO PV, S.R.L., Studina Solar, S.A., Cujmir Solar, S.A., Potelu Solar, S.A., Vanju Mare Solar, S.A., Foton Delta, S.A., Foton Epsilon,
S.A. into EDPR România, S.R.L.
The companies EDP Energía, S.A.U., Baser Comercializadora de Referencia, S.A. and EDP Comercializadora, S.A.U., in which EDP Iberia, S.L.
held, directly or indirectly, a 100% financial interest, were sold for the amount of 479,148 thousand Euros and generated a gain which has been
registered within the "Other income" caption of the consolidated financial statements in the amount of 30.129 thousand Euros (see note 8);
North Sea Wave, N.V.;
4 North American companies.
The companies Bon Vent de Corbera, S.L.U., Eólica Sierra de Ávila, S.L.U., Parc Eòlic de Coll de Moro, S.L.U., Parc Eòlic de Torre Madrina, S.L.U.
and Parc Eòlic de Vilalba dels Arcs, S.L.U., in which EDP Renovables España, S.L.U. held, directly or indirectly, a 100% financial interest and the
company Aprofitament D'Energies Renovables de L'Ebre, S.L. owned in 13,29%, were sold for the amount of 449,658 thousand Euros, of which
112,724 thousand Euros are related to a shareholder loan. This transaction generated a gain which has been registered within the "Other
income" caption of the consolidated financial statements in the amount of 112,908 thousand Euros (see note 8);
In December, under the agreement to sell a company that owns a portfolio o
f
6 hydro plants in Portugal (Miranda, Bemposta, Picote, Foz Tua,
Baixo Sabor and Feiticeiro) established with the consortium of investors formed by Engie, Crédit Agricole Assurances and Mirova - Grupo
Natixis, the spin-off of these assets and liabilities, rights and obligations, legal and labor relations, contractual positions, protocols and licenses
associated with these plants from EDP Produção was carried out, originated a new company. Subsequently, EDP SA sold this company to the
referred consortium for the global amount of 2,173 million Euros, generating a gain of 215,609 thousand Euros recorded in the caption Other
income
(
see note 8
)
;
In the fourth quarter o
f
2020, EDP Renováveis, S.A. sold, through a North American subsidiary, a company in North America for the value o
f
160,741 thousand Euros, generating a gain of 14,438 thousand Euros(see note 8); and
6 companies in North America were liquidated.
EDP Renewables Vietnam Ltd.;
343
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
●
●
7.
Revenues and cost of Energy Sales and Services and Other
Revenues from energy sales and services and other, by sector, are as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Electricity and network access
10,706,781
12,327,096
2,052,712
2,422,467
Gas and network access
857,939
757,099
170,444
24,816
Sales of CO2 Licenses
95,052
86,141
473,678
357,781
Revenue from assets assigned to concessions
622,826
918,826
-
-
Other
165,607
243,847
166,482
163,696
12,448,205
14,333,009
2,863,316
2,968,760
Revenues from energy sales and services and other, by geographical market, for the Group, are as follows:
Thousand Euros
Portugal
Spain
Brazil
USA
Other
Group
Electricity and network access
5,556,501
2,198,945
2,046,186
623,547
281,602
10,706,781
Gas and network access
433,921
424,018
-
-
-
857,939
Revenue from assets assigned to concessions
230,796
-
392,030
-
-
622,826
Other
113,724
55,894
73,841
9,932
7,268
260,659
6,334,942
2,678,857
2,512,057
633,479
288,870
12,448,205
Thousand Euros
Portugal
Spain
Brazil
USA
Other
Group
Electricity and network access
5,975,879
2,730,461
2,708,597
616,222
295,937
12,327,096
Gas and network access
286,337
470,762
-
-
-
757,099
Revenue from assets assigned to concessions
225,751
-
693,075
-
-
918,826
Other
137,297
57,373
129,545
4,200
1,573
329,988
6,625,264
3,258,596
3,531,217
620,422
297,510
14,333,009
Dec 2020
Dec 2019
The caption Electricity and networ
k
access in Portugal, on a consolidated basis, includes a net revenue o
f
1,462,407 thousand Euros (revenue in
31 December 2019: 1,438,399 thousand Euros) regarding tariff adjustments of the period (see note 26). This caption also includes a net revenue
of 61,596 thousand Euros (31 December 2019: net cost of 902 thousand Euros) related to recognition of tariff adjustments for the period in Brazil
(see notes 26 and 38).
Additionally, the caption Electricity and networ
k
access includes, on a consolidated basis, a positive amount o
f
61,777 thousand Euros (31
December 2019: positive amount of 70,354 thousand Euros) related to the contractual stability compensation (CMEC) as a result of the power
purchase agreements (PPA) termination, including an income of 21,629 thousand Euros related to the CMEC final adjustment (31 December
2019: positive amount of 21,156 thousand Euros), net from the recognised provision due to the final adjustment official approval.
The caption Electricity and networ
k
access, on a company basis, includes 1,097,464 thousand Euros (31 December 2019: 1,255,951 thousand
Euros) related with energy sales under the purchase and sale agreement of evolutive energy between EDP, S.A. and EDP Comercial S.A.
As a result o
f
this transaction, EDP Renováveis has registered a gain in the amount o
f
217,633 thousand Euros in the other income caption o
f
the consolidated income statement (see note 8).
EDP Renováveis owns 100% o
f
Nation Raise LP trough Quatro Limited Partnership (99.99%) and Nation Rise Wind Farm GP Inc. (0.01%) (see
note 21).
The companies included in the consolidation perimeter of EDP Group as at 31 December 2020 and 2019 are disclosed in Annex I.
Group
Company
EDP Iberia S.L. sold 100% o
f
its direct stake in Hidrocantábrico Distribucion Eléctrica, S.A.U. and indirect 75% stake in Electra Llobregat Energía,
S.L. to IE2 Inversiones Globales Empresariales, S.L., which is 75.1% owned by EDP Iberia S.L.
344
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Renewables
Networks
Client
Solutions &
Energy
Management
Total
Group
Electricity and network access
1,308,733
3,032,242
6,365,852
10,706,827
-45
10,706,782
Gas and network access
-
10,322
847,616
857,938
-
857,938
Revenue from assets assigned to concessions
-
622,823
3
622,826
-
622,826
Other
49,685
48,688
157,382
255,755
4,904
260,659
1,358,418
3,714,075
7,370,853
12,443,346
4,859
12,448,205
Thousand Euros
Renewables
Networks
Client
Solutions &
Energy
Management
Total
Group
Electricity and network access
1,371,741
3,476,658
7,478,769
12,327,168
-73
12,327,095
Gas and network access
-
12,729
744,369
757,098
-
757,098
Revenue from assets assigned to concessions
-
918,813
14
918,827
-
918,827
Other
37,751
98,837
184,216
320,804
9,185
329,989
1,409,492
4,507,037
8,407,368
14,323,897
9,112
14,333,009
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Cost of electricity
5,141,261
6,333,955
1,953,992
2,407,172
Cost of gas
837,299
1,031,410
-
-
Expenditure with assets assigned to concessions
531,861
812,539
-
-
Fuel, steam and ashes
177,253
371,207
-
-
Gas
248,850
152,192
169,310
24,816
CO2 Licenses
261,784
282,200
458,007
356,139
Other
158,179
132,356
-26,308
-49,057
846,066
937,955
601,009
331,898
7,356,487
9,115,859
2,555,001
2,739,070
Cost o
f
electricity includes, on a company basis, costs o
f
1,047,943 thousand Euros (31 December 2019: 1,184,778 thousand Euros) with the
purchase of energy under the agreement for management, purchase and resale of energy signed between EDP, S.A. and EDP Gestão da Produção
de Energia, S.A.
The segment "Client Solutions & Energy Management" includes sales o
f
renewable energy, hydro and wind, carried out by EDP SA's energy
management business unit, as part of its intermediation activity.
Revenues from energy sales and services and other by segment are considered globally as "overtime" and not as "at a point in time".
Cost of energy sales and other are as follows:
Group
Company
Changes in inventories and cost of raw materials and consumables used
Dec 2020
Reported Operating Segments
Other
Segments
Dec 2019
Reported Operating Segments
Other
Segments
The breakdown of Revenues from energy sales and services and other by segment, are as follows (see note 51 - Operating Segments):
345
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Dec 2020
Dec 2019
Revenue from assets assigned to concessions
622,826
918,826
Expenditure with assets assigned to concessions
Subcontracts and other materials
-417,609
-710,793
Personnel costs capitalised (see note 10)
-70,709
-71,413
Capitalised borrowing costs (see note 13)
-43,543
-30,333
-531,861
-812,539
8.
Other Income
Other income, for the Group, are as follows:
Thousand Euros
Dec 2020
Dec 2019
Income arising from institutional partnerships (see note 37)
201,783
181,570
Gains on disposals - electricity business assets - Asset Rotation
444,338
313,452
Gains on disposals - electricity business assets
245,738
-
Gains from contractual indemnities and insurance companies
25,373
26,168
Other
160,457
170,696
1,077,689
691,886
Group
Income arising from institutional partnerships relates to income arising from production and investment tax credits (PTC/ITC), mostly from
accelerated tax depreciation, regarding wind farms and solar plants in North America (see note 37).
The caption Gains on disposals - electricity business assets - Asset Rotation corresponds to gains from asset rotation strategy. This strategy
aimed at crystallizing the value of a project by selling with loss of control, and reinvesting the proceeds in another projects, targeting greater
growth. As at 31 December 2020, the caption Gains on disposals includes: i) the gain amounting to 217,633 thousand Euros resulting from loss of
control in the EDPR’s offshore business as a consequence of the joint control partnership between EDPr and Engie (see note 6); ii) the gain
amounting to 112,908 thousand Euros from the sale of the entire stake in the companies Bon Vent de Corbera, S.L.U., Eólica Sierra de Ávila, S.L.U.,
Parc Eòlic de Torre Madrina, S.L.U., Parc Eòlic de Coll de Moro, S.L.U., Parc Eòlic de Vilalba dels Arcs, S.L.U. and Aprofitament D'Energies
Renovables de L'Ebre, S.L. (see note 6); iii) the gain amounting to 99,359 thousand Euros related to the sale of the 80% stake and loss of control
of EDPR companies in North America (see note 6); and iv) 14,438 thousand Euros from the sale of one EDPR company in North America (see note
6
)
.
The caption Other includes gains on the reinsurance activity, gains in the adjustment o
f
contingent prices o
f
sale operations and gains on the sale
of property, plant and equipment.
The caption on Gains on disposals - eletricity business assets includes: i) 215,609 thousand Euros from the sale o
f
the new company to the
consortium of investors formed by Engie, Crédit Agricole Assurance and Mirova - Grupo Natixis (see note 6); and ii) 30,129 thousand Euros from
the sale of EDP Energía, S.A.U., Baser Comercializadora de Referencia, S.A. and EDP Comercializadora, S.A.U. (see note 6).
Under the terms o
f
concession contracts o
f
EDP Group to which IFRIC 12 is applicable, the construction activities are outsourced to external
specialised entities. The revenue and the expenditure with the acquisition of these assets are as follows:
Group
Revenue from assets assigned to concessions include 358,474 thousand Euros relative to electricity distribution concessions in Portugal and in
Brazil resulting from the application of the mixed model. Additionally, it also includes the revenue related to the asset to be received by EDP Group
under the transmission concessions in Brazil (see note 26).
The main variations on the captions Revenues and cost o
f
Energy Sales and Services and Other are described in the Chapter 3 - Performance
mainly in 3.1 - Group's financial analysis and 3.4 - Business area analysis.
346
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
9.
Supplies and Services
Supplies and services are as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Consumables and communications
27,300
30,961
6,681
7,759
Rents and leases
31,619
32,190
6,183
6,176
Maintenance and repairs
353,442
396,278
16,878
32,587
Specialised works:
- Commercial activity
142,404
156,906
656
631
- IT services, legal and advisory fees
140,076
96,362
77,442
43,816
- Other services
52,584
48,936
23,988
27,298
Provided personnel
-
-
9,156
9,548
Other supplies and services
109,094
135,910
18,764
25,136
856,519
897,543
159,748
152,951
10.
Personnel Costs and Employee Benefits
Personnel costs and employee benefits are as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Personnel costs
Board of Directors remuneration
16,997
17,981
7,050
7,062
Employees' remuneration
466,762
471,091
42,501
38,785
Social charges on remuneration
112,117
115,936
10,918
10,187
Performance, assiduity and seniority bonus
84,138
74,944
16,753
11,741
Other costs
22,972
25,014
294
495
Own work capitalised:
- Assigned to concessions (see note 7)
-70,709
-71,413
-
-
- Other (see note 16)
-77,367
-62,465
-6,660
-
554,910
571,088
70,856
68,270
Employee benefits
Pension plans costs
18,673
22,849
4,967
1,996
Medical plans costs and other benefits (see note 35)
14,843
8,293
348
335
Pension plans past service cost (Curtailment/Plan amendments) (see note 35)
36,848
8,958
-
-
1,068
-30,820
-
-
Other
40,971
39,828
3,211
2,199
112,403
49,108
8,526
4,530
667,313
620,196
79,382
72,800
The variation in the caption Performance, assiduity and seniority bonus, for the Company, essentially results from the 2018 bonus adjustment
registered in the first quarter of 2019.
As at 31 December 2020, Pension plans past service cost (Curtailment/Plan amendments) is essentially related to the increase in liabilities under
the permanent employees reduction program that covered 121 portuguese employees, from which 43 were considered as a curtailment since
weren´t met the pre-retirement conditions foreseen in the ACT of 2014 (see note 35).
As at 31 December 2020, Other benefits plans past service cost (Curtailment/Plan amendments) results essentially from the change in the
medical plan granted to brazilian employees (new access rules to medical procedures and variety of specialities / exams) due to the change in
the operator with its own medical services network and infrastrutures (see note 35).
During 2020, EDP Group distributed treasury stocks to employees (334,606 shares) totalling 1,259 thousand Euros.
Group
Company
Group
Company
Pension plans costs include 5,202 thousand Euros (31 December 2019: 6,159 thousand Euros) related to defined benefit plans (see note 35) and
13,471 thousand Euros (31 December 2019: 16,690 thousand Euros) related with defined contribution plans.
Other benefits plans past service cost (Curtailment/Plan amendments) (see
note 35)
347
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Executive Board of Directors
9
9
9
9
Senior management
861
827
102
101
Managers
777
783
28
28
Specialists
4,717
4,528
441
394
Support, Operational and Administrative Technicians
5,246
5,513
72
67
11,610
11,660
652
599
11.
Other Expenses
Other Expenses are as follows:
Thousand Euros
Dec 2020
Dec 2019
Concession rents paid to local authorities and others
283,486
281,825
Direct and indirect taxes
207,487
230,870
Donations
24,822
22,489
Write-off of tangible assets
33,755
41,374
Other
85,630
75,915
635,180
652,473
12.
Amortisation and Impairment
Amortisation and impairment are as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Depreciation/impairment of Property, plant and equipment (see note 16)
1,112,667
1,294,059
6,045
6,057
Depreciation/impairment of Right of use asset (see note 17)
62,282
56,898
5,519
5,414
Amortisation/impairment of Intangible assets (see note 18)
455,783
418,678
17,858
13,410
1,630,732
1,769,635
29,422
24,881
Amortisation/impairment of Investment property (see note 23)
8,042
356
11,304
3,975
1,638,774
1,769,991
40,726
28,856
Compensation of depreciation
Partially-funded property, plant and equipment (see note 38)
-22,176
-27,003
-
-
12,841
22,142
-
-
Impairment of Goodwill (see note 19)
2,392
489
-
-
1,631,831
1,765,619
40,726
28,856
Group
Company
Amortisation of Incremental costs of obtaining contracts with customers (see
note 26)
During 2020, due to the revision o
f
market assumptions (in mainly, commodity prices and energy sales prices), as well as the expected reduction
in consumption in the Iberian market and the consequent entry of renewable energy capacity, the Group carried out a review of its future
estimates of value by carrying out impairment tests for some of the production assets.
Group
The caption Concession rents paid to local authorities and others includes essentially the rents paid to the local authorities under the terms o
f
the
low tension electricity distribution concession contracts and rents paid to city councils where the power plants are located.
The caption Direct and indirect taxes includes the tax of 7% over electricity generation in Spain, property tax, clawback and other taxes and levies.
In 2020, the EDP Group proceeded to the write-of
f
o
f
tangible assets, which mainly relate to losses in materials, equipment and discontinuation o
f
projects in Brasil and Portugal in the amount of 31,747 thousand Euros (31 December 2019: 23,472 thousand Euros).
The caption Others includes losses in the reinsurance activity and losses in tangible fixed assets. Also, the caption includes an amount o
f
10,439
thousand Euros that refers to a change in the fair value of the contingent consideration related to the sale in 2018 to Sumitomo Corporation of
13.5% stake in the companies Éoliennes en Mer Dieppe - Le Tréport, S.A.S. and Éoliennes en Mer Îles d'Yeu et de Noirmoutier, S.A.S., in
accordance with the relevant agreements signed (see note 27).
The breakdown by management positions and category of professional staff is as follows:
Group
Company
348
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
13.
Financial Income and Expenses
Financial income and expenses, for the Group, are as follows:
Thousand Euros
Dec 2020
Dec 2019
Financial income
Interest income from bank deposits and other investments
20,294
49,445
Interest from derivative financial instruments
24,161
31,632
Interest income on tariff deficit:
- Portugal - Electricity (see note 26)
1,147
-1,658
- Brazil - Electricity (see notes 26 and 38)
2,205
4,256
Other interest income
47,604
59,862
Derivative financial instruments
-9,076
8,444
Foreign exchange gains
59,315
25,763
CMEC:
- Interest on the initial CMEC
30,570
33,658
- Financial effect considered in the calculation
7,792
11,574
Gains on the sale of financial investments
41
85
Gains on the sale of the electricity tariff deficit - Portugal (see note 26)
992
3,589
Equity instruments at fair value through other comprehensive income (see note 22)
1,893
33,690
Other financial income
39,764
127,477
226,702
387,817
Financial expenses
Interest expense on financial debt
513,692
648,821
Bonds buyback
70,436
-
Capitalised borrowing costs:
- Assigned to concessions (see note 7)
-43,543
-30,333
- Other (see note 16)
-26,989
-17,484
Interest from derivative financial instruments
24,387
29,547
Interest expense on tariff deficit:
- Portugal - Electricity (see note 38)
42
314
- Brazil - Electricity (see notes 26 and 38)
7,191
1,716
Other interest expense
19,559
32,059
Derivative financial instruments
8,759
5,126
Foreign exchange losses
65,228
47,717
CMEC
10,655
13,428
Unwinding of discounted liabilities
142,421
124,000
Unwinding of lease liabilities (rents due from lease contracts) (see note 39)
39,743
38,687
Net interest on the net pensions plan liability (see note 35)
2,197
10,580
Net interest on the medical liabilities and other benefits (see note 35)
13,372
22,072
Losses on the sale of the electricity tariff deficit - Portugal (see note 26)
1,037
-
Other financial expenses
49,139
131,341
897,326
1,057,591
Financial income/(expenses)
-670,624
-669,774
The above impairment tests carried out led to the recording o
f
the following impairments on assets in Portugal: 44,404 thousand Euros at the
combined cycle thermoelectric plant in Lares, 25,520 thousand Euros at the combined cycle thermoelectric plant in Ribatejo, 8,441 thousand
Euros at the hydroelectric plant Greenvouga and 33,659 thousand Euros at the Guadiana Hydroelectric Power Plant (see notes 16 and 18).
Impairments were also recorded in Spain in the amount of 43,778 thousand Euros, essentially at the combined cycle thermoelectric plant in Soto
5
(
39,200 thousand Euros
)
(
see note 16
)
.
In the scope o
f
impairment tests on these assets, sensitivity analyzes were performed on key variables, namely discount rates. A sensitivity
analysis of +0.5% in discount rate would determine an additional impairment loss of around 18,364 thousand Euros in Lares power station, 20,421
thousand Euros in Ribatejo power station, 27,603 thousand Euros in Greenvouga, 19,029
thousand Euros in Hidroelétrica do Guadiana and
12,795 thousand Euros in Soto 5.
Group
Additionally on 14 July 2020, a declaration o
f
resignation o
f
the production license was delivered to the Sines power plant closure by January
2021. Considering this decision the impairment test carried out was reviewed, being determined an additional impairment amounting of 77 million
Euros (see note 16).
349
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Financial income and expenses, for the Company, are as follows:
Thousand Euros
Dec 2020
Dec 2019
Financial income
Interest income from loans to subsidiaries and related parties (see note 44)
53,123
67,244
Interest from derivative financial instruments
124,800
155,867
Derivative financial instruments
151,540
65,012
Income from equity investments (see note 44)
908,690
686,205
Gains on the sale of financial investments
215,650
243,349
Other financial income
32,979
35,168
1,486,782
1,252,845
Financial expenses
Interest expense on financial debt
209,513
293,889
Bonds Buyback
120,042
-
Interest from derivative financial instruments
136,141
159,967
Derivative financial instruments
207,352
96,591
Unwinding of lease liabilities (rents due from lease contracts)
7,062
5,601
Other financial expenses
14,834
11,022
694,944
567,070
Financial income/(expenses)
791,838
685,775
In the first quarter o
f
2020, EDP S.A. concluded a "Tender Offer" over the issue “€750,000,000 Fixed to Reset Rate Subordinated Notes due 2075”,
booking a cost related to the transaction of 56,897 thousand Euros. On December 2020, EDP S.A. Has ought an amount of 450 million Euros from
the issue "EUR1.000.000.000 Fixed Rate Notes due 2025", booking a cost related to the transaction of 63,145 thousand Euros.
As at 31 December 2019, the caption Gains on the sale o
f
financial investments includes the impact o
f
the operation in EDP International
Investment and Servicies, S.L., which generated a gain of 243,272 thousand Euros.
The Derivative financial instruments caption includes income and expenses related with financial assets and liabilities measured and fair value
through profit and loss, while the remaining captions of financial income and expenses are registered at amortised cost, based on the effective
interest rate method.
Company
The caption Other financial income includes 14,053 thousand Euros related to nominal interests from bonds issued by EDP Finance B.V.,
repurchased by EDP S.A. (see notes 27 and 44). The effective interest of these instruments amounts to 205 thousand Euros (includes the
recognition of premium and transaction costs associated with the buyback transaction by the effective interest rate method).
Capitalised borrowing costs includes the interest capitalised in assets under construction according to Group accounting policy. Regarding the
rate applicable to borrowing costs related with tangible/intangible assets under construction that is used in the determination of the amount of
borrowing costs eligible for capitalisation (see notes 16 and 18), it varies depending on business unit, the country and currency, since EDP Group
incorporates in its scope of consolidation a significant number of subsidiaries in several geographies with different currencies. Therefore, for the
most representative geographies, the weighted average funding rates, in use in 2020, ranged from 1.05% to 2% in Portugal, from 2.6% to 7% in
S
p
ain and from 0.28% to 7.75% in North America, de
p
endin
g
on related assets under construction and related financin
g
.
The Unwinding o
f
discounted liabilities refers essentially to: (i) the unwinding o
f
the dismantling and decommissioning provision for wind
generation assets of 6,432 thousand Euros (31 December 2019: 6,614 thousand Euros) (see note 36); (ii) the implied financial return in
institutional partnerships of 94,718 thousand Euros (31 December 2019: 85,320 thousand Euros) (see note 37); and (iii) the financial expenses
related to the discount of the liability associated to the concessions of Alqueva/Pedrógão, Investco and Enerpeixe of 26,721 thousand Euros (31
December 2019: 20,352 thousand Euros
)
.
In 2019, the captions Other financial income and Other financial expenses include the amount o
f
93,557 thousando Euros (412,918 thousand
Brazilian Reais), which net impact is null, resulting from the monetary update on the exclusion of ICMS from PIS/COFINS tax assessment in EDP
Espirito Santo and EDP São Paulo, which resulted in recognizing an liability of 388,988 thousand Euros (1,756,597 thousand Brazilian Reais) in
Amounts payable from tariff adjustments - Electricity - Brazil caption (see note 38),
against a asset in Special taxes Brazil caption (see note 28).
On December 2020, EDP S.A. sold its stake in the company that owns the portfolio o
f
6 Hydroelectric Power Plants (Miranda, Bemposta, Picote,
Foz Tua, Baixo Sabor e Feiticeiro), by a total amount of 2,173,000 thousand Euros, generating a gain of 215,609 thousand Euros in the Caption
Gains on the sale of financial investments (see note 6).
In the first quarter o
f
2020, EDP S.A. concluded a "Tender Offer" over the issue “€750,000,000 Fixed to Reset Rate Subordinated Notes due 2075”,
and on November 2020, EDP S.A. has bought an amount of 53,357 thousand Euros issued by EDP Finance B.V., booking a cost related to both
transactions of 70,436 thousand Euros.
350
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
14.
Income Tax
Dec 2020
Dec 2019
Europe:
Portugal
21% - 31.5%
21% - 31.5%
Spain
24% - 25%
24% - 25%
Netherlands
25%
25%
Belgium
25%
29.58%
France
28%
28% - 32.02%
Italy
24% - 28.8%
24% - 28.8%
Poland
19%
19%
Romania
16%
16%
United Kingdom
19%
19%
America:
Brazil
34%
34%
United States of America
24.91%
24.91%
Canada
26.5%
26.5%
Mexico
30%
30%
The statutory corporate income tax rates applicable in the main countries in which EDP Group operates are as follows:
EDP Group companies are taxed, whenever possible, on a Group consolidated basis as allowed by the tax legislation of the respective countries.
As per the applicable legislation, in general terms, tax periods may be subject to review and reassessment by the various tax authorities during a
limited number of years. Statutes of limitation differ from country to country, as follows: Portugal 4 years or, if tax losses or credits have been
used, the number of years that such tax losses or credits may be carried forward; Spain 4 years; USA and The Netherlands 3 years; and Brazil 5
years. In remaining main jurisdictions, the deadline for review and reassessment by the various tax authorities ranges between 3 and 10 years.
Tax losses generated in each year are also subject to tax authorities' review and reassessment and may be used to offset yearly taxable income
assessed in the subsequent periods, in the main jurisdictions in which EDP is present, as follows: in Portugal 5 years (for tax losses of 2017 to
2019, not being considered the years 2020 and 2021 for the purposes of this period); and 12 years (for tax losses of 2014 to 2016, being also
applicable the suspension of two years previously referred; 2020 and 2021); in the Netherlands 6 years (for tax losses incurred from 2019
onwards); and 9 years (for tax losses incurred before 2018), and without term in the USA, Brazil and Spain. Moreover, in the Netherlands the tax
losses of a given year may be used to recover current tax of the previous year. However, the deduction of tax losses in the USA, Portugal, Spain
and Brazil may be limited to a percentage of the taxable income of each period.
As the EDP Group prepares and discloses its financial statements in accordance with IFRS, an alignment between the accounting o
f
income tax
expense or income and the corresponding cash flow is not mandatory. Accordingly, this analysis does not represent the income tax paid or
received by the EDP Group for the correspondent reporting period.
The overall tax contribution borne by the EDP Group (which includes comments on the contributions paid to the respective states where the
Group operates), as well as other relevant information (such as EDP Group's tax footprint, specific taxation over energy sector and procedures to
control and manage adverse tax exposures), are disclosed on the annual Sustainability Report, available on EDP website (
www.edp.com).The general principles concerning EDP Group's mission and tax policy are also addressed in the same report. This document also describes the
key principles with respect to transfer pricing policy applicable to the EDP Group, under which the Group's policy is to abide within the
international rules, guidelines and best practises applicable in the various geographies where it operates.
It should be noted that, as a multinational group, the EDP Group fully complies with the annual obligation o
f
communication and report, which
results from the transposition to the Portuguese domestic Law of the disposals of Action 13 of the Base Erosion and Profit Shifting (named
Country-by-Country Reporting), as a part of a set of measures adopted by OECED and G20 countries to enhance transparency for tax
administrations. Furthermore, this obligation is fulfilled in Portugal by the parent company, within the deadlines foreseen by law.
Main features of the tax systems of the countries in which EDP Group operates
The following note includes an analysis on the reconciliation between the theoretical and the effective income tax rate applicable at an individual
level and at the level of the EDP Group, on a consolidated basis. In general terms, this analysis aims to quantify the impact of the income tax,
recognised in the income statement, which includes both current and deferred tax.
351
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Income tax expense is as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Current tax
-139,751
-145,858
25,411
18,125
Deferred tax
-169,361
-80,043
35,009
47,033
-309,112
-225,901
60,420
65,158
The effective income tax rate is as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Profit before tax and CESE
1,535,414
1,193,705
817,731
655,758
Income tax expense
-309,112
-225,901
60,420
65,158
Effective income tax rate
20.1%
18.9%
-7.4%
-9.9%
Thousand Euros
Dec 2020
Dec 2019
Profit before income tax and CESE
1,535,414
1,193,705
Theoretical income tax rate *
29.5%
29.5%
Theoretical income tax expense
452,947
352,143
Different tax rates (includes state surcharge) and CIT rate changes
36,624
51,604
Tax losses and tax credits
-33,846
-19,559
Dividends
1,867
-16,655
Tax benefits
-19,530
-21,392
Differences between accounting and fiscal provisions/depreciations
20,661
-26,476
-130,804
-73,882
Taxable differences attributable to non-controlling interests
-15,776
-16,360
Other adjustments and changes in estimates
-3,031
-3,522
Effective income tax expense as per the Consolidated Income Statement
309,112
225,901
* Average tax rate considering the different tax rates applicable to EDP Group companies in Portugal.
The caption Accounting/fiscal differences on the recognition/derecognition o
f
assets mainly includes the impacts inherent to transactions o
f
production and energy supply business assets, in the the several geographies in which the Group operates as a result of its business activity (see
note 6).
The caption Different tax rates (includes state surcharge) and CIT rate changes mainly refer to the difference between the tax rates applicable in
the countries in which the EDP Group operates as compared to the tax rate used as reference for the theoretical income tax expense calculation.
The caption Taxable differences attributable to non-controlling interests (North America) include the effect inherent in the attribution of taxable
income to non-controllable interests in EDPR Group in the USA, as determined by the tax legislation of that geography.
Reconciliation between the theoretical and the effective income tax expense
Group
Company
The difference between the theoretical and the effective income tax expense results from the application o
f
the law provisions, in the various
countries where EDP operates, in the determination of the taxable base, as demonstrated below.
The reconciliation between the theoretical and the effective income tax expense for the Group, in December 2020 and 2019, is as follows:
Accounting/fiscal differences on the recognition/derecognition of assets
Corporate income tax provision
Group
Company
EDP Group companies may, in accordance with the law, benefit from certain tax benefits or incentives in specific conditions, namely the
Production Tax Credit in North America, which are the dominant form of wind remuneration in this country, and represent an extra source of
revenue per unit of electricity, over the first 10 years of the asset’s life. Wind facilities that qualify for the application of the Production Tax Credits
prior to 1 January 2017, benefit from 100% of the credit ($25/MWh in 2020 and $26/MWh in 2021, being adjusted to inflation in subsequent
years). The credit amount is reduced by 20% for wind facilities qualifying in 2017, 40% in 2018 and 60% in 2019. Additional legislation in 2020 and
2021 extended the aforementioned regime to wind facilities, with start of construction in 2020 or 2021, attributing 60% of the tax credit amount.
Additionally, EDP Group companies benefit from the Investment Tax Credit which avails solar projects to a credit based upon its capital
expenditures. This credit amount equates to 26% for projects that start construction before 2022 and 22% for projects starting construction in
2023 as long as these projects go into service by 2025.
EDP is monitoring, in the countries where it is present, tax measures designed to help mitigate the economic effects o
f
the COVID-19 outbreak. To
date, these measures have not constitute material impacts in the geographies where the EDP Group is present.
352
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Dec 2020
Dec 2019
Profit before income tax
817,731
655,758
Nominal income tax rate (*)
22.5%
22.5%
Theoretical income tax expense
183,989
147,546
Tax losses and tax credits
-1,258
2,140
Dividends
-204,455
-154,396
Accounting/fiscal temporary differences on the recognition / derecognition of assets
-48,762
-54,749
Other adjustments and changes in estimates
10,066
-5,699
Effective income tax expense as per the Company Income Statement
-60,420
-65,158
15.
Extraordinary Contribution to the Energy Sector (CESE)
EDP has paid 453.357 thousand Euros relating to CESE so far. The withdrawal o
f
these legal actions will have no impact on EDP’s financial
statements, considering the full payment has already been made.
The reconciliation between the theoretical and the effective income tax expense for the Company, in 2020 and 2019, is as follows:
Since January 2016, EDP Groups contests the legal basis and constitutionality o
f
this contribution. Furthermore, EDP undertakes periodic
assessments of the company’s ongoing legal proceedings. From this analysis and taking into account the current public health and economic
crisis, caused by the COVID-19 pandemic, the litigation related to CESE has been considered for a possible withdrawal and the relevant legal
procedures will be carried. On this account, it should also be noted that EDP based its judicial actions, among other aspects, on the fact that the
amounts paid relating to the CESE were not being utilized for the reduction of the National Electric System’s tariff debt, contrarily to the legal
p
rovision. However, the le
g
islation has been followed since 2019 and the amounts
p
aid are bein
g
directed towards the reduction of this debt.
CESE is calculated based on the companies’ net assets as at 1 January, which comply, cumulatively, to: (i) property, plant and equipment; (ii)
intangible assets, except industrial property elements; and (iii) financial assets assigned to concessions or licensed activities. In the case of
regulated activities, CESE focuses on the value of regulated assets if it is higher than the value of those assets.
The general rate is 0.85%. However, in case o
f
natural gas combined cycle power plants with an annual utilization equivalent o
f
installed capacity
equal or higher to 1,500 hours and lower than 3,000 hours, is expected a reduced rate of 0.565%. Nevertheless, this rate could be 0.285% in case
the annual utilization of installed capacity is lower than 1,500 hours.
The CESE system has been successively extended and is now valid for 2020 through Law nº 2/2020 of 31 March.
*
Statutory Corporate Income Tax rate applicable in Portugal (21%) and municipal surcharge (1.5%),
Law 83-C/2013, o
f
the State Budget 2014 ("Lei do Orçamento de Estado 2014"), approved by the Portuguese Government on 31 December 2013,
introduced CESE, with the objective of financing mechanisms that promote the energy sector systemic sustainability, through the establishment
of a fund which aims to contribute for the reduction of tariff debt and to finance social and environmental policies in the energy sector. This
contribution focuses generally on the economic operators that develop the following activities: (i) generation, transportation or distribution of
electricity; (ii) transportation, distribution, storage or wholesale supply of natural gas; and (iii) refining, treatment, storage, transportation,
distribution and wholesale su
pp
l
y
of crude oil and oil
p
roducts.
353
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
16.
Property, Plant and Equipment
Thousand Euros
Land and natural
resources
Buildings and
other
constructions
Plant and
machinery
Other tangible
assets
Assets under
construction
Total
Gross Amount
82,310
374,054
34,942,285
432,248
1,719,438
37,550,335
-
159,637
17,288,860
340,967
84,649
17,874,113
82,310
214,417
17,653,425
91,281
1,634,789
19,676,222
Gross Amount
74,057
364,648
35,458,783
553,586
2,800,419
39,251,493
-
163,937
18,426,670
416,164
81,501
19,088,272
74,057
200,711
17,032,113
137,422
2,718,918
20,163,221
Balance as at 1 January 2019
87,067
232,985
21,032,693
100,707
1,173,536
22,626,988
Additions
1,196
199
47,504
18,789
1,247,626
1,315,314
Depreciation and impairment
-
-9,866
-1,248,142
-30,439
-5,612
-1,294,059
Disposals/Write-offs
-2,228
-5,840
-472
-1,518
-24,708
-34,766
Transfers
-320
222
-1,041,612
14,288
-739,070
-1,766,492
Exchange Difference
-701
-2,371
103,022
191
8,306
108,447
Perimeter Variations
-2,704
-912
-1,239,568
-10,737
-25,289
-1,279,210
Balance as at 31 December 2019
82,310
214,417
17,653,425
91,281
1,634,789
19,676,222
Additions
770
8,319
577,859
16,557
2,179,260
2,782,765
Depreciation and impairment
-
-8,303
-1,072,363
-31,378
-623
-1,112,667
Disposals/Write-offs
-1,425
-1,048
-18,885
-846
-2,418
-24,622
Transfers
-
4,317
1,009,091
23,874
-992,291
44,991
Exchange Difference
-13,465
-44,991
-1,095,810
-1,548
-199,023
-1,354,837
Perimeter Variations
5,867
28,000
-21,204
39,482
99,224
151,369
Balance as at 31 December 2020
74,057
200,711
17,032,113
137,422
2,718,918
20,163,221
Thousand Euros
Land and natural
resources
Buildings and
other
constructions
Plant and
machinery
Other tangible
assets
Assets under
construction
Total
Gross Amount
4,581
28,772
468
79,335
10,464
123,620
-
26,827
309
59,039
8,520
94,695
4,581
1,945
159
20,296
1,944
28,925
Gross Amount
4,581
28,575
468
82,297
11,486
127,407
-
26,661
323
63,945
8,520
99,449
4,581
1,914
145
18,352
2,966
27,958
Balance as at 1 January 2019
4,581
1,792
153
22,848
1,738
31,112
Additions
-
-
19
6,747
2,290
9,056
Depreciation and impairment
-
-73
-13
-5,968
-3
-6,057
Disposals/Write-offs
-
-15
-
-5,100
-
-5,115
Transfers
-
241
-
1,840
-2,081
-
Other
-
-
-
-71
-
-71
Balance as at 31 December 2019
4,581
1,945
159
20,296
1,944
28,925
Additions
-
-
-
2,587
2,595
5,182
Depreciation and impairment
-
-78
-14
-5,953
-
-6,045
Disposals/Write-offs
-
-52
-
-48
-
-100
Transfers
-
103
-
1,470
-1,573
-
Other
-
-4
-
-
-
-4
Balance as at 31 December 2020
4,581
1,914
145
18,352
2,966
27,958
This caption is as follows, for the Group:
Accumulated depreciation and
impairment losses
Carrying Amount at 31
December 2019
Carrying Amount at 31
December 2020
Accumulated depreciation and
impairment losses
Carrying Amount at 31
December 2019
Accumulated depreciation and
impairment losses
Carrying Amount at 31
December 2020
This caption is as follows, for the Company:
Accumulated depreciation and
impairment losses
354
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Gross amount of Assets under construction are as follows:
Thousand Euros
Dec 2020
Dec 2019
Wind and solar farms in North America
1,485,274
1,003,395
Wind and solar farms in Europe
643,396
345,360
Hydric Portugal
43,943
142,573
Other assets under construction
627,806
228,110
2,800,419
1,719,438
The capitalised costs for Property, plant and equipment for the period, except Land and natural resources, are as follows:
Thousand Euros
Dec 2020
Dec 2019
Subcontracts and other materials
2,356,170
1,134,284
Purchase price allocation
256,054
63,575
Dismantling and decommissioning costs (see note 36)
65,415
36,310
Personnel costs (see note 10)
77,367
62,465
Borrowing costs (see note 13)
26,989
17,484
2,781,995
1,314,118
Disposals/Write-offs include essentially the write-of
f
o
f
two Hydroelectric Power Plants: Bemposta by the net amount o
f
7,199 thousand Euros
and Picote by the net amount of 4,709 thousand Euros, and the sell of scrap and solar panels by the amount of 3,252 thousand Euros at EDP
Produção and EDP Comercial.
Perimeter Variations/Regularisations mainly include: (i) the impact o
f
Viesgo acquisition in the amount o
f
1,109,942 thousand Euros (see notes 6
and 49); (ii) the impact of the sale of subsidiaries in North America in the amount of 586,783 thousand Euros (see note 6); and (iii) the impact of
the sale of EDP Spain subsidiaries in the amount of 549,840 thousand Euros (see note 6). Additionally, additions include the effect of the price
allocation exercise of Viesgo assets in he amount of 472,567 thousand Euros (see note 49).
Charge/Impairment losses include impairment in combined cycle thermoelectric plants and Hydroeletric Power Plant in Portugal in the amount o
f
78,365 thousand Euros as well as impairments in Spain in the amount of 43,778 thousand Euros (see note 12). Additionally, considering the
decision to close Sines plant, its impairment test carried out was revised, with an impairment of a total amount of 77,311 thousand Euros (see
note 12).
The movement in Exchange differences in the period results mainly from the depreciation of US Dollar and Brazilian Real, against the Euro.
Transfers refers to the transfer o
f
Brazil hydroelectric production, classified on 31 December 2019 as held for sale, by the net amount o
f
44,991
thousand Euros (cost in the amount of 68,067 thousand Euros and accumulated depreciation and impairment losses in the amount of 23,066
thousand Euros).
Additions include the investment in wind and solar farms by North America, Europe and Brazil. In Portugal, the Group is carrying out hydroelectric
investments in several power plants (Caniçada and Ribeiradio-Ermida) and improvements and repairs in thermoelectric power plants (Lares and
Ribatejo).
355
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
17.
Right of use assets
Thousand Euros
Land and
natural
resources
Buildings
and other
construc-
tions
Plant and
machinery
Other tangible
assets
Total
Gross amount
649,050
220,027
4,873
8,750
882,700
25,661
23,794
1,234
3,508
54,197
623,389
196,233
3,639
5,242
828,503
Gross amount
723,690
250,301
153,316
11,744
1,139,051
49,350
45,303
7,282
6,923
108,858
674,340
204,998
146,034
4,821
1,030,193
Balance as at 1 January 2019
605,979
208,957
4,947
8,343
828,226
Additions (see note 39)
94,147
17,019
170
1,785
113,121
Depreciation and impairment
-27,133
-24,530
-1,262
-3,973
-56,898
Disposals/Write-offs
-
-34
-
-458
-492
Transfers
-
-4,295
-
-259
-4,554
Exchange Difference
3,591
-784
-216
-196
2,395
Perimeter Variations
-53,195
-100
-
-
-53,295
Balance as at 31 December 2019
623,389
196,233
3,639
5,242
828,503
Additions (see note 39)
138,008
38,120
149,754
1,879
327,761
Depreciation and impairment
-28,135
-24,308
-6,473
-3,366
-62,282
Disposals/Write-offs
-7
-680
-
-5
-692
Transfers
-
47
-
127
174
Exchange Difference
-45,573
-4,492
-886
-657
-51,608
Perimeter Variations
-13,342
78
-
1,601
-11,663
Balance as at 31 December 2020
674,340
204,998
146,034
4,821
1,030,193
Thousand Euros
Buildings and
other
construc-
tions
Other tangible
assets
Total
115,744
617
116,361
5,210
204
5,414
110,534
413
110,947
117,135
709
117,844
10,532
401
10,933
106,603
308
106,911
118,961
-
118,961
1,009
-
1,009
Depreciation and impairment
-5,210
-204
-5,414
Other
-4,226
617
-3,609
110,534
413
110,947
1,391
92
1,483
Depreciation and impairment
-5,322
-197
-5,519
106,603
308
106,911
Additions
Accumulated depreciation and impairment losses
Carrying Amount at 31 December 2020
Balance as at 31 December 2020
Balance as at 1 January 2019
Additions
Balance as at 31 December 2019
This caption is as follows, for the Group:
This caption is as follows, for the Company:
Accumulated depreciation and
impairment losses
Carrying Amount at 31 December 2019
Gross amount
Accumulated depreciation and
impairment losses
Carrying Amount at 31
December 2019
Carrying Amount at 31
December 2020
Gross amount
Accumulated depreciation and impairment losses
Additions include, essentially, new lease contracts registered, under IFRS16, in EDP Renováveis (North America and Europe) and in EDP Espanha.
356
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
18.
Intangible Assets
Thousand Euros
Concession
rights
CO2
Licenses
Other
intangibles
Intangible
assets in
progress
Total
Gross amount
12,727,969
224,992
1,047,336
219,004
14,219,301
9,390,468
-
605,010
-
9,995,478
3,337,501
224,992
442,326
219,004
4,223,823
Gross amount
12,355,618
198,555
2,227,892
169,842
14,951,907
9,291,434
-
662,238
-
9,953,672
3,064,184
198,555
1,565,654
169,842
4,998,235
Balance as at 31 December 2018
3,669,176
197,273
400,709
469,372
4,736,530
Additions
54,465
268,850
40,015
116,535
479,865
Depreciation and impairment
-358,142
-
-60,536
-
-418,678
Disposals/Write-offs
-10,564
-241,131
-516
-932
-253,143
Transfers
-20,931
-
53,606
-68,662
-35,987
Exchange Difference
-8,108
-
-1,841
-237
-10,186
Perimeter Variations
11,605
-
10,889
-297,072
-274,578
Balance as at 31 December 2019
3,337,501
224,992
442,326
219,004
4,223,823
Additions
31,209
237,892
595,549
145,967
1,010,617
Depreciation and impairment
-381,476
-
-74,307
-
-455,783
Disposals/Write-offs
-5,183
-269,172
-9,681
-64
-284,100
Transfers
147,435
-
183,230
-195,754
134,911
Exchange Difference
-151,560
-
-12,372
-4,043
-167,975
Perimeter Variations
86,258
4,843
440,909
4,732
536,742
Balance as at 31 December 2020
3,064,184
198,555
1,565,654
169,842
4,998,235
Thousand Euros
Other
intangibles
Intangible
assets in
progress
Total
145,921
44,634
190,555
97,202
-
97,202
48,719
44,634
93,353
183,691
54,412
238,103
122,880
-
122,880
60,811
54,412
115,223
43,347
35,315
78,662
3,641
24,888
28,529
Depreciation and impairment
-13,410
-
-13,410
Disposals/Write-offs
-498
-
-498
Transfers
15,570
-15,570
-
Other
70
-
70
48,720
44,633
93,353
9,647
30,081
39,728
Depreciation and impairment
-17,858
-
-17,858
Transfers
20,302
-20,302
-
60,811
54,412
115,223
Accumulated depreciation and impairment losses
Gross amount
The concession rights over the electricity distribution networks in Brazil, namely in EDP São Paulo Distribuição de Energia S.A. and in EDP Espírito
Santo Distribuição de Energia S.A. are amortised on a straight-line basis over the concession period until 2028 and 2025, respectively. Concession
rights in Portugal relate to the public hydric domain for hydroelectric generation (EDP Produção and Hidroeléctrica do Guadiana), which useful life
does not exceed 75 years.
Accumulated depreciation and
impairment losses
Carrying Amount at 31
December 2019
Accumulated depreciation and
impairment losses
Carrying Amount at 31
December 2020
This caption is as follows, for the Group:
This caption is as follows, for the Company:
Carrying Amount at 31 December 2019
Gross amount
Accumulated depreciation and impairment losses
Carrying Amount at 31 December 2020
Balance as at 31 December 2018
Balance as at 31 December 2019
Balance as at 31 December 2020
Additions
Additions
357
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
19. Goodwill
Thousand Euros
Dec 2020
Dec 2019
Renewables
1,651,582
1,627,099
Networks
644,173
300,207
Client Solutions & Energy Management
10,548
192,556
2,306,303
2,119,862
The movements in Goodwill, during the period ended 31 December 2020, are analysed as follows:
Thousand Euros
Balance at
1 January
Increases
Decreases
Impairment
(see note 12)
Exchange
differences
Balance at
31 December
Renewables
1,627,099
143,700
-57,310
-2,759
-59,148
1,651,582
Networks
300,207
343,966
-
-
-
644,173
Client Solutions & Energy Management
192,556
-
-180,434
367
-1,941
10,548
2,119,862
487,666
-237,744
-2,392
-61,089
2,306,303
Thousand Euros
Balance at
1 January
Increases
Decreases
Impairment
(see note 12)
Exchange
differences
Balance at
31 December
Renewables
1,758,106
-
-143,850
-
12,843
1,627,099
Networks
300,207
-
-
-
-
300,207
Client Solutions & Energy Management
193,148
-
-
-489
-103
192,556
2,251,461
-
-143,850
-489
12,740
2,119,862
Renewables
Goodwill for the Group, resulting from the difference between the acquisition price and the fair value o
f
the net assets acquired, at the acquisition
date, is organized by segment, and is as follows:
Group
The movements in Goodwill, during the period ended 31 December 2019, are as follows:
The assets allocated to concession contracts (IFRIC 12) currently in force in EDP Group fall within the Intangible Asset Model, for the electricity
special regime production concessions (PRE) in Portugal and within the Mixed Model, for the electricity distribution concessions in Portugal and
in Brazil, as referred in the Group's accounting policies.
Additions o
f
CO2 Licenses include 53,612 thousand Euros refering to CO2 Licenses granted free o
f
charge to EDP Group plants operating in
Portugal and Spain and 184,280 thousand Euros of licences purchased in the market for own consumption. The Disposals/Write-offs of CO2
licences, essentially includes the delivery in April 2020 of the 2019 consumption licenses.
Additions of Intangible assets in progress essentially include the implementation and development of information systems projects.
In the fourth quarter o
f
2020, the acquisition o
f
Viesgo’s renewable business (see notes 6 and 49), through EDP Renováveis S.A., originated an
increase in this caption in the amount of 143,700 thousand Euros, in accordance with the requirements of IFRS 3. Additionally, an amount of
4,641 thousand Euros was recorded in Investments in joint ventures and associates caption due to associate companies consolidated by the
equity method (see note 21).
Transfers refer to the intangible assets assigned to concessions that became operational, in the amount o
f
122,748 thousand Euros (see note
26). Additionally, this caption includes the transfer to held for sale of Electricity generation assets (Hydro Brazil).
The capitalised costs of the period related to construction of intangible assets are included in own work capitalised in notes 7, 10 and 12.
Perimeter Variations/Regularisations include essentially the impact o
f
Viesgo acquisition that generated the inclusion o
f
intangible assets in the
amount of 452,469 thousand Euros (see notes 6 and 49). Additionally, additions include the effect of the price allocation exercise of Viesgo
assets in the amount of 604,162 thousand Euros (see note 49).
Charge/Impairment losses include impairment in Guadiana Hydroeletric Power Plant in Portugal in the amount of 33,659 (see note 12).
The concession rights over electricity generation in Brazil, namely for Lajeado Energia and Investco, are amortised over the concession period
until 2032.
358
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Networks
Client Solutions & Energy Management
Goodwill impairment test analysis – EDP Group
In the fourth quarter o
f
2020, the acquisition o
f
the electricity distribution, thermal and hydro generation business o
f
Viesgo by EDP Iberia S.L.
generated an increase in this caption in the amount of 343,966 thousand Euros through the purchase price allocation exercise carried out in
accordance with IFRS 3 (see notes 6 and 49).
Following the update o
f
the EDP Group's strategic plan for the horizon 2019-2022, released on March 12, 2019, the Executive Board o
f
Directors
reorganized the operating segments based on which, EDP group monitors the Group's activity to align them with this new vision , with effect from
1 January 2019.
Within the scope of this change, the composition of the segments for the purpose of comparability, was changed.
In reverse, the movement in the amount o
f
3,654 thousand Euros is related to the reclassification o
f
the item o
f
non-current assets held for sale to
the item of goodwill related to the company Energest S.A.
During 2020, the sale o
f
two gas power plants (Castejón I & III) was concluded resulting in a decrease in goodwill in the amount o
f
180,434
thousand Euros (see note 6).
- Regarding the production o
f
wind and solar energy, the “net capacity factors” used for each cash-generating unit consider: (i) the installed
capacity and the forecast resulting from the studies on the occurrence of wind in the long term; and (ii) that regulatory mechanisms in almost all
geographies determine the production and priority of energy dispatch whenever weather conditions permit;
- Regarding hydro production, the “net capacity factors” used for each cash-generating unit consider: (i) the installed capacity and the forecast for
hydraulic production; and (ii) that the regulatory mechanisms in each geography;
- Energy remuneration: the approved or contracted remunerations were considered in the event o
f
long-term energy sales contracts for the total or
partial useful life of the assets or remunerations determined by the regulatory framework in force in each geography. In the remaining cases, the
long-term market price curves projected by the Group were used based on past experience and internal models built on the basis of external
information sources;
For the purposes o
f
these tests, the EDP Group has defined a set o
f
assumptions to determine the recoverable amount o
f
the main investments
by each cash generating unit, being presented by aggregation in each business units after the impairment tests carried out at each subgroup/cash
generating unit.
Goodwill impairment test analysis –
Renewables Segmen
t
The future cash flows are based on the useful life o
f
wind farms, solar and hydro assets. This projection also considers long-term energy sales
contracts and long-term energy price estimates, for assets with market exposure.
The main assumptions on which impairment tests are based are as follows:
The recoverable amount of the goodwill in subsidiaries is assessed annually, as at 30 September, independently of the existence of any indicators
of impairment. The recoverable amount is determined based on the value in use of the assets, calculated using valuation methodologies
supported by discounted cash flow techniques, considering market conditions, the time value of money and the business risks. Any impairment
losses are recognised in the income statement for the period.
The new EDP Group segments are the following and their composition is detailled in the note 51:
Additionally, also in the last quarter o
f
2020, the sale o
f
a Spanish portfolio o
f
companies was concluded (Bon Vent de Corbera, S.L.U., Eólica
Sierra de Ávila, S.L.U., Parc Eòlic de Torre Madrina, S.L.U., Parc Eòlic de Coll de Moro, S.L.U., Parc Eòlic de Vilalba dels Arcs, S.L.U. and
Aprofitament D'Energies Renovables de L'Ebre, S.L.) and originated a decrease in the goodwill in the amount of 60,964 thousand Euros related
with (see note 6).
• Renewables - corresponds to the activity of producing electricity through renewable energy sources, with emphasis on hydro, wind and solar;
• Grids - corresponds to the electricity distribution and transmission activity, including regulated energy retailers;
• Client Solutions and Energy Management - includes the following activities: production o
f
electricity using non-renewable energy sources, with
emphasis on coal and gas; commercialization of electricity and gas and energy solutions services to customers; and the intermediation business
responsible for managing the purchase and sale of energy in the Iberian and Brazilian markets, as well as for the respective hedging operations;
359
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
2020
2019
Europe (EUR)
3.5% - 5.3%
3.5% - 5.5%
North America (USD)
4.8% - 6.5%
4.8% - 6.6%
Brazil (BRL)
8.5% - 10.2%
8.8% - 10.4%
20.
Investments in Subsidiaries (Company Basis)
This caption is as follows:
Thousand Euros
Dec 2020
Dec 2019
Acquisition cost
15,414,830
16,700,420
Effect of equity method (transition to IFRS)
-785,593
-785,593
Equity investments in subsidiaries
14,629,237
15,914,827
Impairment losses on equity investments in subsidiaries
-233,132
-230,481
14,396,105
15,684,346
Company
- The terminal value o
f
the distribution assets corresponds to the present value o
f
the net assets at the end o
f
the concession ("Net Regulatory
Asset Base”).
Sensitivity analyzes were carried out on the results o
f
the impairment tests carried out, namely at discount rates. The results o
f
the sensitivity
analyzes carried out conclude that an increase of 50 basis points in the different discount rates, does not determine the existence of signs of
impairment in "goodwill" or concession rights.
The discount rates after taxes used in the grids segment for the purposes o
f
impairment tests ranged between 3.6% (Spain) and 7.8% (Brazil in
BRL) (2019: between 3.5% and 10.8% respectively).
The main assumptions used to project cash flows are as follows:
- Investment costs: the best available estimates o
f
the investments to be made were used to ensure regular use o
f
current assets, as well as
those resulting from legislative changes;
- Regarding operating costs, the projections made considered the current operating costs projected based on the historical experience acquired,
in the Budget approved for the next year and taking into account internal models of analysis;
- The most recent remuneration rates proposed by ANEEL and CNMC ("Comisión Nacional de los Mercados y la Competencia") were considered,
applying the updating mechanisms as provided for in the regulation;
- The projections for the electricity distribution businesses are based on long-term estimates o
f
the various assumptions considered in the
analysis;
Impairment tests were performed taking into account the regulatory changes in each country.
The impairment tests carried out on Goodwill led to the recording of Greenvouga's impairment in the amount of 2,626 thousand Euros.
Goodwill impairment test analysis –
Grids Segmen
t
The cash flow projection assumes the extent o
f
the concessions related to the electricity distribution business in Brazil. In the case o
f
the
concession in Spain, it is perpetual. These cash flows are estimated considering the volume of production and expected consumption, installed
capacity, the evolution forecast of the tariff and the energy purchase / sale agreements.
- New capacity: impairment tests were based on the best information available regarding the wind farms that are expected to be built in the
coming years, adjusted by the probability of the planned projects being completed, by the expectations of growth based on the objectives of the
Business Plan and by the projections of market growth. The tests consider the prices contracted and expected to purchase turbines from the
various suppliers;
- Operating costs: the land and maintenance contracts in force were used. The other operating costs were projected consistently based on the
experience acquired, on the Budget approved for the next year and taking into account internal analysis models;
- Terminal value: considered as a 15% of the initial investment in each wind farm, considering inflation; and
- Discount rate: the discount rates used are post-tax, reflect EDP Group’s best estimate of the risks specific to each CGU and range as follows:
Regarding the business grids in Spain, an impairment test was not made due to the value on the recent transation.
360
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Investments in subsidiaries are as follows:
Company
Dec 2020
Dec 2019
Thousand Euros
Net amount
Net amount
Equity investments in subsidiaries:
EDP Renováveis, S.A.
4,154,431
4,154,431
EDP Gestão de Produção de Energia, S.A.
4,470,776
5,756,366
EDP España, S.A.U.
2,105,002
2,105,002
E-Redes – Distribuição de Eletricidade, S.A. de Energia, S.A.
1,686,158
1,686,158
EDP Servicios Financieros España, S.A.U.
482,695
482,695
EDP Comercial - Comercialização de Energia, S.A.
299,091
299,091
EDP International Investments and Services, S.L.
988,849
988,849
SU Eletricidade, S.A., S.A.
145,104
145,104
Other
63,999
66,650
14,396,105
15,684,346
The assumptions used in the valuation models o
f
EDP S.A.'s financial holdings in other geographies, as well as the respective sensitivity analyses
are described in note 19.
- Additionally, other system costs are considered, such as: ISP and CO2 addition fee, CESE, social tariff, and other income;
- The operating costs considered were based on extrapolations from current operating costs based on the knowledge acquired in each activity.
To the assets that were subject to impairment tests, the sensitivity analyzes carried out at the discount rate considering an increase o
f
50 basis
points did not determine a relevant additional impairment in the financial investments of EDP, S.A.
- For the activities subject to regulation, the remunerations currently in force and/or approved were considered, applying the updating
mechanisms as provided for in the regulation, and incorporates the expectation of renewal of the concessions currently in force and the best
estimate of CAPEX and the future regulatory framework;
- Fuel prices (brent, gas, coal and CO2 licenses) and electricity prices forcast were defined considering market expectations for future prices and
the application of internal models for building price curves, taking into account the regulatory framework in force and the best expectation
regarding its future evolution. Regarding fuel prices, the prices and clauses established in long-term supply contracts, including gas purchase
contracts, were also considered. Production assets were valued from a portfolio management perspective, without prejudice to an individual
anal
y
sis as to recoverabilit
y
, based on the estimate of the evolution of the market share;
- The production estimates were based on an average hydrological year over the projection period for the hydroelectric plants, the estimated
evolution of demand, market share projections and current installed and under construction capacity, as well as the best estimate of the plants to
be decommission in the projection period;
The impairment tests led to the recording of impairment in EDP Real State Global Solutions, S.A.'s stake in the amount of 2,651 thousand Euros.
The variation in the caption Investments in subsidiaries on a company basis results from the spin-of
f
o
f
EDP Gestão de Produção de Energia, S.A.
associated to the portfolio of 6 plants in Portugal to the investor consortium formed by Engie, Crédit Agricole Assurances and Mirova - Grupo
Natixis, and subsequent sale by EDP, S.A. (see note 6).
In the context o
f
impairment tests carried out at EDP Group, the financial investments held by EDP, S.A. in subsidiaries are reviewed, based on the
higher of the value in use and the fair value less costs related to the sale. The main assumptions considered in the valuation models of the main
financial holdings in Portugal of EDP, S.A. are as follows:
- The discount rates used reflect the best estimate regarding the specific risks associated to each subsidiary activity within a range between 3.6%
and 4.8% (2019: between 3.5% and 4.7%);
On the date o
f
transition to IFRS, EDP, S.A. ceased to apply the equity method o
f
accounting to its investments in its separate financial
statements, having considered this method in the determination of the deemed cost at transition date.
361
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
21.
Investments in Joint Ventures and Associates
This caption is as follows:
Thousand Euros
Dec 2020
Dec 2019
Investments in joint ventures
753,056
936,496
Investments in associates
187,306
162,016
940,362
1,098,512
Thousand Euros
Dec 2020
Dec 2019
Balance at the beginning of the period
1,098,512
951,613
Acquisitions/Entries
71,495
6,982
Increases/Decreases of share capital
126,647
260,298
Disposals
-79,833
-
Share of profit in joint ventures and associates
6,938
25,011
Dividends
-52,739
-45,771
Exchange differences
-187,621
107
Cash flow hedging reserve
-1,642
-10,334
Transfer to Assets held for sale (see note 41)
-10,103
-90,270
Other
-31,292
876
Balance at the end of the period
940,362
1,098,512
The movement in Investments in joint ventures and associates, for the Group, is as follows:
Group
Nation Rise has reached the construction phase of a 100 MW wind farm in Ontario, Canada. This facility was scheduled to begin commercial
operations in the first quarter of 2020. On 6 December 2019, the Ontario Minister of the Environment, Conservation and Parks issued a decision to
revoke Nation Rise’s Renewable Energy Approval (REA). This was a reversal of prior approvals by the same Ministry and was also previously
ratified by the Environmental Review Tribunal. As a result of this decision, EDPR was forced to halt all construction activities. Immediately
following this revocation, Nation Rise filed a Notice of Application for Judicial Review of the Ministers revocation of the REA. Subsequent to the
filing for judicial review, Nation Rise was successful in obtaining a determination of force majeure, providing for a delay in the start date of the
project’s power sales contract. On 13 May 2020, the Ontario Superior Court rendered its decision fully in favor of the Nations Rise project and
overturned the Ministry’s actions. Considering the positive outcome of the litigation, the project will continue its development and construction.
As a consequence of the delays caused by the legal procedure, and according with the agreements reached in the selling contract of the project
with Axium, as of 3 of June 2020, EDPR returned the original consideration received plus interest and now owns 100% of the project. This implies
a decrease in the amount of 9,415 thousand Euros in interests in joint ventures caption (see note 6).
Further, EDPR Group has signed an agreement with ENGIE on January 2020 to establish a co-controlled 50/50
j
oint venture, OW Offshore S.L., in
fixed and floating offshore wind segment business. This entity will be the exclusive vehicle of investment of EDPR and ENGIE for offshore wind
opportunities worldwide (see note 6). This implies a decrease in the amount of 2,370 thousand Euros in interests in joint ventures caption.
The sale o
f
the 80% stake and loss o
f
control in portfolio o
f
companies from North America led to an increase amounting to 37,368 thousand
Euros related to the 20% of interest (see note 6). The effect of the fair value adjustment of the interest in joint ventures has an amount of 20,561
thousand Euros.
The acquisition o
f
Viesgo's renewables business originated an increase amounting to 9,436 thousand Euros in interests in associates for the
companies Elecdey Carcelén, S.A., Eos Pax IIa, S.L., Geólica Magallón, S.L., San Juan de Bargas Eólica, S.L., Unión de Generadores de Energía,
S.L. and Eólica de São Julião, Lda. The effect of the fair value adjustment of the interest in associates was recognized in the amount of 48,661
thousand Euros. The acquisition of Viesgo's renewables business also originated a decrease amounting to 46,527 thousand Euros related to the
company Compañía Eólica Aragonesa, S.A. where EDP Renováveis, S.A. had 50% of the shares of the company and gained control, throught a
business combination achieved in sta
g
es, b
y
ac
q
uirin
g
the remainin
g
50% of the shares
(
see note 6 and 49
)
.
Group
As at 31 December 2020, for the Group, this caption includes goodwill in investments in
j
oint ventures o
f
8,047 thousand Euros (31 December
2019: 42,226 thousand Euros) and goodwill in investments in associates of 24,599 thousand Euros (31 December 2019: 20,045 thousand Euros).
The movement in Exchange differences in the period results mainly from the depreciation of US Dollar and Brazilian Real, against the Euro.
362
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Companhia
Energia
Energia
Flat Rock
Hydro
Energética
Cachoeira
São
Windpower
Flat Rock
Global
Thousand Euros
do Jari
Caldeirão
Manoel
II
Windpower
Investment
Companies' financial information of joint ventures
Non-Current Assets
246,874
204,661
584,212
80,247
196,644
221,071
Current Assets
25,393
18,184
30,361
2,334
3,022
70,163
Cash and cash equivalents
12,093
11,873
13,875
1,085
1,927
61,241
Total Equity
143,409
90,781
296,676
79,905
192,900
90,166
Long term Financial debt
77,237
109,317
273,868
-
-
163,107
Non-Current Liabilities
100,115
113,752
283,510
1,411
3,714
178,743
Short term Financial debt
8,477
14,396
24,184
-
-
1,381
Current Liabilities
28,743
18,312
34,387
1,265
3,052
22,325
Revenues
46,749
24,204
61,243
2,726
7,106
-
-9,005
-7,885
-22,952
-5,351
-13,703
-366
Other financial expenses
-10,329
-12,453
-30,815
-25
-55
-19,228
Income tax expense
267
2,360
7,032
-
-
3,887
Net profit for the period
15,314
-4,603
-13,665
-7,996
-19,919
-16,650
Amounts proportionally attributed to EDP Group
Net assets
97,019
45,620
98,894
39,953
103,315
34,736
Goodwill
-
-
-
-
-
-
Dividends paid
11,414
-
-
-
10,149
-
EDP Asia
OW
Portfolio
Portfolio
Thousand Euros
Group
Offshore, S.L.
Vento XVII
Vento XIX
Others
Companies' financial information of joint ventures
Non-Current Assets
115,001
873,253
506,707
449,711
543,060
Current Assets
1
133,403
4,590
11,435
23,458
Cash and cash equivalents
1
38,740
-126
4,569
7,819
Total Equity
115,002
8,790
166,781
120,578
315,402
Long term Financial debt
-
-
-
-
3,679
Non-Current Liabilities
-
166,013
338,441
336,584
226,206
Short term Financial debt
-
10,612
-
-
8,431
Current Liabilities
-
831,853
6,075
3,984
24,910
Revenues
-
1,108
39,505
25,448
56,136
-
-777
-13,179
-16,177
-24,232
Other financial expenses
-
-29,415
-29,782
-18,485
-7,702
Income tax expense
-
305
-
-
-766
Net profit for the period
20,023
-18,096
-1,694
20,055
1,492
Amounts proportionally attributed to EDP Group
Net assets
83,409
9,027
53,917
44,943
142,223
Goodwill
-
5,352
-
-
2,695
Dividends paid
7,087
-
-
5,477
10,674
The following table resumes the companies' financial information o
f
j
oint ventures whose investment is included under the equity method in the
Group consolidated accounts, as at 31 December 2020:
Property plant and equipment and intangibles
amortization/impairment
Property plant and equipment and intangibles
amortization/impairment
363
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Companhia
Energia
Energia
Flat Rock
Hydro
Energética
Cachoeira
São
Windpower
Flat Rock
Global
Thousand Euros
do Jari
Caldeirão
Manoel
II
Windpower
Investment
Companies' financial information of joint ventures
Non-Current Assets
360,192
293,592
827,401
94,214
231,447
214,741
Current Assets
33,627
25,649
49,765
1,465
1,547
106,022
Cash and cash equivalents
12,995
13,838
25,009
635
593
105,674
Total Equity
204,749
134,131
436,552
92,251
225,323
120,573
Long term Financial debt
119,820
160,808
388,141
-
-
154,324
Non-Current Liabilities
152,049
166,340
404,360
1,516
4,001
169,664
Short term Financial debt
13,010
12,727
25,841
-
-
1,855
Current Liabilities
37,021
18,770
36,254
1,912
3,670
30,526
Revenues
5,273
31,547
86,665
3,203
8,378
-
-3,346
-10,178
-29,515
-5,512
-14,119
-74
Other financial expenses
-1,649
-17,242
-42,021
-26
-56
-62,796
Income tax expense
571
2,757
1,530
-
-
-753
Net profit for the period
21,157
-5,386
-2,994
-7,534
-18,771
-10,477
Amounts proportionally attributed to EDP Group
Net assets
139,593
67,402
145,520
46,125
121,606
48,329
Goodwill
-
-
-
-
-
-
Dividends paid
7,809
-
-
-
12,688
-
Compañía
Eólica
CIDE
EDP Asia
Portfolio
Thousand Euros
Aragonesa
HC Energía
Group
Vento XIX
Others
Companies' financial information of joint ventures
Non-Current Assets
115,362
1,999
119,157
493,326
774,060
Current Assets
7,883
47,193
1
25,138
63,078
Cash and cash equivalents
6,263
820
1
16,732
12,860
Total Equity
100,909
17,630
119,158
100,274
394,992
Long term Financial debt
-
-
-
-
60,309
Non-Current Liabilities
19,621
3,889
-
377,751
347,227
Short term Financial debt
-
-
-
198
11,655
Current Liabilities
2,715
27,673
-
40,439
94,919
Revenues
19,262
245,031
-
25,063
32,106
-12,469
-47
-
-12,258
-3,367
Other financial expenses
-342
-767
-
-13,616
-718
Income tax expense
1,359
-1,775
1,820
-
-4,568
Net profit for the period
1,018
4,464
22,901
22,701
46,366
Amounts proportionally attributed to EDP Group
Net assets
45,830
8,864
92,305
51,837
169,085
Goodwill
39,558
-
-
-
2,668
Dividends paid
3,086
1,000
7,178
3,289
1,473
Property plant and equipment and intangibles
amortization/impairment
The following table resumes the companies' financial information o
f
j
oint ventures whose investment is included under the equity method in the
Group consolidated accounts, as at 31 December 2019:
Property plant and equipment and intangibles
amortization/impairment
364
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Parque
Parque
Principle
Mabe
Eólico
Eólico
Power
Thousand Euros
Brasil
Celesc
Belmonte
Madero
Inc.
Others
Non-Current Assets
506
256,026
18,589
45,647
15,544
66,275
Current Assets
1,013
21,121
2,033
14,281
20,395
63,974
Total Equity
357
253,354
8,234
33,412
28,840
80,545
Non-Current Liabilities
232
714
4,790
3,974
4,527
30,842
Current Liabilities
930
23,080
7,599
22,542
2,573
18,862
Revenues
-
-
4,575
9,895
8,201
65,024
Net profit for the period
-3,918
48,475
1,187
2,547
-5,653
3,853
Amounts proportionally attributed to EDP Group
Net assets
178
75,744
4,188
14,033
9,893
83,270
Goodwill
-
-
1,726
-
5,008
17,865
Dividends paid
-
5,578
-
1,470
-
890
Parque
Parque
Principle
Mabe
Eólico
Eólico
Power
Thousand Euros
Brasil
Celesc
Belmonte
Madero
Inc.
Others
Non-Current Assets
2,540
445,094
20,849
47,410
19,485
49,244
Current Assets
17,138
9,239
6,196
13,810
3,813
42,473
Total Equity
-4,892
437,046
7,047
34,419
15,363
47,253
Non-Current Liabilities
21,668
1,004
13,708
5,446
5,742
34,557
Current Liabilities
2,902
16,283
6,290
21,355
2,193
9,906
Revenues
-
-
4,057
11,109
6,954
55,237
Net profit for the period
-1,446
49,453
1,384
3,662
-3,424
7,915
Net assets
-
110,797
3,830
14,456
6,778
26,155
Goodwill
-
-
1,726
-
5,091
13,228
Dividends paid
-
4,979
339
-
-
3,930
Amounts proportionally attributed to EDP Group
Other include companies with financial statements as o
f
31 December 2019, with the exception o
f
companies that have no activity or are in
liquidation process, and Portsines whose financial statements are for the period ended 30 November 2019, once the accounts as at 31 December
2019 were not yet available.
The following table resumes the companies' financial information o
f
associates whose investment is included in the Group consolidated
accounts under the equity method, as at 31 December 2020:
Companies' financial information of associates
The column "Others" include companies with financial statements as o
f
31 December 2020, with the exception o
f
companies that have no activity
or are in liquidation process, and Portsines whose financial statements are for the period ended 30 November 2020, once the accounts as at 31
December 2020 were not yet available.
The following table resumes the companies' financial information o
f
associates whose investment is included in the Group consolidated
accounts under the equity method, as at 31 December 2019:
Companies' financial information of associates
365
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
%
Fair Value
Net
Thousand Euros
Equity
EM
Adjustments
Goodwill
Other
Assets
Companhia Energética do Jari
143,409
50.00%
25,314
-
-
97,019
Empresa de Energia Cachoeira Caldeirão S.A.
90,781
50.00%
229
-
-
45,620
Empresa de Energia São Manoel S.A.
296,676
33.33%
-
-
-
98,894
Flat Rock Windpower II LLC
79,905
50.00%
-
-
-
39,953
Flat Rock Windpower LLC
192,900
50.00%
-
-
6,865
103,315
Hydro Global Investment, Ltda
90,166
50.00%
-
-
-10,347
34,736
EDP ASIA - Investimento e Consultadoria, Lda
115,002
50.00%
25,908
-
83,409
OW Offshore, S.L.
8,790
50.00%
-
5,352
-720
9,027
Portfolio Vento XVII
166,781
20.00%
20,561
-
-
53,917
Portfolio Vento XIX
120,578
20.00%
20,558
-
269
44,943
Mabe Construções e Administração projectos, Lda
357
50.00%
-
-
-
178
Centrais eléctricas de Santa Catarina, S.A. - Celesc
253,354
29.90%
-
-
-
75,744
Parque Eólico de Belmonte, S.A.
8,234
29.90%
-
1,726
-
4,188
Parque Eólico Sierra del Madero S.A.
33,412
42.00%
-
-
-
14,033
Principle Power, Inc.
28,840
25.93%
-
5,008
-2,593
9,893
%
Fair Value
Net
Thousand Euros
Equity
EM
Adjustments
Goodwill
Other
Assets
Companhia Energética do Jari
204,749
50.00%
37,218
-
-
139,593
Empresa de Energia Cachoeira Caldeirão S.A.
134,131
50.00%
336
-
-
67,402
Empresa de Energia São Manoel S.A.
436,552
33.33%
-
-
-
145,520
Flat Rock Windpower II LLC
92,251
50.00%
-
-
-
46,125
Flat Rock Windpower LLC
225,323
50.00%
-
-
8,944
121,606
Hydro Global Investment, Ltda
120,573
50.00%
-
-
-11,958
48,329
Compañía Eólica Aragonesa, S.A.
100,909
50.00%
-4,625
-
-
45,830
CIDE HC Energía, S.A.
17,630
50.00%
-
-
49
8,864
EDP ASIA - Investimento e Consultadoria, Lda
119,158
50.00%
32,726
-
-
92,305
Portfolio Vento XIX
100,274
20.00%
31,782
-
-
51,837
Mabe Construções e Administração Projetos, Lda
-4,892
50.00%
-
-
2,446
-
Centrais eléctricas de Santa Catarina, S.A. - Celesc
437,046
25.35%
-
-
-
110,797
Parque Eólico de Belmonte, S.A.
7,047
29.90%
-
1,726
-3
3,830
Parque Eólico Sierra del Madero S.A.
34,419
42.00%
-
-
-
14,456
Principle Power, Inc.
15,363
32.51%
-
5,091
-3,308
6,778
Less
From
From
More
than 1
1 to 3
3 to 5
than 5
Thousand Euros
Total
year
years
years
years
342,872
314,547
7,427
2,351
18,547
Less
From
From
More
than 1
1 to 3
3 to 5
than 5
Thousand Euros
Total
year
years
years
years
126,246
83,257
14,349
3,242
25,398
Capital outstanding by maturity
Commitments and contingent liabilities in respect of joint
ventures and associates
Dec 2019
Capital outstanding by maturity
Commitments and contingent liabilities in respect of joint
ventures and associates
Commitments and contingent liabilities in respect o
f
j
oint ventures and associatess include EDPR commitments to provide funding to Offshore
projects and to the construction of solar farms facilities in USA, and to commitments assumed by EDP Brasil related to its joint ventures
operating obligations.
As at 31 December 2020, the significant companies' financial information o
f
j
oint ventures and associates presents the following reconciliation o
f
net assets proportionally attributed to EDP Group:
As at 31 December 2019, the significant companies' financial information o
f
j
oint ventures and associates presents the following reconciliation o
f
net assets proportionally attributed to EDP Group:
As at 31 December 2020 and 2019, commitments and contingent liabilities assumed by the Group in respect o
f
its
j
oint ventures and associates,
including its share of commitments assumed jointly with other investors, are disclosed by maturity as follows:
Dec 2020
366
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
22.
Equity Instruments at Fair Value
Thousand Euros
Dec 2020
Dec 2019
117,111
102,814
67,637
67,992
184,748
170,806
Thousand Euros
Zephyr Fund
(Energia RE
portfolio)
Mercer and
Dunas Funds
(Energia RE
portfolio)
Other
EDA -
Electricidade
dos Açores,
S.A.
Feedzai -
Consultadoria
e Inov. Tecn.,
S.A.
Other
Balance as at 1 January 2019
74,535
-
18,752
13,666
15,526
2,668
125,147
Acquisitions
-
-
3,425
-
-
2,870
6,295
Disposals
-
-
-369
-
-
-
-369
Change in fair value (see note 32)
5,544
-
958
750
31,288
1,652
40,192
Other variations
-
-
-31
-
-
-428
-459
Balance as at 31 December 2019
80,079
-
22,735
14,416
46,814
6,762
170,806
Acquisitions
-
94,915
4,071
-
-
1,371
100,357
Disposals
-79,054
-8,595
-2,394
-
-
-2,750
-92,793
Change in fair value (see note 32)
-1,025
3,501
3,130
870
-
-469
6,007
Other variations
-
-
-252
-
-
623
371
Balance as at 31 December 2020
-
89,821
27,290
15,286
46,814
5,537
184,748
Thousand Euros
Dec 2020
Dec 2019
Zephyr Fund (Energia RE portfolio)
-
11,997
Mercer Funds
2,907
-
Defined Crowd Corporation
6,339
-
Other
4,009
6,458
13,255
18,455
As at 31 December 2020, the fair value reserve o
f
equity instruments measured at fair value through other comprehensive income attributable to
the Group is as follows:
In equity instruments measured at fair value through profit stands out: i) Feedzai - Consultadoria e Inovação Tecnológica, S.A., the fair value o
f
46,814 thousand Euros was determined according to the last transaction sales of the society EQ/sales amounting to 9,6x. The sensitivity analysis,
considering a reduction or increase of 0,5x in the multiple, determines a fair value of 44,4 million Euros and 49,3 million Euros, respectively; 2) EDA
- Electricidade dos Açores, S.A., the fair value of 15,286 thousand Euros was determined according to the Dividend Discounted model. The
sensitivity analysis, considering a reduction or increase of 50bp in the discounted rate, determines a fair value of 14,8 million Euros and 15,9
million Euros, res
p
ectivel
y
.
As a result o
f
the analysis o
f
the applicable business model, the EDP Group classified equity instruments held for long-term strategic purposes as
Equity instruments measured at fair value through other comprehensive income (OCI) and the remaining equity instruments held for trading
purposes as Equity instruments measured at fair value through Results (PL).
Equity Instruments at Fair Value through Results (PL)
As at 31 December 2020, this caption is analysed as follows:
Total
Under IFRS 13 (see note 45), equity instruments at fair value are classified into three levels o
f
fair value: level 1 includes essentially financial
investments that are indexed to quoted market prices; level 2 includes the fund of stocks and bonds held by Energia RE; and level 3 covers all
other equity instruments at fair value. As at 31 December 2020, there are no equity instruments at fair value within level 1.
During 2020 an increase in the fair value o
f
the Equity Instruments through OCI, in the amount o
f
401 thousand Euros, was booked against Profit
or Loss (see notes 13 and 45).
The summarised financial information for subsidiaries with material non-controlling interests, namely EDP Brasil and EDP Renováveis, as at 31
December 2020, are disclosed in the Annex I.
As at 31 December 2020, the movements in Equity Instruments measured at Fair Value are as follows:
Group
Equity Instruments at Fair Value through Other Comprehensive Income (OCI)
Results
During the third quarter o
f
2020, Zephyr fund, that represents the participation units in a fund o
f
stocks and bonds held by Energia RE as a result o
f
its reinsurance activity, was sold. On the same period, Energia RE acquired particiapation units in two new funds (Mercer Funds and Dunas
Patrimonio).
Other Comprehensive Income
367
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
23.
Investment property
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Cost
55,733
56,630
112,644
85,214
Accumulated amortisation and impairment losses
-34,355
-26,686
-25,355
-14,051
Carrying amount
21,378
29,944
87,289
71,163
24.
Deferred Tax Assets and Liabilities
Thousand Euros
Balance at
01.01.2020
Mov. Results
Mov.
Reserves
Perimeter
variations,
exchange
differences
and others
Balance at
31.12.2020
Tax losses and tax credits
1,067,738
-2,498
-
-41,528
1,023,712
666,766
-14,940
24,130
46,734
722,690
Financial instruments
84,851
1,810
30,030
-21,274
95,417
Property plant and equipment
278,901
62,006
-
71,744
412,651
Financial and equity instruments at fair value
248
83
2,600
-63
2,868
Tariff adjustments and tariff deficit
14,448
23,540
-
-
37,988
13,248
-8,382
-
87,603
92,469
Fiscal revaluations
392,872
-92,494
-
4,334
304,712
Use of public property
24,437
6,867
-
-7,646
23,658
Other temporary differences
86,815
8,934
1,947
-10,155
87,541
-1,546,278
-55,514
-623
-61,748
-1,664,163
1,084,046
-70,588
58,084
68,001
1,139,543
On a consolidated basis, Accumulated amortisation and impairment losses in 2020 includes 342 thousand Euros related to charges o
f
the period.
The Accumulated impairment losses in investiment property amounts to 7,700 thousand Euros, booked during 2020, based on an independent
evaluation of the fair value of these assets (see note 12).
EDP Group records the tax effect resulting from temporary differences between the assets and liabilities determined on an accounting basis and
on a tax basis. As at a 31 December 2020, on a consolidated basis, the movement by nature of Net Deferred Tax Assets and Liabilities are as
follows:
Net Deferred Tax Assets
Provisions for social benefits, bad debts and
other risks
Allocation of fair value to assets and liabilities
acquired
The investment properties are mainly lands and buildings held to obtain rents or for capital appreciation and are not materially relevant.
The caption is detailed as follows:
Group
Company
Assets/liabilities compensation of deferred
taxes
On an individual basis, Accumulated amortisation and impairment losses in 2020 includes 3,604 thousand Euros related to charges o
f
the period.
The Accumulated impairment losses in investiment property amounts to 7,700 thousand Euros, booked during 2020, related to investment
properties based on an independent evaluation of the fair value of these assets (see note 12). The variation in the caption Cost relates with the
transfer of property, plant and equipment and right-of-use assets to investment property of 27,431 thousand Euros (see notes 16 and 17).
The impairment tests carried out o
f
Investment Properties are based on assessments using current market practices: the comparative method, in
cases where there is an active and comparable market, the income method, through discounted cash flows and the cost method, which considers
the the market value of the land and the construction costs.
368
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Balance at
01.01.2020
Mov. Results
Mov.
Reserves
Perimeter
variations,
exchange
differences
and others
Balance at
31.12.2020
16,375
732
-2,267
-427
14,413
122,266
-7,667
11,080
-24,768
100,911
Property plant and equipment
404,458
-2,614
-
-34,976
366,868
Reinvested gains
3,192
-
-
543
3,735
Financial and equity instruments at fair value
10,551
29
-1,621
-
8,959
Tariff adjustments and tariff deficit
109,158
40,090
442
-
149,690
663,855
74,060
-
389,737
1,127,652
Fiscal revaluations
61,552
-4,931
-
-1,884
54,737
Deferred income relating to CMEC
177,611
9,947
-
-
187,558
349,644
25,711
57
-31,320
344,092
Use of public property
6,958
3,038
-
-2,259
7,737
Fair value of financial assets
56,977
7,872
-
-17,206
47,643
Other temporary differences
67,427
8,019
-
-10,804
64,642
-1,546,278
-55,514
-623
-61,748
-1,664,163
503,746
98,772
7,068
204,888
814,474
Thousand Euros
Balance at
01.01.2019
Mov. Results
Mov.
Reserves
Perimeter
variations,
exchange
differences
and others
Balance at
31.12.2019
Tax losses and tax credits
983,530
59,624
-
24,584
1,067,738
698,426
-91,176
63,915
-4,399
666,766
Financial instruments
109,159
-11,494
-12,173
-641
84,851
Property plant and equipment
204,030
80,579
-
-5,708
278,901
Financial and equity instruments at fair value
438
-
-196
6
248
Tariff adjustments and tariff deficit
39,906
-27,449
-
1,991
14,448
24,762
-8,833
-
-2,681
13,248
Fiscal revaluations
464,070
-56,876
-
-14,322
392,872
Use of public property
24,068
769
-
-400
24,437
Other temporary differences
44,296
38,385
3,872
262
86,815
-1,440,490
-73,718
-3,903
-28,167
-1,546,278
1,152,195
-90,189
51,515
-29,475
1,084,046
Net Deferred Tax Assets
Net Deferred Tax Liabilities
Provisions for social benefits, bad debts and
other risks
Allocation of fair value to assets and liabilities
Assets/liabilities compensation of deferred
taxes
Allocation of fair value to assets and liabilities
Financial instruments
As at a 31 December 2019, on a consolidated basis, the movement by nature of Net Deferred Tax Assets and Liabilities are as follows:
Provisions for social benefits, bad debts and
other risks
Gains from institutional partnerships in wind
farms
Assets/liabilities compensation of deferred
taxes
369
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Balance at
01.01.2019
Mov. Results
Mov.
Reserves
Perimeter
variations,
exchange
differences
and others
Balance at
31.12.2019
16,163
-636
1,314
-466
16,375
36,264
4,636
81,607
-241
122,266
Property plant and equipment
434,119
12,677
-
-42,338
404,458
Reinvested gains
3,213
-21
-
-
3,192
Financial and equity instruments at fair value
3,993
6,558
-
-
10,551
Tariff adjustments and tariff deficit
80,337
26,830
-
1,991
109,158
698,042
43,721
-
-77,908
663,855
Fiscal revaluations
70,138
-3,981
-
-4,605
61,552
Deferred income relating to CMEC
198,055
-20,444
-
-
177,611
336,895
6,203
58
6,488
349,644
Use of public property
7,500
-432
-
-110
6,958
Fair value of financial assets
35,505
22,546
-
-1,074
56,977
Other temporary differences
94,967
-34,085
7,356
-811
67,427
-1,440,490
-73,718
-3,903
-28,167
-1,546,278
574,701
-10,146
86,432
-147,241
503,746
Thousand Euros
Balance at
01.01.2020
Mov. Results
Mov.
Reserves
Others
Balance at
31.12.2020
Tax losses and tax credits
116,483
37,356
-
-14,442
139,397
6,065
2,006
-159
-95
7,817
Financial instruments
48,337
-
-19,741
-
28,596
Property plant and equipment
4,330
-365
-
-
3,965
Other temporary differences
3,086
-
-
187
3,273
-35,394
-24,028
-
-
-59,422
142,907
14,969
-19,900
-14,350
123,626
Under EDP Group accounting policies, when there is uncertainty over income tax treatments, EDP Group measures its current or deferred tax
asset or liability applying the requirements in IAS 12 (see note 2 q)). The main pending litigations or disputes with tax authorities are disclosed in
note 36.
Financial instruments
As referred under accounting policies, note 2 q), the compensation between deferred tax assets and liabilities is performed at each subsidiary,
and therefore the consolidated financial statements reflect in its assets the total of the deferred tax of subsidiaries that have deferred tax assets
and in its liabilities the total of the deferred tax of subsidiaries that have deferred tax liabilities.
On a Company basis, EDP, S.A. records the tax effect arising from temporary differences between the assets and liabilities determined on an
accounting basis and on a tax basis. As at a 31 December 2020, on a Company basis, the movement by nature of Net Deferred Tax Assets and
Liabilities are as follows:
Net Deferred Tax Assets
Provisions for social benefits, bad debts and
other risks
Net Deferred Tax Liabilities
Allocation of fair value to assets and liabilities
Provisions for social benefits, bad debts and
other risks
Gains from institutional partnerships in USA wind
farms
Assets/liabilities compensation of deferred
taxes
Assets/liabilities compensation of deferred
taxes
370
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Balance at
01.01.2020
Mov. Results
Mov.
Reserves
Others
Balance at
31.12.2020
27,642
-
20,039
-
47,681
3,546
3,546
Fiscal revaluations
192
-7
-
-
185
Other temporary differences
4,014
3,995
-
1
8,010
-35,394
-24,028
-
-
-59,422
-
-20,040
20,039
1
-
Thousand Euros
Balance at
01.01.2019
Mov. Results
Mov.
Reserves
Others
Balance at
31.12.2019
Tax losses and tax credits
89,383
44,893
-
-17,793
116,483
6,945
-1,571
122
569
6,065
Financial instruments
21,431
-
26,906
-
48,337
Property plant and equipment
4,322
-
-
8
4,330
Other temporary differences
3,083
-
-
3
3,086
-32,505
-2,889
-
-
-35,394
92,659
40,433
27,028
-17,213
142,907
Thousand Euros
Balance at
01.01.2019
Mov. Results
Mov.
Reserves
Others
Balance at
31.12.2019
21,042
-
6,600
-
27,642
3,546
-
-
-
3,546
Fiscal revaluations
199
-7
-
-
192
Other temporary differences
7,718
-3,704
-
-
4,014
-32,505
-2,889
-
-
-35,394
-
-6,600
6,600
-
-
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Financial instruments and fair value
17,701
-93,244
-39,780
20,306
Actuarial gains and losses
24,235
64,139
-159
122
Changes in fair value of financial assets held for sale
485
-1,514
-
-
Transactions with non-controlling interests and Others
8,595
-4,298
-
-
51,016
-34,917
-39,939
20,428
Financial instruments
Financial instruments
Allocation of fair value to assets and liabilities
acquired
Taxes recorded against reserves are as follows:
Group
Company
Net Deferred Tax Assets
Provisions for social benefits, bad debts and
other risks
Net Deferred Tax Liabilities
Assets/liabilities compensation of deferred
taxes
Assets/liabilities compensation of deferred
taxes
Net Deferred Tax Liabilities
Allocation of fair value to assets and liabilities
acquired
As at a 31 December 2019, on a Company basis, the movement by nature of Net Deferred Tax Assets and Liabilities are as follows:
Assets/liabilities compensation of deferred
taxes
371
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
The Group tax losses carried forward are analysed as follows:
Thousand Euros
Dec 2020
Dec 2019
Expiry date:
2020
-
9,131
2021
41,583
47,691
2022
12,558
17,101
2023
22,875
36,081
2024
34,604
541,209
2025
16,858
10,897
2026 a 2040
2,865,581
2,277,516
Without expiry date
1,673,849
1,032,844
4,667,908
3,972,470
25. Inventories
This caption is as follows:
Thousand Euros
Dec 2020
Dec 2019
Merchandise
54,159
54,368
Finished, intermediate products and sub-products
27,801
37,785
Raw and subsidiary materials and consumables (coal and other fuels)
43,275
150,465
Nuclear fuel
14,576
15,562
CO2 licenses
57,661
-
Other
126,473
110,154
323,945
368,334
CO2 (Ton)
Dec 2020
Dec 2019
CO2 Licenses held for trading on 1 January
-
-
Licenses negotiated in the market
8,697,000
7,677,267
Emission Licenses transferred from trading portfolio to intangibles
-6,925,000
-7,677,267
CO2 Licenses held for trading on 31 December
1,772,000
-
CO2 Licenses for trading on 31 December (in thousand Euros)
57,661
-
O
f
the total o
f
EDP Group’s tax losses available to carry forward as at 31 December 2020, the amount o
f
750,795 thousand Euros does not have
deferred tax asset, in accordance with the applicable accounting standards since, at the present date, there is still not sufficient visibility about
the future period in which such tax losses will be used.
Group
The caption CO2 Licenses, includes licenses held for trading, measured at the lower o
f
acquisition cost and net realisable value, which
corresponds to the market quote, as described in accounting policy 2 x).
Group
The movements in the portfolio of CO2 Licenses held for trading and classified as inventories are as follows:
Group
Purchases and sales o
f
Licenses are booked based on the listed price on the transaction date. Emission Licenses transferred to the trading
portfolios are classified as Inventories, in accordance with Accounting policy - note 2 x).
Fair value corresponds to the spot price (closing price) at the end of December in each period.
372
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
26.
Debtors and Other Assets from Commercial Activities
At Group level, Debtors and other assets from commercial activities are as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Assets measured at amortised cost:
Amounts receivable from tariff adjustments - Electricity - Portugal
53,634
254,482
1,036
82,166
Amounts receivable from tariff adjustments - Electricity - Brazil
49,986
29,105
35,600
50,486
Debtors for other goods and services
-
-
29,480
32,201
Amounts receivable relating to CMEC
507,419
579,160
189,752
197,905
Amounts receivable from concessions - IFRIC 12
359,650
954,132
755,565
57,916
Other assets measured at amortised cost
65,125
44,935
175,170
155,600
Impairment losses on other assets measured at amortised cost
-2,894
-2,895
-1,406
-2,694
1,032,920
1,858,919
1,185,197
573,580
Trade receivables at amortised cost:
Trade receivables
24,896
49,305
1,363,760
1,480,280
Impairment losses on trade receivables
-8,771
-16,285
-253,067
-302,687
16,125
33,020
1,110,693
1,177,593
Assets measured at fair value through other comprehensive income:
Amounts receivable from tariff adjustments - Electricity - Portugal
267,054
6,292
156,270
2,865
Assets measured at fair value through profit or loss:
Amounts receivable from concessions - IFRIC 12
547,103
664,489
-
-
Contract assets:
Contract assets receivable from energy sales contracts
600
1,355
1,034,442
1,051,994
Contract assets receivable from concessions - IFRIC 12
805,382
743,111
-
805,982
744,466
1,034,442
1,051,994
Other assets:
Incremental costs of obtaining contracts with customers
33,600
63,752
-
-
Other assets from comercial activities
44,228
53,282
59,009
52,128
77,828
117,034
59,009
52,128
2,747,012
3,424,220
3,545,611
2,858,160
At Company level, Debtors and other assets from commercial activities are as follows:
Thousand Euros
Dec 2020
Dec 2019
Assets measured at amortised cost:
Debtors for other goods and services
40,223
33,827
Other assets measured at amortised cost
246,349
62,754
Impairment losses on other assets measured at amortised cost
-1
-
286,571
96,581
Trade receivables at amortised cost:
Trade receivables
214,153
237,424
Impairment losses on trade receivables
-209
-215
213,944
237,209
Contract assets:
Contract assets receivable from energy sales contracts
226,040
245,567
Other assets:
Other assets from comercial activities
7,371
4,471
733,926
583,828
Current
Non-Current
Current
373
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Non-Current
Current
Balance as at 31 December 2019
260,774
85,031
Receipts through the electricity tariff
-
-86,126
Sale of 2020 and 2021 overcosts for the special regime generators
-
-1,363,221
Tariff adjustment of the period (see note 7)
375,208
1,087,199
Fair value of the tariff deficit measured at fair value through other comprehensive income (see note 29)
-438
1,843
Financial expenses (see note 13)
66
1,081
Transfer to/from tariff adjustment payable (see note 38)
75,093
41,484
Transfer from Non-Current to Current
-390,015
390,015
Balance as at 31 December 2020
320,688
157,306
Thousand Euros
Deficit
Tariff adj.
Sales
Total
Year:
4,994
-
-
4,994
1,298
11,677
-
12,975
1,094,715
42,993
-1,093,221
44,487
685,538
-
-270,000
415,538
1,786,545
54,670
-1,363,221
477,994
The caption Amounts receivable from tarif
f
adjustments - Electricity - Brazil corresponds to tarif
f
adjustments recognised in EDP São Paulo -
Distribuição de Energia S.A. and EDP Espírito Santo - Distribuição de Energia S.A. in the accumulated amount, as at 31 December 2020, of 45,503
thousand Euros (31 December 2019: 33,190 thousand Euros) and 40,083 thousand Euros (31 December 2019: 46,401 thousand Euros),
respectively. The variation occurred includes the tariff deficit for the period with a positive impact of 173,417 thousand Euros (see note 7),
transfer to tariff adjustment payable of 25,040 thousand Euros (see note 38), amounts received through the electricity tariff of 172,089 thousand
Euros, unwinding in the amount of 5,233 thousand Euros (see note 13) and the exchange differences due to depreciation of Brazilian Real against
Euro with a ne
g
ative im
p
act of 25,606 thousand Euros.
2018
2019
2021
2020
The movement for the period in Amounts receivable from tariff adjustments - Electricity - Portugal (Non-current and Current) is as follows:
During the first quarter o
f
2020, SU Eletricidade, S.A., sold the 2020 tarif
f
deficit in the amount o
f
821,221 thousand Euros. This tarif
f
deficit
resulted from the deferral, for the period of 5 years, of the recovery of the 2020 over costs related to the acquisition of electricity from special
regime generators (including the adjustments for 2018 and 2019). In this sale transaction of assets, SU Eletricidade, S.A., gave in fully and without
recourse, the right to receive such amounts and interest. The sale price amounted to 825 million Euros and generated a loss net of transaction
costs of 1,037 thousand Euros
(
see note 13
)
.
As at 31 December 2020, the caption Assets measured at fair value through other comprehensive income includes the amount o
f
the tarif
f
deficit
classified and measured at fair value through other comprehensive income. According to IFRS 13, the tariff deficit fair value is classified as level 2
(see note 45).
The following table provides details for the caption Amounts receivable from tarif
f
adjustments - Electricity - Portugal, by nature and year o
f
establishment, as well as presents the amounts of tariff deficit that have been sold during the period ended 31 December 2020:
During the third quarter o
f
2020, SU Eletricidade, S.A., sold the 2020 tarif
f
deficit in the amount o
f
272,000 thousand Euros. This tarif
f
deficit
results from the 5-year deferral of the recovery of the 2020 overcost related with the acquisition of energy from special regime generators
(including adjustments for 2018 and 2019). In this sale transaction of assets, SU Eletricidade, S.A., gave in fully and without recourse, the right to
receive such amounts and interest. The sale price amounted to 273 million Euros and generated a gain net of transaction costs of 103 thousand
Euros
(
see note 13
)
.
During the fourth quarter o
f
2020, SU Eletricidade, S.A., sold the 2021 tarif
f
deficit in the amount o
f
270,000 thousand Euros. This tarif
f
deficit
results from the 5-year deferral of the recovery of the 2021 overcost related with the acquisition of energy from special regime generators (having
been recognized as a Deficit in 2020 only the component referring to the adjustments of 2019 and 2020, as published in the "Caderno de
Proveitos Permitidos e Ajustamentos de 2021" on 15 December 2020). In this sale transaction of assets, SU Eletricidade, S.A., gave in fully and
without recourse, the right to receive such amounts and interest. The sale price amounted to 271 million Euros and generated a gain net of
transaction costs of 889 thousand Euros
(
see note 13
)
.
374
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
The caption Amounts receivable relating to CMEC is detailed as follows:
Thousand Euros
Non-current
Current
Initial CMEC
345,860
27,426
Final adjustement
161,559
61,134
Revisibility 2014 - 2017 *
-
101,192
507,419
189,752
Thousand Euros
Non-current
Current
Balance as at 1 January 2019
2,895
5,897
Charge of the period
-
121
Reversal of impairment losses
-
-554
Charge-off
-
-2,720
Exchange differences
-
-3
Perimeter variations/Other regularisations
-
-47
Balance as at 31 December 2019
2,895
2,694
Charge of the period
-
32
Reversal of impairment losses
-
-421
Charge-off
-
-702
Exchange differences
-
-66
Perimeter variations/Other regularisations
-1
-131
Balance as at 31 December 2020
2,894
1,406
Thousand Euros
Non-current
Current
Balance as at 1 January 2019
52,629
304,237
Charge of the period
929
95,306
Reversal of impairment losses
-12,121
-50,474
Charge-off
-25,060
-49,020
Exchange differences
-103
-1,809
Perimeter variations/Other regularisations
11
4,447
Balance as at 31 December 2019
16,285
302,687
Charge of the period
65
100,447
Reversal of impairment losses
-1,169
-35,264
Charge-off
-4,696
-40,539
Exchange differences
-1,714
-30,115
Perimeter variations/Other regularisations
-
-44,149
Balance as at 31 December 2020
8,771
253,067
The caption Incremental costs o
f
obtaining contracts with customers includes contract assets from the recognition o
f
incremental costs o
f
obtaining contracts with customers, which are capitalised and amortised under IFRS 15.
The geographical market Trade receivables' breakdown and the credit ris
k
analysis are disclosed in note 5, under the Counterparty credit ris
k
management.
As at 31 December 2020 and 2019, on a company basis, trade receivables are from Portugal geographical market.
The movements in Impairment losses on trade receivables are as follows:
Group
Contract assets receivable from energy sales contracts - Current include contract assets relating to energy delivered and not yet invoiced,
amounts receivable from REN regarding the CMEC Revisibility of 2016 and 2017 which are awaiting approval, and accruals from UNGE's energy
management business. The impairment losses on Trade receivables includes impairment losses related to Contract assets receivable from
energy sales contracts.
The caption Amounts receivable from concessions - IFRIC 12 in the amount o
f
1,662,318 thousand Euros (31 December 2019: 1,676,537
thousand Euros) relates to the financial asset to be received by the EDP Group regarding the electricity distribution concessions in Portugal and
Brazil, resulting from the application of the mixed model, and the asset related to electricity transmission concessions in Brazil. The variation of
the period includes: (i) the effect of the depreciation of Brazilian Real against Euro in the amount of 216,509 thousand Euros and (ii) transfers
from Contract assets receivable from concessions in the amount of 179,279 thousand Euros.
The movements in Impairment losses on other assets measured at amortised cost are as follows:
Group
* The revisibility calculation for 2016 to 2017 is still waiting the official approval.
375
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
27.
Other Debtors and Other Assets
Other debtors and other assets are as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019 *
Debtors and other assets - Non-Current
Assets measured at amortised cost:
Loans to subsidiaries
-
-
2,739,230
3,016,108
Loans to related parties
7,630
9,070
90
90
Guarantees rendered to third parties
96,311
107,744
-
-
Other financial assets at amortised cost (i)
23,864
46,382
113,609
46,900
Assets measured at fair value through profit or loss:
Derivative financial instruments (see note 42)
333,600
201,349
350,400
225,947
Contingent price
113,880
155,353
-
-
Other assets:
Excess of the pension fund financing (see note 35)
29,610
55,506
93
104
Other debtors and sundry operations
415,893
357,174
-
-
1,020,788
932,578
3,203,422
3,289,149
Debtors and other assets - Current
Assets measured at amortised cost:
Loans to subsidiaries
-
-
18,186
297,616
Dividends attributed by subsidiaries
-
-
110,000
85,000
Loans to related parties
415,120
13,257
-
-
Receivables from the State and concessors
5,402
27,955
-
-
Guarantees rendered to third parties
72,150
70,809
47,102
43,980
Subsidiary companies
-
-
103,602
69,318
Other financial assets at amortised cost (i)
22,818
23,025
56,038
526,428
Assets measured at fair value through profit or loss:
Derivative financial instruments (see note 42)
271,828
363,943
421,666
439,143
Other financial investments measured at fair value
24,157
29,938
-
-
Contingent price
12,159
129,161
7,159
-
Other assets:
Other debtors and sundry operations
27,119
223,691
89,654
89,655
850,753
881,779
853,407
1,551,140
1,871,541
1,814,357
4,056,829
4,840,289
Loans to subsidiaries - Non-Current and Current, for the Company, mainly includes 807,346 thousand Euros (31 December 2019: 1,369,908
thousand Euros) of loans granted to EDP - Gestão da Produção de Energia, S.A. and 1,503,685 thousand Euros (31 December 2019: 1,503,715
thousand Euros) of loans granted to E-Redes – Distribuição de Eletricidade, S.A. (see note 44).
For the Loans to subsidiaries, EDP S.A. performs an analysis to evaluate impairment based on the general approach. The company uses several
inputs on making its assessment of the credit risk related to these assets, such as the analysis of the historical possible delays and/or
impairment losses indications, rating companies (when applicable) and market and macroeconomic data that may change the probability of
default and the expectation of delays in the receivable amounts. According to the analysis performed, as per 31 December 2020 there are no
expected credit losses accounted for related to loans with subsidiaries.
Loans to related parties - Current, on a consolidated basis, mainly include loans granted to OW FS Offshore, S.A. in the amount o
f
398,348
thousand Euros and to Parque Eólico Sierra del Madero, S.A. in the amount of 8,149 thousand Euros (see note 44).
The caption Contract assets receivable from concessions - IFRIC 12 refers to the investment in assets under construction assigned to
concessions. The variation of the period includes (i) the effect of the depreciation of Brazilian Real against Euro in the amount of 212,595
thousand Euros; (ii) the investment of the period in the amount of 502,126 thousand Euros and (iii) the transfer of assets assigned to concessions
which began operation to intangible assets, in the amount of 122,748 thousand Euros (see note 16), and to Amounts receivable from concessions
- IFRIC 12, in the amount of 179,279 thousand Euros.
Group
Company
* Includes reclassification resulting from the change of the accounting policy as described in note 2a)
376
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
(i)
Issue
Class R
Liquidity
Senior
Total
Thousand Euros
date
Notes
Notes
Notes
Jun 2020
Overcost from special regime production 2016
Ago 2016
367
125
-
492
Overcost from special regime production 2017
Dec 2017
510
329
8,766
9,605
Overcost from special regime production 2018
Jun 2018
409
825
17,754
18,988
Overcost from special regime production 2019
Jun 2019
540
509
16,529
17,578
1,826
1,788
43,049
46,663
Nominal value
Acquired
Fair
in Currency
in Currency
Value
'000
'000
'000
EDP Finance B.V.
20 Jan 2021
EUR
4.13%
600,000
46,783
46,871
EDP Finance B.V.
23 Dec 2022
EUR
Fixed rate (i)
93,357
53,357
56,167
100,140
103,038
(i)
This issue corresponds to private placements.
Contingent prices - Non Current mainly include 69,557 thousand Euros and 27,031 thousand Euros related to the fair value o
f
the contingent
consideration in connection with the sale in 2020 and 2018 of 29,5% and 13,5% stake of the French companies Éoliennes en Mer Dieppe - Le
Tréport, S.A.S and Éoliennes en Mer Îles d'Yeu et de Noirmoutier, SAS to OW Offshore S.L. and Sumitomo Corporation respectively, in accordance
with the relevant agreements signed. The variation of the caption Contingent prices - Current is mainly due to a decrease amounting to 123,061
thousand Euros related to financing proceeds of Nation Rise pro
j
ect
(
see note 21
)
.
The caption Other debtors and sundry operations - Non Current includes the financial consideration paid in advance in 2009 for the exploitation o
f
the hydro power plants of Fridão and other amounts invested in such hydro power plant (see note 4).
The variation o
f
the caption Other debtors and sundry operations - Current is mainly due to the receipt in the first quarter o
f
2020 the amount o
f
121,596 thousand Euros related to the sale of Babilônia Holding, S.A. and its subsidiaries and the receipt in 2020 of amounts related with the
transaction of acquisition of certain projects in North America in 2019, amounting 54,506 thousand Euros as at 31 December 2019.
On a company basis, this caption includes the bonds issued by EDP Finance B.V. reacquired on market by EDP, S.A.
During 2020 EDP Finance B.V. repaid, at maturity, in the first quarter 750 million American Dollars o
f
securities issued, o
f
which EDP S.A. had
already reacquired 167,076 thousand American Dollars, in the second quarter 300 million Euros of securities issued, of which EDP S.A. had
already reacquired 66,628 thousand Euros and in the third quarter 750 million Euros of securities issued, of which EDP S.A. had already reacquired
287,778 thousand Euros.
The detail of these bonds is as follows:
Issuer
Maturity
date
Currency
Interest
rate
Other financial assets at amortised cost
On a consolidated basis, this caption mainly includes securities issued by Tagus - Sociedade de Titularização de Crédito, SA, in the context o
f
the
transmission of the right to receive tariff adjustments (deviations and deficits) from the National Electric System for credit securitisation
companies, acquired by SU Eletricidade, S.A. The detail of the balances arising from these operations is as follows:
On 15 December 2017, EDP S.A. has bought an amount o
f
500,000 thousand American Dollars o
f
nominal debt, related to a couple o
f
bonds
issued by EDP Finance B.V. in a market operation, in the total amount of 446,802 thousand Euros. This amount includes a premium paid over the
nominal debt of 18,016 thousand Euros and accrued interest as at the acquisition date. On 11 December 2018, EDP S.A. has bought an amount of
499,998 thousand Euros of nominal debt, related to a couple of bonds issued by EDP Finance B.V. in a market operation, in the total amount of
541,751 thousand Euros. This amount includes a premium paid over the nominal debt of 33,705 thousand Euros and accrued interest as at the
acquisition date. On November 2020, EDP S.A. has bought an amount of 53,357 thousand Euros of a private bond placement, issued by EDP
Finance B.V.
377
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
28.
Tax Assets
Current tax assets are as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Non-Current:
Special taxes Brazil
251,770
389,037
-
-
Current:
Income tax
125,503
186,869
44,241
108,799
Value added tax (VAT)
191,587
87,431
6,196
-
Special taxes Brazil
90,783
132,792
-
-
Other taxes
6,429
8,643
877
877
414,302
415,735
51,314
109,676
666,072
804,772
51,314
109,676
The movement in the period in current and non-current taxes in Brazil is mainly due to exchange rate differences resulting from the depreciation
of Brazilian Real against the Euro in 2020.
In December 2014, the distribution companies EDP São Paulo and EDP Espírito Santo began to recognise tarif
f
adjustments as payable and
receivable amounts, considering that the triggering event for the recognition of the various taxes (e.g. IRPJ, CSLL, PIS and COFINS) would only be
verified when the respective energy was consumed, in accordance with the legal opinion of independent consultants. This understanding was
consistent with the interpretation of Brazilian Fiscal Authorities (“Receita Federal do Brasil” - RFB), made public through the consultation no.
26/02 of the COSIT.
On 30 June 2016, RFB approved the COSIT opinion no. 101/16 where it concluded that the receivables over tarif
f
adjustments should integrate the
basis for tax calculation at the time of the accounting recognition. Thus, companies requested independent consultants to update their legal
opinions, and they kept their initial understanding.
In the third quarter o
f
2017, considering that the new COSIT procedure is more conservative and the possibility o
f
appealing to the Tax
Regularisation Special Programme (“Programa Especial de Regularização Tributária” - PERT), created by Provisional Measure no. 783/17 and
regulated by Normative Instruction RFB 1711/17, the distribution companies changed their criteria and started to recalculate all taxes since the
initial recognition of payable and receivable amounts related with tariff adjustments.
Additionally, Enerpeixe identified energy sale contracts, signed before 31 December 2003, with the possibility o
f
being integrated in the cumulative
fiscal regime with the consequential application of a PIS and COFINS tax rate of 3.65% compared to the 9.25% previously considered. These
contracts were submitted to the evaluation of an independent consultant, who demonstrated that the pre-determined price did not decrease, in
accordance with Law 11196/05 and Normative Instruction RFB 658/06.
Following these operations, the companies recognized tax receivables totaling 21,063 thousand Euros (134,244 thousand Brazilian Reais) and tax
payables totaling 80,678 thousand euros (514,203 thousand Brazilian Reais) (see note 40).
As at 31 December 2020, the captions Income tax and Special taxes Brazil include the amount o
f
13,029 thousand Euros (83,038 thousand
Brazilian Reais), corresponding to the recognised asset of 21,063 thousand Euros net of compensations.
The Special taxes Brazil caption relates to the following taxes: CSLL (Social Contribution on net profits), PIS (Social integration programme) and
COFINS (Social Security Financing Contribution).
On 3 April 2019 and 10 December 2019, EDP Espírito Santo and EDP São Paulo were granted with a favourable judicial decision, which recognises
the right of non-inclusion of the amounts of VAT borne in the basis of calculation of PIS and COFINS, as well as, the right to reacquire the
previously collected amounts. EDP Espírito Santo and EDP São Paulo recognised the amount of 6,566 thousand Euros (38,664 thousand Brazilian
Reais) of financial update on the value resulting from the exclusion, in 2019, of the ICMS from the PIS/COFINS base calculation (1,756,597
thousand Brazilian Reais on 31 December 2019, of which 65,213 thousand Brazilian Reais were returned in 2020 through the electricity tariff),
based on the Consultation no. 13/2018 of the COSIT, in the Special taxes Brazil caption. On the other hand, the same amount was recognised in
the Amounts payable for tariff adjustments caption (see note 38), in order to pass through this amount to the customers. Both companies are
waiting for authorisation by the Brazilian Fiscal Authorities on the possibility of an alleged compensation of future tax liabilities in this regard and
are also expecting a definition by the regulatory entity in what concerns the model of pass through to the costumers.
Group
Company
378
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
29.
Cash and Cash Equivalents
Cash and cash equivalents are as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019*
Cash
254
298
39
41
Bank deposits
Current deposits
1,461,444
953,829
1,030,863
167,288
Term deposits
1,452,451
545,480
150,000
-
Specific demand deposits in relation to institutional partnerships
34,313
60,977
-
-
2,948,208
1,560,286
1,180,863
167,288
Operations pending cash settlement
Current deposits
-
-
118,000
258,000
Other operations
Group Financial System (see note 44)
-
-
873,729
612,064
2,948,462
1,560,584
2,172,631
1,037,393
Held for sale operations:
Cash and cash equivalents reclassified as held for sale
5,840
-17,862
-
-
2,954,302
1,542,722
2,172,631
1,037,393
* Includes the reclassification arising from the change in accounting policy as described in note 2a).
30.
Share Capital and Share Premium
EDP, S.A. was incorporated as a State-owned company and started its privatisation process in 1997. The second and third phases o
f
the
privatisation process were carried out in 1998, the fourth phase in 2000, the fifth phase consisting of a capital increase in 2004 and a sixth phase
in 2005. In December 2007, the State issued bonds convertible into shares of EDP, S.A. under the seventh phase of the privatisation process.
On 11 May 2012, regarding EDP's eighth privatisation phase, the Portuguese State sold to China Three Gorges (Europe), S.A. (former - CWEI
(Europe), S.A.), the ownership of 780,633,782 shares representing 21.35% of the share capital and the voting rights of EDP, S.A.
On 21 February 2013, Parpública – Participações Públicas (SGPS) S.A. (Parpública) notified EDP that, on 19 February 2013, it sold 151,517,000
shares, which correspond to 4.14% of EDP's share capital.
As a result of these last two transactions, Parpública no longer has a qualified shareholding position in EDP share capital.
On 29 September 2017, China Three Gorges (Europe), S.A. acquired 70,143,242 shares representing around 1.92% o
f
EDP's share capital and
voting rights. After this acquisition, an off-market transaction, CTG Europe became the holder of 850,777,024 shares.
On August 11, 2020, EDP made a capital increase by issuing 309,143,297 ordinary, book-entry and nominative shares, with a unit face value o
f
1
Euro, with a unit subscription price of 3.30 Euros, offered to subscription of its shareholders, in the exercise of the respective preemptive rights,
offered to the shareholders of EDP for subscription through the exercise of their pre-emption subscription rights pursuant to applicable law (the
“Rights Offering”). The new ordinary shares will be fungible with existing ordinary shares and will entitle their holders to the same rights as those
of pre-existing shares. As such, the current share capital of EDP is now of 3,965,681,012 Euros, represented by 3,965,681,012 ordinary, registered,
book-entr
y
shares with nominal value 1,00 Euro each.
Group
Company
Specific demand deposits in relation to institutional partnerships corresponds to funds required to be held in escrow sufficient to pay the
remaining construction related costs of projects in institutional equity partnerships (see note 37), under the Group accounting policy.
As at 31 December 2020, on a company basis, the caption Operations pending cash settlement represents commercial paper issued by EDP, S.A.,
which is booked as financial debt at the issuance trade date, under the Group accounting policy. This caption of 118,000 thousand Euros (31
December 2019: 258,000 thousand Euros) refers to commercial paper issued on 31 December 2020, acquired by EDP Finance B.V., which
settlement date occurred on 5 January 2021.
379
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
% Capital
% Voting
China Three Gorges Corporation
21.55%
21.55%
Oppidum Capital, S.L.
7.20%
7.20%
BlackRock, Inc.
5.06%
5.06%
Norges Bank
3.13%
3.13%
Alliance Bernstein
2.70%
2.70%
Qatar Investment Authority
2.27%
2.27%
Sonatrach
2.19%
2.19%
EDP (Treasury Stock)
0.49%
Remaining Shareholders
55.41%
100.00%
Thousand Euros
Share
capital
Share
premium
Balance as at 1 January
3,656,538
503,923
Movements during the period
309,143
692,599
Balance as at 31 December
3,965,681
1,196,522
The earnings per share (EPS) attributable to the equity holders of EDP are as follows:
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Net profit attributable to the equity holders of EDP (in Euros)
800,691,979
511,750,938
878,151,389
720,916,031
800,691,979
511,750,938
878,151,389
720,916,031
Weighted average number of ordinary shares outstanding
3,764,319,113
3,635,010,162
3,765,706,030
3,636,482,426
Weighted average number of diluted ordinary shares outstanding
3,764,319,113
3,635,010,162
3,765,706,030
3,636,482,426
Basic earnings per share attributable to equity holders of EDP (in Euros)
0.21
0.14
-
-
Diluted earnings per share attributable to equity holders of EDP (in Euros)
0.21
0.14
-
-
Basic earnings per share from continuing operations (in Euros)
0.21
0.14
-
-
Diluted earnings per share from continuing operations (in Euros)
0.21
0.14
-
-
The average number of shares is determined as follows:
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Ordinary shares issued at the beginning of the period
3,656,537,715
3,656,537,715
3,656,537,715
3,656,537,715
Effect of shares issued during the period
128,809,707
128,809,707
Average number of realised shares
3,785,347,422
3,656,537,715
3,785,347,422
3,656,537,715
Effect of treasury stock
-21,028,309
-21,527,553
-19,641,393
-20,055,289
3,764,319,113
3,635,010,162
3,765,706,030
3,636,482,426
31.
Treasury Stock
This caption is as follows:
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Book value of EDP, S.A.'s treasury stock (thousand Euros)
54,025
61,220
54,025
55,124
Number of shares
19,557,741
21,405,347
19,557,741
19,892,347
Market value per share (in Euros)
5.156
3.864
5.156
3.864
Market value of EDP, S.A.'s treasury stock (thousand Euros)
100,840
82,710
100,840
76,864
Average number and diluted average number of shares during the period
Group
Company
Share capital and Share premium are as follows:
Group and Company
Group
Company
EDP Group calculates basic and diluted earnings per share attributable to equity holders o
f
EDP using the weighted average number o
f
ordinary
shares outstanding during the period, net of changes in treasury stock during the period. Basic earnings per share and diluted earnings per share
are equal because there are no dilution factors.
Group
Company
Net profit from continuing operations attributable to the equity holders of EDP
(in Euros)
19,557,741
2,197,579,391
3,965,681,012
107,030,000
87,007,433
89,915,722
EDP - Energias de Portugal S.A. shareholder structure as at 31 December 2020 is as follows:
No. of Shares
854,736,441
285,414,883
200,481,297
123,958,104
380
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Shares' transactions occurred between 1 January and 31 December 2020:
EDP, S.A.
Energia RE
Volume acquired (number of shares)
-
-
Average purchase price (in Euros)
-
-
Total purchases (thousand Euros)
-
-
Volume sold (number of shares)
i)
-334,606
-1,513,000
Average selling price (in Euros)
3.360
4.464
Total sales (thousand Euros)
i)
1,124
6,753
Final position (number of shares)
19,557,741
-
Highest market price (in Euros)
3.760
4.515
Lowest market price (in Euros)
3.760
4.422
Average market price (in Euros)
3.760
4.464
32.
Reserves and retained earnings
This caption is as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Legal reserve
739,024
739,024
739,024
739,024
Fair value reserve (cash flow hedge)
-6,066
58,716
84,893
-91,909
Tax effect of fair value reserve (cash flow hedge)
1,698
-18,175
-19,140
20,640
14,659
18,455
-
-
-2,771
-3,253
-
-
Currency translation reserve - Exchange differences arising on consolidation
-699,299
62,094
-
-
Currency translation reserve - Net investment hedge
-291,829
-594,947
-
-
Currency translation reserve - Net investment hedge - Cost of hedging
-62,367
-21,194
-
-
Treasury stock reserve (EDP, S.A.)
54,025
55,124
54,025
55,124
Other reserves and retained earnings
3,926,711
3,951,351
1,927,982
1,896,365
3,673,785
4,247,195
2,786,784
2,619,244
Group
Thousand Euros
FV reserve
Balance as at 31 December 2019
18,455
Positive changes in fair value
11,954
Negative changes in fair value
-4,184
Disposal of Zephyr Fund (see note 22)
-11,566
Balance as at 31 December 2020
14,659
Fair value reserve (financial assets at fair value through other comprehensive income
)
The changes in this consolidated caption for the period are as follows:
Tax effect of the fair value reserve of assets measured at fair value through
other comprehensive income
Legal reserv
e
In accordance with article no. 295 o
f
"Código das Sociedades Comerciais" (Portuguese Commercial Companies Code) and EDP, S.A.'s articles o
f
association, the legal reserve must be increased by a minimum of 5% of the annual profit until it reaches 20% of the company’s share capital. This
reserve can only be used to cover losses or to increase share capital.
Fair value reserve (cash flow hedge
)
This reserve includes the effective portion of the cumulative net change in the fair value of the cash flow hedging financial derivative instruments.
i) Includes the distribution of treasury stocks to employees (see note 10).
The treasury stoc
k
held by EDP, S.A. is within the limits established by the Company's articles o
f
association and by the "Código das Sociedades
Comerciais" (Portuguese Commercial Companies Code). Treasury stock is recognised at acquisition cost.
Group
Company
Fair value reserve of assets measured at fair value through other
comprehensive income
381
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Increases
Decreases
6,339
-
3,501
-
213
-1,238
1,843
-438
58
-2,508
11,954
-4,184
Currency
Close
Average
Close
Average
US Dollar
USD
1.227
1.142
1.123
1.120
Brazilian Real
BRL
6.374
5.889
4.516
4.414
Macao Pataca
MOP
9.800
9.124
9.010
9.035
Canadian Dollar
CAD
1.563
1.530
1.460
1.486
Polish Zloty
PLN
4.615
4.444
4.257
4.298
Romanian Leu
RON
4.869
4.837
4.783
4.745
Pound Sterling
GBP
0.899
0.890
0.851
0.878
South African Rand
ZAR
18.022
18.754
15.777
16.177
Mexican Peso
MXN
24.359
24.514
21.220
21.560
Colombian peso
COP
4,191.065
4,214.657
3,685.713
3,673.675
Chinese Yuan
CNY
8.023
7.874
7.821
7.736
Corean Won
WON
1,336.000
1,345.385
1,296.280
1,305.210
Japanese Yen
JPY
126.490
121.846
121.940
122.021
Net
investment
Cost of
Thousand Euros
hedge
hedging
Balance as at 31 December 2019
-594,947
-21,194
Changes in fair value
303,118
-41,173
Balance as at 31 December 2020
-291,829
-62,367
Treasury stock reserve (EDP, S.A.
)
In accordance with the article 324º o
f
"Código das Sociedades Comerciais" (Portuguese Commercial Companies Code), EDP, S.A. has created an
unavailable reserve with an amount equal to the book value amount of treasury stock held in the company statements.
Dividend
s
On 16 April 2020, the Shareholders General Meeting o
f
EDP, S.A. approved the dividends distribution to shareholders o
f
the net profit for the year
2019 in the amount of 690,739 thousand Euros, corresponding to a dividend of 0.19 Euros per share (including the treasury stock dividend owned
by Energia RE in the amount of 287 thousand Euros). This distribution occurred on 14 May 2020.
Currency translation reserve - Net investment hedge and Cost of hedgin
g
The changes in these captions, net of income tax, for the period are as follows:
The caption Net investment hedge corresponds to the amounts resulting from the application o
f
hedge accounting to investments in subsidiaries
in foreign currencies, mainly in the subsidiary EDPR North America, through financial derivative instruments (see note 42) and debt in foreign
currency. The caption Cost of hedging corresponds to the amounts determined in accordance with accounting policies.
Zephyr Fund (Energia RE portfolio) (see note 22)
SU Eletricidade, S.A. tariff deficit (see note 22)
Other (see note 26)
Currency translation reserve - Exchange differences arising on consolidatio
n
Exchange differences arising on consolidation corresponds to the amounts resulting from changes in the value o
f
net assets o
f
subsidiaries,
j
oint
ventures and associated companies resulting from changes in exchange rates. The exchange rates used in the preparation of the financial
statements are as follows:
Exchange rates
at Dec 2020
Exchange rates
at Dec 2019
Changes in fair value reserve attributable to the EDP Group during the period ended 31 December 2020 are as follows:
Defined Crowd Corporation (see note 22)
Mercer and Dunas Funds (carteira da Energia RE) (see note 22)
The movement for the period in Exchange differences arising on consolidation is mainly due to the effect o
f
the depreciation o
f
the Brasilian Real
against the Euro.
382
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
33.
Non-Controlling Interests
This caption is as follows:
Thousand Euros
Dec 2020
Dec 2019
Non-controlling interests in income statement
360,501
387,576
Non-controlling interests in equity and reserves
3,135,253
3,386,250
3,495,754
3,773,826
The movement by subgroup of the non-controlling interests item is analysed as follows:
Thousand Euros
EDP
Renováveis
Grou
p
EDP Brasil
Group
Other
Total
Balance as at 31 December 2019
2,547,411
1,266,635
-40,220
3,773,826
Results
219,645
148,996
-8,140
360,501
Dividends
-50,496
-81,940
-
-132,436
Currency Exchange differences
-138,511
-334,296
-
-472,807
Captial Increses/Decreases
-66,089
-
-1,298
-67,387
Perimeter variations and Others
6,501
-56,228
83,784
34,057
Balance as at 31 December 2020
2,518,461
943,167
34,126
3,495,754
Group
The caption Perimeter variations and Others includes 83,373 thousand Euros o
f
Non-controlling interests related to the acquisition o
f
Viesgo (see
note 49).
The summarised financial information for subsidiaries with material non-controlling interests, namely EDP Brasil and EDP Renováveis, as at 31
December 2020, are disclosed in the Annex I.
383
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
34.
Financial Debt
This caption is as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Debt and borrowings - Non-current
Bank loans:
- EDP Finance B.V. **
-8,935
439,261
-
-
- EDP Brasil Group
200,782
285,520
-
-
- EDP España Group
15,067
-
-
-
- EDP Renováveis Group
572,457
688,708
-
-
779,371
1,413,489
-
-
Non-convertible bond loans:
- EDP S.A.
742,779
-
6,192,779
7,400,000
- EDP Finance B.V.
8,475,687
9,190,998
-
-
- EDP Brasil Group
613,880
1,060,453
-
-
- EDP España Group
1,052,210
-
-
-
10,884,556
10,251,451
6,192,779
7,400,000
Hybrid bonds:
- EDP S.A.
1,737,918
994,071
1,737,918
994,071
1,737,918
994,071
1,737,918
994,071
Commercial paper:
- EDP S.A.
203,732
100,000
203,732
100,000
- EDP Finance B.V.
183,359
222,539
-
-
- EDP Brasil Group
62,760
66,435
-
-
449,851
388,974
203,732
100,000
Other loans
26,741
13,557
-
-
13,878,437
13,061,542
8,134,429
8,494,071
Accrued interest
13,026
8,528
-
-
Other liabilities:
- Fair value of the issued debt hedged ris
k
132,477
54,545
-
-
Total Debt and Borrowings
14,023,940
13,124,615
8,134,429
8,494,071
Collateral Deposits - Non-current *
-22,848
-21,690
-
-
14,001,092
13,102,925
8,134,429
8,494,071
** Deferred discount of origination fees on celebrated RCF, which are currently not used.
* Deposits constituted as collateral for financial guarantee.
Group
Company
384
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
**
Debt and borrowings - Current
Bank loans:
- EDP Brasil Group
188,032
125,956
-
-
- EDP Renováveis Group
77,173
79,825
-
-
- Other
3,305
17
-
-
268,510
205,798
-
-
Non-convertible bond loans:
- EDP S.A.
-
-
1,500,000
850,000
- EDP Finance B.V.
1,164,278
1,213,181
-
-
- EDP Brasil Group
181,219
282,301
-
-
1,345,497
1,495,482
1,500,000
850,000
Hybrid bonds:
- EDP, S.A.
-
739,258
-
739,258
-
739,258
-
739,258
Commercial paper:
- EDP S.A
-
100,000
586,000
2,582,000
- EDP Finance B.V.
155,000
618,750
-
-
- EDP Brasil Group
123,951
-
-
-
- EDP España Group
100,000
-
-
-
378,951
718,750
586,000
2,582,000
Other loans
Group Financial System (see note 44)
-
-
1,188,704
711,836
- Other
1,797
1,198
-
-
1,797
1,198
1,188,704
711,836
Accrued interest
243,214
279,568
74,439
96,964
Other liabilities:
- Fair value of the issued debt hedged ris
k
24,854
6,800
-
-
Total Debt and Borrowings
2,262,823
3,446,854
3,349,143
4,980,058
Collateral Deposits - Current *
-9,221
-39,786
-
-
2,253,602
3,407,068
3,349,143
4,980,058
On December 2020, EDP Iberia S.L. acquired Viesgo Group for electricity distribution networ
k
business in Spain (see notes 6 and 49). This fact
explains the variation above on EDP España Group.
In November 2020, EDP S.A. acquired 53,357 thousand Euros o
f
private bond placement, issued by EDP Finance BV in 2002 and due on 23
December 2022 (see notes 13 and 27).
On 21 January 2020, EDP concluded a "Tender Offer" over the issue “€750,000,000 Fixed to Reset Rate Subordinated Notes due 2075”. As a result
of the offer, EDP S.A. acquired 681 million Euros of that issuance, and on March 2020 proceeded with the early redemption for the remaining
nominal amount of that issuance, which totalled 69 million Euros (see note 13).
On 15 April 2020, under its "Debt Issuance Program (EMTN)", EDP issued a green bond of 750 million Euros maturing in April 2027.
On 17 September 2020, under its "Debt Issuance Program (EMTN)", EDP issued a green bond o
f
850 million American Dollars maturing in January
2028.
Group
Company
* Deposits constituted as collateral for financial guarantee.
** Includes the reclassification arising from the change in accounting policy as described in note 2a).
Non-current Commercial Paper refers to a Commercial Paper program with firm underwriting commitment for a period o
f
over one year, in the
amount of 475,000 thousand American Dollars and 400,000 thousand Brazilian Real.
Main events of the period:
385
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Group
Company
Hybrids by EDP S.A.
EDP S.A. (iv)
Jan/19
Fixed rate EUR 4.496% (v)
n.a.
Apr/79
1,000 EUR
1,000,000
1,000,000
EDP S.A. (vi)
Jan/20
Fixed rate EUR 1.7% (vii)
n.a.
Jul/80
750 EUR
750,000
750,000
1,750,000
1,750,000
Issued under the Euro Medium Term Notes program (EMTN)
EDP Finance B.V. (ii)
Dec/02
Taxa fixa EUR (iii)
n.a.
Dec/22
40 EUR
40,000
-
EDP Finance B.V. (i)
Nov/08
Fixed rate GBP 8.625%
Fair Value
Jan/24
325 GBP
410,314
-
EDP Finance B.V.
Nov/08
Zero coupon EUR (iii)
n.a.
Nov/23
160 EUR
160,000
-
EDP Finance B.V. (ii)
Nov/13
Fixed rate EUR 4.125%
n.a.
Jan/21
553 EUR
553,217
-
EDP Finance B.V.
Jan/14
Fixed rate USD 5.25%
Net Investment
Jan/21
750 USD
611,197
-
EDP Finance B.V. (i)
Sep/14
Fixed rate EUR 2.625%
Fair Value
Jan/22
1000 EUR
1,000,000
-
EDP Finance B.V. (i)
Apr/15
Fixed rate EUR 2%
Fair Value
Apr/25
750 EUR
750,000
-
EDP Finance B.V.
Mar/16
Fixed rate EUR 2.375%
n.a.
Mar/23
600 EUR
600,000
-
EDP Finance B.V. (i)
Aug/16
Fixed rate EUR 1.125%
Net Investment
Feb/24
1000 EUR
1,000,000
-
EDP Finance B.V.
Jan/17
Fixed rate EUR 1.875%
n.a.
Sep/23
600 EUR
600,000
-
EDP Finance B.V.
Jun/17
Fixed rate USD 3.625%
Net Investment
Jul/24
1000 USD
814,930
-
EDP Finance B.V.
Nov/17
Fixed rate EUR 1.5%
n.a.
Nov/27
500 EUR
500,000
-
EDP Finance B.V.
Jun/18
Fixed rate EUR 1.625%
n.a.
Jan/26
750 EUR
750,000
-
EDP Finance B.V.
Oct/18
Fixed rate EUR 1.875%
n.a.
Oct/25
600 EUR
600,000
-
EDP Finance B.V.
Sep/19
Fixed rate EUR 0.375%
n.a.
Sep/26
600 EUR
600,000
-
EDP S.A.
Apr/20
Fixed rate EUR 1.625%
n.a.
Apr/27
750 EUR
750,000
750,000
EDP Finance B.V.
Sep/20
Fixed rate USD 1.71%
Net Investment
Jan/28
850 USD
692,690
-
10,432,347
750,000
Issued by the EDP Energias do Brasil Group in the Brazilian domestic market
Energias do Brasil
Sep/15
IPCA + 8.8201%
n.a.
Sep/21
75 BRL
11,821
-
Energias do Brasil
Sep/15
IPCA + 8.7608%
n.a.
Sep/24
60 BRL
9,471
-
Energias do Brasil
Apr/16
IPCA + 8.3479%
n.a.
Apr/22
298 BRL
46,733
-
Pecém
Dec/16
CDI + 2.95%
n.a.
Nov/21
165 BRL
25,888
-
EDP São Paulo
Apr/17
108.75 % CDI
n.a.
Apr/22
90 BRL
14,121
-
EDP Espírito Santo
Apr/17
108.75 % CDI
n.a.
Apr/22
114 BRL
17,887
-
Enerpeixe
Nov/17
116% CDI
n.a.
Dec/22
213 BRL
33,479
-
Lajeado Energia
Dec/17
113.70% CDI
n.a.
Dec/22
200 BRL
31,380
-
EDP Espírito Santo
Dec/17
107.5 % CDI
n.a.
Jan/21
55 BRL
8,629
-
EDP São Paulo
Dec/17
107.5%
CDI
n.a.
Jan/21
50 BRL
7,845
-
EDP Espírito Santo
Jan/18
107.5 % CDI
n.a.
Jan/21
55 BRL
8,629
-
EDP São Paulo
Jan/18
107.5%
CDI
n.a.
Jan/21
50 BRL
7,845
-
EDP Transmissão
May/18
IPCA + 7.0267%
n.a.
May/33
127 BRL
19,991
-
EDP Espírito Santo
Aug/18
IPCA + 5.91%
n.a.
Jul/25
206 BRL
32,376
-
EDP São Paulo
Aug/18
IPCA + 5.91%
n.a.
Aug/25
272 BRL
42,707
-
EDP Transmissão
Oct/18
IPCA + 6.72%
n.a.
Oct/28
1297 BRL
203,460
-
Lajeado Energia
Nov/18
109.25% CDI
n.a.
Oct/22
100 BRL
15,690
-
Enerpeixe
Dec/18
112.48% CDI
n.a.
Nov/23
255 BRL
40,009
-
EDP Espírito Santo
Apr/19
106.9% CDI
n.a.
Mar/24
300 BRL
47,070
-
EDP São Paulo
Apr/19
107.5% CDI
n.a.
Mar/24
200 BRL
31,380
-
EDP Transmissão
Aug/19
IPCA + 4.45%
n.a.
Jul/39
840 BRL
131,859
-
EDP Espírito Santo
Apr/20
CDI + 2.5%
n.a.
Apr/21
150 BRL
23,535
-
811,806
-
12,994,154
2,500,000
(i)
These issues by EDP Finance B.V. are associated with interest rate swaps and/or currency swaps;
(ii)
Consolidated nominal value after the repurchase of securities by EDP - Energias de Portugal, S.A.;
(iii)
These issues correspond to private placements;
(iv)
(v)
(vi)
(vii)
There is a call option exercisable at par by EDP at January 2024 and subsequently, on each interest payment date;
The nominal value of outstanding Bond loans placed with external counterparties issued during 2020, as at 31 December 2020, is as follows:
Issuer
Issue
date
Interest
rate
Type
of hedge
Conditions /
Redemption
Nominal
Value in
Million
Currency
Thousand Euros
Fixed rate in the first 5.25 years, subsequently updated every 5 years;
There is a call option exercisable at par by EDP at April 2025 and July 2025 and subsequently, on each interest payment date;
Fixed rate in the first 5.5 years, subsequently updated every 5 years.
386
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Following
Thousand Euros
Dec 2021
Dec 2022
Dec 2023
Dec 2024
Dec 2025
years
Total
Bank loans:
Euro
49,272
46,444
37,605
30,677
16,208
56,194
236,400
Brazilian Real
159,025
54,700
48,859
38,730
31,174
165,805
498,293
US Dollar
59,593
11,304
11,546
12,135
13,109
148,042
255,729
Other
22,796
12,964
16,389
19,905
9,858
18,064
99,976
290,686
125,412
114,399
101,447
70,349
388,105
1,090,398
Bond loans:
Euro
714,271
1,095,210
1,843,550
1,421,152
1,379,512
3,227,930
9,681,625
Brazilian Real
196,059
79,483
80,744
122,108
122,380
234,352
835,126
US Dollar
642,896
-
-
814,930
-
692,690
2,150,516
1,553,226
1,174,693
1,924,294
2,358,190
1,501,892
4,154,972
12,667,267
Hybrid Bonds:
Euro
36,066
-
-
-
-
1,750,000
1,786,066
36,066
-
-
-
-
1,750,000
1,786,066
Commercial paper:
Euro
255,000
-
-
-
-
-
255,000
Brazilian Real
123,951
15,690
-
47,070
-
-
186,711
US Dollar
2,517
-
91,680
-
295,412
-
389,609
381,468
15,690
91,680
47,070
295,412
-
831,320
Other loans:
Euro
2,210
994
1,202
1,011
1,031
13,125
19,573
Brazilian Real
782
-
-
-
-
9,378
10,160
2,992
994
1,202
1,011
1,031
22,503
29,733
Origination Fees:
-1,615
-6,788
-38,785
-8,922
-6,620
-55,291
-118,021
2,262,823
1,310,001
2,092,790
2,498,796
1,862,064
6,260,289
16,286,763
Some o
f
the loans contracted by the EDP Group, mainly debt issued under the EMTN, include some usual clauses in this type o
f
operations,
namely, "change-of-control", "negative pledge", "pari-passu" and "cross-default" clauses, each one only applicable under a restricted set of
circumstances.
The Group has project finance loans with the usual guarantees for such loans, namely pledges or promissory pledges over shares, ban
k
accounts
and assets relating to the projects. As at 31 December 2020, these loans amounted to 643,984 thousand Euros (31 December 2019: 771,854
thousand Euros). At 31 December 2020, the Group confirms the fulfillment of all the covenants of the Project Finance Portfolio under the Facilities
Agreements. Additionally, there are 18,034 thousand Euros of other loans that are guaranteed by EDPR.
EDP Group has several credit facilities it uses for liquidity management. EDP Group has short-term credit facilities o
f
256 million Euros, indexed to
Euribor for the agreed period of use with spread conditions agreed in advance, all with a firm underwriting commitment, which as at 31 December
2020 were totally available. EDP Group also has a Commercial Paper program of 50 million Euros with guaranteed placement, which as at 31
December 2020 was totally available. Regarding medium-term credit facilities with a firm underwriting commitment, EDP Group has three
Revolving Credit Facilities, namely (i) 75 million Euros, maturing in 2021; (ii) 3,300 million Euros, of which 3,295 million Euros mature in 2024 while
the remaining amount matures in 2023; and (iii) 2,240 million Euros, of which 2,095 million Euros mature in 2025 while the remaining amount
matures in 2023, all of them totall
y
available as at 31 December 2020.
As at 31 December 2020, future debt and interest payments and origination fees, by type of loan and currency, are as follows:
387
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Following
Thousand Euros
Dec 2020
Dec 2021
Dec 2022
Dec 2023
Dec 2024
years
Total
Bank loans:
Euro
40,840
43,687
43,997
492,832
39,302
117,166
777,824
Brazilian Real
149,710
86,692
65,750
61,580
47,558
140,975
552,265
US Dollar
12,472
12,605
12,348
12,612
12,720
150,836
213,593
Other
13,859
10,033
14,049
17,763
21,572
32,778
110,054
216,881
153,017
136,144
584,787
121,152
441,755
1,653,736
Bond loans:
Euro
842,859
553,217
1,203,888
1,375,147
1,414,671
3,227,070
8,616,852
Brazilian Real
304,290
224,285
111,472
112,022
170,217
475,439
1,397,725
US Dollar
559,901
667,616
-
-
890,155
-
2,117,672
1,707,050
1,445,118
1,315,360
1,487,169
2,475,043
3,702,509
12,132,249
Hybrid Bond:
Euro
812,271
-
-
-
-
1,000,000
1,812,271
812,271
-
-
-
-
1,000,000
1,812,271
Commercial paper:
Euro
719,089
100,000
-
-
-
-
819,089
Brazilian Real
-
-
-
-
66,435
-
66,435
US Dollar
2,690
-
-
-
222,539
-
225,229
721,779
100,000
-
-
288,974
-
1,110,753
Other loans:
Euro
1,333
104
34
211
-
-
1,682
Brazilian Real
1,050
393
-
-
-
12,818
14,261
2,383
497
34
211
-
12,818
15,943
Origination Fees:
-13,510
-3,221
-9,908
-50,555
-12,068
-64,221
-153,483
3,446,854
1,695,411
1,441,630
2,021,612
2,873,101
5,092,861
16,571,469
35.
Employee Benefits
Employee benefits are as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Provisions for pension liabilities
507,883
499,948
121,725
130,842
Provisions for medical liabilities and other benefits
630,354
628,207
82,342
52,672
1,138,237
1,128,155
204,067
183,514
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Balance at the beginning of the period
630,790
759,376
680,879
647,926
Charge for the period
7,399
16,739
28,215
30,365
Past service cost (Curtailment/Plan amendments)
36,848
8,958
1,068
-30,820
Actuarial (gains)/losses
97,403
86,498
-22,668
114,391
Charge-off
-129,588
-137,461
-26,504
-35,104
Fund contributions (see note 44)
-
-
-23,040
-141,660
Surplus/(Deficit) pension funding (see note 27)
-25,896
-4,334
-
-
Transfers, reclassifications and exchange differences
-11,293
-98,986
-45,718
95,781
Perimeter variations
23,945
-
120,464
-
Balance at the end of the period
629,608
630,790
712,696
680,879
Current
Non-Current
Medical and Other
A more detailed analysis has been carried out by the EDP Group in 2019, which has resulted in the transfer o
f
the amount o
f
liabilities with
employee benefits in Spain from Provisions for pension liabilities to Provisions for medical liabilities and other benefits. Perimeter variations
result from the acquisition of Viesgo Group by EDP Iberia S.L., in December 2020 (see notes 6 and 49).
As at 31 December 2019, future debt and interest payments and origination fees, by type of loan and currency, are as follows:
In accordance with the Group's accounting policies, the financial liabilities whose risks are being hedged by derivative financial instruments and
that comply with hedge accounting requirements of IFRS 9, are accounted at fair value. The financial liabilities are booked at amortised cost.
The movement in Provisions for employee benefits liabilities for EDP Group is as follows:
Pensions
388
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Actuarial gains and losses arising from:
- changes in financial assumptions
3,369
136,357
-9,838
137,855
- experience adjustments
95,671
51,967
-8,107
-1,277
Actuarial gains and losses arising from return on plan assets
6,892
-101,950
-4,723
-22,187
Actuarial gains and losses of asset ceiling
-8,529
124
-
-
97,403
86,498
-22,668
114,391
Thousand Euros
Portugal
Spain
Brazil
Group
Current service cost (see note 10)
6,304
-
-1,102
5,202
Past service cost (Curtailment/Plan amendments) (see note 10)
36,848
-
-
36,848
Operational component
43,152
-
-1,102
42,050
Net interest on the net pensions plan liability (see note 13)
206
-
1,991
2,197
Financial component
206
-
1,991
2,197
43,358
-
889
44,247
Thousand Euros
Portugal
Spain
Brazil
Group
Current service cost (see note 10)
6,564
-
-405
6,159
Past service cost (Curtailment/Plan amendments) (see note 10)
8,958
-
-
8,958
Operational component
15,522
-
-405
15,117
Net interest on the net pensions plan liability (see note 13)
9,238
-
1,342
10,580
Financial component
9,238
-
1,342
10,580
24,760
-
937
25,697
Thousand Euros
Portugal
Spain
Brazil
Group
Current service cost (see note 10)
4,832
9,324
687
14,843
Past service cost (Curtailment/Plan amendments) (see note 10)
1,068
-
-
1,068
Operational component
5,900
9,324
687
15,911
Net interest on the net medical liabilities and other benefits (see note 13)
2,640
1,038
9,694
13,372
Financial component
2,640
1,038
9,694
13,372
8,540
10,362
10,381
29,283
Thousand Euros
Portugal
Spain
Brazil
Group
Current service cost (see note 10)
5,163
2,426
704
8,293
Past service cost (Curtailment/Plan amendments) (see note 10)
260
-
-31,080
-30,820
Operational component
5,423
2,426
-30,376
-22,527
Net interest on the net medical liabilities and other benefits (see note 13)
6,902
1,398
13,772
22,072
Financial component
6,902
1,398
13,772
22,072
12,325
3,824
-16,604
-455
In accordance with accounting policies - note 2 m), the EDP Group opted, upon transition to IFRS, to charge to reserves, the total amount o
f
the
deferred actuarial losses existing at that date, for the several employee benefits plans. The impact in reserves at 31 December 2004 amounted to
1,162,000 thousand Euros. In the following periods, actuarial gains and losses were recognised directly in reserves. As at 31 December 2020
losses of 74,735 thousand Euros (31 December 2019: losses of 200,889 thousand Euros).
During 2020, under the employees' reduction program in Portugal and the closure o
f
Sines power plant, EDP Group entered into early retirement
and anticipation of retirement agreements, and as a result an increase in liabilities with employee benefits has been recognised in the income
statement in the amount of 37,916 thousand Euros (see note 10).
The breakdown of actuarial gains and losses is as follows:
The components of the consolidated net cost of the pension plans recognised during the period are as follows:
Dec 2020
Dec 2019
The components of the consolidated net cost of the medical and other benefits plans recognised during the period are as follows:
Dec 2020
Dec 2019
Pensions
Medical and Other
The weighted average duration of the defined benefit liabilities in Portugal is 10 years.
389
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Portugal
Spain
Brazil
Portugal
Spain
Brazil
Assumptions
Discount rate
0.70% - 0.80%
0.90%
6.78% - 7.67%
0.95%
1.00%
7.56%
Salary increase rate
1.75%
not applicable
4.18%
1.75%
not applicable
4.90%
Pension increase rate
1.50%
not applicable
3.31%
1.50%
not applicable
4.03%
Social Security salary appreciation
1.50%
not applicable
not applicable
1.50%
not applicable
4.03%
Inflation rate
1.50%
1.50%
3.31%
1.50%
3.00%
4.03%
Annual increase rate of medical service costs
1.50%
not applicable
9.51% (b)
1.50%
not applicable
10.27% (d)
289 €/year
(
c
)
2.00%
not applicable
297 €/year
(
e
)
not applicable
not applicable
Mortality table
Nasc.< 1950
-
- TV99/01
(+1) //
Nasc.>=
1950 --
TV99/01
PERM/F-
2000P
AT-2000 / RP-
2000
Geracional
Nasc.< 1950 --
TV99/01 (+1)
// Nasc.>=
1950 --
TV99/01
PERM/F-
2000P
AT-2000 / RP-
2000
Geracional
Disability table
50%EKV 80
not applicable
Muller / TASA
1927
50%EKV 80
not applicable
Muller / TASA
1927
(a)
not applicable
not applicable
(a)
not applicable
not applicable
(b) 9.51% in the first year, decreasing to 5.38% in 2029.
(c) Decrease of 2.4% for 2022, decrease of 0.4% for 2023 and an increase after that date.
(d) 10.27% in the first year, decreasing to 6.11% in 2028.
(e) Decrease of 2.7% for 2021, decrease of 2.4% for 2022, decrease of 0.4% for 2023 and an increase after that date.
Thousand Euros
Years
Portugal
Spain
Brazil
Total
Portugal
Spain
Brazil
Total
2021
185,140
132
13,362
198,634
37,336
37,724
5,822
80,882
2022
160,536
36
13,576
174,148
35,456
32,144
6,129
73,729
2023
136,902
30
13,959
150,891
35,253
11,215
6,423
52,891
2024
114,055
27
14,345
128,427
35,245
10,939
6,739
52,923
2025 and
following
399,504
14
94,383
493,901
206,778
168,059
47,104
421,941
(a) 45% o
f
the eligible population (employees entitled to early retirement, as stated in the Collective Labour Agreement: 37 years o
f
service with
at least 61 years of age or 40 years of service at any age).
The discount rates used for the EDP Group pension plan were selected based on an analysis o
f
the rates o
f
return available on the date for the
high quality corporate bonds. Bonds with maturities and ratings considered appropriate were selected considering the amount and the periods
that the benefits are expected to be paid.
As at 31 December 2020 the amount of future benefits expected to be paid, related to the activity in Portugal, Spain and Brazil, is as follows:
In 2020, the pensions paid by the funds in Portugal amounted 81,001 thousand Euros (31 December 2019: 79,938 thousand Euros) and in Brazil
amounted to 13,195 thousand Euros (31 December 2019: 16,368 thousand Euros). The contributions made to the Pension funds in Brazil
amounted to 697 thousand Euros (31 December 2019: 1,447 thousand Euros), which were fully paid in cash.
Assumptions used to determine EDP Group liabilities related to employee benefits
The following financial and actuarial assumptions used in the calculation of the liability for employees defined benefit plans, were updated
considering the evolutions occurred in the financial markets during 2020 and 2019, respectively:
Dec 2020
Dec 2019
Estimated administrative expenses per
beneficiary per year (Euros)
Expected % of eligible employees accepting early
retirement
Following the decision and implementation o
f
the autonomisation o
f
the Medical Plan and Death Subsidy Plan in Portugal, EDP Group has made
contributions of 23,040 thousand Euros in 2020 (31 December 2019: 141,660 thousand Euros). In the following years, until the end of 2027, the
Group estimates to make additional contributions in the approximate total amount of 150 million Euros, of which approximate 23 million Euros in
2021, in line with the financing plan approved by Insurance and Pension Funds Supervisory Authority (ASF) (see note 44).
Pensions
Medical and Other Benefits
390
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Increase
Decrease
Increase
Decrease
Increase
Decrease
-46,891
50,604
-8,701
9,826
-13,759
15,052
Thousand Euros
Increase
Decrease
Increase
Decrease
Increase
Decrease
-55,047
61,568
-15,641
17,578
-11,548
3,906
13,533
-12,433
-
-
-
-
Thousand Euros
Liquidity
Bonds
Shares
Property
Other
Total
31 December 2020
-14,639
519,874
454,436
197,314
94,216
1,251,201
31 December 2019
-3,357
538,441
466,278
198,285
91,268
1,290,915
%
Liquidity
Bonds
Shares
Property
Other
Total
31 December 2020
-1.17%
41.55%
36.32%
15.77%
7.53%
100.00%
31 December 2019
-0.26%
41.71%
36.12%
15.36%
7.07%
100.00%
The portfolio of shares and bonds have a quoted market price in an active market.
Thousand Euros
Liquidity
Bonds
Shares
Property
Other
Total
31 December 2020
-
197,959
2,505
1,624
-
202,088
31 December 2019
-
315,397
12,879
2,420
-
330,696
Spain
Brazil
-
2,898
The real return rate on assets of the pension Fund in 2020 was positive in 2.12% (2019: positive in 9.71%).
The assets of the pension fund in Brazil are as follows:
Fund assets by nature
The level o
f
solvency o
f
the fund for the financing o
f
post-employment medical care liabilities in Portugal may vary not only from the risks
described above, but also from the performance of the different classes of assets that comprise it. Considering the nature of the defined benefit
of the plan and despite the fund's low risk profile (mostly composed of fixed income assets), the joint materialization of adverse risks (including
those above referred) may lead to changes in the financing plan approved by ASF.
The assets of the pension funds, medical care and death subsidy in Portugal are as follows:
Fund assets by nature
Fund assets by nature
Properties included in the fund, that are being used by the Group amount to 183,242 thousand Euros as at 31 December 2020 (31 December 2019:
183,708 thousand Euros). Bonds includes 5,138 thousand Euros (31 December 2019: 3,018 thousand Euros) relating to bonds issued by EDP
Finance B.V. and EDP, S.A.
Composition of the assets portfolio funds
Mortality (increase of 1 year in expected lifetime
of plan participants)
Portugal
19,519
-
9,811
Discount rate (0.5% movement)
Mortality (increase of 1 year in expected lifetime
of plan participants)
Portugal
45,311
Discount rate (0.5% movement)
Health care cost trend (0.5% movement)
The solvency level o
f
the fund for the financing o
f
pension plan liabilities in Portugal may vary not only from the risks described above, but also
from the performance of the different classes of assets that comprise it. Considering the nature of the defined benefit of the plan and despite the
fund's low risk profile (mostly composed of fixed income assets), the joint materialization of adverse risks (including those above referred) may
lead to the need for additional contributions to the fund.
The medical care and other benefits Plans in Portugal, Spain and Brazil are subject to several risks, in which are included the ris
k
o
f
changes in
market rates (which impacts the discount rate and the fixed rate of return rate on assets), the risk of changes in the health care costs and the risk
of changes on the expected lifetime of plan participants, to which are made the following sensitivity analysis for the liabilities at the end of the
period:
Spain
Brazil
The Pension Plans in Portugal, Spain and Brazil are subject to several risks, in which are included the ris
k
o
f
changes in market rates (which
impacts the discount rate and the fixed rate of return rate on assets), the risk of changes on the expected lifetime of plan participants, the risk of
changes on the pension increase rate and the risk of changes on the social security pension increase, to which are made the following sensitivity
analysis for the liabilities at the end of the period:
391
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
%
Liquidity
Bonds
Shares
Property
Other
Total
31 December 2020
-
97.96%
1.24%
0.80%
-
100.00%
31 December 2019
-
95.37%
3.90%
0.73%
-
100.00%
The portfolio of shares and bonds have a quoted market price in an active market.
Portugal
Spain
Brazil
Portugal
Spain
Brazil
Retirees and pensioners
17,949
822
1,483
18,003
-
1,632
Active workers
2,575
159
592
3,044
-
720
20,524
981
2,075
21,047
-
2,352
EDP Espírito Santo, EDP São Paulo and Energest have Defined Benefit Plans that grant complementary pensions for retirement and early
retirement.
In the pension plans in Portugal, and according with the Pension Funds regulation, the surplus amount o
f
the assets fund, under certain
conditions, can be reimbursed to the company.
In the pension plans in Brazil, the surplus amount o
f
the assets fund generally can not be reimbursed to the company, since there are very strict
rules on the amount that can be recovered, therefore the asset amount to be recognised is greatly reduced.
The number of participants covered by the pension plans and similar obligations is as follows:
2020
2019
The EDP Group companies in Portugal resulting from the EDP spin-of
f
in 1994 have a social benefits plan funded by a closed Pension Fund,
complemented by a specific provision. The EDP Pension Fund is managed by an external entity as well as the management of its assets is
subcontracted to external asset management entities.
This Pension Fund covers the liability for retirement pension complementary benefits for age. The responsibilities for early retirement are not
covered by the fund’s assets, being adequately provisioned through a specific provision.
EDP São Paulo in Brazil has two defined benefit plans managed by a closed complementary welfare entity, sponsored by companies o
f
EDP Brasil
Group, in order to manage a set of benefit plans for employees and ex-employees of the company:
- Bandeirante (BD) plan in force up to 31 March 1998, a Balanced Benefit Plan that grants Balanced Proportional Supplementary Benefits (BSPS)
in the form of an annuity payable to participants enrolled until 31 March 1998, of an amount defined in proportion to accumulated past service up
to that date, based on compliance with the regulatory granting requirements. The company is fully liable to fund this plan;
- BD plan in force after 31 March 1998, grants an annuity in proportion to the accumulated past services after 31 March 1998, on the basis o
f
70%
of the average actual monthly wage for the last 36 months in service. In the event of death or disability caused by a labour accident, the benefits
incorporate all the past service (including that accumulated up to 31 March 1998), and not only past service accumulated after 31 March 1998.
The Company and the participants are equally responsible for funding the Plan.
Fund assets by nature
Some EDP Group companies grant post-retirement benefits to employees, under defined benefit and defined contribution plans, namely pension
plans that pay retirement complements of age, disability and surviving pensions, as well as early retirement pensions. In some cases healthcare is
provided during retirement and early retirement, through mechanisms complementary to those provided by the National Health Service.
The following is a summary of the nature of the plans and the companies covered, as well as financial and economic data of the plans:
Employee benefit plans
In Spain, the companies Viesgo Holdco S.A. and Viesgo Distribución, acquired by EDP Group in December 2020, have defined benefit plans
partially outsourced throught insurance policies, and complemented by a specific provision, which covers the liabilities for retirement, widowhood,
death and disability.
I. Defined benefit pension plans
392
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Portugal
Spain
Brazil
Group
Liability at the end of the period
1,353,388
23,945
210,725
1,588,058
Plan assets at the end of the period
-814,128
-
-202,088
-1,016,216
Surplus/(Deficit) pension funding (see note 27)
29,610
-
-
29,610
Asset ceiling
-
-
28,156
28,156
Provision at the end of the period
568,870
23,945
36,793
629,608
Thousand Euros
Portugal
Spain
Brazil
Group
Liability at the end of the period
1,404,188
-
315,247
1,719,435
Plan assets at the end of the period
-864,350
-
-330,696
-1,195,046
Surplus/(Deficit) pension funding (see note 27)
55,506
-
-
55,506
Asset ceiling
-
-
50,895
50,895
Provision at the end of the period
595,344
-
35,446
630,790
Thousand Euros
2020
2019
2018
2017
2016
Liability at the end of the period
1,588,058
1,719,435
1,784,521
1,882,891
1,948,791
Plan assets at the end of the period
-1,016,216
-1,195,046
-1,136,581
-1,236,791
-1,248,017
Surplus / (Deficit) pension funding
29,610
55,506
59,840
58,952
57,585
Asset ceiling
28,156
50,895
51,596
58,197
56,905
Provision at the end of the period
629,608
630,790
759,376
763,249
815,264
Thousand Euros
2020
2019
2018
2017
2016
Portugal
Experience adjustments for the Plan liabilities
61,193
-46,993
-91,575
-55,281
-51,686
Experience adjustments for the Plan assets
-6,662
60,914
-37,567
64,044
-2,061
Brazil
Experience adjustments for the Plan liabilities
34,478
-4,974
-6,090
15,354
-8,941
Experience adjustments for the Plan assets
13,554
41,036
8,182
6,278
30,772
The past service liability of the pension plans for the Group is as follows:
Thousand Euros
Portugal
Spain
Brazil
Group
Liability at the beginning of the period
1,404,188
-
315,247
1,719,435
Current service cost
6,304
-
-1,102
5,202
Net interest on the pensions plan liability
3,796
-
20,735
24,531
Benefits paid
-188,691
-
-14,566
-203,257
Past service cost (Curtailment/Plan amendments) (see note 10)
36,848
-
-
36,848
Actuarial (gains)/losses
90,943
-
8,097
99,040
Exchange differences
-
-
-90,825
-90,825
Perimeter variations and other
-
23,945
-26,861
-2,916
Liability at the end of the period
1,353,388
23,945
210,725
1,588,058
Thousand Euros
Portugal
Spain
Brazil
Group
Liability at the beginning of the period
1,436,616
98,481
249,424
1,784,521
Current service cost
6,564
-
-405
6,159
Net interest on the pensions plan liability
23,543
-
23,946
47,489
Benefits paid
-196,095
-81
-18,127
-214,303
Past service cost (Curtailment/Plan amendments)
8,958
-
-
8,958
Actuarial (gains)/losses
124,467
-
63,042
187,509
Exchange differences
-
-
-5,582
-5,582
Other
135
-98,400
2,949
-95,316
Liability at the end of the period
1,404,188
-
315,247
1,719,435
Dec 2020
Dec 2019
The liability for retirement pensions and related coverage for the Group is as follows:
Dec 2020
Dec 2019
The evolution of the present value of the plan liability and fair value of the plan assets of the related Funds is as follows:
The experience adjustments (effects o
f
the differences between the previous actuarial assumptions and what has really occurred) for the Pension
Funds in Portugal and Brazil are as follows:
393
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Portugal
Brazil
Group
Assets value at the beginning of the period
864,350
330,696
1,195,046
Group contribution
-
697
697
Plan participants contributions
-
504
504
Benefits paid
-60,474
-13,195
-73,669
Interest on the pensions plan assets
3,590
18,744
22,334
Actuarial gains/(losses)
6,662
-13,554
-6,892
Exchange differences
-
-93,742
-93,742
Other variations
-
-28,062
-28,062
Assets value at the end of the period
814,128
202,088
1,016,216
Thousand Euros
Portugal
Brazil
Group
Assets value at the beginning of the period
849,606
286,975
1,136,581
Group contribution
-
1,447
1,447
Plan participants contributions
-
676
676
Benefits paid
-60,474
-16,368
-76,842
Interest on the pensions plan assets
14,305
22,604
36,909
Actuarial gains/(losses)
60,914
40,221
101,135
Exchange differences
-
-4,859
-4,859
Other variations
-1
-
-1
Assets value at the end of the period
864,350
330,696
1,195,046
Thousand Euros
Dec 2020
Dec 2019
Asset ceiling at the beginning of the period
50,895
51,596
Effect of changes in restricted net assets of benefits to the asset ceiling
-8,529
124
Exchange differences
-14,210
-825
Asset ceiling at the end of the period
28,156
50,895
The EDP Group companies in Portugal resulting from the EDP spin-of
f
in 1994 have a Medical Care and Death Subsidy Plans partially funded by a
closed Pension Fund, complemented by a specific provision. The responsibilities regarding the remaining defined benefit plans are fully covered
by a provision.
In Brazil, EDP Espírito Santo, Energest and Investco also have Medical and other benefits plans for retired employees which are also fully covered
by provisions.
In addition, EDP Group grants other benefits, supporting charges arising from responsibilities for disability benefit’s complements, survival
benefits, life insurance, antiquity and retirement benefits, power and gas tariff discounts, among others.
Group
To determine the amount o
f
provisions for pension funds, it has been deducted from the assets funds the value o
f
the asset ceiling o
f
28,156
thousand Euros (179,452 thousand Reais). As at 31 December 2019, the asset ceiling amounted to 50,895 thousand Euros (229,829 thousand
Reais).
The actuarial gains/losses in Brazil include the negative amount o
f
8,529 thousand Euros (50,227 thousand Reais) related to actuarial gains and
losses of the asset ceiling not recognised in reserves (31 December 2019: positive in 124 thousand Euros).
II. Defined Contribution Pension Plan
EDPR Europe and EDP España in Spain, EDP São Paulo in Brazil and several subsidiaries in Portugal, have defined contribution plans for their
employees that complement those granted by the Social Welfare Systems, under which they pay annual contributions to these plans, calculated in
accordance with the rules established in each case.
III. Liability for Medical Care and Other Benefits Plans - Defined Benefit Type
In Spain, the companies Viesgo Holdco S.A. and Viesgo Distribución, acquired by EDP Group in December 2020, have Medical Care and Death
Subsidy Plans partially outsourced throught insurance policies, and complemented by a specific provision. The responsibilities regarding the
remaining defined benefit plans are fully covered by a provision.
The evolution of the consolidated assets of the Pension Funds is as follows:
The caption Asset ceiling refers to the unrecognised assets in the respective accounting periods. The reconciliation between the opening balance
and the closing balance is as follows:
Dec 2020
Dec 2019
394
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Portugal
Spain
Brazil
Portugal
Spain
Brazil
Retirees and pensioners
17,949
2,876
2,884
18,013
-
2,755
Active workers
5,672
639
203
5,819
1,417
845
23,621
3,515
3,087
23,832
1,417
3,600
Thousand Euros
Portugal
Spain
Brazil
Group
Liability at the end of the period
833,506
212,451
103,812
1,149,769
Plan assets at the end of the period
-437,073
-
-
-437,073
Provision at the end of the period
396,433
212,451
103,812
712,696
Thousand Euros
Portugal
Spain
Brazil
Group
Liability at the end of the period
835,882
104,364
167,198
1,107,444
Plan assets at the end of the period
-426,565
-
-
-426,565
Provision at the end of the period
409,317
104,364
167,198
680,879
Thousand Euros
2020
2019
2018
2017
2016
Liability at the end of the period
1,149,769
1,107,444
923,880
994,273
993,506
Plan assets at the end of the period
-437,073
-426,565
-275,954
-235,269
-81,925
Provision at the end of the period
712,696
680,879
647,926
759,004
911,581
Thousand Euros
2020
2019
2018
2017
2016
Portugal
11,979
3,214
-1,265
-452
-5,816
-4,723
22,187
-11,869
8,368
-8
Brazil
-20,086
-1,937
37,773
-2,565
-6,245
The past service liability of medical and other benefits plans for the Group is as follows:
Thousand Euros
Portugal
Spain
Brazil
Group
Liability at the beginning of the period
835,882
104,364
167,198
1,107,444
Current service cost
4,832
9,324
687
14,843
Net interest on the net medical liabilities and other benefits
5,910
1,038
9,694
16,642
Benefits paid
-32,597
-7,940
-6,494
-47,031
Past service cost (Curtailment/Plan amendments) (see note 10)
1,068
-
-
1,068
Actuarial (gains)/losses
18,403
-14,162
-22,186
-17,945
Exchange differences
-
-
-48,318
-48,318
Perimeter variations and other
8
119,827
3,231
123,066
Liability at the end of the period
833,506
212,451
103,812
1,149,769
Thousand Euros
Portugal
Spain
Brazil
Group
Liability at the beginning of the period
763,960
-
159,920
923,880
Current service cost
5,163
2,426
704
8,293
Net interest on the net medical liabilities and other benefits
13,130
1,398
13,772
28,300
Benefits paid
-34,825
-9,859
-9,884
-54,568
Past service cost (Curtailment/Plan amendments)
260
-
-31,080
-30,820
Actuarial (gains)/losses
88,068
8,717
39,793
136,578
Exchange differences
-
-
-6,028
-6,028
Other
126
101,682
1
101,809
Liability at the end of the period
835,882
104,364
167,198
1,107,444
Experience adjustments for the Plan assets
Experience adjustments for the Medical Plan liabilities
Dec 2020
Dec 2019
The provision for medical liabilities and other benefits and related coverage for the Group is as follows:
Dec 2020
Dec 2019
The evolution of the present value of the liability for Medical care and other benefits for the Group is as follows:
The experience adjustments (effects o
f
the differences between the previous actuarial assumptions and what really occurred) for the medical and
other benefits Liabilities in Portugal and Brazil and for the Plan Assets in Portugal are as follows:
Experience adjustments for the Plan liabilities
The number of participants covered by the medical and other benefits plans is as follows:
2020
2019
395
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Dec 2020
Dec 2019
Assets value at the beginning of the period
426,565
275,954
Group contribution
23,040
141,660
Benefits paid
-20,525
-19,464
Interest on the pensions plan assets
3,270
6,228
Actuarial gains/(losses)
4,723
22,187
Assets value at the end of the period
437,073
426,565
36.
Provisions
Provisions are as follows:
Thousand Euros
Dec 2020
Dec 2019
Provision for legal and labour matters and other contingencies
100,316
110,034
Provision for customer guarantees under current operation
21,691
1,029
Provision for dismantling and decommissioning
566,170
485,990
Provision for other liabilities and charges
564,842
455,464
1,253,019
1,052,517
This caption is as follows:
Thousand Euros
Dec 2020
Dec 2019
Non-Current
992,865
926,426
Current
260,154
126,091
1,253,019
1,052,517
With reference to 31 December 2020, the movement by nature of the Provisions item at the EDP Group level is presented as follows:
Thousand Euros
Legal, labour
and other
matters
Guarantees to
customers in
the context of
current activity
Dismantling
and
Decommission
ing
Other risks and
charges
Total
Balance as at 31 December 2018
92,034
15,686
480,508
430,217
1,018,445
Perimeter variations (see note 6)
-
-
-35,865
-
-35,865
Charge for the period
22,365
400
-
7,179
29,944
Reversals
-8,588
-
-
-6,015
-14,603
Charge-off for the period
-18,601
-11,496
-
-10,246
-40,343
Unwinding (see note 12)
-
-
6,614
-
6,614
Increase of the responsibility (see note 14)
-
-
36,310
-
36,310
Hydro power plants of Fridão (see note 4)
-
-
-
86,189
86,189
Innovative Features Charge-off (see note 4)
-
-
-
-92,458
-92,458
CMEC
-
-
-
15,977
15,977
"Lesividad"
-
-
-
12,020
12,020
Exchange differences and other
24,100
-3,561
-1,577
12,777
31,739
Reclassification to Liabilities Held for Sale
-1,276
-
-
-176
-1,452
Balance as at 31 December 2019
110,034
1,029
485,990
455,464
1,052,517
Perimeter variations (see note 6)
723
-
43,871
100,755
145,349
Charge for the period
20,300
-
-
33,753
54,053
Reversals
-9,871
-
-
-4,989
-14,860
Charge-off for the period
-9,072
-
-17,154
-4,064
-30,290
Unwinding (see note 13)
12,013
-
6,432
2,497
20,942
Increase of the responsibility (see note 16)
-
-
65,415
-
65,415
Onerous contracts
-
20,662
-
-
20,662
Innovative Features Charge-off (see note 4)
-
-
-
-110,963
-110,963
Overcompensation revisability CMEC (see note 4)
-
-
-
72,900
72,900
CMEC
-
-
-
15,824
15,824
"Lesividad"
-
-
-
12,020
12,020
Exchange differences and other
-24,789
-
-18,384
-8,718
-51,891
Reclassification to Liabilities Held for Sale
978
-
-
363
1,341
Balance as at 31 December 2020
100,316
21,691
566,170
564,842
1,253,019
Portugal
The evolution of the consolidated assets of the Medical care and Death subsidy Funds is as follows:
Group
Group
396
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Europe
North
America
Brazil
Discount Rate
[0,00% - 4,04%]
[0,13% - 1,45%] [2,79% - 7,64%]
Inflation Rate
[0,60% - 2,85%]
[2,00% - 3,50%]
[3,76% - 4,47%]
iii) The remaining legal litigations correspond mainly to indemnities for damages allegelly suffered in consequence of interruption of electricity
su
pp
l
y
,
p
ower accidents and fires.
In accordance with IFRS 3, during an acquisition, the acquiring company shall recognise, at the acquisition date, a contingent liability for the
present obligations resulting from past events which fair value can be reliably measured. Within the process of acquisition of control of Porto do
Pecém in 2015, the Board of Directors identified a contingency, which estimated responsibility amounts to 3,412 thousand Euros (31 December
2019: 4,815 thousand Euros).
iii) Under the current and future social/economical trends and the practices followed by the EDP Group in matters o
f
sustainability and
environment, the Group recognises provisions to cover the costs with the decommissioning, dismantlement and environmental rehabilitation of
electric power plants. As at 31 December 2020, the provision amounts to 93,191 thousand Euros and 75,695 thousand Euros for the electric
power plants located in Portugal and Spain, respectively. According to accounting policy referred in note 2 n), these provisions are calculated at
the present value of the future liability and are accounted against an increase in property, plant and equipment and are depreciated on a straight
line basis over the useful life of the assets. The calculation of these provisions was based on an inflation rate between 1.35% and 2% and
discount rates between 0% and 1.31%.
iv) The item Variations in Perimeter reflects the effect o
f
the acquisitions and disposals made in the year ended December 31, 2020, within the
scope of the strategic plan carried out by the Group (see note 6).
EDP and its subsidiaries' Board o
f
Directors, based on the information provided by its legal advisors and on the analysis o
f
pending law suits, have
recognised provisions to cover the losses estimated as probable, related with litigations in progress.
As at 31 December 2020, Provision for dismantling and decommissioning includes the following situations:
i) The Group has recognised a provision o
f
47,614 thousand Euros (31 December 2019: 44,375 thousand Euros) to cover the cost o
f
dismantling
the Trillo Nuclear Plant from the final close down until its transfer to Enresa, the company that will dismantle it. The assumptions used in the
calculation of the provision include an inflation rate of 2% and a discount rate of 0.60%. Enresa has the responsibility of decommissioning
nuclear power plants, as well as of treating and accommodating radioactive waste, within three years after the conclusion of the operational
activit
y
of nuclear power plants;
ii) Provisions for dismantling wind farms and solar parks of 305,628 thousand Euros (31 December 2019: 270,353 thousand Euros) to cover the
costs of bringing the sites to their original conditions, of which 151,704 thousand Euros refer to the wind farms and solar parks in North
America, 149,249 thousand Euros refer to the wind farms and solar parks in Europe and 4,675 thousand Euros refer to the wind farms in Brazil.
Discount and Inflation rates used for 2020 are:
Provisions for customer guarantees under current operations include essentially provisions for commercial losses.
Provision for legal and labour matters and other contingencies includes provisions for litigation in progress and other labour contingencies, which
are related essentially with:
i) Requests for the refund of tariff increases paid by industrial consumers of the brazilian subsidiaries EDP São Paulo and EDP Espírito Santo in
the amount of 10,575 thousand Euros (31 December 2019: 13,102 thousand Euros). These requests result from the application of
Administrative Orders DNAEE no. 38 of 27 Februar
y
1986 and no. 45 of 4 March 1986 - Plano Cruzado, effective from March to November 1986;
ii) In 2012, following the decision by the arbitration court, which partially accepted Terriminas' claim, and condemned EDP Produção to pay the
amount of 1,329 thousand Euros regarding the price differential for 1985 and 1986, EDP Group has booked a provision to cover this
contingency. Therefore, as at 31 December 2016, the estimated liability amounted to 5,836 thousand Euros, corresponding to the indemnity
discounted amount. The appeal presented by EDP Produção was denied, and confirmed the court sentence that determined the legitimacy for
Terriminas to collect the amount in which EDP Produção was condemned. EDP Produção paid 6,371 thousand Euros and appeal for the
payment of the remaining amount of 1,629 thousand Euros (interest from 2 February 2013 to 30 September 2017) for lack of an enforceable
instrument. On February 2019, a decision was delivered regarding EDP's claim, considering it as an undue payment. On May 2019, the court
decided in favour of EDP Group claim. As at 31 December 2019 this process was closed. After the conclusion of this process, Terriminas filed a
new claim against EDP Produção, asking for the payment of interests. This contingency was assessed in the amount of 2,207 thousand Euros
with a possible risk of loss. Additionally, on September 15, 2020, the Court issued a clearing order in which it judged the exception of res
judicata to be verified and, consequently, acquitted EDP Produção of the instance. On 18 November 2020, Terriminas appealed this decision to
the Lisbon Court of Appeal, and is awaiting a decision from this Court.;
397
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Milhares de Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Administrative and Civil
222,541
239,911
-
1,279
Fiscal
559,652
488,963
11,969
12,023
Others
133,969
126,472
2,691
3,056
916,162
855,346
14,660
16,358
The possible contingencies more relevant in Portugal, are as follows:
distribution grids, including public illumination, with respect to the urbanistic reconversion and intervention area in Parque Expo 98. In this
context, Parque Expo 98 claims that, between 1996 and 2014, it supported the costs that are responsibility of E-Redes – Distribuição de
Eletricidade, S.A. In November 2015, Parque Expo 98 in liquidation addressed E-Redes – Distribuição de Eletricidade, S.A. a separate judicial
notice, in order to interrupt the limitation period (which would occur 20 years from the date of the referred agreement). Meanwhile Parque Expo
98, in liquidation, claims a reimbursement from E-Redes – Distribuição de Eletricidade, S.A. of those costs in the amount of 15,811 thousand
Euros. E-Redes – Distribuição de Eletricidade, S.A. contested this claim on 28 June 2017 and is still waiting for further developments.
On 26 September 2018, DGEG notified EDP about a dispatch issued by the Secretary o
f
State for Energy (SSE) on 29 August 2018, which
quantifies at 285 million Euros the alleged overcompensation of EDP related to the calculation of the real availability factor of the plants under the
CMEC regime. Thus, even though the Group is still analysing the technical and legal foundations of this dispatch, this has been reflected in the
financial statements as at 31 December 2018, through a provision of the same amount. During 2020, EDP made payments of 110,963 thousand
Euros, using this provision. As at 31 December 2020, the value of this provision is 81,579 thousand Euros
(
see note 4
)
.
In their ordinary course o
f
business, EDP Group subsidiaries are involved in several litigations and contingencies (o
f
possible risk) o
f
administrative,
civil,
tax,
labour
and
other
natures.
These
legal,
arbitration
or
other actions,
involve customers,
suppliers, employees,
administrative, central, municipal, tax, environmental or other authorities. In EDP Group and its legal advisors' opinion, the risk of a loss in these
actions is not probable, and the outcome will not affect on a material way its consolidated financial position.
The processes whose losses were considered as possible, do not require the recognition o
f
provisions and are periodically reassessed. The detail
of possible contingencies is analised as follows:
The BOE 223/2017 published during the third quarter o
f
2017 opened the hearing process o
f
the Order o
f
the Minister o
f
Energy, Tourism and
Digital Agenda of 13 September, introducing a "lesividad" declaration procedure for the public interest Order IET/980/2016, of 10 June, which
established a remuneration for electricity distribution companies for 2016. Thus, the remuneration that was determined was allegedly higher than
it should be for 2016. Until to solve the “lesividad” procedure, the remuneration for the distribution activity for the years 2017, 2018 and 2019 is
considered provisional, EDP España has been calculating the remuneration based on the remuneration of 2016. As at 31 December 2020, EDP
España recorded a provision in the amount of 12,020 thousand Euros (31 December 2019: 12,020 thousand Euros) and the total value of this
contin
g
enc
y
at this
p
oint is 60,100 thousand Euros related to the
p
otential "lesividad" effect for 2016, 2017, 2018, 2019 and 2020.
On 3 May 2018, it has come to EDP’s knowledge (through a DGEG’s letter) that the CMEC final adjustment had been officially approved, according
to ERSE’s proposal, in the amount of 154 million Euros. EDP reflected this reality in its financial statements as of 31 December 2018, recognising
a provision by the difference in the final adjustment amounts already recognised in the Group's revenues. On 31 December 2020 EDP maintains
the provision in its accounts (see note 4).
On 19 October 2020, EDP Produção became aware, by letter sent by DGEG, of the dispatch of the SEE regarding the approval of the revisibility for
the year 2015, which is deducted in the amount of 72.9 million Euros the predicted amount of 135.6 million Euros.. In this respect, the EDP Group
has registered a provision in the amount of 72.9 million Euros, and carried out an administrative appeal against the order of SEE on 19 January
2021
(
see note 4
)
.
Group
Company
398
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
ii) On 29 July 2016, the Portuguese Competition Authority (AdC) has notified EDP S.A. and EDP Comercial, S.A. with a notice for alleged
violation of competition laws, regarding the process about the commercial campaign done in partnership with Modelo Continente, designated
as "Plano EDP Continente". This was an occasional campaign, limited to two years, which was one of several campaigns usually performed by
several other market agents. On 5 May 2017, EDP S.A. and EDP Comercial, S.A. received AdC final decision which applied a fee of 2,900
thousand Euros to EDP S.A. and 25,800 thousand Euros to EDP Comercial. EDP Group is convinced that this campaign has brought real benefits
to consumers and competition in markets and that no transgression has been committed. The companies filed their appeal on 19 June 2017
and are still awaiting sentence. Subsequently, a dispatch was delivered by Competition, Regulation and Supervision Court (TCRS) that
considered unconstitutional the law from AdC which demanded a fine payment or a security before a decision about the case. This view was
confirmed with a Constitutional Court judgment on 4 October 2018. The Public Prosecuters as well as AdC presented a new appeal about this
judgement for Constitutional Court, with EDP S.A and EDP Comercial presenting its counter-allegations. On 17 December 2019, EDP S.A. and
EDP Comercial were notified by the Constitutional Court for the reversal of the prior decision, by the same court. The process was transfer from
the Constitutional Court to TCRS and EDP Group companies are now awaiting for a new audience. On 5 June 2020, it was determined in a court
hearing that EDP and EDP Comercial would provide a security in the amount of 50% of the fine imposed on them by the AdC, and on 19 June
2020, EDP and EDP Comercial provided surety bond and surety in the amounts of 1,450 thousand Euros and 12,900 thousand Euros,
respectively. The last judgment session was held on the 15th of July, awaiting the decision of the TCRS and maintaining for the time being both
the amount of the contingency and the risk analysis. On 30 September 2020, a judgment was issued by the TCRS, which maintained the
conviction of the two companies of the EDP Group, as well as Sonae Group's Companies, having also reduced fines by 10%. Fines were
determined at 2,610 thousand Euros and 23,220 thousand Euros for EDP and EDP Comercial, respectively. On 30 October 2020, EDP and EDP
Comercial appealed the condemnatory sentence handed down by the TCRS, to the Lisbon Court of Appeal, and are awaiting the decision of this
Court. The contingency amount and risk analysis remain unchanged.
iii) Within E-Redes – Distribuição de Eletricidade, S.A. there is a contingency established by Gás Natural Comercializador, S.A. (GNC), for the
undue payment of tariffs for access to networks charged by E-Redes – Distribuição de Eletricidade, S.A. and surplus consumption by Repsol
Polimeros, S.A. The situation is related with the attribution of a proper consumption producer status to Repsol Polimeros, S.A. in June 2014,
being this energy invoiced only from October 2015 onwards. Regarding the year 2015, GNC was reimbursed for the over paid amounts, therefore
the claim is only on payments about the second half of 2014, in the amount of 5,724 thousand Euros. As at 31 December 2020, the value of this
contingency is divided between a probable risk of loss in the amount of 2,308 thousand Euros and the remain value with a classification of risk
as possible. According to the expert report issued in the meantime, it came to recognize that, with regard to the Network Access Tariffs (“TAR”),
despite the fact that at the time of the facts, the self-consumption statute has not yet been approved and that, therefore, E-Redes – Distribuição
de Eletricidade, S.A. situation was not clear, the amount of TAR charged by the company would have been higher than the amount actually due
by GNC. With regard to the amount claimed by GNC as “excess consumption”, the consolidated expert report concluded that “the reliquidation
taking into account the adjustments between 13 June 2014 and 31 December 2014, according to the hourly values presented by GNC for that
period, would generate a return to GNC whose approximate value estimates that it could be in the range between 3,192 thousand Euros and
3,271 thousand Euros ”. Consequently, and with reference to 31 December 2020, the probable contingency amount of 2,308 thousand Euros
(referring to the value of TAR) was updated to 5,579 thousand Euros; the difference refers to the higher amount indicated in the expert report as
the amount allegedly owed by GNC to excess consumption securities. The provision amount was also updated accordingly, with the remainder
remaining as possible, 144 thousand Euros. In October 2020, the experts presented the clarifications requested by the Court, and the Judgment
Hearing was scheduled for January 2021. On December 31, 2020, the amount of the contingency and the risk analysis remain unchanged.
iv) On 3 September 2018, the Portuguese Competition Authority (AdC) notified EDP Produção with Statement of Objections, under which EDP
Produção is accused of abuse of a dominant position in the secondary regulation band market (a part of the ancillary services market). AdC
claims that EDP Produção has deliberately limited the participation of CMEC plants in the secondary regulation market between 2009 and 2013,
benefitting its non-CMEC power plants. The alleged benefit, in detriment of consumers, would be twofold: receiving higher compensation under
CMEC annual adjustment regime; profiting from higher market prices in said market. AdC has estimated that the alleged practice of EDP
Produção has generated damages to the national electricity system and to consumers of around 140 million Euros. AdC pointed out that the
adoption of a Statement of Objections did not determine the result of the investigation, which began in September 2016 and is still in course. On
28 November 2018, EDP Produção presented to AdC its facts about the accusation. On 18 September 2019, AdC has notified EDP Produção for
an alleged infraction to competition rules. This contingency was estimated with a value of 48 million Euros and it graduation was assessed as
possible. On 30 October 2019, EDP Produção presented an appeal against this decision to the TCRS and it is waiting the counter-allegations of
AdC. On 20 May 2020, EDP Produção was notified of a decision by the TCRS, which, among other things, admitted its Judicial Challenge Appeal,
establishing a purely return effect and determining the payment of the fine imposed within 20 days. In this regard, EDP Produção submitted
requests, invoking supervening facts for the demonstration of considerable damage, and arguing defects in the decision that determined the
attribution of a merely devolution effect to the Judicial Challenge Appeal. On 16 July 2020, EDP was notified of an order which implied the
existence of substantial losses if the fine was paid in advance. Thus, the payment order was therefore suspended. On 18 November 2020, EDP
Produção was notified of a decision by the Lisbon Court of Appeal, granting the appeal presented by the Public Prosecutor and, consequently,
revoking the order of TCRS of 16 July 2020. EDP Produção appealed of this judgment to the Constitutional Court on November 30, 2020, and is
awaiting the decision of this Court. As of 31 December 2020, the contingency amount and the associated risk remain unchanged.
399
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
vi) Porto do Pecém was the subject o
f
tax execution procedure in the amount o
f
19,995 thousand Euros, resulting from alleged non-taxation
under IRPJ and CSLL of financial income and exchange variations related to previous periods amounting to 31 December 2020 to 14,407
thousand Euros (31 December 2019: 19,995 thousand Euros); e
vii) Following a period o
f
drought in the State o
f
Ceará, the local government, through Decree 32,044 o
f
16 September 2016, introduced an
extraordinary rate called the Emergency Water Charge (EHE) over the actual water consumption of thermoelectric power plants, and in
particular the Porto do Pecém. On 13 October 2016, the Porto do Pecém submitted an administrative request to ANEEL for the purpose of
transferring this additional cost to the Unit Variable Cost (CVU), in order to restore the economic-financial balance of the contract (CCEAR).
ANEEL, through Order 3,293 of 16 December 2016, denied the request of the Porto do Pecém, which initiated proceedings against ANEEL.
As at 31 December 2020, the lawsuit is estimated in an amount o
f
19,721 thousand Euros (31 December 2019: 23,738 thousand euros). The
variation occured during this period is related with the revision of assumptions used to calculate the contingency which previously was
considering the estimative of the value of EHE to be paid following the historical average. The new calculation is based on the claim effective
risk considering the transference of CVU.
The possible contingencies more relevant in Brazil, are as follows:
i) Investco is involved in a legal action o
f
a civil nature mostly related with indemnity claims resulting from the filling o
f
the hydroelectric
reservoir, in the amount of 21,033 thousand Euros (31 December 2019: 24,879 thousand Euros);
ii) There is a public civil action filed against EDP São Paulo and EDP Espírito Santo by ADIC – Associação de Defesa dos Interesses Colectivos,
claiming a compensation arising from a tariff readjustment on part A from 43 concessionaires. The estimated value attributable to EDP São
Paulo and EDP Espirito Santo amounts to 44,502 thousand Euros (31 December 2019: 52,668 thousand Euros);
iii) EDP São Paulo is a party to a lawsuit related to the COFINS (Contribution for social security financing) from 1993 to 1995 in
j
oinder with AES
Eletropaulo, where is discussed the application of the tax amnesty introduced by the Provisional Measures paragraphs 1858-6 and 1858-8,
granted to taxpayers who did not collect COFINS, considering it improper. In the trial of 2nd Instance, was partially confirmed the right to
amnesty, and applied the Decree-Law 1,025/69, which established the payment of procedural costs in favour of the National Treasury. From this
decision, an appeal was presented, which holds trial. The updated amount as at 31 December 2020 is 12,050 thousand Euros (31 December
2019: 16,905 thousand Euros
)
;
iv) EDP São Paulo and EDP Espírito Santo have administrative and
j
udicial actions regarding tax compensations not ratified by the Brazilian
Federal Revenue Bureau, which: (i) are protected by judicially recognised credits (IRPJ - Corporate tax income and CSLL - Social Contribution on
net profits) and (ii) that result from tax contributions in 2001 of IRPJ, CSLL, PIS (Social integration programme) and COFINS considered to be
excessive as a consequence of the application of "Parecer COSIT 26/2002" (Extraordinary Tariff Adjustment - RTE) published by the Brazilian
Tax Authorities. According to this opinion, the amounts resulting from tariffs updated under RTE should be recognised and taxed only as of
2002. As at 31 December 2020, the u
p
dated values amount to 30,917 thousand Euros
(
31 December 2019: 86,023 thousand Euros
)
;
v) Lajeado has a
j
udicial tax action initiated by the Brazilian Tax Authorities in 2014 aimed at collecting tax contributions (IRPJ and CSLL)
resulting from the disallowance of expenses regarding goodwill arising from a business combination (acquisition). As at 31 December 2020,
this contingency amounts to 22,332 thousand Euros (31 December 2019: 28,918 thousand Euros);
v) On 9 September 2020, Portsines - Terminal Multipurpose de Sines, SA (Portsines) filed an arbitration lawsuit against EDP Produção, to obtain
its condemnation in the payment of the amounts relating to port fees, allegedly provided for in the Contract for Provision of Services celebrated
between both. In summary, Portsines intends to obtain the condemnation of EDP Produção to the payment of the so-called fixed rate provided
for in the Contract, even concerning periods in which there is no unloading of coal destined for the Sines Thermoelectric Power Station, claiming
in particular that the referred fee remunerates the investment made by you in said infrastructure and makes its actual use by EDP Produção
irrelevant. On 2 November 2020, a decision was handed down that ordered EDP Produção to pay (i) the amount invoiced and overdue of 590
thousand Euros related to the fixed rate of the first quarter of 2020; (ii) the amount invoiced and falling due of 590 thousand Euros related to the
fixed rate of the second quarter of 2020; (iii) conditionally, until the end of the Concession Contract or until the end of the Contract, whichever
occurs first, the amount of 599 thousand Euros for the third and fourth quarters of 2020 and each of the four quarters of the year 2021 and first
two quarters of the year 2022; and (iv) conditionally, alternatively, full payment of the current fixed fee amount of 3,074 thousand Euros, divided
quarterly, during the period between the date of the eventual termination of the Contract between Tejo Energia and Portsines and the end of the
Contract Concession or Contract between EDP Produção and Portsines, whichever comes first; (v) interest due and falling due at the applicable
rate. On December 2, 2020, EDP Produção filed an Appeal against the aforementioned Arbitral Award, to the Lisbon Court of Appeal, within
which a request for annulment of the final decision was also deducted, awaiting a decision on the same. The amount of the contingency
currently amounts to 5,896 thousand Euros, with the risk being classified as possible.
400
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
37.
Institutional Partnerships in North America
Thousand Euros
Dec 2020
Dec 2019
799,094
1,002,871
1,134,448
1,286,913
1,933,542
2,289,784
Thousand Euros
Dec 2020
Dec 2019
Balance at the beginning of the period
2,289,784
2,231,249
Proceeds received from institutional investors
307,860
188,490
Cash paid for deferred transaction costs
-3,310
-2,087
Cash paid to institutional investors
-55,822
-80,776
Other Income (see note 8)
-201,783
-181,570
Unwinding (see note 13)
94,718
85,320
Exchange differences
-181,398
42,848
Loss of control of companies with Institutional Partnerships (see note 6)
-320,944
-
Other
4,437
6,310
Balance at the end of the period
1,933,542
2,289,784
Deferred income related to benefits provided
Liabilities arising from institutional partnerships
Subsidiaries in North America recognises under this caption the receipts o
f
institutional investors associated with wind and solar projects. This
liability is reduced by the amount of tax benefits provided and payments made to the institutional investors during the period. The amount of tax
benefits provided is booked as a non-current deferred income, and recognised over the useful life of the related projects (see note 8). Additionally,
this liability is increased by the estimated interest based on the liability outstanding and the expected rate of return of the institutional investors
(
see note 13
)
.
The movements in Institutional partnerships in North America are as follows:
Group
During the first quarter o
f
2020, EDPR NA, has secured and received proceeds amounting to 130,055 thousand Euros (148,539 thousand dollars)
related to institutional equity financing from JP Morgan, in exchange for an interest in onshore wind projects.
Group
Finally, even if EDP Group classifies its risk as remote, it is important to identify the following litigation:
i)
O
n
27
O
cto
b
er
2009
an
d
5
J
anuary
2010
,t
h
e
EDP
G
roup rece
i
ve
d
two tax sett
l
ements regar
di
ng
2005
an
d
2006
taxa
bl
e
i
ncome
f
or t
h
e
EDP
tax Group, which included an adjustment of 591 million Euros regarding its subsidiary, EDP Internacional SGPS, related to the tax treatment
considered by the EDP Group in relation to a capital loss generated with the liquidation of a subsidiary, whose main assets consisted of
investments in operating subsidiaries in Brazil, namely EDP Espírito Santo and Enersul. As at 31 December 2020, the amount of this tax
contingency amounts to 299 million euros (31 December 2019: 290 million euros).
Considering the analysis made, the technical advice received and a favourable binding opinion obtained from the tax authorities in relation to
the nature of the transaction occurred in the year of the assessment, the EDP Group considers as remote the risk associated with this matter.
Under this analysis, the capital loss is tax deductible for income tax purposes as established in article 75 no. 2 of the Corporate Income Tax
Code ("Código do IRC") based on the wording of the law in force at that date (existing article 81).
Given the above, and considering that the EDP Group’s tax procedures comply with applicable Portuguese tax legislation at the date of the
events, the Group is currently using all available legal means to contest these additional settlements. Thus, following the implied rejection of the
hierarchical appeal, EDP presented a judicial claim, on 6 June 2012. In November 2018, EDP Group was notified with a decision in favour. The
Treasuar
y
filed an a
pp
eal on that decision.
ii) EDP São Paulo through the Power Industry Union o
f
the State o
f
São Paulo - SindiEnergia, filed two claims against the Treasury Department
of the State of São Paulo, seeking the suspension of the effects of Decrees 55.421/2010 and 55.867/2010. Both claims deal with VAT incidence
on energy technical losses (theft, deviation or fraud) and obtained a favourable decision. These decisions are still subject of appeal to higher
courts, however, given that the higher courts jurisprudence supports the thesis discussed in this process, the EDP Group classifies as remote
the risk of losing this action. The estimated value at 31 December 2019 amounted to 133,613 thousand Euros. As at 31 December 2020, this
contin
g
enc
y
is closed, due to the favourable decision to EDP São Paulo in Februar
y
2021.
The caption Institutional partnerships in North America is as follows:
401
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
38.
Trade payables and other liabilities from commercial activities
At Group level, Trade payables and other liabilities from commercial activities are as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Contract liabilities:
Energy sales contracts - North America
6,286
9 148
-
-
Deferred income - CMEC
142,482
208,535
66,053
74,995
-
-
12,405
-
148,768
217,683
78,458
74,995
Other liabilities:
Investment government grants
515,409
566,450
-
-
Amounts payable for tariff adjustments - Electricity - Portugal
75,093
-
41,479
43,626
Amounts payable for tariff adjustments - Electricity - Brazil
277,807
464,823
98,345
-
Amounts payable - securitisations
-
-
139,192
136,933
Amounts payable - CMEC
-
-
222,245
221,955
Amounts payable for concessions
195,471
199,772
-
-
Property, plant and equipment suppliers
2,874
5,101
1,202,896
1,196,186
Suppliers
-
-
799,158
919,745
Accrued costs related with commercial activities
-
-
731,954
633,664
Holiday pay, bonus and other charges with employees
-
-
168,272
151,917
CO2 emission Licenses
-
-
166,692
203,085
Other creditors and sundry operations
219,584
190,478
303,522
277,517
1,286,238
1,426,624
3,873,755
3,784,628
1,435,006
1,644,307
3,952,213
3,859,623
At Company level, Trade payables and other liabilities from commercial activities are as follows:
Thousand Euros
Dec 2020
Dec 2019
Other liabilities:
Suppliers
390,819
412,388
Accrued costs related with commercial activities
234,644
253,650
Property, plant and equipment suppliers
1,379
961
Holiday pay, bonus and other charges with employees
33,133
30,370
Other creditors and sundry operations
2,584
17,945
662,559
715,314
The caption Deferred income - CMEC is detailed as follows:
Thousand Euros
Non-current
Current
Initial CMEC
37,553
37,883
Final adjustment
104,929
28,170
142,482
66,053
During the third quarter o
f
2020, EDPR NA, has secured and received proceeds amounting to 177,805 thousand Euros (203,075 thousand dollars)
related to institutional equity financing from Bank of America, in exchange for an interest in the 405 MW onshore wind projects.
EDP Renováveis has lost control in 2020 over a portfolio upon the completion o
f
the sale o
f
80% o
f
equity shareholding (see note 6), implying a
decrease in the amount of 320,944 thousand Euros in the Institutional partnerships liabilities related to this portfolio.
Under these partnerships, EDP Group provides operating guarantees to institutional investors in wind and solar projects, which are typical o
f
this
type of structure. As at 31 December 2020, the liabilities associated with these guarantees are not expected to exceed the amounts already
recognized under the caption Liabilities arising from institutional partnerships.
Non-Current
Current
Amounts received from the Fund for systemic sustainability of the energy sector
Current
At the moment o
f
EDPR NA acquisition, the contracts signed between this subsidiary and its customers, determined under the terms o
f
the
Purchase Price Allocation, were valued through discounted cash flow models and market assumptions at 190,400 thousand US Dollars, being
booked as a non-current liability under Energy sales contract - EDPR NA, and amortised over the useful life of the contracts in Other operating
income - Other.
402
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Non-Current
Current
Balance at the beginning of the period
-
43,626
Payment through the electricity tariff
-
-43,673
Interest expense (see note 13)
-
42
Transfer to/from tariff adjustment payable (see note 26)
75,093
41,484
Balance at the end of the period
75,093
41,479
The caption CO2 emission licenses includes the CO2 consumptions during 2020 in Portugal and Spain, in the amount o
f
103,469 thousand Euros
and 63,223 thousand Euros, respectively (31 December 2019: 116,752 thousand Euros and 86,333 thousand Euros). The variation includes the
consumptions of 2020 and the delivery in 2020 of the 2019 consumption licenses, which are returned to regulatory authorities until April of the
year following its consumption.
The caption Other creditors and sundry operations - Non-current includes the amount o
f
55,155 thousand Euros related with the reinsurance
activity (31 December 2019: 62,258 thousand Euros). The caption Other creditors and sundry operations - Current includes the amount of 14,317
thousand Euros related to tariff adjustment payable (31 December 2019: 14,317 thousand Euros).
The movement for the period in Amounts payable for tariff adjustments - Electricity - Portugal (Non-current and Current) is as follows:
T
h
e caption Amounts paya
bl
e
f
or tari
ff
a
d
justments - E
l
ectricity - Brazi
l
, re
f
ers to tari
ff
a
d
justments recognise
d
in EDP São Pau
l
o - Distri
b
uição
d
e
Energia S.A. and EDP Espírito Santo - Distribuição de Energia S.A. in the accumulated amount of 242,630 thousand Euros (31 December 2019:
276,341 thousand Euros) and 133,522 thousand Euros (31 December 2019: 188,482 thousand Euros), respectively. The variation occurred
includes the tariff deficit of the period with a positive impact of 111,821 thousand Euros (see note 7), the transfer from tariff adjustment
receivable of 25,040 thousand Euros (see note 26), the decrease of the amount returned through the tariff of 96,410 thousand Euros, the
exchange differences due to depreciation of Brazilian Real against Euro with a negative impact of 139,341 thousand Euros and the unwinding in
the amount of 10,219 thousand Euros (see note 13), which includes the recognition of 6,566 thousand Euros (38,664 thousand Brazilian Real) of
the unwinding over the amount resulting from the non-inclusion, in 2019, of the amounts of VAT borne in the basis of calculation of PIS and
COFINS (1,756,597 thousand Brazilian Real as at 31 December 2019, of which 65,213 thousand Brazilian Reais were returned in 2020 through the
electricit
y
tariff
)
.
In the energy distribution activity, the subsidiaries o
f
EDP Group in Portugal and Spain recover the deficits and tarif
f
adjustment assets through
the tariffs charged to their customers. The caption Amounts payable - securitizations includes the amounts payable to entities that have acquired
the right to receive these assets in securitisation or direct sales operations in Portugal.
The caption Amounts payable - CMEC refers to amounts received by E-Redes – Distribuição de Eletricidade, S.A., through the tariff, regarding the
CMEC Revisibility of 2016 and 2017, which delivery to REN is awaiting approval.
The caption Amounts payable for concessions includes the concession rights for the operation o
f
the hydric domain o
f
Alqueva and Pedrógão
transferred by EDIA in the amount of 131,577 thousand Euros (31 December 2019: 134,496 thousand Euros) and the financial compensation for
the use of the public domain related to concession agreements of Investco, S.A. and Enerpeixe, S.A. in Brazil in the amount of 63,894 thousand
Euros (31 December 2019: 65,276 thousand Euros).
The caption Property, plant and equipment suppliers - Current refers mainly to the amounts due related with the construction o
f
windfarms and
solar parks in North America in the amount of 789,771 thousand Euros (31 December 2019: 1,003,668 thousand Euros) and in Poland in the
amount of 65,036 thousand Euros (31 December 2019: 18,055 thousand Euros).
Deferred income - CMEC Non-current and Current, in the amount o
f
208,535 thousand Euros (31 December 2019: 283,530 thousand Euros)
includes the amount of 75,436 thousand Euros corresponding to the initial CMEC amount (833,467 thousand Euros) deducted from the
amortisation of initial CMEC during the years 2007 to 2017 and accrued with unwinding (see note 13), and the amount of 133,099 thousand Euros
relating with the final adjustment recognised in accordance with the result achieved by EDP/REN working group (256,539 thousand Euros),
deducted from amortisation charges of the period and accrued with corresponding unwinding
(
see note 13
)
.
The Amounts received from the Fund for Systemic Sustainability o
f
the Energy Sector refer to amounts transferred to SU Eletricidade, S.A. related
with the electricity tariffs for 2020, which represented CESE amounts intended to reduce the National Electric System's tariff debt and that will be
settled through the tariff.
Investment government grants are amortised through the recognition o
f
a revenue in the income statement over the useful life o
f
the related
assets, which amounts to 22,176 thousand Euros as at 31 December 2020.
403
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
39.
Other Liabilities and Other Payables
Other liabilities and other payables are as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019 *
Loans from non-controlling interests
409,978
215,023
-
-
Derivative financial instruments (see note 42)
227,228
169,008
263,309
215,510
Amounts payable and contingent prices for acquisitions/sales
143,567
18,303
84,393
-
Lease Liabilities (Rents due from lease contracts)
955,036
762,725
149,588
133,378
Other creditors and sundry operations
3,639
12,060
-
2
1,739,448
1,177,119
497,290
348,890
Other liabilities and other payables - Current
Loans from non-controlling interests
180,446
117,327
-
-
Dividends attributed to related companies
55,561
58,749
-
-
Derivative financial instruments
(see note 42)
169,654
213,363
346,612
547,312
Group companies
-
-
3,873
70,288
Amounts payable and contingent prices for acquisitions/sales
67,039
151,975
25,349
-
Lease Liabilities (Rents due from lease contracts)
100,642
75,004
12,384
12,390
Other creditors and sundry operations
16,775
7,353
35,119
51,289
590,117
623,771
423,337
681,279
2,329,565
1,800,890
920,627
1,030,169
Thousand Euros
Dec 2020
Dec 2019
ACE Portugal (CTG Group)
Fixed rate of 3.75%
29,282
32,302
ACE Poland (CTG Group)
88,950
109,245
ACE Italy (CTG Group)
Fixed rate of 4.5%
50,284
55,474
CITIC CWEI Renewables (CTG Group)
Fixed rate of 5.5%
26,462
38,696
Sonatrach
Fixed rate of 5.6%
76,394
73,186
306,368
-
577,740
308,903
Fixed rate of a range between
1.33% and 7.23%
Fixed rate of a range between
0.50% and 2.73%
Macquarie Super Core Infrastructure Fund SD Holdings S.À.R.L.
(“MSCIF”)
Group
Company
Other liabilities and other payables - Non-Current
The caption Loans from non-controlling interests Current and Non-Current mainly includes:
The variation o
f
the caption Lease Liabilities (Rents due from lease contracts) Non-Current and Current includes: i) 326,815 thousand Euros
corresponding to lease liabilities (rents due from lease contracts) starting after 1 January 2020; ii) negative 78,225 thousand Euros corresponding
to payments rents made; and iii) 39,743 thousand Euros corresponding to the financial update of the liability (see note 13).
As at 31 December 2020, the nominal value o
f
the lease liabilities (rents due from lease contracts) is detailed as follows: (i) less than 5 years:
464,607 thousand Euros; (ii) from 5 to 10 years: 324,148 thousand Euros; (iii) from 10 to 15 years: 283,371 thousand Euros; and (iv) more than 15
years: 566,945 thousand Euros.
The caption Lease Liabilities (Rents due from lease contracts), on a Company basis, includes lease contracts with EDP Pension and Medical and
Death Subsidy Funds regarding to the building units of Porto headquarters acquired by EDP Pension Fund in December 2015 and the Lisbon
headquarters building given as an in-kind contribution to EDP Medical and Death Subsidy Fund in September 2017. These contracts were
celebrated for a period of 25 years (see note 44).
* Includes reclassification resulting from the change of the accounting policy as described in note 2a).
The variation o
f
the caption Amounts payable and contingent prices for acquisitions/sales results from the recognition o
f
contingent prices in the
amount of 109,741 thousand Euros and 61,000 thousand Euros regarding the sale of the company that owns Douro's power plants portfolio by
EDP S.A. and the sale of the companies EDP Energía, S.A.U., Baser Comercializadora de Referencia, S.A. e EDP Comercializadora, S.A.U. by EDP
Iberia S.L. in December 2020, respectively, (see note 6) and the recognition of 19,510 thousand Euros related to the estimated construction costs
to be incur as a result of the sale of North America projects in 2020. On the other hand, the variation relates to Nation Rise project (decrease of
87,963 thousand Euros (see note 21)), the regularisation of contingent prices related to the sale of gas distribution business in Portugal (decrease
of 37,673 thousand Euros) and the costs actually incurred in the construction of the windfarm projects as foreseen in the context of the sale of
North America
p
ro
j
ects, in December 2018
(
decrease of 14,230 thousand Euros
)
.
404
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
40.
Tax Liabilities
Tax liabilities are as follows:
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Non Current
Special tax Brazil
122,743
138,212
-
-
Current
Income tax
47,859
47,100
15,044
1,456
Withholding tax
35,730
36,785
1,256
1,801
Value Added Tax (VAT)
141,399
116,799
3,777
24,725
Special taxes Brazil
71,911
90,100
-
-
CESE (see note 15)
-
53,360
-
-
Other taxes
101,735
134,450
1,145
1,053
398,634
478,594
21,222
29,035
521,377
616,806
21,222
29,035
41.
Non-Current Assets and Liabilities Held for Sale
This caption is as follows:
Thousand Euros
Dec 2020
Dec 2019
Assets held for sale
Electricity generation assets - Hydro Brazil
-
90,517
Electricity generation assets - Hydro Portugal
-
1,951,176
Electricity generation assets - Offshore wind
12,306
9,308
Electricity generation assets - Offshore wind - Transaction completed
-
204,886
Electricity supply (B2C) assets - Spain
9,942
-
22,248
2,255,887
Liabilities held for sale
Electricity generation liabilities - Hydro Brazil
-
16,924
Electricity generation liabilities - Hydro Portugal
-
35,147
Electricity generation liabilities - Offshore wind
111
111
Electricity generation liabilities - Offshore wind - Transaction completed
-
26,640
111
78,822
22,137
2,177,065
During the first semester o
f
2019, the EDP Brasil Group started the process o
f
selling Energest, S.A. Assets and liabilities associated with this
company were presented in non-current assets and liabilities held for sale. During the first semester of 2020 and considering the actual scenario
of uncertainty, the management of the EDP Brasil Group decided that is no longer its intention to dispose of the participation in this company. As
of the decision taken, its assets and liabilities stopped being presented as non-current assets and liabilities held for sale.
As at 31 December 2020, the captions Income tax and Special taxes Brazil include the amount of 58,489 thousand Euros (372,778 thousand
Brazilian Reais), corresponding to the recognised liability value of 80,678 thousand Euros (514,203 thousand Brazilian Reais) net of payments
(see note 28).
The criteria for classifying assets and liabilities as held for sale, as well as their presentation in EDP Group’s consolidated financial statements,
are described in the Group's accounting policies.
Group
In May 2019, EDPR Group signed a strategic memorandum o
f
understanding with ENGIE to create a co-controlled 50/50
j
oint venture in fixed and
floating offshore wind segment, the OW Offshore S.L. The new entity will be the exclusive vehicle of investment of EDPR and ENGIE for offshore
wind opportunities worldwide. This transaction was completed (see note 6). The assets and liabilities associated with Moray West Holdings
Limited remain classified as non-current assets and liabilities held for sale under the sale plan that the EDPR Group has entered into in the past.
In the last quarter o
f
2019, the EDP Group agreed to sell a company that owns a portfolio o
f
6 hydro plants in Portugal to a consortium o
f
investors formed by Engie, Crédit Agricole Assurances and Mirova – Natixis Group. The hydro portfolio comprises 1,689 MW of installed capacity
in the Douro river basin (Miranda, Picote, Bemposta, Foz Tua, Baixo Sabor and Feiticeiro). This transaction was completed in December 2020 (see
note 6).
Group
Company
405
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Renewables
Client
Solutions &
Energy
Management
Thousand Euros
Offshore wind
Supply (B2C)
Spain
Total
Assets
Investments in joint ventures and associates (see note 21)
-161
-9,942
-10,103
Other assets
-2,837
-
-2,837
Assets Held for Sale
2,998
9,942
12,940
-
-
-
42.
Derivative Financial Instruments
These reclassifications were made only for financial statement presentation purposes, without impact on the measurement o
f
these assets and
liabilities, as it is expected that the fair value less costs to sell is higher than its book value, in accordance with IFRS 5.
In accordance with IFRS 9, the Group classifies derivative financial instruments as fair value hedge o
f
a recognised asset or liability (Fair value
hedge), as cash flow hedge of recognised liabilities and highly probable future transactions (Cash flow hedge), as net investment hedge in foreign
operations (Net investment hedge), or as held for trading, if or when they are not eligible for hedge accounting.
As at 31 December 2020 the following reclassifications were made to held for sale:
In the third quarter o
f
2020, EDPR Group signed a sale and purchase agreement with Connor, Clar
k
& Lunn Infrastructure to sell an 80% equity
shareholding in a onshore wind and solar portfolio located in the United States with 563 MW (450 MW net). This transaction was completed in
December 2020 (see note 6).
In the second quarter o
f
2020, the EDP Group agreed to sell a portfolio o
f
two CCGTs power plants (Castejón I & III), with 843 MW o
f
installed
capacity located in Navarra, North of Spain and the B2C energy supply business in Spain, which includes 1.2 million clients in free market, and the
50% stake in our joint venture with CIDE for electricity supply in this segment (CHC Energia). This transaction was completed (see note 6) in
December 2020. Furthermore, following CIDE’s exercise of its preferential right for the acquisition of EDP’s 50% shareholding in CHC Energia, EDP
and CIDE have reached an agreement for the acquisition by CIDE which shall be completed in 2021, so this asset is still presented as a non-
current asset held for sale.
In the second quarter o
f
2020, EDPR Group committed to the plan o
f
selling the entire stake held in the following portfolio o
f
Spanish companies:
Bon Vent de Corbera, S.L.U., Eólica Sierra de Ávila, S.L.U., Parc Eòlic de Coll de Moro, S.L.U., Parc Eòlic de Torre Madrina, S.L.U., Parc Eòlic de
Vilalba dels Arcs, S.L.U., Aprofitament D'Energies Renovables de la Terra Alta, S.A. and Aprofitament D'Energies Renovables de L'Ebre, S.L. This
transaction was completed in December 2020 (see note 6).
406
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Assets
Liabilities
Assets
Liabilities
Net Investment hedge
Cross-currency interest rate swaps
83,532
-23,822
9,343
-54,085
Currency forwards
5,544
-38
5,026
-
Fair value hedge
Interest rate swaps
70,515
-
84,762
-
Cross-currency interest rate swaps
27,320
-3,974
50,213
-
Cash flow hedge
Interest rate swaps
2,287
-24,852
122
-15,383
Swaps related to gas commodity
153,253
-156,716
131,719
-148,416
Electricity swaps
24,219
-34,235
25,213
-30,132
Currency forwards for commodities
54,046
-22,770
95,434
-5,240
Trading
Interest rate swaps
-
-6,054
7,682
-1,958
Cross-currency interest rate swaps
1,089
-432
-
-55
Commodity swaps and forwards
146,877
-97,339
123,013
-116,937
Currency forwards
3,006
-4,528
1,573
-1,233
CO2 forwards
-
-3,843
728
-2,760
Currency forwards associated to commodities
29,592
-18,279
27,855
-6,172
Commodity options
4,148
-
2,609
-
605,428
-396,882
565,292
-382,371
Thousand Euros
Assets
Liabilities
Assets
Liabilities
Cash flow hedge
Swaps related to gas commodity
27,101
-80,913
7,392
-82,537
Electricity swaps
57,387
-2,434
4,157
-95,770
Currency forwards for commodities
39,768
-7,766
86,380
-
Trading
Interest rate swaps
69,493
-73,850
91,067
-86,739
Cross-currency interest rate swaps
96,906
-88,240
53,946
-57,922
Commodity swaps
417,217
-305,455
369,978
-405,701
Currency forwards
6,847
-6,700
2,806
-5,296
Commodity forwards
3,341
-7,535
7,661
-10,089
Currency forwards associated to commodities
46,111
-32,960
39,096
-16,269
Commodity options
7,895
-4,068
2,607
-2,499
772,066
-609,921
665,090
-762,822
The fair value of the derivative financial instruments in EDP Group is as follows:
Dec 2020
Dec 2019
As at 31 December 2020, EDP Group holds contracts for the purchase and sale o
f
commodities traded on futures exchange market, namely
Chicago Mercantile Exchange, Intercontinental Exchange, European Energy Exchange and OMIP, whose fair value of the contracted operations is
settled on a daily basis, and therefore it is not included in the Statement of Financial Position. The notional amount of these futures contracts
amount to 2,619,544 thousand Euros with maturities ranged between 2020 and 2024 (31 December 2019: 3,394,113 thousand Euros, with
maturity in 2019 and 2024), and the fair value held in EDP Group results and cash flow hedge reserves related to these operations are a negative
amount of 11,313 thousand Euros and a negative amount of 16,664 thousand Euros, respectively (31 December 2019: positive amount of 13,762
thousand Euros and
p
ositive amount of 27,453 thousand Euros
)
.
The management o
f
financial ris
k
o
f
EDP, S.A. and other EDP Group companies, is carried out centrally by EDP, S.A. (note 5). On this basis, EDP,
S.A. negotiates derivative financial instruments with external entities to hedge its own individual business risks, as well as for other companies of
the Group, performing for these entities’ as an intermediate in their contracting.
The fair value of the derivative financial instruments at Company level is as follows:
Dec 2020
Dec 2019
The fair value o
f
derivative financial instruments is booked in Other debtors and other assets (see note 27) and Other liabilities and other payables
(see note 39), according to its nature.
Fair value o
f
derivative financial instruments is based on listed market prices, whenever available, or on valuations determined through valuation
models that use variables observable on the market. Therefore, according to IFRS 13 requirements, the fair value of the derivative financial
instruments is classified as of level 2 (see note 45) and no changes of level were made during this period. These valuation models are based on
generally accepted discounted cash flow techniques and option valuation models, using market data obtained through financial information
platforms.
407
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Following
Thousand Units
Unit
2021
2022
2023
2024
years
Total
Net Investment hedge
Euros
94,906
102,959
138,512
877,009
686,740
1,900,126
Currency forwards
Euros
1,001,739
-
-
-
-
1,001,739
-
Interest rate swaps
Euros
-
1,000,000
-
-
600,000
1,600,000
Euros
-
-
-
410,314
-
410,314
Interest rate swaps
Euros
98,526
131,973
59,216
56,798
101,719
448,232
Swaps related to gas commodity
MWh
64,366
40,584
34,849
23,401
12,792
175,992
Electricity swaps
MWh
11,313
7,521
5,829
4,270
9,076
38,009
Euros
581,611
178,358
108,358
105,768
82,878
1,056,974
Trading
Interest rate swaps
Euros
639
645
645
645
311,276
313,850
Euros
95,403
-
-
-
-
95,403
Swaps related to gas commodity
MWh
26,654
27,782
15,308
8,694
-
78,438
Electricity swaps and forwards
MWh
8,590
3,420
3,709
1,895
2,542
20,156
Currency forwards
Euros
201,447
58,957
-
-
-
260,404
CO2 forwards
MT
655
155
-
-
-
810
Euros
166,530
240,776
185,549
108,352
-
701,207
MWh
1,752
438
-
-
-
2,190
Followin
g
Thousand Units
Unit
2020
2021
2022
2023
y
ears
Total
Net Investment hedge
Euros
77,093
75,416
49,558
75,720
1,183,694
1,461,481
Currency forwards
Euros
772,434
-
-
-
-
772,434
Interest rate swaps
Euros
450,000
-
1,000,000
-
600,000
2,050,000
Euros
-
-
-
-
410,314
410,314
Interest rate swaps
Euros
108,087
112,905
146,423
74,511
217,539
659,465
Swaps related to gas commodity
MWh
46,792
27,269
22,738
18,956
18,956
134,711
Electricity swaps
MWh
10,087
7,171
5,212
3,645
5,600
31,715
Euros
195,566
166,997
155,983
130,374
129,372
778,292
Trading
Interest rate swaps
Euros
600,000
-
-
-
300,000
900,000
Euros
-
6,075
-
-
-
6,075
Swaps related to gas commodity
MWh
63,822
975
-
-
-
64,797
Electricity swaps
MWh
5,232
1,897
1,160
515
2,630
11,434
Currency forwards
Euros
87,848
22,887
-
-
-
110,735
CO2 forwards
MT
1,194
-
-
-
-
1,194
Euros
612,462
3,686
-
-
-
616,148
MWh
439
-
-
-
-
439
Cross-currency interest rate
swaps
Cross-currency interest rate
swaps
Cross-currency interest rate
swaps
Cross-currency interest rate
swaps
Cross-currency interest rate
swaps
Cross-currency interest rate
Currency forwards for
commodities
Options purchased and sold
Currency forwards for
commodities
Options purchased and sold
In 2019, the notional amounts per measurement unit of the derivative financial instruments in EDP Group, were as follows:
Fair value hedge
Cash flow hedge
Currency forwards for
commodities
Derivative financial instruments classified as trading are financial hedging instruments contracted for economic hedging at EDP Group level (see
note 5), however such instruments are not eligible for hedge accounting under IFRS.
In 2020, the notional amounts per measurement unit of the derivative financial instruments in EDP Group, are as follows:
Fair value hedge
Cash flow hedge
Currency forwards for
commodities
408
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Following
Thousand Units
Unit
2021
2022
2023
2024
years
Total
Swaps related to gas commodity
MWh
21,012
21,658
20,801
16,253
12,792
92,516
Electricity swaps
MWh
8,015
542
796
315
1,148
10,816
Euros
148,473
127,379
93,236
105,768
82,878
557,734
Trading
Interest rate swaps
Euros
-
2,000,000
-
-
1,500,000
3,500,000
Euros
965,829
1,011,349
277,024
901,418
686,740
3,842,360
Swaps related to gas commodity
MWh
115,663
65,685
46,609
24,643
-
252,600
Coal swaps
MT
528
-
-
-
-
528
Electricity swaps
MWh
12,576
4,260
1,344
1,346
6,696
26,222
Currency forwards
Euros
974,985
54,328
-
-
-
1,029,313
CO2 forwards
MT
1,923
155
-
-
-
2,078
Euros
464,053
303,912
215,795
108,352
-
1,092,112
MWh
5,256
1,314
-
-
-
6,570
Following
Thousand Units
Unit
2020
2021
2022
2023
years
Total
Swaps related to gas commodity
MWh
2,247
22,706
22,713
18,956
18,956
85,578
Electricity swaps
MWh
13,520
403
192
139
1,287
15,541
Euros
-
165,069
155,983
130,374
129,372
580,798
Trading
Interest rate swaps
Euros
1,500,000
-
2,000,000
-
1,500,000
5,000,000
Euros
154,187
126,932
135,164
151,440
1,867,388
2,435,111
Swaps related to gas commodity
MWh
162,834
11,905
79
-
-
174,818
Coal swaps
MT
4,314
-
-
-
-
4,314
Electricity swaps
MWh
15,635
3,276
1,396
792
7,138
28,237
Euros
508,883
45,774
-
-
-
554,657
MT
10,624
-
-
-
-
10,624
Euros
1,182,484
3,686
-
-
-
1,186,170
MWh
878
-
-
-
-
878
Options purchased and sold
Cross-currency interest rate
swaps
Currency forwards for
commodities
Options purchased and sold
In 2019, the notional amounts per measurement unit of the derivative financial instruments at Company level, were as follows:
Cash flow hedge
Currency forwards for
Currency forwards for
commodities
Cross-currency interest rate
swaps
In 2020, the notional amounts per measurement unit of the derivative financial instruments at Company level, are as follows:
Cash flow hedge
Currency forwards for
commodities
Currency forwards
CO2 forwards
409
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Following
Thousand Euros
2021
2022
2023
2024
years
Total
Net Investment hedge
Cross-currency interest rate swaps
-34,223
-26,730
-24,583
34,322
-17,442
-68,656
Currency forwards
5,578
-
-
-
-
5,578
-28,645
-26,730
-24,583
34,322
-17,442
-63,078
Fair value hedge
20,754
29,271
7,332
7,338
5,732
70,427
Cross-currency interest rate swaps
15,959
15,953
15,953
-26,728
-
21,137
36,713
45,224
23,285
-19,390
5,732
91,564
Cash flow hedge
-5,143
-3,535
-2,332
-1,728
-16,786
-29,524
23,534
-17,495
-5,626
-6,570
2,662
-3,495
-1,551
-4,208
-3,194
-2,411
-4,942
-16,306
11,106
9,624
5,918
10,124
-9,290
27,482
27,946
-15,614
-5,234
-585
-28,356
-21,843
Trading
-2,123
-977
-969
-971
-995
-6,035
Cross-currency interest rate swaps
591
-
-
-
-
591
7,115
284
9,764
13,131
18,149
48,443
-2,581
-1,235
-
-
-
-3,816
-1,943
787
-
-
-
-1,156
6,817
2,193
-1,160
3,463
-
11,313
5,015
1,533
-
-
-
6,548
12,891
2,585
7,635
15,623
17,154
55,888
48,905
5,465
1,103
29,970
-22,912
62,531
Following
Thousand Euros
2020
2021
2022
2023
years
Total
Net Investment hedge
Cross-currency interest rate swaps
-34,570
-35,122
-29,961
-30,078
-62,614
-192,345
Currency forwards
5,026
904
-
-
-
5,930
-29,544
-34,218
-29,961
-30,078
-62,614
-186,415
Fair value hedge
28,940
17,868
27,379
6,105
11,228
91,520
Cross-currency interest rate swaps
17,487
17,569
17,527
17,527
740
70,850
46,427
35,437
44,906
23,632
11,968
162,370
Cash flow hedge
-5,299
-4,376
-2,851
-1,751
-2,102
-16,379
54,580
-12,046
-24,728
-16,897
-19,847
-18,938
2,241
-2,830
-1,200
-462
-419
-2,670
7,509
19,738
24,551
19,385
19,010
90,193
59,031
486
-4,228
275
-3,358
52,206
Trading
7,198
-357
-359
-356
-535
5,591
Cross-currency interest rate swaps
-83
-99
-
-
-
-182
-7,511
2,556
446
-43
8,246
3,694
-2,027
-
-
-
-
-2,027
-563
-
-
-
-
-563
21,759
-67
-10
-
-
21,682
3,083
-
-
-
-
3,083
21,856
2,033
77
-399
7,711
31,278
97,770
3,738
10,794
-6,570
-46,293
59,439
Currency forwards
Options purchased and sold
Electricity swaps
Currency forwards for commodities
Interest rate swaps
Commodity swaps
Commodity forwards
Currency forwards for commodities
Currency forwards for commodities
Options purchased and sold
In 2019, the future undiscounted cash flows of the derivative financial instruments in EDP Group, are as follows:
Interest rate swaps
Interest rate swaps
Swaps related to gas commodity
Electricity swaps
Currency forwards for commodities
Interest rate swaps
Commodity swaps and forwards
CO2 forwards
Currency forwards
In 2020, the future undiscounted cash flows of the derivative financial instruments in EDP Group, are as follows:
Interest rate swaps
Interest rate swaps
Swaps related to gas commodity
410
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Following
Thousand Euros
2021
2022
2023
2024
Years
Total
Cash flow hedge
-26,037
-18,740
-7,696
-4,519
2,662
-54,330
51,464
1,725
2,359
-163
-561
54,824
7,751
12,158
7,684
10,124
-5,936
31,781
33,178
-4,857
2,347
5,442
-3,835
32,275
Trading
-929
-977
-969
-971
-484
-4,330
-54,323
1,642
-30,504
33,648
-17,442
-66,979
82,362
10,801
9,454
985
8,806
112,408
-
-
-
-
-
-
-2,931
-1,235
-
-
-
-4,166
8,129
2,193
-1,160
3,463
-
12,625
Commodity options purchased and sold
4,906
1,511
-
-
-
6,417
37,214
13,935
-23,179
37,125
-9,120
55,975
70,392
9,078
-20,832
42,567
-12,955
88,250
Following
Thousand Euros
2020
2021
2022
2023
Years
Total
Cash flow hedge
-190
-16,053
-24,716
-16,897
-19,847
-77,703
-92,161
-657
484
486
382
-91,466
-
25,406
24,484
18,947
17,543
86,380
-92,351
8,696
252
2,536
-1,922
-82,789
Trading
5,804
-357
-359
-356
-535
4,197
-10,723
-11,132
-11,080
-11,324
2,798
-41,461
-38,158
-5,104
-1,416
88
8,939
-35,651
-3,054
904
-
-
-
-2,150
-2,422
-
-
-
-
-2,422
30,279
-67
-10
-
-
30,202
Commodity options purchased and sold
110
-
-
-
-
110
-18,164
-15,756
-12,865
-11,592
11,202
-47,175
-110,515
-7,060
-12,613
-9,056
9,280
-129,964
Thousand Euros
Hedged risk
Instrument
Risk
Instrument
Risk
Net investment (i)
104,452
-159,741
-45,390
17,970
Net investment
Currency forwards
Subsidiaries in USD
480
-480
2,345
-2,345
Fair value
Interest rate swap
Interest rate
-14,247
14,866
-5,329
5,311
Fair value
Cross-curr. int. rate swaps
Exchange and interest rate
-26,867
26,577
24,452
-18,190
Cash flow
Interest rate swap
Interest rate
-7,304
7,304
643
-643
Cash flow
Currency forwards
Exchange rate
-58,918
58,918
24,688
-24,688
Cash flow (ii)
Commodity prices
8,137
-21,500
243,611
-276,212
5,733
-74,056
245,020
-298,797
(i)
(ii)
Considering that hedging derivative financial instruments are contracted with a high correlation o
f
critical terms, namely in the same currency and
at the same indexes, the hedge ratio between the hedging instruments and the hedged instruments is 1:1.
Hedging instrument
Cross-curr. int. rate swaps
Subsidiaries
in
PLN,
BRL,
GBP, USD and CAD
Commodity swaps
Fair value variation of the hedging instrument on Cross currency interest rate swaps for Net investment includes a negative amount of
52,118 thousand Euros related to the cost of hedging (41,173 thousand Euros net of tax effect), recorded in reserves (see note 32), and
ineffectiveness of a negative amount of 3,171 thousand Euros.
Fair value variation of the hedging instrument on Commodity swaps for Cash flow includes a negative amount of 13,363 thousand Euros
related to ineffectiveness, and in the company level a negative amount of 40,421 thousand Euros.
The changes in the fair value, including accrued interest, of hedging instruments and risks being hedged are as follows:
2020
2019
Changes in fair value
Changes in fair value
Cross-currency interest rate swaps
Commodity swaps
Currency forwards
Commodity forwards
Currency forwards for commodities
Currency forwards for commodities
In 2019, the future undiscounted cash flows of the derivative financial instruments at Company level, are as follows:
Swaps related to gas commodity
Electricity swaps
Currency forwards for commodities
Interest rate swaps
Currency forwards for commodities
Interest rate swaps
Cross-currency interest rate swaps
Commodity swaps
Currency forwards
Commodity forwards
In 2020, the future undiscounted cash flows of the derivative financial instruments at Company level, are as follows:
Swaps related to gas commodity
Electricity swaps
411
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Instrument
Fair value indexed to the following market inputs
Currency forwards
Commodity swaps
Thousand Euros
Interest rate
swaps
Commodity
swaps
Currency
forwards for
commodities
Gross Amount
Deferred Tax
Total
Balance as at 1 Januray 2019
-28,317
-319,818
62,396
-285,739
72,424
-213,315
Fair value changes
11,765
385,329
26,590
423,684
-111,094
312,590
-39
3,453
-
3,414
-1,577
1,837
-
-60,442
5,710
-54,732
17,174
-37,558
-27,911
-
-
-27,911
4,898
-23,013
Balance as at 31 December 2019
-44,502
8,522
94,696
58,716
-18,175
40,541
Fair value changes
39,063
-87,407
-77,761
-126,105
47,233
-78,872
Transfer to results from hedging
-36
63,095
-
63,059
-28,885
34,174
Comprehensive Income changes in associates
-1,735
-
-
-1,735
1,524
-211
Balance as at 31 December 2020
-7,210
-15,790
16,935
-6,065
1,697
-4,368
Thousand Euros
Commodity
swaps
Currency
forwards for
commodities
Gross Amount
Deferred Tax
Total
Balance as at 1 Januray 2019
-61,548
59,886
-1,662
334
-1,328
Fair value changes
-362,506
26,493
-336,013
75,604
-260,409
245,765
-
245,765
-55,297
190,468
Balance as at 31 December 2019
-178,289
86,379
-91,910
20,641
-71,269
-96,537
-54,378
-150,915
33,956
-116,959
Transfer to results from hedging
327,717
-
327,717
-73,736
253,981
Balance as at 31 December 2020
52,891
32,001
84,892
-19,139
65,753
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Commodity derivatives held for trading
50,432
43,061
26,395
49,078
Debt derivatives held for trading
-16,065
32,832
-
-
Net investment hedge - ineffectiveness
-3,171
-296
-
-
Fair value hedges:
-Derivatives
-36,498
21,802
-
-
-Hedged liabilities
37,935
-15,540
-
-
Cash flow hedges:
-Transfer to results from hedging of financial liabilities
-36
-39
-
-
-Transfer to results from hedging of commodity prices
40,939
-23,071
-327,717
-245,765
73,536
58,749
-301,322
-196,687
The gains and losses on the financial instruments portfolio, excluding accrued interest, booked in the Income Statement in 2020 and 2019 are as
follows:
Group
Company
The changes in the fair value reserve related to cash flow hedges in 2020 and 2019 by nature o
f
derivative financial instruments at Company level,
were as follows:
Changes in fair value for the period, on consolidated and individual basis, in the fair value reserve include: (i) contracts for the purchase and sale
of commodities traded on futures exchange market whose fair values are settled on a daily basis, and therefor are not in the statement of
financial position; and (ii) fair value variation of derivative financial instruments contracted and settled within the same period.
Fair value changes
Transfer to results from hedging
Exchange rates: EUR/USD, EUR/PLN, EUR/BRL, EUR/GBP, BRL/USD, BRL/CNY, COP/USD and MXN/USD.
Market quotes of commodities: Brent, NBP Natural Gas, Electricity, Henry Hub, TTF, Coal, CO2 and JKM.
The changes in the fair value reserve related to cash flow hedges in 2020 and 2019 by nature o
f
derivative financial instruments in EDP Group,
were as follows:
Transfer to results from hedging
Transfers included in the initial cost of inventories
from hedging of commodity prices
Comprehensive Income changes in associates
As at 31 December 2020, the following market inputs were considered for the fair value calculation:
Cross-curr. int. rate swaps
Interest rates: Euribor 3M, Euribor 6M, Libor 3M, Libor 6M, Daily CDI, Wibor 3M, Wibor 6M, CAD Libor 3M,
Robor 3M and Colombia Overnight Interbank; and exchange rates: EUR/GBP, EUR/BRL, EUR/PLN, EUR/CAD,
EUR/RON, EUR/COP, and EUR/USD.
Interest rate swaps
Interest rates: Euribor 3M, Euribor 6M, Wibor 6M, US Libor 3M and CAD Libor 3M.
412
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Notional
Euro'000
Currency
Interest rate contracts:
Interest rate swaps
2,158,662
EUR
Interest rate swaps
34,763
PLN
Interest rate swaps
40,804
USD
Interest rate swaps
14,090
CAD
Currency and interest rate contracts:
CIRS (currency interest rate swaps)
458,647
EUR/GBP
CIRS (currency interest rate swaps)
225,348
EUR/PLN
CIRS (currency interest rate swaps)
29,345
EUR/BRL
CIRS (currency interest rate swaps)
8,455
EUR/COP
CIRS (currency interest rate swaps)
97,638
EUR/CAD
CIRS (currency interest rate swaps)
72,441
USD/BRL
CIRS (currency interest rate swaps)
1,539,340
USD/EUR
Notional
Euro'000
Currency
Interest rate contracts:
Interest rate swaps
3,486,543
EUR
Interest rate swaps
42,760
PLN
Interest rate swaps
47,925
USD
Interest rate swaps
12,253
CAD
Currency and interest rate contracts:
CIRS (currency interest rate swaps)
434,798
EUR/GBP
CIRS (currency interest rate swaps)
199,422
EUR/PLN
CIRS (currency interest rate swaps)
29,345
EUR/BRL
CIRS (currency interest rate swaps)
44,307
EUR/CAD
CIRS (currency interest rate swaps)
1,169,997
USD/EUR
Following
Unit
2021
2022
2023
2024
Years
Electricity swaps
Euros/MWh
[40,35 - 53,00]
[41,75 - 45,60]
[41,75 - 45,25]
[41,75 - 45,25]
[37,00 - 44,00]
Swaps related to gas commodity
Euros/MWh
[6,20 - 23,64]
[6,36 - 19,87]
[6,99 - 17,23]
[7,84 - 17,05]
[6,94 - 16,67]
CO2 forwards
Euros/MT
[26,58 - 29,10]
[24,97 - 24,97]
n.a.
n.a.
n.a.
Following
Unit
2020
2021
2022
2023
Years
Electricity swaps
Euros/MWh
[44,00 - 59,25]
[44,00 - 53,00]
[44,00 - 45,25]
[44,00 - 45,25]
[37,00 - 45,25]
Swaps related to gas commodity
Euros/MWh
[6,74 - 26,21]
[8,69 - 25,36]
[8,16 - 21,25]
[8,33 - 16,90]
[8,56 - 16,80]
CO2 forwards
Euros/MT
[23,64 - 28,95]
n.a.
n.a.
n.a.
n.a.
[
1.86% ]
[
-0.22% ]
[
2.59% ]
[
-0.51% ]
[ 2.59% ]
[ 1.86% ]
[ -2.10% ]
[
2.78%
-
2.48% ]
[ -1.79% ]
[
3.21%
-
0.17% ]
[
0.95%
-
0.84% ]
[
3.82%
-
2.30% ]
[
1.50%
-
0.38% ]
The effective interest rates of the derivative financial instruments relating to financing operations at 31 December 2019 were as follows:
Group
[
-0.44%
-
-0.54% ]
[
1.70% ]
[
-0.54% ]
[
0.86%
-
0.22% ]
[
-0.51%
-
-0.57% ]
[
3.15%
-
0.32% ]
[
1.84%
-
-0.54% ]
EDP Pays
EDP Receives
[
3.67%
-
-0.92% ]
[
4.88%
-
-0.83% ]
[
3.59%
-
0.12% ]
[
8.63%
-
-0.54% ]
[
5.95%
-
0.69% ]
[ -1.97% ]
[
3.67%
-
0.98% ]
[
8.63%
-
-0.41% ]
Group
EDP Pays
EDP Receives
[
3.67%
-
-0.50% ]
[
2.63%
-
-0.50% ]
[
2.78%
-
2.48% ]
[
-0.28% ]
[
3.81%
-
2.43% ]
[
1.50%
-
0.38% ]
The contracted prices of the derivative financial instruments relating to commodities at 31 December 2020 were as follows:
The contracted prices of the derivative financial instruments relating to commodities at 31 December 2019 were as follows:
[
2.45%
-
-0.40% ]
[
-0.31%
-
-0.41% ]
[
4.69%
-
-0.40% ]
[
2.03%
-
-0.40% ]
[
5.95%
-
5.94% ]
[
-0.40%
-
-0.44% ]
The amount transferred to the Income Statement related to the hedging o
f
commodity derivatives is included in the caption o
f
Revenues and cost
of Energy Sales and Services and Other.
The effective interest rates of the derivative financial instruments relating to financing operations at 31 December 2020 are as follows:
413
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
43. Commitments
Thousand Euros
Dec 2020
Dec 2019
Dec 2020
Dec 2019
Operating guarantees
EDP S.A.
440,724
453,005
440,724
453,005
EDP España Group
87,851
105,283
-
-
EDP Brasil Group
159,325
270,421
-
-
EDP Renováveis Group
1,444,576
1,435,821
-
-
2,132,476
2,264,530
440,724
453,005
Less
From
From
More
than 1
1 to 3
3 to 5
than 5
Thousand Euros
Total
year
years
years
years
64,408
7,379
11,535
6,436
39,058
Purchase obligations
21,992,063
4,502,177
3,774,031
2,392,018
11,323,837
22,056,471
4,509,556
3,785,567
2,398,454
11,362,895
Less
From
From
More
than 1
1 to 3
3 to 5
than 5
Thousand Euros
Total
year
years
years
years
300,347
22,773
65,895
58,665
153,014
Purchase obligations
23,762,667
4,772,858
5,354,099
2,824,157
10,811,553
24,063,014
4,795,631
5,419,994
2,882,822
10,964,567
Operating guarantees granted by EDP Group, not included in the consolidated statement of financial position nor in the Notes, are as follows:
Group
Future cash outflows not reflected in the measurement of the
lease liabilities (rents due from lease contracts)
The Group’s contractual commitments shown above relate essentially to agreements and commitments required for current business activities.
Specifically, the majority of the commitments are established to guarantee adequate supply of energy to the customers in Europe, North America
and Brazil and to comply with medium and long term investment objectives of the Group.
As at 31 December 2020, there are commitments from future cash outflows not reflected in the measurement o
f
the lease liabilities (rents due
from lease contracts) which refer to future rents of lease contracts already signed but not yet commenced.
The commitments related to the joint ventures are disclosed in note 21.
Capital outstanding by maturity
Future cash outflows not reflected in the measurement of the
lease liabilities (rents due from lease contracts)
Dec 2019
Capital outstanding by maturity
Additionally to the above guarantees, there are guarantees o
f
operational nature related to the portfolio o
f
Spanish and North American
companies of EDPR, whose sale occurred in December 2020 (see note 6), in the amount of 200 thousand Euros and 982 thousand Euros,
respectively, for which EDPR temporarily assumes responsibility until they are effectively replaced.
In addition to the guarantees identified above, EDP Group provides financial and operating guarantees related to liabilities assumed by
j
oint
ventures and associates in the amount of 492,364 thousand Euros and 309,806 thousand Euros, respectively (31 December 2019: 604,590
thousand Euros and 341,301 thousand Euros).
The remaining financial and operating guarantees granted by EDP Group have underlying liabilities that are already reflected in its consolidated
statement of financial position and/or disclosed in the Notes.
In the Group, the commitments relating to future cash outflows not reflected in the measurement o
f
the lease liabilities (rents due from lease
contracts) and purchase obligations are disclosed, by maturity, as follows:
Dec 2020
The operating guarantees which are not included in the consolidated statement o
f
financial position or in the Notes, as at 31 December 2020 and
2019, mainly refer to Power Purchase Agreements (PPA), interconnection, permits and market participation guarantees.
Company
414
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Dec 2020
Dec 2019
Purchase obligation - Present value
8,560,278
12,328,055
Purchase obligation - Nominal amount
12,149,109
17,121,883
Thousand Euros
Dec 2020
Dec 2019
Fuel acquisition
5,473,666
6,994,412
Electricity acquisition
11,533,487
11,294,873
O&M contracts
719,288
902,040
1,888,135
2,159,439
Supply and assembly contract
1,404,619
1,340,568
Other supplies and services
972,868
1,071,335
21,992,063
23,762,667
Less
From
From
More
than 1
1 to 3
3 to 5
than 5
Thousand Euros
Total
year
years
years
years
Fuel acquisition
5,473,666
557,396
760,122
488,274
3,667,873
Electricity acquisition
11,533,487
837,075
1,789,979
1,752,465
7,153,968
17,007,153
1,394,471
2,550,101
2,240,739
10,821,841
Less
From
From
More
than 1
1 to 3
3 to 5
than 5
Thousand Euros
Total
year
years
years
years
Fuel acquisition
6,994,412
657,713
1,071,616
734,854
4,530,229
Electricity acquisition
11,294,873
1,431,081
2,207,412
1,904,441
5,751,939
18,289,285
2,088,794
3,279,028
2,639,295
10,282,168
Less
From
From
More
than 1
1 to 3
3 to 5
than 5
Thousand Euros
Total
year
years
years
years
450
450
-
-
-
Purchase obligations
4,960,512
297,368
514,212
488,623
3,660,309
4,960,962
297,818
514,212
488,623
3,660,309
Purchase obligations also include obligations o
f
long term contracts relating to the supply o
f
products and services under the Group’s ordinary
course of business. Prices defined under forward contracts are used in estimating the amount of contractual commitments.
The nature of purchase obligations breaks down as follows:
Fixed assets, equipment and miscellaneous materials
The commitments for fuel and electricity acquisition are disclosed, by maturity, as follows:
Purchase obligations o
f
8,671,817 thousand Euros essentially related with very long-term contracts for energy acquisition in the brazilian market
(by regulatory imposition) which are updated with the respective projected rates and discounted at present value by a rate that represents the
weighted average cost of capital (WACC) of the EDP Brasil Group, as follows:
Some o
f
the transactions related to the disposal o
f
non-controlling interests while retaining control, carried out in previous years, incorporate
contingent assets and liabilities according to the terms of the corresponding agreements. Additionally, some of the assets acquisition
transactions foresee contingent liabilities which depend on certain milestones and, although EDP Group has recognized the fair value of these
liabilities in the consolidated financial statements, changes in the assumptions could change these liabilities.
At Company level, the commitments relating to future cash outflows not reflected in the measurement of the lease liabilities (rents due from lease
contracts) and purchase obligations are disclosed, by maturity, as follows:
Dec 2020
Capital outstanding by maturity
Dec 2020
Capital outstanding by maturity
Dec 2019
Capital outstanding by maturity
Future cash outflows not reflected in the measurement of the
lease liabilities (rents due from lease contracts)
415
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Less
From
From
More
than 1
1 to 3
3 to 5
than 5
Thousand Euros
Total
year
years
years
years
362
362
-
-
-
Purchase obligations
5,645,372
310,741
603,311
525,902
4,205,418
5,645,734
311,103
603,311
525,902
4,205,418
44.
Related Parties
Shares held by company officers
2020
2019
Nr. of shares
Nr. of shares
General and Supervisory Board
China Three Gorges Corporation (represented by Dingming Zhang)
854,736,441
850,777,024
China Three Gorges International Corp. (represented by Shengliang Wu)
854,736,441
850,777,024
China Three Gorges (Europe), S.A. (represented by Ignacio Herrero Ruiz)
854,736,441
850,777,024
Draursa, S.A. (represented by Felipe Fernández Fernández)
1,350
1,350
Fernando Maria Masaveu Herrero
285,434,976
265,065,136
Mubadala Investment Company (represented by Mohammed Issa Khalfan Alhuraimel Alshamsi)
54,095,476
76,787,292
Sonatrach (represented by Karim Djebbour)
87,007,433
87,007,433
Vasco Joaquim Rocha Vieira
3,515
3,203
Banco Comercial Português, S.A. (represented by Nuno Manuel da Silva Amado)
76,627,022
75,615,918
João Carvalho das Neves
8,060
7,429
Luís Maria Viana Palha da Silva
5,479
5,050
Executive Board of Directors
António Luís Guerra Nunes Mexia
101,093
91,000
António Fernando Melo Martins da Costa
58,915
54,299
João Manuel Manso Neto
1,375
1,268
Miguel Nuno Simões Nunes Ferreira Setas
8,104
7,382
Miguel Stilwell de Andrade
151,904
140,000
Maria Teresa Isabel Pereira
25,415
71,281
Rui Manuel Rodrigues Lopes Teixeira
39,033
31,733
Vera de Morais Pinto Pereira Carneiro
7,000
-
Remuneration of company officers
Future cash outflows not reflected in the measurement of the
lease liabilities (rents due from lease contracts)
In accordance with the Company's by-laws, the remuneration o
f
company officers is set by a Remunerations Committee appointed by the
Shareholders’ General Meeting, except for the remuneration of the members of the Executive Board of Directors (EBD), which is set by a
Remunerations Committee appointed by the General and Supervisory Board (GSB).
Following the capital increase o
f
EDP - Energias de Portugal, SA, registered on 11 August 2020, and in which subscription rights were attributed to
shareholders, the exercise of the respective subscription rights was reported by the following members of the Executive Board of Directors : (i)
António Luís Guerra Nunes Mexia, (ii) João Manuel Manso Neto, (iii) António Fernando Melo Martins da Costa, (iv) Miguel Stilwell de Andrade, (v)
Miguel Nuno Simões Nunes Ferreira Setas, (vi) Rui Manuel Rodrigues Lopes Teixeira and (vii) Maria Teresa Isabel Pereira.
Additionally, on 4 September 2020, Director Vera de Morais Pinto Pereira Carneiro has acquired 7,000 shares representative o
f
EDP - Energias de
Portugal, S.A. share capital.
On 30 October 2020, Director Maria Teresa Isabel Pereira has disposed o
f
52,228 shares representative o
f
EDP - Energias de Portugal, S.A. share
capital.
Dec 2019
Capital outstanding by maturity
The caption Purchase obligations relates mainly to gas purchase contracts.
The number of shares of EDP S.A. held or attributable to company officers as at 31 December 2020 and 2019 are as follows:
EDP S.A bonds and the number o
f
shares o
f
other EDP group companies held or attributable to company officers are disclosed in part I section A -
Ownership structure of chapter 4 - Corporate governance.
During 2019, João Manuel Veríssimo Marques da Cruz, member o
f
the Executive Board o
f
Directors (EBD), sold 79,578 shares representative o
f
EDP - Energias de Portugal, S.A. share capital.
416
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
EBD
GSB
President
1,524
515
Members
6,719
1,348
8,243
1,863
In the course o
f
its activity and regardless o
f
their relevance, EDP concludes businesses and operations under normal market conditions for
similar transactions with different entities, namely financial institutions, including holders of qualified shareholdings in EDP's share capital and
those related parties.
On 11 May 2012, after the Strategic Partnership Agreement concluded with China Three Gorges Corporation (CTG) came into effect in December
2011, this company (and three other group companies) became part of EDP's General and Supervisory Board.
Under the Strategic Partnership Agreement with China Three Gorges Corporation, on 28 June 2013, EDP Renováveis, S.A. sold for a total final
price of 368 million Euros to a CTG Group company (CITIC CWEI Renewables S.C.A.) a 49% shareholding in EDP Renováveis Portugal and 25% of
the shareholder loans capital and supplementary capital contributions under the applicable rules for additional contributions granted to this
company.
In 2020, PwC fees relating to external audit and statutory audit o
f
all subsidiaries o
f
EDP Group, except EDP Brasil Group, amounted to 5,619,449
Euros. Additionally, the total fees charged by PwC for other assurance services, which include quarterly reviews, and other non audit services
amounted to 2,187,709 Euros and 16,000 Euros, respectively.
In 2020, PwC Portugal fees relating to external audit and statutory audit of all subsidiaries of EDP Group in Portugal, amounted to 2,473,892
Euros. The total fees charged by PwC Portugal for other assurance of reliability services, which include quarterly reviews and other non audit
services to subsidiaries of EDP Group in Portugal amounted to 1,894,873 Euros and 16,000 Euros, respectively.
Business operations between the Company and the members of the Executive Board of Directors and General and Supervisory Board with
qualifying holdings and companies in the group or control relationship with EDP
Also under this partnership, on 6 December 2013, EDP Brasil signed a Memorandum o
f
Understanding with CWE Investment Corporation (CWEI),
currently designated as
China Three Gorges Corporation, a wholly owned subsidiary of CTG, setting out the main guidelines for a future
partnership in joint investments between EDP Brasil and CWEI and that governs parties' participation in joint projects in Brazil. These investments
by CWEI Brasil were considered for purposes of fulfilment of the Strategic Partnership Agreement in relation to the total investment of 2 billion
Euros made by CTG up to 2015 (including co-funding of operating investments) in ready-to-build and operational renewable energy generation
p
ro
j
ects.
Post-employment benefit
s
EDP has no specific retirement benefits system in place for its directors. The remuneration fixed by the Remuneration Committee o
f
the General
and Supervisory Board provides for a retirement savings plan-type standard financial product for the members of the Executive Board of Directors,
who contribute 10% (ten percent) of their net fixed annual remuneration. It was granted by decision of the General Meeting of 16 April 2020 as
part of the remuneration policy statement. This financial product does not entail any cost to EDP in the future, as it is merely a subscription to a
financial product while the members of the managing body hold their positions and is not covered by Article 402 (1) of the "Código das
Sociedades Comerciais"
(
Portu
g
uese Commercial Com
p
anies Code
)
.
Audit and non audit fees
During 2020, the annual fixed and variable remuneration cost accounted for the members o
f
the EBD and the fixed remuneration o
f
the GSB, was
as follows:
The remuneration costs accounted with the EBD includes the amount o
f
2,688 thousand Euros related to the annual variable remuneration. This
amount was calculated considering the best estimation of the variable remuneration for the year of 2020, in accordance with Remunerations
Committee policy of the GSB, deducted from the correction of the accrual from the previous year compared with the amount paid.
Additionally, the Remunerations Committee policy o
f
the GSB foresees, in certain circumstances, a variable multi-annual remuneration to the EBD
members, corresponding to the current mandate (2018-2020). On this basis, an estimated amount of 12,383 thousand Euros was accrued (31
December 2019: 12,745 thousand Euros).
During 2020, the remuneration costs o
f
the members o
f
the Remunerations Committee o
f
the General Assembly amounted to 35,000 Euros and
there were no remuneration costs regardind the Sustainability Committee.
Short-term employee benefit
s
417
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Balances and transactions with companies of China Three Gorges Group
Balances with EDP Pension and Medical and Death Subsidy Funds
Balances and transactions with subsidiaries, joint ventures and associates
In December 2015, EDP, S.A. signed a lease contract related with the building units o
f
the Porto headquarters (sold to the EDP Pension Fund in
December 2015) for a period of 25 years. As at 31 December 2020, the present value of the lease liability (rents due from lease contracts), as a
result of the adoption of IFRS 16, amounts to 46,941 thousand Euros (31 December 2019: 48,232 thousand Euros) (see note 39).
During 2020, EDPR Portugal distributed dividends to CTG in the amount of 19,600 thousand Euros.
Following the decision and implementation o
f
the autonomisation o
f
the Medical Plan and Death Subsidy Plan in Portugal, EDP Group has made
contributions of 23,040 thousand Euros in 2020 (31 December 2019: 141,660 thousand Euros) (see note 35). In the next years, and until the end of
2027, the Group estimates to make additional contributions in the approximatly total amount of 150 million Euros, of which approximate 23
million Euros in 2021, in line with the financing plan approved by Insurance and Pension Funds Supervisory Authority (ASF).
In their ordinary course o
f
business, EDP Group companies establish commercial transactions and operations with other Group companies,
whose terms reflect current market conditions.
On 30 June 2017, EDP Renewables, SGPS, S.A. completed the sale to ACE Portugal S.A.R.L. (CTG Group), o
f
a 49% equity shareholding in EDPR PT
-
PE. This transaction was recognised as a sale without loss of control, having the Group recognised non-controlling interests of 135,679 thousand
Euros and an impact in reserves attributable to the Group of 74,419 thousand Euros in 2017.
On 28 December 2018, EDP Renováveis, S.A. completed the sale to CTG, o
f
a 10% equity stake and respective shareholder loans on Moray
Offshore Windfarm (East) Limited, for the total amount of 37.6 million Pounds.
In accordance with the EDP/CTG strategic partnership, EDPR Group completed the sale o
f
49% o
f
EDPR Portugal, EDPR Brasil, EDPR PT-PE, EDPR
Italia and EDPR Polska to CTG Group.
Following these transactions, CTG Group granted shareholders loans to the EDPR Group in the amount o
f
194,978 thousand Euros including
accrued interests (31 December 2019: 235,717 thousand Euros) (see note 39).
On 19 May 2015, EDP Renováveis, S.A. completed the sale to CTG, o
f
a 49% equity shareholding in selected wind farms in Brazil. This transaction
was recognised as a sale without loss of control, having the Group recognised non-controlling interests of 50,943 thousand Euros and an impact
in reserves attributable to the Group of 10,337 thousand Euros in 2015.
In September 2017, EDP, S.A. signed a lease contract related with the building o
f
the Lisbon headquarters (given as an in-kind contribution to the
EDP Medical and Death Subsidy Funds) for a period of 25 years. As at 31 December 2020, the present value of the lease liability (rents due from
lease contracts), as a result of the adoption of IFRS 16, amounts to 88,261 thousand Euros (31 December 2019: 89,280 thousand Euros) (see
note 39).
On 27 October 2016, the transaction relating with the sale o
f
the minority interest in the wind generation assets o
f
EDP Renováveis, S.A. in Italy
and Poland to CTG, which purchase and sale agreement was signed on 28 December 2015 was concluded. CTG, through ACE Poland S.A.R.L. and
ACE Italy S.A.R.L., both owned in 100% by ACE Investment Fund LP, an entity owned by China Three Gorges Hong Kong Ltd, subsidiary of CTG,
formalised the payment of approximately 363 million Euros corresponding to the final price agreed between the parties.
418
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Credits held
Intra-Group
Loans and
Thousand Euros
Financial
Mov.
Interests
receivable
Other Credits
Total
EDP Comercial, S.A.
-
42,037
259,053
301,090
E-Redes – Distribuição de Eletricidade, S.A.
19,381
1,503,685
28,567
1,551,633
EDP España, S.A.U.
-
-
143,878
143,878
EDP Finance B.V.
-
156,705
300
157,005
EDP Produção, S.A.
-
807,346
402,019
1,209,365
Hidrocantábrico Distribucion Eléctrica, S.A.U.
-
-
30,500
30,500
EDP Renováveis, S.A.
-
-
19,278
19,278
EDP Servicios Financieros España, S.A.U.
853,955
-
6,453
860,408
SU Eletricidade, S.A., S.A.
-
300,387
14,728
315,115
EDP Renewables Europe, S.L.U.
-
-
22,520
22,520
-
10,038
13,988
24,026
EDP Clientes, S.A.
-
-
121,228
121,228
Other
393
94,013
35,841
130,247
873,729
2,914,211
1,098,353
4,886,293
Intra-Group
Loans and
Thousand Euros
Financial
Mov.
Interests
receivable
Other Credits
Total
EDP Comercial, S.A.
56,945
75,831
275,210
407,986
E-Redes – Distribuição de Eletricidade, S.A.
-
1,503,715
25,434
1,529,149
EDP España, S.A.U.
-
-
107,479
107,479
EDP Finance, B.V.
-
560,077
39,458
599,535
EDP Produção, S.A.
-
1,369,908
188,855
1,558,763
EDP Real State Global Solutions, S.A.
-
-
31,823
31,823
EDP Renováveis, S.A.
-
-
5,257
5,257
EDP Servicios Financieros España, S.A.U.
523,825
-
1,522
525,347
SU Eletricidade, S.A., S.A.
-
300,157
5,595
305,752
EDP Renewables Europe, S.L.U.
-
-
15,237
15,237
EDP Comercializadora, S.A.U.
-
-
40,429
40,429
7,807
10,038
7,177
25,022
Other
23,487
54,165
45,060
122,712
612,064
3,873,891
788,536
5,274,491
Debits held
Intra-Group
Loans and
Thousand Euros
Financial
Mov.
Interests
pa
y
able
Other
Debits
Total
E-Redes – Distribuição de Eletricidade, S.A.
-
-
13,257
13,257
EDP Comercial, S.A.
41,506
-
1,281
42,787
EDP Finance B.V.
-
7,567,069
69,579
7,636,648
EDP Renováveis Servicios Financieros, S.A.
-
-
17,237
17,237
EDP Produção, S.A.
864,756
-
364,155
1,228,911
EDP Renováveis, S.A.
-
-
56,058
56,058
SU Eletricidade, S.A., S.A.
203,304
-
9
203,313
EDP España, S.A.U.
-
-
28,775
28,775
EDP Clientes, S.A.
-
-
54,580
54,580
Other
79,137
-
70,448
149,585
1,188,703
7,567,069
675,379
9,431,151
The credits and debits over subsidiaries, joint ventures and associates, at Company level, are as follows:
31 December 2020
31 December 2020
EDP GÁS.COM - Comércio de Gás Natural, S.A.
The amount o
f
156,705 thousand Euros refers to one private placement and one repurchase in market by EDP, S.A. o
f
two bonds issued by EDP
Finance B.V.
31 December 2019
EDP GÁS.COM - Comércio de Gás Natural, S.A.
419
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Intra-Group
Loans and
Thousand Euros
Financial
Mov.
Interests
pa
y
able
Other
Debits
Total
E-Redes – Distribuição de Eletricidade, S.A.
225,055
-
5,712
230,767
EDP Comercial, S.A.
-
-
459
459
EDP Finance, B.V.
-
10,836,891
87,808
10,924,699
EDP Renováveis Servicios Financieros, S.A.
-
-
1,311
1,311
EDP Produção, S.A.
289,981
-
614,484
904,465
EDP Renováveis, S.A.
-
-
4,099
4,099
SU Eletricidade, S.A., S.A.
157,645
-
36,920
194,565
EDP España, S.A.U.
-
-
20,428
20,428
-
-
127,524
127,524
Other
39,154
-
77,807
116,961
711,835
10,836,891
976,552
12,525,278
Expenses
Interest on
Intra-Group
Interest
Thousand Euros
Financial
Mov.
on Loans
Obtained
Other
Losses
Total
EDP Finance B.V.
-
136,276
145,147
281,423
EDP Produção, S.A.
-
-
2,031,542
2,031,542
EDP España, S.A.U.
-
-
140,240
140,240
Other
30
-
406,976
407,006
30
136,276
2,723,905
2,860,211
Interest on
Intra-Group
Interest
Thousand Euros
Financial
Mov.
on Loans
Obtained
Other
Losses
Total
EDP Finance, B.V.
-
152,228
130,808
283,036
EDP Produção, S.A.
-
-
1,190,204
1,190,204
EDP España, S.A.U.
-
-
152,442
152,442
-
-
278,097
278,097
Other
8
-
132,489
132,497
8
152,228
1,884,040
2,036,276
Income
Interest on
Intra-Group
Interest
Thousand Euros
Financial
Mov.
on Loans
Granted
Other
Gains
Total
EDP Comercial, S.A.
119
1,537
1,145,769
1,147,425
E-Redes – Distribuição de Eletricidade, S.A.
11
23,209
137,345
160,565
EDP España, S.A.U.
-
-
909,485
909,485
EDP Produção, S.A.
-
21,802
941,198
963,000
EDP Soluções Comerciais, S.A.
2
219
10,221
10,442
EDP Finance B.V.
-
14,053
97,630
111,683
Hidrocantábrico Distribución Eléctrica S.A.U.
-
-
23,632
23,632
EDP Renováveis, S.A.
-
-
86,794
86,794
EDP Renewables Europe, S.L.U.
-
-
22,276
22,276
Other
46
6,178
400,069
406,293
178
66,998
3,774,419
3,841,595
EDP Comercializadora, S.A.U
EDP Comercializadora, S.A.U.
Other gains include income from equity investments of 908,690 thousand Euros (see note 13).
31 December 2019
31 December 2020
31 December 2019
31 December 2020
Expenses and income related to Subsidiaries, Joint Ventures and Associates, at Company level, are as follows:
The amount o
f
7,567,069 thousand Euros includes 6,977,196 thousand Euros related to five intragroup bonds issued by EDP Finance BV and
acquired by EDP S.A., with fixed and variable rate and a term to maturity up to 7 years.
420
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Interest on
Intra-Group
Interest
Thousand Euros
Financial
Mov.
on Loans
Granted
Other
Gains
Total
EDP Comercial, S.A.
82
2,225
1,296,096
1,298,403
E-Redes – Distribuição de Eletricidade, S.A.
-
33,459
106,878
140,337
EDP España, S.A.U.
-
-
684,450
684,450
EDP Produção, S.A.
8
24,959
578,889
603,856
EDP Soluções Comerciais, S.A.
75
-
11,929
12,004
EDP Finance, B.V.
-
37,547
58,527
96,074
Hidrocantábrico Distribución Eléctrica S.A.U.
-
-
22,791
22,791
EDP Comercializadora, S.A.U
-
-
78,952
78,952
EDP Renováveis, S.A.
-
314
69,857
70,171
EDP Renewables Europe, S.L.U.
-
-
27,726
27,726
Other
94
6,028
176,441
182,563
259
104,532
3,112,536
3,217,327
Assets and Liabilities
Thousand Euros
Assets
Liabilities
Net Value
Joint Ventures
OW Offshore, S.L.
474,939
130
474,809
Cide HC Energía, S.A.
6,860
1,276
5,584
SCNET - Sino-Portuguese Centre
-
1,080
-1,080
HC Tudela Cogeneración, S.L.
906
1,488
-582
Flat Rock Windpower II LLC
17
961
-944
Other
8,992
928
8,064
491,714
5,863
485,851
Associates
Parque Eólico Sierra del Madero, S.A.
8,149
-
8,149
Parque Eólico Belmonte, S.A.
1,119
-
1,119
Centrais Elétricas de Santa Catarina, S.A. - Celesc
3,083
-
3,083
Solar Works! B.V.
965
-
965
Other
2,078
36
2,042
15,394
36
15,358
507,108
5,899
501,209
Thousand Euros
Assets
Liabilities
Net Value
Joint Ventures
Companhia Energética do JARI - CEJA
3,522
467
3,055
Porto do Pecém Transportadora de Minérios S.A.
1,418
343
1,075
Cide HC Energía, S.A.
3,275
6,470
-3,195
SCNET - Sino-Portuguese Centre
-
1,080
-1,080
HC Tudela Cogeneración, S.L.
2,298
1,294
1,004
Outras
2,943
954
1,989
13,456
10,608
2,848
Associates
MABE Construção e Administração de Projectos, Ltda.
5,407
-
5,407
Parque Eólico Sierra del Madero, S.A.
8,150
-
8,150
Outras
6,983
2,426
4,557
20,540
2,426
18,114
33,996
13,034
20,962
31 December 2020
31 December 2019
31 December 2019
Assets, liabilities and transactions with related companies, for the Group, are as follows:
421
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Transactions
Operating
Financial
Operating
Financial
Thousand Euros
Income
Income
Expenses
Expenses
Joint Ventures
Cide HC Energía, S.A.
67,144
5
110
-
Companhia Energética do JARI - CEJA
218
-
2,462
-
HC Tudela Cogeneración, S.L.
706
18
2,955
-
Empresa de Energia São Manoel, S.A.
4,998
-
6,629
-
OW Offshore, S.L.
6,932
3,934
-
3,102
Porto do Pecém Transportadora de Minérios S.A.
172
-
2,568
-
Other
8,392
96
874
-
88,562
4,053
15,598
3,102
Associates
-
113
-
-
Desarrollos Eólicos de Canarias, S.A.
453
-
55
-
Parque Eólico Sierra del Madero
8
284
-
-
Parque Eólico Belmonte, S.A.
644
33
-
-
1,105
430
55
-
89,667
4,483
15,653
3,102
Operating
Financial
Operating
Financial
Thousand Euros
Income
Income
Expenses
Expenses
Joint Ventures
Cide HC Energía, S.A.
90,553
12
113
-
HC Tudela Cogeneración, S.L.
5,192
28
3,146
-
35
-
8,559
-
Comercializador de Referencia Energético, S.L.U.
5,949
-
17
-
Porto do Pecém Transportadora de Minérios S.A.
259
-
5,294
-
Other
9,694
991
1,569
-
111,682
1,031
18,698
-
Associates
-
304
-
-
Desarrollos Eólicos de Canarias, S.A.
227
-
18
-
Parque Eólico Sierra del Madero
8
345
-
-
Parque Eólico Belmonte, S.A.
695
34
-
-
Other
48
217
120
-
978
900
138
-
112,660
1,931
18,836
-
45.
Fair Value of Financial Assets and Liabilities
MABE Construção e Administração de Projectos,
Ltda.
31 December 2020
MABE Construção e Administração de Projectos,
Ltda.
31 December 2019
Empresa de Energia São Manoel, S.A.
Fair value o
f
financial instruments is based, whenever available, on listed market prices. Otherwise, fair value is determined through quotations
supplied by third parties or through the use of generally accepted valuation models, which are based on cash flow discounting techniques and
option valuation models. These models use market data which impacts the financial instruments, namely yield curves, exchange rates and
volatility indicators, including credit risk.
Market data is available on stock exchanges and/or financial information platforms such as Bloomberg and Reuters.
During 2020, EDP Group contributed with
12,700
thousand Euros of donations to Fundação EDP (see note 11).
Additionally,
management
describes
other
transactions
with
related
parties
in
the
part
I
section
A
-
Ownership
structure
of
chapter
4
-
Corporate
governance.
The
aforementioned
chapter
includes
transactions
with
holders
of
qualified
shareholding
positions
as
required
by
the
Securities
Code which are out of scope of IAS 24.
422
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
The fair value of financial assets and liabilities is as follows:
Thousand Euros
Fair value
Difference
Carrying
amount
Fair value
Difference
Assets
Equity instruments at fair value
184,748
184,748
-
170,806
170,806
-
6,292,623
6,292,623
-
6,282,380
6,282,380
-
Other debtors and other assets
1,266,113
1,266,113
-
1,249,065
1,249,065
-
Derivative financial instruments
605,428
605,428
-
565,292
565,292
-
Collateral deposits/financial debt
32,069
32,069
-
61,476
61,476
-
Cash and cash equivalents
2,954,302
2,954,302
-
1,542,722
1,542,722
-
11,335,283
11,335,283
-
9,871,741
9,871,741
-
Liabilities
Financial debt
16,286,763
17,100,948
814,185
16,571,469
17,319,817
748,348
Suppliers and accruals
2,002,054
2,002,054
-
2,115,931
2,115,931
-
Institutional partnerships
1,933,542
1,933,542
-
2,289,784
2,289,784
-
2,869,756
2,869,756
-
2,821,549
2,821,549
-
Other liabilities and other payables
1,932,683
1,932,683
-
1,418,519
1,418,519
-
Derivative financial instruments
396,882
396,882
-
382,371
382,371
-
25,421,680
26,235,865
814,185
25,599,623
26,347,971
748,348
Thousand Euros
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Financial assets
Equity instruments at fair value through
other comprehensive income (see note 22)
-
89,821
27,290
-
80,079
22,735
profit or loss (see note 22)
-
-
67,637
-
-
67,992
-
423,324
-
-
9,157
-
-
547,103
-
-
664,489
-
Derivative financial instruments (see note 42)
-
605,428
-
-
565,292
-
-
1,665,676
94,927
-
1,319,017
90,727
Financial liabilities
Derivative financial instruments (see note 42)
-
396,882
-
-
382,371
-
-
396,882
-
-
382,371
-
Dec 2019
Carrying
amount
Debtors/other assets from commercial activities
●
Level 2 – Fair value based in market inputs not included in level 1, but observable in the market for the asset or liability, either directly or
indirectly;
●
Level 1 – Fair value based on the available listed price (not adjusted) in the identified active markets for assets and liabilities;
●
Level 3 – Fair value of the assets and liabilities calculated with inputs that are not based on observable market information.
Dec 2019
Trade payables and other liabilities from
commercial activities
Given that EDP Group’s financial assets and liabilities, recognised at amortised cost, are predominantly short-term and level 2, changes in fair
value were not considered. Fair value of EDP Group’s financial debt was determined considering current market, namely listed price (level 1).
The market value o
f
financial debt, when no listed market prices are available, is calculated based on the discounted cash flows at market interest
rates at the balance sheet date, increased by the best estimate, at the same date, of market conditions applicable to Group's debt.
According to IFRS 13 requirements, EDP Group established the way it obtains the fair value o
f
its financial assets and liabilities. The levels used
are defined as follows:
Dec 2020
Amounts receivable from concessions-IFRIC 12
at fair value through profit or loss (see note 26)
The market value o
f
the amounts o
f
tarif
f
deficit at fair value through other comprehensive income is calculated based on the cash flows
associated with these assets, discounted at rates which, at the balance sheet date, better reflect the assets risk considering the average term of
the assets.
Dec 2020
Tariff deficit at fair value through
other comprehensive income (see note 26)
423
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
other
comprehen-
sive income
profit or loss
Balance at beginning of period
22,735
67,992
Change in fair value (see note 22)
3,130
401
Acquisitions
4,071
1,371
Disposals
-2,394
-2,750
Other changes
-252
623
Balance at the end of the period
27,290
67,637
46.
Relevant or Subsequent Events
Acquisition of 85% of a distributed solar paltaform in USA
Enertel acquisition
On 12 January 2021, EDP announced, through its subsidiary EDP Comercial S.A., the acqusition o
f
Enertel, an italian company that provides
decentralized solar energy self-consumption solutions. Decentralized solar energy is one of the main resources listed by European institutions to
achieve the goal of reducing the environmental footprint and CO2 emissions, and over the next decade its installed capacity is expected to triple
on a global scale.
Power purchase agreement for two solar projects in USA
On 4 January 2021, EDP announced that has closed two 15-year Power Purchase Agreement to sell the energy produced by two solar PV plants
totalling 275 MW. The projects, located in the U.S. states of Mississippi and Indiana, are expected to begin operations in 2023.
Sale by China Three Gorges of 2.5% stake in EDP
On 15 January 2021, China Three Gorges (CTG) has completed the sale through a private placement o
f
a 2.5% stake in EDP for 534 million Euros,
corresponding to a price of 5.34 Euros per share, according to a regulatory filing. Following this transaction, CTG’s stake in EDP’s share capital
stands at 19%, continuing to support the strategic partnership established between EDP and CTG.
On 18 January 2021, EDP disclosed that, through its subsidiary EDP Renewables North America LLC, has entered into an agreement to acquire a
majority interest in C2 Omega, LLC, the distributed solar platform of C2 Energy Capital, LLC.
With this transaction, EDP Renewables North America LLC will acquire an 85% equity stake in a solar generation portfolio that includes 89 MW o
f
operating and imminent completion capacity and a near-term pipeline of around 120 MW, across near 200 sites in 16 states. EDP Renewables
North America LLC investment in C2’s distributed solar platform business corresponds to an enterprise value of approximately 119 million
American Dollars for the acquisition of the operating capacity. The transaction will also include certain earn-out payments based on the growth in
future operational capacit
y
.
The assumptions used in the determination of Equity Instruments at Fair Value are described in note 22, as required by IFRS 13.
The amounts receivable from concessions - IFRIC 12 at fair value through profit or loss are valued based in the methodology o
f
the Value o
f
Replacement as New (VNR). This method requires that each asset is valued, at current prices, for all the expenses needed for its replacement by
equivalent asset that performs the same services and has the same capacity as the existing asset. The valuation for each asset is based on (i)
Data Bank of Referential Prices - which is defined in the Tariff Adjustment Procedures - PRORET; or (ii) Data Bank of Prices from the Distribution
company - which is formed based on the company's own information; or (iii) Referential Budget – that corresponds to the calculation by
comparison of market data, relating to other assets with similar characteristics. ANEEL reviews the VNR, through the valuation report of the
Regulatory Remuneration Base, every three years for EDP Espírito Santo and every four years for EDP São Paulo, as established in the concession
contracts.
The movement in financial assets and liabilities included in Level 3 is as follows:
At fair value through
Early repaid by EDP S.A. of 500 Million Euros
Regarding a 1,500 Million Euros bond fully subscribed by EDP Finance B.V. due on October 2021, 500 Million Euros were early repaid by EDP S.A.
on 19 January.
424
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
47.
EDP Branch in Spain
AES Inova is a distributed solar investment platform that holds a portfolio o
f
approximately 34 MWp in the states o
f
Rio Grande do Sul, São Paulo
and Minas Gerais, with projects at different stages of development. The closing of this operation is expected in the second quarter of 2021 and is
subject to the fulfillment of regulatory conditions precedent, in addition to other land and environment related steps required for the development
of the projects.
On 27 January 2021, EDP announced that was awarded long-term Contract-for-Differences at the Spanish and Italian renewable energy auctions
to sell electricity.
At the Spanish auction, a portfolio o
f
6 projects o
f
wind and solar, including hybrid projects, with a total capacity o
f
143 MW has been awarded.
The projects are expected to become operational in 2022 and 2023. At the Italian auction, a wind project of 44 MW and expected to become
operational in 2022 has also been awarded.
Qualified shareholding in EDP
On 17 February 2021, Canada Pension Plan Investment Board, notified EDP that it had reached a qualified shareholding correspondent to 2.01% o
f
EDP’s share capital and respective voting rights. The 2% threshold was crossed on 11 February 2021.
On 25 January 2021, EDP priced a fixed to reset rate subordinated notes issuance in the total amount of 750 million Euros, with an early
redemption option exercisable by EDP 5.25 years after the issue date, final maturity date in August 2081 and a yield of 1.95% up to the first reset
date to happen 5 years and 6 months after issuance.
Long-term Contract-for-Differences for 187 MW in Spanish and Italian renewable auctions
Intention to acquire the AES Tietê Energia, S.A.
On February 2021, EDP - Energias do Brasil, S.A. announced its intention to enter into a purchase agreement with AES Tietê Energia S.A. for the
acquisition of 100% of the voting shares of AES Inova Soluções de Energia Ltda. and the respective subsidiaries, AES Tietê Inova Soluções de
Energia I Ltda. and AES Tietê Inova Soluções de Energia II Ltda.
Solar PV project in Hungary with 50 MW
On 12 February 2021, EDP announced that has secured a 15-year Contract-for-Difference to sell energy produced by a solar PV project in Hungary
totalling 50 MW and with expected commercial operation in 2022.
The Spanish branch of EDP has offices in Madrid and Oviedo. From a formal and legal point of view, the representation of the Spanish branch of
EDP before third parties is ensured through the permanent representatives, which are members of the Executive Board of Directors of EDP,
mandated for that
p
ur
p
ose.
The structure of direction, coordination, management and representation of the Spanish branch of EDP is composed by an Executive Committee,
a Mana
g
ement Committee and b
y
direct re
p
resentation on iberian sco
p
e EDP Mana
g
ement Committees.
The aim o
f
EDP - Energias de Portugal - Sociedade Anónima, Sucursal en España is to manage and coordinate the energy interests o
f
subsidiaries
depending from EDP Group in Spain, organised through managing and monitoring structures, in order to ensure the maximum synergy and value
creation in the operations and activities in Spain, also assuming itself as an organizational platform to lead the Iberian integration of shared and
support services (back and middle offices). On this basis, interests in EDP Servicios Financieros (España), S.A.U. and EDP España, S.A.U. are
directl
y
allocated to the assets of EDP Sucursal, as well as the ma
j
orit
y
interest in EDP Renováveis, S.A.
Green hybrid issuance of 750 million Euros
Asset rotation in North America
In February 2021, the requirements defined in IFRS 5 - Non-current assets held for sale were met, for the classification o
f
a group o
f
assets and
liabilities corresponding to 405 MW in North America as non-current assets and liabilities held for sale. Because these conditions were not
fulfilled at 31 December 2020, assets and liabilities were not classified as such in the financial statements as at 31 December 2020.
425
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Dec 2020
Dec 2019*
Investments in subsidiaries:
- EDP Renováveis, S.A.
4,154,431
4,154,431
- EDP España, S.A.U.
2,105,002
2,105,002
- EDP Servicios Financieros (España), S.A.U.
482,695
482,695
- EDP International Investments and Services, S.L.
988,849
988,849
Deferred tax assets
53,020
66,972
Other debtors and others assets
9,358
9,702
Total Non-Current Assets
7,793,355
7,807,651
Other debtors and others assets
176,365
132,751
Tax receivable
39,515
79,517
Cash and cash equivalents
854,129
523,961
Total Current Assets
1,070,009
736,229
Total Assets
8,863,364
8,543,880
Equity
8,809,855
8,442,024
Employee benefits
1,592
2,225
Other liabilities and other payables
685
1,501
Total Non-Current Liabilities
2,277
3,726
Employee benefits
891
17
Other liabilities and other payables
46,251
96,521
Tax payable
4,090
1,592
Total Current Liabilities
51,232
98,130
Total Liabilities
53,509
101,856
Total Equity and Liabilities
8,863,364
8,543,880
* Includes reclassification resulting from the change in accounting policy as described in note 2a)
48.
Environmental Matters
The Statement of Financial Position of the Branch is as follows:
EDP Branch
Expenses o
f
an environmental nature are those identified and incurred to avoid, reduce or repair damage o
f
an environmental nature resulting
from the company's normal activity.
Expenses o
f
an environmental nature are booked as expenses for the period, except i
f
they qualify to be recognised as an asset according with
IAS 16.
The Executive Committee is composed essentially by five permanent representatives, a Corporate General Director (Group Controller for the
activities in Spain) and by first line directors of the business units in Spain, which constitute the main direction and coordination body of the
Branch, being responsible for the coordination of the activities of the permanent representatives and of the Management Committee. The
Management Committee is chaired by the Corporate General Director and is composed by the natural extension of the Departments of the
Corporate Centre of EDP in Spain, namely the Department of M&A ("Direcção de Projectos e Novos Negócios"), Department of Legal Affairs
("Direcção de Assessoria Jurídica"), Department of Internal Audit ("Direcção de Auditoria"), Department of Administration and Finance ("Direcção
de Administração e Finanças"), Department of Human Resources ("Direcção de Recursos Humanos"), Department of EDP Spain Foundation
("Direcção da Fundação EDP Espanha"), Department of Regulation ("Direcção de Regulação"), IT Department ("Direcção de Sistemas de
Informação") and Department of Environment, Sustainability, Innovation and Quality ("Direcção de Ambiente, Sustentabilidade, Inovação e
Qualidade") ensuring in a homogeneous way the functions of these departments transversally to the Spanish territory, being provided with 192
human resources as at 31 December 2020, including 109 in its own payroll. Lastly, the Spanish branch of EDP has direct representation on iberian
scope EDP Management Committees, particularly the Energy Planning, Price and Volume, Markets, Distribution Networks, Commercial and
Production Committees.
426
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Dec 2020
Dec 2019
Air and climate protection
6,200
777
Water management
346
376
Waste management
159
118
Soil, subterranean and surface water protection
3,334
1,290
Noise and vibration reduction
470
735
Biodiversity protection
17,638
13,499
Landscape protection
9,094
14,784
Energetic efficiency
16,752
21,643
Research and development in the environmental area
-
17
Other environmental management and protection activities
12,995
35,078
66,988
88,317
Thousand Euros
Dec 2020
Dec 2019
Air and climate protection
194,624
205,589
Water management
6,989
13,186
Waste management
18,317
13,487
Soil, subterranean and surface water protection
836
1,910
Noise and vibration reduction
277
225
Biodiversity protection
5,079
4,973
Landscape protection
40
13
Energetic efficiency
5,450
13,877
Radiations management
118
66
Research and development in the environmental area
455
547
Other environmental management and protection activities
9,885
12,006
242,070
265,879
49.
Business combinations
Non-controlling interests were measured using the proportionate share method.
Investments o
f
an environmental nature booked as Property, plant and equipment and intangible assets during 2020 and 2019, in the Group, are
as follows:
Group
These transactions are considered under the scope of IFRS 3 - Business combinations.
For simplification purposes, and considering this does not have a material effect, the Group used the financial statements as at 31 December
2020 of the companies acquired, to determine pre-acquisition results and, consequently, the companies have been consolidated from that date
with no impact in the 2020 consolidated profit and loss of the EDP Group, except for the result of the aforementioned business combination
achieved in stages detailed below (Compañía Eólica Aragonesa, S.A.).
During 2020 and 2019, the Group recognised expenses that are as follows:
Group
Under current and future socioeconomic trends and practices followed by the EDP Group regarding to environmental sustainability, the group
accounts for provisions to cover the costs of dismantling, decommissioning, restoring and decontaminating land where electric power plants are
located, of
93,191 thousand Euros and 75,695 thousand Euros for thermoelectric power plants located in Portugal and Spain, respectively.
Regarding the liability to dismantle and restore the land where solar and wind farms are located to its original condition, as at 31 December 2020,
the provisions amount to 301,839 thousand Euros. Additionally, the provision to dismantle the Trillo nuclear power plant amounts to 47,614
thousand Euros
(
see notes 2 n
)
and 36
)
.
On 16 December 2020, EDP Iberia S.L., 100% owned by EDP, has completed the acquisition of Viesgo.
This transaction includes the establishment o
f
a long-term partnership with Macquarie Super Core Infrastructure Fund SD Holdings S.
À
.R.L.
(“MSCIF”) for electricity distribution business in Spain, which will be 75.1% owned by EDP and 24.9% by MSCIF. This partnership will own three
electricity distribution companies: E-Redes (previously 100% owned by EDP), Viesgo Distribución and Begasa, (currently 100% owned by Viesgo).
Environmental income recognised in 2020 relates to the sale o
f
environmental waste o
f
2,716 thousand Euros (31 December 2019: 4,535
thousand Euros) and the sale of by-products of 71 thousand Euros (31 December 2019: 127 thousand Euros).
In addition, as part o
f
the transaction, EDP Renováveis, S.A. (EDPR), acquired 100% o
f
the renewables business o
f
Viesgo, comprising 0.5 GW in
Iberia, and EDP owns 100% of Viesgo’s two thermal power plants currently under decommissioning stage in the south of Spain, which carry
potential interconnection rights to develop renewable projects.
427
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Acquisition of electricity distribution and thermal and hydro generation business of Viesgo by EDP Iberia S.L.
Thousand Euros
Assets
Property, plant and equipment
906,915
258,313
1,165,228
Right-of-use assets
2,438
-
2,438
Intangible assets
439,129
604,162
1,043,291
Deferred tax assets
268,584
24,601
293,185
Other debtors and other assets
680,820
-1,709
679,111
Cash and cash equivalents
52,672
-
52,672
Total Assets
2,350,558
885,367
3,235,925
Liabilities
Financial Debt
1,181,058
102,930
1,283,988
Employee benefits
144,409
-
144,409
Provisions
127,805
35,000
162,805
Deferred tax liabilities
196,364
215,292
411,656
Other liabilities and other payables
247,859
-39,926
207,933
Total liabilities
1,897,495
313,296
2,210,791
Net Assets
453,063
572,071
1,025,134
Net assets acquired at fair value (75.1% of Distribution business + 100% Generation business)
758,731
Acquisition cost
1,102,697
Goodwill
343,966
Net Assets Viesgo - Distribution business
1,069,326
Net Assets Viesgo - Generation business
-44,193
Net Assets Viesgo
1,025,134
Net Assets Viesgo - Distribution business
1,069,326
Incorporation of E-redes (Net book value)
391,629
Incorporation of E-redes (Acquisition cost)
-1,126,122
Net Assets - Distribution business
334,833
Non-controlling interests (24.9%) (see note 33)
83,373
acquisition date
The intangible assets identified and subject to analysis and valuation are the Permits, Licences and Concessions (PLCs). The existing PLCs allow
Viesgo Distribución to operate the electricity distribution business in Cantabria. To estimate the value of the PLC’s, the Multi-Period Excess
Earnings Method (MEEM) has been used, which is commonly applied in the valuation of intangible assets that generate earnings through the
contribution of other assets, since intangible assets do not generate cash flows individually. This valuation has determined a fair value of PLCs in
the amount of 1,033,466 thousand Euros, generating a fair value adjustment of 604,162 thousand Euros. As a result, a deferred tax liability arise
amountin
g
to 151,040 thousand Euros.
adjustment
acquisition date
In the Consolidated Financial Statements o
f
Viesgo as at 31 December 2020 there are grants amounting to 39,926 thousand Euros. As these
grants won’t generate cash flows in future an adjustment to the Viesgo Financial Statements should be done as at 31 December 2020 in this
regard. As a result, an adjustment to deferred tax assets arise amounting 9,982 thousand Euros.
Book value at
Fair value
Fair value at
I
f
this acquisition had occurred in the beginning o
f
the exercise, Viesgo would have contributed for the consolidated financial statements with
Revenues from energy sales and distribution in the amount of 244,855 thousands of Euros and with a Net profit for the period in the amount of
45,176 thousands of Euros for the period of 2020.
At the acquisition date, EDP Group has determined the fair value o
f
the assets acquired and liabilities assumed, based on a valuation performed
by an independent third party. This valuation, which was based on the discounted cashflow method, came to a fair value of Viesgo in the amount
of 1,025 million Euros. Fair value of identifiable assets and liabilities at the acquisition date is presented as follows:
Viesgo valuation has determined a fair value for Property, plant and equipment in the amount 1,165,228 thousand Euros, based on the regularory
asset base value, generating a fair value adjustment of 258,313 thousand Euros. As a result, a deferred tax liability arise amounting to 64,578
thousand Euros.
On the same date o
f
this transaction, EDP Iberia S.L. sold 100% o
f
its direct stake in Hidrocantábrico Distribucion Eléctrica, S.A.U. (E-redes) and
indirect 75% stake in Electra Llobregat Energía, S.L. to IE2 Inversiones Globales Empresariales, S.L., a Viesgo portfolio company. This transaction
resulted in the following impacts on Non-controlling interests:
428
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Acquisition of the renewable business of Viesgo by EDP Renováveis, S.A (EDPR)
At the acquisition date, EDPR Group has determined the fair value o
f
the assets acquired and liabilities assumed, based on a valuation performed
internally. The valuation methodology applied was a discounted cashflow approach, where cash flows for each project were forecasted for the
remaining life of the assets. The main components of cashflow, namely production, long term power prices and operational costs were estimated
using EDPR’s own methodology using historical data of the assets provided by the seller and information from similar wind farms in EDPR’s
portfolio. The after tax cash flows were then discounted at the weighted average cost of capital reflecting the risk of each of the country and
adjusted for the contracted profile of each project. Lastly to the aggregate value of the portfolio, adjustments were made for one-off items, other
balance sheet assets or liabilities and s
y
ner
g
ies, to reach the final e
q
uit
y
valuation.
EDP Renováveis, S.A entered in July 2020 into an agreement with certain funds managed by Macquarie Infrastructure and Real Assets, for the
acquisition of the control of the renewable business of Viesgo, and namely the acquisition of 100% of the shares in the companies Viesgo Europa,
S.L.U. and Viesgo Renovables, S.L.U. which in turn owns a portfolio of affiliates (see note 6). At that moment, the completion of this transaction
was subject to customary conditions precedent.
With this transaction, completed in 16 December 2020 once the aforementioned customary conditions precedent were fulfilled, EDPR has
acquired 100% of a portfolio of 0.5 GW of renewable installed capacity in Spain (84%) and Portugal (16%) for a total consideration of 563,488
thousand Euros of which an amount of 26,001 thousand Euros refers to shareholders loans.
The subsidiary IE2 Holdco, S.A. is the vehicle that maintains the Group’s Euro Medium-Term Notes (EMTN) programme guaranteed by the
subsidiary company Viesgo Holdco, S.A. As at 31 December 2020, the liability registered related to the bonds of this programme totaled 1,052,210
thousand Euros. The fair value of this liability amount to 1,155,140 thousand Euros based on the price method in an active market, generating a
fair value adjustment of 102,930 thousand Euros. As a result, a deferred tax asset arise amounting to 25,733 thousand Euros.
According to due diligences reviewed (labor, tax, legal and environmental), the SPA and ris
k
information, relevant matters detected have been
analysed in order to conclude if there were present obligations as at the acquisition date and whether its fair value can be measured reliably. In
this regard, a provision related to a contingent liability has to be recognized in the business combination in Generation Financial Statements
amounting to 35,000 thousand Euros according to management estimation. As a result, a deferred tax asset arise amounting to 8,750 thousand
Euros.
The purchase price allocation exercise carried out in accordance with IFRS 3 resulted in a goodwill recognition in the Distribution cash-generating
unit in the amount of 343,965 thousand Euros, as per the difference of the net assets acquired at fair value and the consideration transferred for
the acquisition of the shares.
I
f
this acquisition had occurred in the beginning o
f
the exercise, it would have contributed to the consolidated financial statements with Revenues,
mainly from energy sales, in the approximate amount of 78 million Euros and with a Net profit for the period in the approximate amount of 17
million Euros, referring to the twelve-month period ended at 31 December 2020.
Within this transaction, EDPR has gained control over the company Compañía Eólica Aragonesa, S.A., where EDPR had 50% o
f
the shares o
f
the
company and acquired the remaining 50% of the shares, considering this acquisition a business combination achieved in stages under IFRS 3.
Until the date in which the control was obtained, the shareholding previously held was being included in the consolidated financial statements
under the equity method. Total value of the equity investment previously to the transaction amounted to 46,527 thousand Euros of which an
amount of 1,954 thousand Euros corresponds to the result of the compan
y
for the
y
ear 2020 attributable to EDPR.
429
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Assets
Property, plant and equipment
203,027
214,254
417,281
Right-of-use assets
15,403
-
15,403
Intangible assets
13,340
-
13,340
Goodwill
112,279
-
112,279
Investments in subsidiaries
9,437
44,023
53,460
Equity instruments at fair value
182
366
548
Deferred tax assets
15,184
-
15,184
Other debtors and other assets
62,357
-
62,357
Cash and cash equivalents
32,907
-
32,907
Total Assets
464,116
258,643
722,759
Liabilities
Financial Debt
18,059
-
18,059
Provisions
18,728
1,100
19,828
Deferred tax liabilities
11,449
56,631
68,080
Other liabilities and other payables
58,642
-
58,642
Total liabilities
106,878
57,731
164,609
Net Assets
357,238
200,912
558,150
Non-controlling interests
-8,311
Net assets previously held in
Compañía Eólica Aragonesa, S.A. (business combination achieved in stages)
-46,527
Net assets acquired at fair value
503,312
Acquisition cost
537,487
Goodwill
36,062
Gain on acquisition Compañía Eólica Aragonesa, S.A. (business combination achieved in stages)
-1,887
Such valuation has determined a fair value o
f
the net assets acquired in the amount o
f
503,312 thousands o
f
Euros. Fair value o
f
identifiable
assets and liabilities at the acquisition date is presented as follows:
Book value at
Fair value
acquisition date
adjustment
acquisition date
The aforementioned Viesgo's valuation has determined a fair value for Property, plant and equipment in the amount o
f
417,281 thousand Euros,
generating a fair value adjustment of 214,254 thousand Euros and a corresponding deferred tax liability in the amount of 56,631 thousand Euros
(see note 16). Further, some of the affiliates of Viesgo Renovables, S.L.U. are associates companies which are consolidated by the equity method,
as well as equity instruments at fair value where the valuation determined a fair value adjustment in the amount of 44,023 thousand Euros (see
note 21
)
and 366 thousand Euros respectivel
y
.
At the acquisition date, certain contingent liabilities have been identified, therefore additional provisions have been recognized in the amount o
f
1,100 thousand Euros.
The aforementioned goodwill resulting from the purchase price allocation, which is identified as provisional according to what is indicated in note
2 a), is mainly attributable to the high-quality of the portfolio with strong wind resource (29% average load factor) and with a low risk profile, of
which 87% of the capacity is regulated, with an average age of 13 years (~7 years of remaining regulated life) considering that the portfolio also
counts with an attractive potential for future extensions/repowering given the aforementioned profile, as well as to the benefits and synergies that
are expected to arise as a result of its integration into EDPR Group.
The purchase price allocation exercise carried out in accordance with IFRS 3 resulted as follows:
i) Goodwill recognition in the amount of 148,341 thousand Euros as per the difference of the net assets acquired at fair value and the
consideration transferred for the acquisition of the shares. This amount includes the previous Goodwill recognized in the book value at
acquisition date amounting to 112,279 thousand Euros and an additional amount of 36,062 thousand Euros, of which an amount of 4,641
thousand Euros refers to associate companies consolidated by the equity method, thus presented in the caption Investments in joint ventures and
associates caption (see note 19 and 21); and
ii) Gain in the step acquisition of Compañía Eólica Aragonesa, S.A. in the amount of 1,887 thousand Euros as a consequence of the
remeasurement at fair value of the investment previously held, being registered the corresponding difference between the fair value and the book
value in the Other income caption of the consolidated financial statements.
Fair value at
430
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
50.
Investigation process about CMEC and DPH
This methodology was subjected to the European Commission’s (EC) prior approval, expressed in the Decision concerning State aid N161/2004,
which deemed it effective and strictly necessary. Additionally, the enactment of the aforementioned Decree-Law by the Portuguese Government
was the object of a legislative authorization, granted by the Portuguese Parliament.
On 6 July 2020, a measure o
f
constraint to suspend the exercise o
f
functions in EDP’s Executive Board o
f
Directors was proposed by the Public
Prosecutor’s Office, and applied by the court, to António Mexia and João Manso Neto (then Chairman and member of the board, respectively),
while the investigation remained in the inquiry stage. On the same day, the General and Supervisory Board and the Executive Board of Directors
resolved to appoint then Chief Financial Officer Miguel Stilwell de Andrade as interim Chairman, for the duration of the impediment of the current
Chairman of the Executive Board of Directors, in addition to his functions at the time.
On 30 November 2020, and as communicated to the market on that same date, EDP received formal notices o
f
both suspended members o
f
the
Executive Board of Directors, informing it of their unavailability to be re-appointed to serve in EDP’s corporate bodies for the 2021-2023 term of
office.
On 19 January 2021, an Extraordinary General Shareholders’ Meeting was held, and a new management team was appointed to the Executive
Board of Directors, for the 2021-2023 triennium.
Accordingly, Decree-Law no. 240/2004, o
f
27 December, was enacted in the context o
f
the liberalization o
f
the Portuguese energy sector,
establishing the early termination of the CAEs entered into in 1996 and, at the same time, approving the methodology to be used in accomplishing
said termination, as well as the compensation due to energy producers in that respect.
In that context, and according to the approved methodology, EDP and REN - Rede Eléctrica Nacional, S.A. (REN) signed the CAE early termination
agreements in 2005, their entry into force having taken place on 1 July 2007, after being amended earlier that same year. Both termination
agreements were ratified by the member of the Portuguese Government responsible for the energy sector.
Pursuant to the provisions o
f
the 2005 CAE termination agreements, on 8 March 2008 the Portuguese Government, REN and EDP Produção
entered into a number of concession agreements formalizing EDP’s right of use over the Public Hydro Domain (“Domínio Público Hídrico” – DPH)
until the end of the operational life of the hydroelectric plants subject to the so-called Costs for the Maintenance of the Contractual Balance
mechanism (“Custos de Manutenção do Equilíbrio Contratual“ – CMEC). Decree-Law 226-A/2007, of 31 May, introduced a new obligation to EDP,
unforeseen in the 2004 legislation or in the 2005 termination agreements, which consisted in the payment by EDP of an amount concerning the
“economic and financial balance” of each power plant. Pursuant to this legal framework, and following assessments carried out by two
independent financial institutions appointed by the Government, EDP Produção was ordered to pay EUR 759 million, as consideration for the
extension of its ri
g
ht of use over the DPH. This included a
pp
roximatel
y
EUR 55 million due for the H
y
dro Resources Tax.
In 2012, the EC and Portuguese authorities (the Central Department o
f
Criminal Investigation and Prosecution, a part o
f
the Public Prosecutor’s
Office – “Departamento Central de Investigação e Ação Penal”, DCIAP) received complaints regarding (i) the methodology adopted for the early
termination of the CAEs and the implementation of the CMEC mechanism; and (ii) EDP’s right of use over the DPH.
Following the enactment o
f
an EU legislation package regarding the construction o
f
the Internal Energy Market, aimed at, among others,
promoting the liberalization of the electricity sector, the existence of long-term Power Purchase Agreements (“Contratos de Aquisição de Energia”
– CAE), and the Portuguese legal framework involving a “single buyer”, ceased to be compatible with EU law.
So far as the complaint received by the EC is concerned, this institution addressed a clarification request to the Portuguese Government over the
early termination of the CAEs, and its replacement by the CMEC framework.
In 2 June 2017, EDP was made aware o
f
the investigation being carried out by the DCIAP since 2012 regarding the amounts due to EDP for the
early termination of the CAEs and the right of use over the DPH. On that date, the authorities carried out a search in EDP’s offices, as well as REN’s
(as network operator) and a consultant. At that time, DCIAP informed, by way of a public press release, that investigations were ongoing, and the
alleged facts could amount to active and passive corruption, and economic participation in business deals. The DCIAP further informed, in said
press release, that some members of EDP’s Executive Board of Directors, as well as former directors who executed the relevant agreements, were
sus
p
ects in that investi
g
ation.
The EC decided, in September 2013, that the compensation attributed to EDP Produção in the context o
f
the early termination o
f
the CAEs did not
exceed the amount required to reimburse the investment costs meant to be recovered throughout the operational life of the assets in question.
Furthermore, it certified that the execution of the CMEC framework respected the terms that were notified to the EC, and approved, in 2004.
Accordingly, the EC has at this stage concluded its investigation regarding the early termination of the CAEs. Having found no evidence of non-
compliance with the framework in force in Portugal (approved by the EC itself in 2004) or at the EU level, it decided not to pursue an in-depth
investi
g
ation on the matter.
Simultaneously, in September 2013, the EC decided to undertake an in-depth investigation exclusively in respect o
f
the right o
f
use over the DPH
matter.
431
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
51.
Operating Segments
• Hidrocantábrico Distribucion Eléctrica, S.A.U.;
• EDP Gás Serviço Universal, S.A.;
• EDP Espírito Santo Distribuição de Energia S.A.;
• Viesgo Distribución Eléctrica, S.L.;
• Barras Eléctricas Galaico-Asturianas, S.A.;
• EDP São Paulo Distribuição de Energia S.A.;
• EDP Transmissão, S.A.;
• EDP Transmissão Aliança SC, S.A.;
• EDP Transmissão SP-MG, S.A.
The Client Solutions & Energy Management segment includes the following activities: generation of electricity from non-renewable sources,
mainly coal and gas; electricity and gas supply and related energy solutions services to clients; and energy management businesses responsible
for management of purchases and sales of energy in iberian and brazilian markets, and also for the related hedging transactions. This segment
includes, but not limited to, the following companies:
• EDP - Gestão da Produção de Energia, S.A. (thermal activity);
• Electra de Llobregat Energía, S.L.;
• EDP España, S.A.U. (thermal and intermediation activities);
• UNGE - Unidade de Negócio de Gestão de Energia Ibérica (EDP, S.A.);
• Porto do Pecém Geração de Energia, S.A.;
• EDP Comercial - Comercialização de Energia, S.A.;
• EDP - Comercialização e Serviços de Energia, Ltda.
• SU Eletricidade, S.A., S.A.;
The Executive Board o
f
Directors regularly reviews segmental reports, using Operating Profit to assess and release each business operating
performance, as well as to allocate resources.
• EDP España, S.A.U. (hydro activity);
• EDP Renováveis, S.A. and all subsidiaries of the EDPR Group;
• Enerpeixe, S.A.;
• Investco, S.A.;
• Lajeado Energia, S.A.
The Networks segment corresponds to the activities o
f
electricity distribution and transmission, including last resort suppliers. This segment
includes, but not limited to, the following companies:
The Renewables segment corresponds to the activity o
f
generation o
f
electricity from renewable sources, mainly hydro, wind and solar. This
segment includes, but not limited to, the following companies:
• EDP - Gestão da Produção de Energia, S.A. (hydro activity);
The management o
f
financial activities o
f
all EDP Group entities (except Brazil) is undertaken centrally by the Financial Department at holding
level, in accordance with policies approved by the Executive Board of Directors. As a result of this management, all financial operations and
financial results are disclosed only at Group level.
• E-Redes – Distribuição de Eletricidade, S.A.;
The Group develops a set o
f
regulated and liberalised activities in the energy sector, with special emphasis in generation, distribution and supply
of electricity.
EDP reaffirms that no irregularities exist regarding the matters at hand and believes the amounts due by the early termination o
f
the CAEs and the
proceedings regarding the DPH, in particular the amounts paid, were fair and according to market conditions.
EDP remains determined in the pursuit o
f
its corporate purpose and in the fulfilment o
f
its clients, shareholders, employees, and remaining
stakeholders’ highest expectations. EDP is committed to the accomplishment of its strategic goals, and no impact to its consolidated financial
statements is expected to arise as a consequence of the above.
In accordance with IFRS 8, an operating segment is a Group component:
(i) that engages in business activities from which it may earn revenues and incur expenses;
(iii) for which discrete financial information is available.
(ii) whose operating results are reviewed regularly by the Group's chief operating decision maker to make decisions about resources to be
allocated to the segment and assess its performance; and
432
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements as at and
for the periods ended 31 December 2020 and 2019
Thousand Euros
Portugal
Spain
Brazil
USA
Other
Group
Property, plant and equipment
4,029,157
4,592,682
1,386,986
7,310,276
2,844,120
20,163,221
Right-of-use assets
254,666
230,486
20,230
413,295
111,516
1,030,193
Intangible assets
3,088,607
1,153,701
561,805
55,995
138,127
4,998,235
Goodwill
47,262
1,492,248
32,604
644,499
89,690
2,306,303
7,419,692
7,469,117
2,001,625
8,424,065
3,183,453
28,497,952
Thousand Euros
Portugal
Spain
Brazil
USA
Other
Group
Property, plant and equipment
4,149,543
3,787,643
1,701,371
7,880,618
2,157,047
19,676,222
Right-of-use assets
244,002
87,505
24,188
418,736
54,072
828,503
Intangible assets
3,194,391
149,498
677,804
65,162
136,968
4,223,823
Goodwill
49,889
1,246,112
30,780
702,818
90,263
2,119,862
7,637,825
5,270,758
2,434,143
9,067,334
2,438,350
26,848,410
Segment Definition
Dec 2020
Dec 2019
Under IFRS 8, the EDP Group discloses as Operating investment, additions in non-current assets, except for financial instruments, deferred tax
assets and post-employment benefit assets. Therefore, in each business segment, the Operating Investment caption includes increases in
Property, Plant and Equipment; Intangible Assets; and Amounts receivable from concessions - IFRIC 12 under the financial asset model, excluding
CO2 licenses and Green certificates, net of increases in Government grants, customers contributions for investment and sales of properties in the
period. Goodwill is disclosed in note 19.
In consolidated financial statements, Joint Ventures and associated companies are accounted under the equity method, in accordance with the
Group accounting policy disclose in note 2. These equity accounted investees are disclosed by business segment under IFRS 8 and presented in
the business segment correspondent to its operating activity.
Geographic information
The Group manages its activity based on business segments mentioned above, however has business in several geographical locations, being its
main office located in Portugal.
Revenues from energy sales and services and other by geographic market, for EDP Group, are presented in note 7. Additionally, the geographical
information bellow, details the Non-current assets excluding Financial instruments, Deferred tax assets and Employee benefits. In the disclosure
of this information, the Revenues from energy sales and services and other, as well as the Non-current assets, are based on companies’
geographical location where the Assets are booked.
Non-current assets by geographical market for the Group EDP, are as follows:
The amounts reported in each operating segment result from the aggregation o
f
the subsidiaries and business units defined in each segment
perimeter and the elimination of transactions between companies of the same segment.
The statement o
f
financial position captions o
f
each subsidiary and business unit, as well as income statement captions for each operating
segment, are determined based on the amounts booked directly in the companies that compose the segment, including the elimination of
balances between companies of the same segment, and excluding the allocation in the segments of the adjustments between segments.
In each business segment, Assets include the Property, Plant and Equipment, Right-of-use assets, Intangible Assets and Goodwill. The remaining
assets are presented in the "Reconciliation of information between Operating Segments and Financial Statements".
433
EDP Group Operating Segments Information as at 31 December 2020
Thousand Euros
Renewables
Networks
Client Solutions &
Energy
Management
Total Segments
Revenues from energy sales and services and other
2,600,353
5,329,480
7,477,747
15,407,579
Revenues inter-segments
1,241,935
1,615,405
106,894
2,964,233
Revenues from third parties
1,358,418
3,714,075
7,370,853
12,443,346
Gross Profit
2,416,124
1,702,762
992,176
5,111,063
Other income
920,102
75,826
54,980
1,050,908
Supplies and services
-355,222
-325,018
-270,042
-950,282
Personnel costs and employee benefits
-190,367
-204,095
-163,434
-557,897
Other costs
-176,234
-314,862
-107,451
-598,546
Impairment losses on trade receivables and debtors
-110
-27,198
-36,389
-63,697
Joint ventures and associates
-1,369
2,382
3,933
4,946
Gross Operating Profit
2,612,924
909,797
473,774
3,996,494
Provisions
-73,265
-10,566
-27,831
-111,661
Amortisation and impairment
-827,782
-372,419
-389,506
-1,589,707
Operating Profit
1,711,877
526,812
56,437
2,295,126
Assets
20,501,380
6,067,756
2,369,626
28,938,762
Financial assets - Investments in joint ventures and associates
716,417
75,835
10,871
803,123
Operating Investment
2,134,995
624,273
105,593
2,864,861
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended at 31 December 2020 and 2019
434
Thousand Euros
Total Revenues from energy sales and services and other of Reported
Segments
15,407,579
Revenues from ener
gy
sales and services and others from Other Se
g
ments
225,485
Ad
j
ustments and Inter-se
g
ments eliminations*
-3,184,858
Total Revenues from energy sales and services and other of EDP Group
12,448,205
Total Gross Profit of Re
p
orted Se
g
ments
5,111,063
Gross Profit from Other Se
g
ments
225,201
Ad
j
ustments and Inter-se
g
ments eliminations*
-244,546
Total Gross Profit of EDP Grou
p
5,091,718
Total Gross O
p
eratin
g
Profit of Re
p
orted Se
g
ments
3,996,494
Gross O
p
eratin
g
Profit from Other Se
g
ments
-43,640
Ad
j
ustments and Inter-se
g
ments eliminations*
-2,892
Total Gross O
p
eratin
g
Profit of EDP Grou
p
3,949,962
Total O
p
eratin
g
Profit of Re
p
orted Se
g
ments
2,295,126
O
p
eratin
g
Profit from Other Se
g
ments
-96,603
Ad
j
ustments and Inter-se
g
ments eliminations*
7,515
Total O
p
eratin
g
Profit of EDP Grou
p
2,206,038
Total Assets of Re
p
orted Se
g
ments
28,938,762
Assets Not Allocated
13,508,470
Financial Assets
3,193,367
Trade Receivables and Other Debtor
s
6,292,623
Inventories
323,945
Tax Assets
1,805,615
Other Assets
1,892,920
Assets from Other Se
g
ments
554,951
Inter-se
g
ments assets eliminations*
-55,400
Total Assets of EDP Group
42,946,783
Total Equity accounted Investments in joint ventures and associates of
Re
p
orted Se
g
ments
803,123
Equity accounted Investments in joint ventures and associates from Other
Se
g
ments
137,239
Total Equity accounted Investments in joint ventures and associates of
EDP Grou
p
940,362
Total Operating Investment of Reported Segments
2,864,861
Operating Investment from Other Segments
44,330
Total Operating Investment of EDP Group
2,909,191
Dismantling/discomission of PP&E
65,050
CO2 Emission Licenses and Green Certificates
237,321
Concession Rights - IFRIC 12 *
*
-502,126
Investment Grants
-
Other Investments ***
1,083,946
Total Fixed Assets additions of EDP Group
(
Notes 16 and 18
)
3,793,382
Total of Reported
Segments
Other Segments
Adjustments and
Inter-segments
eliminations*
Total of EDP Group
Other income
1,050,908
49,291
-22,510
1,077,689
Supplies and services
-950,282
-166,347
260,110
-856,519
Personnel costs and employee benefits
-557,897
-112,925
3,509
-667,313
Other costs
-598,546
-37,178
545
-635,180
Impairment losses on trade receivables and debtors
-63,697
7
-
-63,690
Equity method in joint ventures and associates
4,946
-1,688
-
3,257
Provisions
-111,661
-432
-
-112,093
Amortisation and impairment
-1,589,707
-52,531
10,407
-1,631,831
* Mainly related with intragroup balances and transactions eliminations.
** See Note 26 - Debtors and Other Assets from Commercial Activitie
s
*** Includes, mainly, the effect of the price allocation exercise of Viesgo assets (see note 16 and 18).
Reconciliation of information between Operating Segments and Financial Statements for 31 December 2020
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended at 31 December 2020 and 2019
435
Thousand Euros
Renewables
Networks
Client Solutions &
Energy
Management
Total Segments
Revenues from energy sales and services and other
2,782,845
6,195,333
8,639,171
17,617,349
Revenues inter-segments
1,373,353
1,688,296
231,803
3,293,452
Revenues from third parties
1,409,492
4,507,037
8,407,368
14,323,897
Gross Profit
2,408,761
1,816,351
1,001,334
5,226,446
Other income
604,286
43,932
30,106
678,324
Supplies and services
-364,884
-351,632
-285,495
-1,002,011
Personnel costs and employee benefits
-181,836
-199,583
-128,897
-510,316
Other costs
-179,158
-305,805
-122,931
-607,894
Impairment losses on trade receivables and debtors
-1,505
-11,875
-19,904
-33,284
Joint ventures and associates
11,377
5,580
5,679
22,636
Gross Operating Profit
2,297,041
996,968
479,892
3,773,901
Provisions
-82,141
-14,132
-5,628
-101,901
Amortisation and impairment
-815,631
-356,184
-538,923
-1,710,738
Operating Profit
1,399,269
626,652
-64,659
1,961,262
Assets
20,532,246
3,654,007
3,124,385
27,310,638
Financial assets - Investments in joint ventures and associates Assets
812,696
110,846
20,401
943,943
Operating Investment
1,167,576
911,972
123,683
2,203,231
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended at 31 December 2020 and 2019
EDP Group Operating Segments Information as at 31 December 2019
436
Thousand Euros
Total Revenues from energy sales and services and others of Reported
Se
g
ments
17,617,349
Revenues from energy sales and services and others from Other Segments
258,560
Adjustments and Inter-segments eliminations*
-3,542,900
Total Revenues from energy sales and services and others of EDP Group
14,333,009
Total Gross Profit of Reported Se
g
ments
5,226,446
Gross Profit from Other Se
g
ments
251,546
Ad
j
ustments and Inter-se
g
ments eliminations*
-260,842
Total Gross Profit of EDP Group
5,217,150
Total Gross Operatin
g
Profit of Reported Se
g
ments
3,773,901
Gross Operatin
g
Profit from Other Se
g
ments
*
-41,808
Ad
j
ustments and Inter-se
g
ments eliminations*
-1,465
Total Gross Operatin
g
Profit of EDP Group
3,730,628
Total Operatin
g
Profit of Reported Se
g
ments
1,961,262
Operatin
g
Profit from Other Se
g
ments
-81,249
Ad
j
ustments and Inter-se
g
ments eliminations*
-16,534
Total Operatin
g
Profit of EDP Group
1,863,479
Total Assets of Reported Se
g
ments
27,310,638
Assets Not Allocated
14,414,72
4
Financial Assets
4,030,891
Trade Receivables and Other Debtor
s
6,282,380
Inventories
368,33
4
Tax Assets
1,888,818
Other Assets
1,844,301
Assets from Other Segments
531,633
Inter-segments assets eliminations*
104,651
Total Assets of EDP Group
42,361,646
Total Equity accounted Investments in joint ventures and associates of
Re
p
orted Se
g
ments
943,943
Equity accounted Investments in joint ventures and associates from Other
Se
g
ments
154,569
Total Equity accounted Investments in joint ventures and associates of EDP
Grou
p
1,098,512
Total Operating Investment of Reported Segments
2,203,231
Operating Investment from Other Segments
55,155
Total Operating Investment of EDP Group
2,258,386
Discomission of Property, plant and equipment
36,310
CO2 Licenses and Green Certificates
295,676
Concession Rights - IFRIC 12
-770,907
Investment Grants
-1,633
Other Investments
-22,653
Total Fixed Assets additions of EDP Group
(
Notes 16 and 18
)
1,795,179
Total of Reported
Segments
Other Segments
Adjustments and
Inter-segments
eliminations*
Total of EDP
Group
Other income
678,324
40,238
-26,676
691,886
Supplies and services
-1,002,011
-178,477
282,945
-897,543
Personnel costs and employee benefits
-510,316
-116,706
6,826
-620,196
Other costs
-607,894
-40,621
-3,958
-652,473
Impairment losses on trade receivables and debtors
-33,284
76
1
-33,207
Joint ventures and associates
22,636
2,137
238
25,011
Provisions
-101,901
371
-
-101,530
Amortisation and impairment
-1,710,738
-39,813
-15,068
-1,765,619
* Mainly related with intragroup balances and transactions elimination
s
Reconciliation of information between Operating Segments and Financial Statements for 31 December 2019
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended at 31 December 2020 and 2019
437
52.
Reconciliation of Changes in the responsibilities of Financing activities at 31 December 2020
Loans
obtained
Collateral
Deposits
Derivative
financial
instruments
Institutional
partnerships in
North America
Lease
Liabilities
(Rents due)
Loans from
non-
controlling
interests
Thousand Euros
(Note 34)
(Note 34)
(Note 42)*
(Note 37)
(Note 39)
(Note 39)
Balance as at 31 de December 2018
16,084,899
-192,891
-119,169
2,231,249
-
642,874
Cash flows:
Receipts relating to financial debt
(including Collateral Deposits)
3,974,474
125,418
-
-
-
-
(Payments) relating to financial debt
(including Collateral Deposits)
-3,436,259
-7,104
-
-
-
-
Interest and similar costs of financial debt including hedge derivatives
-564,876
-
7,606
-
-
-
Receipts/(payments) relating to loans from non-controlling interests
-
-
-
-
-
-29,922
-
-
-
-
-
-21,177
Receipts/(payments) relating to derivative financial instruments
-
-
-4,946
-
-
-
Receipts/(payments) from institutional partnerships - USA
-
-
-
105,627
-
-
Lease (payments)
-
-
-
-75,754
-
Perimeter variations
-190,675
13,009
-1,489
-
-53,128
-283,427
Exchange differences
109,730
92
-109
42,848
-1,890
1,260
Fair value changes
-6,561
-
34,184
-
-
-
Interests and accrued and deferred costs
600,737
-
-2,084
6,310
-
22,742
Unwinding
-
-
-
85,320
39,061
-
ITC/PTC recognition
-
-
-
-181,570
-
-
New lease contracts/Increments in rent values
-
-
-
-
112,254
-
Transition IFRS 16
-
-
-
-
822,001
-
Reclassification to Liabilities held for sale
-
-
-
-
-4,815
-
Balance as at 31 de December 2019
16,571,469
-61,476
-86,007
2,289,784
837,729
332,350
Cash flows:
Receipts relating to financial debt
(
including Collateral Deposits
)
5,907,155
20,528
-
-
-
-
(
Payments
)
relating to financial debt
(
including Collateral Deposits
)
-6,459,862
-3,704
-
-
-
-
Interest and similar costs of financial debt including hedge derivatives
-582,350
-
12,195
-
-
-
Receipts/
(
payments
)
relating to loans from non-controlling interests
-
-
-
-
-
216,858
-
-
-
-
-
-9,831
Receipts/
(
payments
)
relating to derivative financial instruments
-
-
12,776
-
-
-
Receipts/
(
payments
)
from institutional partnerships
-
-
-
248,728
-
-
Lease
(
payments
)
-
-
-
-
-80,364
-
Perimeter variations
1 209 285
4
42 375
- 320 944
- 12 801
44 372
Exchange differences
- 855 183
12 579
- 1 141
- 181 398
- 54 766
- 8 091
Fair value changes
-16,381
-
-110,016
-
-
-
Interests and accrued and deferred costs
512,630
-
-
4,437
-
-
Unwinding
-
-
225
94,718
39,735
14,766
ITC/PTC recognition
-
-
-
-201,783
-
-
New lease contracts/Increments in rent values
-
-
-
-
324,827
-
Reclassification to Liabilities held for sale
-
-
-
-
1,318
-
Balance as at 31 December 2020
16,286,763
-32,069
-129,593
1,933,542
1,055,678
590,424
* The Group considers as financing activities all derivative financial instruments excluding derivatives related with commodities.
Loans
obtained
Derivative
financial
instruments
Lease
Liabilities
(Rents due)
Group
companies
Thousand Euros
(Note 34)
(Note 42)*
(Note 39)
(Note 39)
Balance as at 31 de December 2018
13,840,962
-73,520
-
97,636
Cash flows:
Receipts relating to financial debt
(including Collateral Deposits)
1,657,992
-
-
-
(Payments) relating to financial debt
(including Collateral Deposits)
-1,729,425
-
-
-
-266,094
-50
-
-
Receipts/(payments) relating to loans from related parties
-318,645
-
-
-42,773
-
-
-
-4,988
Receipts/(payments) relating to derivative financial instruments
-
35,365
-
-
Lease
(
payments
)
-
-
- 12 533
-
Perimeter variations
-
-
-
-
Exchange differences
4,416
-
-
-
Fair value changes
-
36,241
-
-
Unwinding
-
-
5 601
-
Interests and accrued and deferred costs
284,923
4,102
-
20,413
New lease contracts/Increments in rent values
-
-
1 008
-
Transition IFRS 16
-
-
151 692
-
Balance as at 31 December 2019
13,474,129
2,138
145,768
70,288
Cash flows:
Receipts relating to financial debt
(
including Collateral Deposits
)
1,942,863
-
-
-
(
Payments
)
relating to financial debt
(
including Collateral Deposits
)
-4,365,029
-
-
-
Interest and similar costs of financial debt including hedge derivatives
-347,023
-2,674
-
-
Receipts/
(
payments
)
relating to loans from related parties
476,868
-
-
-70,271
-
-
-
-3,145
Receipts/
(
payments
)
relating to derivative financial instruments
-
-68,248
-
-
Lease
(
payments
)
-
-
-11,853
-
Exchange differences
-20,102
-
-
-
Fair value changes
-
52,987
-
-
Unwinding
-
-
7 062
-
Interests and accrued and deferred costs
321,866
11,341
-
7,001
New lease contracts/Increments in rent values
-
-
20,995
-
Balance as at 31 December 2020
11,483,572
-4,456
161,972
3,873
* The Group considers as financing activities all derivative financial instruments excluding derivatives related with commodities.
Interest and similar costs relating to loans from non-controlling interests
Interest and similar costs of financial debt including hedge derivatives
Group
Financial debt and Derivative financial
instruments (including Collateral
Deposits)
Company
Financial debt and
Derivative financial
instruments
Interest and similar costs relating to loans from non-controlling interests
Interest and similar costs of loans from related parties including hedge derivatives
Interest and similar costs of loans from related parties including hedge derivatives
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended at 31 December 2020 and 2019
438
53.
Explanation Added for Translation
These financial statements are a free translation of the financial statements originally issued in Portuguese in accordance with International
Financial Re
p
ortin
g
Standards as ado
p
ted b
y
the Euro
p
ean Union. In the event of discre
p
ancies, the Portu
g
uese lan
g
ua
g
e version
p
revails.
EDP
‐
Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended at 31 December 2020 and 2019
439
EDP - Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended 31 December 2020 and 2019
Annex I. Companies in the Consolidation Perimeter
The subsidiary companies where the Group exercises control as at 31 December 2020 are as follows:
Group's parent holding company and Related Activities:
Portugal:
EDP - Energias de Portugal, S.A. (Empresa-Matriz do Grupo EDP)
Lisbon
3,965,681,012 EUR
21,873,796
13,100,683
8,773,113
2,863,316
878,151
100.00%
-
CEO - Companhia de Energia Oceânica, S.A.
Póvoa do Varzim
65,435 EUR
1,162
638
524
-
-171
52.07%
-
EDP Estudos e Consultoria, S.A
Lisbon
50,000 EUR
3,413
111
3,302
143
-257
100.00%
100.00%
EDP Real Estate Global Solutions - Imobiliária e Gestão de Participações, S.A.
Lisbon
10,000,000 EUR
18,204
5,138
13,066
8,004
-2,346
100.00%
100.00%
EDP Inovação, S.A.
Lisbon
50,000 EUR
61,805
58,018
3,787
4,839
-632
100.00%
100.00%
EDP Internacional, S.A.
Lisbon
50,000 EUR
12,573
1,625
10,948
945
-628
100.00%
100.00%
EDP IS – Investimentos e Serviços, Sociedade Unipessoal, Lda
Lisbon
140,309,500 EUR
436,252
184,566
251,686
-
4,831
100.00%
-
EDP Ventures, S.G.P.S., S.A.
Lisbon
50,000 EUR
82,718
40,815
41,903
15
-321
100.00%
-
ENAGÁS - S.G.P.S., S.A.
Oporto
299,400 EUR
2,075
61
2,014
-
-3,713
60.00%
-
Fundo EDP CleanTech FCR
Lisbon
19,895,723 EUR
17,416
34
17,381
-
-838
60.00%
-
Labelec - Estudos, Desenvolvimento e Actividades Laboratoriais, S.A.
Sacavém
2,200,000 EUR
17,523
9,397
8,126
14,614
585
100.00%
100.00%
Sãvida - Medicina Apoiada, S.A
Lisbon
450,000 EUR
18,286
11,844
6,442
22,874
932
100.00%
100.00%
Other Countries:
EDP - Ásia Soluções Energéticas Limitada
Macao
1,500,000 MOP
2,329
21
2,308
482
79
100.00%
5.00%
EDP Finance, B.V.
Amesterdam
2,000,000 EUR
11,353,425
11,234,961
118,464
-
5,953
100.00%
100.00%
EDP International Investments and Services, S.L.
Oviedo
9,116 EUR
1,258,376
143,619
1,114,757
-
11,970
100.00%
67.03%
EDP Servicios Financieros España, S.A.U.
Oviedo
10,300,058 EUR
2,486,506
1,969,488
517,018
-
19,442
100.00%
100.00%
Energia RE - Soceidade Cativa de Resseguro, S.A.
Luxembourg
3,000,000 EUR
156,402
97,216
59,186
21
2,507
100.00%
100.00%
Electricity and Gas Activity - Portugal:
Electricity Generation:
EDP - Gestão da Produção de Energia, S.A.
Lisbon
1,233,943,000 EUR
6,563,023
2,734,910
3,828,113
608,779
-489,966
100.00%
100.00%
Empresa Hidroeléctrica do Guadiana, S.A.
Lisbon
72,047,035 EUR
368,392
250,574
117,818
24,951
-53,927
100.00%
-
FISIGEN - Empresa de Cogeração, S.A.
Lisbon
50,000 EUR
23,777
19,515
4,261
14,145
1,940
51.00%
-
Greenvouga - Soc. Gest. do Aproveit. Hidroel. de Ribeiradio-Ermida, S.A.
Lisbon
1,000,000 EUR
227,607
177,345
50,262
6,290
-9,191
100.00%
-
Tergen - Operação e Manutenção de Centrais Termoeléctricas, S.A.
Carregado
250,000 EUR
4,197
2,704
1,494
6,413
196
100.00%
-
Electricity Distribution:
EDP Distribuição de Energia, S.A.
Lisbon
200,013,000 EUR
4,154,887
3,049,950
1,104,937
1,265,721
93,044
100.00%
100.00%
Electricity Supply:
EDP Comercial - Comercialização de Energia, S.A.
Lisbon
20,842,695 EUR
744,730
588,629
156,101
3,006,250
39,939
100.00%
100.00%
EDP Serviço Universal, S.A.
Lisbon
10,104,000 EUR
938,121
912,620
25,501
2,477,400
1,222
100.00%
100.00%
Gas Distribution:
EDP Gás Serviço Universal, S.A.
Oporto
1,050,996 EUR
13,489
4,524
8,965
10,323
-298
100.00%
100.00%
Gas Supply:
EDP GÁS.Com - Comércio de Gás Natural, S.A.
Lisbon
50,000 EUR
107,591
72,393
35,198
297,989
17,425
100.00%
100.00%
Shared Services:
EDP - Soluções Comerciais, S.A.
Lisbon
50,000 EUR
32,319
30,015
2,304
38,647
1,330
100.00%
100.00%
EDP Global Solutions - Gestão Integrada de Serviços, S.A.
Lisbon
4,550,000 EUR
109,582
103,025
6,556
46,396
-593
100.00%
100.00%
Other Activities:
CNET - Centre for New Energy Technologies, S.A.
Sacavém
300,000 EUR
3,294
2,828
465
215
3
60.00%
-
EDP Mediadora, S.A.
Lisbon
50,000 EUR
7,193
1,726
5,467
3,721
2,129
100.00%
-
EDP Ventures - Sociedade de Capital de Risco, S.A.
Lisbon
125,000 EUR
969
45
924
147
55
100.00%
-
SGORME – Soc. Gestora de Operações da Rede de Mobilidade Eléctrica, S.A.
Lisbon
500,000 EUR
146
852
-706
-
-4
91.00%
-
Effizency, S.A.
Lisbon
60,714 EUR
849
444
404
947
-162
94.61%
-
Electricity and Gas Activity - Spain:
Electricity Generation:
EDP España, S.A.U. (Empresa-Matriz do Subgrupo HC Energia)
Oviedo
421,739,790 EUR
3,617,432
806,735
2,810,697
993,079
1,442,261
100.00%
100.00%
Central Termica Ciclo Combinado Grupo 4, S.L.
Oviedo
2,117,000 EUR
140,129
381,478
-241,349
36,944
-26,097
75.00%
-
EDP Iberia, S.L.
Bilbao
130,260,000 EUR
1,403,121
112,653
1,290,468
152
244,494
100.00%
-
Iberenergia, S.A.U.
Oviedo
60,200 EUR
190,479
175,813
14,666
41,741
-11,148
100.00%
-
Naturgas Cogeneración, S.A.
Oviedo
1,000,000 EUR
4,249
8,563
-4,314
7,185
-5,589
100.00%
-
Transporte GNL, S.A.
Bilbao
1,000,000 EUR
144,765
146,382
-1,617
3,762
-2,617
100.00%
-
Viesgo Producción, S.L.
Bilbao
25,000,000 EUR
169,231
170,440
-1,210
-
-
100.00%
-
Electricity Distribution:
Electra Llobregat Energía, S.L.
Barcelona
90,000 EUR
4,552
2,700
1,852
667
319
56.33%
-
Viesgo Distribución Eléctrica, S.L.
Santander
77,792,000 EUR
1,074,812
926,159
148,653
-
-
75.10%
-
Barras Eléctricas Galaico-Asturianas, S.A.
Lugo
15,689,797 EUR
325,704
233,895
91,809
-
-
75.10%
-
Electricity Supply:
EDP Energia Ibérica, S.A.
Oviedo
60,200 EUR
58
12,984
-12,926
-
-1
100.00%
-
EDP Solar España, S.A.
Oviedo
1,000,000 EUR
10,373
16,108
-5,735
4,682
-6,742
100.00%
-
Hidrocantábrico Distribucion Eléctrica, S.A.U.
Oviedo
44,002,000 EUR
1,020,997
907,972
113,024
213,527
71,175
75.10%
-
Comercializadora Energética Sostenible, S.A.
Bilbao
60,000 EUR
85
12
73
90
13
100.00%
-
EDP Clientes, S.A.
Bilbao
1,000,000 EUR
362,937
320,829
42,108
755,468
533
100.00%
-
Other activities:
EDP Ventures España, S.A.
Oviedo
60,000 EUR
59
-
59
-
-
100.00%
-
Fresco International S.a.r.l.
Luxembourg
145,000 EUR
196,972
177,775
19,196
-
-
75.10%
-
Fresco Investments S.a.r.l.
Luxembourg
130,000 EUR
237,492
90,332
147,161
-
-
75.10%
-
IE2 Inversiones Globales Empresariales, S.L.
Oviedo
10,000,000 EUR
1,408,395
1,021,425
386,970
-
-
75.10%
-
Viesgo Infraestructuras Energéticas, S.L.
Santander
147,195,418 EUR
1,426,521
1,173,723
252,798
-
-
75.10%
-
Viesgo HoldCo, S.A.
Santander
15,000 EUR
1,848,521
1,165,366
683,155
-
-
75.10%
-
IE2 Innovación, S.L.
Santander
3,000 EUR
30
260
-230
-
-
75.10%
-
IE2 HoldCo, S.A.
Santander
60,000 EUR
1,067,516
1,065,214
2,302
-
-
75.10%
-
Electricity and Gas Activity - Other Countries:
Electricity Supply:
EDP Energia Italia S.R.L.
Milan
3,610,000 EUR
5,714
3,003
2,711
534
-899
100.00%
-
EDP Energie France
Paris
10,000 EUR
29
107
-78
-
-50
100.00%
-
EDP Energia Polska
Warsaw
8,505,000 EUR
3,627
2,591
1,036
213
-1,413
100.00%
-
Electricity Activity - Brazil:
Parent company and Related Activities:
EDP Energias do Brasil, S.A. (Empresa-Matriz do Subgrupo EDP Brasil)
São Paulo
5,502,715,947 BRL
1,800,680
207,295
1,593,386
480
255,132
53.36%
-
Electricity Generation:
Energest, S.A.
São Paulo
48,204,770 BRL
84,850
34,782
50,068
45,845
29,962
53.36%
-
Enerpeixe, S.A.
São Paulo
219,735,967 BRL
350,732
246,507
104,225
51,475
19,788
32.01%
-
Investco, S.A.
Tocantins
804,458,842 BRL
181,679
39,010
142,669
24,943
5,849
21.76%
-
Lajeado Energia, S.A.
São Paulo
6,867,541 BRL
191,843
93,189
98,654
110,553
46,438
29.81%
-
Porto do Pecém Geração de Energia, S.A.
Ceará
2,368,998,621 BRL
622,524
212,444
410,080
296,325
50,087
53.36%
-
Resende Engenharia e Assessoria, Ltda.
São Paulo
21,573,318 BRL
3,326
-
3,326
-
-3
53.36%
-
Revenues
31-Dec-20
Euro'000
Net Profit/(Loss)
31-Dec-20
Euro'000
%
Group
%
Company
Subsidiaries
Head
Office
Share capital
/ Currency
Assets
31-Dec-20
Euro'000
Liabilities
31-Dec-20
Euro'000
Equity
31-Dec-20
Euro'000
440
EDP - Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended 31 December 2020 and 2019
Electricity Distribution:
EDP Espírito Santo Distribuição de Energia S.A.
Espírito Santo
650,572,403 BRL
835,514
663,844
171,671
646,084
47,517
53.36%
-
EDP São Paulo Distribuição de Energia S.A.
São Paulo
596,669,107 BRL
959,616
801,662
157,954
792,784
63,151
53.36%
-
Electricity Supply:
EDP - Soluções em Energia, S.A.
Rio Grande do Sul
103,072,773 BRL
25,419
10,334
15,085
9,986
-235
53.36%
-
EDP - Comercialização e Serviços de Energia, LTDA.
São Paulo
32,606,383 BRL
249,446
201,547
47,899
573,003
19,080
53.36%
-
EDP Comercialização Varejista, Ltda
São Paulo
4,531,000 BRL
2,752
1,750
1,003
12,653
341
53.36%
-
UFV SP V Equipamentos Fotovoltaicos Ltda.
São Paulo
13,441,069 BRL
2,161
64
2,098
201
-8
53.36%
-
Transmission of Electricity:
EDP Transmissão, S.A.
Espírito Santo
8,630,148 BRL
42,205
33,860
8,345
5,226
1,066
53.36%
-
EDP Transmissão Aliança SC, S.A.
Espírito Santo
126,500,999 BRL
286,534
249,100
37,434
85,686
13,816
48.02%
-
EDP Transmissão SP-MG, S.A.
São Paulo
33,000,999 BRL
310,026
279,935
30,091
77,987
15,961
53.36%
-
EDP Transmissão MA I, S.A.
Espírito Santo
85,649,286 BRL
89,891
68,836
21,054
44,970
5,837
53.36%
-
EDP Transmissão MA II, S.A.
Espírito Santo
31,130,179 BRL
42,626
34,803
7,823
13,001
2,470
53.36%
-
EDP Transmissão Litoral Sul S.A.
São Paulo
75,000,000 BRL
22,479
13,871
8,608
12,922
-1,795
53.36%
-
Other Activities:
EDP Grid Gestão de Redes Inteligentes de Distribuição, S.A.
Espírito Santo
102,786,011 BRL
50,360
35,749
14,611
4,606
-1,660
53.36%
-
EDP Ventures Brasil S.A.
São Paulo
6,500,999 BRL
1,156
384
771
-
-152
53.36%
-
Renewable Energy Activity:
Parent company and Related Activities:
EDP Renováveis, S.A. (EDP Renováveis Subgroup Parent Company)
Oviedo
4,361,540,810 EUR
9,464,035
2,786,595
6,677,440
52,035
1,388,501
82.56%
82.56%
EDP Renováveis Servicios Financieros, S.A.
Oviedo
84,691,368 EUR
5,029,374
4,612,247
417,127
18,781
10,686
82.56%
-
EDP Renewables Europe, S.L.U. (EDPR EU Subgroup Parent Company)
Europe Geography / Platform:
Spain:
EDP Renewables Europe, S.L.U. (EDPR EU Subgroup Parent Company)
Oviedo
249,498,800 EUR
3,234,985
733,084
2,501,901
75,777
639,583
82.56%
-
Acampo Arias, S.L.
Zaragoza
3,314,300 EUR
45,731
38,664
7,067
5,808
582
78.43%
-
Aplicaciones Industriales de Energías Limpias, S.L.
Zaragoza
131,288 EUR
1,380
-
1,379
-
393
50.78%
-
Aprofitament D'Energies Renovables de la Terra Alta, S.A.
Barcelona
1,994,350 EUR
27
-
27
-
-2
36.40%
-
Compañía Eólica Aragonesa, S.A.
Zaragoza
6,701,165 EUR
114,410
21,357
93,053
-
-
82.56%
-
Desarrollos Eólicos de Teruel, S.L.
Zaragoza
60,100 EUR
17,717
17,657
60
-
-
42.11%
-
EDP Renovables España, S.L.U.
Oviedo
46,128,100 EUR
1,354,772
608,833
745,940
167,734
253,412
82.56%
-
EDPR Suvan S.L.U.
Madrid
3,000 EUR
2
-
2
-
-
82.56%
-
EDPR Terral S.L.U.
Madrid
3,000 EUR
2
-
2
-
-
82.56%
-
EDPR Yield, S.A.U.
Oviedo
99,405,403 EUR
249,979
61,561
188,418
-
29,740
82.56%
-
Elecdey Carcelén, S.A.
Albacete
6,969,600 EUR
-
-
5,789
-
-
18.99%
-
Eólica Arlanzón, S.A.
Madrid
4,508,980 EUR
16,928
5,090
11,838
3,430
503
70.18%
-
Eólica Campollano, S.A.
Madrid
6,559,994 EUR
65,164
36,843
28,320
11,043
2,616
61.92%
-
Eólica Fontesilva, S.L.U.
La Coruña
6,860,000 EUR
41,092
24,538
16,554
6,692
1,043
82.56%
-
Eólica La Brújula, S.A.U.
Madrid
3,294,000 EUR
45,037
23,312
21,725
10,187
2,852
82.56%
-
Eólica La Janda, S.L.U.
Madrid
4,525,000 EUR
160,213
134,620
25,593
34,073
10,445
82.56%
-
Eólica Sierra de Ávila, S.L.U.
Madrid
12,977,466 EUR
-
-
-
14,828
3,597
0.00%
-
Eos Pax IIa, S.L.
La Coruña
6,010 EUR
-
-
3,440
-
-
40.04%
-
Geólica Magallón, S.L.
Zaragoza
3,400,000 EUR
-
-
4,960
-
-
29.92%
-
Iberia Aprovechamientos Eólicos, S.A.
Zaragoza
1,918,728 EUR
19,868
14,568
5,300
3,596
251
77.61%
-
Northeolic Monte Buño, S.L.
Cantabria
4,000 EUR
300
450
-151
-
-
61.92%
-
Parc Eòlic Serra Voltorera, S.L.U.
Barcelona
3,458,010 EUR
20,718
9,624
11,093
3,599
838
82.56%
-
Parque Eólico Altos del Voltoya, S.A.
Madrid
6,434,349 EUR
24,032
5,230
18,802
4,076
177
76.37%
-
Parque Eólico de Abrazadilla, S.L.U.
Madrid
3,000 EUR
2
2
1
-
-2
82.56%
-
Parque Eólico la Sotonera, S.L.
Zaragoza
2,000,000 EUR
12,257
4,207
8,050
2,410
440
57.66%
-
Parque Eólico Los Cantales, S.L.U.
Zaragoza
1,963,050 EUR
17,908
13,658
4,250
4,070
1,053
82.56%
-
Parque Eólico Santa Quiteria, S.L.
Zaragoza
63,006 EUR
17,548
4,320
13,227
3,280
711
69.32%
-
Renovables Castilla la Mancha, S.A.
Madrid
60,102 EUR
25,310
19,059
6,251
5,482
1,597
74.31%
-
San Juan de Bargas Eólica, S.L.
Zaragoza
5,000,000 EUR
-
-
7,973
-
-
38.81%
-
Tébar Eólica, S.A.U.
Madrid
4,720,400 EUR
15,123
5,339
9,784
5,541
2,510
82.56%
-
Unión de Generadores de Energía, S.L.
Zaragoza
23,044 EUR
-
-
6,333
-
-
41.28%
-
Viesgo Europa, S.L.U.
Cantabria
1,000,000 EUR
27,539
24,086
3,453
-
-
82.56%
-
Viesgo Renovables, S.L.U.
Cantabria
12,769,690 EUR
273,404
64,696
208,708
-
-
82.56%
-
Viesgo Mantenimiento, S.L.U.
Cantabria
3,050 EUR
1,490
564
926
-
-
82.56%
-
Portugal:
EDP Renováveis Portugal, S.A.
Oporto
7,500,000 EUR
464,311
313,396
150,915
122,879
46,341
42.11%
-
EDP Renewables, SGPS, S.A.
Oporto
50,000 EUR
164,423
37,596
126,828
-
9,848
82.56%
-
EDPR PT - Parques Eólicos, S.A.
Oporto
50,000 EUR
105,646
60,530
45,116
30
1,141
42.11%
-
EDPR PT - Promoção e Operação, S.A.
Oporto
57,500 EUR
19,626
14,056
5,570
14,448
-1,390
82.56%
-
Eólica do Alto da Teixosa, S.A.
Alhões
50,000 EUR
26,076
15,899
10,178
4,899
1,620
42.11%
-
Eólica da Alagoa, S.A.
Arcos de Valdevez
50,000 EUR
7,357
2,468
4,889
2,733
1,542
25.26%
-
Eólica da Coutada, S.A.
Vila Pouca de Aguiar
50,000 EUR
151,720
99,795
51,926
25,808
8,085
42.11%
-
Eólica da Serra das Alturas, S.A.
Boticas
50,000 EUR
11,838
4,083
7,754
3,099
1,395
21.10%
-
Eólica das Serras das Beiras, S.A.
Arganil
50,000 EUR
95,590
58,942
36,647
17,106
5,248
42.11%
-
Eólica da Terra do Mato, S.A.
Oporto
50,000 EUR
43,828
32,432
11,396
6,895
1,682
42.11%
-
Eólica de Montenegrelo, S.A.
Vila Pouca de Aguiar
50,000 EUR
19,102
6,904
12,198
5,537
2,388
21.10%
-
Eólica de São Julião, Lda.
Lisbon
500,000 EUR
-
-
2,785
-
-
37.15%
-
Eólica do Alto da Lagoa, S.A.
Oporto
50,000 EUR
21,404
9,241
12,163
4,304
1,275
42.11%
-
Eólica do Alto do Mourisco, S.A.
Boticas
50,000 EUR
23,104
13,927
9,178
4,480
1,661
42.11%
-
Eólica do Espigão, S.A.
Miranda do Corvo
50,000 EUR
27,090
12,306
14,784
5,604
1,799
42.11%
-
Eólica do Sincelo, S.A.
Oporto
150,000 EUR
33,262
28,591
4,671
-
886
82.56%
-
Eólica dos Altos de Salgueiros-Guilhado, S.A.
Vila Pouca de Aguiar
50,000 EUR
11,329
7,335
3,995
2,112
712
42.11%
-
Eólica da Linha, S.A.
Oporto
100,000 EUR
102,832
97,632
5,199
14,608
5,129
82.56%
-
Eoliser - Serviços de Gestão para Parques Eólicos, Lda.
Lisbon
264,085 EUR
4,032
3,240
793
-
-
82.56%
-
Fotovoltaica Lote A, S.A.
Oporto
50,000 EUR
2,094
2,090
4
-
-24
82.56%
-
IE2 Portugal, SGPS, S.A.
Lisbon
331,187 EUR
3,750
2,176
1,574
-
-
82.56%
-
Malhadizes - Energia Eólica, S.A.
Oporto
50,000 EUR
17,680
7,719
9,962
5,117
2,255
42.11%
-
Parque Eólico do Barlavento, S.A.
Lisbon
60,000 EUR
39,828
9,235
30,593
-
-
74.29%
-
S.E.E. - Sul Energía Eólica, S.A.
Lisbon
150,000 EUR
8,144
2,226
5,917
-
-
82.56%
-
France:
Bourbriac II, S.A.S.
Paris
1,000 EUR
71
105
-34
-
-6
82.56%
-
EDPR France Holding, S.A.S.
Paris
19,900,000 EUR
143,270
92,207
51,063
10,314
-6,764
82.56%
-
Parc Eolien de Dionay, S.A.S.
Paris
37,004 EUR
1,416
1,463
-46
-
-5
82.56%
-
Parc Eolien Louvières, S.A.R.L.
Paris
1,000 EUR
16,035
15,916
119
437
185
82.56%
-
La Plaine de Nouaille, S.A.S.
Paris
8,000 EUR
4,417
4,440
-23
-
-6
82.56%
-
Le Chemin de la Corvée, S.A.S.
Paris
123,000 EUR
1,550
1,490
60
-
-2
82.56%
-
Le Chemin de Saint Druon, S.A.S.
Paris
92,000 EUR
2,423
2,350
73
-
-4
82.56%
-
Monts de la Madeleine Energie, S.A.S.
Paris
37,000 EUR
1,324
1,319
5
-
-10
82.56%
-
Monts du Forez Energie, S.A.S.
Paris
37,000 EUR
1,048
1,088
-40
-
-8
82.56%
-
Parc Éolien de Boqueho-Plouagat, S.A.S.
Paris
1,000 EUR
10,577
8,878
1,699
2,205
598
82.56%
-
Parc Éolien d’Entrains-sur-Nohain, S.A.S.
Paris
451,000 EUR
443
14
429
-
-5
74.31%
-
Parc Éolien de Flavin, S.A.S.
Paris
2,501,000 EUR
16,096
12,305
3,791
1,931
277
82.56%
-
Parc Éolien de la Champagne Berrichonne, S.A.R.L.
Paris
3,700 EUR
18,164
15,924
2,240
2,574
502
82.56%
-
Parc Éolien de la Côte du Cerisat, S.A.S.
Paris
27,448 EUR
66,061
65,232
829
2,872
910
82.56%
-
Parc Éolien de La Hetroye, S.A.S.
Paris
37,004 EUR
2
25
-23
-
-4
82.56%
-
Parc Éolien de Marchéville, S.A.S.
Paris
1,000 EUR
18,611
18,239
372
1,446
497
82.56%
-
Parc Éolien de Mancheville, S.A.R.L.
Paris
1,000 EUR
5,867
5,531
336
897
189
82.56%
-
Parc Éolien de Prouville, S.A.S.
Paris
1,000 EUR
1
30
-29
-
-10
82.56%
-
Parc Éolien des 7 Domaines, S.A.S.
Paris
5,000 EUR
3,770
3,795
-25
-
-15
82.56%
-
Parc Éolien des Longs Champs, S.A.R.L.
Paris
1,201,000 EUR
8,567
6,794
1,773
1,299
486
82.56%
-
Revenues
31-Dec-20
Euro'000
Net Profit/(Loss)
31-Dec-20
Euro'000
%
Group
%
Company
Subsidiaries
Head
Office
Share capital
/ Currency
Assets
31-Dec-20
Euro'000
Liabilities
31-Dec-20
Euro'000
Equity
31-Dec-20
Euro'000
441
EDP - Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended 31 December 2020 and 2019
Parc Éolien de Paudy, S.A.S.
Paris
3,537,000 EUR
25,108
19,787
5,321
3,362
1,087
82.56%
-
Transition Euroise Roman II, S.A.S.
Paris
603,000 EUR
2,816
2,217
598
-
-5
70.18%
-
Vanosc Energie, S.A.S.
Paris
1,000 EUR
810
810
-
-
-1
82.56%
-
Vaudrimesnil Energie, S.A.R.L.
Paris
7,400 EUR
11,063
11,063
-
-
-10
82.56%
-
Poland:
Budzyn, Sp. z o.o.
Warsaw
5,000 PLN
1
2
-2
-
-3
42.11%
-
EDP Renewables Polska, Sp. z o.o.
Warsaw
435,045,000 PLN
327,474
147,133
180,341
10,576
2,704
82.56%
-
EDP Renewables Polska HoldCo, S.A.
Warsaw
100,100 PLN
230,615
67,579
163,037
-
7,645
42.11%
-
EDP Renewables Polska Solar, Sp. Zo.o.
Warsaw
5,000 PLN
470
669
-200
-
-118
82.56%
-
Elektrownia Wiatrowa Kresy I, Sp. z o.o.
Warsaw
70,210 PLN
105,092
30,109
74,983
17,182
6,499
42.11%
-
European Wind Power Krasin, Sp. zo.o.
Warsaw
7,190,000 PLN
14,057
12,859
1,198
-
-298
82.56%
-
EW Dobrzyca, sp.z o.o.
Warsaw
674,000 PLN
30,309
23,768
6,541
-
-507
82.56%
-
Farma Wiatrowa Bogoria, Sp. zo.o.
Warsaw
2,395,300 PLN
12,628
10,494
2,135
-
-303
82.56%
-
Farma Wiatrowa Starozreby, Sp. z o.o.
Warsaw
466,000 PLN
303
4
300
-
-14
82.56%
-
FW Warta, Sp. z o.o.
Warsaw
10,000 PLN
8,627
8,857
-230
-
-179
82.56%
-
Gudziki Wind Farm sp. z o.o.
Warsaw
5,000 PLN
3
25
-22
-
-21
42.11%
-
Rowy-Karpacka Mala Energetyka, Sp. z o.o.
Warsaw
50,000 PLN
81
494
-413
-
-34
82.56%
-
Korsze Wind Farm, Sp. z o.o.
Warsaw
38,855,000 PLN
125,826
96,294
29,532
15,475
6,524
42.11%
-
Kowalewo Wind, Sp. zo.o.
Warsaw
89,900 PLN
8,410
8,080
329
-
-186
82.56%
-
Lichnowy Windfarm, Sp. z o.o.
Warsaw
865,500 PLN
33,380
32,199
1,180
373
-9
82.56%
-
Masovia Wind Farm I, Sp. z o.o.
Warsaw
1,258,000 PLN
111
103
8
-
-45
82.56%
-
Miramit Investments, Sp. z o.o.
Warsaw
55,000 PLN
474
306
168
-
-12
82.56%
-
Molen Wind II, Sp. z o.o.
Warsaw
14,600 PLN
59,380
47,978
11,401
10,005
2,173
42.11%
-
Neo Solar Farm, Sp. z o.o.
Warsaw
5,000 PLN
1,320
2,400
-1,080
-
-1
82.56%
-
Nowa Energia 1, Sp. zo.o.
Warsaw
83,300 PLN
52,616
52,885
-268
-
-653
82.56%
-
Radziejów Wind Farm, Sp. z o.o.
Warsaw
27,605,000 PLN
29,814
27,714
2,100
3,983
-150
42.11%
-
Relax Wind Park I, Sp. z o.o.
Warsaw
46,540,000 PLN
116,833
93,629
23,205
22,045
6,034
42.11%
-
Relax Wind Park III, Sp. z o.o.
Warsaw
59,603,000 PLN
132,383
116,554
15,830
15,326
1,254
42.11%
-
Rampton, Sp. z o.o.
Warsaw
1,005,000 PLN
304
125
179
263
-
82.56%
-
R.Wind, Sp. z o.o.
Warsaw
6,000 PLN
595
609
-15
-
-
82.56%
-
Ujazd Sp.Zo.o.
Warsaw
4,648,016 PLN
9,975
10,019
-44
-
-243
82.56%
-
Wind Field Wielkopolska, Sp. zo.o.
Warsaw
505,000 PLN
14,347
14,919
-572
-
-486
82.56%
-
Winfan sp.Zo.o.
Warsaw
20,000 PLN
2,156
2,068
88
-
-84
82.56%
-
Romania:
Cernavoda Power, S.A.
Bucharest
335,692,400 RON
154,539
96,718
57,822
18,174
3,589
82.56%
-
EDPR România, S.R.L.
Bucharest
1,081,586,750 RON
311,293
23,543
287,749
29,944
11,257
82.56%
-
Pestera Wind Farm, S.A.
Bucharest
269,955,070 RON
92,843
50,651
42,192
11,284
2,467
82.56%
-
Sibioara Wind Farm, S.r.l.
Bucharest
81,900,600 RON
39,489
33,101
6,388
4,351
-25
82.56%
-
VS Wind Farm, S.A.
Bucharest
216,170,000 RON
72,796
23,404
49,392
9,249
2,779
82.56%
-
Great Britain:
Altnabreac Wind Farm Limited
Edinburgh
100 GBP
719
719
-
-
-
82.56%
-
Ben Sca Wind Farm Limited
Edinburgh
100 GBP
1,610
1,615
-5
-
-
82.56%
-
Drummarnock Wind Farm Limited
Edinburgh
100 GBP
292
292
-
-
-
82.56%
-
Moorshield Wind Farm Limited
Edinburgh
100 GBP
623
625
-2
-
-
82.56%
-
Wind 2 Project 1 Limited
Edinburgh
100 GBP
281
281
-
-
-
82.56%
-
Italy:
Aliseo, S.r.l.
Milan
500,000 EUR
586
127
459
-
-11
82.56%
-
AW 2, S.r.l.
Milan
100,000 EUR
23,446
19,034
4,411
2,673
613
61.92%
-
Breva Wind S.R.L.
Milan
7,100,000 EUR
49,767
43,822
5,946
-
-330
82.56%
-
Conza Energia, S.r.l.
Milan
456,000 EUR
41,018
36,030
4,988
4,443
940
82.56%
-
Custolito, S.R.L.
Milan
10,000 EUR
155
120
35
-
-10
82.56%
-
EDP Renewables Italia Holding, S.r.l.
Milan
347,000 EUR
140,291
90,659
49,632
16
-3,936
82.56%
-
EDP Renewables Italia, S.r.l.
Milan
34,439,343 EUR
183,320
121,843
61,477
15,519
11,225
42.11%
-
EDPR Sicilia PV, S.R.L.
Milan
10,000 EUR
512
513
-2
-
-9
82.56%
-
EDPR Sicilia Wind, S.r.l.
Milan
10,000 EUR
419
439
-20
-
-28
82.56%
-
EDPR Villa Galla, S.R.L.
Milan
9,000,000 EUR
97,591
29,868
67,723
18,996
7,515
42.11%
-
Energia Emissioni Zero 4, S.r.l.
Naples
10,000 EUR
5,226
5,169
57
-
-40
49.54%
-
Giglio, S.r.l.
Milan
20,000 EUR
1,346
123
1,224
-
-2
49.54%
-
Lucus Power, S.r.l.
Milan
10,000 EUR
26,369
21,235
5,133
2,726
666
82.56%
-
Re Plus, S.r.l.
Milan
100,000 EUR
750
650
100
-
-30
82.56%
-
San Mauro, S.r.l.
Milan
70,000 EUR
19,013
16,022
2,991
1,744
-51
61.92%
-
Sarve, S.r.l.
Milan
10,000 EUR
3,070
3,219
-149
-
-243
82.56%
-
T Power, S.p.A.
Milan
1,000,000 EUR
2,359
142
2,217
-
-648
82.56%
-
TACA Wind, S.r.l.
Milan
1,160,000 EUR
28,037
20,846
7,191
2,954
392
82.56%
-
Tivano, S.r.l.
Milan
100,000 EUR
20,864
18,218
2,646
2,499
604
61.92%
-
VRG Wind 153, S.r.l.
Rovereto
10,000 EUR
463
7
455
-
-3
82.56%
-
WinCap, S.r.l.
Milan
2,550,000 EUR
31,147
22,737
8,411
2,747
870
82.56%
-
Wind Energy San Giorgio, S.r.l.
Milan
20,000 EUR
773
40
733
-
-2
49.54%
-
Greece:
Aioliko Parko Fthiotidos Erimia E.P.E.
Agia Paraskevi
34,500 EUR
393
255
138
-
-158
82.56%
-
EDPR Hellas 1 M.A.E.
Attica
1,205,000 EUR
1,734
296
1,438
-
-155
82.56%
-
EDPR Hellas 2 M.A.E.
Attica
410,000 EUR
2,025
360
1,665
-
-173
82.56%
-
Energiaki Arvanikou E.P.E.
Athens
13,222,380 EUR
29,124
15,865
13,258
488
-825
82.56%
-
Wind Park Aerorrachi M.A.E.
Athens
310,020 EUR
2,002
2,018
-16
-
-1,061
82.56%
-
Wind Shape, Ltd.
Attica
18,000 EUR
398
433
-34
-
-
82.56%
0.00%
Other Countries:
EDP Renewables Belgium, S.A.
Brussels
286,500 EUR
18,353
17,763
590
251
-99
82.56%
-
EDP Renewables Hungary
Hungary
15,000,000 HUF
88
297
-209
-
-259
82.56%
-
EDPR International Investments, B.V.
Amesterdam
20,000 EUR
5,311
2,018
3,293
-
30,531
82.56%
-
ESC ER
Ő
M
Ű
, Kft.
Hungary
3,000,000 HUF
9
236
-227
-
-244
70.18%
-
Sunlight Solar, Kft.
Hungary
5,000,000 HUF
74
298
-224
-
-247
70.18%
-
North America Geography / Platform:
United States of America:
EDP Renewables North America LLC (Empresa-Matriz de Subgrupo EUA)
Delaware
5,452,875,776 USD
4,464,473
622,076
3,842,397
98,185
97,730
82.56%
-
17th Star Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
2007 Vento I LLC
Delaware
551,949,368 USD
501,230
6,999
494,231
10,263
2,918
82.56%
-
2007 Vento II LLC
Delaware
349,167,559 USD
280,251
201
280,050
-
-167
42.11%
-
2008 Vento III LLC
Delaware
446,432,698 USD
358,853
697
358,156
-
-49
42.11%
-
2009 Vento IV LLC
Delaware
201,869,260 USD
163,385
155
163,229
-
-126
82.56%
-
2009 Vento V LLC
Delaware
27,844,228 USD
22,046
435
21,612
-
-26
42.11%
-
2011 Vento IX LLC
Delaware
77,764,256 USD
62,580
170
62,410
-
-126
42.11%
-
2011 Vento X LLC
Delaware
90,257,997 USD
73,207
567
72,640
-
-120
82.56%
-
2014 Sol I LLC
Delaware
66,049,287 USD
53,501
140
53,362
-
-98
41.28%
-
2014 Vento XI LLC
Delaware
241,980,281 USD
197,176
64
197,112
-
-25
42.11%
-
2014 Vento XII LLC
Delaware
131,131,689 USD
106,821
55
106,766
-
-29
42.11%
-
2015 Vento XIII LLC
Delaware
290,867,832 USD
236,846
506
236,341
-
-118
42.11%
-
2015 Vento XIV LLC
Delaware
254,620,080 USD
207,061
55
207,006
-
-115
42.11%
-
2016 Vento XV LLC
Delaware
474,269,381 USD
391,995
5,949
386,046
-
-136
82.56%
-
2016 Vento XVI LLC
Delaware
174,986,123 USD
143,428
1,246
142,182
-
-129
82.56%
-
2017 Sol II LLC
Delaware
113,035,792 USD
92,223
230
91,992
-
-49
82.56%
-
2018 Vento XVIII LLC
Delaware
479,982,078 USD
391,920
1,074
390,846
-
-118
82.56%
-
Revenues
31-Dec-20
Euro'000
Net Profit/(Loss)
31-Dec-20
Euro'000
%
Group
%
Company
Subsidiaries
Head
Office
Share capital
/ Currency
Assets
31-Dec-20
Euro'000
Liabilities
31-Dec-20
Euro'000
Equity
31-Dec-20
Euro'000
442
EDP - Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended 31 December 2020 and 2019
2019 SOL V LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
2019 Vento XX LLC
Delaware
622,791,151 USD
507,555
61
507,494
-
-40
82.56%
-
2019 Vento XXI LLC
Delaware
272,928,524 USD
222,780
409
222,372
-
-49
82.56%
-
2020 Vento XXII LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Alabama Ledge Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Alabama Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Antelope Ridge Wind Power Project LLC
Delaware
12,828,809 USD
-
-
-
-
-
82.56%
-
Arbuckle Mountain Wind Farm LLC
Delaware
150,258,134 USD
125,943
9,620
116,323
7,594
-2,174
42.11%
-
Arkwright Summit Wind Farm LLC
Delaware
196,157,034 USD
179,178
16,144
163,034
12,990
-338
82.56%
-
Arlington Wind Power Project LLC
Delaware
71,118,386 USD
94,055
8,394
85,661
17,095
7,370
42.11%
-
Aroostook Wind Energy LLC
Delaware
46,071,701 USD
33,128
14
33,114
-
-
82.56%
-
Ashford Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Athena-Weston Wind Power Project II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Athena-Weston Wind Power Project LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Avondale Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Azalea Springs Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
AZ Solar LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Bayou Bend Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
BC2 Maple Ridge Holdings LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
BC2 Maple Ridge Wind LLC
Delaware
268,810,612 USD
105,072
2,579
102,494
-
-88,983
82.56%
-
Big River Wind Power Project LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Black Prairie Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Black Prairie Wind Farm II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Black Prairie Wind Farm III LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Black Prairie Wind Farm LLC
Delaware
1,179,568 USD
959
-
959
-
-
82.56%
-
Blackford County Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blackford County Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blackstone Wind Farm II LLC
Delaware
203,395,419 USD
258,572
91,830
166,742
17,810
144
82.56%
-
Blackstone Wind Farm III LLC
Delaware
6,275,439 USD
-
-
-
-
-
82.56%
-
Blackstone Wind Farm IV LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blackstone Wind Farm LLC
Delaware
92,722,736 USD
117,139
42,102
75,037
7,939
-1,407
82.56%
-
Blackstone Wind Farm V LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blue Canyon Wind Power VII LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blue Canyon Windpower II LLC
Texas
114,619,804 USD
86,166
20,624
65,542
4,238
-34,902
82.56%
-
Blue Canyon Windpower III LLC
Texas
- USD
-
-
-
-
-
82.56%
-
Blue Canyon Windpower IV LLC
Texas
- USD
-
-
-
-
-
82.56%
-
Blue Canyon Windpower V LLC
Texas
27,052,876 USD
104,911
8,938
95,972
18,825
7,764
42.11%
-
Blue Canyon Windpower VI LLC
Delaware
89,831,713 USD
99,313
8,920
90,393
11,495
2,381
82.56%
-
Blue Harvest Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blue Marmot I LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blue Marmot II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blue Marmot IV LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blue Marmot IX LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blue Marmot V LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blue Marmot VI LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blue Marmot VII LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blue Marmot VIII LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blue Marmot Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Blue Marmot XI LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Bluebird Prairie Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Bright Stalk Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Broadlands Wind Farm II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Broadlands Wind Farm III LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Broadlands Wind Farm LLC
Delaware
298,538,932 USD
273,247
37,125
236,123
6,714
-1,298
82.56%
-
Buffalo Bluff Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Cameron Solar LLC
Delaware
36,770,157 USD
33,234
3,018
30,217
1,777
35
82.56%
-
Casa Grande Carmel Solar LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Castle Valley Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Chateaugay River Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Cielo Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Clinton County Wind Farm LLC
Delaware
211,939,274 USD
172,709
-
172,709
-
-
82.56%
-
Cloud County Wind Farm LLC
Delaware
154,708,374 USD
175,283
13,476
161,808
21,471
6,389
42.11%
-
Crescent Bar Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Crossing Trails Wind Power Project II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Duff Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Eastmill Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
EDPR NA DG Holding LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
EDPR Solar Ventures IV LLC
Delaware
98,121,380 USD
81,832
112
81,720
-
1,931
82.56%
-
EDPR Wind Ventures XX LLC
Delaware
209,666,026 USD
507,531
326,070
181,461
-
11,261
82.56%
-
EDPR Wind Ventures XXI LLC
Delaware
127,470,465 USD
222,418
116,369
106,048
-
2,330
82.56%
-
Edwardsport Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Lowland Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Moonshine Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Sedge Meadow Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Plum Nellie Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Cattlemen Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Coldwater Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Coos Curry Wind Power Project LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Crittenden Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Cropsey Ridge Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Crossing Trails Wind Power Project LLC
Delaware
9,106,285 USD
106,282
98,878
7,405
-
-17
82.56%
-
Dairy Hills Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Diamond Power Partners LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Drake Peak Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Dry Creek Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Duff Solar Park II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
East Klickitat Wind Power Project LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
EDPR CA Solar Park II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
EDPR CA Solar Park III LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
EDPR CA Solar Park IV LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
EDPR CA Solar Park LLC
Delaware
- USD
-
6
-6
-
-6
82.56%
-
EDPR CA Solar Park V LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
EDPR CA Solar Park VI LLC
Delaware
- USD
-
67
-67
-
-72
82.56%
-
EDPR Northeast Allen Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
EDPR Solar Ventures I LLC
Delaware
38,859,201 USD
53,826
20,025
33,801
-
-967
41.28%
-
EDPR Solar Ventures II LLC
Delaware
53,672,662 USD
92,116
46,299
45,818
-
917
82.56%
-
EDPR Solar Ventures III LLC
Delaware
80,234,392 USD
64,948
86
64,862
-
-502
82.56%
-
EDPR Solar Ventures V LLC
Delaware
2,747,430 USD
2,239
-
2,239
-
-
82.56%
-
EDPR South Table LLC
Nebraska
- USD
-
-
-
-
-
82.56%
-
EDPR Vento I Holding LLC
Delaware
277,480,123 USD
226,127
-
226,127
-
-
82.56%
-
EDPR Vento IV Holding LLC
Delaware
68,995,105 USD
56,226
-
56,226
-
-
82.56%
-
EDPR WF LLC
Delaware
49,317,020 USD
40,190
-
40,190
-
-
82.56%
-
EDPR Wind Ventures X LLC
Delaware
10,834,576 USD
75,595
10,905
64,690
-
8,260
82.56%
-
EDPR Wind Ventures XI LLC
Delaware
51,056,638 USD
197,197
113,359
83,838
-
9,177
42.11%
-
EDPR Wind Ventures XII LLC
Delaware
23,027,881 USD
106,863
82,593
24,270
-
1,407
42.11%
-
EDPR Wind Ventures XIII LLC
Delaware
72,633,517 USD
237,037
152,048
84,989
-
6,315
42.11%
-
EDPR Wind Ventures XIV LLC
Delaware
27,522,985 USD
207,497
158,958
48,539
-
6,204
42.11%
-
Revenues
31-Dec-20
Euro'000
Net Profit/(Loss)
31-Dec-20
Euro'000
%
Group
%
Company
Subsidiaries
Head
Office
Share capital
/ Currency
Assets
31-Dec-20
Euro'000
Liabilities
31-Dec-20
Euro'000
Equity
31-Dec-20
Euro'000
443
EDP - Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended 31 December 2020 and 2019
EDPR Wind Ventures XV LLC
Delaware
134,120,363 USD
386,496
231,035
155,461
-
9,942
82.56%
-
EDPR Wind Ventures XVI LLC
Delaware
63,534,768 USD
142,601
84,634
57,967
-
1,647
82.56%
-
EDPR Wind Ventures XVIII LLC
Delaware
212,371,952 USD
391,152
202,288
188,863
-
8,403
82.56%
-
EDPR Wind Ventures XXII LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Esker Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Esker Solar Park II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Estill Solar I LLC
Delaware
39,835,558 USD
34,393
1,863
32,530
1,684
3
82.56%
-
Five-Spot LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Ford Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Franklin Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Goldfinger Ventures III LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Greenbow Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Green Country Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Green Power Offsets LLC
Delaware
10,515 USD
-
-
-
-
-
82.56%
-
Gulf Coast Windpower Management Company LLC
Delaware
- USD
-
-
-
-
-
61.92%
-
Hampton Solar II LLC
Delaware
36,476,027 USD
32,628
1,673
30,955
1,728
106
82.56%
-
Headwaters Wind Farm LLC
Delaware
241,954,517 USD
269,581
25,944
243,636
26,315
8,267
42.11%
-
Headwaters Wind Farm II LLC
Delaware
75,669,209 USD
131,257
70,371
60,885
-
-838
82.56%
-
Headwaters Wind Farm III LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Headwaters Wind Farm IV LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Helena Harbor Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Hidalgo Wind Farm II LLC
Delaware
46,312,324 USD
61,632
23,054
38,578
1,703
902
82.56%
-
Hidalgo Wind Farm LLC
Delaware
347,487,468 USD
303,526
20,735
282,791
14,303
-9,059
82.56%
-
High Prairie Wind Farm II LLC
Delaware
59,769,146 USD
89,814
15,545
74,269
12,459
3,785
42.11%
-
High Trail Wind Farm LLC
Delaware
152,099,245 USD
201,952
17,164
184,789
13,029
-6,795
82.56%
-
Holly Hill Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wind Chocolate Bayou I LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wind Energy Midwest IX LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wind Energy Northwest I LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wind Energy Northwest IV LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wind Energy Northwest VII LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wind Energy Northwest X LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wind Energy Northwest XI LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wind Energy Panhandle I LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wind Energy Southwest I LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wind Energy Southwest II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wind Energy Southwest III LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wind Energy Southwest IV LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wind Energy Valley I LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wind MREC Iowa Partners LLC
Delaware
- USD
-
-
-
-
-
61.92%
-
Horizon Wind Ventures I LLC
Delaware
99,077,759 USD
588,727
117,373
471,354
-
-113
82.56%
-
Horizon Wind Ventures IB LLC
Delaware
- USD
284,547
207,653
76,894
-
2,164
42.11%
-
Horizon Wind Ventures IC LLC
Delaware
207,075,587 USD
363,811
40,969
322,842
-
2,445
42.11%
-
Horizon Wind Ventures II LLC
Delaware
138,494,271 USD
164,509
35,258
129,251
-
2,029
82.56%
-
Horizon Wind Ventures III LLC
Delaware
- USD
22,691
9,392
13,299
-
-198
42.11%
-
Horizon Wind Ventures IX LLC
Delaware
38,922,744 USD
63,372
34,461
28,911
-
1,621
42.11%
-
Horizon Wind Freeport Windpower I LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horizon Wyoming Transmission LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Horse Mountain Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Indiana Crossroads Wind Farm II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Indiana Crossroads Solar Park II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Meadow Lake Wind Farm VIII LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Indiana Crossroads Wind Farm LLC
Delaware
- USD
-
148
-148
-
-159
82.56%
-
Jericho Rise Wind Farm LLC
Delaware
133,529,890 USD
125,894
8,518
117,375
9,008
-349
82.56%
-
Juniper Wind Power Partners LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Leprechaun Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Lexington Chenoa Wind Farm II LLC
Delaware
2,005,797 USD
1,162
17
1,145
-
-
82.56%
-
Lexington Chenoa Wind Farm III LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Lexington Chenoa Wind Farm LLC
Delaware
312,014,012 USD
299,017
46,309
252,708
13,699
-1,965
82.56%
-
Little Brook Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Loblolly Hill Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Loki Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Loma de la Gloria Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Lone Valley Solar Park I LLC
Delaware
24,147,760 USD
22,687
1,726
20,961
1,660
227
41.28%
-
Lone Valley Solar Park II LLC
Delaware
41,503,920 USD
42,241
3,497
38,745
3,280
676
41.28%
-
Long Hollow wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Lost Lakes Wind Farm LLC
Delaware
113,944,747 USD
108,923
13,064
95,859
15,100
2,355
82.56%
-
Loyal Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Machias Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Madison Windpower LLC
Delaware
17,592,794 USD
3,707
507
3,200
755
-1,203
82.56%
-
Marathon Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Marble River LLC
Delaware
211,931,519 USD
293,131
94,544
198,587
14,819
-3,480
82.56%
-
Martinsdale Wind Farm LLC
Delaware
5,456,617 USD
4,430
35
4,394
-
-32
82.56%
-
Meadow Lake Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Meadow Lake Wind Farm II LLC
Delaware
143,689,224 USD
115,992
12,960
103,032
8,699
-1,779
82.56%
-
Meadow Lake Wind Farm III LLC
Delaware
95,239,829 USD
126,726
44,094
82,631
8,097
-532
82.56%
-
Meadow Lake Wind Farm IV LLC
Delaware
87,982,005 USD
101,768
35,995
65,773
5,621
-1,530
82.56%
-
Meadow Lake Wind Farm LLC
Delaware
190,057,699 USD
214,367
77,040
137,327
13,763
-2,250
82.56%
-
Mesquite Wind LLC
Delaware
112,760,370 USD
160,849
9,242
151,607
18,748
2,835
82.56%
-
Mineral Springs Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Misenheimer Solar LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
New Trail Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Nine Kings Transco LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
North Slope Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Number Nine Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Old Trail Wind Farm LLC
Delaware
138,283,331 USD
211,115
16,029
195,085
32,041
11,528
42.11%
-
OPQ Property LLC
Delaware
- USD
142
-
142
-
-
82.56%
-
Pacific Southwest Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Paulding Wind Farm II LLC
Delaware
76,791,347 USD
128,527
19,175
109,352
18,197
5,654
42.11%
-
Paulding Wind Farm III LLC
Delaware
175,750,734 USD
171,254
17,775
153,479
9,456
2,190
82.56%
-
Paulding Wind Farm IV LLC
Delaware
197,255,901 USD
198,075
37,825
160,250
7,491
-858
82.56%
-
Paulding Wind Farm LLC
Delaware
35,380 USD
-
1
-
-
-6
82.56%
-
Paulding Wind Farm V LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Paulding Wind Farm VI LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Peterson Power Partners LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Pioneer Prairie Wind Farm I LLC
Delaware
214,520,980 USD
318,708
32,817
285,890
46,183
12,762
42.11%
-
Pleasantville Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Poplar Camp Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Post Oak Wind LLC
Delaware
132,319,089 USD
183,310
8,003
175,307
22,566
2,948
42.11%
-
Prospector Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Quilt Block Wind Farm II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Rail Splitter Wind Farm LLC
Delaware
200,489,377 USD
127,213
15,056
112,156
7,054
-4,717
82.56%
-
Rail Splitter Wind Farm II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
RE Scarlet LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Reloj del Sol Wind Farm LLC
Delaware
97,354,725 USD
212,271
132,944
79,327
-
-
82.56%
-
Renville County Wind Farm LLC
Delaware
130 USD
1,561
1,561
-
-
-
82.56%
-
Rio Blanco Wind Farm LLC
Delaware
3,055,646 USD
2,489
-
2,489
-
-
82.56%
-
Revenues
31-Dec-20
Euro'000
Net Profit/(Loss)
31-Dec-20
Euro'000
%
Group
%
Company
Subsidiaries
Head
Office
Share capital
/ Currency
Assets
31-Dec-20
Euro'000
Liabilities
31-Dec-20
Euro'000
Equity
31-Dec-20
Euro'000
444
EDP - Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended 31 December 2020 and 2019
Rising Tree Wind Farm II LLC
Delaware
25,755,589 USD
27,889
2,277
25,612
2,821
733
42.11%
-
Rising Tree Wind Farm III LLC
Delaware
140,375,848 USD
146,221
4,255
141,967
18,388
5,464
42.11%
-
Rising Tree Wind Farm LLC
Delaware
105,323,931 USD
119,893
3,539
116,354
17,209
7,141
42.11%
-
Riverstart Development LLC
Delaware
2,747,430 USD
2,239
-
2,239
-
-
82.56%
-
Riverstart Solar Park II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Riverstart Solar Park III LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Riverstart Solar Park IV LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Riverstart Solar Park LLC
Delaware
2,747,430 USD
18,795
16,827
1,967
-
-292
82.56%
-
Riverstart Solar Park V LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Riverstart Ventures LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Rolling Upland Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Rosewater Ventures LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
RTSW Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
RTSW Solar Park II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
RTSW Solar Park III LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
RTSW Solar Park IV LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
RTSW Solar Park V LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
RTSW Solar Park VI LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Rush County Wind Farm LLC
Delaware
2,813,717 USD
2,306
13
2,293
-
-
82.56%
-
Rye Patch Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Saddleback Wind Power Project LLC
Delaware
1,351,288 USD
1
-
1
-
-
82.56%
-
Sagebrush Power Partners LLC
Delaware
131,011,611 USD
104,700
9,412
95,288
15,402
5,197
82.56%
-
San Clemente Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Sardinia Windpower LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Shullsburg Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Signal Hill Wind Power Project LLC
Delaware
4,502 USD
-
-
-
-
-
82.56%
-
Simpson Ridge Wind Farm II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Simpson Ridge Wind Farm III LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Simpson Ridge Wind Farm IV LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Simpson Ridge Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Simpson Ridge Wind Farm V LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Solar Ventures Purchasing LLC
Delaware
- USD
1,113
2,106
-993
-
-1,737
82.56%
-
Spruce Ridge Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Stinson Mills Wind Farm LLC
Delaware
4,601,921 USD
3,676
7
3,669
-
-
82.56%
-
Sustaining Power Solutions LLC
Delaware
88,263,502 USD
20,226
18,787
1,439
45,352
-6,247
82.56%
-
Sweet Stream Wind Farm LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Telocaset Wind Power Partners LLC
Delaware
13,524,184 USD
90,887
8,749
82,138
17,465
8,222
42.11%
-
Tillman Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Timber Road Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Timber Road Solar Park II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Timber Road Solar Park III LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Timber Road II Storage LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Timber Road III Storage LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Top Crop I Storage LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Top Crop II Storage LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Tug Hill Windpower LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Tumbleweed Wind Power Project LLC
Delaware
4,003 USD
-
-
-
-
-
82.56%
-
Turtle Creek Wind Farm LLC
Delaware
284,767,763 USD
265,364
22,781
242,583
16,216
6,479
82.56%
-
Twin Groves I Storage LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Twin Groves II Storage LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Waverly Wind Farm II LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Waverly Wind Farm LLC
Delaware
254,083,847 USD
242,155
14,578
227,576
18,512
2,338
42.11%
-
Western Trail Wind Project I LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Wheat Field Holding LLC
Delaware
- USD
-
10,108
-10,108
-
-20
42.11%
-
Wheat Field Wind Power Project LLC
Delaware
- USD
81,538
26,660
54,878
16,436
9,451
42.11%
-
Whiskey Ridge Power Partners LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Whistling Wind WI Energy Center LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
White Stone Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Whitestone Wind Purchasing LLC
Delaware
8,358,729 USD
5,229
586
4,643
-
-1,031
82.56%
-
Wildcat Creek Wind Farm LLC
Delaware
92,729,852 USD
167,187
91,669
75,518
-
-
82.56%
-
Wilson Creek Power Project LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Wind Turbine Prometheus LP
Delaware
5,990 USD
-
-
-
-
-
82.56%
-
Wrangler Solar Park LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
WTP Management Company LLC
Delaware
- USD
-
-
-
-
-
82.56%
-
Canada:
EDP Renewables Canada, Ltd. (Empresa-Matriz de Subgrupo Canadá)
British Columbia
149,647,024 CAD
95,016
4,378
90,638
-
-31,926
82.56%
-
Blue Bridge Solar Park GP Ltd
British Columbia
- CAD
-
-
-
-
-
82.56%
-
Blue Bridge Solar Park LP
British Columbia
- CAD
77
276
-199
-
-13
82.56%
-
Bromhead Solar Park GP Ltd
British Columbia
- CAD
-
-
-
-
-
82.56%
-
Bromhead Solar Park LP
Saskatchewan
- CAD
77
276
-199
-
-13
82.56%
-
EDP Renewables Canada Management Services Ltd
British Columbia
- CAD
4,582
7,017
-2,435
595
-
82.56%
-
EDP Renewables Sask SE GP Ltd
British Columbia
- CAD
-
-
-
-
-
82.56%
-
EDP Renewables Sask SE Limited Partnership
Ontário
- CAD
-
517
-517
-
-174
82.56%
-
EDP Renewables SH II Project GP Ltd
British Columbia
- CAD
-
-
-
-
-
82.56%
-
EDP Renewables SH II Project LP
Alberta
- CAD
-
-
-
-
-
82.56%
-
EDP Renewables Sharp Hills Project GP, Ltd.
British Columbia
- CAD
-
-
-
-
-
82.56%
-
EDP Renewables Sharp Hills Project LP
Alberta
832,628 CAD
17,263
17,411
-148
-
-243
82.56%
-
Halbrite Solar Park GP Ltd
British Columbia
- CAD
-
-
-
-
-
82.56%
-
Halbrite Solar Park LP
Saskatchewan
- CAD
77
276
-199
-
-13
82.56%
-
Kennedy Wind Farm GP Ltd
British Columbia
- CAD
-
-
-
-
-
82.56%
-
Kennedy Wind Farm LP
Saskatchewan
- CAD
77
276
-199
-
-13
82.56%
-
Nation Rise Wind Farm GP II Inc.
British Columbia
5,470 CAD
2
1
1
-
-
82.56%
-
Quatro Limited Partnership
Ontário
54,694,518 CAD
40,231
-
40,230
-
27,442
82.56%
-
SBWF GP, Inc.
British Columbia
514 CAD
2
-
1
-
-
42.11%
-
South Branch Wind Farm II GP Inc.
British Columbia
- CAD
-
-
-
-
-
82.56%
-
South Branch Wind Farm II LP
Ontário
414,528 CAD
1,353
1,498
-145
-
-37
82.56%
-
South Dundas Wind Farm LP
Ontário
14,109,981 CAD
49,280
18,933
30,347
7,528
3,682
42.11%
-
Mexico:
EDPR Servicios de México, S. de R.L. de C.V.
Cidade do México
117,437,656 MXN
4,230
1,513
2,717
1,792
-239
82.56%
-
Eólica de Coahuila, S.A. de C.V.
Cidade do México
7,792,042 USD
247,111
206,363
40,748
41,595
17,387
42.11%
-
Vientos de Coahuila, S.A. de C.V.
Cidade do México
2,502,421 USD
24,955
23,462
1,493
-
-374
82.56%
-
Parque Solar Los Cuervos, S. de R.L. de C.V.
Cidade do México
5,244,480 USD
130,729
127,040
3,689
-
-647
82.56%
0.00%
South America Geography / Platform:
Brazil:
EDP Renovaveis Brasil, SA (Empresa-Matriz de Subgrupo EDPR BR)
São Paulo
1,041,804,658 BRL
325,443
117,420
208,023
1,119
3,142
82.56%
-
Aventura Holding, S.A.
São Paulo
213,024,987 BRL
33,281
61
33,220
-
-145
82.56%
-
Central Eólica Aventura I, S.A.
São Paulo
81,678,829 BRL
23,532
9,978
13,554
2,742
730
42.10%
-
Central Eólica Aventura II, S.A.
São Paulo
35,660,564 BRL
9,682
4,153
5,529
-
-36
82.56%
-
Central Eólica Aventura III, S.A.
São Paulo
78,746,401 BRL
17,201
4,885
12,317
-
-29
82.56%
-
Central Eólica Aventura IV, S.A.
São Paulo
49,231,221 BRL
13,310
5,635
7,675
-
-40
82.56%
-
Central Eólica Aventura V, S.A.
São Paulo
49,568,851 BRL
13,334
5,597
7,737
-
-30
82.56%
-
Central Eólica Baixa do Feijão I, S.A.
São Paulo
39,216,713 BRL
20,808
12,757
8,051
2,904
183
42.11%
-
Central Eólica Baixa do Feijão II, S.A.
São Paulo
40,551,200 BRL
20,120
11,790
8,330
2,694
120
42.11%
-
Central Eólica Baixa do Feijão III, S.A.
São Paulo
67,416,713 BRL
23,836
12,903
10,933
2,627
-241
42.11%
-
Central Eólica Baixa do Feijão IV, S.A.
São Paulo
44,433,110 BRL
19,911
11,734
8,178
2,461
-73
42.11%
-
Revenues
31-Dec-20
Euro'000
Net Profit/(Loss)
31-Dec-20
Euro'000
%
Group
%
Company
Subsidiaries
Head
Office
Share capital
/ Currency
Assets
31-Dec-20
Euro'000
Liabilities
31-Dec-20
Euro'000
Equity
31-Dec-20
Euro'000
445
EDP - Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended 31 December 2020 and 2019
Central Eólica Boqueirão I, S.A.
São Paulo
50 BRL
2,647
2,653
-6
-
-6
82.56%
-
Central Eólica Boqueirão II, S.A.
São Paulo
50 BRL
2,407
2,411
-4
-
-5
82.56%
-
Central Eólica Catanduba I, S.A.
São Paulo
500 BRL
-
5
-5
-
-6
82.56%
-
Central Eólica Catanduba II, S.A.
São Paulo
500 BRL
-
5
-5
-
-6
82.56%
-
Central Eólica Jerusalém I, S.A.
São Paulo
9,894,250 USD
3,019
675
2,344
-
-13
82.56%
-
Central Eólica Jerusalém II, S.A.
São Paulo
9,015,250 USD
2,891
682
2,209
-
-10
82.56%
-
Central Eólica Jerusalém III, S.A.
São Paulo
9,709,250 USD
3,006
688
2,318
-
-10
82.56%
-
Central Eólica Jerusalém IV, S.A.
São Paulo
8,959,150 USD
2,875
675
2,200
-
-10
82.56%
-
Central Eólica Jerusalém V, S.A.
São Paulo
8,973,250 USD
2,877
675
2,202
-
-10
82.56%
-
Central Eólica Jerusalém VI, S.A.
São Paulo
10,516,250 USD
3,240
680
2,559
-
-10
82.56%
-
Central Eólica Monte Verde I, S.A.
Lagoa Nova
20,593,200 BRL
8,442
3,381
5,060
-
-10
82.56%
-
Central Eólica Monte Verde II, S.A.
Lagoa Nova
20,307,200 BRL
8,536
3,517
5,019
-
-6
82.56%
-
Central Eólica Monte Verde III, S.A.
Lagoa Nova
18,473,200 BRL
7,957
3,458
4,499
-
-9
82.56%
-
Central Eólica Monte Verde IV, S.A.
Lagoa Nova
14,528,200 BRL
6,825
3,289
3,536
-
-9
82.56%
-
Central Eólica Monte Verde V, S.A.
Lagoa Nova
10,517,200 BRL
5,660
3,092
2,568
-
-2
82.56%
-
Central Eólica Monte Verde VI, S.A.
Lagoa Nova
12,211,000 BRL
5,056
3,150
1,906
-
-9
82.56%
-
Central Eólica SRMN I, S.A.
São Paulo
54,114,765 BRL
14,516
6,064
8,453
-
-20
82.56%
-
Central Eólica SRMN II, S.A.
São Paulo
83,393,676 BRL
19,797
6,742
13,055
-
-18
82.56%
-
Central Eólica SRMN III, S.A.
São Paulo
54,211,265 BRL
14,342
5,867
8,475
-
-19
82.56%
-
Central Eólica SRMN IV, S.A.
São Paulo
55,642,262 BRL
9,730
1,030
8,700
-
-18
82.56%
-
Central Eólica SRMN V, S.A.
São Paulo
41,343,289 BRL
7,255
795
6,460
-
-16
82.56%
-
Central Eólica Jau, S.A.
São Paulo
174,051,904 BRL
67,051
32,099
34,952
7,947
507
42.11%
-
Central Nacional de Energia Eólica, S.A.
São Paulo
12,396,000 BRL
3,896
936
2,961
2,020
1,009
42.11%
-
Central Solar Lagoa I, S.A.
São Paulo
10,000 USD
2
-
2
-
-
82.56%
-
Central Solar Lagoa II, S.A.
São Paulo
10,000 USD
2
-
2
-
-
82.56%
-
Central Solar Pereira Barreto I, S.A.
Pereira Barreto
39,317,000 USD
16,437
10,203
6,234
-
-105
82.56%
-
Central Solar Pereira Barreto II, S.A.
Pereira Barreto
102,597,000 USD
21,175
5,126
16,049
-
-228
82.56%
-
Central Solar Pereira Barreto III, S.A.
Pereira Barreto
34,747,000 USD
23,276
17,729
5,546
-
-72
82.56%
-
Central Solar Pereira Barreto IV, S.A.
Pereira Barreto
54,747,000 USD
20,787
12,273
8,514
-
-257
82.56%
-
Central Solar Pereira Barreto V, S.A.
Pereira Barreto
14,035,000 USD
9,837
7,575
2,262
-
-85
82.56%
-
Elebrás Projetos, S.A.
São Paulo
103,779,268 BRL
37,476
13,909
23,567
17,333
7,325
42.11%
-
Jerusalém Holding, S.A.
São Paulo
57,212,700 BRL
8,903
1
8,902
-
-73
82.56%
-
Monte Verde Holding, S.A.
São Paulo
96,816,300 BRL
15,138
10
15,127
-
-60
82.56%
-
SRMN Holding, S.A.
São Paulo
288,902,564 BRL
45,164
3
45,161
-
-101
82.56%
-
Colombia:
Eolos Energías, S.A.S. E.S.P.
Bogotá
2,334,214,100 COP
36,484
31,082
5,402
-
5
82.56%
-
Vientos del Norte, S.A.S. E.S.P.
Bogotá
2,947,510,000 COP
30,769
23,669
7,100
483
282
82.56%
-
Solar Power Solutions, S.A.S. E.S.P.
Bogotá
202,000 COP
30
452
-422
-
-413
82.56%
-
Elipse Energía, S.A.S. E.S.P.
Bogotá
40,640,000 COP
7
422
-416
-
-416
82.56%
-
Omega Energía, S.A.S. E.S.P.
Bogotá
24,470,000 COP
3
419
-416
-
-416
82.56%
-
Kappa Energía, S.A.S. E.S.P.
Bogotá
24,900,000 COP
3
419
-416
-
-416
82.56%
-
Other Geographies:
EDPR Vietnam
Ho Chi Minh
7,200,000,000 VND
254
-
254
-
-
82.56%
-
The companies main financial data of joint ventures as at 31 December 2020 are as follows:
Electricity Generation:
Bioastur, A.I.E.
Serín
60,101 EUR
50.00%
-
Ceprastur, A.I.E.
Oviedo
360,607 EUR
46.86%
-
Companhia Energética do JARI - CEJA
São Paulo
850,823,746 BRL
26.68%
-
Empresa de Energia Cachoeira Caldeirão, S.A.
Amapá
728,600,000 BRL
26.68%
-
Empresa de Energia São Manoel, S.A.
Rio de Janeiro
2,409,974,102 BRL
17.79%
-
HC Tudela Cogeneración, S.L.
Aboño - Carreño
306,030 EUR
50.10%
-
Pecém Operação e Manutenção de Unidades de Geração Eletrica, S.A.
Ceará
7,053,368 BRL
26.68%
-
Pecém Transportadora de Minérios, S.A.
Ceará
6,604,018 BRL
26.68%
-
Electricity Supply:
CHC Comercializador de Referencia, S.L.U.
Madrid
72,000 EUR
50.00%
-
CIDE HC Energía, S.A.
Madrid
500,000 EUR
50.00%
-
Renewable Energy Activity:
2019 SOL IV LLC
Delaware
316,169,431 USD
41.28%
-
Desarrollos Energéticos Canarios, S.A.
Las Palmas
15,025 EUR
41.20%
-
Desarrollos Energéticos del Val, S.L.
Soria
137,070 EUR
20.64%
-
Dunkerque Éoliennes en Mer, S.A.S.
Montpellier
10,000 EUR
26.42%
-
EDPR Wind Ventures XVII LLC
Delaware
- USD
82.56%
-
Hog Creek Wind Project LLC
Delaware
96,319,972 USD
16.51%
-
Meadow Lake Wind Farm V LLC
Delaware
147,518,483 USD
16.51%
-
Quilt Block Wind Farm LLC
Delaware
138,049,755 USD
16.51%
-
Redbed Plains Wind Farm LLC
Delaware
154,582,883 USD
16.51%
-
TEI Vento XVII
Delaware
149,727,162 USD
16.51%
-
2017 Vento XVII LLC
Delaware
536,689,832 USD
16.51%
-
Evolución 2000, S.L.
Albacete
117,994 EUR
40.58%
-
Flat Rock Windpower II LLC
Delaware
215,034,270 USD
41.28%
-
Flat Rock Windpower LLC
Delaware
543,598,932 USD
41.28%
-
Goldfinger Ventures LLC
Delaware
146,473,771 USD
41.28%
-
Sunshine Valley Solar LLC
Delaware
201,098,196 USD
41.28%
-
Windhub Solar A LLC
Delaware
36,343,904 USD
41.28%
-
2019 SOL III LLC
Delaware
235,989,831 USD
41.28%
-
Goldfinger Ventures II LLC
Delaware
194,656,553 USD
41.28%
-
Meadow Lake Wind Farm VI LLC
Delaware
264,400,228 USD
16.51%
-
Prairie Queen Wind Farm LLC
Delaware
223,444,606 USD
16.51%
-
TEI XIX
Delaware
98,363,564 USD
16.51%
-
2018 Vento XIX LLC
Delaware
493,538,562 USD
16.51%
-
Nation Rise Wind Farm GP, Inc.
British Columbia
1,690 CAD
82.56%
-
Nation Rise Wind Farm LP
Ontário
95,017,256 CAD
82.56%
-
OW Offshore, S.L.
Madrid
3,731,000 EUR
41.28%
-
Ancoris Beheer Nederland, B.V.
Zwolle
100 PLN
41.28%
-
B&C Wind Polska sp. z o.o. s.c.
Warsaw
- PLN
41.28%
-
B-Wind Polska, Sp. z o.o.
Warsaw
60,000 PLN
41.28%
-
C-Wind Polska, Sp. z o.o.
Warsaw
1,850,000 PLN
41.28%
-
Delphis Holdings Limited
London
4 EUR
41.28%
-
East Blue Power Co., Ltd.
Seul
200,000,000 KRW
22.76%
-
EDPR FS Offshore, S.A.
Oviedo
3,500,000 EUR
41.28%
-
Electrabel Offshore Energy
Belgium
13,606,250 EUR
41.28%
-
Éoliennes en Mer Dieppe - Le Tréport, S.A.S.
Bois Guillaume
31,436,000 EUR
24.97%
-
Éoliennes en Mer Îles d'Yeu et de Noirmoutier, S.A.S.
Nantes
36,376,000 EUR
24.97%
-
Korean Floating Wind Power Co., Ltd.
Seul
10,000,000 KRW
25.28%
-
Les Eoliennes en Mer Services, S.A.S.
Courbevoie
40,000 EUR
24.97%
-
Les Eoliennes Flottantes du Golfe du Lion, S.A.S.
Montpellier
40,000 EUR
33.02%
-
Mayflower Wind Energy LLC
Delaware
468,300,200 USD
20.64%
-
Moray East Holdings Limited
London
10,000,000 GBP
23.36%
-
Moray West Holdings Limited
London
1,000 GBP
53.00%
-
Moray Offshore Renewable Power Limited
London
23,027,589 GBP
41.28%
-
Joint Ventures entities *
Head
Office
Share capital
/ Currency
%
Group
%
Company
Subsidiaries
Head
Office
Share capital
/ Currency
Assets
31-Dec-20
Euro'000
Liabilities
31-Dec-20
Euro'000
Equity
31-Dec-20
Euro'000
Revenues
31-Dec-20
Euro'000
Net Profit/(Loss)
31-Dec-20
Euro'000
%
Group
%
Company
446
EDP - Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended 31 December 2020 and 2019
Moray Offshore Windfarm (East) Limited
London
10,000,000 GBP
23.36%
-
Moray Offshore Windfarm (West) Limited
London
1,000 GBP
53.00%
-
Mordel Limited
London
2 GBP
20.64%
-
Morska Farma Wiatrowa Neptun, Sp. z o.o.
Warsaw
220,000 PLN
41.28%
-
North River Wind LLC
Delaware
- USD
41.28%
-
North Sea Wave, N.V.
Belgium
362,500 EUR
7.22%
-
Ocean Winds UK Limited
London
9,578,002 GBP
41.28%
-
OW France, S.A.S.
Paris
1,307,527 EUR
41.28%
-
OW Japan Godo Kaisha
Tóquio
24,400,001 JPY
41.28%
-
OW North America LLC
Delaware
228,689,706 USD
41.28%
-
Redwood Coast Offshore Wind LLC
Delaware
- USD
20.64%
-
Relax Wind Park IV, Sp. z o.o.
Warsaw
4,490,000 PLN
41.28%
-
SeaMade, N.V
Belgium
76,524,001 EUR
7.22%
-
Windplus, S.A.
Lisbon
1,779,000 EUR
35.37%
-
Ventos do Atlântico - Projetos de Energía Eólica Ltda
São Paulo
100 BRL
41.28%
-
Ventum Ventures III Holding, B.V.
Zwolle
100 EUR
41.28%
-
OW South Korea Co., Ltd
Seul
65,000,000 KRW
41.28%
-
4THEWIND I, B.V.
Zwolle
100 EUR
41.28%
-
4THEWIND II, B.V.
Zwolle
100 EUR
41.28%
-
4THEWIND III, B.V.
Zwolle
100 EUR
41.28%
-
4THEWIND IV, B.V.
Zwolle
100 EUR
41.28%
-
4THEWIND V, B.V.
Zwolle
100 EUR
41.28%
-
4THEWIND VI, B.V.
Zwolle
100 EUR
41.28%
-
4THEWIND VII, B.V.
Zwolle
100 EUR
41.28%
-
4THEWIND VIII, B.V.
Zwolle
100 EUR
41.28%
-
Sistemas Eólicos Tres Cruces, S.L.
Soria
50,000 EUR
20.64%
-
Solar Ventures Acquisition LLC
Delaware
- USD
41.28%
-
Sun Streams LLC
Delaware
317,353,745 USD
41.28%
-
Other Activities:
Grupo ARQUILED
Mora
231,000 EUR
49.91%
-
Energia Ásia Consultoria, Limitada
Macao
200,000 MOP
50.00%
49.00%
Hydro Global Investment, Ltda.
Hong Kong
136,066,000 USD
50.00%
-
Sino - Portuguese Centre for New Technologies (Shangai) CO., Ltd
Shanghai
21,600,000 CNY
40.00%
-
The companies main financial data of joint ventures as at 31 December 2019 are as follows:
Electricity Generation:
Bioastur, A.I.E.
Serin
60,101 EUR
50.00%
-
Ceprastur, A.I.E.
Oviedo
360,607 EUR
46.86%
-
Companhia Energética do JARI - CEJA
Sao Paulo
850,823,746 BRL
25.69%
-
Empresa de Energia Cachoeira Caldeirão, S.A.
Amapá
728,600,000 BRL
25.69%
-
Empresa de Energia São Manoel, S.A.
Rio de Janeiro
2,409,974,102 BRL
17.13%
-
HC Tudela Cogeneración, S.L.
Aboño - Carreño
306,030 EUR
50.10%
-
Pecém Operação e Manutenção de Unidades de Geração Eletrica, S.A.
Ceará
1,527,000 BRL
25.69%
-
Pecém Transportadora de Minérios, S.A.
Ceará
3,364,018 BRL
25.69%
-
Electricity Supply:
CHC Comercializador de Referencia, S.L.U.
Madrid
72,000 EUR
50.00%
-
CIDE HC Energía, S.A.
Madrid
500,000 EUR
50.00%
-
Renewable Energy Activity:
2018 Vento XIX LLC
Delaware
483,122,053 USD
16.51%
-
2019 SOL III LLC
Delaware
246,422,986 USD
41.28%
-
2019 SOL IV LLC
Delaware
333,609,989 USD
41.28%
-
Compañía Eólica Aragonesa, S.A.
Zaragoza
6,701,165 EUR
41.28%
-
Desarrollos Energéticos Canarios, S.A.
Las Palmas
15,025 EUR
41.20%
-
Desarrollos Energéticos del Val, S.L.
Soria
137,070 EUR
20.64%
-
Dunkerque Éoliennes en Mer, S.A.S.
Montpellier
10,000 EUR
26.42%
-
Éoliennes en Mer Dieppe - Le Tréport, S.A.S.
Bois Guillaume
31,436,000 EUR
24.36%
-
Éoliennes en Mer Îles d'Yeu et de Noirmoutier, S.A.S.
Nantes
36,376,000 EUR
24.36%
-
Evolución 2000, S.L.
Albacete
117,994 EUR
40.58%
-
Flat Rock Windpower II LLC
Delaware
211,171,187 USD
41.28%
-
Flat Rock Windpower LLC
Delaware
536,426,287 USD
41.28%
-
Frontier Beheer Nederland, B. V.
Zwolle
1,000 EUR
24.77%
-
Frontier, C.V.
Zwolle
1,000 EUR
24.77%
-
Goldfinger Ventures LLC
Delaware
154,978,239 USD
41.28%
-
Goldfinger Ventures II LLC
Delaware
208,565,999 USD
41.28%
-
Les Eoliennes en Mer Services, S.A.S.
Courbevoie
40,000 EUR
24.36%
-
Les Eoliennes Flottantes du Golfe du Lion, S.A.S.
Montpellier
40,000 EUR
28.90%
-
Mayflower Wind Energy LLC
Delaware
159,000,000 USD
41.28%
-
Meadow Lake Wind Farm VI LLC
Delaware
273,341,071 USD
16.51%
-
Moray East Holdings Limited
London
10,000,000 GBP
27.49%
-
Moray Offshore Windfarm (East) Limited
London
10,000,000 GBP
27.49%
-
Moray Offshore Windfarm (West) Limited
London
1,000 GBP
55.32%
-
Moray West Holdings Limited
London
1,000 GBP
55.32%
-
Nation Rise Wind Farm GP, Inc.
British Columbia
1,276 CAD
20.64%
-
Nation Rise Wind Farm LP
Ontario
62,024,174 CAD
20.64%
-
Prairie Queen Wind Farm LLC
Delaware
191,095,968 USD
16.51%
-
Sistemas Eólicos Tres Cruces, S.L.U.
Soria
50,000 EUR
20.64%
-
Solar Ventures Acquisition LLC
Delaware
- USD
41.28%
-
Sun Streams LLC
Delaware
333,609,989 USD
41.28%
-
Sunshine Valley Solar LLC
Delaware
208,520,098 USD
41.28%
-
Windhub Solar A LLC
Delaware
37,902,128 USD
41.28%
-
Windplus, S.A.
Lisbon
1,250,000 EUR
44.91%
-
Other Activities:
ARQUILED Group
Mora
231,000 EUR
49.91%
-
Energia Ásia Consultoria, Limitada
Macao
200,000 MOP
50.00%
49.00%
Hydro Global Investment, Ltda.
Hong Kong
136,066,000 USD
50.00%
-
Sino - Portuguese Centre for New Technologies (Shangai) CO., Ltd
Shanghai
21,600,000 CNY
40.00%
-
* The companies financial data of joint ventures are disclosed in note 21.
Joint Ventures entities *
Head
Office
Share capital
/ Currency
%
Group
%
Company
Joint Ventures entities *
Head
Office
Share capital
/ Currency
%
Group
%
Company
447
EDP - Energias de Portugal, S.A.
Notes to the Consolidated and Company Financial Statements
for the periods ended 31 December 2020 and 2019
The companies where the Group has significant influence as at 31 December 2020 are as follows:
Electricity Generation:
Carriço Cogeração - Sociedade de Geração de Electricidade e Calor, S.A.
Lisbon
50,000 EUR
35.00%
-
Kosorkuntza, A.I.E.
Bilbao
- EUR
25.00%
-
Solar Siglo XXI, S.A.
Ciudad Real
80,000 EUR
20.64%
-
Electricity Distribution:
AMBERTREE - Tecnologia para Redes de Energia Electrica, Lda
Lisbon
5,000 EUR
26.00%
-
Renewable Energy Activity:
Biomasas del Pirineo, S.A.
Huesca
454,896 EUR
24.77%
-
Blue Canyon Windpower LLC
Texas
- USD
20.64%
-
Desarrollos Eólicos de Canarias, S.A.
Gran Canaria
1,817,130 EUR
36.94%
-
Nine Kings Wind Farm LLC
Delaware
- USD
41.28%
-
Parque Eólico Belmonte, S.A.
Madrid
120,400 EUR
24.69%
-
Parque Eólico Sierra del Madero, S.A.
Madrid
7,193,970 EUR
34.68%
-
Solar Works! B.V.
Rotterdam
6,769,000 EUR
16.67%
-
Other Activities:
Centrais Elétricas de Santa Catarina, S.A. - Celesc
Santa Catarina
1,340,000,000 BRL
15.95%
-
Comercializadora de Equipamentos y Materiais MABE, Ltda.
Chile
- BRL
26.68%
-
EIDT-Engenharia, Inovação e Desenvolvimento Tecnológico, S.A.
Oporto
221,794 EUR
33.50%
-
Endeco Technologies Limited
Dublin
15,641,010 EUR
16.90%
-
MABE Construção e Administração de Projectos, Ltda.
Ceará
566,151,832 BRL
26.68%
-
Portsines - Terminal Multipurpose de Sines, S.A.
Sines
4,200,000 EUR
39.60%
-
Principle Power, Inc
Seattle
32,636 USD
24.48%
-
Vertequip, Equipamentos e Trabalhos Verticais, Lda
Chamusca
347,139 EUR
23.66%
-
WPVT, S.A.
Oporto
75,000 EUR
20.00%
-
The companies where the Group has significant influence as at 31 December 2019 are as follows:
Electricity Generation:
Carriço Cogeração - Sociedade de Geração de Electricidade e Calor, S.A.
Lisbon
50,000 EUR
35.00%
-
Kosorkuntza, A.I.E.
Bilbao
- EUR
25.00%
-
Solar Siglo XXI, S.A.
Ciudad Real
80,000 EUR
20.64%
-
Electricity Distribution:
AMBERTREE - Tecnologia para Redes de Energia Electrica, Lda
Lisbon
5,000 EUR
26.00%
-
Renewable Energy Activity:
Aprofitament D'Energies Renovables de L'Ebre, S.L.
Barcelona
14,933,030 EUR
10.98%
-
Biomasas del Pirineo, S.A.
Huesca
454,896 EUR
24.77%
-
Blue Canyon Windpower LLC
Texas
- USD
25.00%
-
Desarrollos Eólicos de Canarias, S.A.
Gran Canaria
1,817,130 EUR
36.94%
-
Nine Kings Wind Farm LLC
Delaware
- USD
41.28%
-
Parque Eólico Belmonte, S.A.
Madrid
120,400 EUR
24.69%
-
Parque Eólico Sierra del Madero, S.A.
Madrid
7,193,970 EUR
34.68%
-
Solar Works! B.V.
Rotterdam
3 EUR
16.67%
-
Other Activities:
Centrais Elétricas de Santa Catarina, S.A. - Celesc
Santa Catarina
1,340,000,000 BRL
13.03%
-
Comercializadora de Equipamentos y Materiais MABE, Ltda.
Chile
- BRL
25.69%
-
EIDT-Engenharia, Inovação e Desenvolvimento Tecnológico, S.A.
Oporto
221,794 EUR
33.50%
-
Endeco Technologies Limited
Dublin
15,633,266 EUR
16.90%
-
MABE Construção e Administração de Projectos, Ltda.
Ceará
520,459,000 BRL
25.69%
-
Portsines - Terminal Multipurpose de Sines, S.A.
Sines
4,200,000 EUR
39.60%
-
Principle Power, Inc
Seattle
356,066 USD
32.51%
-
Vertequip, Equipamentos e Trabalhos Verticais, Lda
Chamusca
347,139 EUR
23.66%
-
WPVT, S.A.
Oporto
75,000 EUR
20.00%
-
* The companies financial data of associated companies are disclosed in note 21.
Associated companies *
Head
Office
Share capital
/ Currency
%
Group
%
Company
Associated companies *
Head
Office
Share capital
/ Currency
%
Group
%
Company
448
Making
all forms of
sustainability real
Changing tomorrow now.
Final References
454
Proposal for the Appropriation of Profit
455
Historic Operational Indicators
456
Economic Activity of EDP Group
461
Concepts and Defenitions
501
External Checks
510
454
Final References
The Executive Board of Directors expresses its gratitude to all those who have supported and followed, directly or indirectly,
the activity of EDP Group over the year of 2020.
First, we would like to thank the shareholders for the trust and support given to the Executive Board of Directors and to each
of its members in the exercise of its activity.
The Executive Board of Directors would also like to thank all the Board members of the 2018-2020 term, who contributed
significantly to the development of EDP Group, namely António Mexia, whose leadership was always guided by strong
dedication and commitment.
To all the members of the Corporate Bodies, responsible for the auditing and supervision of the Group, a special thanks is
also due, for the support given over the year. A special word to the General and Supervisory Board for the guidance provided
to the activity of the Executive Board of Directors.
The successful results of the Group and the intrepid defense of all stakeholders’ interests clearly demonstrate that the
governance model is fully consolidated.
Additionally, as a result of the support granted to the group’s activities during last year, the Board thanks the members of
the governmental bodies and the public authorities of countries in which EDP is present, for the continued support provided.
Within the energy sector, it is also important to refer the constant and constructive dialogue between EDP and the different
energy sector regulators. Particularly with the Regulatory Body for Energy Services (ERSE) and the Directorate-General for
Energy and Geology (DGEG) in Portugal, as well as to other regulators in countries where the activity of the EDP group is
most visible, such as CNE in Spain, ANEEL in Brazil and FERC and NERC in the USA.
The Executive Board of Directors also extends its gratitude to all the other entities that interacted with the group during
2020, namely, the financial markets regulators, the sectorial associations and the social and environmental non-government
organizations.
It is also imperative to thank our customers and reaffirm our full commitment to seek continuous improvement of our offer,
as well as to achieve excellence in the service delivery. We are focused and determined to satisfy our customers’ needs.
The Board’s gratitude is also extended to suppliers, as well as to the social media that followed the company throughout
the year.
Lastly, a special thanks to all EDP employees. Their knowledge, determination, and commitment were crucial for the
company to achieve its results.
Miguel Stilwell de Andrade (Chairman)
Rui Manuel Rodrigues Lopes Teixeira
Miguel Nuno Simões Nunes Ferreira Setas
Vera de Morais Pinto Pereira Carneiro
Ana Paula Garrido Pina Marques
455
ANNUAL REPORT 2020
Proposal for the Appropriation of Profits
Under the terms of the Article 30, number 1, of the Company constitution, the Executive Board of Directors proposes
to the shareholders that the Net Profit of 2020, amounting to € 878,151,389.05 is appropriated as follows:
Legal Reserves
*
€ 43.907.569,45
Dividends
*
€ 753.479.392,28
Donations to Fundação EDP
**
€ 6.200.000,00
Retained Earnings
€ 74.564.427,32
* The proposed dividend per share is € 0.19.
** The proposed amount maintains the reduction made in 2019
The dividend value considers the total shares representing EDP’s share capital. Nevertheless, under the applicable legal
terms, there is no payment of dividends regarding own shares held by EDP as of the date that dividends are made available
for payment. Accordingly, such value is added to the amount of retained earnings.
456
Historic Operational Indicators
RENEWABLES
UN
2020
2019
2018
2017
HYDRO INSTALLED CAPACITY
MW
7,126
8,785
8,785
9,019
Portugal
MW
5,076
6,759
6,759
6,847
Spain
MW
451
426
426
426
Brazil
MW
1,599
1,599
1,599
1,746
EQUITY HYDRO INSTALLED CAPACITY
1
Installed Capacity
MW
551
551
539
364
Brazil
MW
551
551
539
364
Capacity under Construction
MW
78
78
78
173
Brazil
MW
-
-
-
173
Peru
MW
78
78
78
-
HYDRO NET ELECTRICITY GENERATION
GWH
18,792
14,110
19,296
11,424
Portugal
GWh
12,571
9,101
12,648
6,948
Spain
GWh
677
880
1,054
472
Brazil
GWh
5,543
4,129
5,594
4,004
HYDRO TECHNICAL AVAILABILITY
Portugal
%
93
91
91
91
Spain
%
100
100
100
100
Brazil
%
91
98
94
95
1
Share of the MW installed in plants owned by companies equity consolidated
457
ANNUAL REPORT 2020
RENEWABLES
UN
2020
2019
2018
2017
WIND AND SOLAR INSTALLED CAPACITY
Installed Capacity
MW
11,500
10,812
11,301
10,676
Portugal
MW
1,228
1,164
1,309
1,253
Spain
MW
2,137
1,974
2,312
2,244
Rest of Europe
MW
1,403
1,263
1,652
1,564
North America
MW
6,296
5,944
5,562
5,284
Brazil
MW
436
467
467
331
Capacity under Construction
MW
2,051
664
344
828
Portugal
MW
135
6
47
55
Spain
MW
85
18
29
68
Rest of Europe
MW
502
130
69
88
North America
MW
970
509
199
480
Brazil
MW
359
0
0
137
Equity Installed Capacity
1
MW
668
550
371
331
Portugal
MW
30
0
0
0
Spain
MW
167
152
152
152
Rest of Europe
MW
0
0
0
0
North America
MW
471
398
219
179
Brazil
MW
0
0
0
0
Capacity under Construction MEP
1
MW
311
330
330
0
Portugal
MW
0
14
14
0
Rest of Europe
MW
311
316
316
0
WIND AND SOLAR NET ELECTRICITY GENERATION
GWH
28,537
30,041
28,359
27,621
Portugal
GWh
2,624
3,160
2,995
2,912
Spain
GWh
4,346
5,298
5,164
5,095
Rest of Europe
GWh
3,054
3,333
3,321
3,662
North America
GWh
17,421
16,492
15,644
15,091
Brazil
GWh
1,093
1,757
1,235
861
WIND AND SOLAR TECHNICAL AVAILABILITY
97
97
97
98
Portugal
%
98
98
98
98
Spain
%
95
97
97
97
Rest of Europe
%
98
97
97
98
North America
%
96
96
97
98
Brazil
%
98
98
98
98
1
Share of the MW installed in plants owned by companies equity consolidated
458
NETWORKS
UN
2020
2019
2018
2017
DISTRIBUTION
Electricity distributed
GWh
76,123
79,519
80,426
78,736
Portugal
GWh
44,143
45,666
46,059
44,753
Spain
GWh
7,559
8,262
9,360
9,331
Brazil
GWh
24,421
25,591
25,007
24,652
Electricity supply points
'000
11,274
10,470
10,343
10,228
Portugal
'000
6,302
6,277
6,226
6,187
Spain
'000
1,371
668
666
664
Brazil
'000
3,601
3,524
3,451
3,377
Electricity customers
GWh
27,272
28,708
17,229
17,387
Portugal
GWh
2,413
2,658
3,016
3,243
Spain
GWh
438
461
444
446
Brazil
GWh
24,421
25,589
13,769
13,697
Electricity customers
'000
4,565
4,786
4,797
4,818
Portugal
'000
965
1,034
1,125
1,223
Spain
'000
0
229
221
219
Brazil
'000
3,600
3,523
3,450
3,376
Grid extension
Km
374,691
340,744
339,177
338,179
Portugal
Km
228,349
226,823
226,308
226,027
Overhead lines
Km
179,181
177,841
177,491
177,321
Underground lines
Km
49,168
48,981
48,817
48,706
Spain
Km
52,492
20,766
20,709
20,613
Overhead lines
Km
39,670
15,729
15,723
15,695
Underground lines
Km
12,822
5,037
4,986
4,918
Brazil
Km
93,850
93,155
92,160
91,538
Overhead lines
Km
93,582
92,899
91,906
91,293
Underground lines
Km
268
256
254
245
GRID LOSSES
Portugal
%
10
10
10
10
Spain
%
4
4
3
4
Brazil
%
11
10
10
10
SERVICE QUALITY
Portugal
Installed Capacity Equivalent Interruption Time
1
Min
60
56
61
53
Spain
Installed Capacity Equivalent Interruption Time
1
Min
15
26
17
20
Brazil
Average Interruption Duration per Consumer
EDP São Paulo
Hours
7
7
8
8
EDP Espírito Santo
Hours
8
8
8
9
Frequency of Interruptions per Consumer
EDP São Paulo
#
5
5
5
5
EDP Espírito Santo
#
4
5
5
5
TRANSMISSION
Grid extension
Km
1,441
1,441
1,299
1,299
Grid extension in Operation
Km
316
113
113
-
Grid extension Under Construction
Km
1,125
1,328
1,186
1,299
1
ICEIT in MV grid, excluding extraordinary events
459
ANNUAL REPORT 2020
CLIENT SOLUTIONS AND ENERGY MANAGEMENT
UN
2020
2019
2018
2017
THERMAL INSTALLED CAPACITY
Installed Capacity
MW
5,053
7,084
7,058
7,058
Portugal
MW
2,049
3,236
3,236
3,236
CCGT
MW
2,031
2,031
2,031
2,031
Coal
MW
0
1,180
1,180
1,180
Cogeneration
MW
17
24
24
24
Spain
MW
2,285
3,128
3,102
3,102
CCGT
MW
854
1,698
1,698
1,698
Coal
MW
1,250
1,250
1,224
1,224
Nuclear
MW
156
156
156
156
Cogeneration and Waste
MW
25
25
25
25
Brazil
MW
720
720
720
720
Coal
MW
720
720
720
720
Equity Installed Capacity
1
MW
10
10
10
41
Portugal
MW
0
0
0
32
Spain
MW
10
10
10
10
THERMAL NET ELECTRICITY GENERATION
GWH
16,988
22,539
24,308
30,955
Portugal
GWh
7,623
10,027
12,341
15,486
CCGT
GWh
5,653
5,838
4,091
5,941
Coal
GWh
1,832
4,025
8,067
9,426
Cogeneration
GWh
138
163
182
119
Spain
GWh
7,779
8,805
8,512
10,872
CCGT
GWh
4,107
4,346
1,242
2,087
Coal
GWh
2,403
3,129
5,948
7,421
Nuclear
GWh
1,196
1,223
1,196
1,236
Cogeneration and Waste
GWh
73
107
126
128
Brazil
GWh
1,586
3,707
3,455
4,597
Coal
GWh
1,586
3,707
3,455
4,597
THERMAL TECHNICAL AVAILABILITY
Portugal
%
94
90
89
93
CCGT
%
94
90
86
93
Coal
%
96
90
94
94
Cogeneration
%
94
94
97
65
Espanha
%
95
95
96
94
CCGT
%
98
95
99
97
Coal
%
91
97
93
91
Nuclear
%
91
92
90
92
Cogeneration
%
97
100
100
92
Waste
%
85
81
92
95
Brazil
%
92
95
80
92
Coal
%
92
95
80
92
1
Share of the MW installed in plants owned by companies equity consolidated
460
CLIENT SOLUTIONS AND ENERGY MANAGEMENT
UN
2020
2019
2018
2017
ELECTRICITY CUSTOMERS
'000
4,050
5,042
5,052
5,068
Portugal
'000
4,028
4,104
4,119
4,153
Market Share EDP - Liberalised Market
%
n.a.
78
81
n.d.
Spain
'000
22
937
933
914
Brazil
'000
0
0
0
0
Social Tariff
'000
749
803
798
880
Portugal
'000
555
588
615
661
Spain
'000
0
51
39
57
Brazil
'000
194
164
144
162
Special Needs
'000
1
1
2
1
Portugal
'000
0
0
2
1
Brazil
'000
1
1
1
0
Green Tariff
'000
230
1,131
1,026
932
Portugal
'000
n.a.
73
3
3
Spain
'000
0
1,058
1,023
929
Brazil
'000
n.a.
n.a.
n.a.
n.a.
ELECTRICITY SUPPLIED
GWH
53,001
53,933
48,327
49,607
Portugal
GWh
17,095
17,995
18,119
18,246
Market Share EDP - Liberalised Market
%
n.a.
42
42
n.d.
Spain
GWh
10,352
11,901
12,106
13,556
Market Share EDP - Liberalised Market
%
6
6
7
7
Brazil
GWh
25,554
24,036
18,102
17,804
Social Tariff
GWh
718
631
523
604
Portugal
GWh
148
173
199
213
Spain
GWh
110
111
117
117
Brazil
GWh
461
348
208
275
Green Tariff
GWh
5,760
5,456
5,546
5,553
Portugal
GWh
n.a.
174
10
9
Spain
GWh
5,014
5,282
5,536
5,544
Brazil
GWh
n.a.
n.a.
n.a.
n.a.
GAS CUSTOMERS
'000
691
1,599
1,595
1,585
Portugal
'000
686
696
700
702
Last Resort
'000
34
37
41
45
Liberalised Market
'000
651
659
659
658
Spain
'000
6
903
895
883
Last Resort
'000
0
52
51
52
Liberalised Market
'000
6
851
844
831
GAS SUPPLIED
GWH
17,070
19,389
18,997
18,904
Portugal
GWh
4,294
3,995
3,854
3,890
Last Resort
GWh
167
202
249
262
Liberalised Market
GWh
4,127
3,793
3,605
3,628
Market Share EDP - Liberalised Market
%
n.a.
11
10
n.d.
Spain
GWh
12,776
15,394
15,143
15,014
Last Resort
GWh
195
247
261
244
Liberalised Market
GWh
12,581
15,147
14,882
14,770
Market Share EDP - Liberalised Market
%
3
4
3
4
461
ANNUAL REPORT 2020
Economic Activity of EDP Group
EDP - Energias de Portugal, S.A. (hereinafter referred to as EDP), currently with head office in Lisbon, Avenida 24 de Julho 12
and with its shares listed on the Euronext Lisbon stock exchange, results from the transformation of Electricidade de
Portugal, E.P., incorporated in 1976 following the nationalization and consequent merger of the main companies in the
electricity sector in Portugal. During 1994, as established by Decree-laws 7/91 and 131/94, the EDP Group (EDP Group
or Group) was set up following the split of EDP, which led to a number of directly or indirectly wholly owned subsidiaries
of EDP.
The Group’s businesses are currently focused on the generation, transmission, distribution
and
supply of electricity and
supply of gas. Although complementary, the Group also operates in related areas such as engineering, laboratory tests,
professional training and property management.
EDP Group operates essentially in the European (Portugal, Spain, France, Poland and Romania) and American (Brazil
and the United States of America) energy sectors.
ACTIVITY IN THE ENERGY SECTOR IN PORTUGAL
Portugal – Electricity
The general basis of the organization and inner workings of the National Electrical System (SEN), as well as the general
bases applicable i) to the exercise of the activities of generation, transportation, distribution, supplying of electricity
and operator change logistics and ii) to the organization of the electricity markets is set in Decree-Law (DL) 29/2006
of 15 February 2006, in the version published in the DL 215-A/2012 of 8 October 2012, with the changes introduced
by DL 42/2016, of 28 December 2016, and further developed by the DL 172/2006 of 23 August 2006, on the version
republished by the DL 215-B/2012 of 8 October 2012, with the changes introduced by the DL 114/2017 of 29 December
2017 and by DL 76/2019, of 3 June 2019.
These legal diplomas transpose to the Portuguese law, the principles of Directive 2009/72/CE, from the European
Parliament and the Council of 13 July, which sets common rules for the internal electricity market and revokes the Directive
2003/54/CE, of the European Parliament and the Council, of 26 June.
The SEN integrates the activities of: i) generation, ii) transportation, iii) distribution, iv) supplying, v) organized markets
operation, vi) operator change logistics and vii) other activities related with providing services related with the market
integrated.
These activities are under the regulation of the Energy Services Regulatory Entity (ERSE), whose purpose is to contribute
to ensure the correct efficiency and rationality regarding objectivity, transparency, non-discrimination and competition,
through the continuous supervision and oversight, integrated in the goal of fulfillment of the internal electricity market.
In what concerns the transportation, distribution and last resource supplying, the law sets the right to a fixed income,
dictated by ERSE, as stipulated in the Tariff Regulations, that assures the economic-financial balance given the conditions
of an efficient management.
Portugal - Electricity - Generation
Background
The generation activity involves generation in both the ordinary regime (PRO) and the special regime (PRE), being both
regimes, subjected to the assignment of a generation license by the Portuguese Authority of Energy and Geology (DGEG).
462
"The PRO regime incorporates the production that is not under a special regime, including all remunerated power plants
under the PPAs (Power Purchase Agreement), CMEC (Contractual Stability Compensation) and Power Guarantee,
being the energy produced sold in organized markets or through bilateral contracts."
On the other hand, PRE integrates: i) the production that is covered by special regimes such as the production of electricity
through cogeneration and endogenous, renewable and non-renewable resources, micro production, mini-production
and production without power injection in the network or, ii) the production that is made through endogenous, renewable
and non-renewable resources, not subject to special legal regime.
The energy produced under a special regime, if it is under guaranteed remuneration, is sold to the Supplier of Last Resort
(CUR). Otherwise, it can be sold to any trader or market aggregator, on organized markets or through the celebration of
bilateral contracts.
In Portugal, EDP Group develops the activity of PRO and the activity of PRE through EDP Gestão da Produção, S.A.
and EDP Renováveis Portugal, S.A., amongst other subsidiaries.
Highlights:
Transformation from Power Purchase Agreement (PPAs) into Contractual Stability Compensation (CMEC)
The PPAs were created by the DL 182/95, of 27 July 1995, as long term contracts, signed between bound electricity
generators and REN. The fix and variable costs of production were indemnified to the producer by meanings of a
pre-determined remuneration which might vary considering the plants availability. These contracts assure to the
electricity generators a low level of risk.
The approval of Directive 2003/54/CCE in 2004, which aimed to deepen the liberalization of the energy market, and the
commitments assumed by Portuguese and Spain Governments, with a view to the construction of the Iberian Electricity
Market (MIBEL), led to the revision of the sector organization, particularly regarding generation, as it was at stake the
PPAs compatibility with goals pursued at the European and Iberian levels. In this context, DL 240/2004, of 27 December,
established PPAs early termination, based on the implementation of a mechanism for the maintenance of the contractual
equilibrium named CMEC, which consisted on the right to the payment of a compensation to the envisaged generators.
This regime was notified (and authorized) by the European Commission and, also, was object of a legislation authorization,
conferred to by Law 52/2004.
"The PPAs maintained by EDP Group were early terminated and CMEC regime entry into force from 1 July 2007 onwards.
CMECs consist of i) an initial amount, that corresponds to the difference between the present value of the PPAs (calculated
at the early end of the contract (2007), and the value of expected market revenues, deducting the respective operating
costs and other costs (estimated in 2007, to that year's values). The amount thus determined is paid in annuities from
July 2007 up to the end date of the longest underlying PPA (December 2027); ii) annual adjustments, that correspond
to the annual revisibility, calculated by the difference between the conditions underlying the initial amount and the values
resulting from the valuation model (Valoragua), obtained from real data. These annual adjustments occurred during the first
10 years of the CMEC mechanism, ie between July 2007 and July 2017 and iii) a final adjustment, which reviews, reported
to July 2017 date, the amount of the compensation to be paid to the electricity generator up to 2027 (the remaining PPA
term with the longest duration), with a rational calculation similar to the initial amount but without any adjustments from
July 2017 onwards.”
In EDP Group 27 PPAs ongoing for hydro power plants and 7 PPAs for thermal power plants were early terminated
in July 2007.
However, EDP Group was the only entity that accepted PPAs early termination and the remuneration through CMEC regime.
The remaining entities maintain the respective PPAs into force (regarding to a coal plant and to a gas plant).
463
ANNUAL REPORT 2020
While within the scope of the PPAs, investment and availability of the plants were remunerated with full recognition
of costs incurred in generation, in the CMEC regime, each plant started to be remunerated in market, being this
remuneration complemented by the difference between what the plants would receive in the PPAs and what they receive
in the free market in a context of an efficient management.
"In 2012, several citizens presented a complaint at the European Commission on the hypothetical disconformity of the
CMEC mechanism and of the hydro public domain (DPH) use rights that accompanied hydric plants. In 2017, the European
Committee issued its decision, and state that the national procedures regarding to DPH connected to plants operating
under CMEC regime were in accordance to European legislation on State Aid. "
Meanwhile, the implementation of the CMEC regime has been object of several vicissitudes, contested by EDP Group at the
adequate level, namely: (i) the calculation of the final adjustment value with basis on a different methodology than the one
legally foreseen, resulting in the value approximately of 154 million Euros, homologated by the Energy Secretary of State
(SEE) BY Dispatch dated 25 April 2018; (ii) the alleged existence of “innovatory aspects” regarding, in particular, the
performance of tests to the CMEC plants availability from which a supposed benefit of 285 million euros, currently
deducted, in the tariff context, to the values to be received by EDP; (iii) obligation of the CMEC plants to the payment
foreseen in DL 74/2013 (clawback), following determination of Law 71/2008, which approves State Budget for 2019; this
sets that the Government, until the end of 2019 first trimester, proceeds with the revision of clawback mechanism, which
happened through DL 104/2019, of 9 August.
System Services
In addition to operating in the daily, intraday and long-term market, generators can participate in the system services
markets.
The system services are adjustments to solve deviations and technical constraints in real time, in order to respond to the
needs of quality, reliability and security of the network, while always maintaining the supply-demand balance.
Remuneration Regime
The generation activity is remunerated by the energy produced, by the availability of the installed capacity and by the
systems services:
REMUNERAÇÃO REGULADO
REMUNERAÇÃO EM MERCADO
ENERGY
•
PPA
•
CMEC
•
Bonus rates for special regime production
•
MIBEL
•
Bilateral contracts
INSTALLED CAPACITY
•
PPA
•
CMEC
•
Power guarantee
•
Capacity auctions
SUSTEM SERVICES
•
Direct hiring
•
System services market
Social Tariff
The DL138-A/2010, of 28 December, created a social tariff scheme financed by ordinary regime producers, including
large hydro plants.
Social tariff consisted of the allocation to economically vulnerable customers of a discount on the network access tariff
in an amount corresponding to a discount of 20% on the transitional tariffs of sale to end customers.
464
In 2011, a regime of extraordinary social support to the energy consumers (ASECE) was created, which consisted of an
additional discount granted to economically vulnerable customers worth 13.8% of the value of the invoice, in this case,
financed by the State, in order to neutralize the VAT increase from 6% to 23% for these customers.
In 2016, ASECE was extinguished, but the value of the respective discount was incorporated into social tariff, which means
it has became also financed by producers in ordinary regime and by the big hydric. Beyond that, the eligibility criteria to
benefit from social tariff is broader and the respective implementation is immediate.
Considering the historic, in 2016 the number of persons benefiting from social tariff increased from around 80.000
to around 800.000 and the discount, that was of 20% come to 33,8%, situation that is still maintained actually.
Clawback
The DL 74/2013, of 4 June, introduced a regulatory mechanism to ensure the competitive balance in the wholesale
electricity market in Portugal, which acts in the event of distortions resulting from extra-market events, through allocation,
based on the impact registered on the price structure, of the allocation of the cost of general economic interest (CIEG)
between consumers and producers of electricity - Clawback
The electricity generators covered by this mechanism are ordinary regime producers and other producers that are not
covered by the guaranteed remuneration scheme.
Clawback aims to prevent that extra markets events, as the existence of taxes existing only in one of MIBEL countries,
may entail non-justified benefits for the producers that develop their activity in another country.
ERSE periodically prepares a study on the impact of electricity average price formation at Portuguese wholesale market
in extra market events registered within European Union considering also national extra markets events. Concretely,
it has been considered as an European extra market event the tax burden that levies over producers located in Spain and
as a national extra market event the Social Tariff (funded by the PRO) and the Extraordinary Contribution on the Energetic
Market. More recently, the tax over oil products was also considered as a national extra market event. This mechanism is
currently framed by DL 74/2013, DL 104/2019, Ministerial Order 282/2019 and by Dispatch 12424-A/2016 of 26 December.
The implementation of DL 74/2013 registered several amendments, namely regarding recognition of national extra market
events.
Hydrological Correction Account
On 5 March, the Energy Secretary of State published Dispatch 2224/2018, which determines the creation and composition
of a Working Group, designed as "Working Group for the extinction of the hydrological correction account" - for EDP -
Energias de Portugal,S.A. financial statements - with the purpose of preparing a grounded report with the hydrological
correction account 's annual movements and their origin, as well as of determine rights on the differentials of the updated
amounts of the payments and receipts flows and the financial charges associated with the hydrological correction account.
This working group was created following the extinction of an earlier working group with the same purpose, operated by
Dispatch 5443/2017 of 22 June. The Working Group concluded its work and the Government, recognizing the value at stake,
does not recognize to EDP its right to receive it, and this fact was already object of contest at the right place.
Reserve remuneration regime for National Electricity System (SEN)
On 27 January 2017, Ordinance 41/2017 established a new regime for the payment of the security reserve provided
to the SEN through the availability services provided by electric producers and other market agents. Under this scheme,
the remuneration of the security reserve is established through an annual competitive auction mechanism that pays
exclusively for the availability services provided, favoring low carbon technologies. However, Law 114/2017 of 29 December
2017, that approves the State Budget for 2018, determined the postponement of the annual auction until the Portuguese
State receives the unequivocal pronouncement of the European Commission regarding the compatibility of the mechanism
of the SEN security reserve with the Community provisions regarding State support for the energy sector. On 3 April 2018,
Order 93/2018 was published, which maintains the postponement of that auction.
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Key Developments of 2019
Exemption of the oil tax (ISP) and surcharge over CO
2
Ordinance 6-A/2019 was published on 4 January 2019, which sets the CO
2
surcharge rate on CO
2
emissions and the
addition value for each product. The addition rate forecast in the Article 92-A of the Code of Special Taxes on Consumption,
defined annually, is based on the tenders prices for the greenhouse gas emission carried out under the European Trading of
Emission Allowances (CELE). The amount for 2019 is 12.74€ / tonne of CO
2
(in 2018, this amount was 6.85€/tonne of CO
2
).
Clawback
On 23 January 2019, Dispatch 895/2019 of the Office of the Energy Secretary of State was published, which defines the
parameter corresponding to the impact of extra market measures and events registered in the European Union in the
creation of average electricity prices in the wholesale market in Portugal (clawback). The suspension of the Clawback
mechanism is thus determined in the period corresponding to the suspension of the tax measures in Spain, from 1 October
2018 until 31 March 2019. In the calculation of system costs, ERSE is considering the value of 4.18€ / MWh as of 1 April
2019.
On 9 August 2019 was published DL 104/2019, of the Council of Ministers, which makes the first amendment to Decree-Law
74/2013, of 4 June 2013, regarding the clawback mechanism, clarifying the subjective scope of the mechanism, which now
includes the following producers:
•
producers of electricity in the ordinary regime, except for the power plants covered by paragraph 2 a)
of article 17 of that law, until the date of termination of the respective contracts for the purchase of energy;
•
electricity producers exploiting hydroelectric plants with installed capacity> = 10 MVA;
•
electricity producers that do not benefit from any guaranteed remuneration mechanism, except producers: i) that make
specific compensations to SEN within the scope of the competitive procedure provided for in article 5-B of Decree-Law
No. 172/2006, of 23 August 2006, as amended; and ii) whose installed capacity of each individually considered power
station is <5 MW.
With the published DL it becomes possible a CIT (Corporate Income Payment) – Advanced Payment, applied to electricity
producers covered by the clawback mechanism, and the unit value of the payment on account is established by the
government member responsible for the energy area, under proposal from ERSE. The same Government official decides
on the amounts to be invoiced to electricity producers, based on the results of a study prepared annually by ERSE on the
impact on average electricity prices in the Portuguese wholesale market of measures and extra market events registered
in the EU.
On 30 August 2019 it was published Ordinance 282/2019, from the Environment and Energy Transition, which regulates
some aspects of the clawback mechanism, following the provisions of Decree Law 104/2019, in particular: (i) ERSE's
annual study; (ii) clawback's tariff repercussions and changes to the formulas to be used and; (iii) the Advanced Payment
mechanism.
On 26 September 2019, Order No. 8521/2019 of the Ministry of the Environment and Energy Transition published the CIT
(Corporate Income Payment) – advanced payment for Clawback of 2.71€ / MWh for coal-fired power plants and 4.18€ /
MWh for the remaining plants.
On 27 December 2019, Dispatch 12424-A / 2019, published by the Office of the Secretary of State for Energy,
was published, which identifies the national extra-market events to be considered in the Study to be prepared by ERSE
in 2020 (with reference to 2019) under the Clawback mechanism. The taxation of petroleum and energy products used
in the production of electricity (ISP), the Extraordinary Contribution on the Energy Sector (CESE) and the Social Electricity
Tariff are considered as extra-market events.
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Over-equipment of wind farms
"On 31 January 2019 it was published Ordinance 43/2019, of the Ministry of the Environment and Energy Transition,
which changes the criteria for granting authorization for the installation of over-equipment in wind farms."
"With the publication of this Ordinance, ERSE consultation (foreseen in former legislation) is dismissed if the owner
of the power plant chooses to apply the energy of the over-equipment to a tariff of 45€/MWh, without update, for a period
of 15 years. This Ordinance also applies to requests for authorization that, at the date of its entry into force, are still pending
from the decision of DGEG.”
Guarantees of origin
On 8 October 2019, Order 8965/2019 of the Office of the Secretary of State for Energy was published, which determines
that REN, as the Issuer of Guarantees of Origin (EEGO), must create and maintain a platform that ensures the management
of the certification of cogeneration and electricity production facilities from renewable energy sources and the issuing
of guarantees of origin (GO).
Parliamentary Commission of Inquiry on the Payment of Excessive Income to Electricity
Producers (CPIPREPE)
On 15 May 2019 the CPIPREPE Final report has been globally approved, with votes in favor from PS PCP, BE and PEV
and votes against from PSD and CDS. The absence of unanimity in the voting process reveals the existence of divergent
opinions on the issue of alleged excessive rents.
The Conclusions and Recommendations contained in the Final Report of CPIPREPE are not binding.
Other Key Developments of 2019
On 18 January 2019, Decree-Law (DL) 10/2019 was published, which establishes the new rules on the allocation
of revenues from emission allowances tenders and introduces into Portuguese legislation the partial transposition
of the European Directive 2018/410 on the rules of the CELE.
This Decree-Law sets in 60% the value of the revenues generated from the emission licenses tenders to be transferred
to SEN in order to offset part of the total over-cost of the special regime (PRE) from renewable energy sources, in each year,
until it reaches 100% of this extra cost (includes over cost of renewable cogeneration generation).
These revenues are allocated to National Electric System (SEN) to deduct from the Global System Use tariff, in order
to reduce the consumer's energy bill. It also allows, if necessary, an additional transfer of funds from the Environmental
Fund to the SEN, in case there is a significant difference between actual revenues and estimated revenues.
On 3 June 2019, DL 76/2019 of the Presidency of the Council of Ministers was published, which amends the legal regime
applicable to the exercise of the activities of generation, transportation, distribution and supply of electricity and to the
organization of the electricity markets. In general terms, this Decree-Law aims, among other aspects:
•
establish the legal basis for the adoption, within the PRE, of procedures of a competitive nature, maintaining
as a prerequisite in the licensing the existence of injection capacity in the network;
•
allow the promoters, who so wish, to support the construction or reinforcement in the network (without burdening the
system) when it does not have the necessary injection capacity, not limiting the realization of projects;
•
allow the licensing of production units in pre-existing electro-producing centers that, using a different source of
renewable energy, do not require an increase in injection capacity in the Electric Public Network (RESP);
•
to frame the regime applicable to Small Production Units (UPP);
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ANNUAL REPORT 2020
•
to frame the SEN's risk management and guarantees regime in the scope of the use of network infrastructures and
participation in SEN's global management;
•
change the object of the concessions of the LV electricity distribution network, in order to grant an option to the grantor
to include or not the public lighting network in the object of the concession.
On 6 June 2019, Dispatch 5532-B / 2019 of the Secretary of State for Energy was published, which establishes the opening
of a competitive procedure, in the form of an electronic auction, for the allocation of reserve of injection capacity in RESP
connection points for photovoltaic solar energy.
Portugal - Electricity - Transportation
Background
The transportation activity integrates the overall management of the system and is implemented under a public service
concession, exclusively, through the exploitation of the National Transportation Network (RNT).
The RNT concession contract was awarded by the State to REN - Redes Energéticas Nacionais, SGPS, SA in 2007,
for a period of 50 years.
Portugal - Electricity - Distribution
Background
The distribution activity includes the operation of the National Distribution Network (RND), which includes distribution
networks in medium and high voltage, and the operation of distribution networks in low voltage, being exercised through
concession contracts under a public service regime, exclusively.
"The concession contract for RND’s exploration in high and medium voltage was attributed by the state to EDP Distribuição
in 2009, for a period of 35 years."
The concession contracts for the operation of the low voltage electricity distribution networks were settled between
the 278 Municipalities of mainland Portugal and EDP Distribuição on different dates, for a period of 20 years, according
to DL 344-B/82 of 1 September with the respective amendments, namely those introduced by DL 29/2006.
The concession contracts between the 278 Municipalities and EDP Distribuição will reach their end until 2026, the majority
in 2021 and 2022.
In this context, Law 31/2017, of 31 May, came to predict the launch of the public tender for the award of new concession
contracts synchronously, in 2019, to territorial areas defined by municipalities or municipal entities, under proposal
from ERSE.
Key Developments of 2019
ERSE Directive 5/2019 of 18 January 2019 approved tariffs and prices for electricity and other services to be in force
in 2019.
On 15 April, ERSE Directive 10/2019 was published, which approves the parameters related to the connections to the
electric energy networks and repeals Directive 18/2012, of 8 November, of ERSE.
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On 2 August 2019, Regulation 610/2019 was published, which approves the Intelligent Electricity Distribution Services
Regulation, framing the intelligent network services by network operators and suppliers.
In the Tariffs for 2020, approved in 16 December 2019, ERSE recognized the principle of profit sharing with the system and
assumed the return into the tariffs of approximately 16.6 million Euros referring to half of the net gains obtained from the
sale of real estate by EDP Distribuição between 2009 and 2018, having mentioned that the position to be taken by the
respective grantors of the Concession Contract for the National Distribution Network (RND) and the electricity distribution
network concessions in BT may determine the revision of this amount.
Subsequent to the publication of the Tariffs for 2020, the Government approved an Order that stipulates that the total value
of the gains generated by the sale of real estate by EDP Distribuição between 2009 and 2018, and which were subject to
remuneration for the tariffs, “reverts entirely to the grantor ”, and should be“ fully reflected in the electricity tariffs ”.
Portugal - Electricity - Supply
Background
The commercialization activity is open to competition, being subject to prior registration.
Suppliers can freely buy and sell electricity and, in this sense, they have the right to access to the transmission and
distribution networks, through the payment of regulated tariffs fixed by ERSE.
It is also legally consecrated, for the protection of consumers, a supplier of last resort, subject to the granting of a license,
whose purpose is to serve as guarantor of the electricity supply to costumers, especially the most vulnerable, in terms of
quality and continuity of service.
The commercialization activity is carried out by EDP Comercial, S.A and the activity of last resort supplier (CUR) is carried
out by EDP Serviço Universal, SA - a company incorporated and totally owned by EDP Distribuição, S.A.
Key Developments of 2019
Self-consumption, small production units and renewable energy communities
On 15 April, Ordinance 115/2019 was published, which sets the reference tariff applicable, during the current year,
to the electricity sold in its entirety to RESP, from small production units (UPP) using sources of renewable energy.
It is planned to maintain the value practiced in recent years - from the entry into force of the current regime, which r
eplaces the previous similar model of micro and mini-production -, set at 95€ /MWh, in order to guarantee investment
stability and cost control for SEN.
On 17 September 2019, Resolution no. 192/2019, of the Assembly of the Republic, was published, recommending the
Government the adoption of a legislative framework for collective self-consumption and for renewable energy communities
(this resolution had already been approved 19 July 2019 and the new legislative framework was approved by the Council of
Ministers on 5 September 2019).
On 25 October 2019, Decree-Law 162/2019 of the Presidency of the Council of Ministers was published, which establishes
the legal regime applicable to self-consumption of renewable energy, individually, collectively or by renewable energy
communities, proceeding, in this last part, to the partial transposition into national law of Directive 2018/2001 of the
European Parliament and of the Council, of 11 December 2018, on the promotion of the use of energy from renewable
sources.
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This decree-law intends for Portugal to achieve the goals defined under the PNEC 2030, namely to achieve a 47% share of
energy from renewable sources in gross final consumption in 2030, as well as to reduce the price of electricity consumption
for those who adhere to the self-consumption. This Decree-Law takes effect in the following terms:
a)
as of 1 January 2020, for individual self-consumption projects and collective self-consumption projects or CER,
which cumulatively: i) have an intelligent counting system; ii) are installed at the same voltage level;
b)
DGEG and ERSE publish, until 31 December 2019, the necessary regulations for the implementation of the
aforementioned projects;
c)
o As of 1 January 2021, related to other self-consumption projects;
d)
DGEG and ERSE promote the participation of entities that intend to implement self-consumption projects, which must
express such interest in the Portal, in the process of defining the regulations necessary for the implementation of this
decree-law.
DGEG Order 46/2019, dated 30 December 2019, was published, which defines the operating rules of the computer platform
intended for the operationalization of the prior control procedures provided for in Decree-Law 162/2019, of 25 October
2019, as well as the necessary introductory documents, applicable to self-consumption production units (UPAC), electricity
use facilities (IU) associated with those and facilities related to Renewable Energy Communities (CER).
Other Key Developments of 2019
On 11 January 2019, Law 5/2019 of the National Assembly was published, which establishes the regime of compliance
with the duty of information of the energy supplier to the consumer. It applies to suppliers in the supply and / or provider
of services to consumers of electricity, natural gas, GPL and petroleum derived fuels. The supplier must inform the
consumer of the conditions under which the supply and / or provider of services is performed in a clear and complete
manner. In the electricity and natural gas sectors, this is reflected in a greater detail on the invoice information.
"On 15 January 2019, ERSE Directive 4/2019 was published, approving the rules of the pilot project for consumers
participation in the system services market in the regulatory reserve component. The pilot project lasts one year
(starting on 2 April 2019) and aims to ensure equal treatment in the participation in the regulatory reserve market
of eligible consumers and producers, thereby increasing competition in this market. The approved rules will allow
consumers with an offer capacity equal to or greater than 1 MW to participate in the reserve market of SEN regulation."
On 10 April 2019, following ERSE Directive 4/2019, ERSE Directive 9/2019 was published, which approves the general
conditions of the system services market access contract in the scope of the pilot project for participation of the
consumption in the reserve market of regulation established in the Manual of Procedures of the Global System
Management (MPGGS) of the electric sector.
On 6 May 2019, ERSE Directive 11/2019 was issued, which approves the terms and conditions for the setting of energy
purchased from producers under a special regime, through an auctioning mechanism for products with a maturity term
of different maturity. This mechanism allows the coverage of commercial price and supply risks by market traders and the
stability of CUR's revenue conditions in the purchase and sale of electricity from the special regime production.
DL 60/2019 of the Presidency of the Council of Ministers was published on 13 May 2019, which determines the introduction
of the reduced VAT rate to the fixed component of network access tariffs for electricity supplies, corresponding to a
contracted power not exceeding 3.45 kVA, and supplies of natural gas, corresponding to low-pressure consumption not
exceeding 10,000 m3 per year.
470
On 18 July 2019, ERSE Directive No. 13/2019 was published, which approves the terms and conditions of the CUR's forward
purchase mechanism, which aims to cover the risks of price variability and the stabilization of the cost conditions for the
supply of the CUR for the benefit of consumers.
On 24 July 2019, ERSE Directive No. 14/2019 was published, which determines the entities authorized to be part of the
diversion trading unit under the terms of the Global System Management Procedures Manual (MPGGS), related to the units
of marketing schedule.
On 7 October 2019, Order 8900/2019, published by the Office of the Secretary of State for Energy, was published,
which determines the discount to be applied to tariffs for access to electricity networks, applicable from 1 January 2020,
which must correspond to a value that allows a 33.8% discount on the transitory tariffs for sale to final electricity
customers, excluding VAT, other taxes, contributions, fees and late payment fees that may apply.
On 6 December 2019, Order 11585-A/2019, issued by the Office of the Ministry of Environment and Climate Action,
was published, which establishes the parameters to the calculation of the remuneration of the five-year straightening
of the extra cost with the 2020 PRE. Remuneration was set at 1.1020% for the year 2019 and 0.5553% is set for 2020.
Organized markets operation
Background
The activity of management of organized electricity markets is liberalized, being subject to approval, and is the
responsibility of market operators.
Logistic operations for the change of suppliers
Background
The activity of logistic operations for the change of suppliers includes the necessary functions to change the supplier by
the final consumer, at his request, and has been exercised, provisionally and temporarily, by EDP Distribuição - Energia, S.A.
However, this activity was through DL 38/2017, of 31 March, attributed to ADENE, which now exercises it for both electricity
and natural gas.
Portugal - Natural Gas
Background
The general bases for the organization and operation of the national natural gas system (SNGN), as well as the general
bases i) applicable to the operation of reception, storage and regasification of liquefied natural gas (GGNL), underground
storage and transportation of natural gas, distribution and sale of natural gas and ii) the organization of these markets are
established in DL 30/2006, of 15 February, in the version corresponding to the republishing made by DL 230/2012, of 8
October, with the changes introduced by Law 42/2016, of 28 December, and developed by DL 140/2006 of 26 July, in the
corresponding republication version made by DL 231/2012, of 8 October, with the changes introduced by Law 38/2017,
of 29 December.
These legal diplomas transpose into Portuguese law Directive 2009/75/CE of the European Parliament and of the Council
of 13 June 2009, on common rules for the internal market in natural gas and revoking Directive 2003/55/CE.
The national natural gas system (SNGN) includes the activities of (i) receiving, storing and regasifying LNG, (ii) underground
storage of natural gas, (iii) natural gas transportation, (iv) natural gas distribution, (v) natural gas supply; (vi) operation of
organized natural gas markets; and (vii) natural gas supplier's logistic change operation.
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These activities are subject to the regulation of the Energy Services Regulatory Agency (ERSE), whose purpose is to ensure
the efficiency and rationality of activities in objective, transparent, non-discriminatory and competitive terms, through its
continuous supervision and monitoring, integrated the purpose of the internal market for natural gas.
For the activities of transportation, distribution and supplying of last resort, the law establishes the right to a remuneration
fixed by ERSE, in accordance with the Tariff Regulation, that ensures the economic and financial balance under the
conditions of an efficient management.
Key Developments of 2019
On 4 April, ERSE Directive 8/2019 was published, which defines the reference price methodology to be applied in
determining transmission network usage tariffs, the discount to be applied at points of entry from storage facilities
and at exit points for storage facilities and the discount to be applied to products of standard interruptible capacity.
As part of the regulatory review in the Natural Gas sector, Regulation 362/2019 of 23 April 2019 was published by ERSE,
which amends the Regulation on Access to Networks, Infrastructures and Natural Gas Interconnections, in particular
with regard to matters relating to the establishment of allowable income for network and infrastructure operators in the
framework of the tariff process.
Portugal - Natural Gas - Supply
Background
The supply activity is liberalized, being subject to prior registration.
The suppliers can buy and sell natural gas without restrictions . To this end, and upon the payment of a regulated tariff, they
have the right of access to GNL storage facilities and terminals and to transportation networks and distribution networks.
The sale of natural gas is subject to the transitional regime established for the gradual opening of the market.
For the protection of the customers, the last resort supplier is also subject to the attribution of license and public service
obligations in the areas covered by the Public Natural Gas Network (RPGN).
This supplier is subject to the obligation of supply, guaranteeing, in the areas covered by the RPGN, to all customers who
request it, the satisfaction of their needs, in compliance with the applicable legislation, namely the one related to customers
protection.
The liberalized trading activity is carried out in the EDP Group by EDP Comercial, S.A. and the activity of last resort supplier
(CUR) is carried out by EDP Gás Serviço Universal, S.A.
Key Developments of 2019
On 10 April 2019 was issued the Dispatch 4001/2019, from the Office of the Secretary of State for Energy, which determines
the maintenance of the percentage of the natural gas tariff by 31.2% on the transitional rates of sale to final customers
of natural gas (excluding VAT, other taxes, contributions, fees and default interest that are applicable), and its application
should not be considered for the purposes of other currently existing support.
Also in the scope of the regulatory review that took place in the Natural Gas sector, the Tariff Regulation (Regulation
no. 361/2019, dated 23 April 2019, of ERSE) and the Trade Relations Regulation (Regulation (ERSE), in order to integrate
a set of issues for the new regulatory period to start in January 2020.
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As mentioned in the chapter of the electricity supply, DL 60/2019 of the Presidency of the Council of Ministers was
published on 13 May 2019, which determines the introduction of the reduced VAT rate on natural gas supplies,
corresponding to low pressure consumption not exceeding 10,000 m3 per year.
On 1 July 2019 ERSE Directive 12/2019 was published, which approves natural gas tariffs and prices for gas year 2019-2020
and the parameters for the 2020-2023 regulation period. This Directive also embodies the innovations introduced by the
Tariff Regulation, in particular the changes in the methodology for the structure of tariffs for the use of the transmission
system, resulting from the application of Regulation (EU) 2017/460 that approves the Network Code on tariff structures
for natural gas transportation, as well as the adoption of the 4-year regulatory period (2020-2023) and the adoption of the
new regulated tariff period, coinciding with the capacity allocation year.
ERSE Directive 15/2019 was published on 26 July 2019, which approves the consumption profiles applicable to connections
with annual consumption up to 100 000 m3, as well as the average daily consumptions characteristic of each consumption
profile, to be in force from 1 July 2019 to 30 June 2020.
ACTIVITY IN THE ENERGY SECTOR IN SPAIN
Electricity - Spain - Supply
In Spain, EDP-España, S.A.U. (EDP-España) operates in the electricity and gas sectors. In the electricity sector generates,
distributes and supplies electricity. Production is based essentially on traditional coal thermal power plants and, on a
smaller scale, on hydroelectric and nuclear power plants.
Electric Sector Regulation
On 27 November 1997 the Electric Sector's Law 54/1997 was approved, which (i) implements the principles included in the
Protocol signed on 11 December 1996 between the Ministry of Industry and the major electric power companies regarding
greater liberalization and competition in the electricity sector and (ii) incorporates into Spanish law the provisions contained
in Directive 96/92/EC on common rules for the internal electricity market. Additionally, on 6 July 2007 the Law 17/2007
of 4 July came into force, amending the Law 54/1997, to adapt it to the Directive 2003/54/EC of the European Council
and Parliament of 26 June 2003 on common rules for the internal market of electricity. Law 54/1997 was updated by the
Royal Decree 13/2012 of 30 March, incorporating the principles of the European Parliament and Council’s Directive
2009/72/CE of 13 July that revokes the Directive 2003/54/CE. On 27 December 2013, was published in the Official State
Gazette the Law (BOE) 24/2013 which replaces Law 54/1997 maintaining the principles established in previous legislation
but with particular emphasis on economic and financial sustainability of the electricity sector.
Generation
Since 1 January 1998 electricity generation operates on a free market competition basis, which covers the purchase and
sale of energy and other services related to the supply of electricity.
The market structure for electricity generation has been widened by Law 17/2007 of 4 July, in order to include the forward
market and the intraday market, as well as technical issues, complementary services, deviations management and non-
organized markets. The organization and regulation of the market for electric power generation is defined by Royal Decree
2019/1997 of 26 December, and its implementing standards.
Electricity is paid at the system's marginal price plus a component for the adjustment services necessary to ensure an
adequate supply. Additionally, the Order ITC/2794/2007 of 27 September 2007, replaced the concept of "power availability"
remuneration of electricity generation by the concept of "capacity payments" stated in article 14.5 of the Law 24/2013,
which sets a remuneration of the availability service (eliminated in June 2018) and the incentive to invest in long-term
capacity.
The set-up of new generation units is liberalized, subject to obtaining the necessary permits.
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ANNUAL REPORT 2020
Producers have the right to use primary energy sources in their generation units as deemed most appropriate,
with the applicable environmental restrictions. On 7 April 2019, Royal Decree 244/2019 of 5 April 2019 entered into force,
which regulates the administrative, technical and economic conditions of the self-consumption of electricity that replaces
the previous Royal Decree 900/2015, of 9 October 2015.
The Royal Decree-Law 9/2013 regulates the remuneration scheme for facilities that use cogeneration, renewable energy
sources and waste (former special regime) and, in addition of the price market sale, can be charged a specific fee to cover
the costs not recovered in the market. This scheme generates a return, before tax, equal to the rate of the 10-year Spanish
state bonds, plus a spread. This spread, since July 2013, is 300 basis points. The Royal Decree 413/2014 regulates the
energy production through renewable energy sources, waste or cogeneration and different Ministerial Orders regulate the
prices applicable to these facilities.
Due to the climate emergency and in order to contribute to the implementation of the objectives set out in the Strategic
Energy and Climate Framework, Royal Decree Law 17/2019 of 22 November 2019 adopts urgent measures for the
necessary changes in the remuneration affecting the electricity system and by which it responds to the process of
cessation of activity of thermal power plants. Of the fourteen coal plants on the peninsula, the Ministry of Ecological
Transition is currently processing eight closure requests that will cease operation by 30 June 2020.
Transmission
Red Eléctrica de España, S.A. performs the activities of Transmission Manager and System Operator, being responsible for
its technical management, to ensure the continuity of supply and efficient management of the generation and transmission
systems. The responsibility for the economic management of the system is guaranteed by OMI - Polo Español, S.A.
The entities and qualified consumers have free access to the transmission and supply grids, setting out a system of "tariffs"
for traffic. The remuneration for the transmission and distribution activities is set by the regulatory entity.
The Royal Decree 9/2013 establishes the methodology for calculating the remuneration of the electricity transmission
activity based on the Spanish Government ten year bond yield, plus 200 basis points.
According to the Law 24/2013 the transmission activity is performed by a single entity. There is also a distinction made
between the primary transmission system (facilities superior or equal to 380 kV with international networks and with extra-
peninsular and insular systems) and the secondary transmission system (facilities superior or equal to 220 kV other than
primary transmission systems and the facilities below 220kV with transmission functions).
Distribution
Law 54/1997 established that the remuneration for each company must respect criteria based on the costs needed
to develop the activity, taking into account a model of characterization of distribution areas and other parameters.
On 19 March 2008, the Royal Decree 222/2008 of 15 February entered into force, establishing a new system of
remuneration for the electricity distribution activity and modified the system of "Acometidas" (system that regulates the
installation that connects the distribution grid to the point of delivery of energy to the customers). This remuneration system
is based on investments and increased demand of each distributor. On 1 April 2012, came into force the Royal Decree
13/2012, amending the remuneration criteria of the distribution activity related to the assets in use that are not amortized,
taking as basis for their financial retribution their net amount. Additionally, the return on assets in use in the year t shall be
initiated at 1 January t+2. However, since the adoption of the Royal Decree 9/2013, the distribution activity remuneration
will be calculated based on the Spanish Government ten year bond yield, plus 100 basis points. during the second quarter
of 2013 and 200 b.p. from 2014 forward. These principles were embodied in the new Law 24/2013 and developed in Royal
Decree 1048/2013, repealing the Royal Decree 222/2008.
The application of the new methodology adopted in the Royal Decree 1048/2013 was conditioned by the approval of the
standard facilities list and unit investment values and operation and maintenance, which occurred with the publication of
the Order IET/2660/2015 of 11 December.
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On 10 June 2016, the Spanish Government has published the Ministerial Order IET/980/2016, that has set the final
compensation amount from EDP España’s electricity distribution business for 2016. In addition, new regulation has set the
regulatory average remaining life of EDP España’s existing assets as at 31 December 2014 at 25.13 years. Consequently,
EDP España evaluated the accounting criteria of the regulated activity, starting to recognize income according to the
amortization pace of its assets, considering the limit of 25.13 years.
The BOE 223/2017 published on 15 September 2017 opened the hearing process of the Order of the Minister of Energy,
Tourism and Digital Agenda, introducing a “lesividad” declaration procedure for the public interest Order IET/980/2016,
which established the remuneration for the electricity distribution companies until 2016. The allegation of injury to the
public interest comes from the fact that this Order does not consider the penalty or reduction of the remuneration per client
that was established under the Royal Decree 1048/2013 article 13 for failures in energy meters readings and measuring
instruments, as well as different criteria for calculating the residual value of the assets depending on the dimension of the
distribution company.
Supply
Law 54/1997 established a progressive liberalization of electricity supply and the introduction of supply activities to enable
customers to progressively choose their suppliers and liberalizing the supply market from 1 January 2003. Additionally,
since 1 July 2009, distributors can no longer act as suppliers (sell electricity) acting strictly as grid operators. Law 24/2013
determines that certain consumers are entitled to be provided with voluntary prices for small consumers and last resort
tariffs for reference traders. The reference traders are determined according to the criteria established in Royal Decree
216/2014.
Electricity Tariffs Regime
The electrical system costs are described in Article 13.3 of Law 24/2013. These costs will be financed through the revenue
from the electrical system, including access fees (which are intended to cover the remuneration of the transmission and
distribution), charges for the payment of the cost of other items that are not covered by other income, may be compensated
for any financial mechanism legally established, including the state budget.
Access fees, equal in all the Spanish territory, must be determined with the methodologies defined by the National Markets
and Competence Commission (CNMC) considering the costs of the system as defined in the Law 24/2013. Charges
applicable to consumers and producers are determined by calculation methods adopted by the Government and CNMC that
will serve to cover certain costs of the system, without prejudice of what is in force for the access fees of the transport and
distribution networks.
For the year 2020, electricity access tariffs are established in Ordinance TEC / 1258/2019 of 20 December 2019. Royal
Decree-Law 1/2019 included urgent measures to adapt the CNMC's ("Comisión Nacional de los Mercados y la
Competencia") competences to the requirements in European Parliament and Council Directive 2009/72/EC and
2009/73/EC of 13 July 2009 establishing common rules for the internal electricity market and natural gas, thereby altering
the CNMC's controls by assigning to it: i) to fix annually the remuneration of electricity transmission and distribution
activities; ii) approve the methodology and conditions for access and connection to the electricity transmission and
distribution networks; iii) set the operating rules of the market in aspects whose approval corresponds to the national
regulatory authority and; iv) define the remuneration of the electric system operator.
For the exercise of these skills, the CNMC has approved the following rules: i) Circular 2/2019, of 12 November 2019,
which establishes the methodology for calculating the financial remuneration rate for the activities of electricity
transmission and distribution and regasification, transportation and distribution of natural gas; ii) Circular 3/2019,
of 20 November 2019, which establishes the methodologies that regulate the operation of the wholesale electricity market
and the management of the operation of the system; iii) Circular 4/2019, of 27 November 2019, which establishes the
remuneration methodology for the electric system operator; iv) Circular 5/2019, of December 5, 2019, which establishes
the methodology for calculating the remuneration of the electricity transmission activity; v) Circular 6/2019, of December 5,
2019, which establishes the methodology for calculating the remuneration of the electricity distribution activity.
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ANNUAL REPORT 2020
On the other hand, on 1 July 2009 the system of electricity tariffs became extinct and all consumers were transferred to the
liberalized market. However, the Royal Decree 485/2009 of 3 April, provided that the consumers of low-tension, with
contract capacity not exceeding 10 kW, were eligible for last resort tariff (TUR), which determines the maximum price of
supply. These tariffs will be applicable by the suppliers of last resort (CUR), where EDP Comercializadora Último Recurso,
S.A. is included.
Law 24/2013 replaces the concept of TUR by "voluntary price for the small consumer" and the concept of CUR by "reference
supplier", leaving the term TUR reserved for reducing the rate to be applied to vulnerable consumers or rate disincentive for
consumers who are temporarily without supplier. The Royal Decree 216/2014 sets out the methodology for the calculation
of the voluntary price for small consumer and their legal framework of contracting, already updated by the Real Decree
469/2016 of 18 November.
Vulnerable Consumers
The previous legislation on social allowance, which imposes its financing on vertically integrated companies, was overruled
by a verdict of the Supreme Court of 24 October 2016. As a consequence of the judicial decision, on 25 December 2016
entered into force the Royal Decree-Law 7/2016, of 23 December, which regulates a new financing mechanism for the cost
of social allowance and other measures to protect vulnerable electricity consumers, modifying Law 24/2013.
Royal Decree 897/2017 and Order ETU/943/2017, both of 6 October, proceeded to the regulatory development of the
measures adopted by Royal Decree-Law 7/2016. The application of the new social allowance is now based on an income
criteria and certain personal circumstances (large family, disability, pensioners with minimal retirement, victims of gender
violence or victims of terrorism), which will determine the discount applicable to the electricity bill as vulnerable consumer
or consumer at risk of social exclusion. The new financing of social allowance will be assumed by the parent companies of
the groups of companies that carry out the activity of electricity sale or by the companies that do so if they are not part of
any corporate group and in proportion to the customers to whom they supply electricity.
"On 28 September and 22 December 2017, the Ministry of Energy published the Orders ETU/929/2017 and ETU/1282/2017,
respectively, which determine the refund by the Spanish State of the amount that the electricity companies contributed to
the financing of the social tariff between 2014 and 2016."
Gas - Spain
Law 34/1998, approved on 7 October and amended by Law 12/2007 of 2 July identifies the suppliers as well as the
companies that have access to the facilities owned by third parties, which purchase natural gas for sale to consumers
or other suppliers for the purpose of international exchanges.
Law 34/1998 of the hydrocarbons sector was amended by Law 8/2015 of 21 May, with the aim of creating an organized
gas market and providing greater flexibility and lower costs for traders in the management of security minimum stocks.
" In accordance with Article 82 of Law 34/1998, the new last resort tariffs have been set, that can benefit consumers who
are covered by the regulation (from July 2009 defined as those consuming less than 50,000 kWh/year), and which will be
implemented by the suppliers that,, have an obligation as suppliers of last resort. EDP Comercializadora Último Recurso,
S.A. is one of the trading companies designated by the Ministry."
For suppliers of last resort, the Royal Decree 485/2009 makes it possible for groups of companies that have the obligation
to provide last-resort electricity and gas, to aggregate in a single company both obligations (EDP Comercializadora de
Último Recurso, S.A. currently covers suppliers obligations of last resort for gas and electricity).
The Royal Decree 104/2010 of 5 February, regulates the supplier of last resort in the natural gas sector and establishes
that the last resort tariff (TUR) became the only tariff from 1 January 2010 on, denying to suppliers of last resort the
application of discounts over customers with TUR.
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The main measures are: i) creation of a National Energy Efficiency Fund, for which the gas and electricity suppliers’
companies and petroleum products traders will have to make mandatory contributions until 2020. This fund will also
be provided with resources from EU funds (FEDER) and other resources allocated by the state budget; ii) definition of the
mechanism of gas deficit recovery generated until 31 December 2014 for a period of 15 years and the deficit generated
from 1 January 2015 for a period of 5 years; iii) aligning remuneration of regulated activities with the demand trends; iv)
elimination of the distribution remuneration update based on price and review of the compensation units; and v) cut in the
remuneration of regulated activities since 5 June 2014. The parameters of the remuneration of the regasification, storage,
transportation and distribution of natural gas activities will be determined by regulatory periods of 6 years, subject to
adjustments every 3 years.
Law 2/2015 of 30 March, on the indexation of the Spanish economy, aims to establish a new index system, in order to
monetary values of regulated prices do not be amended as a result of price index or formulas, affecting the determination
of price updates related to the hire of meters, royalties, and periodic inspections. Until the approval of the Royal-Decree that
will detail how these updates will be revised, the reference prices as the industrial index price and the consumer index price
will be zero.
The regulation of the natural gas organized market is complete with the Resolution of 4 December 2015, of the Secretary
of State for Energy, approving: (i) the market rules that determine the technical and economic management of the organized
market; (ii) the accession agreement that the agents have to subscribe to operate in the market; and (iii) the resolutions
relating to the operation of the market, as well by the resolution of the State Secretary of 23 December 2015, that developed
the procedure for operation gas acquisition, and two other resolution of 2 August, which approved the management rules of
the gas system guarantee and the structure access to the installations of the Spanish gas system.
The Decree TEC / 1259/2019, of 20 December 2019, establishes the fees and tariffs associated with third party access to
gas installations and the remuneration of regulated activities for the year 2020.
ACTIVITY IN THE ENERGY SECTOR IN BRAZIL
Electricity
In Brazil, the EDP Group generates, distributes, transmits and supplies electric energy through its subsidiary EDP Energias
do Brasil, S.A. (EDP Energias do Brasil).
In early 90s, the Brazilian electricity sector has undergone major structural changes, having migrated from a monopoly run
by the State to a market model, involving private capital. This market model includes the existence of two distinct systems,
the regulated system and the liberalized system.
Regulated System
The Regulated Contracting Environment is for the sale of electricity between generators, energy importers or retailers,
selling energy to distributors who in turn, acquire energy to ensure supply to consumers in the regulated system.
Since 2004, the main form of contracting by a distributor concessionaire is through the realization of public auctions
regulated by National Electricity Agency (ANEEL). The rules of these auctions are designed so that the winner is the one
with the lowest price.
The distribution companies must estimate the amount of electricity to contract in auctions and they are obliged to purchase
100% of their needs respecting the condition that, market increases must be met by energy from new ventures, contracted
3 years (Auction A-3) or 5 years (Auction A-5) in advance. Failure to comply with the supply of energy to its markets may
result in severe fines.
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ANNUAL REPORT 2020
Liberalized system
In the liberalized market, electricity is traded among production concessionaires, independent power producers, auto-
producers, supply agents and free consumers. In this market, the contractual conditions, such as price, duration and amount
of the contract are traded freely and negotiated between the parties (Decree No. 5,163/04). Free consumers can return to
the regulated system under certain conditions.
Regulatory Changes
"The Federal Government has defined changes in the electric sector through ""MP"". The ""MP"" 577, published on 31 August
2012, addresses the termination of public service concessions of electricity and the temporary service, and the intervention
for the suitability of the public service of electricity. This measure results in the Law 12,767 of 27 December 2012."
"Several significant changes in regulation regarding the electric sector occurred during 2012, such as the ""MP"" 579/2012,
in which the Federal Government presented measures to reduce electric energy bill to the consumer. The expected average
reduction for Brazil amounted to 20.2% due to government actions: Concession Renewals (13%) and changes of Sector
charges (7%). This measure results in the Law 12,783 of 11 January 2013.“
Regarding concessions renewal, the generation concessionaires in which contracts expire between 2015 and 2017 may
anticipate the renewal of their concessions and shall make available their physical energy guarantee for the quotas system
to be distributed proportionally to the market share of each distributor, affecting the energy acquisition contracts. The
transmission concessionaires in which contracts expire between 2015 and 2017 may renew their concessions and,
considering that the assets bounded to the electricity transmission service are totally depreciated, only the operation and
maintenance costs will be considered for the annual allowed revenues calculation.
Some concessions attributed to distribution companies have been anticipated, so they had to enter into a new contract.
Others, including EDP São Paulo and EDP Espírito Santo, regardless of the maturity of the contracts, may join the
amendment proposed by ANEEL, using the methodology that is being evaluated in the Public Hearing 58/2016.
This amendment brings changes in the calculation of portions A and B, namely: i) calculation of portion B shall be
determined by the market of the test-year and by the tariff prevailing in the last tariff process, ceasing to be obtained by the
difference between the verified revenue and portion A; ii) unrecoverable revenues, demand surplus, exceeding demand and
other income are now part of Portion A; iii) National Electric System Operator (ONS) becomes part of portion B; iv) Other
Transmission Facilities (DIT) losses will be allocated to the technical losses; and v) neutral energy and transportation.
The hydro concessions held by EDP Group - Energias do Brasil have been granted after February 1995, corresponding
to the date of the entry into force of Law 8,987, thus they are not covered by the regulatory changes introduced. Still, these
changes will influence the rules that will be applied on the renewal of these concessions in the future, in the following
conditions:
•
each hydro plant should be remunerated by a tariff calculated by the ANEEL;
•
power selling (Physic guarantees) defined through production quotas dedicated exclusively to the regulated sector,
that is to the distributors; and
•
compliance with the quality service standards determined by ANEEL.
On 24 January 2013, ANEEL approved the Extraordinary Tariff Review - RTE specific for the adjustment of energy costs,
transmission costs and sectorial charges, from all energy distributors. Thus, the unmanageable costs and supply tariffs
will be reduced, with no impact in the distributors margin. These effects were noticeable by consumers, from the end
of January 2013.
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On 23 January 2013, it was published the "MP" 605, whose objective was to increase the scope of application of the
resources of the CDE (Energy Development Account), which began promoting resources to cover the discounts applied
to the tariffs and involuntary exposure of distributors resulting from the non-adherence to the extension of part of the
generation concessions. This measure amended the Law 10,438/2002 which established the application of CDE resources.
The Decree 7,891, of 23 January 2013, established more options for the implementation of CDE resources, which can
be used to compensate the discount on the electricity tariffs established by law, such as the social tariff of low income,
rural, water, sewage and sanitation, among others. Thus, the difference in the revenue due to the discounts no longer will
be reimbursed through the tariffs of other consumers. This decree was amended on 7 March 2013, by the Decree 9,745,
which increased the costs that can be incurred with funds from the Energy Development Account - CDE.
Eletrobrás, the managing company of the sector funds, among them the CDE, is responsible for monthly transferring
to the distribution utilities of the costs related to: generation allocated under the Energy Relocation Mechanism - ERM
(Hydrological Risk Quotas); replacement amount not covered by quotas (Involuntary Exposure) and the additional cost of
the thermal power plants activation outside the order of merit (ESS - Energy Security), occurred from January to December
2013 and the annual amounts approved by ANEEL to cover, entirely or partially, the positive balances in "Conta de
Compensação de Variação de Valores de Itens da Parcela A - CVA", arising from the cost of purchasing electricity and
Ancillary Services Charge - ESS.
On 13 March 2014, the Ministries of Mines and Energy (MME) and Treasury announced the following measures to support
the national electricity sector: (i) Establishment of Centralized Account (Account-ACR), managed by the CCEE (Electricity
Trading Chamber) with the aim of preserving the consumer tariff volatility, besides relieving distributors cash flow for 2014
expenses; (ii) 4 billion Reais of additional Financial Contribution from the National Treasury in the Energy Development
Account (CDE); and (iii) performance of Existing Energy Auction of the Year "A", with energy delivery in 2014, expected to be
held in April and supply starting from 1 May 2014.
These measures were implemented by Decree 8,221/2014, of 2 April 2014 related with the cover of the extra costs for 2014,
with retroactive effects to February, which defines the financing method and the subsequent effect on electricity tariffs.
This is a non-refundable contribution cost.
From January 2015, entered into force the Flags Tariff System. This system signals to consumers the real costs of
electricity generation, and consists on three flags: green, yellow and red. The green flag indicates that the cost of energy
production is lower and, therefore no changes are applied to the energy tariffs. The yellow and red flags represent the
increase in energy production cost and is added an additional amount to the energy tariff. Only consumers classified
as low income residential subcategory will have discount on the additional amount applied by the yellow and red flags.
On a monthly basis, the operating system conditions are reassessed by the ONS, which defines the best strategy for power
generation over demand.
On 4 February 2015, the Tariff Flag Resource Account was established, through the Decree 8,401. Distributors should collect
the proceeds from the application of this system to this account, managed by the CCEE. Proceeds are allocated to cover the
costs that are not included in the distribution tariff, such as: Energy Security of the Ancillary Service Charge - ESS, thermal
dispatch, Itaipu hydrological risk and quotas, exposure to spot market and the Power Reserve Account - CONER surplus.
ANEEL should approve on a monthly basis, the transfers to the distribution companies. Any costs not covered by revenue
will be considered in the next tariff process.
On 27 February 2015, through Ratifying Resolution 1,859, ANEEL established the new criteria for the additional tariff and the
operation of the Flags Tariff System:
a) Green Flag: used in the months in which the value of the Variable Unit Cost - CVU of the last plant to be dispatched is less
than the amount of 200 R$/MWh;
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ANNUAL REPORT 2020
b) Yellow Flag: used in the months in which the value of the Variable Unit Cost - CVU of the last plant to be dispatched is
equal to or greater than 200 R$/MWh and lower than the maximum value of the Differences Settlement Price - PLD, at the
time at 388.48 R$/MWh. For the period of 1 January to 1 March 2015, the consumption proportional increase is 1.5 R$
per 100 KWh. From 2 March 2015, the consumption proportional increase is 2.5 R$ per 100 KWh; and
c) Red Flag: used in the months in which the value of the Variable Unit Cost - CVU of the last plant to be dispatched is equal
to or greater than the maximum value of the PLD. For the period from 1 January to 1 March 2015, the consumption
proportional increase is 3 R$ per 100 KWh. From 2 March 2015, the consumption proportional increase is 5.5 R$ per
100 KWh. After 1 September 2015, as determined by ANEEL Ratifying Resolution 1,945 of 28 August 2015, occurred the
approval of the red flag amount reduction to 4,5 R$ per 100 KWh.
As at 26 January 2016, ANEEL approved the division of the red flag in two price levels, into force from 1 February. The first
level will have a value of 3 R$ per 100 kWh consumed and will be used when the CVU of the most expensive plant to be
dispatched is between 422.56 R$/MWh and 610 R$/MWh; the second level will continue to be 4.50 R$ per 100 kWh
consumed and will be used when the CVU of the most expensive plant to be dispatched exceeds 610 R$/MWh.
As at 26 October 2017, ANEEL approved the increase the second level of the red flag at 5 R$ per 100 kWh consumed.
The yellow flag decrease to 1 R$ per 100 kWh. The first level of the red flag remained unchanged.
On 28 April 2015, through the Normative Resolution 660, ANEEL approved changes in the methodology applicable to the
Periodic Tariff Review processes for distributors valid for the processes performed from 6 May 2015. The changes occurred
on the following aspects: (i) general procedures; (ii) operating costs; (iii) X factor (productivity gains); (iv) non-technical
losses; (v) unrecoverable revenues and (vi) other income, among with:
a)
"Extinction of the tariff cycle concept, starting to be used methodologies and parameters prevailing at the time of the
tariff review. The update of the parameters will occur in periods of 2/4 years while the updating of the methodologies
in periods of 4/8 years;"
b)
"The weighted average cost of capital (WACC) increased from 7.5% to 8.09% (after taxes). The points considered in the
update were: (i) standardization of series; (ii) use of average credit risk of companies in the debt capital of third parties;
and (iii) recalculation of the cost of capital every 3 years, with methodology review in every 6 years;"
c)
remuneration for the risk associated with investment operations carried out with third-party funds (subsidies);
d)
or the definition of efficient operating costs, were considered the "quality index" and "losses";
e)
to define the level of non-technical losses, it was included the variable "low-income" and the database updated based
on 3 statistical models;
f)
the level of unrecoverable revenues (%) shall be calculated based on past 60 months of non-compliance of the
reference distributors;
g)
the percentage share of other revenue has been changed to 30% in the following services: (i) efficiency of energy
consumption; (ii) qualified cogeneration facility; and (iii) data communication services. For the other services the share
percentage was set at 60%; and
h)
the calculation of the X Factor now regards commercial quality.
On 23 November 2015, ANEEL approved, through Normative Resolution 686/2015, changes to the tariff revision
methodology on Regulatory Remuneration Base (BRR). The main changes are the following: (i) the exchange of BRR
monetary adjustment index, from IGP-M (General Market Price Index), from FGV (Getulio Vargas Foundation), to the IPCA
(Price Index Broad consumer), from IBGE (Brazilian Institute of Geography and Statistics); (ii) the assessment of hand labor
costs and smaller components of investment through pre-approved regulatory values by type of equipment; and (iii) update
of tariff transfer of systems, vehicles, and rentals.
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On 28 March 2016, was published Normative Resolution No. 703, of 15 March 2016, through which ANEEL changed some
regulatory procedures affecting the calculation of sectorial assets and liabilities relating to: (i) Variation Compensation
Account of the A items amounts (CVA)"; (ii) Energy over contracting and Short Term Market Exposure (MCP); (iii) Other
financial components; and (iv) Limits of the Power Purchase Costs Transfer.
The main changes with impact for the distribution companies are: (i) “glosa” calculation of the outstanding balance
for power purchase CVA; (ii) exclusion of hydrological risk for the composition of contracts price in the “glosa” calculation,
except for availability contracts; (iii) use of the carrying amounts of energy contracts and spot market performance for
the calculation of the outstanding balance of the power purchase CVA and for the Ancillary Service Charge (ESS) and the
Reserve Energy Charge (EER); and (iv) calculation of the spot market results through specific financial component.
On 19 September 2016, ANEEL approved, through Normative Resolution 733/2016, the conditions for the application
of a new tariff, the White Tariff.
The White Tariff is a new option that indicates to consumers the variation of the energy value according to the day and time
of consumption. This tariff is offered to low voltage consumers, known as group B. With this rate, the consumer will be able
to pay different amounts depending on the time and day of the week.
On weekdays, the value of the White Tariff varies depending on three periods: peak, intermediate and off-peak. The peak,
intermediate and off-peak periods are approved by ANEEL in the periodic revisions of each distributor. To adhere to the
White Tariff, consumers need to formalize their choice with their distributor. Who does not opt for this system, will continue
to be charged according with the Conventional Tariffs.
The adherence to this new system can be made since January 2018, as follows: (i) immediately for new connections and for
consumers with average annual consumption exceeding 500 kWh/month; (ii) up to 12 months for consumers with average
annual consumption exceeding 250 kWh/month; and (iii) up to 24 months for the remaining consumers. Consumers may
return to the Conventional Tariff.
The MP 735/16, converted in Law 13,360 published on 18 November 2016, restructures the management of the sector
funds: Energy Development Account - CDE, Global Reversion Reserve - RGR and Fuel Consumption Account - CCC,
whose values today are approximately of 20 billion Reais, transferring this management from Eletrobrás to the Electric
Energy Trading Chamber - CCEE, until 1 May 2017.
Nowadays, the Brazilian electricity sector is in discussion about the redefinition of the sectorial regulatory model. These
initiatives, have been discussed by segments of the electricity industry and some associations, materialized in two law
projects currently in progress in the national congress.
Among the changes debated, the main ones are: the opening of the liberalized market; the assessment of the supply growth;
the separation of "lastro" and energy; and the revision of the sectorial subsidies.
Thus, the Ministry of Mines and Energy published the public consultation (CP 33/17) proposing significant reforms to the
sectorial model, namely: self-production; opening of the liberalized market; changes in the contracting obligation; reduction
of transmission and production costs; connection between price and operation; separation of "lastro" and energy;
involuntary over contracting; distribution tariffs; subsidies to stimulated sources (biomass, solar, wind and small
hydropower); rationalization of discounts; risk and rationalization of contracts; transmission compensation; quotas’
withdraw and privatization; convergence of the CDE; extension of power plants up to 50MW; hydrological risk; and
installment payments of outstanding debts.
EDP Brasil conducted in-depth studies and simulations on the various topics, assisted by the consultant Bain & CO in order
to actively contribute to CP 33/17.
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ANNUAL REPORT 2020
After the contribution period, Decree 9158/17 was published, which changes the rules for the extension of power plants
up to 50 MW, in line with what was proposed in the public consultation. Thus, power plants between 5 and 50 MW,
under a concession or authorization regime, may be extended, upon discretion of the granting authority, for a period
of 30 years through the payment of public property use. In addition to this payment, the extension is subject to the payment
of the financial compensation for the use of water resources - CFURH, which reverts to the municipalities affected by the
power plant, the reversal of the assets at the end of the period and the waiver of pre-existing rights.
The MP 814, published on 29 December 2017, covers, among other topics, the electric power services in Isolated Systems
and on the expansion of electric power supply, and allows the inclusion of Eletrobras Group in the National Privatization
Plan, since the measure has the force of law. The hopped solution to the recent judicialization of the electricity sector that
already involves 6 billion Brazilian Reais in amounts not paid in the liberalized market, related to the deficit of generation
of hydroelectric energy (GSF) was not under this MP. This MP pointed to a hydrological risk solution in the Free Contracting
Environment (ACL), addressed the Eletrobras privatization, the increased costs with subsidies and charges (CCC/CDE, the
increase in Social tariff regime and the “Light for All” Program) and the increase of the energy price for the continuity of
Angra 3. The fear of political effects of these tariff impacts contributed to the loss of parliamentary support for MP
814/2017, which was revoked in June 2018.
On 09 February 2018, the Ministry of Mines and Energy (MME) published a proposal for a Decree-Law regarding the
Modernisation and Opening of the liberalized market of Electric Energy that resulted from the discussions and contributions
sent under Public Consultation 033 - Enhancement of the Legal Framework of the Electric Sector. The purpose of this
Decree-Law is to improve the sector's regulatory model, namely: (i) liberalized market expansion for a wider range
of customers; (ii) separation of the “lastro” of the commercialization of electric energy; (iii) reduction of distributors'
responsibilities regarding the energy purchase management; and (iv) greater participation and autonomy of agents in the
sector. The document is in the Civil House to be sent to the National Congress. On 16 December 2019, MME published
Ordinance 465, promoting the opening to the free market: (i) from 1 January 2021 for consumers with voltage equal to
or greater than 1,500 kW; (ii) as of 1 January 2022, for consumers with a voltage of 1,000 kW or more. By 31 January 2022,
ANEEL and CCEE should present a study on the regulatory measures necessary to allow the opening of the free market
for consumers with voltage below 500 kW, including the regulated energy supplier and a proposal for planning opening
beginning 1 January 2024.
On 6 March 2018, the National Electric Energy Agency (ANEEL) defined that the weighted average cost of capital (WACC)
for energy distributors will be maintained at 8.09% until 31 December 2019, anticipating the methodology review from 2020
to 2019. On the same date, ANEEL approved the new efficiencies to be applied in the definition of regulatory operational
costs. EDP São Paulo maintained its efficiency level at 82% and EDP Espirito Santo increased its efficiency from 72% to
82%. The distributors' overall efficiency increased from 76% to 79%. ANEEL accepted the request to consider labour
sentences and dismantling costs. Regarding the operational cost of the test year and civil sentences, ANEEL chose to
postpone the discussion for the methodological review in 2020.
The Government's Law 10.322/2018 permits the privatization of six power distributors companies controlled by Eletrobras.
This Government's Law takes advantage of MP 814/17 policies and is currently in process.
On 27 April 2018, ANEEL published the new criteria of the tariff flags for the cumulative distribution function (FDA)
and the adjustment of the Energy Reallocation Mechanism (MRE).
On 28 December 2018, the Brazilian Government approved Decree 9.642, which gradually eliminates subsidies included
in the electricity tariffs at a rate of 20% per year for 5 years. The subsidies targeted for reduction are those related to the
discount for the rural, irrigation/aquaculture and water/sewage/sanitation consumers. The decree also ends with the
commutativity of discounts for the beneficiaries of the rural and irrigation/aquaculture classes.
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On 29 December 2018, Ordinance 514 was published, which decreases the power limits for contracting electric energy
from consumers in the liberalized market. From 1 July 2019 consumers with power of 2,500 kW or more will be able to
purchase energy on the open market and from 1 January 2020 the possibility will also include the power of 2,000 kW.
On 12 February 2019, it was published the Ordinance 124 of 2019 that established the Working Group in order to coordinate
the development of studies to support the revision process of Annex C of the Itaipu Treaty.
On 4 April 4 2019, Ordinance 187 established the Working Group to develop proposals for the Modernization of the
Electricity Sector, dealing in an integrated manner the following topics: i) market environment and viability mechanisms
for the expansion of the Electricity System; ii) pricing mechanisms; iii) rationalization of costs and subventions; iv) energy
reallocation mechanism; v) allocation of costs and risks; vi) adoption of new technologies; and vii) sustainability of
distribution services.
Decree 9.744/2019, published by the Ministries of Mines and Energy (MME) on 3 April 2019, established the cumulative
subsidies for consumers in the rural and irrigation/low voltage aquaculture consumers from the date of its publication.
Authorization Resolution 7,807/2019 of 9 May 2019, provisionally approves 370 million Reais, equivalent to six-twelfths
of the budget proposed for 2019, which is part of the proposal presented by ONS for the cycle budget from January 2019
to December 2021.
On 17 October 2019, Decree No. 9,864 / 2019 was published, which regulates Law No. 10,295, that creates the Energy
Efficiency Indicators and Levels Steering Committee and the Technical Group for Energy Efficiency in Constructions
in the Country.
Ordinance No. 6,012 / 2019 - ANEEL - Establishes ANEEL's Special Bidding Committee - CEL, which mission is to coordinate
the processes related to auctions.
Generation
The generation market is based predominantly on the existence of Power Purchase Agreements (PPA) between generators
and distributors, with tenders to supply long-term demand, the adjustment of medium and short term and daily market for
deviations, or spot market.
Electricity generation in Brazil relies mostly on hydroelectric technology. Power generation plants are the object of
concession, permit or registration, according to the type of plant, the power capacity to be installed and the destination
of the energy. Depending on the destination of energy, power generation plants can be classified as:
•
generation companies, producing electricity for public service distribution;
•
independent producers (which assume the risk of the sale of electricity with distributors or directly with free
consumers);
•
auto-producers (energy generation for own consumption, the excess of which can be sold through an authorization).
The capacity payments of a generation plant defined by the Ministry of Mines and Energy and set out in the concession
agreement or authorization act, correspond to the maximum amount of energy that can be used for commercialization
through contracts, in accordance with Decree 5,163 of 2004.
An unfavourable hydrological scenario could damage revenues and the results of hydroelectric production due to the lack
of capacity to produce the necessary energy in order to fulfill the contractual obligations.
The systemic production deficit, by national hydroelectric plants related to the Energy Reallocation Mechanism (MRE),
cause the reduction of capacity of all hydropower plants in the country, through the factor known as Generation Scaling
Factor - GSF. This decrease compels those companies to buy energy in the free market to comply with the agreements with
the consequent of a negative exposure in the spot market.
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ANNUAL REPORT 2020
On 18 August 2015, the Federal Government published the MP 688 (converted into Law 13,203 at 8 December 2015)
on the renegotiation of the production hydrological risk, in order to allow the hydrological risk renegotiation by hydroelectric
producers participating in the MRE. The regulation of the renegotiation hydrological risk was carried out by ANEEL,
through Normative Resolution REN 684 on 11 December 2015, with retroactive application to January 2015, the access
to this system requires regulatory approval.
For producers operating in the regulated system (ACR), it is planned the transfer the of GSF losses for the Tariff Flag
account upon a payment of a premium risk. Thus, producers will be reimbursed for losses from 2015 GSF through the
exemption from the premium risk from January 2016 until the full compensation of the 2015 losses as ANEEL approval.
For producers operating in the liberalized system (ACL), will also be subject to a premium risk payment, due to the
acquisition of the system backup power. The compensation of losses from the 2015 GSF will be made by the extension of
the concession contract of the production company that adhere to the agreement in ACL. From 2016 the renegotiation does
not exempt the producer of the GSF cost, allows only the mitigation of part of the hydrological risk through the purchase of
new energy which will be available in the electrical system.
"On 18 December 2015, the companies Lajeado, Investco, Pantanal and the jointly controlled company ECE Participações
(Jari) filed the request for the renegotiation of the hydrological risk approval in the regulated system to ANEEL, with effect
from 1 January 2015. EDP Brasil failed the renegotiation of the hydrological risk in the liberalized system. Also note that on
29 January 2016, the orders have been published that approved the renegotiation of the hydrological risk in the regulated
system for other plants that were upon evaluation of EDP Brasil, namely, Santa Fé and Energest (regarding with
Mascarenhas hydro plant). Enerpeixe and part of the energy related to Mascarenhas hydro plant did not had their requests
approved for the energy acquired in the Energy Auction A-1. For these cases, Energest and Enerpeixe appealed against the
ANEEL decision of 29 March 2016 on Macarenhas, denying the request. On 17 May, ANEEL denied the administrative appeal
of Enerpeixe.”
In 6 January 2018, physical guarantee of UHE Santo Antônio do Jarí was increased to 222 MW.
Normative Resolution 7017 of 15 May 2018 allowed the change in the installed capacity of Swiss Hydroelectric Plant from
33,900 kW to 35,337 kW.
On 21 June 2018, Decree No. 4915 was published with the following changes: (i) MME's competences were transferred to
ANEEL: the definition in the bidding document and the reimbursement by the winner of the bid for costs incurred in studies
or projects of hydroelectric projects above 50 MW were approved and; (ii) the definition of the optimal use of the above 50
MW projects to be tendered.
On 19 July 2018, Normative Resolution 822/2018 was published, which establishes the Complementary Dispatch for the
Maintenance of the Operational Power Reserve, valid as of 1 October 2018. This Ancillary Service is defined as the dispatch
of generating units of thermoelectric plants that are centrally controlled, to preserve the operational power reserve in the
hydroelectric plants that participate in the Automatic Generation Control in any subsystem. This dispatch will be determined
by ONS, which will define the systematics of price offer, a week earlier, limited to 130% of the latest value of the Unit
Variable Cost (CVU), to minimize the cost operating system.
On 23 August 2018, Normative Resolution 827/2018 was published, which regulates the new formula for penalty for failure
to supply fuel to thermoelectric plants with centralized dispatch. The main change is that ANEEL started to pass on the fine
to the CVU. The penalty will be determined by the ratio between the total or partial unavailability of the plant due to the lack
of fuel and the percentage that will be applied to the penalty. This percentage will be multiplied by the CVU and by an
amount of Non-Supplementary Energy that will be calculated by the ONS, thus reaching the value of the penalty.
On 29 January 2019, the Ministerial Council for Disaster Response Supervision published Resolution 1 of 28 January 2019,
which determines federal supervisory agencies to require the immediate updating of the Power Plants Safety Plans, Law
12,334 of 2010. The National Electricity Agency (ANEEL) has implemented a special operation to monitor power plants,
which includes a documentary assessment and face-to-face inspection of all the power plants in operation.
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On 1 March 2019, the MME published Ordinance 151 that established the dates of the energy auctions in: (i) 2019: A-4
in June and A-6 in September; (ii) 2020: A-4 in April and A-6 in September; and (iii) 2021: A-4 in April and A-6 in September.
Ordinance 152 established the schedule for existing A-1 and A-2 energy auctions in December 2019, 2020 and 2021.
On 1 March 2019, Ordinance 152 was published, which establishes the estimated timetable for the promotion of Auctions
to Purchase Electricity from Existing Generation Projects, for the contracting of electricity by the distribution agents of the
National Interconnected System (SIN), which is dealt with in article 19, 1º-D, of Decree nº 5163, of 30 July 2004, for the
years 2019, 2020 and 2021.
Normative Resolution 843 of 2 April 2019 establishes criteria and procedures for the preparation of the Monthly Energy
Operation Program (PMO) and for the formation of the Settlement Price of Differences (PLD).
On 3 April 2019, Ordinance 186 was published and established the Guidelines for the Bidding for the Purchase of Electricity
from New Generation Projects, named "A-4", of 2019.
On 11 April 2019, Ordinance 190/2019 published by MME, includes fixed costs in the Unit Variable Cost (CVU) for
generation in Natural Gas Termoelectric Plants (UTEs). Ordinance 504, published by MME, from 19 December 2018, will
become effective with the following changes: "Article 1 To authorize, on an exceptional and temporary basis, until 30 April
2020, the inclusion of fixed costs to the CVU for the generation of centrally dispatched centrally, operationally available and
without Electric Power Commercialization Contract in effect on the date of publication of this Administrative Rule and
whose representation of availability is null in the planning horizon of the Monthly Operating Program (PMO), considering as
reference the date of publication of this Order, to trigger the order of merit or regardless of the order of merit, if there is a
decision of the Committee of Monitoring of the Electric Sector (CMSE)".
On 16 April 2019, Ordinance 198/2019 extended the duration of the Working Group for thirty days in order to coordinate the
development of studies to support the revision process of Annex C to the Itaipu Treaty, as defined in Ordinance 124/2019 of
the MME.
Ordinance 216/2019, from 13 May 2019, amends Administrative Rule 318/2018, of the MME, regarding the Special Regime
for Incentives for Infrastructure Development (REIDI), including in its framework the generation of electricity from
participation bidding, in the auction mode in the Regulated Contracting Environment (ACR), including supply solutions in the
Isolated Systems.
By means of Dispatch 1,251, from 2 May 2019, ANEEL partially grants the request for reconsideration of EDP Energias do
Brasil SA, in face of Dispatch SRM/ANEEL 977 of 2019, to approve the adjustment of the basic price of sale of energy
(CFURH) of the Electricity Trading Contracts in the Regulated Environment (CCEARs) signed by EDP Pequenas Centrais
Hidroelétricas SA, backed by the Rio Bonito Small Hydroelectric Power Plant, in accordance with the Annex; and determines
to the Chamber of Electric Energy Commercialization (CCEE) to make available the Additives to the CCEARs with
adjustment of the basic price of sale of energy, to celebrate the contractual instruments.
Through Ordinance 222/2019, from 6 May 2019, the MME establishes the Guidelines for the Bidding for the Purchase of
Electricity from New Production Undertakings, called "A-6", of 2019.
On 16 May 2019, the MME published Ordinance 226/2019, which restates the amendment to Ordinance MME 222, which
establishes guidelines for the Auction for the Purchase of Electricity from New Production Undertakings, named "A-6", 2019.
On 23 May 2019, the MME published Ordinance 230/2019, which establishes the methodology to be applied in the Auction
for Purchase of Electricity from New Production Projects, called the New Energy Auction "A-4", of 2019, provided for in
article 1 of Ordinance MME 186 of 3 April 2019.
On 28 May 2019, ANEEL's board of directors approved the bidding for this year's A-4 generation auction (auction 03/2019).
The purpose is to contract energy from new hydroelectric, wind, solar photovoltaic and thermoelectric biomass power
plants, starting from January 2023.
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ANNUAL REPORT 2020
Resolution 2,566, dated 25 June 2019, homologates the tariffs to be use for the Reference Distribution Systems (TUSD)
applicable to producing power plants connected at the voltage levels of 88 kV or 138 kV for the 2019/2020 tariff cycle.
On 5 June 2019, Complementary Law 912 was enacted, which establishes the State Policy for Governance and Safety of
Dams in the State of Espírito Santo.
ANEEL published the decision to modify the formula for calculating the Electricity Trading Rules in the 2017, 2018 and 2019
versions, through of Order 1,635/2019 of 6 June 2019, in order to: (i) correct the determination of unavailability of
thermoelectric power plants in order of merit for the purpose of calculating energy eligible for the displacement of
hydroelectric generation, pursuant to Normative Resolution 764, of 18 April 18 2017; (ii) approve the Electricity
Commercialization Rules applicable to the Accounting and Settlement System, in the form of the modules of Annex I; and
(iii) to determine to CCEE the accounting of short-term market operations since the beginning of the effectiveness of REN
764, in accordance with the rules approved in the previous item.
On 13 June 2019, the MME published Ordinance 144/2019, which defines new amounts of physical energy guarantee of the
Hydropower Plants denominated Swiss UHE, Quebra Quebrada UHE and UHE Jirau, in the form of the Annexes of the
present Ordinance.
Through Authorizing Resolution 7,886/2019 of 4 June 2019, the authorization for Cachoeira Caldeirão S.A. was published to
implement the necessary resources to provide the Cachoeira Caldeirão Hydroelectric Power Station with the capacity to
provide the ancillary service of the Special Protection System.
The Installed Power of UHE São Manoel was changed from 700.00 MW to 735.84 MW, according to ANEEL Order 2,674 /
2019. The new parameter was sent to MME for extraordinary review of Physical Guarantee.
Distribution
The public service concession arrangements for electricity distribution are allocated by tender and establish rules regarding
price, regularity, continuity, safety, timeliness and quality of services and supplies provided to consumers and users. These
arrangements also define penalties for possible irregularities.
With the publication of the Decree 8,461, of 2 June 2015, the extension of the electricity distribution concessions
encompassed in the Law 12,783, of 11 January 2013, may be extended for thirty years, once met the following criteria:
(i) relative efficiency to the service quality; (ii) economic and financial management efficiency; (iii) operating and economic
rationality; and (iv) moderate tariffs.
The distribution concessions held by EDP - Energias do Brasil, which were granted after February 1995, date of entry into
force of Law 8,987, are not covered by the regulatory changes. Still, these changes are likely to influence the rules that will
be applied in the renewal of these concessions.
In most states, mainly in the North and Northeast, the concession area corresponds to the state boundaries. However,
mainly in São Paulo and Rio Grande do Sul, the concessions for distribution may cover areas smaller than the state itself.
In some cases, the concession area is extended beyond the geographical limits of the state where the distribution company
is located.
The distribution activity operates in a fully regulated environment, with tariffs determined in the context of incentive
regulation ("price cap") with a remuneration on the basis of the assets used in the distribution energy service (BRR). The
tariff also includes a portion to cover the operating costs established from a standard company, the reference company
(with costs that would be charged by an efficient operator at the concession area). The regulatory EBITDA has two parts:
(i) regulatory depreciation of BRR assets and (ii) return on capital prudently invested multiplied by the regulatory WACC.
Finally, the tariffs also consider the costs of acquiring energy, hiring the use of transmission and sector-based charges as
costs to be included in the tariff. The tariff portion that includes the regulatory remuneration, the depreciation charge and
the value of the operating costs is called portion B. The costs of buying energy, hiring of basic network and charges, set up
the portion A of the tariffs as set out in the concession contracts for distribution companies.
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"Tariffs are adjusted annually based on changes in portion A costs and in the monetary correction of portion B costs, by the
Market prices index (IGPM), discounted of productivity gains (factor X). The adjustment index is calculated in such a way to
pass the non-controlling cost variations of the portion A and the corrected portion B. Periodically (on average every 4 years),
a Periodic Tariff Review occurs, generating the recalculation of all costs, the definition of a new BRR and a new reference
company, capturing productivity gains occurred in the period between revisions. At the beginning of 2010 an addendum to
the concession contracts of distribution companies was signed to ensure the neutrality of sector costs. On 25 November
2014, ANEEL made addendums to the concession contracts with brazilian electric distribution companies to reduce
significant uncertainties regarding to the recognition and realization of regulatory assets/liabilities and, as a consequence,
to qualify them to be recognized in the financial statements. After the addendums, it was considered that the conditions are
met to recognize regulatory assets/liabilities as assets and liabilities. Therefore, on 10 December 2014, EDP Brasil signed
the Fourth and Fifth Addendum to the Concession Agreement with ANEEL.”
The Decree 8,828/2016 of 4 August 2016, eliminated the obligation of contracting the installed capacity of the plants that
correspond to the maximum load demand ("Lastro de potência") and the penalties associated with their eventual failure.
In addition, it removed the limitation of transfer costs to the tariff, when it needs to recontract energy, which volume is less
than 96% of the Replacement Amount, for cases when there is an excess of contracts on the supply load measured in year
A-1 (Existing Energy). The exclusion of the transfer limit on over contracting situations will bring more flexibility to the
distributors, making them able to mitigate - in a very limited way though - the effects of reducing the existing volume of
energy in their portfolios.
Additionally, the withdrawal of the mandatory "monômia" tariff for low voltage consumers, allowed the proposal of
implementation of the "binômia"(energy and demand) tariff, seeking to encourage the efficient use of the distribution’
networks and ensure the expansion and the sustainability of the incentive program for renewable energy and localized
production.
As one of the mitigation measures for the problem of the electricity over contracting felt by the most distributors throughout
2016, ANEEL published some normative resolutions. Normative Resolution 711/2016 allowed distributors, in agreement
with the production agents: to reduce, postpone or cancel energy trading agreements in the ACR (CCEARs). There is a
charge or receipt of bonuses by the distributor for 3 years, depending on the contract price, in relation to the average
purchase price of the distributor.
In addition, there was a large number of customers that went to the ACL market, especially due to the high costs of
thermoelectric generation that occurred between 2014 and 2015, with a significant impact on the over-contracting of the
distributors. In this context, Normative Resolution 726/2016 was published, which made it possible the contracts devolution
when the customers are in new energy trading agreements in the ACR.
Normative Resolution 727/2016, in turn, and within the package of measures adopted by ANEEL regarding over contracting,
has improved the use of the New Energy Deficits and Deficit Compensation Mechanism (MCSD), with the possibility of
contractual reduction by producers. The reductions will occur from the most expensive contract to the cheapest, without
mechanism of charges and bonuses.
On 28 March 2017, ANEEL decided to republish the Energy Tariffs to reverse the forecast of the Reserve Energy Charge
(EER) of Almirante Álvaro Alberto - Unit III (Angra III) nuclear power plant. The new tariffs became effective from 1 April
2017 until the next tariff processes of the country's distributors, scheduled during 2017. Nevertheless, it was decided to
anticipate the reversal of the charge, in an extraordinary and exclusively way, in April 2017, of the amounts already collected
from tariffs from 2016 until March 2017, since the Angra III nuclear power plant was scheduled to start operating in January
2016, but due to delays in construction work, the new entry forecasted is from 2019.
In April 2017, Decree 9022/2017 was published, establishing standards and guidelines for the Energy Development Account
(CDE), the Global Reversion Reserve (RGR) and the National System Operator (ONS). The main reason was the change of
the manager of the CDE and RGR accounts, from Eletrobrás to CCEE (Electric Energy Trading Chamber). In the same decree,
rules concerning the purpose and budget for CDE and RGR, management, transparency and some provisions related to the
change of the account manager were also defined. In addition, ONS received new assignments related to the load
forecasting and planning of isolated systems operation.
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ANNUAL REPORT 2020
On 22 December 2017, Normative Resolution 794 was published amending Normative Resolution 414 of 9 September 2010,
which approves the revision of Modules 1 and 8 of the Procedures for the Distribution of Electricity in the National Electrical
System - PRODIST and revokes REN 574/2013. With the publication of the resolution, a specific section was included in
PRODIST to establish procedures for the quality of complaint handling, including a methodology for defining the limits for
the years following the publication of the resolution. With the publication of the trajectory of the indicators of the
distributors EDP São Paulo, the limits will be: i) 25 in 2018; (ii) 24 in 2019; (iii) 21 in 2020; (iv) 17 in 2021; and v) 12 in 2022.
For EDP Espírito Santo, the limits will be: i) 23 in 2018; (ii) 23 in 2019; (iii) 21 in 2020; iv) 17 in 2021; and v) 13 in 2022. In
addition, Submodules 5.1 and 5.2 of the Tariff Regulation Procedures (PRORET), which regulate the Fuel Consumption
Account and the Energy Development Account (CDE) were approved, as provided for in Decree No. 9.022/2017.
On 27 April 2018, ANEEL announced the new criteria for triggering the tariff flags considering the hydrological risk
thresholds defined according to the known operational history of the National Interconnected System (SIN). From 2019,
the rule for the tariff coverage treatment will be revaluated based on the hydrological calendar, in April, which is the end
of the rainy period. The metric will consider the definition of hydrological risk cost, where there is an indirect relationship
between the depth of the hydro generation deficit (GSF) and the short-term price of electricity (PLD). The composition
of these two variables causes the proposed amounts to approximate the costs incurred. The yellow flag remains R$1
per 100 kWh consumed and fractions. The red flag on level 1 is R$3 per 100 kWh and, on level 2, is R$5 per 100 kWh.
On 17 July 2018, ANEEL approved Normative Resolution 824, which redefines the mechanism for the sale of surplus
and its tariff impact.
On 7 August 2018, ANEEL approved the Annual Tariff Adjustment of EDP Espírito Santo. Regarding the current tariff, the
average effect to be perceived by consumers will be +15.87%, +14.99% for consumer units served in high and medium
tension and +16.30% for those served in low tension. Portion B (portion managed by the distributor) was 862 million Reais.
On 16 October 2018, ANEEL approved the Annual Tariff Adjustment of EDP São Paulo. Regarding the current tariff, the
average effect to be passed on to consumers will be +16.12%, being +17.84% for high and medium tension consumption
and +15.13% for low tension consumption. Portion B (portion managed by the distributor) was 961 million Reais.
The budget of the Energy Development Account - CDE for the year 2019 was established by ANEEL through Normative
Resolution 840, of 26 December 2018.
ANEEL decides, through Order 1.220/2019 of 26 April 2019, that: (i) The ONS shall issue a Partial Release Agreement
(TLP) without any non-impeding pendencies proper to the Transmission Functions (FT) of the Concession Contract
016/2019 signed by Água Azul SPE SA - Água Azul Substation, with the right to receive 100% of the Allowed Annual Revenue
(RAP) per FT released, as of 20 February 2019; (ii) Água Azul will be entitled to receive the charges for use associated to
EDP São Paulo Distribuidora de Energia SA (EDP São Paulo) exclusive use line entries as of the date established in the
Transmission Facility Connection Contract (CCT) signed between Água Azul and EDP São Paulo, pursuant to Normative
Resolution 68, of 8 June 2004; and (iii) differences in revenue collection should be considered in the next annual revenue
readjustment, pursuant to Article 4 of Normative Resolution 454 of 2011.
Through Order 1,265/2019, dated 3 May 2019, ANEEL informs that the balance of ITAIPU's Electric Energy Trading Account
in 2018 was positive and requests data on a monthly basis to the concessionaires and licensees.
Through Order No. 1,241/2019 of 30 April 2019, ANEEL classifies the concessionaires and licensees of public energy
distribution service of SIN as distribution agents with a market of less than 700 GWh / year for the year 2020.
Through Order 1,223 / 2019, dated 29 April 2019, ANEEL establishes the annual forecast of the System Service Charge
(ESS) and the Reserve Energy Charge (EER), with the objective of tariff coverage of the distributors with a tariff process in
the second quarter of 2019. Concessionaire: EDP / ES - EER = 73 Million Reais and ESS = 4 Million Reais.
Normative Resolution 845 and Homologatory Resolution 2,551, both dated 21 May 2019, establish the new bands
and the additional tariff flags.
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Normative Resolution 846 of 11 June 2019 approves new procedures, parameters and criteria for imposing penalties
on agents of the electricity sector.
In a press release dated 20 March 2019, MME, ANEEL and CCEE announced an agreement with banks to anticipate
the payment of the ACR Account loan. As a result, consumers will no longer make monthly account disbursements between
October 2019 and April 2020, which would result in an average 3.7% reduction in tariff readjustments in 2019 and 1.2%
in 2020. However, ANEEL underlined that the effect of this measure will not be immediately, but will be included in the
subsequent tariff revisions.
Through Authorizing Resolution 7,717/2019 of 2 April 2019, ANEEL changed the limits for the commercial quality indicator
FER - Equivalent Frequency of Complaint.
Order 2,581/2019 sets the average cost of energy and power traded by distribution agents in the ACR at 306.55 R$/MWh
for the year 2020.
On 6 August 2019, ANEEL ratified the result of the 8th EDP Espírito Santo Periodic Tariff Review. The average effect for
consumers was -4.84%. Parcel B, intended to cover the costs of electricity distribution, was set at 979 million Brazilian reais.
The value of the X Factor for the T component at -1.05% and the value of the Pd component at 1.12%, to be applied in the
Parcel B update in the EDP Espirito Santo tariff adjustments. Technical losses were set at 7.06% on injected energy and non-
technical losses were set at a reduction path from 10.58% in 2019 to 9.58% in 2021 for the low voltage market.
On 16 August 2019, ANEEL published REN 854 changing the rule for billing electricity for public lighting for cases in which it
is carried out by consumption estimate based on the installed power and the period of use. This change may reduce the
billing amounts of EDP Group's distributors, as well as indirect impacts on the Non-Technical Losses and Operating Costs
process.
On 23 October 2019, ANEEL approved the tariff review of EDP São Paulo. The average effect on consumers was -5.33%.
Portion B was 2.7%, considering an X Factor of 0.88%. The value of the T component of the Factor X was set at 0%, the Pd at
0.96% and the Q at -0.08%. Technical losses were fixed at 5.06%, while commercial losses were set at 8.43% in relation to
the low voltage market, in a downward trend of up to 8.42% until 2022.
On 17 December 2019, the ANEEL Board approved the budget for the Energy Development Account (CDE) for the year 2020,
with a 24% increase in CDE. The total budget amount was 21.9 thousand millions Brazilian Reais. The increase in the fund
for 2020 was provided by the increase in the costs of the Fuel Consumption Account (CCC) - 1.180 thousand millions
Brazilian reais, by the forecast of the account deficit in 2019, and by the constitution of the technical reserve. The difference
between the cost of the new quota for 2020 and the tariff coverage is the triggering event. Currently, there is no way of
monthly transfer to the deficit tariff, and the tariff balance is achieved only in the next tariff event.
On 17 December 2019, ANEEL published Normative Resolution 868 that regulates the reduction of tariff discounts to rural
consumers until its elimination in 2023.
On 23 December 2019, ANEEL published Normative Resolution 863/2019 which requires that the Group A consumer
measurement system in the Regulated Contracting Environment be equivalent to the Free Contracting Environment system
and both have a limited reading period to the calendar month. Billing by Group B estimate should also be limited to the
calendar month. There is also the possibility of self-reading for low-voltage consumers, if they have a common agreement
between the distributor and the consumer.
Supply
The electricity suppliers that do not own electric assets, are authorised to act exclusively in the free market (ACL), selling
or buying energy in quantity, conditions and prices freely negotiated. The commercialization of energy with a distributor
is only possible through participation in the "Auction set by the distributors", with the negotiation of contracts, for a
maximum of two years, and commencement of energy delivery within a period not exceeding two years.
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ANNUAL REPORT 2020
ANEEL approved improvements in the establishment of the short-term price of electricity (PLD), through Normative
Resolution 843, of 5 April 2019, establishing the general guidelines for the process of price creation and the disclosure
of data to the market, reinforcing its anticipation and transparency, as well as consolidating several agency regulations.
Order 1,635/2019 amends the Electricity Trading Rules in the 2017, 2018 and 2019 versions, to correct how the
unavailability of thermal power plants is determined. It also approves the Electricity Trading Rules applicable to the
Accounting and Settlement System and directs the CCEE to recount short-term market operations since the effectiveness
of REN 764.
Normative Resolution 848/2019 publishes version 2018.1.2 of CCEAR's Sales Revenue Book of the Electricity Trading Rules
applicable to the Accounting and Settlement System – SCL and Normative Resolution 850/2019 publishes the approval of
these same rules.
Public Domain Assets
In Brazil, fixed assets used in the distribution and the supply activities are bound to these services and cannot be removed,
sold, transferred or mortgaged without the prior and express consent of the regulator (ANEEL).
Transmission
The concession of the public electricity transmission service is delegated by the Granting Authority through bids and
formalized through concession agreements. The remuneration for the public transmission service is denominated Annual
Revenue Allowance (RAP), and it is achieved in the transmission auction itself and paid to the transmitters as they start
operating.
The RAP is adjusted annually and is reviewed every four or five years, under the terms of the concession agreements.
ANEEL can still calculate an additional amount to the RAP in order to remunerate the new installations through an
Authorizing Resolution, whenever there is a need for reinforcements and / or improvements indicated in studies.
The revenues of the transmission companies are the result of the payment of a designated tariff TUST - Tariff of Use
of the Transmission System - by users of the Basic Network of the National Interconnected System: generators, distributors,
free and potentially free consumers, and suppliers importing and exporting energy.
The electricity transmission concessionaires have the quality of the service evaluated through indicators associated
with the availability of the transmission system, defined by Normative Resolution 729 of 2016. These indicators are
characterized as: (i) Variable Portion - PV, portion to be deducted from the transmitter's revenue due to the non-provision
of the service and; (ii) additional to the RAP, a value to be added to the annual remuneration of the transmitter that presents
excellent performance, with resources coming exclusively from the Variable Portion, deducted from the transmitters.
The public electricity transmission service of the National Interconnected System (SIN) includes the facilities of the Basic
Network - RB and Basic Border Network - RBF. Normative Resolution 67/2004 establishes criteria for the structure of the
Basic Network of the National Interconnected System and defines that the RB consists in the SIN installations with a
tension level equal to or greater than 230 kV, while the RBF is made up of the transforming units of SIN power with an upper
tension equal to or greater than 230 kV and a lower tension of less than 230 kVA.
Normative Resolution 68/2004 establishes the procedures for access and implementation of reinforcements in the Other
Transmission Facilities - DITs.
Decree 5,597 of 26 November 2005, which regulated the criteria for access to the Basic Network, was subsequently
regulated by Normative Resolution 722, dated 31 May 2017, which established criteria for access to the Basic Network.
Through Normative Resolution 831 of 30 October 30 2018, ANEEL changed the parameters for the calculation of the price
limit for new auctions.
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Normative Resolution 454/2011 establishes the criteria and conditions for the commercial operation and incorporation into
the National Interconnected System (SIN), the increases and reinforcements in transmission facilities. REN defines that for
the initiation of the tests, it is necessary to issue the Release Term for Test and for commercial entry, the Partial Release
Terms - TLP or the Definitive Release Term - TLD, by ONS. The TLP indicates that there may be restrictions of its own or
even third party impediment restrictions; however, it guarantees the right to receive remuneration. REN also establishes
the receipt of 90% of the RAP part if the transmission facilities start commercial operation with their own non-impeding
restrictions.
Normative Resolution 841/2018 will enter into force as of 1 July 2019 and will revoke REN 454/2011. The new REN creates
the Revenue Release Term - TLR, which, in the case of installations capable of operating with third party impeding
restrictions, will receive 100% of the RAP and will maintain the receipt of 90% of the RAP portion for the TLPs if the
restrictions for more than 12 months, the transmitter will receive 80% of the RAP portion. The new REN creates the Revenue
Release Term - TLR, which for the cases of facilities capable of operating with third party impediments, receives 100%
of the RAP and maintains the receipt of 90% of the RAP portion for the TLPs if the for more than 12 months.
On 23 December 2018, EDP Transmissão started the commercial operation of its facilities, the Linhares - São Mateus
2 - 230kV Transmission Line, with 113 km of extension and the São Mateus 2 Substation, in the State of Espírito Santo.
The beginning of commercial operation occurred twenty months prior to the date established in the Concession Agreement,
an unprecedented event in the Brazilian electricity sector.
Resolution 2,514, of 19 February 2019, updates the ANEEL reference bank to be used in the authorization, concession
bidding processes and revision of the annual allowed revenues of electric power transmission concessionaires.
Through Ordinance 217/2019, of 29 April 2019, MME established the schedule for the execution of the Bids for the Public
Service Concession for Electric Power Transmission in the years 2019, 2020 and 2021. It is a requirement for Bidding for
Basic Network Transmission Facilities to include Power Transformers with Primary Voltage equal to or greater than 230 kV
and Secondary and Tertiary Voltages below 230 kV, as well as their Connections and other Equipment connected to the
Tertiary, the conclusion of the Contract of Use of the Transmission System - CUST among the concessionaires, permit
holders or authorized to Public Service of Distribution of Electric Energy and National Operator of the Electric System -
ONS within the deadlines established in the Annex. ANEEL will inform the concessionaires, licensees or authorized for
Public Service of Electric Energy Distribution regarding the existence of Transmission Facilities that depend on CUST
for bidding. On 13 January 2020, through Ordinance 15/2020, six tenders were announced until the year 2022:
two tenders in 2020 in July and December, two tenders in 2021 in June and December, and two in 2022 in the months
of June and December. The deadline for entering into the contracts is up to seven months after completion.
Normative Resolution 847, dated 25 June 2019, revokes Normative Resolution 709, which limited the shareholder structure
of the transmission concessionaire to the level of the holding company, when both jointly carried out the activity and
required that the holding company keep the economic and financial information segregated in cost centers in order to
identify the operational and holding activities.
Homologation Resolution No. 2,549, dated 14 May 2019, amends Homologatory Resolution 2,514 of 19 February 2019,
which ratifies the new values of the Reference Price Bank to be practiced in the substation and transmission line works.
By Order 1,306 of 14 May 2019, ANEEL attests conformity of the technical characteristics of the basic design of the object
transmission facilities of the Concession Agreement 39/2017-ANEEL, prepared by EDP Transmissão Aliança SC S.A.
Homologatory Resolution 2,562, of 25 June 2019, establishes the value of the Tariffs for the Use of the Transmission
System (TUST) for electricity, components of the National Interconnected System for the 2019-2020 cycle.
Homologatory Resolution 2,565 of June 25, 2019 establishes the Annual Revenues Allowed for the provision of the facilities
under the responsibility of concessionaires of public energy transmission service.
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ANNUAL REPORT 2020
Normative Resolution 847 revokes Normative Resolution 709, given that ANEEL understood that the restrictions imposed
could hinder the participation of agents in transmission auctions, reducing the competitiveness of the competitions.
These restrictions concerned the development of operating and holding activities by the public service transmission
concessionaires.
The Secretariat of Coordination and Governance of the Union's Heritage published Ordinance 02, which authorizes
EDP Transmission MA II S.A to carry out the construction works of the Power Transmission Line, in the Municipality
of Cantanhede/MA.
On 26 November 2019, ANEEL published Normative Resolution 861 that creates the Database of Electricity Transmission
Installations - BDIT, determining that by 31 March of each year, the transmission companies must inform about the new
installations. They should also send data for installations that have been in operation in the past.
Activity in the renewable energy sector
In December 2007 the EDP Group incorporated EDP Renováveis, S.L. in Spain so as to concentrate the Group's subsidiaries
in the renewable energies sector. On 18 March 2008, EDP Renováveis was converted into a public limited company.
On 4 June 2008, a share capital increase of EDP Renováveis was made through an Initial Public Offering (IPO) of
196,024,306 shares. This share capital increase was not subscribed by the EDP Group, resulting in a dilution of the interest
held in EDP Renováveis from 100% to 77.53%. The share capital increase amounted to 1,566,726 thousand Euros,
of which 980,121 thousand Euros relates to the capital increase and 586,605 thousand Euros relates to the share premium.
On 3 August 2017, in the context of the General and Voluntary Public Tender Offer for the acquisition of shares
representative of the share capital of EDP Renováveis, S.A. that was concluded on the third quarter of 2017,
EDP - Energias de Portugal, S.A. total investment was 296,376 thousand Euros with added transaction costs
in the amount of 3,244 thousand Euros. As a result of this transaction, EDP - Energias de Portugal, S.A. holds
720,191,372 shares in EDP Renováveis, S.A., increasing its interest in the company from 77.5% to 82.6%.
Electricity
Generation
As at December 2019, EDP Renováveis, the subsidiary of EDP Group for the renewable energies sector, holds the share
capital of EDP Renewables Europe, S.L. (EDPR EU, previous designated as Nuevas Energias del Ocidente, S.L.), EDP
Renewables North America, LLC. (EDPR NA, previous designated as Horizon Wind Energy, LLC.) and EDP Renováveis Brasil,
S.A., operating respectively in Europe, in the United States of America and in Brazil.
EDP Renewables Europe operates through its subsidiaries located in Portugal, Spain, France, Belgium, Poland, Romania,
Italy and United Kingdom. EDPR EU's main subsidiaries are: EDP Renováveis Portugal, EDP Renewables España, EDP
Renewables France, EDP Renewables Belgium, EDP Renewables Polska, EDP Renewables Romania, EDP Renewables Italia
and EDPR UK Limited. As at 31 December 2019, Spain and Portugal are the most relevant geographical markets where
EDPR EU operates.
In July 2007 the EDP Group acquired from Goldman Sachs, 100% of the share capital of EDPR NA, which develops, manages
and operates wind farms in the United States of America. EDPR NA holds a series of wind farms in operation and a pipeline
of projects under development for the construction of wind farms.
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Regulatory framework for the activities in Spain
On 12 July 2013 the Spanish Council of Ministers approved a comprehensive reform of the energy sector. This energy
reform was afterwards implemented by means of a new “Energy Sector Act”, a Decree-Law, eight Royal Decrees
and three Ministerial Orders.
As a part or this Energy Reform, Royal Decree-Law 9/2013 was approved in July 2013. The purpose of this Royal
Decree-Law was to adopt a series of measures to ensure the sustainability of the electricity system. Prior to Royal
Decree-Law 9/2013, renewable generators benefited from a feed-in tariff regime in which renewable electricity could
be sold at a regulated feed-in tariff or at the Spanish wholesale market price plus a variable premium.
According to the 2013 regulatory framework, renewable energy facilities are entitled to sell the electricity they generate
into the Spanish wholesale market and, during their respective regulatory lives, receive additional payments per installed
MW from the Spanish electricity system through the “Comisión Nacional de los Mercados y la Competencia (CNMC)”
body. This regulatory system is intended to allow each standard wind farm to achieve a pre-tax rate of return (fixed at
7.398% until 2019 YE) over its regulatory life. This reasonable return was determined by reference to the 10-year Spanish
government bond plus a spread of 300 basis points.
Regarding the wind sector, Decree Law 413/2014 confirmed that wind farms in operation in 2003 (or before) would not
receive any further incentive, while the incentive for the rest of the wind farms would be calculated in order to reach the
7.398% return before taxes. More than 1,300 possible types of renewables installation (“standard facilities”) are included in
the Decree Law, 23 of them corresponding to wind farms of more than 5 MW classified by the year of first operation (from
1994 to 2016).
In October 2015, the Government approved Royal Decree 947/2015 and a Ministerial Order aimed at allowing the installation
of new renewable capacity through competitive tenders.
On 14 January 2016, the first auction of renewables’ capacity was held. The auction was designed to provide a similar
remuneration scheme that the one that applies to current installations (RD 413/2014). Following this framework, auction
participants were requested to bid on the “initial investment” (CAPEX) parameter which would then, by being plugged in the
formula set by RD 413/2014 determine the “RINV” (investment premium) that would eventually be awarded.
Developers were bidding to build 500 MW of wind energy and 200 MW of biomass plants. The auction was very competitive,
around 5 times oversubscribed for onshore wind. EDPR was awarded 93 MW of wind energy.
In December 2016, the Energy Ministry (MINETAD) published a draft Royal Decree and a Ministerial Order defining a
competitive process for the allocation of new renewable capacity. On 6 and 8 March 2017, two additional draft Resolutions
were released including relevant information regarding the auction rules. The Council of Ministers approved on 31 March
the RD 359/2017 launching the official call for the auction. The remuneration scheme will be in line with RD 413/2014
scheme. However there will be some differences in the distribution of the remuneration scheme when compared to previous
tenders. On the one hand, the tender will be technologically neutral, meaning that projects based on different renewable
energy technologies, such as wind, solar and biomass, will be able to compete for contracts.
On 22 February 2017, the Ministerial Order ETU/130/2017 was published, which includes the new remuneration parameters.
In 2016 the first semi-regulatory period of RD 413/2014 ended, and therefore, the “RINV” parameter had to be adjusted in
order to consider pool price deviations between the estimated price and the current price and the new pool forecasts.
In 17 May 2017, the "Operador do Mercado Ibérico - Pólo Espanhol" (OMIE) held a tender for the allocation of 3 GW of new
renewable capacity. The tender had around 9 GW of competing capacity. 2,979 MW of the 3 GW auctioned were allocated
to wind projects.
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ANNUAL REPORT 2020
Following the outcome of this tender, the Spanish government decided to launch one additional tender for a maximum
of 3 GW. The new tender held place on 26 July 2017 and was open exclusively to wind and solar PV technologies.
The rules governing the new tender was the same as the ones for the tender held on 17 May, except for the maximum
possible discount to the standard CAPEX which would be 87.08% for wind and 69.88% for solar PV.
Additionally, the royal decree ruling the tender (RD 650/2017) included the possibility to increase the allocated capacity
to all capacity bidding the same discount, provided it would not create an overcost to the system. Following this, all the
capacity which offered the maximum allowed discount was awarded (no tiebreaker rule was triggered). Overall, 5,037 MW
were awarded, with solar power producers being the biggest winners with 3,909 MW compared to 1,120 MW for wind.
On 8 October 2018, Spanish Minister of Energy and environmental transition introduced several measures to limit the basis
of electricity cost for new consumers giving a new step towards the long-term energy transition targeted by the Socialist
Party. The implemented measures include the suspension of the 7% generation tax for a 6-month period, the facilitation of
self-consumption and the administrative extension until March 2019 of the connection rights for the renewable plants
awarded in last year´s auctions.
On 22 February 2019, MITECO (The Ministry for Environmental Transition) put for public consultation the “Strategic
Framework for Energy and Climat” (Marco Estratégico de Energía y Clima) including: (i) a new version of the Draft Project
Law on Energy Transition, (ii) the draft National Energy and Climate Plan 2021-2030 (“NECP”); and (iii) Draft Strategy for a
fair energy transition. With regards to the Spanish NECP, Spain has submitted a draft version to the European Commission
targeting a share of 42% of renewables (74% of renewable electricity) by 2030.
On 22 November 2019, Royal Decree Law 17/2019 was passed, introducing a series of measures aimed at guaranteeing
a stable regulatory and economic framework to encourage the development of renewable energy generation in Spain.
The RDL updates the “reasonable return” for renewable generation for the next regulatory period starting on 1 January 2020
at a level of 7.39% for assets before RDL 9/2013 and 7.09% for the new ones. In addition, RDL 17/2019 establishes that the
period for reviewing the rest of parameters will run until 29 February 2020.
Another objective of RDL is to adopt a new regulation governing access to the network in nodes affected by the closure
of coal and nuclear power plants and concessions for the private use of water, where new renewable projects may offer an
alternative. Under RDL 17/2019, grating access to the grid to renewable projects in areas affected by the closure of thermal
facilities, will be based on the technical and economic benefits, as well as the environmental and social ones, in particular
job creation.
Regulatory framework for the activities in Portugal
The Portuguese legal provisions applicable to the generation of power from renewable sources are currently established
by Decree-Law 189/88 dated 27 May, (subsequently amended by Decree-Law 168/99 of 18 May, Decree-Law 312/2001 of
10 December and Decree-Law 339-C/2001 of 29 December). Also relevant is Decree-Law 33-A/2005, of 16 February 2005
("DL 33-A/2005"), which establishes the feed-in tariff remuneration applicable to energy produced by renewable sources.
The Portuguese Government published on 28 February 2013, the Decree Law 35/2013 that maintains the legal stability
of the current feed-in tariff contracts (following Decree-Law 33-A/2005) and protects the value of the investments made
by wind energy producers. However, this Decree Law granted the possibility to adhere to voluntary changes of the existing
feed-in tariff. Indeed, wind generators could extend the support scheme (generally 5 or 7 years) in exchange of upfront
payments or discounts on existing tariffs. EDPR chose a 7 year extension of the tariff defined as the average market price of
previous twelve months, with a floor of 74€/MWh and a cap of 98€/MWh (values updated with inflation from 2021 onwards)
in exchange for yearly payments from 2013 to 2020.
The Environment and Energy Ministry published, on 24 June, the Decree Law 94/2014 that allows the increase of installed
capacity of wind farms up to 20%. The additional production generated from the capacity increase will have a fixed
remuneration of 60 €/MWh, whilst the remaining production is remunerated at the previous tariff.
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In 1 August 2017, the Portuguese Government approved Order 7087/2017 that determines the procedures for authorisation
process for new equipments (SE). In particular, the Government introduced a new requirement for the authorisation: the
obligation for the Direção Geral de Energia e Geologia (DGEG) to consult ERSE, which will have to assess its impact on the
electricity system. Therefore, a new SE will only be authorised it does not have a negative impact on the electricity system.
The Portuguese government 2019 Budget included an extension of the special energy tax (so-called CESE) to renewables.
However, there is an exemption for facilities with licenses that had been granted through public tenders.
On 31 January 2019 was published Ordinance 43/2019, of the Ministry of the Environment and Energy Transition,
which changes the criteria for granting authorization for the installation of over-equipment of wind farms.
With the publication of this Ordinance, ERSE consultation is dismissed if the owner of the power plant chooses to apply
the energy of the over-equipment to a tariff of 45€/MWh, without update, for a period of 15 years. This Ordinance also
applies to requests for authorization that, at the date of its entry into force, are still pending from the decision of the
Portuguese Authority of Energy and Geology (DGEG).
On 3 June 2019 the DL 76/2019 was published. This DL is a comprehensive review of the legal basis of the Portuguese
electricity sector. Regarding new renewable capacity, the Decree changes the order in which grid capacity reservation
and production license are obtained. New projects will need to obtain the title of grid capacity reservation prior to applying
for the production license. The Decree also introduces three ways to obtain grid capacity reservation, being one of them
competitive tenders.
Portugal launched its first utility-scale renewable energy auction in June 2019, with the first round for 1.4GW of PV injection
capacity held in July. Developers in the Portuguese tender could present two kinds of offer: one with a fixed price below
€45/MWh and another with a variable tariff which includes a requirement to pay compensation to the electricity system,
depending on spot market power prices. Both systems will be valid for 15 years from commercial operations. EDPR secured
a 15-year contract for a solar project with total capacity of 142 MW.
On December 6, the DGEG (Direção-Geral de Energia e Geologia) released regulation of the Licensing Monitoring Committee
(Comissão de Acompanhamento dos Processos de Licenciamento) of the solar PV plants resulting from the 2019’s
Auction. This Committee was set up with the aim of contributing to the fulfilmenet of the obligations arising from the tender
procedure, in particular with regard to the deadline for obtaining the licences.
Regulatory framework for the activities in Romania
In 30 March 2017, the government finally approved the emergency ordinance to amend the renewable law 220/2008.
As expected, the Green Certificate (GC) scheme was extended until 2031 (GC will remain valid until March 2032).
The Ordinance also confirmed the GC floor would remain fixed at 29.4€ and GC cap will lose indexation and reduced
to a level of 35€. Regarding wind energy, the ordinance approves the extension of the GC recovery from 2018 to 2025,
while solar PV’s GC postponement is extended until the end of 2024 (the recovery will take place from 2025 to 2030).
Following the approval of the Emergency Government Ordinance (EGO) 24/2017 in March, the energy regulator (ANRE)
issued the Order 27/2017 establishing the mandatory quota of estimated green certificates for the period April-December
2017. This new quota is based on a new methodology, which establishes the number of GCs estimated to be issued, instead
of a percentage of clean energy. The number of GC for the April-December period was defined to 11,233,667 GCs.
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ANNUAL REPORT 2020
ANRE issued the Order 77/2017 approving the regulation on organisation and functioning of the Green Certificates (GC)
market. The Order allows the trade of GCs in two different markets: (i) a centralised anonymous GC market (operational
as of 1 September 2017) that comprises platforms for GCs trading (spot and forward transactions) organised by Romanian
Electricity and Gas Market Operator (OPCOM), allowing participants to the GCs market to submit firm GCs sale or purchase
offers with respect to quantity and price, without revealing their identity to the other participants to the trading sessions; and
(ii) a centralised market for electricity from renewable energy sources benefiting from the GCs scheme (not yet operational):
market platform to trade bundled GC and electricity of renewable energy sources. The electricity price will be determined
competitively by the market mechanisms, while the price of the GCs associated to the sold quantity of electricity will be
equal to the closing price for the last trading session on the centralised anonymous GCs market. In both markets, the
transactions have a limit of 10,000 GCs per day.
On 26 June 2018 EGO 24/2017 concluded the process of co-validation within Romanian Parliament with the approval
of the Chamber of Deputies (CD). During the discussions in the CD, several amendments to the text approved in March 2017
were discussed. The final set of amendments includes, among others: (i) a potential change to a Feed-in-Premium scheme
for operating assets; (ii) a gradual increase in the maximum allowed impact to final consumers currently at a maximum
of 11.1€/MWh; (iii) the removal of the Green Certificates (GC) loss from positive unbalances; (iv) the pro-rata allocation
of GCs sold in the centralized platforms when the supply exceeds demand; and (v) modifications in the postponement
of solar photo voltaic (PV) GCs.
In December 2018, the EGO 114/2018 introducing several measures affecting the Romanian electricity sector was
approved. The EGO will charge companies holding licenses in the electricity sector with a tax of 2% of the annual turnover
(as opposed to former charge of 0.1%). Also, the EGO sets the obligation for electricity producers to sell at regulated prices
to the suppliers of last resort the quantities needed to cover the consumption of household consumers (for which regulated
tariffs will apply) from 1 March 2019 to 28 February 2022.
Regulatory framework for the activities in the United States of America
The United States federal government and various state governments have been implementing policies to promote
the growth of renewable energy, particularly wind power. The main federal renewable energy incentive program is the
Production Tax Credit (PTC), which was created by the US Congress as part of 1992 EPACT. Additionally, several states
have passed legislation, mainly in the form of renewable portfolio standards (RPS), which require utilities to purchase a
certain percentage of their energy supply from renewable sources, similar to the Renewable Energy Directive in the EU.
American Recovery and Reinvestment Act of 2009 includes a number of energy measures related to tax and policy
provisions to benefit the development of wind energy generation, namely (i) a three year extension of the PTC until 2012
and (ii) an option to elect a 30% Investment Tax Credit (ITC) that could replace the PTC through the duration of the
extension. This ITC allows the companies to receive 30% of the cash invested in projects placed in service or with
the beginning of construction in 2009 and 2010. In December 2010, the Tax Relief, Unemployment, Insurance and
Reauthorization, and Job Creation Act of 2010 was approved and includes an one year of ITC extension, which allow
the companies to receive 30% of the cash invested in projects with beginning of construction until December 2011
as long as placed in service until December 2012.
On 1 January 2013, the US Congress approved "The American Taxpayer Relief Act" that includes an extension of the
Production Tax Credit (PTC) for wind energy, including the possibility of a 30% Investment Tax Credit (ITC) instead of the
PTC. Congress set 31 December 2013 as the new expiration date of these benefits and changed the qualification criteria
(projects will only qualify as long as they are under construction by year-end 2013). The legislation also includes a
depreciation bonus on new equipment placed in service which allows the depreciation of a higher percentage of the cost of
the project (less 50% of the Investment Tax Credit) in the year that it is placed in service. This bonus depreciation was 100%
in 2011 and 50% for 2012.
On 16 December 2014, the US Congress approved the "Tax Increase Prevention Act of 2014" that included an extension
of the Production Tax Credit (PTC) for wind energy, including the possibility of a 30% Investment Tax Credit (ITC) instead
of the PTC. Congress set a new expiration date of 31 December 2014 and kept the qualification criteria (projects can qualify
as long as they are under construction by year-end 2014).
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On 15 December 2015, the US Congress approved the “Consolidated Appropriations Act of 2016” that included an extension
of the PTC for wind energy, as well as the possibility of a 30% Investment Tax Credit instead of the PTC. Developers had
until the end of 2016 to start construction of new wind farms to qualify for 10 years of production tax credits at the full level.
Congress introduced a phase out for projects that start construction after 2016 and before 2020. These projects will still
qualify for production tax credits, but at reduced levels. The levels are 80% for projects starting construction in 2017;
60% in 2018; and 40% in 2019. Developers of projects that start construction before 2020 may choose to claim 30%
investment tax credits instead of production tax credits, subject to a similar phase out. The phase out reduces the value
of the 30% investment tax credit to 24% in 2017; 18% in 2018; and 12% in 2019. Neither production tax credits nor
investment tax credits are allowed for wind projects that start construction in 2020 or later.
The aforementioned "Consolidated Appropriations Act, 2016" also extended the Investment Tax Credit (ITC) for solar
projects. Solar projects that are under construction by the end of 2019 will now qualify for the 30% ITC. The credit is
reduced to 26% for projects starting construction in 2020 and to 22% for projects starting construction in 2021.
The credit drops to a permanent 10% level for projects that begin construction in 2022 or later.
Additionally, on 5 May 2016, the US Internal Revenue Service issued guidance that wind farms have four years from
their start of construction to be placed in service and qualify for the PTC. As a result, projects that start construction prior
to year-end 2019 and are placed in service prior to year-end 2023 will be eligible for the PTC. The IRS ruling also includes
a provision that allows developers to secure the PTC if 5% of a project's capital components by US dollar value are safe
harbored in a given year and construction is complete within 4 years. Thus, if a developer safe harbors 5% of project Capex
in 2016, will be qualified for 100% of the PTC if the construction is concluded until 2020.
On 22 June 2018, the IRS released Notice 2018-59, which provides guidance to determine when a solar project begins
construction for ITC purposes and specifies that projects have until 2024 to be placed in service and qualify for the ITC
at levels above 10%. The ITC percentage for a solar project is determined based on the year in which construction of the
project begins – provided the solar project is also placed in service before 1 January 2024 – as follows: (i) before 1 January
2020, 30%; (ii) in 2020, 26%; (iii) in 2021, 22%; and (iv) any time thereafter (regardless of the year in which the solar project
is placed in service), 10%. Similar to the IRS guidance regarding the wind PTC, establishing the beginning of construction
is deemed by (i) engaging significant physical work or (ii) paying or incurring 5% of the ultimate tax basis of the project.
Thus, if a developer safe harbors 5% of project Capex in 2019, the project will be qualified for a 30% ITC if the construction
is concluded before 1 January 2024. Similarly, if a developer safe harbors 5% of project Capex in 2021, the project will be
qualified for a 22% ITC if the construction is concluded before 1 January 2024.
On 20 December 2019, the President signed the Taxpayer Certainty and Disaster Tax Relief Act of 2019. The act changes
the phase down schedule for the Production Tax Credit for onshore wind energy projects.. Under prior law, the PTC phased
down to 40% for projects beginning construction in 2019 and then to 0% for facilites for which construction began in 2020.
The new act leaves in place the 40% PTC rate for 2019 projects, then increases the PTC to 60% for projects beginning
construction in 2020. Projects beginning construction in 2021 and later will have no PTC. The act made no changes
to the solar ITC.
The Taxpayer Certainty and Disaster Tax Relief Act of 2019 also did not include the creation of any new tax credits for
offshore wind or energy storage, despite previously proposed legislation that sought to do so. Two bills recently introduced
in the U.S. Senate would extend the 30% investment tax credit (ITC) for offshore wind projects for another 6 to 8 years.
Legislation has also been introduced to make energy storage technologies fully eligible for the ITC that is currently available
to solar and some solar-plus-storage projects. More than 100 House Democrats signed a letter asking for a long-term
extension of clean energy tax credits. While tax credits for offshore wind and storage were not included in the Taxpayer
Certainty and Disaster Tax Relief Act of 2019, it is still possible that they could be included in future legislation. Improved
ITC for offshore wind and storage would improve the economic outlook for those resources.
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ANNUAL REPORT 2020
On 9 February 2016, the US Supreme Court suspended implementation of the Clean Power Plan (CPP) announced by the
United States' Environmental Protection Agency (EPA) on 3 August 2015, a rule to cut carbon pollution from existing power
plants, which is pending judicial review. On 7 December 2017, EPA Administrator Scott Pruitt announced at a hearing of the
U.S. House Energy and Commerce Committee that the EPA will introduce a replacement rule to CPP. As of 29 June 2018,
EPA’s agenda put a final Clean Power Plan repeal date in October speculating that a replacement rule will be proposed at
the same time. On 21 August 2018, the EPA proposed the Affordable Clean Energy (ACE) rule to replace the CPP to
establish emissions guidelines for states to develop plans to address greenhouse gas emissions from existing coal-fired
plants. The rule would allow states full discretion to set heat-rate improvements (HRI) for unit-specific emissions standards.
The HRIs may be overstated, since they appear to be based on potential improvements at inefficient plants that have
already retired; i.e. the existing fleet may have already applied “Best system of emission reduction” (BSER) measures and
therefore do not have room for improvement.
On 1 June 2017, President Trump announced that the U.S. would withdraw from The Paris Agreement, an international
accord to combat climate change. The ultimate impact of these changes on renewable demand is not yet clear for several
reasons: most of these changes will be contested in court; States regulators decide on the energy mix at State level; the
most important energy players are already implementing the main elements of the Clean Power Plan; and the Executive
Order does not impact ITC/PTC, which is the main development driver for the US renewable energy market. On 23 January
2018, Trump signed a proclamation setting in place four years of tariffs for cell and module imports. The tariffs commence
at 30% of reported value, decrease in subsequent years and don’t apply to the first 2.5GW of cell imports each year. On 3
April 2018, the Trump administration released a list of more than 1,300 imported products from China that may be subject
to a 25% tariff. The list of imports from China includes “wind-powered electric generating sets,” which will have minimal
impact on the U.S. wind industry due to the low number of wind turbines imported from China. The Trump administration
also placed a 25% tariff on steel imports and a 10% tariff on aluminum imports, two raw materials that are sometimes used
in manufacturing wind and solar energy components.
On 22 December 2017, President Trump signed the final bill for a tax reform law, the Tax Cuts and Jobs Act of 2017.
The law made numerous changes to the U.S. tax code including some that may impact demand and financing for renewable
energy. Among these are the Base Erosion Anti-Abuse Tax (BEAT) provision, which seeks to prevent multinational
companies from engaging in "earnings stripping", the practice of lowering a company's U.S. tax liability by deducting interest
from payments made from a foreign parent company to its U.S. subsidiary. The BEAT provision allows companies to offset
up to 80% of BEAT tax payments with energy tax credits such as the PTC and ITC. Because companies are not allowed
to offset the entirety of BEAT tax payments with energy tax credits, the provision may negatively impact the tax equity
financing market, a key finance driver for renewable energy. The final law also reduced the corporate tax rate from 35% to
21%. This could also decrease the size of the market for tax equity financing. With regards to other new policy initiatives,
White House officials have expressed a desire to introduce an infrastructure plan to be passed by Congress. While details
of this plan are currently unclear, increased investment in Infrastructure could change the demand for renewables or change
the value of production from existing facilities.
On 8 January 2018, the Federal Energy Regulatory Commission (FERC) rejected a proposal from the Department of Energy
(DoE) to subsidize certain coal and nuclear plants by providing cost recovery for plants with onsite fuel supplies. The FERC
instead asked regional grid operators to assess how best to enhance the resilience of the power system. FERC's five
members unanimously rejected the proposed DoE rule. Instead, FERC asked regional grid operators to review an extensive
list of quesitons about improving power system resilience and report back within 60 days. It is currently unclear as to
whether or not the DoE will continue to pursue coal and nuclear subsidies and, if so, how the DoE will seek to do so.
On 3 January 2019, the 116th United States Congress convened with a Republican-majority Senate and a Democratic-
majority House of Representatives. In the prior Congress, Republicans held majorities in both the Senate and the House of
Representatives. With this change, a shift in governing philosophy is expected. Democratic representatives have informally
proposed a range of potential legislative actions having to do with climate change. One of these proposals is a "Green New
Deal" which features a 100% United States RPS standard. Such a standard, if implemented, would increase demand for
renewable electricity in the U.S. However, new legislation regarding climate change and renewable energy has yet to be
formally proposed and the details of such legislation, if proposed at all, are unclear. Additionally, any legislation passing the
Democratic-majority House of Representatives would also to have to pass the Republican-majority Senate and be signed by
President Trump before becoming law. While this "Green New Deal" is not currently a likely success, it is an indicator that
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Green goals are becoming bolder and seeking greater results such as, in this case, a 100% renewable mandate. On June 26,
2019, a new bill was introduced to the Senate targeting a national 50% renewable energy standard (RES) by 2035. While the
bill has not been passed and currently has only a handful of sponsors, it supports the growing bipartisan trend towards
climate action.
Regulatory framework for the activities in Poland
On 19 February 2016 the PiS MPs party proposed a draft law on wind investments covering localization, realizations and
operation of wind farms, the so-called Wind Turbine Investment Act. After a long approval process in which the renewable
sector succeeded in introducing some amendments to the original draft the law was finally approved and published in the
Polish Official Gazette in June 2016. The main measures of this new law include minimum distance restrictions for new
wind farms and increased real estate tax burden.
On the other hand, and following the delay of implementation of the RES Act Chapter 4 introduced in late December 2015,
PiS’ government has introduced to Polish parliament a more comprehensive amendment proposal to the RES Act in early
May 2016. After having gone through Poland’s parliamentary appreciation process the amendments were finally approved
and published in late June, in line with the intentions to have the Chapter 4 in force since 1 July 2016. While keeping the
core of the new auction system introduced by the new 2015 RES Act these new amendments have also introduced some
modifications (namely introducing technology baskets for future tenders and improving the treatment of biomass, biogas
and cofiring technologies).
In October 2016 the Polish Government published the Ordinance detailing the amount and value of energy to be auctioned
in 2016. Wind energy was not included among the technologies allowed to participate (except for facilities below 1 MW).
The auction was held in 30 December 2016.
"On 23 November 2016, the Polish Government disclosed a draft ordinance detailing the amount and value of energy
planned to be auctioned in 2017. The draft highlights that baseload renewables (dedicated biomass and biogas) remain
key to the government as they will be allocated around 50% of the total 2017’s auction budget. The new draft proposes the
budget to be allocated to the pot in which new onshore wind could compete. This amount could amount up to 150 MW.
It is also likely that wind and PV will compete for the same budget. “
During the first semester of 2017, the substitution fee was 300.03 PLN. However, with the entry into force of the
amendment proposed by the Polisk Government in the third quarter of 2017 the substitution fee changed to 125% of the
average market price of the green certificate from the previous year capped at 300 PLN. Given the current low prices of GCs,
this rule is expected to involve a even higher price reduction.
Together with the reduction of the substituion fee, the accompanying note of the amendment proposal includes a proposal
to set up (and increase) the GC's quotas up to 2020: 17.5% in 2018, 18.5% in 2019; and 19.5% in 2020. However, this
specific proposal is not included in the official text of the proposal that has been approved.
On 13 December 2017, the EU Commission (through the Directorate-General for Competition) approved the Polish support
scheme for renewables and therefore confirmed that the scheme is in line with the 2014 European State Aid Guidelines.
On 29 June 2018, Polish Parliament (Sejm and Senate) approved a set of amendments to the Wind Turbine Investment Act,
amendments which were published in Polish Official Gazette on 30 June. The approved amendments envisaged a return to
the initial taxable base of the Real Estate Tax as of January 2018. The amendments do not include any relevant changes
towards operating assets and focus mainly on operative changes and clarifications to the new tender scheme. Therefore,
the amendments include the budget (values and volumes) for 2018 tenders.
On 2 October 2018, the Energy Regulatory Office published a call for the first auction in Poland in which wind onshore and
solar PV with capacity above 1MW can participate to get a 15 year CfD. Following this announcement, a wind and solar PV
joint auction for projects exceeding 1 MW was held on 5 November 2018. All contracted power went to wind, with 31 wind
projects selected at an average price of 196 PLN/MWh (around 45.4€/MWh).
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ANNUAL REPORT 2020
On 3 January 2019, the Polish Energy Exchange published the official weighted average price of Green Certificates:
103.82 PLN/MWh. As the substitution fee should be 125% of the previous year price, its value for 2019 should
be 129.8 PLN/MWh.
On 25 June 2019, the government approved a set of amendments to the Renewable Energy Sources Act, which were
originally published and submitted for public consultation on 28 February 2019. The main objective pursued by the Act was
to allow auctions for new renewable energy projects in 2019 (including some changes to the CfD scheme to be granted
therein). The Act confirms the celebration of auctions for new assets in 2018, including proposed budget, volumes and
reference prices (for onshore wind >1 MW around 2.5 GW with a reference price of 286 PLN/MWh).
Poland’s energy regulator launched a wind and solar PV tender on 5 December 2019 granting 2,2 GW of new capacity (most
of the capacity was granted to onshore wind projects). Winning bids were below 233PLN/MWh with lowest bids reaching
163 PLN/MWh. EDPR was awarded 307 MW of wind power under a 15-year contract-for-difference.
The Polish government is working on a offshore wind law, that should be formally enacted in the first quarter of 2020.
Poland’s National Energy and Climate Plan (NECP) was sent to the European Commission on 29 December 2019. According
to the information published in the Ministry’s website, the country could commit to a 23% share of renewable energy in 2030
if it gets additional European funds. In addition, the share of renewables in electricity generation will rise to 32% in 2030.
Onshore wind installed capacity could increase to 9,6 GW in 2030 while offshore wind to 3,8 GW in 2030 and 8 GW in 2040.
Regulatory framework for the activities in France
On 15 April 2016, the French council of State published a decision ordering the government to start recovering the interests
that the feed-in tariff received from 2008 to 2014 would have generated. This decision was based on the grounds that the
French Government failed to notify the European Commission of the Ministerial Order approving the feed-in tariff.
A Contract-for-difference (CfD) scheme replacing the feed-in tariff scheme was released in December 2016 for wind farms
having requested a PPA in 2016. According to the decree, the strike price would be equal to the value of the current feed-in
tariff (similar tenure, indexation and adjustment after year 10), plus a management fee to compensate balancing costs
(2.8 €/MWh). The market reference price will be the production weighted average pool price, using a representative
production profile of the wind industry in France. The settlement would be done on a monthly basis.
The French Government also disclosed a draft decree for the 2017 CfDs for wind farms below 6 wind turbines. According
to the draft, the CfD tenure will be extended to 20 years (instead of 15 years), being the strike price 72€/MWh (plus the
management fee). The draft also includes a limitation of the amount of energy to be remunerated under the CfD strike price.
Larger wind farms will be awarded CfDs through competitive tenders.
Additionally, on 24 April 2016 the French Government enacted the so-called “Programmation pluriannuelle des
Investissements” (PPI) which objective is to set different renewables’ capacity targets by technology, in order to achieve
the objectives of the “Loi de Transition Énergétique” (decree-law meant to define the long term energetic and climate
politic in France, officially approved in August 2015). The PPI provides short-term (2018) and medium-term (2023)
renewables’ capacity targets and also includes a provisional timetable of the next renewable tenders to be launched
between 2016 and 2019.
The French government published on 10 May, the decree for the 2017 Contract-for-Difference (CfD) for wind farms below
6 wind turbines and maximum 3 MW per turbine. These projects will be exempt from tendering.
The regulator has also disclosed the tender rules for onshore wind farms (of more than 7 wind turbines or with over 3 MW
per wind turbine) for the period from November 2017 to June 2020. The rules foresee the allocation of 3 GW of wind
capacity in six successive 500 MW rounds every 6 months during the next 3 years. The rules also include a calendar with
the dates in which the tenders are expected to take place and the first tender was in November 2017.
500
Together with the disclosure of the results of the second onshore wind tender the French government and regulator
introduced some changes to the tender rules including a downward revision of the maximum strike price as well as small
changes to the calendar and quotas of remaining tenders to be held up to 2020.
On 27 November 2018, the “Pluriannual Energy Planning” (PPE) was released. According to the PPE, 40% of the energy
could be produced from renewable sources by 2030. The PPE includes different targets for renewables: 35.6-44.5 GW of
solar capacity, 34-35.6 GW of onshore wind and 4.7-5 GW of offshore wind, by 2028.
On 29 November 2018, the government approved the Decree 1054-2018 aimed at accelerating legal procedures following
claims against the administrative authorizations of wind farms, by removing the two-level court system in the event of
litigation.
The third offshore auction took place in March 2019 with all major players participating (grouped in 10 consortiums).
On 14 June 2019, the Energy Regulation Commission “CRE” announced the result of the Dunkirk auction, being consortium
made of EDF, Innogy and Enbridge the winner. The final price was 44€/MWh for a period of 20 years. François de Rugy,
France’s Minister for Ecologic and Solidary Transition, has confirmed that France will double its offshore wind tender
schedule to 1 GW yearly between 2020 and 2023 (and potentially beyond) after bids in the latest round confirmed steep
cost reductions in the sector. The PPE envisaged tenders for about 5 GW out to 2028 or about 500 MW annually.
In June 2019 also were announced the winners of the third onshore wind round. The overall capacity of winning projects
was 516 MW, with the average bid price standing at 63€/MWh (vs. a maximum reference price of 71€/MWh). Successful
projects will sign 20-year CfDs.
Next onshore round started in July 2019 and 500 MW was tendered. A new specification clause has been added in case that
participation is low. In case that there are only 400 MW participating (or less), then the 20% less competitive projects will be
automatically discarded.
The French Parliament approved on 26 September 2019 the so-called “Energy and Climate Law”, committing the country to
carbon-neutrality by 2050.
"On 8 November 2019 the Energy and Climate Law, which sets the framework and targets of French climate policy for the
next 30 years, was formally enacted. The adoption of the Energy-Climate law constitutes a major step toward achieving the
government's ambition to address climate change by becoming carbon neutral by 2050. This objective represents a
reduction of France's greenhouse gas emissions by a factor of more than six compared to 1990 emissions levels."
In order to achieve carbon neutrality by 2050, the Energy-Climate law provides for the reduction of fossil fuels consumption
by 40% by 2030 (instead of the previous 30% target) and for the end of coal-based electricity generation by 2022. The law
provides that the share of nuclear in the electricity mix should be reduced to 50% by 2035. Regarding wind energy, the law
redefines the authority responsible for permitting onshore wind projects. Concerning offshore wind, the law also includes a
higher target (already announced by the Energy Minister) of auctioning 1 GW of capacity until 2024 (doubling the volumes
defined by France’s initial energy plan published in January 2019).
Due to the high volume of projects potentially wishing to benefit from the CR 2016 Regime (the so-called “Complément de
Rémuneration” which grants a 15-year CfD with a strike price at a level close to the former feed-in tariff), the Ministry of
Ecological Transition (Ministère de Transition écologique et solidaire) decided in December 2019 to close the scheme once
the first 1.800 MW of contracts are signed (in December 2019, around 1,23 GW of contracts had been already signed).
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ANNUAL REPORT 2020
Concepts and Definitions
A
ADJUSTED NET DEBT
Net Debt adjusted by Regulatory Receivables.
ADJUSTED NET DEBT/EBITDA
Number of times/years needed to pay the Adjusted Net Debt with the EBITDA generated by the Company.
ASSET ROTATION
Strategy aimed at crystallizing the value of a project by selling a stake in an asset and reinvesting the proceeds in another
asset, targeting greater growth. Typically the developer retain the role as an O&M supplier.
AVERAGE COST OF DEBT
Considers (Interest expense on financial debt +/- Income and Expenses with Interest from derivative financial instruments) /
Average Financial Gross Debt in the period (Total debt and borrowings - Accrued Interest - Fair value of the issued debt
hedged risk). Includes 50% of the interest expense and of the nominal amount of hybrid debt.
C
CAGR (Compound annual growth rate)
Annual growth rate over a specified period of time longer than one year
CAPEX (Capital Expenditure)
Capex includes increases in Property, Plant and Equipment and in Intangible Assets, excluding CO
2
licenses and Green
certificates, net of increases in Government grants, Customers contributions for investment and Sales of properties
in the period.
CDI (INTERBANK DEPOSIT CERTIFICATE RATE)
Brazilian
reference interest rate
constructed from the daily average overnight interbank loans
.
The CDI rate is commonly
used as the reference in short-term securities.
CDS (CLEAN DARK SPREAD)
Theoretical gross margin of a coal-fired power plant per unit of electricity after deducting variable production costs
(fuel, emission allowances, transport charges, variable O&M, per-unit taxes, etc.).
CESE (Extraordinary Contribution to the Energy Sector)
Extraordinary contribution created in 2014, in Portugal, with the objective of financing mechanisms that promote the energy
sector systemic sustainability. This contribution focuses generally on the economic operators that develop the following
activities: (i) generation, transportation or distribution of electricity; (ii) transportation, distribution, storage or wholesale
supply of natural gas; and (iii) refining, treatment, storage, transportation, distribution and wholesale supply of crude oil
and oil products.
CLAWBACK
Mechanism of financial compensation established by the Portuguese government on electricity generators operating
in Portugal. This mechanism has as its objective the restitution to the electricity system of part of the income derived f
rom the tax differences in electricity generation between Portugal and Spain.
502
COD (Commercial Operation Date)
Date upon which the project starts operating officially, after the testing and commissioning period.
CONTRACTING LEVEL
Ratio that returns the percentage of market commitment of Brazilian electricity distribution companies that is properly
covered by energy purchase contracts registered in CCEE. Non-compliance generates penalties provided for in the rules
and procedures of commercialization. The penalties apply when the ratio is above 105% or below 95%.
CSS (CLEAN SPARK SPREAD)
Theoretical gross margin of a gas-fired power plant per unit of electricity after deducting variable production costs (fuel,
emission allowances, transport charges, variable O&M, per-unit taxes, etc.).
D
D/E (DEBT-TO-EQUITY RATIO)
Debt-to-equity (D/E) ratio is calculated by dividing a company’s total liabilities by its shareholder equity. The ratio is used
to evaluate a company's financial leverage being an important metric used in corporate finance. It is a measure of the
degree to which a company is financing its operations through debt versus wholly-owned funds.
DEC
Equivalent interruption time of energy per consumed unit. Refers only to medium voltage.
DIVIDEND PAY-OUT RATIO
Measures the percentage of a company’s net income that is given to shareholders in the form of dividends
(Total Dividends per Share of period “n”/ Earnings per Share of period “n-1”).
DIVIDEND YIELD
Considers the ratio between gross dividend per share and its share price.
DPS (DIVIDEND PER SHARE)
Dividend per share (DPS) is the sum of declared dividends issued by a company for every ordinary outstanding share.
DPS is calculated by dividing the total dividends paid out by a business, including interim dividends, over a period
of time by the number of outstanding ordinary shares issued.
E
EBIT
Earnings before Interest and Tax: EBITDA deducted from provisions, amortisations and impairments.
EBITDA
Earnings before Interest, Tax, Depreciations and Amortizations: Gross Profit - Supplies and services - Personnel costs
and employee benefits +/- Other income/expenses.
EBITDA@risk
Estimated loss of EBITDA, in a given period of time and for a given confidence interval. Usually it is used an horizon
of 12 months and a level of confidence of 95%.
EOLICITY
Indicator that allows to quantify the deviation of the total value of energy produced by wind in a given period,
in relation to an average wind regime.
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ANNUAL REPORT 2020
ENERGY BOX
Energy Box is a household energy manager that does much more than metering energy, being endowed with technology
that supports the supply of electricity services, namely, in remote communications.
EPS (Earnings per share)
The portion of a company's net profit allocated to each outstanding share of common stock.
F
FEC
Equivalent interruption frequency of energy per consumed unit. Refers only to medium voltage.
FEED IN TARIFFS
Remuneration framework that guarantees that a company will receive a set price, applied to all of the electricity they
generate and provide to the grid.
FFO
Funds from Operations: EBITDA – Interest on debt and on TEI liabilities – Current taxes +/- Income from equity investments
+/- other residual adjustments resulting from accruals/deferrals.
FFO/NET DEBT
Funds from Operations (FFO) over Net Debt. For this purpose, Net Debt includes Nominal Debt of the company + Pension
and Medical care liabilities post tax + Tax Equity financial liabilities + Present value of leasing and other financial
commitments.
FOREX
Foreign Exchange (forex or FX) is the trading of one currency for another. For example, one can swap the U.S. dollar for
the euro. Foreign exchange transactions can take place on the foreign exchange market, also known as the Forex Market.
G
GC (GREEN CERTIFICATE)
Tradable commodity resulting from electricity generated using renewable energy sources.
GHG (GREENHOUSE GASES)
Gases that trap the heat of the sun in the Earth's atmosphere, producing the greenhouse effect. The two major greenhouse
gases are water vapor and carbon dioxide. Lesser greenhouse gases include methane, ozone, chlorofluorocarbons,
and nitrogen oxides.
GROSS PROFIT
Includes Revenues from energy sales and services and other minus Cost of energy sales and other.
GSF (Generation Scaling Factor)
Ratio of the deficit of hydroelectric companies' actual generation volumes to their assured energy delivery.
GW (Gigawatt)
Unit of electric power equal to 1,000 MW.
GWh
Equal to 1,000 MW used continuously for one hour.
504
H
HEDGING
Risk management strategy used in limiting or offsetting probability of loss from fluctuations in the prices of commodities,
currencies, indexes or securities.
HYDRO COEFFICIENT
Indicator that allows to quantify the deviation of the total value of hydroelectric energy produced in a given period,
in relation to an average hydro regime. Values above "1" translate a period with inflows and energy generated above
the average ("wet" period) and bellow "1" the reverse ("dry" period).
I
ICEIT (Installed capacity equivalent interruption time)
Indicator that represents the equivalent interruption time of installed power per geographical area of the operator
of the distribution network in a given period, excluding extraordinary events (the extraordinary weather events
that exceed the conditions for which was dimensioned).
IGP-M (GENERAL MARKET PRICE INDEX)
Index used to comprehensively measure the fluctuation of prices of goods and services practiced in the Brazilian
market. Calculated by FGV (Getúlio Vargas Foundation), this index is used to update the prices of some goods
and services, namely electricity.
INSTALLED CAPACITY
Installed Capacity is the sum of capacity (MW) installed in power plants owned by companies fully consolidated.
INSTALLED CAPACITY EQUITY
Installed Capacity Equity also includes the respective share of the MW installed in power plants owned by company’s
equity consolidated.
IPCA (EXTENDED NATIONAL CONSUMER PRICE INDEX)
Is the name given to the Consumer Price Index in Brazil being a measure that examines the weighted average of prices
of a basket of consumer goods and services, such as transportation, food and medical care.
ITC (Investment tax credit)
Tax incentive in the US in the form of an one-shot tax credit that covers a percentage of the investment.
K
KRI (KEY RISK INDICATOR)
Risk indicator that follows a variable risk factor, allowing the early warning of changes in risk exposure and the identification
of potential risks or opportunities.
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ANNUAL REPORT 2020
L
LIQUIDITY
Total amount of Cash and Equivalents, Credit Lines available and Financial assets at fair value through profit or loss.
LOSSES
The total losses of electric energy are calculated by the differential between the energy entered in the electrical network
and the distributed energy (% Global losses = (Energy Input - Distributed Energy) / Distributed Energy). They consist
of technical losses related to the magnetization of the power transformers, the Joule effect, the consumption
of meters, etc. and non-technical losses related to theft, fraud, anomalies in counting equipment or in systems
M
MW (Megawatt)
Unit of electric power equal to 10
6
watts.
MWh
Equal to 10
6
watts of electricity used continuously for one hour.
N
NCF (NET CAPACITY FACTOR)
The ratio of a plant’s actual output over a period of time to its potential output if it were possible for it to operate at full
nameplate capacity continuously, over the same period of time. Also known as Load Factor.
NET DEBT
A metric that shows a company’s overall debt situation calculated using company’s total debt less cash on hand.
From 2017 onwards it includes Financial Debt, Cash and Equivalents, Short-term financial assets at fair-value and fair
value hedge and collateral deposits associated to financial debt and 50% of the amount related with the issuance
of a subordinated debt instrument (hybrid). Until 31 December 2016, it included the fair value of derivatives designated
for Net Investments hedge.
NET INVESTMENTS
Considers Capex + organic Financial Investments - Asset Rotations + granted and/or sold shareholder loans.
O
OPEX (Operating Expenditure)
Includes Supplies and Services and Personnel costs and Employee Benefits.
OPEX/GROSS PROFIT
Efficiency ratio that compares the cost to operate with the income generated computed by OPEX (excluding Restructuring
costs) over Gross Profit (including income from institutional partnerships in EDPR-NA).
ORGANIC CASH-FLOW
Cash generated from organic activities. Includes cash flows from operating activities (excluding changes in Regulatory
Receivables), net of maintenance CAPEX, interest payments associated with debt, payments to institutional partnerships
in the US and payments to minorities (such as dividends, capital distributions and payments of capital/interests on
shareholder loans), not excluding gains arised from Sell-Down .
506
P
PLD (SETTLEMENT PRICE FOR THE DIFFERENCES)
Price used to value the energy exchanged in the spot market. This price is calculated weekly for each submarket
and load periods, based on the marginal cost of generation. It is limited by a minimum and maximum value.
PPA (Power purchase agreement)
A legal contract between an electricity generator (provider) and a power purchaser (host). The power purchaser buys
energy, and sometimes also capacity and/or ancillary services, from the electricity generator.
PTC (Production tax credit)
The result of the Energy Policy Act of 1992, a commercial tax credit in the US that applies to wholesale electrical generators
of wind energy facilities based upon the amount of energy generated in a year.
PUMPING
Pumping activity is the act of pushing back to the dam reservoir the water that had already been turbinated before.
This action intends to increase the hydro output and thus generate higher operational results as water is pushed back
when electricity market prices are low and turbinated again when those prices reach higher levels.
R
RAB (REGULATORY ASSET BASE)
Corresponds to the net book value of the distribution companies’ regulated fixed assets (gross value less accumulated
depreciation, net of reimbursements).
RECURRING
Which occurs periodically or repeatedly. It aims to normalize indicators into more predictable ones and which can be
counted on in the future with a high degree of certainty. Indicators such as EBITDA, Net Profit, FFO, Organic Cash-Flow
are referred to as recurring when adjusted by one-off events. One-off events include non-recurrent amounts materially
relevant resulting from, for instance, impairments and capital gains/losses on assets, retroactive regulatory changes,
HR and debt restructuring costs and CESE.
REGULATORY RECEIVABLES
Amounts pending to be received from the electricity system and related with tariff adjustments and tariff deficits from
regulated activities in Iberia and Brazil (Generation in Portugal and Spain, Distribution and Last Resort Supply of electricity
in Portugal and Distribution in Brazil).
RENEWABLE ENERGY
Energy that is derived from resources that are regenerative or that cannot be depleted including wind energy, solar, biomass,
geothermal, and moving water.
REC (Renewable energy credit)
Represents the property rights to the environmental, social, and other non-power qualities of renewable electricity
generation. A REC can be sold separately from the electricity associated with a renewable energy generation source.
RESERVOIR LEVEL
Volume of water stored in a dam reservoir measured in total amount of electrical power it can produce if turbinated (GWh).
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ANNUAL REPORT 2020
RESIDUAL INCOME
Is the amount of net income generated in excess of the minimum rate of return. Residual income concepts have been
used in a number of contexts, including as a measurement of internal corporate performance whereby a company's
management team evaluates the return generated relative to the company's minimum required return.
ROE (Return on Equity)
Earnings before non-controlling interests over average total equity of the period.
ROIC (Return on Invested Capital)
ROIC gives a sense of how a company uses its money to generate returns. ROIC = EBIT Adjusted over annual average
Invested Capital. EBIT Adjusted is EBIT + share of net profit in joint ventures and associates + impairments + provisions
+/- capital losses/gains (except related to sell downs) + HR restructuring costs – Price Purchase Allocation amortizations –
other one-off events. Invested Capital includes net fixed assets – assets under construction + working capital.
ROIC Cash (Cash Return on Invested Capital)
Similar to ROIC but focuses on cash return rather than profit. EBIT adjusted is EBIT – (nominal tax rate x EBIT) + share
of net profit in joint ventures and associates. Invested Capital as in ROIC.
ROIC LEVELIZED
Similar to ROIC but focuses on the average life of Invested Capital rather than in accounted Invested Capital. EBIT Adjusted
as in ROIC. Invested Capital assumes 50% amortization of assets for all businesses except networks.
ROR (RATE OF RETURN)
Corresponds to the rate to be applied to the distribution companies’ RAB accepted for capital remuneration purposes,
with the respective formula defined by the Regulator at the beginning of each regulatory period.
RPS (Renewable Portfolio Standard)
Regulation in the US that places an obligation in certain states on electricity supply companies to source a specific
percentage of their energy from renewable sources.
S
SAIDI (System Average Interruption Duration Index)
Is the average outage duration for each served customer.
SELL-DOWN
Strategy aimed at developing and selling a majority stake in an asset, crystallizing the value of a project, and reinvesting
the proceeds in another asset, targeting greater growth. Typically, the developer may retain the role of O&M supplier.
SOLAR PV (photovoltaic)
Generation of electricity by means of solar power through photovoltaics, consisting on an arrangement of several
components, including solar panels to absorb and convert sunlight into electricity, a solar inverter, cables and other
electrical accessories.
SUPPLY POINTS
Points of the grid where the delivering or reception of electricity is made to the costumer, producer or other grid installation.
SUSTAINABILITY INDEX
The Sustainability Index (SI) is a measurement system of sustainability performance, composed by 33 indicators organized
in 3 dimensions: Economic, Environmental and Social. The weights assigned to each dimension of the sustainable
development reflect the importance given by RobecoSAM (investment specialist focused exclusively on Sustainability
Investing).
508
T
TEI (Tax Equity Investors)
Tax Equity Investors are the agents that are willing to trade on PTC.
TSR (Total Shareholder Return)
Measures the return that the stock provides to the shareholder, including dividends paid and the stock price appreciation.
V
VALUE@RISK
Estimated loss of the asset value, in a given period of time and for a given confidence interval. Usually it is used a horizon
of 12 months and a level of confidence of 95%.
W
WATT (W)
The rate of energy transfer equivalent to one ampere under an electrical pressure of one volt. One watt equals 1/746
horsepower, or one joule per second. It is the product of voltage and current (amperage). Watts are the yardstick for
measuring power.
WIND TARIFF
Average price of energy sold per MWh produced.
Sociedade Anónima - Capital Social 1.335.000 euros - Inscrição n.º 178 na Ordem dos Revisores Oficiais de Contas - Inscrição N.º 20161480 na Comissão do Mercado de Valores Mobiliários
Contribuinte N.º 505 988 283 - C. R. Comercial de Lisboa sob o mesmo número
A member firm of Ernst & Young Global Limited
Ernst & Young
Audit & Associados - SROC, S.A.
Avenida da República, 90-6º
1600-206 Lisboa
Portugal
Tel: +351 217 912 000
Fax: +351 217 957 586
Independent Assurance Report on the
Compliance Management System
(Translation from the original document in the Portuguese language.
In case of doubt, the Portuguese version prevails)
To the Board of Directors of
EDP Energias de Portugal S.A.
Introduction
1.
We have been engaged by the Executive Board of Directors of EDP Energias de Portugal S.A. to proceed with
the independent review of the "Compliance Management System" of EDP Energias de Portugal S.A. referred
to in the "2020 Consolidated Annual Report", regarding its performance in the period from January 1 to
December 31, 2020, implemented based on the criteria established by the framework issued by the
International Organization for Standardization ("ISO") 19600: 2014 Compliance management systems.
Responsibilities
2.
The Executive Board of Directors is responsible for implementing a Compliance Management System as
well as to maintain an appropriate internal control system that allows the information presented to be free
from material misstatements due to fraud or error.
3.
It is our responsibility to issue a reasonable assurance report, professional and independent, based on the
procedures performed and described in the “Scope” section below.
Scope
4.
The procedures performed have been planned and executed in accordance with the International Standard
on Assurance Engagements (ISAE) 3000 (Revised) – “Assurance engagements other than Audits and
Reviews of Historical Financial Information”, issued by the International Auditing and Assurance Standard
Board, for a reasonable level of assurance.
5.
Our procedures were conducted with the objective of obtaining a reasonable assurance on the
performance of the Compliance Management System, implemented by the Executive Board of Directors of
EDP Energias de Portugal S.A., in accordance with the criteria established by the framework issued by ISO
19600: 2014 Compliance management systems. Our procedures do not cover the Compliance
Management System implemented at subsidiaries level neither the Specific Individual Programs of
Compliance. Under these circumstances, our independent review procedures consisted of:
►
Review of the scope of the Compliance Management System through the analysis of the risks identified
against the general and sector compliance risks;
►
Conducting interviews with management, in order to understand how the information system is
structured and assess their level of knowledge of the topics addressed in the report;
►
Analysis of the questionnaire sent to the Compliance Partners and Compliance Business Partners
considering the basic elements of the Compliance Management System against the responsibilities of
the Compliance Partners and Compliance Business Partners, defined in the Compliance Management
System;
►
Conducting interviews with the Local Compliance Departments to understand and validate the
alignment of the work performed against the Compliance Management System;
►
Review of the presentations made to management and supervisory bodies: Executive Board of
Directors and the Financial Matters Committee / Audit Committee of the General and Supervisory
Board;
EDP Energias de Portugal S.A.
Independent Assurance Reporto on the
Compliance Management System
January 1 to December 31, 2020
►
Review of standards, policies and procedures, including the analysis and review of the Compliance
Standard (base document of the Compliance Management System);
►
Analysis of the controls that were developed for training and communication between the Compliance
Management System and the Specific Programs of Compliance;
►
Analysis of documentation related to the Compliance Management System and the control of the
Specific Programs of Compliance (monthly status reports, reports to management and supervisory
bodies, incident management, action plans and control of the Specific Programs of Compliance, among
others);
►
Analysis of the monitoring and evaluation activities related to the Compliance Management System;
►
Verification of the conformity of the information included in the Compliance Management System with
the results of our work.
Quality and independence
6.
Our firm applies International Standard on Quality Control 1 (ISQC 1), and consequently maintains a global
quality control system which includes documented policies and procedures relating to compliance with
ethical requirements, professional standards, and the legal and regulatory provisions applicable and we
comply with the independence and ethical requirements of the International Ethics Standards Board for
Accountants (IESBA) Code of Ethics and the Institute of Statutory Auditors’ Code of Ethics.
Conclusion
7.
In our opinion, the entity has complied, in all material aspects, with the policies and procedures defined by
the "Compliance Management System" of EDP Energias de Portugal, S.A., for the year ended December
31, 2020, which is in accordance with the criteria established by the framework issued by ISO 19600:
2014 Compliance Management Systems.
Other matter
8.
The standard that supports EDP’s Group Compliance Management System applied during 2020, was
formally approved by the Executive Board of Directors of EDP Energias de Portugal S.A. on February 2,
2021.
Lisbon, 23 February 2021
Ernst & Young Audit & Associados – SROC, S.A.
Sociedade de Revisores Oficiais de Contas (no. 178)
Represented by:
(Signed)
Manuel Ladeiro de Carvalho Coelho da Mota (ROC no. 1410)
Registered with the Portuguese Securities Market Commission under license nº 20161020
CONTACTS
HEAD OFFICE
EDP — Energias de Portugal
Av. 24 de Julho, 12
249-300 Lisboa
Portugal
Tel: +351 21 001 25 00
INVESTORS
DRI – Investor Relations Department
Av. 24 de Julho, 12
1249-300 Lisboa
Portugal
Tel: +351 21 001 28 34
E-mail: ir@edp.com
CLIENTS
EDP Lines
Customer services SU Eletricidade
(regulated market):
808 505 505
Customer services EDP Comercial
(libersalised market):
808 53 53 53
E-Redes: 808 100 100
SUPPLIERS
Tel: 800 100 113
E-mail: srm@edp.pt
HUMAN RESOURCES
PEX — People Experience Unit
Av. 24 de Julho, 12
1249-300 Lisboa
Portugal
Tel: +351 21 001 25 89
MEDIA
DC – Communications Department
Av. 24 de Julho, 12
1249-300 Lisboa
Portugal
Tel: + 351 21 001 26 80
E-mail: pressedp@edp.com
SUSTAINABILITY
E-mail: sustentabilidade@edp.pt
FUNDAÇÃO EDP
Av. de Brasília, Central Tejo
1300-598 Lisboa
Portugal
Tel: +351 21 002 81 30
Website
:
E-mail: fundacaoedp@edp.pt
STAKEHOLDERS
DRIS – Institutional Relationship and
Stakeholders Department
Av. 24 de Julho, 12
1249-300 Lisboa
Portugal
E-mail: stakeholders@edp.pt