Europe

Revenues

In the European platform, EDPR delivered a solid 13% YoY growth in Revenues to 635 million euros. Revenues from the Rest of Europe division, namely France, Belgium, Poland and Romania already accounts for 20% of total revenues. Spain and Portugal reduced its relative contribution to 58% and 22% respectively.

The revenues performance (+13% YoY) was driven by the electricity output 10% growth, following the new capacity brought into service throughout 2011 and the full impact of the capacity added in 2010 (+93 million euros), and the higher average selling price (+23 million euros), more than offsetting the lower wind resource in Iberia throughout the year and the ramp-up period in Romania (-31 million euros).

Tariff

Selling price increases 5% YoY

The 2011 average selling price improved by 5% YoY to €88/MWh given the YoY positive price evolution in EDPR most mature markets and the increased contribution of its new markets with prices higher than portfolio average.

The higher prices in Spain is explained by EDPR strategic option to elect the fixed tariff (on the capacity under the RD 661/2007) instead of the market option, and the higher pool prices observed. In Portugal prices reflects the CPI indexation, and are positively impacted by a lower price in 2010 (influenced by the working hours’ adjustment factor given the high wind resource in 2010). In France, the wind tariff improved 3% YoY in line with inflation. The price achieved in Poland was stable in Zloty, but lower in Euro terms due to the Zloty devaluation.

Operating costs

Total operating costs decreased 5% YoY, positively impacted by the annual assets and liabilities fair value revaluation test in some of EDPR’s European Assets, resulting in a 52 million euros gain.

The unitary operating costs still deliver a sound efficiency ratios: +2% YoY per average MW (the +11% YoY per MWh is distorted by the lower wind resource in 2011 vs. 2010). This performance is a result of a stable and efficient operational cost structure based on a strong track record in efficient operation of wind farms, together with the maximization of the assets’ availability levels which allows to extract the highest levels of production at the lowest cost.

Operating income

EBITDA in 2011 reached 539 million euros improving by +17% YoY, on the back of the Revenues performance and of strong cost discipline. The EBITDA margin of 85% was impacted by non-recurrent events.

EBIT increased by 14% YoY to 289 million euros, following the EBITDA growth and the change in the assets’ useful life but hampered by the negative 41 million of impairment charges and asset amortization.

Spain

In 2011 EDPR revenues in Spain evolved positively having increased by 8% YoY to 370 million euros, outperforming the electricity generation growth.

The 2011 electricity output increased by 5% to 4,584 GWh, as more capacity was in operation in the period, but impacted by the weaker wind resource (net capacity factor was above the market average but below EDPR last ten years average of 27%).

The average selling price increased by 4% YoY to €83/MWh following the higher capacity remunerated according with the fixed tariff (+774 MW), the inflation type adjustment of all the regulated prices under the RD661/2007 as well as the recovery in the realised brown energy price in Spain to €47/MWh. EDPR has a low exposure to market prices volatility given the regulated nature of the remuneration frameworks in Spain and EDPR’s proactive hedging strategy. In 2011, 82% of the production sold was protected through fixed tariffs, minimum selling prices and financial hedges.

82% of the output sold was protected

As such, the revenues performance is explained by: I) the capacity additions (+48 million euros), and; II) the improvement in the average selling price (+14 million euros) more than offsetting; III) the lower wind resource (-29 million euros).

In 2011, EBITDA reached 286 million euros, more 4% than in 2010. The EBITDA margin of 77% reflects the net capacity factor in the year.

Portugal

Revenues in Portugal in 2011 totalled 139 million euros (vs 140 million euros in 2010), reflecting the sustainability and stability of the remuneration framework in the country.

The new capacity in 2011 (14 MW) was installed late in year, consequently it had a marginal impact on the period generation. The net capacity factor in 2011 was broadly in line with the long-term expected value reaching 27% (-2pp vs. 2010). In the period, the electricity output reached 1.4 TWh (-5.6% YoY), given the outstanding wind resource in the comparable period of 2010.

The average selling price in Portugal increased 5% YoY to €99/MWh, reflecting the CPI indexation, while the YoY analysis is positively impacted by the lower price received in 2010 due to the working hour’s adjustment factor given the above average production achieved. The price in Portugal does not include the price achieved in the Eólicas de Portugal consortium, defined in a public competitive tender being one of the lowest throughout Europe. Portugal is a regulated market offering a stable feed-in tariff, reflected in long-term PPAs with the distribution company, which provides a sustainable and competitive remuneration levels.

A stable and low risk market

All in all, 2011 EBITDA totalled 111 million euros reflecting an 80% EBITDA margin as the net capacity factor in 2011 was broadly in line with the long-term expected value, but below 2010 figure.

EDPR Portugal accounts for 13% of the Company’s total installed capacity and 14% of the 2011 EBITDA.

Rest of Europe

EDPR activities in the Rest of Europe have undergone an outstanding operational growth in the last years leading Revenues to grow in 2011 by 61% to 126 million euros.

Poland and Romania increased considerably their weight in the division and now account for about 50% of Revenues. Given the investment in these countries it is expected for their weight to increase even further.

The electricity generation in 2011 increased by 65% to 1,326 GW due to the new capacity and the net capacity factor of 23%.

Poland and Romania were the main growth drivers. In Poland, the electricity produced in 2011 increased by 94% YoY to 376 GWh given the capacity increase in the last 12 months and the stable net capacity factors. In Romania, 195 MW were added in 2011 and together with the contribution from 90 MW installed in late 2010 led to a total annual output of 245 GWh.

French operations delivered a 20% YoY output growth to 589 GWh following the capacity expansion, while in Belgium the 200bps improvement in the net capacity factor lead to a 9% increase in the electricity generated (117 GWh).

Strong performance on volumes and price visibility

The average selling price went up 2% to €96/MWh, following Poland and Romania’s increased contribution in the division performance.

In France, the wind tariff improved 3% YoY – in line with inflation – to €87/MWh, while EDPR Polish assets received €109/MWh under attractive long-term contracts (YoY evolution was driven by the Zloty devaluation).

The Belgium selling price was stable at €112/MWh due to the long-term PPA in place. In Romania the price reached €89/MWh, reflecting the wind farms trial period and the receivable of only one green certificate per MWh (the full implementation of the second green certificate scheme, approved by law in July 2011, only happened in late 2011).