Annual Report - EDP

: financial report :local currency, due to the negative contributionfrom Pecém’s coal plant following the delay incommercial operation start-up (-BRL 104 million).In electricity distribution in Brazil, EBITDA in2012 dropped 26% year-on-year, penalised bynegative tariff deviations, justifying the -BRL 231million difference between regulated revenuesand gross profit in 2012. EBITDA was alsoaffected by: (i) negative impact from ANEEL’sdirective under which the amounts collectedfrom industrial clients for power demandabove contracted levels must be registeredas investment subsidies and not as operatingrevenues (BRL 46 million in 2011) and (ii) positiveimpact of BRL 102 million from the distributionasset revaluation due to the re-estimation ofthe compensation of distribution concessions inBandeirante and Escelsa (Escelsa’s concessionwill expire in July 2025 and Bandeirante’s inOctober 2028) on the back of the ProvisoryAct No. 579. The Provisory Act No. 579 led tothe decrease of the electricity costs mostly byreducing the sector costs, namely charges onelectricity (pass-through cost for distributors)and also generation costs related to theconcessions’ renewal conditions.Volume of electricity sold rose 3.2% year-onyear,reflecting an increase in the residential,commercial & other segments of 6%, justified bythe increase of 3.6% in the number of clients andalso of the consumption of electricity per capita.On the other hand, the industrial segment partiallycompensated by declining 4.8% due to the lowerindustrial activity in Bandeirante’s area as well asmigration of clients to the free market. Electricitydistributed rose 1.5% in 2012 penalized by lowervolumes of energy distributed to clients in thefree market.Bandeirante’s regulatory review for the period2011-15, was approved in October 2012 byANEEL. The gross Regulated Asset Base wasset at BRL 3,000 million and the net RAB atBRL 1,545 million, both 27% above the figuresin the previous regulatory period. It was alsodefined a 7.29% increase in Bandeirante’s tarifffor the period from October 2012 to October2013 already including the regulatory reviewimpact. The financial adjustment resulting fromthe tariff freezing between October 2011 andOctober 2012, including the non-application ofthe new regulatory methodology, which amountsto BRL 78 million will be returned by Bandeiranteto tariffs in three annual installments with thefirst one included in this tariff readjustment andthe remaining in the following two annual tariffreadjustments. Regarding Escelsa, in August 2012ANEEL set a 14.29% tariff increase for the periodfrom August 2012 to August 2013 on the back ofthe annual tariff readjustment process. Escelsa’snew regulatory period will start in August 2013.EBITDA in our electricity generation activitiesin Brazil went down 7% since the inflationupdate on PPA’s selling price was more thancompensated by the negative contribution fromPécem’s coal plant (-BRL 104 million in 2012)due to the delay of the start of its commercialoperation. The negative impact from hydro plantsenergy purchase in fourth quarter 2012 promptedby the extreme dry weather was offset by theenergy sold in the spot market in first half 2012.Electricity volumes sold increased 13% yearon-yearreflecting the increase of the installedcapacity. Average selling price increased 6%year-on-year in 2012 supported by the updateof prices to inflation. Almost all EDP Brasil’sinstalled capacity is contracted under PPA longterm contracts.In December 2012, EDP Brasil was awardeda PPA for Cachoeira Caldeirão hydro plant,a 219MW project with an average 129.7 MWcontracted for a 30-year period at a price ofBRL 95.31/MWh. The hydro plant PPA startsin January 2017 and the project will have anexpected investment of BRL 1.1 billion andestimated leverage of 60%.The trading and supply activity in Brazilis carried out by our EDP Comercializadorasubsidiary in the free market essentially througha service of energy sourcing to large industrialclients without incurring in material energymarket risk. In 2012, gross profit in supplydeclined BRL 19 million as the 14% increase ofvolumes were more than compensated by lowerunit margins due to higher costs of energypurchased.EDP Group’s net controllable operating costs(supply and services, personnel costs, costs withsocial benefits and other operating costs (net))rose 7.1% (+EUR 119 million), to EUR 1,800 millionin 2012, driven by a EUR 64 million increasein operating costs and a EUR 55 million rise inother net operating costs. Operating costs roseby 4%, to EUR 1,600 million backed by: (i) +3%in Iberia, prompted by higher costs related toclients’switching to the free market, as part ofthe liberalisation process, and by an increase ofrestructuring costs, (ii) +13% at EDP Renováveisbacked by larger scale of operations and Foreximpact (USD appreciation); and (iii) a 1% fall inBrazil supported by favourable forex impact.Financial results totalled -EUR 705 millionin 2012, mainly driven by a 7% rise in averagenet debt coupled with lower average cost of debt(-10bp to 4.0%); lower impairment on our financialstake at BCP (EUR 58 million in 2011 and EUR5 million in 2012) and lower provisions due toa litigation process with a client in Brazil(EUR 22 million in 2011).Consolidated capex totalled EUR 2,011 millionin 2012, standing 7% below 2011. Expansion capexwas 6% lower year-on-year, backed by lowerexpansion in wind & solar (-27% year-on-year)and higher capex in liberalised activities (newhydro in Portugal) and Brazil (new hydro andcoal capacity). Maintenance capex was 8% loweryear-on-year, at EUR 692m mostly reflectingthe completion of DeNOx facilities at our Sinescoal plant in 2011. In 2012, hydro & wind capacityabsorbed 88% of expansion capex.5.1.3. CAPEX – EDP GROUPEUR Million 2012 2011 ∆ % ∆ Abs.Long-Term Contracted Generation Iberia 44.1 58.9 -25% -15Liberalised Activities Iberia 524.2 465.4 13% +59Regulated Networks Iberia 403.6 404.8 -0% -1Wind Power 606.5 828.7 -27% -222Brazil 388.4 341.2 14% +47Other 43.8 61.7 -29% -18EDP Group 2,010.7 2,160.6 -7% -150Expansion Capex 1,318,6 1,408.2 -6% -90Maintenance Capex 691.9 752.4 -8% -60156A World Full Of Energy