Annual Report - EDP

notes to the EDP consolidated - Energias de Portugal, and company S.A. financial statementsNotes to for the the Consolidated years ended and Company 31 december Financial Statements 2012 and 2011for the years ended 31 December 2012 and 2011Customers contributions includes the effect of the application of IFRIC 18 in the electricity and gas distribution activities in Spain in the amount of 37,335 thousands ofEuros (31 December 2011: 47,687 thousands of Euros), as referred in accounting policy 2h).Income arising from institutional partnerships - EDPR NA relates to revenue recognition arising from production and investment tax credits (PTC/ITC) and taxdepreciations regarding Vento I, II, III, IV, V, VI, VII, VIII, IX and X projects, in wind farms in U.S.A. (see note 38).EDPR Italia acquired 100% of Pietragalla Eólico S.R.L. share capital. Additionally, EDPR Romenia acquired 100% of the share capital of six solar photovoltaic companies.During 2012, EDPR Group carried out the purchase price allocation to the identificable assets acquired and liabilities assumed of these companies which originates anoperating income of 29,754 thousands of Euros in EDPR Romania and 2,639 thousands of Euros in EDPR Italia (see note 19). These bargain purchases arose fromEDPR Group negotiation power, financing capacity and liquidity, as were as from Romanian Solar market stage of development which enables favorable transactions.During 2010, the Group acquired 85% of EDP Renewables Italia, S.r.l. The EDPR Group granted the seller a put option over the remanaining 15% of the interest which, inline with the Group's accounting policy, has been treated as an advance purchase of non-controlling interests. The acquisition cost recognised in the annual accountsfor 2011 included the balance settled in cash, consideration contigent on the successful implementation of projects underway, and an amount reflecting the fair valueof the put option. The contigent consideration and the amount of the put option are both at fair value (see notes 19 and 40). In 2011, EDPR Italia increased its sharecapital and the minority shareholder, Energía in Natura,S.r.l., did not subscribe this increase. As a result, the percentage ownership on the non-controlling interestshas fallen to 6.48% and as well the percentage to be adquired through that written put option. After this operation, the Group updated the estimate of the amountpayable taking into account the reduced percentage of the anticipated acquisition of non-controlling interests, and considering the updated estimate of energy pricesand the number of MW to be installed in the future. In light of the above, the EDPR Group has reduced the liability associated with the put option by 34,625 thousandsof Euros and the contigent consideration by 17,070 thousands of Euros, and recognised a profit for the year of 51,695 thousands of Euros (see note 40).In May 2012, EDP Energias do Brasil, S.A. signed a sale and purchase agreement to sell its financial investment in Evrecy Participações, Ltda. (owner of electricitytransmission assets) to Companhia de Transmissão de Energia Elétrica Paulista - CTEEP for 25,181 thousands of Euros (63,164 thousands of Brazilian Real). On 21December 2012, after ANEEL's approval, the disposal process was completed, originating a gain of 12,478 thousands of Euros.In 2012, Provisional Measure 579/12, meanwhile converted into Law 12.783/13, was issued in Brazil, which establishes the calculation rule of the indemnities payableto distribution companies, related to the assets not fully amortised or depreciated at the end of the concession period, based on the new replacement valuemethodology. This methodology determined an increase in the indemnity receivable by Bandeirante and Escelsa, accounted for as a financial asset under IFRIC 12terms, of 40,838 thousands of Euros (102,439 thousands of Brazilian Real), against other operating income. This amount corresponds to the difference between theresidual value of the assets according to the new replacement value versus the historical cost (see note 26).The caption Other operating income includes the power purchase agreements between EDPR NA and its customers which were valued based on marketassumptions, at the acquisition date, using discounted cash flow models. At that date, these agreements were valued at approximately 190,400 thousands of USDand recorded as a non-current liability (see note 39). This liability is depreciated over the period of the agreements against Other operating income. As at 31 December2012, the amortisation for the period amounts to 9,888 thousands of Euros (31 December 2011: 10,334 thousands of Euros).As at 31 December 2011, Gains on fixed assets includes approximately 27 millions of Euros related with the sale of the electricity transmission network andpowerstations owned by Hidrocantabrico to Rede Eléctrica de España ("REE").9. SUPPLIES AND SERVICESSupplies and services are analysed as follows:GroupCompanyThousands of Euros Dec 2012 Dec 2011 Dec 2012 Dec 2011Supplies and servicesConsumables and communications 52,345 54,403 9,382 11,324Rents and leases 112,579 102,154 45,676 40,865Maintenance and repairs 326,291 326,897 17,452 15,871Specialised works:- Commercial activity 152,507 156,386 5,554 9,778- IT services, legal and advisory fees 98,019 89,081 30,226 26,400- Other services 59,106 46,452 11,459 12,784Provided personnel - - 44,309 44,575Other supplies and services 127,440 125,675 16,821 15,255928,287 901,048 180,879 176,852EDP - Annual Report 2012197