Annual Report - EDP

notes to the consolidated EDP - and Energias company de Portugal, financial S.A. statementsfor the years ended 31 december 2012 and 2011Notes to the Consolidated and Company Financial Statementsfor the years ended 31 December 2012 and 201115. FINANCIAL INCOME AND EXPENSESFinancial income and expenses are analysed as follows:GroupCompanyThousands of Euros Dec 2012 Dec 2011 Dec 2012 Dec 2011Financial incomeInterest income from bank deposits and other applications 53,998 80,377 22,770 35,349Interest income from loans to subsidiaries and related parties 12,263 8,040 433,734 325,696Interest from derivative financial instruments 135,149 140,040 23,335 28,749Derivative financial instruments 223,691 265,911 350,285 437,216Other interest income 57,846 60,681 1,272 1,485Income from equity investments 5,828 7,885 643,458 638,498Foreign exchange gains 59,665 71,758 12,743 5,331CMEC 77,322 81,272 - -Other financial income 105,896 102,884 2,848 670731,658 818,848 1,490,445 1,472,994Financial expensesInterest expense on financial debt 807,627 776,628 312,049 320,179Capitalised borrowing costs:Assigned to concessions (see note 7) -11,603 -13,922 - -Other -131,400 -126,721 - -Interest from derivative financial instruments 110,444 113,255 17,577 33,171Derivative financial instruments 277,315 250,182 339,879 377,320Other interest expense 41,239 54,560 8,752 8,769Impairment of financial investments:Available for sale financial assets 9,328 63,435 - -Subsidiaries - - 25,307 51,854Foreign exchange losses 54,801 123,813 5,453 77,618CMEC 18,240 17,974 - -Unwinding of liabilities 114,969 107,940 - -Unwinding of pension liabilities 48,202 44,926 - -Unwinding of medical liabilities and other plans 45,251 43,161 - -Other financial expenses 52,511 79,004 13,198 10,0311,436,924 1,534,235 722,215 878,942Financial income / (expenses) -705,266 -715,387 768,230 594,052The caption Other financial Income - CMEC totalling 77,322 thousands of Euros includes 18,976 thousands of Euros related to interest of the initial CMEC (31 December2011: 19,080 thousands of Euros) included in the annuity for 2012, 55,687 thousands of Euros related to the financial effect considered in the calculation of the initialCMEC (31 December 2011: 57,629 thousands of Euros) and 2,659 thousands of Euros relating to the financial component of the revisable mechanism of CMEC for 2012(31 December 2011: 4,563 thousans of Euros).The caption Other financial income includes essentially an amount of 68,808 thousands of Euros related with interest income of tariff adjustment and tariff deficit in thenational electricity system in Portugal (31 December 2011: 21,578 thousands of Euros) and 10,851 thousands of Euros (31 December 2011: 7,282 thousands of Euros)related with interest income of tariff adjustment and tariff deficit in Spain. The caption Other financial expenses includes an amount of 4,453 thousands of Eurosrelated with interests of tariff adjustment in Portugal (31 December 2011: 4,009 thousands of Euros).Other financial expenses - CMEC, in the amount of 18,240 thousands of Euros (31 December 2011: 17,974 thousands of Euros), relates to the unwinding of the initialCMEC, booked against Deferred Income (see note 39).Capitalised borrowing costs includes the interest capitalised in assets under construction according to the accounting policy described in paragraph 2 h). The interestrates considered for the referred capitalisation are in accordance with market rates.The caption Impairment of available for sale financial assets in the amount of 9,328 thousands of Euros, refers essentially to impairment of the investment held in BCPin the amount of 5,495 thousands of Euros (31 December 2011: 57,851 thousands of Euros), as a result of the listed price decrease of this shares (see note 22).As at 31 December 2012, the caption Impairment of financial investments, on a company basis, includes 25,307 thousands of Euros of the net effect related to theincreased of impairment losses on equity investments in subsidiaries in the amount of 66,091 thousands of Euros (see note 20) and to the decrease of provision tocover the negative equity of subsidiary companies in the amount of 40,784 thousands of Euros (see note 37). In 2011 this caption includes an impairment bookedagainst financial expenses as a result of losses on the subsidiaries EDP Imobiliária e Participações, S.A. (50,784 thousands of Euros) and EDP Investimentos, S.A. (1,020thousands of Euros).The Unwinding of discounted value liabilities refers essentially to, (i) the unwinding of the dismantling and decommissioning provision for wind generation assets of7,862 thousands of Euros (31 December 2011: 4,741 thousands of Euros), (ii) the unwinding related to the put option of EDP Renewables Itália of 214 thousands of Euros(31 December 2011: 1,400 thousands of Euros), (iii) the implied financial return in institutional partnership in USA wind farms which amounted to 68,431 thousands ofEuros (31 December 2011: 62,538 thousands of Euros), and (iv) the financial expenses related to the discount of the debt associated to the concessions of Alqueva,Investco and Enerpeixe of 10,610 thousands of Euros (31 December 2011: 10,628 thousands of Euros), 3,035 thousands of Euros (31 December 2011: 5,051 thousands ofEuros) and 10,575 thousands of Euros (31 December 2011: 11,958 thousands of Euros), respectively.200A World Full Of Energy