Annual Report - EDP

notes to the EDP consolidated - Energias de Portugal, and company S.A. financial statementsfor the years ended 31 december 2012 and 2011Notes to the Consolidated and Company Financial Statementsfor the years ended 31 December 2012 and 2011The movement in Provision for dismantling and decommissioning is analysed as follows:GroupThousands of Euros Dec 2012 Dec 2011Balance at the beginning of the year 140,212 65,331Unwinding 7,862 4,741Increase of the responsability 23,125 41,094Other and exchange differences -1,797 29,046Balance at the end of the year 169,402 140,212As at 31 December 2012, Provision for dismantling and decommissioning on a consolidated basis includes the following situations:i) The Group holds a provision of 29,059 thousands of Euros (31 December 2011: 22,877 thousands of Euros) to cover the cost of dismantling the Trillo Nuclear Plantfrom the final close down until its transfer to Enresa, the company that will dismantle it;ii) Provisions for dismantling of wind farms of 63,336 thousands of Euros (31 December 2011: 57,694 thousands of Euros) to cover the costs of returning the sites totheir original state, from which 37,652 thousands of Euros referring to the wind farms of the EDPR North America Group, 24,810 thousands of Euros to the windfarms of the EDPR Europe Group and 874 thousands of Euros to the wind farms of the EDPR Brazil Group;iii) Under the current and future social/economical trends and the practices followed by the EDP Group in matters of sustainability and environment, the groupaccounts for provisions to cover the costs with the restoring and decontaminating land where electric power plants are located. As at 31 December 2012, theprovision which amounts to 56,044 thousands of Euros (31 December 2011: 43,215 thousands of Euros) and 20,194 thousands of Euros (31 December 2011: 15,608thousands of Euros) to the electric power plants located in Portugal and Spain, respectively. According to accounting policy referred in note 2 o), these provisionsare calculated at the present value of the future liability and are accounted for as part of the cost of the related asset (increase in property, plant and equipment)and are depreciated on a straight line basis over the expected average useful life of the assets.The movement in Provision for other liabilities and charges for is analysed as follows:GroupCompanyThousands of Euros Dec 2012 Dec 2011 Dec 2012 Dec 2011Balance at the beginning of the year 149,927 164,977 72,172 21,867Charge for the year 28,366 31,811 12,171 56,463Reversals -22,693 -33,890 -55,882 -6,163Charge-off for the year -22,930 -14,519 - -Other and exchange differences -7,822 1,548 -579 5Balance at the end of the year 124,848 149,927 27,882 72,172During the second quarter of 2012, the EDP Group reversed a provision in the amount of 16,667 thousands of Euros related to a litigation with Iberdrola for damagesand losses for their unjustified opposition to the access of HC Energia to the transportation networks in the community of Valencia during the years 2001 and 2002. On17 May 2012, HC Energia was notified by the High Court of Valencia of the decision to accept an expert report which strengthens the HC Energia position. Thus, HCEnergia reviewed the contingency associated with this litigation, and considered as remote the possibility of returning to Iberdrola the compensation receivedfollowing the court decision subject to an appeal by Iberdrola.As at 31 December 2012, Provision for other liabilities and charges includes, in individual basis, the variation of 40,784 thousands of Euros related to a reduction on theprovision to cover for the negative equity of subsidiary companies, booked against financial results (see note 15).In the course of its normal activity, EDP Group subsidiaries are involved in several litigations and contingencies (of possible risk) of administrative, civil, tax, labour andother natures. These legal, arbitration or other actions, involve customers, suppliers, employees, administrative, central, municipal, tax, environmental or otherauthorities. In EDP Groups opinion and its legal advisors the risk of a loss in these actions is not probable and the outcome will not affect on a material way itsconsolidated financial position.The losses of these processes were considered as possible, do not require the recognition of provisions and are periodically reassessed. At 31 December 2012, themore relevant situations considered as possible contingencies are described as follows:i) Bandeirante is involved in a lawsuit with the client White Martins, S.A. in the amount of 28,117 thousands of Euros, on the alleged existence of reflex effects of theAdministrative Order 38/86 and 45/86 of the extinguished DNAEE, in the electricity tarrif charged by Bandeirante, between 1986 and 2000. EDP Group classifiesthe risk of loss of this lawsuit as possible, considering that customer complaint has no legal basis, in accordance with existing jurisprudence with regard to suchcomplaints;ii) Investco is involved in a legal action of a civil nature mostly related with indemnity claims resulting from the filling of the hydroelectric reservoir, in the amount of32,366 thousands of Euros.On 27 October 2009 and 5 January 2010, the EDP Group received two tax assessments regarding 2005 and 2006 taxable income for the EDP tax Group, whichincluded an adjustment of 591 millions of Euros regarding its subsidiary, EDP Internacional SGPS, related to the tax treatment considered by the EDP Group in relationto a capital loss generated with the liquidation of a subsidiary, whose main assets consists of investments in operating subsidiaries in Brazil, namely Escelsa andEnersul. As at 31 December 2012, the amount of this tax contingency totals 224 millions of Euros.Considering the analysis made and the technical advice received, and a favourable binding opinion obtained from the tax authorities in relation to the nature of thetransaction 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 taxdeductible 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 atpresent date (actual article 81).EDP - Annual Report 2012233