Following the publication of Decree-Law n.° 240/2004 on January 27, 2005, agreements were signed for the early termination or" the PPAs held by EDP's generation plants (the PPAs with the private developers remained in torce). The Decree-Law established that in order to maintain the contractual equilibrium of the PPAs, the holders of such agreements, which included a significant portion of LDP's generation capacîtv in Portugal, had the right to receive compensation for the early tennination ot those agreements (CMEC). Termination depended on certain pre-conditions being fulfilled, including the launch of the spot electricity market at the Iberian level (MIBFL), which came into effect on Įulv 1, 2007, although the relevant agreement for the EDP PPAs was signed on 15 June 2007. Generation plants operating under CMEC sell electricitv directiv on MIBLcommasuperiorL i.e. are not dispatched by REN. However, plants have to match "Yaloragua's" simulations in terms ot (quantity ot) energy placed on the market. For the two remaining PPAs, R.EN Trading makes offers for these plants' output.
We understand that the CMEC regulation set out the amount of initial compensadon for the termination of the PPAs and at the same rime it was established that EDP would pay an additional sum in relation ro the extension of its rights to use public hydro resources for an average period of over 26 years.
Thus under the CMEC programme, each EDP generatoti plant that was under a PPA with REN was treated as follows: • Intention was to keep each plant 'whole' as per its PPA with REN.
• The underlying remuneration of assets remained unchanged at 8.5% real pre-tax cost of capital and all operating costs (fuel, C02, other variable and fixed) continue to be passed through to the consumer taritt • The incentive scheme to promote power availability remained unchanged: we understand that this incentive regime was a source of additional profit for the generators.
• We also understand that in order to calculate the termination payment, each plant was reviewed and the NPV of future cash streams compured, bur that the NPV calculation and subsequent calculation of annuity payments gave a further and significant financial uplift to EDP.
• We also understand that FDP may have acquiring rights to extend the use of hydrological resources at a price which created a further financial gain for EDP, and that the use of correction tactors in hydro and coal generation also mitigates the risk of EDP Table 2.1 below summarises how individual Hums are dealt with under the P l'As/ CMEC. This summán- is based on a review of a private developer's CCGT PPA and discussions with the Ministry.
5 DE JUNHO DE 2012
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