business plan for 2004 - EDP

2003 - Annual Report - EDP
desired balance of surplus energy in generation, and the
reconstitution of revenues that had been forecast by the
distributors were not solved by the growth of the market.
Faced with this panorama, Mines and Energy Ministry
(MME) presented a Proposed Institutional Model for the
Electricity Sector, later converted to Institutional Model
for the Electricity Sector on December 11.
Institutional model for the Electricity Sector
The new regulatory framework seeks to re-establish
medium and long-term planning, to centralise the
regulated marketing of blocks of energy between the
concessionaires on central bodies, and to create a suitable
climate to bring about investment, particularly in
production.
Two new entities were created – the Electricity Marketing
Board (CCEE), succeeding the Wholesale Electricity
Market (MAE), and the Energy Research Company (EPE)
whose main purpose is to undertake studies to allow the
MME to comply with its role of executor of the energy
planning.
The responsibilities of the existing agents were altered:
the MME is once again the direct agent of the concessor
entity; the National Energy Policy Council (CNPE) is
responsible for the security of the system; the regulatory
duties of the National Electricity Agency (ANEEL) have
been adjusted; and the structure of governance of the
National Electricity System has been altered.
Contracting energy will be undertaken by the CCEE in
two different environments:
• the regulated contracting environment, including
contracting by distributors to serve captive customers;
and
• the free contracting environment, including contracting
to serve free customers through freely-negotiated
contracts.
The distributors have to provide the contracted coverage
for 100% of their market, through regulated contracting,
always by means of auctions. This means that bilateral
contracting by distributor concessionaires without public
auction has been eliminated, and they can no longer sell
to free consumers. Self-dealing has also been
extinguished. However, contracts that existed prior to the
introduction of the new model remain valid.
Furthermore, the public service concessionaires cannot
provide services atypical to the electricity sector except
with ANEEL approval.
It should be mentioned that the regulatory environment
has not yet been fully defined and that the rules of the
new model are to be defined by future legislation, leading
to criticism by the agents.
>> 1.3.2 Position of the EDP Group
Taking into consideration, on one hand, the macroeconomic
and regulatory framework in Brazil and, on the other, the
restructuring of the EDP Group started during the first
half of 2003, there have been significant positioning
adjustments to the business of EDP in Brazil.
The EDP Group has defined the following as its major
guidelines for Brazil:
• Inclusion of the Brazil operations in its strategic
agenda;
• The need to develop these operations on a selfsustaining
basis; and
• The strengthening and the autonomy of local
management, in keeping with the Group’s strategic
principles.
In this connection, a start has been made to a process of
repositioning, which will take place over a short to
medium-term time horizon, consisting of five stages, not
necessarily sequential:
• Corporate restructuring: integration of all activities in
Brazil under the EDP Brazil sub-holding company,
which will therefore consolidate not only the financial
aspects but also planning and strategic control;
• Capital restructuring: optimisation of the allocation of
the own and borrowed funds employed by EDP Brazil
as a whole, to ensure the best possible shareholder
return;
• Corporate governance: harmonisation and alignment of
the corporate governance structures and procedures of
the EDP Brazil companies, in particular in the subholding
company/ subsidiaries interface, with a view
of improving the efficiency and transparency of the
decision-taking process. In this field, alterations have
already been made to the composition of the boards of
directors and management of the companies, so as to
strengthen local integrated management capabilities;
• Strategic positioning: introduction of the necessary
adjustments to the existing portfolio with a view to
obtain greater added value for shareholders and the
establishment of strategic platforms for the
development of future businesses in the light of the
attractiveness of the macroeconomic, regulatory and
competitive framework that will be established; and
• Generation of synergies: ensuring that EDP Brazil,
taken as a whole, is worth more than the sum of its
parts, thus providing adequate remuneration of capital
employed, in line with best international practice. The
relaunch of the Efficiency Programme and the analysis
of the feasibility of the shared services units are
included in this stage.
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