edp – energias de portugal, sa edp finance bv €12500000000 - CMVM

EDP for its actual or anticipated loss and the loss of any of these assets may adversely affect EDP’s business,
financial condition, prospects and results of operations. Moreover, the expiration or termination of
concessions, licences or permits might limit EDP’s ability to renew such concessions, licenses or permits and/or
to further conduct its business in an entire jurisdiction and, consequently, could have a material adverse effect
on EDP’s business, financial condition, prospects or results of operations.
EDP’s businesses are subject to and constrained by environmental, health and safety laws and regulations.
EDP’s businesses are subject to numerous environmental regulations that could have a material adverse
effect on its business, financial condition, prospects or results of operations. These include national, regional
and local laws and regulations of the different countries in which EDP operates, as well as supra-national laws,
particularly EU regulations and directives and international environmental agreements. More restrictive or less
favourable regulations, or the stricter interpretation of current regulations, such as an obligation to modify
existing power plants and associated facilities or the implementation of additional inspection, monitoring,
clean up or remediation procedures, could lead to changes in EDP’s operating conditions that might require
additional capital expenditures, increase its operating costs or otherwise hinder the development of its
business. Environmental regulations affecting EDP’s business primarily relate to air emissions, water pollution,
waste disposal and electromagnetic fields.
EDP’s thermal electricity generation operations, particularly coal-based power plants, are significantly
affected/regulated by legislation aimed at reducing CO2 emissions. Currently, installations located within the
European Union receive from Member States an initial free allocation of CO2 allowances (European Union
Allowances (EUAs)). EDP expects to receive, in the 2008-2012 period, free allowances from the Portuguese and
Spanish governments amounting to approximately 77 metric tons of CO2. This volume of EUAs, with the
purchase of additional allowances and other carbon credits such as Certified Emission Reductions (CERs) and
Emission Reduction Units (ERUs), are expected to cover EDP’s emissions fully for this period. From 2013
onwards, emissions allowances for the power sector are expected to be 100 per cent. auctioned. EDP’s
thermal plants in Portugal which are subject to CMEC legislation have the right to allocate costs of CO2
emissions into the system tariff until the original date of termination of the Power Purchasing Agreement (PPA)
concerning each plant, which will be at the end of 2017 in the case of EDP’s main coal-based power plant at
Sines.
Although EDP’s past and planned future investments in new generation facilities assume that there will
be no CO2-free allowances from 2013 onwards and that such allowances will be even more restricted over
time, EDP continues to operate according to its current CO2 risk management practices and to the existing
legislation and regulations regarding these emissions. There can be no assurance that EDP will manage its CO2
emissions within the applicable allowances nor that there will be no changes in current laws, regulations and
targets which might adversely affect EDP’s business, financial conditions, prospects and results of operations.
Apart from CO2, the major waste products of electricity generation using fossil fuels are sulphur dioxide,
nitrogen oxide, and particulate matter, such as dust and ash. A primary focus of the environmental regulations
applicable to EDP’s business is to reduce these emissions, and EDP may have to incur significant costs to
comply with environmental regulations which require the implementation of preventative or remediation
measures. Environmental regulation may include emission limits, cap-and-trade mechanisms, taxes or
remediation measures, among others, and may determine EDP’s policies in ways that affect its business
decisions and strategy, notably discouraging the use of certain fuels.
The EU Large Combustion Plant (LCP) Directive (the “LCP Directive) regulates industrial pollution and aims
to reduce emissions of acidifying pollutants, particles, and ozone precursors. The LCP Directive entered into
force on 27 November 2001 and it replaced the old Directive on large combustion plants (Directive 88/609/EEC
as amended by Directive 94/66/EC). The LCP Directive encourages the combined generation of heat and power
and sets specific emission limit values for the use of biomass as fuel. It also includes certain gas turbines in its
scope in order to regulate NOX emissions, and has set limits for sulphur dioxide, nitrogen oxide and dust in
effect since 1 January 2008. The main strategy adopted by EDP to comply with the LCP Directive and with
applicable national law (notably with Decree-Law 178/2003, of 5 August which transposes into national law the
said Directive) involved installing desulphurisation and denitrification systems in its most efficient coal plants.
After a two-year review process, the European Commission adopted on 21 December 2007 a proposal for
a Directive on industrial emissions to minimise pollution from various industrial sources throughout the
European Union (the “IPPC Directive”). The Proposal recasts seven existing Directives related to industrial
emissions into a single clear and coherent legislative instrument. The recast includes the then-existing Directive
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