Ana Maria Fernandes - EDP Renováveis

EDP Investor Day
Ana Maria Fernandes
EDP Renováveis, CEO
November 6th , 2008 powered powered by by nature
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EDPR: EDPR: #4 #4 wind wind player player in in the the world world with with a a sound sound asset asset base… base
(1) Pending on local approvals
USA
1,733
625
17,923
MW Installed Capacity
MW Under Construction
MW Pipeline + Prospects
Brazil
14 (1)
-
216
Portugal
517
78
738
France
144
49
1,256
Spain
1,761
783
5,669
Gross MW
Belgium
-
57
74
Installed
Capacity
Poland
-
20
1,002
Under
Construction
Romania
Pipeline +
Prospects
4,155 1,612 27,615
-
-
737
1

…and and well positioned to capture long long-term long
term profitable profitable growth
growth
1
2
3
The sector for renewable energy experiences solid fundamentals and a
positive trend for long term growth
Pure renewable player, with a balanced asset base in attractive markets,
and a robust pipeline to feed future growth through a selective approach
Recent IPO provides for a solid short-term balance sheet, with future
needs supported by EDP parent company
2

Importance Importance of of energy energy dependency, dependency, CO CO2
emissions emissions and and and time time to
to
market market drives drives the the the need need for for renewables
renewables…
renewables
Coal
Nuclear
Natural
Gas
Wind
CO 2
emissions
Energy
dependency
Time to
market
5-7 yrs
~10 yrs
2-3 yrs
1-3 yrs
• Unfavorable economics
• Obsolescence risk
• Lack of public support
• Low timely availability
• Uncertain economics
• Not clear public support
• Increasing fuel dependency
• High price and volatility
Better Worst
• No CO 2 cost
• Growing regulatory and public
support
Currently, wind is the most attractive renewable technology both in terms of cost and scalability
3

…creating creating growing growing regulatory regulatory and and public public support support in in USA and EU
Growing momentum at State and Federal levels
for more strict renewable policy initiatives to
underpin wind support
US Elections / New Administration support
Establish a federal Renewable Portfolio
Standard (RPS) of 10% by 2012
escalating to 25% by 2025
Extension of PTC for 5 years at a time
USA willing to re-launch economy based on
sustainable investments
Stable regulatory environment: growth
conditions created to meet local government
and EU 2020 targets
Increasing support at national level
Mature markets: Germany increased wind
on-shore tariff to revive investments
Growing markets: Romania enhanced the
remuneration attributed to wind projects
European Commission continues to support 2020
targets even under current environment
4

1
2
3
Sector with solid fundamentals and positive trend for the long term
Pure renewable player, with a balanced asset base in attractive markets,
and a robust pipeline to feed future growth through a selective approach
Recent IPO provides for a solid short-term balance sheet, with future
needs supported by EDP parent company

Strong Strong presence presence in in attractive attractive markets markets… markets
Country
9M08 Gross MW
In operation (under
construction) 9M08 Price/MWh Remuneration Scheme
Spain
USA
Portugal
France
Belgium
Poland
Romania
1,761 (783) €99.4 Feed-in tariff + market option
1,733 (625)
517 (78) €100.1 Feed-in tariff
144 (49)
4,155 (1,612)
$87.0 (3)
€73.2
•PPA and REC contracts
•PTCs + MACRS
Feed-in tariff, 1 year
accelerated fiscal depreciation
Wind Resource
Country growth
potential 2007-2015 (4)
0 (0) €160 (2) +0.7 GW
Green Certificates, PPA
+85% CAGR
Note: (1) Base on PPA signed (2) Base on 9M08 power prices + green certificates; in Romania assuming prices of green certificates in new regulation
(3) Including sale of interests in institutional partnerships (grossed-up for taxes) (4) Source: EER, European Wind Power Market Forecasts, June 2008 and EER, US/Canada Wind Power Market Forecasts, June 2008
+16 GW
+10% CAGR
+5 GW
+17% CAGR
+ 11 GW
+24% CAGR
0 (57) €112 Green Certificates, PPA
(1) +1 GW
+18% CAGR
0 (20) €126 Green Certificates, PPA
(2)
30%
+70 GW
+23% CAGR
+3 GW
+35% CAGR
6

…with with top quality load factors to deliver premium assets
Historic and long-term load factors
(%) Premium site selection
+2.7pp
25% 25%
28% 27%
+2.1pp
24%
24%
+0.6pp
Market average
32%
2004-2007 2004-2007 2004-2007 2004-2007
28% 28% 25% 35%
Second-to-none wind assessment team
Designing premium projects by
optimizing site layout
Selecting the best fit turbine
Long-term expected on current assets + under construction A clear competitive advantage:
key value driver to maximize returns
7

EDP EDP Renov Renováveis Renov veis is is on on track track to to execute execute execute short short-term short term growth growth… growth
Total capacity: installed + under construction
(Gross MW)
Installed Capacity
Under construction
3,640
+515
+1,612
€1.0bn
already
invested (1)
2007 9M08 add. Under
constr.
5,767
Total
Gross
MW
5,115
Total
EBITDA
MW
2008 additions and capacity under construction
(Gross MW)
2008 additions
Under construction
• On track to install 1.4 GW in 2008 and visibility on 2009 new capacity
+1.4 GW
63%
37%
2008 2009
• Back-end weighted of new installations in 2008 follows historical civil works investment cycle
• Execution of short-term growth through pipeline development
(1) Excludes turbines deposits for future projects of €250m
0.7 GW
8

…and and is is adapting adapting its its growth growth strategy strategy to to current current environment
environment
Recent trends on key value drivers EDP Renováveis mitigating levers
Decrease of electricity prices
from a peak level
Increased cost of capital on
current economic environment
Possible downward pressure on
turbine prices
1
2
3
Low risk profile in a balanced and
diversified asset portfolio
Enlarged and robust pipeline providing
optionalities to value oriented growth
Un-contracted position and flexibility on
turbine delivery
9

1
Actively Actively improving improving portfolio portfolio risk risk profile
profile
Revenues breakdown
(EBITDA MW)
19%
37%
14%
5%
5%
16%
34%
15%
13%
8%
19% 13%
9M08 9M08 + Under constr.
Feed-in Tariff
Long-term PPA
Fixed Premium
Market w/ Cap&Floor
PPA to be signed
Market
Revenues Sensitivity
Fixed tariffs indexed to inflation
Long-term PPA at fixed prices or fixed escalator
Fixed premium attributed in Spain: €38/MWh on old
regulation; €30/MWh on new regulation
Market prices with a cap and floor on final realized price
Exposure to green certificate prices:
In regions with strong mandatory green quotas the “green
price” hedges “brown price”.
Total exposure to electricity market prices until 2012
(Spain): By 2013 a cap&floor will be introduced
(premium on this assets is reduced to 30€/MWh)
Currently, >85% of EBITDA MW have limited to no exposure to volatility in power prices.
10

2
Benefit Benefit Benefit from from a a robust robust pipeline pipeline of of 29GW 29GW providing
providing
optionalities optionalities to short/medium term term value value-oriented value
oriented growth
growth
Portfolio of projects
(Gross MW)
29,227
10,580
10,211
5,156
+8.4 GW
1,668
1,612
Total Prospects Tier 3 Tier 2 Tier 1 Under
const.
Time-to-market
Europe
43%
(of under construction,
Tier I and Tier II)
USA
57%
(of under construction,
Tier I and Tier II)
2012 target: 10.5 gross GW;
+6.3 GW vs. 9M2008
Spain: Target top-quality sites
Portugal: awarded tender with
assets in premium locations
Rest of Europe: growth options on
high yield markets
Accelerate development in
attractive liquid markets with
strong RPS
Mandatory demand for green
electricity is the main driver for
prices settlement and profitability
11

3
Flexibility Flexibility on on turbine turbine delivery delivery and and hold hold medium medium-term
medium term
un un-contracted un contracted position position… position
Turbines commitment until 2012
(GW)
Under
Constr.
Contracted
Not
Contracted
Total
1.6
1.8
Contracts at fixed prices (or inflation): without
indexation to past commodity escalation
c35% of the contracted turbines with flexibility on
geography and year at limited cost
Maximize projects’ value creation through the
negotiation of new contracts at competitive prices
Flexibility to serve a global pipeline and maximize
projects’ value
12

3
...to ...to manage manage project project profitability profitability and and maximize maximize value value creation
creation
Capex main inputs:
1•
Turbines: cost is driven by
raw material prices and by
the balance between
supply and demand (global
deals)
2•
Balance of Plant (BoP):
construction cost driven by
local market dynamics
1
2
70-80%
30-20%
Typical capex brekdown
EDPR: capex cost evolution
(€m / MW)
1.1
7%
CAGR
1.3
2005 2006 2007 2008 2009-10 2011 2012 2013
Signed 2006-2008 To be signed 2009-2010
Escalation of commodities and
seller’s market WTG efficiency
Capex/MW
-€100th
Depending on
economic scenarios
Current drop in commodities and
re-balancing supply and demand
+100bps
IRR unlevered
13

1
2
3
Sector with solid fundamentals and positive trend for the long term
Pure renewable player, with a balanced asset base in attractive markets,
and a robust pipeline to feed future growth through a selective approach
Recent IPO provides for a solid short-term balance sheet, with future
needs supported by EDP parent company

Funding Funding terms terms were were already already contracted contracted for for the the current current capacity
capacity
under under construction
construction
Total capacity: installed + under construction
(Gross MW)
Installed Capacity
Under construction
4,155
+1,612
5,767
9M08 Under constr. Total Gross
MW
Capex already incurred
(€ million)
1.6 GW
For 2009
0.7 GW
For 2008
0.9 GW
To be
paid
Already
spent
Under construction Capex needs covered
1 Capital expenditures already financed through debt arrangements with EDP parent or IPO proceeds
2 Terms already contracted in the former agreements with EDP parent to finance projects under construc. at fixed price for 10Y
Notes: (1) Excludes €250m of turbine deposits already spent
Total of 5,767 MW not financially impacted by the increase of cost of capital
Remaining
IPO proceeds
2
1
(1)
15

EDP EDP Renov Renováveis Renov veis sources sources of of funding
funding
1. EDP parent
company loans
2. Tax equity
markets in US
3. Project finance or
other instruments
Rational
•EDP to support the funding for EDP Renováveis to
finance business growth
•EDP to finance EDP Renováveis at market prices
•EDPR monetizes tax benefits of first 10 years of the
projects so that the value of taxable benefits are
realized as they are generated
•Monetization represents approx. 50% of projects’ initial
capex
•Mostly used in cases of wind farms in new geographies,
minority shareholders, …
•If and when terms are better than EDP’s conditions
16

Monetization Monetization of of tax tax credits credits in in US US has has become become more more challenging
challenging
but but 2008 2008 structure structure is is expected expected to to be be close close by by year year-end year end
Partnership structures to allow to capture the
full value of the projects
The lack of taxable base postpones the benefit from
the tax credits granted: tax partnerships will enable
to capture the time value of money of tax credits
New structure: Vento III – 604 MW
177 MW 358 MW 71 MW
Installed
Under
construction
end-2008
Under
construction
1Q09
Vento III undergoing due diligence process
Illustrative: capital structure of US wind
activity (%)
Life-time
Institutional
partners liability
Equity
Financial Debt
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Partners receive tax credits (PTC +
MACRS) and cash-flow from the
project between flip-dates to achieve
agreed IRR
Once construction is done Partners pay lump-sum
equivalent to the tax benefits of the first 10 years
17

Conclusion

Current Current share share price price not not even even discounts discounts the the replacement replacement cost cost of
of
the the existing existing assets
assets
Enterprise Value
(€ millions)
Equity @ 4.50 3,925
Net Debt 9M08 513
Institutional Partners 9M08 769
Minorities 9M08 343
Enterprise Value 5,551
Works in progress 9M08 1,229
Capex already incurred with projects under construction
and development
-
EV / MW
(€m/MW)
1.23
3,502 EBITDA MW
9M2008
Price to Book
(x)
0.78
@ 4.50
19

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