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EDP Renewables 2013 Annual Report

Strategy

EDPR’S STRATEGY IS BASED IN THREE MAIN PILLARS

EDPR’s strategy is based in delivering higher profitability supported by the performance of its premium assets and selective and profitable growth through a self-funded business model. To capture new growth opportunities and expand operations, it is important to successfully select the best projects and to minimize dependence on external sources of funding.

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QUALITY ASSETS DELIVERING INCREASED PROFITABILITY

As of December 2013, EDPR managed a global portfolio of 8.5 GW spread over 10 countries, of which 8.0 GW fully consolidated (EBITDA MW) with additional 455 MW equity consolidated through its interest in the Eólicas de Portugal consortium. EDPR’s portfolio has low exposure to electricity market volatility as 93% of the installed capacity has pre- defined remuneration schemes with a long-term profile and only 7% is exposed to US spot wholesale electricity markets.

Optimizing performance throughout a project’s life-cycle is a key priority at EDPR. EDPR’s superior know-how and expertise guided by internal models drives operational metrics above the market, resulting in premium load factors and high levels of availability. EDPR’s focus on high operational efficiency metrics, with a comprehensive O&M strategy, is crucial to keep costs under control and key to achieve quality financial metrics.

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SELECTIVE AND PROFITABLE GROWTH

To grow profitably and create solid value, EDPR has a low risk strategy when it comes to energy prices. By entering markets with predictable prices through long-term power purchase agreements, EDPR is able to define its future in advance and achieve solid visibility of the projects’ stable cash-flow stream.

1,200 MW OF NEW PPAS SECURED IN THE US

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Since the extension of the PTCs in the United States in early 2013, EDPR secured 1,200 MW of PPAs in the US market with 950 MW for new projects to be installed in 2014 and beyond. The successful outcome from securing long-term PPA agreements reinforces EDPR’s shift to markets with a low risk profile.

Besides United States, EDPR was also granted during 2013 with new 20-year contracts for projects to be installed in Italy (60 MW) and Brazil (116 MW). The new long-term contract in Brazil, adds to a total of 236 MW of capacity

already awarded in Brazil, reinforcing the growth potential of this market. France remains a market where EDPR will continue to grow by taking advantage of its low risk remuneration system. EDPR continues to pursue new long-term PPAs along with contracts awarded in energy auctions, as these provide predictable prices over the useful life of the projects, allowing the company to define its future in advance and to create value thought projects with solid and visible cash flows.

SELF-FUNDED BUSINESS MODEL

In 2012, EDPR implemented a financial policy that embraces being independent from external funding sources to pursue its growth strategy. In capital intensive businesses, such as renewable energy, it is crucial to have visibility on the company’s ability to raise funds to add new value accretive projects when a project is still in the final stages of development. With this mind-set it is of the upmost importance to make sure the operating cash-flow of the assets already installed is maximized as this will be the main source of funds for the company’s growth.

In order to achieve this strategic pillar, while maximizing the execution of growth opportunities, EDPR implemented its Asset Rotation Strategy. The purpose is to sell minority stakes in operational assets with a low risk profile and reinvest the proceeds in new higher value accretive projects. With the successful execution, EDPR also crystallizes the value of the asset upfront and accelerates the value growth cycle.

620 MILLION EUROS ALREADY SIGNED WITH BOREALIS, CTG, FIERA AXIUM AND AXPO

Since the asset rotation strategy was implemented, EDPR has successfully executed four transactions totalling 620 million euros and signed a MoU envisaging an additional one. This remarkable track record in the Asset Rotation strategy, besides being crucial to continue adding news projects to the company’s portfolio, also provides a good benchmark of the value of EDPR’s assets to the capital markets.

In 2013, EDPR concluded the transactions structured in December 2012 with China Three Gorges (CTG) covering EDPR’s wind farms in Portugal (613 MW) and executed deals with Fiera Axium for a 97 MW wind farm in the United States and with Axpo Power for a portfolio of 100 MW in France. Also in 2013 EDPR signed a MoU with CTG envisaging an asset rotation strategy in relation with EDPR’s interest in the ENEOP consortium, which is to amount to 535 MW when the construction of the project is finalized.

EDPR’s asset rotation strategy leverages on critical expertise in creating value in the project’s initial stages, transforming high risk projects into low risk profile assets with a long useful life and stable and visible cash flows. This strategy allows EDPR to monetize the value of the project’s future cash flows, while maintaining operating control of the wind farms, and re-investing the proceeds in the development of new higher quality and value accretive projects.