Growth on renewables and Brazil balanced with value crystallisation under a controlled financial leverage

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Maximilian Payne
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2 Net investments (1) 2017: geographical breakdown ( bn) Recurring EBITDA breakdown (%) By geography By business area 0.6 (2) 0.5 (3) % 24% 15% 19% 19% 17% 18% 19% 23% Networks Iberia G&S Iberia Renewables with PPA/FiT New hydro & wind with PPA; Regulated networks Sale of gas distribution Sale of gas distribution and 49% in some wind farms Acquisition of 5.1% stake in EDPR 47% % 2018E 40% 2018E Growth on renewables and Brazil balanced with value crystallisation under a controlled financial leverage (1) Net of TEIs; (2) Includes EDPR Capex in rest of the world; (3) Includes net investments at EDPR level in Brazil 1

GW Secured 2018 2019-20 2021-23 0.68 0.35 0.

clarification of tax reform impacts 0.35 0.49 0.15 0.

Tréport/Noirmoutier (France): FID 2020E; COD 2023/24E Additional farm downs:

3 GW Secured New renewables in US: PPAs and TEIs markets back to normal following the clarification of tax reform impacts Value enhancing disposals: Asset rotations (minority stakes) BOT (majority stakes) 1.16 (1) New wind offshore projects: Moray East (UK): FID 2018E; COD 2022E Le Tréport/Noirmoutier (France): FID 2020E; COD 2023/24E Additional farm downs: 2018E Strong visibility on growth improving competitiveness of generation portfolio at attractive returns (1) Based on attributable installed capacity in UK offshore (77% of 950MW) and France (43% of 992MW) 2

Greenfield Transmission Lines 5 transmission lines with 1,297km to be built until 2021/2022 Expected capex: R$3.

Distribution concession in Santa Catarina State Up to R$0.4bn investment for 33.3% stake (1) at EV/RAB of 0.

eventual consideration of small size opportunities Track record on efficiency improvements; sound regulatory frameworks; favourable interest

4 Greenfield Transmission Lines 5 transmission lines with 1,297km to be built until 2021/2022 Expected capex: R$3.1bn (~ 800m), expected ROE 12%-14% (real terms) Potential upside from funding costs and anticipation of construction schedule Celesc Distribution concession in Santa Catarina State Up to R$0.4bn investment for 33.3% stake (1) at EV/RAB of 0.7x; involvement in management Potential upside from efficiency improvements and eventual privatisation process Portfolio restructuring: eventual consideration of small size opportunities Track record on efficiency improvements; sound regulatory frameworks; favourable interest rate cycle (1) Voluntary Public Offering to be potentially held for the preferred shares of CELESC at R$27/share and up to 32% of the total preferred shares of the issue of CELESC (potential total amount of R$0.2bn) 3

5 Operating costs 2017 Business area Indicator YoY Chg. Main drivers Operating costs 2018E Target Savings Key initiatives already launched 58% Iberia Opex (proforma (1) ) -1% 25% Core EDPR Opex/MW -1% (ex-forex) Avg. MW: +7%; Thermal production: +29% Avg. Headcount (2) : -2% (~200 employees) Inflation Portugal +1.4% (3) Average installed capacity: +9% Opex ex-forex: +8% Double outperformance vs. Opex IV Expected outperformance vs. OPEX IV (5) Zero Base Budgeting Launched in Spain and IT EDP X launched in Jan-18 Group-wide digitalisation programme HR restructuring program in Iberia (so far reduction of 150 FTEs ) 17% EDP Brasil Weight on Opex Opex in BRL (inflation adjusted) -1.5% Opex in BRL:+2% Avg. Inflation 2017: +3.5% (4) 130 Target Savings Remote management of power plants in Iberia: contract signed with GE for preventive maintenance Opex IV corporate-wide efficiency programme: 141m savings in 2017, 26% above target (1) Excludes gas networks and HR restructuring costs; (2) Excluding gas networks; (3) Avg. IPC 2017 vs. 2017; (4) Avg. IPCA 2017vs. 2016; (5) Measures taken until Sep-17 4

6 Net Interest Cost ( m) Marginal and average cost of debt (%, ) (2) Weighted avg. marginal cost of debt EDP 4.4% 4.1% Avg. Cost of Debt bp -30 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2.8% % -90 Net interest cost (1) ( m) % Avg. Net Debt ( bn) % 15.7 Strong decline of marginal cost of debt in 2017: room for further decline in avg. cost of debt (1) 4Q16 and 4Q17 net interest costs exclude non-recurring costs with debt repurchase programmes (2) Based on EDP 5Y bond yield in EUR, USD and CDI as at 31-Dec-16 and 31-Dec-17 multiplied by the proportion of debt denominated in EUR, USD and BRL, respectively 5

7 Recurring EBITDA YoY Key highlights Weight on Recurring EBITDA 39% EDPR +0.20bn +17% +9% avg. capacity mostly US, Mexico and Brazil 1st farmdown in UK wind offshore project (CfD awarded in Sep-17) 27% Regulated Networks Iberia -0.04bn -4% Gas distribution: - 83m YoY, to 128m, following disposals in Jul/Oct-17 Electricity distribution +6% YoY (+ 0.05bn) on efficiency and previous years adjustments 17% EDP Brasil +0.08bn +14% EUR, +8% BRL Benefitting from a more integrated hedging strategy in energy markets Forex: +7% impact 17% Generation & Supply -0.41bn -42% Hydro production vs. average hydro year: - 0.3bn in 2017 vs bn in 2016 Higher fuel costs (coal), adverse regulatory changes (end of CMECs, higher clawback levy) -0.2bn -5% Renewables capacity growth, efficiency improvements and Brazil s good risk management mitigated severe drought and deconsolidation of gas networks in Iberia 6

8 Net profit 2017 ( m) Recurring net profit ( m) 1,113 Naturgas Capital Gain Hydro volumes: - 0.3bn Coal plants Iberia EDPR Poland Gas disposals Wind asset life Reported Net profit Capital gains Impairm. Other (1) Energy tax Recurring net profit 2016 EBITDA D&A Financials Taxes & Minorities 2017 Recurring net profit strongly penalised by extreme low hydro production in Iberia (1) Restructuring costs (- 21m), regulatory-driven costs/provisions (- 61m); debt prepayment fees and others (- 33m); impact from US fiscal reform (+ 44m) 7

9 Change in Net Debt: Dec-17 vs. Dec-16 ( bn) Regulatory Receivables Net debt excluding reg. receivables Portfolio reshuffling: - 2.4bn One-offs taxes/costs: + 0.5bn ForEx: - 0.6bn YoY bn from extreme drought Net Debt Dec-16 Rec. Organic FCF (1) Dividends paid to EDP Shareh. Net Expansion Investm., net of disposals (2) Reg. Receivables Other Net Debt Dec-17 YE16 ( bn) Adj. Net Debt /EBITDA (x) Portfolio reshuffling improving Adj. Net Debt/EBITDA to 3.7x, even including negative hydro impact (1) EBITDA - Maintenance capex - Interest paid - Income taxes + Chg. in work. capital excluding regulatory receivables; (2) Expansion capex, Net financial investments (incl. shareholder loans transferred in asset rotation deals), TEI proceeds, Chg. in work. capital from equip. suppliers; acquisitions and disposals; and changes in consolidation perimeter. (3) Net Debt ex-reg Receivables and trailing recurring EBITDA 8

10 Financial liquidity as of Dec-17 ( bn) EDP consolidated debt maturity profile as of Dec-17 ( bn) EDP S.A., EDP Finance B.V. and Other EDP Brasil Cash & Equivalents: 2.4bn Avg. Debt Maturity: 4.8Y 4.8 Available Credit Lines: 4.2bn 3.4 Revolving Credit Facility maturing on Oct-22 (1) Other RCF s and Credit Lines 3.3bn 0.9bn Total Liquidity 6.6bn Q17 main events 0.5bn 10Y bond 0.6bn of tariff deficit securitization Repurchase of USD0.5bn of notes Completion of USD0.5bn of TEIs 6.6bn available liquidity by Dec-17 covers refinancing needs beyond 2019 (1) The maturity of a 3.3bn RCF was extended from Jun-19 to Oct-22 in Oct-17 9

11 Distribution Regulated Revenues (1) Change 2018 vs bn ERSE s proposal on Oct-13 th Final figures announced on Dec-15 th Regulatory framework now stable for Focus on efficiency levers: grid losses, Opex, digitalisation Clawback bn Change in clawback levy since Aug-17 Questionable and disproportional level of taxes and levies justify the several ongoing appeals in courts Already reflected on earnings consensus (1) Assuming average of 2.01% for 10Y PT Bond Yield between 1-Oct-17 and 27-Feb-18 10

EBITDA drivers for 2018E Iberia Recovery of hydro volumes (although Jan/Feb still weak) Gas networks disposals in 3Q17 Lower regulated revenues in distribution; higher clawback

PPAs Recurring Net Profit 770m EDP Brasil Growth in local currency Negative Forex impact Net Debt 14.2bn Interest costs Lower avg. net debt; marginal cost of debt below avg.

12 EBITDA drivers for 2018E Iberia Recovery of hydro volumes (although Jan/Feb still weak) Gas networks disposals in 3Q17 Lower regulated revenues in distribution; higher clawback Analysts Consensus on EDP for 2018E (1) Efficiency: Further improvements (Opex IV) Recurring EBITDA 3,420m EDPR Wind capacity additions in 2017 and 2018: Mostly US and Brazil PPAs Recurring Net Profit 770m EDP Brasil Growth in local currency Negative Forex impact Net Debt 14.2bn Interest costs Lower avg. net debt; marginal cost of debt below avg. cost 2018 consensus already reflect regulatory cuts in Portugal slightly below average hydro year in Iberia (1) Consensus 2018 compiled by EDP based on 19 analysts as of March 1 st,

13 Average Residual Useful Life of EDP s Generation 2020E by Technology (1) Average Residual Useful Life of EDP s Generation Portfolio (1) (Years) Hydro CCGT Wind & Solar Coal with DeNOx Nuclear 48% (33%) (13%) (42%) 21 (11%) 9 8 (1%) Dec-05 Dec-20 Generation portfolio: low exposure to regulatory/environmental risks as CO 2, NOx or nuclear lifecycles Long term contracted generation and regulated networks to represent ~75% of EBITDA by 2020 (1) Reference Date: Dec-20; Excluding: Special Regime (Mini-hydro, Cogeneration and Biomass) and Including MW attributable by Equity Consolidated Method 12

14 Profitable and focused growth 3.1 GW of renewables growth projects secured (0.8W under construction) Regulated networks Brazil: 5 new transmission concessions and minority stake in Celesc Visibility on growth platforms Financial discipline Adjusted Net debt/ebitda x Investment grade by 3 rating agencies Value crystallisation trough asset rotations/bot Sound capital structure Reinforce efficiency Opex IV efficiency programme: 26% above target in 2017 ( 141m savings) Targeting to double outperformance in 2018 to 180m Best in class Focus on profitability and shareholder return with a firm commitment on dividend policy: 0.19/share as a floor (payout of 62% in 2017) 13

15 ANNEXES 14

16 EDP Shareholder Structure (March 1 st, 2018) FREE FLOAT, 33.1% CHINA THREE GORGES (China), 23.3% AGM announced for April 5 th, with management s reelection for proposed by 39% of share capital TREASURY STOCK, 0.6% QATAR, 2.3% SONATRACH (Algeria), 2.4% CAPITAL GROUP (US), 12.0% OPPIDUM (Spain), 7.2% Masaveu 56% Liberbank 44% Two tier model: Executive Board of Directors (EBD) and General and Supervisory Board (GSB) All major corporate and strategic decisions scrutinised by the GSB after proposal of the EBD: two tier model assures split between management and supervisory BCP Pension Fund (Portugal), 2.4% NORGES BANK (Norway), 2.8% CNIC (China), 5.0% BLACKROCK (US), 5.0% MUBADALA (UAE), 4.1% GSB composed of 21 members with a majority of independents EBD composed of 8 members 15

Wind & Solar Power 39% of EBITDA (17% North America; 9% Spain; 6% Portugal; 2%

6%) IPO in Jun-08 Wind & Solar Power: 10.

EBITDA Listed subsidiary: EDP Brasil (EDP has 51%) Presence since 1996 Power

5 GW (hydro and coal) 2 electricity distribution concessions 5 transmissions lines

17 Wind & Solar Power 39% of EBITDA (17% North America; 9% Spain; 6% Portugal; 2% Brazil; 6% Other) Listed subsidiary: EDP Renováveis (EDP has 82.6%) IPO in Jun-08 Wind & Solar Power: 10.7GW A worldwide renewable market leader Note: Data as of Dec-17 EDP Brasil 17% of EBITDA Listed subsidiary: EDP Brasil (EDP has 51%) Presence since 1996 Power generation: 2.5 GW (hydro and coal) 2 electricity distribution concessions 5 transmissions lines (under construction) Portugal 32% of EBITDA Privatisation in 1997 (IPO) Single electricity distributor Power generation: 10.1 GW (ex-wind) (from which 6.8GW is hydro) Spain 12% of EBITDA Presence since 2001 Power generation 3.5 GW (ex-wind) 16

18 Canada 30 - US 5,055 47% % - ~86% LT PPAs/Hedged ~14% Merchant price Brazil 331 3% 137 Long term PPAs (20 years) Offshore wind project under development UK 2 Offshore wind projects under development Portugal - - Spain Belgium 71 - France % Italy 1,253 12% 2,244 21% 144 1% Spain: pool + premium per MW Fixed tariffs indexed to inflation: Portugal: for years France: for 15 years 4% 77 Poland Other Europe: Long Term PPAs or regulated price; wind receive 1 Green Certificate/MWh 4% Romania 521-5% Installed Capacity (MW) % total installed capacity MW Under construction 10,676 (1) 828 Note: Data as of Dec-17 (1) Does not include 331MW consolidated through the equity method (Spain: 152MW; US 179MW) 17

19 EDP Brasil: Geographical footprint (1) Hydro Power Plant Thermal power plant Distribution Concession Area Jari 373MW (50%) Avg. Price: R$121/MWh End of PPA: 2044 São Manoel 700MW (33%) (due in 2018) Avg. Price: R$83/MWh End of PPA: 2047 Lajeado 903MW (73%) Avg. Price: R$125/MWh End of PPA: 2031 (avg.) Concession: 2033 Energest (2) 299.5MW (100%) Avg. Price: R$148/MWh End of PPA: 2022 (avg.) Concession: 2025 C. Caldeirão 219MW (50%) Avg. Price: R$102/MWh End of PPA: 2046 Pecém 720MW (coal) (100%) Fixed Revenue:R$118/MWh End of PPA: 2026 Concession: 2043 Peixe Angical 499MW (60%) Avg. Price: R$146/MWh Concession: 2036 EDP São Paulo(100%) (part of São Paulo state) Celesc (14.5%) (Santa Catarina state) EDP Espírito Santo (100%) (Espírito Santo state) Electricity Generation Total Installed Capacity in operation: 2.5GW (hydro & coal) Energy sales by long term PPA contracts (inflation updated prices) Electricity Distribution RoRAB with efficiency incentives (CPI-X) Pass-through of non-controllable costs to clients: deviations between forecasted and real costs are passed through to clients by annual tariff updates. Distribution Subsidiary Net RAB (R$m) Return on RAB Regulatory Period Next Regulatory Review Concession Term EDP Espírito Santo 2, % 3 Years Aug EDP São Paulo 1, % 4 Years Oct (1) Avg. PPA Prices as of 01-Jan-14 (inflation updated at IGP-M or IPCA), except for Peixe Angical (2016); (2) Energest is responsible for the PPA contracts of Mascarenhas + Suiça, Viçosa, São João, Alegre, Fruteiras, Jucu and Rio Bonito. 18

20 Recurring EBITDA Generation & Supply Iberia ( m) YoY 1,067-44% Avg. selling price to customers ( /MWh) Hydro weight (%) % 22% -1% -23pp 603 Avg. fuel cost (gen. mix) (1) ( /MWh) % Regulatory costs ( m) % CMEC deviation revenues ( m) % Strong increase of sourcing costs due to very weak hydro and higher fuel/regulatory costs Avg. selling price to customers -1% YoY vs. Avg. fuel cost +70% YoY (1) Includes coal, gas, CO2, pumping and other associated costs 19

21 Portugal: Hydro production deviation vs. avg. hydro year (1) (%) Monthly hydro Production in Portugal vs. historical average (TWh) EDP gross hydro production in Iberia: deviation vs. historical average (2) Historical average ( ) Min and Max ( ) +33% 2017 was one of the four driest years since 1931 (3) -66% -83% -3TWh -53% -9TWh 4Q16 4Q Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Negative impact on recurring EBITDA: ~ 300m in 2017 (of which ~ 100m in 4Q17) (1) Source: REN; based on historical average of last 40 years; (2) Net production deviation vs. avg. hydro year : -7TWh in 2017; -2.4TWh in 4Q17; (3) Source: IPMA 20

22 Portugal: Electricity System Regulatory Receivables ( bn) Share of total receivables in the system Other creditors % EDP % Dec-15 Dec-16 Dec-17 Dec-18(E) (1) Total system debt to decrease 0.7bn in 2018, following 0.4bn decline in bn tariff deficit sales in 2017 (1) Estimates based on ERSE s 2018 Tariffs (2) Electricity distributed by EDP 21

23 Bonds Currency Amount (million) Maturity Coupon Market Price (Bid) Market Yield ISIN Code EDP BV Euro MTN EUR /04/ % % XS EDP BV Euro MTN EUR /06/ % % XS EDP BV Euro MTN EUR /09/ % % XS EDP BV Euro MTN EUR /01/ % % XS EDP BV Euro MTN EUR 1,000 18/01/ % % XS EDP BV Euro MTN EUR /03/ % % XS EDP BV Euro MTN EUR /09/ % % XS EDP BV Euro MTN EUR 1,000 12/02/ % % XS EDP BV Euro MTN EUR /04/ % % XS EDP BV Euro MTN EUR /11/ % % XS EDP Hybrid Notes EUR /09/ % % PTEDPUOM0024 EDP BV Euro MTN GBP /01/ % % XS EDP BV Euro-Dollar(1) USD /10/ % % XS EDP BV Euro-Dollar USD /01/ % % XS EDP BV Euro-Dollar (2) USD /01/ % % XS EDP BV Euro-Dollar USD 1,000 15/07/ % % XS Equity Stock Exchange ( ) P/E 2018E P/E 2019E P/BV 2018E DY 2017E Market Cap Avg. Daily Volume 52 Weeks (# tm) EDP SA Euronext Lisbon ,279m 6.6 EDP Renováveis Euronext Lisbon ,233m 0.3 EDP Brasil BM&FBOVESPA R$ R$8,393m 1.8 Source: Bloomberg as of Mar 5 th, notes repurchased in Dec-17. (1) Initial issue size at 1bn; amount shown net of USD 31m and USD 333m of notes repurchased in Dec-16 and Dec-17, respectively. (2) Initial issue size at 750m; amount shown net of USD167m of 22

24 This document has been prepared by EDP - Energias de Portugal, S.A. (the "Company") solely for use at the presentation to be made on this date and its purpose is merely of informative nature and, as such, it may be amended and supplemented. By attending the meeting where this presentation is made, or by reading the presentation slides, you acknowledge and agree to be bound by the following limitations and restrictions. Therefore, this presentation may not be distributed to the press or to any other person in any jurisdiction, and may not be reproduced in any form, in whole or in part for any other purpose without the express and prior consent in writing of the Company. The information contained in this presentation has not been independently verified by any of the Company's advisors or auditors. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. Neither the Company nor any of its affiliates, subsidiaries, directors, representatives, employees and/or advisors shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation. This presentation and all materials, documents and information used therein or distributed to investors in the context of this presentation do not constitute or form part of and should not be construed as, an offer (public or private) to sell or issue or the solicitation of an offer (public or private) to buy or acquire securities of the Company or any of its affiliates or subsidiaries in any jurisdiction or an inducement to enter into investment activity in any jurisdiction. Neither this presentation nor any materials, documents and information used therein or distributed to investors in the context of this presentation or any part thereof, nor the fact of its distribution, shall form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever and may not be used in the future in connection with any offer (public or private) in relation to securities issued by the Company. Any decision to purchase any securities in any offering should be made solely on the basis of the information to be contained in the relevant prospectus or final offering memorandum to be published in due course in relation to any such offering. Neither this presentation nor any copy of it, nor the information contained herein, in whole or in part, may be taken or transmitted into, or distributed, directly or indirectly to the United States. Any failure to comply with this restriction may constitute a violation of U.S. securities laws. This presentation does not constitute and should not be construed as an offer to sell or the solicitation of an offer to buy securities in the United States. No securities of the Company have been registered under U.S. securities laws, and unless so registered may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of U.S. securities laws and applicable state securities laws. This presentation is made to and directed only at persons (i) who are outside the United Kingdom, (ii) having professional experience in matters relating to investments who fall within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the "Order") or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "Relevant Persons"). This presentation must not be acted or relied on by persons who are not Relevant Persons. Matters discussed in this presentation may constitute forward-looking statements. Forward-looking statements are statements other than in respect of historical facts. The words believe, expect, anticipate, intends, estimate, will, may, "continue," should and similar expressions usually identify forward-looking statements. Forward-looking statements include statements regarding: objectives, goals, strategies, outlook and growth prospects; future plans, events or performance and potential for future growth; liquidity, capital resources and capital expenditures; economic outlook and industry trends; energy demand and supply; developments of the Company s markets; the impact of legal and regulatory initiatives; and the strength of the Company s competitors. The forward-looking statements in this presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management s examination of historical operating trends, data contained in the Company s records and other data available from third parties. Although the Company believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant known and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and are beyond its control. Important factors that may lead to significant differences between the actual results and the statements of expectations about future events or results include the company s business strategy, financial strategy, national and international economic conditions, technology, legal and regulatory conditions, public service industry developments, hydrological conditions, cost of raw materials, financial market conditions, uncertainty of the results of future operations, plans, objectives, expectations and intentions, among others. Such risks, uncertainties, contingencies and other important factors could cause the actual results, performance or achievements of the Company or industry results to differ materially from those results expressed or implied in this presentation by such forward-looking statements. The information, opinions and forward-looking statements contained in this presentation speak only as at the date of this presentation, and are subject to change without notice unless required by applicable law. The Company and its respective directors, representatives, employees and/or advisors do not intend to, and expressly disclaim any duty, undertaking or obligation to, make or disseminate any supplement, amendment, update or revision to any of the information, opinions or forward-looking statements contained in this presentation to reflect any change in events, conditions or circumstances. 23

pt Phone: +351 210012834 Visit EDP Website Site: www.edp.

25 IR Contacts Miguel Viana, Head of IR Sónia Pimpão João Machado Maria João Matias Sérgio Tavares Noélia Rocha Phone: Visit EDP Website Site: Link Results & Presentations: Next Events Mar 6 th -7 th : Roadshow New York Mar 8 th : Roadshow Boston Mar 12 th : Roadshow Madrid Mar 13 th and 16 th : Roadshow Netherlands Mar 14 th -15 th : Eiffel Conference (London)

+0.6GW additions of wind and solar capacity Efficiency savings of 141m (26% above 2017 target for OPEX IV Programme)

+0.6GW additions of wind and solar capacity Efficiency savings of 141m (26% above 2017 target for OPEX IV Programme) 0 EBITDA +6% at 3.99bn, benefiting from the gain on Naturgas disposal (+ 0.5bn one-offs) Recurring EBITDA -5% to 3.52bn, penalised by severe drought in Iberian peninsula (- 0.3bn) +0.6GW additions of wind