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2 % &!' &' Electricity Distribution & Gas Transmission and Distribution HC Energia Naturgás Naturgás 233,418 km 8,750 km Portgás HC Energia Electricity: EDP Distribuição Naturgás HC Energia Mainland Portugal and in Spain in the Asturias region Gas: Electricity Gas Portugal, in the north regions of OPorto, Braga and Viana do Castelo Electricity & Gas 1

3 %!!! ( ) % Weight on Total Regulated Networks Iberia Energy Regulated Networks Iberia 100% 100% 72% 63.5% EDP Distribuição HC Distribución EDP Gás Distribuição Naturgás EDP Serv. Universal HC Explotación Redes EDP Gás Serv. Univ. EDP Sol. Comerciais Underlying Activities Electricity Distribution Last Resource Supplier Electricity Distribution Last Resource Supplier Gas Distribution Last Resource Supplier Gas Distribution Gas Transmission Last Resource Supplier EBITDA 9M08 ( m) 520 (74%) 68 (10%) 19 (3%) 97 (14%) GWh 34,385 (58%) 7,266 (12%) 1,902 (3%) 15,550 (26%) # Clients (th) 6,134 (80%) 626 (8%) 195 (3%) 681 (9%) 2

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5 % (( ' ''& Regulated Tariff to Final Clients = Regulated Supply Tariff + Third Party Access Tariffs (TPAs) + System Costs Tariffs + Energy Acquisition Paid only by Regulated Consumers Regulated Supply Tariff The last resource supplier (EDP SU) sells electricity to regulated consumers Third Party Access Tariffs (TPAs) Distribution: Regulated activity operated by EDP D Transmission: Regulated activity operated by REN Third Party Access Tariffs (TPAs) System costs paid by all consumers, namely: (1) CMECs financial system fixed fee and annual adjustment (2) differential costs with Turbogás and Tejo Energia PPAs (3) spread between special regime tariffs and market prices (4) general costs with the system and market management (ERSE/OMEL/OMIP/REN) Regulated Supply Tariff By all Consumers The last resource supplier (EDP SU) buys electricity in the market Regulator forecasts avg. price at which the last resource supplier buys electricity in the market. For 2008: 50/MWh; tariff proposal 2009: 70/MWh Last resource supplier has to buy energy in forward quarterly auctions (12% of energy auctioned) and ~10% of volume in the forward market (OMIP) 4

6 '' ' && ' Regulated EDP Serviço Universal Last resource electricity supplier in Portugal mainland Regulated return set by ERSE, based on Return on RAB and return on working capital, accepted costs and efficiency incentives. Contracts commercial services with EDP SC Supports tariff deviations and deficits when electricity procurement price in the market or electricity volumes supplied are different from ERSE s assumption over tariffs period Regulated EDP Distribuição Operates the electricity distribution network in Portugal mainland: concession for distribution electricity at MV and HV in Portugal mainland (35 years) and municipal concessions for Low Voltage electricity distribution (20 years) Regulated return set by ERSE, based on Return on RAB, accepted costs and efficiency incentives Bulk of controllable cost base in regulated activities. Small impact from tariff deficits, restricted to deviations on volume of electricity distributed EDP Soluções Comerciais Commercial shared services platform for the regulated and liberalized electricity supply focused on the efficiency of commercial services: Shops / Call Centers / Agents Meters Reading Invoicing Collection 5

7 "##)*"#++ "#++ & & &&, Regulated Asset Base 2.9bn asset base Working capital not remunerated Asset base reduced by ~ 100m (parliament legislation on meters) Negative impact in 2009 (including retroactive from 2008) (-) Return 8.0% regulated return Return set annually = 10Y Government Bond Yield + 4% premium (8.55% for EDP D and EDP SU) (+) For 2009: 8.55%, applied to working capital in EDP SU 100m gap between real and Cost Base accepted costs Efficiency factor of ~4% (real) on Efficiency factor of 3.5% (real) on controllable costs per MWh (+) total costs base Regulated Gross Margin (1) 2008E: 1,009 million 2009P: 1,090 million (+) Proposed 8% increase of regulated gross margin but ROA still below WACC (1) Excluding Previous Years Adjustments Allowed Revenues were adjusted for Concession Rentals and Law 12/2008 (Meters asset base; monthly reading and invoicing) 6

8 % ''( - ' & Headcount evolution (thousand) PRRH: ~ 3,800 employees (~33% of total workforce) Benefit: 610m Cost: 817m 140m cash payments still to be made 48% of benefit to book after E Early retirees evolution (1) (thousand) Early Retirees Retirees E PAR: 1,410 employees (20% of total workforce) Benefit: 270m Cost: 480m Total costs accepted by ERSE to be recovered through the tariffs over 20 years PAE 777 employees (16% of total workforce) Benefit: 87m Cost: 127m relative to 518 exits in (Provisioned in 2007) (1) Early Retirees that are covered by the provision in the Balance Sheet (2) Retirees that are being paid by the Pension Fund 7

9 % && ' ' (('' & DEA results years Opex (1) /GWh DEA Data Envelope Analysis Constant return-to-scale Input: Opex Output: Network, Clients, Energy, Consumption/Client EDP Peers Average Company 1 EDP D Company 2-7% -9% Company 3 Company 4-7% -6% -7% 0% 20% 40% 60% 80% 100% Electricity distribution and supply activities show efficiency levels above average when compared to other similar companies When simply comparing Opex/GWh the apparent inefficiency is due to structural electricity network and consumption profile divergences Recurring efforts have enabled the company to become a more efficient company Source: EDP & Company Reports (Distribution & Supply Activities) Portugal, Spain and Italy (1) Materials, Supplies and Services, Personnel Costs, Provisions, Other Operating Costs/Revenues and Amortizations (Adjusted to exclude restructuring costs, personnel costs related to own work capitalized and concession rentals) 8

10 ( '' '. Bad debtors * Service quality & service satisfaction Avg. Collecting Period (Days) Matured Debt Level of Client Satisfaction 71% 65% 71% 74% Collecting costs M08 Costs with invoicing 2007 Mar-08 Jun-08 Set-08 Avg. Collecting Costs ( ) ** Collecting Mix P Avg. Invoicing Costs ( ) *** Invoicing Mix P Automatic Banking Transfer ATM CTT Stores & Agents Payshop & Other 8% 11% Bi-monthly Monthly Conta-certa Electronic 25% 12% 20% 60% 14% M P 7% M P 43% Maximization of clients satisfaction Higher control over electricity clients doubtful debts * Excluding debt from municipalities ** Costs per collection *** Costs per invoicing document 9

11 ,&% '. New remuneration model Regulated revenues (1) CAGR Inflation Activity increase Quality of service incentive Losses reduction incentive +4% GWh distributed Price cap on predetermined EIT 144 Year t Year t P New methodology brings regulatory stability, increases remuneration and encourages quality improvement and loss reduction (1) Including Services Rendered 10

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13 /0% *#$ Gas Transport Regulated revenues ( m) Regulated Asset Base Initial assets revaluation (negative impact in of initial under valuation) Successive revaluations (-) -25% CAGR % +16% Return 9% return nominal before taxes (+) CAGR Opex Recovery of depreciations and other operating costs (but do not include underground (-) occupation rate) Gas Supply 6.227% Supply Margin (Euribor 3M+150 bp) E 2012 P Working Capital to cover for the financial risk associated to the working capital management Supply margin of 4 / client for 15 years (-) New model rewards investment (9% return) and preserves the value of the Opex Opex recovery (+) business lower short term revenues vs. higher long term revenues 12

14 % ( Gas Distribution, Transmission & Supply Regulated revenues ( m) Distribution Regulated Revenues updated annually (CPI, efficiency factor and estimated demand) Adjusted for differences between real and estimated demand CAGR % +18% +5% CAGR > Jun-08 Naturgás: last resource supply for Pressure < 4 bar and consumption < 3 GWh/year Supply in 2008 (2 GWh in 2009 and 1 GWh in 2010) Maximum prices set by the government (last resource tariffs) Transmission Assets as from Jan-08: Regulated Revenues = Rate of Return x Asset Base (pipeline investments have to comply with defined standard costs) E 2012 P Next distribution regulatory review estimated to happen in

15 &1('. & 1& ( Accumulated capex ( m) Distribution EIT (min) Accumulated Capex : 1.5 bn EDP D HC Energia Gas Spain 15% 175 * ~ Gas Portugal 7% ~ % Distribution Spain 66% Distribution Portugal Gas distribution network (Km) Portugal Spain Focus on quality improvement and technological innovation of the electricity distribution grid, and on the expansion of the gas distribution and transmission networks InovGrid Introduction of advanced technological and communication tools into the distribution grid for improved energy and grid management +26% 2,987 3, % 5,161 5, (1) Adjusted for non-recurring impacts (rainstorms, high winds and summer fires) 14

16 * ' E CAGR Stable regulatory environment: Recent regulatory reviews in electricity/gas in Portugal/Spain: Good visibility on regulated revenues Gross Profit ( m) ~4% Energy distributed volumes: Growing above European average Low volatility in energy demand, low impact on regulated revenues Electricity Distributed Gas Distributed (TWh) ~2% ~5% Strong focus on efficiency improvement Gradual personnel reduction and tight control of supplies and services Opex (1) /MWh Electricity Gas ~0% ~-4% Good visibility on regulated revenues + focus on efficiency EBITDA ( m) (2) ~6% Capex in 2009E-2012E: Average of 0.4bn/year 20% increase of gas networks extension; to satisfy a 5% increase in the number of electricity supply points Stable regulatory environment providing good visibility on returns (1) S&S, Personnel Costs and Costs with Social Benefits (Excluding HR Restructuring Costs) (2) Excluding HR Restructuring Costs 15

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Sustainable domestic investment plan with potential upside in international development

OCTOBER 2016 EQUITY STORY Top of the industry TSO in efficiency and service quality Solid domestic business with stable regulation Sustainable domestic investment plan with potential upside in international