I. Competence to determine remuneration

I.66. Indication with regard to competence to determine the remuneration of
corporate bodies, members of the Executive Committee or delegated director
and the Company’s managers

The REN General Meeting is responsible for the appointment of the members
of the Remunerations Committee , which is responsible for setting the
remuneration and for submitting the annual declaration on the remuneration
policy for members of management and supervisory bodies. The Remunerations
Committee is responsible for presenting and submitting to the shareholders
the principles of the remuneration policy for corporate bodies, as well as
for determining the respective remunerations, including the respective
complements73. Moreover, this proposed declaration will be subject to assessment
and deliberation by the shareholders of the Annual General Meeting.

The abovementioned declaration on the remuneration policy covers all
company officers (within the meaning of the provision of Article 248(B)(3) of
the Securities Code, given that the REN Board of Directors understands that
those officers correspond only to the members of the company’s Management
and Supervisory Bodies.

II. Remuneration Committee

II.67. Composition of the Remuneration Committee, including identification
of natural or legal persons hired to provide support and declaration on the
independence of each of the members and consultants

At 31 December 2013, the following three members, appointed at the annual
General Meeting of 27 March 2012, were on the Remunerations Committee
(three-year period of 2012-2014):

name Position
Carlos Rodrigues Chairman
Rui Horta e Costa Member
Pedro de Sommer Carvalho Member

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The current Remunerations Committee is comprised by members who are
independent from the management. To such extent, the Remunerations
Committee does not include any member of another corporate body for which it
determines the respective remuneration, and its three members in office do not
have any family relationship with members of such other bodies, notably spouses,
relatives and kin, in a direct line, up to the 3rd degree, inclusive.

At the Annual General Meeting of 2013 held on 30 April 2013, the Chairman of the
Remunerations Committee was present, Mr. Carlos Rodrigues, as representative
of that committee.

In carrying out its duties, the Remunerations Committee received advice on
matters of remuneration from Professor Doctor Paulo Otero, in the certainty that
the aforementioned has not, in the previous three years, provided services to any
other structure that is dependent on the administrative body, to the Company’s
administrative body or to any other structure that has a current relationship with
the Company or in a consultancy of REN.

Moreover, Professor Doctor Paulo Otero was not bound to the Company or to a
consultancy of the Company by an employment contract or service agreement.

It’s worth noting that, through a letter dated 29 November 2013, the
Remunerations Commission members tended their resignations, which will
only come into effect upon the nominations of new Remuneration Commission
members at the Ordinary General Meeting to be held in 2014.

72 Cfr. alínea d) do n.º 2 do artigo 8.º do Contrato de Sociedade.
73 Cfr. artigo 26.º do Contrato de Sociedade.

II.68. Expertise and experience of the Remunerations Committee
in matters or remuneration policy

The Remunerations Committee members have the necessary and relevant
expertise in order to consider, reflect and decide upon all matters under the
Remuneration Committee remit, taking into account that referred infra.

Each member of the Remunerations Committee has an academic background in
the areas of finance and economics, and one of the members is in possession of
a Masters in Strategic Planning, education which offers them the necessary and
relevant theoretical expertise to carry out their functions.

Moreover, the Remunerations Committee consists of three members with vast
professional experience, namely in the corporate field and in the banking,
financial, insurance and capital markets sectors, in both Portugal and abroad. As
such, the Remunerations Committee members have continually carried out their
functions as (i) members of the administrative bodies of various national and
international entities, including financial institutions, listed companies, companies
operating in the energy sector and regulatory bodies, and (ii) human resources
consultancies, thereby gaining further relevant practical knowledge with regard
to remuneration policy, assessment systems and related materials.

III. Remuneration structure

III.69. Description of the remuneration policy for management and supervisory
bodies as referred to in Article 2 of Law No 28/2009 of June 19 2009

As an issuer of shares admitted to trading on the regulated market,
REN is subject to Law No 28/2009 of June 19 2009 as well as to CMVM
recommendations;

Therefore, on one hand, in the interest of transparency and legitimacy of
the setting of remuneration policy (according to the principle of say-on-pay,
internationally recognized with regard to good corporate governance) and,
on the other hand, for purposes of compliance with the legal provisions and
recommendations described above, the Remuneration Committee submits for
the appraisal of the Annual General Meeting, a declaration on the remuneration
policy for corporate bodies for the 2012-2014 term of office, the terms of which
were subject to prior resolutions by this Committee.

The conclusion of the second stage in the REN privatization process reduced the
state’s holdings in Company capital, meaning that REN went from being a public
company to an invested company and as such, the system for state companies
with its specificities and limitations, ceased to apply to the company in most
circumstances;

Given that REN is a company of mostly private capital and issues shares
admitted to trading in the regulated Euronext Lisbon market, the Remunerations
Committee carried out an in-depth review of the remunerations policy and
conditions applicable to members of the REN Board of Directors, Audit
Committee and Board of the General Meeting, for the term of office underway
corresponding to the three-year period of 2012-2014; For this purpose, the
abovementioned Committee conducted several joint studies with specialized and
independent consultants, more specifically with regard to market analyses and a
study of the legal recommended framework applicable to remunerations;

Further to these checks, the REN Remunerations Committee approved a new
remuneration policy which has been in effect since 1 June 2012.

On 30 April 2013, a declaration by the Remunerations Committee on the
remuneration policy for members of corporate bodies was unanimously
approved at the General Meeting. This declaration includes the information
set out in Article 2 of law No 28/2009 of 19 June 2009. In accordance with
CMVM recommendation II.3.3, the abovementioned declaration also contains:
(i) identification and explanation of the criteria to determine the remuneration
to be awarded to members of corporate bodies; and (ii) information on the
enforceability or non-enforceability of payments for the dismissal or termination
of duties of directors.

The remuneration policy for Executive Directors follows the guidelines set out
below:

  • To be simple clear, transparent and aligned with REN culture;
  • To be suitable and fitting to the size, nature, scope and specificity of REN’s business;
  • To ensure total remuneration which is competitive and equitable and in
    line with the best practices and latest trends seen nationally and in Europe,
    particularly with regard to REN’s peers;
  • To incorporate a fixed component which matches the duties and
    responsibility of the directors;
  • To incorporate a variable component which is reasonable overall in relation
    to the fixed remuneration, with one short-term component and another
    medium-term component, both with maximum limits;
  • To establish a variable remuneration indexed to individual performance
    assessment and that of the company, in accordance with achievement of
    specific quantifiable aims which are in line with Company and shareholder
    interests; and
  • To establish a variable remuneration component based on the mediumterm
    indexed to the evolution of the REN share price, thus ensuring that the
    remuneration of executive directors is bound to the sustainability of results
    and the creation of wealth for shareholders.

Based on these principles, the remuneration of executive directors is mainly
determined based on four general criteria: (i) competitiveness, taking into
consideration the practices of the Portuguese market; (ii) equity, in that
remuneration must be based on uniform, consistent, fair and balanced criteria;
(iii) assessment of performance, in accordance with duties and the level of
responsibility of the person in question, as well as the assumption of suitable
levels of risk and compliance with the rules applicable to REN business; and (iv)
alignment of directors’ interests with the Company’s and its sustainability and
creation of long-term wealth.

The remuneration of the executive directors includes a fixed component and a
variable component. The variable component consists of a parcel which seeks to
remunerate short-term performance and another with the same objective based
on medium-term performance, as described in further detail below.

The members of the Audit Committee, the non-executive directors and the
Vice-Chairman of the Board of Directors are entitled to fixed monthly
remuneration, defined in line with the best practices observed at large-scale
companies in the Portuguese market.

The remuneration of the members of the Board of the General Meeting
corresponds to an annual fixed sum.

There are no approved variable remuneration plans or programmes that consist
of the allocation of shares, options to acquire shares or other incentive schemes
based on a variation of the price of shares for members of the management or
supervisory bodies (or persons discharging managerial functions, within the
meaning of Article 248(B)(3) of the Portuguese Securities Code), without prejudice
to the method of calculating medium-term variable remuneration (MTVR)

Furthermore, there is no system of retirement benefits for the members of the
management or supervisory bodies (or persons discharging managerial functions,
within the meaning of Article 248(B)(3) of the Portuguese Securities Code).

III.70. Information on how remuneration is structured so as to allow alignment of
the interests of members of the management body with the Company’s long-term
interests, as well as how it is based on performance assessment and discourages
taking on excessive risk

As mentioned in III.69, non-executive directors’ remuneration (including the
members of the Audit Committee) consists exclusively of a fixed component, paid
in 12 monthly instalments over the year, and is not connected to the performance
or value of REN, meeting the applicable recommendations on this matter.

The remuneration structure of executive directors consists of a fixed component
and a variable component. There is an adequate proportionality between both
components, as explained in III.69.

In accordance with the remuneration policy approved for the three year period of
2012-2014 and described in the Remuneration Committee declaration approved
by the Annual General Meeting of 2013, the variable component of remuneration
for 2013 may include a short-term parcel (‘STVR’) and a medium-term parcel
(‘MTVR), both based on a performance assessment with weighting on key
individual performance indicators of the director and the performance of the
Company itself. Such indicators, described in more detail in III.71, seek to bring
the interests of the executive directors closer to the long-term interests of REN
and its shareholders.

Particularly, MTVR has the following characteristics which contribute to the
alignment of the interests of REN executive directors with those of the Company
and shareholders:

  • MTVR is set in Remuneratory Units (RU) which refer to every financial year
    in the term of office in which each executive director has performed duties;
  • Each Remuneratory Unit has a value corresponding to the REN share price
    at the date the MTVR is set and this value evolves in a manner equal to that
    of the Total Shareholder Return (TSR) for REN shares;

The main aims of the proportionality between the fixed and variable components
and the limits to variable remuneration (i.e. between 20% and 120% of fixed
remuneration, in a gradual manner, without prejudice to the evolution in RU) are
to discourage taking on excessive risk and to stimulate the adoption of a suitable
risk management strategy.

III.71. Reference, if applicable, to the existence of a variable remuneration
component and information on possible impact of performance assessment on
this component

As has already been mentioned, the remuneration structure of the Executive
Committee consists of fixed and variable components, and in accordance with
the remuneration policy approved for the 2012-2014 term of office and described
in the Remuneration Committee declaration approved by the Annual General

Meeting of 2013, the variable component of remuneration for 2013 may include
short and medium-term parcels – STVR and MTVR74.

The awarding of STVR and MTVR is subject to the following common
requirements:

  • The awarding of the variable component of remuneration only takes place
    after approval of the accounts for each financial year, after the performance
    assessment for the year to which the payment refers and only when
    predefined objectives have been complied with, measured with individual
    and company performance indicators indexed to targets in the REN
    strategic plan.
  • The degree of achievement of defined goals is measured through an
    annual performance assessment, based on a predefined model Therefore,
    if compliance with goals falls below 80% (minimum performance level),
    no payment of variable remuneration takes place. However, if compliance
    with goals lies between 80% and 120% or greater, the corresponding total
    variable remuneration will equate to between 20% and 120% of the fixed
    remuneration.

The abovementioned annual performance assessment, for purposes of awarding
STVR and MTVR during the term of office, is carried out based on the following
REN Key Performance Indicators (KPI) on a consolidated basis (weighting of
80%) and the individual performance assessment (weighting of 20%), which, if
negative, will result in the non-awarding of short-term variable remuneration:

i) Average cost of debt;
ii) Return on invested capital;
iii) EBITDA abroad;
iv) Earnings per share (compound annual growth rate – CAGR);
v) EBITDA CAGR.

74 Cf. points III.69. and III.70.

Short-term variable remuneration

a) Short-Term Variable Remuneration (STVR) is paid in cash, depending on
the annual performance assessment, with the sum being paid varying
in accordance with the degree of achievement of goals relating to Key
Performance Indicators.
b) Therefore, if the annual performance assessment falls below 80%
(minimum performance level), no payment of STVR takes place. However, if
the annual performance assessment lies between 80% and 120% or greater,
the corresponding STVR will equate to between 10% and 60% of the fixed
remuneration.

Medium-term variable remuneration

a) M edium-Term Variable Remuneration (MTVR) aims to strengthen the
alignment of the interests of REN executive directors with those of the
Company and shareholders. This payment will vary depending on the
annual performance assessment (already described in the previous point)
and will follow the same model as that for STVR.

III.72. Deferral of the payment of the variable remuneration component, with
mention of the deferral period

The awarding of STVR will correspond to a sum of up to 50% of total variable
remuneration awarded with regard to each financial year in question.

In turn, STVR is set in RU which refer to every financial year of the term of office
and is structured to ensure deferral of payment and is conditioned to continued
positive performance, through the following channels:

  • Each RU has a value corresponding to the REN share price at the date the
    MTVR is set and this value evolves in a manner equal to that of TSR for
    REN shares;
  • The entitlement executive directors have to convert their RUs is attained on
    a successive basis. The units are broken down into thirds and the first 1/3 is
    consolidated at the end of the first financial year while the remaining 2/3
    are consolidated at the end of subsequent financial years, provided that the
    director performs executive duties in the respective financial year (except if
    termination occurs as a result of acquisition of a controlling position in REN);
  • RUs will be automatically converted into cash or, should the REN General
    Meeting come to deliberate (and in accordance with the terms thereby
    established), into REN shares, either partially or totally, when three years have
    elapsed since the date on which they were awarded.

Bearing in mind the above, payment of MTVR for 2012 is awarded in 2013 and
deferred for a period of three years.

III.73. Criteria on which the awarding of variable remuneration in shares is
based, as well as on the maintaining, by the executive directors, of these
shares, on possible signing of contracts which refer to the shares, more
specifically hedging contracts or risk transfer contracts, the respective limit,
and their relation to the value of total annual remuneration

At present, no plans to award variable remuneration in shares exist, and as such
REN considers that CMVM recommendation III.6. does not apply.

Therefore, despite the remuneration policy approved by the Remuneration
Committee for the term of office determining that, within the scope of MTVR,
RU can be converted into REN shares, either partially or totally, should the REN
General Meeting so deliberate, this has not as yet taken place. Should the General
Meeting make such a decision, this deliberation shall govern the conditions for
awarding the shares in question, including the potential requirement to maintain
the shares or part of them until the end of the term of office.

Furthermore, bearing in mind the objectives sought through the remuneration
model stipulated herein, executive directors of the Company shall not take out
contracts either with the company or with third parties, designed to mitigate the
risk inherent to the variability of their remuneration.

III.74. Criteria on which the awarding of variable remuneration in options is
based and indication of the deferral period and the price

There are no variable remuneration plans or programmes that consist of the
allocation of shares, options to acquire shares or other incentive systems
based on a variation of the price of shares for members of the management
or supervisory bodies or persons discharging managerial functions, within the
meaning of Article 248-B(3) of the Portuguese Securities Code.

III.75. Main parameters and basis of any system of annual bonuses and any
other non-monetary benefits

In 2013, Executive Directors were entitled to the use of a car and a mobile
telephone, for the performance of their duties, plus health insurance, life
insurance and personal accident insurance. It is estimated that the value of these
benefits is € 20 000/director.

There is no system of annual bonuses or any other non-monetary benefits,
beyond the variable component of remuneration described above and in the
previous paragraph.

III.76. Main characteristics of the complementary pensions or early retirement
schemes for directors and the date on which they were approved at the General
Meeting, in individual terms

There is no system of retirement benefits or pensions for the members of the
management and supervisory bodies.

IV. Disclosure of remuneration

IV.77. Indication of the annual amount of remuneration earned, jointly and
individually, by the members of Company management bodies, paid by the
Company, including fixed and variable remuneration and, with regard to the
latter, mention of the different components

Remuneration paid in 2013 to members of REN’s management body, individually
and collectively, was as follows:

Name
(amount in euros)
  fixed Remuneration Variable Remuneration Total
Rui Cartaxo Chairman of the Board
of Directors and the
Executive Committee   
385.000 (1) 100.521 485.521
João Faria Conceição Executive Committee 305.000 79.717 384.717
Gonçalo Morais Soares Executive Committee 305.000 79.717 384.717
Guangchao Zhu Vice-Chairman of
the Board of Directors
80.000   80.000
Mengrong Chen the Board of Directors 36.000   36.000
Haibin Wan the Board of Directors 36.000   36.000
Hilal Al-Kharusi the Board of Directors 36.000   36.000
Aníbal Santos the Board of Directors 33.735   33.735
EGF, S.A. the Board of Directors 36.000   36.000
Manuel Champalimaud the Board of Directors 36.000   36.000
Red Electrica Corporacion, S.A. the Board of Directors 36.000   36.000
José Luís Arnaut the Board of Directors 36.000   36.000
José Luis Alvim Audit Committee 75.000   75.000

José Frederico Jordão

Audit Committee 60.000   60.000
Emilío Rui Vilar Audit Committee 60.000   60.000
Total    1.555.735 259.955 1.815.69

(1) This sum includes €171 005.49 paid by the subsidiary Red Eléctrica Corporácion, S.A., a Company incorporated under Spanish Law,
in which he inherently holds the office of member of the Board of Directors.

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STVR paid in 2013, as indicated in the table above, refers to the financial year
of 2012. Members of the Executive Committee were also awarded an additional
remuneration parcel, for MTVR referring to the 2012 financial year, set in RU.
Based on the REN share price on the date MTVR was set (30 May 2013), 2.239
euros, the number of RU to be awarded to each member of the Executive
Committee is as follows:

i) Rui Cartaxo – 44 895.4 RU;
ii) João Faria Conceição – 35 603.7 RU;
iii) Gonçalo Morais Soares – 35 603.7 RU.

IV.78. Sums paid for any reason by other companies in a controlling or group
relationship or which are subject to common control

The members of the corporate bodies of REN did not receive any amounts paid by
other companies in a controlling or group relationship with REN.

IV.79. Remuneration paid in the form of profit sharing and/or payment of
bonuses and the reasons why such bonuses and/or profit sharing were granted

There are no payments in the form of profit sharing and/or payment of bonuses,
beyond the variable component of remuneration described above.

IV.80. Compensation paid or due to Ex Executive Directors for the termination
of their duties during office

There were no amounts due or paid in the form of compensation to Ex Executive
Directors for the termination of their duties during office.

IV.81. Indication of the annual amount of remuneration earned, jointly and
individually, by the members of the Company’s consulting bodies, for the
purposes of Law 28/2009, of 19 July 2009

With regard to the Audit Commission, please refer to IV.77. and with regard to the
Statutory Auditor, please refer to V.47.

IV.82. Indication of the annual remuneration of the Chairman of the General
Meeting

In 2013, the Chairman and Vice Chairman of the General Meeting received,
respectively, the set annual amount of 5 000 and 3 000 euros for the carrying
out of their respective functions.

V. Agreements with remuneration implications

V.83. Contractual limitation for compensation to be paid for unfair dismissal of
a director and its relation to the variable remuneration component

In accordance with the remuneration policy approved by the Remunerations
Committee with regard to the financial year of 2013, in the event of termination of
management duties through agreement or unfair dismissal, no compensation will
be paid, beyond that legally required, if the termination or dismissal is due to the
unsuitable performance of the director.

The legally owed compensation, in the case of unfair dismissal, corresponds
to the compensation for damages suffered, yet must not exceed the amount
of compensation that they would otherwise received up to the end of their
elected term.

V.84. Reference to the existence and description, with the amounts involved
indicated, of agreements between the Company and the members of the
management body or other officers, in the meaning of Article 248(B)(3) of
the Portuguese Security Code, that would award compensation in the event
of resignation, unfair dismissal or termination of the employment relationship,
following a change in control over the Company. (Art. 245(A)(1)(l)

There are no agreements between REN and the members of the management
body or other officers (in the meaning of Article 248(B)(3) of the Portuguese
Securities Code) that would award compensation in the event of resignation
or unfair dismissal or termination of the employment relationship, following a
change in control over the Company.

VI. Plans to allocate shares or stock options

VI.85. Identification of the plan and the respective recipients

There are no variable remuneration programmes or plans that consist of the
allocation of shares, options to acquire shares or other incentive systems
based on a variation of the price of shares for members of the management
or supervisory bodies or persons discharging managerial functions, within the
meaning of Article 248(B)(3) of the Portuguese Securities Code.

However, the remuneration policy approved by the Remuneration Committee
and which came into effect on 1 June 2012, determines that, within the scope of
MTVR, RU can be converted into REN shares, either partially or totally, should the
REN General Meeting so deliberate (which has not happened so far).

VI.86. Characteristics of the plan (conditions of allocation, non-transferable
clauses of shares, criteria relating to the share price and exercise price, period
during which options can be exercised, characteristics of the allocated shares
or options, existence of incentives for the acquisition of shares and/or the
exercising of options

See VI.85.

VI.87. Option rights allocated for the acquisition of stock options to be
assigned to Company workers or employees

See VI.85.

VI.88. Control Mechanisms available in a possible scheme for worker
participation in capital, in that voting rights shall not be directly exercised by
said workers (Art. 245(A)(1)(e)

There are no schemes for worker participation in the share capital of
the Company.