Power Purchase Agreements (PPA) not subject to early termination in
compliance with Decree-Law No 172/2006 of 23 August 2006, are managed
during the period they are in effect by REN Trading, a 100% subsidiary of
REN - Redes Energéticas Nacionais, SGPS.

In this context, REN Trading manages the PPA with Tejo Energia through the
thermal power plant in Pego (576 MW), and the PPA with Turbogás, for the
thermal power plant at Tapada do Outeiro (990 MW). The company’s objective
is to maximise profits by means of the market sale of energy and system
services, as well as to minimise the costs of PPAs, pursuant to Official Order
No 11210/2008, amended by Directive No 7/2011 of 22 December 2011 and by
Directive No 1/2013 of 2 January 2013, of the ERSE.

Within the scope of managing the respective PPAs, REN Trading acquires all the
energy and systems services from the Pego and Turbogás plants. In this field,
in addition to the Natural Gas Consumption Management Agreement (AGC)
established with GAL P Gás Natural, S.A., it is also necessary to accompany the
markets in fuels (coal and natural gas) and their respective indexes.

During 2013, negotiations continued with Galp with the aim of reducing the
quantity of gas consumed at the Turbogás power plant this year, so as to adapt
the plant’s production to real market needs, with the resulting benefits of a
reduction in costs to consumer.

With regard to operating in the European market for emissions licences (ETS -
Emissions Trading Scheme), there was a greater participation than in previous
years on the ICE (Intercontinental Exchange), the leading futures exchange.REN Trading is responsible for managing the CO2 emissions licences attributed
to its two plants, although, with the start of Phase 3 (2013-2020), there are no
longer free licences allocated to electrical plants. A management strategy was
put in place for these environmental requirements, involving the purchase of
emission licences, namely EUA (European Unit Allowances), on a secondary
futures market of the ICE. 2013 continued to see a drop in the carbon market,
due to various factors.

The sale of electric energy in the market is mainly carried out by means of the
Iberian Electricity Market (placing daily and intraday sales and repurchase offers
on the OMIE) and the System Services market, operated by the System Manager.
The company continued to actively participate in the Portuguese System Services
market, with good overall results.

In order to improve the results achieved by means of sales, and so as to diversify
risk, REN Trading participated in diverse CESUR auctions held during 2013, only
finalising one contract in the first trimester and with a positive outcome overall.

Through its area of Financial Products, REN Trading accompanies the most
relevant market trends in the sector, with an emphasis on energy and CO2
emission licences. Future options were traded on centrally issued CO2 licences
along with term hedges (on the derivatives market) and some purely financial
operations that were negotiated with regard to providing services to REN SGPS.

As it is a regulated company, in its Official Order No 11210/2008 of 8 April 2008,
amended by Directive No 7/2011 of 22 December 2011, and by Directive No 1/2013
of 2 January 2013, the Energy Services Regulatory Authority (ERSE) established
a set of incentives defining methods of sharing the benefits of regulated activities
between electricity consumers and the company. The final value of the incentives
is derived from operations in the company’s diverse areas of activity, related with
optimising the sales of energy from the power plants as well as minimising the
costs of acquiring natural gas and CO2 emissions licences.

Thus, the company’s operating results in 2013 correspond to the value calculated
for the incentives set by ERSE, which are identified below (the ICO2, an incentive
for the efficient management of CO2 emission licences was eliminated this
year, along with swaps, as there is no longer an annual allocation of EUAs to be
exchanged):

  • I 1 – Incentive related to the efficient supply of energy from the Turbogás Power Plant in the daily market (limited to 1.5 million euros, fully achieved in 2013)
  • I 3 – Incentive related to optimising the production of the Tejo Energia Power Plant (limited to 1.5 million euros, fully achieved in 2013)

Thus, the total incentives obtained in 2013 amounted to 3.0 million euros, a figure
lower than that of the previous year (due to the elimination of incentives relating
to CO2 emissions licences).