In the 2013 fiscal year net profit for REN decreased by 1.8% (-2.3 millions of euros) to 121.3M. The 6.2 million of euros (-4.6%) fall in financial income was a major financing contributing, resulting from growing financing costs due to an increase in average gross debt. On the other hand, and somewhat compensating for this development, EBITDA increased by 9.9 million of euros (+1.9%) compared to 2012, reflecting a continued aim for improvement in the operational performance of the group.

It should be noted that as a result of implementing the changes It should be noted that as a result of implementing the changes in standard IA S 19 – Staff Benefits, which is required to be applied in financial years starting on or after 1 January 2013 (see Notes 3.1 and 21 of Chapter 5 – Consolidated Financial Statements), the values reported referring to 31 December 2012 have been re-expressed. The use of a single discount rate has now been considered in compliance with the new wording of IA S 19. This has resulted in an increase in the category ‘Staff costs’ in the Consolidated Statement of Results for 2012 (and as such, a reduction in net profits for the financial year of 2012), and taken to the category of ‘Accumulated Profits’ on 31
December 2012, in the amount of 0.3 million of euros.

Investment decreased by 6.6% (-13.2million of euros), reflecting the end of the Sines Terminal expansion project (23.5million of euros) during 2012, whilst operation costs exhibited the same results. In spite of these reductions, average RAB increased in comparison to the previous year.

The group’s conditions for access to funding began to turn during 2013, with the average debt cost set at 5.54%, a reduction of 16 b.p. compared to the previous year, and the net debt reduced by 110.1million of euros (-4.4%) in comparison to 2012.

Main indicators

[Millions of euros]

 '13 '12 VAR.%
EBITDA7  521,5  511,6 1,9%
Financial income -142.2 -136.0 -4.6%
Net income  121.3 123.6  -1.8%
Recurrent net profit 8 120.7  120.2 0.4%
Capex total   187.8  201.1  0-6.6%
Transfers to RAB (at historical costs) 9  245.0  -320.6  -23.6%
Average RAB (at reference costs)  3 488.9  3 380.7  3.2%%
Net debt  2 402.3 2 512.4 -4.4%
Average debt cost  5.54%  5.70%  0.16 p p

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7 In 2013, there was a small change in the methodology used to calculate EBITDA , and the value for 2012 was adjusted for comparison purposes, using the same criteria.

8 Recurring net profit in 2013 reflects the carry cost of the pledge to the European Investment Bank, considered as a non-recurring item. The figure for 2012 has been adjusted for purposes of comparison, applying the same criteria.

9 Includes direct acquisitions (RAB related).

 

Operational results - EBITDA

EBITDA reached 521.5 million of euros, an increase of 9.9 million of euros (+1.9%) in comparison with 2012. In spite of the impact on Company profits, resulting from a lower rate of return on assets, positive development can be seen as a result of the continued aim to reduce operating costs.

EBITDA

(Millions of euros)

 ‘13 ‘12  Var.%
1) Revenues of assets  474.7  493.1  -3,5%
Return on RAB  269.0  286.6  -6.2%
Smoothing differences and neutrality effect (gas)  -11.5  -7.5  53.7%
Hydroland remuneration  8.3  9.7  -13.6%
Lease revenues from hydro protection zone  0.7  0.8  -1.1%
Remuneration of fully depreciated assets  8.3  7.9  4.6%
Recovery of depreciation (net OF subsidies)  181.7  177.3  2.5%
Subsidies depreciation  19.1  18.4  4.1%
2) Revenues from Opex  104.6  110.4  -5.2%
3) Other revenues  21.1  7.3  n.m.
4) Own works (capitalised in investment)  25.3  27.6  -8.4%
5) Earnings on Construction – Own works  162.2  172.9  -6.2%
6) OPEX  110.7  123.5  -10.4

Personnel costs 10

 54.2  53.5  1.2%
External costs  56.5  70.0  -19.3%
7) Construction costs – Own works  162.2  172.9  .6.2%
8) Provisions / (reversal)  -0.2  0.6  n.m.
9) Impairment of receivable debts / (reversal)  -5.3  2.6  n.m.
10) EBITDA (1+2+3+4+5-6-7-8-9)  521.5  511.6  1.9%
11) Depreciations  201.2  197.4  2.0%
12) Financia lincome  -142.2  -136.0  4.6%
13) Income tax expenses  56.7  54.6  3.8%
14) Net income (10-11+12-13)  121.3  123.6  -1.8%
15) Nonrecurring items (14+15)  -0.6  -3.3  n.m.
16) Recurrent net income  120.7  120.2  0.4%

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10 Includes: i) reclassification of training, seminar and staff fuel costs, from external costs to staff costs (0.9 millions of euros in 2012 and 0.6 millions of euros in 2013) ), and ii) provison of 2 millions of euros in 2012.

The following factors made a positive contribution to the evolution of EBITDA :

  • A decrease in Opex by 12.8 million of euros (-10.4%), of which the following are worthy of note: i) a decrease of 5.5 million of euros in non-core costs, including -2.8 million of euros in forest clearing and 3.3 million of euros in system services and cross-border tariffs; ii) reduction of 8.0 million of euros in external core costs, including -4.4 million of euros in specialist services contracts, -1.0 million of euros in maintenance costs and -0.9 million of euros in advertising costs;
  • The increase seen in other revenues (+13.8 million of euros), resulting mainly from the increase contribution of 9.2 million of euros from the interest on tariff deviation, which went from -6.5 million of euros in 2012 (resulting from tariff deviation to be returned to tariffs) to 2.7 million of euros in 2013 (resulting from tariff deviation to be received from tariffs);
  • Revenues from recovery of depreciation increased by 4.4 million of euros (+2.5%), in line with the increase in RAB;
  •   A 7.9 million of euros change in the impairment of receivable debts, resulting from one impairment in 2012 (-2.6 million of euros), and the reversal in 2013 of the impairments accumulated over previous years of 5.6 million of euros.

These positive results were partially offset by:

  • A decrease of 17.6 million of euros (-6.2%) in the return on RAB, of which return on electricity assets accounted for -19.6 million of euros (excluding land), resulting from a reduction in the base rate of return, that went from 9.55% to 8.06% (the rate of return for electricity assets is linked to the daily average of the Portuguese 5 year CDS), partially offset by an increase in the average RAB (+94.6 million of euros; +4.8%), along with an increase in the weighting of premium assets, which went from 38% to 43% of the total in 2013;
  • A decrease in the remuneration of hydro land, which went from 9.7 million of euros in 2012 to 8.3 million of euros in 2013 (-1.3 million of euros; -13.6%), due to the decrease in interbank swap rates11;
  • A decrease in the revenue from Opex (-5.7 million of euros; -5.2%), in line with the decrease in group operational costs.

11 Remuneration calculated on the basis of the interbank swap rate for the term closest to the legal depreciation horizon for the lands in question, plus 0.5%.

Net profit

Despite the increase in EBITDA , net profit fell by -2.3 million of euros (-1.8%),
due to an increase in groupwide depreciations (+3.9 million of euros; +2.0%),
in line with the increased asset base and the reduction in financial income (-6.2
million of euros; -4.6%). The reduction in financial income can be explained by
the increase in average gross debt (necessary to ensure the display of liquidity for
ratings purposes), and in spite of a reduction in the average costs of financing by
5.54% (-16 b.p.).

Recurring Net Profit (i.e. Net profit less nonrecurring items) increased 0.4% (0.5
million euros). The nonrecurring items considered in 2013 and 2012 are as follows:

  • In 2013 – i) reversal of impairments of receivable debts registered in previous years (5.3 million of euros; 3.8 million of euros after tax); and ii) effect of the carry cost of the pledge to the European Investment Bank (4.6 million of euros; 3.2 million of euros after tax)
  • In 2012 – ii) correction of the surplus from the estimated income tax of -5.6 million of euros related to the recognition as a fiscal cost of the provision of an indemnity pertaining to the litigation with Amorim Energia; and ii) registration of a provision for impairment of receivable debts amounting to 2.6 million of euros (1.8 million of euros after tax); and iii) effect of the carry cost of the pledge to the European Investment Bank, made in November 2012 (0.7 million of euros; 0.5 million of euros after tax)

NET INCOME
(Millions of eur os)

'13 '12 Var.%
EBITDA 521.5 511.6 1.9%
Depreciations 201.2 197.4 2.0%
Financial income -142.2 -136.0 4.6%
Income tax expenses 56.7 54.6 3.8%
Net income 121.3 123.6 -1.8%
Nonrecurring items -10.6 -3.3 n.m.
Recurrent Net Income 120.7 120.2 0.4%

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Capex and average RAB

Total Capex reached187.8 millions of euros, a 13.2 million of euros (-6.6%) drop,
consisting of-15.1 million of euros in Natural Gas and +2.1 million of euros in
Electricity. This decrease is due to the conclusion of the Sines Terminal expansion
project (23.5 million of euros) during 2012.

Following the same pattern assets transferred to operations decreased by 75.6
million of euros (-23.6%), reaching a sum of 245.0 million of euros. In a similar
way to that of capex, this drop can be explained by the start of operations at the
Sines Terminal in 2012 (106.9 million of euros).

Average RAB increased by 3.2% (+108.2 million of euros), reaching 3 488.9
million of euros, consisting of 81.0 million of euros in the Electricity sector and
27.2 million of euros in Natural Gas. In electricity, the increase in average RAB
occurred mainly in the categories with the greatest rate of return, wherein 139.4
million of euros of this increase took place in electricity with premium (RoR of
9.6%), while the categories with a lower rate of return (hydro lands, RoR of 2.8%,
and electricity without premium, RoR of 8.1%) saw their average RAB value reduce
12.9 million of euros and 44.8 million of euros, respectively.

Investment

In the electricity segment, it is highlighted projects associated with reinforcing the
distribution network’s suply conditions, the safety and reliability of the system’s
overall functioning and reinforcing the energy reception capacity, particularly
from renewable sources.

The following activities are worthy of note: the development of the network
in the Trás-os-Montes region, where 14 million of euros was invested; the
reinforcement of the network on the route of the Douro axis and in the Porto region,
where 49 million of euros was invested, on the coastline south of Porto (Feira)
17 million of euros, the development of the network in the Beira Interior region
(14 million of euros) and in the Lisbon area and Setúbal Peninsula (33 million
of euros).

In the gas segment, the following activities are worthy of note: the construction of
the Mangualde-Celorico-Guarda gas pipeline, where approximately 19.7 millions
of euros was invested in 2013, and the C6 cavern for storing natural gas, with an
investment of 4.5 million of euros.

MAIN PROJECTS IN 2013   
 Imagem_tabela_1 Imagem_tabela_2
ELETRICITY
(MAIN PROJECTS)
GAS
(MAIN PROJECTS)
48,5 MD DEVELOPMENT OF THE NETWORK IN PORTO AND DOURO AXIS AREAS 19,7 MD GAS PIPELINE Mangualde - Celorico -Guarda [REN Gasodutos]
32,9 MD REINFORCING THE NETWORK IN LISBON / SETÚBAL PENÍNSULA AREA 4,5 MD CAVITY 06 [REN Armazenagem]
17,2 MD REINFORCING THE NETWORK ALONG THE COAST SOUTH OF PORTO 3,4 MD OTHER Projets
17,2 MD REFORÇO DA REDE NA FAIXA LITORAL A SUL DO PORTO    
14,1 MD DEVELOPMENT OF THE NETWORK IN TRÁS-OS -MONTES AREA    
14,2 MD DEVELOPMENT OF THE NETWORK IN THE Beira Interior AREA    
30,6 MD OTHER PROJECTS    
ELETRICIty 157,6M€ OTHER BUSINESSES: 0,4M€ gAs: 29,9M€
  GROUP’S INVESTMENTS IN 2013: 187,8MD  

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Eletricity

Investment in the electricity segment amounted to 157.6 million of euros
(+1.3%) and transfers into operation amounted to 197.3 million of euros (-1.8%).
In the Trás-os-Montes region a new 220kV connection came into operation
between Valpaços and Vila Pouca de Aguiar, completing the 220 kV circuit of the
mountainous axis between Lagoaça and Valdigem, in order to reinforce supply to
consumers and improve power feeding conditions to the network in that area.

On the Douro axis and in the Porto area, the 400kV connections between
Armamar-Recarei and Recarei-Vermoim came into operation, along with the
introduction of a 400kV level at Vermoim substation. Also in the Porto area, the
refurbishment to 220kV of the Maia steel plant was concluded, along with the
connection that feeds it.

In the southern coastal region of Greater Porto a new 400/60kV substation came
into operation at Feira, supplying consumers in the municipalities of São João da
Madeira, Feira and Arouca.

In the Beira Interior region a second 150kV connection came into service between
the Falagueira and Castelo Branco substations, providing this interior region with improved supply of renewable energies and enhanced overall safety of the network operation.

In the Lisbon area and on the Setúbal Peninsula, in order to reinforce supply to
consumers, it is worth noting the construction of a new 220kV underground
circuit between the Alto de Mira and Sete Rios substations and the introduction
of a 400kV level at the Fernão Ferro substation.

Seven new transformers started operation, with a total power increase of 1,069
MVA (of which 320MVA are at the Maia steel plant substation).

MAIN GROUP INVESTMENTS - ELECTRICITY

Natural gas

Investments in the area of natural gas stood at 29.9 million of euros (-33.6%)
and assets put into operation totalled 47.7 million of euros (-60.1%).

In 2013, REN continued with the implementation of the development and
investment plan in the National Transmission Network, in the Underground
Storage Infrastructures and in the LNG Terminals (RNTIA T). This plan, which
includes development and expansion projects, internal reinforcement and
revamping investment and connection to the RNDGN and customers.

As part of the expansion of the RNTGN, REN Gasodutos put the Mangualde-
Celorico-Guarda gas pipeline into operation, running for almost 76km and
closing the loop between lots 5 (Monforte/Guarda) and 6 (Cantanhede/
Mangualde), thereby increasing supply security and making possible a future
third interconnection of the RNTGN with Spain. Along with the pipeline, four new
stations also came into operation at Arcozelo, Soeiro do Chão, Celorico da Beira
and Avelãs de Ambom. This project was eligible under the European Energy
Programme for Recovery (EEPR) criteria.

REN Armazenagem continued to construct the RENC-6 cavity, which underwent
leaching operations during 2013, estimating a final volume of almost 530 000 m3.
The initial natural gas filling took place at Transgás-Armazenagem’s TGC-2 cavity.

GROUPS MAIN INVESTMENTS – GAS