EDP - Energias de Portugal, S.A.

António Mexia - Chief Executive Officer Miguel Viana - Head of Investor Relations Nuno Alves - Chief Financial Officer

Carolina Dores - Morgan Stanley Stefano Bezzato - Credit Suisse Unai Franco - Bank of America Merrill Lynch Martin Young - RBC

Hello. Good morning, everybody.

Thank you for being present once more for the presentation of the first half 2015 results. While you are looking to both EBITDA and of course, net debt, I would like to start that the six months were very marked by rain -- by two events, rain and dollar.

We had really low rain in Iberia, but also low rain in Brasil and we have really big change in exchange rate of dollar, euro. And even with these two events, we have delivered according to the expectations.

I would like to stress hands at the beginning. As you see, the EBITDA grows up to 2.13, 7% year-on-year and the adjusted EBITDA, if you correct by the key Pecém deal grows up 1% year-on-year to €174 billion.

I will go this in a more detail, but before we detail this, I would like to express another thing that is important for the first semester is the assistant ability of the Portuguese system. We have for the first time as it was already anticipated by us and shared with you, slight tariff surplus in the second quarter.

So, clearly, we are in line and what concerns the fact that we will see a flat tariff deficit stock in 2015, and then starting decreasing in 2016. So this issue has been around for long time and I -- it’s important that we stress that we are exactly what -- where we expect.

In terms of net debt, we see an increase of 5%, but basically the increase is due to the Pecém deal, the increase of $700 million is exactly the same amount of the deal related to Pecém deal with consolidation. And as you see, we have $300 million due to the ForEx, so the increase of the dollar that is more less the same as the disposal that we have done in this moment.

So, clearly, we would where -- without the Pecém deal we were where we were expected to be. The net profit is 7% down to $587 million, mainly panelized by financial costs, with the huge percentage of non-cash items and I will talk about this later.

So let’s go back to the results, to the EBITDA. First, as you see on page three, the GSF in Brasil was 80%, that compares with 95% last year.

In Portugal, it was 0.75, compared to 1.37. On the wind is also lower, but here it was compensated by higher prices and of course, higher capacity.

What you see clearly is, when rain is less in Brasil you have 18% lower generation, hydro generation and in Iberia the big impact less 40%. And this has a triple effect, the lower rain in Iberia.

First, less revenue and the liberalize activities, the second impact is, we have already completed new hydros, but the lack of water means that they will start later than expected on a normal year, and third, of course, low rain, of course, lower wind, lower volatile on the pool, lower energy management possibilities, that were very, very strong in the first semester last year. And as you can see, wind and hydro represented in the first 65% of the generation mix, compared to almost 80% in the same period for last year.

So climate change in this semester is really impacting the figures. In terms of adjusted EBITDA, 1% above, supported by basically EDPR, EDP Brasil, as it is interesting to see what are the adjustments, last year you had Jari and Cachoeira, and also the benefits with the restructuring of the labor agreements that were -- as you remember 1 -- 29 -- €129 and this year if you compare you takeaway the disposal of Gas Murcia and the bad real gain on Pecém acquisition.

And with these adjustments you still have an increase on EBITDA. You know what, on the generation supply as we have seen very strong impact of the lower hydro and lower energy management gains that EDP Renovaveis positive in terms of recovery of the prices, EDP Brasil, we have the positive impact of the new accounting of tariff deviation that as you remember was only decided at the end of last year legally.

In terms of regulated networks, of course, I would like to stress this thing, higher efficiency and lower return on RAB due to the decreasing risk perception in the market for Portugal as you know, for the next session. So, clearly, this is compulsory elsewhere, its good news, elsewhere it’s, of course, lower than here.

So, overall, delivering what was expected even in weak semester, mainly due to rain and stronger dollar expected with impact of non-cash items. Miguel, if you like to give the presentation and then I will come for the closure and Q&A.

Thank you, Antonio. Going through the market conditions in Iberia in the first half 2015.

We can see that much lower hydro volumes versus last year and also an increasing demand as you will see lead to search in terms of production and also crude prices in the first half 2015. Regarding energy demand in Iberia, as we can see in the next page, electric demand in Iberian market went up 1.8%, with the breakdown of plus 1.2% in Portugal and slightly higher 1.9% in Spain, which is a sign an economic recovery in both countries.

Adjusted for temperature in working days, demand was flat year-on-year in Portugal and showed an increase 0.5% in Spain. Gas demand went up 6.4% in Iberia and supported initially by strong growth of demand for power production namely CCGT plus 36.8%.

Regarding our electricity generation operations in Iberia, our production in liberalized market went 17%, reflecting a strong increase in coal and gas production, which compensated the decline in hydro volumes. Our hydro and coal plant in Portugal under PPA/CMEC showed a deviation between the contracted end-market revenues, close to zero in the case of coal and €96 million deviation in the case hydro, explained by hydro volumes 39% lower than expected.

Moving to next page we can note that our first half 2015 operations in liberalized markets in Iberia were penalized by as we have already stated weak hydro production, but also lower gains on energy management. These results essentially from the market positioning of EDP, which include significant rise of hydro and generation mix and also long position needs us to final clients versus our own production in the market, meaning that as it can be seen historically, management gains happen to be much lower in dry years versus wet years.

Moving to next page, as you can see in terms of adjusted EBITDA in generation and supply in Iberia, excluding the gain of new Collective Labour Agreement in the first half 2014. EBITDA went down 21% year-on-year.

Regarding liberalized activities, EBITDA went down 40%, reflecting average generation cost going up 62% in the period on lower hydro volumes, and gains on energy management almost non-existence in the first half 2015 versus very significant in previous year, and finally also higher generation taxes. Regarding long-term contracted generation in Iberia, our EBITDA went down 3%, mostly due to many hydro volumes declined by 44% versus previous year.

Moving to regulated networks in Iberia, our reported EBITDA went up 2%, including in 2015, the disposal of Gas Murcia capital gain of €89 million and in 2014 €87 gain on the new Collective Labour Agreement, excluding these adjustments, adjusted EBITDA went up also 2%, reflecting the significant efficiency improvement as already referred despite the lower return on RAB in electricity in Portugal. Regarding EDP renewables, our EBITDA went up 11% in the period, by major market segments, EBITDA went up 25% in North America in euro terms or 2% in local currency in dollars, supported by increase of 3% in terms of average selling price.

EBITDA in Iberia was stable, including a recovery in power prices in Spain, but also decline in terms of wind volumes, while other European markets went up 12% in terms of EBITDA, reflecting higher capacity and also better average load factor, despite slightly lower prices in Romania. Moving to the first half 2015 environment in terms of the Brasil electricity system.

We can see that rainfall levels continued below historical average, but being better in the second quarter so 93% below historical average versus 58% below historical average in the first quarter 2015, so a slight improvement in the second part of the semester. This imply the strong thermal dispatch that continued during all the semester and also, of course, with hydro generation exit going up 4 times from 5% in the first half 2014 to 20% in the first half 2015.

The good news came essentially from hydro reservoirs recovery from 19% in December ’14 to 37% in June ’15. Spot prices, so the PLD going down by 43% also reflecting the revision downward of the cap and also the material tariff updates implemented by the regulator with the support from the government, which also reduced the regulatory receivables at level of our distribution companies.

The decline in power demand also was minus 2.1% year-on-year, which reduces the pressure on the system as a whole. Overall, the risk of electricity rationing in 2015 is now extremely low, but either generators with PPA’s such as our case continue to be highly penalized by decline in hydro dispatch in Brasil.

As a result, as we can see in terms of EBITDA in Brasil, first, we have our reported EBITDA in local currency going up 98%, but strongly impacted as we already referred by one the capital gains last year on the sale of Jari & Cachoeira Caldeirão to our partnership CTG 50% stakes. And this year the acquisition at discount of 50% in Pecém, which generated both gains in first semester of both years.

In distribution, our EBITDA in distribution last year BRL28 million was penalized by the non-accounting of BRK340 million of negative tariff deviations in distribution. Adjusted for this impact, we can see that adjusted EBITDA of EDP Brasil in local currency was essentially flat year-on-year.

In generation, EBITDA is going down by 11%, reflecting a higher generation losses, BRL219 million versus last year near BRL46 million, which were partially mitigated by more favorable seasonal volumes allocated to the first half of the year in '15, and also the first EBITDA contribution from the operation of Pecém so 45 days already in our consolidated EBITDA in second quarter '15. Distribution, EBITDA went up 12% year-on-year, reflecting essentially the tariff increases that were implemented during the last 12 months.

Moving to operating costs, at consolidated level they went up 1% year-on-year or flat if we exclude the ForEx impact. By geography; in Iberian Peninsula, operating costs went down 2%, including the execution of our OPEX III efficiency program and also supported by headcount reduction, mostly related to early retirements in Portugal.

At level of EDP Renewables, operating costs went up 2%, excluding forex despite the 6% increase in installed capacity. And finally, in Brazil, operating costs in local currency went up 5%, clearly below inflation in the period and including also 45 days of Pecém operating costs.

Overall, the OPEX III efficiency program achieved €88 million of cost savings in the first half 2015, showing a 19% improvement year-on-year. Moving to net investments, they went down 14%, essentially reflecting €339 million of asset rotation deals of EDPR -- at EDPR level.

In terms of investments, 68% of the investments were related with expansion, expansion in wind power in US with PPA, the conclusion of our hydro program in Portugal, and also the two hydro plants for the construction in Brazil, and 25% of our investments were allocated to our regulated asset bases in our energy networks in Portugal, Spain, and Brazil. Moving to the next slide, we can see that regarding the evolution of regulatory receivables in Portugal, we have this time highlight a slight tariff surplus in the second quarter of '15 for the first time in several years.

So €10 million of tariff surplus in the second quarter or still slight tariff deficit of €38 million for first six months of 2015, even being still penalized by the low hydro volumes in the period and also the slightly above average wind volumes. So wind volumes still 6% above average in Portugal.

We would compliment that for this month or for the month of July, the positive trend continues. We continue to see high power prices, CO2 prices recovery, which are both good in terms of cost and revenues, also demand showing a good behavior, and also finally in terms of special region production not only volume slightly below average but also the lower cogeneration tariff, which are indexed to regulator gas tariffs.

So we continue on track to deliver the expectation of 5.3 tariff debt by the end of 2015, representing a zero tariff deficit for the year of 2015 for the Portuguese electricity system as a whole. Looking to regulatory receivables at the level of EDP balance sheet, they went down by €157 million, impacted essentially by more than €200 million decline in Portugal, which includes the impact -- positive impact from securitizations, the ex-ante deficit for the period of €750 million, but also positive annual deviations of more than €300 million.

In Spain, the amount is very small, reflecting essentially our share of gas tariff deficit in Spain. And in Brazil, the increase was also almost immaterial due to slightly higher energy costs than the ones incorporated in tariffs in Brazil.

In terms of net debt evolution in the first half 2015, we can see that it is significantly impacted by the consolidation of Pecém. So Pecém increases net debt in this second quarter by €0.7 billion, so €0.6 billion from the full debt consolidation of Pecém and also €0.1 billion from the price base for the acquisition of 50%.

The other significant impact is the forex. So the stronger dollar and net debt 23% of our gross debt is US dollar denominated, essentially in natural hedging to fund our US operations of EDP Renewables and we had this negative impact in the first semester of €0.3 billion at debt level.

It includes also of course as normally in the second quarter the full payment of the annual dividend in cash of €670 million, which always impact our second quarter net debt figure. Still on financial debt and in terms of average cost of debt, you can see that there was still an increase in this quarter, 10 basis points increase to 4.7% due to lower cost of some debt maturities during 2014 and during the first semester of '15.

While in terms of average debt maturity, it continues to increase to 4.6 years by June versus four years by December on refinancing at lower maturities. In terms of financial liquidity, it amounts €5 billion by June with the breakdown of €1.4 billion of cash and equivalents and €3.64 billion in terms of available credit lines, which cover the refinancing needs that we have until 2017.

Moving to financial results, we can see that the cost financial results increased from €245 million to €364 million, impacted by adverse forex and also the lower capitalized cost. This year-on-year change includes higher net financial interest so that the 10 basis points increase on average cost of debt and also the 23% appreciation of dollar versus euro, which affects the interest paid in dollars, also the forex impact essentially €14 million of losses in the first half of '15 versus €33 million of gains in previous year.

This is noncash essentially related with US dollar and also with energy markets mark-to-market positions. We have also the gains on tariff deficit securitizations, which are smaller this year, so less €20 million versus previous year and also the lower capitalized costs, which are mostly related with the hydro projects under construction in Portugal, which are reaching conclusion.

Overall in terms of P&L breakdown, we would highlight that the adoption of IFRIC 21 accounting rule, which changed the account of levies at the moment in which they are due versus the previous linear accounting over the year, impacted our first half 2015 results by minus €45 million and by minus €43 million on the restated figures for the first half of 2014. Overall after the 7% increase on EBITDA, we have a similar increase of EBIT in absolute terms, in relative terms plus 12% at level of EBIT, cost financial results and the associated companies increasing by 63% as we saw before, and income taxes going down by 19%.

We have extraordinary energy tax in Portugal fully accounted in this first half of the year, reflecting the accounting change of IFRIC 21. So €61 million for the first half of '15, which will be the same figure for the full year and the increase of non-controlling interest by 79%, which reflects the gains of Pecém acquisition at level of our subsidiary EDP Brasil, which has 49% weight of minorities.

Overall net profit going down by 7% to €587 million and adjusted net profit adjusted for the factors that we saw before going down by 23% year-on-year to €431 million by the first half of 2015. I will pass now to our CEO for the final outlook.

Thank you, Miguel. So further two slides, when you’re looking to these results I would say the results delivered according to expectations, both at EBITDA level and net profit, despite the really low hydro both in Iberia, Portugal, Spain and also Brazil.

I would like to stress the cost control. We are flat ex-FX and even with the increase in dollar, we are just slightly 1% up.

So it means that we have been also focusing very much on the efficiency side since we last see, but for us it’s critical. And we have been delivering as we remember all the OPEX programs and once again we are above what we have committed to the market.

So before going and looking into the end of 2015 so year end, I would like to talk a little bit about Brazil and why Brazil, because in previous conference calls and also in all the road shows and our meetings, Brazil has been the topic, half of the -- eventually more than half of the questions have been always about Brazil in the last six months, not to say the last year. And in Brazil, what I have to say is that the recent developments in that market improved our perspective.

We are today much better than we were three months ago for several reasons and the first one of course is rain and either reservoirs. As you see, the gap that was almost 80% compared to last year that was already not fantastic was around 8%.

And as we speak, we are -- today we are almost 1% above the same level on the key regions in Brazil. And I think that’s a very significant change and the very important change.

That is related also with the decrease in spot price. As you remember, the limit was revised this year.

In the first half on average we were close to the ceiling of 300 days, but in July we are providing a decrease of almost 30% on the spot price. At the same time, the demand evolution is in the right direction and say to put less pressure on the system and the decrease of 2.8% in the second quarter.

For the system overall it’s a good news. So these plus everything that is being discussed around the treatment of GSF, means that we can only look into the future in a more optimistic way.

And by the way on distribution, the lower PDLs reduces the regulatory receivables. Of course it reduces pressure on the customer status and on the regulatory front, the new return on RAB of 8.1% and all the negotiations involved with on this implementation also have been improving.

And so we felt it’s a good news. So Brazil really today, we will be talking of course again in three months about rain in Brazil and how things are evolving.

But today Brazil is much brighter than it looked three months ago and I expect this last time talking about Brazil. And this concerns the end of the year 2015.

We expect the adjusted EBITDA reaching the consensus. If you see the reported EBITDA, our guidance is doing about 385.

If you take the capital gains in Brazil, so the good news are on the M&A front and you see GSF impact also. If you will incorporate this and you expect this of course to be lower than the figure that you have mentioned three months ago.

It’s lower than €150 million impact on the EBITDA basically in line with the consensus. Talking about net profits, net profits we are talking now about €950 million assuming the average cost of debt of 4.6.

And to travel between EBITDA and net profit, I think it’s, probably, what everybody is doing on the envelop, so let’s talk a little bit about it. The only addition non-recurring impact on net profit that we are adding now is Pecém €130 million.

Our repeated guidance of the EBITDA was €3.6. As I mentioned, the net profit was about €900 million, already included the Gas Murcia and a significant GSF negative impact on the EBITDA.

The new guidance excluding Pecém interest rate above 950 brings let say the adjusted, slightly above the 820. The deviation to the 900 is basically divided into two things, first outside [indiscernible] around € 40 million due to the lower legalized activities in Iberia.

So we are talking about around €40 million with lower arbitrage opportunities compared to what we like. And the rest is basically non-cash market-to-market accounting impact because of the dollar evolution.

So more than half of it is non-cash. The small impact on regulation of real through the euro but basically €40 million is typically connected with expected legalized activities given a lower impact, lower why, because lower expected hydro volumes and so typically, we see this as a normal evolution.

Talking about extraordinary adjustments. Capital allocation, I think that we have a balance and value enhancing approaching.

And even when we talk out extraordinary, it’s important to see that they have decided because they are value enhancing. We see items where we can say that we have sold well.

Eventually, you say okay but now it’s easy to sell. We need to do it in any case, I think that namely the authorization policy the gas assets in Spain, the mini-hydros in Brazil, that will only have an impact on the first quarter next year but also it will show that we have been doing well on the same side.

But we have also performed very well on the buying side. We have transformed an eventual problem of Pecém in a good opportunity as we all know that the acquisition of ENEVA is 50%, I think it’s clearly very, very good deal with a 70% discount to book.

And of course, value creating for our shareholders. We have the hydro on time.

We have the wind on the construction. We have also the Brazil in terms of new ideas well developed.

So clearly all these investment and disposals, we see this as a very positive and leading visibility to the financial commitments in the business plan after 2017. At the same time, talking about YieldCo, of course, gives the visibility about crystallizing value and of course, value enhancing opportunities in markets that we like, like the U.S.

So overall, we feel comfortable with the results. We feel comfortable with the year ends and specially also we feel comfortable with the capital allocation policy that I think as being always value enhancing for our shareholders.

So let’s go for the Q&A.

Hi. Good morning everyone.

Thanks for taking my questions. I have three.

First one, I understand the EBITDA reduction expectations for net income for ’15, but one should know how do you see 16 numbers. Last quarter you said, you were comfortable with consensus which for memory was around 1 billion.

Just wanted to know if you are still comfortable with that. Second is your net debt, you need to bring it up by 700 million.

Mainly where is this coming from. Is it mall securitizations?

And my third question is on Pecém, if you can give us an update on the status of the plants and when you expect to be operating as you would expect. Thank you very much.

So I would talk about ‘16. Let’s be clear, we feel comfortable with the consensus, those consensus, EBITDA and net profit for ‘16.

At this stage, we feel comfortable with it. So the line is always in that front, net debt.

Net debt figure of €17 billion does foresee €200 million on securitization of the deficit in the second half. It does foresee about €300 million of asset rotation in U.S.

on the renewable side. And it does expect that at least partial payment still this year of the CTG transactions which we expect to announce at the beginning of the fourth quarter.

And with that, we should reach €17 billion. So that does not clearly account on having a YieldCo on efficacy from good YieldCo and a number of discussion below the €17 billion.

In this part, as present, we are -- in July, we are above 90%. So everything is going as we like.

So as we’ve been seeing since the beginning of the year, that’s actually the problems are gone. The fact that now we are in full concern of the company also helps and we are at July as we speak above 90%.

Can we go to the next call please, next question.

Yeah. Hi.

Good afternoon everyone. Thank you for taking my questions.

First of all, on Brazil, you are right everybody asked about it. But what expectations do you have today for 2016 EBITDA for both distribution and generation.

Obviously, you may see a constant exchange rate and clarify your hydro expectations and any other assumptions you have, maybe if you can also crystal ball into 2017. I know it’s tough but it will be helpful.

Secondly, we also know short-term growth drivers for the group hydro in Iberia, Brazil, renewals and so on but can you talk in recent general terms about longer term growth possibilities for the group or is it just too difficult to contemplate about growth given the balance sheet constraints. Thirdly, just sort of a number one really in 2014, you had a capitalized cost on €69 million, a serious decline by €36 million.

So what do you expect for the full year 2015 and ‘16 please. And then just finally on the YieldCo, you could update us on both.

I know it’s long-term study but you’re obviously seeing what share price behaviors are happening to other YieldCo. I just wonder if you have any takeaways so far.

Thanks.

Hi Lawson. Regarding Brazil in 2016, we have first in distribution the positive impact from the revision of return on RABs.

So in the case of Bandeirante from next February onwards and indicate from August 2016 onwards with the revision of the return on RAB from 7.5 to 8.1. So we expect, we have also positive news in terms of some benchmark in terms of cost base.

In generation, of course, 12 months of Pecém versus seven months in 2015 and then in the part of hydro, so we would expect these developments more recent both in terms of PLD, in terms of hydro reservoirs and in terms of eventually changing regulation with being positive news flow on that front. But I would say that this is the more difficult part to forecast.

In terms of currency, of course, as you know the real has been a little bit weaker in the last couple of months. We have still also this expectation in terms of the gain with the sale of Pantanal, which we expect regulatory approvals, which can impact some activity level something like €80 billion and that level of net profit something like €20 something million in 2016.

And that’s also we have had some impact outside at this uncertainty in Brazil coming more, of course, from ForEx and from the part of the rain namely in terms of generation.

Also some long-term possibility growth, as you see, as you know, we are always trying to show exactly where we are going to invest and its possible being detailed on the projects, as you know we are finalizing the hydro project in Portugal. In Brasil, we are still, we have, of course, Cachoeira and São Manoel you have clear -- we have very clear detailed the targets for the renewables in the short and medium-term with visibility on the projects, so that part is obvious.

After this what we have been trying is, we will be focusing on renewables in markets that we are already, which more than diversifying into 10 new markets is developing further in the market that we are already. I think for us is the best strategy and lower risk and better returns.

And as we have mentioned, but -- with no impact probably until 2017 is, of course, trying to find new possibilities in hydro with CTG, in what concerns small and medium hydros, where you can find good regulations, long-term contract in markets that’s basically met fulfill all the conditions that we want. Feasibility on the cash flow, the right framework in terms of regulatory front, the right of taking everything, so this rule will give visibility as soon as it makes sense.

In any case it will not have any impact on the next two year that will be mainly driven by what everybody knows in detail. The balance sheet constraints, it’s a word that could look negative.

The only thing that have look, I would like to stress that this level is that we are fully committed with the targets with the balance between gross and deleveraging with dividend policy. So this is not -- we don’t see this as a constraint.

We see this as key targets that we are committed with the shareholders. And what concerns YieldCo and as you know we cannot talk about this.

At this stage, we are studying the possibility of leasing a minority stake of an EDPR YieldCo the only that I would like to say is a kind of [Lapalis] [ph] we only do it if it make sense for EDP shareholders and what concerns capitalized cost.

Capitalized cost just round numbers total for 2015 around $85 million for 2016 about $70 million. Next question?

And those U.K. question too.

So the U.K. I’ve met, I’ve just told you, we cannot talk about it, because we are just studying the possibility and the only thing that I’m saying is we only do it if the market is there and in the conditions that will be value creating for the EDP shareholders.

I’m saying something that is obvious, but that have implications in what concerns the possibility of doing it.

Okay. Thank you very much.

It looks simple but it has a lot of meaning.

Yeah. Okay.

We can go to the next question, please.

Yes. Good morning.

Just one question for me. In relation to EU Power Market Reform, over the past few days your competitors have sounded pretty positive about the progress at EU level on Power Market Reform.

Someone has even mentioned the possibility of rain production of PPAs in the future. What are your expectations both in terms of timing and how we feel the margin the future EU Power Markets?

Stefano, as you know, probably we were the first company, I want to first talk about these markets, this annual reform and we have been passing the word and trying to explain the people how we need to work in a new environment where the new additions have zero marginal cost and where marginal pricing does no longer work and both have authorization and investments in those. And U.K.

market is a good example of it. Whenever you need to new investment, you will need to recognize that you need to change something.

PPAs in the future, I think that this kind of Iberia model where you have no longer than energy market alone but you have a kind of an exact competition with competition being made reductions, is something that we will see in the future, so the question is timing. As soon as you need new capacity, all the markets that need a new investment will recognize reality.

You need new kinds of model that will be kind of hybrid. Let me speak of the Brazilian flavor, as you see Brazilian have been talking about because -- not because the model is bad, the model is very good, is because it was illimplemented.

So I believe that we will see rather sooner than expected and make sure of markets, every markets with spot markets and exact competition with PPAs. And of course, capacity payment is part of it, as you know our countries that don’t like it, because they believe that they can live without it like Germany, but even in that front we see evolutions.

So, but it will be two hours speculation, but we -- I feel more comfortable today than six months ago about this as we have seen in the market and we have been pushing, I have been pushing.

We got question from the Internet, there is a couple of questions here asking you to comment on the energy tax in Portugal and how you see it going forward?

Energy tax, difficult question but the answer will not be different from what we have given three months ago. Our position is clear.

The tax should go away in 2016. Being realistic, we now facing what was already the commitments of the actual government saying that they will reduce it first to 50% then to 25% and then it will go away.

We have elections as I stated it when we look in a sustainable market as we see today Portugal. So we don’t need new measure, you kind of seeing, we need to extract measures because the sustainability is there.

We see energy tax is something that going out of an extraordinary situation, it should go out as much as possible, as quick as possible. So if it’s not the case, we will take decision in the right place in the right moment but let’s wait for the measure next year.

But in any case we see it going away. The question is about the speed of it going away.

Next question. We can go to the next question please.

Hi to everyone. Thanks for taking my questions.

First of all, on Brazil, what exchange rate are you assuming in your plan for the second half? And then could you please give us or elaborate a little bit on the GSF solution that the local press has been talking about whereby the GSF risk could be eliminated in exchange for lower contract prices.

And from 2017 onwards and in the meantime, GSF cost would be paid by concession extensions, that what we’ve been reading in Brazil. So could you please comment on that?

And then next on the yield closure to go back to the story but my understanding is that the idea is basically to unlock capital to invest in more profitable wind. Now, you’ve been successfully selling down on wind assets on an ad-hoc basis.

So why not pursue that root also in Europe. Do you really, I mean do you expect bit of multiples if you go down the YieldCo root.

And then in connection to this, if you were to raise more cash a being with a YieldCo or more asset rotation, could you indicate us please how could you redeploy that cash? What kind of -- potentially, what kind of contract -- sorry, what kind of pipeline could you be envisioning in the U.S.

under the current PPC umbrella. And then last would you also consider selling down on distribution assets instead of the YieldCo both in power and oil gas.

And then last question on the Iberian and Iberia last generation supply, the EBITDA was down 41% due to hydro Spanish, Texas got supply margin. Is this a new H1 -- sorry this is H1 sort of a new normalized level.

How could we or should we think about the H1 next year considering a normal hydro year? What are the basically the comps there in terms of EBITDA?

Thank you.

Okay. Thank you, Nuno.

Exchange rate I think is 3.5. GSF through extensions, we have been -- catching there authorities by the way we’ve been feeding the discussion with idea namely the construction extension, capture the value as I’ve motioned earlier.

So we exported some of the ideas of European to Brazil. I think it helps.

What I believe is that the government really wants to find a solution. By the way, it is being pushed to find a solution because as you know we have some legal decisions even if they are preliminary.

That allowed players to reduce the GSF risk to zero. I don't think that we need that zero but we need is clearly the items to be less affected by decisions that they don’t depend upon them, because it was not only question of rain, but also management of the system.

What I really can tell you today is that we are discussing something that was denied few months ago. And the discussions are we try to attempt, we are discussing measures.

The mix of measures, I rather not to be very detail because I really don't know what will happen. But in any case, we are optimistic in that front.

And what concerns the YieldCo and locking and reinvesting at, the idea why the YieldCo and not just the typical asset rotation. YieldCo is a proxy to the asset rotation but better asset.

It must be a better than the typically asset rotation that we have been doing. It’s a reason why we have separated U.S.

market in terms of asset rotation and European YieldCo to be an European. And the idea is clearly it gives you -- it must give you better value, the unlocking must be better than typical asset rotation and that's clear, were now the key criteria.

If not, it doesn’t make sense. And of course the idea is to reinvest in a pipeline where we have good visibility in the sense that due to the stock of project that we have, we feel comfortable on the possibility of unlocking and reinvesting.

So that movement will be simultaneous. What concerns the question number five distribution, selling distribution, instead of the namely added deals or the YieldCo that we have now analyzing.

The question is, no, why. We like the profile of EDP.

I think that we have stressed this in the recent past. Changing this profile in terms of stability of the cash flow and the lower risk approach and it does make sense in our opinion and we prefer to keep it.

Liberalized markets, let’s be very clear. We don't see.

And hopefully, I was clear and also we don't see this as a new normalized Iberian market. Last year was as we’ve stated at moment a very good one, more better than normalized.

But the year is clearly it was than the normalized one, because we basically are almost half of the ideal capacity and 25% below what this normalized DSO. You should not consider this as a new normalized.

Last year was a better than normalized.

We can go to the last question please.

Good afternoon to everyone. I am just going to limited two questions.

And the first is to pick up on the issue of your position in the liberalized market in Iberia and your strategy towards it. Given the long position that you’re having in customers, have you not fall to back trying to close that volatility gap to a degree by buying some elements of power forward and hence obviously presenting, shall we less volatile results quarter-on-quarter?

And then secondly getting back to the YieldCo, are you just looking to establish a vechile, which is fully populated with assets from the off or would you be looking to establishing a vechile, which has dropdowns and assets build up in it over time? Thank you.

Hi, Martin. Regarding the strategy in terms of clients, as you know, so after 2017 we will change the regime of our PPA/CMEC plants.

So we’ll have a CMEC plants and several hydro plants in the market. So today the long positioning in clients will become essentially neutral post 2017, given that we’ll have new generation already in the market without needing to buy any kind of assets.

We have already the assets in our portfolio. Regarding the YieldCo?

Martin, regarding the YieldCo, I apologize, but I cannot talk it about for a reason -- for obvious reason. We are considering the possibility.

We will talk about this next time we meet. At this stage, we cannot talk about it.

The only thing that I’d like to convey is clear that notion, a better than asset rotation from the European markets, value enhancing for EDP shareholders, crystallizing value and the rebalancing of the portfolio, and of course focusing on assets that in markets that we believe that this is the best solution to provide them and what concerns the strategy, and that I can only talk when we take a decision, I'm sorry.

I would love it, but I can’t.

Okay. Thank you.

Thank you, Martin. Thank you everybody.

And have a good vacation hopefully starting tonight, and see you soon. And if you come to Portugal, good news, good weather, and eventually we will meet around.

Thank you. Bye-bye.