Selling price

 

Over 90% of the total installed capacity is under regulated remuneration schemes, have long term power purchase agreements, or have their merchant production hedged. This enables EDPR to minimize risk related to merchant prices.

The average selling price increased to €63.5/MWh (+€5.8/MWh or +10% yoy) as a result of: i) higher selling prices in Europe (+€2.7/MWh); ii) favourable evolution in the €/$ forex (+€1.5/MWh); iii) the production mix change following higher production in Europe (+€0.7/MWh); iv) US average price improvement (+€0.6/MWh), and; v) higher selling price and output in Brazil (+€0.3/MWh).

PRiCe iMPROVeMenTS and inCReaSed weigHT FROM ROMania leadS TO STROng inCReaSe OF 7% in euROPe’S aVeRage PRiCe

EDPR’s average selling price in Europe reached ¤94/MWh, increasing ¤6/MWh, or 7%, above 2011.

All countries posted positive year over year evolutions except for Poland, mainly due to lower electricity prices on the spot market.

Several factors contributed to the positive price evolution in Iberia along with a greater weight of production from Central and Eastern European geographies with above average prices.

Average selling price registered in Spain for 2012 increased 6% yoy to ¤88/MWh, benefiting from an increase in pool price and the tactical decision by EDPR to shift more MWs to the more favourable tariff option within the RD661/2007 regime. In the period, 88% of the output was sold with no exposure to market prices and the remaining 12% sold at market prices plus ¤38.3/ MWh premium.

In detail, the year-on-year price performance is explained by:
i) better hedging prices (¤52/MWh vs. ¤44/MWh, +18% yoy);
ii) the strategic decision to elect the tariff option under the RD 661/2007 which currently implies a realized price above the fixed floor mechanism; iii) the CPI-x update of all the regulated prices under the RD 661/2007 and iv) lower production sold at market prices (-26% yoy).

REVENUE LEVER ExPLAINED
The levers that year after year affect EDPR’s revenues clearly demonstrate our approach to minimize price risk. In 2012 only 10% of revenues were subject to changes in power price markets. The remaining 90% are either fixed, subject to inflation or escalators, or shielding our balance sheet from undesired volatility. Coupled with our fixed cost financing strategy, those approaches ensure the long-term profitability of our projects by locking-in the spread IRR/WACC.
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The average selling price achieved in Portugal in 2012 increased 3% to ¤102/MWh, mainly reflecting the CPI indexation update and extra remuneration for the prevention of voltage dips.

The ¤137/MWh average selling price performance (+54% yoy) in Romania follows the full implementation of the two green certificates scheme per each MWh produced, reinforcing Romania’s attractiveness for wind energy development.

In Poland, the average realized price was €102/MWh under attractive long-term contract structures. The negative year over year evolution is mainly due to the historically low electricity prices realized on the spot market.

In France, the wind selling price improved 2% year-on-year to €89/MWh, while in Belgium the selling price was stable at €112/MWh as per the long-term contracts in place.

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675 Mw OF new PPaS KiCK-in in THe uS, duRing 2012

Average selling price at the wind farms under PPAs increased 2% during 2012, as a result of price escalators, while selling prices at the merchant wind farms increased 3% associated with a recovery in gas prices from last year.

In addition to the 215 MW Marble River Wind Farm, which already has a long-term contract, c. 460 MW of previously installed capacity started to benefit from PPAs signed in prior periods.

In order to improve certainty for the merchant revenue, a total of 615 TWh (24% of merchant revenue) was hedged in 2012 by entering into power futures contracts, securing a fixed price for the stated volume. These hedges provided price stability and effectively reduced the cash-flow volatility due in market-driven electricity prices.

bRazil PRiCeS inCReaSe in line wiTH eSCalaTORS

In 2012, the average selling price of EDPR in Brazil increased 3% to $R285/MWh following the escalator update.

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