EDP lost 400 million with CMEC, according to a study by ISEG

"The transition from CAE to CMEC is not favorable to EDP, it is even slightly unfavorable.It's not here that they embellished the bride or made the pig get fat." The argument was presented in the parliamentary commission of investigation on excessive energy rents by the economist João Duque, author of a study dated May 2012 and commissioned directly by Professor ISEG by António Mexia, CEO of EDP. The confidential document entitled "Financial Analysis of CMEC and Extension of the EDP Water Domain", to which Vivo Cash had access, calculates this alleged EDP disadvantage of 441 million euros. .

This difference in value is between 833 million euros of valuation of CMEC according to the "methodology of the agreement put in place in 2007 in a post-PPP scenario" and the 1274 million of 39, euros resulting from the valuation of the study in question

The calculations in the document show that this higher value which would be attributable to the transmission of EDP to CMEC results from the a divergence between the expected cash flows : firstly, a low annual capital cost of 4.85% (nominal, before taxes), for the period 2007-2016; On the other hand, a higher risk, calculated at 7.55% between 2017 and 2027. According to this reasoning, the annual amount paid to EDP should have fluctuated between 101 and 125 million euros instead of 82 million euros. euros decided in 2007. However, the study of João Duque and two other teachers of ISEG recognizes that the interest rate of 7.55% (set by Manuel Pinho in 2007) has helped to compensate, though "partially", the CMEC

"One day, Dr. António Mexia or Dr. Manso Neto, I do not know which one, he asked me if a team of ISEG could do some financial analysis work on how the CMECs were renegotiated, replacing the PPPs.As the assessment is financial and being me finance professor, he said that he could join the because the issue was purely technical, "said John Duke in Parliament. Asked whether EDP had commissioned the study to justify a policy measure or a decision from the company, the economist responded: "It was probably to defend his position."

This ISEG document was delivered to EDP in May 2012, in direct response to the study "Rents in the Electricity Sector" (which incorporates an analysis from the University of Cambridge ), published three months earlier, in February of the same year, by the cabinet of the Secretary of State for Energy Henrique Gomes. It is important to remember that between one study and the other, Henrique Gomes resigned from the government of Passos Coelho and was replaced by Artur Trindade of ERSE.

The issue was division within the PSD-CDS government over how they needed to correct EDP's excessive revenues. This year, Henrique Gomes has already admitted that there was a pressure from EDP directly to the Prime Minister. At that time, the Secretary of State for Energy had even defended the introduction of a special levy on excessive rents in the regulated energy production, but the proposal has made impractical because of the privatization of the PDE.

If his study concluded that there was no excessive rent paid to EDP within CMEC, João Duque said, "Excessive word is not included in this document" . "The revenues that can be considered excessive (PPPs or CMEC), if they fit with the privatization process, the state has received, as a seller of EDP. privatization included CMEC cash flow "said the economist.

In response to the latest September 2017 ERSE study, according to which EDP received an excessive value of 510 million euros for CMEC, the company headed by Mexia responded that the regulator was using "fictitious scenarios" to calculate the income to be paid in the next decade, until 2027, and also assured that he would lose 240 million euros.

"EDP has studies by independent entities [como a consultora Nera] that show that the CMEC system has resulted in a substantial reduction in the costs borne by consumers, compared to what they should pay in the EAC scheme, for a cumulative total of 240 million euros, "said EDP in a document sent to DCIAP, which investigates the case in which António Mexia and Manso Neto are accused.

With regard to the differences between the rates, what the ISEG study points out, the ERSE considered that "there is no basis for choosing a rate used for CMEC cashflows in the calculation of the initial value (4.85%) significantly lower than the rate used to calculate the annual revenues (7.55%) applied to them cashflows at the same time ". The regulator countered with the recommendation to reduce the annuity rate associated with the fixed component paid to EDP to 2.04%