DEAR SHAREHOLDER, 

We are living in a world in profound transformation characterized by its unprecedent speed, as we move towards the globalization and interdependence of economic activities, creating significant challenges and opportunities with regards to the organization of our societies, national and international institutions, regulation and market functioning. We are also living in a time of assessment of the role of companies in our system, where their success is closely linked to the capacity to anticipate and execute and above all, it is dependent on their capacity to reinvent themselves, considering a mandatory framework of shared commitments with all stakeholders. 

It is in this context that the urgency of fighting climate change and decarbonizing the economy arises as a decisive factor in companies’ long- term prospects. On the one hand, energy generation from renewable sources has been accelerating, strongly supported by its exponential cost-competitiveness vis-à-vis conventional generation technologies. On the other hand, the intensification of the financing and investment in sustainable companies already reflects the growing awareness on this issue. The commitment to decarbonize the economy in little less than 30 years is a challenge that needs to be at the top of the agenda for both private and public institutions, and the civil society. 

GLOBAL LEADER IN RENEWABLES 

The investment in renewable energy generation and the electrification of other sectors of society are essential to guarantee an indispensable, inclusive and fair energy transition. This is a commitment that has been incorporated in EDP Group’s strategy for over
a decade and which has resulted in our affirmation as a global leader in renewables, with over 20GW of renewable installed capacity, contributing to 66% of our generation. Additionally, we have a considerable international exposure through our presence in 19 countries, with more than 65% of the recurring EBITDA stemming from abroad. 

Sustainable development has been one of the main drivers of our strategy. We have been contributing to the achievement of 9 of the 17 Sustainable Development Goals from the United Nations’ 2030 agenda, through several initiatives, investments and a corporate sustainability fund. We have also shown our commitment to the United Nations Global Compact’s 10 principles, as we continuously align ourselves with the best practices in human rights, labour, environment and anti-corruption. EDP was the first Portuguese company to launch a green debt instrument, having already issued the equivalent to 3 billion euros in Green Bonds, currently listed on renowned indexes such as the Bloomberg Barclays MSCI Global Green Bond Index and the ICE BofAML Green Bond Index, and more recently, the new Green Bond specific segment by EURONEXT Dublin. Given our distinguished sustainable and green positioning, we are recognized, since 2008, by the Dow Jones Sustainability indexes as one of the most sustainable companies in the world, occupying a leadership position among integrated utilities and having obtained, in 2019, our best score ever.

COMMITTED TO DELIVER ON OUR STRATEGIC TARGETS 

EDP’s strategy is also reflected in the consistency of our results. 2019 was again marked by a strong operating performance, with the recurring EBITDA increasing to 3.7 billion euros, a 13% increase compared to 2018, backed by the solid performance of our teams. The recurring net income increased 7% in 2019, reaching 854 million euros, boosted by record-high results at EDP Renováveis and EDP Brasil and a record-high operating profit at EDP Comercial. 

This past year, the company installed 888MW of renewable capacity and secured 3GW, almost doubling the contracted pipeline which already corresponds to 76% of the 7GW additions targeted until 2022. In offshore, we reinforced our leadership positioning through the signing of a 50-50 joint-venture with Engie, which doubles our pipeline ambition, and through the entry in the United States of America with an 804MW supply contract with the State of Massachusetts. 

“In 2019 we provided visibility on the delivery of our 2022 strategic commitments, reinforcing the confidence over our strong execution capabilities” 

In line with our strategic plan, we maintained our focus on optimizing our portfolio through the asset rotation strategy, with one billion euros
in proceeds and over 300 million euros in capital gains. To rebalance our portfolio in Iberia, we reached a 2.2 billion euros’ agreement for the disposal of 1.7GW of hydro capacity in Portugal, contributing to the reduction of our generation portfolio’s concentration and hydrological risk. 

In networks, we have strengthened our focus in transmission in Brazil, supported by the acquisition of a new 142km lot, which will imply a total investment of 407 million Brazilian real. Complementing this, are our strong execution capabilities as 187km of transmission lines are already in operation, 20 months ahead of schedule. 

As to the strengthening of our balance sheet, our strong execution capabilities led to a decrease of the net-debt-to-EBITDA ratio to 3.6x, the lowest level since 2007. We have also continued the cost-reduction and optimization of our operations, resulting in an OPEX reduction of 1% (excluding growth).

FOCUSED ON LEADING AN ELECTRIC FUTURE 

2020 sets the beginning of a decade that will be decisive to achieve carbon neutrality by 2050 and accelerate the profound behavioural change that it requires. Recognizing the urgency of this matter, EDP joined other utilities to push the European Union to formally commit to achieving carbon neutrality by 2050 and to target a greenhouse gas emissions’ reduction of at least 55% by 2030 (compared to 1990).

“We are aware of the role we must play in the global effort to decarbonize the planet. We want to lead by example and actively contribute to contain the global temperature increase to 1.5oc” 

We have committed, and intend to meet, the ambitious goals of the Clean Energy for all Europeans’ package and we were one of the first 87 companies to answer the United Nations’ call as we stepped up and subscribed the Business Ambition for 1.5oC. On top of this, our decarbonisation commitment has already been recognized by the Science Based Target Initiative as having a level of ambition aligned with the Paris Agreement, on a path to well below 2oC. 

The commitment is ours, but the effort must be shared. We therefore continuously promote partnerships to create value and respond to the sector’s challenges. Whether by collaborating with international institutions such as Sustainable Energy for ALL (a United Nations initiative that brings together governments, international organizations and the private sector to promote global access to sustainable energy), or by creating an open innovation ecosystem with start-ups, EDP intends to be part of the solution. 

We have been working and partnering to find new solutions for these challenges at a global scale: 

• To stay at the forefront of innovation, we acquired minority stakes in more than 30 start-ups, in an amount superior to 36 million euros. The recent investment in GridBeyond, a leading ancillary services company focused on flexible load management for corporate clients, in the United Kingdom and Ireland, is a clear example of this strategy. 
• We recently entered Nigeria through the investment in Rensource, a company developing decentralized solar energy systems, strengthening our access to energy commitment for a more just and inclusive energy transition.
• In emergent renewable technologies, we are leading in the development of floating wind platforms through the Windfloat Altantic project, which implies the installation of 8,4MW wind turbines in deep water (the largest turbine ever installed on a floating platform), so far inaccessible and where the abundant wind resources may be used. 
• In electric mobility, we are consistently increasing the pace, having recently closed a partnership with 10 reference companies in the Brazilian mobility sector for the development of the largest ultra-fast chargers’ installation in South America, with more than 2,500km of extension. 

To remain at the forefront of the sector, we also continuously evaluate and test new potential energy generation alternatives: 

• We have developed several renewable technology hybridization projects, among which the 11,000 floating solar panel installation with storage in the Alqueva, a pumped-storage hydro powerplant. 
• We are also developing a pilot project to produce hydrogen at the Ribatejo Combined Cycle Plant, with storage and natural gas co-combustion as hydrogen, produced from renewable sources, will be a clear solution to solve the so-called last mile of decarbonisation in sectors and industries where direct electrification is not an option. 

“We challenge ourselves daily, with increasingly ambitious and demanding objectives for the building of a more sustainable future, an electric future.” 

By 2030, we will reduce our CO2 specific emissions by 90% (compared to 2005) based, above all, on the increase in generation from renewable energy sources (which will represent more than 90% of our generation) and the exit from the coal business, namely by closing Sines Power Plant, the Group’s largest coal plant, until 2023. We will promote electric mobility with the aim of reaching one million customers by 2030 and boost the installation of more than 4 million solar panels. We will also continue with the transition to smart grids in Iberia and with the digitalization of our organization.

Our starting point is unique and distinctive and gives us an advantage to meet tomorrow’s challenges and lead the energy transition. Nonetheless, it is our ability to deliver on our commitments, our ambition and our focus in our vision that will make the difference in this indispensable and irreversible change. We are proud of what we have achieved so far, but we want to take on the responsibility of going further. The decisive decade has started, and the future cannot wait - the future is now. 

I invite you to learn more about our operation throughout the pages of this report and to follow the energy and commitment with which we are preparing the future - a future that will be electric.