Grupo

’Consolidated Annual Report11 & Accounts www.iberwind.pt Contents

02 Report of the Board of Directors

05 Chairman’s Statement

06 General Background

06 Macroeconomic 08 Regulatory 09 Sector and Market

16 Activity Background

16 Changes to Shareholder Structure 17 Branch Offices 17 Business Between the Companies and their Managers or Directors 17 Organisational Chart 18 Consolidation Perimeter 19 Business Units 23 Human Resources

24 Analysis of Business Activity

24 Performance Indicators 26 Main Actions 28 Operational and Financial Analysis

34 Relevant Events After the End of the Financial Year and Future Prospects

34 Application of Annual Results

36 Financial Statements and Notes

86 Audit Report Report of the Board of Directors

04 Report of the Board of Directors Chairman’s Statement General Background Activity Background Analysis of Business Activity 05

Chairman’s Statement

In 2011 Iberwind developed its activity of producing electricity from wind sources maintaining a high performance level.

Iberwind’s team of 64 professionals (operations, maintenance management and administration of operations) and portfolio of 31 wind farms totalling 684 MW, geographically distributed over the country’s best locations, produced 1.55 TWh, with an average wind generator availability of 97.4%.

This production was generated from 2,281 equivalent hours of wind, calculated on the installed capacity, which represents a decline of 8.7% of the average resource availability in the previous two years. In fact, wind availability was below normal, especially in the last quarter, thus jeopardising production in the year.

It should also be noted that Iberwind developed and completed the reconstruction of the Lagoa Funda Wind Farm in August 2011, as planned, carrying out its repowering and overpowering in accordance with Decree Law No. 51/2010, of May 20.

Thus, 20 old generators of 500 kW power were removed and replaced by 6 modern wind generators of 2 MW, increasing the wind farm’s power by 20% and its production by 50%.

It was the first operation of this type in Portugal and Iberwind is currently selecting and licensing a series of repowering and/or overpowering operations that will allow it to increase the productivity of its operations and investment.

We believe we are a company that the country can be proud of in the worldwide renewable energy sector.

João Talone 06 Report of the Board of Directors

Dear Shareholders,

Pursuant to Article 65 of the Portuguese Companies’ Code and the Articles of Association, we hereby submit for your appraisal the Management Report, Consolidated Balance Sheet and Accounts for the 2011 financial year.

General Background

Macroeconomic

2011 was marked by the widespread tendency of worsening economic conditions in the world’s major economies.

Although world economic growth may have been close to 3.5%, this growth was relatively asymmetrical.

The Gross Domestic Product (GDP) of the USA grew 1.7%, in frank deceleration compared with growth of 3% in 2010.

Economic activity in Japan was heavily affected by the devastating consequences of the massive earthquake of March 2011.

In Europe, 2011 was dominated by the worsening sovereign debt crisis of the Euro Area. In addition to all the concerns regarding the problems in Greece, the contagion to not only other peripheral economies but also extending to economies of central Europe, was evident. Financial instability took hold of the Euro Area. Economic growth was weak, standing at around 1.5%, slowing down from the 1.9% growth rate of the previous year. This figure was built on 3% growth recorded in Germany, much more moderate growth in most states of the Euro Area and even negative variations, such as the rates in Greece and Portugal.

The slowdown of economic growth in the Euro Area in 2011 was essentially due to the heavy fiscal consolidation in several of its Member States and also a sharp drop in private consumption, mainly due to an alarming rise in unemployment, which increased to 10.4% of the active population of the Euro Area. Exports also slowed down reflecting the slowdown in external demand. Chairman’s Statement General Background Activity Background Analysis of Business Activity 07

Emerging economies such as China, India and Brazil, continued to record quite attractive rates of growth, although they too underwent a slight deceleration in economic activity in the second half of 2011. Nonetheless, we are still referring to growth rates of around 9% for China, 8% in India and 3% in Brazil. These are countries that decisively contribute to world economic growth remaining at around 3.5%.

In Portugal, 2011 was marked by the spread of the sovereign debt crisis in Europe and the implementation of a very demanding financial adjustment programme. This programme, agreed with the International Monetary Fund (IMF), European Commission (EC) and European Central Bank (ECB), began implementation in May 2011. It comprises the funding of seventy-eight billion euros for the Portuguese economy, and two positive evaluations have already been undertaken by the funding entities.

As a result of this programme, the general government deficit, taking into account some extraordinary measures, decreased from 9.8% of GDP in 2010 to around 4%. Major structural reforms in the labour market, the property rental market and the transport sector were undertaken and an ambitious privatization plan is also envisaged, which began in 2011. The fiscal consolidation measures have significantly contributed to the decline of domestic demand, with public and private consumption decreasing by approximately 3%, and investment by about 11%. Unemployment was also affected in 2011, ended the year at above 12% of the active population. Exports, on the contrary, continued to grow at a very interesting rate, in the region of 7%, despite all the global difficulties, with an increasing share of exports to non-European countries. This increase in exports eased the negative GDP growth, which stood at 1.6% in 2011. 08 Report of the Board of Directors

Regulatory

The public accounts adjustment program initiated by the new PSD-CDS coalition government provides for the review and reassessment of a large part of the investment trajectories that were being forecast in the recent past, with special emphasis on major public works and public-private partnerships.

National electricity consumption in 2011 decreased by 3.2%, as domestic consumption shrank owing to the austerity measures that were being implemented since 2010 by the previous and the current government. This trend is expected to continue for the foreseeable future.

In parallel, electricity generation from renewable sources in Portugal, since 2010, has achieved a steady rate above 50% of consumption. Around 55% of electricity generation Sra. da Vitória by renewable means is from hydropower, 35% from wind energy and 10% from remaining sources (mainly biomass and photovoltaic).

The Government Programme, given this framework and in line with the memorandum of understanding signed in May 2011, indicated the need to consider and review the legal framework for new special regime electricity generation projects, particularly those using renewable endogenous resources and combined heat and electricity technology.

Accordingly, in February 2012 the Government decided to temporarily suspend the award of new licences for such projects. This situation is expected to remain unchanged for the duration of the adjustment program currently undergoing implementation. Chairman’s Statement General Background Activity Background Analysis of Business Activity 09

Sector and Market

In 2011, over 45 GW of power were installed in electricity generating units in the countries of the European Union (EU), 9.6 GW of which refer to wind power. The new installed capacity in wind energy in 2011 was similar to that of 2010 and represents 21% of power plants built in the year concerned. It should also be noted that in the EU countries in 2011, the nuclear and fuel and oil segments recorded a negative balance when the new installed power and decommissioned power are considered. The following chart shows the new installed capacity and decommissioned capacity by generation technology.

Installed and Decommissioned Capacity (MW) in EU in 2011 Source: EWEA

New Installed Capacity

Decommissioned Capacity

21,000

9,718 9,616

2,147

690 700 606 472 331 234 32 9 5

0 0 0 0 0 0 -216 -22 -60 -934 -840 -1,147

-6,253

Photovoltaic Natural Gas Wind Coal Fuel and Oil Hydro Solar Energy Nuclear Biomass Waste Geothermal Small Hydro Waves 10 Report of the Board of Directors

Renewable energy accounted for the installation of 32 GW in the EU in 2011, approximately 71.3% of new installed capacity. In absolute terms the increase was the largest ever, and it was 37.7% higher than 2010.

Breakdown of Technology used in new Installed Capacity in EU in 2011 Source: EWEA

Fuel and Oil 1.6% Waves 0.0%

Natural Gas 21.6% Wind 21.4%

Coal 4.8% Small Hydro 0.0% Nuclear 0.7% Geothermal 0.1%

Solar Energy 1.1%

Hydro 1.3%

Waste 0.2%

Biomass 0.5%

Photovoltaic 46.7%

The annual installation of wind power in the European Community has steadily grown over the last seventeen years. Average annual growth over this period has been 15.6%, taking as references the 0.8 GW installed in 1995 and 9.6 GW in 2011. Germany was the country that grew most in terms of installed wind power in 2011, followed by Spain, France, Italy and the UK. Chairman’s Statement General Background Activity Background Analysis of Business Activity 11

Wind Power in GW Annually Installed in the EU Source: EWEA

10.5 9.6 9.6

8.5 8.3 7.6

6.2 5.9 5.8 5.5

4.4

3.2 3.2

1.7 1.3 0.8 1.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Market Share of Wind Power Installed in 2011 in the EU Countries Source: EWEA

Others (1,001 MW) 10% Germany (2,086 MW) 22% Greece (311 MW) 3%

Portugal (377 MW) 4%

Poland (436 MW) 5%

Romania (520 MW) 5%

United Kingdom (1,293 MW) 13%

Sweden (763 MW) 8%

Spain (1,050 MW) 11% France (830 MW) 9%

Italy (950 MW) 10% 12 Report of the Board of Directors

In cumulative terms, installed wind power in the EU amounted to 93.9 GW at the end of 2011, and Germany continued to be the country with the largest installed wind capacity, followed by Spain, France, Italy and the UK.

Total Installed Wind Power in GW in the EU Source: EWEA

93.9

84.6

75.1

64.7

56.5

48.0

40.5 34.4 28.5 23.1 17.3 12.9 9.7 6.5 4.8 2.5 3.5

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Market Share by EU Country in terms of Cumulative Wind Capacity Source: EWEA

Others (8.3 GW) 9%

Ireland (1.6 GW) 2%

Sweden (2.9 GW) 3% Netherlands (2.3 GW) 3%

Denmark (3.9 GW) 4% Germany (29.1 GW) 31%

Portugal (4.1 GW) 4%

United Kingdom (6.5 GW) 7%

France (6.8 GW) 7%

Italy (6.7 GW) 7% Spain (21.7 GW) 23% Chairman’s Statement General Background Activity Background Analysis of Business Activity 13

The 4.1 GW of Portugal makes it the sixth largest EU country in terms of installed wind power. Electricity generation in Portugal at the end of the year, based on the use of this resource, was 9,003 GWh, which is a 0.2% decrease over 2010.

By 2011, wind power in Portugal contributed significantly to the energy sector performance and compliance with the goals of energy generation from renewable sources, supplying about 18% of electricity consumption. Thus, Portugal is one of the EU countries with the highest share of wind energy use in electricity consumption and, according to estimates, is only surpassed by Denmark (25.9%).

Geographical Distribution of Installed Capacity in Europe Source: EWEA Finland 197 Total Installed Capacity: Norway 520 EU 27 - 93,957 MW Faroe Island Europe - 96,607 MW 4 Sweden Estonia 2,907 184 Russia n/a Latvia Denmark 31 Ireland 3,871 Lithuania 1,631 179 United Kingdom 6,540 Netherlands 2,328 Poland Germany Belgium 1,616 29,060 1,078 Luxembourg Ukraine Czech Rep. 44 151 217 Slovakia France 3 Austria 6,800 Switzerland 1,084 Hungary 46 329 Romania Croatia 982 131 Portugal 4,083 Spain Italy Bulgaria 21,674 6,747 612

Greece Turkey 1,629 1,799

Cyprus 134 14 Report of the Board of Directors

Wind power connected to the public grid increased 375 MW in 2011, with the completion of new wind farms and also with the repowering of others, totalling 4,083 MW at the end of the year. The highlights of 2011 of the wind energy sector in Portugal are the connection of the first floating wind turbine of the offshore deep water wind farm located off the coast of Póvoa do Varzim and the first full replacement (Repowering) of a wind farm, more precisely the Lagoa Funda Wind Farm, owned by the IBERWIND Group.

As regards the 275 wind farms in the country, 47% have an installed capacity below 10 MW, 34% between 10 MW and 25 MW, 17% between 25 MW and 100 MW and the remaining 2% have an installed capacity above 100 MW. Most of the installed capacity in Portugal is located on the mainland (98.5%), predominantly in the centre and north regions of the country. The distribution by districts of mainland Portugal and the Autonomous Regions is shown in the chart below.

Installed Power by Districts and Autonomous Regions in 2011 Source: INEGI / APREN

1000

900

800

700

600

500

400

300

200

100

0 Viseu Coimbra Vila Castelo Viana Lisbon Leiria Guarda Braga Faro Santarém Oporto Bragança Aveiro A. R. Beja Setúbal A. R. Évora Portalegre Real Branco do Madeira Azores Castelo Chairman’s Statement General Background Activity Background Analysis of Business Activity 15

Finally, IBERWIND had, in national and individual terms, the second largest market share of all developers in 2011, with about 16% of installed capacity (wind turbines connected to the grid). The market shares of other developers in Portuguese territory are indicated in the following chart.

Market Share of Developers in Portugal in 2011 (Wind turbines connected to grid) Source: INEGI / APREN

OTHERS 18.0% ENEOP2 18.6%

ENERSIS 2.7%

ACCIONA 2.7%

TECNEIRA 2.8% IBERWIND 16.1%

EDF EN Portugal 3.7 %

ELECTRABEL 4.9 %

EEVM 6.7% EDPr 13.8%

GENERG 10.0% 16 Report of the Board of Directors

Activity Background

Iberwind – Desenvolvimento e Projectos S.A. is a public limited company established on October 28th, 2008. The company’s main business activity is to provide technical consultancy for the creation, development, expansion and modernisation of industrial, trading and services companies, the provision of management services and others of an accounting and economic nature, and also the development, evaluation and undertaking of renewable energy studies and projects.

On November 14th, 2008, a consortium acquired, through its subsidiary Iberwind – Desenvolvimento e Projectos S.A., the majority of the wind assets formerly owned by the Enersis Group, as well as the portfolio of service companies that guarantee the management, operation and supervision of those same assets.

Changes to Shareholder Structure

There were no changes in the shareholder structure in 2011. Thus, the share capital of Iberwind – Desenvolvimento e Projectos S.A. at December 31st, 2011 was held by the following entities:

Capital Held Shares Held % Name (EUR) at Year’s End Shareholding Convento III S.à.r.l. 32,350 32,350 64.70%

Espírito Santo Infrastructure Fund - I - Fundo de Capital de Risco 3,185 3,185 6.37%

Espírito Santo Capital - Sociedade de Capital de Risco, S.A. 795 795 1.59%

Fundo Albuquerque - Fundo de Capital de Risco, FCR 3,585 3,585 7.17%

Gotan, SGPS S.A. 3,585 3,585 7.17%

Wind Source - SGPS, S.A. 2,655 2,655 5.31%

Madre - Renováveis, SGPS, Unipessoal Lda. 2,655 2,655 5.31% Ivory Investments SGPS, S.A. 1,190 1,190 2.38%

Total 50,000 50,000 100.00% Chairman’s Statement General Background Activity Background Analysis of Business Activity 17

Branch Offices

There are no branch offices in the IBERWIND Group.

Business Between the Companies and their Managers or Directors

There was no business between the Companies of the IBERWIND Group and its Managers or Directors.

Organisational Chart

The organisational chart of the Group led by Iberwind – Desenvolvimento e Projectos S.A. at December 31st, 2011 is as follows:

IBERWIND, S.A.

100.000%

WINDVENTURE, S.A.

100.000%

IBERWIND II PROD, LDA.

100.000% 100.000% PESM, S.A. HIDROMARÃO, S.A.

0.002% 99.998% 75.000% PEVB, LDA. MONTE AGRAÇO, LDA.

5.000% 95.000% 51.001% PE TREVIM, LDA. ENTREVENTOS, S.A.

0.150% 99.850% 100.000% PEL, LDA. PESB, S.A.

0.028% 99.972% 100.000% ENERFLORA, LDA. PESL, S.A.

0.068% 99.932% 100.000% PECF, LDA. PE MALHADAS, S.A.

100.000% PE PAMPILHOSA, S.A. 18 Report of the Board of Directors

During 2011, following the purchase option exercised under the Clause 6 of the Shareholders Agreement, Ecojoule, Energias Renováveis, Lda. acquired from the company Iberwind II Produção – Sociedade Unipessoal, Lda., 13,952 shares that it held in the company Entreventos – Energias Renováveis, S.A., which entailed that the shareholding of Iberwind II Produção – Sociedade Unipessoal, Lda. was altered to 51.001% of the share capital.

Relating to September 16th, 2011, a Windventure - SGPS, S.A., acquired 25,500 bearer shares from Multiwave Networks Portugal – Sistemas Avançados de Telecomunicações, S.A., which meant that it now held 100% of the share capital of that company.

With an effect relating to December 2nd, 2011, Multiwave Networks Portugal – Sistemas Avançados de Telecomunicações, S.A. was wound up by merger and transfer of all its assets to Windventure – SGPS, S.A..

Malhadizes Consolidation Perimeter

The shareholdings held as at December 31st, 2011 are indicated below, along with the consolidation method used in the financial statements included herein.

Company Method Location % Capital Held by Group

WINDVENTURE, S.G.P.S., S.A. Full Method Porto Salvo 100.000%

Iberwind II Produção, Sociedade Unipessoal, Lda. Full Method Rio Maior 100.000%

PEVB - Parque Eólico de Vila do Bispo, Lda. Full Method Vila do Bispo 100.000%

PECF - Parque Eólico de Chão Falcão, Lda. Full Method Porto Mós 100.000%

PEL - Parque Eólico da Lousã, Lda. Full Method Penela 100.000%

PESB - Parque Eólico da Serra de Bornes, S.A. Full Method Alfândega-da-Fé 100.000%

Monte Agraço - Energias Alternativas, Lda. Full Method Sobral de Monte Agraço 75.000%

Hidromarão - Sociedade Produtora de Energia, S.A. Full Method Vila Real 100.000%

Enerflora - Produção de Energia Eléctrica, Lda. Full Method Mafra 100.000%

Entreventos - Energias Renováveis, S.A. Full Method Coimbra 51.001%

PESL - Parque Eólico da Serra do Larouco, S.A. Full Method Montalegre 100.000%

Parque Eólico de Malhadas Góis, S.A. Full Method Góis 100.000%

PESM - Parque Eólico da Serra das Meadas, S.A. Full Method Lamego 100.000%

Parque de Pampilhosa da Serra, S.A. Full Method Pampilhosa da Serra 100.000% Parque Eólico de Trevim, Lda. Full Method Lousã 100.000% Chairman’s Statement General Background Activity Background Analysis of Business Activity 19

Business Units

The business of the IBERWIND Group encompasses a range of different activities that can be described as follows:

• Developing and operating wind farms in Portugal;

• Development of telecommunication systems applied to the operation and maintenance of wind farms for generating electricity from renewable sources;

• Internal supply of value added services, including the operation and maintenance of functioning developments, studies and projects to build wind farms to harness renewable energy sources;

• Internal supply of administrative management services.

In terms of operating business units, the IBERWIND Group currently operates 31 wind farms, as outlined below:

Wind Farms 1 Bragança Facility > Installed Power (MWs) Viana do Castelo 4 2 3 Braga 5 Vila Real 1 Cabeço Alto > 11.7 17 Lousã II > 50.0 6 Porto 2 Lomba da Seixa I > 13.0 18 Degracias > 20.0 8 7 9 3 Lomba da Seixa II > 12.0 19 Rabaçal > 2.0 11 10 12 Aveiro Viseu 4 Borninhos > 2.0 20 Malhadizes > 12.0 Guarda 5 Bornes > 60.0 21 Sra. da Vitória > 12.0 Coimbra 6 Meroicinha > 9.0 22 Chão Falcão > 80.5 14 13 15 16 18 19 17 7 Bigorne > 7.0 23 Candeeiros > 111.0 20 Castelo Branco Leiria 8 São Cristóvão > 5.3 24 Todo o Mundo > 10.0 21 22 9 Vila Lobos > 10.0 25 Achada > 6.9 23 24 Portalegre 10 Leomil > 16.1 26 Arcela > 11.5 Santarém 25 26 11 Freita I > 18.4 27 Escusa > 2.0 27 28 30 29 12 São Macário > 11.5 28 São Mamede > 6.9 Lisboa Setúbal Évora 13 Chiqueiro > 4.0 29 Igreja Nova > 7.2 14 Pampilhosa > 114.0 30 Jarmeleira > 0.9 15 Lousã I > 35.0 31 Lagoa Funda > 12.0 Beja 16 Malhadas > 9.9 Total > 683.8

31 Faro 20 Report of the Board of Directors

The details of the wind farms in operation are set forth in the following table, including identification of the developer:

Installed Operations Wind Farm Location Developer Capacity Start (PTO) Achada Torres Vedras 6.9 MW 2005 PESM - Parque Eólico da Serra das Meadas, S.A.

Arcela Sobral de Monte Agraço 11.5 MW 2005 Monte Agraço - Energias Alternativas, Lda.

Bigorne Lamego 7.0 MW 2002 PESM - Parque Eólico da Serra das Meadas, S.A.

Bornes Macedo Cavaleiros/Alfandega da Fé 60.0 MW 2009 PESB - Parque Eólico da Serra de Bornes, S.A.

Borninhos Macedo de Cavaleiros 2.0 MW 2004 PESB - Parque Eólico da Serra de Bornes, S.A.

Cabeço Alto Montalegre 11.7 MW 2000 PESL - Parque Eólico da Serra do Larouco, S.A.

Candeeiros Rio Maior/Alcobaça 111.0 MW 2006 Iberwind II Produção, Sociedade Unipessoal, Lda.

Chão Falcão Porto de Mós/Batalha/Alcanena 80.5 MW 2005/2009 PECF - Parque Eólico de Chão Falcão, Lda.

Chiqueiro Pampilhosa da Serra 4.0 MW 2007 Iberwind II Produção, Sociedade Unipessoal, Lda.

Degracias Soure 20.0 MW 2005 Entreventos - Energias Renováveis, S.A.

Escusa Mafra 2.0 MW 2005 Enerflora - Produção de Energia Eléctrica, Lda.

Freita I Arouca 18.4 MW 2006 Iberwind II Produção, Sociedade Unipessoal, Lda.

Igreja Nova Mafra 7.2 MW 1999/2002 Enerflora - Produção de Energia Eléctrica, Lda.

Jarmeleira Mafra 0.9 MW 2002 Enerflora - Produção de Energia Eléctrica, Lda.

Lagoa Funda* Vila do Bispo 12.0 MW 2011 PEVB - Parque Eólico de Vila do Bispo, Lda.

Leomil Moimenta da Beira 16.1 MW 2008 Iberwind II Produção, Sociedade Unipessoal, Lda.

Lomba da Seixa I Montalegre 13.0 MW 2000 PESL - Parque Eólico da Serra do Larouco, S.A.

Lomba da Seixa II Montalegre 12.0 MW 2004 PESL - Parque Eólico da Serra do Larouco, S.A.

Lousã I Lousã 35.0 MW 2007 Parque Eólico de Trevim, Lda.

Lousã II Lousã/Castanheira de Pera 50.0 MW 2009 Parque Eólico de Trevim, Lda.

Malhadas Góis 9.9 MW 2001 Parque Eólico de Malhadas Góis, S.A.

Malhadizes Penela 12.0 MW 2005 PEL - Parque Eólico da Lousã, Lda.

Meroicinha Vila Real 9.0 MW 2004 Hidromarão - Sociedade Produtora de Energia, S.A.

Pampilhosa Pampilhosa da Serra 114.0 MW 2006 Parque de Pampilhosa da Serra - Energia Eólica, S.A.

Rabaçal Soure 2.0 MW 2005 Entreventos - Energias Renováveis, S.A.

São Cristóvão Lamego 5.3 MW 2002/2007 PESM - Parque Eólico da Serra das Meadas, S.A.

São Macário S. Pedro do Sul 11.5 MW 2007 Iberwind II Produção, Sociedade Unipessoal, Lda.

São Mamede Mafra 6.9 MW 2005 Enerflora - Produção de Energia Eléctrica, Lda.

Sra. da Vitória Nazaré 12.0 MW 2004 Iberwind II Produção, Sociedade Unipessoal, Lda.

Todo o Mundo Cadaval 10.0 MW 2004 Iberwind II Produção, Sociedade Unipessoal, Lda.

Vila Lobos Lamego/ Resende 10.0 MW 1998 PESM - Parque Eólico da Serra das Meadas, S.A.

* Repowering undertaken in 2011, increasing installed capacity to 12 MW

The IBERWIND Group has recorded substantial growth of its installed capacity over the last few years. During 2011, the full replacement (repowering) as well as overpowering (20% increase of installed power in relation to the capacity connected to the grid) of the Lagoa Funda Wind Farm was completed, taking its nominal capacity up to 12 MW, resulting from the installation of 6 Vestas wind turbines of 2.0 MW each. Thus, the installed capacity at the end of 2011 amounts to 683.75 MW. Chairman’s Statement General Background Activity Background Analysis of Business Activity 21

Todo o Mundo

Installed Wind Power in the IBERWIND Group [MW]

680.8 680.8 683.8

539.4 524.8 461.2

317.9

106.0 72.1

2003 2004 2005 2006 2007 2008 2009 2010 2011 22 Report of the Board of Directors

The Environmental Balance sheet of the IBERWIND Group is shown in the following table:

Environmental Balance Sheet 2006 2007 2008 2009 2010 2011

Iberwind Total Wind Production (GWh) 900 1,008 1,261 1,480 1,710 1,552

% CO2 Free Electricity Production 100% 100% 100% 100% 100% 100%

Iberwind Production as % of Total Production in Portugal 2.0% 2.3% 3.0% 3.2% 3.5% 3.2%

Equivalent Domestic Consumption (Population)* 900,300 1,008,500 1,261,100 1,479,800 1,710,000 1.552,200

Barrels of Oil Avoided* 540,200 605,000 756,700 887,900 1.025,700 931,300

Tonnes of Oil Equivalent Avoided* 77,400 86,800 108,500 127,300 147,000 133,500

CO2 Emissions Avoided (Ton/Year)* 400,000 444,000 555,000 843,500 975,000 886,100

* rounded values

The operation and maintenance of the wind assets is carried out with the aim of improving the performance of the wind farms, guaranteeing quick intervention on any equipment when a fault occurs.

Operating and Maintenance Indicators 2006 2007 2008 2009 2010 2011

Wind Farms under Management 27 28 29 31 31 31

No. Wind Generators Checked 249 248 255 331 331 319 Average Availability of Wind Generators 97.5% 93.7% 94.9% 96.8% 97.1% 97.4% Chairman’s Statement General Background Activity Background Analysis of Business Activity 23

Human Resources

The number of employees of Iberwind – Desenvolvimento e Projectos S.A. was 67 at the end of 2010.

The number of employees at the end of 2011 was 64, in what is considered the normal entry and exit movements of workers.

Leomil 24 Report of the Board of Directors

Analysis of Business Activity

Performance Indicators

Electricity Sales Production (M Euros) (GWh)

170.0 1,800 +16% 160.0 1,600 -9% -4% 1,710 1,400 150.0 +14% 157.9 1,480 1,200 151.1 1,552 140.0 1,000 138.3 130,0 800 600 120.0 400 110.0 200 100.0 0 2009 2010 2011 2009 2010 2011

Installed Capacity Wind Farms Availability (MW) (%)

800.0 98,0% = +0.4%

683.8 +0,3 p.p. 600.0 680.8 680.8 +0,3 p.p. 97,4% 97,0% 97,1% 96,8% 400.0

96,0% 200.0

0.0 95,0% 2009 2010 2011 2009 2010 2011 Chairman’s Statement General Background Activity Background Analysis of Business Activity 25

Equivalent to Declared Capacity* No. Employees (Hours) (End of Year)

2,600 80 -14%

78 -4%

+5% 2,511 60 67 64 2,400 -9%

2,381 40

2,200 2,281 20

2,000 0 2009 2010 2011 2009 2010 2011

* 2009 excludes Chão Falcão II and III, Lousã II and Bornes Wind Farms

EBITDA* EBITDA Margin* (M Euros)

140 90.0% -5% 136.9 88.0% 130 +16% 86.0% 129.7 +2 p.p. -2 p.p. 86% 120 84.0%

84% 84% 117.6 82.0% 110 80.0%

100 78.0% 2009 2010 2011 2009 2010 2011

* Adjusted for comparison purposes * Adjusted for comparison purposes

Net Assets (M Euros)

1,500.0

-7% 1,250.0 1,292.9 -3%

1,203.1 1,164.2

1,000.0 2009 2010 2011 26 Report of the Board of Directors

Main Actions

The current Shareholders of the IBERWIND group defined at the end of 2008, at the time of the takeover, a set of strategic objectives and guidelines:

• Achieve an efficient and flexible organisation adjusted to the scale of the assets under management and also to the pipeline development goals;

• Develop state-of-the-art management for the wind farms, seeking to maximize energy generation as well as ensure the market’s highest availability rate and cost effective operations and maintenance;

• Ensure appropriate financial management to mitigate the risks and provide long-term access to low-cost funds, including attractive financing for all the wind farms of the Vila Lobos Group’s portfolio;

• Create value-generating options in attractive European countries from a wind energy perspective.

Notable in relation to the first strategic objective is the significant downsizing of the IBERWIND Group’s human resources, which shrank from 114 employees at the end of 2008 to 64 at the end of 2011. The corporate restructuring undertaken by the IBERWIND Group between 2009 and 2011 is also noteworthy. This action significantly reduced the number of companies from 29 to 16 by the merger of 13 companies, which simplified the organisational, administrative and financial structure of the Group and also increased operational efficiency and allowed savings to be made in terms of costs. Also significant regarding the first strategic goal is the partnership concluded in 2010 with the Novabase Group, for the transfer of the information technology/systems of the IBERWIND Group to Novabase. This will provide a significant set of advantages, such as ensuring the continuous upgrade of the monitoring system (software) of the Group’s wind farms, eliminating/ mitigating the risk of loss of technical know-how and improving the security of the IT infrastructure and the service’s level of quality (24 hours x 7 days coverage), with obvious benefits on the IBERWIND Group’s operating efficiency.

In relation to the second strategic objective, some policies and procedures begun in previous years continued to be pursued and developed in 2011, with the aim of improving the efficiency in the operation and maintenance of all the IBERWIND Group’s wind farms. It included the setting up of a best practices centre in order to improve wind farms performance. The result of these initiatives and procedures is clearly visible in the significant and sustained improvement of the overall level of technical availability of the portfolio, which has been always improving, from 94.9% in 2008 to 97.4% in 2011, as is clearly demonstrated in the chart presented above. It should be noted in this regard that IBERWIND Group was included in a benchmarking analysis conducted by the consultant company McKinsey, together with seven other relevant European players of the wind sector. The IBERWIND Group’s portfolio was rated one of the best of the various criteria defined in the analysis. Chairman’s Statement General Background Activity Background Analysis of Business Activity 27

Furthermore, in relation to the second strategic objective, the completion of the repowering (full replacement) process of Lagoa Funda Wind Farm in 2011 is of particular note. This process provides significant advantages for the IBERWIND Group, since it increases the level of productivity of the Group’s portfolio, through the harnessing of a site with excellent wind resources. This process turns one of the least productive wind farms on the portfolio into one of the best. It also sets an example for similar processes to occur in the future, not only in IBERWIND Group but among other wind energy developers in Portugal.

The highlights of financial management, embodied by the third strategic objective, were the distribution of EUR 13.5 million to Shareholders in 2011, as repayment of loans, as well as the negotiation and closing of funding of EUR 10 million from a banking syndicate, for the repowering of the above-referred Lagoa Funda Wind Farm.

In relation to the final objective, the Board of Directors decided at the end of 2009 to temporarily halt the process of internationalisation of the IBERWIND Group, considering the difficult economic and financial climate in Portugal and Europe.

Lastly, we refer to the IBERWIND Group being awarded the Best Emerging Renewable Company in Europe 2011 award by The New Economy magazine.

Pampilhosa 28 Report of the Board of Directors

Operational and Financial Analysis

Performance levels in 2011 were lower than those of the preceding year, primarily due to weak wind resources in 2011.

The historical analysis of production of the IBERWIND Group wind farms is detailed below, with the aim of describing the performance of the electricity generating business units in operation (it includes annual historical data prior to the acquisition of the companies and wind farms by the IBERWIND Group wherever such data is deemed relevant from a strictly operational point of view for understanding the performance and/or the creation of future expectations regarding such business units).

Achada Chairman’s Statement General Background Activity Background Analysis of Business Activity 29

Evolution of Electricity Generation of the Wind Farms of the IBERWIND Group 2006 - 2011 [GWh]

Wind Farm 2006 2007 2008 2009 2010 2011

Achada 20.6 20.0 22.1 21.7 22.4 21.0

Arcela 25.6 26.3 30.2 28.9 31.3 27.4

Bigorne 15.2 14.0 15.0 14.8 15.4 13.2

Bornes ------80.5 168.6 148.8

Borninhos 4.8 4.8 5.0 4.7 4.6 4.2

Cabeço Alto 25.6 23.8 22.9 24.7 24.8 22.9

Candeeiros 237.9 284.1 325.9 320.7 338.9 316.4

Chão Falcão 72.1 66.9 82.1 133.1 186.0 163.3

Chiqueiro -- 2.6 8.9 7.9 8.4 7.0

Degracias 45.8 39.9 47.1 48.2 50.7 45.9

Escusa 3.9 4.0 4.6 4.5 3.8 3.9

Freita I 20.9 38.3 42.2 43.3 46.6 39.1

Igreja Nova 15.2 15.1 16.9 15.9 17.3 14.7

Jarmeleira 2.0 2.1 2.2 2.2 2.2 1.9

Lagoa Funda 12.6 11.7 14.4 14.5 15.5 18.0

Leomil -- 2.4 31.2 35.4 33.6 28.1

Lomba da Seixa I 22.9 22.0 22.1 23.1 22.6 18.6

Lomba da Seixa II 23.0 23.4 23.5 22.5 23.0 19.9

Lousã I 1.0 31.6 60.9 64.1 71.7 63.4

Lousã II -- -- 0.8 93.0 135.3 125.8

Malhadas 26.0 22.5 28.5 27.1 26.7 25.6

Malhadizes 26.9 22.5 29.4 28.2 27.7 25.2

Meroicinha 20.0 19.9 26.2 25.1 24.5 21.9

Pampilhosa 181.4 207.6 264.9 263.9 268.7 254.6

Rabaçal 5.5 4.6 5.5 5.6 5.9 4.9

São Cristóvão 6.6 7.6 12.3 12.5 11.5 9.9

São Macário -- 5.7 24.8 25.3 26.8 22.5

São Mamede 10.3 11.5 14.1 13.8 15.2 12.7

Sra. da Vitória 21.9 21.9 23.3 23.3 26.7 22.9

Todo o Mundo 25.1 25.5 28.7 27.3 29.1 26.2

Vila Lobos 27.4 25.8 25.4 23.9 24.1 22.4

Total 900.2 1,008.1 1,261.1 1,479.8 1,709.6 1,552.2 30 Report of the Board of Directors

It is easy to conclude from the comparative operational analysis of production in recent years, and taking into account the effect from the progressive integration of some wind farms in the portfolio of the IBERWIND Group, that 2011 production was abnormally low. This was due to the abnormal decline of wind resources, particularly during the last quarter of the year under review. Electricity generation decreased 157.4 GWh from 2010, among all wind farms of the IBERWIND Group, for the reasons explained above.

An economic and financial analysis of the IBERWIND Group’s consolidated accounts indicates that the consolidated operating profit, in the region of EUR 68 million, demonstrates the positive performance of the Group companies. This profit was driven by:

• Total operating income of EUR 155.7 million, which is broken down into its different components in the following chart:

Breakdown of Operating Income [%]

Pampilhosa 16%

Chão Falcão 11%

Other Electricity Candeeiros 19% Income Sales 2% 97% Bornes 9% Provision of Services 0.25% Lousã II 8%

Others 31 % Lousã I 4%

The relative share of electricity sales, including the FRT Bonus (EUR 1.6 per MWh generated valid for a period of seven years, for the eligible wind farms), in total operating income of the IBERWIND Group, as shown in the chart above, is very significant, amounting to EUR 151.5 million in 2011 and accounting for about 97% of total operating income. The performances by the Candeeiros and Pampilhosa wind farms stand out from the Group’s other wind farms, as these two wind farms alone account for around 35% of electricity sales.

• Operating costs of EUR 87.7 million, which include the following significant components:

i. Supplies and external services totalling EUR 17.2 million, in which the main components were the maintenance costs of wind farms (EUR 9.7 million), the rents of the land where the wind farms are located and of the Headquarters (EUR 1.8 million), insurance premiums (EUR 1.7 million) and specialised work (EUR 1.5 million); Chairman’s Statement General Background Activity Background Analysis of Business Activity 31

ii. Employee costs totalling EUR 2.7 million, arising from salaries and related payroll costs of the Group’s human resources;

iii. Other costs in the total of EUR 7.1 million, mainly resulting from taxes, which include EUR 4.4 million relating to amounts paid in municipal taxes under Decree Law No. 339-C/2001. “Prior year corrections” also contributed EUR 1.1 million, which include losses due to penalties/availability, claims, December 2010 billing adjustments due to the change in the declared power of some wind farms, maintenance subcontracts and non-deductible VAT, amounting to EUR 1.0 million;

iv. Depreciations in the financial year, amounting to EUR 60.7 million representing the wear of operating wind energy assets.

The following items are particularly significant in regards to the negative Financial Results for the year of EUR 69.9 million:

• Financial income of EUR 1.2 million from interest on investments;

• Financial costs of EUR 47.4 million, resulting mainly from:

i. Interest paid on loans from financial institutions in the region of EUR 37.1 million (EUR 35.2 million by Iberwind II Produção, EUR 343,000 by Entreventos and EUR 1.5 million relative to the application of amortized cost);

ii. Interest paid on loans obtained from the Shareholders (bearing interest under normal market conditions), in the amount of EUR 9.4 million;

iii. Bank charges in the amount of EUR 882,000.

The net loss of EUR 23.7 million resulting from the interest rate swap instrument contracted by Iberwind II Produção – Sociedade Unipessoal, Lda. to mitigate the identified risk, also contributes to the Financial Income. This loss is recognised in the accounts at the calculated amounts of fixed interest rates payable and the receivable floating interest rates.

The companies of the IBERWIND Group, except for the companies with minority Shareholders (Entreventos and Monte Agraço) are taxed according to the special regime for company groups. Current income tax for the 2011 financial year was negative EUR 10.7 million and the deferred tax assets were EUR 12.8 million. 32 Report of the Board of Directors

Following that indicated above, the IBERWIND Group registered consolidated net results of EUR 133,000 for the financial year.

The main characteristics of the equity structure of the IBERWIND Group are a high degree of financial leverage, due to the investment needs of the business activity that the Group undertakes.

The financial liabilities on the balance sheet were initially measured at fair value and subsequently recognised by amortized cost, with the adoption of the International Financial Reporting Standards (IFRS). The effective rate method is being used, which is the rate that discounts the estimated future cash-flow payments or receivables over the expected life of the loan.

The IBERWIND Group, following the refinancing operation occurred in June 2009, took on a bond loan. The nominal value outstanding at December 31st, 2011 was EUR 864.5 million (EUR 914.8 million in 2010), recognised under the “Other financial instruments item”, both current and non-current, at amortized cost in the value of EUR 853.2 million (EUR 902.1 million in 2010).

Recognised under current and non-current bank loans at December 31st, 2011 was the amount of EUR 17.6 million (book value of EUR 17.2 million). This value refers to the “Revolving” credit facility (Working Capital and Guarantees), which was divided into two independent components in 2011: (i) Sublimit A, which kept the original purpose and of which an amount of EUR 8 million had been used at December 31 (nominal value equal to book value) and (ii) Sublimit B to finance the repowering of Lagoa Funda Wind Farm, (owned by its subsidiary PEVB – Parque Eólico de Vila do Bispo, Lda.) and in which, on the same date, EUR 9.6 million (book value of EUR 9.2 million) was owed.

The nominal outstanding amount at December 31st, 2011 of the Project Finance bank loan contracted by the subsidiary Entreventos – Energias Renováveis, S.A., was EUR 11.8 million (the book value on that same date was EUR 11.4 million).

The commitments made by the IBERWIND Group’s operating companies under the Operational Programme for the Economy amounted to EUR 2.8 million and are recognised under “Other financial instruments” (current and non-current). The nominal value of this financial liability is EUR 3.0 million.

The current “Payable and other liabilities” item mostly refers to the market value of the interest rate swap instrument contracted by Iberwind II Produção – Sociedade Unipessoal, Lda., amounting to EUR 116.3 million on December 31st, 2011. It also includes EUR 5.6 million referring to the “State and other public entities” item (income tax, withholding of tax at source, VAT and social security contributions).

The non-current “Payable and other liabilities” item mostly refers to loans obtained from the Shareholders of Iberwind – Desenvolvimento e Projectos S.A., bearing interest at normal market rates and without defined repayment term. Their value at the end of 2011 was EUR 81.3 million. It also includes EUR 37.5 million of interest on Shareholder loans, which mature and are due on November 15th, 2016 . Chairman’s Statement General Background Activity Background Analysis of Business Activity 33

The non-refundable “Government grants” awarded to IBERWIND Group companies amounted to EUR 21.6 million, both current and non-current liabilities, at December 31st, 2011.

In relation to the IBERWIND Group’s balance sheet, “Tangible fixed assets” account for 75% of total assets, and they include investments in infrastructure and the development of wind farm construction projects.

“Goodwill” decreased EUR 405,000 from 2010 due to the sale of the equipment of the Lagoa Funda Wind Farm. At December 31st, 2011, the value of goodwill was EUR 207.4 million.

The components of the “Receivables and other assets” item to highlight are:

i. EUR 4.2 million relative to the early payment of the rents and municipal taxes Escusa under Decree-Law No. 339-C/2001;

ii. EUR 2.7 million relative to maintenance and repair contracts.

Consolidated equity at December 31st, 2011 recorded a negative value of EUR 105,847,854 as shown on the Balance Sheet. This is mainly due to the negative fair value reserve of EUR 84,809,346, associated with the interest rate swap instrument, contracted under the current bond loan, as well as the negative retained earnings of EUR 54,657,748. The development of the fair value reserve is primarily dependent on the future performance of the Euribor interest rate curve, which is, at the reference date of the financial statements, at a historically low level (with a negative impact on fair value). It should be noted in relation to the retained earnings that there was a substantial improvement in net profit for the year in 2011 (attributable to Shareholders), compared to the previous year, which evolved from negative EUR 13,559,689 to the amount of EUR 293,838 still negative, but only marginally. An improvement of the net profit of the Group is expected in the coming year, based on energy production in line with an average year’s production, and consequently, retained earnings are expected to evolve positively.

On a final note, it is to be highlighted that during the financial year the IBERWIND Group companies have punctually complied with all legal obligations, especially those to the State, Social Security and Other Entities. 34 Report of the Board of Directors

Relevant Events After the End of the Financial Year and Future Prospects

Further improvement to the Group’s consolidated results and its asset and financial position is forecast, considering the technical performance and operating history of the wind farms in operation and that energy production in the coming year will correspond to that of an average year.

The Memorandum of Understanding signed in May 2011 by the Portuguese State and the European Commission (EC), the International Monetary Fund (IMF) and European Central Bank (ECB) (commonly known as the “Troika”), establishes for the special regime of energy generation contracts currently in force, that the possibility of obtaining an agreement to renegotiate such contracts, involving the downward revision of tariffs currently in effect, will be assessed through a report to be produced for that purpose. Moreover, it established that such an assessment be completed in the fourth quarter of 2011, which has not been the case up to now, and it is not therefore possible to anticipate the respective outcome, as well as the potential impact.

Application of Annual Results

Iberwind – Desenvolvimento e Projectos S.A. does not share out profits on the basis of consolidated accounts.

The individual accounts of the parent company Iberwind – Desenvolvimento e Projectos S.A., reported a net loss of EUR 203,232.93 for the financial year ended on December 31st, 2011. The Board of Directors, considering law (articles 32 and 33 of the Portuguese Companies’ Code) and the articles of association, proposes that the loss for the financial year be transferred in full to retained earnings. Chairman’s Statement General Background Activity Background Analysis of Business Activity 35

Acknowledgement

The Board of Directors cannot conclude without expressing its gratitude to:

• The Employees; • The Shareholders; • The Auditor; • EDP Serviço Universal, S.A.; • Associação Portuguesa de Energias Renováveis – APREN [The Portuguese Renewable Energy Association].

Lisbon, 22 February 2012

The Board of Directors

João Luís Ramalho de Carvalho Talone Chairman

António João de Sousa Marques Gellweiler Arnaldo Navarro Machado Vice-Chairman Vice-Chairman

António da Silva Parente Enrique de Leyva Director Director

João Peres Coelho Borges Gracinda Augusta Figueiras Raposo Director Director

José Diogo Araújo e Silva José Antonio Marco Izquierdo Director Director

Luís Nuno Lima de Carvalho Valença Pinto Luís Miguel Bastos Mendes Rezende Director Director Financial Statements and Notes

38 Report of the Board of Directors Financial Statements and Notes 39

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

AT DECEMBER 31, 2011 AND 2010

Amounts in euro Note Dec/11 Dec/10 Sales and services rendered 9 151,924,129 157,951,050 Costs of goods sold and materials consumed 9 - - Supplies and external services 10 (17,165,324) (14,208,319) Employee costs 11 (2,722,365) (3,062,303) Impairment of non-depreciable assets 12 24,844 (2,000,000) Provisions 12 289,800 (600,000) Other income 13 3,292,940 3,573,092

Other costs 13 (7,091,767) (5,651,101)

Depreciations 14 (60,746,052) (60,596,190) Impairment of depreciable assets 14 170,768 (2,515,301) Operational results 67,976,973 72,890,926 Financial income 15 15,000,409 10,489,714 Financial costs 15 (84,915,349) (86,285,197) Dividends 15 - - Results before tax (1,937,966) (2,904,557) Income tax 16 2,070,527 (10,183,929) Net results for the year 132,560 (13,088,486) Attributable to shareholders (293,838) (13,559,689) Attributable to minority interests 17 426,398 471,203 Net results 132,560 (13,088,486) Other comprehensive income items: Fair value reserve - hedging derivatives 30 (47,376,249) (18,481,435) Associated tax effect 30 13,620,671 6,426,696 Other comprehensive income items (33,755,577) (12,054,739) Comprehensive income for the year (33,623,017) (25,143,224) Attributable to shareholders (34,049,415) (25,614,428) Attributable to minority interests 17 426,398 471,203 Comprehensive income for the year (33,623,017) (25,143,224) Earnings per share (basic and diluted) - Euro 18 (5.88) (271.19) 40 Report of the Board of Directors

CONSOLIDATED BALANCE SHEET

AT DECEMBER 31, 2011 AND 2010

Amounts in euro Note Dec/11 Dec/10 ASSETS Non-current assets Tangible fixed assets 19 871,738,089 918,140,505 Goodwill 20 207,409,042 207,813,779

Investment in subsidiaries and associates 21 - -

Other investments 22 - - Assets held for sale 23 - - Receivable and other assets 24 - - Deferred tax assets 25 39,552,898 27,062,045 1,118,700,029 1,153,016,328 Current assets Assets held for sale 23 - - Other investments 22 - - Inventories 26 - - Trade debtors 27 29,260,318 28,247,360 Receivable and other assets 24 10,936,182 11,201,949 Cash and cash equivalents 28 5,289,452 10,605,366 45,485,952 50,054,674

Total assets 1,164,185,981 1,203,071,002 EQUITY AND LIABILITIES Capital and reserves Share capital 29 50,000 50,000 Supplementary capital 29 23,057,250 21,057,250 Legal reserve 30 - - Fair value reserves and others 30 (84,809,346) (48,421,995) Retained earnings 30 (54,657,748) (41,098,060) Net results for the year (293,838) (13,559,689) (116,653,682) (81,972,494) Minority interests 17 10,805,829 8,818,783 Total equity (105,847,854) (73,153,710) LIABILITIES Non-current liabilities Provisions 31 407,450 712,450 Bank loans and overdrafts 32 19,033,254 11,361,889 Other financial instruments 33 808,549,127 856,647,699 Payable and other liabilities 35 139,576,756 147,011,535 Deferred tax liabilities 25 111,699,626 118,041,450 1,079,266,213 1,133,775,022 Current liabilities Trade creditors 34 4,316,603 2,850,692 Bank loans and overdrafts 32 9,532,183 9,889,176 Other financial instruments 33 47,473,995 48,989,460 Payable and other liabilities 35 129,444,840 80,720,363 190,767,621 142,449,690 Total liabilities 1,270,033,834 1,276,224,712 Total equity and liabilities 1,164,185,981 1,203,071,002 Financial Statements and Notes 41

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

AT DECEMBER 31, 2011 AND 2010

Fair value Share Supplementary reserves Retained Net results Minority Amounts in euro capital capital and others earnings for the year Sub-Total interests Total

Equity at December 31, 2009 50,000 21,057,250 (36,367,256) (1,616,959) (39,481,101) (56,358,066) 8,584,153 (47,773,913)

Comprehensive income:

Net result for the year - - - - (13,559,689) (13,559,689) 471,203 (13,088,486)

Changes in fair value reserve - hedging - - (12,054,739) - - (12,054,739) - (12,054,739) derivatives - net of taxes

Total comprehensive income for year - - (12,054,739) - (13,559,689) (25,614,428) 471,203 (25,143,224)

Net results of the prior year - - - (39,481,101) 39,481,101 - - -

Dividends paid ------(195,646) (195,646)

Reimbursement of supplementary capital ------(41,274) (41,274)

Other movements ------347 347

Equity at December 31, 2010 50,000 21,057,250 (48,421,995) (41,098,060) (13,559,689) (81,972,493) 8,818,783 (73,153,710)

Comprehensive income:

Net result for the year - - - - (293,838) (293,838) 426,398 132,560

Changes in fair value reserve - - (33,755,577) - - (33,755,577) - (33,755,577) - hedging derivatives - net of taxes

Total comprehensive income for year - - (33,755,577) - (293,838) (34,049,415) 426,398 (33,623,017)

Net results of the prior year - - - (13,559,689) 13,559,689 - - -

Dividends paid ------(1,040,855) (1,040,855)

Allocation of supplementary capital - 2,000,000 - - - 2,000,000 - 2,000,000

Entreventos purchase option - - (2,631,774) - - (2,631,774) 2,701,534 69,760

Other movements ------(100,032) (100,032)

Equity at December 31, 2011 50,000 23,057,250 (84,809,346) (54,657,748) (293,838) (116,653,682) 10,805,829 (105,847,854) 42 Report of the Board of Directors

CONSOLIDATED CASH FLOW STATEMENT

AT DECEMBER 31, 2011 AND 2010

Amounts in euro Note Dec/11 Dec/10 Operating activities Received from customers 165,990,022 174,435,165 Payments to suppliers (26,351,324) (21,226,961)

Payments to employees (1,760,955) (2,173,535)

(Payments) / Receipts of income tax (4,213,640) (927,405) Other (payments) / receipts from operating activities (7,876,577) (4,828,001) Cash flow from operating activities 125,787,525 145,279,263

Investing activities Receipts relating to: Financial investments 17 e 30 69,760 - Tangible and intangible fixed assets 1,987,643 241,948 Payments relating to: Financial investments 15 (25,500) - Tangible and intangible fixed assets 19 (15,154,933) (15,083,644) Cash flow from investing activities (13,123,030) (14,841,697)

Financing activities Receipts relating to: Borrowings 10,000,000 - Interest and similar income 1,200,191 1,347,026 Payments relating to: Borrowings (53,765,306) (54,276,744) Supplementary capital 17 e 29 - (41,274) Loans from shareholders 36 (13,500,000) (33,500,000) Interest and similar expenses (60,874,440) (62,997,597) Dividends 17 (1,040,855) (195,646) Cash flow from financing activities (117,980,409) (149,664,234)

Change in cash and cash equivalents (5,315,914) (19,226,668) Cash and cash equivalents at beginning of period 28 10,605,366 29,832,034 Cash and cash equivalents at end of period 28 5,289,452 10,605,366 Financial Statements and Notes 43

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2011 AND 2010

(Translation of the Financial Statements originally issued in Portuguese).

(All amounts in these notes are in euros, unless otherwise indicated).

The IBERWIND Group (“GROUP”) comprises Iberwind – Desenvolvimento e Projectos, S.A. (“IBERWIND”) and subsidiaries (Note 4).

Iberwind – Desenvolvimento e Projectos, S.A. (hereinafter referred to only as the Company or IBERWIND) is a public limited company incorporated on October 28, 2008, having as its main business activity the provision of technical consultancy for the creation, development, expansion and modernisation of industrial, trading and services companies, the provision of management services and others of an accounting and economic nature, and also the development, evaluation and undertaking of renewable energy studies and projects.

Registered office:Lagoas Park, Edifício 5 A, 4.º, Porto Salvo Share Capital: EUR 50,000 Registration Number: 508772206

The business of the GROUP is the generation and sale of wind energy.

The GROUP has a total installed capacity of 683.8 MW (680.8 MW in 2010). 44 Report of the Board of Directors

1. Summary of the major accounting policies Subsidiaries

The main accounting policies applied in the preparation Subsidiaries are all companies over which the GROUP of these financial statements are described below. These exercises control. Control is usually deemed to exist when policies have been applied consistently to all years the GROUP holds the power to exercise the majority of reported, after conversion to IFRS (January 1, 2006), voting rights. Control may also exist when the GROUP unless otherwise indicated. holds the power to directly or indirectly manage financial and operating policy of a certain company, to obtain 1.1. Basis of preparation benefits from its activities, even when its equity holding is The financial statements have been prepared in accordance less than 50%. with International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU). The IFRS Subsidiaries are fully consolidated from the date on which standards include standards issued by the International control is transferred to the GROUP, and they are excluded Accounting Standards Board (IASB) and interpretations from the consolidation from the date on which that control issued by the International Financial Reporting ceases. Interpretations Committee (IFRIC) and by the respective predecessor bodies. The equity and net income of these companies corresponding to third-party shareholdings are presented separately under The attached consolidated financial statements have been minority interests on, respectively, the consolidated balance prepared based on the assumption that the business is an sheet and consolidated income statement. on-going concern, from the accounting books and records of the GROUP and applying historical cost, except for the Minority interests include third parties in proportion to the assets and liabilities recorded at fair value. fair value of identifiable assets and liabilities on the date of acquisition of the subsidiaries and are updated proportionally The preparation of financial statements requires the use following movements in equity. of relevant estimates and judgments. The main assertions of which are disclosed in Note 3. The profit/loss on subsidiaries acquired or disposed of during the year are included in the consolidated statements from The consolidated financial statements for the financial the date of acquisition or until the date of their disposal. year ended on December 31, 2011 were approved by the management body and approved for publication on After January 1, 2010, when IFRS 3 (Revised) was February 22, 2012. introduced, in an acquisition operation in steps resulting in the acquisition of control, the revaluation of any share 1.2. Changes of Accounting Policies previously acquired is recognised against profit/loss, No changes to accounting policies or corrections of material when the goodwill is calculated. In turn, on a partial sale errors of prior years occurred during the period. resulting in loss of control any remaining shareholding is revaluated to market on the date of sale and the gain 1.3. Consolidation principles or loss resulting from revaluation is registered against The consolidated financial statements reflect the assets, the profit/loss. liabilities and profits/losses of IBERWIND and its subsidiaries (“GROUP”), and the profit/loss attributable to In the acquisitions/dilution of minority interests without the GROUP concerning financial investments in associates. loss of control, the differences between the acquisition The accounting policies were applied consistently value and fair value of the minority interests acquired are in relation to all GROUP companies. registered against reserves. They were registered against Goodwill up to December 31, 2009. Financial Statements and Notes 45

The financial statements of subsidiaries are adjusted Associate companies whenever necessary to align their accounting policies with those used by the GROUP. Intercompany transactions, Associates are classified as those companies in which the balances, unrealised gains on transactions and dividends GROUP has the power to exercise significant influence on distributed between GROUP companies are eliminated. financial and operating policies, but does not hold control. Unrealised losses are also eliminated unless the transaction Usually it is assumed that the GROUP exercises significant indicates the impairment of a transferred asset. influence when it has the power to exercise between 20% and 50% of the voting rights in associates. In situations where the GROUP holds, in principle, control of other companies although it has no direct shareholdings Investments in associate companies are accounted by the in those companies, those companies are consolidated by equity method, from the time when the GROUP acquires the full consolidation method. Entities encompassed by significant influence up to when this terminates. such situations are included under Note 4. Under the equity method, investments are accounted at Joint Ventures acquisition cost, adjusted for the amount corresponding to the GROUP’s holding in changes in equity of associate A jointly-controlled entity is a joint venture in which each companies, including net results for the period, offset investor in the joint venture has an interest and joint control against the gains or losses for the period as well as over the economic activity of the entity is established dividends received. through contractual agreement between the investors in the joint venture. An evaluation of investments in associate companies is made when there are signs that the shareholding may be Jointly-controlled entities are included in the consolidated impaired. Any losses that are demonstrated are registered. financial statements by the proportional method, where and the assets, liabilities, income and expenses of the When impairment losses recognised in prior periods cease jointly-controlled entities are recognised item by item in to exist, they are reversed. the consolidated financial statements according to the proportion of control attributable to the GROUP. When the shareholding of the GROUP of losses in associates equals or exceeds the investment made and any other The transactions, balances and dividends distributed medium and long-term interests in that associate, the between companies are eliminated in the process of equity method is discontinued unless the GROUP has a consolidation in proportion to the control assigned to the legal or constructive obligation to recognise those losses or GROUP. it has made payments on behalf of the associate.

Investments in joint ventures are detailed in Note 5. Investments in associate companies are detailed in Note 6. 46 Report of the Board of Directors

Goodwill Tangible fixed assets acquired after that date are recorded at acquisition cost net of depreciation and impairment The GROUP records the acquisition of subsidiaries, joint losses. The acquisition cost includes all expenditure ventures and associates which occurred after 1 January directly attributable to the acquisition of the goods and 2006 under the purchase method. The acquisition cost is their being made available at the indicated site and under equal to the fair value, determined at the date of purchase the required operating conditions. of the assets, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the The subsequent costs are included in the book value of acquisition. the asset or recognised as separate assets, as appropriate, only when it is probable that the GROUP will obtain future After January 1, 2010, when IFRS 3 (Revised) was economic benefits and the cost of the asset can be reliably introduced, the registering of costs directly related to the measured. All expenditure on repairs and maintenance acquisition of a subsidiary, joint ventures and associates, are recognised as a cost in the period in which they are are now directly imputed to profit/loss. incurred.

The goodwill resulting from the acquisition of shares Tangible fixed assets in progress refer to fixed assets in companies is defined as the difference between the still undergoing construction and these are registered at acquisition cost and proportional fair value of the acquired acquisition cost net any impairment losses, and they are equity holding. depreciated from the time when the investment projects are operationally ready. Positive goodwill is registered under assets at its cost and it is not amortized, in accordance with IFRS 3 - Business Depreciation is calculated on the deemed cost or acquisition combinations. Negative goodwill is directly recognised on cost using the straight line method, according to the the income statement in the period in which the acquisition following periods of expected useful life of the assets: occurs.

Useful life (years) The recoverable value of the goodwill registered under Buildings and other constructions 20 assets is revised annually, irrespective of the existence of Equipments 8 and 20 indications of impairment. Any impairment losses that are Transport equipment 4 to 5 determined are recognised in the income statement. Tools and utensils 5 to 8 Office equipment 3 to 8 Contingent acquisition prices prior to December 31, 2009 were determined based on the best estimate of probable payments and subsequent amendments could be registered The residual values of assets and their useful lives are against goodwill. After January 1, 2010, goodwill is not reviewed and adjusted, if necessary, on the balance sheet corrected for the final ascertaining of the contingent price date. paid, this impact is recognised in the profit/loss. When there is sign that an asset may be impaired, IAS 1.4. Tangible fixed assets 36 requires that its recoverable amount be estimated, Tangible fixed assets acquired before the transition date and an impairment loss must be recognised whenever to IFRS are recorded according to the option provided in the net value of an asset exceeds its recoverable amount. IFRS 1, at their deemed cost, which corresponds to the Impairment losses are recognised in the income statement acquisition cost, revaluated when applicable in accordance for the period. with the law in force up to that date, net of accumulated depreciations and impairment losses.

Financial Statements and Notes 47

The recoverable amount is determined to be the higher of Directors make the classification of the investment on its its net sale price and the used value, which is calculated initial recognition and reappraises this classification on based on the actual value of estimated future cash flows each reporting date. expected to be obtained from the continued use of the asset and its disposal at the end of its useful life. The classification depends on the purpose for which the investment was acquired. All acquisitions and disposals of Gains or losses arising from the write-off or sale are these investments are recognised on the date of signing determined by the difference between the proceeds the relevant purchase and sale contracts, regardless of the received on disposals and the asset’s book value and are financial settlement date. recognised in the income statement as other income or other operating costs. Investments are initially recorded at their acquisition value, and the fair value is equivalent to the price paid, including 1.5. Impairment of non-current assets transaction expenses. Subsequent measurement depends Non-current assets with an undefined useful life do not on the investment’s category, as follows: undergo amortisation but annual impairment tests. Assets subject to depreciation are reviewed for impairment 1.6.1. Loans granted and receivables whenever events or changes in circumstances indicate that Loans granted and receivables are non-derivative financial their amount at which they are shown in the accounts may assets with fixed or determinable payments and are not not be recoverable. listed on an active market. They are generated when the GROUP provides money, goods or services directly to a An impairment loss is recognised on the excess of the debtor with no intention of trading the debt. book value of the asset over its recoverable amount. The recoverable amount is the higher of the fair value of They are included under current assets, whenever the an asset less the selling costs and its value in use. When maturity date is less than 12 months at the balance sheet the impairment testing of each asset cannot be performed date. individually, assets are grouped at the lowest level at which cash flows can be separately identified (cash flow Loans granted and receivables are included on the balance generating units to which the asset belongs). sheet under Trade debtors and Receivables and other assets (Notes 27 and 24). The reversal of impairment losses recognised in prior periods is registered when it is concluded that the 1.6.2. Financial assets at fair value through profit or loss recognised impairment losses no longer exist or have This category is subdivided into two: financial assets held decreased. This analysis is carried out whenever there is for trading and those designated at fair value through profit sign that the previously recognised impairment loss may or loss since their creation. have been reversed. The reversal of impairment losses is recognised on the income statement as other operating A financial asset is classified in this category if it is acquired income. However, the reversal of the impairment loss primarily for the purpose of selling in the short term or if it is only carried up to identical amount of that which is designated as such by the management. Assets in this would be recognised (net of amortisation or depreciation) category are classed as current if they are held for trading if the impairment loss were not registered in prior periods. or realisable within 12 months of the balance sheet date. These investments are measured at fair value through the 1.6. Financial investments income statement. The GROUP classifies its investments into the following categories: i) financial assets at fair value through profit or loss, ii) financial assets available for sale, iii) investments held to maturity and iv) loans and receivables. The classification depends on the purpose for which the investment was acquired. The Board of 48 Report of the Board of Directors

1.6.3. Financial investments held to maturity 1.7. Derivatives financial instruments Investments held to maturity are non-derivative financial The GROUP uses derivatives to manage the financial risks assets with fixed or determinable payments and defined it faces (Note 2). maturities, which the GROUP has the intention and capability of holding to maturity. They are reported at In the operations qualifying as effective hedging amortized cost using the effective interest rate method. instruments, changes in fair value are initially recorded against equity and subsequently reclassified under the 1.6.4. Financial assets available for sale financial profit/loss item on their maturity date. Financial assets available for sale are non-derivative financial assets that are designated in this category or not Not all the derivatives contracted by the GROUP qualify classified in any of the other categories. They are included as hedging instruments in accordance with the accounting under non-current assets unless the managers wish to sell rules and requirements of IAS 39, although they may be the investment within 12 months after the balance sheet effective instruments in hedging economic risks. Such date. cases are recorded on the balance sheet at fair value and their changes in value recognised under financial profit/ These investments are recognized at market value, which loss. is deemed to be the respective market price at the balance sheet date. If there is no active market, the fair value is The fair value of derivatives is included under the Receivable determined by valuation techniques, which include the and other assets and Payable and other liabilities items use of recent commercial transactions, reference to other (Notes 24 and 35). instruments with similar characteristics, the analysis of discounted cash flow and option pricing models modified to 1.8. Income tax include the special characteristics of the issuer. Whenever Income tax encompasses current tax and deferred tax. medium-term expectations of the indicate valuations significantly below the price on the balance sheet date, Current income tax is calculated based on net income, impairment losses reflecting those permanent losses are adjusted according to tax legislation in force on the balance recorded, which is when the potential losses are transferred sheet date. from fair value reserves to the income statement. Deferred tax is calculated based on the liability method, If there is no market value or it cannot be determined, on temporary differences between the book value of assets the investments in question are maintained at acquisition and liabilities and their tax base. Deferred tax is calculated cost. Provisions are established to reduce the value, where at the (decreed) tax rate expected to be in force in the justified. The potential gains and losses that may result are period when the differences are to be reversed. recorded directly in fair value reserves until the financial investment is sold, received or otherwise disposed of, at Deferred tax assets are recognised when there is which time the accrued gain or loss previously recognised reasonable assurance that profits will be generated in under equity is included in the net income for the period. the future against which the assets may be used. Deferred tax assets are periodically reviewed and reduced whenever An impairment loss that is recognised in relation to their use is no longer probable. financial assets available for sale is reversed if the loss was caused by specific external events of an exceptional Deferred taxes are recorded as cost or profit in the financial nature that are not expected to be repeated, but which year, except when they relate to amounts directly reported subsequent external events have caused to be reversed. In under equity, in which case the deferred tax is also recorded such circumstances the reversal does not affect the income under the same item. statement, and the subsequent positive fluctuation of the asset is registered in the fair value reserves. Financial Statements and Notes 49

1.9. Trade debtors and other current assets Loans are classified as current liabilities except when there The balances of Trade debtors and Other current assets are is unconditional entitlement to defer settlement of the initially recorded at fair value and subsequently measured liability for at least 12 months after the balance sheet date. at their amortized cost, adjusted for any expected losses in collection, required to place them at their expected net 1.12.2. Non-interest bearing loans granted by governmental realisable value. entities Non-interest bearing loans granted by government entities Impairment losses are recorded when there is objective are recognised at fair value on the balance sheet using evidence that the total amount outstanding, according the discounted cash flow method at a current market rate to the original conditions of the receivables, will not be as of 1 January 2006 (date of transition to IFRS). received. The difference between the discounted value and the value 1.10. Cash and cash equivalents of the loan received net of repayments made prior to the The cash and cash equivalents item includes: i) cash, reporting date is included under the Payable and other ii) bank deposits and iii) other short-term investments with liabilities item. maturities of up to three months, which can be immediately mobilised without significant risk in value fluctuations. 1.13. Borrowing costs This item also includes, for the purpose of the cash flow Financial expenses on loans are generally recognised as net statements, bank overdrafts, which are reported on the financial costs, in accordance with the accrual accounting balance sheet in current liabilities, under the Loans item. principle.

1.11. Share Capital Borrowing costs directly related to the acquisition, The shares are classified as equity. construction or production of fixed assets are capitalized, becoming a component part of the cost of the asset. The costs directly attributable to the issue of new shares The capitalization of those costs begins after the start or other equity instruments are reported as a deduction, of the preparation of the asset construction or development net of taxes, on the amount received as a result of that activities and it is interrupted after the asset has begun issue. to be used or when the specific project is suspended.

1.12. Financial liabilities Any financial income generated from loans, directly related An instrument is classified as a financial liability when to a specific investment, is deducted from the borrowing there is a contractual obligation for payment to be made costs eligible for capitalization. in cash or through another financial asset, regardless of its legal form. 1.14. Provisions Provisions are recognized whenever (i) there is a legal or 1.12.1. Loans constructive obligation as a result of past events, (ii) it is Loans are initially recognised at fair value, net of transaction probable that an outflow of resources will be required to costs, and they are subsequently stated at amortized settle the obligation, and (iii) a reliable estimate may be cost. Any difference between the amounts received (net made of the obligation amount. of transaction costs) and the reimbursement value is recognised in the income statement over the period of loan using the effective rate method. 50 Report of the Board of Directors

When a provision is determined taking into account the The revenue from the provision of services is recognised future cash flows required to settle such an obligation, it is in the income statement with reference to the stage of registered at their present value. completion of the services provided at the balance sheet date. Provisions are not recognised for future operating losses. Provisions are reviewed at the balance sheet date and Revenue from dividends is recognised when entitlement adjusted to reflect the best estimate at that time. Provisions to receive such is issued. for restructuring costs are recognised by the GROUP whenever there is a formal and detailed restructuring plan. Interest receivable is recognised in accordance with the principle of accrual accounting, taking into account 1.15. Trade creditors and other current liabilities the amount outstanding and effective rate over the period The balances of trade creditors and other current liabilities to maturity. are recorded at nominal value. Costs and income are recorded in accordance with the 1.16. Government grants principle of accrual accounting, i.e. costs and income Government grants are only recognised when there is are recognised as they arise, regardless of when they reasonable assurance that the conditions for those grants are received or paid. are complied with and the grant will be received. The differences between the amounts received and paid Operating grants that are received in order to offset costs and corresponding costs and income are recorded under incurred by the GROUP are consistently registered on the Trade debtors and Receivable and other current assets the income statement during the periods those costs are items and the Trade creditors and Payable and other current recognised that the grants are intended to offset. liabilities items (Notes 27, 24, 34 and 35).

Investment grants that are received in order to offset 1.19. Environmental Issues investments made by the GROUP in tangible fixed assets The GROUP takes steps to prevent, reduce or repair are recognised as income over the estimated useful life of environmental damage caused by its business activities. the granted asset. The costs of environmental activities are recognised under 1.17. Dividends distribution the Supplies and external services item (Note 10) in the The distribution of profits to the shareholders is recognised period they are incurred. as a liability in the financial statements of the period in which the dividends are approved by shareholders, until 1.20. Leases their financial settlement. Lease contracts are classified as finance leasing if under such contracts all risks and rewards inherent to ownership 1.18. Revenue and accruals basis of the assets concerned are substantially transferred to the Income from sales is recognised on the income statement lessee. Those not meeting that criteria are classified as when the risks and benefits from ownership of the assets operational leasing. The classification of leases is based on are transferred to the buyer and the amount of income can the substance and not the legal form of the contract. be reasonably quantified. Sales are recognised, net of taxes, discounts and other costs inherent to their realisation, at fair value of the amount received or receivable. Financial Statements and Notes 51

Assets acquired under financial leasing contracts and Geographical segment is a distinguishable component the corresponding liabilities to the lessor are entered of the GROUP committed to supplying a product within in the accounts using the financial method, according a specific economic environment, and which is subject to the contracted financial plan. Interest included in the to risks and returns different to those of the components rent amounts and depreciation of the tangible fixed asset operating in other economic environments (Note 8). are recognised in the income statement for the period when occurring.

Payments made by the GROUP on operating leasing contracts are recognised in the income statement of the period when occurring.

1.21. Contingent assets and liabilities Contingent liabilities where the possibility of an outflow of funds affecting future economic benefits is unlikely are not recognised in the financial statements, but disclosed in the Notes, unless the possibility of an outflow of funds affecting future economic benefits is remote, in which case they are not disclosed. Provisions are recognized for contingent liabilities that meet the requirements established in Note 1.14.

Contingent assets are not recognised in the financial statements but disclosed in the Notes when the existence of future economic benefits is likely (Note 40).

1.22. Subsequent events Events after the balance sheet date that provide additional information on the conditions existing at the balance sheet date are considered in the financial statements.

Events after the balance sheet date that provide information on conditions that occur after the balance sheet date are disclosed, if materially relevant, in the notes to the financial statements (Note 39).

1.23. Segment reporting Business segment is a distinguishable component of the GROUP committed to supplying an individual product, and which is subject to risks and returns that are different to those of other business segments (Note 8). 52 Report of the Board of Directors

1.24. New standards, amendments and interpretations to existing standards The new standards, interpretations and amendments to existing standards identified below are of mandatory application by the IASB for financial years beginning on or after January 1, 2011:

Standards Effective date (a)

IFRS 1 (Amendment) January 1, 2011 First-time adoption - To provide an exemption from comparative IFRS 7 disclosures

IAS 24 (Revised) January 1, 2011 Related party disclosures

IAS 32 (Amendment) January 1, 2011 Financial instruments: Presentation - classification of rights’ issues

IFRIC 14 (Amendment) January 1, 2011 Minimum funding requirements

IFRIC 19 January 1, 2011 Extinguishing financial liabilities with equity instruments

2010 Amendments

IFRS 1 - First-time adoption January 1, 2011 IFRS 3 - Business combinations January 1, 2011 IFRS 7 - Financial instruments: Disclosures January 1, 2011 IAS 1 - Presentation of financial statements January 1, 2011 IAS 27 - Consolidated and separate financial statements January 1, 2011 IAS 34 - Interim financial reporting January 1, 2011 IFRIC 13 - Customer loyalty programmes January 1, 2011

(a) Periods beginning on or after

The introduction of these standards, interpretations and amendments did not have significant impact on the GROUP’s financial statements.

Financial Statements and Notes 53

Moreover, at the date of approval of these financial statements by the Board of Directors, the following new standards, amendments and interpretations of existing standards have been issued but have not yet been adopted by the GROUP (in some cases the standards have not yet been approved by the European Commission), and they are of mandatory application in financial years beginning on or after January 1, 2012:

Standards Effective date (a)

IFRS 1 (Amendment) June 30, 2011 First-time adoption

IFRS 7 (Amendment) June 30, 2011 Financial instruments - Disclosures

IFRS 9 January 1, 2013 Financial instruments (new classification and measuring requirements for financial assets and liabilities)

IFRS 10 January 1, 2013 Consolidated financial statements

IFRS 11 January 1, 2013 Joint arrangements

IFRS 12 January 1, 2013 Disclosure of interests in other entities

IFRS 13 January 1, 2013 Fair value measurement

IAS 1 (Amendment) June 30, 2012 Presentation of financial statements

IAS 12 (Amendment) January 1, 2012 Income tax

IAS 19 (Revised) January 1, 2013 Employee benefits

IAS 27 (Revised in 2011) January 1, 2013 Consolidated and separate financial statements

IAS 28 (Amendment) January 1, 2013 Investment in associates and joint ventures

(a) Periods beginning on or after

Despite the fact that the impact of the application of the above mentioned standards and interpretations on the financial statements of future years has not yet been fully evaluated, it is not expected that they will have a materially relevant impact on the financial position and profits. 54 Report of the Board of Directors

2. Financial risk management 2.2. Risk of cash flows and fair value associated with interest rate The business is exposed to a variety of risk factors: As the GROUP has no significant interest bearing i) liquidity risk, ii) the risk of cash flows and fair value assets, profits and operating cash flows are substantially associated with interest rate, and (iii) tariff risk. independent from changes to market interest rates.

2.1. Liquidity risk The interest rate risk arises from long-term loans. Loans The management of the liquidity risk implies maintaining issued at variable rates expose the GROUP to cash flow cash and bank deposits at sufficient levels, ensuring the risks associated with interest rates. Loans issued at fixed feasibility of the consolidation of floating debt through rates expose it to fair value risk associated with interest an adequate amount of credit facilities and the ability rates. to settle market positions. The financial department wants to maintain the flexibility of floating debt, keeping The GROUP manages the cash flow risk associated with credit lines available, which is tied to the dynamics of the interest rates by transforming variable interest rate swaps underlying businesses (Note 32). into fixed interest rates swaps. The interest rate swaps have the economic effect of converting variable interest The maturities of financial instruments are identified in rate loans into loans at fixed interest rates. Generally, the Notes 32, 33 and 36. GROUP contracts long-term loans at variable interest rates and performs swaps to transform them into fixed interest On the other hand, no significant fluctuations are expected rates, which are less than those contracted in fixed interest in the compliance with obligations, since the settlement rates loans. The agreement with the other parties in interest date of the swaps and hedged instruments are similar. rate swaps is to swap, at specified intervals (half-yearly), the difference between the amount of the contracted fixed interest rate and the amount of the variable interest rate.

On December 31, 2011, the development of financial assets and liabilities exposed to interest rate risk is shown in the following table, by maturity or the next settlement date:

Amounts in euro Less than 1 month 1-3 months 3-12 months 1-5 years More than 5 years Total

Assets

Current

Cash and cash equivalents (Note 28) 5,289,452 - - - - 5,289,452

Total non-financial assets 5,289,452 - - - - 5,289,452

Liabilities

Non-current

Bank loans (Note 32) - - - 9,426,097 9,607,157 19,033,254

Bond loans (Note 33) - - - 205,145,298 601,393,174 806,538,472

Current

Bank loans (Note 32) - - 9,532,183 - - 9,532,183

Bond loans (Note 33) - - 46,658,877 - - 46,658,877

Total financial liabilities - - 56,191,061 214,571,395 611,000,332 881,762,787

Gap 5,289,452 - (56,191,061) (214,571,395) (611,000,332) (876,473,335) Financial Statements and Notes 55

Those figures on December 31, 2010 were as follows:

Amounts in euro Less than 1 month 1-3 months 3-12 months 1-5 years More than 5 years Total Assets Current

Cash and cash equivalents (Note 28) 4,450,366 - 6,155,000 - - 10,605,366 Total non-financial assets 4,450,366 - 6,155,000 - - 10,605,366

Liabilities Non-current

Bank loans (Note 32) - - - 4,794,725 6,567,164 11,361,889 Bond loans (Note 33) - - - 196,500,569 657,427,713 853,928,282 Current Bank loans (Note 32) - - 9,889,176 - - 9,889,176 Bond loans (Note 33) - - 48,174,273 - - 48,174,273 Total financial liabilities - - 58,063,449 201,295,294 663,994,878 923,353,620 Gap 4,450,366 - (51,908,449) (201,295,294) (663,994,878) (912,748,254)

Under normal conditions, there is not the possibility that The GROUP obtained all the necessary licences that lenders may require the repayment of capital upfront. allowed it to register its projects under DL 198/88, of 27 May (as worded by DL 168/99 of 18 May and amended by The GROUP’s credit rating at December 31, 2011 and 2010, DL 339-C/2001 of 29 December), which provides for a based on the financial assets (cash and cash equivalents) more favourable tariff regime that that of DL 33-A/2005 with financial institutions as counterparties (Standard and of 16 February. Poor’s credit rating) is shown in the following table: The subsidiary PEVB – Parque Eólico de Vila do Bispo, Lda. simultaneously undertook in 2011 the repowering and Amounts in euro Dec/11 Dec/10 20% repowering of the wind farm that it operates, under Rating the provisions of Decree-Law 225/2007 of May 31, as A- - 2,556,315 amended by Decree-Law 51/2010 of May 20, remaining BBB+ - 8,044,436 in the above-referred tariff scheme, despite bearing BB+ 1,896,908 - a reduction of 2.4%.. BB 3,387,786 -

5,284,694 10,600,751

Moreover, the majority of operations with derivative financial instruments are contracted under ISDA Master Agreements, thus facilitating the transfer of instruments in the market.

2.3. Tariff risk The special regime electricity generation sector, from renewable energy sources, has its tariffs regulated and so the risk of tariff fluctuations is controllable. 56 Report of the Board of Directors

3. Relevant estimates and judgements 3.4. Impairment of non-current assets Tangible fixed assets are analysed for impairment when 3.1. Estimates there is evidence indicating that the net amount is not The preparation of financial statements requires that the recovered. Goodwill is also analysed for impairment one management makes judgments and estimates that affect year after the acquisition date and also whenever there the amounts of income, costs, assets, liabilities and is indication that its net value is not recoverable. disclosures at the balance sheet date. These estimates are determined by judgments of the management, based on: Considering the uncertainties regarding the recovery value (i) the best information and knowledge of present events, of the net value of tangible fixed assets and goodwill, supplemented in some cases by reports of independent because it is based on the best information available to experts and (ii) the actions that the GROUP deems it date, changes in assumptions could impact on determining may undertake in the future. However, the results of the the level of impairment and therefore the profits of the operations undertaken may differ from the estimates. GROUP.

The management estimates that the liabilities which may 3.5. Review of the useful life of assets associated with arise from the obligation to dismantle wind farms at the production end of their useful life will be offset by the residual value The GROUP regularly reviews the useful lives of the assets of the equipment, which is why it has not considered any associated with electricity generation, to ensure they are residual value for the equipment or made any provision for harmonised with the technical and economic measurements decommissioning. of the facilities, taking into account their technological capacity and regulatory restrictions in force. 3.2. Income tax The GROUP recognises liabilities for additional payments 3.6. Register of provisions of tax that may result from an inspection by the tax The GROUP regularly analyses possible obligations arise authorities. When the end figure of those matters is from past events that should be recognised or disclosed. different to the values initially reported, those differences The subjectivity inherent to the determination of the will have an impact on income tax and the provisions for probability and the amount of internal resources required to deferred taxes, in the period in which such differences settle the obligations may lead to significant adjustments are identified. in the future, whether by variation in the assumptions made or by the future recognition of provisions previously 3.3. Fair value of financial instruments disclosed as contingent liabilities (Note 1.14). The fair value is based on market prices. In the absence of a market price it is determined based on the prices of 3.7. Doubtful debts recent, similar transactions, realised in market conditions The GROUP uses methods to evaluate the existence or based on valuation methodologies that are underpinned of impairment losses on the balances of trade debtors by discounted future cash flow techniques. These methods and receivables, including the probability of recovery may require the use of assumptions or judgments in of the balances and their age. This evaluation process estimating fair value. is thus subject to estimates and judgments. There are circumstances / facts that may change according to Accordingly, the use of different methodologies and/or the assumptions considered, including changes to the different assumptions/judgments in applying a particular economic environment, the deterioration of the credit risk model can lead to financial results that are different to of major debtors and major defaults. those reported. Financial Statements and Notes 57

4. Companies included in the consolidation by the full method – Subsidiaries

Direct and indirect shareholding COMPANY INCLUDED IN CONSOLIDATION BY FULL METHOD % of capital of IBERWIND effectively Company name Registered office Direct Indirect Total held

Parent company

IBERWIND - Desenvolvimento e Projectos, S.A. Porto Salvo

Subsidiaries

WINDVENTURE, S.G.P.S., S.A. Porto Salvo 100.000% 0.000% 100.000% 100.000%

Iberwind II Produção, Sociedade Unipessoal, Lda. Rio Maior 0.000% 100.000% 100.000% 100.000%

PESM - Parque Eólico da Serra das Meadas, S.A. Lamego 0.000% 100.000% 100.000% 100.000%

PESL - Parque Eólico da Serra do Larouco, S.A. Montalegre 0.000% 100.000% 100.000% 100.000%

Enerflora - Produção de Energia Eléctrica, Lda. Mafra 0.000% 100.000% 100.000% 100.000%

PEVB - Parque Eólico de Vila do Bispo, Lda. Vila do Bispo 0.000% 100.000% 100.000% 100.000%

PECF - Parque Eólico de Chão Falcão, Lda. Porto Mós 0.000% 100.000% 100.000% 100.000%

PEL - Parque Eólico da Lousã, Lda. Penela 0.000% 100.000% 100.000% 100.000%

Parque Eólico de Trevim, Lda. Lousã 0.000% 100.000% 100.000% 100.000%

PESB - Parque Eólico da Serra de Bornes, S.A. Alfândega-da-Fé 0.000% 100.000% 100.000% 100.000%

Hidromarão - Sociedade Produtora de Energia, S.A. Vila Real 0.000% 100.000% 100.000% 100.000%

Monte Agraço - Energias Alternativas, Lda. Sobral de Monte Agraço 0.000% 75.000% 75.000% 75.000%

Entreventos - Energias Renováveis, S.A. Coimbra 0.000% 51.001% 51.001% 51.001%

Parque de Pampilhosa da Serra, S.A. Pampilhosa da Serra 0.000% 100.000% 100.000% 100.000%

Parque Eólico de Malhadas Góis, S.A. Góis 0.000% 100.000% 100.000% 100.000% 58 Report of the Board of Directors

5. Companies included in the consolidation by The following companies were merged into Iberwind II the proportional method - Joint ventures Produção – Sociedade Unipessoal, Lda., with effects reported to January 1, 2010: There are no interests in joint ventures.

% Effective 6. Companies included in the consolidation by PEP - Parque Eólico da Polvoeira, Lda. 100.00% the equity method - Associates Comp. das Energias Ren. Serra dos Candeeiros, Lda. 100.00% Parque Eólico de Cabeça Alta, Lda. 100.00% Parque Eólico do Chiqueiro, Lda. 100.00% There are no interests in associate companies. Parque Eólico da Serra de Leomil, S.A. 100.00% LISMORE - Consultoria, Investimentos e Serviços, Lda. 100.00% 7. Changes to the consolidation perimeter

The following company merged with Windventure – SGPS, 8. Segment reporting S.A., with effects reported to January 1, 2011: Information by segment is presented in relation to the business segments of the GROUP. Since GROUP activity % Effective is solely developed in Portugal, no geographical segment Multiwave Networks Portugal 49.00% was identified. - Sistemas Avançados de Telecomunicações,S.A. Financial Statements and Notes 59

In the financial years ended on December 31, 2011 and 2010, the assets, liabilities and profit/loss of the GROUP refer to two business segments: (i) Production of wind energy and (ii) Shared services.

Dec/11 Dec/10 Wind Shared Wind Shared energy services Eliminations Consolidated energy services Eliminations Consolidated REVENUE

External sales and services rendered 151,530,507 12,332,678 (11,939,056) 151,924,129 157,940,250 8,502,491 (8,491,691) 157,951,050

Inter-segmental sales and services rendered - (11,939,056) 11,939,056 - - (8,491,691) 8,491,691 -

Total revenue 151,530,507 393,623 - 151,924,129 157,940,250 10,800 - 157,951,050

External operational results 66,116,809 1,781,552 78,613 67,976,973 70,197,946 2,614,368 78,613 72,890,926

Inter-segmental operational results 78,613 - (78,613) - 78,613 - (78,613) -

Total operational results 66,195,421 1,781,552 - 67,976,973 70,276,559 2,614,368 - 72,890,926

External financial results (57,876,862) (12,038,078) - (69,914,940) (63,026,814) (12,768,669) - (75,795,483)

Inter-segmental financial results ------

Total financial results (57,876,862) (12,038,078) - (69,914,940) (63,026,814) (12,768,669) - (75,795,483)

External income tax (1,707,989) 3,801,117 (22,601) 2,070,527 (12,732,391) 2,535,908 12,553 (10,183,929)

Inter-segmental income tax (22,601) - 22,601 - 12,553 - (12,553) -

Total income tax (1,730,591) 3,801,117 - 2,070,527 (12,719,838) 2,535,908 - (10,183,929)

Net results for the year 6,587,969 (6,455,409) - 132,560 (5,470,093) (7,618,393) - (13,088,486)

Attributable to shareholders 6,161,571 (6,455,409) - (293,838) (5,941,296) (7,618,393) - (13,559,689)

Attributable to minority interests 426,398 - - 426,398 471,203 - - 471,203

Other comprehensive income items (33,755,577) - - (33,755,577) (12,054,739) - - (12,054,739)

Comprehensive income for the year (27,167,608) (6,455,409) - (33,623,017) (17,524,831) (7,618,393) - (25,143,224)

Attributable to shareholders (27,594,006) (6,455,409) - (34,049,415) (17,996,034) (7,618,393) - (25,614,428)

Attributable to minority interests 426,398 - - 426,398 471,203 - - 471,203

OTHER INFORMATION

Segment assets 1,107,143,430 261,641,988 (204,599,437) 1,164,185,981 1,131,847,208 274,801,230 (203,577,436) 1,203,071,002

Inter-segmental assets (44,393,152) (160,206,284) 204,599,437 - (36,578,274) (166,999,162) 203,577,436 -

Total assets 1,062,750,277 101,435,703 - 1,164,185,981 1,095,268,934 107,802,069 - 1,203,071,002

Segment liabilities 1,153,221,459 236,152,749 (119,340,375) 1,270,033,834 1,149,630,491 243,726,452 (117,132,231) 1,276,224,712

Inter-segmental liabilities (2,708,946) (116,631,429) 119,340,375 - (1,081,873) (116,050,359) 117,132,231 -

Total liabilities 1,150,512,514 119,521,321 - 1,270,033,834 1,148,548,619 127,676,094 - 1,276,224,712 60 Report of the Board of Directors

9. Sales and services rendered and cost of goods 10. Supplies and external services sold and materials consumed The Supplies and external services item is broken down as The Sales and services rendered item is broken down as follows, on December 31, 2011 and 2010: follows, on December 31, 2011 and 2010:

Amounts in euro Dec/11 Dec/10 Amounts in euro Dec/11 Dec/10 Subcontracts Sales Maintenance 9,726,309 7,508,865 Vila Lobos 2,245,437 2,257,232 Other subcontracts 555,313 358,507 São Cristóvão 1,016,979 1,152,372 Supplies and services Bigorne 1,290,221 1,459,269 Water, electricity and fuel 583,860 509,658 Achada 1,863,462 1,866,520 Office materials 71,628 59,759 Cabeço Alto 2,300,387 2,412,599 Rents and rentals 1,846,166 1,692,632 Lomba da Seixa I 1,914,784 2,213,886 Communications 230,165 212,011 Lomba da Seixa II 2,041,897 2,223,168 Insurance 1,652,821 1,581,344 Igreja Nova 1,495,232 1,619,762 Travel and accommodation 63,850 53,260 Jarmeleira 201,647 208,854 Fees 104,969 203,568 São Mamede 1,299,722 1,466,518 Maintenance and repairs 443,726 338,742 Escusa 411,054 391,833 Environmental monitoring 247,917 289,784 Lagoa Funda 1,836,701 1,612,985 Specialised labour 1,524,253 1,274,277 Sra. da Vitória 2,294,840 2,422,994 Other supplies and services 114,345 125,913 Chão Falcão 16,647,000 18,040,153 17,165,324 14,208,319 Malhadizes 2,499,135 2,545,593 Lousã I 6,551,372 6,941,426 The Other subcontracts refers to the sub-contracting of Lousã II 12,486,972 12,688,642 outsourcing services of management and control of wind Borninhos 435,639 459,598 power production and information systems. Bornes 14,595,152 15,224,774 Candeeiros 28,925,703 29,248,522 The specialised labour item includes (i) EUR 508,489 Meroicinha 2,072,817 2,216,590 (EUR 462,216 in 2010) relative to consultancy services Arcela 2,774,566 2,960,934 and (ii) EUR 526,475 (EUR 268,388 in 2010) relative to Todo o Mundo 2,522,247 2,610,340 the sub-contracting of wind farm maintenance/supervisory Chiqueiro 736,831 845,465 services. Degracias 4,368,337 4,592,516 Rabaçal 514,391 610,948 Pampilhosa 24,554,585 24,884,617 Malhadas 2,486,373 2,519,754 11. Employee costs Leomil 2,881,985 3,336,793 Freita I 3,954,565 4,323,308 The GROUP had the following Employee costs at December São Macário 2,310,474 2,582,286 31, 2011 and 2010: Services rendered Other 393,623 10,800 Amounts in euro Dec/11 Dec/10 151,924,129 157,951,050 Management remuneration 300,050 414,450 Employee's remuneration 1,912,082 2,016,957 Social charges on remunerations 375,985 450,808 The Cost of goods sold and materials consumed item is Other employee's costs 134,248 180,088 non-existent at December 31, 2011 and 2010. 2,722,365 3,062,303

Financial Statements and Notes 61

The headcount of the GROUP at December 31, 2011 and 13. Other operating income and costs 2010 is as follows: The breakdown of the Other income item on December 31, 2011 and 2010 is as follows: Dec/11 Dec/10 Management 11 11 Employees 62 65 Amounts in euro Dec/11 Dec/10 73 76 Work for the company 635,650 - Supplementary income 15,000 855,064 Gains on tangible and intangible fixed assets 245,982 63,807 Only 1 of the 11 directors is paid remuneration. Overestimated income tax provision 52,539 43,645 Government grants (Note 35) 1,454,395 1,454,395 12. Impairment of non-depreciable assets and Prior-year corrections 802,445 1,137,207 Provisions Other operating income 86,928 18,973 3,292,940 3,573,092

The breakdown of the Impairment of non-depreciable assets item on December 31, 2011 and 2010 is as follows: The Supplementary income item in 2010 includes the amount of EUR 750,000 from the sale of the wind power production management and control platform – SCADA. Amounts in euro Dec/11 Dec/10 Increase: The Prior-year corrections item includes in 2011 Receivables (Note 24) - 2,000,000 (i) EUR 305,450 (EUR 586,636 in 2010) relating Reversal: to compensation received for production losses, Trade debtors (Note 27) (1,090) - (ii) EUR 74,996 (EUR 170,045 in 2010) relating Receivables (Note 24) (23,754) - to insurance, (iii) EUR 68,109 (EUR 98,722 in 2010) (24,844) 2,000,000 relating to rents, and (iv) EUR 169,683 (EUR 0 in 2010) relating to sales and services rendered. This item included The breakdown of the Provisions item is: EUR 140,372 in 2010, relating to employee costs.

The Other costs item is broken down as follows: Amounts in euro Dec/11 Dec/10 Increase:

Tax (Note 31) - 600,000 Amounts in euro Dec/11 Dec/10 Deductibles of insurance claims (Note 31) 245,000 - Municipal production taxes - Decree-Law 339- 4,434,534 4,620,851 C/2001 (Note 38) Reversal: Other taxes 230,971 137,287 Tax (Note 31) (530,000) - Donations 78,000 1,000 Legal proceeding in progress (Note 31) (4,800) - Contributions 40,000 40,600 (289,800) 600,000 Losses on tangible and intangible fixed assets 475,003 333,780 Losses on financial instruments 45,383 11,890 The establishment of the provision of EUR 600,000 in Fines and penalties 96,446 985 2010 is the result of additional VAT settlement orders that Underprovision for income tax 33,760 45,921 the GROUP received and is contesting. Prior-year corrections 1,111,849 351,961 Other operating costs 545,821 106,826 The provision in the amount of EUR 530,000 was 7,091,767 5,651,101 reversed in 2011, due to a report issued by the Tax Authorities (“Centro de Estudos Fiscais”) in line with the view expressed by the GROUP. 62 Report of the Board of Directors

The Losses on tangible and intangible fixed assets item Impairment losses on depreciable assets in the financial include (i) EUR 70,000 (EUR 294,522 in 2010) relating years ended on December 31, 2011 and 2010 are: to claims for the amount not covered by insurance, and

(ii) EUR 404,736 relating to the sale of equipment from Amounts in euro Dec/11 Dec/10 the Lagoa Funda Wind Farm (as mentioned in Note 2.3, in Increase: 2011, the GROUP completed the repowering of the wind Impairment of depreciable assets (Note 19) - 2,515,301 farm). Reversal: Impairment of depreciable assets (Note 19) (170,768) - The Prior-year corrections item includes (i) EUR 119,483 (170,768) 2,515,301 (EUR 73,152 in 2010) relating to losses due to penalties/ /availability, (ii) EUR 209,674 (EUR 108,084 in 2010) relating to claims, (iii) EUR 241,375 in 2011, The impairment, recognition and reversal registered in the concerning corrections of billing for December 2010, 2011 and 2010 financial years refer to the Lagoa Funda due to the change in declared power, (iv) EUR 198,153 Wind Farm. (EUR 25,001 in 2010), relating to maintenance subcontracts and (v) EUR 243,775 relating to non- -deductible VAT. 15. Financial results and dividends received

The Other operating costs item includes (i) EUR 254,418 The breakdown of the Financial income item on December (EUR 29,193 in 2010) relating to reactive energy penalties, 31, 2011 and 2010 is as follows: (ii) EUR 51,429 (EUR 26,297 in 2010) relating to non- -recoverable special payment on account (PEC’s) Amounts in euro Dec/11 Dec/10 and (iii) EUR 150,000 relating to the sale of machinery Interest from bank deposits 1,200,332 659,576 originating from the Lagoa Funda Wind Farm, due to the Other interest 43,321 134,277 repowering carried out. Gains on swaps 13,756,756 9,695,861 15,000,409 10,489,714

14. Depreciations and Impairment of depreciable assets The Other interest item in 2011 includes EUR 34,734 (EUR 26,363 in 2010) relative to accrued interest of the The Depreciations item is broken down as follows at Pampilhosa subsidiary due to the “deposit-guarantee” December 31, 2011 and 2010: contract concluded with Vestaspor.

The Financial costs item has the following breakdown: Amounts in euro Dec/11 Dec/10 Buildings and other constructions 39,404 39,775

Basic equipment 54,328,403 54,238,416 Amounts in euro Dec/11 Dec/10 Transport equipment 251,770 244,487 Bank/Bond loan interest 37,082,806 33,734,113

Tools and utensils 113,380 73,829 Penalty and compensatory interest 837 3 Office equipment 129,996 132,968 Interest on loans from shareholders (Note 36) 9,370,536 12,223,453 Other tangible fixed assets 5,883,098 5,866,715 Bank charges 881,778 725,752 60,746,052 60,596,190 Losses on swaps 37,504,606 39,542,645 Other 74,786 59,232 84,915,349 86,285,197 Financial Statements and Notes 63

The Bank/Bond loans interest item includes, in addition to The annual tax returns are liable for review and possible the nominal interest, the amount of EUR 1,482,392 (EUR adjustment by the tax authorities for a period of four years. 1,517,731 in 2010) relative to the application of amortized However, in the event of reported tax losses they are liable cost (Notes 32 and 33). to review by tax authorities over a period of four years (six years for tax losses reported in financial years beginning The Gains on swaps and Losses on swaps items show the before January 1, 2010). amounts resulting from fixed interest payable and floating interest receivable. The Management/Board of Directors considers that any adjustments to those statements as a result of a review/ inspection by the tax authorities will not have any significant 16. Income tax impact on the financial statements for the period ending on December 31, 2011 and 2010. The income of GROUP companies is taxed at the rate of 25%, which can be further increased by a maximum On December 31, 2011 and 2010, the tax item is as follows: of 1.5% due to the municipal corporate tax, generating an aggregate tax rate of 26.50%. Amounts in euro Dec/11 Dec/10 Current tax (Note 35) (10,713,880) (11,787,275) Law No. 12-A/2010 of June 30, 2010, approved a set Deferred tax (Note 25) 12,784,406 1,603,346 of additional fiscal consolidation measures envisaged in 2,070,527 (10,183,929) the Stability and Growth Pact (SGP) and in particular the introduction of a State Surcharge equivalent to 2.5% of taxable profits over EUR 2 million. As a result, the total tax The reconciliation of the effective tax rate is detailed as rate applying to business in Portugal with a taxable income follows: exceeding that amount increased to 29% (26.5% + 2.5%).

Amounts in euro Dec/11 Dec/10 In 2011 and 2010 the majority of the Companies are Results before tax (1,937,966) (2,904,557) taxed under the special tax regime applicable to groups Expected income tax 29.00% (562,010) 29.00% (842,321) of enterprises, in which IBERWIND is the controlling Permanent differences (a) 105.67% (2,047,935) -50.35% 1,462,406 company. Under this regime, the taxable income of the Adjustments to assessment -6.96% 134,944 -2.21% 64,259 group is determined by the algebraic sum of profits and tax - Autonomous tax losses of the companies forming part thereof. Update of income tax rate (Note 25) 0.00% - -325.05% 9,441,340 Differences in tax rate (b) -20.87% 404,474 -2.01% 58,245 Under current legislation, tax losses are carried forward 106.84% (2,070,527) -350.62% 10,183,929 for a period of four years (six years for those occurring in financial years beginning before January 1, 2010) after their occurrence and may be deducted from taxable profits generated during this period.

Moreover, dividends are included in the calculation of the taxable amount for the year in which they are received, if the holdings are below 10% or the assets held for less than one year, unless the acquisition cost is greater than EUR 20,000,000. 64 Report of the Board of Directors

(a) This value primarily relates to: The movements in the Minority interests item during the 2011 and 2010 financial years were as follows:

Amounts in euro Dec/11 Dec/10 Impairment of non-depreciable assets Amounts in euro Dec/11 Dec/10 (24,844) 2,000,000 (Note 12) Opening balance 8,818,783 8,584,153 Impairment of depreciable assets (Note 14) (170,768) 2,515,301 Net results for the year 426,398 471,203 Provisions (Note 12) (11,570) 76,770 Reimbursement of supplementary - (41,274) Taxable capital gains/(losses) (3,529,979) 58,162 capital Accounting capital (gains)/losses (Note 13) 229,021 (24,094) Dividends paid (1,040,855) (195,646) Claims (Note 13) - 294,522 Other (100,032) 347

Non recoverable/(recoverable) tax losses Disposal of shareholdings: (4,212,987) 742,332 (Note 25) Entreventos - Energias Renováveis, S.A. 2,701,534 - Dividends 172,407 - 10,805,829 8,818,783 Tax benefits - surcharge on contributions (20,000) (20,000) (Note 13)

Donations (Note 13) 78,000 - During 2011, the minority shareholder of the company Prior year income tax and compensatory 52,266 26,300 Entreventos – Energias Renováveis, S.A., exercised its interest (Notes 13 and 15) purchase option of 15.5% of the company. However, loss Prior-year corrections (Note 13) 143,762 28,621 of control of the subsidiary has not occurred (Notes 7

Underestimate / (Overestimate) of income tax and 30). (18,779) 2,276 provision (Note 13)

Fines and penalties (Note 13) 96,446 985 Reverse of taxable prior year corrections - (688,203) 18. Earnings per share Other 155,182 29,808 (7,061,844) 5,042,779 The basic and diluted earnings per share in the 2011 and Tax effect (2,047,935) 1,462,406 2010 financial years is calculated as follows:

Dec/11 Dec/10 (b) This value primarily relates to the difference in the Results attributable to shareholders (293,838) (13,559,689) effective rate of the municipal corporate tax (between 0% Weighted average number of shares (Note 29) 50,000 50,000 and 1.5%) and the EUR 2 million not subject to the state Basic earnings per share (5.88) (271.19) surcharge (2.5%) and the establishment of deferred tax on tax losses (25% rate used).

17. Minority interests

The Minority interests item included under equity referred to the following subsidiaries, at December 31, 2011 and 2010:

Amounts in euro Dec/11 Dec/10 Monte Agraço - Energias Alternativas, Lda. 2,832,393 2,916,795 Entreventos - Energias Renováveis, S.A. 7,973,435 5,901,989 10,805,829 8,818,783 Financial Statements and Notes 65

19. Tangible fixed assets

The changes in tangible fixed assets as well as the relevant depreciations and impairment losses during the year ended on December 31, 2011 were:

Gross acquisition amounts Movement Amounts in euro Opening balance Increase Disposals Transfers & write-offs Closing balance Land 89,576 - - - 89,576 Buildings and other constructions 235,225 - - - 235,225 Equipment 1,208,966,585 3,505,971 (14,365,358) 12,353,105 1,210,460,303 Assets in progress - 12,353,105 - (12,353,105) - Advance for fixed assets 103,200 5,067 - (5,067) 103,200 1,209,394,585 15,864,143 (14,365,358) (5,067) 1,210,888,304

Accumulated depreciations and impairment losses Movement Amounts in euro Opening balance Increase Disposals Transfers & write-offs Closing balance Buildings and other constructions 81,574 39,404 - - 120,979 Equipment 291,172,507 60,535,879 (12,679,149) - 339,029,237 291,254,081 60,575,283 (12,679,149) - 339,150,215

Net book value Movement Amounts in euro Opening balance Increase Disposals Transfers & write-offs Closing balance Land 89,576 - - - 89,576 Buildings and other constructions 153,650 (39,404) - - 114,246 Equipment 917,794,078 (57,029,908) (1,686,209) 12,353,105 871,431,067 Assets in progress - 12,353,105 - (12,353,105) - Advance for fixed assets 103,200 5,067 - (5,067) 103,200 918,140,505 (44,711,140) (1,686,209) (5,067) 871,738,089

The changes recorded in the gross acquisition amounts and respective accumulated depreciation and impairment losses resulting from (i) replacement of basic equipment (wind turbines of Lagoa Funda Wind Farm - repowering) and (ii) investment made to purchase equipment to tackle voltage dips pursuant to Decree-Law 225/2007 of May 31, as amended by Decree-Law 51/2010 of May 20.

The increase of depreciation and impairment losses includes the amount of EUR 170,768 of reversal of impairment losses (Note 14). 66 Report of the Board of Directors

The changes in the value of tangible fixed assets as well as depreciation and impairment losses, was as follows during the year ended on December 31, 2010:

Gross acquisition amounts Movement Amounts in euro Opening balance Increase Disposals Transfers & write-offs Closing balance Land 89,576 - - - 89,576 Buildings and other constructions 3,121,171 5,942 - (2,891,888) 235,225 Equipment 1,205,520,094 1,058,973 (293,716) 2,681,234 1,208,966,585 Advance for fixed assets 74,739 33,200 - (4,739) 103,200 1,208,805,579 1,098,115 (293,716) (215,393) 1,209,394,585

Accumulated depreciations and impairment losses Movement Amounts in euro Opening balance Increase Disposals Transfers & write-offs Closing balance Buildings and other constructions 797,210 39,775 - (755,411) 81,574 Equipment 227,780,662 63,071,717 (271,121) 591,249 291,172,507 228,577,872 63,111,492 (271,121) (164,162) 291,254,081

Net book value Movement Amounts in euro Opening balance Increase Disposals Transfers & write-offs Closing balance Land 89,576 - - - 89,576 Buildings and other constructions 2,323,960 (33,833) - (2,136,477) 153,650 Equipment 977,739,432 (62,012,744) (22,594) 2,089,985 917,794,078 Advance for fixed assets 74,739 33,200 - (4,739) 103,200 980,227,707 (62,013,377) (22,594) (51,231) 918,140,505

The increase of depreciation and impairment losses includes the amount of EUR 2,515,301 of impairment losses (Note 14). Financial Statements and Notes 67

The goods acquired under leasing contracts at December The change in Goodwill in the 2011 and 2010 financial 31, 2011 and 2010 were as follows: years was as follows:

Amounts in euro Dec/11 Dec/10 Amounts in euro Dec/11 Dec/10 Transport equipment Opening balance 207,813,779 207,813,779 Net book value opening balance 554,612 297,695 Adjustments, transfers and write-offs (404,736) - New contracts 368,260 447,841 Impairment losses (Note 13) - - Net book value opening balance 207,409,042 207,813,779 (29,172) (11,902) for end contracts

Accumulated depreciations (199,068) (179,022) Net book value closing balance 694,632 554,612 The amount of EUR 404,736 recorded in 2011, corresponds to the change in goodwill due to the disposal of equipment originating from the Lagoa Funda Wind Farm (Note 13). The liabilities not yet settled on leasing contracts at December 31, 2011 and 2010 are summarised as As referred to in accounting policy (Note 1.3.), Goodwill is follows: not amortized but undergoes annual tests to determine any impairment.

Amounts in euro Dec/11 Dec/10 In each reporting period the GROUP calculates the Lease commitments recoverable amount of the assets of subsidiaries by Less than 1 year 193,052 180,653 determining the value according to the discounted cash flow 1 to 2 years 200,621 127,198 method. The financial model underlying the refinancing 2 to 3 years 176,833 132,649 carried out in 2009 and updated in 2011, and which 3 to 4 years 175,045 103,657 included the expected period of use of each wind farm, 4 to 5 years 38,041 77,957 was used for this calculation in 2011 and 2010. Present value of lease commitments 783,592 622,113 (Note 35)

Future interest 82,152 46,061 The main assumptions used in the calculation were:

Assumptions 2011 2010 Inflation rate 2.520% 2.520% 20. Goodwill Discount rate 8.000% 7.368%

The Goodwill item had the following breakdown at December 31, 2011 and 2010: The above-stated discount rate was calculated based on the WACC (Weighted Average Cost of Capital) method, and it is net of taxes. The corresponding rate before tax Amounts in euro Dec/11 Dec/10 is 10.00% (8.47% in 2010). The assumptions used for Wind energy 200,037,385 200,442,121 ascertaining the discount rate were: Shared services 7,371,657 7,371,657 207,409,042 207,813,779 Assumptions 2011 2010 Risk-free interest rate 3.30% 4.75% Market risk premium 10.13% 6.02% Tax rate 28.75% 28.75% 68 Report of the Board of Directors

21. Investment in subsidiaries and associates 23. Assets held for sale

As stated in Note 6, there was no investment in subsidiaries No Assets are held for sale at December 31, 2011 and and associates at December 31, 2011 and 2010. 2010.

22. Other investments 24. Receivable and other assets

There are no Other investments at December 31, 2011 and The Receivable and other assets item has the following 2010. breakdown, at December 31, 2011 and 2010:

Dec/11 Dec/10 Amounts in euro Non-current Current Non-current Current State and other public entities Income tax (Note 35) - 1,003,987 - 772,418 Value Added Tax - 632,334 - 2,005,968 Other - - - 2,843 Debtors Support fund - 27,207 - 16,743 Windbrokers Europe B.V. - - - 15,000 Novabase - 17,997 - 99,896

Enercon - 230,451 - - Parque Eólico de Vale do Chão - - - 952,858 Costa Duarte - - - 313,631 Magnum Capital Management GP - 182,832 - - CAP fair value (Note 35) - 15,254 - 60,637 Guarantees given - 40,020 - 52,225 Advance payments to suppliers - 66,005 - 2,076,338 Impairment losses (Note 12) - (60,000) - (2,060,000) Others (less than EUR 10,000) - 30,140 - 52,270 Impairment losses (Note 12) - (6,031) - (29,784) Accruals and Deferrals Interest receivable (Note 15) - 98,946 - 71,691 Other deferred costs - 371,957 - 225,518 Components of wind turbines and others - 236,376 - - Rents - 3,813,283 - 4,102,474 Insurance - 34,411 - - Municipal production taxes - 411,603 - 520,848 Claims - 879,740 - 544,489 Maintenance - 2,666,553 - 1,398,032 Other - 243,117 - 7,854 - 10,936,182 - 11,201,949 Financial Statements and Notes 69

The change in the Impairment losses item in the 2011 financial years was as follows:

Opening Increase Reversal Closing Amounts in euro balance (Note 12) (Note 12) Use balance Advance payments to suppliers 2,060,000 - - (2,000,000) 60,000 Other debtors 29,784 - (23,754) - 6,031 2,089,784 - (23,754) (2,000,000) 66,031

The change in the Impairment losses item in the 2010 financial years was as follows:

Opening Increase Reversal Closing Amounts in euro balance (Note 12) (Note 12) Use balance Advance payments to suppliers 60,000 2,000,000 - - 2,060,000 Other debtors 54,578 - - (24,793) 29,784 114,578 2,000,000 - (24,793) 2,089,784

The impairment loss registered in 2010 is entirely composed of advance payments to Castanheira de Pêra Municipal Council.

The Others item in accruals and deferrals includes EUR 235,263 relating to the upgrading of accesses, which are being deferred for a period of 5 years. The change in the item during the 2011 and 2010 financial years was as follows:

Amounts in euro Dec/11 Dec/10 Opening balance - - Recognised in financial year 239,250 - Recognised in results (Note 10) (3,988) - 235,263 - 70 Report of the Board of Directors

25. Deferred tax assets and liabilities

The change under Deferred tax assets and liabilities at December 31, 2011 was as follows:

Income statement Other items Amounts in euro Opening balance Increase Decrease Increase Decrease Closing balance Temporary differences originating deferred tax assets

Tax losses carried forward 15,084,862 27,832,135 (1,688,349) - (30,289,600) 10,939,048

Fair value of swap 67,965,096 - (4,401) 47,376,249 - 115,336,944

Tangible fixed assets 5,595,428 823,976 (940,898) - - 5,478,507

Bank loans 796,225 454,897 - - - 1,251,122

Taxable Provisions 523,230 245,000 (523,230) - - 245,000

Intra-group transactions 6,131,599 - (380,091) - - 5,751,509

96,096,442 29,356,008 (3,536,969) 47,376,249 (30,289,600) 139,002,130

Temporary differences originating deferred tax liabilities

Revaluation of fixed assets (324,113,096) - 21,881,536 - - (302,231,560)

Fair value of swap - (7,488) - - - (7,488)

Tangible fixed assets (86,277,063) (689,097) 826,369 - - (86,139,791)

Bank loans (188,798) - 47,199 - - (141,598)

(410,578,957) (696,585) 22,755,105 - - (388,520,437)

Amounts carried on Balance Sheet

Deferred tax assets 27,062,045 7,396,147 (953,565) 13,620,671 (7,572,400) 39,552,898

Deferred tax liabilities (118,041,450) (200,268) 6,542,093 - - (111,699,626)

The amounts reflected in Other items relating to tax losses correspond to the taxable base established by the GROUP companies for tax purposes, EUR 30,298,388, for which the associated tax (EUR 7,574,597) was reclassified from income tax in Payables and other liabilities (Note 35) to Deferred tax assets. Financial Statements and Notes 71

At December 31, 2010 the figures were as follows:

Income statement Other items

Amounts in euro Opening balance Increase Decrease Rate change (a) Increase Decrease Rate change (a) Closing balance Temporary differences originating deferred tax assets

Tax losses carried forward 37,381,327 19,948,444 (1,115,511) - 1,142,858 (42,272,256) - 15,084,862

Fair value of swap 49,479,260 4,401 - - 18,481,435 - - 67,965,096

Tangible fixed assets 3,448,982 2,814,222 (667,776) - - - - 5,595,428

Bank loans 299,083 497,142 - - - - - 796,225

Taxable provisions - 523,230 - - - - - 523,230

Intra-group transactions 6,511,690 - (380,091) - - - - 6,131,599

97,120,343 23,787,440 (2,163,378) - 19,624,293 (42,272,256) - 96,096,442

Temporary differences originating deferred tax liabilities

Revaluation of fixed assets (346,018,696) - 21,905,600 - - - - (324,113,096)

Fair value of swap (7,488) - 7,488 - - - - -

Tangible fixed assets (83,612,682) (2,814,222) 149,840 - - - - (86,277,063)

Bank loans (235,997) - - - - 47,199 - (188,798)

(429,874,863) (2,814,222) 22,062,928 - - 47,199 - (410,578,957)

Amounts carried on Balance Sheet

Deferred tax assets 25,176,171 6,090,822 (580,139) 230,844 5,599,127 (10,568,064) 1,113,283 27,062,045

Deferred tax liabilities (113,916,839) (809,089) 6,343,092 (9,672,184) - 13,570 - (118,041,450)

(a) Update due to the introduction of State Surcharge (Note 16).

The amounts under Other items relating to tax losses are: 27. Trade debtors (i) the taxable base established by the GROUP companies for tax purposes, EUR 38,977,730, for which the associated The Trade debtors item is broken down as follows at tax (EUR 9,744,432) was reclassified from income tax December 31, 2011 and 2010: under Payable and other liabilities (Note 35) to Deferred tax assets and (ii) EUR 2,151,668 relating to the consumption Amounts in euro Dec/11 Dec/10 of tax losses by the GROUP in 2009. Trade debtors current account EDP Serviço Universal, S.A. 29,241,176 28,214,689 Nordex Energy GmbH - 13,530 26. Inventories Winwind Ibérica 17,352 17,352 Others (less than EUR 10,000) 1,790 5,455 There are no Inventories at December 31, 2011 and 2010. Impairment losses (Note 12) - (3,665) 29,260,318 28,247,360 72 Report of the Board of Directors

For the years ended December 31, 2011 and 2010, the Trade debtors item had the following maturities:

Amounts in euro Dec/11 Dec/10

Receivables < 90 days 28,545,888 27,611,591 90 - 180 days - 616,627 > 180 days 714,430 19,142 29,260,318 28,247,360

The change in the Impairment losses item in the financial years ended on December 31, 2011 and 2010 was as follows:

Amounts in euro Dec/11 Dec/10

Opening balance 3,665 3,665 Use (2,575) - Reversal (Note 12) (1,090) - - 3,665

28. Cash and cash equivalents

The Cash and cash equivalents item is broken down as follows at December 31, 2011 and 2010:

Amounts in euro Dec/11 Dec/10 Cash 4,758 4,615 Short term bank 289,694 325,751 deposits Other bank deposits 4,995,000 10,275,000 5,289,452 10,605,366 Financial Statements and Notes 73

29. Share capital and supplementary capital

The share capital of IBERWIND was fully subscribed and paid up at December 31, 2011 and 2010. It is represented by 50,000 shares with a nominal value of 1 Euro, which are held by the entities identified below:

Dec/11 Dec/10 Amounts in euro % Nominal value % Nominal value

Convento III S.à.r.l. 64.70 32,350 64.70 32,350

Espírito Santo Infrastructure Fund - I - Fundo de Capital de Risco 6.37 3,185 6.37 3,185 Espírito Santo Capital - Sociedade de Capital de Risco, S.A. 1.59 795 1.59 795 Fundo Albuquerque - Fundo de Capital de Risco, FCR 7.17 3,585 7.17 3,585 Gotan, SGPS S.A. 7.17 3,585 7.17 3,585 Wind Source - SGPS, S.A. 5.31 2,655 5.31 2,655 Madre - Renováveis, SGPS, Unipessoal Lda. 5.31 2,655 5.31 2,655 Ivory Investments SGPS, S.A. 2.38 1,190 2.38 1,190 100.00 50,000 100.00 50,000

Supplementary capital is broken down as follows:

Dec/11 Dec/10 Amounts in euro % Nominal value % Nominal value

Convento III S.à.r.l. 64.70 14,918,041 64.70 13,624,041

Espírito Santo Infrastructure Fund - I - Fundo de Capital de Risco 6.37 1,468,747 6.37 1,341,347 Espírito Santo Capital - Sociedade de Capital de Risco, S.A. 1.59 366,610 1.59 334,810 Fundo Albuquerque - Fundo de Capital de Risco, FCR 7.17 1,653,205 7.17 1,509,805 Gotan, SGPS S.A. 7.17 1,653,205 7.17 1,509,805 Wind Source - SGPS, S.A. 5.31 1,224,340 5.31 1,118,140 Madre - Renováveis, SGPS, Unipessoal Lda. 5.31 1,224,340 5.31 1,118,140 Ivory Investments SGPS, S.A. 2.38 548,763 2.38 501,163 100.00 23,057,250 100.00 21,057,250

74 Report of the Board of Directors

The movement in Supplementary capital in 2011 and 2010 The changes to the Fair value reserve and other item in was as follows: 2011 and 2010 are as follows:

Amounts in euro Dec/11 Dec/10 Amounts in euro Dec/11 Dec/10

Supplementary capital Fair value reserves and others Opening balance 21,057,250 21,057,250 Opening balance (48,421,995) (36,367,256) Allocation in the financial year 2,000,000 - Recognised in financial year 23,057,250 21,057,250 Entreventos purchase option (Note 17) (2,631,774) - Swap (Notes 25 and 35) (47,376,249) (18,481,435) Associated deferred tax (Note 25) 13,620,671 6,426,696 The allocation in the financial year amounting to EUR (84,809,346) (48,421,995) 2,000,000 corresponds to the conversion of loans into supplementary capital in March 2011. The changes to Retained earnings are shown in the following table: 30. Reserves and Retained earnings

Amounts in euro Dec/11 Dec/10 The breakdown of the Reserves and Retained earnings Retained earnings item at December 31, 2011 and 2010 is as follows: Opening balance (41,098,060) (1,616,959) Recognised in financial year (13,559,689) (39,481,101)

Amounts in euro Dec/11 Dec/10 (54,657,748) (41,098,060) Legal reserve - - Fair value reserves and others (84,809,346) (48,421,995) The losses reported in the 2010 and 2009 financial years Retained earnings (54,657,748) (41,098,060) amounting to EUR 13,559,689 and EUR 39,481,101, (139,467,094) (89,520,055) respectively, were fully transferred to Retained earnings, as demonstrated in the Statement of Changes in Equity.

No changes to the Legal reserve item occurred in 2011 and 2010.

Commercial law establishes that at least 5% of annual net profit must strengthen the legal reserve until it represents at least 20% of the capital.

This reserve cannot be shared out other than in the event of liquidation, though it can be used to absorb losses after all other reserves have been used up, or it can be absorbed into the equity capital. Financial Statements and Notes 75

31. Provisions

The movement in the Provisions item in 2011 was:

Opening Increase Decrease Decrease Closing Amounts in euro balance (Note 12) (Note 12) Use balance Tax 674,772 - (530,000) - 144,772 Other provisions 37,678 245,000 (4,800) (15,200) 262,678 712,450 245,000 (534,800) (15,200) 407,450

The change in the Provisions item in 2010 was as follows:

Opening Increase Decrease Decrease Closing Amounts in euro balance (Note 12) (Note 12) Use balance Tax 74,772 600,000 - - 674,772 Other provisions 109,678 - - (72,000) 37,678 184,450 600,000 - (72,000) 712,450

32. Bank Loans and overdrafts

Bank loans and overdrafts were as follows, at December 31, 2011 and 2010:

Dec/11 Dec/10 Amounts in euro Non-current Current Non-current Current Bank loans 19,033,254 9,532,183 11,361,889 9,889,176 19,033,254 9,532,183 11,361,889 9,889,176

Borrowings from banking institutions in force at December 31, 2011 and 2010 mature in 2019 and 2020 and are reimbursable in half-yearly instalments, earning interest at a rate tied to the 6-month Euribor rate plus spread. They are registered at amortized cost and no material difference to the market value is considered to exist, since they are loans that bear interest at a rate tied to Euribor. 76 Report of the Board of Directors

Bank loans had the following planned repayment plan (nominal value) at December 31, 2011 and 2010:

Amounts in euro Dec/11 Dec/10 Less than 1 year 9,675,617 9,975,112 1 to 2 years 1,714,754 1,076,617 2 to 3 years 2,531,548 1,199,754 3 to 4 years 2,952,317 1,329,548 4 to 5 years 2,697,702 1,474,317 More than 5 years 9,759,652 6,679,354 29,331,590 21,734,702

At December 31, 2011, the GROUP had available the following undrawn credit lines :

Working Capital Amounts in euro Cash Flow support Debt Service Total and Guarantees

Iberwind 500,000 - - 500,000 Iberwind Produção - 2,263,639 54,000,000 56,263,639 Entreventos - 2,000,000 1,500,000 3,500,000 Total 500,000 4,263,639 55,500,000 60,263,639

The GROUP divided the Working Capital and Guarantees credit line into two independent components in 2011: (i) Sublimit A for the purpose initially identified with available value of EUR 11,000,000 and (ii) Sublimit B for the purpose of repowering the Lagoa Funda Wind Farm with the available value of EUR 10,000,000, and it was fully used in September 2011 and may not be subject to new use.

Thus, the decrease in the Working Capital and Guarantees credit lines from 2010, in the amount of EUR 9,000,000 refers to (i) the use of EUR 10,000,000 of sublimit B for the repowering started and completed in 2011, compensated by (ii) the amortization made in the amount of EUR 1,000,000. Financial Statements and Notes 77

The credit lines available and not drawn at December 31, 2010 were as follows:

Working capital Amounts in euro Cash Flow support Debt Service Total and Guarantees

Iberwind 1,000,000 - - 1,000,000 Iberwind Produção - 11,263,639 54,000,000 65,263,639 Entreventos - 2,000,000 1,500,000 3,500,000 Total 1,000,000 13,263,639 55,500,000 69,763,639

33. Other financial instruments

The breakdown of the Other financial instruments item at December 31, 2011 and 2010 is as follows:

Dec/11 Dec/10 Amounts in euro Non-current Current Non-current Current Bond loans 806,538,472 46,658,877 853,928,282 48,174,273 Other loans 2,010,655 815,118 2,719,416 815,187 808,549,127 47,473,995 856,647,699 48,989,460

The Bond loans mature in 2025 and are repayable in half On the other hand, the Other borrowings item refers to yearly instalments bearing interest at a rate indexed to the repayable government grants awarded by IAPMEI under 6-month Euribor plus spread. They are valued at amortized the Energy Programme. These are registered at fair value. cost and no material difference to the market value is considered to exist, since they are loans that bear interest The Other borrowings have the following repayment plans at a rate tied to Euribor. (nominal value) at December 31, 2011 and 2010:

The Bond loans had the following repayment plans Amounts in euro Dec/11 Dec/10 (nominal value) at December 31, 2011 and 2010: Less than 1 year 833,339 833,339 1 to 2 years 833,339 833,339 Amounts in euro Dec/11 Dec/10 2 to 3 years 833,339 833,339 Less than 1 year 47,990,580 49,551,411 3 to 4 years 542,261 833,339 1 to 2 years 54,108,725 48,031,335 4 to 5 years - 542,261 2 to 3 years 48,608,944 54,154,664 3,042,278 3,875,617 3 to 4 years 50,605,011 48,650,224 4 to 5 years 56,569,783 50,647,981 The difference between the nominal value and balance sheet More than 5 years 606,605,993 663,738,899 value of Other borrowings, in the amount of EUR 216,505 864,489,036 914,774,514 (EUR 341,014 in 2010) is reported under Payables and other liabilities (Note 35). 78 Report of the Board of Directors

34. Trade Creditors

The Trade creditors item is broken down as follows at December 31, 2011 and 2010:

Amounts in euro Dec/11 Dec/10 Trade creditors current account

Vestaspor 2,360,797 381,931

Enercon - 205,780

Nordex GmbH 718,344 1,234,250

General Electric International, Inc - 14,738

Morais Leitão, Galvão Teles, Soares 3,612 44,788

Nova Ouriense 3,599 11,143

Bio3-Est.Proj.Biol.Val.Rec.Nat.,Lda 20,963 -

Efacec Serv. de Manut. e Assistência 9,668 14,499

Mota Engil 77,800 77,800

Deloitte - 12,100

Petrogal, S.A. 14,111 12,165

ABB (Asea Brown Boveri) 12,748 33,190

Samortécnica 2,927 13,583

CME - Const. e Manut. Electromecânica - 19,381

Tecnilab - 39,010

Linklaters - 52,586

Briopul, Lda. 233,561 -

Teixeira Duarte-Gestão Participações 24,903 24,570 Inves. Imob.

Global Estratégias - 37,106

MTVD, Lda. 578 33,257

Wavecom, SA 1,925 29,997

F9 Consulting 6,150 24,200

Costa Duarte - Corretor de Seguros, SA 61,633 9

Electrolinhas S.A. 26,202 -

EPME, S.A. - 63,346

Winter Winds - Proj. de Energias 683 10,545 Renováveis

Efacec Engenharia e Sistemas, S.A. 47,441 -

Novabase 204,131 249,582

José Afonso Jesus Amaral - 13,189

Carlos Alberto Rocha - 11,260

Lahmeyer Internacional - 13,992

Esol4u SOLUTIONS, Lda. 20,704 -

EDP Comercial - Comercialização de 78,458 - Energia, S.A.

Ernst & Young 45,756 10,503

Moventas Spain, SL 26,353 -

ZF Services Espanha S.A.U. 170,738 -

Det Norske Veritas 19,494 -

Others (less than EUR 10,000) 123,325 162,190

4,316,603 2,850,692 Financial Statements and Notes 79

35. Payable and other liabilities

The Payable and other liabilities item at December 31, 2011 and 2010 is broken down as follows:

Dec/11 Dec/10 Amounts in euro Non-current Current Non-current Current State and other public entities Income tax - 1,652,183 - 1,430,263 Withholding tax - 107,340 - 291,208 Value Added Tax - 3,773,724 - 954,493 Social security - 37,024 - 36,473 Related parties (Note 36) 81,281,750 - 96,781,750 - Fixed asset suppliers Vestas Portugal - 98,808 - - Nordex GmbH - 200,000 - 586,238 Novabase - 33,436 - 67,232 Others (less than EUR 10,000) - 12,504 - 7,000 Creditors Fair value of swap - 116,305,757 - 69,151,041 EDP Distribuição - - - 183,371 Parque Eólico Vale do Chão - - - 787,486 Others (less than EUR 10,000) - 3,631 - 6,384 Leasing suppliers (Note 19) 590,540 193,052 441,460 180,653 Accruals and deferrals Payroll expenses - 746,275 - 804,925 Interest payable 37,515,815 1,787,143 28,145,278 1,549,032 Audit and statutory audit (Note 37) - 4,100 - 22,943 Rents - 98,711 - 61,280 Municipal production taxes - Decree-Law 339-C/2001 (Note 13) - 702,627 - 745,065 Maintenance - 404,953 - 555,758 Other accrued costs - 1,612,672 - 1,489,109 Government grants 20,188,651 1,454,395 21,643,046 1,454,395 Fair value of other financial instruments (Note 33) - 216,505 - 341,014 Other deferred income - - - 15,000 139,576,756 129,444,840 147,011,535 80,720,363 80 Report of the Board of Directors

The Income Tax item is broken down as follows at December 31, 2011 and 2010:

Dec/11 Dec/10 Amounts in euro Asset balance Liability balance Net Asset balance Liability balance Net Income tax for period (Note 16) (800,273) 2,339,010 (3,139,283) (4,792) 2,051,620 (2,056,412) Income tax receivable 6,960 - 6,960 94,879 - 94,879 Payments on account 900,519 - 900,519 - (316,515) 316,515 Additional payments on account 14,487 (424,629) 439,116 - (86,985) 86,985 Special payments on account 871,304 - 871,304 630,521 (6,291) 636,812 Withholding tax 10,991 (350,117) 361,108 51,809 (211,567) 263,376 Other taxes - 87,919 (87,919) - - - 1,003,987 1,652,183 (648,195) 772,418 1,430,263 (657,845)

The amount for income tax for the period is net of EUR 7,574,597 (EUR 9,744,432 in 2010) of tax loss carry-forwards which, due to most companies being taxed under the Special Tax Regime for Groups, was reclassified as deferred tax assets for this item (Note 16 and 25).

The fair value of derivatives at December 31, 2011 and 2010 was the following:

Average Amount Date Market value Type Amounts in euro rate Dec/11 Dec/10 Effective End Dec/11 Dec/10 Trading

Entreventos - Energias Renováveis, S.A. CAP 6.000% 11,343,360 12,376,560 15/Dec/05 15/Dec/15 15,254 60,637 Hedging

Iberwind II Produção - Soc. Unip., Lda SWAP 4.247% 859,599,789 910,031,625 15/Dec/06 15/Jun/25 (116,305,757) (69,151,041)

(116,290,503) (69,090,404) Financial Statements and Notes 81

The fair value of Cap relating to December 31, 2011, The payable Loans item refers to loans from shareholders, amounting to EUR 15,254 (EUR 60,637 in 2010), is bearing interest at standard market conditions. included under the Receivable and other assets item since it is positive (Note 24). Transactions with related parties during the financial year ended on December 31, 2011 were the following: The valuation of derivative financial instruments is based on prices set by external entities. These entities use Financial costs market information and generally accepted future cash Amounts in euro Note 15 flow discount techniques. Shareholders

Convento III S.à.r.l. 6,062,737 The Interest payable – Non-current item corresponds Espírito Santo Infrastructure Fund - I 596,903 to the accured interest of shareholder loans that mature - Fundo de Capital de Risco Espírito Santo Capital - Sociedade de Capital and are due on November 15, 2016 (Note 36). 148,992 de Risco, S.A.

Fundo Albuquerque - Fundo de Capital de Risco, FCR 671,867 The changes to Government grants in the financial years Gotan, SGPS S.A. 671,867 ended on December 31, 2011 and 2010 were: Wind Source - SGPS, S.A. 497,575

Madre - Renováveis, SGPS, Unipessoal Lda. 497,575

Amounts in euro Dec/11 Dec/10 Ivory Investments SGPS, S.A. 223,019

Opening balance 23,097,441 24,551,836 9,370,536 Recognised in results (Note 13) (1,454,395) (1,454,395) 21,643,046 23,097,441 The transactions with related parties at December 31, 2010 can be broken down as follows:

36. Balances and transactions with related Financial costs parties Amounts in euro Note 15 Shareholders The amounts payable and receivable in relation to related Convento III S.à.r.l. 7,908,574 parties at December 31, 2011 and 2010 are broken down Espírito Santo Infrastructure Fund - I 778,634 as follows: - Fundo de Capital de Risco Espírito Santo Capital - Sociedade de Capital 194,353 de Risco, S.A.

Dec/11 Dec/10 Fundo Albuquerque - Fundo de Capital de Risco, FCR 876,422 Payable Payable Gotan, SGPS S.A. 876,422 Loans Loans Wind Source - SGPS, S.A. 649,065 Amounts in euro Note 35 Note 35 Madre - Renováveis, SGPS, Unipessoal Lda. 649,065 Shareholders Ivory Investments SGPS, S.A. 290,918 Convento III S.à.r.l. 52,589,292 62,617,792 12,223,453 Espírito Santo Infrastructure Fund - I 5,177,647 6,164,997 - Fundo de Capital de Risco Espírito Santo Capital - Sociedade 1,292,380 1,538,830 de Capital de Risco, S.A. Fundo Albuquerque - Fundo de Capital 5,827,901 6,939,251 de Risco, FCR

Gotan, SGPS S.A. 5,827,901 6,939,251 Wind Source - SGPS, S.A. 4,316,061 5,139,111 Madre - Renováveis, SGPS, 4,316,061 5,139,111 Unipessoal Lda. Ivory Investments SGPS, S.A. 1,934,506 2,303,406 81,281,750 96,781,750 82 Report of the Board of Directors

37. Audit and Statutory Audit costs The guarantees contracted on behalf of EDP/REN, in the amount of EUR 470,492 (EUR 470,492 in 2010), comprise The costs incurred for the services provided by the current the security deposit necessary to guarantee completion of auditors/statutory auditors were as follows in the financial electricity supply installation works. years ended on December 31, 2011 and 2010: The guarantee on behalf of DGCI refers to the process that resulted in the additional VAT settlement orders referred to Amounts in euro Dec/11 Dec/10 in Note 12. Statutory audit services 47,120 68,793

47,120 68,793 The companies operating wind farms must pay to the municipal council where the farm is sited a monthly rent 38. Commitments equivalent in value to 2.5% of the electricity generated, with the aim of distributing the global benefits of wind The commitments undertaken with third parties, through farms, in accordance with paragraph no. 33 of Annex II of bank guarantees, at December 31, 2011 and 2010, were Decree-Law No. 189/88, amended by Decree-Law No. the following: 339-C/2001.

Consequently, 2.5% of the electricity generated will be Amounts in euro Dec/11 Dec/10 channelled to municipal councils (Note 13). IAPMEI 1,150,068 1,446,403

EDP 398,027 398,027 The bond loan and Project Finance loan contracted by the REN 72,465 72,465 GROUP include the usual guarantees in such types of DGCI 736,361 736,361 financing, i.e. the pledge of shares and/or pledge of bank Petrogal 25,000 25,000 accounts and assets related to the financed projects, as well 2,381,921 2,678,256 as compliance with defined ratios. That financing amounted to, at December 31, 2011 and 2010, EUR 893,820,626 and The guarantees contracted on behalf of IAPMEI – Support EUR 936,509,216, respectively (nominal values - Notes 32 Institute for Small & Medium - Size Enterprises in the and 33). amount of EUR 1,150,068 (EUR 1,446,403 in 2010) arise from the award of financial incentives under the Economic Operational Programme - Incentive Scheme for Business Modernisation (Note 33). Financial Statements and Notes 83

39. Subsequent events

The Memorandum of Understanding signed in May 2011 by the Portuguese State and the European Commission (EC), the International Monetary Fund (IMF) and European Central Bank (ECB) (commonly known as the “Troika”), establishes for the special regime of energy generation contracts currently in force, that the possibility of obtaining an agreement to renegotiate such contracts, involving the downward revision of tariffs currently in effect, will be assessed through a report to be produced for that purpose. Moreover, it established that such an assessment be completed in the fourth quarter of 2011, which has not been the case up to now, and it is not therefore possible to anticipate the respective outcome, as well as the potential impact.

40. Contingent assets and liabilities

There are no contingent assets and liabilities that must be reported. 84 Report of the Board of Directors

Porto Salvo, 22 February 2012

The Board of Directors

João Luís Ramalho de Carvalho Talone Chairman

António João de Sousa Marques Gellweiler Vice-Chairman

Arnaldo Navarro Machado Vice-Chairman

João Peres Coelho Borges Director

José Diogo Araújo e Silva Director

Luis Nuno Lima de Carvalho Valença Pinto Director

Gracinda Augusta Figueiras Raposo Director

Enrique de Leyva Director

Luís Miguel Bastos Mendes Rezende Director

José António Marco Izquierdo Director

António da Silva Parente Director

Rita Maria de Eça Dias Accountant Financial Statements and Notes 85 Audit Report

Grupo

Lagoas Park, Edifício 5A, 4º 2740-298 Porto Salvo Portugal T (+351) 21 487 67 00 F (+351) 21 487 67 01

www.iberwind.pt