Sustainability Report 2018
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Sustainability Report 2018 We love energy. Energy moves us, unites us, and brings us closer to the world. We love this energy, the universal language, which comes in all shapes and colors. Which impels us, motivates us, and challenges us in this story of sharing and of victories. Which is from the sun, the water, the wind, and the people. Which transforms, reinvents and creates an increasingly clean, sustainable, and efficient future. A contagious energy that encourages us to explore, to amaze, and to innovate in a world in constant change. This is the energy we love. WE LOVE ENERGY Sustainability Report 3 WE LOVE ENERGY EDP 2018 THIS REPORT EDP - Energias de Portugal, S.A. (hereinafter referred to as EDP), with head office in Lisbon, Avenida 24 de Julho 12 and with its shares listed on the Euronext Lisbon stock exchange, results from the transformation of Electricidade de Portugal, E.P., incorporated in 1976 following the nationalization and consequent merger of the main companies in the electricity sector in Portugal. During 1994, as established by Decree-laws 7/91 and 131/94, the EDP Group (EDP Group or Group) was set up following the split of EDP, which led to a number of directly or indirectly wholly owned subsidiaries of EDP. The Group’s businesses are currently focused on the generation, transmission, distribution and supply of electricity and supply of gas. Although complementary, the Group also operates in related areas such as engineering, laboratory tests, professional training, energy services and property management. EDP Group operates essentially in the European (Portugal, Spain, France, Poland and Romania) and American (Brazil and the United States of America) energy sectors. The Sustainability Report of EDP Group was prepared in accordance with the standards of the Global Reporting Initiative (GRI Standards) and with the Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 and with the Decree-Law no. 89/2017 of 28 July, as regards disclosure of Group sustainability performance in 2017, with focus in material themes. This Report has been structured in 3 major blocks: PRESENTATION AND STRATEGIC APPROACH PERFORMANCE PERFORMANCE INDICATORS Organized around the four sustainability Organized by material theme. It also Focused in Sustainability within the Group’s strategy. strategic pillars, reports on the year's includes indicators disaggregated by Includes our commitments, with goals and targets material issues Includes management geography, in the past four years. and their relationship with the United Nations 2030 approach, the main events and Together we aim to respond to the Sustainable Development Goals. illustrative cases about EDP practices. Global Reporting Initiative standards. Additionally, EDP makes available a set of reports at www.edp.com> sustainability> publications> reports: Annual Report; Annual Report of the General and Supervisory Board; Sectoral reports, in particular: Ethics Ombudsman’s Report, Report of assessment on potential impacts and respect for Human and Labour Rights, Safety Summary and Stakeholders’ Report; Annual and sustainability reports of the societies EDP Espanha, EDP – Energias do Brasil and EDP Renováveis; Management Approach on Sustainability, which endorses the issues set by GRI methodology and explains the relation between organizational processes and material issues for the society. ENGLISH VERSION This Sustainability Report is a free translation of the Sustainability Report originally issued in Portuguese. In the event of discrepancies, the Portuguese language version prevails. INDEX 01 ABOUT EDP Messages from the Board 8 Vision, Values and Commitments 18 Recognition 20 Where we are 22 EDP in the World 24 Who We Are 26 Business Model 28 Shareholder’s Structure 30 02 STRATEGIC APPROACH Corporate Governance 35 Sustainability Organization 39 Stakeholders 41 Sector Trends 42 Risk Management 47 Strategy, Goals and Targets 51 03 PERFORMANCE Materiality 57 Generate Economic Value Investing in Decarbonization 60 Develop Our People 80 Improve Environmental Performance 97 Enhance Trust 110 Performance Indicators 141 04 ANNEXS Biography of Corporate Entities 155 EDP’s Principles and Policies 169 Reporting Principles 170 Non-Financial Statement (Art.66th e 508thG) 173 TCFD Reporting Recommendations 174 GRI Indicators 175 GRI Index 185 Auditor Statement 194 Report on the Allocation and Impacts of Green Bonds 197 Green Bonds Report 199 01 ABOUT EDP Messages from the Board 8 Vision, Values and Commitments 18 Recognition 20 Where We Are 22 EDP In The World 24 Who We Are 26 Business Model 28 Shareholder’s Sctructure 30 8 ANTÓNIO MEXIA CHAIRMAN OF THE EXECUTIVE BOARD OF DIRECTORS Sustainability Report 9 WE LOVE ENERGY EDP 2018 MESSAGE FROM THE CHAIRMAN ANTÓNIO MEXIA DEAR SHAREHOLDER, Over the past 12 years we have been anticipating the trends in the energy sector and aligning our business model with the energy transition for the fight against climate change - a requirement for those who are committed to creating a more sustainable world for future generations. Our strategy has resulted in the creation of a leading renewable energy company. Today we are the second greenest player in Europe, with 65% of the EBITDA being sourced from renewable energy and a total installed capacity of 21 GW with considerable international exposure, more than 60% of the recurrent EBITDA is generated outside Portugal. 66% 20% 2005 2018 “WE WERE EARLY MOVERS IN Renewable total generation (TWh) RENEWABLES. AS A RESULT, TODAY The commitment to sustainable development has long EDP IS UNIQUELY POSITIONED TO been incorporated in EDP’s strategy as one of the core EMBRACE THE CHALLENGES OF values and we will continue to push forward with clear and demanding goals. In agreement with this, since 2008, THE FUTURE AND LEAD THE ENERGY we have been part of the Dow Jones Sustainability Index (DJSI), always with a leading position as one of the most TRANSITION” sustainable companies in the world. 10 We are aware of the role that we will play in the global effort substantial solar projects - one in the United States to decarbonize the world and limit the global temperature (0.2 GW) and one in Brazil (0.2 GW). Furthermore, increase to 1.5° C. We are committed and intend to meet it was also a dynamic year in offshore wind with the ambitious goals of the Clean Energy for all Europeans the beginning of the construction of Moray East legislative package, which targets a carbon-neutral European in December and the acquisition of the exclusive Union by 2050. Thus, today it is clear that the energy of the right to develop a project of up to 1.6 GW in the future will undoubtedly be electric and: United States, under a joint venture with Shell. Lastly, 2018 was also marked by the bet on the floating 1. Clean, with an increased need for decarbonization, technology with the beginning of the construction where utilities play an increasingly important role, of the Windfloat Atlantic, potentially the most as they account for 40% of total emissions; efficient way to produce renewable energy in 2. Affordable, a paradigm that will be further densely populated and deep-water countries. enhanced by the decrease in the cost of In Brazil, growth was supported by the completion renewables, reinforcing their position as the most of the first of five transmission lines, 20 months competitive technologies; ahead of schedule, and by the acquisition of a 3. Reliable, with flexibility ensured by backup systems 23.56% stake in CELESC which allowed us to be such as batteries, water reservoirs for pumping and involved in the management of the company. thermal; 2. A continuous portfolio optimization through the 4. Focused on the client, with the creation of new completion of the first majority sale - 80% stake in solutions and services based on energy efficiency, a ~500 MW portfolio of wind farms in the USA and distributed generation, the use of batteries and the Canada, with a capital gain of 129 million dollars - adoption of electric mobility. and through the sale of minority stakes in offshore projects, particularly in the United Kingdom (43%) and France (13.5%). These sales and risk sharing As mentioned last year, the current revolution in the mechanisms allow not only for capital recycling, energy sector is characterized by “3Ds”: Decarbonization, but also for value crystallization in a shorter time Digitalization and Downstream, where today, we should frame. In this context, EDP has also divested non- also add the need for full Disclosure of the company’s core and smaller scale activities, such as biomass performance. EDP is very well positioned for the future in Portugal and small-hydro assets in Portugal and due to the anticipation of these trends. Our unique and Brazil. distinctive starting point, fully aligned with an indispensable and irreversible energy transition, puts us in a privileged 3. The focus on operational efficiency allowed us to position to increase the ambition and the focus of our vision. reach the target of OPEX IV two years ahead of schedule, generating total savings of 200 million A DEMANDING YEAR DUE TO THE REGULATORY euros. From a financing standpoint, we securitized CONTEXT IN PORTUGAL 1.3 billion euros of tariff deficit, we were pioneers in Portugal with the issuance of a 600 million euros 2018 was a particularly difficult year, we were faced with Green Bond and secured the funding of Moray non-predictable and unjustified regulatory measures in East for a total amount of 2.6 billion pounds, a Portugal, leading to a significant decrease of our results. milestone in renewable energy on a global scale. However, we maintained the focus, with a continuous bet In Addition, EDP contracted Tax Equity funding with and better than expected performance in EDP Renováveis, the most favorable conditions of the last 10 years. in Brazil and in Spain.