António Mexia

Dear Shareholder,

The 2017 year made clear that the energy sector is undergoing significant changes. These changes are in line with our focus in recent years, which makes me confident that, with the collaboration of all our stakeholders, EDPR will rise to the challenge and show why we are a world leader in renewable energy production and sustainability.

Today, we are certain that the energy sector of the future will be characterized by four key factors: decarbonization, digitalization, downstream and disclosure. Decarbonization has become an unstoppable trend and electrification based on renewables plays a central role in achieving our ambitious goals for clean energy. We believe that the energy supply sector can be carbon-neutral by 2050. We were pioneers in our commitment to renewables, and today our leading position in the sector places us at the forefront among utilities.

Digitalization has had major implications in all sectors, creating deep disruptions in the most traditional business models and prompting changes throughout our value chain, from the operation of our assets to the way we relate to our customers and the way we work. We have several ongoing digital initiatives and a strong record across the different countries where we operate and we aim to be leaders in this area.

In what we call the “new Downstream,” we are now seeing customers who are more informed, more technologically savvy and more demanding. Customers’ role is shifting from that of mere consumers to that of a producers and managers of their own energy. This new paradigm not only has implications for the type of supply, but also attracts competitors from other sectors. As a company and as a group, EDP quickly understood the importance of placing the customer at the core of everything we do.

Lastly, we know that in the interest of society, it is not enough for companies merely to be profitable. Each year we see a trend of companies increasing their disclosure of information and being fully open and transparent in their relations with all stakeholders. For example, in 2017, over 1,300 companies disclosed to the Carbon Disclosure Project their current practices or plans to use internal carbon pricing, up from 150 companies in 2014. At EDP Group, we pride ourselves on being pioneers in this movemet. We began reporting in 2009, and since then have always acted with total transparency in accordance with the most respected standards of sustainability, whether environmental, social or ethical, or related to corporate governance and investor relations.

But we do even more to ensure the transparency of our operations and to contribute to the sustainability of our world. This is a core value for us. For that reason, we are signatories of the United Nations Global Compact initiative, which establishes ten criteria in the areas of human rights, labor, employment, environment and anti-corruption. In 2017, EDP Group was recognized for the sixth consecutive year as one of the most ethical companies in the world. And, in its 2017 list of the World’s Most Ethical Companies, the Ethisphere Institute identified EDP Group as one of only six from the Energy & Utilities sector among 124 companies from 19 countries recognized. In addition, EDP Group received its highest score yet on the Dow Jones Sustainability Index, maintaining its 10th-place position in the World Index. It was also recognized in 2017 as the first fully integrated company.

We are committed to continuing to lead the discussion on the sector’s future and to continuing to invest in order to make this sector a positive contributor to our society.

EDPR’s strategy has been based on three key pillars: focused growth, self-funding and operational excellence. And while we know that this is the best strategy to take our company forward, we are still able to adapt our strategy to the evolution of markets and technology. 2017 showed us, once again, that we are on the right track.

This past year we created additional growth opportunities, mainly through the creation of a dedicated platform for developing offshore wind. The levelized cost of energy for this technology has decreased by 50% in recent years and we expect, given the technological developments we are witnessing, to see an additional 50% decrease by 2030. But our reasons for investing in offshore wind go far beyond the falling costs. We do it because it is a clear fit with our strategy, due to its steady cash flows with acceptable risk, asset liquidity in specific countries and the fact that it leverages capabilities we already have within EDPR.

In Brazil, we won an A-6 onshore wind auction, and we began operations on a solar farm in the United States.In terms of our self-funding strategic principle, we continued to take actions to maintain the strength of our balance sheet, namely by maintaining our asset rotation policy and executing tax equity deals. And we will consider new approaches such as the build-and-transfer model or the sell-down of majority stakes, when appropriate.

EDPR also remained focused on preserving its push for greater operational excellence. We believe in innovation and our technical teams are always looking for ways to become more efficient. We are sure that digitalization will be crucial to improving the availability of our assets and their lifespan.

Supported by our strategy, EDPR was able to deliver its best financial results since the IPO and reinforce its role as the main growth platform within EDP Group.

Maintaining our diversification strategy, EDPR incremented its installed capacity to a total of 11,007 MW (+6% year-on-year) in 2017.

Consequently, EDPR’s EBITDA saw a significant increase of 17% to reach €1,366 million. Most importantly, the Retained Cash Flow, or net cash generated by our assets, also improved considerably this year. In 2017 we reached a total of €1,114 million, which represents a 35% year-on-year recurrent increase. As such, EDPR achieved a clearly positive Net Income of €276 million versus €56 million in 2016.

All in all, we believe that EDPR’s performance in 2017 was very strong on all levels and demonstrates how the company was able to define a very clear set of strategies and execute them to achieve the desired goals.

EDPR’s board plans to propose an increase of the dividend per share distribution to €0.06 at the General Shareholders’ Meeting.

All of this was only possible with the key contributions from EDPR’s team. Their drive to contribute to the company’s success and their imaginative ways to get the job done are essential for the overall success of EDPR and ultimately, EDP Group. Because of EDPR’s people and their great diversity – our employees hail from 34 countries – the company is able to learn faster, anticipate challenges better and act with flexibility.

I would also like to recognize the role of the company’s corporate bodies, namely my fellow members of the Board of Directors, for their full support during the year.

Lastly, a word of thanks to other stakeholders, from shareholders to business partners, government entities and regulators. They are – and will continue to be – a significant force in EDPR’s future.

Yours sincerely,