I. POWER TO ESTABLISH
66. COMPETENCES TO DETERMINE THE REMUNERATION OF THE CORPORATE BODIES
The Nominations and Remunerations Committee is a permanent body belonging to the Board of Directors with an informative and advisory nature. Its recommendations and reports are non-binding.
As such, the Nominations and Remunerations Committee has no executive functions. The main functions of the Nominations and Remunerations Committee are to assist and inform the Board of Directors regarding the nominations (including by co-option), re-elections, dismissals, and the remuneration of the Board Members and its position about the composition of the Board of Directors, as well as the nominations, remuneration, and removal of senior management personnel.
The Nominations and Remunerations Committee is the body responsible for proposing to the Board of Directors the determination of the remuneration of the Executive management of the Company; the Declaration on Remuneration Policy; the evaluation and compliance of the KPI’s (Key Performance Indicators); the annual and multi annual variable remuneration, if applicable, and also proposes the remuneration of the Non-Executive Directors and members of the Board Committees.
The Board of Directors is responsible for the approval of the above-mentioned proposals except to the extent it concerns the Declaration on the Remuneration Policy which is approved by the General Shareholders’ Meeting.
The Declaration on the Remuneration Policy is submitted by the Board of Directors to the approval of the General Shareholders’ Meeting as an independent proposal. According to the Company’s Articles of Association the Board of Directors remuneration is subject to a maximum value that can only be modified by a Shareholders agreement.
II. NOMINATIONS AND REMUNERATION COMMITTEE
67. NOMINATIONS AND REMUNERATIONS COMMITTEE
The Composition of the Nominations and Remunerations Committee is reflected on topic 29 of the report.
The Nominations and Remunerations Committee did not hire any external consultancy services corresponding to 2017.
68. KNOWLEDGE AND EXPERIENCE REGARDING REMUNERATION POLICY
The Chairman of the Nominations and Remunerations Committee has knowledge and experience regarding Remuneration Policy as member of the Remuneration Committee of a Portuguese listed company as mentioned on his biography available in the Annex of this report, together with the biographies of all other members of the Nominations and Remunerations Committee.
III. REMUNERATION STRUCTURE
69. REMUNERATION POLICY
Pursuant to Article 26.1 of the Company’s Articles of Association the Directors shall be entitled to a remuneration which consists of (i) a fixed amount to be determined annually by the General Shareholders’ Meeting for the whole Board of Directors and of (ii) attendance fees regarding the Board Meetings.
The above-mentioned article also establishes the possibility of the Directors being remunerated with Company shares, share options, or other securities granting the right to obtain shares or by means of share-indexed remuneration systems. In any case, the system chosen must be approved by the General Shareholders’ Meeting and comply with current legal provisions.
The total amount of the remunerations that the Company will pay to its Directors under the terms provided in the previous paragraphs shall not exceed the amount determined by the General Shareholders’ Meeting. The maximum remuneration approved by the General Shareholders’ Meeting for all the members of the Board of Directors was EUR 2,500,000 per year.
Pursuant to Article 26.4 of the Company’s Articles of Association, the rights and duties of any kind derived from the condition of Board Member shall be compatible with any other rights and obligations either fixed or variable that could correspond to the Board Members as a consequence of other employment or professional engagements, if any, carried out in the Company. Variable remuneration resulting from said contracts or from any other relationship, including being a Board Member, will be limited to a maximum annual amount to be established by the General Shareholders’ Meeting.
The maximum annual remuneration approved by the General Shareholders’ Meeting for the variable remuneration for all the executive members of the Board of Directors was EUR 1,000,000 per year.
EDPR, in line with EDP Group corporate governance practices, has signed an Executive Management Services Agreement with EDP, under which the Company bears the cost for such services to some of the members of the Board of Directors to the extent their services are devoted to EDPR.
The Non-Executive Directors only receive a fixed remuneration, which is calculated on the basis of their work exclusively as Directors or with their membership on the Nominations and Remunerations Committee, Related Party Transactions
Committee, and the Audit and Control Committee. Those members who are seated in two different Committees do not accumulate two remunerations. In these cases, the remuneration to be received is the one that corresponds to the highest value.
EDPR has not incorporated any share remuneration or share purchase options plans as components of the remuneration of its Directors.
No Director has entered into any contract with the Company or third parties that have the effect of mitigating the risk inherent in the variability of the remuneration established by the Company.
In EDPR there are not any payments for the dismissal or termination of Director’s duties.
The remuneration policy for the Directors of the Company is submitted each year to the General Shareholders’ Meeting for approval.
70. REMUNERATION STRUCTURE
The remuneration policy applicable for 2017-2019, proposed by the Nominations and Remuneration Committee and approved by the General Shareholders’ Meeting held on April 6th, 2017 (the “Remuneration Policy”), defines a structure with a fixed remuneration for all members of the Board of Directors, whereas for the members of the Executive Committee defines a fixed and a variable remuneration, with an annual component and a multi-annual component.
EDPR Business Plan for North America platform includes a substantial and strategic investment. On the other hand, EDPR wishes to consolidate its presence in offshore wind on the renewable energy landscape by delivering the projects in which it holds a stake as well as by identifying and developing new opportunities in the same markets or new ones with similar characteristics. Finally, the business environment for next years in Europe and Brazil is becoming very challenging.
Taking into consideration this business perspective and with the aim of reaching a consistency with the market conditions, the Nominations and Remuneration Committee proposed to the Board of Directors 2 (two) new Long Term Incentive Complementary Programs: one for the COO North America and other for the COO Offshore, to its submission to the next General Shareholders’ Meeting. Additionally the Nominations and Remunerations Committee may consider studying in 2018 a Long Term Incentive Complementary Plan for COO Europe & Brazil.
On the topic below can be found the KPIs (“Key Performance Indicators”) stated in the Remuneration Policy for variable annual and multi-annual variable components.
71. VARIABLE REMUNERATION
Variable annual and multi-annual remuneration applies to the members of the Executive Committee.
The variable annual remuneration may range from 0 to 68% of the annual fixed remuneration and the multi-annual remuneration from 0 to 120% of the annual fixed remuneration.
For Executive Committee Members that are also Officers, there will be a qualitative evaluation of the CEO about the annual performance. This evaluation will have a weight of 20% for the final calculation in the annual variable remuneration and of 32% in the multi-annual variable remuneration. The other 80% will be calculated based on the weights indicated in the next paragraph for the annual variable remuneration and 68% for the multi-annual variable.
The key performance indicators (KPIs) used to determine the amounts of the annual and multi-annual variable remuneration regarding to each year of the term are aligned with the strategic grounds of the Company: growth, risk control and efficiency. These are the same for all members of the Executive Committee, although with specific targets for the platforms in the case of COOs NA and EU/BR. For the year 2017 and in order to align the indicators with the company objectives, some minor amendments were applied to some KPIs.
According to the Remuneration Policy approved by the General Shareholders’ Meeting, the maximum variable remuneration (annual and multi-annual) is applicable if all the above mentioned KPI’s were achieved and the performance evaluation is equal or above 110%.
As mentioned above, two Long Term Incentive Complementary Programs (LTICP) have been designed and will be proposed to the next General Shareholders Meeting: one for the COO Offshore, and other for the COO North America.
Regarding COO North America, the LTICP for the period 2017 – 2020 is conditioned to the achievement of the strategic business objectives. The target amount is 50% of the COO NA year-end base salary (USD183.444 gross amount) for each of the four years, implying a total target of 734.000$ for the period 2017-2020.
The LTICP KPIs measures are as follows: 2017-2020 EDPR Gross Installed MWs in North America, 2017-2020 EDPR EBITDA in North America, 2017-2020 EDPR ROIC Cash in North America
The measures will be consistent across the Plan, and will be evaluated only at the end of the Plan Term (i.e., in January 2021 for the four-year total) and payments would be made based on the LTICP % achievement rate and capped at 120% of target. Given the recent appointment of the COO NA, part of the plan can be substituted by the accommodation expenses derived from his move to the US.
In COO Offshore case, the LTICP KPIs measures are based in reaching Final Investment Decision in the projects where EDPR already has subscribed long term PPAs within the time frames established, and also obtaining additional CfD or FiT contracts.
This program will cover the next three years and shall be paid on January 2021. The maximum target amount (TA) to be accrued yearly is 50% of the COO Offshore year-end base salary (EUR 145.000 gross amount) implying a maximum total of EUR 435.000 for the period 2018-2020.
72. MULTI-ANNUAL REMUNERATION
The Remuneration Policy incorporates the deferral for a period of three years of the multi-annual variable remuneration, being the relevant payment conditioned to the lack of any willful illicit action, known after the appraisal and which endangers the sustainable performance of the company, in line with CMVM corporate governance practices.
Given such deferral policy, an amount of €135.000 (gross amount) corresponding to the Multi-Annual remuneration of Rui Teixeira (former EDPR Executive Committee Member) achieved by him on the period 2014-2016 pursuant to the Appointments and Remuneration Committee evaluation issued on February 18th, 2015, and approved on the Board of Directors Meeting held on February 24th, 2015, was due on 2017.
73. VARIABLE REMUNERATION BASED ON SHARES
EDPR has not allocated variable remuneration on shares and does not maintain Company shares that the Executive Directors have had access to.
74. VARIABLE REMUNERATION BASED ON OPTIONS
EDPR has not allocated variable remuneration on options.
75. ANNUAL BONUS AND NON-MONETARY BENEFITS
The key factors and grounds for any annual bonus scheme are described on topics 71 and 72. Additionally, the Officers, with the exception of the CEO, received the following non-monetary benefits: company car and Health Insurance. In 2017, the non-monetary benefits amounted to EUR 128,753.
The Non-Executive Directors do not receive any relevant non-monetary benefits as remuneration.
76. RETIREMENT SAVINGS PLAN
The retirement savings plan for the members of the Executive Committee that are also Officers, acts as an effective retirement supplement with a range between 3% to 6% of their annual salary. The percentage is defined according with the retirement savings plan applicable in their home country. The retirement savings plan has been approved by the General Shareholders’ Meeting on April 14th 2016 (the Remuneration Policy included the retirement plan).
IV. REMUNERATION DISCLOSURE
77. BOARD OF DIRECTORS REMUNERATION
The remuneration paid by EDPR to the members of its Board of Directors for the year ended on December 31st 2017 was as follows:
According to the Executive Management Services Agreement signed with EDP, EDPR is due to pay an amount to EDP, for the services rendered by the Executive Managers and the Non-Executive Managers. The amount due under said Agreement for the management services rendered by EDP in 2017 is EUR 621,070, of which EUR 531,070 refers to the management services rendered by the Executive Members and EUR 90,000 to the management services rendered by the Non-Executive Members. The retirement savings plan for the members of the Executive Committee, excluding the Officers, acts as an effective retirement supplement and corresponds to 5% of their annual salary.
The Non-Executive Directors may opt between a fixed remuneration or attendance fees per meeting, in a value equivalent to the fixed remuneration proposed for a Director, taking into consideration the duties carried out.
78. REMUNERATION FROM OTHER GROUP COMPANIES
The total remuneration of the Officers during the relevant 2017 period corresponding to each of them, ex-CEO, was the following:
79. REMUNERATION PAID IN FORM OF PROFIT SHARING AND/OR BONUS PAYMENTS
In EDPR there is no payment of remuneration in the form of profit sharing and/or bonus payments and the reasons for said bonuses or profit sharing being awarded.
80. COMPENSATION FOR RESIGNED BOARD MEMBERS
In EDPR there is no compensation paid or owed to former executive Directors concerning contract termination during the financial year.
81. AUDIT AND CONTROL COMMITTEE REMUNERATION
82. REMUNERATION OF THE CHAIRPERSON OF THE GENERAL SHAREHOLDERS’ MEETING
In 2017, the remuneration of the Chairman of the General Shareholders’ Meeting of EDPR was EUR 15,000.
V. AGREEMENTS WITH REMUNERATION IMPLICATION
EDPR has no agreements with remuneration implication.
VI. SHARE-ALLOCATION AND/OR STOCK OPTION PLANS
EDPR does not have any Share-Allocation and/or Stock Option Plans.