ANNUAL

REPORT
RELATÓRIO E CONTAS
 Empresa de Electricidade da Madeira

Index

Board of Directors 3

Organigram 4

Characteristic Data 5
Transmission Network 6
Summary 9

Technical Information 13
I. Production 15
II. Transmission 25
III. Distribution 27
IV. Commercialisation 30
V. Service Quality 34
VI. Unspecified Investments 35
VII. Human Resources 37

Economic and Financial Information 39

Consolidated and Individual Financial Statements 57

Statutory Auditor’s Report Consolidated Financial Statements 115

Extract of the Minute of the General Assembly Meeting 125

Note to reader:
This document is a translation of a Portuguese version. In case of doubt arising from the text here presented, the Portuguese version prevails.

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 Empresa de Electricidade da Madeira

Board of Directors

From left to right:

João Pedro Barreto de Sousa (Vice-Chairman of the Board)
Rui Alberto de Faria Rebelo (Chairman of the Board)
Mário Eugénio Jardim Fernandes (Board Member)

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Annual Report 2017
Organigram

Organigram

4
Characteristic
Data
Annual Report 2017
Characteristic Data

Transmission Network

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 Empresa de Electricidade da Madeira

Electric energy production by primary source in RAM - (EEM’s system)

GWh 2013 2014 2015 2016 2017

Madeira Island 495.08 491.17 500.23 498.47 491.03

Hydroelectric 71.76 92.27 62.64 101.55 73.88
Thermoelectric (Vitória) 423.33 398.90 437.59 396.92 417.15

Porto Santo Island 27.28 27.81 28.87 28.85 30.34

Thermoelectric 26.99 27.55 28.87 28.85 30.34
Wind Plants 0.29 0.26 - - -

Total RAM 522.36 518.98 529.10 527.32 521.37

Note: RAM - Autonomous Region of Madeira

Electric energy acquisition - Other entities

GWh 2013 2014 2015 2016 2017

Madeira Island 333.59 347.61 341.56 343.98 357.23

Hydroelectric 4.95 4.46 4.39 3.82 4.19
Wind Plants 81.71 87.58 75.01 82.48 83.11
Thermoelectric (Caniçal) 192.12 192.39 192.92 192.26 192.54
ETRSU (Meia Serra)* 25.71 33.14 38.85 35.57 47.61
Photovoltaics** 29.10 30.03 30.39 29.85 29.78

Porto Santo Island 3.69 4.06 4.43 5.31 5.08

Wind Plants 0.59 0.90 1.08 1.59 1.33
Photovoltaics** 3.10 3.16 3.35 3.72 3.75

Total RAM 337.27 351.68 345.99 349.29 362.31

*Solid Waste Incineration
**Including PRE ("special power generation" Dec-Law 312/2001), microgeneration (Dec-Law 363/2007) and minigeneration (Dec-Law
34/2011)

RAM's energy balance - 2017

GWh Net Demand Billing
Madeira Island 834.24
762.20
Porto Santo Island 33.16 32.00

Total RAM 867.40

794.20

Substations
2013 2014 2015 2016 2017

Madeira Island
Number 29 29 29 29 29
Installed power (MVA) 583 583 587 581 581

Porto Santo Island

Number 3 3 3 3 3
Installed power (MVA) 20 20 20 20 20

Total RAM
Number 32 32 32 32 32
Installed power (MVA) 603 603 607 601 601

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Annual Report 2017
Characteristic Data

Transforming Posts
2013 2014 2015 2016 2017

Madeira Island
Number 1,664 1,654 1,651 1,647 1,661
Installed power (MVA) 725.8 721.8 720.6 717.8 724.8

Porto Santo Island

Number 88 87 87 88 91
Installed power (MVA) 33.7 33.3 32.6 30.8 30.8

Total RAM
Number 1,752 1,741 1,738 1,735 1,752
Installed power (MVA) 759.5 755.1 753.2 748.6 755.6

Transmission and Distribution Network - 2017

km* Madeira Porto Santo Total RAM

LV 3,166.77 131.25 3,298.02

Overhead lines 2,495.92 46.00 2,541.92
Underground cables 670.85 85.25 756.10

6, 6 kV 1,165.96 81.47 1,247.43

Overhead lines 419.78 14.21 433.99
Underground cables 746.18 67.26 813.44

30 kV 313.02 17.93 330.95

Overhead lines 177.99 2.67 180,66
Underground cables 135.03 15.26 150.29

60 kV 99.11 - 99.11
Overhead lines 75.35 - 75.35
Underground cables 23.76 - 23.76

Total RAM 4,744.86 230.65 4,975.51

**Planimetric extension, based on registration SIT-GeoEEM (EEM Geo-referenced Technical Information System ), on 31/12/2017.
The extension of the LV network, does not consider LV extensions (customers) and the PL network.

Commercial Data
2013 2014 2015 2016 2017
Madeira Island
Number of Consumers 131,905 131,888 131,990 132,213 133,012
Consumption (GWh) 748.73 756.84 754.35 756.96 762.20
Households and Agriculture 239.21 248.47 242.27 247.57 238.40
Services and Commerce 317.42 341.95 354.27 357.90 365.93
Public Services 52.85 62.84 58.04 49.98 55.96
Industry 60.68 28.63 30.19 30.50 31.55
Public Lighting 78.57 74.95 69.58 71.01 70.36

Porto Santo Island

Number of Consumers 4,665 4,653 4,644 4,638 4,667
Consumption (GWh) 27.48 28.78 30.00 31.13 32.00
Households and Agriculture 6.46 6.41 6.42 6.59 6.37
Services and Commerce 10.98 16.04 16.86 19.21 19.83
Public Services 2.47 3.30 3.21 2.19 2.08
Industry 5.49 0.97 1.55 1.19 1.91
Public Lighting 2.08 2.05 1.96 1.95 1.81

Total RAM
Number of Consumers 136,570 136,541 136,634 136,851 137,679
Consumption (GWh) 776.21 785.62 784.35 788.09 794.20

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 Empresa de Electricidade da Madeira

Human Resources
2013 2014 2015 2016 2017

No. of Employees 789 772 749 724 703

Other Consolidated Data

€’000 2013 2014 2015 2016 2017

Turnover 199,685 189,717 167,880 153,856 173.140

Investment 12,667 9,175 16,617 17,492 35.296

Summary
The year of 2017 is marked as another year of economic recovery, after the completion of the Program
for Economic and Financial Adjustment (PAEF) specific to the Region, signed between the Regional
Government and the Government of the Republic, named PAEF-RAM.

This program included a wide range of measures, targeting the following goals: to enable the fiscal
consolidation of the Autonomous Region of Madeira in order to recover the sustainability of the
public finances and to restore the autonomous financing capability. The budgetary policy undertaken
by the Regional Government, beyond the main goal of reaching budgetary equilibrium, also aims the
promotion of investment, economic growth, reduction of unemployment rates and improvement of
population’s quality of life.

The high degree of commitment in the implementation of the rules along with the budgetary
commitments defined by the Regional Government, has allowed a sustained reduction of the global
public debt of the Region, representing a reduction of 1,328 million Euros since 2012. Although,
some countries with significant presence of emigrants are experimenting high levels of political and
social instability, such as Venezuela, leading to a continuous increase of Portuguese descendants
returning to Madeira, the labour market in Madeira registered an unemployment rate of 10.4% in
2017, representing a significant decrease when compared to value of 12.9% registered in 2016.
To point out that Madeira, in 2017, enjoyed another of its best years in terms of Tourism, with more
than 1.44 million incoming tourists, accounting for about 7.5 million overnights, representing an
increase of 2% comparing to last year’s values.

In an economical growth context, the energy consumption in 2017 increased 0.8% regarding 2016,
confirming the increase of 0.3% register in the previous year. Therefore, the energy consumption in
the Autonomous Region of Madeira reverses the tendency of regression that took place between the
years of 2009 and 2015.

It is also important to point out that in the last years, the company’s global investment has consistently
been below the values of amortizations/depreciations, existing a reduction of the liquid investment,
and inherently decreasing the investment susceptible to generate remuneration regarding tariff
purposes. With the concretization of the biggest ongoing projects, such as the important investment
of the new hydroelectric power system – Calheta III, an inversion of this situation is expected,
resulting in higher levels of investment, in line with the mean values of investment registered in the
years before economic crisis.

The total fulfilled investment amount (consolidated) reached 35,296 thousand Euros, with the following
distribution by area of activity: 52.9% in production, 14.1% in distribution/commercialisation, 7.4% in
transmission and 5.5% in non-specific investment. The remaining 20.1% was invested in subsidiaries
of EEM.

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Annual Report 2017
Characteristic Data

Production
The achieved investments in the production area amounted to 18,676 thousand Euros, mainly in:
• Beginning of works on the field regarding Enlargement of Calheta Hydroelectric System (Calheta III);
• Substitution of the Steam boiler in CTV II;
• Installation of a Pelton wheel in the Socorridos Hydroelectric power plant;
• Construction of a parking lot roof in CTV III;
• Refurbishment and improvement of the firefighting system in CTPS;
• Recovery of several sections of water canals, in order to guarantee the water supply in good
security conditions.

Transmission
The accomplished investments in the transmission area amounted to 2,594 thousand Euros, being
detachable the following activities:

In substations/switchgear posts it is pointed out as follows:

• Beginning of the refurbishment of Lombo do Doutor substation;
• Beginning of the refurbishment and enlargement works of Amparo substation;
• Substitution of the RTU of Palheiro Ferreiro substation;
• Beginning of the refurbishment of Caniçal Substation’s Command and Control System of the 60 kV
panels.

In the transmission area, the following actions were accomplished:

• Start of the implementation of the plan to refurbish the metallic electric pylons;
• Conclusion of the cable ducts within the construction of the new road link between Ponta Delgada
and Boaventura;
• Alteration of the 30 kV Lombo do Doutor - Bica da Cana power line, within the Expansion of Calheta
Hydroelectric systems (Calheta III).

Regarding the Telecommunications System it should be noted the enlargement of the optical fiber
network in about 13.8 km, the beginning of the refurbishment of EEM active network in order to
support the telecommunications of SCADA and the beginning of the energy systems remodeling of
Telecommunication’s technical rooms in Dispatch Center, Santa Quitéria and Viveiros substations.

With regard to the Dispatch Centre, it should be highlighted the conclusion of implementation of the
geographical redundancy in the SCADA system core, beginning of the ADMS implementation, and
the completion of the project for remote controlling the water gates of “Serra d’Água” and “Ribeira
da Ameixeira” and its integration into SCADA.

Distribution/ Commercialisation
The achieved investments in the distribution/commercialization sector reached the amount of 4,989
thousand Euros, being detailed as follows:
• Connection of 16 new transforming posts for public service;
• Connection of 8 new private transforming posts to network;
• Construction of 11.25 km of medium voltage network;
• Removal of 5.09 km of medium voltage network;
• Remodelling of 3.85 km of medium voltage network;
• Construction of 12.69 km of low voltage network;
• Removal of 4.79 km of low voltage network;
• Remodelling of 98.83 of km low voltage network;
• Installation of 82 new public lighting luminaries;
• Replacement of 608 public lighting luminaries;

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 Empresa de Electricidade da Madeira

• The electric energy sales reached 762.20 GWh in Madeira Island and 32.00 GWh in Porto Santo
Island, totalizing 794.20 GWh in RAM;
• The average number of clients connected to the network in 2017, reached 133,012 and 4,667 in
Madeira and Porto Santo islands, respectively.

Other accomplishments
The fulfilled investments regarding unspecified areas, in a transversal way to the Company were as
follows: general installations, equipment, tools and information systems, reaching the amount of
1,934 thousand Euros. In this area, it is important to highlight the facilities and information systems,
with particular emphasis on the following projects:
• Beginning of the renovation of the warehouse of Socorridos;
• Restoration of the shelter of Rabaçal;
• Acquisition and substitution of tools and personal security equipment;
• Acquisition of furniture and office equipment;
• Upgrade of SAP platform;
• Functional and technological upgrade of SIT and SGI platforms and integration between SIT and
ADMS;
• Development of a project for the procurement section using SAP MM module;
• Business Intelligence – Regarding EEM’s information system, the year of 2017 was marked by the
continuous investment strategy in control platforms, service quality assurance and information
reporting;
• Renewal of computers (user support);
• Maintenance Management – After the completion of the pilot-project in the field of Transforming
Posts, using the components of Plant Maintenance “PM” and Asset Enterprise Management “AEM”
from SAP, the project continued in new areas, widening its scope to substations and transmission
power lines;
• General Data Protection Regulation – In 2017, following the current legal obligations, EEM
incorporated in its development strategy, the adoption of the required procedures to fulfil the
general data protection regulation that will come into force on 26th of May 2018.

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Technical
Information
 Empresa de Electricidade da Madeira

I. Production
In 2017, the investments in the production area amounted to 18,676 thousand Euros, being noted
the substitution of the Steam boiler in CTV II, interventions in hydraulic facilities connecting to
hydroelectric power plants, refurbishment and improvement of the firefighting system of the
Thermoelectric Power plant in Porto Santo and beginning of works on the field regarding Enlargement
of Calheta Hydroelectric System (Calheta III).

A. Madeira Island

Hydroelectric utilities
Among all the investments carried out during 2017, regarding the hydroelectric power plants, were
highlighted the following actions:
• Installation of a Pelton wheel in the Hydroelectric power plant of Socorridos
• Recovery of several sections of water canals, in order to guarantee the water supply in good
security conditions, especially in sections of “Canal do Norte” connecting to Serra de Água system
and in water canals of Ribeira da Janela.

Enlargement of the Calheta hydroelectric system (Calheta III)

As has been mentioned, in the area of hydroelectric exploitations, the enlargement of the Calheta
hydroelectric system (Calheta III) is the biggest and most structuring hydroelectric project in
Madeira Island. This system has an important impact in the existing downstream water system, and
allows the energy contribution of wind and photovoltaic to be strengthened, thanks to the storage
of energy and the pumping system, through different planned duty ranges of Production/Pumping/
Synchronous Compensation.

After the completion of this project, it is estimated an increase of nearly 15 GWh of hydroelectric
production and a power guarantee of 30 MW (equivalent to two thermoelectric machines) in any
season of the year.

On the other hand, with the introduction of the pumping system with a rated power of 16.5 MW, it will
be possible to accommodate in the grid, even during the Winter off-peak hours, an additional Wind
power, higher than the pumping system power, of 25 MW, due to the operation of Calheta II in lower
power ranges thanks to the upstream retention of water. The enlargement of Calheta hydroelectric
system (Calheta III) includes the following components:
• Pico da Urze dam;
• Water pumping penstock;
• Construction of the new power plant with two generators;
• Calheta restitution reservoir;
• Paul da Serra pumping station;
• Pumping station of Calheta;
• Refurbishment of water canals connecting to the hydroelectric power system;
• Refurbishment of the substation, connection to the grid and HV-MV power lines alterations.

Due to procedural issues and technical expertise, the execution of the work was divided in three
different contracts:
• Contract 1: Conception/construction of Calheta hydroelectric power plant and pumping station,
Paul pumping station and its water penstock (≈49% of total budget);
• Contract 2: Construction of Pico da Urze dam, Calheta restitution reservoir, water canals and its
connection to the hydric system(≈42% of total budget);
• Contract 3: Alteration of some HV-MV electric lines, adaptions of the interconnecting substation
and connection to the grid (≈9% of total budget).

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Annual Report 2017
Technical Information

Regarding the Contract 1, it took EEM some time to obtain the required authorizations to undertake
the necessary surveys to characterize the execution project of some components, for example the
penstock, which extended the deadline. Consequently, the delay in the elaboration of the execution
project, delayed also the ECEPR - Environmental Conformity of the Execution Project Report, which
can only be made after the elaboration of the execution plan, thus conditioning the emission of the
Environmental Impact Declarations that was obtain only on the 22th March 2017, allowing then the
works on the field to start.

In the contract number 2, the questions asked by the contenders, in the qualification phase and in
the tenders submission phase, extended the deadline, delaying the start of works on the field to April
2017.

In addition to the constraints described, during the execution of the works, other external factors
such as unforeseen circumstances during excavations and adverse weather conditions changed the
planned work schedule.

Due to the reasons stated above, the completion of the project, as a whole, which was initially
expected to occur in the end of 2018, is now expected to occur until the end of the first semester of
2019.

Due to its structural nature and its impact to the exploitation of renewable resources, EEM carried out
an application with this project to EU funds, for the years 2014-2020 through the OPSEUR program,
being expected co-funding of 45 million euros. In December of 2016, the national managing body of
OPSEUR approved EEM’s application of Calheta III project, considering the previous stated amount
of co-funding. The process was then submitted to the European Union, to make the final validation,
after an analysis carried out by experts nominated by the EU.

Recently, in a tripartite meeting held in April 2018, regarding big projects, involving Portuguese
organisations, the European Commission and the JASPERS, where EEM also participated as a guest
entity, promising indications were obtain, regarding the formal acceptance of Calheta III project
application, which should occur in the near future.

Chão da Ribeira Hydroelectric exploitation

With the Enlargement of the Calheta hydroelectric system consolidated, EEM intends to continue
the measures stated in the regional energy policy plan, specifically in terms of maximising the
exploration of endogenous renewable resources.

In this regard, EEM has analysed several potential projects, with great capabilities of reaching the
defined goals, being the Chão da Ribeira/Seixal Hydroelectric and Chão da Lagoa/Tornos exploitations
the most prominent.

The proposed conception for the Chão da Ribeira/Seixal exploitation features the enhancement of
the water supply systems of Calheta Hydroelectric Systems (with two stage hydropower cascade
exploitations: Calheta III and Calheta de Inverno – Calheta II), in order to take advantage of the
installed power of these hydroelectric power plants, therefore maximizing their energy production.
For this reason, EEM opted to prioritize Chão da Ribeira/Seixal project, keeping Chão da Lagoa/
Tornos project for a next stage.

The carried out preliminary study features two alternatives for this project, A and B, having one
common part between them and another part that differentiate them.

The estimated cost of Alternative B is about 65 million Euros, being 11 million Euros less that the
Alternative A, making the Alternative B the preferred option, on a first analysis.

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 Empresa de Electricidade da Madeira

Nevertheless, during further analysis of the alternatives, new conceptual solutions were taken
into account, having a new alternative seemed more attractive in terms of cost/benefit. This third
alternative (Alternative C) essentially consists on the following: the transport of Chão da Ribeira’s
waters to restitution dam of Calheta III hydroelectric system; reinforcement of water collecting
through the canal of Poço Ladrão; diversion of waters of Pico da Urze Damn (Calheta III) to the
Juncal area, on a penstock, through Paul da Serra plateau; and on the water collecting in Juncal
dam, providing water to Fonte do Juncal mini hydroelectric power plant, providing then water to the
already existent Serra de Água, Socorridos, Santa Quitéria power plants, like predicted in Alternative A.

Since the hydroelectric systems may interfere with other water utilizations, namely irrigation and/
or public supply of drinking water, it is necessary to coordinate these projects with other regional
relevant entities in this field, in order to avoid constraints and guarantee that the principle established
for the different water uses is not compromised: 1- Drinking water public supply; 2- Irrigations; 3-
Electric energy production.

In this regard, EEM has been maintaining contact with other relevant regional entities, being firmly
convinced that the project conception will have consensus of all entities involved.

Thermoelectric utilities
Vitória Thermoelectric Power Plant

In Vitória Thermoelectric Power Plant are reported the following actions:

• Substitution of the Steam boiler in CTV II;
• Speed regulation retrofit of the CTV II generators;
• CTV II RTU upgrade;
• Construction of a parking lot roof in CTV III.

On December 31st, 2017, the EEM´s electric generating system in Madeira Island, consisted of
one thermoelectric power plant and nine hydroelectric power plants with a total installed power of
213.51 MW, of which 167.04 MW (78.2%) are installed in Vitória Thermoelectric Power Plant and the
remaining 46.47 MW (21.8%) in hydroelectric power plants.

EEM's power system in Madeira Island - 2017

Thermal Hydro Total
No. of Power Plants 1 9 10
Installed Power (MW) 167.04 46.47 213.51
Production (GWh) 417.15 73.88 491.03

EEM's thermal power plant in Madeira Island - 2017

Units Installed Power Max. C. Power*** Production Net Emission Fuel
(MW) (MVA) (MW) (GWh) (GWh)

Vitória 1, 2, 3, 4, 5, 6* 45.90 58.50 - - Thick Fuel-oil

Thermal 7, 8, 9, 10 42.24 52.00 34.00 122.09 Thick Fuel-oil

Power 11, 12, 13, 14, 15 57.60 70.00 47.00 140.90 Thick Fuel-oil

Plant 16 12.80 16.00 12.80 0.01 Dual-Fuel
17,18,19,20** 54.40 68.15 49.00 154.15 Dual-Fuel

Total - CTV 167.04 206.15 142.80 417.15 404.99

* Decomissioned power unit groups (No. 1 and No. 2 in 2012; No. 3 and No. 4 in 2013, No. 5 and No. 6 in 2014)
** Combined Cycle - Power Group No. 20
*** Maximum Continuous Power

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Annual Report 2017
Technical Information

EEM’s hydro power plants in Madeira Island - 2017

Inst. Power Production Net Emission Height Type
(MW) (GWh) (GWh) of Fall (m) of Turbine
Serra de Água 5.20 11.33 11.29 430 Pelton
Calheta I 1.10** - - 629 Pelton
2.40** - - 629 Pelton
0.52 - - 314 Pelton
0.50 10.39 10.24 181 Pelton
Calheta II 7.00 14.89 14.85 637 Pelton
Ribeira da Janela 3.00 5.78 5.70 398 Pelton
Fajã da Nogueira 2.40 4.58 4.52 348 Pelton
Lombo do Brasil 0.45 1.33 1.33 316 Pelton
Santa Quitéria 1.70 4.23 4.15 212 Pelton
Fajã dos Padres 1.70 - - 530 Pelton
Socorridos 24.00 21.35 21.30 457 Pelton
Hydroelectric Pumping 11.25 - - 457 Francis

Total EEM* 46.47 73.88 73.38

**Hydroelectric Power Pumping not included.
**Decomissioned power groups 1 and 4 of Calheta II in 31/12/2017, due to construction of Calheta III (-3.5 MW).

In 2017, the total EEM energy production in Madeira Island, reached 491.03 GWh, of which 417.15
GWh (85.0%) were generated by thermoelectric power plants and the remaining 73.88 GWh (15.0%)
were generated by hydroelectric power plants.

EEM’s monthly hydroelectric production in Madeira Island - 2017

GWh Fajã dos Padres Fajã da Nogueira Serra de Água
Santa Quitéria Ribeira da Janela Calheta II
Lombo do Brasil Calheta I Socorridos
14

12

10

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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 Empresa de Electricidade da Madeira

EEM’s annual hydroelectric production in Madeira Island

GWh Fajã dos Padres Fajã da Nogueira Serra de Água
Santa Quitéria Ribeira da Janela Calheta II
Lombo do Brasil Calheta I Socorridos
120

100

80

60

40

20

0
2013 2014 2015 2016 2017

The installed power in the private generating power plants remained 108.94 MW.

The following table reflects the distribution of independent producers, by primary energy sources:

Private owned power plants in Madeira Island - 2017

Thermal Hydro Wind Waste* Photovoltaics** Total
No. of Power Plants 1 1 9 1 774 786
Installed power (MW) 36.00 0.70 45.11 8.00 19.13 108.94
Acquisition (GWh) 192.54 4.19 83.11 47.61 29.78 357.23
*Solid Waste Incineration
**Including PRE ("special power generation" Dec-Law 312/2001), microgeneration (Dec-Law 363/2007) and minigeneration (Dec-Law
34/2011)

In 2017, the global energy issued by these generating power systems, reached to 357.23 GWh, more
than 3.9% over the previous year. Thus, 53.9% of this energy was provided by Caniçal Thermoelectric
Power Plant, 23.3% by wind plants, 13.3% by ETRSU (solid waste incineration), 8.3% by photovoltaic
producers, micro and mini generation, being the remaining 1.2% from Terça mini-hydroelectric
Power Plant.

The private plants energy contribution represents 46.1% of the total emission in Madeira Island.

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Annual Report 2017
Technical Information

The distribution of the net energy emitted through the network system (EEM system and private
producers) in the Madeira Island, in 2017 is presented as follows:

Net emission by primary source of energy in Madeira Island - 2017

 Thermal - Fuel 53.5%

 Thermal- Nat. Gas 18.0%

 Hydro 9.3%

 Wind Plants 9.9%

 Waste 5.7%

 Photovoltaics 3.6%

Thus, the renewable component, in 2017, amounted to 28.5% of the total energy emitted into the
electric grid and the remaining 71.5% came from fossil fuels.

The monthly and annual net emission evolution by primary sources can be presented as follows:

Monthy net emission in Madeira Island - 2017

GWh Thermal - Fuel Thermal - Natural Gas Hydro
Wind Plants Waste Photovoltaics
80

70

60

50

40

30

20

10

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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 Empresa de Electricidade da Madeira

Annual net emission by primary source of energy in Madeira Island

GWh Thermal - Fuel Thermal - Natural Gas Hydro
Wind Plants Waste Photovoltaics
900

800

700

600

500

400

300

200

100

0

2013 2014 2015 2016 2017

The peak load in Madeira Island occurred in December, reaching the value of 138.4 MW, representing
an increase of 0.3%, comparing to 2016.

Peak production demand in Madeira Island

MW

160

140
140.2 142.2
138.5 137.9 138.4
120

100

80

60

40

20

0
2013 2014 2015 2016 2017

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Annual Report 2017
Technical Information

The consumption of fuel and lubricants in Vitória Thermoelectric Power Plant amounted to 32,633
thousand m3 of natural gas, 54,935 tons of Thick Fuel-oil, 861 thousand Liters of diesel and 316
thousand Liters of lubricant.

Fuel and lubricant consumed by the EEM’s system in Madeira Island - 2017
Natural Gas Thick Fuel-oil Diesel Lubricant
(103 m3) (Tons) (k Liters) (k Liters)
Vitória Thermal Power Plant 32,633 54,935 861 316

B. Porto Santo Island

The generating power system in Porto Santo Island consists of one thermoelectric power plant, two
wind plants, one solar power plant and twenty photovoltaic micro and mini producers.

Energy Storage System using Batteries in the Electric Power System of

Porto Santo
EEM has been performing several studies about the dynamic behaviour of the electric grid in Porto
Santo Island, concerning its small sized electric system and the renewable energy that it is necessary
to integrate.

The total installed power in Porto Santo amounts to 20.73 MW, shared by Porto Santo Thermoelectric
Power Plant, with 17.28 MW (83.4%), by the solar power plant and micro/mini generation installations
with 2.34 MW (11.3%), and by the two wind plants with the remaining contribution of 1.11 MW (5.3%).

In this situation, it was considered appropriate to analyse new solutions for the power generating
system of Porto Santo, comprising three main objectives:
• Support the frequency control of the electric grid, in order to cope with the strong variations of the
intermittent renewable resources that have been occurring on the Island;
• Improve the performance of the thermoelectric power plant, using only one thermal generator in
grid, operating with thick fuel-oil;
• Maximize the integration of energy coming from renewable resources.

From the analysis of the different solutions available, the one that presents the best cost-benefit ratio
consists in a system with 4 MW power output and 3 MWh energy storage capacity using batteries,
which will assure the fulfilment of the above mentioned objectives. The major economic benefits are
provided by the reduction of one thermal generator in the grid, resulting in a significant reduction
of diesel consumption, improving the generator’s performance when operating with Thick Fuel-oil,
reducing the maintenance costs and maximizing the integration of the existing renewable resources.

In 2016, a tender procedure for the implementation of this system was launched, but due to technical
and processual gaps of the contenders, the tender procedure was cancelled, therefore it was not
possibly to award the contract. A new tender procedure was launched in 2017, and, at current time,
EEM is assessing the applications of contenders.

EEM’s power system in Porto Santo Island - 2017

EEM ENEREEM Privates
Thermal Wind Plants Wind Plants Photovoltaics* Total
No. of Power Plants 1 1 1 20 23
Installed power (MW) 17.28 0.45 0.66 2.34 20.73
Net Emission (GWh) 28.07 - 1.33 3.75 33.15
*Including PRE (“special power generation”- Dec-Law 312/2001) and microgeneration (Dec-Law 363/2007) and minigeneration
Dec-Law 34/2011)

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 Empresa de Electricidade da Madeira

The EEM’s Eolic power plant was inactive during 2017 due to failures in both machines. Given the
discontinuity of the wind turbines, the difficulty of finding spare parts and the inability of remote
controlling by the Dispatch Centre, EEM is considering the replacement of the wind turbines.

EEM's thermal power plant in Porto Santo Island - 2017

Units Installed Power Max. C. Power** Production Net Emission Fuel
(MW) (MVA) (MW) (GWh) (GWh)

Porto Santo 1,2* 10.00 12.86 - - Diesel

Thermal 3,4,5 12.96 15.30 11.40 22.01 Thick Fuel-oil
Power Plant 6 4.32 5.10 3.80 8.32 Thick Fuel-oil

Total - CTPS 17.28 20.40 15.20 30.34 28.07

*Decommissioned power unit groups in 2008
**Maximum continuous power

In 2017, the energy issued by the generating power system in Porto Santo Island, reached 33.15
GWh, of which 28.07 GWh (84.7%) were produced by the thermoelectric plant, 3.75 GWh (11.3%) by
photovoltaic sources and the remaining 1.33 GWh (4.0%) by the wind plants.

Net emission by primary source of energy in Porto Santo Island - 2017

 Thermal 84.7%

 Wind Plants 4.0%

 Photovoltaics 11.3%

The monthly and annual net emission evolution by primary sources can be presented as follows:

Monthly net emission in Porto Santo Island - 2017

GWh Thermal Wind Plants Photovoltaics

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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Annual Report 2017
Technical Information

Annual net emission by primary source of energy in Porto Santo Island

GWh Thermal Wind Plants Photovoltaics
35

30

25

20

15

10

0

2013 2014 2015 2016 2017

The electric consumption in Porto Santo Island increased 3.5%, compared to the previous year,
resulting from an increase of economic activity on this Island.

The yearly peak load in Porto Santo Island occurred in August, registering 7.7 MW, 3.6% less than the
one recorded in 2016, albeit the increase of the annual consumption.

Peak production demand in Porto Santo Island

MW
8

7 8.0
7.8 7.5 7.7 7.7

0
2013 2014 2015 2016 2017

The consumption of fuel and lubricants in Porto Santo Thermoelectric Power Plant amounted to
6,806 tons of Thick Fuel-oil, 1,521 thousand Liters of Diesel and 70 thousand Liters of Lubricant.

Fuel and lubricant consumption in Porto Santo Island - 2017

Thick Fuel-oil Diesel Lubricant
(Tons) (k Liters) (k Liters)
Porto Santo Thermal Power Plant 6,806 1,521 70

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 Empresa de Electricidade da Madeira

II. Transmission
In transmission, the most significant accomplished investments were in transmission lines,
substations/switchgear houses and optical fibre totalling 2,594 thousand Euros.

Substations/Switchgear Houses
In the substation/switchgear houses area the main investments, are presented as follows:
• Beginning of the refurbishment of Lombo do Doutor substation;
• Beginning of the refurbishment and enlargement works of Amparo substation;
• Substitution of the RTU of Palheiro Ferreiro substation;
• Beginning of the refurbishment of Caniçal Substation’s Command and Control System of the 60 kV panels;
• Implementation of a continuous passive dehumidifying system for the power transformer in Lombo
do Meio substation;
• Several refurbishment actions in various substations.

Beyond the already refereed investments, the following actions should be highlighted:
• Carrying out general maintenance works, in particular on the power transformers;
• Development of thermograph inspection works.

Substations in RAM - 2017

Installed Power (MVA) Capacitors
30/6.6 kV 60/30 kV 60/6.6 kV Total MVAr

Madeira Island 236.0 220.0 125.0 581.0 32.0

Funchal 3 x 10.0 - - 30.0 6.0
Amparo 2 x 10.0 - - 20.0 2.0
Vitória 6.6 kV 2 x 10.0 - - 20.0 4.0
Vitória - 4 x 25.0 - 100.0 -
Santa Quitéria 10.0 - - 10.0 -
Virtudes 2 x 15.0 - - 30.0 2.0
Alegria - - 10.0 10.0 -
Viveiros - - 2 x 15.0 30.0 4.0
Ponte Vermelha 15.0 - - 15.0 2.0
Pedra Mole - 2 x 25.0 - 50.0 -
Lombo do Meio 4.0 - - 4.0 -
Central da Calheta 3.0 - - 3.0 -
Calheta 10.0 - - 10.0 -
Lombo do Doutor - 25.0 - 25.0 -
Ribeira da Janela 6.0 - - 6.0 -
Serra de Água 4.0 - - 4.0 -
Lombo do Faial 6.0 - - 6.0 -
Santana 6.0 - - 6.0 -
Machico - 15.0 10.0 + 15.0 40.0 2.0
Assomada 2 x 10.0 - - 20.0 2.0
Livramento 2 x 10.0 - - 20.0 2.0
Palheiro Ferreiro - 2 x 15.0 2 x 10.0 50.0 2.0
São Vicente 6.0 - - 6.0 -
Prazeres 6.0 - - 6.0 -
Caniçal - - 10.0 10.0 -
Cabo Girão 10.0 - - 10.0 -
Santo da Serra 6.0 - - 6.0 -
Ponta Delgada 4.0 - - 4.0 -
São João - - 2 x 15.0 30.0 4.0

Porto Santo Island 20.0 - - 20.0 -

Nova Central 4.0 - - 4.0 -
Vila Baleira 4.0 + 6.0 - - 10.0 -
Calheta 6.0 - - 6.0 -

Total RAM 256.0 220.0 125.0 601.0 32.0

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Annual Report 2017
Technical Information

Transmission network
In the transmission network, the main undertaken investments are as follows:
• Start of the implementation of the plan to refurbish the metallic electric pylons;
• Conclusion of the cable ducts within the construction of the new road link between Ponta Delgada
and Boaventura;
• Alteration of the 30 kV Lombo do Doutor - Bica da Cana power line, within the Expansion of Calheta
Hydroelectric systems (Calheta III);
• Construction of cable ducts on new roads;
• Remodelling of several HV-MV connections.

Other interventions took place, including the cleaning of cable glands, replacement of suspension
isolators, terminal boxes, as well as the deforesting of line corridors and cleaning the bases of
overhead lines support.

Regarding the transmission network monitoring, the following actions should be highlighted:
• Thermography inspection of 60 kV and 30 kV overhead lines in an extension of 61 km and 108 km,
respectively;
• Inspection of 60 kV and 30 kV overhead lines in an extension of 13 km and 30 km, respectively;
• Deforesting and cleaning the overhead lines supports in an extension of 14 km.

Transmission Network in RAM - 2017

Madeira Porto Santo Total RAM

Substations 60/30/6.6 kV
Number of units 9 - 9
Installed Power (MVA)) 345.00 - 345.00

Substations 30/6.6 kV
Number of units 20 3 23
Installed Power (MVA) 236.00 20.00 256.00

60 kV Network 99.11 - 99.11

Overhead lines (km) 75.35 - 75.35
Underground cables (km) 23.76 - 23.76

30 kV Network* 313.02 17.93 330.95

Overhead lines (km) 177.99 2.67 180.66
Underground cables (km) 135.03 15.26 15.29

Optic Fiber (km) 1,053.46 26.24 1,079.70

*30 kV Distribution Network included.

Telecommunications
In the telecommunication area, it is relevant to point out
• Further expansion of the optical fibre network, increasing its extension in 13.8 km in Madeira
Island;
• Beginning of the refurbishment of EEM active network in order to support the telecommunications
of SCADA;
• Beginning of the energy systems remodeling of Telecommunication’s technical room in Dispatch
Center, Santa Quitéria and Viveiros substations.

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 Empresa de Electricidade da Madeira

Dispatch Centre
In the dispatch centre, the main performed investments, can be presented as follows:
• Conclusion of RTU’s replacement project in the substations of Virtudes, Alegria, Palheiro Ferreiro
and Vitória power plant;
• Beginning of the ADMS implementation;
• Completion of the implementation of the remote controlling project for the water gates of “Serra
d’Água” and “Ribeira da Ameixeira” and its integration in SCADA;
• Completion of the implementation of geographical redundancy in the SCADA system core.

III. Distribution
Regarding the distribution network, the investment was directed mainly to the renovation and
construction of new medium voltage lines (MV), transforming posts, public lighting and low voltage
networks (TP/PL/LV).

The distribution extent of the medium and low voltage network is shown in the following table:

Distribution Network in RAM - 2017

km* Madeira Porto Santo Total RAM

6.6 kV Network 1,165.96 81.47 1,247.43

Overhead lines 419.78 14.21 433.99
Underground cables 746.18 67.26 813.44

Low Voltage Network 3,166.77 131.25 3,298.02

Overhead lines 2,495.92 46.00 2,541.92
Underground cables 670.85 85.25 756.10
* Planimetric extension - SIT-GeoEEM on 31/12/2017. LV exclude the LV connections and PL (Public Lighting)

Transforming Posts by council in RAM - 2017

Private Public Total
No. P (kVA) No. P (kVA) No. P (kVA)
Funchal 115 86,160 455 246,000 570 332,160
Câmara de Lobos 13 8,405 116 43,115 129 51,520
Ribeira Brava 10 3,610 108 33,030 118 36,640
Ponta do Sol 4 1,550 60 20,365 64 21,915
Calheta 16 5,840 116 31,115 132 36,955
Porto Moniz 11 1,970 38 10,450 49 12,420
São Vicente 4 1,220 58 19,640 62 20,860
Santana 11 5,855 87 19,795 98 25,650
Machico 40 24,675 118 45,290 158 69,965
Santa Cruz 44 28,815 237 87,915 281 116,730
Porto Santo 18 12,930 73 17,845 91 30,775

Total RAM 286 181,030 1,466 574,560 1,752 755,590

The councils with more installed capacity are Funchal, Santa Cruz and Machico with 332,160 kVA,
116,730 kVA and 69,965 kVA, respectively.

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Annual Report 2017
Technical Information

A. Madeira Island
In Madeira Island, the main indicators of the distribution network are as follows:
• Installation of 11 new public transforming posts with an installed power of 5,530 kVA and 8 new
private ones with an installed power of 4,010 kVA;
• Decommissioning of 7 transforming posts (public and private), resulting in a decrease of 2,745 kVA
of installed power;
• Remodelling of 18 public transforming posts (increase/decrease in power capacity) resulting in a
power decrease of 700 kVA;
• Construction of 8.29 km of medium voltage network, being 1.36 km of overhead lines and 6.93 km
of underground network;
• Removal of 2.61 km of medium voltage network;
• Remodelling of 3.85 km of medium voltage network;
• Construction of 11.76 km of low voltage network, being 2.86 km of overhead lines and 8.90 km of
underground network;
• Remodelling of 98.12 km of low voltage network;
• Installation of 78 new public lighting luminaries;
• Replacement of 598 public lighting luminaries.

B. Porto Santo Island

In Porto Santo Island, the highlighted actions are as follows:
• Installation of 5 public transforming post with a total of 550 kVA of installed power;
• Decommissioning of 2 transforming posts (public and private), resulting in a decrease of 945 kVA
of installed power;
• Construction of 2.96 km of medium voltage network, being 1.28 km of overhead lines and 1.68 km
of underground network;
• Removal of 2.48 km of medium voltage, being 0.65 km of overhead lines and 1.83 km of underground
network;
• Installation of 0.93 km of low voltage network;
• Removal of 1.36km of low voltage network, being 0.35 km of overhead lines and 1.01 km of
underground network;
• Remodelling of about 0.71 km of low voltage network;
• Installation of 4 new public lighting luminaries;
• Replacement of 10 public lighting luminaries.

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 Empresa de Electricidade da Madeira

Evolution of the Distribution Network in RAM - 2017

Madeira Porto Santo Total RAM
Distribution Network Expansion
Transforming Posts for public service
Number of units 11 5 16
Power (kVA) 5,530 550 6,080
Transforming Posts for private service
Number of units 8 - 8
Power (kVA) 4,010 - 4,010
Medium Voltage Network 6,6 kV 8.29 2.96 11.25
Overhead lines (km) 1.36 1.28 2.64
Underground cables (km) 6.93 1.68 8.61
Low Voltage Network 11.76 0.93 12.69
Overhead lines (km) 2.86 0.02 2.88
Underground cables (km) 8.90 0.91 9.81

Removal Distribution Network

Transforming Posts
Number of units (5) (2) (7)
Power (kVA) (1,800) (945) (2,745)
Medium Voltage Network 6,6 kV (2.61) (2.48) (5.09)
Overhead lines (km) (2.61) (0.65) (3.26)
Underground cables (km) - (1.83) (1.83)
Low Voltage Network (3.43) (1.36) (4.79)
Overhead lines (km) (2.13) (0.35) (2.48)
Underground cables (km) (1.30) (1.01) (2.31)

Renewals
Transforming Posts for public service
Number of units 18 - 18
Power (kVA) (700) - (700)
Transforming Posts for private service
Number of units - - -
Power (kVA) - - -
Medium Voltage Network 6,6 kV 3.85 - 3.85
Overhead lines (km) 2.70 - 2.70
Underground cables (km) 1.15 - 1.15
Low Voltage Network 98.12 0.71 98.83
Overhead lines (km) 92.93 0.48 93.41
Underground cables (km) 5.19 0.23 5.42

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Annual Report 2017
Technical Information

IV. Commercialisation
The RAM´s energy balance, in 2017, is presented as follows:

RAM’s energy balance - 2017

MWh Madeira Porto Santo Total RAM

EEM - Power plants productions 491,035 30,338 521,373

Thermal 417,149 30,338 447,487
Fuel 262,992 25,557 288,549
Diesel 5 4,781 4,787
Natural Gas 154,152 - 154,152
Hydro 73,886 - 73,886
Wind - - -

Consumption and Losses of plants 12,680 2,268 14,948

Total EEM energy net emission 478,355 28,071 506,425

Other acquisitions - SEPM** 192,541 - 192,541

Thermal 192,541 - 192,541
Fuel 192,541 - 192,541

Total special status generation 164,690 5,088 169,777

Hydro 4,192 - 4,192
Wind 83,110 1,334 84,444
ETRSU* 47,613 - 47,613
Photovoltaics 24,634 3,195 27,829
Microgeneration 5,141 559 5,700

Total net generation 835,585 33,159 868,744

Hydroelectric pumping 1,343 - 1,343

Total net demand SEPM** 834,242 33,159 867,401

Proper consumptions 1,070 45 1,115

Total energy sales SEPM** 762,200 31,999 794,199
MV (Medium Voltage) 201,370 14,529 215,898
LV (Low Voltage) 560,831 17,470 578,300

Total net delivery 763,270 32,044 795,314

Losses 70,972 1,115 72,087

*Solid Waste Incineration.
**SEPM - Public Electricity Supply System of Madeira Island

The energy consumption in 2017, presented a slight increase rate of 0.7% in Madeira Island and an
increase of 2.8% in Porto Santo Island comparing to last year’s values.

Energy sales to SEPM clients per tension level and tariffs regime - 2017
GWh HV MV SLV NLV Total
Energy - 215.90 155.21 423.09 794.20
Note:
HV - High Voltage NLV - Normal Low Voltage
MV - Medium Voltage SEPM - Public Electricity Supply System of Madeira Island
SLV - Special Low Voltage

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 Empresa de Electricidade da Madeira

The RAM’s consumption in medium voltage reached 215.90 GWh, while in low voltage was 578.30
GWh, which corresponds to a distribution of 27.2% and 72.8%, of the total consumption.

The following tables present the distribution of consumption and consumers by council and by activity
sector:

Consumption by activity in RAM - 2017

GWh Services & Public Public
Households Hotels Commerce Industry Agriculture Lighting Services Construction Total %

Madeira Island 235.08 147.32 213.02 31.55 3.32 70.36 55.96 5.58 762.20 100.0%
30.9% 19.3% 28.0% 4.1% 0.4% 9.2% 7.4% 0.7% 100.0%

Funchal 103.48 103.43 119.42 8.59 0.33 16.89 35.05 1.86 389.04 51.1%
Câmara de Lobos 26.69 5.32 13.70 6.13 0.93 8.64 2.83 1.58 65.81 8.6%
Ribeira Brava 11.55 2.42 6.10 0.81 0.09 5.66 1.20 0.12 27.96 3.7%
Ponta do Sol 8.38 2.48 2.06 1.27 0.32 3.50 1.42 0.31 19.74 2.6%
Calheta 13.09 6.46 3.54 0.88 0.22 6.05 2.44 0.25 32.93 4.3%
Porto Moniz 2.53 1.75 0.81 0.04 0.04 3.19 1.72 0.01 10.08 1.3%
São Vicente 5.32 2.54 1.62 0.37 0.13 3.43 1.27 0.20 14.88 2.0%
Santana 6.74 2.08 3.06 0.27 0.09 4.42 2.18 0.18 19.02 2.5%
Machico 19.22 4.54 20.87 5.50 0.27 8.22 3.14 0.29 62.04 8.1%
Santa Cruz 38.08 16.31 41.85 7.69 0.90 10.36 4.72 0.78 120.69 15.8%

Porto Santo Island 6.35 9.25 10.38 1.91 0.02 1.81 2.08 0.20 32.00
19.9% 28.9% 32.4% 6.0% 0.1% 5.6% 6.5% 0.6% 100.0%

Total RAM 241.44 156.57 223.40 33.46 3.34 72.17 58.04 5.79 794.20
30.4% 19.7% 28.2% 4.2% 0.4% 9.1% 7.3% 0.7% 100.0%

Consumers by activity in RAM - 2017

GWh Services & Public Public
Households Hotels Commerce Industry Agriculture Lighting Services Construction Total %

Madeira Island 113,088 2,237 11,417 617 1,445 1,565 2,045 598 133,012 100.0%
85.0% 1.7% 8.6% 0.5% 1.1% 1.2% 1.5% 0.4% 100.0%

Funchal 47,289 1,131 6,644 220 160 442 955 268 57,109 42.9%
Câmara de Lobos 12,170 136 886 59 269 144 199 60 13,923 10.5%
Ribeira Brava 6,047 81 411 28 76 125 89 36 6,893 5.2%
Ponta do Sol 4,405 70 254 31 153 73 81 33 5,100 3.8%
Calheta 6,706 119 349 30 120 126 141 45 7,636 5.7%
Porto Moniz 1,704 60 105 10 58 58 93 3 2,091 1.6%
São Vicente 3,197 76 190 11 167 69 88 26 3,824 2.9%
Santana 4,306 82 280 19 137 107 93 12 5,036 3.8%
Machico 8,807 191 753 67 141 167 140 51 10,317 7.8%
Santa Cruz 18,457 291 1,545 142 164 254 166 64 21,083 15.8%

Porto Santo Island 4,009 98 330 19 18 67 108 18 4,667

85.9% 2.1% 7.1% 0.4% 0.4% 1.4% 2.3% 0.4% 100.0%

Total RAM 117,097 2,335 11,747 636 1,463 1,632 2,153 616 137,679
85.0% 1.7% 8.5% 0.5% 1.1% 1.2% 1.6% 0.4% 100.0%

In 2017, the average number of clients connected to the electric network of RAM, reached 137,679,
representing an increase of 0.6% when compared to last year’s values.

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Annual Report 2017
Technical Information

Consumption/Clients - Distribution by activity in RAM - 2017

Medium and Low Voltage 000 000 Low Voltage00 0 000 00 000Households00 0 00
Consump, (MWh)/ Consump, (MWh)/ Consump, (MWh)/
(GWh) Clients Client (GWh) Clients Client (GWh) Clients Client

Madeira Island 762.20 133,012 5.73 560.83 132,727 4.23 235.08 113,088 2.08

Funchal 389.04 57,109 6.81 274.07 56,995 4.81 103.48 47,289 2.19
Câmara de Lobos 65.81 13,923 4.73 51.52 13,905 3.71 26.69 12,170 2.19
Ribeira Brava 27.96 6,893 4.06 27.03 6,886 3.93 11.55 6,047 1.91
Ponta do Sol 19.74 5,100 3.87 17.98 5,090 3.53 8.38 4,405 1.90
Calheta 32.93 7,636 4.31 28.39 7,620 3.73 13.09 6,706 1.95
Porto Moniz 10.08 2,091 4.82 8.51 2,079 4.09 2.53 1,704 1.49
São Vicente 14.88 3,824 3.89 14.16 3,820 3.71 5.32 3,197 1.66
Santana 19.02 5,036 3.78 15.59 5,025 3.10 6.74 4,306 1.57
Machico 62.04 10,317 6.01 41.26 10,274 4.02 19.22 8,807 2.18
Santa Cruz 120.69 21,083 5.72 82.32 21,033 3.91 38.08 18,457 2.06

Porto Santo Island 32.00 4,667 6.86 17.47 4,646 3.76 6.35 4,009 1.59

Total RAM 794.20 137,679 5.77 578.30 137,373 4.21 241.44 117,097 2.06

The average consumption per client ascended to 5.77 MWh/client. The highest consumption values
were registered in the councils of Funchal, Machico and Santa Cruz. The average consumption in the
Households sector of the RAM reached the amount of 2.06 MWh/client, slightly less than the previous
year, being the highest values verified in the councils of Machico, Câmara de Lobos and Funchal.

A. Madeira Island
In Madeira Island, the consumption distribution by sectors is similar to the recent years. The
Households consumption presented the highest percentage with 30.9%, followed by the Services
and Commerce sector with 28.0% and Hotels with 19.3%.

Regarding consumption evolution, it was reported a decrease of 3.7% in Households, 1.4% in

Agriculture and 0.9% in Public Lighting, comparatively to the previous year. On other hand, it was
registered an increase of 12.0% in Public Services, 4.2% in Construction and 3.4% in Industry.

Consumption by activity in Madeira Island - 2016/2017

GWh 2016  2017
250

200

150

100

50

0
Households Hotels Services & Industry Agriculture Public Lighting Public Construction
Commerce Services

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 Empresa de Electricidade da Madeira

The Funchal council with 42.9% of the total number of consumers was responsible for 51.1% of
the total energy consumption in Madeira Island, followed by the councils of Santa Cruz with 15.8%,
Câmara de Lobos with 8.6% and Machico with 8.1%.

Consumption in Madeira Island per council - 2017

Funchal 51.1% Porto Moniz 1.3%

Câmara de Lobos 8.6% São Vicente 2.0%
Ribeira Brava 3.7% Santana 2.5%
Ponta do Sol 2.6% Machico 8.1%
Calheta 4.3% Santa Cruz 15.8%

In a context of a slight increase of electricity consumption, the council with the highest growth rate,
compared to 2016 was the council of Ponta do Sol, with a value of around 1.6%. On the other hand,
the council with highest decrease rate in electricity consumption was Porto Moniz, with a value
around 2.2%.

Consumption in Madeira Island per council - 2016/2017

GWh 2016  2017
400

350

300

250

200

150

100

50

0
Funchal C. Lobos R. Brava P. do Sol Calheta P. Moniz S. Vicente Santana Machico S. Cruz

In 2017, the number of consumers connected to the electric grid in Madeira Island reached 133,012
clients, of which 285 are medium voltage clients. The medium and low voltage consumption reached
201.37 GWh and 560.83 GWh, with a distribution of 26.4% and 73.6%, respectively.

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Annual Report 2017
Technical Information

B. Porto Santo Island

The evolution rate, regarding electricity consumption in the Porto Santo Island, compared to 2016,
suffered an increase of 2.8%, as a result of an improving economic activity.

Consumption by activity in Porto Santo Island - 2016/2017

GWh 2016  2017
12

10

0
Households Hotels Services & Industry Agriculture Public Lighting Public Construction
Commerce Services

The distribution of the main energy consumption by activities was 32.4% in Services & Commerce,
28.9% in Hotels and 19.9% in Households.

The Industry and Construction sectors’ consumptions increased in about 61.2% and 11.3%,
respectively, compared to 2016. On the other hand, it was registered a decrease of 7.5% in Public
Lighting, 5.4% in Public Services and 3.9% in Agriculture, compared to the previous year.

In 2017, the Porto Santo Island grid contained 4,667 customers, including 21 in medium voltage.
The consumption within the medium and low voltage reached 14.53 GWh and 17.47 GWh, with a
distribution of 45.4% and 54.6%, respectively.

V. Service Quality
The characterization of the Service Quality in RAM, regarding the year of 2017, is supported by the
Regulation of the Service Quality (RQS), no. 455/2014 published on the 29th of November 2013, in
“Diário da República” and it comprises essentially, the following areas:
• Service Continuity;
• Voltage Wave Quality (QOT);
• Commercial Quality.

In this context, EEM has equipped itself the necessary resources to fulfil the regulation framework,
being distinguished, the following initiatives, in 2017:
• Conducting of measurement actions of Voltage Wave Quality in 13 annually fixed locations, 11 of
which are in Madeira Island and 2 in Porto Santo Island, and 10 semi-annual mobile locations,
according to the previous monitoring approved plan;
• Conducting a customer’s satisfaction survey to obtain the general indicators of evaluation and
customer satisfaction.

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 Empresa de Electricidade da Madeira

The service quality is subject to a specific report, published yearly in May and is available on the EEM
website.

The global indicators regarding the service continuity of the transmission and distribution grids
of Madeira Island registered a significant improvement in 2017. The absence of high impact
atmospheric phenomena and inexistence of significant force majeure incidents contributed to this
outcome. In Porto Santo Island, the indicators of Service Quality registered a slight deterioration,
due to the excellent results registered in 2016 with a low number of incidents, albeit keeping up to
level of recent years. In this context, EEM continues to develop measures to minimize the number
and duration of interruptions, through the introduction of technical improvements and remodelling
of sections traditionally most affected. To outline also the measures contemplated in the investment
plan, which will allow a faster diagnosis of the cause of outages and respective location.

The Voltage Wave Quality measurements generally fulfilled the conditions stipulated by the Service
Quality Regulation (RQS), according to the NP EN 50160.

Regarding the Commercial Quality, EEM fulfils, in general, the stipulated conditions through RQS. In
this context, the indicators obtained in 2017 are aligned with the ones obtained in the previous years,
with exception to some variations that occurred due to operational and legal framework in which
EEM carries out its activity.

By the end of 2017, the new Service Quality Regulation for Electric and Gas Sectors was approved
and published, Reg. no. 629/2017, coming into force in 2018.

VI. Unspecified Investments

The investments made in general areas by EEM in 2017, amounted to 1,934 thousand Euros,
comprising interventions in support infrastructures and initiatives in information area systems.

VI.I - Support Infrastructures

Some investments in the support infrastructures area were also undertaken, being highlighted:
• Renovation of the warehouse of Socorridos;
• Restoration of the shelter of Rabaçal;
• Acquisition of furniture and office equipment;
• Other small interventions.

VI.II - Information Systems

EEM continued with its investment policy in the Information area, in order to assure the legal
requirements fulfilment and the regulation procedures, as well as the normal business evolution.
The necessary technological upgrade of all application platforms is also a guideline for investment.
The main developments were as follows:

35
Annual Report 2017
Technical Information

• SAP Developments
EEM implemented a set of developments on this platform, aiming to respond to the regulatory and
legal requirements and technological upgrade. The most important initiatives of the year 2017, in
terms of commitment and effort, were:
• Upgrade of SAP on the following aspects: Data Base - from DB2 9.1 to DB2 11.1 LUW, Operating
System – from Windows 2003 X64 to Windows 2012 Server X64 and Enhancement packages – from
EHP4 to EHP6;
• Upgrade of SAF-T billing to version 1.04_011.04_01 according to Ordinance 302/2014, along with
the upgrade of SEPA from version 2.0 to 3.01. defined by the European Payments Council (EPC);
• Activation of the legal reporting regarding the fulfilment of the 40 Annex of the VAT declaration;
• Implementing of the controls associated with the Social Tariff, because of the automatic Social
Tariff attribution as stated in the Government Budget of 2016;
• Integrations of SAP with a new platform to control the assiduity of EEM’s employees.

• SIT/SGI – Technical Information System/Downtime Management System

Completion of functional and technological upgrade of SIT and SGI platforms and ongoing integration
between SIT and ADMS.

• Collaborative Services
During 2017, EEM continued to develop collaborative tools, namely the Intranet developed within
Microsoft SharePoint component. This strategy of continuous evolution allows the consolidation of
administrative processes dematerialization.

• SGE – Team Management System

Regarding SGE platform, in 2017 EEM proceeded to integrate the inspections of transforming posts
in the mobility (SGE), using Tablets to receive the working orders and to collect data regarding the
work execution, featuring online integration with SAP ERP, with stock control and management of
technicians work hours.

• BI – Business Intelligence - Reporting tools

Regarding EEM’s information system, the year of 2017 was marked by the continuous investment
strategy in control platforms, service quality assurance and information reporting. In this field, due
to its relevance for the business, the following evolutions should be highlighted:
• Integration of the Service Segment billing into the existing data warehouse;
• Reinforcement of the automatic reconciliation mechanism between the reporting platform and the
accountability;
• Implementing of new automatic controls on the service quality reporting procedures;
• Provision of computerized mechanisms associated with the new rules for Social Tariff attribution.

• Specialized Business Consulting

The dynamic of utilities sector makes it necessary to adapt continuously the business process of
EEM. This component includes support activities for implementing the changes of business process
and related information systems, needed to support this need for change.

• Update of EEM’s Data Center

In 2017, the investment of EEM in the data center was focused in the need to fulfil the growth of
the electronic data storage, thus, a new storage and associated software was acquired. In 2017
EEM began the renovation of perimeter protection systems procedure, which will be carried out in
gradual stages, in order to reduce resulting the risks of this technological change.

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 Empresa de Electricidade da Madeira

• Maintenance Management
After implementing the pilot project in the area of transforming posts, using Plant Maintenance, PM,
and Asset Enterprise Management, AEM, modules of SAP, in 2017 the project continued, widening its
scoop to other departments of EEM such as substations a transmission power lines.

• General Data Protection Regulation

In 2017, following the current legal obligations, EEM incorporated in its development strategy, the
adoption of the required procedures to fulfil the general data protection regulation that will come
into force on 26th of May 2018.

VII. Human Resources

At 31st December 2017, EEM’s staff was composed by 703 employees, thus being 700 as permanent
staff and 3 under a short-term contract.

Human Resources by functions

2013 2014 2015 2016 2017
Engineers 71 75 76 77 75
Others with university degree 42 43 45 40 38
Technical Engineers 8 8 5 6 8
Industrial Staff 421 387 358 361 341
Administrative Staff 235 247 254 230 231
Assistants 10 9 9 7 8
Employees under term contract 2 3 2 3 2

Total 789 772 749 724 703

From the 703 total employees, 662 rendered services in Madeira Island and the remaining 41 in Porto
Santo Island.

Professional training actions

During 2017, several training actions were accomplished, covering 669 employees in a total of 3,537
training hours, subdivided by 2,999 hours of external actions and 538 hours of internal actions.

37
Annual Report 2017
Technical Information

VIII. Porto Santo – Smart Fossil Free Island

As an integral part of the European 20-20-20 Strategy, which aims by 2020 to achieve a 20% reduction
in greenhouse gas (GHG) emissions based on 1990 levels, to reach 20% of final energy from
renewable sources and to achieve a 20% improvement in energy efficiency compared to 1990, this
initiative is based on a simple concept that involves using technology to increase energy efficiency
and environmental sustainability.

This initiative, created by the Regional Government of Madeira and supported by the EEM and AREAM
(Regional Agency for Energy and the Environment of the Autonomous Region of Madeira), aims to
transform Porto Santo into a fossil fuel-free and nearly zero carbon dioxide emissions territory
in Europe, aiming to guarantee the medium and long term environmental, social and economic
sustainability of the island.

In the context of this initiative, the following actions are highlighted:

• Installation of storage systems using batteries and the associated storage management system;
• Refurbishment of Street Lighting using high performance LED luminaires and development of
smart control systems;
• Medium a low voltage power grids automation, aiming the improvement of service quality indicators
of the power grid;
• Installation of a charging stations network for electric vehicles;
• Replacement of standard energy meters by smart meters.

Anticipating these paradigm shifts in the power grid, EEM intends to act as a facilitator of this
technological revolution and eliminate possible constraints to progress. More renewable energy,
energy storage, electric vehicles, smart homes, energy efficiency, control of street lighting, better
service quality, shorter outages are only possible thanks to recent changes and to changes yet to be
implemented as part of the development of the “Sustainable Porto Santo – Smart Fossil Free Island”.

38
Economic and Financial
Information
 Empresa de Electricidade da Madeira

1 - Economic and Financial Information

Context
According to the International Monetary Fund, in 2017, the world economy recorded a growth rate of
3.7%, compared to 3.1% in 2016. This positive evolution results from the combined effect of the growth
observed in the advanced economies of 2.3% and 4.7% in emerging and developing economies. The
US economy is in the longest expansion phase since 1850, up 2.3% in 2017, supported by a solid
increase in consumption and in a recovery of investment levels. Emerging and developing economies
have benefited from accommodative financial conditions and, in the case of commodities-exporting
countries, from the increase in reference prices since the end of 2016. In the context of world trade,
the price of oil has grown 20% in 2017, compared to the previous year, interrupting a downward trend
presented in the period 2013-2016. The evolution of the financial markets in 2017, is also marked
by the international socio-political framework, in particular as regards the implementation of the
British decision to exit from the European Union and the growing tensions between the American
Administration and North Korea.

In the year 2017, the Euro Zone has overcome an important set of economic and political challenges.
The domestic electoral process in France and Germany, the uncertainty inherent in the process of
the UK exit from the EU and the external effects of the world economic recovery. In this context,
exports accelerated significantly, as a result of strong external demand, private investment and
consumption grew moderately, in an improving labour market context and the reduction of the level
of household indebtedness, together with low levels of interest rates. These conditions were decisive
for the expansion of economic activity in the Euro Zone, which was 2.4%, compared to 1.7% in 2016.
Among the largest economies in the Euro Zone, Spain stands out with a growth of 3.1%, followed by
Germany with 2.5%. The policies defined by the European Central Bank, the successive extension
of the quantitative easing measures, have led to interest rates that remain at historically low levels,
reaching negative values in different maturities. By 2018, the European Commission points to a likely
continuation of the upward trend of economic growth, at around 2.3%, and forecasts may be revised
upward, due to the expected drop in the unemployment rate, which currently stands at 8.5%.

In 2017, the Portuguese GDP growth positively by 2.7%, benefiting from a cycle of economic expansion,
extensive to all the countries of the Euro Zone, where our main trading partners are located, and,
in a very favourable evolution of the tourism sector. The greater robustness of economic activity
was mainly due to the significant evolution of investment, valued at 8.3% and, to a lesser extent, the
increase in private consumption by 2.2%. Net external demand has made an important contribution,
benefiting from the extraordinary dynamism of tourism, as well as, from the performance of goods
exports to the European Union. On the other hand, imports accelerated by 7.5%, much influenced
by rising of energy prices. Regarding the labour market, the unemployment rate fell from 11.1% in
2016 to 8.9% in 2017. The level of consumer confidence continued to improve because of a slight
increase in the available real income, the progressive improvement of labour market conditions and
the maintenance of favourable financing conditions. Despite the positive signs of the Portuguese
economy, the evolution of the national banking system presents some uncertainty and insecurity. The
year 2017 was marked by the sale of Novo Banco to the Lone Star fund, the process of recapitalization
and the restructuring of Caixa Geral de Depósitos, the restructuring of “BPI’s” corporate structure,
the consolidation of the activities of the former Banif in Santander and a latent instability in Montepio
Geral.

Regarding the Autonomous Region of Madeira, the year 2017 is marked as another year of economic
recovery, in the period after PAEF-RAM - Specific Adjustment Program for the Region, signed
between the Regional Government and the Government of the Republic. This program, which was
successfully concluded by the Regional Government, included a wide range of measures aimed at
the following objectives: to allow the fiscal consolidation of the Autonomous Region of Madeira in
order to restore the sustainability of public finances and allow the autonomous financing capacity to
be restored. In addition to the central objective of reaching a balance, the budgetary policy adopted by

41
Annual Report 2017
Economic and Financial Information

the Regional Government of Madeira also aims to promote investment, economic growth, improving
employment levels and improving the quality of life of the population. The high degree of commitment
in the implementation of the fiscal rules and targets defined by the Regional Government of Madeira
allowed a sustained decrease in the level of the Region’s global public debt, which decreased by
1,328 million Euros compared to 2012. The data for the third quarter of 2017, show that the debt to
GDP ratio is 109.3% in Madeira, compared to 130.5% in Portugal. In spite of the high instability in
countries with significant and expressive communities of Madeira emigrants, such as Venezuela,
where there has been a gradual and constant return of Portuguese descent, as far as the labour
market in Madeira is concerned, there was a reduction of the unemployment rate to 10.4%, well
below of the 12.9% recorded in 2016. Finally, it should be noted, that in 2017 Madeira recorded one
of the best years in tourism, with more than 1.44 million tourists, responsible for about 7.5 million
overnight stays, corresponding to an increase of around 2%, over the previous year. Also noteworthy
was the growth of the important “RevPAR” balance, which amounted to approximately € 51.45, an
increase of 8.3% in revenue compared to 2016. In addition, some 540 thousand passengers, were
registered in 2017 in transit on cruise ships in the ports of the Region, corresponding to an increase
of 3.4% compared to 2016.

In 2017, the demand for electricity in the RAM was 868.7 GWh, showing a growth of 0.8% over 2016,
which also showed a growth of 0.3% compared to 2015, after a period of 4 consecutive years of
demand reduction. Thus, the trend indicates a sustained growth of consumption, although moderate,
mainly in the summer, as presented in the following graphs:

Monthly net emission in RAM Emission RAM

GWh
_2008 _2009 _2010 _2011 _2012 GWh

_2013 _2014 _2015 _2016 _2017
980
90 960

940
85
920
80 900

880
75
860

70 840

820
65
800

60 780
J F M A M J J A S O N D 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

The period 2009-2013, characterized by a deep economic and social crisis, which resulted in
a cumulative decrease in energy demand of 11.7%, seems to have been surpassed, and even
though EEM has taken on a very pondered Investment Plan. Since 2015, EEM restarted some of
the investments in projects that could no longer be postponed, in order to ensure and maintain an
adequate level of service provided.

42
 Empresa de Electricidade da Madeira

Balance Sheet
Individual Balance Sheet Structure
€’000 519,802 547,293
396,228 119,552 399,188 118,521
Non-current assets 76.2% 23.0% 72.9% 21.7%
Current assets
Equity 316,045
332,424
Non-current liabilities 60.8%
60.7%
Current liabilities

148,105
123,574
27.1% 96,348
23.8% 84,205
16.2% 17.6%

2017 2016

Consolidated Balance Sheet Structure

€’000 533,358 559,860
408,878 120,198 410,355 119,262
 Non-current assets 76.7% 22.5% 73.3% 21.3%
 Current assets
 Equity
325,735 344,245
 Non-current liabilities
61.1% 61.5%
 Current liabilities

149,505
124,480
26.7%
23.3% 87,425 96,353
16.4% 17.2%

2017 2016

Long-Term Capital
€’000 Group Individual
2017 2016 2017 2016
Shareholders’ equity
Amount 120,198 119,262 119,552 118,521
% 27% 26% 27% 26%

Medium and long-term liabilities

Amount 325,735 344,245 316,045 332,424
% 73% 74% 73% 74%

Long-term capital
Amount 445,933 463,507 435,597 450,945
% 100% 100% 100% 100%

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Annual Report 2017
Economic and Financial Information

Working Capital
€’000 Group Individual
2017 2016 2017 2016
Current assets 124,480 149,505 123,574 148,105
Current liabilities 87,425 96,353 84,205 96,348
Working capital 37,055 53,152 39,369 51,757

Assets
In 2017, the total value of the EEM balance sheet was 519,802 thousand Euros (consolidated: 533,358
thousand Euros), decreasing by 5% over the previous year.

The most significant changes in assets were the decrease in customers debts and cash and cash
equivalents, by approximately 28 and 21 million Euros, respectively, the increase being more significant
in Other receivables, in the order of 17 million Euros.

The net tangible and intangible fixed assets, which represent 60% of the total assets of EEM
(consolidated: 71%), reached 313,570 thousand Euros (consolidated: 379,864 thousand Euros),
increasing 1% compared to 2016 (consolidated: increase of 2%).

The economic and financial environment of recent years has required the adoption of very moderate
investment plans, which have resulted in a relatively long period of low investment, which, despite
having increased in the last 2 years, has been, since 2011, at significantly lower levels than the
depreciation/amortization value for the year. In 2017, total investment exceeded depreciation/amortization
for the year, amounting to 28,193 thousand Euros (consolidated: 35,296 thousand Euros), a 62%
increase over the previous year (consolidated: 102%).

In 2016, EEM obtained control of the company EEM - Biotecnologia, S.A., which was consolidated,
for the first time, by the integral method, at the year-end. Since its tangible and intangible assets
were included in consolidated assets in 2016, the year 2017 was the first year in which the company’s
investment is considered as such, leading to an increase compared to the previous year, in consolidated
terms. The investment of this subsidiary in 2017 amounted to 6,695 thousand Euros.

The investment was divided by the EEM main activities, as follows:

• Production: 18,676 thousand Euros;
• Transmission: 2,594 thousand Euros;
• Distribution/Commercialisation: 4,989 thousand Euros;
• Other activities: 1,934 thousand Euros;
• Subsidiary companies: 7,103 thousand Euros.

In the Production area, the investment made in the hydroelectric power plants amounted to 18,046
thousand Euros, of which 17,620 thousand Euros related to the expansion of the hydroelectric power
plant of Calheta and its transformation into a reversible system and 318 thousand Euros spent on the
reconstruction of several water channels. In thermal power plants, the total investment amounted
to 630 thousand Euros.

The investment in the Transport area amounted to 2,594 thousand Euros, of which 887 thousand
Euros were applied in substations, 247 thousand Euros in the dispatch/control and monitoring
centres and 757 thousand Euros in the high voltage network.

In the Distribution/Commercialization areas, the investment amounted to 4,989 thousand Euros, with
the most significant applications being in the low voltage network (2,007 thousand Euros), medium
voltage network (1,139 thousand Euros), counting and measurement equipment’s (930 thousand
Euros) and transforming posts (560 thousand Euros).

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 Empresa de Electricidade da Madeira

Non-specific investment refers essentially to information and communication systems, amounting

to 1,934 thousand Euros.

Regarding the Subsidiary companies, the most significant investment was made by Biotecnologia, in
the amount of 6,695 thousand Euros, and concerns the Biomass Production Unit that is in conclusion
in the Porto Santo’s Island.

In the subsidiaries Enereem and Emacom, the investment amounted to 235 and 173 thousand Euros,
respectively.

The caption Investment properties, in which property held for valuation and not for use in the
company’s current activity is registered, has not changed at all, remaining at 2,229 thousand Euros.

Regarding the financial investments accounted for under the equity method, totalling 55,567
thousand Euros, the increase of 4,100 thousand Euros is mainly due to the change in the amount
of the loan to EEM - Biotecnologia, S.A., with the purpose of financing the construction of the Porto
Santo Biomass plant. In consolidated terms, due to the annulment of the holdings in the Group
companies, the amount of 2,036 thousand Euros at the end of the year, relates to the stake in the
company Teleféricos da Madeira.

The reduction of 177 thousand Euros verified in the participations registered in Other financial
investments corresponds to the Liquidation of Luso Carbon Fund.

The net deferred taxes decreased by 3,738 thousand Euros (consolidated: 3,728 thousand Euros),
amounting to 4,301 thousand Euros (consolidated: 4,187 thousand Euros) at the year end of 2017.
The most significant variation refers to the deferred tax associated with the tariff deviation to be
received/returned and tax loss reportable, whose balance on credit varies 2,296 thousand Euros.

The net balance of Customers, in the amount of 38,010 thousand Euros (consolidated: 37,306 thousand
Euros) decreased by 27,669 thousand Euros (consolidated: 28,009 thousand Euros) compared to the
previous year. This decrease was mainly due to the balances of official entities registered as a result
of the high degree of compliance with the Protocols/ARDs, under which 4,975 thousand Euros were
received, but also through the offsetting of outstanding balances as a result of a credit assignment
agreement, amounting to 21,824 thousand Euros, carried out with a financial entity, which allowed
an immediate entry of funds in EEM treasury.

The net debt of customers/private entities remained at roughly the same level as in the previous year.

The non-current portion of customer debts amounted to 19,760 thousand Euros.

The tariff compensation to be received increased by 16,307 thousand Euros compared to 2016, of
which 13,263 thousand Euros were receivable for more than 12 months.

Current assets in the amount of 123,574 thousand Euros (consolidated: 124,480 thousand Euros),
decreased by 17% (consolidated: 17%).

This reduction is mainly due to the reduction of the cash and cash equivalents by 20,523 thousand
Euros and, as mentioned above, to the reduction of the net balance of customers, which decreased
by 7,909 thousand Euros in the portion included in current assets: 8,248 thousand Euros).

Inventories decreased by 499 thousand Euros, with year-end balance changes depending on the date
on which the last supplies of goods occurred, as well as the prices charged for fuel oil in the last
weeks of the year.

On the other hand, the tariff compensation to be received in less than 12 months, increased by 3,044
thousand Euros.

45
Annual Report 2017
Economic and Financial Information

Liabilities and Long-term Capitals

Permanent Capital (Equity and medium/long-term debt) represents 84% (consolidated: 84%) of the
total balance sheet, ensuring adequate financial coverage of fixed assets.

The Shareholders’ Equity in the amount of 119,552 thousand Euros (consolidated: 120,198 thousand
Euros), showed a slight increase of 1%. In 2017 dividends of 5,700 thousand Euros were distributed
to the shareholder, and the net profit for the year reached 6,818 thousand Euros (consolidated
attributable to the Group: 6,818 thousand Euros).

In Liabilities, the reduction was largely due to the reduction of debt to financial entities and the tariff
compensation to be returned in subsequent years.

Non-current liabilities decreased by 5% (individual: -16,379 thousand Euros, consolidated: -18,510

thousand Euros) in relation to the previous year, mainly through the transfer to current liabilities
of the bank loans to be amortized in 2018. in the amount of 13,274 thousand Euros (consolidated:
15,092 thousand Euros). Overall, the amount owed to financial institutions decreased by 12,774
thousand Euros (consolidated: 14,592 thousand Euros), to 315,964 thousand Euros (consolidated:
325,054 thousand Euros) at the end of 2017.

Also contributing to the reduction of non-current liabilities, there was a reduction in the amount
of Other payables, by 5,918 thousand Euros (consolidated: 5,921 thousand Euros), mainly due to
the reduction of the tariff adjustment to be received, over 12 months, compared to the previous
year (-5,610 thousand Euros). Responsibilities for post-employment benefits decreased by 2,812
thousand Euros, to 18,991 thousand Euros at the end of 2017.

On the other hand, provisions of 5,390 thousand Euros were recognized to cover contingencies/risks
arising from the activity, considered as probable.

Current liabilities amounted to 84,205 thousand Euros (consolidated: 87,425 thousand Euros), showing
a reduction of 13% (consolidated: 9%) in relation to the previous year.

This variation is mainly justified by the reduction of the tariff compensation payable during the
following year, included in the Other payables caption, by 15,588 thousand Euros. The amount owed
to the State decreased by 2,093 thousand Euros (consolidated: 2,421 thousand Euros), mainly due to
the reduction of the VAT paid on the billed tariff compensation, which was significantly lower than in
the previous year.

The balance owed to Suppliers increased by 3,166 thousand Euros (consolidated: 6,703 thousand
Euros) to 28,787 thousand Euros (consolidated: 30,601 thousand Euros) at the end of 2017.

46
 Empresa de Electricidade da Madeira

Income Statement
Operating Revenues

Operating Revenues
€’000 Group Individual
2017 % 2016 % % 2017 % 2016 % %
Sales 171,831 93.3 152,572 92.5 12.6 172,094 93.1 152,768 92.0 12.7
Services rendered by third parties 1,310 0.7 1,284 0.8 2.0 383 0.2 366 0.2 4.6
Operating Subsidies 134 0.1 - - N/A 134 0.1 - - N/A
Imputed gains of associates 982 0.5 809 0.5 21.4 2,244 1.2 2,577 1.6 (12.9)
Own work capitalised 7,851 4.3 7,459 4.5 5.3 7,851 4.3 7,459 4.5 5.3
Other revenues 1,995 1.1 2,883 1.7 (30.8) 1,992 1.1 2,838 1.7 (29.8)

Total 184,103 100.0 165,007 100.0 11.6 184,698 100.0 166,008 100.0 11.3

In 2017, on an individual basis, sales amounted to 172,094 thousand Euros (152,768 thousand Euros
in 2016), including:

• Electricity sales: 129,052 thousand Euros;

• Tariff convergence: 43,042 thousand Euros.

Electricity Sales in the Region amounted to 129,052 thousand Euros (2016: 129,295 thousand Euros),
representing a decrease of about 0.2% over the previous year. Although electricity consumption and
average tariffs increased by 0.8% and 0.5% respectively, the reduction in the total value of sales is
explained by the fact that, in 2017, the number of customers covered by the social tariff (benefiting
from a 33.8% tariff reduction) increased from 6,057 to 11,121.

The tariff convergence includes, in addition to the compensation for the 2017 fiscal year, the
adjustment of the value relative to the municipal public domain occupation rate, referring to the
periods prior to 2016, calculated as a function of the application, for the years of 2006, 2007 and 2008,
of the formulas established in Ordinance no. 437/2001 of April 28th and, for the years 2009 to 2015,
inclusive of the formulas established in Decree-Law no. 230/2008, of November 27th (both applicable
to the calculation of incomes of municipal concessions in the continent, in the same time period
2006-2015), in the amount of 4,928 thousand Euros.

The caption Own work capitalised, corresponds almost entirely to investments made by EEM’s own
resources, amounted to 7,851 thousand Euros, up 5% on the previous year (7,459 thousand Euros).

The caption Other revenues amounted to 1,992 thousand Euros, showing a decrease of 846 thousand
Euros compared to 2016. This caption includes 1,468 thousand Euros related to the recognition of
investment subsidies (2016: 2,299 thousand Euros).

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Annual Report 2017
Economic and Financial Information

Expenditures
Operating Expenses
€’000 Group Individual
2017 % 2016 % % 2017 % 2016 % %
Cost of sales - Materials 4,804 3.7 5,110 4.1 (6.0) 4,804 3.6 5,110 4.0 (6.0)
Cost of sales - Raw materials 36,029 27.8 27,529 22.1 30.9 36,029 27.1 27,529 21.5 30.9
Cost of sales - Electric energy acquisition 40,862 31.5 34,553 27.6 18.3 44,908 33.8 39,065 30.4 15.0
Services rendered by third parties 11,825 9.1
12,176 9.8 (2.9) 10,971 8.3
11,402 8.9 (3.8)
Staff expenses 28,877 22.2 28,535 22.9 1.2 28,641 21.6 28,331 22.1 1.1
Others 7,390 5.7 16,869 13.5 (56.2) 7,370 5.6 16,843 13.1 (56.2)
Operating Expenses Subtotal 129,787 100.0 124,772 100.0 4.0 132,723 100.0 128,280 100.0 3.5

Other Operating Expenses

€’000 Group Individual
2017 % 2016 % % 2017 % 2016 % %
Impairment of receivables 42 0.1 (578) (2.5) (107.3) 42 0.1 (578) (2.7) (107.3)
Provisions (gains/reductions) 5,390 15.8 (3,598) (15.6) (249.8) 5,390 16.6 (3,598) (16.9) (249.8)
Impair.of invest. non-depr./amor. losses/(rever.)* - - (679) (2.9) (100.0) - - (679) (3.2) (100.0)
Gains/Reductions of fair value 1 - 26 0.1 (96.2) 1 - 26 0.1 (96.2)
Depreciation and amortization losses/(reversals) 28,768 84.1 27,850 120.9 3.3 26,970 83.3 26,101 122.7 3.3
Operating Expenses Subtotal 34,201 100.0 23,021 100.0 48.6 32,403 100.0 21,272 100.0 52.3
Total 163,988 147,793 11.0 165,126 149,552 10.4
* Impairment of investments non-depreciable/amortizable losses/(reversals)

Operating expenses amounted to 132,723 thousand Euros (consolidated: 129,787 thousand Euros),
an increase of 4% over 2016. This increase of 4,443 thousand Euros (consolidated: 5,015 thousand
Euros) is explained in the following paragraphs.

The cost of raw materials, namely fuels, amounted to 36,029 thousand Euros, showing an increase of
31%. In spite of the average 2% depreciation of the US dollar against the Euro over the previous year,
the 24% increase in Brent’s average USD price led to a significant increase in the average unit cost
of fuels, compared to 2016. These developments in the price of fuels combined with the increase of
5% in thermal production by EEM led to an increase in the total cost of fuel.

In 2017, there was an increase of 7 GWh (0.8%) in total energy produced in the RAM, with the production
mix experiencing minor changes, with a slight reduction in the level of penetration of energy obtained
from renewable sources which decreased from 30% in 2016 to 28% in 2017. The year 2017 was less
useful regarding the contribution of renewable energy to total electricity production, for reasons
related to the reduction of endogenous resources, namely, water, which, as is known are irregular
over time. As a result, production of hydroelectric origin decreased by 27.3 GWh, with energy from
wind origin practically maintaining the same level of the previous year. Production from solid waste
increased by 12 GWh. In total, production from renewable sources decreased by 14.9 GWh.

48
 Empresa de Electricidade da Madeira

The slight increase in total production and the decrease in production from renewable sources were
accommodated by the production of thermal origin, which increased by 22 GWh and its weight in the
mix production from 70% to 72%.

RAM’s Production
GWh 2017 % 2016 %
Hydro 78.08 8.8% 105.38 12.0%
Wind plants 84.44 9.6% 84.07 9.6%
Thermal 640.03 72.5% 618.05 70.4%
Waste incineration 47.61 5.4% 35.56 4.1%
Photovoltaic 27.83 3.1% 27.72 3.2%
Mini/Micro generation 5.70 0.6% 5.85 0.7%

Total 883.69 100.0% 876.63 100.0%

EEM’s Production
GWh Group Individual
2017 % 2016 % 2017 % 2016 %
Hydro 73.89 13.0% 101.55 17.5% 73.89 14.2% 101.55 19.3%
Wind plants 48.17 8.5% 53.93 9.3% - - - -
Thermal 447.49 78.5% 425.79 73.2% 447.49 85.8% 425.79 80.7%

Total 569.55 100.0% 581.27 100.0% 521.38 100.0% 527.34 100.0%

In 2017, the total production of EEM Group decreased by 11.7 GWh, with the energy weight of enewable
energy rising to 22%.

EEM acquired 362.3 GWh of energy from third parties, including 48.2 GWh (2016: 53.9 GWh) from
Enereem, the company responsible for the management of EEM Group wind farms.

Electric energy acquisition

GWh Group Individual
2017 % 2016 % 2017 % 2016 %
Hydro 4.19 1.3% 3.83 1.3% 4.19 1.2% 3.83 1.1%
Wind plants 36.27 11.5% 30.14 10.2% 84.44 23.3% 84.07 24.1%
Thermal 192.54 61.3% 192.26 65.1% 192.54 53.1% 192.26 55.0%
Waste incineration 47.61 15.2% 35.56 12.0% 47.61 13.1% 35.56 10.2%
Photovoltaic 27.83 8.9% 27.72 9.4% 27.83 7.7% 27.72 7.9%
Mini/Micro generation 5.70 1.8% 5.85 2.0% 5.70 1.6% 5.85 1.7%

Total 314.14 100.0% 295.36 100.0% 362.31 100.0% 349.29 100.0%

As can be analysed from the previous table, the EEM Group’s mix of acquisitions, by energy source,
underwent some changes compared to the composition of the previous year. In absolute terms, the
most relevant variation was the 12 GWh increase in energy produced from solid waste.

In relation to 2016, the average unit cost of energy purchased increased by 11% (individual and
consolidated), which, together with an increase of approximately 4% (consolidated: 6%) in the
quantities acquired, led to an increase in the total value of acquisition in 15% (consolidated: 18%).
For this evolution, energy of thermal origin, the most relevant in the mix of energy acquisitions to
third parties (individual: 53%, consolidated: 61%), was mainly due to the increase in the price of fuel
already mentioned.

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Annual Report 2017
Economic and Financial Information

The cost of acquiring energy to third parties amounted to 44,908 thousand Euros (consolidated:
40,862 thousand Euros), plus 5,843 thousand Euros (consolidated: 6,309 thousand Euros) than in the
previous year. The individual accounts include 4,047 thousand Euros (2016: 4,513 thousand Euros) of
energy purchased from the subsidiary Enereem.

The caption supplies and services, decreased by 4% (consolidated: 3%) compared to 2016. This item
essentially includes goods and services necessary for the operation of the various activities of the
company, namely production, transportation, distribution and commercialization of energy.

The periodicity of expenditure on the planned and incidental maintenance of productive equipment
leads to non-regular annual variations of the caption of supplies and services. Revision of the
thermal power generator sets takes place at 10,000/15,000 operating hours, depending on the age,
condition and operating conditions of the equipment, usually taking about 2 years to reach that
level of production. In addition, interventions must be coordinated according to the availability of
renewable (mainly water) resources, as well as any unavailability, due to the maintenance of private
producer centers, in order to maintain adequate levels of security of supply.

Expenses incurred with investments made using own funds are also included, which are simultaneously
recorded under the caption Own work capitalised, the total amount of which is influenced by the
volume and nature of the investment made each year.

The total of the Personnel Expenses caption amounted to 28,641 thousand Euros (consolidated:
28,877 thousand Euros), showing a slight increase of around 1% compared to 2016. This variation is
mainly due to the following factors:

• In 2016, and similarly to previous years, EEM and its subsidiaries have fully complied with the application
of the remuneration reduction measures applicable to sovereign bodies and Public Administration,
including Public Institutes, Regulatory Entities and Public Companies.
Throughout 2016, under the terms of Law no.159-A/2015 of December 30th, the remuneration
reduction provided for the Law no. 75/2014 of September 12th, which covered monthly remuneration
above 1,500 Euros, ended. The termination was progressive, through quarterly reversals, beginning
on January 1st, until the complete extinction on October 1st.
2017 was the first year since 2011, when salaries were paid without any cuts, which obviously led to
a significant increase in costs per employee;

• The application of the measures expected in the State and Autonomous Region of Madeira Budgets
for 2017, particularly with regards to the replacement of 50% of the rights defined in Collective
Regulatory Labour Law, as of July 2017, a very significant impact on the cost increase over 2016;

• EEM continued the careful policy of human resources management, which it has been implementing
in recent years. The implementation of this policy, combined with the constant demand for an even
greater efficiency in resources in general, allowed the reduction of 21 workers in 2017, which
corresponded to a decrease of more than 3% over the previous year. In relation to 2010, there is a
cumulative decrease of 17%, corresponding to 148 workers. The departure of workers in the coming
years for retirement will require, in 2018, the recruitment of new resources in order to guarantee an
appropriate quality of the service provided;

• Employee benefits recorded in 2017, amounted to 229 thousand Euros.

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 Empresa de Electricidade da Madeira

Thus, in spite of the very significant increase in costs per employee resulting from the application of
the above-mentioned legislation, the company’s careful human resources policy has mitigated this
effect in the total costs with personnel that only increased by 1% over the previous year.

The amount recorded under Other expenses amounted to 7,370 thousand Euros (consolidated: 7,390
thousand Euros), a decrease of 56% over the previous year. This very significant reduction is due to
the extraordinary derecognition in 2016 of credits with significant seniority, considered uncollectible,
with a net impairment of 9,641 thousand Euros.

In this caption, 6,696 thousand Euros are recorded, referring to the municipal rate of occupation of
the public domain for electrical infrastructures, calculated in terms equivalent to those established
for the annual rent provided for in Decree-Law no. 230/2008, of November 27th, in its current
wording, under Regional Legislative Decree no. 34/2016/M, of August 5th. The remaining amounts
included in Other expenses caption essentially correspond to direct and indirect taxes (stamp duty)
and expenses related to damages paid to customers for damages caused by network disruptions.

There was a reinforcement of Impairment of receivables in the amount of 42 thousand Euros.

Provisions in the amount of 5,390 thousand Euros refers to the recording of provisions to cover
contingencies/risks within the scope of the company’s activity, considered as probable.

The negative variation of Fair value in the amount of 1 thousand Euros, results from the devaluation
verified in the Luso Carbon Fund occurred from the beginning of the year until the date of its
liquidation.

In 2017, the value of depreciation and amortization expenses amounted to 26,970 thousand Euros
(consolidated: 28,768 thousand Euros), 3% higher than the previous year. This caption includes
amortization expenses relating to the consumption of CO2 licenses for the year, amounting to 2,130
thousand Euros (1,437 thousand Euros in 2016). Accordingly, the amount related to depreciation and
amortization expenses related to other tangible and intangible fixed assets was 24,840 thousand
Euros (consolidated: 26,638 thousand Euros), a slight increase of 1% over the previous year.

The balance of Interest and similar income obtained in the amount of 995 thousand Euros, 33
thousand Euros less in relation to the previous year, is justified by the decrease in the delays of
payments by the customers, as well as the reduction of the remuneration of bank deposits. Interest
received on delays in the payment of energy amounted to 602 thousand Euros.

The interest and similar expenses incurred amounted to 9,933 thousand Euros (consolidated:
9,967 thousand Euros), representing a 13% reduction compared to 2016. It should be noted that
the amount of interest and similar expenses is presented net of charges with capitalized financing,
whose amount in 2017 was 669 thousand Euros (363 thousand Euros in 2016). This positive evolution
contributed to the reduction of outstanding capital to financial institutions by 12,774 thousand Euros
(consolidated: 14,592 thousand Euros), as well as the average decrease in the total cost of financing
compared to the previous year.

51
Annual Report 2017
Economic and Financial Information

Results

Results
€’000 Group Individual
2017 2016  % 2017 2016  %
Profit before depreciation, financing costs and taxes 48,883 45,064 3,819 8.5 46,542 42,557 3,985 9.4
Operating results 20,115 17,214 2,901 16.9 19,572 16,456 3,116 18.9
Financial results (8,971) (10,463) 1,492 14.3 (8,938) (10,402) 1,464 14.1
Profit before tax 11,144 6,751 4,393 65.1 10,634 6,054 4,580 75.7
Income tax (4,233) (2,769) (1,464) (52.9) (3,816) (2,189) (1,627) (74.3)
Minority interests 93 117 (24) (20.5) - - - -
Net Income 6,818 3,865 2,953 76.4 6,818 3,865 2,953 76.4

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 9% compared
to 2016, reaching 46,542 thousand Euros. The same result, on a consolidated basis, amounted to
48,883 thousand Euros (2016: 45,064 thousand Euros). This variation, as explained above is, in large
part, due to the registration of the adjustment of the value relative to the municipal rate of occupation
of municipal public domain, referring to the periods prior to 2016.

The change in income tax essentially corresponds to the net effect of deferred taxes related to reversal/
utilization of impairments, tax losses and changes in the amounts of future tariff compensation to
be received/paid.

Net income increased by 76% to 6,818 Euros thousand in 2017.

EEM´s Contributions to the Portuguese State

In 2017, the EEM Group and its employees contributed directly to the State revenues by 30,077
thousand Euros.

EEM’s contributions for the Portuguese State

€’000 Group Individual
2017 % 2016 % % 2017 % 2016 % %
Company:
Corporate income tax 506 940 (46.2%) 77 350 (78.0%)
Other tax 16,416 21,317 (23.0%) 15,466 20,069 (22.9%)
Social security costs 5,257 5,019 4.7% 5,216 4,983 4.7%
22,179 73.7% 27,276 78.6% (18.7%) 20,759 72.7% 25,402 77.5% (18.3%)
Staff:
Personnel income tax 5,464 5,109 6.9% 5,397 5,047 6.9%
Social security costs 2,434 2,324 4.7% 2,415 2,308 4.6%
7,898 26.3% 7,433 21.4% 6.3% 7,812 27.3% 7,355 22.5% 6.2%

Total 30,077
34,709
(13.3%) 28,571
32,757
(12.8%)

The reduction is largely explained by the reduction in VAT settlement related to tariff convergence,
whose turnover in 2017 decreased by 17,443 thousand Euros compared to the previous year.

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 Empresa de Electricidade da Madeira

Gross value added

Gross value added amounted to 78,238 thousand Euros (consolidated: 82,077 thousand Euros), an
increase of 23% (consolidated: 21%) compared to 2016, mainly due to extraordinary non-recurring
expenses recognized in 2016.

Companies included in the consolidation

The subsidiaries included in the consolidation perimeter using the full consolidation method as of
December 31st, 2017 are as follows:

Designation
Amounts in Euros Head Share Total Total Total Sales and Net Profit % Group
Office Capital Assets Liabilities Equity Services for the
Rendered Period
Enereem - Energias Renováveis, Lda. Funchal 49,880 18,487,805 9,877,468 8,610,337 4,046,912 1,235,121 92.50%
Emacom - Telecomunicações da Madeira, Unip., Lda. Funchal 49,880 3,895,693 2,976,197 919,496 1,189,419 355,455 100.00%
EEM - Biotecnologia, S.A. Funchal 6,000,000 48,607,151 37,100,853 11,506,298 - (236,254) 100.00%

Enereem - Energias Renováveis, Lda (Enereem), whose main activity is the production of energy from
renewable sources, with the main focus on wind component. Being the Company with the largest
installed wind capacity in RAM, it has added responsibilities on the balance of the regional power
system, looking to contribute so that they can safely reach levels of integration of wind power without
parallel in an isolated and small electric grid. In conclusion, Enereem should not be reductively
perceived as a mere instrument of EEM Group, for the production of renewable energy.

Emacom, Telecomunicações da Madeira, Unipessoal, Lda. (Emacom) is the entity responsible for EEM
Group Contact Center, simultaneously developing a vital role in managing the telecommunications
associated with EEM main activities, namely: transmission and distribution of electric energy.

The purpose of EEM - Biotecnologia, S.A. (Biotechnology), is to produce and commercialize biomass/
bio petroleum from the cultivation of sea algae, its transformation into electric energy and its energy
recovery, as well as the commercialisation of other by-products resulting from process of biomass/
bio petroleum.

Economic and Financial Indicators

Economic Structure
Amounts in Euros Group Individual
2017 2016 2017 2016
Net income 6,818 3,865 6,818 3,865
Sales and services provided 173,140 153,856 172,477 153,133
EBITDA 48,883 45,064 46,542 42,557
Depreciations and adjustments 28,768 27,850 26,970 26,101
Financial expenses 9,967 11,492 9,933 11,429
Staff expenses 28,877 28,535 28,641 28,331
Gross value added 82,077 67,961 78,238 63,482
No, of employees 716 736 703 724
Staff productivity 115 92 111 88
Average cost per employee 40 39 41 39
Financial expenses in gross value added 0.12 0.17 0.13 0.18
Staff costs in gross value added 0.35 0.42 0.37 0.45
Depreciations and adjustments in cash flow EBITDA 0.59 0.62 0.58 0.61
Return on equity 5.67 3.24 5.70 3.26
Net income/Energy power sales and services provided 3.94 2.51 3.95 2.52

53
Annual Report 2017
Economic and Financial Information

Financial Structure
€’000 Group Individual
2017 2016 2017 2016
Current assets 124,480 149,505 123,574 148,105
Non-current assets 408,878 410,355 396,228 399,188
Total assets 533,358 559,860 519,802 547,293
Current liabilities 87,425 96,353 84,205 96,348
Non-current liabilities 325,735 344,245 316,045 332,424
Total liabilities 413,160 440,598 400,250 428,772
Bank debts 324,853 340,152 315,762 329,243
Equity 120,198 119,262 119,552 118,521
Fixed capital 445,933 463,507 435,597 450,945
Working capital 37,055 53,152 39,369 51,757
Coverage of non-current assets by equity 0.29 0.29 0.30 0.30
Coverage of non-current assets by fixed capital 1.09 1.13 1.10 1.13
Indebtedness - (Total liabilities/Total assets) 0.77 0.79 0.77 0.78
Shareholders’ equity/Total assets 0.23 0.21 0.23 0.22
Non-current liabilities/Fixed capital 0.73 0.74 0.73 0.74
Solvency - (Total liabilities/Total assets) 1.29 1.27 1.30 1.28
Liquidity - (Current assets/Short-term liabilities) 1.42 1.55 1.47 1.54

Other disclosures
Under Article 397º of the Portuguese Companies Code (CSC), during the year 2017 did not exist,
authorizations granted for business between the Company and its Directors.

Under Article 447º of the Portuguese Companies Code (CSC), the members of the governing bodies
do not hold ownership of any shares and/or obligations of the Company.

Under Article 448º of the Portuguese Companies Code (CSC), on December 31st, 2017, the total
capital stock of EEM is held by the Autonomous Region of Madeira.

The company does not have any overdue debts to the tax authorities or social security.

The material events occurred after the year end are disclosed in Note 46 of the individual and
consolidated financial statements.

2 – Proposed Appropriation of net Income

In accordance with article 19º of EEM’s Statues, the Board of Directors proposes the following
application of 2017 Company’s net Income, amounting to 6,818,449.42 Euros to be allocated as
following:

• Statutory Reserves (Investment Reserves) 681,844.94 Euros;

• Retained Earnings 636,604.48 Euros;
• Distribution to shareholders 5,500,000.00 Euros.

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 Empresa de Electricidade da Madeira

3 - Final Remarks

In conclusion of the Annual Report regarding the activity developed by EEM - Empresa de Electricidade
da Madeira, S.A., over the year of 2017, the Board of Directors wishes to express a word of gratitude
for the support received from all the different entities with whom we have cooperated over the
year, particularly our shareholder, the Regional Government of Madeira, represented by the Vice-
Presidency of the Regional Government whom oversees the energy sector.

The Board of Directors also expresses its appreciation to the General Assembly and to the Statutory
Auditor for their cooperation, permanent availability and for their positive contribution for the
development and control of EEM activities.

A special reference to our staff for the dedication, competence and professionalism, they have
continuously expressed in its functions and to the development of our Company.

Finally, to our customers, to thank the confidence expressed in us and reaffirm our unmistakable
commitment in upgrade the services provided.

The Board of Directors:

Rui Alberto de Faria Rebelo (Chairman of the Board)

João Pedro Barreto de Sousa (Vice-Chairman of the Board)
Mário Eugénio Jardim Fernandes (Board Member)

55
Dados
Consolidated
Caraterísticos
and Individual
Financial Statements
Annual Report 2017
Consolidated and Individual Financial Statements

EEM - Empresa de Electricidade da Madeira

Consolidated Balance Sheet as at 31 December 2017 and 2016

CHIEF ACCOUNTANT THE BOARD OF DIRECTORS

To be read with the notes to the Financial Statements

58
 Empresa de Electricidade da Madeira

EEM - Empresa de Electricidade da Madeira

Consolidated Income Statement
for the periods ended 31 December 2017 and 2016

CHIEF ACCOUNTANT THE BOARD OF DIRECTORS

To be read with the notes to the Financial Statements

59
60
Annual Report

EEM - Empresa de Electricidade da Madeira

Consolidated Statement of Changes in Shareholders’ Equity
2017

for the periods ended 31 December 2017 and 2016

Consolidated and Individual Financial Statements

To be read with the notes to the Financial Statements

 Empresa de Electricidade da Madeira

EEM - Empresa de Electricidade da Madeira

Consolidated Cash Flow Statement
for the periods ended 31 December 2017 and 2016

(*) See detail of “Cash and cash equivalents” in Note 5 to the Financial Statements.

To be read with the notes to the Financial Statements

61
Annual Report 2017
Consolidated and Individual Financial Statements

EEM - Empresa de Electricidade da Madeira, S. A.

Balance Sheet as at 31 December 2017 and 2016

CHIEF ACCOUNTANT THE BOARD OF DIRECTORS

To be read with the notes to the Financial Statements

62
 Empresa de Electricidade da Madeira

EEM - Empresa de Electricidade da Madeira, S. A.

Income Statement
for the periods ended 31 December 2017 and 2016

CHIEF ACCOUNTANT THE BOARD OF DIRECTORS

To be read with the notes to the Financial Statements

63
64
Annual Report

EEM - Empresa de Electricidade da Madeira, S. A.

Statement of Changes in Shareholders’ Equity
2017

for the periods ended 31 December 2017 and 2016

Consolidated and Individual Financial Statements

To be read with the notes to the Financial Statements

 Empresa de Electricidade da Madeira

EEM - Empresa de Electricidade da Madeira, S. A.

Cash Flow Statement
for the periods ended 31 December 2017 and 2016

(*) See detail of “Cash and cash equivalents” in Note 5 to the Financial Statements.

To be read with the notes to the Financial Statements

65
Annual Report 2017
Consolidated and Individual Financial Statements

EEM - Empresa de Electricidade da Madeira

Notes to the Financial Statements

31st December 2017 and 2016

Annex to the Financial Statements

1. Entity identification

EEM - Empresa de Electricidade da Madeira, S.A. (EEM) was established as a state-owned company
(E.P.) by the Decree-Law no. 12/74, of 17th January, being its main objective the generation, transport,
distribution and commercialisation of electric energy in the Autonomous Region of Madeira. The
company head office is located in Funchal at Avenida do Mar e das Comunidades Madeirenses, no. 32.

In accordance with the Regional Legislative Decree no. 14/94/M, published in “Diário da República”
on 3rd June 1994, the legal status of EEM changed to a private company (S.A.), entirely held by a public
shareholder. Its name also changed to EEM - Empresa de Electricidade da Madeira, S.A.

The above regulation set up the main rules by which EEM operates. In addition, internal by-laws,
private company regulations and other special rules are also applied to similar companies operating
within the same legal framework.

The Decree-Law no. 69/2002 published on 25th March 2002 introduced to the Portuguese Autonomous
Regions of Azores and Madeira, the Regulatory Agency for Energy Services (ERSE), entity that
regulates the Portuguese market for the activities of generation, transport, distribution and
commercialisation of electric energy. During 2002, ERSE implemented the regulatory framework
for the electric sector, namely the Tariff Regulation in both Autonomous Regions. As a result, Tariff
Regulation, brought a more progressive standardisation of electricity tariffs across Portugal from
1st January 2003. Furthermore, this was achieved taking into consideration the principles of tariff
convergence and electric organisations’ financial stability regarding production and distribution
within the national electricity sector. Consequently, the tariffs charged by EEM from 1st January 2003
are set by the regulator - ERSE, being its sole responsibility, the calculation of the electricity price
and to set the compensation amount to be paid to EEM from that date onwards due to the tariffs
reduction (see Note 4.2 l)).

Activity in the Renewable Energy Sector

Under Decree-Law no. 189/88 of May 27th, emended by Decree-Law no. 168/99 of 18th May; the
Decree-Law no. 312/2001 of 10th December; and Decree-Law no. 339-C/2001 of December 29th, defines
the bases applicable to the electricity generation from renewable resources. The remuneration
formula applicable, for the total production of energy currently used from renewable sources and
deadlines for its implementation are set by Decree-Law no. 33-A/2005 of 16th February.

On February 28th, 2013, the Decree-Law no. 35/2013 opened to wind energy producers the option
of joining an alternative remuneration scheme, for a period of five or seven years after the end
of guaranteed remuneration term, with the commitment to contribute to the sustainability of the
National Electricity System (SEN), through the payment of a compensation to the wind producers.
This Agreement is applicable only to wind farms under Decree-Law no. 33-A/2005, that excludes any
wind capacity allocated via public tenders.

This scheme brought additional stability to the Portuguese electrical grid, reinforcing the legal
framework in place and Portugal’s commitment to renewable energy through (i) maintaining the
legal conditions set forth in Decree-Law no. 33-A/2005 (sell of the entire production to the last resort

66
 Empresa de Electricidade da Madeira

supplier); (ii) allow each wind producer the option to join to individual agreements of supply and (iii)
introduction of a new tariff scheme, through the extension of the pay period from the current 15 years
after the publication of Decree-Law no. 33-A/2005 or the start-up date if later, for a period of 20 to 22
years, in which wind producers will make an annual payment between 2013 and 2020. Enereem opted
for an extension of seven years with the tariff defined as the average market price of the previous
twelve months, with a floor price of €74/MWh, and a cap of €98/MWh updated according to inflation
rate in 2021 onwards in exchange for a payment of around €5,800/MW from 2013 to 2020.

Ordinance no. 119/2013 of 25th March, further clarifies the penalties to be applied to wind farms in the
event of late payment or default, after joining the new scheme.

Further information regarding the companies in which EEM consolidating is presented in Note 7 to
the financial statements and the remaining in Notes 11 and 18.

2. Accounting standards applied in the financial statements

2.1 EEM’s financial statements were prepared according with the Portuguese accounting standards
“Sistema de Normalização Contabilística” (SNC), as required by Decree-Law no. 158/2009, of 13th
July. SNC consists by; “Financial Statement Presentation Basis” (BADF), “Financial Statement
Templates” (MDF), “Accounts Code” (CC), “Accounting and Financial Reports Standards” (NCRF),
“Interpretative Standards” (NI) and “Conceptual Framework”.

The financial statements that includes the balance sheet, the income statement by nature, the
statement of changes in shareholder’s equity, the cash flow statement and the notes to the
financial statements, were approved by the Board of Directors as at 27th March 2018. These
financial statements are presented in Euros currency and prepared on a continuity and accrual
basis, under items that are recognised as assets, liabilities, equity, income and expenses
when they meet the definitions and recognition criteria for those elements, as established in
the conceptual framework, in accordance with the qualitative features of comprehensibility,
relevance, materiality, reliability, faithful representation, substance over form, neutrality, prudence,
completeness and comparability.

The Board has assessed the Group’s and Entities ability to operate on a continuous basis, based
on all relevant information, facts and circumstances of a financial, commercial or other nature,
including events after the reporting date of the financial statements. Thus, the evaluation carried
out, the Board concluded that the Group and the Entity have adequate resources to maintain the
activities, with no intention to cease activities in the short term, and considered it appropriate to
use the assumption of continuity of operations in the preparation of Financial statements.

The accounting policies, presented in Note 4, were used in preparation of the financial statements
for the period ending 31st December 2017 and for the comparative financial information presented
in these financial statements for the period ending 31st December 2016.

2.2 There were no exceptions to SNC disposals.

2.3 There are no items from the balance sheet and income statement accounts whose contents are
not comparable with the previous period, however, the following facts should be considered:

• In 2017, the revaluation surplus was reclassified to the Retained earnings caption. The
reclassified amounts refer to revaluations of tangible and intangible fixed assets, carried out
based on legal documents, up to 1998 and not yet realized. For comparative purposes, the
same reclassification was made for the year 2016. This procedure is not due to a change in
accounting policy, just a mere reclassification;

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Annual Report 2017
Consolidated and Individual Financial Statements

• In 2016, EEM became the owner of the share capital of EEM - Biotecnologia, S.A. (Biotechnology).
As of December 31st, 2016, the consolidated financial statements reflect, for the first time,
the assets, liabilities and results of this company. The effect on the consolidated financial
statements of EEM is disclosed in the accompanying Notes, whenever this proves necessary to
the understanding of the respective caption.

3. First-time Implementation of NCRF

Not applicable.

4. Main accounting policies

The main accounting policies were used in the preparation of the financial statements and are shown
in the paragraphs below.

4.1 Measurement basis used in the preparation of the financial statements

The consolidated financial statements as of December 31st, 2017 and 2016 reflected the new
set of assets, liabilities and results of EEM and its subsidiaries, namely, the Emacom, Enereem
and EEM - Biotecnologia (see Note 7) and the results attributed to EEM relating to investments
in associated companies. These accounting policies were consistently applied to the above
companies. The financial statements were prepared under the historical cost principle.

The preparation of the financial statements in accordance with NCRF requires the Board of
Directors to produce judgments, estimates and assumptions that affect the application of the
accounting policies as well as the reported values of the assets, liabilities, income and expenses.
The estimates and related assumptions are based on historical experience and other factors
that are believed to be reasonable under current circumstances, the results form the basis for
making judgments regarding the carrying values of assets and liabilities that are not clear from
other sources. Actual results may differ from these estimates. The issues involving a higher
degree of judgment or complexity, or where assumptions and estimates are considered to be
significant, are presented in Note 4.3, critical accounting estimates and judgments in preparing
the financial statements.

4.2 Other significant accounting policies

a) Basis of consolidation
Investments in subsidiaries
Investments in subsidiaries that EEM has direct or indirect control are fully consolidated from
the date EEM assumes control over their financial and operating activities, and remains until the
moment that control ceases to exist. It is considered control when EEM owns more than half of
the voting rights or has direct or indirect power, to manage the financial and operating policies of
an entity with the aim to obtain benefits from its activities, even if the shareholding percentage is
less than 50%.

EEM investments in subsidiaries that EEM has direct or indirect control are registered using the
equity method from the date EEM assumes control over their financial and operating activities
until the moment that control ceases to exist.

Investments in associated companies

Investments in associated companies are registered using the equity method from the date the
EEM obtains directly or indirectly control by obtaining relevant influence, and remains until the
date it ceases. Associated companies are entities that EEM shows significant influence, but not to

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the point that has overall control over its financial and operating policies. From the moment that
EEM holds more than 20% of the voting rights of the investee it is considered to have significant
influence. In the event that EEM holds less than 20% of the voting rights of the investee, it is
considered not to have significant influence, unless such influence can be clearly demonstrated.

Balances and transactions removed from consolidation

Inter-company balances and transactions, including any unrealised gains and losses, were
removed from the consolidation process. Unrealised gains and losses arising on transactions
with associated companies are eliminated to the extent of the Group’s interest in those entities.

Other investments
The investments that the EEM Group holds less than 20% of the voting rights and therefore
has no significant influence over the financial and operating policies are registered at fair value
through profit or loss.

The fair value of listed investments in active markets is based on current bid price. The Group
determines the fair value of unlisted securities through (i) valuation methodologies, such as
the price of similar recent transactions and discounted cash flow techniques; and (ii) valuation
assumptions based on market information. Investments that fair value cannot be determined
with accuracy are recorded at purchase cost, any impairment raised from this method is recorded
against the income statement.

b) Tangible fixed assets

Tangible fixed assets are accounted at purchase cost and with expenditure directly related
with; bringing the asset to the location, working condition for its intended use, removing the
accumulated depreciation and impairment losses.

In the switch to NCRF, EEM decided to consider as deemed cost the revalued amount of the
tangible fixed assets (determined under the legal revaluations realised in previous periods), in
accordance with the previous accounting policy.

Remaining costs are recognised as tangible fixed assets only when there is the likelihood of
obtaining future economic benefits for EEM. Daily costs or repair and maintenance costs are
acknowledged as expenditure as when it incurred, in an accrual basis.

EEM carries out impairment tests whenever events or circumstances may indicate that the
asset book value exceeds its recoverable value, if an impairment is recognised then this will be
acknowledged in the income statement. The recoverable value is determined as the higher of net
selling price and value in use, the latter being calculated by the present value based on estimated
future cash flows revenue from continued usage of the asset and its sale at the end of its useful
life.

Land is not depreciated. Depreciation of tangible fixed assets is determined via straight-line basis
method after the deduction of their estimated residual value, and according with the expected
goods usable life term, as shown below:

No. of years
Buildings 10 to 50
Basic equipment 3 to 33
Transport equipment 4 to 5
Office equipment 4 to 16
Other 4 to 20

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The useful life, the depreciation method and the residual value are reviewed annually. The impact
of changes on these estimates is recognised in the income statement.

Any gains or losses resulting from assets disposals are determined by the difference between
the receivable amount and the book value, and therefore are recognised as income or cost in
that period. In the event of disposals of revaluated assets, the excess amount included in the
revaluation is transferred to retained results.

c) Investment properties
The company considers as investment properties (land or buildings or part of a building or both)
held for rental purposes and/or for capital appreciation.

Investment properties are initially evaluated by the acquisition or production cost, which includes
related transaction costs.

After initial recognition, investment properties are evaluated according to the fair value model.
Gains or losses from changes in fair value of the investment properties are acknowledged in the
period in that they occur.

The fair value at which investment properties are recorded was estimated based on independent
appraisals made by an expert, as at December 31st, 2015. Only new valuations will be carried
out using independent experts if there is objective evidence of a significant change in fair value
resulting from events that occurred after the last valuation, a situation that did not occur during
the year 2017.

d) Intangible assets
EEM recognises an intangible asset if; its identifiable, has some control over it, is expected to
obtain future economic benefits from it and if its costs can be accurately measurable.

Intangible assets with defined useful life

The intangible assets with defined useful life are recorded at acquisition cost and deducted the
added depreciations and impairment losses.

EEM performs impairment reviews whenever events or circumstances may indicate that the
book value of the asset exceeds its recoverable amount, such impairment is recognised in the
income statement. The redeemable amount is assessed by the higher value between fair value
less costs to sell and value in use. This is performed considering current value of the future cash
flow revenues generated during the asset economic life deducted from any remained value from
its sale at the end of its useful life.

Intangible assets internally produced

Research expenditures are recognised as cost when incurred. EEM recognises internally generated
intangible assets when it is possible to demonstrate:

• Its technical feasibility to complete the intangible asset so that is available for use or sale;
• Its intention to complete the intangible asset and to use or sell it;
• Its ability to use or sell the intangible asset;
• The way the intangible asset is likely to generate future economic benefits;
• The availability of technical, financial and other resources to complete the development of the
intangible asset and to use or sell it;
• Its ability to measure accurately the expenditure related with the intangible asset during its
development stage.

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The cost of internally generated intangible assets comprises all directly attributable costs
necessary to create, produce and prepare an asset to operate as expected.

Software purchase and development

Software total purchasing costs includes all the related costs up to the time that software is
ready for usage. The straight-line amortisation method is used during the expected useful life of
the software.

EEM Costs incurred directly with the development of software are expected to generate
economic benefits beyond one year and are recognised and recorded as intangible assets. Such
costs include employee costs directly associated with the project and amortisation based on a
straight-line method over the expected life of the software.

Software maintenance costs are acknowledged as costs for the period incurred.

Industrial property and other rights

Industrial property and other rights are depreciated on a straight-line method over the estimated
useful life.

Goods estimated useful lives are as follows:

No. of years
Software 6
Industrial property and other rights 10 to 33

Payments by extension of the tariff period in accordance with Decree-Law no. 35/2013
Payments are made according with Decree-Law no. 35/2013 are recorded as intangible assets in
progress to be amortized based on the straight-line method, for the period of 7 years, from the
regulatory period end date of 15 years applicable to each site.

e) Borrowing costs capitalised

Borrowing costs that are directly allocated to the purchase, construction or production of assets
are capitalised as part of the cost of the assets.

A qualifying asset is an asset that needs a substantial period of time to be ready for its intended
use or sale. The amount of borrowing costs eligible for capitalisation is determined by applying
a capitalisation rate over the amount of investments made, and net of government grants. The
capitalisation rate is obtained by the weighted average of the borrowing costs applicable to the
outstanding borrowings for the period.

The capitalisation of borrowing costs starts with expenditures incurred with the asset, the
necessary incurring borrowing costs and activities have started to prepare the assets for their
intended use or sale are in progress.

Borrowing costs capitalisation ceases with the end of the majority of the activities needed to
prepare the qualifying assets for their intended usage or completed sale.

For presentation purposes of the income statement, the capitalised borrowing costs are presented
in the caption Financial Income/Expenses.

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f) Leases
EEM sees leases as financial or operating leases based in the transaction substance rather than
its legal form. A lease is classified as a financial lease if it transfers substantially the risks and
rewards associated with the ownership of the asset to the lessee. On the other hand, a lease
is classified as an operating lease if it doesn’t transfers substantially the risks and rewards
associated with the ownership of the asset to the lessee.

Operating leases
Payments made as per operating leases contracts are recorded in the income statement in the
period in question.

Finance leases
Finance lease contracts are recorded at inception date, in assets as well as in liabilities, at the
purchase cost of the leased asset, equivalent to the current cost of future lease Instalments.

Instalments comprise: (i) interest charge that is acknowledged in the income statement; and (ii)
financial amortisation that is deducted from liabilities. Financial charges are recognised in the
income statement over the lease period, with the aim to show a constant periodic rate of interest
in the remaining balance of the liability for each period.

g) Inventories
Inventories value is set up at the lower cost of the acquisition and its net value. The cost of
inventories includes; purchase costs, conversion costs and other costs incurred in having the
inventories at their present location and current condition. The net value is the estimated selling
price during the normal business activity deducted by the respective selling costs.

Inventories usage (consumption) is valued at the average cost of goods.

EEM Inventories costs are reduced from net realisable value every time these assets are recorded
at a higher amount than the expected to be obtained through its usage or sale.

h) Accounts receivable
Accounts receivable are initially recognised at their fair value, subsequently valued at amortisation
cost based on the effective interest rate method, and presented in the balance statement by
deducting impairment losses.

Impairment losses are recorded based on the regular evaluation of the associated impairment
losses linked to doubtful debts at the balance sheet date. The identified impairment losses are
recognised in the income statement and can be reversed if the estimated losses decrease, in a
subsequent period.

i) Cash and cash equivalents

For the purposes of the cash flows statement, cash and cash equivalents comprise balances with
short term maturity, including cash and deposits at banks.

j) Income tax
EEM and its subsidiaries are subjected to the tax legislation considered in “Código do IRC – Imposto
sobre o Rendimento das Pessoas Colectivas”. According to the Portuguese tax legislation, tax
returns can be reviewed and adjusted by the tax authorities for a period of four years, for tax
years beginning after 2012 (for Social Security scheme 5 years). If there are tax losses, the period
to consider is 12 years, for tax years beginning in 2014, 2015 and 2016 and 5 years for the years
2017, 2013 and 2012.

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In addition, tax losses deduction is limited to 70% of taxable income, and this rule applies to
deductions made in tax periods beginning or after January 1st, 2014, regardless of the tax period
in which they were performed. In 2012 and 2013 exercises the limit was 75%.

Income taxes for the period, relates to the current and deferred taxes.

The current income tax calculation is based on taxable income (that differs from the accounting
income) of the Company, in accordance with the tax rules enacted at the balance sheet date at the
Company’s headquarters. The Company is subject to taxation in accordance with the Corporate
Tax Rate (“IRC”) at the rate of 21%. Taxation is increased by municipal surcharge that is set by
each municipality.

In addition, taxable income that exceeds 1,500,000 Euros is subject to the municipality surcharge
at the following rates:

• 3% for taxable income between 1,500,000 and 7,500,000 Euros;

• 5% for taxable income between 7,500,000 and 35,000,000 Euros;
• 7% for taxable income exceeding 35,000,000 Euros.

Income tax is recorded in the income statement, except for items that are directly recorded
against shareholders’ equity.

Current tax is the tax expected to be paid based on the taxable profit for the period, calculated
based in the current tax rules and using tax rates enacted or substantively enacted in each
jurisdiction.

Deferred tax is determined and periodically assessed according with the balance sheet liability
method, for temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their respective tax basis, are calculated using the tax rates
enacted or substantively enacted in each jurisdiction as at the balance sheet date.

Deferred tax liabilities are acknowledged for all taxable temporary differences. Deferred tax
assets are only recognised to the extent is likely to attain future taxable profits able to absorb
temporary deductible differences. In each balance sheet date, an assessment is performed
to temporary differences resulting from deferred tax with the aim to acknowledge and rectify
according with current expectations of future recovery.

Paragraph 68 of NCRF 25, EEM proceeds to compensation of deferred tax assets and liabilities
whenever (i) is legally enforceable right to offset current tax assets against current tax liabilities;
and (ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the
same taxation authority by the same taxable entity.

k) Foreign exchange transactions

Foreign exchange transactions are exchanged into Euros at exchange rate of the transaction
date. Monetary assets and liabilities in foreign currencies are exchanged to Euros at the
foreign exchange rates of the balance sheet date. Foreign currency exchange differences are
acknowledged in the income statement. Non-monetary assets and liabilities that are in foreign
currency are recorded as historical cost valuated using the exchange rate as at the transaction
date. Non-monetary assets and liabilities that are recorded by fair value method in a foreign
currency are converted using the exchange rate as at the date the fair value was determined.

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l) Government grants and other similar grants

Non-refundable government grants and other similar grants related to tangible and intangible
assets are initially recognized as equity and therefore, for those that relate to depreciable fixed
tangible and intangible assets with finite useful life, allocated on a systematic basis as income
over the periods necessary to match them with the related costs which they are intended to
compensate. As for those respecting non-depreciable fixed tangible and intangible assets with
indefinite useful life, are kept as equity, unless the correspondent amount is needed to offset any
impairment loss.

Refundable government grants and other similar grants are recorded as liabilities.

Accounting Standards Board (CNC) comprehends that, in accordance with NCRF 25.5, there are
no taxable temporary differences associated with non-refundable government grants related to
depreciable tangible assets and intangible assets with finite useful life. Thus, there is no place to
acknowledge any deferred tax liability, and therefore, the tax component associated with these
subsidies is presented under “other payables”. In addition, the reversal of the tax component for
the period recorded as “other payables” is recorded under the caption of “adjustments/other
changes in equity”.

Compensation regarding the tariff convergence

In accordance with The Tariff Regulation, the compensations granted to the EEM under the tariff
convergence are recognised in the income statement in the period that convergence occurs,
according with equity principle of tariffs between the mainland and Autonomous Region of
Madeira consumers.

Asset Transfers from customers

The works carried out in the distribution network at customer request and invoiced to them
are recorded as tangible fixed assets if they meet the capitalisation requirements. The received
amounts are recorded in the income statement.

Promotion plan for efficient consumption of energy

The subsidies granted by ERSE to finance the Promotion Plan for Efficient Consumption of Energy
(PPEC) are recognised in the income statement when there is reasonable assurance that the
amounts due will be repaid.

m) Provisions
Provisions are recognised when:

• EEM has an obligation that’s either present, legal or constructive as result of a past event;
• It is likely that a previous resource item that is part of an economic benefit will be required in
the future to satisfy a settlement;
• It´s feasible to produce an accurate estimate of an obligation.

Provisions are subject for review on an annual basis, and according with the expectation of their
future commitments.

n) Employee benefits
Pensions
According to the Company Agreement, EEM took responsibility for the liabilities related
to retirement and pre-retirement pensions for the employees that were part of the Social
Security (“Caixa Nacional de Pensões”) as at the date of the Agreement. The retirement pension

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complements include the difference between the pension granted by the Social Security (limit of
age or disability) and the last salary received by the employee.

The above-mentioned pension plan consists in a defined benefit retirement plan, whose liabilities
are assessed by an independent actuarial expert using the projected unit credit method, with the
purpose of determining the present value of projected benefits and the corresponding current
services costs. The discount rate used is determined based on market rates associated with
corporate bonds with high rating, in the same currency that benefits will be paid and with a
similar maturity to the maturity date of the liability.

With the change in the wording of NCRF 28 - Employee Benefits, applicable to periods beginning
on or after January 1st, 2016, actuarial gains and losses are recognized directly in equity. As from
2016, a net total amount is recognized as an expense in the income statement that includes (i)
the current service cost; (ii) past service cost and losses or gains on settlement; and (iii) the net
cost of interest on the liability.

o) Recognition of income and expenses

Income and expenses are recorded in the period that they indicate regardless of when paid or
received, in accordance with the accrual concept. Differences between amounts received and
paid and the corresponding revenues and charges are recorded under other assets or liabilities
depending on whether they are receivable or payable amounts.

Revenue is measured at fair value of the received or receivable retribution. Revenue comprise
the amounts of electricity sales invoiced and related services rendered, net of value added taxes,
rebates and discounts and the exclusion of sales between Group companies.

Energy sales are considered as income in the period that the consumption occurs, regardless of
the invoicing date. The invoice of electricity sales is undertaken on a monthly basis, considering
the electricity tariffs set up by ERSE. Revenues regarding the electric energy to be invoiced,
corresponding to the actual consumption not metered at the time of the balance sheet, are
accrued based on real consumptions.

p) CO2 emission Licenses

EEM owns CO2 emission licenses in order to offset the emissions that result from its operational
activity. The licenses acquired in the market to settle the liability arising from the consumption
are recognised as an intangible asset at its acquisition cost.

The licenses usage is valued at historical cost considering the emissions occurred during the
period (FIFO). These emissions are registered as depreciation expenses in the period they take
place. When the emissions for the period exceeds the licenses held, a provision is made for the
amount necessary to purchase the needed licenses in the market, as per balance sheet date.

q) Tariff adjustments
In activities subject to regulation, the Regulator establishes through the tariff adjustment mechanism,
the criteria to recognise gains or losses of one period in future periods. The tariff adjustments
accounted for in EEM’s financial statements represent the difference between the amounts
invoiced by EEM (based on the applicable tariffs published by ERSE in December of the previous
year) and the regulated revenue calculated based on real costs. The assets or liabilities resulting
from the tariff adjustments are recovered or returned through the electricity tariffs charged to
customers in subsequent periods.

Decree-Law no. 165/2008, of 21st August, recognised the unconditional right of the regulated
operators to recoup the tariff adjustments under a regime identical to the one used for the
tariff deficits. Consequently, EEM records in the income statement the impact resulting from

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the recognition of tariff adjustments. According to the above Decree-Law, the tariff adjustments
determined annually will be returned by the regulated operators even in the event of insolvency
or cease of operations. ERSE is the entity responsible to set the method that ensures the entity
entitled to these rights continues to benefit from the tariff adjustments until its full payment. The
Decree-Law also grants the transfer of the right to receive the tariff adjustment to a third party,
as a whole or in part, through electricity tariffs.

r) Financial instruments
EEM recognises a financial asset, a financial liability or an equity instrument only when it becomes
part of the financial instrument contract dispositions.

EEM measures the financial instruments at amortisation cost deducted from the net of impairment
losses, when they fulfil the following conditions:

• Are repayable on demand or have a defined maturity;

• The returns for its holder are (i) a fixed amount; (ii) determined based on a fixed interest rate
over the instrument life or based on a variable rate that is a typical market index for financing
transactions or that includes a spread over the same index;
• Do not contain any contractual clause that may result in the loss of the nominal value and
accumulated interest (excluding the typical credit risks events).

The remaining financial instruments are recognised at fair value or at acquisition cost, net of
impairment, when it is not possible to accurately measure the fair value.

Clients and other receivables

Clients and other receivables are recognised, at balance sheet date, at net amortisation cost
of impairment losses. These assets are initially recognised at their fair value added by the
transactions costs.

Financial liabilities
An instrument is classified as a financial liability when it contains a contractual obligation to
liquidate capital and/or interest, through delivering cash or other financial asset, independently
of its legal form. Financial liabilities are recognised (i) initially at fair value less transaction costs
and (ii) subsequently at amortisation cost, using the interest rate method.

Derivative financial instruments

EEM proceeds to contractual arrangements of derivative financial instruments with the purpose of
hedging the interest rate risk arising from its financial debt portfolio (Management perspective),
in order to reduce the variations in the related financial costs.

Derivative financial instruments are recognised at the trade date and at fair value. Subsequently,
the fair value of derivative financial instruments is re-measured on a regular basis, the gains or
losses on re-evaluation are recognised directly in the income statement, except for derivatives
labelled as cash flow hedging instruments.

Changes in the fair value of derivatives qualified as cash flow hedges are recognised in reserves.
The cumulative gains or losses recognised in reserves are reclassified in the income statement
when the hedged item impacts the income statement.

Impairment
At each balance sheet date an assessment is performed as to whether there is objective evidence
of impairment, namely those resulting in an adverse effect on estimated future cash flows of the
financial asset or group of financial assets, and every time it can be accurately measured. If there

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is objective evidence of impairment, the recoverable value of the financial asset is determined,
and the impairment loss is recognised in the income statement.

A financial asset or a group of financial assets is impaired if there is objective evidence of

impairment as a result of one or more events that occurred after their initial recognition.

s) Contingent assets and liabilities

The Company does not recognize contingent assets and liabilities.

Contingent liabilities are disclosed unless the possibility of an outflow of resources embodying
economic benefits. Assets are disclosed when an inflow of economic benefits is remote.

Assets and contingent liabilities are assessed continually to ensure that developments are
appropriately reflected in the financial statements.

If it becomes evident that an outflow of economic benefits will be required for an item previously
dealt with as a contingent liability, a provision will be recognized in the financial statements of
the period that the change will occur.

If it is likely that an inflow of economic benefits will occur, the asset and related income are
recognized in the financial statements of the period that the change occurs.

Environmental contingent liabilities are not recognized in the balance sheet. If there is a
possibility, less likely, that environmental damage should be rectified in the future, but the
obligation is still dependent on the occurrence of an uncertain event, the Company discloses the
respective contingent liability.

t) Expenses/Income from financing

The expenses/income from financing include the interest paid by borrowing, interest received
from such investments and income and expenses obtained and supported.

Interest is recognized according to the accrual basis, at the amortisation cost method.

u) Events occurred after the balance sheet date

The presented financial statements reflect subsequent events occurred until 27th March 2018,
date in which the Board of Directors approved them, as mentioned in Note 2.1. Events occurring
after the balance sheet date about conditions that existed at the balance date are considered in
the preparation of financial statements.

The material events occurred after the balance sheet date that do not result in adjustments are
disclosed in Note 46.

v) Equity instruments
An instrument is classified as an equity instrument when there is no contractual obligation for its
settlement to be realised by delivering cash or another financial asset, regardless of their legal
form, showing a residual interest in the assets of an entity after deducting all its liabilities.

When resources or money are received before the issue of shares and the company cannot be
required to return such funds or cash, the Company recognizes an increase in capital up to the
amount received.

Costs directly resulting from the issuing of equity instruments are recognized in equity as a
deduction to the issue value.

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The distributions made on account of capital instruments, such as dividends, are debited directly
to equity as company dividends, when approved by the General Assembly.

At the date of approval of the accounts by the Management Board, they’re not aware of any
obligation to deliver cash or any other asset, against these equity instruments in the next 12
months.

4.3 Critical accounting estimates and judgments used in preparing the financial
statements
NCRF require the use of judgment and estimates in the decision process about certain accounting
treatments, with impact in total assets, liabilities, equity, costs and income. The actual impact
may differ from these estimates and judgments, namely in relation to the effect of actual costs
and income.

The main accounting estimates and judgments used in applying the accounting policies are
discussed in this note to improve the understanding of how their application impacts the EEM’s
reported results and disclosures. A broader description of the accounting policies employed by
EEM is disclosed in Note 4.2.

Considering that in many cases there are alternatives to the accounting treatment adopted by
EEM, the reported results could differ if a different treatment was chosen. The Board of Directors
believes that the options made are appropriate and that the financial statements present fairly, in
all material respects, EEM’s financial position and results. The alternative outcomes discussed
below are presented solely to support the reader in understanding the financial statements and
are not intended to suggest that other alternatives or estimates would be more appropriate.

Investment properties
The fair value of investment property disclosed in the financial statements is based on a valuation
by an independent expert who has a recognized and relevant professional qualification and has
recent experience in the location and category of the investment property being valued.

Impairments of clients and other debtors

Impairment losses related to clients and other debtors are determined by EEM based on the
estimated recoverable amounts, the default date, debt write offs and other factors. Certain
circumstances and facts may change the estimated impairment losses of clients and other
debtors, namely changes in the economic environment, economic sector trends, client’s credit
risk and increases in the rate of defaults. The evaluation process is subject to a series of estimates
and judgments. Changes in the estimates and judgments could impact in the impairment test
results and therefore affect the reported results.

Tariff adjustments
Tariff adjustments represent the difference between costs and income of the National Electricity
System (SEN), estimated at the beginning of each period for purposes of calculating the tariff,
and the actual costs and income of the Electricity System settled at the end of each period. The
tariff adjustments to assets or liabilities are redeemed or returned through electricity tariffs
for customers in subsequent periods. Considering the current legislation that specifies an
unconditional right of the regulated operators to recover or return the tariff adjustments, EEM
records the income of the period, the impact of the recognition of the tariff adjustment. Under
the current legislation, regulated companies can also sell to a third party, in whole or in part, the
right to receive the tariff adjustments through the electricity tariffs.

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Impairment of non-current assets

Impairment tests are performed, whenever there is a trigger that the recoverable amount of
tangible and intangible assets is less than the corresponding carrying amount. Considering the
uncertainties regarding the recoverable amount of tangible and intangible assets as they are
based on the best information available, changes in the assumptions can result in changes in the
determination of the amount of impairment and, consequently, on the EEM’s results.

Assets useful life

The amortisation of assets for production, transmission and distribution of energy is made during
their estimated period of useful life, considering the facts and circumstances existing on the date
of preparation of financial statements that includes, among others, the best estimates of EEM on
the useful life of the respective assets.

In 2012, EEM Group, through its subsidiary Enereem, redefined the useful lives of the wind farms
of Porto Santo and the Bica da Cana from 16 to 20 years and therefore changed the respective
amortisation amount.

The Company power plants estimated lifetime was based on technical specifications of the
suppliers of assets installed in these parks and certified by an external entity. Based on this
information, the remaining useful life of each asset was identified. This analysis included
assumptions that require judgments and estimates used in the determination of the useful lives
of the assets considered, as well as the expectation of the Board of Directors that the licenses to
use the public domain of the Autonomous Region of Madeira for the production of electricity from
renewable sources will be renewed.

Responsibility for dismantling and decommissioning of generation assets

Considering the expectation of renewal of licenses and the estimated value of generation
assets at the time of its replacement, are not considered responsibilities for dismantling and
decommissioning in preparation of financial statements.

Pensions and other employee benefits

Determining pension and other employee benefits liabilities requires the use of assumptions and
estimates, including actuarial projections, estimated rates of return on investments, discount
rates and pension and salary growth and other factors that can impact the cost and the liability.
Changes in the assumptions can materially affect the amounts determined.

Provisions
The amount recognised as a provision is the best estimate of the expense required to settle the
current obligations at the balance sheet date. The use of different assumptions in the estimates
and judgments from those referred to can lead to different results of those considered.

In the normal course of its activities, the EEM Group’s subsidiaries have some lawsuits and
contingencies (possible risk) of administrative nature, civil nature, tax and other. These lawsuits,
arbitration or other involve third parties, administrative authorities, tax authorities and other.

The processes that estimate unlikely losses do not require provisioning, although are periodically
reassessed.

Fair value of financial instruments

Fair value is based on listed market prices, if available, otherwise fair value is determined
either by the price of a similar recent transactions under market conditions or determined by
external entities, or by pricing models based on net present value of estimated future cash

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flows techniques considering market conditions, time value, yield curves and volatility factors.
These methodologies may require the use of assumptions or judgments in estimating fair value.
Consequently, the use of different methodologies or different assumptions or judgments in
applying a particular model, can produce different financial results from those reported.

Income tax
There are several transactions and calculations for which the ultimate tax determination is
uncertain during the ordinary course of business. Different interpretations and estimates would
result in a different level of income taxes, current and deferred, recognised in the period.

In Portugal, the Tax Authorities are entitled to review EEM determination of its annual taxable
earnings, for a period of four years. If there are tax losses this period is twelve years for 2014, 2015
and 2016 tax periods and five years for the years 2017, 2013 and 2012. As a result, it is possible
that some additional taxes may be assessed, mainly as a result of differences in interpretation
of the tax law. However, EEM believes that there will be no material tax assessments within the
context of the financial statements.

Recognition of deferred tax assets related to tax losses carried forward is based on EEM’s Board
of Directors expectations that future taxable income will exist.

4.4 Main assumptions concerning the future

There were no situations identified by EEM’s Board of Directors threatening the continuity of
EEM.

4.5 Main sources of uncertainties in estimates

The main sources of uncertainty in the estimates are detailed in Note 4.3.

5. Cash Flow Statement

The Cash Flow Statement is presented under the direct method, by which receivables and payments
related with gross cash from operational activities, investment and financing activities are disclosed.
EEM records cash flows related to interests and dividends paid as financing activities and the
interests as well as dividends received as investment activities.

5.1 At 31st December 2017 all the cash and cash equivalent balances are available.
5.2 Cash and deposits at banks were allocated as follows:

6. Accounting policies, changes in accounting estimates and errors

During this period accounting estimates have not changed, neither corrections were performed due
to errors.

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7. Consolidation parameter
The subsidiaries consolidated under the full consolidation method as at 31st December 2017 were
as follows:

* Emacom – Telecomunicações da Madeira, Unipessoal, Lda.

The associated companies included in the consolidation process under the equity method as at 31st
December 2017 were as follows:

8. Tangible fixed assets

This balance statement was as follows:

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Consolidated and Individual Financial Statements

The movements in Tangible fixed assets for the Group, during 2017, were as follows:

The amounts recorded in 2017 include interventions in medium voltage distribution lines (1,139,834
Euros), low voltage networks (2,007,955 Euros), transformer stations (560,264 Euros), and metering
and measurement equipment (930,983 Euros). In the transport area, substations investments are
included (887,862 Euros), transmission lines (757,889 Euros) and control centers and telemetry
(247,040 Euros).

In the production area the investment in hydroelectric plants amounted to 18,045,599 Euros, with
the largest share allocated to the expansion of the Hydroelectric System of Calheta, in the amount of
17,620,280 Euros. In thermoelectric plants, the investment was 630,148 Euros.

During the period this caption includes borrowing costs in the amount of 668,668 Euros incorporated
based on a capitalisation rate of 3.2% (see Note 39).

In Biotechnology, 6,693,491 Euros were spent in the Biomass Production Unit, currently under
construction on the island of Porto Santo.

At Enereem, the investment in equipment associated with the current parks amounted to 205,532
Euros.

At Emacom, the total investment amounted to 172,646 Euros.

The main projects recorded as assets in progress, as they are still under construction/execution and
as such are not in a position to start the 2017 activity, are as follows:

• Biomass production unit 39,374,990 Euros;

• Expansion of the Hydroelectric System of Calheta 29,248,496 Euros;
• Remodelling and expansion of the Amparo Substation 1,114,820 Euros;
• Requalification of the CTPS fire network 529,647 Euros.

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The movements in Tangible fixed assets for the Group, during 2016, were as follows:

The amounts recorded in 2016 included interventions in medium voltage distribution lines (725,601
Euros), low voltage networks (2,265,929 Euros), transformer stations (722,647 Euros), and metering
and measurement equipment (811,863 Euros). In the transport area, substations investments are
included (1,399,605 Euros), transmission lines (2,471,822 Euros) and control centers and telemetry
(510,525 Euros).

In the production area the investment in hydroelectric plants amounted to 4,488,455 Euros, with the
largest share allocated to the expansion of the Hydroelectric System of Calheta, in the amount of
3,849,729 Euros. In thermoelectric plants, the investment was 1,049,837 Euros.

During the period this caption includes borrowing costs in the amount of 362,796 Euros incorporated
using a capitalisation rate of 3.5% (see Note 39).

As a result of the consolidation of Biotechnology for the first time, 32,681,499 Euros will be included in
the consolidated tangible assets, related to the Biomass Production Unit, currently under construction
on the island of Porto Santo.

The main projects recorded as assets in progress, as they are still under construction/execution and
as such are not in a position to start the 2016 activity, are as follows:

• Biomass production unit 32,681,499 Euros;

• Expansion of the Hydroelectric System of Calheta 11,365,237 Euros;
• Network of ducts between Santana - Ponta Delgada 688,773 Euros;
• Remodelling and expansion of the Amparo Substation 627,917 Euros;
• Network of ducts of the Variant to Madalena do Mar 438,645 Euros.

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Consolidated and Individual Financial Statements

Tangible fixed assets movements on an individual basis, during the year 2017, were as follows:

Tangible fixed assets movements on an individual basis, during the year 2016, were as follows:

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During the years ending on 31st December 2017 and 2016, the following amounts were capitalised
under the caption Tangible fixed assets: sábado
30 junho
2018
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During 2017, the expenses incurred with these assets amounted to 7,607,722 Euros (2016: 7,237,043
Euros), the corresponding income is recorded in the income statement under the caption Own work
capitalised (Note 33).

9. Investment properties
In this caption, for the Group and as well as on an individual basis, includes buildings that are not
used as part of the core activities of the company, which were as follows:

There were no movements in this caption in 2017 and 2016.

Investment properties relate to land and buildings held for capital appreciation.

Investment properties are measured at fair value method, with gains or losses arising from changes in
fair value and recognized in the income statement (Note 36) according to the accounting policy 4.2 c).

In determining the fair value of the investment properties, it was considered the evaluations carried
out by an independent expert with professional qualification and experience in Funchal, where the
buildings are located.

There are no restrictions or contractual obligations on investment properties held.

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Consolidated and Individual Financial Statements

10. Intangible assets

This balance, for this item were as follows:

The movements for the Group, during 2017, were as follows:

The additions shown to Software refer, mainly to the investment performed in updating and developing
EEM computer systems.

In 2017, the EEM proceeded to the purchase of 268,971 licenses of CO2 emissions for the total amount
of 2,130,462 Euros, corresponding to the increases materialised in this caption.

The decrease in the gross amount of the caption Licenses of CO2 emissions in the amount of 1,436,707
Euros, and is assigned to the delivery of the allowances corresponding to CO2 emissions recorded
in 2016 (265,006 tons), being offset by compensation of accumulated depreciation, as mentioned in
Note 42.

The amortisation recorded under Licenses of CO2 emissions in the amount of 2,130,222 Euros,
corresponds to the CO2 emissions (271,792 tons) in the development of its operational activities
during the year, as described in accounting policy 4.2 p).

The amount recorded in Intangible assets in progress corresponds to the compensation paid by
Enereem for joining the alternative remuneration scheme, as mentioned in Note 1, which provides
for payment of an annual compensation to the SEN for a period of 8 years, from 2013 and 2020. These
assets will be amortized over a period of 7 years from 2021, which corresponds to the period when
the economic benefits associated with these payments will flow to the company. This scheme covers
the Porto Santo and Bica da Cana wind farms. In 2017 the increase of 21,479 Euros (21,727 Euros in
2016) results from payments made in the period related to this compensation (Note 45).

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The movements in this balance for the Group, during 2016, were as follows:

The additions shown to Software refer, mainly to the investment performed in updating and developing
EEM computer systems.

In 2016, the EEM proceeded to the purchase of 267,725 licenses of CO2 emissions for the total amount
of 1,442,738 Euros, corresponding to the increases materialised in this caption.

The decrease in the gross amount of the caption Licenses of CO2 emissions in the amount of 2,270,239
Euros, and is assigned to the delivery of the allowances corresponding to CO2 emissions recorded
in 2015 (283,315 tons), being offset by compensation of accumulated depreciation, as mentioned in
Note 42.

The amortisation recorded under Licenses of CO2 emissions in the amount of 1,436,707 Euros,
corresponds to the CO2 emissions (265,006 tons) in the development of its operational activities
during the year, as described in accounting policy 4.2 p).

The amount recorded in Intangible assets in progress corresponds to the compensation paid by
Enereem for joining the alternative remuneration scheme, as mentioned in Note 1, which provides
for payment of an annual compensation to the SEN for a period of 8 years, from 2013 and 2020. These
assets will be amortized over a period of 7 years from 2021, which corresponds to the period when
the economic benefits associated with these payments will flow to the company. This scheme covers
the Porto Santo and Bica da Cana wind farms. In 2016 the increase of 21,727 Euros (22,171 Euros in
2015) is the result of payments made regarding to such compensation (Note 43).

As a result of the consolidation of Biotechnology for the first time, 9,000,000 Euros will be included
in intangible assets, related to patent rights. These assets will be amortized over the period during
which it is expected that economic benefits will flow to the company, through the operation of the
Biomass Production Unit in Porto Santo’s island, which, as of December 31st, 2017 and 2016, no
amortisation of this asset was recorded.

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Consolidated and Individual Financial Statements

The movements in this caption on an individual basis, during the year 2017, were as follows:

The movements in this caption on an individual basis, during the year 2016, were as follows:

During the years ended December 31st, 2017 and 2016, the following amounts relating to Own work
capitalised were capitalised under the caption Intangible Assets:

During 2017, the amount of expenses incurred with these assets amounted to 180,582 Euros (2016:
174,766 Euros), and the corresponding income is recorded in the Own work capitalised caption in the
Financial Statements (Note 33).

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11. Financial investments – Equity method

This balance is displayed as follows:

The detail of this balance, on an individual basis, is displayed as follows:

As referred under the accounting policy 4.2 a) and in accordance with NCRF 13, on an individual
basis, the EEM investments in subsidiaries and associated companies that has control or significant
influence, are recorded by the equity method. However, in a consolidated basis, the investments in
subsidiaries are fully consolidated.

In 2015, an agreement was reached between the shareholders of Biotecnologia, which predicted that
EEM would hold all its capital. During 2016, all administrative procedures were completed, namely
the notarial registry of statutory changes that allowed EEM, S.A. to be the sole shareholder of this
company, which, from 2016, was included in the consolidation perimeter using the integral method.

In the amount registered in Biotecnologia, 33,141,437 Euros (2016: 28,262,897 Euros) refers to loans
(Note 43).

The movements in this balance on an individual basis, during 2017, were as follows:

The appropriation of the results of subsidiaries and affiliated companies, amounting to 2,243,526
Euros, is recorded against income for the year (Note 32).

The negative changes in equity correspond essentially to the refund of supplementary benefits by
Enereem in the amount of 740,000 Euros.

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Consolidated and Individual Financial Statements

The caption Other changes refers to the variation of the supplies considered as equity instruments
under the NCRF.

The summary of financial information for the subsidiaries and associates companies is presented
in Note 7.

The movements in this balance during 2016 on an individual basis were as follows:

The appropriation of the results of subsidiaries and affiliated companies, amounting to 2,577,523
Euros, is recorded against income for the year (Note 32).

The negative change in equity in Biotechnology relates to the registration, in exchange for Adjustments/
other changes in equity, of 407,373 Euros, as a result of the increase in participation.

The caption Other changes refers to the variation of the supplies considered as equity instruments
under the NCRF. In 2016, the value referring to Biotechnology corresponds to the reclassification,
from the caption Other receivables, of the accumulated balance of loans granted.

The addition of 3,600,000 Euros corresponds to 60% of the share capital of Biotechnology.

The summary of financial information for the subsidiaries and associates companies is presented
in Note 7.

12. Clients
The Clients are analysed as follows:

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The balance of the Official entities with protocol was in the amount of 10,649,722 Euros (2016:
37,448,831 Euros), this relates to a set of protocols signed with several regional official entities
in order to receive the amounts owed by those entities during a period between 5 and 30 years,
without interest and on monthly based instalments, in the total amount of 83,344 Euros celebrated
in 2016. Under these protocols, EEM has received during 2017 the amount of 4,974,763 Euros (2016:
8,707,143 Euros). Following a credit cession operation carried out with a financial entity in August
2017, which allowed the immediate entry of funds into the EEM, resulting in an accounting offsets in
the amount of 21,824,346 Euros regarding open amounts related to protocols.

The balance of the Official entities without protocol was in the amount of 11,929,310 Euros (2016:
13,347,283 Euros), this relates to the amounts invoiced to regional official entities until 31st December
2017 regarding electric energy supply and other services rendered due as at the balance sheet date
and with no payment plan established. This amount includes 6,888,853 Euros (2016: 7,888,847 Euros)
solely on public lightning.

In 2017, the movements in Impairment losses, for the Group, were as follows:

The charge-off of impairment of private clients in the amount of 1,015,766 Euros corresponds to the
write-off of amounts due with significant seniority (irrecoverable), whose impairment was already
fully registered.

In 2016, the movements in Impairment losses, for the Group, were as follows:

The charge-off of impairment of private clients in the amount of 14,910,173 Euros corresponds to the
write-off of amounts due with significant seniority (irrecoverable), whose impairment was already
fully registered.

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Consolidated and Individual Financial Statements

13. Other receivables

The detail of this balance is displayed as follows:

The Tariff compensation caption, in the amount of 78,344,908 Euros (2016: 60,154,384 Euros),
corresponds to the difference between the amounts invoiced by EEM (based on the tariffs published
by ERSE in December of the previous year) and the regulated revenue calculated using the tariff
compensation mechanism determined by ERSE. This difference, which is generally determined in
year “n” and received or returned in “n + 2”, is detailed, per year of receipt or return, as follows:

Tariff compensation 2006/2015 corresponds to the municipal public domain occupation rate,
referring to the periods prior to 2016, calculated in 2017, due to the application, for 2006, 2007 and
2008, of the formulas established in Administrative Rule no. 437/2001 of April 28th, and for the years
2009 to 2015 inclusive of the formulas established in Decree-Law no. 230/2008, of November 27th
(both regulations applicable to the calculation of municipal concessions in the mainland in the same
time period 2006-2015).

The REN caption that amounts to 503,636 Euros (2016: 2,387,017 Euros) corresponds to the value of
tariff convergence for December, transferred monthly to the EEM.

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14. Deferred tax assets and liabilities

In its consolidated financial statements, EEM recognises the tax impact arising from temporary
differences between the carrying amounts of assets and liabilities and their respective tax basis,
that were as follows:

In its individual financial statements, EEM recognises the tax impact arising from temporary
differences between the carrying amounts of assets and liabilities and their respective tax basis,
that were as follows:

The tax losses for which deferred tax assets were recorded are deductible up to 2022 (20,404,289
Euros), 2026 (6,727,624 Euros) and 2027 (581,891 Euros).

The changes in deferred taxes for the Group and in an individual basis, for 2017 and 2016, were as
follows:

The Regional Legislative Decree no. 17/2015/M, of 30th December, defines the corporate tax rate
applicable in the Autonomous Region of Madeira in 2016 and 2017, of 21%.

In accordance with NCRF 25, the Deferred tax assets and liabilities should be recorded at the tax
rates that are expected to be applied in the period when the asset is realized or the liability is settled,
based on tax rates (and tax law) that are enacted at the balance sheet date.

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Consolidated and Individual Financial Statements

15. State and other public entities

This balance regarding Government and other public entities is displayed as follows:

The income tax is analysed as follows:

16. Inventories
This balance is displayed as follows:

The caption of goods includes electric cables, material to be incorporated in the transport and
distribution networks and thermoelectric backup components for power plants.

There were no movements in the impairment of inventories in 2017 and 2016.

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17. Deferrals
This balance is displayed as follows:

According to its maturity, this balance is displayed as follows:

An insurance deferred expenses relates primarily to multi-risk, civil and environmental responsibility
insurances.

Deferred income, in a consolidated basis, includes amounts received by Emacom subsidiary via a
multi-year contracts to provide services. This caption also includes 2,423,731 Euros (2016: 2,566,304
Euros) relating to billing of the contract celebrated between Emacom and Madeira Regional
Government for a period of twenty years, this amount has been already collected. The caption Expenses
to be recognized, on a consolidated basis, includes expenses related to the implementation of this
agreement, in the amount of 1,149,810 Euros (2016: 1,217,457 Euros). The income and expenses
arising from these contracts will be recognized in accordance with the contractual deadlines defined.

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Consolidated and Individual Financial Statements

18. Other financial investments/assets

This balance is displayed as follows:

Other financial investments are displayed as follows:

In 2017, CLCM distributed dividends in the amount of 258,990 Euros (2016: 192,319 Euros), recorded
in results for the year (Note 39).

The movement of financial investments during the year 2017 is analysed as follows:

During 2017, the Luso Carbon Fund was liquidated. Until the settlement date, the financial investment
depreciated 1,179 Euros, this variation was recorded as entry to the Increases/Decreases in fair
value (Note 36). The amount received under the settlement amounted to 176,544 Euros.

The movement of financial investments during the year 2016 is analysed as follows:

With reference to December 31st, 2016, the financial investment held in the Luso Carbon Fund
depreciated 26,012 Euros, these changes were recorded in the Increases/Reductions in fair value
caption (see Note 36).

During the year 2016 the EEM made a supplementary capital increase of the company Horários do
Funchal, S.A., in the amount of 119,475 Euros. At the same time, the entire impairment was reversed.

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19. Share capital

The share capital, in the amount of 20,000,000 Euros, is represented by 4,000,000 shares with a
nominal value of 5 Euros each, and is fully paid as at 31st December 2017, being entirely held by
Madeira’s Regional Government.

The Company calculates its earnings per share using the weighted average number of shares
outstanding during the year of reporting, net of the movement of own shares that occurred during
the year.

The average number of shares were as follows:

Earnings per share attributable to EEM’s shareholders were as follows:

20. Legal reserves

Under the Portuguese legislation, art. no. 295 of the Commercial Companies code of law, EEM is
required to set up a legal reserve equal to a minimum of 5% of the annual profits until the reserve
reaches 20% of its share capital. Such reserve can only be used to cover future losses or to be
used to increase the company’s share capital. Considering that in earlier periods EEM has already
reached the limit of the legal reserve, as mentioned above, it was not charged against this balance
any amount of net profit for the period ending 31st December 2016.

21. Other reserves

This caption corresponds to an investment reserve, corresponding to the change in the year, to 10%
of net income for the previous year.

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Consolidated and Individual Financial Statements

22. Retained earnings

In 2017, the revaluation surplus was reclassified to the Retained earnings caption. The reclassified
amounts refer to revaluations of tangible and intangible fixed assets, carried out based on legal
documents, up to 1998 and not yet realized. For comparative purposes, the same reclassification
was made for the year 2016.

This caption includes 7,216,725 Euros (2016: 7,708,555 Euros) related to the revaluation reserves of
tangible and intangible fixed assets, carried out based on legal instruments, up to 1998 and not yet
realized, and are not available for distribution to shareholders.

In 2017, the variation of this caption was:

• Application of the 2016 Group’s net profit for the period in the amount of 3,478,849 Euros and
in the same amount on an individual basis;
• The reclassification for the caption Adjustments in financial assets of the net profit value that
the EEM appropriated in relation to its associates through the application of the equity method
and not distributed, representing an increase in the amount of 38,287 Euros for the Group and
in the amount of 164,563 Euros on an individual basis;
• Recognition of actuarial gains and losses of 1,082,596 Euros;
• The distribution of dividends in the amount of 5,700,000 Euros to the sole shareholder of the
company, Regional Government of Madeira as per the resolution of the General Meeting dated
August 7th, 2017 and, for the Group, interests that it does not control in the amount of 127,500
Euros.

In 2016, the variation of this caption was:

• Application of the 2015 Group’s net profit for the period in the amount of 4,523,798 Euros and
in the same amount on an individual basis;
• The reclassification for the caption Adjustments in financial assets of the net profit value that
the EEM appropriated in relation to its associates through the application of the equity method
and not distributed, representing a reduction in the amount of 535,523 Euros for the Group and
in the amount of 1,038,959 Euros on an individual basis;
• The distribution of dividends in the amount of 5,380,000 Euros to the sole shareholder of the
company, Regional Government of Madeira.

23. Adjustments/other changes in equity

The balance Other changes in equity were as follows:

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The movements in Other changes in equity for the Group and on an individual basis, for 2017 and
2016, were as follows:

24. Non-controlling interests

The caption non-controlling interests, refers to the investment held by “Aream - Agência Regional
da Energia e Ambiente” in its subsidiary Enereem.

The 92.5% investment held by EEM was consolidated under the full consolidation method, creating
non-controlling interests related to the remaining 7.5% investment on Enereem, in the amount of
645,775 Euros (2016: 741,442 Euros).

In 2017 the reduction of 60,000 Euros recorded in Other operations with equity holders corresponds
to the refund of the supplementary shares benefits held by Enereem.

25. Provisions
This balance is displayed as follows:

In 2017, the movement in Provisions for the Group were as follows:

The charges added for the year relate to contingencies for risks and charges within the scope of the
EEM activity, considered as probable.

In 2016, the changes in Provisions for the Group were as follows:

The reversal refers to provisions for risks that were consider as no longer likely.

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Consolidated and Individual Financial Statements

26. Financial debt

This balance is displayed as follows:

In 2005, the EEM contracted a loan of 220,000,000 Euros from a bank syndicate composed by of Dexia,
KFW and BNG, maturing in 2020. This financing consists of two instalments, one of 154,000,000
Euros subject to a fixed rate of 3.745% + spread, and another 66,000,000 Euros subject to variable
rate indexed to Euribor 6 months + spread. The conditions set for the 1st instalment is valid until
November 2017. After that date, and by the end of the contract, the conditions are the same as the
2nd instalment.

Foreign financing caption includes financing from the European Investment Bank (EIB), in the amount
of 78,750,000 Euros (2016: 90,416,667 Euros).

Following the financial crisis that affected the liquidity in international markets, EEM’s rating was
downgraded, as a result of the Portuguese Republic rating downgrade and, consequently, the
Autonomous Region of Madeira. Regarding the 220 million Euros syndicated loan, the referred
downgrade to a rating below Baa2 demanded, in 2011, an unconditional and irrevocable guarantee
from the Autonomous Region of Madeira Government.

Financing agreements with the banking and EIB include clauses requiring the maintenance of the
majority of the capital and/or voting rights of EEM by the Autonomous Region of Madeira. Should this
fail to materialize, banks may require early repayment of the loans.

In 2017, Financial debt, by maturity, for the Group, were as follows:

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In 2016, Financial debt, by maturity, for the Group, were as follows:

In 2017, Financial debt, by maturity, on an individual basis, were as follows:

In 2016, Financial, debt by maturity, on an individual basis, were as follows:

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Consolidated and Individual Financial Statements

As at 31st December 2017, the scheduled repayments of the Group’s debt including interest accrual
are as follows:

As at 31st December 2016, the scheduled repayments of the Group’s debt including interest accrual
are as follows:

As at 31st December 2017 , the scheduled repayments debt on an individual basis including interest
accrual is as follows:

As at 31st December 2016 , the scheduled repayments debt on an individual basis including interest
accrual is as follows:

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27. Employee benefits

In the terms of the Company Agreement, EEM assumed under the form of a defined benefit plan, the
liability to pay pension complements on retirement to employees that were included in the Social
Security Scheme (“Caixa Nacional de Pensões”) as at the date of the above-mentioned Agreement.

As at 31st December 2017 and 2016, the liabilities for past services associated to the pension plan
were the following:

As at 31st December 2017 and 2016, the number of participants covered by this pension plan is
analysed as follows:

The actuarial assumptions used for the calculation of pension liabilities are presented as follows:

The liabilities with the pension plan are covered by pension provisions, as shown below:

In 2017, the EEM recorded a cost with supplementary retirement and pre-retirement in the amount
of 228,543 Euros (2016: 191,983 Euros).

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Consolidated and Individual Financial Statements

28. Suppliers
This balance is displayed as follows:

The caption “Suppliers – General” includes, mainly, fuel and energy supply.

On an individual basis, the caption “Suppliers – Subsidiaries” is related to services rendered by

Enereem (energy supply) and services provided by Emacom.

In 2017, this caption included invoices from suppliers in confirming, in the amount of 1,762,699 Euros.

29. Other payables

This balance is displayed as follows:

The tariff compensation amount corresponds to the tariff compensation determined in 2017 and prior
years to return in subsequent years, as referred in the tariff compensation mechanism managed by
ERSE.

The caption Municipal network tax refers to the local tax rate owed by EEM related to the usage of
the regional public domain. The tax rate is calculated in equivalent terms to those established for
annual income provided in the Decree-Law no. 230/2008, of November 27th, in its current version,
under Regional Legislative Decree no. 34/2016/M, August 5th.

The caption Other accrued expenses relate to expenses for the year whose documents were issued
with the date of the following year.

In Other liabilities caption are included the security deposits, relating to deposits paid by consumers
of electricity, amounting to 1,467,205 Euros (2016: 1,888,425 Euros).

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30. Sales and services rendered and Cost of sales

This balance is displayed as follows:

In 2017, tariff compensation caption included the amounts of 24,354,816 Euros transferred by REN,
as defined by ERSE, related to the 2017 tariff convergence, 13,183,085 Euros referring to the 2017
tariff adjustment 575,951 Euros corresponding to the downward revision by ERSE of the estimate of
the 2016 tariff adjustment.

In 2017, the adjustment of the value relative to the municipal public domain occupation rate, referring
to the periods prior to 2016, calculated in 2017, due to the application, for 2006, 2007 and 2008, of
the formulas established in Administrative Rule no. 437/2001 of April 28th, and for the years 2009
to 2015 inclusive of the formulas established in Decree-Law no. 230/2008, of November 27th (both
regulations applicable to the calculation of municipal concessions in the mainland in the same time
period 2006-2015), in the amount of 4,927,680 Euros (Note 13).

In 2016, tariff compensation includes the amounts of 29,654,002 Euros transferred by REN, as
defined by ERSE, related to the 2016 tariff convergence, (6,132,591) Euros referring to the 2016 and
(86,373) Euros tariff adjustment corresponding to the revision of the 2015 tariff adjustment estimate.

31. Operating subsidies

This balance is displayed as follows:

The amount received under Horizonte 2020, the EU ‘s Community Research and Innovation Framework
Program, is intended to contribute to the SMILE - Smart Islands Energy Systems project.

The amount received from the European Union Solidarity Fund is intended to finance emergency and
recovery operations following the fires that affected the island of Madeira in August 2016.

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Consolidated and Individual Financial Statements

32. Gains/(losses) from subsidiaries, associated companies and joint

ventures
The Gains/ (losses) on subsidiaries, associated companies and joint ventures resulting from the
application of the equity method were as follows:

Investments recorded using the equity method are disclosed in Notes 7 and 11, and the amounts
above relate to changes in the investment resulting in the appropriation of the results of subsidiaries
and associated during the period in question.

33. Own work capitalised

The balance Own work capitalised is displayed as follows:

34. Supplies and services

The balance for Supplies and services were as follows:

The caption “specialised works” includes expenses with financial, legal and IT advisory services.

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35. Employee costs

The Employees balance costs is displayed as follows:

The average number of employees for the Group companies during the period totals to 726 (2016: 748).

36. Fair value gains/losses

The balance of Fair value gains/losses is displayed as follows:

37. Other income

The balance Other income is as follows:

In 2017, other income item includes 219,979 Euros of VAT recovery of uncollectible customers.

In 2016, other income item includes 246,748 Euros of VAT recovery of uncollectible customers.

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38. Other expenses

The balance Other expenses were as following:

The caption Municipal network tax refers to the 2017 local tax rate owed by EEM.

The stamp duty is essentially linked with the tax associated with bank financing operations.

Uncollectible debts correspond to the extraordinary derecognition of credits with significant seniority,
net of impairment, considered uncollectible in 2016.

39. Financial income and expenses

The Interest and other income obtained and Interest and other losses supported were as follows:

The caption Interest and other income obtained - Dividends, relates to dividends paid by associated
company – “Companhia Logística de Combustíveis da Madeira, S.A.” (CLCM) (Note 18).

Commissions and bank guarantees include 1,626,733 Euros regarding to guarantees made with
several banks for the benefit of the European Investment Bank (2016: 1,871,391 Euros).

In the caption Interest and similar expenses incurred - Others are recorded 1,115,278 Euros (2016:
1,118,333 Euros) concerns the costs with the unconditional and irrevocable guarantees (aval) obtained
from the Government of the Autonomous Region of Madeira in order to meet the requirements of
the 220 million Euros syndicated loan as a result of the reduction in EEM’s rating to a note below the

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Baa2, resulting from the rating reduction of Portugal and consequently of the Autonomous Region
of Madeira.

The caption Capitalised interest expense from financial debt relates to interest on loans related to
the purchase, construction or production of the company’s assets, in accordance with the accounting
policy described in Note 4.2.e).

40. Income taxes

This balance is displayed as follows:

The deferred tax item corresponds to the allocation results of assets and deferred tax liabilities,
according to Note 14.

The current tax is determined as follows:

The corporate tax rate applicable in the Autonomous Region of Madeira in 2016 and 2017, is 21%.

In accordance with the provisions of the NCRF 25, deferred tax assets and liabilities should be
measured at the tax rates that are expected to be applied in the period that the asset is realised or
the liability is settled, based on tax rates (and tax laws) that are approved at the balance sheet date.

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41. Operating leases

The total unrevoked minimum lease payments regarding future operating leases were as follows:

To these values, VAT needs to be added at the legal rate in the period that the invoicing rents are
issued.

The Operating leases caption corresponds to EEM’s fleet leases.

42. Environmental issues

The CO2 emission licenses changes were as follows:

The licenses corresponding to each civil year consumptions are returned to the regulatory entity of
each country until the end of the fourth month of the subsequent year (Note 10).

During the period, investments were made and recorded in expenses, environmental expenditures
in the amounts of 18,626,620 Euros and 1,587,527 Euros (2016: 6,013,527 Euros and 874,358 Euros),
respectively.

43. Related parties

Shareholders
As at 31st December 2017, EEM’s share capital is entirely held by Madeira’s Regional Government as
referred in Note 19.

Remuneration of company officers

During the periods ended 31st December 2017, the remuneration cost of the Board of Directors was
256,694 Euros (2016: 282,571).

During the period ended on 31st December 2017, the cost of the Fiscal Council’s remuneration
amounted to 12,000 Euros. In 2016, the supervisory functions of the company were exercised by the
single auditor, whose costs are detailed in Note 44.

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Balances and transactions with subsidiaries, associated companies and other investments
In the normal development of its activity, EEM performs business operations and transactions with
several entities, among those includes companies that are in control or in a group related with EEM.
These transactions are conducted on normal market conditions for similar transactions, regardless
of its relevance, and are part of the current activity of the EEM.

The balances and transactions between EEM and its subsidiaries, associated companies and other
investments, for the year ended 31st December 2017, were as follows:

The balances between EEM and its subsidiaries are removed during the consolidation process, as
referred in Note 4.2.a).

The balances and transactions between EEM and its subsidiaries, associated companies and other
investments, for the year ending 31st December 2016, were as follows:

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44. Fees regarding the Statutory Auditor

As at 31st December 2017, the expenses with the Statutory Auditor regarding the Consolidated
Financial Statements and other audit services amounted to 81,500 Euros (2016: 81,000 Euros).

45. Commitments
As at 31st December 2017 and 2016, the commitments not included in the balance sheet, regarding
to bank guarantees, were as follows:

EEM’s commitments through bank guarantees provided on behalf of EEM were agreed with the
following financial institutions; Novo Banco, Banco Português de Investimento, Caixa Geral de
Depósitos, Banco Comercial Português and Banco Santander Totta, in benefit of European Investment
Bank.

The amount of 13,633 Euros regarding to bank guarantees given by EEM relates primarily to
guarantees in favour of the Labour Court of Funchal.

The guarantees provided by Emacom regarding to bank guarantees contracted with Banif, in benefit
of the Regional Government of Madeira.

During the year 2014 EEM signed a contract for the supply of natural gas to the Vitória power plant,
for a period of eight years, starting in March 2014. This contract requires the purchase of a minimum
annual quantity of 240 GWh, at average price of 2017, which is approximately 8,500,000 Euros/year.

In 2014, it was allocated the contract regarding the “Projecto de Ampliação do Aproveitamento
Hidroelétrico da Calheta”. Contracting conception/construction of the hydroelectric power plant of
Calheta III, pumping station of Paúl and forced pumping conduct with a contract price of 28,705,000
Euros, that at the end of 2017, 14,087,052 Euros were already billed. Our forecast is to execute this
construction by the end of 2018.

In 2016, a contract was awarded for the “Construção da Barragem de Acumulação do Pico da Urze e do
Reservatório de Restituição da Calheta, ampliação das Levadas Velha do Paul e do Paul II e remodelação
da Levada do Lombo do Salão”, with a Contractual price of 24,250,000 Euros, that at the end of 2017,
7,741,263 Euros were already billed. It is expected that this work will be executed by the end of 2018.

In 2016, a contract was awarded for the “Remodelação da Subestação do Lombo do Doutor 60/30 kV e
Ligações à Rede”, with a contractual price of 5,139,022 Euros, of which, at the end of 2017, 513,902
Euros were already billed. This work is expected to be completed by the end of 2018.

In 2016, a contract was awarded for the “Remodelação da Subestação do Amparo”, with a contractual
price of 3,546,246 Euros, of which, at the end of 2017, 886,561 Euros were already billed. This work
is expected to be completed by the end of 2018.

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On December 31st, 2017, the estimated values of commitments made by Enereem not listed in the
balance sheet were as follows:

Maintenance contracts of wind farms cover the period between 2015-2020.

The compensation regarding the agreement to join the alternative remuneration scheme provided by
the Decree no. 35/2013, detailed in Note 1, takes place in the period between 2013 and 2020.

46. Subsequent events

After the balance sheet date there were no events that could lead to adjustments in the financial
statements of the company.

47. Explanation added for translation

These financial statements are a transcription of financial statements originally issued in Portuguese
in accordance with generally accepted accounting principles in Portugal. In the event of discrepancies,
the Portuguese language version prevails.

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Extract of the Minute
of the General
Assembly Meeting
Annual Report 2017
Extract of the Minute of the General Assembly Meeting

MINUTE NUMBER FORTY-FOUR

- On the twenty eighth day of May of two thousand and eighteen at eleven o’clock AM, in accordance
with paragraph one of the 376th article of the Commercial Companies Code, the General Assembly
of the EEM – Empresa de Electricidade da Madeira, S.A., a collective entity registered in the
Commercial Registry of Funchal number 511010435 was gathered in its headquarters at Avenida
do Mar e das Comunidades Madeirenses, number thirty-two, in Funchal. At the meeting there
were present the Vice-President of the General Assembly, Dr. Rui Antero Fernandes Pestana,
the Secretary of the General Assembly, Dra. Ana Cristina Dantas Andrade, the members of the
Executive Board, Dr. Rui Alberto Faria Rebelo, Dr. João Pedro Barreto Sousa and Engineer Mário
Eugénio Jardim Fernandes, as well as the single shareholder, the Autonomous Region of Madeira,
represented by the assistant Regional Director of Economy, Dra. Cláudia Patrícia Homem de
Gouveia Dantas de Caires, mandated by the resolution of the Regional Government no. 303/2018
of the 17th of May 2018 published in JORAM on the 18th of May 2018, representing the total Share
capital, valued at twenty million Euros, for which reasons the General Assembly has gathered the
necessary quorum to operate and deliberate according to legal terms and regarding the following
order of tasks:

POINT ONE: The Annual Report of 2017;

POINT TWO: Deliberate on application of net profits;

POINT THREE: Management Report and Consolidated Accounts of 2017;

POINT FOUR: Deliberate on the general assessment of the administration and fiscal supervision;

POINT FIVE Deliberate on the distribution of dividends.

- At the opening of the session, the Vice - Chairman of the Board read the respective call, after which
he entered the first item on the agenda, giving the floor to the Chairman of the Board of Directors
of EEM - Empresa de Electricidade da Madeira SA, which presented an overview of the Company’s
operational performance in 2017, with a focus on production mix, evolving demand for electricity
by sector and the distribution of revenues. It then presented the main financial data, analysing EEM
accounts, income statement, balance sheet and cash flow.

- Turning to point two, the Chairman of the Board of Directors presented the proposal for the
application of results, which suggested that the net positive result for the year amounting to
€6,818,449.42 (six million, eight hundred and eighteen thousand, four hundred and fourty-nine
Euros and fourty-two cents) is given the following application:

- Retained earnings - €636,604.48 (Six hundred and thirty-six thousand, six hundred and four Euros
and forty-eight cents).

- Statutory Reserve: €681,844.94 (Six hundred and eighty-one thousand, eight hundred and forty-
four Euros and ninety-four cents).

- Distribution of dividends – €5,500,000.00 (Five million, five hundred thousand Euros).

- Once the document in question was appreciated and the proposal presented, it was resolved
unanimously to approve point one and two.

- In compliance with Articles no. 65 and no. 66 of the Companies Code, a non-financial statement
(sustainability report) was also presented for the year 2017, which, after analysis, was approved
unanimously.

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- Regarding point three, the Chairman of the Board of Directors presented the Annual Report
and Consolidated Accounts of 2017, with the net income of the year, amounting to €6,911,083.50
(Six million, nine hundred and eleven thousand and eighty-three Euros and fitty cents) of which
€6,818,449.42 (Six million, eight hundred and eighteen thousand, four hundred and forty-nine Euros
and forty-two cents) are attributable to the EEM the remaining €92,634.08 (Ninety-two thousand,
six hundred and thirty-four Euros and eight cents) are attributable to minority interests. After
proper consideration it was resolved to approve them unanimously.

- Regarding item four of the agenda, Dra. Cláudia Patrícia Homem de Gouveia Dantas de Caires
as the representative of the shareholder Autonomous Region of Madeira said that in view of the
presentation of said documents, recognised a very positive performance of EEM and its subsidiaries,
expressing a high recognition to the Board of Directors of the Company and its fiscal supervision.

- In compliance with Articles no. 508.º-G of the Companies Code, a non-financial statement
(sustainability report) was also presented for the year 2017, which, after analysis, was approved
unanimously.

- Regarding the last point, after being duly analysed, it was decided to unanimously approve the
allocation of dividends in the amount of €5,500,000 (Five million, five hundred thousand Euros) to
the sole shareholder.

- As there were no other matters of interest to the company to address, so the meeting was closed
and the present minute written, which, after having been read and approved, was properly signed.

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