NERA Economic Consulting Announces Results from CESUR Energy Auction in Spain

28 July 2007

Madrid/28 June 2007 -- NERA Economic Consulting, a leading global adviser on market design and auctions to government agencies and electricity service providers, has completed the first in a series of auctions of bilateral energy contracts for regulated supply in Spain (CESUR Auctions).

The auction, held on 19 June 2007, was carried out under the legal framework of Orden Ministerial ITC/400/2007, which regulates bilateral contracts between electricity distributors for the supply of energy to regulated customers. NERA was commissioned by Comisión Nacional de Energía (CNE), the Spanish energy regulator, to design and manage the CESUR Auctions. The CNE supervised the auction and has validated its competitive results.

The first auction was held in successive descending price rounds, a format generally used for the purchase of large volumes of energy. Total volume bought during the auction was 6,500 MW, to be supplied in base load to distribution companies that serve captive customers in Spain and Portugal over the next three months (for a total of 14,352 GWh).

The auction began with a starting price of 70€/MWh, with 25 domestic and international sellers participating in the bidding. The auction closed after 25 bidding rounds, with the product awarded to 21 sellers at a price of 46.27€/MWh. Base load contracts resulting from the auction have been assigned to the main distribution companies in Spain and Portugal according to the pre-established percentages in the Resolución, dated 19 April 2007, of the Secretaría General de Energía (Endesa 35%, Iberdrola 35%, EDP 12%, Fenosa 11%, Hidrocantábrico 4%, and Viesgo 3%). These contracts will cover 30-40% of the energy for captive customers supplied by the distribution companies in Spain during the period July-September 2007.

The resulting auction price for the energy will be part of the allowed energy costs of the distribution companies, which results in clear benefits for the Spanish electricity system. Through forward energy contract cover, the exposure of distribution companies in Spain that normally purchase energy in the volatile spot market is reduced. Also, by providing a transparent price signal for energy procurement, the energy component in regulated tariffs can be set using market comparisons. This will foster competition in the retail energy market and will eliminate the disparity between energy costs and regulated tariffs that generates deficits for distribution companies.

Future CESUR auctions administered by NERA will be held in September and December 2007, and in March 2008.

To obtain further information about the CESUR Auctions, please visit: www.subasta-cesur.eu.

NERA Economic Consulting (www.nera.com), founded in 1961 as National Economic Research Associates, is a unit of the Oliver Wyman Group, an MMC company.

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For over half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world's leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

NERA's clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world's largest economic consultancies. With its main office in New York City, NERA serves clients from more than 25 offices across North America, Europe, and Asia Pacific.