NERA Economic Consulting Announces Results from Second CESUR Energy Auction in Spain

20 September 2007

Madrid/20 September 2007 -- NERA Economic Consulting, a leading global adviser on market design and auctions to government agencies and electricity service providers, has completed the second in a series of energy auctions of bilateral contracts for regulated supply in Spain (CESUR Auctions).

The auction, held on 18 September 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 has supervised the auction and has validated its competitive results.

The auction was held in successive descending price rounds, a format generally used for the purchase of large volumes of energy. Under this auction design, every round the auction manager names a price and bidders submit the quantities they want to sell at the price of the round. The auction concludes at that price where the volume bid is equal to the volume that wants to be bought. Total volume bought during the auction was 6,500 MW, to be supplied in base load to distribution companies who serve captive customers in Spain and Portugal over the next three months.

The auction began with a starting price of 60€/MWh, with 26 domestic and international sellers participating in the bidding. The auction closed after 15 bidding rounds, with the product awarded to 18 sellers at a price of 38.45€/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 legislation (Endesa 35%, Iberdrola 35%, EDP 12%, Fenosa 11%, Hidrocantábrico 4%, Viesgo 3%). These contracts will cover 30-40% of the energy for captive customers supplied by the distribution companies in Spain in the period October-December.

The resulting auction price for the energy will be part of the allowed energy costs of the distribution companies leading to clear benefits for the system. By buying forward contract cover the exposure of distribution companies in Spain, who 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 December 2007, and in March 2008.

To obtain further information about the CESUR Auctions, please visit: www.subastacesur.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.