NERA Economic Consulting Announces Results from Third CESUR Energy Auction for Regulated Distribution Firms in Spain

19 December 2007

Madrid/19 December 2007 -- NERA Economic Consulting, a leading global adviser on the design of energy auctions, successfully completed the third in a series of descending-clock auctions (CESUR Auctions) for electricity supply by the main regulated distribution companies in Spain and Portugal. The auction, held on 18 December 2007, was subject to the legal framework of Ministerial Order ITC/400/2007. NERA was commissioned by the Comisión Nacional de Energía (CNE), the Spanish energy regulator, to design and manage the CESUR Auctions. The CNE supervised the December auction and has validated its competitive results.

The December auction was held in successive descending price rounds, a format commonly used for the acquisition of large volumes of energy, particularly in retail access jurisdictions. Under the auction design, the auction manager quotes a price at the beginning of each round and bidders submit the volume they want to sell at the going price. The auction concludes at the round where the total bid volume equals the target volume that must be acquired for energy supply. The third CESUR auction began with a starting price of 85€/MWh, with 24 domestic and international sellers participating in the bidding. The auction closed after 14 bidding rounds, at a price of 64.65 €/MWh. The total volume of the auction was 6,500 MW of base load, awarded to 23 winning sellers.

The auction volume assigned to each winning bidder is to be converted into bilateral base-load energy contracts between the seller and each of the main distribution companies in Spain and Portugal for supply to end-users during the first quarter of 2008. The energy quantities in the bilateral base load contracts that electricity distributors enter into as a result of the auction are determined according to the pre-established percentages as per the current Spanish legislation (Endesa 35%, Iberdrola 35%, EDP 12%, Fenosa 11%, Hidrocantábrico 4%, Viesgo 3%). These contracts will cover approximately 30% to 40% of the total energy supply by the distribution companies in Spain in the period 1 January to 31 March 2008.

The resulting auction price and contract quantities are recognized as part of the authorized energy costs of the distribution companies, leading to clear benefits. These bilateral contracts limit the market exposure of the distribution utilities, which normally purchase their energy requirements in the volatile spot market.

NERA will evaluate possible variants to the auction product in the following auctions. The next CESUR auction will be held in March 2008. To obtain further information about the CESUR Auctions, please visit: www.subastacesur.eu. You can also contact the Auction Manager via email.

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.