NERA Economic Consulting Announces Results from the Fourth CESUR Energy Auction in Spain

17 March 2008

Madrid/17 March 2008 -- NERA Economic Consulting, a leading global adviser on the design of energy auctions, successfully completed the fourth in a series of descending-clock auctions (CESUR Auctions) for electricity supply to captive customers in Spain and Portugal. The auction, held on 13 March 2008, covers a significant part of the electricity needs of the Spanish and Portuguese electricity distribution companies for the delivery period April to September 2008. NERA was commissioned by the Comisión Nacional de Energía (CNE), the Spanish energy regulator, to design and manage the CESUR Auctions.

The 13 March 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 fourth CESUR auction introduced a new element with regard to the previous three auctions, as this auction included a simultaneous auction of two products: a three-month base load product, for delivery from 1 April to 30 June 2008, and a six-month base load product, for delivery during the period 1 April to 30 September 2008, both months included. In the fourth CESUR auction, the distribution companies purchased a total of 7,000 MW of base load, divided equally between the two products (3,500 MW for the three-month product and 3,500 MW for the six-month product).

The fourth CESUR auction began with a starting price of 85€/MWh for both products, with 26 domestic and international sellers participating in the bidding. The auction closed after 16 bidding rounds, at a price of 63.36 €/MWh for the three-month base load product and 63.73 €/MWh for the six-month product. The total volume of the auction was 7,000 MW of base load, awarded to 26 winning sellers. The CNE has validated its competitive results.

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. The 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%).

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.

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

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.