The first Sustainability Report for 2004 and 2005 was published by Rede Eléctrica Nacional, S.A., in 2006. It is a great pleasure for us to continue to honour our commitment to giving our stakeholders regular accounts of our involvement in and contribution to sustainable development in 2006, though they now refer to REN – Redes Energéticas Nacionais, SGPS, S.A.
The year 2006 was marked by the setting-up and addition to the REN Group of three natural gas companies: REN – Gasodutos, REN ATLÂNTICO and REN – Armazenagem. This operation was only completed in September and so part of the information, such as environmental indicators, refers mostly to the Rede Eléctrica Nacional. We will seek to achieve a greater balance between the performances of all the Group's companies in future reports.
The granting by the Portuguese government of the concessions for the transport, regasification and storage of natural gas, to add to the existing electricity transmission concession, reinforced REN's strategic positioning in the national economic panorama in general and the energy sector in particular in the last quarter of 2006.
This has naturally resulted in raised awareness of added responsibility when it comes to abiding by and defending the principles of sustainable development by any means possible. We have therefore made a commitment to maintaining and perfecting an ethical, socially responsible management model and will endeavour to give balanced consideration to economic, social and environmental aspects in our decision-making processes.
Within the framework of these principles, our efforts are focused on becoming one of the most efficient European energy transmission operators, creating value and living up to or even exceeding the expectations of the different stakeholder groups.
In order to fulfil this vision of the future, REN has devoted special attention to a variety of strategic aims, some of the most important of which are creating value for shareholders, developing our human capital, health and safety, quality of service, rational investments and preserving the environment.
ECONOMIC PERFORMANCE
Where economic performance was concerned, there was a highly significant increase in the value created by REN in 2006 compared to 2005. The sale of our 18.3% shareholding in GALP Energia contributed considerably to this increase (253.8%), with a capital gain of around EUR 524 million, as did the change in the tariff convergence process with the Autonomous Regions of Madeira and the Azores, resulting in a favourable difference of EUR 59 million.
The profits distributed to our shareholders total EUR 461.3 million, in accordance with the proposal for appropriation of profits to be submitted to the General Meeting of Shareholders. This is EUR 439 million more than in 2005. The shareholders also received an early dividend of EUR 87 million, which, along with the retained earnings, accounted for more than 75% of the value created.
These results were achieved in a year in which the Group continued at the highest level in terms of operations and the Group's companies' operating behaviour. Equivalent interruption time, EIT, which was 0.57 minutes for electricity transmission (not counting the effects of a force majeure incident on 4 November incident affecting around 15 million consumers in the synchronously connected European grid) and the natural gas network continuity of service indicators on the availability of the system and average duration of supply cuts to all delivery points were 100% and 0 minutes, respectively.
Where investment was concerned, we continued to give priority to developing electricity transmission infrastructures to accommodate the pressure resulting from the accelerated growth of special-status generation, which made an 18% contribution to satisfying overall electricity demand, and to ensuring that the Iberian market's technical interconnection capacity between Portugal and Spain does not stand in the way of the construction of the MIBEL.
ENVIRONMENTAL PERFORMANCE
With regard to quality, environment and safety management systems, one aspect of 2006 was the consolidation of these systems in the electricity transmission grid, including the renewal of ISO 14001:2004 certification for another three years,
and the other was the expiry of certification in the gas transport network, as a result of the setting-up of the new companies and their inclusion in REN. We will be dealing with this situation in the near future.
Together with our substantial investments in the electricity grid, we undertook a considerable number of activities that made REN one of the largest promoters of environmental studies in the country. They took the form of environmental impact assessments, environmental impact statements, project environmental conformity reports and a wide range of impact-mitigating measures.
We continued to take voluntary environmental measures as part of our environmental performance plan. The plan, which was highly successful in 2006, includes research and development partnerships and projects, the integration of substations in the landscape, and the protection of birdlife and environmental rehabilitation of right-of-way lines.
REN and the Centro de Estudos de Avifauna Ibérica (Iberian Birdlife Study Centre) continued a project to preserve Bonelli's eagle tree species in Portugal and we signed an agreement with IDAD – Instituto do Ambiente e Desenvolvimento (Environment and Development Institute) for studies of noise, an environmental aspect that requires continuous technical measures and investment on our part. I would also like to mention the completion of the first phase in the preparation of the Guide on Assessing the Environmental Impact of the National Transmission Grid, a joint initiative by the Agência Portuguesa do Ambiente (Portuguese Environment Agency) and APAI – Associação Portuguesa de Avaliação de Impactes (Portuguese Impact Assessment Association).
SOCIAL PERFORMANCE
In the social field, I am pleased to report that we continue to support the United Nations Global Compact initiative. The Board of Directors fully supports its 10 principles and endeavours to disseminate them to the companies in the country. With this in mind, REN is one of the founding members of the Portuguese Global Compact Network. This report is the best way for us to communicate REN's progress in applying these principles, following up on the commitment we made to the UN Secretary-General.
In 2006, REN's participation in the Fórum BCSD Portugal –Business Council for Sustainable Development was particularly active and fruitful. REN had the privilege of being represented by young managers with high potential at all the editions of the organisation's Young Managers Team project.
The previous report described the approval of REN's statement of commitment to society was approved. In early 2007, REN's Board of Directors approved and published a social responsibility policy statement applicable to all the Group's companies. The statement takes up and furthers our commitments to society.
Although slightly behind schedule, in the last quarter of 2006 we began a project to systematise and improve communication and relations with stakeholders based on the AA 1000 SES – Stakeholder Engagement Standard. This is a highly opportune project of great interest at a time when there has been increasing public opposition to the construction of new infrastructure, with considerable media coverage.
In the field of knowledge and innovation, we have established and maintained partnerships with Portuguese and foreign universities and research centres, seeking the best solutions to increasingly complex problems. We have also intensified cooperation with specialised international bodies in the energy sector and with other energy companies.
We continued to sponsor civil society's cultural initiatives, focusing particularly on theatre, cinema, photography, literature and music. In 2006, we were once again the exclusive patron of Teatro de São João in Oporto. We also sponsored sports events and countless humanitarian organisations.
Improving the qualifications of the Group's human capital was particularly important. The Group belongs to a technologically challenging, constantly changing sector where new skills are required on a daily basis. In 2006, we undertook the first phase of a skill management project to ensure that we have the right tools to identify and update the necessary competences and make better use of existing ones. The project will continue in 2007 and will be applied to all the Group's companies.
Where safety and accident prevention were concerned, there was an overall improvement in the accident rate not only for REN employees but also for contractors and service providers working with us. This is, however, a never-ending, unrelenting task. Unfortunately there was one fatal accident involving a service provider employee in 2007. Regarding safety, I would like to express my appreciation of the intensive programme of drills and a word of thanks to all the bodies who have worked with us, particularly the fire brigades.
THE FUTURE
The near future continues to hold important challenges. In particular, we bear the responsibilities resulting from managing the national electricity transmission and gas transport system in a framework of growing internationalisation of energy supply problems and the construction of the Iberian electricity market, MIBEL. At the same time, we will also have to continue our part of the preparation for the liberalisation of the natural gas sector.
Regulatory questions are extremely important in REN's current activity, not only due to their stabilising effect on investment in infrastructure to guarantee mandatory quality of service but also to the confidence that they instil in the market in regard to the predictability of the results.
We will soon be continuing to consolidate our new corporate structure and its new governance model, using this reorganisation, without affecting high operability, to take advantage of existing synergies and encourage the creation of a "Group culture" based upon the different cultures of its companies.
The first phase of REN's privatisation will also be starting soon and the initial public offering is now being prepared. This initiative will be another milestone in the history of the energy sector.
In short, 2006 was a year filled with activities in favour of sustainable development. We have just begun a new cycle, which is also full of challenges that we will endeavour to meet with redoubled motivation and commitment.
José Rodrigues Pereira dos Penedos