(The following statement was released by the rating agency)LONDON, April 15 (Fitch) Fitch Ratings has maintained EDP - Energias de Portugal S.A. and EDP Finance B.V.'s 'BBB-' Long-term Issuer Default Ratings (IDR) and senior unsecured ratings and 'F3' Short-term IDR on Rating Watch Negative (RWN). Fitch has also maintained Hidroelectrica del Cantabrico, S.A.'s (HC) 'BBB-' Long-term IDR and 'F3' Short-term IDR on RWN.  Fitch placed EDP on RWN in July 2013, and has subsequently maintained the RWN on January 15, 2014. This rating review is to comply with Fitch's internal guideline to review ratings on Rating Watch every three months following the initial six-month review. The RWN followed the introduction by the Spanish government of regulatory changes affecting the remuneration of electricity sector activities including electricity distribution and renewable generation assets. We expect to resolve the watch once the updated strategy is available and in light of management actions to cope with the new regulation and market scenario.  KEY RATING DRIVERSPenalizing Regulatory ChangesEDP's EBITDA in 2013 was negatively impacted by regulation changes in Spain and Portugal and adverse foreign currency movements of the Brazilian real. The impact of regulation changes in Spain amounts to approximately EUR180m including cut in capacity payments, lower remuneration in regulated networks and renewables, and generation taxes. Regulatory changes in Portugal introduced in 2012 resulted in lower EBITDA by EUR50m including cuts in capacity payments and lower remuneration of distribution networks.Both Spain and Portugal introduced between 2012-13 changes in the regulated system of costs in order to reduce the tariff deficit in their respective markets.   Resilient Operating PerformanceDespite the negative impact of regulatory changes on earnings, EDP's EBITDA in YE13 remained flat at EUR3.6bn thanks to a positive off-setting contribution from exceptionally favorable hydro conditions in Iberia supporting contracted and liberalized generation operations both in Spain and Portugal, new renewable capacity contribution from EDP Renovaveis and the recovery of past distribution tariff deviation in Brazil.     Slower DeleverageEDP's funds from operations (FFO) adjusted net leverage at YE13 remained almost flat at 5.6x on YE12 given that, despite lower net debt, FFO was negatively impacted by lower regulatory revenues and higher cash taxes - mostly TD securitizations related - and financial costs. The ability and the pace of future deleveraging will be driven by the level of capex that the management will decide to commit in its business plan and in light of a lower net debt /EBITDA the company has targeted to achieve. Regulation Jeopardizes Execution of DisposalsThe impact on market valuation of the existing renewable portfolio in Spain remains a potential downside. The uncertainties surrounding the regulatory framework have delayed the disposal of minority stakes in renewable assets to EDP's new partner China Tree Gorges (CTG). Upon the acquisition of its 21% stake in EDP, CTG committed to invest up to EUR2bn in minority stakes of EDP's renewable assets. To date, realized or already agreed investments amount to EUR1bn.  The planned disposals may be redirected to outside of Spain depending on the final renewable regulation law, which at the moment is only in draft form. Positive Outlook on PortugalFitch has recently reviewed the Outlook on Portugal's IDR to Positive based on progress in reducing its budget deficit to 4.5% of GDP, well below the target of 5.5%, and recovery of the Portuguese economy. Fitch has revised its growth GDP projections to 1.3% from 0.2% for 2014 and to 1.5% from 1% in 2015. GDP's growth supports a steady recovery of electricity demand in 2014-15 which in turn is a positive driver for EDP's operating performances.   Declining TD Receivables    EDP's exposure to Portuguese TD went up EUR200m in YE13 to EUR2.4bn, having monetized EUR1bn of receivables over the year. In 1Q14 an additional EUR750m of TD monetization and EUR150m of cash proceeds from assets sales were completed. EDP's exposure to the Spanish TD has declined to EUR264m at YE13 having received during 2013 EUR487m through the securitization of receivables. HC's Rating AlignedHC is wholly owned by EDP and its ratings remain aligned with those of EDP according to Fitch's "Parent and Subsidiary Rating Linkage Methodology", reflecting the close integration of the two companies. HC is strategically and operationally important to EDP as it provides the parent with a strong platform in Spain, enabling the group to optimize its positioning in the Iberian market.LIQUIDITYAs of December 2013, committed facilities plus cash on hand at EDP's recourse level (excluding project finance and EDP Brazil) amounted to EUR4.4bn to compare with 2014 maturities of EUR3.2bn. Fitch expects the company to generate slightly negative free cash flow in 2014. EDP's market access has improved having successfully placed a seven year USD750m bond in January and a five year EUR650m bond in April 2014 which adds to the liquidity available. EDP's EUR2.0bn revolving credit facility expires in November 2015.    RATING SENSITIVITIES Positive: Future developments that may potentially lead to a resolution of the RWN and affirmation of the ratings include:- FFO adjusted net leverage trending towards 4.5x and FFO interest coverage above 4.0x on a sustained basis. Negative: Future developments that may potentially lead to a downgrade of the ratings include:- An increase of expected FFO adjusted net leverage above 5.0x and FFO interest coverage below 3.5x on a sustained basis as a result of the approved measures.- Deterioration of the operating environment or further government measures substantially reducing cash flows.Contact: Principal Analyst Pilar AuguetsDirector+34 93 467 87 47Supervisory Analyst Francesca Fraulo Director+39 02 879087 237Fitch Italia SpaVia Privata Maria Teresa 820123 MilanCommittee ChairpersonArkadiusz WicikSenior Director+48 22 338 62 86Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com.Additional information is available at 
  www.fitchratings.com.
  For regulatory purposes in various jurisdictions, the supervisory analyst named above is deemed to be the primary analyst for this issuer; the principal analyst is deemed to be the secondary.Applicable criteria, 'Corporate Rating Methodology', dated 05 August 2013, is available at 
  www.fitchratings.com.
 Applicable Criteria and Related Research: Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139
 Additional Disclosure Solicitation Status 
  http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=826982
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