EDP said the JV would focus on exploring potential hydro schemes in the Vouga and Palva river basins.
Each project to be developed as a result of the pact will be progressed via separate companies owned in a 55:45 split between EDP Producao and Eviva, respectively.
The strategic venture is a result of EDP's plan to boost its hydro assets by almost 20%, or 1GW by 2015, from the current total installed capacity of 4405MW.
While developing its hydro assets, the company has also been increasing its renewables portfolio through wind power acquisitions.
