Elecnor S. A. — Annual Report 2019

Mar 27, 2020

Non-official English translation for information purposes only. Spanish version shall prevail.

Elecnor, S.A. and Subsidiaries

Consolidated Annual Accounts 31 December 2019

Consolidated Directors' Report 2019

(With Independent Auditor's Report Thereon)

Prepared under International Financial Reporting Standards as adopted by the European Union

Revenue from Construction contracts
See Note 3.u to the consolidated annual accounts
The key audit matter	How the matter was addressed in our audit
A large part of the revenues of the Elecnor Group are generated by construction and services provision contracts, in which the revenue is recognised over time by the resources method based on the costs incurred over the total costs expected, i.e. on the basis of the degree of performance of the contract at the end of each accounting period, it being necessary, for determining the revenue to be recognised, for the Group to make estimates of the costs and result foreseen for each of the contracts. The application of this method therefore requires a high degree of judgment on the part of the directors and exhaustive control of the estimates made and of the deviations that may occur throughout the duration of the contract. The estimates should take into account all the costs and revenues related to the contracts, including any additional cost to the one initially budgeted, and the risks or claims that are in dispute. In this respect, the revenues are only recognised when it is probable that the Group will receive economic profits from the transaction and the costs incurred and those to be incurred, and the degree of performance of the contract, on the closing date, can be assessed reliably. Because of the uncertainty associated with the aforesaid estimates and the fact that changes in them might give rise to material differences in the revenues registered, it was considered a key audit matter.	Our auditing procedures included, among others, the following: - Evaluating the design and implementation of controls related to the process of recognition and valuation of revenue by the resources method and with the budgetary control process and verification of the effectiveness of the key controls identified; - Checking that the methodology used by the Group for determining the revenue, calculated taking as a basis the proportion of services performed with respect to the total of services to be rendered, is one of the methodologies accepted by the applicable regulatory framework for financial information; - Evaluating the hypotheses used in drawing up the budgets for the contracts; - On the basis of certain quantitative and qualitative selection criteria, we selected a sample of the construction contracts in order to assess the estimates made in drawing up the results forecast of the contract and in the recognition of revenues. In this respect, we obtained the contracts and the support documentation on which those estimates are based and the judgements made by the Group; - Comparative analysis of the result of finalised contracts with the result budgeted, analysing the historic evolution, the budgetary control performed by the Group and the judgement applied, and assessing whether on the whole the budgets represent the best estimate considering the risks existing at every moment; - Assessing whether the provisions recognised at the close of the year relating to each of the contracts reasonably reflect present obligations which will probably generate a departure from financial profits in future, as laid down in the contracts and obtaining the documentary support that justifies their recognition and assessing the judgment applied by the Group in its estimates; and - Assessing whether the information disclosed in the consolidated annual accounts meets the requirements of the regulatory framework for financial information applicable to the Group.

The key audit matter

How the matter was addressed in our audit

As mentioned in note 2.f to the accompanying notes to the consolidated annual accounts, during the year 2019 the Elecnor Group undertook a shareholding restructuring transaction in the company Celeo Concesiones e Inversiones, S.L. (hereinafter Celeo CI) which was carried out through a non-cash contribution which, together with the partial sale of shares that Elecnor, S.A. possessed, enabled a new shareholder to enter with a 49% holding in its capital, so the Elecnor Group lost control of the sub-group Celeo Concesiones e Inversiones, S.L. and subsidiary companies, over which, after the restructuring carried out, it has joint control. This transaction requires thorough analysis of the composition of the bodies keeping control over the relevant activities of the company, as well as of the agreements existing between partners with regard to concluding on the existence of joint control. Likewise, accounting for these transactions constitutes a complex exercise that calls for applying value judgments in determining the dilutive effect on Elecnor of not taking part in the capital increase subscribed by the other shareholder, and in estimating the reasonable value of the holding in Celeo CI retained by the Group. We consider this transaction a key audit matter because of its significance, the high degree of judgment inherent to the reasonable value estimates and the impact that it has on the consolidated annual accounts.

Our auditing procedures included, among others, the following: - Evaluation of and discussion with the Group's Management on the analysis that they made whereby they conclude on the loss of control. Reading and understanding the articles of association of Celeo CI and of the partner agreements; Evaluation of the methodology and key hypotheses used to determine the reasonable value of the holding retained in Celeo CI, involving for that purpose our specialists in assessment and corroborating the Group's explanations with market data and our prior experience, and which includes: Obtaining the valuation report on the Celeo Redes Group made by the independent expert engaged by the Group, Understanding and assessing the hypotheses used by the Group to determine the reasonable value of the other holdings held by Celeo CI; Making sure that the registration of the transactions carried out was performed in accordance with what is laid down by the accounting regulations applicable. In particular, that the assets and liabilities linked to the companies that have fallen outside the consolidation perimeter have been derecognised and that the holding retained over Celeo CI was registered initially at its reasonable value on the date on which the loss of control occurred. - Assessing whether the information on the transaction disclosed in the consolidated annual accounts meets the requirements of the regulatory framework for financial information applicable to the Group.

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CHAIRMAN (Non-executive):	MR. JAIME REAL DE ASUA ARTECHE	D.N.I. 14.906.314-Z
DEPUTY CHAIRMAN:	MR. FERNANDO LEON DOMECQ	D.N.I. 31.582.770-K
DEPUTY CHAIRMAN:	MR. IGNACIO PRADO REY-BALTAR	D.N.I. 14.899.260-K
CEO:	MR. RAFAEL MARTIN DE BUSTAMANTE VEGA	D.N.I. 788.886-D
MEMBERS:	MR. FERNANDO AZAOLA ARTECHE	D.N.I. 14.500.614-B
	MR. MIGUEL CERVERA EARLE	D.N.I. 05.390.195-F
	MRS. ISABEL DUTILH CARVAJAL	D.N.I. 5.392.056-M
	MRS. IRENE HERNANDEZ ALVAREZ	D.N.I. 00.811.866-N
	MR. JUAN LANDECHO SARABIA	D.N.I. 16.025.693-Y
	MR. MIGUEL MORENES GILES	D.N.I. 31.552.959-H
	MR. GABRIEL DE ORAA Y MOYUA	D.N.I. 14.170.156-V
	MR. RAFAEL PRADO ARANGUREN	D.N.I. 16.042.601-D
	MR. EMILIO YBARRA AZNAR	D.N.I. 16.039.261-G
	MR. JOAQUÍN GÓMEZ DE OLEA Y MENDARO	D.N.I. 16.038.401-H
MEMBER DEPUTY SECRETARY:	D. CRISTÓBAL GONZÁLEZ DE AGUILAR ALONSO-URQUIJO	D.N.I. 1.397.142-F

In compliance with current legislation, all the members of the Board of Directors of ELECNOR, S.A. as of signing date have drafted the annual accounts of ELECNOR, S.A. and its subsidiaries forming the Group ELECNOR (consolidated) corresponding to fiscal year ended on 31 December 2019, as herein detailed and identified.

Likewise, and compliant to paragraph one, letter b) of article 8 of the Royal Decree 1362/2007, the members of the Board of Directors of ELECNOR, S.A. state that, to their best knowledge, the Consolidated Annual Accounts of the Group ELECNOR (consolidated) corresponding to fiscal year ended on 31 December 2019 have been prepared according to the International Financial Reporting Standards adopted by the European Union, applying the corresponding consolidation principles, accounting policies and valuation criteria, showing a truthful image of the consolidated net equity, consolidated financial situation and the results of the consolidated companies, consolidated changes in equity and consolidated cash flow, and that the Management Report of the Group ELECNOR (consolidated) corresponding to fiscal year ended on 31 December 2019 includes the truthful assessment of the evolution and business results and the position of the consolidated companies, together with the description of the main risks and uncertainties facing the Group ELECNOR (consolidated).

The consolidated Annual Accounts are comprised by the documents herein attached.

Madrid, 25 March 2020.

Consolidated Annual Accounts 31 December 2019

Consolidated Directors' Report 2019

(With Independent Auditor's Report Thereon)

Prepared under International Financial Reporting Standards as adopted by the European Union

Consolidated Statement of Financial Position at 31 December 2019

(Thousands of Euros)

		Restated 31	Restated
	31 December 2019	December 2018 (*)	1 January
Assets			2018 (*)
Non-current assets:
Intangible assets
Goodwill (Note 9)	24.878	28.840	28.826
Other intangible assets (Note 10)	17.442	45.775	49.676
	42.320	74.615	78.502
Right-to-use assets (Note 12)	35.166	-	-
Property, plant and equipment (Note 11)	715.735	689.358	753.774
Equity-accounted investees (Note 13)	580.567	339.718	381.335
Non-current financial assets (Note 14)
Investments	1.744	2.560	2.687
Other financial assets	40.227	80.840	64.285
Derivative financial instruments (Note 18)	24	109	1.036
	41.995	83.509	68.008
Deferred tax assets (Note 21)	103.427	95.826	97.294
Total non-current assets	1.519.210	1.283.026	1.378.913
Current assets:
Inventories (Note 3.p)	5.759	7.288	7.630
Customer contract assets (Note 24)	306.129	258.756	146.756
Trade and other receivables (Note 15.a)	682.168	653.773	741.001
Trade receivables from related companies (Note 29)	15.119	7.112	13.099
Public entities, receivable	40.633	35.943	52.164
Current income tax assets	6.820	12.853	8.763
Other receivables	20.794	15.221	21.650
Current investments in related companies	128	297	-6
Other current financial investments	6.429	4.947	-
Derivative financial instruments (Note 18)	3.873	871	-
Other current assets	8.345	6.063	10.698
Cash and cash equivalents (Note 15.b)	325.116	293.399	236.642
Non-current assets held for sale (Note 8)	38.721	423	423
Total current assets	1.460.034	1.296.946	1.238.820
Total assets	2.979.244	2.579.972	2.617.733

The accompanying notes form an integral part of the consolidated annual accounts. (*) Figures restated, see Note 2.e)

Consolidated Statement of Financial Position at 31 December 2019 (Thousands of Euros)

Equity and Liabilities	31 December 2019	Restated 31 December 2018 (*)	Restated 1 January 2018 (*)
Equity (Note 16):
Equity attributable to equity holders of the Parent
Capital	8.700	8.700	8.700
Own shares (Note 16)	(21.963)	(21.884)	(21.232)
Other reserves	743.548	705.915	671.167
Translation differences (Note 16)	(132.494)	(199.459)	(152.004)
Valuation adjustments to equity (Note 16)	(13.569)	(51.717)	(57.381)
Profit/loss for the year attributable to the Parent	126.377	82.117	64.737
Interim dividend paid in the year (Note 5)	(4.987)	(4.795)	(4.611)
	705.612	518.877	509.376
Non-controlling interests (Note 16)	31.708	47.469	54.370
Total equity	737.320	566.346	563.746
Non-current liabilities:
Official grants (Note 3.r)	6.448	6.979	7.829
Provisions for other liabilities and charges (Note 19)	46.389	29.914	30.598
Financial liabilities for the issuance of bonds and other marketable securities
(Note 17)	60.122	35.185	36.922
Finance liabilities on loans and borrowings (Note 17)	583.934	571.221	697.836
Derivative financial instruments (Notes 17 & 18)	14.132	11.413	0
Lease liabilities (Note 12)	32.710	-	-
Other non-current liabilities	19.634	24.197	26.563
Deferred tax liabilities (Note 21)	20.606	22.097	30.827
Total non-current liabilities	783.975	701.006	830.575
Current liabilities:
Provisions for other liabilities and charges (Note 19)	64.418	68.029	48.992
Financial liabilities for the issuance of bonds and other marketable securities
(Note 17)	74.998	156.825	101.380
Finance liabilities on loans and borrowings (Note 17)	96.964	86.035	69.962
Derivative financial instruments (Notes 17 & 18)	5.722	6.569	0
Non-current liabilities (Note 12)	7.410	-	-
Trade payables to associates and related companies (Note 29)	60	596	3.447
Trade and other payables-
Purchases and services received	551.744	481.468	466.059
Customer advances (Note 20)	89.013	67.543	117.669
	640.757	549.011	583.728
Customer contract liabilities (Note 24)	357.009	320.310	252.734
Current income tax liabilities	52.370	23.795	20.594
Other payables
Public entities, payable	56.002	49.246	52.727
Current liabilities (Note 11 and 24)	79.082	52.204	89.848
	135.084	101.450	142.575
Liabilities associated directly with non-current assets held for sale (Note 8)	23.157	-	-
Total current liabilities	1.457.949	1.312.620	1.223.412
Total liabilities and equity	2.979.244	2.579.972	2.617.733

The accompanying notes form an integral part of the consolidated annual accounts.

(*) Figures restated, see Note 2.e)

Consolidated Income Statement

for the year ended

31 December 2019

(Thousands of Euros)

	2019	Restated 2018 (*)
Continuing operations:
Net turnover (Note 24)	2.453.726	2.250.899
Changes in inventories of finished goods and work in progress	23	(1.055)
Self-constructed assets (Note 3.i)	24.240	5.079
Materials consumed (Note 24)	(1.195.013)	(1.089.170)
Other operating income (Note 3.r)	14.495	17.740
Personnel expenses (Note 24)	(669.018)	(599.994)
Other operating expenses (Note 24)	(381.931)	(348.064)
Expense for amortisation, depreciation, impairment and charges to provisions (Note 24)	(162.122)	(104.793)
Impairment and profit/loss on disposal of fixed assets (Note 2.f)	186.742	-
Profit/loss at equity-accounted investees
(Notes 7 and 13)	(46.268)	18.733
Negative difference in business combinations (Note 7)	14.802	-
Results from operating activities	239.676	149.375
Finance income (Note 24)	9.338	10.899
Finance costs (Note 24)	(54.560)	(48.609)
Translation differences	(2.552)	13.838
Impairment and profit/loss on disposal of financial instruments	(2.235)	273
Changes in the fair value of financial instruments	410	(385)
Profit before income tax	190.077	125.391
Income tax (Note 22)	(59.412)	(37.558)
Profit/loss from continuing operations	130.665	87.833
Profit/loss for the year	130.665	87.833
Attributable to:
Shareholders of the Parent	126.377	82.117
Non-controlling interests (Note 16)	4.288	5.716
Earnings per share (in Euros) (Note 31)
Basic	1,49	0,97
Diluted	1,49	0,97

The accompanying notes form an integral part of the consolidated annual accounts.

(*) Figures restated, see Note 2.e)

Consolidated Statement of Comprehensive Income for the year

ended 31 December 2019

(Thousands of Euros)

	Notes to the Report	2019	Restated 2018 (*)
CONSOLIDATED PROFIT		130.665	87.833
Other comprehensive income:
Items to not be reclassified to profit or loss		-	-
Items to be reclassified to profit or loss
- Cash flow hedges		53.089	(11.479)
- Exchange differences of financial statements for businesses abroad		(4.785)	(30.839)
- Share of other comprehensive income of equity-accounted investees	Note 13	(15.051)	(10.462)
- Tax effect		(1.985)	3.024
Other comprehensive income for the year, net of tax		31.268	(49.756)
Total comprehensive income attributable to:		161.933	38.077
a) Equity holders of the Parent		153.210	36.833
b) Non-controlling interests		8.723	1.244

The accompanying notes form an integral part of the consolidated annual accounts. (*) Figures restated, see Note 2.e)

Consolidated Statement of Changes in Equity for the year

ended 31 December 2019

(Thousands of Euros)

				Interim	Cash		Net
		Accumulated	Own	dividend	flow	Translation	profit/loss	Non-controlling	Total
	Capital	Reserves	Shares	paid in	hedges	Differences	for the year	Interests	Equity
				the year
Balances at 31 December 2017 (restated)	8.700	714.947	(21.232)	(4.611)	(61.244)	(183.763)	71.227	380.037	904.061
Adjustments due to restatement (Note 2.e)	-	(24.093)	-	-	3.863	29.448	(6.490)	(325.667)	(322.939)
Adjustment for initial application of IFRS 15	-	(19.364)	-	-	-	2.311	-	-	(17.053)
Adjustment for initial application of IFRS 9	-	(323)	-	-	-	-	-	-	(323)
Balances at 1 January 2018 (restated)	8.700	671.167	(21.232)	(4.611)	(57.381)	(152.004)	64.737	54.370	563.746
Adjustments for changes in accounting policies (Note 2.g)	-	(3.493)	-	-	-	3.493	-	-	-
Total recognised income and expense for 2018	-	-	-	-	5.664	(50.948)	82.117	1.244	38.077
Distribution of profit:
Reserves	-	39.780	-	-	-	-	(39.780)	-	-
Supplementary dividend (Note 5)	-	-	-	-	-	-	(20.346)	(5.077)	(25.423)
2017 interim dividend	-	-	-	4.611	-	-	(4.611)		-
Acquisition of own shares	-	-	(1.563)	-	-	-	-	-	(1.563)
Sale of own shares	-	334	911	-	-	-	-	-	1.245
Interim dividend paid in 2018	-	-	-	(4.795)	-	-	-	-	(4.795)
Changes in interests in subsidiaries (Note 16.e)	-	-	-	-	-	-	-	158	158
Capital reductions	-	-	-	-	-	-	-	(3.130)	(3.130)
Adjustments for hyperinflation	-	390	-	-	-	-	-	-	390
Other	-	(2.263)	-	-	-	-	-	(96)	(2.359)
Balances at 31 December 2018 (restated)	8.700	705.915	(21.884)	(4.795)	(51.717)	(199.459)	82.117	47.469	566.346
Adjustment for initial application of IFRS 16 (Note 2.b)	-	(5.308)	-	-	-	-	-	-	(5.308)
Adjustment for initial application of IFRIC 23 (Note 2.b)	-	(6.300)	-	-	-	-	-	-	(6.300)
Total recognised income and expense for 2019	-	-	-	-	43.487	(16.654)	126.377	8.723	161.933
Distribution of profit:
Reserves	-	55.383	-	-	-	-	(55.383)	-	-
Supplementary dividend (Note 5)	-	-	-	-	-	-	(21.939)	(16.222)	(38.161)
2018 interim dividend	-	-	-	4.795	-	-	(4.795)	-	-
Acquisition of own shares	-	-	(1.213)	-	-	-	-	-	(1.213)
Sale of own shares	-	189	1.134	-	-	-	-	-	1.323
Interim dividend paid in 2019	-	-	-	(4.987)	-	-	-	-	(4.987)
Changes in the consolidated Group (Note 2.f)	-	-	-	-	(5.339)	83.619	-	-	78.280
Capital reductions	-	-	-	-	-	-	-	(9.360)	(9.360)
Adjustments for hyperinflation	-	(3.569)	-	-	-	-	-	-	(3.569)
Other	-	(2.762)	-	-	-	-	-	1.098	(1.664)
Balances at 31 December 2019	8.700	743.548	(21.963)	(4.987)	(13.569)	(132.494)	126.377	31.708	737.320

Consolidated Statement of Cash Flow for the year

ended 31 December 2019

(Thousands of Euros)

	2019	Restated 2018 (*)
Cash flows from operating activities:
Consolidated profit for the year	130.665	87.833
Adjustments for:
Depreciation and amortisation Impairment and net profit from disposals of property, plant and equipment and intangible	86.723	62.710
assets	11.581	(145)
Changes in provisions for liabilities, risk and charges (Note 24)	81.457	41.375
Capital grants taken to income	(484)	(478)
Share in (profit)/loss for the year of equity-accounted investees (Note 13)	46.268	(18.733)
Impairment and net gains on disposal of financial instruments other assets (Note 2.f)	(184.507)	-
Finance costs (Note 24)	45.222	37.710
Translation differences	2.552	(13.838)
Other income and expenses	(9.761)	1.796
Corporate Income Tax	59.412	37.558
Funds generated from operations	269.128	235.788
Changes to working capital:
Trade and other receivables	(101.437)	(58.602)
Inventories	2.451	342
Trade and other payables	90.052	36.591
Changes in other current assets and liabilities	6.077	817
Income tax paid	(35.505)	(46.960)
Net cash flows from operating activities (I)	230.766	167.976
Cash flows from investing activities:
Payments for acquisition of Group companies, associates and jointly-controlled entities
(Note 7)	(2.871)	(28.900)
Payments for acquisition of intangible assets (Note 10)	(3.477)	(2.961)
Payments for acquisition of financial assets (Note 14)	(7.206)	(15.160)
Payments for acquisition of property, plant and equipment (Note 11)	(118.343)	(33.256)
Payments for contributions to associates (Note 13)	(7.926)	(1.086)
Dividends received from associates (Note 13)	2.294	47.468
Interest received	9.338	9.476
Proceeds from disposal of Group companies, associates and jointly-controlled entities (Notes 2.f)	28.635	9.234
Proceeds from the sale of intangible assets and property, plant and equipment (Notes 10
and 11)	4.566	3.753
Proceeds from disposal of financial assets, net (Note 14)	15.503	17.043
Net cash flows used in investing activities (ll)	(79.487)	5.611
Cash flows from financing activities:
Cash inflows from financial debt and other non-current borrowings (Note 17)	1.793.221	756.929
Interest paid	(57.222)	(47.300)
Repayment of financial debt and other non-current borrowings (Note 17)	(1.803.163)	(788.340)
Dividends paid (Note 16)	(43.148)	(34.829)
Proceeds from contribution/return of funds by/to non-controlling shareholders, net
(Note 16)	(9.360)	(2.972)
Cash inflows due to disposal of own shares (Note 16)	1.323	1.245
Cash outflows due to purchase of own shares (Note 16)	(1.213)	(1.563)
Net cash flows used in financing activities (III)	(119.562)	(116.830)
Effect of changes in the consolidated group (IV)	-	-
Net increase/decrease in cash and cash equivalents (I+II+III+IV)	31.717	56.757
Cash and cash equivalents at beginning of year	293.399	236.642
Cash and cash equivalents at year end	325.116	293.399

The accompanying notes form an integral part of the consolidated annual accounts.

(*) Figures restated, see detailed in Note 2.e)

Notes to the consolidated annual accounts for the year ended 31 December 2019

1. Nature, Activities and Composition of the Group

Elecnor, S.A., (hereinafter, the Parent), was incorporated for an indefinite period in Spain on 6 June 1958 and its registered office is located at Calle Marqués de Mondéjar 33, Madrid.

The Parent's statutory activity, according to its bylaws, is:

• Wide-ranging commercial activity in connection with the engineering, design, construction, erection, repair, maintenance and upkeep of all manner of construction projects and installation work in the broadest sense, i.e. the entire execution thereof with or without the supply of materials, on its own account or through third parties, on an exclusive basis or through associations of any kind.
• The provision of public and private services in relation to the collection of all types of waste; sweeping and cleaning of streets; transfer and transport of waste to the place of end disposal; the end disposal of such waste, recycling, treatment and deposit of public, private, industrial, hospital and pathological waste; cleaning, maintenance and upkeep of sewers; and, in general, urban water treatment services and all other ancillary services related directly or indirectly to the aforementioned services in their broadest sense.
• The design, research, development, construction, operation, maintenance and marketing of waste treatment, recovery and elimination facilities, and the purchase and sale of the by-products originating from these treatments.
• The design, research, development, construction, operation, maintenance and marketing of plants and facilities for the treatment of water, wastewater and waste, the recovery and elimination of waste, and the purchase and sale of the by-products originating from these treatments.
• The use, transformation and marketing of water of all types.

The aforementioned business activities can also be fully or partially carried out indirectly by the Parent through investments in other companies with a similar statutory activity, both in Spain and abroad. The Elecnor Group may not carry out any business activity for which specific conditions or limitations are imposed by law, unless it fully meets such conditions.

The subsidiaries basically engage in business activities comprising the aforementioned statutory activity, and in the operation of wind energy generation, solar thermal and solar PV facilities, the provision of aeronautical and aerospace software research, advisory and development services and the manufacture and distribution of solar panels and solar PV plants.

The Parent's bylaws and other related public information may be viewed on the website www.elecnor.es and at its registered office.

Elecnor, S.A. is the Parent of a Group comprising subsidiaries that focus on a range of activities and that, together with it, form the Elecnor Group (hereinafter, the "Group" or the "Elecnor Group"). Moreover, the Group has investments in associates and joint ventures and takes part in joint ventures with other operators.

Shares in Elecnor, S.A. are traded in the Madrid and Bilbao stock exchanges.

Appendix I includes information on equity-accounted subsidiaries and associates included in the Elecnor Group's consolidated scope.

2. Basis of presentation

a) Basis of presentation and regulatory financial reporting framework applicable to the Group

The accompanying consolidated annual accounts have been prepared on the basis of the accounting records of Elecnor, S.A. and of the consolidated companies. The consolidated annual accounts for 2019 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS-EU), and other applicable provisions in the financial reporting framework, to give a true and fair view of the consolidated equity and consolidated financial position of Elecnor, S.A. and subsidiaries at 31 December 2019 and consolidated results of operations and changes in consolidated equity and cash flows of the Group for the year then ended.

The Group adopted IFRS-EU on 1 January 2004 and applied IFRS 1, "First-time adoption of International Financial Reporting Standards".

The directors of the Parent consider that the consolidated annual accounts for 2019, authorised for issue on 25 March 2020, will be approved with no changes by the General Shareholders' Meeting.

The Elecnor Group's consolidated annual accounts for 2018 were authorised for issue by General Shareholders' Meeting of Elecnor, S.A. at their annual general meeting held on 22 May 2019.

These consolidated annual accounts have been prepared on a going concern basis using the historical cost principle, with the exception of derivative financial instruments, which have been recognised at fair value.

Note that the balances from the Group's Argentine and Venezuelan companies were expressed at current cost before inclusion in the consolidated annual accounts of the Elecnor Group, as per IAS 29 "Financial Reporting in Hyperinflationary Economies", as these countries' economies are considered to be hyperinflationary (see section g).

b) Adoption of International Financial Reporting Standards (IFRS)-

Standards applied for the first time

The Group has applied the following interpretations for the first time to the consolidated annual accounts commencing on 1 January 2019:

IFRS 16 Leases

IFRS 16 eliminates the double-entry accounting model for lessees that distinguishes between finance leases, which are recognised in the balance sheet, and operating leases, for which future lease payments do not have to be recognised. A single model has been developed in its place for the balance sheet, which is similar to the current finance lease model. In the case of lessors, the same model is maintained, i.e. the classification of leases as finance and operating leases.

IFRS 16 replaces the existing guidelines on leases, including IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC-15 Operating Leases—Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The Group has opted to implement IFRS 16 using the modified retroactive method, recognising the right-ofuse asset at an amount equal to its carrying amount, as though the standard had been applied since the start date, but discounted by applying the incremental interest rate of the lessee's indebtedness on the initial application date. By taking this approach, the Group does not restate comparative information.

(i) Identification of a lease

At inception of a contract, the Group assesses whether the contract contains a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The period in which a Group uses an asset includes consecutive and nonconsecutive periods. The Group only reassesses the conditions when there is a modification to the contract.

(ii) Lessee accounting

For a contract that contains a lease component and one or more additional lease or non- lease components, the Group considers all components as a single lease component.

The Group has opted not to apply the accounting policies shown below for short-term leases and those whose underlying asset has a value of less than Euros 5 thousand, which correspond primarily to machinery leases for use in construction works, since the estimated duration of the works is less than or around one year, as such machinery tends to be leased for the duration of the project for which it has been leased. On 31 December 2019, the heading "Right-of-use assets" corresponds mainly to leases of premises and of plots of land on which wind farms are located.

The Group recognises the lease payments associated with those leases as an expense on a straight-line basis over the lease term.

At the lease commencement date the Group recognises a right-of-use asset and a lease liability.

The right-of-use asset comprises the amount of the initial measurement of the lease liability, any lease payment made at or before the commencement date, less any lease incentives received, any initial direct costs incurred and an estimate of the decommissioning or restoration costs to be incurred, as indicated in the accounting policy on provisions.

The Group measures the lease liability at the present value of the lease payments that are not paid at that date. The Group discounts lease payments at the appropriate incremental interest rate, unless it can readily determine the lessor's implicit interest rate. In this regard, for the initial measurement of the lease liability the incremental interest rate was used, representing the interest rate that a lessee would have to pay for borrowing over a similar period, with a similar guarantee, the necessary funds to obtain an asset of a value similar to that of the right-of-use asset in a similar economic context. The Group uses different discount rates for each country and depending upon the remaining lease terms, the applied discount rates being between 0.70% and 4.95% for leases in Spain, in accordance with the duration of the contracts, as this is where most of the leases subject to this standard are located.

Lease payments pending comprise fixed payments less any incentives receivable, variable payments that depend on an index or rate, initially measured using the index or rate as at the commencement date, the amounts expected to be payable under residual value guarantees, the exercise price of the purchase option if the lessee is reasonably certain to exercise that option, and the payment of penalties terminating the lease, provided that the lease term reflects the lessee exercising an option to terminate the lease.

The Group measures right-of-use assets at cost, less any accumulated depreciation and impairment, adjusted for any re-measurement of the lease liability.

If the lease transfers ownership of the underlying asset to the Group by the end of the lease term or if the cost of the right-of-use asset reflects that the lessee will exercise a purchase option, the Group depreciates the right-of- use asset from the commencement date to the end of the useful life of the underlying asset. Otherwise, the Group depreciates the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.

The Group measures lease liabilities by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made, and remeasuring the carrying amount to reflect any lease modifications or to reflect revised in-substance lease payments.

The Group recognises the amount of remeasurement of the liability as an adjustment to the right-of-use asset until this is reduced to zero and subsequently in profit or loss.

The Group remeasures lease liabilities by discounting the revised lease payments using a revised discount rate, of there is a change in the lease term or a change in assessment of an option to purchase the underlying asset.

The Group remeasures lease liabilities if there is a change in the estimated amounts payable of a residual value guarantee or a change in the index or rate used to determine the payments, including a change to reflect variations in market rental rates once there has been a review thereof.

IFRIC 23 Uncertainty over Income Tax Treatments

The IFRS Interpretations Committee (IFRIC) issued IFRIC 23, establishing how to recognise and measure taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates when there is uncertainty over income tax treatments.

An uncertain income tax treatment is any treatment applied by an entity where there is uncertainty as to whether said approach will be accepted by the tax authority. The interpretation takes into account:

• How to determine the appropriate accounting unit, and whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments, depending on which approach better predicts the resolution of the uncertainty.
• That the entity must assume that a taxation authority will examine amounts it has a right to examine and have full knowledge of all related information when making those examinations; in other words, risk of detection must be ignored.
• That the entity must reflect the effect of uncertainty on its accounting for income tax when the taxation authority is unlikely to accept the treatment.
• That the impact of uncertainty must be measured using the most likely amount method or the expected value method, depending on which method better predicts the resolution of the uncertainty, and that the judgements and estimates used must be reassessed if the facts and circumstances change or new information becomes available.

If the Group determines that it is unlikely that the tax authority will accept an uncertain tax treatment or group of uncertain tax treatments, it considers said uncertainty when determining the taxable income, tax bases, tax loss carryforwards, deductions or tax rates. The Group determines the effect of uncertainty on the corporate income tax filing using the expected value method, when the range of potential outcomes is very broad, or the most likely amount method, when the outcome is binary or concentrated on one value. In those cases in which the tax asset or liability calculated based on these criteria exceeds the amount presented in self-assessments, it is presented as current or non-current in the consolidated statement of financial position based on the estimated recovery or payment date, considering, where appropriate, the amount of related late-payment interest on the liability as accrued in the income statement. The Group recognises changes in events and circumstances relating to tax uncertainties as a change of estimate.

The Group recognises and presents fines in accordance with the stated accounting policy for provisions.

The Group opted to apply IFRIC 23 using the retroactive method, recognising the cumulative effect of calculating uncertainty in accordance with the expected value in reserves and without restating the comparative information.

The table below summarises the impact of adopting IFRS 16 and CINIF 23 on the Consolidated Statement of Financial Position at 1 January 2019 for each of the affected headings.

Impact on the Consolidated Statement of Financial Position

1 January 2019

Thousands of Euros	Amounts restated without adoption IFRS 16 and CINIF 23	Adjustments IFRS 16	Adjustments IFRIC 23	Amounts after adoption of IFRS 16 and IFRIC 23
Assets
Non-current assets
Equity-accounted investees	339,718	(1,190)	-	338,528
Right-to-use assets	-	29,750	-	29,750
Deferred tax assets	95,826	542	-	96,368
Total non-current assets	1,283,026	29,102	-	1,312,128
Total assets	2,579,972	29,102	-	2,609,074
Equity and Liabilities Equity
Other reserves	705,915	(5,308)	(6,300)	694,307
Total equity	566,346	(5,308)	(6,300)	554,738
Non-current liabilities
Lease liabilities	-	34,408	-	34,408
Total non-current liabilities	701,006	34,408	-	735,414
Current liabilities
Lease liabilities	-	2	-	2
Current income tax
liabilities	23,795	-	6,300	30,095
Total current liabilities	1,312,620	2	6,300	1,318,922
Total liabilities and equity	2,579,972	29,102	-	2,609,074

As a result of the application of IFRS 16 in relation to those leases that were previously classified as operating leases, the Group has recognised right-of-use assets amounting to Euros 35,166 thousand and lease liabilities amounting to Euros 40,120 thousand at 31 December 2019.

Likewise, and also in relation to the accounting treatment of leases under IFRS 16, the Group booked depreciation charges for right-of-use assets and finance expenses instead of lease expenses, which in the consolidated income statement at 31 December 2018 were included under the heading "Other operating expenses". Specifically, in 2019, the Group booked depreciation charges amounting to Euros 6,362 thousand, finance expenses for lease liabilities amounting to Euros 2,688 thousand, and lower operating lease expenses amounting to Euros 7,875 thousand.

The application impact of IFRS 16 on the Statement of Cash Flows in 2019 was not material.

Standards, modifications and interpretations issued but not yet in force

At the date on which these consolidated annual accounts were authorised for issue, the standards, amendments and interpretations issued but not yet in force and which the Group expects to adopt from 1 January 2020 or subsequently, are:

• IAS 1(Amendment) and IAS 8 (Amendment) "Definition of Material"
• Modification to references of IFRS standards due to the conceptual framework.
• IBOR reform

Existing standards, amendments and interpretations have not been adopted by the European Union

At the date on which these consolidated annual accounts were authorised for issue, the IASB and IFRS Interpretations Committee had published standards, amendments and interpretations listed below, that are pending adoption by the European Union:

• IFRS 10 (Amendment) and IAS 28 (Amendment) "Sale or Contribution of Assets between an Investor and its Associate or Joint Venture"
• IFRS 3 (Amendment) "Definition of a Business"
• IFRS 17 Insurance Contracts

In view of the Group's activities, the effect of applying new standards, amendments or interpretations on the consolidated annual accounts when applied for the first time is not considered to be material for the Group.

c) Functional currency and presentation currency-

The figures disclosed in the consolidated annual financial statements are expressed in thousands of Euros, the Parent's functional and presentation currency.

d) Material accounting estimates and significant assumptions and judgements in applying accounting policies-

The information in these consolidated annual accounts is the responsibility of the Board of Directors of Elecnor.

The preparation of consolidated annual financial statements in accordance with EU-IFRS requires the application of material accounting estimates and significant judgements, estimates and assumptions in the process of applying the Group's accounting policies. In this connection, there follows a detailed summary of the aspects that have involved the greatest degree of judgement, complexity or in which the assumptions and estimates are not material for preparing the consolidated annual financial statements.

Material accounting estimates and significant assumptions

• The Group tests goodwill for impairment annually. Determining the recoverable value of a division to which goodwill has been assigned implies using estimates. The recoverable value is higher than the fair value less costs to sell or otherwise dispose of the item and value in use. Generally, the Group uses discounted cash flow methods to determine these values. Discounted cash flow calculations are based on 5-year projections of the budgets approved by the Group for infrastructure segment assets and projections over the entire regulatory useful life for concession assets. The flows take into account past experience and represent the best estimate on future market performance. Cash flows from the fifth year for infrastructure segment assets are extrapolated using individual growth rates. The key assumption to measure fair value less costs to sell or otherwise dispose of the item and value in use include growth rates, the discount rates and tax rates. The estimates, including the methodology used, may have a material impact on the values and on impairment losses (Note 9).

• Impairment adjustments due to customer insolvencies, the revision of individual balances based on the credit quality of customers, current market trends and a historical analysis of insolvencies on an aggregate basis involve significant level of judgements.

• The Group performs a significant portion of its activities in construction contracts with customers. The Group recognises construction contracts considering the degree of completion. This method implies the need to estimate the total cost and total income from each project, including any claims and incentives and to allocate provisions in the event that losses are estimated in the contract (Note 19). The Group continually reviews all the contract estimates and adjusts them accordingly.

• The calculation of provisions for customer claims, guarantees, litigation and contingencies is subject to considerable uncertainty.

Moreover, although the estimates performed by the Parent's directors were calculated based on the best information available at 31 December 2019, it is possible that future events might oblige their modification in the next few years. The effect on the consolidated annual financial statements of modifications that, in the event, may derive from adjustments over the next few years would be recognised prospectively.

Significant judgements in applying accounting policies

Since 17 December 2019 the Elecnor Group has, along with the investment fund APG, jointly controlled the subgroup Celeo Concesiones e Inversiones (see section f), and since that date has held at 51% shareholding, compared with a previous shareholding of 100%.

The material judgements that have led to the Elecnor Group's conclusion regarding the loss of the controlling interest it hitherto held in Celeo Concesiones e Inversiones, S.L. are as follows:

• The equitable composition of the Board of Directors and the General Shareholders' Meeting with homogeneous rights.
• The decisions adopted by the General Shareholders' Meeting must be approved by a reinforced majority of at least 75%, with only the following matters requiring a simple majority:
  • o Modification of the Corporate Bylaws when such modification is required by law, provided such modification does not contravene the provisions of the shareholders' agreement.
  • o Appropriation of profit/loss in order to build the Legal Reserve required by law.
• The control and functional dependence of the management of Celeo Concesiones e Inversiones, S.L., which handles the material aspects of the business and which ceases to depend on the Elecnor Group to instead report directly to the Board of Directors of Celeo Concesiones e Inversiones, S.L.
• The existence of a neutral arbitration system in the event of a dispute. In the event of any dispute between the two shareholders, a mediator will be called in to resolve it, and if this were not sufficient an arbitration process will take place, involving three arbitrators, with the shareholders each appointing one arbitrator and a third appointed by agreement of the other two arbitrators.

Accompanying notes

e) Comparative information-

In the consolidated annual accounts for 2019, we present, for comparative purposes, along with each item of the consolidated statements of financial position, consolidated income statement, comprehensive income, changes in equity, cash flows and notes to the consolidated annual accounts, in addition to the figures for 2019, those corresponding to the previous year, which differ from those approved by the Ordinary Annual General Shareholders' Meeting of the Parent on 22 May 2019 due to the restatement of the previous year's figures in relation to the following:

• The Elecnor Group has classified the income in 2019 corresponding to equity-accounted investees in previous years under the heading "Share in profit/loss of equity-accounted investees in the consolidated income statement" as part of the Group's "Operating income" in the amount of Euros 46,268 thousand in losses (Euros 3,831 thousand in 2018) for all the associates as they belong to the Group's same operating business.

The directors of the Parent consider that the fact that the jointly controlled investees and the associates conduct the same activity as specified in the corporate purpose of the Elecnor Group, along with the incorporation of the subgroup Celeo Concesiones e Inversiones as a joint venture, which will imply an increasing contribution by these businesses to the Group's consolidated profit/loss, justifies the need for this change in the presentation in the Consolidated Financial Statements so as to more reliably reflect the financial information contained in the Group's Consolidated Annual Accounts, in accordance with Decision EECS/0114-06 – "Change of Presentation of the Share in profit/loss of Associates and Joint Ventures Accounted for Using the Equity Method" issued by the European Securities and Markets Authority (ESMA).

• The Elecnor Group has adjusted the provisional amounts relating to the acquisition by the subgroup Celeo Redes in December 2018 of shares in Jaurú Transmissora de Energia, S.A. (JTE) and in Cachoeira Paulista Transmissora de Energia, S.A. (CPTE) from Isolux Energia de Participaçoes, S.A. and assigned the relevant price of purchasing these holdings in accordance with the principles of IFRS 3 (see Note 13).
• As a result of the partnership between the Elecnor Group and APG, the world's second-largest pension fund, to jointly manage the subgroup Celeo Concesiones e Inversiones, formalised on 17 December 2019 (see section f ), and after various meetings with the National Securities Market Commission (CNMV), the comparative amounts for 2018 have been re-stated in the Consolidated Annual Accounts for 2019 in order to retroactively reflect the effects had the assets and liabilities of the subgroup Celeo Redes been accounted for using the equity method since the outset of the agreement with APG.

Accompanying notes

As a result, the accompanying consolidated statement of financial position and the consolidated income statement corresponding to 2018 differ from those included in the consolidated annual accounts approved in that year, as per the following detail:

Consolidated

Statements of Financial Position 31 December 2018

Thousands of Euros	31/12/2018	Adjustment to provisional amounts (IFRS 3)	Accounting of the Celeo Redes subgroup using the equity method	Restated 31/12/2018
Assets
Non-current assets
Intangible assets	146,616	-	(72,001)	74,615
Property, plant and equipment	1,123,276	-	(433,918)	689,358
Equity-accounted investees
	164,078	5,650	169,990	339,718
Non-current financial assets	770,744	-	(687,235)	83,509
Deferred tax assets	102,198	-	(6,372)	95,826
Total non-current assets	2,306,912	5,650	(1,029,536)	1,283,026
Current assets
Inventories	8,241	-	(953)	7,288
Trade and other receivables
	675,106	-	(21,333)	653,773
Trade receivables from related companies	6,349	-	763	7,112
Public entities, receivable	41,115	-	(5,172)	35,943
Current income tax
assets	14,230	-	(1,377)	12,853
Other receivables	19,799	-	(4,578)	15,221
Other current financial investments	1,804	-	(1,507)	297
Other current assets	6,545	-	(482)	6,063
Cash and cash equivalents and other current
financial investments Non-current assets held for sale	426,837	-	(128,491)	298,346
	24,114	-	(23,691)	423
Total current assets	1,483,767	-	(186,821)	1,296,946
Total assets	3,790,679	5,650	(1,216,357)	2,579,972

Accompanying notes

Consolidated statement of financial position

31 December 2018

Thousands of Euros	31/12/2018	Adjustment to provisional amounts (IFRS 3)	Accounting of the Celeo Redes subgroup using the equity method	Restated 31/12/2018
Equity and Liabilities
Equity
Other reserves	736,498	-	(30,583)	705,915
Translation differences	(228,906)	-	29,447	(199,459)
Valuation adjustments to equity	(55,580)	-	3,863	(51,717)
Profit/loss for the year attributable to the
Parent Non-controlling interests	74,262 332,412	5,650 -	2,205 (284,943)	82,117 47,469
Total equity	840,707	5,650	(280,011)	566,346
Non-current liabilities
		-	(80)
Provisions for liabilities and charges Financial liabilities due to the issuance	29,994			29,914
of bonds and other marketable securities	669,228	-	(634,043)	35,185
Finance liabilities on loans and borrowings
	730,470	-	(159,249)	571,221
Other non-current liabilities	26,920	-	(2,723)	24,197
Deferred tax liabilities	81,403	-	(59,306)	22,097
Total non-current liabilities	1,556,407	-	(855,401)	701,006
Current liabilities
Financial liabilities from issuing
bonds and other marketable securities commercial paper	180,577	-	(23,752)	156,825
Finance liabilities on and borrowings
	104,939	-	(18,904)	86,035
Trade payables to associates and related companies	34	-	562	596
Trade and other payables
	576,077	-	(27,066)	549,011
Current income tax liabilities
	26,533	- -	(2,738) (9,047)	23,795
Other payables	110,497	-	(80,945)	101,450
Total current liabilities	1,393,565			1,312,620
Total liabilities and equity	3,790,679	5,650	(1,216,357)	2,579,972

Accompanying notes

Consolidated Income Statement 2018

Thousands of Euros		Adjustment to provisional	Reclassification using the equity	Accounting of the Celeo Redes subgroup using the	Restated
	31/12/2018	amounts (IFRS 3)	method	equity method	31/12/2018
Continuing operations
Net Turnover	2,273,057	-	-	(22,158)	2,250,899
Self-constructed assets	43,010	-	-	(37,931)	5,079
Materials consumed	(1,092,220)	-	-	3,050	(1,089,170)
Other operating income	19,373	-	-	(1,633)	17,740
Personnel expenses	(609,556)	-	-	9,562	(599,994)
Other operating expenses	(368,737)	-	-	20,673	(348,064)
Expense for amortisation, depreciation, impairment and charges to provisions Profit/loss at equity-accounted investees	(112,012)	-	-	7,219	(104,793)
	-	5,650	(3,831)	16,914	18,733
Results from operating activities	151,860	5,650	(3,831)	(4,304)	149,375
Finance income	108,683	-	-	(97,784)	10,899
Finance costs	(98,946)	-	-	50,337	(48,609)
Translation differences	11,381	-	-	2,457	13,838
Impairment and profit/loss on disposal of financial instruments Share of profit/loss	274	-	-	(1)	273
of investees accounted for using the equity method	(3,831)	-	3,831	-	-
Profit before income tax	169,036	5,650	-	(49,295)	125,391
Income tax	(57,086)	-	-	19,528	(37,558)
Profit/loss from continuing operations
	111,950	5,650	-	(29,767)	87,833
Profit/loss for the year	111,950	5,650	-	(29,767)	87,833
Attributable to:
Shareholders of the Parent	74,262	5,650	-	2,205	82,117
Non-controlling interests	37,688	-	-	(31,972)	5,716

The notes to these consolidated annual accounts that include breakdowns and movements for 2018 in headings affected by this restatement have also been adapted for the purpose of comparison.

In addition, when comparing the figures for 2019 included in these consolidated annual accounts with those for 2018, it is necessary to take into account the adoption on 1 January 2019 of IFRS 16 (Note 2.b).

f) Changes to the consolidated Group-

The most significant changes in the scope of consolidation in 2019 were as follows:

• On 11 July 2019, the Elecnor Group signed agreements to sell the subsidiaries Sociedad Aragonesa De Aguas Residuales, S.A.U. and Sociedad Aragonesa De Estaciones Depuradoras, S.A. and the associate Sociedad Aguas Residuales Pirineos, S.A., which all focus on the construction and operation of waste water treatment plants (see Note 8).

• On 31 July 2019, the Elecnor Group, via the company Celeo Termosolar, S.L., acquired 42.57% and 44.30% shareholdings in the companies Dioxipe Solar, S.L. and Aries Solar Termoeléctrica, S.L., respectively, and now control those businesses whose corporate purpose is the construction and operation of three parabolic trough technology solar thermal power plants in Extremadura and Castilla La Mancha (see Note 7).

• On 20 December 2019, the Elecnor Group sold Tramperase, S.L., a company focusing on the development of projects, for Euros 11,774 thousand. The proceeds from this transaction were booked under "Impairment and profit/loss on disposal of fixed assets" in the accompanying consolidated income statement for 2019.
• On 17 December 2019, the Elecnor Group signed a shareholders' agreement with APG to jointly control the subgroup Celeo Concesiones e Inversiones, pursuant to which the Elecnor Group would hold a 51% stake in Celeo Concesiones e Inversiones, S.L. This agreement implied a loss of the control hitherto held by the Elecnor Group over the subgroup Celeo Concesiones e Inversiones (see section d).

This new agreement is instrumented by means of the contribution by APG to the subgroup Celeo Concesiones e Inversiones of 49% of the shareholding it hitherto held in the subgroup Celeo Redes plus a cash payment of Euros 43 million to Elecnor, S.A., affording it a 49% stake in the subgroup Celeo Concesiones e Inversiones. Moreover, the parties agreed that decisions in connection with the subgroup Celeo Concesiones e Inversiones must be made collectively and therefore they would have joint control over the subgroup.

The summary of the main accounting impacts shown in the consolidated financial statements for 2019 is as follows:

• Derecognition of all assets and liabilities belonging to the subgroup Celeo Concesiones e Inversiones on the date of the loss of control at their carrying amount, which amounted to Euros 346,911 thousand (net assets).
• Recognition of the investment maintained in the subgroup Celeo Concesiones e Inversiones at its fair value on the date of the loss of control, amounting to Euros 560,624 thousand, estimated, on the one hand, based on a report by an independent expert (Deloitte) hired to estimate the fair value of the subgroup Celeo Redes (Euros 513,074 thousand) and,on the other hand, in accordance with the valuation agreed by the Elecnor Group and APG for the transmission of the rest of the subgroup Celeo Concesiones e Inversiones, which implied an additional payment of Euros 42,912 thousand by APG to the Elecnor Group. Since the date of relinquishing control, the Elecnor Group has booked this shareholding as an investment in an associate, as per the provisions of IAS 28 Investments in Associates.
• Recognition of all amounts previously booked in other comprehensive income (translation differences and valuation adjustments) in the consolidated income statement on the date of relinquishing control in the amount of Euros 83,619 thousand in expense and Euros 5,339 thousand in income, respectively.
• Recognition of the difference in income for the year attributable to the Elecnor Group in the amount of Euros 178,345 thousand, an amount booked under "Impairment and profit/loss on disposal of fixed assets" in the accompanying consolidated income statement for 2019.

The key assumptions used in the measurement of the shareholding maintained were as follows:

• The value was obtained using the discounted equity cash flows method, estimated in the respective functional currencies of the projects (US Dollar for projects in Chile and Brazilian Real for projects in Brazil).

• • The discount rates used to convert the aforementioned flows to their current value correspond to the respective costs of capital, estimated using the capital asset pricing model (CAPM), considering both the current market circumstances and those of the specific projects (7% for projects in Chile and 12% for projects in Brazil, approximately).
• • The translation into Euros of the current amount obtained was performed using the exchange rates on the operation's closing date (31 December 2019).

At the date on which these consolidated annual accounts were authorised for issue, the Elecnor Group is in the process of assigning the relevant sale price to the shareholding in this Group pursuant to the principles of IFRS 3, so the amount of said investment must be considered to be provisional and, if necessary, may be restated in 2020 based on the criteria set forth in said accounting standard. However, since the date of the loss of control was 17 December 2019, any potential impact on the consolidated income statement for 2019 is not expected to be material.

The carrying amount of the assets and liabilities belonging to the subgroup Celeo Concesiones e Inversiones on the date of the loss of control is presented below (31 December 2019 was taken as a reference date since there were no significant variations with respect to 17 December 2019):

		Thousands of
	Note	Euros
Assets
Goodwill	9	1,125
Other intangible assets	10	39
Right-to-use assets	12	20,517
Property, plant and equipment	11	644,271
Equity-accounted investees
	13	266,733
Non-current financial assets	14	6,419
Deferred tax assets	21	78,422
Current assets		23,653
Liabilities
Non-controlling interests	16.e	408
Non-current payables and other financial liabilities		640,471
Current liabilities		31,561
Deferred tax liabilities	21	21,828
Total net assets		346,911
Fair value of the shareholding maintained	13	560,624
Cash payment received		42,912

The Elecnor Group does not consider this loss of control as a discontinued business since the subgroup Celeo Concesiones e Inversiones does not correspond to a segment of activity but is within the concessions segment of the Elecnor Group. Furthermore, the loss of control does not imply withdrawing from any geographical area where the Group was present.

In 2018 there were no material changes in the consolidation scope except as explained in Note 13.

g) Classification of Argentina and Venezuela as hyperinflationary economies-

During 2018, a number of factors surfaced in the Argentine economy that led the Elecnor Group to reconsider its applied to in connection with the conversion of the financial statements of its investee in that country.

In accordance with IFRS-EU, Argentina is considered to be a hyperinflationary economy for accounting purposes for the periods ending from 1 July 2018. IAS 29 applied for the first time in Argentina in the Group's consolidated annual accounts of 2018, in accordance with the following criteria:

• The comparative figures for 2017 were not modified.
• Hyperinflationary accounting applied to all assets and liabilities of the investee Elecnor Argentina prior to translation.
• The historical cost of non-monetary assets and liabilities and the various items of equity of that company from the date of its acquisition or inclusion in the consolidated statement of financial position until the end of the reporting period adjusted to reflect changes in the purchasing power of the currency as a result of inflation.
• Opening equity reported in the stable currency will be affected by the cumulative effect of restating nonmonetary items from the date they were first recognised and the effect of translating those balances to the closing rate. The Group opted to recognise the difference between the closing equity of the previous year and the opening equity of the year 2018 in reserves, together with the exchange differences accumulated through that date, 1 January 2018.

The Group adjusted the 2018 statement of profit and loss to reflect the relevant impact of inflation on net monetary assets.

Continuing with the application of the provisions above, and in order to improve the true and fair view of the consolidated annual financial statements, in 2018 the Group changed its accounting policy to recognise, under Reserves, the exchange differences generated in the translation into euros of the restated financial statements of Venezuelan subsidiaries, previously booked under "Exchange differences".

The Group changed this accounting policy as it understands that, pursuant to IAS 8, it offers more reliable and relevant information on its operations in Venezuela. The consolidated statement of changes to equity includes, under "Adjustments for hyperinflation" in reserves, both the exchange differences and the effects of restatements for inflation (see Note 3 e).

3. Accounting principles

a) Subsidiaries-

Subsidiaries are entities over which the Company exercises control, either directly or indirectly through subsidiaries. The Company controls a subsidiary when it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The Company has power over a subsidiary when it has existing substantive rights that give it the ability to direct the relevant activities. The Company is exposed, or has rights, to variable returns from its involvement with the subsidiary when its returns from its involvement have the potential to vary as a result of the subsidiary's performance.

The income, expenses and cash flows of subsidiaries are included in the consolidated annual accounts from their acquisition date, which is the date control commences. Subsidiaries are excluded from the consolidated Group from the date on which this control is lost.

Accompanying notes

Transactions and balances with Group companies and unrealised profit or loss were eliminated in the consolidation process. However, unrealised losses were considered to be an indicator of the impairment of the assets transferred.

The accounting policies of subsidiaries were adapted to the Group's accounting policies, for transactions and other events that are similar and took place in comparable circumstances.

The annual accounts or financial statements of subsidiaries used in the consolidation process refer to the same presentation date and the same period as those of the Parent

Non-controlling interests in the net assets of subsidiaries are recognised in equity separately from the Parent's equity. Non-controlling interests' share in consolidated profit or loss for the year (and in consolidated total comprehensive income for the year) is disclosed separately in the consolidated income statement.

Changes in the ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions, i.e. any difference is recognised directly in equity.

In the reduction of the shareholding in a subsidiary that implies a loss of control thereof, the Group recognises profit/loss due to the difference between the consideration received plus the fair value of any investment retained in the company plus the carrying amount of the non-controlling interests and the value of the consolidated net assets. Other comprehensive income relating to the subsidiary is reclassified to profit or loss or reserves depending on its nature. Consolidated net assets include goodwill inasmuch as the divested entity constitutes a business. If the divested entity constitutes a business which belonged to a cash generating unit to which goodwill had been assigned, then the goodwill is assigned to the part divested and the part maintained in accordance with the fair value and recoverable value, respectively.

The fair value of the investment maintained constitutes the acquisition cost for the purposes of subsequent measurement in accordance with its classification.

b) Business combinations-

As permitted by IFRS 1 First-time Adoption of International Financial Reporting Standards, the Group has recognised only business combinations that occurred on or after 1 January 2004, the date of transition to IFRS-EU, using the acquisition method. Entities acquired prior to that date were recognised in accordance with accounting principles prevailing at that time, taking into account the necessary corrections and adjustments at the transition date.

The Group applied IFRS 3 "Business combinations" revised in 2008 to transactions conducted from 1 January 2010 onwards.

In business combinations, the Group applies the acquisition method.

The acquisition date is the date on which the Group obtains the control of the acquired business.

The consideration paid for the business combination is determined on the acquisition date based on the sum of the fair values of the assets delivered, liabilities incurred or assumed, equity instruments issued and any contingent liabilities that depend on future events or compliance with certain conditions in exchange for the control of the acquired business.

The consideration paid excludes any disbursement that does not form part of the exchange for the business acquired. Cost relating to the acquisition are recognised as an expense as they are incurred.

The Group recognises the assets acquired and liabilities assumed on the acquisition date. Liabilities assumed include contingent liabilities insofar as they represent present obligations arising from past events and their fair value may be reliably measured. Moreover, the Group recognises indemnification assets granted by the seller at the same time and on the same basis as the indemnified item of the business acquired, considering, where appropriate, the collectibility of the indemnification asset and any contractual limitations on the indemnified amount.

Excepted from the application of this criterion are non-current assets or disposal groups of items classified as held for sale.

The excess between the consideration given and the value of net assets acquired and liabilities assumed, is recognised as goodwill. Any shortfall, having measured the amount of the consideration delivered and the identification and measurement of the net assets acquired, is recognised in a separate item of the consolidated income statement.

If the business combination can only be determined provisionally, the identifiable net assets are initially booked at their provisional values, recognising the adjustments made during the valuation period as though they had been known on the acquisition date, and restating, where appropriate, the comparative figures for the previous year. In any event, adjustments to provisional values include only that information that is relevant to the facts and circumstances on the acquisition date and which, had they been known, would have affected the amounts recognised on that date.

Once that period has elapsed, adjustments to the initial measurement are made only to correct errors.

In business combinations achieved in stages, the excess between the consideration given, plus the value assigned to non-controlling interests plus the fair value of the previous shareholding in the business acquired, and the value of net assets acquired and liabilities assumed, is recognised as goodwill. Any shortfall, after evaluating the consideration given, the value assigned to non-controlling interests, the previous shareholding and the identification and measurement of net assets acquired, is recognised in profit/loss. The Group recognises the difference between the fair value of the previous shareholding in the business acquired and the carrying amount in consolidated profit/loss or other comprehensive income. Moreover, the Group reclassifies deferred amounts in other comprehensive income corresponding to the previous shareholding to reserves or profit/loss, as appropriate.

If the Group did not hold a previous interest in the business acquired, the excess between the value assigned to non-controlling interests, and the net value of assets acquired and liabilities assumed, is recognised as goodwill. Any shortfall, after evaluating the value assigned to non-controlling interests and the identification and measurement of net assets acquired, is recognised in profit/loss.

Loss of control

When the Group loses its control over a subsidiary, it derecognises the subsidiary's assets (including goodwill) and liabilities and the non-controlling interest at the carrying amount thereof at the date on which control is lost. The consideration received and the interest retained in the company are recognised at fair value at the date on which control is lost, and any difference is recognised. Other comprehensive income relating to the subsidiary is reclassified to profit or loss or reserves depending on its nature.

Accompanying notes

Non-controlling interests

Non-controlling interests in subsidiaries acquired from 1 January 2004 onwards are recognised on acquisition date by their percentage share of the fair value of identifiable net assets. Non-controlling interests in subsidiaries acquired prior to the transition date are recognised by the percentage holding in their equity on the date of first consolidation.

Non-controlling interests are presented in consolidated net equity separately from equity attributed to the shareholders of the Parent. Non-controlling interests' share in consolidated profit or loss for the year (and in consolidated total comprehensive income for the year) is disclosed separately in the consolidated income statement (Consolidated Statements of Comprehensive Income).

The Group's interest and non-controlling interests in consolidated profit and loss in the year (the global total consolidated profit and loss in the year) and in changes in the net equity of subsidiaries, having considered adjustments and eliminations deriving from consolidation, are determined on the basis of the ownership interest at year-end, not taking into account the possible exercise or conversion of potential voting rights and after discounting the dividend effect, agreed or not, of preferred shares with cumulative rights that have been classified in net equity. Nevertheless, the Group's interest and non-controlling interests are determined considering the eventual exercise of potential voting rights and other derivative financial instruments which substantially provide current access to the economic benefits associated with the ownership interests, in other words, the right to participate in future dividends and changes in the value of subsidiaries.

Excess losses attributable to non-controlling interests generated prior to 1 January 2010, not imputable thereto due to exceeding the value of their contribution to the subsidiary's equity, are recognised as a reduction in the net equity attributable to the shareholders of the Parent, except in those cases in which the non-controlling interests have a binding obligation to assume part or all of the losses and have the capacity to make the necessary additional investment. Profits obtained in subsequent years are assigned to net equity attributed to the shareholders of the Parent until the amount of losses absorbed in previous years and corresponding to the non-controlling interests have been recovered.

From 1 January 2010, profit and loss and each component of other comprehensive income are allocated to net equity attributed to the shareholders of the Parent in proportion to its interest, although this implies a payable from non-controlling interests. The agreements between the Group and non-controlling interests are recognised as a separate transaction.

c) Associates-

Associates are entities over which the Company, either directly or indirectly through subsidiaries, exercises significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The existence of potential voting rights that are exercisable or convertible at the end of each reporting period, including potential voting rights held by the Group or other entities, are considered when assessing whether an entity has significant influence.

Investments in associates are accounted for using the equity method from the date that significant influence commences until the date that significant influence ceases. However, if on the acquisition date all or part of the investment fulfils the conditions to be classified as non-current assets or disposable groups of items held for sale, it is recognised at fair value, less the costs of divestment or disposal by another means.

Accompanying notes

In associates are initially recognised at acquisition cost, also including any cost directly attributable to the acquisition and any contingent asset or liability consideration that depends on future events or the failure to fulfil certain conditions.

The excess between the cost of the investment and the percentage corresponding to the Group in fair values of identifiable net assets is registered as goodwill and included in the accounting value of the investment. The defect, having measured the amounts of the cost of the investment and the identification and measurement of the net assets of the associate, is recognised as income when determining the investors interest in the associate's profit and loss in the year in which it is acquired.

If the investment is the result of a loss of control of a subsidiary that did not constitute a business, the cost of the investment is the fair value, net of the derecognitions deriving from the loss of control.

The accounting policies of associates were harmonised in time and valuation terms in line with those used at subsidiaries.

The Group's share of the profit or loss of an associate from the date of acquisition is recognised as an increase or decrease in the value of the investments, with a credit or debit to "Profit/loss from equityaccounted investees" in the consolidated income statement. The Group's share of other comprehensive income of associates from the date of acquisition is recognised as an increase or decrease in the value of the investments in associates with a balancing entry, based on the nature of the investment, in other comprehensive income in the consolidated statement of comprehensive income. The distribution of dividends is recognised as a decrease in the value of the investment. The Group's share of profit or loss, including impairment losses recognised by the associates, is calculated based on income and expenses arising from application of the acquisition method.

The Group's share in the profit and loss of associates and in changes to net equity is determined based on the ownership interest at the end of each year, not taking into account the potential exercise of conversion of potential voting rights. Nevertheless, the Group's interest is determined considering the eventual exercise of potential voting rights and other derivative financial instruments which substantially provide current access to the economic benefits associated with the ownership interests, in other words, the right to participate in future dividends and changes in the value of associates.

Losses of an associate attributable to the Group are limited to the extent of its net investment, except where the Group has legal or constructive obligations or when payments have been made on behalf of the associate. For the purpose of recognising impairment losses in associates, net investments are considered as the carrying amount of the investment after applying the equity method plus any other item which in substance forms part of the investment in the associate. The excess of the losses over the equity instrument investment is applied to the remaining items in reverse order of settlement. Subsequent profits obtained by associates for which impairment losses are limited to the value of the investment are recognised to the extent that they exceed previously unrecognised losses.

If the Group's share of losses in an associate equals or exceeds its investment in the associate, it does not recognise its share of any further losses. The investment in the associate is the carrying amount of the investment determined using the equity method, plus any other non-current portion that, in substance, forms part of the Group's net investment in the associate.

Profit and loss not realised in transactions between the Group and associates are only recognised insofar as they correspond to the holdings of other unrelated investors. The exception in the application of this criterion is the recognition of unrealised losses that constitute evidence of the impairment of the transferred asset. Nevertheless, profit and loss deriving from transactions between the Group and associates involving net assets that constitute a business are recognised in their entirety.

In the reduction of a shareholding in an associate that does not imply a significant loss of influence or when the Group loses the joint control of a joint venture and maintains a significant influence, the Grup recognises the result as the difference between the consideration received and the proportionate part of the carrying amount of the divested shareholding. Other comprehensive income corresponding to the proportionate part of the divested associated is reclassified to profit/loss or reserves as though the associate had directly sold the assets and liabilities linked to it. If the transaction implies a loss, the Group tests the impairment in the residual value maintained.

Impairment

Once the equity method has been applied, the Group assesses whether or not there is objective evidence of an impairment in the net investment in the associate.

Calculation of impairment is determined as a result of the comparison between the carrying amount linked to the net investment in the associate and its recoverable value, understood as the higher between value in use and fair value less the costs to sell or otherwise dispose of the item. In this connection, value in use is calculated as a function of the Group's interest in the current value of estimated cash flows in ordinary activities and the amounts potentially resulting from the final disposal of the associate.

The recoverable amount of the investment in an associate is assessed in relation to each associate, unless it does not constitute a cash-generating unit (CGU).

d) Joint arrangements-

Joint arrangements are those in which there is a contractual agreement to share the control over an economic activity, in such a way that decisions about the relevant activities require the unanimous consent of the Group and the remaining venturers or operators. The existence of joint control is assessed considering the definition of control over subsidiaries.

• Joint ventures: investments in joint ventures are accounted for using the equity method described in the letter above.
• Joint operations: for joint operations, the Group recognises the assets, including its share of any assets held jointly, the liabilities, including its share of any liabilities incurred jointly with the other operators, the revenue from the sale of its share of the output arising from the joint operation, its share of the revenue from the sale of the output by the joint operation and the expenses, including its share of any expenses incurred jointly, in the consolidated annual accounts.

The Group has joint control in various Joint Ventures since it has contractual agreements that require the consent of both shareholders to make decisions on important activities. The Group has classified the investments as joint operations since the shareholders have rights on the assets and obligations on the liabilities. Said right are principal and not subsidiary. In addition, the Group includes in this category certain foreign entities considered to be a similar vehicle to a UTE, through which it carries out part of its business activities.

The Group's acquisition of the initial and subsequent shareholding in a joint operation that constitutes a business is recognised by applying the criteria developed for business combinations by the percentage stake in the individual assets and liabilities.

Accompanying notes

e) Foreign currency transactions and balances-

Foreign currency transactions, balances and cash flows

Transactions in foreign currency are translated at the spot exchange rate prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies have been translated into Euros at the closing rate, while non-monetary assets and liabilities measured at historical cost have been translated at the exchange rate prevailing at the transaction date. Non-monetary assets measured at fair value have been translated into Euros at the exchange rate at the date that the fair value was determined.

Translation of foreign operations

The Group has applied the exemption permitted by IFRS 1, First-time Adoption of International Financial Reporting Standards, relating to accumulated translation differences. Consequently, translation differences recognised in the consolidated annual accounts generated prior to 1 January 2004 are recognised in retained earnings. As of that date, foreign operations whose functional currency is not the currency of a hyperinflationary economy have been translated into Euros as follows:

• Assets and liabilities, including goodwill and net asset adjustments derived from the acquisition of the operations, including comparative amounts, are translated at the closing rate at the reporting date.
• Income and expenses, including comparative amounts, are translated at the exchange rates prevailing at each transaction date.
• All resulting exchange differences are recognised as translation differences in other comprehensive income.

These criteria are also applicable to the translation of the financial statements of equity-accounted companies, with translation differences attributable to the Group recognised in other comprehensive income.

The translation differences recognised in other comprehensive income are recognised as an adjustment in the profit/loss on the sale, based on the criteria set forth in the sections on subsidiaries and associates.

Foreign operations in hyperinflationary economies

The financial statements of Group companies whose functional currency is the currency of a hyperinflationary economy are restated in terms of the measuring unit at the reporting date.

The results and financial position of the Group's foreign operations whose functional currency is the currency of a hyperinflationary economy are translated into Euros as follows:

• Assets and liabilities, including goodwill and net asset adjustments derived from the acquisition of the operations, assets and liabilities, income and expenses, and cash flows are translated at the closing rate at the most recent reporting date.
• Comparative amounts are those that were included in the prior year consolidated annual accounts and are not adjusted for subsequent changes in the price level or in exchange rates. The effect of the adjustment on the prior year's balances is recognised in reserves in consolidated net equity.

None of the functional currencies of the consolidated companies and associates located abroad are those of a hyperinflationary economy as defined by IFRS, except in the cases of Venezuela and, from 1 January 2018, Argentina (see section g of Note 2).

At the 2019 and 2018 reporting dates the aforementioned financial statements were restated using the measuring unit current at 31 December 2019 and 2018. The financial statements of Venezuela and Argentina were prepared using the historical cost method and were restated applying a general price index, which in Venezuela's case was of 4,679.5% (334,402% in 2018). At 31 December 2019, the cumulative impact of this restatement on equity amounts to approximately Euros 2,163 thousand (approximately Euros 1,656 thousand at 31 December 2018).

f) Borrowing costs-

The Group recognises interest expenses directly attributable to the acquisition, construction or production of qualifying assets as higher value thereof. Qualifying assets are those that require a substantial period before being used or disposed of. To the extent that the financing was obtained specifically for the qualifying asset, the amount of interest to capitalise is determined as a function of the actual costs incurred during the year less the returns obtained on temporary investments with said funds.

Capitalisation of interest starts when expenses related with the assets are incurred, interest is accrued and the necessary activities to prepare the assets or a portion thereof for their intended use or sale are being performed and ends when all or practically all of the activities necessary to prepare the assets or portions thereof for their intended use or sale have been completed. Nevertheless, the capitalisation of interest is suspended during periods in which active development is interrupted over a significant period of time, unless the delay is necessary to place the asset in operating condition or prepare it for sale.

g) Non-current assets held for sale

Non-current assets or disposal groups whose carrying amount will be recovered primarily through a sale transaction, rather than through continuing use, are classified as non-current assets held for sale. To be classified as non-current assets or disposable groups as held for sale, they must available in their current state for disposal, subject only to the usual and widely accepted terms of sale transactions, and the transaction must also be considered to be highly probable.

Non-current assets or disposal groups classified as held for sale are measured at the lower of the carrying amount and fair value less the costs of disposal and are not depreciated.

The Group classifies on the acquisition date a non-current asset or disposable group of items, including subsidiaries, and all or part of the investment in associates or joint ventures acquired solely for the purpose of their subsequent disposal or exchange, as held for sale, if the planned transaction is expected to take place in the following year and the sale fulfils the requirements to be considered highly probable within a short period after the acquisition. At the time of the initial recognition of this kind of assets, their initial measurement is determined by the lower of the value that would have been recognised if they had not been classified as available for sale and their fair value less costs to sell or otherwise dispose of the assets.

h) Intangible assets

Goodwill

Goodwill is measured using the criteria outlined in the section on business combinations.

Accompanying notes

Goodwill is not amortised, but is impairment tested annually or sooner if there are signs of a potential impairment in the asset's value. In this connection, the goodwill resulting from a business combination is allocated to each cash generating unit (CGU) or group of CGUs in the Group that are expected to benefit from the synergies of the combination and the criteria to which section j) impairment refers. After initial recognition, goodwill is measured at cost less cumulative impairment losses.

An impairment loss recognised for goodwill may not be reversed in a subsequent period.

Internally generated goodwill is not recognised as an asset.

Other intangible assets

Intangible assets are presented in the consolidated statement of financial position at cost less amortisation and cumulative impairment losses.

Intangible assets are amortised on a straight-line basis over their useful lives.

Impairment

The Group measures and determines the intangible asset's impairment losses and reversals in accordance with the criteria set forth in section j).

i) Property, plant and equipment

Initial recognition

Property, plant and equipment is measured at cost, less cumulative depreciation and, in the event, cumulative impairment losses. However, prior to 1 January 2004, the Elecnor Group revalued certain items of property, plant and equipment as permitted by applicable legislation. In accordance with IFRS, the Elecnor Group treated the amount of these revaluations as part of the cost of these assets because it considered that the revaluations reflected the effect of inflation.

The cost of property, plant and equipment includes the estimated decommissioning or removal costs, as well as the cost of restoring the location, provided these are obligations incurred as a consequence of its use and for purposes other than the production of inventories. In this regard, since the Elecnor Group does not have to incur significant costs in relation to the closure of its facilities, the accompanying consolidated statement of financial position does not include any related provision, except for a Euros 5 million provision for dismantling relating to the wind farm in Canada and Euros 3 million for the wind farms in Brazil (Note 19).

Capitalised costs include borrowing costs on external financing accrued during the construction period on construction work exceeding one year.

Self-constructed assets property, plant and equipment is recognised at accumulated cost; i.e. external costs plus in-house costs, determined on the basis of warehouse materials consumed, and manufacturing costs calculated using hourly absorption rates similar to those used for the measurement of inventories. In 2019, Euros 21,495 thousand was recognised for this item under "Self-constructed assets" in the consolidated income statement, mainly relating to a wind farm in Spain.

Subsequent costs

Subsequent to the initial recognition of the asset, only those costs that will generate future economic benefits that may reasonably be described as probable, and whose amount can be measured reliably, are capitalised. In this connection, the costs deriving from the daily upkeep of property, plant and equipment are recognised as they are incurred.

Accompanying notes

The replacement of items of property, plant and equipment that may potentially be capitalised implies reducing the carrying value of the items replaced. In those cases in which the cost of the replaced items has not been independently depreciated and it is not feasible to determine their carrying amount, the replacement cost is used to indicate the cost of the items at the time of their acquisition or construction.

Depreciation and amortisation

Property, plant and equipment is depreciated by distributing the depreciable amount using the straight-line method over its useful life.

Depreciation of property, plant and equipment is determined by applying the following criteria:

	Years of useful life
	2019	2018
Buildings	33-50	33-50
Technical installations and machinery (*)	10-25	10-25
Hand and machine tools	3-10	3-10
Furniture and fixtures	3-10	3-10
Information technology equipment	3-5	3-5
Motor vehicles	2-10	2-10
Other property, plant and equipment	3-10	3-10

(*) Includes machinery and facilities used in wind projects, basically wind turbines.

The Group reviews the residual value, useful life and depreciation method of the property, plant and equipment at the end of each financial year. Any changes to the initially established criteria are recognised as a change in estimate.

Impairment

The Group measures and determines the property, plant and equipment's impairment losses and reversals in accordance with the criteria set forth in section j).

The Parent's directors consider that the carrying amount of the assets does not exceed their recoverable amount, which is calculated on the basis of the future cash flows that the assets will generate (See Note 3.j).

j) Impairment of non-financial assets carried at amortised or depreciated cost-

The Group evaluates whether there are indications of possible impairment losses on non-financial assets subject to amortisation or depreciation to verify whether the carrying amount of these assets exceeds the recoverable amount.

Likewise, regardless of the existence of any indication of impairment, the Group reviews, at least once yearly, the potential impairment that might affect goodwill and intangible assets with an indefinite useful life.

The recoverable amount of the assets is the higher amount between fair value less costs to sell and value in use.

The asset's value in use is calculated as a function of the estimated future cash flows deriving from the use of the asset, the expectation about possible changes in timing of those cash flows, the time value of money, the price for bearing the uncertainty inherent in the asset and other factors that market participants would reflect in pricing the future cash flows expected to derive from the asset.

Where the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised for the difference with a charge to depreciation, amortisation, impairment and provisions in the accompanying consolidated income statement.

At each closing date, the Group tests for any signs that the impairment recognised in previous years no longer exists or may have diminished. Impairment losses corresponding to goodwill are not reversible. Impairment losses from the rest of assets are only reversed if there has been a change in the estimates used to determine the asset's recoverable value.

k) Leases (applicable until 31 December 2018)-

The Group classifies as financial leases those contracts whose terms transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. Otherwise they are classified as operating leases.

The Group has been assigned the right to use certain assets under lease agreements.

Finance leases

At the start of the lease period, the Group recognises an asset and liability as the lower of the fair value of the leased asset or the current value of the minimum lease payments. Initial direct costs are included as the higher asset value. Minimum payments are divided between the financial charge and the reduction of the outstanding debt. Finance expenses are imputed to consolidated income statement, by applying the effective interest rate method.

The accounting principles applied to the assets used by the Group pursuant to lease agreements classified as finance leases are those outlined in section i). Nevertheless, if there is no reasonable certainty that the Group will obtain ownership at the end of the asset lease period, they are amortised over the lower of the useful life or the term thereof.

Operating leases

The instalments of operating leases are recognised as an expense under the heading "Other operating expenses" of the consolidated income statement using the straight-line method over the lease period unless another basis of distribution is more representative to better reflect the timing of the rewards of the lease.

In 2018, the Elecnor Group's most significant operating leases were for machinery and motor vehicles, and buildings used to carry out its business activities.

At the 2018 closes, the Group had contractually agreed the following minimum lease payments with lessors, based on the leases currently in force, without taking into account any shared expenses passed on, future CPI increases or future contractual lease payment reviews (in thousands of Euros):

	Nominal amount
Operating lease	Restated 2018
Minimum payments
Less than one year	17,610
Between 1 and 5 years	28,982
More than 5 years	37,329
Total	83,921

The minimum operating lease payments did not include machinery and motor vehicles, which are leased over the term of the construction work performed by the Group, since the Parent's directors consider that there are no long-term commitments in relation to these leases.

l) Financial instruments-

Recognition and classification of financial instruments

Financial instruments are classified on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the economic substance of the contractual arrangement and the definitions of a financial asset, a financial liability and an equity instrument in IAS 32 "Financial Instruments: Presentation".

The Group recognises financial instruments when it becomes a party to the contract or legal transaction, in accordance with the terms set out therein.

For measurement purposes, the Group classifies financial instruments in the categories of financial assets and liabilities at fair value through profit or loss, separating those initially designated from those held for trading or that measured at fair value through profit or loss, financial assets and liabilities at amortised cost and financial assets at fair value through other comprehensive income, separating equity instruments designated as such from the rest of financial assets. The Group classifies financial assets designated at fair value through profit or loss and equity instruments designated at fair value through other comprehensive income in accordance with the business model and nature of the contractual flows. The Group classifies financial liabilities as measured at amortised cost, except those designated at fair value through profit or loss and those held for trading.

The Group classifies a financial asset at amortised cost if it is held within the framework of a business model aimed at holding financial assets in order to obtain contractual cash flows and the contractual conditions of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest on the unpaid principal.

The Group classifies a financial assets at fair value through other comprehensive income if it is held within the framework of a business model aimed at obtaining contractual cash flows and selling financial assets and the contractual conditions of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest on the unpaid principal.

The business model is determined by key staff at the Group at a level reflecting the manner in which groups of assets are managed jointly to achieve the aim of a specific business. The Group's business model represents the manner in which it manages its financial assets to generate cash flows.

The financial assets within the framework of a business model aimed at holding assets to receive contractual cash flows are managed to generate cash flows in the form of contractual receipts during the life of the instruments. The Group manages the assets held on the portfolio so as to receive these specific contractual cash flows. To determine whether the cash flows are obtained by receiving contractual cash flows from the financial assets, the Group considers the frequency, value and calendar of sales in previous years, the reasons for those sales and the expectations in relation to the future sales activity. Nevertheless, sales do not, of themselves, determine the business model and, accordingly, cannot be considered on their own. Instead, it is information on past sales and expectations of future sales that offers an indication of the way to achieve the Group's stated goal with regard to the management of financial assets and, more specifically, how the cash flows are obtained. The Group considers information on past sales in the context of the reasons for those sales and the conditions at that time as compared to current conditions. To this end, the Group considers that trade and other receivables that will be assigned to third parties and will not be derecognised are maintained in this business model.

Accompanying notes

Although the goal of the Group's business model is to hold financial assets in order to receive contractual cash flows, this does not mean that the Group holds all the instruments to maturity. Consequently, the Group's business model is to hold financial assets to receive contractual cash flows even when there have been or there are expected to be sales of these assets. The Group understands that this requirement is fulfilled provided the sales take place due to an increase in the credit risk of the financial assets. In the rest of cases, in individual and aggregate terms, sales may not be significant even if they are frequent or must be infrequent where they are significant.

The contractual cash flows that are solely payments of principal and interest on the unpaid principal are consistent with a basic loan agreement. In a basic loan agreement, the main items of interest are generally the consideration for the time value of money (TVM) and credit risk. Nevertheless, in an agreement of this kind, interest also includes consideration for other risks, such as liquidity and costs, like the administrative risks of a basic loan associated with maintaining the financial asset for a certain period. Moreover, interest may include a profit margin consistent with a basic loan agreement.

The Group designates a financial liability initially at fair value through profit or loss, if by doing so it eliminates or significantly reduces any inconsistency in the measurement or recognition that would otherwise emerge, if the measurement of the assets or liabilities or recognition of the profit/loss thereof were performed on different bases or a group of financial liabilities or of financial assets and financial liabilities is managed, and its performance assessed, on a fair value basis, in accordance with a documented investment strategy or risk management strategy, and information is provided internally concerning said group on the same basis to key staff from the Group's management.

The Group classifies the rest of financial liabilities, except financial guarantee contracts, commitments to grant a loan at a lower-than-market rate and financial liabilities resulting from a transfer of assets not fulfilling the requirements for derecognition from accounts or accounted for using the ongoing involvement approach, as financial liabilities at amortised cost.

Financial assets at fair value

An analysis of financial instruments measured at fair value at 31 December 2019 and 2018 subsequent to their initial recognition, classified into levels 1 to 3 based on the fair value measurement method, is as follows:

• Level 1: their fair value is obtained from directly observable quoted prices in active markets for an identical asset or liability.
• Level 2: their fair value is determined using market inputs, other than the quoted prices included in level 1, that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices).

Accompanying notes

Level 3: their fair value is determined using measurement techniques that include inputs for the assets and liabilities that are not directly observable market data.

		Fair value at 31 December 2019
		Thousands of Euros
	Level 1	Level 2	Level 3	Total
Non-current financial assets
Derivative financial instruments (Note 18)	-	24	-	24
Current financial assets
Derivative financial instruments (Note 18)	-	3,873	-	3,873
Non-current liabilities
Derivative financial instruments (Note 18)	-	(14,132)	-	(14,132)
Current liabilities
Derivative financial instruments (Note 18)	-	(5,722)	-	(5,722)
	-	(15,957)	-	(15,957)

		Fair value at 31 December 2018
		Thousands of Euros
	Level 1	Level 2	Level 3	Total
Non-current financial assets
Derivative financial instruments (Note 18)	-	109	-	109
Current financial assets
Derivative financial instruments (Note 18)	-	871	-	871
Non-current liabilities
Derivative financial instruments (Note 18)	-	(11,413)	-	(11,413)
Current liabilities
Derivative financial instruments (Note 18)	-	(6,569)	-	(6,569)
	-	(17,002)	-	(17,002)

Financial assets and liabilities at amortised cost

Financial assets and liabilities at amortised cost are initially recognised at fair value, plus or minus transaction costs incurred, and are subsequently measured at amortised cost using the effective interest method.

Financial assets measured at cost

Investments in equity instruments for which there is insufficient information for their measurement or those in which there is a broad range of measurements and derivative instruments linked thereto that must be settled on delivery of said investments, are measured at cost. However, if at any time the Group may obtain a reliable measurement of the asset or the contract, they will be recognised at that time at fair value, booking profit or loss in income or other comprehensive income, if the instrument is designated at fair value through comprehensive income.

Impairment

The Group recognises in income an impairment for expected credit losses in financial assets measured at amortised cost, fair value through other comprehensive income, accounts receivable from finance leases, contract assets, loan commitments and financial guarantees.

For financial assets at fair value through other comprehensive income, the expected credit loss is recognised in other comprehensive income and does not reduce the fair value of the assets.

At each balance sheet date, the Group measures the impairment in an amount equal to the expected credit losses in the following twelve months, for financial assets for which credit risk has not significantly increased since initial recognition or when it considers that the credit risk of a financial asset has no longer significantly increased.

When assessing whether there is a significant increase in credit risk, the Group considers all the reasonable and supportable prospective information, specifically:

• Internal and external credit risk ratings;
• Current or expected adverse changes in the business, financial or economic conditions that might trigger a significant change in the borrower's ability to meet its obligations;
• Current or expected significant changes in the borrower's operating income;
• Significant increases in credit risk in other financial instruments of the same borrower;
• Significant changes in the value of the guarantee securing the obligation or as third-party guarantees or credit enhancements;

Nevertheless, the Group recognises the expected credit loss throughout the life of the instrument for trade receivables or contract assets.

Interest and dividends

Interest is recognised by the Group using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of a financial instrument to the net carrying amount of that financial instrument based on the contractual terms of the instrument and not considering expected credit losses, except for financial assets acquired or originated with losses incurred.

Dividends from investments in equity instruments are recognised in profit or loss when the Group is entitled to receive them, it is likely to receive the economic benefits and the amount can be reliably estimated.

Derecognitions and modifications of financial liabilities

The Group derecognises a financial liability or a portion thereof when it has fulfilled the obligation contained in the liability or when it is legally released from the principal responsibility contained in the liability either pursuant to judicial proceedings or by the creditor.

The exchange of debt instruments between the Group and the counterparty or substantial modifications to initially recognised liabilities are recognised as an extinguishment of the original financial liability and recognition of a new financial liability, provided the instruments have substantially different terms.

The Group considers that the terms are substantially different if the current value of the cash flow discounted under the new terms, including any fees paid net of any fees received, and using for the purpose of the discount the original effective interest rate, differs by at least 10 per cent from the current discounted value of the remaining cash flows of the original financial liability.

If the exchange is recognised as the extinguishment of the original financial liability, the costs or fees are recognised in profit and loss. Otherwise, the modified flows are discounted at the original effective interest rate, recognising any difference with the previous carrying amount in profit and loss. Moreover, the costs or fees adjust the finance liability's carrying amount and are amortised using the amortised cost method during the remaining life of the modified liability.

The Group recognises the carrying amount of the financial liability or a part thereof cancelled or assigned to a third party and the consideration paid, including any assigned asset other than the cash or liability assumed in profit and loss.

The Group has arranged confirming lines with various financial institutions to manage supplier payments. The Group applies the aforementioned criteria to assess whether the original liability should be extinguished with trade creditors and a new liability should be recognised with the financial institutions. Trade payables the settlement of which is managed by the financial institutions are shown under trade and other accounts payable, insofar as the Group has only assigned the management of payment to the financial institutions, but remains the primary party obliged to pay the debts to trade creditors.

Moreover, bank borrowings as a result of the sale of trade accounts payable are recognised under trade payables due to confirming operations, in trade and other accounts payable in the consolidated statement of financial position.

m) Hedge accounting-

Derivative financial instruments are initially recognised based on the criteria set forth above for financial assets and liabilities. Derivative financial instruments that do not meet the hedge accounting criteria below are classified and measured as financial assets or liabilities at fair value through changes in profit and loss. Derivative financial instruments that meet the criteria for hedge accounting are initially recognised at fair value, plus, in the event, the transaction costs that are directly attributable to their contracting, or less, in the event, the transaction costs that are directly attributable to their issuance. Notwithstanding transaction costs, they are subsequently recognised in income, to the extent that they do not form a part of the effective change in hedging.

At the inception of the hedge the Group formally designates and documents the hedging relationships and the objective and strategy for undertaking the hedges. The documentation includes the identification of the hedge instrument, the item hedged, the nature of the hedged risk and the manner in which the Group measures the effectiveness of the hedge.

Accounting for hedge operations is only applicable when there is an economic relationship between the hedged item and the hedging instrument, credit risk does not exert a dominant effect on the value adjustments resulting from this economic relationship and the coverage ratio of the hedge relation is the same as the one resulting from the amount of the hedged item the Group actually uses to cover said amount of the hedged item. Nevertheless, that designation must not reflect an imbalance between the weightings of the hedged item and the hedging instrument such that a hedging ineffectiveness is generated, regardless of whether or not it is recognised, that might give rise to an accounting result contrary to the purpose of hedge accounting.

For cash flow hedges of forecast transactions or a component thereof, the Group assesses whether these transactions are highly probable and if they present an exposure to variations in cash flows that could ultimately affect profit or loss.

At the start of the hedge relation and continuously the Group assesses whether the relationship prospectively fulfils the effectiveness requirements. The Group assesses effectiveness at each balance sheet date or when there are significant changes that affect effectiveness requirements.

The Group performs a qualitative assessment of effectiveness, provided the fundamental conditions of the instrument and the hedged item coincide. When the fundamental conditions do not coincide fully, the Group uses a hypothetical derivative with fundamental conditions equivalent to the hedged item to assess and measure ineffectiveness.

The Group only designates as hedged items assets, liabilities, firm commitments and highly probable planned transactions. The hedged item may be an individual item or a group of items.

The Group only designates as hedged items those that involve a party external to the Group.

The Group designates derivative financial instruments, essentially foreign currency forward contracts and options and interest rate swaps to hedge against the various risks.

Accompanying notes

Cash flow hedges

The Group recognises in other comprehensive income the gains or losses from fair value measurement of the hedge instrument corresponding to the part identified as effective hedge. The part of the hedge considered to be ineffective, and the part of the gain or loss or cash flow relating to the hedge instrument excluded from the assessment of hedge effectiveness are recognised as a charge or credit to finance expense or income.

In hedges of planned transactions that give rise to the recognition of a financial asset or liability, the associated gains or losses that were recognised in other comprehensive income are reclassified to profit and loss in the same year or years during which the asset acquired or liability assumed affects profit and loss and under the same heading of the consolidated income statement.

Discontinuation of hedge accounting

If the hedge relation ceases to fulfil the effectiveness requirements linked to the coverage ratio, but the risk management goal remains the same for said relationship, the Group adjusts the coverage ratio so as to continue to fulfil the hedge relation criteria (rebalancing). Rebalancing refers to the adjustments made to the amounts designated of the hedged item or the hedging instrument of an existing relationship in order to maintain the coverage ratio that fulfils the hedge effectiveness requirements. The Group accounts for rebalancing as a continuation of the hedge relation. On the rebalancing date, the Group determines the ineffectiveness of the relation and recognises any ineffectiveness in profit and loss.

The Group discontinues the hedge relation prospectively only when all or part of the hedge relation ceases to fulfil the eligibility requirements. This includes situations in which the hedge instrument expires or is sold, finalised or exercised. In this connection, the replacement or renewal of a hedge instrument is not an expiry or finalisation, provided that the operation is consistent with the Group's documented risk management goal.

In cash flow hedges, the cumulative amount in other comprehensive income is not taken to income until the planned transaction takes place. Notwithstanding the foregoing, the cumulative amounts in other comprehensive income are classified as finance income or expense as soon as the Group no longer expects the planned transaction to take place.

n) Issuance and acquisition of equity instruments and recognition of dividends -

The acquisition by the Group of equity instruments of the Parent is presented at acquisition cost separately as a reduction in equity in the consolidated statement of financial position, regardless of the reason for the acquisition. No profit or loss was recognised in transactions with own equity instruments.

The subsequent amortisation of the Parent's instruments leads to a capital reduction in the nominal amount of said shares and the positive or negative difference between the acquisition price and the nominal share price is charged or credited to reserves.

Dividends, whether in cash or in kind, are recognised as a reduction in net equity when they are approved by the General Shareholders' Meeting.

o) Hedge accounting-

Basic earnings per share are calculated by dividing the net profit for the year attributable to the Elecnor, S.A. by the weighted average number of ordinary shares outstanding in the year, excluding the average number of Elecnor, S.A. shares held.

Diluted earnings per share are calculated by dividing the net profit or loss for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding in the year, adjusted by the weighted average number of ordinary shares that would be issued on the conversion of all of the potential ordinary shares into ordinary shares of the Parent.

At 31 December 2019 and 2018, basic earnings per share are the same as diluted earnings per share, since there were no potential shares outstanding during the years then ended.

p) Inventories-

This item reflects the assets that the Elecnor Group:

• Has under production, construction or development for this purpose, except for construction in progress for which revenue is recognised as indicated in section u.1); or
• Expects to consume in the production process or in the rendering of services.

Inventories are measured at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

The cost of items that are not ordinarily interchangeable is assigned by using specific identification of their individual costs; the weighted average cost is used for the remainder.

Net realisable value is the estimated selling price less the estimated costs of completion and the estimated costs necessary to make the sale.

	Thousands of Euros
		Restated
	31/12/2019	31/12/2018
Raw materials and other supplies
	3,547	4,063
Goods for resale	529	488
Semi-finished and finished goods	1,683	2,737
	5,759	7,288

Details of the Elecnor Group's inventories for 2019 and 2018 are as follows:

q) Cash and cash equivalents-

Cash and cash equivalents include cash on hand and sight bank deposits placed with credit institutions. This heading also includes other highly liquid short term investments which can be readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Accordingly, this heading includes investments that are redeemable within less than three months from their acquisition date.

The Group classifies cash flows corresponding to interest received and paid and dividends received and paid as financing and investment activities.

r) Official grants from Public Administrations-

Official grants from Public Administrations are recognised when there is reasonable certainty of compliance with the conditions associated with their being awarded and received.

Capital grants

Capital grants awarded in the form of monetary assets are recognised as a credit entry under "Non-current liabilities – Official grants", in the consolidated statement of financial position and are imputed to other income as the related financed assets are amortised.

At 31 December 2019, the Elecnor Group had received capital grants amounting to Euros 6,448 thousand (Euros 6,979 thousand in 2018), which had not yet been recognised as income. Government capital grants recognised in 2019 amount to approximately Euros 484 thousand (Euros 478 thousand in 2018) and are recognised as other operating income in the accompanying consolidated income statement.

Operating grants

Operating grants are allocated to income in the year in which the related expenses are incurred, with a credit to the heading "Other operating income".

Other operating income in the consolidated income statements for 2019 and 2018 includes approximately Euros 3,241 thousand and Euros 3,377 thousand, respectively. Most operating grants received by the Elecnor Group in 2019 and 2018 related to the costs borne by Deimos Space, S.L.U. and its subsidiaries in carrying out their activities.

s) Provisions-

The Group recognises provisions for the estimated amount required to settle its liabilities, whether legal or constructive, probable or certain, associated with contingencies, ongoing litigation or obligations, when such liabilities arise as a result of past events, it is probable that an outflow of resources will be required and a reliable estimate can be made of the amount of the obligation. Provisions are recognised when the liability or obligation arises (see Note 19), with a charge to the relevant statement of profit and loss heading based on the nature of the obligation, and for the present value thereof, when the effect of discounting the obligation is material.

The amounts recognised in the consolidated statement of financial position correspond to the best estimate at year-end of the disbursements necessary to extinguish the present obligation, having taken into account the risks and uncertainties linked to the provision.

Provisions do not include the tax effect.

Provisions are reversed against profit and loss when there is not likely to be an outflow of resources to extinguish the obligation. The reversal is performed against the item of profit and loss in which the relevant expense was recognised, and the excess, where applicable, is recognised under other income.

Contingent liabilities relating to possible obligations (dependent on the occurrence or non-occurrence of uncertain future events) or to present obligations that do not qualify for the recognition of a provision (because they are not probable or they cannot be measured reliably) are not recognised (see Notes 19 and 23).

Decommissioning provisions

The provisions to which this section refers are recognised based on the general criteria for recognising provisions and are booked as higher cost value of the items of property, plant and equipment to which they relate (see section i).

Accompanying notes

t) Termination benefits-

Termination benefits are recognised at the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognises costs for a restructuring that involves the payment of termination benefits.

For termination benefits payable as a result of an employee's decision to accept an offer, the time when the Group can no longer withdraw the offer of termination benefits is the earlier of when the employee accepts the offer and when a restriction on the Group's ability to withdraw the offer takes effect.

In the case of involuntary termination benefits, the Group can no longer withdraw the offer when it has communicated to the affected employees or trade union representatives the plan; the actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made; the plan identifies the number of employees whose employment is to be terminated, their job classifications or functions and their locations and the expected completion date; the plan establishes the termination benefits that employees will receive in sufficient detail that employees can determine the type and amount of benefits they will receive when their employment is terminated.

u) Revenue from contracts with customers-

u.1 Revenue from the sale of construction contracts

The Group carries out various construction projects for customers. The projects are considered to be a single execution obligation satisfied over time. This is because projects are tailored specifically for customers and they tend to be highly integrated. Income from projects is recognised over time because the Group's execution produces an asset controlled by customers and with no alternative use for the Group, which is entitled to payment for execution completed until year end.

The Group recognises the income from contracts using the percentage of completion method based on costs incurred over total estimated costs. The Group makes adjustments in accordance with the progress for inefficiencies not initially envisaged in the contract. Moreover, the Group only recognises revenue for cost incurred to the extent that the Group delivers a good that is not different, the customer expects to obtain control of the good prior to obtaining service therefrom, the cost of the good delivered is significant in relation to the total estimated costs and the Group acquires the good from a supplier and is not significantly involved in designing and manufacturing the good.

The Group adjusts progress towards completion as the circumstances change and books the impact prospectively as a change in estimate.

Income recognised by the percentage completion method, a liability is recognised by contract, to the extent that the amount is not due and as a receivable if there is an unconditional right to payment. If the payment received by the customer exceeds the recognised income, a contractual liability is recognised. If the time elapsed between accrual of the income and the estimated payment date exceeds twelve months, the Group recognises the income at the current estimated value of the amount receivable discounted at an interest rate that reflects the customer's credit risk. The Group subsequently recognises finance income. If the time elapsed between receiving the payment from the customer and booking the income as a percentage of completion exceeds twelve months, the Group recognises a finance expense charged to liabilities from the date on which the advance is received to the date on which the income is booked. The interest rate used to recognise the finance expense is determined by the Group's incremental interest rate.

u.2 Rendering of services

Ordinary income from rendering services is recognised considering the degree of completion of the rendering at the balance sheet date, providing that the result of the transaction may be reliably estimated. This is the case when the amount of revenues, degree of completion, costs already incurred and those pending can be reliably measured and it is likely that the economic rewards deriving from rendering the service will be received.

u.3 Contractual modifications

The Group recognises contractual modifications when they have been approved by the parties.

The Group recognises a contractual modification as a separate contract when:

• a) The scope of the contract is increased due to the addition of different goods or services, and
• b) The contract price increases by an amount reflecting the individual price of the additional goods or services, plus any adjustment to reflect the specific circumstances of the contract.

If there is no separate contract, then the original contract is completed to the extent that the residual goods or services are different from those previously delivered. In this case, the Group recognises the residual consideration and the new consideration, prospectively with the different obligations or goods or services within an obligation, pending delivery.

Otherwise, the amount of the modification is assigned to all obligations, including those that may already have been delivered, recognising an adjustment in the income accrued to date.

The Group assigns changes in the transaction price to the contractual obligations in the same way as at the start of the contract, so the Group does not reassign the transaction price to reflect changes in independent sale prices after the contract has commenced. The amounts assigned to fulfilled obligations are recognised as income or a reduction in income when the modification takes place. The Group recognises a change in the transaction price, applying the aforementioned criteria concerning contractual modifications.

However, in the event of a change in the transaction price subsequent to a contractual modification, the Group assigns the effect of the change to the obligations identified prior to the modification, to the extent that the price change is attributable to a variable consideration pledged prior to the modification and the modification is not accounted for as a separate contract, but as a completion of the original contract. On other occasions when modifications are not recognised as a separate contract, the Group assigns the change in the transaction price to the obligations of the modified contract, in other words, the obligations pending execution or partially pending execution following the modification.

In contractual modifications accepted by the parties, but in which approval of the transaction price is pending, the Group recognises the modification in the amount it is considered highly probable will not produce a significant reversal of the income. The Group adjusts estimated transaction prices at each balance sheet date.

v) Income tax-

Income tax revenue or expenses include both current and deferred taxes.

Current tax is the amount payable or recoverable for taxes on consolidated fiscal profit or loss in the year. Current tax assets or liabilities are measured by the amounts expected to be paid to or recovered from the tax authorities, based on the tax rules and rates that have been approved or are about to be approved as of year-end.

Deferred tax liabilities are corporate income tax amounts payable in the future relating to temporary differences, while deferred tax assets are corporate income tax amounts recoverable due to the existence of deductible temporary differences, tax loss carryforwards or deductions pending application. In this connection, a temporary difference is understood to mean the difference between carrying the value of assets and liabilities and their taxable base.

Current or deferred income tax is recognised in profit and loss unless there is a transaction or economic event that has been recognised in the same financial year or another year, against net equity or from a business combination.

Recognition of deferred tax liabilities

The Group recognises deferred tax liabilities in all cases except

• those arising from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affect neither accounting profit nor taxable income;
• those corresponding to differences relating to investments in subsidiaries, associates and joint ventures on which the Group has a capacity to control when they are reversed and when they are unlikely to be reversed in the foreseeable future.

Recognition of deferred tax assets

The Group recognises deferred tax assets provided that:

• it is likely that sufficient taxable profits will be obtained in the future to offset those items, or when tax legislation allows for the future conversion of deferred tax assets into an enforceable credit in respect of the Public Administration. However, assets arising from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable income are not recognised;
• they correspond to temporary differences relating to investments in subsidiaries, associates and joint arrangements insofar as the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

It is considered likely that the Group will obtain sufficient taxable profits in the future to offset deferred tax assets, provided there are sufficient deductible temporary differences, relating to the same tax authority and referring to the same taxpayer, the reversal of which is expected in the same tax year as the deductible temporary differences are expected to be reversed or in years in which a tax loss emanating from a deductible temporary difference may be offset against prior or subsequent profit.

In determining future taxable profit, the Group takes into account tax planning opportunities, provided it intends to adopt them or is likely to adopt them.

Measurement of deferred tax assets and liabilities

Deferred tax assets and liabilities are measured by the applicable tax rates in the years in which the assets are expected to be realised or the liabilities paid, based on rules and rates that are approved or about to be approved and having considered the fiscal consequences deriving from the manner in which the Group expects to recover the assets or settle the liabilities. In this connection, the Group has considered the deduction due to the reversal of temporary measures pursuant to transitory provision thirty-seven of Corporate Income Tax Law 27/2014, dated 27 November, as an adjustment in the tax rate applicable to the deductible temporary difference associated with the non-deductibility of amortisations performed in 2013 and 2014 and the updating of balances under Law 16/2012, of 27 December.

At the end of each year, the Group reviews the carrying amount of deferred tax assets with a view to reducing that value to the extent that it is not likely that there will be sufficient future tax credit carryforwards to offset them.

Deferred tax assets that do not meet the aforementioned criteria are not recognised in the consolidated statement of financial position. At the end of each year, the Group reviews whether or not the conditions have been fulfilled to recognise deferred tax assets that have not previously been recognised.

Tax uncertainties

If the Group determines that it is unlikely that the tax authority will accept an uncertain tax treatment or group of uncertain tax treatments, it considers said uncertainty when determining the taxable income, tax bases, tax loss carryforwards, deductions or tax rates. The Group determines the effect of uncertainty on the corporate income tax filing using the expected value method, when the range of potential outcomes is very broad, or the most likely amount method, when the outcome is binary or concentrated on one value. In those cases in which the tax asset or liability calculated based on these criteria exceeds the amount presented in self-assessments, it is presented as current or non-current in the consolidated statement of financial position based on the estimated recovery or payment date, considering, where appropriate, the amount of related late-payment interest on the liability as accrued in the income statement. The Group recognises changes in events and circumstances relating to tax uncertainties as a change of estimate.

The Group recognises and presents fines in accordance with the stated accounting policy for provisions.

Classification

Deferred tax assets and liabilities are recognised in the consolidated statement of financial position as noncurrent assets or liabilities, irrespective of the expected date of realisation or settlement.

w) Statement of cash flows-

The Group presents the cash flow statement using the direct method, using the following expressions with the following meanings:

• Cash flows. Inflows and outflows of cash and cash equivalents, which are short-term, highly liquid investments that are subject to an insignificant risk of changes in value.
• Operating activities. The principal revenue-producing activities of the Elecnor Group companies and other activities that are not investing or financing activities. The Group presents reverse factoring ("confirming") of trade payables as an operating activity.
• Investing activities. The acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents. The Group classifies interest and dividends received as an investment activity.
• Financing activities. Activities that result in changes in the size and composition of the equity and liabilities that are not operating activities.

The cash flows from operating activities of 2019 and 2018 relate to the Group's routine operations. In this connection, in 2019 there has been an improvement in changes in working capital with respect to 2018, which, coupled with the notable improvement in resources from operations, implied significantly higher cash flows from operating activities than in 2018. Moreover, in relation to the same heading, the Parent did not have any drawn down amount in its factoring lines at year end of either 2019 or 2018.

Net cash flows from investment activities in 2019 and 2018 stemmed mainly from the new investments in property, plant and equipment (see Note 11) and the net cash flows from certain corporate transactions carried out in both years, as described in Notes 2.f and 7. Furthermore, in 2018 note the cash flows received as a result of the dividends paid by the subgroup Celeo Redes (Note 13).

Lastly, the main movements in cash flows from financing activities in both 2019 and 2018 correspond to new issuance and redemptions of commercial paper issued in the Alternative Fixed-Income Market (MARF). In addition, in 2019 note the financing secured through wind power projects in Spain and Brazil and the issuance of project covered bonds by the subsidiary Ventos do Sul Energia, S.A., which used part of these funds to cancel the entirety of the previous funding of its wind project (Note 17). In connection with 2018, note the issuance of financing secured through wind projects in Spain and the early repayment of Euros 100 million in the context of the renewal of corporate syndicated financing in the year (Note 17).

x) Segment reporting-

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

y) Environmental issues-

The Group takes measures to prevent, reduce or repair the damage caused to the environment by its activities.

Expenses derived from environmental activities are recognised as other operating expenses in the period in which they are incurred.

Items of property, plant and equipment acquired by the Group for consistent use in its activity and whose main purpose is to minimise the environmental impact of its activity and protect and improve the environment, including the reduction and elimination of future pollution from the Group's activities, are recognised as assets, applying the measurement, presentation and disclosure criteria described in section i).

4. Financial risk management policy

Elecnor Group is exposed to certain financial risks, which it manages by grouping together its systems for identifying, measuring and supervising risks and limiting the concentration thereof. Financial risk management and containment is performed on a coordinated basis by corporate management and the various business units and subsidiaries that comprise the Group. Financial risk management activities are approved at the highest executive level, in accordance with the rules, policies and procedures in place.

Accompanying notes

Currency risk

Exchange risk to be mitigated arises from the transactions that the Group performs on the international markets in the course of its business, namely market risk due primarily to foreign currency risk. Certain income and procurement costs are denominated in currencies other than the Euro. For this reason, the risk of fluctuating exchange rates of these currencies against the functional currency could have an impact on the Group's profit/loss.

In order to manage and minimise this risk, Elecnor uses hedging strategies, since its objective is to generate profits only through its ordinary business, and not by speculating in relation to exchange rate fluctuations.

The instruments used to achieve this hedging are essentially borrowings tied to the contract's collection currency, foreign currency hedges and swaps, whereby Elecnor and the bank exchange the cash flows arising from a loan denominated in Euros for the flows of another loan denominated in the currency in question, as well as the use of "currency baskets" in order to hedge mixed financing tied to various currencies.

At 31 December 2019, if the euro had depreciated/appreciated by 10% against the US dollar, with all other variables remaining constant, consolidated profit after tax would have been Euros 4,305 thousand higher or Euros 3,522 thousand lower, respectively (Euros 2,666 thousand and Euros 1,749 thousand, respectively in 2018), due mainly to the translation of trade receivables and accounts payable.

The Group is exposed primarily to foreign exchange risk from operations involving US Dollars.

The Group's main exposures to foreign exchange risk at 31 December 2019 and 2018 are detailed below. The attached tables reflect the carrying amounts of the Group's financial instruments or classes of financial instruments denominated in foreign currencies:

Thousands of Euros
	Long-term credits to Group companies	Trade and other receivables	Cash and cash equivalents	Trade and payables
MXN EUR USD DZD GBP HTG JOD OMR AOA NOK DOP XAF MAD MRO VES GHS HNL XOF	- - 10,561 - - - - - - - - - - - - - - -	567 1,500 54,884 19,741 54 12,921 8,695 13,380 14,229 7,394 26,355 4,813 302 11,056 - 5,778 4,195 3,028	809 1,178 107,365 294 8 - 163 791 1,974 6,003 4,862 3,578 3,970 701 - 239 611 865	- (2,350) (16,138) (17,012) (14) (2,601) (5,082) (786) - (4,158) (11,429) - - (2,048) (766) (1,596) (446) (2,095)
Other	-	4,768	1,224	(3,332)
Total	10,561	193,660	134,635	(69,853)

Accompanying notes

2018 – restated

Thousands of Euros
	Long-term credits to Group companies	Trade and other receivables	Cash and cash equivalents	Trade and payables
MXN EUR USD DZD GBP HTG JOD OMR AOA AUD NOK RB CLP DOP PAB XAF MAD MRO	- - 26,628 - - - - - - - - - - - - - - -	316 4,347 41,953 22,788 208 9,402 5,451 2,120 867 64 7,005 1,792 14,294 25,222 14,859 2,381 1,099 5,533	15 1,521 77,422 364 1 - 761 98 896 - 1,518 - 74,968 2,795 1,388 390 3,403 1,698	(48) (1,217) (17,337) (22,915) (8) (1,120) (3,752) (1,051) (7,225) - (4,221) - (7,225) (6,211) (5,819) - - (4,031)
VES Other	- -	- 7,479	- 3,168	(2,372) (2,601)
Total	26,628	167,180	170,406	(87,153)

Interest rate risk

Interest rate fluctuations change the fair value of assets and liabilities that accrue interest at fixed rates and the future cash flows from assets and liabilities indexed to floating interest rates. Elecnor has arranged borrowings to enable it to carry on its operations, mainly in connection with the development, construction and operation of wind farms, thermosolar projects and electricity infrastructure concessions, which it does under project financing arrangements. This kind of arrangement requires under contract that interest rate risk be covered using hedging instruments.

In the case of both project and corporate financing, borrowings are arranged mainly at floating rates and, where appropriate, hedging instruments are used to minimise the related interest rate risk. The hedging instruments, which are specifically assigned to financial debt and are limited to the same nominal value as the latter and the same maturity dates as the hedged items, are essentially IRSs, the aim of which is to convert loans originally arranged at variable rates to fixed rates. In any case, the interest rate hedges arranged are all effective for accounting purposes.

If interest rates at 31 December 2019 had been 5 basis points higher or lower and the rest of variables unchanged, consolidated profit before tax would have amounted to Euros 2,241 thousand and Euros 2,241 thousand higher/lower, respectively, mainly due to a higher/lower finance expense on borrowings at floating rates (Euros 1,684 thousand and Euros 2,075 thousand higher/lower, respectively, in 2018)

Accompanying notes

Other price risks-

The Group is also exposed to its risk that cash flows and profits may be affected by changes in energy prices and by oil prices, among other issues. In order to manage and minimise these risks the Group occasionally uses hedging strategies.

Liquidity risk-

Liquidity risk is mitigated through Elecnor's policy of holding cash and highly liquid non-speculative short-term instruments, such as the acquisition of treasury bills under non-optional repurchase agreements and very shortterm US dollar deposits, through leading banks in order to be able to meet its future commitments and the arrangement of committed credit facilities of sufficient amount to cover its projected needs.

Note 17 provides details of the maturities of financial liabilities.

Credit risk-

The main credit risk arises from trade receivables, when the counterparty or customer does not meet their contractual obligations. To mitigate this risk, the Group operates with customers that have adequate credit records. In view of its activities and the sectors in which it operates, Elecnor has customers with very high credit ratings. However, in the case of non-recurrent international sales to customers, mechanisms such as advances, irrevocable letters of credit and insurance policies are used to ensure collection. Furthermore, the financial solvency of customers is analysed and specific terms and conditions are included in contracts, aimed at guaranteeing customer payments of the stipulated price.

In the case of the wind farms, the power produced - in accordance with the legislative framework in force for the electricity industry - is sold in the Iberian Electricity Market (MIBEL) and income is collected from the operator of the Spanish Electricity Market (OMIE) through a payment-guarantee system and from the Spanish National Markets and Competition Commission (CNMC), which regulates energy markets in Spain and reports to the Ministry of Industry. Ventos do Sul Energia, S.A., Parques Eólicos Palmares, S.A., Ventos da Lagoa, S.A., Ventos do Litoral Energía, S.A. and Ventos dos Índios Energia, S.A. (Brazil) entered into long-term agreements with the corresponding Brazilian electricity distribution companies to sell the electric power that they will generate for a period of 20 years. Furthermore, Eóliennes de L'Érable has signed a 20-year contract to sell the electricity it generates to Canadian electric utility Hydro-Québec.

Elecnor seeks always to implement the strictest measures to mitigate this risk and conducts periodic analyses of its exposure to credit risk, making the relevant impairment corrections where necessary. Note 15.a) includes a breakdown of the amount of trade and other receivables past due and the amount impaired at 31 December 2019 and 2018.

Regulatory risk-

Elecnor closely monitors regulatory risk, particularly that affecting renewable energy, to adequately reflect its impact on the consolidated income statement.

Other risks-

In addition to the risks outlined above, the Elecnor Group is exposed to various risk factors (governance, strategic, planning and economic environment, operating, reporting and compliance risks) linked to the sectors in which it operates and the long list of countries in which it operates, either consistently or by means of one-off projects. The Group uses its Risk Management System to continually manage and prevent these risks, reducing to acceptable levels the probability of their materialising and mitigating their potential impact, where applicable, on business volume, profitability and efficiency, reputation and sustainability. The pillars of this Risk Management System are the ongoing identification and assessment of the risks to which the Group is exposed, the improvement of related management mechanisms and tools and the permanent oversight and monitoring of the entire process.

Accompanying notes

5. Appropriation of profit

The proposed appropriation of the Parent's 2019 profit/loss, to be presented to the General Shareholders' Meeting, is as follows:

	2019
Basis of appropriation
Profit/loss for the year	30,122
Voluntary reserves	2,151
Total	32,273
Appropriation
Voluntary reserves	1,249
Capitalisation reserves Law 27/2014	2,151
Interim dividend	4,987
Supplementary dividend	23,886
Total	32,273

At the General Shareholders' Meeting held on 22 May 2019 a supplementary dividend of Euros 21,939 thousand (Euros 0.31 per share) was approved, taking into account the interim dividend of Euros 4,795 thousand out of 2018 profit paid in December 2018.

At the meeting held on 23 October 2019, the Board of directors of the Parent agreed to distribute an interim dividend for 2019 of Euros 4,987 thousand, which was recognised as a reduction in equity under "Interim dividend paid in the year" on the liability side of the accompanying consolidated statement of financial position, and paid on 11 December 2019.

These distribution amounts did not exceed the profit obtained in the last year by the Parent, having deducted the estimated corporate income tax payable on said profit, in accordance with the provisions of article 277 of the Revised Spanish Companies Act.

The provisional accounting statement prepared in accordance with legal requirements evidencing the existence of sufficient liquidity for the distribution of the dividend was as follows:

WORKING CAPITAL POSITION AT 30 SEPTEMBER 2019

	Thousands
	of Euros
Realisable values -
Trade receivables	694,611
Other accounts	112,119
	806,730
Current payables -
Suppliers	272,406
Current loans	293,745
Other accounts	187,613
	753,764
Total working capital	52,966
Liquidity available:
Cash on hand and at banks (including foreign currency)	66,949
Total liquidity available	66,949
Gross interim dividend proposed -
(Euros 0.05732 for 87,000,000 shares)	4,987
% of net profit at 31/10/2016 and 30/10/2015	75.03%
% of working capital + liquidity available	4.16%

((Excluding inventories and prepayments)

6. Segment reporting

IFRS 8 requires operating segments to be identified based on the information that the entity's management uses to make decisions about operating matters. The Parent's directors consider that the segments that must be reported, since they form the basis on which the Group makes its decisions for allocating resources and whose operating profits are reviewed regularly at the highest executive level to assess their performance, are Infrastructure and Concessions (previously Investments). In each of these markets, the Group obtains revenue from the various business activities carried on by it.

The Concessions segment includes the concession and operating activities for wind farms, as the performance and monitoring of the results generated by both activities is measured and managed together; this is also the case for corporate decision-making.

a) Information on operating segments-

Assets and liabilities for general use and the income and expenses arising therefrom were not allocated to the other segments. Similarly, the reconciling items arising from the comparison of the result of integrating the financial statements of the various operating segments (prepared on the basis of management criteria) with the consolidated financial statements of the Elecnor Group, were not allocated. These items are included under the heading "Corporate" in the information shown below.

Information on these operating segments is presented below:

a) Details of the consolidated income statement items by segment at 31 December 2019 and 2018 are as follows:

	Thousands of Euros
					Total at
	Infrastructure	Concessions	Corporate	Intersegment	31/12/2019
Statement of profit and loss
Net Turnover	2,279,501	190,769	-	(16,544)	2,453,726
Results from operating activities	119,585	87,474	38,978	(6,361)	239,676
Finance income	6,392	2,946	-	-	9,338
Finance costs	(17,837)	(36,723)	-	-	(54,560)
Change in fair value of
financial instruments	(3)	413	-	-	410
Translation differences	(2,484)	(68)	-	-	(2,552)
Impairment and profit/loss on
disposal of financial instruments	(655)	(1,580)	-	-	(2,235)
Income tax	(38,385)	(11,543)	(9,418)	(66)	(59,412)
Attributable to non-controlling
interests	(94)	(4,194)	-	-	(4,288)
Consolidated profit/loss attributable
to the Parent	66,519	36,726	29,560	(6,428)	126,377
EBITDA	176,717	144,712	72,637	(7,070)	386,996

2019

Accompanying notes

Restated 2018

	Thousands of Euros
	Infrastructure	Concessions	Corporate	Intersegment	Total restated at 31/12/18
Statement of profit and loss
Net Turnover	2,096,046	158,643	-	(3,790)	2,250,899
Results from operating activities	108,092	67,418	(24,938)	(1,197)	149,375
Finance income	6,826	2,650	1,423	-	10,899
Finance costs	(20,476)	(28,578)	-	445	(48,609)
Change in fair value of
financial instruments	(3)	(382)	-	-	(385)
Translation differences	14,222	(301)	-	(83)	13,838
Impairment and profit/loss on
disposal of financial instruments	168	105	-	-	273
Income tax	(43,648)	(9,832)	16,127	(205)	(37,558)
Attributable to non-controlling
interests	(78)	(5,638)	-	-	(5,716)
Consolidated profit/loss attributable
to the Parent	65,104	25,442	(7,388)	(1,041)	82,117
EBITDA	171,481	114,921	(30,693)	(1,541)	254,168

b) Details of assets and liabilities by segment at 31 December 2019 and 2018 are as follows:

²⁰¹⁹

	Thousands of Euros
					Total at
	Infrastructure	Concessions	Corporate	Intersegment	31/12/2019
Assets
Property, plant and equipment	143,121	582,390	-	(9,776)	715,735
Intangible assets	29,692	12,628	-	-	42,320
Right-to-use assets	19,284	15,882	-	-	35,166
Deferred tax assets	69,924	13,421	17,085	2,997	103,427
Inventories	5,647	112	-	-	5,759
Trade receivables	737,648	21,480	15,119	(368)	773,879
Customer contract assets	306,129	-	-	-	306,129
Investees accounted for
using the equity method	20,015	560,552	-	-	580,567
Non-current financial assets	17,710	19,301	4,984	-	41,995
Non-current assets held
for sale	5,747	32,974	-	-	38,721
Other assets (*)	267,084	68,326	128	8	335,546
Total assets	1,622,001	1,327,066	37,316	(7,139)	2,979,244
Liabilities and equity
Non-current financial liabilities	26,231	355,009	276,948	-	658,188
Provisions for liabilities and charges	7,819	18,220	20,350	-	46,389
Deferred income and grants	4,683	1,765	-	-	6,448
Non-current lease liabilities	15,378	17,332	-	-	32,710
Other non-current liabilities	6,292	13,342	-	-	19,634
Deferred tax liabilities	6,909	13,079	618	-	20,606
Current provisions	60,062	4,356	-	-	64,418
Current financial debt	141,762	34,184	1,738	-	177,684
Current lease liabilities	5,208	2,202	-	-	7,410
Current non-financial debt	1,108,554	45,592	31,406	(272)	1,185,280
Liabilities associated with non-current
assets held for sale	-	23,157	-	-	23,157
Other liabilities (*)	53,627	109,899	587,515	(13,721)	737,320
Total liabilities	1,436,525	638,137	918,575	(13,993)	2,979,244

(*) Includes mainly cash and cash equivalents.

Accompanying notes

Restated 2018

	Thousands of Euros
					Total
			Corporate		restated at
	Infrastructure	Concessions		Intersegment	31/12/18
Assets
Property, plant and equipment	120,302	578,371	-	(9,315)	689,358
Intangible assets	33,749	40,866	-	-	74,615
Deferred tax assets	68,345	22,923	1,649	2,909	95,826
Inventories	7,262	26	-	-	7,288
Trade receivables	703,867	19,986	7,112	1	730,966
Customer contract assets	258,756	-	-	-	258,756
Equity-accounted investees:	22,281	317,437	-	-	339,718
Non-current financial assets	51,539	28,248	3,722	-	83,509
Non-current assets held for sale:
	423	-	-	-	423
Other assets (*)	235,223	63,995	295	-	299,513
Total assets	1,501,747	1,071,852	12,778	(6,405)	2,579,972
Liabilities and equity
Non-current financial liabilities	15,181	348,642	253,996	-	617,819
Provisions for liabilities and charges	16,778	13,136	-	-	29,914
Deferred income and grants	5,169	1,810	-	-	6,979
Other non-current liabilities	7,256	16,941	-	-	24,197
Deferred tax liabilities	7,569	13,773	755	-	22,097
Current provisions	62,667	5,362	-	-	68,029
Current financial debt	203,253	44,429	1,747	-	249,429
Current non-financial debt	960,435	31,757	2,974	-	995,166
Equity	47,045	(11,282)	538,528	(7,949)	566,342
Total liabilities	1,325,353	464,568	798,000	(7,949)	2,579,972

(*) Includes mainly cash and cash equivalents.

b) Information on products and services

The Elecnor Group's business activities are as follows:

• Electricity
• Power generation
• Telecommunications and space
• Construction, environment and water
• Maintenance
• Facilities
• Gas
• Railways

The generation of electricity (included in Energy Generation) using mainly wind farms and solar thermal power plants is one of the lines of business of the Elecnor Group that is carried out through the Enerfín subgroup in the case of wind farms, and by Celeo Termosolar, S.L. (subgroup Celeo Concesiones e Inversiones), in the case of solar thermal plants. Both activities belong to the Concessions segment.

Both activities are included in the Concessions and Investments segment. The electricity generation business of the Elecnor Group's Spanish subsidiaries is regulated by Electricity Industry Law 24/2013 of 26 December 2013, which repeals Law 54/1997 of 27 November 1997, and by the subsequent implementing regulations.

On 28 December 2012, Law 15/2012 of 27 December 2012 on Tax Measures for Energy Sustainability was published, introducing a new tax on the value of electricity output applicable to activities involving the production and feeding of electricity into the Spanish electricity system. The tax base consists of the total amount receivable by the taxpayer for the power output produced and the electricity fed into the system during the tax period, which coincides with the calendar year, and this amount is subject to a 7% tax charge.

Additionally, Final Provision One of this Law amended Law 54/1997, whereby the electricity attributable to the use of fuels at a generation facility that uses any non-consumable renewable energy as a primary energy source will not qualify for the feed-in tariff system, which could affect the Group's thermosolar power plants under operation.

On 2 February 2013, Royal Decree-Law 2/2013 of 1 February 2013 on Urgent Measures in the Electricity System and in the Financial Sector was published, addressing, inter alia, the following:

• Effective from 1 January 2013, all remuneration, tariffs and feed-in tariffs received by the parties to the electricity system, which were tied to the CPI prior to the entry into force of this Royal Decree-Law, will be updated using as a reference the CPI at a constant tax rate, excluding unprocessed foods and energy products.
• Additionally, this Royal Decree-Law amended Royal Decree 661/2007 of 25 May 2007, which governs electricity production under the special regime, establishing a single remuneration option for facilities falling under the special regime, i.e. this remuneration will be treated as a regulated tariff except when the facilities decide to receive only the market price (no feed-in tariff). The pool plus feed-in tariff option normally used by these facilities was therefore eliminated.

Royal Decree-Law 9/2013 of 12 July 2013, adopting urgent measures to ensure the financial stability of the electricity system, was approved on 13 July 2013 and addresses, inter alia, the following:

• The government will be responsible for approving a new legal and economic regime for existing facilities that generate electricity using renewable energy sources, cogeneration and waste. To this end, article 30.4 of Electricity Industry Law 54/1997 of 27 November 1997 was amended to include the specific principles for drawing up this regime, in order to limit the government's scope of activities to the development of remuneration models for these facilities. This regime will be based on facilities receiving revenues for their participation in the market, plus additional remuneration, where necessary, to cover the investment costs that cannot be recovered by an efficient, well-managed company in the market. To this end, in accordance with EU legislation, an efficient, well-managed company is understood to be a company provided with the means necessary to carry out its activity, with costs that correspond to an efficient company engaging in this activity, taking into account the corresponding revenue and a reasonable profit for carrying out its activities.

• Calculation of the specific remuneration for a 'standard' facility will consider the revenues from energy sales at production market prices, the average operating expenses necessary to carry out the activity and the value of the initial investment for a 'standard' facility operated by an efficient, well-managed company. As such, the remuneration model will be based on fixed parameters on the basis of the different 'standard' facilities listed.

• In order to define this new model, the following pieces of legislation were repealed: article 4 of Royal Decree-Law 6/2009 of 30 April 2009, adopting certain measures in the energy sector and approving the social tariff; Royal Decree 661/2007 of 25 May 2007, which regulates the production of electricity under the special regime; and Royal Decree 1578/2008 of 26 September 2008, regulating the revenues from photovoltaic solar electricity production activities for facilities entering into service after the end date for remuneration, under Royal Decree 661/2007 of 25 May 2007, for this technology. However, with a view to maintaining the flow of remuneration to facilities as well as other procedures, rights and obligations, the repealed legislation above will continue to apply temporarily until the regulation developing this Royal Decree-Law has been enacted, except in certain extreme cases.

• To this end, where appropriate, facilities will be entitled to a settlement on account under this temporary system and, once the legislative provisions necessary to apply the new economic regime have been enacted, the pertinent adjustments will be made to the rights to receivables or payment obligations arising as a result of application of the new methodology, effective from the entry into force of this Royal Decree-Law.
• Consequently, although the effectiveness of the legislative provisions governing remuneration that will be enacted has been determined, effective from the entry into force of this Royal Decree-Law, the legislation provides agents with the necessary information as regards the amount of the remuneration mechanism established, considering participation in the market and a return on the investment, and also determines the reasonable rate of return for the 'standard' facility.
• Moreover, for those facilities with the right to the premium financial regime upon the entry into force of the royal decree-law, a reasonable pre-tax profitability shall be determined, which may be revised after six years.

Royal Decree 403/2014 of 6 June 2014, regulating electricity generated from renewable energy sources, cogeneration and waste, was published on 10 June 2014. Subsequently, on 21 June 2014, Ministry of Industry, Energy and Tourism Order IET/1045/2014 of 16 June 2014 was published, approving the remuneration parameters for standard facilities, applicable to certain facilities that produce electricity through renewable sources, cogeneration and waste.

In line with the above, and considering that the government's aim is to reduce feed-in tariffs for the renewables sector, the Elecnor Group has re-estimated the future cash flows of all assets subject to this legislation, as it considers that there could be indications of impairment thereon.

In this connection, sector regulations changed over the course of 2014, building on the reforms commenced in 2013. As a result, the main standards governing the sector are:

• Electricity Sector Law 24/2013, of 26 December. This Law repeals Electricity Sector Law 54/1997, of 27 November, except for additional provisions six, seven, twenty-one and twenty-three, and articles 3 and 4 of Royal Decree Law 2/2013.
• Royal Decree 413/2014 in June and the associated Order of Parameters IET/1045/2014, updated for the 2017-2019 period by Order ETU/130/2017, of 17 February, enforcing the provisions of Royal Decree Law 9/2013, and facilities start operating in the Market, some of them being subject to a specific fixed annual remuneration framework depending on their nature, age and profitability (remuneration on investment and remuneration on operation). The reform of the electricity sector regulation in 2013 and 2014 did not alter Law 15/2012, of 27 December, whereby the Spanish government passed a general tax of 7% on electric power generation, and new taxes on nuclear and large-scale hydroelectric power, as well as a new levy on coal. The tax has been applied since January 2013.

Lastly, this year Royal Decree-Law 17/2019 was approved, adopting urgent measures for the necessary adaptation of remuneration parameters affecting the electricity system. This legislation established a reasonable return of 7.09% for renewable, cogeneration and waste facilities, applicable in the second regulatory period (2020-2025). However, renewable, cogeneration and waste facilities that were remunerated when Royal Decree-Law 9/2013 came into force and in certain circumstances were allowed to maintain, during the second and third regulatory periods (2020-2031) the reasonable return established for the first regulatory period, of 7.398%. Wind farms belonging to the subgroup Enerfín will maintain that reasonable return for this period.

Electricity sale and purchase contracts have been arranged for wind farms in Brazil and Canada with a number of buyers (Eletrobras, the Chamber for the Commercialisation of Electricity and Hydroquebec). These contracts cover a period of 20 years and have been arranged as part of the programme implemented by the Federal Government of Brazil.

The directors do not consider that any other renewable energy-related regulation has been enacted that could significantly affect the consolidated annual accounts at 31 December 2019.

c) Geographical information

Following are details of revenues from external customers and non-current assets that are not financial instruments for the most significant countries at 31 December 2019 and 2018:

Revenue

	Thousands of Euros
		Restated
Country	2019	2018
Spain	1,168,656	987,979
Brazil	417,275	240,404
Angola	42,048	68,830
USA	205,373	181,030
Australia	32,114	159,874
Chile	83,247	73,603
Mexico	45,874	55,355
Panama	70,886	21,820
Dominican Republic	50,858	89,683
Italy	43,158	37,723
Other	294,237	334,598
	2,453,726	2,250,899

Accompanying notes

Non-current assets

	2019
	Thousands of Euros
				Right-to-use
Country	Intangible assets	Goodwill	Property, plant and equipment	assets
Canada	-	-	173,484	3,379
Brazil	34	-	289,719	2,821
Chile	-	-	1,190	-
Peru	-	-	1,404	-
UK	-	5,690	307	1,157
Ecuador	-	1,377	29,472
USA	773	313	10,986	-
Spain	16,234	17,076	205,584	27,656
Other	401	422	3,589	153
	17,442	24,878	715,735	35,166

Non-current assets

	Restated 2018
	Thousands of Euros
Country	Intangible assets	Goodwill	Property, plant and equipment
Canada	-	-	180,243
Brazil	-	-	256,879
Portugal	-	4,385	-
UK	-	5,690	-
USA	1,004	310	10,554
Spain	44,649	18,455	222,841
Other	122	-	18,841
	45,775	28,840	689,358

7. Business combinations

On 31 July 2019, the Group, via the company Celeo Termosolar, S.L., acquired holdings of 42.57% and 44.30% in the companies Dioxipe Solar, S.L. and Aries Solar Termoeléctrica, S.L., respectively. On that date the Group had a non-controlling interest in both companies (see Note 13). Both companies are domiciled in Madrid and their main activity is the construction and operation of three parabolic trough technology solar thermal power plants in Extremadura and Castilla-La Mancha.

The acquired business generated an ordinary loss and consolidated loss of Euros 35,053 thousand and Euros 1,418 thousand, respectively, for the Group between the acquisition date and the end of the period.

Had the acquisition taken place on 1 January 2019, the Group ordinary revenues and consolidated profit/loss for the year ended on 31 December 2019 would have exceeded Euros 55,505 thousand and Euros 5,750 thousand, respectively.

Accompanying notes

The details of the consideration paid, the fair value of the net assets acquired and the excess of net assets acquired over the cost of the combination are as follows:

		Thousands of Euros
		Aries Solar
	Dioxipe Solar, S.L.	Termoeléctrica, S.L.
Consideration paid
Cash paid	3,403	10,846
Total consideration paid	3,403	10,846
Non-controlling interests	735	-
Fair value of the prior investment in the business	12,910	24,169
Fair value of the net assets acquired	23,473	43,392
Excess of net assets acquired over the cost of
acquisition	6,425	8,377

The excess of net assets acquired over the cost of acquisition was recognised under "Negative differences in business combinations" in the accompanying consolidated income statement for 2019.

The fair value measurement of 55% and 55.7% of the previous shareholding in the acquired businesses (Dioxipe Solar, S.L. and Aries Solar Termoeléctrica, S.L., respectively), which amounted to Euros 46,332 thousand, implied the recognition of a loss totalling Euros 9,253 thousand, which was booked under "Profit/loss at equityaccounted investees" in the consolidated income statement for 2019.

In addition, the transfer to the income statement of the valuation adjustments held by the Elecnor Group in net equity on the date of taking control associated with the shareholdings in these companies implied the recognition of a loss totalling Euros 47,445 thousand, which was booked under "Profit/loss at equity-accounted investees" in the consolidated income statement for 2019.

The fair value of the main assets acquired is shown below:

	Thousands of Euros
		Aries Solar
	Dioxipe Solar, S.L.	Termoeléctrica, S.L.
Assets
Right-of-use assets (Note 12)	-	19,159
Property, plant and equipment (Note 11)	214,191	410,083
Current assets	15,901	31,958
Other assets (Note 14)	4,358	125
Deferred tax assets (Note 21)	26,928	53,823
Liabilities
Non-current payables and derivatives	215,967	420,020
Current liabilities	15,346	27,009
Other liabilities	2,773	8,596
Deferred tax liabilities (Note 21)	3,819	16,131
Total net assets	23,473	43,392
Amount paid in cash	3,403	10,846
Cash and cash equivalents of the acquiree	6,220	12,155
Effect of the cash from the acquisition	(2,817)	(1,309)

Accompanying notes

The criterion for calculating the main assets and liabilities on the date control is obtained is outlined below:

• Licence: valued using the multi-period excess earnings method (MPEEM), which calculates the value of the asset as the sum of excess future earnings discounted at their current value having deducted contributory asset charges. The key parameters used in measuring this intangible were EBITDA and a discount rate of 6.52%. This asset was measured at Euros 20 million and is recognised along with property, plant and equipment.
• Property, plant and equipment: this was measured using the depreciated replacement cost.
• Deferred assets: measured in accordance with the best estimate of future taxable profit and based on tax regulations in force at the time of taking control.

8. Non-current assets held for sale

The Group has classified the assets and liabilities of waste water treatment plants as held for sale based on the sale agreements signed on 11 July 2019 (Note 2.f). The sale transactions are expected to be effective in the first half of 2020, once all the relevant permits are obtained.

The disposable group of items comprised assets with a net carrying amount of Euros 38,332 thousand and liabilities of Euros 23,157 thousand. Since the fair value less cost to sell of the disposable group are higher than the net carrying amount at 31 December 2019, it was not necessary to recognise any impairment loss.

Details of assets and liabilities held for sale and other comprehensive income relating to the waste water treatment plants at 31 December 2019 are as follows:

	Thousands of
	Euros
Non-current assets held for sale:
Other intangible assets (Note 10)	24,607
Other non-current financial assets (Note 14)	1,584
Equity-accounted investees (Note 13)	3,522
Deferred tax assets (Note 21)	2,097
Other current assets	683
Cash and cash equivalents	5,839
Total assets	38,332
Liabilities associated with non-current assets held for sale:
Finance liabilities on loans and borrowings (Note 17)	21,329
Other non-current liabilities	1,350
Trade and other payables	478
Total liabilities	23,157
Other comprehensive income	1,302

Accompanying notes

9. Goodwill

Details, by company, of intangible assets - goodwill in the consolidated statements of financial position at 31 December 2019 and 2018 and of the changes therein in those years are as follows:

2019

	Thousands of Euros
	Balance at	Impairment		Change to the consolidated Group	Balance at
	31/12/2018	(Note 24)	Additions	(Note 2.f)	31/12/2019
Fully-consolidated companies
Wind farms:
- Galicia Vento, S.L.	8,702	-	-	-	8,702
- Aerogeneradores del Sur, S.A.	3,630	-	-	-	3,630
-Parque Eólico Montañes, S.L.	-	-	10	-	10
Other businesses:
- Deimos Space, S.L.U.	158	-	-	-	158
- Deimos Engenharia, S.A.	4,227	(4,227)	-	-	-
- Ehisa Construcciones y Obras, S.A.	1,932	-	-	-	1,932
- Hidroambiente, S.A.U.	388	-	-	-	388
- Instalaciones y Proyectos de Gas,
S.A.U. – merged with Elecnor, S.A.	1,031	-	-	-	1,031
- Helios Inversión y Promoción Solar, S.L.U.	1,125	-	-	(1,125)	-
- Jomar Seguridad, S.L.U.	1,647	-	-	-	1,647
- Belco Elecnor Electric, Inc.	310	-	3	-	313
- IQA Operations Group Limited	5,690	-	-	-	5,690
- Wayraenergy, S.A.	-	-	1,377	-	1,377
	28,840	(4,227)	1,390	(1,125)	24,878

2018

	Thousands of Euros
	Balance at	Impairment			Balance at
	01/01/2018	(Note 24)	Disposals	Other	31/12/2018
Fully consolidated companies
Wind farms:
- Galicia Vento, S.L.	8,702	-	-	-	8,702
- Aerogeneradores del Sur, S.A.	3,630	-	-	-	3,630
Other businesses:
- Deimos Space, S.L.U.	158	-	-	-	158
- Deimos Engenharia, S.A.	4,227	-	-	-	4,227
- Ehisa Construcciones y Obras, S.A.	1,932	-	-	-	1,932
- Hidroambiente, S.A.U.	388	-	-	-	388
- Instalaciones y Proyectos de Gas,
S.A.U. – merged with Elecnor, S.A.	1,031	-	-	-	1,031
- Helios Inversión y Promoción Solar, S.L.U.	1,125	-	-	-	1,125
- Jomar Seguridad, S.L.U.	1,647	-	-	-	1,647
- Belco Elecnor Electric, Inc.	296	-	-	14	310
- IQA Operations Group Limited	5,690	-	-	-	5,690
	28,826	-	-	14	28,840

Accompanying notes

As indicated in Note 3.j, at each reporting date the Group reviews goodwill for impairment.

The cash-generating units considered for the purpose of the impairment tests on goodwill, included in the table above, are the companies to which the goodwill was allocated, since these companies are generally set up as single-project entities.

Recoverable amount is the higher of fair value less costs to sell and value in use, which is deemed to be the present value of the estimated future cash flows approved by management and considered reasonable. In assessing value in use, the assumptions used include discount rates, growth rates and expected changes in selling prices and costs. The directors of the Parent estimate discount rates that reflect the time value of money and the risks specific to the cash-generating unit.

In particular, with respect to the impairment tests on the goodwill allocated to wind farms and wind power projects in Spain, performed taking into account the value of the farms and projects together with the value of the related property, plant and equipment, which amounts to Euros 53 million (Euros 60 million in 2018), turnover is estimated in accordance with sector forecasts relating to the pool price and applicable legislation (see Note 6.b), which considers annual increases based on a prudent estimate of the changes in the price index and the average production levels obtained in prior years or those estimated as a result of studies. The main assumptions used by the Parent's directors when testing for impairment in 2019 are as follows:

• Revenues: based on internal estimates and, where applicable, external sources. The pool price applied for 2020 has been estimated at €49.30/MWh.
• Discount rate: 5.32% (*)
• Projection period: depending on the remaining useful life of the asset (Note 3.i.).
  • (*) The rate after the tax effect, as in this type of projects the tax component is very high and a fundamental variable when deciding whether to invest. These tests used net tax flows.

No impairment has emerged from the results obtained in these tests, or from the sensitivity analyses conducted by Management.

The sensitivity analyses performed by management using variations in accordance with the deviations in the main estimates from the previous year did not evidence any indications of impairment.

Additionally, with respect to the impairment tests on the remaining goodwill, the discount rates applied were between 6% and 8%, and in estimating perpetual return, growth rates of between 1.5% and 2% were considered.

In 2019, the Group impaired the goodwill of Deimos Engenharia, S.A. in the amount of Euros 4,227 thousand based on the impairment test carried out in the year and considering that the operating cash flows had decreased by 5% with respect to 2018 and that the Group does not expect growth in the near term.

Accompanying notes

10. Other intangible assets

Movement under this heading of the consolidated statement of financial position in 2019 and 2018 is as follows:

	Thousands of Euros
	Development	Industrial property	Computer	Administrative	Other intangible
	expenses		software	concessions	assets	Total
Balance at 01/01/2018	1,409	3,110	12,666	51,480	27,886	96,551
restated
Changes in the
consolidation
scope	38	-	-	-	-	38
Additions	312	-	2,499	150	-	2,961
Disposals	(102)	-	(93)	-	(340)	(535)
Transfers	-	-	-	-	(36)	(36)
Translation differences	(1)	39	90	-	(9)	119
Balance at 31/12/2018	1,656	3,149	15,162	51,630	27,501	99,098
restated
Changes in the
consolidation
scope (Note 2.f)	(1)	-	(59)	-	-	(60)
Additions	313	-	3,281	21	-	3,615
Disposals	-	-	(471)	-	-	(471)
Translation differences	(1)	9	(248)	(3)	-	(243)
Balance at 31/12/2019	1,967	3,158	17,665	51,648	27,501	101,939
Accumulated
amortisation and
depreciation restated
Balance at 01/01/2018 Charge (Note 24)	1,099 30	2,618 87	8,870 1,684	21,567 2,610	12,721 1,972	46,875 6,383
Disposals	67	-	(94)	-	-	(27)
Transfers	-	(15)	15	-	-	-
Translation differences	-	20	72	-	-	92
Balance at 31/12/2018
restated	1,196	2,710	10,547	24,177	14,693	53,323
Changes in the
consolidation
scope (Note 2.f)	-	-	(21)	-	-	(21)
Charge (Note 24)	46	89	2,393	2,582	1,972	7,082
Disposals	-	-	(253)	-	-	(253)
Translation differences	-	3	(246)	-	2	(241)
Balance at 31/12/2019	1,242	2,802	12,420	26,759	16,667	59,890
Total other intangible
assets, net	725	356	5,245	24,889	10,834	42,049
Transfer to non
current assets held for
sale (Note 8)	-	-	-	(24,607)	-	(24,607)
Net cost at 31/12/2019	725	356	5,245	282	10,834	17,442

Other intangible assets in the above table include a gross amount of Euros 27,507 thousand reflecting the estimated fair value of the contracts with public entities for road maintenance and upkeep relating to the subsidiary Audeca, S.L.U. at the date on which this company was acquired by the Elecnor Group in 2010. The Group amortises this asset over a period of 15 years which, based on past experience, is the estimated average term of the aforementioned contracts including the related renewals. The amortisation of this item in 2019 and 2018 amounted to approximately Euros 1,972 thousand, respectively.

Administrative concessions at 31 December 2018 include approximately Euros 27,160 thousand reflecting the estimated fair value (based on the fair value of the consideration given, i.e. the construction), less amortisation, of the investments made in various waste water treatment plants, which were constructed and are operated under a concession arrangement pursuant to the administrative concessions granted by the Aragón Water Institute. Under these concessions, the ELECNOR Group operates the aforementioned water treatment plants obtaining revenue on the basis of the volume of cubic metres of water treated. At 31 December 2018, all the water treatment plants were in operation, with a concession term of 20 years. In 2019, these assets were transferred to noncurrent assets held for sale on the basis of the sale contracts signed in the year (see Note 8).

Accompanying notes

In 2019, the income generated by these concessions amounted to approximately Euros 6,303 thousand (Euros 6,589 thousand in 2018), and was recognised under turnover in the accompanying consolidated income statement.

The cost of intangible assets in operation, fully amortised at 31 December 2019 and 2018 is as follows:

	Thousands of Euros
	2019	2018
Development expenses	1,030	910
Industrial property	2,265	2,265
Computer software	8,220	6,807
	11,515	9,982

11. Property, plant and equipment

Movement under this heading of the consolidated statement of financial position in 2019 and 2018 is as follows:

Accompanying notes

	Thousands of Euros
		Buildings, technical			Information		Other items of	Assets
		installations and	Hand and	Furniture and	technology		property, plant	under
	Land	machinery	machine tools	fixtures	equipment	Motor vehicles	and equipment	construction	Total
COST: Balance at 01 January	29,013	1,203,492	16,593	8,866	14,000	34,236	8,046	19,017	1,333,263
2018 restated
Additions	-	14,593	4,611	777	1,616	4,556	5,662	1,441	33,256
Disposals	-	(6,885)	(2,781)	(85)	(574)	(2,982)	(607)	(278)	(14,192)
Transfers	-	6,016	19	(20)	391	(161)	(239)	(18,995)	(12,989)
Translation differences	706	(43,300)	344	204	212	3,766	5	(166)	(38,229)
Balance at 31 December
2018 restated	29,719	1,173,916	18,786	9,742	15,645	39,415	12,867	1,019	1,301,109
Changes in the
consolidated Group
Changes in the
consolidated Group (Note 2.f)	(39)	(663,094)	-	(262)	(118)	-	-	-	(663,513)
Business combinations
(Note 7)	-	624,274	-	-	-	-	-	-	624,274
Additions	10	31,162	4,563	957	1,874	5,696	7,328	96,984	148,574
Disposals	(6)	(23,734)	(5,549)	(287)	(348)	(2,211)	(967)	(467)	(33,569)
Transfers	-	341	21	-	2	1,348	-	(1,714)	(2)
Translation differences	(2,105)	(21,016)	(67)	(841)	(766)	(14,170)	(66)	(1,724)	(40,755)
Balance at 31 December
2019	27,579	1,121,849	17,754	9,309	16,289	30,078	19,162	94,098	1,336,118
ACCUMULATED
DEPRECIATION: Balance at 01 January	-
2018 restated Charge (Note 24)	-	526,369 47,518	4,039 1,196	6,386 843	9,862 1,503	24,448 2,596	5,240 1,687	- -	576,344 55,343
Disposals	-	(3,385)	(134)	(214)	(549)	(1,329)	(523)	-	(6,134)
Transfers	-	(11,086)	(7)	(5)	400	(74)	-	-	(10,772)
Translation differences	-	(10,801)	241	268	249	3,845	23	-	(6,175)
Balance at 31 December		548,615	5,335	7,278	11,465	29,486	6,427	-	608,606
2018 restated	-
Changes in the Changes in the consolidated Group	-	(19,059)	-	(103)	(80)	-	-	-	(19,242)
consolidated Group Changes in the Charge (Note 24)	-	62,922	1,072	534	1,802	3.24 3,222	3,727	-	73,279
(Note 2.f) consolidated Group Disposals	-	(16,447)	(765)	(239)	(334)	(1,929)	(668)	-	(20,382)
(Note 2.g) Transfers	-	3,057	(2)	-	-	(13)	(20)	-	3,022
Translation differences	-	(16,442)	(48)	(801)	(727)	(13,733)	(9)	-	(31,760)
Balance at 31 December	-	562,646	5,592	6,669	12,126	17,033	9,457	-	613,523
2019 IMPAIRMENT
Balance at 01 January 2018	1,433	1,712	-	-	-	-	-	-	3,145

Accompanying notes

Balance at 31 December
2018 restated	1,433	1,712	-	-	-	-	-	-	3,145
Impairment losses	3,506	1,765	-	-	-	-	-	-	5,271
Irreversible impairment	-	(1,556)	-	-	-	-	-	-	(1,556)
losses Balance at 31 December	4,939	1,921	-	-	-	-	-	-	6,860
2019 Net cost at 31 December
2019	22,640	557,282	12,162	2,640	4,163	13,045	9,705	94,098	715,735

Accompanying notes

The heading "Buildings, technical installations and machinery" at 31 December 2019 includes mainly assets at wind farms operated by the Group in Brazil and Spain amounting to Euros 937,881 thousand (Euros 946,477 thousand at 31 December 2018).

At 31 December 2019, the heading "Assets under construction" of the above table corresponds mainly to investments in the year for the refurbishment and commissioning of oil wells for an approximate amount of Euros 15,125 thousand and investments in wind farms amounting to Euros 77,786 thousand. The heading "Other current liabilities" at 31 December 2019 includes an amount of Euros 19,824 thousand corresponding to suppliers of fixed assets in relation to investments in oil wells.

The main additions to property, plant and equipment in 2019 were investments in wind farms in Brazil and Spain and in oil wells, as explained in the previous paragraph (in 2018 there were no individually significant additions).

At 31 December 2019, the carrying amount, before depreciation, of the property, plant and equipment pledged to secure certain bank loans, mainly to finance the wind power projects undertaken by Group companies, amounted to approximately Euros 13,123 thousand (Euros 13,331 thousand in 2018) (Note 17).

The offices used by the Group to carry on its business activities, except for those leased in 2007 under the finance lease, are mostly rented.

The cost of the Group's property, plant and equipment which, at 31 December 2019 and 2018, is fully depreciated and in use as follows:

	Thousands of Euros
	2019	2018
Buildings, technical installations and machinery	60,379	59,894
Furniture and fixtures	3,360	2,703
Information technology equipment	6,531	5,138
Motor vehicles	5,674	2,940
	75,944	70,675

The Group takes out insurance policies to cover the possible risks to which its property, plant and equipment are exposed and the claims that might be filed against it for carrying on its business activities. These policies are considered to adequately cover the related risks.

Accompanying notes

12. Right-of-use assets and lease liabilities

The details and movements by class of right-of-use assets in 2019 were as follows:

a) Nature of lease contract-

	Thousands of Euros
			Motor vehicles
	Land	Buildings		Other	Total
Balance at 1 January	21,796	23,940	1,785	3,312	50,833
2019
Additions	6,657	5,226	1,102	128	13,113
Disposals	-	(2,430)	(1,068)	-	(3,498)
Value adjustments	15	66	39	2	122
Business combination
(Note 7)	19,159	-	-	-	19,159
Translation differences	(71)	58	-	-	(13)
Derecognition from the
consolidation
scope (Note 2.f)	(20,676)	-	-	(1,368)	(22,044)
Balance at 31	26,880	26,860	1,858	2,074	57,672
December 2019
Accumulated
depreciation
at 1 January 2019	9,623	9,625	976	859	21,083
Charge (Note 24) Disposals	1,477 -	3,317 (2,405)	846 (1,007)	722 -	6,362 (3,412)
Departures from the
consolidated Group
(Note 2.f)	(779)	-	-	(748)	(1,527)
Accumulated
depreciation at 31
December 2019	10,321	10,537	815	833	22,506
Net cost at 31
December
2019	16,559	16,323	1,043	1,241	35,166

b) Details of lease payments and liabilities-

The analysis of the contractual maturity of lease liabilities, including future interest payable, as at 31 December 2019, is as follows:

	Thousands
	of Euros
Up to six months past due	3,761
Six months to one year	3,649
From one to two years	3,379
From two to three years	2,919
From three to four years	2,563
More than four years	23,849
	40,120

Accompanying notes

13. Equity-accounted investees

Details of the Elecnor Group's investments in associates and joint ventures at 31 December 2019 and 2018, which are accounted for using the equity method (see Note 3.c), are as follows:

	Thousands of Euros
		Restated
Company	2019	2018
Celeo Redes subgroup	-	254,186
Woolsthorpe Holding TRUST	(140)	548
Cosemel Ingeniería, A.I.E	46	56
Parque Eólico Gaviota, S.A.	68	-
Sociedad Aguas Residuales Pirineos, S.A.	-	4,248
Gasoducto de Morelos, S.A.P.I. de C.V.	19,666	17,914
Dioxipe Solar, S.L.	-	24,032
Aries Solar Termoeléctrica, S.L.	-	34,422
Morelos O&M, SAPI de C.V.	261	275
Morelos EPC, SAPI de C.V.	87	4,037
Celeo Concesiones e Inversiones subgroup (Note 2.f)	560,624	-
Other	(45)	-
	580,567	339,718

Details of the key indicators of equity-accounted investees are provided in Appendix III.

At 31 December 2019, as a result of the operation described in Note 2.f, whereby the Elecnor Group took joint control with APG of the subgroup Celeo Concesiones e Inversiones, the Elecnor Group derecognised its equityaccounted investment in the subgroup Celeo Redes amounting to Euros 266,733 thousand and recognised the shareholding it retained in the aforementioned subgroup Celeo Concesiones e Inversiones at its fair value (see Note 2.f).

Moreover, as a result of taking control on 31 July 2019 of the companies Dioxipe Solar, S.L. and Aries Solar Termoeléctrica, S.L., the Elecnor Group has derecognised these equity-accounted investments (see Note 7), whose total value on said date was Euros 46,332 thousand.

Lastly, as a result of the agreements signed in 2019 for the sale of the investment in Sociedad Aguas Residuales Pirineos, S.A., the Elecnor Group transferred its equity-accounted investment to non-current assets held for sale, since the sale is expected to be effective during 2020 (see Note 8).

On 26 December 2018, the Celeo Redes subgroup, via its subsidiary Celeo Redes Brasil, S.A., completed the purchase of shares in two companies (33% of shares in Jaurú Transmissora de Energia, S.A. (JTE) and 100% of shares in Cachoeira Paulista Transmissora de Energia, S.A. (CPTE)) from Isolux Energia de Participaçoes, S.A., for a total of Euros 46.7 million. These acquisitions were part of an agreement with an investment fund whereby said investments will be included in a company in which Celeo Redes Brasil, S.A. and said investor group each hold a 50% interest, so the investments in said companies were presented as associates within the subgroup Celeo Redes in the amount of Euros 23.7 million.

In 2019, the subgroup Celeo Redes completed the assignment of the purchase price corresponding to the shareholding in these associated in accordance with the principles of IFRS 3. This assignment was performed internally and resulted in a negative consolidation difference amounting to Euros 5,650 thousand, which was restated in the consolidated financial statements for 2018 in accordance with the criteria set forth in IFRS 3 (Note 2.e). Since those associates correspond to concessions under the financial asset model, the key parameters used in measuring this asset were estimated cash flows assigned to the investment and a risk-free rate of 12%.

Accompanying notes

At 31 December 2019, the investment in the subgroup Celeo Redes was derecognised as a result of the loss of control of the subgroup Celeo Concesiones e Inversiones (see Note 2.f).

Movement in equity-accounted investees in 2019 and 2018 is as follows:

	Thousands of Euros
		Restated
	2019	2018
Opening balance	339,718	381,225
Acquisitions	-	1,086
Capital increase	7,926	-
Capital reductions	(818)	-
Transfers to assets held for sale (Note 8)	(3,522)	-
Departures from the consolidated scope	(313,065)	-
(Notes 2.f and 7)
Entries in the consolidated scope (Note 2.f)	560,624	-
Share in profits/(loss)	10,430	18,733
Impairment losses	(1,166)	(164)
Translation differences	(7,504)	(24,640)
Dividends received	(1,476)	(47,468)
Share in other comprehensive income	(7,547)	14,178
Impact of IFRS 16 (Note 2.b)	(1,190)	-
Other movements	(1,843)	(3,232)
Closing balance	580,567	339,718

In 2010 the Group acquired 55% of the subsidiaries Dioxipe Solar, S.L. and Aries Solar Termoeléctrica, S.L., whose statutory activities comprise the construction and operation of three parabolic trough technology thermosolar power plants in Extremadura and Castilla La Mancha. In 2010 various agreements were entered into between the shareholders of these companies, governing their relationships as shareholders, their relationships with the companies, the management and administration thereof and various aspects relating to the development and subsequent phases of projects. Specifically, certain matters for which unanimous approval is required in order to adopt decisions were defined.

Matters requiring the unanimous approval of the shareholders at the general meeting are as follows:

• a) Reimbursement of share premiums, capital increases or reductions, amendments to the bylaws and, in particular, approval of any clauses relating to restrictions on the transfer of shares;
• b) Mergers, spin-offs, transformations, dissolutions or transfers en bloc of assets and liabilities and disposals of a substantial portion of assets;
• c) Investments in any joint venture, company or association or acquisitions of any shares, assets or businesses of any other company;
• d) Arrangement, amendment and/or termination of any agreements with shareholders or companies forming part of their group or approval of any transactions with companies related thereto;
• e) Approval of loans, pledges or guarantees of any kind extended to shareholders or related companies;
• f) Changes in the number of directors;
• g) Appointment or removal of auditors;
• h) Changes in the policy of maximising dividends to shareholders;

Accompanying notes

• i) Agreements relating to key project decisions on any changes in activity, arrangement of any transactions, agreements or operations that alter the nature of the business or significantly modify the scope of the project, discontinuation of the project and arrangement of any agreements that are unrelated to the Company's ordinary business activity or outside its ordinary course of business;
• j) Changes in the tax regime;
• k) Agreements relating to the arrangement of project financing and any possible refinancing; and
• l) Amendments to the terms and conditions of the project financing agreements which affect the internal rate of return on the investment at the reporting date, the financing guarantees or the termination of the agreements.

Matters requiring the unanimous approval of the Board of Directors are as follows:

• a) Any loans, credit facilities, any other form of financing or guarantees extended to a third party;
• b) Arrangement of any debt or provision of guarantees other than those required by current suppliers;
• c) Approval of business plans and initial operating budgets;
• d) Approval of the operating budget when it includes a total expenditure increase of more than 10% on the prior year's budget;
• e) Granting of powers of attorney in regard of reserved powers;
• f) Amendment of project financing agreements;
• g) Incorporation of subsidiaries or acquisition of shares of other companies;
• h) Capital increases;
• i) Award of provisional and definitive acceptance certificates for plants in accordance with the Engineering, Procurement and Construction (EPC) contract, approval of waivers and changes in EPC, O&M and/or Owner's Engineering contracts.

In view of the nature of the above matters and the unanimity required in order to adopt decisions thereon, and in accordance with the consolidation principles indicated in Note 3.c, the Elecnor Group considered that the interests in these companies should be classified as joint ventures, specifically as jointly controlled entities. Accordingly, these interests were accounted for using the equity method until it took control of them in 2019 (see Note 7).

The borrowers also acquired certain obligations, which, if not met, could constitute grounds for the mandatory early repayment of the aforementioned loans. The Parent's directors consider that the obligations for the majority of the financing facilities have been met in 2019 and no breaches are expected in the future.

Accompanying notes

14. Non-current financial assets

Details of non-current financial assets other than equity-accounted investees are as follows:

			Financial assets at amortised cost:
				Trade and
		Hedge	Non	other
	Equity	derivatives	current	receivables	Other non
	instruments at	(Note	loans		current	Total
	cost	18)	(Note 29)		assets
Balance at 1 January 2018
restated	2,687	1,036	29,787	-	34,498	68,008
Additions	-	-	-	-	9,910	9,910
Disposals	(127)	(927)	(13,473)	-	(3,600)	(18,127)
Transfers	-	-	-	26,455	(1,142)	25,313
Translation differences	-	-	-	172	(1,767)	(1,595)
Balance at 31 December 2018
restated	2,560	109	16,314	26,627	37,899	83,509
Additions	-	-	-	22	7,184	7,206
Disposals	(813)	(85)	(5,753)	-	(11,644)	(18,295)
Impairment (Note 24)	-	-	-	(25,484)	-	(25,484)
Other	-	-	-	(1,966)	-	(1,966)
Translation differences	-	-	-	831	(286)	545
Transfers to assets held
for sale (Note 8)	-	-	-	-	(1,584)	(1,584)
Changes in the consolidation scope				-
(Note 2.f)	(3)	-	-		(6,416)	(6,419)
Business combination (Note 7)	-	-	-	-	4,483	4,483
Balance at 31 December 2019	1,744	24	10,561	30	29,636	41,995

a) Non-current loans-

Non-current loans in the above table at 31 December 2019 basically include various loans extended to associates of the Elecnor Group.

In 2012, the Group made various contributions to associate Gasoducto de Morelos S.A.P.I. de C.V. for future capital increases amounting to a total of approximately USD 33,483 thousand, some of which were instrumented through various loans whose balance on 31 December 2019 and 2018 amounted to Euros 10,561 thousand and Euros 16,176 thousand, respectively (USD 11,801 thousand and USD 18,255 thousand, respectively), and which accrue interest at an annual rate of 7.5%. In 2019 the Group received approximately Euros 5.8 million in payments relating to these loans (Euros 6 million in 2018).

b) Trade and other receivables-

On 31 January 2017, Consorcio Constructor Ductos del Sur, a customer of the subsidiary Elecnor Perú, S.A.C., notified the latter of the termination of the construction contract as a consequence of the completion of the Southern Peruvian Gas Pipeline contract between the customer and the Peruvian government. The subsidiary immediately commenced proceedings to collect all outstanding amounts owed. In this connection, the subsidiary filed an arbitration request against Consorcio Constructor Ductos del Sur and, in mid-2018, the two parties reached an agreement whereby Consorcio Constructor Ductos del Sur recognised the debt payable to Elecnor Perú, S.A.C. and a payment schedule was established. This debt accrues annual interest at a rate of 30-day Libor + 1.5%.

At 31 December 2018, the heading "Trade and other accounts receivable" under non-current assets corresponds entirely to the balances maintained by Elecnor Perú, S.A.C. with the customer Consorcio Constructor Ductos del Sur, which, in the wake of the agreement reached in 2018, mature primarily in 2021, and for which Odebrecht (a partner in the aforementioned consortium) is liable. In 2019, due to Odebrecht's financial difficulties, the Group booked an impairment in relation to this balance.

Accompanying notes

c) Other non-current assets-

Details of other non-current assets in the above table are as follows:

		Thousands of Euros
		Restated
	2019	2018
Debt service reserve account	12,461	19,228
Guarantees	4,067	3,570
Other	13,108	15,101
	29,636	37,899

The heading "Debt service reserve account" at 31 December 2019 corresponds entirely to the amounts which Spanish and Brazilian subsidiaries focusing on wind farm operation must maintain in bank deposit accounts pursuant to the financing contracts they have entered into (Note 17) (Euros 15,511 thousand at 31 December 2018).

Furthermore, at 31 December 2018, this heading included the amount of the debt service reserve account of Spanish and solar PV concessions, totalling Euros 3,717 thousand. These assets were derecognised on 31 December 2019 as a result of the loss of control of the subgroup Celeo Concesiones e Inversiones (see Note 2.f).

The deposits accrue interest at market rates.

In addition, at 31 December 2019, Elecnor, S.A. holds security and other deposits mainly relating to leases amounting to approximately Euros 4,022 thousand (Euros 3,523 thousand at 31 December 2018).

At 31 December 2019 and 2018, non-current assets are recognised at amortised cost, except in the case of derivative instruments, which are recognised at fair value.

15. Current financial assets

a) Trade and other receivables-

Trade and other receivables in the accompanying consolidated statement of financial position include the Group's receivables arising as a result of transactions with third parties.

Retentions on payments made by customers in 2019 amount to Euros 26,313 thousand (Euros 23,490 thousand in 2018) and are recognised in "Trade and other receivables" under current assets on the accompanying consolidated statement of financial position.

At 31 December 2019 and 2018 the Group had no construction contracts with negative margins the loss of which could be deemed significant (see Note 19).

At 31 December 2019 and 2018, unimpaired past-due receivables amounted to Euros 99,497 thousand and Euros 79,680 thousand, respectively.

The ageing analysis of the balance of "Trade and other receivables" is as follows:

Thousands of Euros
Description	2019	Restated 2018
Unmatured balances Up to six months past due Between six and twelve months past due Over twelve months past due	582,671 48,295 40,298 10,904	574,093 56,830 15,620 7,230
Total	682,168	653,773

The Group makes provision to cover debts classed as non-performing due to late payment, suspension of payments, insolvency or other reasons, following a case-by-case study of their collectability. Provision is made on the basis of the best estimates at year end.

Details of impairment losses on accounts receivable at 31 December 2019 and 2018 and movement in 2019 and 2018 are as follows:

	Thousands of Euros
	31/12/2018	Charge (Note 24)	Application	Reversal (Note 24)	Reclassifications	Translation differences	31/12/2019
Impairment	98,421	29,403	(30,532)	(774)	-	(154)	96,364

	Thousands of Euros
	01/01/2018	Charge (Note 24)	Application	Reversal (Note 24)	Reclassifications	Translation differences	31/12/2018
Impairment	75,098	22,619	(2,254)	(128)	3,383	(297)	98,421

b) Cash and cash equivalents

Details of cash and cash equivalents are as follows:

	Thousands of Euros
	Restated
	2019	2018
Cash equivalents	131,485	91,851
Cash	193,631	201,548
	325,116	293,399

Cash equivalents at 31 December 2019 mainly include fixed-income securities and fixed-term deposits that mature in under three months contracted by Elecnor Chile, S.A. and Elecnor do Brasil, S.A., which earn interest at market rates.

At 31 December 2019, this heading includes approximately Euros 48 million contributed by wind farms and concession operators (Euros 46 million at 31 December 2018 from wind farms and solar PV).

Accompanying notes

16. Equity

a) Share capital-

At 31 December 2019 and 2018, the share capital of Elecnor, S.A. was represented by 87,000,000 book entry shares, each with a par value of Euros 0.10, fully subscribed and paid in.

The shares of Elecnor, S.A. are listed on the Spanish electronic stock market.

At 31 December 2019 and 2018, the Parent's shares were held as follows:

		% Stake
	2019	2018
Cantiles XXI, S.L.	52.76%	52.76%
Bestinver Gestión, S.A., S.G.I.I.C.	-	4.76%
Santander Asset Management, S.A., SGIIC	3.09%	-
Other (*)	44.15%	42.48%
	100.00%	100.00%

(*) All with a percentage ownership of less than 3%.

b) Valuation adjustments to equity-

Movement in 2019 and 2018 was as follows:

	Thousands of Euros
		Change in	Settlement		Change in	Settlement	Business	Departures
	Restated	market	of	Restated	market value	of	combination	from
	31/12/2017	value	derivatives	31/12/2018		derivatives	(Note 7)	consolidation	31/12/20
								scope (Note	19
								2.f)
Fully consolidated companies
Cash flow hedges:
Interest rate swaps
(Note 18)	(9,181)	(4,456)	3,961	(9,676)	(1,387)	3,380	-	(3,720)	(11,403)
Exchange rate insurance (Note 18)	4,031	(4,864)	(2,764)	(3,597)	(7,195)	-	-	-	(10,792)
Energy price	-	(3,729)	-	(3,729)	3,489	3,729	-	-	3,489
Other	210	-	-	475	593	-	-	492	1,560
	(4,940)	(12,784)	1,197	(16,527)	(4,500)	7,109	-	(3,228)	(17,146)
Deferred taxes arising
on valuation adjustments
(Note 21)	1,267	3,163	(32)	4,398	1,906	(781)	-	-	5,523
Total adjustments in equity
due to full
consolidation	(3,673)	(9,621)	1,165	(12,129)	(2,594)	6,328	-	(3,228)	(11,623)
Equity-accounted investees	(54,014)	5,465	8,714	(39,835)	(7,093)	(455)	47,445	(2,111)	(2,049)
Non-controlling interests	306	(88)	29	247	(144)	-	-	-	103
Total valuation
adjustments	(57,381)	(4,244)	9,908	(51,717)	(9,831)	5,873	47,445	(5,339)	(13,569)

c) Other reserves-

At 31 December, the amounts of services not available for distribution are as follows:

	Thousands of Euros
	2019	2018
Legal reserve Goodwill reserve	1,743 619	1,743 722
Capitalisation reserve	4,408	3,149
Reserves from translation to Euros	15	15
Total	6,785	5,629

Legal reserve

Under article 274 of the Revised Spanish Companies Act, an amount equivalent to 10% of profit for each year must be transferred to the legal reserve until the balance of this reserve reaches at least 20% of share capital. The legal reserve has reached the stipulated level.

The legal reserve can be used to increase share capital provided that the balance left on the reserve is at least equal to 10% of the nominal amount of the total share capital after the increase. Except for the aforementioned purpose, unless the legal reserve exceeds 20% of the share capital it may only be used to offset losses if no other reserves are available.

At 31 December 2019 and 2018, the Parent has appropriated to this reserve the minimum amount required by law.

Goodwill reserve

The goodwill reserve was appropriated in compliance with article 273.4 of the revised Spanish Companies Act, which requires companies to transfer profits equivalent to 5% of goodwill to a non-distributable reserve until this reserve reaches an amount equal to recognised goodwill. In the absence of profit, or if profit was insufficient, freely distributable reserves were to be used. This reserve has been freely available since 1 January 2016, for the amount exceeding the net carrying amount of the goodwill recorded in the Parent's balance sheet.

Capitalisation reserve

The capitalisation reserve has been appropriated in accordance with article 25 of the Corporate Income Tax Law, which requires that an amount equal to the reduction in taxable income for the year be appropriated to the reserve. The amount by which taxable income may be reduced is equal to 10% of the increase in equity, as defined in the aforementioned article. In no case may the amount of the reduction exceed 10% of the taxable income for the tax period prior to the reduction, before the integration referred to in article 11.12 of the Law and before offsetting tax loss carryforwards. However, if the reduction cannot be applied due to insufficient taxable income, the outstanding amounts may be applied in the tax periods ending in the two years immediately after the end of the tax period in which the reduction entitlement was generated, together with any reduction applicable in that period, subject to the limit indicated. The reserve is restricted and the increase in equity must be maintained for a five-year period from the end of the tax period in which the reduction is generated, unless accounting losses are incurred.

d) Own shares-

According to the minutes of the General Shareholders' Meeting of 16 May 2017, the Board of directors is authorised to acquire own shares in the Parent on behalf of the latter or of subsidiaries, up to a maximum established by law and in mandatory legal provisions at each given time and which, at present, in combination with those already held by the Parent, may not exceed 10% of its share capital, with a minimum acquisition price of the nominal value of the shares and a maximum price that may not exceed 30% of its share price, over a period of five years, superseding and leaving without effect the authorisation granted in the General Shareholders' Meeting of 23 May 2012.

At 31 December 2019 and 2018, the Parent held own shares amounting to Euros 21,963 thousand and Euros 21,884 thousand, respectively, which are booked under "Own shares" in equity in the consolidated statement of financial position.

Accompanying notes

Details of own shares and movement in 2019 and 2018 are as follows:

	No. of shares
Own shares at 01 January 2018	2,310,650
Acquisition of own shares	124,061
Sale of own shares	(98,215)
Own shares at 31 December 2018	2,336,496
Acquisition of own shares	104,509
Sale of own shares	(120,196)
Own shares at 31 December 2019	2,320,809

The purchase and sale of own shares at 31 December 2019 amounted to approximately Euros 1,213 thousand and Euros 1,323 thousand (Euros 1,563 thousand and Euros 1,245 thousand, respectively, at 31 December 2018), giving rise to a capital gain of Euros 189 thousand, recognised directly in reserves (capital gain of Euros 334 thousand in 2018).

All the own shares held by the Parent at 31 December 2019 and represented 2.67% of the total share capital of Elecnor, S.A. at that date (2.69% at 31 December 2018).

e) Non-controlling interests-

Details of non-controlling interests in 2019 and 2018 are as follows:

	Thousands of Euros
		Restated
	2019	2018
Elecven Construcciones, S.A.	-	12
Sociedad Aragonesa de Estaciones Depuradoras, S.A.	1,496	1,333
Ventos Do Sul Energia, S.A.	253	12,824
Parque Eólico Malpica, S.A.	485	498
Galicia Vento, S.L.	916	524
Páramo de Poza, S.A.	2,484	2,673
Parques Eólicos Palmares, S.A.	5,621	5,807
Ventos do Litoral Energia, S.A.	4,863	5,174
Ventos da Lagoa, S.A.	4,935	5,172
Éoliennes de L'Érable, SEC.	6,603	8,921
Ventos dos Índios Energia, S.A.	3,600	3,749
Betonor, Ltda.	103	338
Elecnor Angola Group	46	243
Other	303	201
	31,708	47,469

Accompanying notes

Movement in non-controlling interests in 2019 and 2018 is as follows:

	Thousands of
	Euros
Balance at 01 January 2018 restated	54,370
- Share in profit/loss	5,716
- Change in fair value of hedging instruments	59
- Dividends paid	(5,077)
- Translation differences	(4,531)
- Capital reduction	(3,130)
- Change in equity investments	158
- Other	(96)
Balance at 31 December 2018 restated	47,469
- Share in profit/loss	4,288
- Change in fair value of hedging instruments	70
- Dividends paid	(16,222)
- Translation differences	4,365
- Capital reduction	(9,360)
- Other	1,098
Balance at 31 December 2019	31,708

The information relating to significant non-controlling interests in subsidiaries at 31 December 2019 and 2018 is as follows (financial information is disclosed prior to carrying out intragroup eliminations):

	Thousands of Euros
	2019	2018
	Éoliennes de L'Érable	Éoliennes de L'Érable
Current assets	7,822	7,723
Non-current assets	176,822	180,225
Current liabilities	20,124	18,189
Non-current liabilities	151,013	151,521
Revenue	29,684	26,791
Profit/loss for the year	2,449	1,044
Total comprehensive income	2,036	1,350

f) Translation differences-

The cumulative translation differences recognised in equity at 31 December 2019 and 2018 for each of the main currencies are as follows:

	Thousands of Euros
Translation differences	Restated
	2019	2018
Brazil	(120,714)	(191,585)
Canada	(7,674)	(7,892)
Chile	(4,296)	(130)
USA	1,543	1,012
Other	(1,353)	(864)
Total	(132,494)	(199,459)

Accompanying notes

The reduction in Translation differences at 31 December 2019 was due mainly to the imputation to profit/loss, as an adjustment to income in the sale, deriving from the loss of control of the subgroup Celeo Concesiones e Inversiones, in the amount of Euros 83,619 thousand (see Note 2.f).

17. Financial debt

Key to the Group's strategy is its policy of maximum financial prudence. The target capital structure is defined by this commitment to solvency and the aim of maximising shareholder returns.

However, certain projects, specifically the construction and operation of wind farms and the related electricity interconnection lines and substations, as well as the electricity distribution infrastructure and wastewater treatment plants, which the Group operates and holds on a concession basis, are mostly financed through syndicated loans under project financing arrangements. Under these loans the subsidiaries that operate these projects accept certain restrictions on the distribution of dividends, conditional upon certain requirements being met, such as the creation of a debt service reserve account. These subsidiaries must also maintain a specified debt/equity ratio and a specified equity structure.

The target capital structure, excluding the effect of the projects financed with non-recourse financing, is quantified at the following ratio of net financing to equity:

Net financial debt Net financial debt + Equity

Net financial debt includes the following line items in the consolidated statement of financial position (having eliminated the effect of net financial debt relating to the projects financed with non-recourse financing):

	Thousands of Euros
		Restated 2018
	2019
Non-current liabilities – Financial debt	284,147	252,877
Current liabilities – Financial debt	138,849	204,029
Current financial assets – Other investments	(10,161)	(5,711)
Cash and cash equivalents	(277,163)	(246,803)
Net financial debt	135,672	204,392

At 31 December 2019 and 2018, "Current and non-current liabilities – financial debt" relates mainly to total financial debt and derivatives in the following table, excluding all loans to concessions, wind farm syndicated loans, financial liabilities due to the issuance of bonds and other marketable securities (solar photovoltaic and wind farms), interest accrued associated with wind farms, solar PV and concessions, derivatives associated with wind farms, solar PV projects and concessions, derivatives associated with currency exchange hedges (Note 18), other borrowings relating to the Parent's forfaiting contracts, and adding Euros 5.2 million in loans granted by public entities that accrue interest booked under other "Current and non-current liabilities" (Euros 4.2 million and Euros 1.1 million, respectively) in the accompanying consolidated statement of financial position (Euros 6.2 million in 2018, of which Euros 5.2 million under non-current and Euros 1 million under current).

At 31 December 2019, "Current financial assets and cash and cash equivalents" comprise all cash and cash equivalents in the accompanying consolidated statement of financial position, excluding cash for projects funded through non-recourse financing amounting to approximately Euros 48 million (Euros 46 million at 31 December 2018) (see Note 15-b) and including the current amount of derivatives.

Accompanying notes

Changes in this ratio are analysed on an ongoing basis and prospective estimates are also made as a key restrictive factor to be taken into account in the Group's investment strategy and dividends policy.

Details of "Financial liabilities for the issuance of bonds and other marketable securities, bank borrowings and derivatives", under non-current and current liabilities in the accompanying consolidated statement of financial position at 31 December 2019 and 2018, are as follows:

	Thousands of Euros
	Restated
	2019		2018
	Non-current	Current	Non-current	Current
Syndicated loans and credit facilities	258,638	-	226,159	-
Syndicated loans – wind farms	294,257	27,057	291,847	33,836
Loans secured with personal guarantee	1,240	6,524	3,381	2,112
Mortgage loans	5,825	980	5,832	691
Loans to concessions	-	-	19,357	2,448
Financial liabilities for the issuance of bonds
and other marketable securities-commercial paper	-	69,989	-	155,022
Financial liabilities for the issuance of bonds
and other marketable securities-photovoltaic	-	-	35,185	1,803
Financial liabilities for the issuance of bonds
and other marketable securities-wind farms	60,122	5,009	-	-
Other payables	15,948	1,713	17,662	1,640
Credit facilities	-	51,544	-	40,002
Unmatured bills and notes	-	30	-	105
Accrued interest payable
Wind and solar PV farms and concessions	-	1,972	-	1,915
Other	-	4,898	551	1,892
Finance lease payables (Note 11)	8,026	2,246	6,432	1,394
Derivative hedging instruments (Note 18)
Wind and solar PV farms and concessions	630	2	2,254	4,459
Other	13,502	5,720	9,159	2,110
Total	658,188	177,684	617,819	249,429

At 31 December 2019 and 2018, all of the Group's financial liabilities correspond to financial liabilities at amortised cost, except hedge derivatives which are measured at fair value.

The main characteristics of the most significant financial liabilities for the issuance of bonds and other marketable securities and bank borrowings at 31 December 2019 and 2018 are as follows:

Accompanying notes

	2019
Type Company	Currency	Interest rate	Due date	Nominal amount	Current	Non-current
Financial liabilities for the issuance of bonds and other marketable securities
Elecnor, S.A.	EUR	-	2020	300,000	69,989	-
Ventos Do Sul, S.A.	BRL	-	31/12/2025	325,000	5,009	60,122
Loans and borrowings
Syndicated loans and credit facilities
Elecnor, S.A. (*)	EUR	Euribor + spread	19/07/2024	324,200	-	223,557
Elecnor, S.A. (*)	USD	Libor + spread	19/07/2024	75,000	-	26,848
Electrificaciones del Ecuador, S.A. (*)	USD	Libor + spread	19/07/2024	75,000	-	8,233
Syndicated loans – wind farms
Parque Eólico Malpica, S.A.	EUR	Euribor+ 2%	24/06/2024	11,950	1,018	8,027
Ventos do Litoral Energia, S.A.	BRL	TJLP +2.34 %	15/07/2029	23,083	2,040	17,188
Ventos Do Indios Energia, S.A.	BRL	TJLP + 2.45%	15/02/2032	23,059	1,964	21,095
Parque Eólico Palmares, S.A.	BRL	TJLP + 2.34 %	31/07/2029	24,583	2,274	18,017
Ventos Do Lagoa, S.A.	BRL	TJLP + 2.34 %	15/02/2029	23,512	2,126	17,364
Parque Éoliennes de L'Érable, SEC	CAD	5.015%	31/03/2033	169,929	7,594	117,697
Parque Éoliennes de L'Érable, SEC	CAD	7.123%	18/04/2033	23,790	734	20,593
Galicia Vento, S.L.	EUR	1.75% + Euribor	31/12/2024	38,500	6,515	24,979
Aerogeneradores del Sur, S.A.	EUR	1.75% + Euribor	31/12/2024	16,500	2,793	10,706
Ventos do São Fernando I Energia	BRL	HICP + 2.1851%	15/01/2039	24,941	-	24,941
Parque Eólico Cofrentes, S.L.U.	EUR	Euribor	30/06/2038	35,775	-	13,650
					102,056	613,017

(*) Referring to the same loan. See Syndicated loans and credit facilities

Accompanying notes

	Restated 2018
Type Company	Currency Interest rate		Due date	Nominal amount	Current	Non-current
Financial liabilities from issuing bonds and other marketable securities
Elecnor, S.A. Celeo Fotovoltaico, S.L.U.	EUR EUR	- 3.95%	2019 31/12/2031	300,000 41,600	154,816 1,803	- 35,185
Loans and borrowings
Syndicated loans and credit facilities Elecnor, S.A.	EUR	Euribor + spread	19/07/2024	400,000	- -	226,159
Loans to concessions
Sociedad Aragonesa De Estaciones Depuradoras, S.A. Sociedad Aragonesa De Aguas Residuales,	EUR	Euribor+ 2.8%	31/12/2026	15,500	1,000	8,314
S.A.U.	EUR	0.779%		23,000	1,418	11,044
Syndicated loans – wind farms
Parque Eólico Malpica, S.A.	EUR	Euribor+ 2%	24/06/2024	11,950	1,006	9,804
Ventos do Litoral Energia, S.A.	BRL	TJLP +2.34 %	15/07/2029	32,008	2,104	19,832
Ventos Do Indios Energia, S.A.	BRL	TJLP + 2.45%	15/02/2032	28,787	2,441	23,484
Parque Eólico Palmares, S.A.	BRL	TJLP + 2.34 %	31/07/2029	34,819	2,345	20,920
Ventos Do Lagoa, S.A.	BRL	TJLP + 2.34 %	15/02/2029	34,177	2,193	20,102
Ventos Do Sul, S.A.	EUR	TJLP + spread	15/07/2019	105,373	6,017	-
Ventos Do Sul, S.A.	BRL	Annual Euribor + spread	30/09/2022	14,543	3,541	10,201
Parque Éoliennes de L'Érable, SEC	CAD	5.015%	31/03/2033	165,618	7,020	121,599
Parque Éoliennes de L'Érable, SEC	CAD	7.123%	18/04/2033	35,000	651	21,083
Galicia Vento, S.L.	EUR	1.75% + Euribor	31/12/2024	38,500	4,563	31,376
Aerogeneradores del Sur, S.A.	EUR	1.75% + Euribor	31/12/2024	16,500	1,955	13,446
					192,873	572,549

Accompanying notes

Debts maturing in	Thousands of Euros 31/12/2019
2021 2022 2023	60,031 79,814 74,773
2024 and thereafter	443,570
Total	658,188

Details, by maturity, of the above debt for 2019 and 2018 are as follows:

Debts maturing in	Thousands of Euros Restated 31/12/2018
2020 2021 2022 2023 and thereafter	41,918 39,496 58,752 477,653
Total	617,819

Syndicated loans and credit facilities

On 21 July 2014, Elecnor arranged syndicated financing of Euros 600 million with a group of 19 financial institutions, which replaced the Euros 401 million that had been drawn down at that date in the syndicated financing arranged in 2012. This financing was structured into two tranches: one loan tranche totalling Euros 300 million, repayable in instalments, and a revolving credit tranche with a limit of Euros 300 million, maturing in July 2019.

On 2 July 2015, Elecnor signed an initial novation of this agreement, subscribed by 18 of the 19 lenders, in order to amend the financial conditions (reducing the applicable margin) and extend the term of the financing.

On 29 June 2016, Elecnor signed a second novation of this agreement, subscribed by 17 of the 18 lenders. Bankinter assigned Euros 22 million, of which Euros 16 million were subscribed by Abanca and Euros 6 million by Kutxabank, while Crédit Agricole assigned Euros 25 million entirely to Abanca.

On 31 October 2017, Elecnor signed a third novation of this agreement, subscribed by 16 of the 17 lenders. This novation implied:

• a decrease in the available limit of the credit tranche (B) of the syndicated financing to Euros 200 million,
• a new tranche in the margin scale applicable as a function of the net financial debt-EBITDA ratio,
• Extend the term of the financing. One-year deferral of the date of each loan instalment and the repayment of the credit facility, thereby pushing back its maturity to July 2022.

On 14 November 2018, Elecnor signed a fourth novation of this contract, subscribed by 14 of the lenders (two of them merged). This renewal entailed the following agreements:

• voluntary prepayment of the loan tranche (tranche A), amounting to Euros 100 million, bringing the total limit of this tranche to Euros 200 million.
• the extension of the financing term, delaying final maturity until July 2024.

Accompanying notes

On 27 June 2019, Elecnor signed a fifth novation of this agreement, subscribed by the 14 lenders. This renewal entailed the addition as a borrower of Electrificaciones del Ecuador, S.A. (Elecdor), the division of the credit tranche (tranche B) into two sub-tranches, one sub-tranche (sub-tranche B1) with a ceiling of Euros 134.2 million available for Elecnor and one sub-tranche (sub-tranche B2) with a ceiling of USD 75 million available for both Elecnor and Elecdor.

The Company analysed whether or not the conditions had been substantially modified, and concluded that there was no extinguishment of the original liabilities in any of the years.

With respect to interest rate hedging, swaps had been arranged prior to the novation to cover the loan for 70% of the loan calendar generated by the renewal of 2018. In June 2019, it was decided to cover the interest rate risk of the remaining 30%, for which purpose another 8 interest rate swaps (IRS) were arranged, with an initial notional amount of Euros 1.5 million and a maximum notional amount of Euros 54 million and a new basis swap with an initial notional amount of Euros 1.5 million and a maximum notional amount of Euros 54 million. At 31 December 2019, there are 39 IRSs and 5 basis swaps, assigned mainly to hedging interest rate risk in syndicating financing and, to a lesser extent, to hedging interest rate risk on commercial paper issuance in the Alternative Fixed Income Market (MARF). The maturities and interest settlement dates of the swaps coincide with those of the financing contracts to which they are assigned.

This syndicated financing bears interest pegged to Euribor for the interest term chosen by the borrower (1, 3 or 6 months) for drawdowns in euros and to Libor for the interest period chosen by the borrower (1, 3 or 6 months), plus a spread tied to the net financial debt/(EBITDA + dividends from projects) ratio. The Parent has undertaken to comply with different ratios over the term of the bank financing agreement ((Net financial debt/EBITDA), (EBITDA/net finance expense), and (Net financial debt/equity)), which are calculated on the basis of the Elecnor Group's consolidated figures. Non-compliance could be cause for terminating the contract, although, at 31 December 2019, all the ratios linked to this financing were compliant.

At 31 December 2019, the drawn down amount of the syndicated financing contract totals Euros 265 million and corresponds to Euros 200 million of the loan tranche, Euros 30 million of the loan tranche in Euros, Euros 27 million (USD 30 million) of the loan tranche in Dollars drawn down by Elecnor, S.A. and Euros 8 million (USD 9.2 million) of the credit tranche in Dollars drawn down by Elecdor (Euros 235 million at 31 December 2018, Euros 200 million corresponding to the loan tranche and Euros 35 million to the credit tranche).

Taking into account the effect of the hedges amounting to Euros 2,273 thousand, the aforementioned syndicated financing agreement (loan tranche and credit facility tranche) accrued interest at an average rate of 2.37%,, totalling Euros 5,182 thousand in 2019 (Euros 6,319 thousand in 2018, including hedging finance costs amounting to Euros 2,618 thousand), which the Group has recognised as "Finance expenses" in the accompanying consolidated income statement for 2019.

Moreover, at 31 December 2019, the credit tranche accrued finance expenses relating to availability fees amounting to Euros 690 thousand (Euros 736 thousand in 2018).

Syndicated loans – wind farms

For loans arranged in Brazilian Reals through the Brazilian Development Bank BNDES, the applicable interest rate is the result of adding a spread to the country's long-term floating interest rate (TJLP). These loans entail an obligation to maintain coverage ratios to service debt within certain limits, and to deposit in a reserve account a sum covering at least three instalments of the principal and interest. The Parent's directors consider that there have been no problems as regards complying with the covenants.

Accompanying notes

To secure the loans of the subsidiaries P.E. Malpica, S.A., Aerogeneradores del Sur, S.A. and Galicia Vento, S.L., a real right of pledge was established on shares of the relevant subsidiary, as well as on any indemnities, compensation and/or penalty payments which may accrue in its favour, and in relation to the construction and operating management agreements, and all the cash accounts of the aforementioned company. Parques Eólicos Palmares, S.A., Ventos da Lagoa, S.A., Ventos do Litoral, S.A. and Ventos dos Índios have signed a surety bond over property, plant and equipment with the BNDES.

In addition, in 2019 the Group arranged two new loans to finance the projects under construction in Brazil (Vento do Sao Fernando) and Spain (P.E. Cofrentes). The loans arranged in Brazilian Reals through BNB (Banco do Nordeste do Brasil) accrue an interest rate that is the result of adding a spread to the Brazilian inflation rate (IPCA). This financing has not been fully disbursed and entails an obligation to maintain coverage ratios within certain limits, and to deposit in a reserve account a sum covering at least three instalments of the principal and interest. It was necessary to arrange a bank guarantee with Bradesco to secure this financing. The financing obtained to fund the wind farm under construction, P.E. Cofrentes is guaranteed by a real right of pledge established on shares of the relevant subsidiary, as well as on any indemnities, compensation and/or penalty payments which may accrue in its favour, and in relation to the construction and operating management agreements, and all the cash accounts of the aforementioned company.

Furthermore, the subsidiaries have certain limitations in relation to these loans consisting basically of restrictions on the disposal of their property, plant and equipment and on the payment of dividends. These restrictions are subject to compliance with certain conditions, such as the ongoing fulfilment of the debt service coverage ratio established in the financing loan agreement and the setting up of a debt servicing reserve account (see Note 14).

The directors consider that all the conditions of the syndicated loans are being met and that the project financing will be serviced on a normal basis, using the revenue generated from each wind power project.

Financial liabilities from issuing bonds and other marketable securities-commercial paper

At the beginning of 2019 Elecnor, S.A. had issued commercial paper on the Alternative Fixed-Income Market for an amount of Euros 155 million. New issues in 2019 totalled Euros 1,601 million while maturities totalled Euros 1,686 million. The outstanding balance at 31 December 2019 was therefore Euros 70 million, reflecting 700 securities with a nominal value of Euros 100 thousand each.

At the beginning of 2018 Elecnor, S.A. had issued promissory notes on the Alternative Fixed-Income Market for an amount of Euros 100 million. New issues in 2018 totalled Euros 658 million while maturities totalled Euros 603 million. The outstanding balance at 31 December 2018 was therefore Euros 155 million, reflecting 1,550 securities with a nominal value of Euros 100 thousand each.

The commercial paper programmes in force in 2019 and June 2018 provided for a maximum of outstanding issues at all times of Euros 300 million and Euros 250 million, respectively.

In 2019, these commercial papers accrued interest and fees totalling Euros 1,216 thousand (Euros 1,276 thousand in 2018) which the Parent recognised under "Finance expenses" in the accompanying income statement.

Financial liabilities for the issuance of bonds and other marketable securities-wind farms

In 2019, the subsidiary Ventos do Sul Energia, S.A. issued bonds amounting to BRL 325 million in two tranches; one BRL 227 million tranche pegged to the CDI plus a market spread and one BRL 98 million tranche indexed to IPCA plus a market spread. This financing was used to cancel the previous financing and the drawn down balance at 31 December 2019 amounted to Euros 65 million.

Accompanying notes

This issue, maturing in December 2025 (a 6.5-year term) is project-backed and earmarked for corporate use by the issuing company or its partners.

Financing secured with personal guarantees-

In 2019, the Group received funding secured with a personal guarantee for the company Dunor Energía S.A.P.I de C.V. in the amount of Euros 4 million (zero in 2018).

Other payables-

At 31 December 2019, other payables included a financing agreement for Euros 9,200 thousand, arranged on 18 August 2017, between Elecnor, S.A. and the European Energy Efficiency Fund, S.A., SICAV-SIF, maturing in 2031 and linked to the assignment of future credit rights of the company. The amount pending repayment at 31 December 2019 is approximately Euros 8,350 thousand (Euros 8,900 thousand at 31 December 2018).

Moreover, on 13 March 2018, the Group arranged a financing contract through a policy for the assignment of credit rights with the Efficiency Solutions fund, amounting to Euros 11,500 thousand, and maturing in June 2027. The amount outstanding at 31 December 2019 is approximately Euros 9,311 thousand (Euros 10,042 thousand at 31 December 2018).

In 2019 these borrowings accrued interest of Euros 818 thousand (Euros 782 thousand in 2018).

Other financing

In 2007 the Elecnor Group arranged a mortgage loan in order to acquire an industrial building in Valencia in which to conduct its solar panel manufacturing business (see Note 11). The unmatured balance of this loan amounts to approximately Euros 5,842 thousand at 31 December 2019 (Euros 6,512 thousand at 31 December 2018).

Excluding tranche B of the syndicated loan, at 31 December 2019 and 2018 Elecnor, S.A. had seven open credit facilities with financial institutions, with a maximum total limit of Euros 111 million (Euros 50 million and Euros 39 million drawn down, respectively). These bilateral credit facilities bear interest pegged to EURIBOR/LIBOR plus a market spread, and most of them mature at one year, or annually with automatic renewals up to a maximum of three years.

All the above financing lines have a personal guarantee attached.

This bank financing accrued interest during 2019 of approximately Euros 380 thousand, which the Group recognised under "Finance expenses" in the accompanying consolidated income statement (approximately Euros 1,280 thousand in 2018).

At 31 December 2019 and 2018, the Elecnor Group does not have any significant bank borrowings bearing interest at fixed rates, except for the hedging instruments described in Note 18.

Accompanying notes

18. Derivative financial instruments

The Elecnor Group uses derivative financial instruments to cover the risks to which its business activities, operations and future cash flows are exposed as a result of exchange rate and interest rate fluctuations, which affect the Group's results. Details of the balances reflecting the measurement of derivatives at 31 December 2019 and 2018 are as follows:

	Thousands of Euros
	2019				2018
	Non				Non
	current		Non-current	Current	current		Non-current	Current
	assets	Current	liabilities	liabilities	assets	Current	liabilities	liabilities
	(Note 14)	assets	(Note 17)	(Note 17)	(Note 14)	assets	(Note 17)	(Note 17)
INTEREST RATE HEDGES
Cash flow hedges:
Interest rate swap	-	292	6,873	1,512	109	-	7,626	2,159
EXCHANGE RATE HEDGES
Cash flow hedges:
Exchange rate insurance	24	92	7,259	4,210	-	871	3,787	681
ENERGY PRICE HEDGES	-	3,489	-	-	-	-	-	3,729
	24	3,873	14,132	5,722	109	871	11,413	6,569

Exchange rate

The Elecnor Group uses exchange rate hedges basically to mitigate the possible adverse effect of exchange rate fluctuations on future cash flows relating to two types of transactions:

• Payments relating to works and supply agreements denominated in a currency other than the functional currency.
• Receipts relating to works agreements denominated in a currency other than the functional currency.

At 31 December 2019 and 2018, the total nominal amount of the items for which exchange rate hedges had been arranged was as follows:

Currencies	31/12/2019	31/12/2018
Thousands of US Dollars (*)	15,256	7,019
Thousands of Chilean Peso (*)	81,544,070	65,187,988
Thousands of Pounds Sterling (*)	120	-
Thousands of Euros	-	4,893

(*) Figures expressed in the pertinent currency

Of the nominal total hedged at 31 December 2019:

• o Euros 12,151 thousand corresponds to sales insurance in US Dollars to cover future payments to suppliers in US dollars,
• o Euros 95,608 thousand corresponds to purchases of Chilean Pesos against US Dollars to cover the risk of payments to suppliers in Chilean pesos,
• o Euros 18,440 thousand corresponds to purchases of US Dollars to cover future payments received in that currency,
• o Euros 144 thousand corresponds to the purchase of Pounds Sterling to cover future payments received in that currency.

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Accompanying notes

Of the nominal total hedged at 31 December 2018:

• o Euros 4,893 thousand corresponded to sales insurance in Australian Dollars to cover future payments to suppliers in US Dollars,
• o Euros 84,025 thousand corresponded to purchases of Chilean Pesos against Dollars US to cover the risk of payments to suppliers in Chilean pesos,
• o Euros 6,220 thousand corresponded to forward sale US Dollars to cover payments received in that currency.

The equivalent Euro value of the nominal amount under exchange rate hedges at 31 December 2019 was approximately Euros 109,405 thousand (approximately Euros 95,138 thousand in 2018).

The expiration of these exchange rate hedges is expected to coincide with the forecast flow of the payments and receipts being hedged. The risk of changes in the estimated cash flows is very low.

Details of the maturities of the maturities of the nominal amounts hedged by derivative financial instruments at 31 December 2019 and 2018 are as follows:

	31/12/2019
	Thousands of Euros
	Maturity
	2024 and
	2020	2021	2022	2023	thereafter	Total
Exchange rate hedge:
USD sales (*)	12,078	1,500	-	-	-	13,578
Chilean Peso purchases (*)	24,537,131	32,906,939 24,100,000		-	-	81,544,070
Purchases of Pounds Sterling		-	-	-	-
(*)	120					120
USD purchases (*)	1,678	-	-	-	-	1,678

(*) Figures expressed in the relevant currency.

	31/12/2018
	Thousands of Euros
	Maturity
	2023 and
	2019	2020	2021	2022	thereafter	Total
Exchange rate hedge:
USD sales (*)	7,019	-	-	-	-	7,019
Chilean Peso purchases (*)	7,743,919		24,537,131 32,906,939	-	-	65,187,989
Euro purchases	4,893	-	-	-	-	4,893

(*) Figures expressed in the pertinent currency.

Interest rate

The Elecnor Group uses interest rate hedging instruments in accordance with its risk management policy. The purpose of these transactions is to mitigate the effect that changes in interest rates could have on future cash flows from certain loans and credit facilities pegged to floating interest rates, associated with the corporate financing obtained by the Parent and project financing. At 31 December 2019 the total nominal value of the liabilities hedged by interest rate hedges amounted to Euros 337,776 thousand (Euros 339,265 thousand in 2018).

Accompanying notes

The nominal amounts of the various interest rate derivative financial instruments described above mature as follows:

		31/12/2019
		Thousands of Euros
		Maturity
	2020	2021	2022	2023	2024 and thereafter	Total
Interest rate hedges	56,506	40,690	30,315	40,586	169,679	337,776

		31/12/2018 Thousands of Euros
		Maturity
	2019	2020	2021	2022	2023 and thereafter	Total
Interest rate hedges	48,146	54,294	71,585	17,118	148,122	339,265

The nominal amount of the interest rate swaps is, at most, equal to or lower than that of the outstanding principals of the hedged loans and their maturity and settlement dates are the same as those of the loans that are being hedged.

Neither in the case of exchange rate hedges or interest rate hedges did any circumstances arise in 2019 or 2018 that required changing the hedge accounting policy initially adopted for recognising the derivatives. In 2019 and 2018 the Elecnor Group did not have any derivatives that do not qualify for hedge accounting.

Adjustments-

The market value of the different financial derivatives is calculated as follows:

• For derivatives quoted on an organised market, their quoted value at year end.
• For derivatives not traded on an organised market, the Elecnor Group uses measurements provided by financial institutions, assumptions based on year-end market conditions. Specifically, the market value of interest rate swaps is calculated by discounting the difference between the swap rates at a market interest rate, and the market value of future exchange rate contracts is determined by discounting the estimated future cash flows using the future exchange rates at year end.

This procedure is also used to determine the market value of loans and receivables arising from cross currency swaps, through which the Group and the related bank exchange the flows from a loan in Euros for the flows from another loan in Dollars (Canadian/US) or pounds. Any resulting differences are settled on maturity. At year end, the Group translates the loan into US Dollars (plus the accrued interest) at the closing exchange rate and compares it with the loan in Euros (plus the accrued interest), and the net value (i.e. the difference) is recognised under other current or non-current assets or financial debt, depending on whether the difference is positive or negative and on the maturity thereof, giving rise to a balancing entry under exchange gains or losses.

Accompanying notes

Details of cross-currency swaps at 31 December 2019 and 2018 are as follows:

		Thousands of Euros
	2019	2018
Notional amount in foreign currency (USD) Equivalent value in Euros	- -	11,600 10,279
Fair value at the reporting date	-	(510)

At 31 December 2019 there are no cross currency swaps in force.

Swaps in force at 31 December 2018 came into effect on 20 and 21 December 2018, and all expired in January 2019.

Given that these financial instruments were not designated as hedges, at each reporting date the Group recognises the changes in their fair values directly in the consolidated income statement.

19. Provisions

The breakdown of provisions for liabilities and charges, and their classification as current or non-current at 31 December 2019 and 2018, is as follows:

	Thousands of Euros
	2019		Restated 2018
	Non-current	Current	Non-current	Current
Litigation and liabilities	15,785	22,257	14,418	26,353
Decommissioning	9,889	275	15,415	206
Other	20,715	41,886	81	41,470
Total	46,389	64,418	29,914	68,029

Details of Provisions for liabilities and charges" in the accompanying consolidated statement of financial position, and movement in 2019 and 2018, are as follows:

	Thousands of Euros
	Litigation and
	liabilities	Decommissioning	Other	Total
Balance at 01 January 2018
restated	38,790	16,286	24,514	79,590
Provisions charged to
profit and loss (Note 24)	16,255	91	25,309	41,655
Reclassification	2,079	455	2,681	5,215
Translation differences	(985)	(9)	-	(994)
Application	(10,812)	-	(9,502)	(20,314)
Reversals (Note 24)	(4,556)	(1,202)	(1,451)	(7,209)
Balance at 31 December 2018
restated	40,771	15,621	41,551	97,943
Provisions charged to
profit and loss (Note 24)	9,800	4,641	44,318	58,759
Reclassification	300	-	(186)	114
Translation differences	(538)	136	(95)	(497)
Application	(4,001)	-	(10,861)	(14,862)
Reversals (Note 24)	(8,290)	(10,234)	(12,126)	(30,650)
Balance at 31 December 2019	38,042	10,164	62,601	110,807

Accompanying notes

The Group estimates the amount of the liabilities arising from litigation and similar events. With the exception of certain liabilities in which it can be estimated that the outflows will be in the short term, the Group cannot reliably estimate the precise timing of the outflows and, accordingly, does not include the updating effect.

Due to the nature of its activities, the Group is exposed to a number of claims and lawsuits. Provisions for litigation and liabilities in the foregoing table reflect the Group's best estimate of potential penalties and other contingencies that could arise from the execution of various projects mainly carried out abroad. The directors estimated that the provision recognised reasonably covers the payments that are likely to arise in the future as a result of past events.

On 31 May 2017, Spain's competition watchdog (CNMC) notified the Parent that it was opening disciplinary proceedings against it and another 15 companies, for a potential infringement in the sphere of the construction and maintenance of electrification systems and electromechanical equipment in railway lines. On 14 March 2019, the CNMC Council issued a resolution reducing the fine with respect to that proposed in the resolution of 31 August 2018 to Euros 20.4 million. In May 2019, the Parent successfully lodged an appeal and on 16 July 2019 the National Court (Audiencia Nacional) suspended execution of the CNMC resolution of 14 March 2019, dependent upon the presentation of bank guarantees.

On 26 September 2019, the Parent received an incidental request to bring proceedings, said proceedings having been brought in proper and timely manner on 11 November 2019.

In light of these events, and based on the assessment of the Parent's legal advisers, although they consider that there are still solid arguments to challenge the CNMC's inspection, due to recent events in connection with other appeals against the Resolution, and the developments in other proceedings in the National Court in the last 12 months when the arguments presented by the parties have been rejected and the CNMC's decision confirmed, the directors of the Parent have booked a provision of Euros 20.4 million to cover this risk, since they estimate that there is a probability of the appeal prospering of less than 50%.

The category "Other" includes provisions for construction contracts with negative margins for a total amount of Euros 25,897 thousand (Euros 8,222 thousand at 31 December 2018), the most significant of which was booked in 2019 in relation to the "Mataquito Transmisora de Energía" developed in Chile, amounting to Euros 12,523 thousand.

Reversals in 2019 and 2018 correspond to penalties and other contingencies in relation to the execution of various projects that were completed in 2019 and 2018, respectively, and that were resolved favourably for the Group.

Decommissioning provisions at 31 December 2019 correspond to the provision for the wind farm owned by the Group in Canada and for the farms in Brazil, booked in 2019.

Decommissioning provisions at 31 December 2018 included the provision for the Group's Canadian wind farm and the provision for the decommissioning of Elecnor Perú, S.A.C. relating to the estimate costs necessary to buy back the lands and roads affected in the development of the construction of the Gasoducto Sur Peruano (Southern Peruvian Gas Pipeline), which was reversed in 2019 on the basis of the analysis conducted by the company's management in cooperation with its legal advisers which finds that Elecnor Perú, S.A.C. fulfilled its contractual obligations in accordance with Consorcio Constructor Ductos del Sur.

20. Advances from customers

Advances from customers basically reflect payments made in advance by customers prior to the start of the related contracts. These advances are discounted from invoices issued during the execution of the contracts.

Accompanying notes

21. Deferred tax assets and deferred tax liabilities

Details of "Deferred tax assets" and "Deferred tax liabilities" in the accompanying consolidated statement of financial position, and movement in 2019 and 2018, are as follows:

	Restate d 01/01/2 018	Transfers	Credit/char ge to the statement of profit/loss	Credit /charge to the assets and liabilities valuation reserve	Translation differences	Other	Restated 31/12/201 8	Transfers	Credit/charge to the statement of profit/loss	Taken to the assets and liabilities valuation reserve	Translation differences	Business combination (Note 7)	Transfer to non current assets held for sale (Note 8)	Changes in the consolidated Group (note 2.f)	31/12/2019
Deferred tax Assets: Valuation of derivative financial
instruments (Note 18) Property, plant and	2,404	105	32	2,220	(35)	-	4,726	297	(1,873)	(2,207)	(278)	28,512	(484)	(23,067)	5,626
equipment /intangible assets Tax credits Deductions and credits	7,728 20,467	253 19	(549) 11,272	- -	(1) (694)	- (460)	7,431 30,604	(119) 98	(386) 249	294 -	- (53)	5,528 36,293	(1,526) (87)	(5,872) (36,293)	5,350 30,811
pending application Losses at external	4,280	(385)	1,627	-	1	-	5,523	375	(1,829)	-	(1)	-	-	(172)	3,896
branches Non-deductible	336	-	(354)	-	-	-	(18)	-	-	-	-	-	-	-	(18)
provisions (Note 19) Other deferred tax	34,047	(540)	4,147	-	(480)	(218)	36,956	(479)	14,409	-	(1,332)	-	-	-	49,554
assets	28,032	(90)	(17,337)	-	(1)	-	10,604	(193)	1,079	-	(682)	10,418	-	(13,018)	8,208
	97,294	(638)	(1,162)	2,220	(1,210)	(678)	95,826	(21)	11,649	(1,913)	(2,346)	80,751	(2,097)	(78,422)	103,427
Deferred tax liabilities: Property, plant and equipment /intangible assets Goodwill Measurement of derivative financial instruments	15,734 2,545	(2) -	(1,423) (772)	- -	(775) -	- -	13,534 1,773	- -	(733) (934)	- -	(186) -	13,100 - -	- -	(14,657) -	11,058 839
(Note 18) Other deferred tax	1,137	-	-	(804)	(5)	-	328	-	-	(222)	(3)		-	-	103
liabilities	11,411	2,989	(7,940)	399	2	(399)	6,462	(1,368)	4,026	(199)	6	6,850	-	(7,171)	8,606
	30,827	2,987	(10,135)	(405)	(778)	(399)	22,097	(1,368)	2,359	(421)	(183)	19,950	-	(21,828)	20,606

Accompanying notes

Deferred tax assets and liabilities that are expected to be realised or reversed in periods of less than 12 months are not significant.

Deferred tax assets and liabilities: property, plant and equipment and intangible assets, in the foregoing table mainly reflect taxable temporary differences arising from differences between the carrying amount of certain property, plant and equipment and intangible assets and their tax base, as well as the timing differences derived from the depreciation and amortisation of these non-current assets for accounting and tax purposes.

Deferred tax assets: tax credits and available deductions and credits, in the foregoing table, include, respectively, unused tax loss carryforwards and available deductions of various Group companies, which have been capitalised as the Parent's directors consider that they will be recovered against estimated profits in the coming years.

Deferred tax assets: non-deductible provisions, in the above table mainly include the tax impact of adjustments to accounting profit/loss as a consequence of various provisions that were not considered deductible when they were recognised (see notes 15.a and 19).

At 31 December 2019 and 2018, the tax credits for capitalised tax loss carryforwards and the deferred tax assets and liabilities by entity/subgroup are as follows:

	2019
	Thousands of Euros
	Tax credits	Deferred tax assets	Deferred tax liabilities
Elecnor, S.A.	15,133	42,211	3,766
Aplicaciones Técnicas de la
Energía, S.A.	3,421	4,492	-
Enerfín subgroup	6,696	15,871	13,079
Audeca, S.L.U.	-	87	2,946
Elecnor do Brasil, Ltda	-	10,224	-
Elecnor Chile, S.A.	-	12,459	-
Elecnor Inc	5,546	-	-
Other	15	18,083	815
Total	30,811	103,427	20,606

	Restated 2018
	Thousands of Euros
	Tax credits	Deferred tax assets	Deferred tax liabilities
Elecnor, S.A.	15,655	42,861	3,878
Aplicaciones Técnicas de la
Energía, S.A.	3,421	4,487	61
Subgroup Celeo Concesiones
e Inversiones	123	3,554	1,397
Enerfín subgroup	8,441	19,165	12,377
Audeca, S.L.U.	-	-	3,228
Elecnor do Brasil, Ltda	429	4,166	-
IQA Operations Group, Ltd	-	-	-
Elecnor Chile, S.A.	2,272	10,915	-
Other	263	10,678	1,156
Total	30,604	95,826	22,097

Accompanying notes

Details of the amounts and expiry years of uncapitalised tax loss carryforwards of the most significant entities/tax groups at 31 December 2019 and 2018 are as follows: (in thousands of Euros)

2019	Unused, uncapitalised tax loss carryforwards	Expiry year
Aplicaciones Técnicas de la
Energía, S.A.	4,596	Unlimited
Montelecnor, S.A.	13,627	2020 - 2021
IQA Operations Group, Ltd	5,896	Unlimited
Elecnor South Africa	2,463	Unlimited
Dunor	15,212	2029
	41,794

Restated	Unused, uncapitalised tax
2018	loss carryforwards	Expiry year
Aplicaciones Técnicas de la
Energía, S.A.	3,128	Unlimited
Celeo Concesiones
e Inversiones, S.L.	1,441	Unlimited
Montelecnor, S.A.	14,806	2020 - 2021
Elecnor South Africa	1,986	Unlimited
IQA Operations Group, Ltd	6,802	Unlimited
Elecnor Inc	38,761	Unlimited
	66,924

22. Income tax

The Parent has the following years open to inspection by the tax authorities in respect of the main taxes applicable to it:

Tax	Years open to inspection
Corporate Income Tax (*)	2014 – 2018
Value Added Tax	2015 – 2019
Personal Income Tax	2015 – 2019
Social security	2015 – 2019
Capital Gains Tax	2015 – 2019
Non-residents	2015 – 2019

(*) The deadline for filing corporate income tax returns is 25 calendar days after the six months subsequent to conclusion of the tax periods, so corporate tax corresponding to 2019 will not be open to inspection until 25 July 2020.

Inspections conducted by the Tax Authority's Large Taxpayers Division at the Parent, and commenced by notification on 1 July 2016, concluded in 2018.

Said inspections encompassed the following taxes and periods:

• Corporate Income Tax for the tax periods 2011 to 2013,
• Value Added Tax for the tax periods 06/2012 to 12/2014,
• Withholdings and payments on account for earnings for personal work and professional activities for the tax periods 06/2012 to 12/2014,

Accompanying notes

• Withholdings and payments on account for capital gains for the periods 06/2012 to 12/2014,
• Withholdings and payments on account for real estate earnings for the tax periods 06/2012 to 12/2014,
• Withholdings on account for non-residents tax for the tax periods 06/2012 to 12/2014,

The aforementioned inspections concluded in 2018 and the Group signed statements of conformity for a total payment in Euros 10,915 thousand in tax, late payment interest and, where applicable, fines, the expense of which is recognised in the accompanying consolidated income statement; it also signed statements of disconformity whose settlement implies a payment obligation totalling Euros 14,208 thousand.

Against the settlement agreements deriving from the disconformity statements the Parent filed economicadministrative appeals on 28 December 2018 before the Central Economic-Administrative Court which, the payment obligation having been suspended while the proceedings are completed, are pending administrative processing on the date of authorising these consolidated annual accounts for issue, the records of the proceedings not yet having been made available or the procedure for presenting arguments yet arranged by the Central Economic-Administrative Court.

In light of this situation, and although there are weighty arguments to underpin the position of the Parent, the latter's directors, on the basis of considerations put forward by its tax advisers, have decided to book a provision this year for the amounts claimed in the appealed settlement agreements in connection with differences in interpretation in relation to related-party transactions amounting to Euros 7,559 thousand, since they consider that in 2019 retroactivity has been ruled out and, accordingly, the reviewing bodies are more likely to approve the Tax Administration's position than not, and considering the impact for the rest of years open to inspection.

In addition to the foregoing, on 29 October 2019, the Parent received a notification of the commencement of an inspection in relation to the following taxes and years:

• Corporate Income Tax for the tax periods 2014 to 2016,
• Value Added Tax for the tax periods 09/2015 to 12/2016,
• Withholdings and payments on account for earnings for personal work and professional activities for the tax periods 09/2015 to 12/2016,
• Withholdings and payments on account for capital gains for the periods 09/2015 to 12/2016,
• Withholdings and payments on account for real estate earnings for the tax periods 09/2015 to 12/2016,
• Withholdings on account for non-residents tax for the tax periods 09/2015 to 12/2016,

However, the Administration's entitlement to verify or investigate tax loss carryforwards offset or pending offsetting, deductions for double taxation and deductions to encourage certain activities applied or pending application prescribes after 10 year from the day after the end of the established period for filing the tax return or self-assessment for the tax period in which the Company's entitlement to offsetting or application was generated. Once that period has elapsed, the Group must accredit tax losses or deductions by presenting the settlement or self-assessment and the accounts, and also evidencing that they have been filed during the aforementioned period in the Companies Register.

Accompanying notes

Details of the income tax expense accrued in 2019 and 2018 are as follows:

	Thousands of Euros
		Reexpresado
	2019	2018
Consolidated profit before income tax	190,077	125,391
Non-deductible expenses	66,539	5,339
Non-taxable income (**)	(205,796)	(11,958)
Profit/loss at equity-accounted investees
(Note 13)	46,268	(18,733)
Other	(513)	(1,208)
Capitalisation reserve	(351)	-
Uncapitalised tax credits applied	(8,133)	(7,664)
Uncapitalised tax loss carryforwards (***)	32,408	18,608
Adjusted accounting profit	120,499	109,775
Gross tax calculated at the tax rate in force in
each country (*)	42,682	37,991
Tax deductions for incentives and other	(472)	(782)
Adjustment to prior year's corporate income
tax expense	1,836	1,643
Effect of tax rate changes on deferred taxes	(484)	(484)
Other adjustments	15,850	(810)
Income tax expense	59,412	37,558

(*) The fully consolidated foreign subsidiaries and branches calculate the corporate income tax expense and the amount due in respect of the various other applicable taxes in accordance with the prevailing tax rates and legislation in their respective countries.

• (**) Non-taxable income in 2019 and 2018 mainly reflected adjustments to the accounting profit for income from the sale of investments which are exempt from taxation (see notes 2.f ).
• (***) Corresponding mainly, in 2019, to the companies Dunor Energía S.A.P.I de C.V., in the amount of Euros 18 million, and the subgroup Enerfín, in the amount of Euros 6.9 million (Proyectos Eléctricos Agua Prieta, SAPI de CV, in the amount of Euros 8.5 million, IQA Operations Group, Ltd in the amount of Euros 1.3 million and the Enerfín subgroup, in the amount of Euros 5.4 million in 2018).

Details of the main components of the income tax expense accrued in 2019 and 2018 were as follows:

	Thousands of Euros
		Restated 2018
	2019
Current tax
Present year	51,016	51,341
Prior year adjustments	1,836	1,643
Other adjustments	15,850	(810)
Deferred tax
Deferred tax expense/income relating
to the origination and reversal of temporary differences	(9,290)	(14,616)
Income tax expense	59,412	37,558

Accompanying notes

Details of the amounts and expiry years of deductible temporary differences, tax losses or credits for which deferred tax assets have not been recognised in the consolidated statements of financial position at 31 December 2019 and 2018, are as follows (in thousands of Euros):

Total	52,067
Unlimited	20,004
2029	15,212
2028	263
2024	97
2023	1,753
2022	920
2021	9,731
2020	4,087
Expiry year:
	31/12/2019
Unused tax loss carryforwards

Unused tax loss carryforwards	Restated at 31/12/2018
Expiry year:
2019	11
2020	4,780
2021	10,134
2022	1,130
2023	645
2026	142
2027	111
Unlimited	30,234
Total	47,187

Unused tax credits for deductions and
other items	31/12/2019
Expiry year:
2027	592
2028	890
2029	451
2030	124
2031	141
Unlimited	1,909
Total	4,107

Unused tax credits for deductions and
other items	31/12/2018
Expiry year:
2027	622
2028	890
2029	451
2030	124
2031	141
Unlimited	2,278
Total	4,506

The unused tax loss carryforwards and tax credits for deductions and other items described above were generated by various companies in the Elecnor Group and their future recoverability is conditional upon these companies' ability to generate sufficient taxable profits.

Accompanying notes

Due to the treatment permitted by prevailing fiscal legislation, additional tax liabilities that cannot be objectively quantified could arise in the event of inspection. However, the Parent's directors consider that the possibility of such contingent liabilities arising during future tax inspections of Group companies is remote and that, in any case, the tax liability that could result therefrom would not materially affect the consolidated annual accounts of the Elecnor Group.

23. Guarantee commitments with third parties and contingencies

Guarantee commitments with third parties-

At 31 December 2019 and 2018, details of the risk exposure relating to bank guarantees received and other bid, completion and performance bonds, extended mainly by the Parent, are as follows:

	Thousands of Euros
		Restated
	2019	2018
Completion bonds	665,788	570,845
Advances on contracts:
Current	213,881	175,649
To be cancelled	47	69
Performance bonds	193,060	188,290
Bid bonds	63,129	52,899
Other	39,181	16,769
Total	1,175,086	1,004,521

At 31 December 2019 and 2018, the Parent had provided guarantees to the customer Empresa de Transmisión Energía for Euros 33 million and Euros 29 million, respectively. It had also provided guarantees to the customer Toabré for Euros 26 million and Euros 25 million, respectively.

The remaining amount of the guarantees at 31 December 2019 and 2018 consists of a number of guarantees of insignificant individual amounts.

The Parent's directors consider that any liabilities that might arise from the bank guarantees provided would not give rise to significant losses in the accompanying consolidated financial statements.

Contingencies-

On 17 January 2020, the Central Court of Instruction No. 5 issued an order decreeing the commencement of a trial concerning a former employee of the Group and concerning the company Deimos Space, S.L., the latter for alleged criminal liability as a legal entity for possible crimes of corruption in international commercial transactions and money laundering, requiring that the company provide a guarantee of Euros 1,460 thousand to cover civil liability., and additional guarantees of Euros 10,240 thousand and Euros 2,625 thousand to cover possible future pecuniary sanctions and confiscations.

The Group is in complete disagreement with the legal decision and is exercising its rights in the proceedings, appealing the guarantee amount required and requesting its free acquittal, as is the former Group employee and the latter's legal team, and it considers that there has been no proof in the proceedings to presume with a sufficient degree of certainty, beyond all reasonable doubt, that either Deimos Space, S.L. or its former employee will be sentenced, so that the directors of the Parent, in accordance with the terms of the plaintiff's defence writ, consider that the probable result of the trial will be an acquittal, and that therefore no criminal or civil liability will be enforced.

Accompanying notes

24. Income and expenses

Net turnover

Details of this item in 2019 and 2018 are as follows:

	Thousands of Euros
		Restated 2018
	2019
Construction contracts and services rendered	2,283,979	2,102,581
Sale of goods and energy	169,747	148,318
Total	2,453,726	2,250,899

The breakdown of the Group's turnover in 2019 and 2018, by both geographic areas and products, is as follows:

	Thousands of Euros
		Restated
By geographical area	2019	2018
Domestic	1,168,656	987,979
International	1,285,070	1,262,920
Total	2,453,726	2,250,899
By line of business
Electricity	908,347	744,732
Power generation	573,375	631,087
Telecommunications and space	247,719	252,914
Construction, environment and water	181,276	169,725
Maintenance	171,830	160,396
Facilities	215,105	165,821
Gas	106,793	102,594
Railways	49,281	23,630
Total	2,453,726	2,250,899

Income from Contracts with Customers

Movement in assets and liabilities from contracts with customers in 2019 is as follows:

	Thousands of Euros
	Assets	Liabilities
At 1 January 2019	258,756	(320,310)
Revenues recognised	2,377,252	2,377,252
Reclassification to income	(2,325,392)	(2,419,727)
Translation differences	(4,487)	5,776
At 01 December 2019	306,129	(357,009)

Accompanying notes

Materials consumed-

Details of this item in 2019 and 2018 are as follows:

	Thousands of Euros
		Restated 2018
	2019
Purchases of raw materials and other supplies	759,959	689,622
Work carried out by other companies	432,762	398,443
Changes in goods for resale, raw materials
and other inventories	2,292	1,105
Total	1,195,013	1,089,170

Other operating expenses

Details of this item in 2019 and 2018 are as follows:

	Thousands of Euros
	Restated 2018
	2019
Leases	71,721	62,507
Repairs and maintenance	23,963	19,172
Independent professional services	122,005	102,012
Transportation	6,622	5,931
Insurance premiums	9,482	10,237
Banking services	10,740	8,516
Advertising and publicity	1,677	1,465
Utilities	41,702	29,245
Taxes	28,414	29,874
Other expenses	65,605	79,105
Total	381,931	348,064

Personnel expenses-

Details of this item in 2019 and 2018 are as follows:

	Thousands of Euros
		Restated
	2019	2018
Salaries and wages	503,473	453,955
Termination benefits	7,033	6,105
Social Security payable by the Company	110,746	98,100
Other employee benefits expenses	47,766	41,834
Total	669,018	599,994

At 31 December 2019, the heading "Other current liabilities" includes approximately Euros 29 million in remuneration pending payment (Euros 20 million at 31 December 2018).

Accompanying notes

Depreciation, amortisation and provisions

Details of this item in 2019 and 2018 are as follows:

	Thousands of Euros
		Restated
	2019	2018
Provisions for depreciation of property, plant and equipment
(Note 11)	73,279	55,343
Amortisation of intangible assets
(Note 10)	7,082	6,383
Changes in provisions for risks and charges without
decommissioning (Note 19)	33,702	35,557
Impairment of fixed assets (Note 11)	5,271	-
Depreciation charge for right-of-use assets
(Note 12)	6,362	-
Change in impairment of receivables (Notes 14.c) and 15)	47,755	22,491
Impairment of goodwill (Note 9)	4,227	-
Other	(15,556)	(14,981)
Total	162,122	104,793

The heading "Other" at 31 December 2019 and 2018 corresponds mainly to the application of provisions the Group recognises against this heading, taking expenses for provisioned payments at 31 December 2018 and 2017 by their type in the accompanying consolidated income statement.

Finance income

Finance income derives from the application of the effective interest rate method to financial assets in the category of financial assets at amortised cost.

Finance expenses

Details of this item in 2019 and 2018 are as follows:

		Thousands of Euros
		Restated 2018
	2019
Finance expenses from issuing bonds and other
marketable securities	5,307	3,422
Finance costs on loans and borrowings (*)	44,362	38,753
Other finance costs	4,891	6,434
	54,560	48,609

(*) Arising mainly from project finance arrangements for wind farms, Elecnor, S.A.'s syndicated loans and interest rate swaps (see Notes 17 and 18).

Finance expenses derive practically entirely from the application of the effective interest rate method to financial liabilities in the category of financial liabilities at amortised cost.

25. Interests in Joint Ventures

In 2019 and 2018 the balance sheets and income statements of joint ventures (known in Spain as UTEs) in which Elecnor, S.A. or its subsidiaries hold interests were proportionately consolidated in the accompanying consolidated annual financial statements, in accordance with IAS 31.

Details of UTEs and the Group's percentage ownership therein at 31 December 2019 and 2018, the amount of revenues from construction work performed in 2019 and 2018 and the order book at year end are included in Appendix II to these consolidated annual accounts.

Accompanying notes

The contribution of UTEs to the various items in the accompanying consolidated statements of financial position and of profit and loss at 31 December 2019 and 2018 are as follows:

ASSETS	Thousands of Euros		LIABILITIES	Thousands of Euros
	2019	2018		2019	2018
Intangible assets Property, plant and equipment	124 31,342		- Profit for the year 2,720 Loans and borrowings	(23,069)	12,623
Financial assets Inventories Trade receivables	1,589 2,399 78,535	152	10,491 Non-current payables 58,320 Current trade	- 3,359	937 42
Current investments Cash Prepayments	1,083 32,074 424	41,578 295	(982) payables	167,280	98,972
Total	147,570	112,574	Total	147,570	112,574

	Thousands of Euros
Statement of profit and loss	2019	2018
Revenues	130,786	148,524
Increase in inventories of finished
goods and work in progress	-	(24)
Materials consumed	(90,589)	(100,782)
Non-trading income	1,213	3,005
Personnel expenses	(11,849)	(12,285)
External services	(24,212)	(18,095)
Taxes	(1,902)	(2,060)
Impairment losses and changes in
provisions for trade operations	(8,066)	(962)
Other operating expenses	(371)	(750)
Depreciation and amortisation	(3,788)	(1,282)
Impairment and profit/loss on disposal
of fixed assets	(2)	59
Excess provisions	-	2
Finance income	1,847	1,034
Finance costs	(6,901)	(6,405)
Translation differences	(8,275)	3,897
Foreign taxes	(960)	(1,253)
Total	(23,069)	12,623

Accompanying notes

26. Order book

Details, by line of business, of the Parent's order backlog at 31 December 2019 and 2018, excluding temporary joint ventures – UTEs (see Note 25), are as follows:

	Thousands of Euros
By geographical area	2019	2018
Domestic	460,249	363,388
International	1,128,920	922,596
Total	1,589,169	1,285,984
By line of business
Electricity	632,051	488,849
Power generation	288,748	442,738
Telecommunications and space	169,774	129,509
Construction, environment and water	314,918	48,778
Maintenance	28,559	40,671
Facilities	64,056	29,457
Gas	24,754	30,701
Railways	66,309	75,281
Total	1,589,169	1,285,984

At 31 December 2019 the order backlog of subsidiaries amounts to Euros 633,547 thousand (Euros 841,399 thousand in 2018) and mainly comprises work for companies in the electricity sector.

27. Average supplier payment period. Final provision two of Law 31/2014 of 3 December 2014

Information on deferred payments to suppliers by consolidated Spanish companies is as follows:

	Days
	2019	2018
Average supplier payment period	63	64
Transactions paid ratio	70	71
Transactions payable ratio	44	43
	Expressed in thousands of Euros
Total payments made	861,025	802,457
Total payments outstanding	248,389	210,708

The payments to suppliers reflected in the above table are trade payables as they relate to goods and services. They therefore include "Trade and other payables - trade payables for purchases or services".

28. Information on employees

The average headcount, by professional category (not including joint ventures), in 2019 and 2018 was as follows:

	Average headcount
Professional category		Restated
	2019	2018
Management	178	152
Executive	1,081	885
Technician	3,010	2,206
Base	10,284	10,034
Total	14,553	13,277

Accompanying notes

Of the Group's average headcount in 2019, a total of 5,709 employees had temporary employment contracts (5,865 employees in 2018).

Moreover, the breakdown by gender at the end of 2019 and 2018, specified by category, of staff and directors, not including joint ventures, is as follows:

	31/12/2019		Restated 31/12/2018
Professional category	Male	Female	Male	Female
Directors	13	2	13	2
Management	145	19	135	20
Executive	897	201	683	239
Technician	2,125	1,120	1,406	868
Base	9,895	453	9,804	422
Total	13,075	1,795	12,041	1,551

The average number of employees at the Parent with a disability equal to or greater than 33%, by category, is as follows:

Professional category	2019	2018
Executive	6	6
Technician	7	5
Base	34	32
Total	47	43

At the 2019 year end Elecnor, S.A. had a headcount of 8,374 employees in Spain (7,981 in 2018), 47 of whom were disabled, representing 0.56% of the workforce in Spain. Elecnor, S.A. has been granted exemption from this requirement through the adoption of alternative measures. Certified purchases made from Special Employment Centres amounted to Euros 3,458 thousand in 2019 (Euros 2,539 thousand in 2018), which is equivalent to hiring an additional 31% of disabled employees (1.93% of disabled employees in 2018). This would result in a total of 2.62%, thereby exceeding the mandatory quota (2%).

29. Related party balances and transactions

29.1. Related party balances and transactions of the Group

Related party transactions have been carried out at arm's length. Transactions carried out by the Group with investees that are not fully or proportionately consolidated and with other non-consolidated companies during 2019 and 2018 are as follows:

Accompanying notes

2019

	Thousands of Euros
	Sales and
	other
	operating	Finance
	income	income
Equity-accounted investees:
Celeo Concesiones e Inversiones, S.L.U.	1	25
Gasoducto de Morelos, SAPI de CV	89	1,382
Celeo Concesiones e Inversiones Group
Celeo Termosolar, S.L.	60	-
Dioxipe Solar, S.L.	5,602	-
Aries Solar Termoeléctrica, S.L.	9,421	-
Celeo Redes Chile, Ltda	965	-
Celeo Fotovoltaico, S.L.U.	317	-
Casablanca Transmisora de Energía, S.A.	5,009	-
Mataquito Transmisora de Energía, S.A.	12,938	-
Diego de Almagro Transmisora de Energía, S.A.	28,382	-
Celeo São João Do Piaui FV I, S.A. (7 companies)	127,901	-
Integraçao Maranhense Tranmissora de Energia, S.A.	159	-
Pedras Transmissora de Energia, S.A.	274	-
Serra De Ibiapa Transmissora de Energia, S.A.	54,517	-
Total	245,635	1,407

Restated 2018

	Thousands of Euros
	External services and other expenses	Sales and other operating income	Finance income
Equity-accounted investees:
Dioxipe Solar, S.L.	-	5,416	-
Aries Solar Termoeléctrica, S.L.	-	9,882	-
Gasoducto de Morelos, SAPI de CV	-	597	-
Morelos EPC, SAPI de CV	-	6,751	2,605
Celeo Redes Group
Celeo Redes Chile, Ltda	87	1,655	-
Charrúa Transmisora de Energia, S.A.	201	7,903	-
Diego de Almagro Transmisora de Energía S.A.	-	29,607	-
Alto Jahuel Transmisora de Energia, S.A.	67	-	-
Celeo São João Do Piaui FV I, S.A.
(7 companies)	-	4,881	-
Cantareira Transmissora de Energia, S.A.	-	8,619	-
Jaurú Transmissora de Energia, S.A.	-	1,388	-
Pedras Transmissora de Energia, S.A.	-	5,671	-
Serra De Ibiapa Transmissora de Energia, S.A.	-	4,444	-
Total	355	86,814	2,605

Accompanying notes

At 31 December 2019 and 2018, balances receivable from and payable to investees that are not fully or proportionately consolidated and other non-consolidated companies, deriving from the above transactions, are as follows:

	Thousands of Euros
	2019			Restated 2018
			Amounts			Amounts
		Amounts receivable	payable	Amounts receivable		payable
			Trade			Trade
	Other	Trade	Payables,	Other	Trade	Payables,
	financial	Receivables,	associates	financial	Receivables,	associates
	investments	related	and related	investments	related	and related
	(Note 14)	companies	companies	(Note 14)	companies	companies
Accounted for using the
equity method
Dioxipe Solar, S.L.	-	2,289	-	-	3,415	-
Aries Solar Termoeléctrica, S.L.	-	2,387	-	138	2,195	-
Gasoducto Morelos S.A.P.I. de
CV	10,561	379	-	16,176	152	20
Serra De Ibiapa Transmissora
de Energia, S.A. – SITE	-	2,223	-	-	-	-
São João do Piauí	-	6,314	-	-	-	-
Other	-	1,527	60	-	1,350	576
	10,561	15,119	60	16,314	7,112	596

At 31 December 2019 Santander Asset Management, S.A., SGIIC has a significant investment in Elecnor, S.A., the Parent of the Elecnor Group. No transactions have been carried out with this company during the year and there were no balances receivable or payable at 31 December 2019.

At 31 December 2018 Bestinver Gestión, S.A., S.G.I.I.C. had a significant investment in Elecnor, S.A., the Parent of the Elecnor Group. No transactions were carried out with this company during the year and there were no balances receivable or payable at 31 December 2018.

29.2. Remuneration of the board of directors

a) Remuneration and other benefits

In 2019 the members of the Parent's Board of directors received remuneration amounting to Euros 5,200 thousand (Euros 4,937 thousand in 2018). This remuneration includes that earned in their capacity as management personnel.

The Parent has paid approximately Euros 4,1 thousand for life insurance arranged for former or current members of its Board of directors in both years.

At 31 December 2019 and 2018, the Parent does not have any pension obligations with former or current members of the board of directors nor has it extended any guarantees on their behalf or granted any loans thereto.

At 31 December 2019 and 2018, the board of directors of the Parent is formed by 15 individuals, two of whom are female.

At 31 December 2019 and 2018 the amount paid by the Parent with regard to public liability insurance for all or some of the directors in relation to damage caused due to acts or omissions in discharging their duties was not significant.

b) Conflicts of interest concerning the directors

The members of the board of directors of Elecnor, S.A. and their related parties have had no conflicts of interest requiring disclosure in accordance with article 229 of the Revised Spanish Companies Act.

Accompanying notes

c) Transactions other than ordinary business or under terms differing from market conditions carried out by the directors

In 2019 and 2018 the directors of the Parent have not carried out any transactions other than ordinary business or applying terms that differ from market conditions with the Company or any other Group company.

29.3. Remuneration to the Management Team

In 2019, the Company's Management Team received remuneration amounting to Euros 4,661 thousand (Euros 1,186 thousand in 2018).

30. Audit fees

The auditor (KPMG Auditores, S.L.) of the Group's annual financial statements invoiced the following net fees for professional services at 31 December 2019 and 2018:

	Thousands of Euros
		Restated 2018
Description	2019
For audit services	334	228
For other accounting verification services	98	112
For other services	12	-
Total	444	340

The above amount includes all fees relating to services provided in 2019 and 2018, regardless of when they were invoiced.

Other verification services refer to the limited review of interim financial statements and procedures in regard to ICSFR, provided by KPMG Auditores, S.L. to Elecnor S.A. in the years ended 31 December 2019 and 2018.

Other services refer to procedural reports regarding compliance with covenants and other procedures agreed provided by KPMG Auditores, S.L. to Elecnor, S.A. in the years ended 31 December 2019 and 2018.

Moreover, other affiliates of KPMG International invoiced the Group in the years ended on 31 December 2019 and 2018 for net fees relating to professional services, as follows:

	Thousands of Euros
		Restated 2018
Description	2019
For audit services	170	149
For other accounting verification services	38	19
For tax advisory services	4	17
For other services	1,356	2,368
Total	1,568	2,553

Accompanying notes

Other auditors also invoiced the Group in the years ended on 31 December 2019 and 2018 for net fees relating to professional services, as follows:

		Thousands of Euros
Description	2019	2018
Audit services	563	579
For other accounting verification services	80	32
Tax advisory services	680	678
Other services	541	270
Total	1,864	1,559

31. Earnings per share

Details of basic earnings per share in 2019 and 2018 are as follows:

	2019	Restated 2018
Attributable net profit (thousands of Euros)	126,377	82,117
Total number of shares outstanding	87,000,000	87,000,000
Less, own shares (Note 16-d)	(2,320,809)	(2,336,496)
Weighted average number of shares outstanding	84,679,191	84,663,504
Basic earnings per share (Euros)	1.49	0.97

At 31 December 2019 and 2018 Elecnor, S.A., the Parent of the Elecnor Group, has not issued any financial instruments or other contracts entitling the holder to receive ordinary shares from the Company, and therefore diluted earnings per share coincide with basic earnings per share.

32. Environmental information

Respect for the environment and sustainability are an integral part of Elecnor's core values and culture. The Company is committed to protecting the environment and fostering efficiency in the consumption of energy resources. Elecnor's Environmental Management System defines a procedure to identify, assess and record the environmental aspects originating in the company's activities in order to determine which are significant and apply the most efficient corrective measures to minimise their impact.

In 2019, AENOR multi-site certification audits were conducted according to ISO standards 9001:2015 and ISO 14001:2015. This is a single certificate for all of the Organisations in the Elecnor infrastructures area that contains all of the scopes of the various activities and all of the work centres which, up until now, obtained certification individually.

The Quality Management (ER-0096/1995) and Environmental Management (GA-2000/0294) certification includes the following Group areas:

• Major Networks Unit
• Major Energy Unit
• Major Engineering Unit
• Major Facilities and Networks Unit: Central Regional Office and Northern Branches, North-Eastern Regional Office, Eastern Regional Office, Southern Regional Office, Elecnor Medio Ambiente, Elecnor Seguridad, Area 3 Equipamiento, Diseño e Interiorismo; Elecnor Infrastrutture S.R.L. (Italy); Ehisa Construcciones y Obras; Aplicaciones Técnicas de la Energía and Jomar Seguridad.

Environmental Management certificates are also held for the following affiliates:

• Audeca, (GA-1999/0134)
• Deimos, (ES 028048-2)
• Hidroambiente, (SGI 1201167/12)
• Enerfín, (GA-2003/0416)

Accompanying notes

In 2019, Elecnor renewed its environment certificate for carbon dioxide emissions, obtained from the Spanish Association for Standardisation and Certification (AENOR) and verified in accordance with ISO standard 14064- 1. Through this verification the Company obtains independent and rigorous endorsement of the amount of GHG emissions caused by its activities, thereby seeking to improve its environmental and energy management.

Elecnor renewed its certification of registration in the National Register for Carbon Footprint, Offsetting and Absorption of Carbon Dioxide at Spain's Ministry for Ecological Transition's Office for Climate Change (OECC), obtaining the REDUZCO seal, having managed to reduce its carbon footprint for 5 consecutive years.

It also renewed its AENOR Energy Management System certification (GE-2013/0033), as per the UNE-EN ISO 50001:2011 standard.

In 2018, Elecnor devised a Climate Change Strategy to reduce its impact, boost its resilience and tap into the potential opportunities provided by climate change, so as to grow as a Group in a sustainable manner.

Lastly, Elecnor joined the CDP sustainability index and has been rated a B for two consecutive years (2018 and 2019), which implies international recognition of its strategy to combat climate change, since it means that in 2019 Elecnor was recognised as having the highest level of climate change management. Elecnor's B rating is above the electric utilities sector average and above the regional European average.

33. Events after the reporting period

The outbreak of the novel coronavirus causing the disease known as COVID-19 in China in January 2020 and its recent spread to numerous countries across the globe led the World Health Organisation to declare a pandemic on 11 March 2020.

Considering the complexity of markets due to their globalisation and the absence, for now, of an effective treatment against the virus, the consequences for the operations of the Elecnor Group are uncertain, and will depend largely on how the pandemic evolves and spreads over the next few months, as well as the capacity of all the economic agents involved to react and adapt.

Consequently, on the date of authorising these Annual Accounts for issue it is too soon to perform a detailed assessment or quantification of the potential impact of COVID-19 on Elecnor and its group of companies, as the short-, medium- and long-term consequences remain uncertain. In any event, the consequences of COVID-19 are considered a subsequent event that does not require an adjustment of the consolidated annual accounts of 2019, without prejudice to their being recognised in the consolidated annual accounts of 2020.

In this regard, there has already been a downturn in the Group's estimated activity in the first few months of 2020 as a result of the COVID-19 outbreak, and it is not yet possible to gauge whether this situation will persist and to what extent.

Nevertheless, the Company's directors and Management, considering the measures adopted by the various governments of the countries in which the Elecnor Group operates to help manage the health crisis unleashed by the COVID-19 pandemic, has conducted a preliminary assessment of the current situation based on the best available information. Due to the aforementioned considerations, this information may be incomplete. Of the findings of that assessment, we highlight the following aspects:

· Liquidity risk: the general market situation may foreseeably trigger a widespread increase in liquidity stresses in the economy, as well as a contraction in the credit market. In this regard, the Group's financial situation is solid and it has sizeable undrawn credit lines (Note 17), which, coupled with the launch of specific plans to boost and efficiently manage liquidity, will enable it to tackle these stresses.

Accompanying notes

• · Operating risk: the changing and unpredictable nature of events could lead to the risk of the temporary disruption of some of the Group's activities. Accordingly, specific working groups and procedures have been established aimed at monitoring and managing developments in its operations at all times, in order to minimise the impact on its business.
• · Risk of variation of certain financial figures: the aforementioned factors could trigger a reduction in the next financial statements of the amounts booked under significant headings for the Elecnor Group, such as "Net turnover" or "Profit after tax", or key indicators thereof (EBITDA/Net financial debt ratio) although for now it is not possible to reliably quantify the impact of this, considering the conditioning factors and restrictions we have already mentioned.

Lastly, note that the directors and Management of Elecnor are constantly monitoring the situation as it unfolds, in order to successfully tackle any potential impacts, both financial and non-financial.

(Thousands of Euros)

						Direct or indirect
			Registered			ownership percentage
2019	Parent	Company	office	Auditor	Activity
Consolidation method
Fully consolidated companies
	Elecnor, S.A.
					Development and operation of
		Andes Solares, SAS (****) Aplicaciones Técnicas de la	COLOMBIA	***	renewable energy sources	100.00%
		Energía, S.L.U.(ATERSA) Area 3 Equipamiento y Diseño	SPAIN	Deloitte	Solar energy	100.00%
		Interiorismo, S.L.U.	SPAIN	***	Interior design	100.00%
		Audeca, S.L.U.			Environmental restoration and reforestation and operation of
			SPAIN	KPMG	roads.	100.00%
		Betonor, S.L.	ANGOLA	***	Dormant	51.00%
		Celeo Concesiones E			Management and
		Inversiones, S.L.U.	SPAIN	KPMG	administration of companies	51.00%
		Corporacion Electrade, S.A.	VENEZUELA	***	Construction and assembly Analysis, engineering and	100.00%
		Deimos Space, S.L.U.	SPAIN	KPMG	development of space missions and software	100.00%
				Jose Francisco
		Ehisa Construcciónes y Obras,		Villamonte
		S.A.U.	SPAIN	Fernando	Construction and assembly	100.00%
		Elecdal, URL	ALGERIA	***	Construction and assembly	100.00%
		Elecdor, S.A.	ECUADOR	Seel & Company, S.A.	Construction and assembly	100.00%
		Elecen, S.A.	HONDURAS	***	Construction and assembly	100.00%
		Elecnor Argentina, S.A.	ARGENTINA	SMS	Construction and assembly	100.00%
		Elecnor Australia PTY LTD	AUSTRALIA	ESV	Management and administration of companies	100.00%
		Elecnor Cameroun Société
		Anonyme	CAMEROON	***	Construction and assembly	100.00%
		Elecnor Chile, S.A.	CHILE	KPMG	Construction and assembly	100.00%
		Elecnor de Mexico, S.A.	MEXICO	KPMG	Construction and assembly	100.00%
		Elecnor Do Brasil, L.T.D.A.	BRAZIL	KPMG	Construction and assembly A broad range of business	100.00%
					activities in the areas of engineering, development,
		Elecnor Energie und Bau,			construction, assembly, repairs
		GmbH	GERMANY	***	and maintenance of all types of works, installation work of any	100.00%
					kind, particularly in energy efficiency and renewable
					energies.
		Elecnor Infrastruttre e Aerospaziale, S.R.L.	ITALY	***	Construction and assembly	100.00%
		Elecnor Infrastruture, LLC	OMAN	***	Construction and maintenance	70.00%
				Portal Vega &
		Elecnor Perú, S.A.C.	PERU	Asociados	Construction and assembly	100.00%

Page 1 of 17

(Thousands of Euros)

			Registered			Direct or indirect ownership percentage
2019	Parent	Company	office	Auditor	Activity
		Elecnor Seguridad, S.L.U.	SPAIN	***	Installation and maintenance of fire prevention and safety systems	100.00%
		Elecnor South Africa (PTY) LTD	South Africa	***	Construction and assembly	100.00%
		Elecnor, INC	USA	RP&B	Facilities	100.00%
		Electrificaciones Del Norte, S.A.	SPAIN	***	A broad range of business activities	100.00%
		Electrolineas del Ecuador, S.A.	ECUADOR	Seel & Company, S.A.	Construction and assembly	100.00%
		Elecven Construcciones, S.A.	VENEZUELA	Deloitte	Construction and assembly	100.00%
		Enertel, S.A. de C.V. Eresma Solar, S.L.U. (****)	MEXICO SPAIN	KPMG ***	Construction and assembly Development, construction and operation of companies linked	99.99% 100.00%
		Elecnor Angola Group	ANGOLA	***	to renewable energy Activities in the areas of public works and civil engineering	55.00%
		Hidroambiente, S.A.U.	SPAIN	KPMG	Environmental activities	100.00%
	IDDE, S.A.U.		SPAIN	***	Sales	100.00%
		IQA Operatios Group, LTD	SCOTLAND	KPMG	Electrical installations Sales, installation and maintenance of fire prevention	100.00%
		Jomar Seguridad, S.L.U.	SPAIN	***	and safety systems	100.00%
		Montelecnor, S.A.	URUGUAY	Ernst & Young	Construction and assembly	100.00%
		Omninstal Electricidade, S.A. Parque Eólico Montañes,	PORTUGAL	KPMG	Construction and assembly Construction and operation of	100.00%
		S.L.U. (****)	SPAIN	***	wind farm	100.00%
		Parque Solar Porton, SAS	COLOMBIA	***	Power generation	100.00%
		Stonewood Desarrollos, S.L.	SPAIN	***	Sales Development and operation of	100.00%
	CORPORACION ELECTRADE	Yariguies Solar, SAS (****)	COLOMBIA	***	renewable energy sources	100.00%
	DEIMOS SPACE, S.L.U.	Electrade Investment, Ltda (*)	BARBADOS	***	Sale of materials	100.00%
		Deimos Atlantic Launchers, S.A. (*)	ITALY	***	Space transport, launch of satellites and space vehicles	100.00%
		Deimos Engenharia, S.A.	PORTUGAL	ESAC Espirito Santo Associados	Services in the areas of telecommunications and aeronautic and space energy Software development,	100.00%
		Deimos Engineering and Systems, S.L.U. .(*)	SPAIN	KPMG	engineering and technical assistance in the field of remote sensing	100.00%
		Deimos Space UK, Limited (*)	ENGLAND	James Cowper Kreston	Analysis, engineering and development of space missions and software	100.00%

Page 2 of 17

(Thousands of Euros)

						Direct or indirect
2019	Parent	Company	Registered office	Auditor	Activity	ownership percentage
		S.C. Deimos Space, S.R.L. (*)	ROMANIA	***	Analysis, engineering and development of space missions	100.00%
					and software
	ELECNOR AUSTRALIA
	ELECNOR INC	Green Light Contractors PTY, LTD (*)	AUSTRALIA	ESV	Construction of a PV farm	100.00%
		Belco Elecnor Electric, INC (*)	USA	RP&B	Electrical installations	100.00%
		Elecnor Hawkeye, LLC (*)	USA	RP&B	Electrical installations	100.00%
	ELECTRIFICACIONES DEL NORTE, ELECNOR, S.A.
		WAYRA ENERGY, S.A. () Zogu, S.A.()	ECUADOR ECUADOR	*** Seel & Company, S.A.	Oil and natural gas extraction Construction and assembly	50.00% 100.00%
		ENERFÍN ENERGY CO OF CANADA Lambton Enerwind General Partner Inc (Gp)(*)	CANADA	***	Administration and advisory services	100.00%
		Lambton Enerwind Limited Partnership (Sec)(*) ENERFÍN ENERGY	CANADA	***	Wind farm development	100.00%
		COMPANY OF CANADA, INC Investissements Éoliennes de L´Érable, INC. (*) Investissements Éoliennes de	CANADA	***	Administration and advisory services Administration and advisory	100.00%
		L´Érable, SEC. (*) ENERFÍN ENERVENTO EXTERIOR, S.L.	CANADA	***	services	100.00%
		Gran Sul Geração de Energia (*)	BRAZIL	***	Wind farm development	100.00%
		Guajira Eolica II, S.A.S. (*)	COLOMBIA	***	Wind farm development	100.00%
		Prairie Winds General Partner (*)	CANADA	***	Management and administration of companies	70.00%
		Prairie Winds Limited Partner (*)	CANADA	***	Wind farm development	25.00%
		Rio Norte I Energia (*)	BRAZIL	***	Management and administration of companies Management and	100.00%
		Rio Sul 1 Energia, Ltda (*)	BRAZIL	Deloitte	administration of companies Management and	100.00%
		Rio Sul 2 Energia, Ltda (*) Vientos De Panabá, S.A. de	BRAZIL	***	administration of companies	100.00%
	ENERFÍN	CV (*)	MEXICO	***	Wind farm development	100.00%
	ENERVENTO, S.L.U.
		Aerogeneradores del Sur, S.A. (*)	SPAIN	Deloitte	Construction, operation and use of wind farm resources	100.00%
		Eólica Montes de Cierzo, S.L. (*)	SPAIN	Deloitte	Operation of power plants	100.00%

Page 3 of 17

(Thousands of Euros)

						Direct or indirect
			Registered			ownership
2019	Parent	Company	office	Auditor	Activity	percentage
		Eólica Páramo de Poza, S.A.
		(*)	SPAIN	Deloitte	Operation of power plants	70.00%
		Galicia Vento, S.L. (*)	SPAIN	Deloitte	Operation of power plants	90.60%
		Parque Eólico Malpica, S.A.(*)	SPAIN	Deloitte	Operation of power plants	95.55%
	ENERFÍN SOCIEDAD
	DE ENERGÍA, S.L.	Enerfera, S.R.L. (*)	ITALY	***	Construction, operation and use of wind farm resources	100.00%
		Enerfín Developments British Columbia, Inc (*)	CANADA	***	Development and management of wind farm activities	100.00%
		Enerfín do Brasil Sociedad de Energia, LTDA (*)	BRAZIL	***	Development and management of wind farm activities	100.00%
		Enerfín Energy Company, INC (*)	USA	***	Development and management of wind farm activities	100.00%
		Enerfín Energy Company of Canada, INC (*)	CANADA	***	Management and administration of companies	100.00%
		Enerfín Enervento Exterior, S.L. (*)	SPAIN	Deloitte	Management and administration of companies Administration and advisory	100.00%
		Enerfín Enervento, S.L.U. (*) Enerfín Québec Services, INC	SPAIN	***	services Management and	100.00%
		(*) Enerfín Sociedad de Energía,	CANADA	***	administration of companies Management and	100.00%
		S.L.U.	SPAIN	Deloitte	administration of companies	100.00%
		Eolica La Vela (*)	COLOMBIA	***	Wind farm development	100.00%
		Eolica Los Lagos (*)	CHILE	***	Wind farm development	100.00%
		Eolica Musichi (*)	COLOMBIA	***	Wind farm development	100.00%
		Guajira Eólica I, S.A.S. (*) Parque Eólico Cofrentes,	COLOMBIA	***	Wind farm development	100.00%
		S.L.U. (*) Vientos de Sucilá, S.A. de CV	SPAIN	***	Operation of power plants	100.00%
		(*) Vientos De Yucatán, S.A. De	MEXICO	***	Wind farm development	100.00%
	ÉOLIENNES DE	Cv (*)	MEXICO	***	Wind farm development	100.00%
	L'ÉRABLE COMMANDITAIRE
		Éoliennes de L´Érable, SEC. (*)	CANADA	Deloitte	Operation of power plants	51.00%
		Éoliennes De L'Érable Commandite Inc(*)	CANADA	***	Administration and advisory services	100.00%
	INVESTISSEMENTS ÉOLIENNES DE L'ÉRABLE SEC
		Éoliennes L'Érable Commanditaire Inc (*)	CANADA	***	Operation of power plants	100.00%

Page 4 of 17

(Thousands of Euros)

						Direct or indirect
			Registered			ownership
2019	Parent RIO NORTE I	Company	office	Auditor	Activity	percentage
	ENERGIA, LTDA
		Ventos do São Fernando I
		Energia (*) Ventos do São Fernando II	BRAZIL	***	Wind farm development	100.00%
		Energia (*) Ventos do São Fernando III	BRAZIL	***	Wind farm development	100.00%
		Energia (*)	BRAZIL	***	Wind farm development	100.00%
	RIO SUL 1 ENERGIA, Ltda
					Operation of electricity
		Parques Eólicos Palmares, S.A. (*)	BRAZIL	Deloitte	transmission service concessions	80.00%
		Ventos da Lagoa, S.A. (*)	BRAZIL	Deloitte	Operation of power plants	80.00%
		Ventos do Litoral Energia, S.A.
		(*)	BRAZIL	Deloitte	Operation of power plants	80.00%
		Ventos do Sul, S.A. (*) Ventos Dos Índios Energia,	BRAZIL	Deloitte	Operation of power plants	80.00%
		S.A.(*)	BRAZIL	Deloitte	Operation of power plants	80.00%
	Equity-accounted investees (Note 13)
	ELECNOR, S.A.
		Cosemel Ingenieria, Aie	SPAIN	***	Development, construction and operation of installations and electrifications of high-speed railway lines Construction of the Empalme II	33.33%
		Dunor Energía, Sapi De Cv	MEXICO	KPMG	combined cycle power plant 313	50.00%
		GASODUCTO DE MORELOS,
		S.A.P.I. (Sdad Anónima Promotora de Inversión) DE C.V.	MEXICO	Deloitte	Operation and maintenance of the Morelos gas pipeline	50.00%
		Morelos Epc S.A.P.I. De Cv	MEXICO	Deloitte	Construction, engineering and supply of Morelos gas pipeline	50.00%
		Morelos O&M, Sapi, Cv	MEXICO	***	Maintenance of the Morelos gas pipeline	50.00%
	CELEO CONCESIONES E INVERSIONES, S.L.U.
		Celeo Energía, S.L. (*)	SPAIN	***	Development, construction and operation of all types of energy and services, utilities, waste treatment, etc. Management and	51.00%
		Celeo Redes, S.L.U. (*)	SPAIN	KPMG	administration of companies	51.00%

Page 5 of 17

(Thousands of Euros)

						Direct or indirect
			Registered			ownership
2019	Parent	Company	office	Auditor	Activity	percentage
	CELEO ENERGÍA,	Celeo Termosolar, S.L. () Helios Inversión Y Promoción Solar, S.L.U. ()	SPAIN SPAIN	KPMG ***	Construction and subsequent operation of thermosolar plants Development, construction and operation of PV farms	51.00% 51.00%
	S.L.U.	Celeo Energia Brasil, LTDA (*)	BRAZIL	***	Development, construction and operation of all types of energy and services, utilities, waste treatment, etc.	51.00%
		Celeo Energía Chile, SPA (*)	CHILE	KPMG	Development, construction and operation of all types of energy and services, utilities, waste treatment, etc.	51.00%
		Celeo Luz de Mexicali I, S.A. de C.V. (*) Celeo Luz de Mexicali II, S.A.	MEXICO	***	Development, energy production Development, energy	51.00%
	CELEO REDES	de C.V. (*)	MEXICO	***	production	51.00%
	BRASIL, S.A.	Brilhante II Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	25.50%
		Brilhante Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	25.50%
		Cachoeira Paulista Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
		Caiuá Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	26.01%
		Cantareira Transmissora de Energia, S.A.(*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	26.01%
		Celeo Redes Expansoes, S.A. ()(***)	BRAZIL	***	Holdings in other national or foreign entities and in consortia	51.00%
		Celeo Redes Transmissao de Energia, S.A. (*)	BRAZIL	KPMG	Holdings in other national or foreign entities and in consortia	51.00%
		Celeo Redes Transmissao e Renovaveis, S.A. (*)	BRAZIL	KPMG	Comercialiçao enegia eletrica de origem solar e manutençao redes de transmissao	51.00%

Page 6 of 17

(Thousands of Euros)

						Direct or
			Registered			indirect ownership
2019	Parent	Company	office	Auditor	Activity	percentage
		Coqueiros Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
		Encruzo Novo Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
		Integraçao Maranhense Tranmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	26.01%
		Linha De Transmissão Corumbá, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
		Parintins Amazonas Transmissora de Energia, S.A. (*)	BRAZIL	***	Operation of public service concessions for electricity transmission	51.00%
		Pedras Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
		Serra De Ibiapa Transmissora de Energia, S.A. - SITE(*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
	CELEO REDES CHILE, LTDA.
		Celeo Redes Operación Chile, S.A.	CHILE	KPMG	Operation of power plants	51.00%
	CELEO REDES EXPANSOES, S.A.	CRC Transmisión, SPA (*)	CHILE	KPMG	Operation of power plants	51.00%
		Jaurú Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
	CELEO REDES OPERACIÓN CHILE, S.A.
		Alto Jahuel Transmisora de Energia, S.A.	CHILE	KPMG	Development, construction and operation of electrical facilities	51.01%
		Charrúa Transmisora de Energia, S.A.	CHILE	KPMG	Assembly, installation, operation of the new 2 x 500 Charrúa – Ancoa line	51.01%
	CELEO REDES T. DE ENERGÍA, S.A.	Lt Triângulo, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%

Page 7 of 17

(Thousands of Euros)

						Direct or
			Registered			indirect ownership
2019	Parent	Company	office	Auditor	Activity	percentage
		Vila Do Conde Transmissora			Operation of public service
		de Energia, S.A. (*)			concessions for electricity
	CELEO REDES T. E		BRAZIL	KPMG	transmission	51.00%
	RENOVAVEIS, S.A.
		Celeo São João Do Piaui FV I,			Generation and sale of solar
		S.A. (*)	BRAZIL	KPMG	power	51.00%
		Celeo São João Do Piaui FV II,			Generation and sale of solar
		S.A. (*) Celeo São João Do Piaui FV	BRAZIL	KPMG	power Generation and sale of solar	51.00%
		III, S.A. (*)	BRAZIL	KPMG	power	51.00%
		Celeo São João Do Piaui FV			Generation and sale of solar
		IV, S.A. (*)	BRAZIL	KPMG	power	51.00%
		Celeo São João Do Piaui FV V, S.A. (*)	BRAZIL	KPMG	Generation and sale of solar power	51.00%
		Celeo São João Do Piaui FV			Generation and sale of solar
		VI, S.A. (*)	BRAZIL	KPMG	power	51.00%
	CELEO REDES, S.L.
		Celeo Redes Brasil, S.A. (*)	BRAZIL	KPMG	Development, construction and	51.00%
					operation of electrical facilities
		Celeo Redes Chile, Ltda (*)	CHILE	KPMG	Operation of power plants	51.00%
	CELEO
	TERMOSOLAR	Aries Solar Termoeléctrica,	SPAIN	KPMG	Development, construction and	51.00%
		S.L. (*)			operation of thermosolar plants
		Dioxipe Solar, S.L. (*)	SPAIN	KPMG	Development, construction and	49.76%
					operation of thermosolar plants
		Solar Renewables Spain, S.A.R.L. ()(***)	LUXEMBOURG	***	Development, construction and operation of thermosolar plants	51.00%
	CRC TRANSMISION,
	SPA
		Casablanca Transmisora de	CHILE	KPMG	Development, construction and	51.00%
		Energía, S.A. (*) Diego de Almagro Transmisora	CHILE	KPMG	operation of electrical facilities Development, construction and	51.00%
		de Energía, S.A. (*)			operation of electrical facilities
		Charrúa Transmisora de	CHILE	KPMG	Development, construction and	51.00%
		Energia, S.A. ()(***)			operation of electrical facilities
	ENERFÍN
	ENERVENTO EXTERIOR, S.L
		Woolsthorpe Holding Pty, Ltd			Management and
		()(***)	AUSTRALIA	***	administration of companies	50.00%
					Management and
		Woolsthorpe Holding Trust (*)	AUSTRALIA	***	administration of companies	50.00%

Page 8 of 17

(Thousands of Euros)

2019	Parent	Company	Registered office	Auditor	Activity	Direct or indirect ownership percentage
	ENERFÍN ENERVENTO, S.L.U. ENERFÍN SOCIEDAD DE ENERGÍA, S.L.	Parque Eólico La Gaviota,S.A.(*)	SPAIN	Ernst & Young	Operation of power plants	37.33%
	HELIOS INVERSION	Gestión de Evacuación La Serna, S.L. (Gelaserna) (*)	SPAIN	***	Wind farm development	15.00%
		Celeo Fotovoltaico, S.L.U. (*)	SPAIN	KPMG	Development, construction and operation of PV farms	51.00%

Page 9 of 17

(Thousands of Euros)

						Direct or indirect
			Registered			ownership
2018	Parent	Company	office	Auditor	Activity	percentage
Método Consolidación
Fully consolidated companies
	ELECNOR, S.A.	Aplicaciones Técnicas de la
		Energía, S.L.U. (ATERSA) Area 3 Equipamiento y Diseño	SPAIN	Deloitte	Solar energy	100.00%
		Interiorismo, S.L.U.	SPAIN	***	Interior design	100.00%
		Audeca, S.L.U.	SPAIN	KPMG	Environmental restoration and reforestation and operation of roads.	100.00%
		Barcaldine Remote Community Solar Farm PTY, LTD(*)	AUSTRALIA	ESV	Development, construction and operation of PV farms	20.00%
		Betonor, S.L. Celeo Concesiones E	ANGOLA	***	Dormant Management and	51.00%
		Inversiones, S.L.U.	SPAIN	KPMG	administration of companies	100.00%
		Corporacion Electrade, S.A.	VENEZUELA	***	Construction and assembly Analysis, engineering and	100.00%
		Deimos Space, S.L.U.	SPAIN	KPMG	development of space missions and software	100.00%
		Ehisa Construcciónes y Obras,
		S.A.U.	SPAIN	Luis Ruiz Apilanez	Construction and assembly	100.00%
		Elecdal, URL	ALGERIA	*** Batallas & Batallas	Construction and assembly	100.00%
		Elecdor, S.A.	ECUADOR	Auditores	Construction and assembly	100.00%
		Elecen, S.A.	HONDURAS	***	Construction and assembly Study and performance of	100.00%
		Elecfrance, SASU	FRANCE	Excelia Conseil	electricity activities	100.00%
		Elecnor Argentina, S.A.	ARGENTINA	SMS	Construction and assembly Management and	100.00%
		Elecnor Australia PTY LTD	AUSTRALIA	ESV Armando Vergara	administration of companies	100.00%
		Elecnor Chile, S.A.	CHILE	Gutiérrez	Construction and assembly	100.00%
		Elecnor de Mexico, S.A.	MEXICO	KPMG	Construction and assembly	100.00%
		Elecnor Do Brasil, L.T.D.A.	BRAZIL	KPMG	Construction and assembly A broad range of business activities in the areas of engineering, development,	100.00%
		Elecnor Energie und Bau, GmbH	GERMANY	***	construction, assembly, repairs and maintenance of all types of works, installation work of any kind, particularly in energy efficiency and renewable energies.	100.00%
		Elecnor Infrastruttre e Aerospaziale, S.R.L.	ITALY	***	Construction and assembly	100.00%
		Elecnor Peru, S.A.C	PERU	KPMG	Construction and assembly	100.00%

Page 10 of 17

(Thousands of Euros)

						Direct or indirect
			Registered			ownership
2018	Parent	Company	office	Auditor	Activity Installation and maintenance of	percentage
		Elecnor Seguridad, S.L.U.	SPAIN	***	fire prevention and safety systems	100.00%
		Elecnor South Africa (PTY) LTD	South Africa	***	Construction and assembly	100.00%
		Elecnor, INC	USA	RP&B Batallas & Batallas	Facilities	100.00%
		Electrolineas del Ecuador, S.A.	ECUADOR	Auditores	Construction and assembly	100.00%
		Elecven Construcciones, S.A.	VENEZUELA	Deloitte	Construction and assembly	100.00%
		Enertel, S.A. de C.V.	MEXICO	KPMG	Construction and assembly Activities in the areas of public	99.99%
		Elecnor Angola Group	ANGOLA	***	works and civil engineering	55.00%
		Hidroambiente, S.A.U.	SPAIN	KPMG	Environmental activities	100.00%
	IDDE, S.A.U.		SPAIN	***	Sales	100.00%
		IQA Operatios Group, LTD	SCOTLAND	KPMG	Electrical installations Sales, installation and maintenance of fire prevention	100.00%
		Jomar Seguridad, S.L.U.	SPAIN	***	and safety systems	100.00%
		Montelecnor, S.A.	URUGUAY	Ernst & Young	Construction and assembly	100.00%
		Omninstal Electricidade, S.A. PARQUE SOLAR PORTON	PORTUGAL	KPMG	Construction and assembly	100.00%
		DEL SOL, SAS (****)	COLOMBIA	***	Power generation Construction and operation of	100.00%
		Sociedad Aragonesa De Aguas Residuales, S.A.U.	SPAIN	KPMG	plants under the special water treatment plan	100.00%
		Stonewood Desarrollos, S.L.	SPAIN		Sales	100.00%
	CELEO CONCESIONES E INVERSIONES, S.L.U.
		Celeo Energía, S.L. (*)	SPAIN	***	Development, construction and operation of all types of energy and services, utilities, waste treatment, etc.	100.00%
		Celeo Redes, S.L.U. (*)	SPAIN	KPMG	Management and administration of companies Construction and subsequent	51.00%
		Celeo Termosolar, S.L.	SPAIN	KPMG	operation of thermosolar plants.	100.00%
		Helios Inversión Y Promoción Solar, S.L.U. (*)	SPAIN	***	Development, construction and operation of PV farms	100.00%
		Tramperase, S.L.(*)	SPAIN	***	Development	100.00%
	CELEO ENERGÍA, S.L.U.				Development, construction and
		Celeo Energia Brasil, LTDA (*)	BRAZIL	***	operation of all types of energy and services, utilities, waste treatment, etc.	100.00%

Page 11 of 17

(Thousands of Euros)

						Direct or indirect
			Registered			ownership
2018	Parent	Company	office	Auditor	Activity	percentage
		Celeo Energía Chile, SPA (*)	CHILE	KPMG	Development, construction and operation of all types of energy and services, utilities, waste treatment, etc.	100.00%
		Celeo Luz de Mexicali I, S.A. de C.V. ()(***)	MEXICO	***	Development, energy production	100.00%
	CORPORACION	Celeo Luz de Mexicali II, S.A. de C.V. ()(***)	MEXICO	***	Development, energy production	100.00%
	ELECTRADE
	DEIMOS SPACE, S.L.U.	Electrade Investment, Ltda (*)	BARBADOS	***	Sale of materials	100.00%
		Deimos Atlantic Launchers, S.A.(*)	ITALY	***	Space transport, launch of satellites and space vehicles Software development, engineering and technical	100.00%
		Deimos Castilla la Mancha, S.L.U.(*)	SPAIN	KPMG	assistance in the field of remote sensing Services in the areas of	100.00%
		Deimos Engenharia, S.A.	PORTUGAL	ESAC Espirito Santo Associados	telecommunications and aeronautic and space energy Analysis, engineering and	100.00%
		Deimos Space UK, Limited (*)	ENGLAND	James Cowper Kreston	development of space missions and software Analysis, engineering and	100.00%
	ELECNOR	S.C. Deimos Space, S.R.L. (*)	ROMANIA	***	development of space missions and software	100.00%
	AUSTRALIA	Green Light Contractors PTY, LTD (*)	AUSTRALIA	ESV	Construction of a PV farm	100.00%
	ELECNOR INC
		Belco Elecnor Electric, INC (*)	USA	RP&B	Electrical installations	100.00%
		Elecnor Hawkeye, LLC (*)	USA	***	Electrical installations	100.00%
	ELECTROL, S.A.	Zogu, S.A. (*)	ECUADOR	Batallas & Batallas Auditores	Construction and assembly	100.00%
	ENERFÍN ENERGY CO OF CANADA
		Lambton Enerwind General Partner Inc (Gp)(*)	CANADA	***	Administration and advisory services	100.00%
		Lambton Enerwind Limited Partnership (Sec)(*)	CANADA	***	Wind farm development	100.00%
	ENERFÍN ENERGY COMPANY OF CANADA, INC
		Investissements Éoliennes de L´Érable, INC. (*)	CANADA	***	Administration and advisory services	100.00%
		Investissements Éoliennes de L´Érable, SEC. (*)	CANADA	***	Administration and advisory services	100.00%

Page 12 of 17

(Thousands of Euros)

						Direct or indirect
2018	Parent	Company	Registered office	Auditor	Activity	ownership percentage
	ENERFÍN
	ENERVENTO EXTERIOR, S.L.
		Eolica La Vela (*)	COLOMBIA	***	Wind farm development	100.00%
		Eolica Los Lagos (*)	CHILE	***	Wind farm development	100.00%
		Eolica Musichi (*) Gran Sul Geração de Energia	COLOMBIA	***	Wind farm development	100.00%
		()(***)	BRAZIL	***	Wind farm development	100.00%
		Guajira Eólica I, S.A.S. (*)	COLOMBIA	***	Wind farm development	100.00%
		Guajira Eolica II, S.A.S. (*) Parques Eólicos Palmares,	COLOMBIA	***	Wind farm development Operation of electricity	100.00%
		S.A. (*)	BRAZIL	Deloitte	transmission service concessions	80.00%
		Prairie Winds General Partner (*)	CANADA	***	Management and administration of companies	70.00%
		Prairie Winds Limited Partner (*)	CANADA	***	Wind farm development	25.00%
		Río Norte I Energia ()(***)	BRAZIL	***	Management and administration of companies Management and	100.00%
		Rio Sul 1 Energia, Ltda (*)	BRAZIL	Deloitte	administration of companies Management and	100.00%
		Rio Sul 2 Energia, Ltda (*)	BRAZIL	***	administration of companies	100.00%
		Ventos da Lagoa, S.A. (*) Ventos do Litoral Energia, S.A.	BRAZIL	Deloitte	Operation of power plants	80.00%
		(*) Ventos do São Fernando I	BRAZIL	Deloitte	Operation of power plants	80.00%
		Energia ()(***) Ventos do São Fernando II	BRAZIL	***	Wind farm development	100.00%
		Energia ()(***)	BRAZIL	***	Wind farm development	100.00%
		Ventos do Sul, S.A. (*) Ventos Dos Índios Energia,	BRAZIL	Deloitte	Operation of power plants	80.00%
		S.A.(*) Vientos De Panabá, S.A. de	BRAZIL	Deloitte	Operation of power plants	80.00%
		CV (*) Vientos de Sucilá, S.A. de CV	MEXICO	***	Wind farm development	100.00%
		(*) Vientos De Yucatán, S.A. De	MEXICO	***	Wind farm development	100.00%
		Cv (*)	MEXICO	***	Wind farm development	100.00%
	ENERFÍN ENERVENTO, S.L.U.
		Aerogeneradores del Sur, S.A. (*)	SPAIN	Deloitte	Construction, operation and use of wind farm resources	100.00%
		Eólica Montes de Cierzo, S.L. (*)	SPAIN	Deloitte	Operation of power plants	100.00%
		Eólica Páramo de Poza, S.A. (*)	SPAIN	Deloitte	Operation of power plants	70.00%
		Galicia Vento, S.L. (*)	SPAIN	Deloitte	Operation of power plants	90.60%
		Parque Eólico Malpica, S.A.(*)	SPAIN	Deloitte	Operation of power plants	95.55%

Page 13 of 17

(Thousands of Euros)

						Direct or
						indirect
2018	Parent	Company	Registered office	Auditor	Activity	ownership percentage
	ENERFÍN SOCIEDAD
	DE ENERGÍA, S.L.
		Enerfera, S.R.L. (*)			Construction, operation and
			ITALY	***	use of wind farm resources	100.00%
		Enerfín Developments British			Development and management
		Columbia, Inc (*)	CANADA	***	of wind farm activities	100.00%
		Enerfín do Brasil Sociedad de Energia, LTDA (*)	BRAZIL	***	Development and management of wind farm activities	100.00%
		Enerfín Energy Company, INC			Development and management
		(*)	USA	***	of wind farm activities	100.00%
		Enerfín Energy Company of			Management and
		Canada, INC (*)	CANADA	***	administration of companies	100.00%
		Enerfín Enervento Exterior,			Management and
		S.L. (*)	SPAIN	Deloitte	administration of companies	100.00%
					Administration and advisory
		Enerfín Enervento, S.L.U. (*)	SPAIN	***	services	100.00%
		Enerfín Québec Services, INC (*)	CANADA	***	Management and administration of companies	100.00%
		Enerfín Sociedad de Energía,			Management and
		S.L.U.	SPAIN	Deloitte	administration of companies	100.00%
		Parque Eólico Cofrentes,
		S.L.U. (*)	SPAIN	***	Operation of power plants	100.00%
	ÉOLIENNES DE
	L'ERABLE
		Eoliennes de L´Érable, SEC.
		(*)	CANADA	Deloitte	Operation of power plants	51.00%
	ÉOLIENNES DE				Administration and advisory
	L'ÉRABLE	Éoliennes De L'Érable	CANADA	***	services	100.00%
	COMMANDITAIRE	Commandite Inc(*)
	HELIOS INVERSION
		Celeo Fotovoltaico, S.L.U. (*)			Development, construction and	100.00%
			SPAIN	KPMG	operation of PV farms
	HIDROAMBIENTE,
	S.A.
		Sdad Aragonesa De			Construction and operation of
		Estaciones Depuradoras, S.A.	SPAIN	KPMG	plants under the special water	60.00%
	INVESTISSEMENTS	(*)			treatment plan
	ÉOLIENNES DE
	L'ÉRABLE SEC
		Éoliennes L'Érable
		Commanditaire Inc (*)	CANADA	***	Operation of power plants	100.00%

Page 14 of 17

(Thousands of Euros)

						Direct or indirect
			Registered			ownership
2018	Parent	Company	office	Auditor	Activity	percentage
Equity accounted investees (Note 10)
	Elecnor, S.A.
		Cosemel Ingenieria, Aie	SPAIN	***	Development, construction and operation of installations and electrifications of high-speed railway lines	33.33%
		GASODUCTO DE MORELOS, S.A.P.I. (Sdad Anónima Promotora de Inversión) DE C.V.	MEXICO	Deloitte	Operation and maintenance of the Morelos gas pipeline	50.00%
		Morelos Epc S.A.P.I. De Cv	MEXICO	Deloitte	Construction, engineering and supply of Morelos gas pipeline	50.00%
		Morelos O&M, Sapi, Cv	MEXICO	***	Maintenance of the Morelos gas pipeline Construction and operation of	50.00%
	CELEO REDES	Sdad. Aguas Residuales Pirineos, S.A.	SPAIN	***	plants under the special water treatment plan	50.00%
	BRASIL, S.A.	Brilhante II Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	25.50%
		Brilhante Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	25.50%
		Jaurú Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	16.99%
		Caiuá Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	26.01%
		Cantareira Transmissora de Energia, S.A.(*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	26.01%
		Celeo Redes Transmissao de Energia, S.A. ()(***)	BRAZIL	KPMG	Holdings in other national or foreign entities and in consortia	51.00%
		Coqueiros Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
		Encruzo Novo Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%

Page 15 of 17

(Thousands of Euros)

						Direct or
						indirect
			Registered			ownership
2018	Parent	Company	office	Auditor	Activity	percentage
		Integraçao Maranhense			Operation of public service	26.01%
		Tranmissora de Energia, S.A.	BRAZIL	KPMG	concessions for electricity
		(*)			transmission
		Linha De Transmissão			Operation of public service	51.00%
		Corumbá, S.A. (*)	BRAZIL	KPMG	concessions for electricity
					transmission Operation of public service	51.00%
		Lt Triângulo, S.A. (*)	BRAZIL	KPMG	concessions for electricity
					transmission
		Pedras Transmissora de			Operation of public service	51.00%
		Energia, S.A. (*)	BRAZIL	KPMG	concessions for electricity
					transmission
		Serra De Ibiapa Transmissora			Operation of public service	51.00%
		de Energia, S.A. - SITE ()(***)	BRAZIL	***	concessions for electricity
					transmission
		Vila Do Conde Transmissora			Operation of public service	51.00%
		de Energia, S.A. (*)	BRAZIL	KPMG	concessions for electricity
	CELEO REDES CHILE				transmission
	LTDA
		Celeo Redes Operación Chile,
		S.A. (*)	CHILE	KPMG	Operation of power plants	51.00%
	CELEO REDES
	OPERACIÓN CHILE,
	S.A.
		Alto Jahuel Transmisora de
		Energia, S.A.	CHILE	KPMG	Development, construction and	50.99%
					operation of electrical facilities
		Charrúa Transmisora de Energia, S.A.	CHILE	KPMG	Assembly, installation, operation of the new 2 x 500	51.00%
					Charrúa – Ancoa line
		Diego de Almagro Transmisora	CHILE	KPMG	Development, construction and	51.00%
		de Energía, S.A. (*)			operation of electrical facilities
	CELEO REDES, S.L.
		Celeo Redes Brasil, S.A. (*)	BRAZIL	KPMG	Development, construction and	51.00%
					operation of electrical facilities
		Celeo Redes Chile, Ltda (*)
			CHILE	KPMG	Operation of power plants	51.00%
	CELEO
	TERMOSOLAR
		Aries Solar Termoeléctrica, S.L. (*)	SPAIN	KPMG	Development, construction and operation of thermosolar plants	55.70%
		Dioxipe Solar, S.L.(*)	SPAIN	KPMG	Development, construction and	55.00%
					operation of thermosolar plants

Page 16 of 17

(Thousands of Euros)

2018	Parent	Company	Registered office	Auditor	Activity	Direct or indirect ownership percentage
	ENERFÍN ENERVENTO EXTERIOR, S.L.
		Woolsthorpe Holding Pty Ltd ()() Woolsthorpe Holding Trust ()(**)	AUSTRALIA AUSTRALIA		Management and administration of companies Management and administration of companies	50.00% 50.00%
	ENERFÍN ENERVENTO, S.L.U. ENERFÍN SOCIEDAD	Parque Eólico La Gaviota,S.A.(*)	SPAIN	Ernst & Young	Operation of power plants	37.33%
	DE ENERGÍA, S.L.	Gestión de Evacuación La Serna, S.L. (Gelaserna)()(***)	SPAIN	***	Wind farm development	15.00%

Page 17 of 17

Appendix II: List of consolidated joint ventures (UTEs)
Page 1 of 8

		Thousands of Euros (*)
		2019		2018
	Percentage	Construction	Backlog	Construction	Backlog
	of	work settled	not yet settled	work settled	not yet settled
	ownership	2019	2019	2018	2018
UTE PUENTE MAYORGA	50.00%	--	--	--	--
UTE ELNR-CONSTUCSA E. HIDROGENO	50.00%	--	--	--	--
UTE PARQUESUR OCIO	90.00%	--	--	--	--
UTE INSTALACIONES ELÉCTRICAS SINCROTRÓN ALBA	50.00%	--	--	--	--
UTE CAMPO ARAÑUELO	50.00%	--	--	--	--
UTE MUVIM	30.00%	--	--	--	--
UTE ROTA HIGH SCHOOL	50.00%	--	--	--	--
UTE ELECNOR OSEPSA	50.00%	--	--	2	--
UTE CAN COLOMER	50.00%	--	--	--	--
UTE VILLASEQUILLA - VILLACAÑAS	21.00%	--	--	543	--
UTE AVELE	22.00%	--	--	--	--
UTE AVELE 2	22.00%	--	--	--	--
AEROPUERTO LANZAROTE SAMPOL-ELECNOR UTE	50.00%	--	--	--	--
UTE NIÑO DE ORO	100.00%	--	--	--	--
UTE EXPLOTACION ZONA 07-A	60.00%	--	--	1,039	--
CONSORCIO ELECNOR DYNATEC	100.00%	--	--	1,535	4,683
UTE ZONA P-2	50.00%	--	--	--	--
UTE SUBESTACION JUNCARIL	50.00%	--	--	(25)	--
UTE AEROPOLIS	50.00%	--	--	--	--
UTE CASA DE LAS ARTES	50.00%	--	--	--	--
UTE 2ª FASE NIÑO DE ORO	100.00%	--	--	--	--
UTE SSAA EIX DIAGONAL	50.00%	--	--	--	--
UTE MARINA BAIXA	40.00%	--	--	--	--
UTE AUDIO BARAJAS	50.00%	--	--	--	--
UTE LOS CARAMBOLOS	100.00%	--	--	--	--
UTE CENTRO DE PROSPECTIVA RURAL	100.00%	--	--	--	--
UTE CENTRO MAYORES BAENA	100.00%	--	--	--	--
UTE TARAZONA	100.00%	--	--	--	--

Appendix II: List of consolidated joint ventures (UTEs)
Page 2 of 8

		Thousands of Euros (*)
			2019	2018
	Percentage	Construction	Backlog not yet	Construction	Backlog not yet
	of	work settled	settled	work settled	settled
	ownership	2019	2019	2018	2018
UTE TERMINAL DE CARGA	50.00%	--	--	--	--
UTE PCTH	100.00%	--	--	--	--
UTE LED MOLLET	70.00%	--	--	--	--
UTE VIA LA CARTUJA	20.00%	--	--	--	--
UTE GALINDO	100.00%	--	--	--	--
UTE DESVIOS LAV Sevilla	28.85%	--	--	--	--
UTE MTO. SEG. Y EMERG. MADRID	100.00%	--	--	--	--
UTE AMPLIACION MUSEO MORERIA	100.00%	--	--	--	--
UTE FIGUERES WIFI	50.00%	--	--	--	--
UTE PLANTA RSU ACAHUALINCA	70.00%	--	--	--	--
UTE CENTRO OUPACIONAL FERROL	50.00%	--	--	--	--
UTE ELECNOR ONILSA	85.00%	--	--	--	--
UTE SAN CRISPIN	100.00%	--	--	122	--
UTE UBE LA ISLA	100.00%	--	--	40	--
UTE EXPLOTACION ZONA P2	50.00%	--	--	641	650
UTE AS SOMOZAS	50.00%	--	--	--	--
UTE SAN JERONIMO	100.00%	--	--	37	--
UTE JARDINES MOGAN	100.00%	--	--	805	--
UTE URBANIZACION PEDRO III	100.00%	--	--	--	--
UTE ELECNOR-ONDOAN SERVICIOS	50.00%	--	--	899	900
UTE ELECNOR - DEIMOS SIPA	100.00%	--	--	--	--
UTE COMUNICACIONS SANT CUGAT	100.00%	--	--	--	--
UTE VENCILLON	100.00%	--	--	--	--
UTE PATRIMONIO SEGURIDAD	66.66%	--	--	480	500
UTE ESPACIOS VERDES SAN VICENTE DEL RASPEIG	100.00%	--	--	334	--
UTE PLAZAS COMERCIALES T4	100.00%	--	--	--	--
UTE BT HOSPITAL DE ZAMORA	50.00%	--	--	--	--

	Thousands of Euros (*)
	2019		2018
Percentage	Construction	Backlog not yet	Construction	Backlog not yet
of	work settled	settled	work settled	settled
ownership	2019	2019	2018	2018

Appendix II: List of consolidated joint ventures (UTEs) Page 3 of 8

	of	work settled	settled	work settled	settled
	ownership	2019	2019	2018	2018
UTE TRANVIA OUARGLA	49.50%	--	--	6,961	2,545
UTE ENERGIA GALICIA	20.00%	--	--	18,238	28,451
UTE AEROPUERTO DE PALMA	100.00%	--	--	--	--
GROUPEMENT INTERNATIONAL SANTÉ POUR HAITI	100.00%	--	--	5,241	2,658
UTE MANCOMUNIDAD DE DURANGO	60.00%	--	--	4	--
UTE ENERGIA GRANADA	33.34%	--	--	62	356
UTE MOBILIARIO HUCA	100.00%	--	--	--	--
UTE ANILLO GALINDO	25.00%	--	--	1,193	--
UTE SICA BCN	100.00%	--	--	--	--
UTE DEINOR NOAIN	100.00%	--	--	--	--
Consorcio Nueva Policlínica de Chitre	100.00%	--	--	3,611	821
Consorcio Nueva Policlínica de Chepo	100.00%	--	--	1,203	125
UTE ADEC LOCALES CERCANIAS	100.00%	--	--	--	--
UTE CRA ENAGAS	100.00%	--	--	--	--
UTE CAMPO DE VUELO TF NORTE	100.00%	--	--	--	--
UTE MATIKO	20.00%	--	--	--	--
UTE VOPI4-ELNR CA L'ALIER	50.00%	--	--	1,589	440
UTE REUBIC EQUIP NAV BARAJAS	100.00%	--	--	38	--
UTE MANTENIMIENTO AVE ENERGIA	12.37%	--	--	15,933	103,002
UTE ASEGOP IBIZA	65.00%	--	--	54	38
UTE ELECNOR BUTEC BELLARA	60.00%	--	--	54,397	26,597
UTE AVELE3	22.00%	--	--	--	--
UTE AVELE4	22.00%	--	--	--	--
UTE EDARES SEGOVIA	70.00%	--	--	73	--
UTE VIGILANCIA BOADILLA	100.00%	--	--	--	--
UTE SICA	100.00%	--	--	71	425
UTE CASTELFLORITE	100.00%	--	--	--	--

		Thousands of Euros (*)
		2019		2018
	Percentage	Construction	Backlog	Construction	Backlog
	of	work settled	not yet settled	work settled	not yet settled
	ownership	2019	2019	2018	2018
UTE MANTENIMIENTO AEROPUERTO DE PALMA	50.00%	--	--	1,822	--
UTE CUETO DEL MORO	25.00%	--	--	--	--
UTE Elecnor Alghanim	60.00%	--	--	285	3,201
UTE MANTENIMIENTO VALEBU	50.00%	--	--	366	2,087
UTE EMBARQUE DESEMBARQUE T4	100.00%	--	--	20	--
UTE CONTAR	100.00%	--	--	53	--
UTE INST. RECERCA SANT PAU	50.00%	--	--	999	282
UTE INST. MERCAT DE SANT ANTONI	60.00%	--	--	3,589	102
UTE TUNELES ABDALAJIS	100.00%	--	--	471	397
UTE TORRENTE - XATIVA	50.00%	--	--	--	--
UTE EMPALME II	50.00%	--	--	3,942	--
UTE CENTRO LOG. IBEREBRO	41.90%	--	--	6	--
UTE AEROPUERTO TERUEL	50.00%	--	--	--	--
UTE NAVE SESTAO	50.00%	--	--	(246)	--
UTE ENERGIA GALICIA MANTENIMIENTO	20.00%	--	--	1,599	31,626
UTE URDULIZ BARRIA	50.00%	--	--	--	--
UTE TERMINAL DE CARGA TF NORTE	50.00%	--	--	165	1
UTE URBANIZADORA RIODEL	50.00%	--	--	--	--
UTE OFICINAS IBEREBRO	100.00%	--	--	760	--
UTE FIRA PAVELLO 2	70.00%	--	--	--	--
ELECNOR TARGET LLC, JV	60.00%	--	--	4,975	5,388
UTE LINEA 1	20.00%	--	--	--	--
UTE INSTALACIONES LOIOLA	50.00%	--	--	--	--
UTE CEIP SOBRADIEL	100.00%	--	--	695	--
UTE TERMINAL E	50.00%	--	--	1,961	80
UTE QUEVEDO	50.00%	--	--	52	3
UTE HERNANI-IRUN	50.00%	--	--	2,136	1,998

Appendix II: List of consolidated joint ventures (UTEs) Page 4 of 8

		Thousands of Euros (*)
		2019		2018
	Percentage	Construction	Backlog	Construction	Backlog
	of	work settled	not yet settled	work settled	not yet settled
	ownership	2019	2019	2018	2018
UTE ACTUAC ETAPS CYII LOTE2	50.00%	--	--	144	160
UTE CARPIO Y POLLOS	50.00%	--	--	130	82
UTE METRO SAN INAZIO	100.00%	--	--	--	--
UTE CAMPO DE VUELOS ASTURIAS	100.00%	--	--	421	868
UTE BIOMASA HUERTA DEL REY	50.00%	--	--	596	15
UTE MOPAEL	80.00%	--	--	4,527	1,576
UTE OFICINAS GENCAT	60.00%	--	--	16,411	11
UTE UYUNI-YUNCHARA	49.00%	--	--	21,623	--
UTE MEGAFONIA AENA	70.00%	--	--	34	--
UTE MANTENIMIENTO SIGMA AENA	100.00%	--	--	199	249
UTE LINEA 8	20.00%	--	--	--	--
UTE RENFE AGENTE UNICO	100.00%	--	--	889	1,498
UTE RENFE CCTV	100.00%	--	--	704	4,316
UTE UCA	100.00%	--	--	216	--
UTE SIPA AENA	100.00%	--	--	510	--
JV ELECNOR AL OWN	70.00%	--	--	13,769	913
UTE BILBOPORTUA	50.00%	--	--	407	353
UTE BIZKAIKO ARGIAK	23.00%	--	--	556	--
ELECNOR AND RAY, J.V.V	60.00%	--	--	1,536	--
UTE MANTENIMIENTO LOTE 1	50.00%	--	--	1,648	587
UTE ILSSA ELECNOR	100.00%	--	--	--	--
UTE ELECNOR - EIFFAGE	50.00%	--	--	28,516	15,456
UTE LINEA 5	20.00%	--	--	3	244
UTE TIL TIL	100.00%	--	--	13,484	--
UTE EDAR LAGUNA DE NEGRILLOS	80.00%	--	--	338	150
UTE CIP ARCOSUR	100.00%	--	--	1,235	--
UTE PORTUKO ARGIAK	23.00%	--	--	1,388	501

Appendix II: List of consolidated joint ventures (UTEs) Page 5 of 8

		Thousands of Euros (*)
		2019		2018
	Percentage	Construction	Backlog	Construction	Backlog
	of	work settled	not yet settled	work settled	not yet settled
	ownership	2019	2019	2018	2018
UTE E&C M.I. BUSTURIA AUXILIAR	51.00%	--	--	824	721
UTE PARQUE FOTOVOL. CARRODILLA	100.00%	--	--	281	--
UTE URBANITZACIÓ MERCAT DE SANT ANTONI	60.00%	--	--	3,094	11
UTE ING PUY DU FOU	50.00%	--	--	186	274
UTE SICA 2018-2021	100.00%	--	--	339	--
UTE ELECTRIFICACIÓN VILLAFRANCA	90.00%	--	--	503	2,993
UTE TREBALLS PREVIS 1 CAMP NOU	45.00%	--	--	7,709	3,899
UTE CLINICA EUGIN BALMES	50.00%	--	--	373	4,377
UTE SALAS VIP AEROP BCN	100.00%	--	--	290	7,876
JV TAFILAH	70.00%	--	--	4,713	18,490
UTE ACCESOS BANCO DE ESPAÑA	100.00%	--	--	0	619
VARIANTE PAJARES UTE	20.00%	--	--	0	(0)
CONSORCIO CHIELEC DOMINICANA	100.00%	--	--	3,005	131
UTE CASETAS AEROPUERTO DE MÁLAGA	100.00%	--	--	263	716
UTE AMPLIACIÓN TRANVÍA VITORIA	50.00%	--	--	0	535
UTE ALSTOM RENOVABLES-ELECNOR II	25.64%	--	--	--	--
UTE OVERTAL - ELECNOR	24.00%	--	--	--	--
UTE ENERGÍA LÍNEA 9	20.00%	--	--	5,011	1,500
S.E.I. UTE (ELECNOR, S.A.-TERRES)	50.00%	--	--	--	--
UTE REMOLAR	23.51%	--	--	--	--
UTE AGENTE URBANIZADOR SECTOR 13 DE LA PLAYA DE TAVERNES	50.00%	--	--	--	--
UTE SERRANO - ELECNOR CANSALADES	40.00%	--	--	--	113
UTE ELECNOR GONZALEZ SOTO	50.00%	--	--	35	--
TERMINAL ALICANTE, UTE	20.00%	--	--	--	--
UTE VILLAGONZALO, Z - 3	35.00%	--	--	--	--
UTE LLANERA ELECNOR SECTOR TULELL	50.00%	--	--	--	--
UTE TARAGUILLA	25.00%	--	--	--	--
UTE Binaced	50.00%	--	--	--	--

Appendix II: List of consolidated joint ventures (UTEs) Page 6 of 8

Appendix II: List of consolidated joint ventures (UTEs)
Page 7 of 8

		Thousands of Euros (*)
		2019		2018
	Percentage	Construction	Backlog	Construction	Backlog
	of	work settled	not yet settled	work settled	not yet settled
	ownership	2019	2019	2018	2018
UTE SAICA	50.00%	--	--	--	--
UTE ROEA EBRO	34.00%	--	--	--	--
UTE Caleta Olivia	100.00%	--	--	--	--
UTE Enarsa Ear-Bmsa	50.00%	--	--	--	--
Consorcio UTE Elecdor Electrol	100.00%	--	--	--	--
Consorcio Elecven Elecdor	100.00%	--	--	2,598	--
UTE AERONAVE TIERRA	20.00%	2	--	1,712	--
UTE MELIALABS	55.00%	16	--	56	--
UTE DEIMOS -IECISA	50.00%	2,745	--	339	--
UTE NAVENTO DEIMOS, File 2017-02371	27.46%	232	--	155	--
AUCOSTA CONSERVACION UTE	50.00%	907	--	1,468	629
CONSERVACIÓN MAQUEDA UTE	50.00%	1,609	--	1,728	1,258
CÓRDOBA NORTE II UTE	50.00%	945	327	820	873
PARQUE PATERNA UTE	50.00%	1,122	--	158	1,087
HUELVA SURESTE II UTE	50.00%	924	--	1,111	388
MADRID NOROESTE UTE	50.00%	--	--	--	--
MANZANARES UTE	60.00%	--	--	1,114	--
MANZANARES II UTE	50.00%	2,272	4,420	979	6,692
PONTESUR UTE	50.00%	1,784	2,176	1,509	1,621
PONTEVEDRA SUR UTE	50.00%	--	--	--	--
PONTENORTE UTE	50.00%	959	2,359	321	3,319
TALAVERA UTE	50.00%	2,249	5,562	1,313	7,828
PUERTO GANDIA UTE	50.00%	--	--	--	--
LEÓN-3 UTE	80.00%	4,803	310	2,584	1,025
UTE MURCIA-SAN JAVIER	50.00%	--	--	97	--
SMA OLVEGA UTE	60.00%	713	3,428	711	5,283
GUADIX-BAZA UTE	51.00%	533	472	492	1,006
UTE SIERRA ESPUÑA	65.00%	(3)	--	(72)	--

Appendix II: List of consolidated joint ventures (UTEs) Page 8 of 8

		Thousands of Euros (*)
			2019	2018
	Percentage	Construction	Backlog	Construction	Backlog
	of	work settled	not yet settled	work settled	not yet settled
	ownership	2019	2019	2018	2018
UTE SIERRA BURETE	65.00%	--	--	76	--
UTE HOSPITAL REINA SOFÍA	20.00%	475	1,429	749	1,904
C.S. ANTONIO GARCÍA	20.00%	56	--	386	22
SEVILLA A66 UTE	50.00%	1,942	5,531	468	7,474
BURGUILLO UTE	50.00%	--	--	419	108
RIBERAS II UTE	50.00%	--	--	--	--
UTE PEDRERA	50.00%	--	--	--	--
UTE ULTZANUETA	50.00%	--	--	--	--
UTE KARRANTZA	41.50%	--	--	--	--
ACCIONA INFRAESTRUCTURAS-ELECNOR HOSPITAL DAVID, S.A.	25.00%	952	--	10,189	(3,781)
PROYECTOS ELECTRICOS AQUAPRIETA, SAPI DE CV	50.00%	14,898	--	(3,161)	--
DUNOR ENERGIA	50.00%	19,142	--	57,132	21,443
WAYRA	50.00%	12,236	15,165	--	--
SAN CIPRIANO UTE	70.00%	757	9,019	--	--
MAQUEDA II UTE	50.00%	634	2,026	--	--
UTE CIRCUNVALACION LUCENTUM	50.00%	549	4,225	--	--
UTE AUDECA CIVISGLOBAL SECTOR O-03	70.00%	45	12,793	--	--

(*) 100% information provided, not taking into account removals.

Appendix III Page 1 of 2

ELECNOR, S.A. AND SUBSIDIARIES

Condensed financial information of equity-accounted companies

31 December 2019

(Expressed in thousands of Euros)

	Gasoducto de Morelos, S.A. Promotora de Inversión de C.V.	Subgroup Celeo Concesiones	Morelos EPC, S.A.P.I. de CV
Information from the statement of financial position
Non-current assets	259,738	2,800,000	--
Non-current liabilities	156,037	1,696,015	--
Non-current financial liabilities	127,690	1,605,950	--
Total non-current net assets	103,701	1,103,985	--
Current assets	23,825	272,413	337
Cash and cash equivalents	10,782	158,718	319
Current liabilities	88,194	148,439	163
Current financial liabilities	7,557	73,634	-
Total current net assets	(64,369)	123,974	174
Net assets	39,332	1,227,959	174
Percentage ownership	0.50	0.51	0.50
Share of net assets	19,666	626,259	87
Carrying amount of the investment	19,666	560,624	87
Information from the statement of profit and loss
Revenue	37,164	44,254	--
Depreciation and amortisation	(13,147)	(16,187)	-
Interest expense	(11,606)	(9,962)	-
Income tax expense/(income)	(4,023)	(2,657)	712
Profit/loss from continued
operations	6,497	227,197	(4,963)
Profit/loss for the year	6,497	227,197	(4,963)
Other comprehensive income	(2,982)	-	(87)
Total comprehensive income	3,515	227,197	(5,050)
Dividends received	-	8,587	1,476

Appendix III Page 2 of 2

ELECNOR, S.A. AND SUBSIDIARIES

Condensed financial information of equity-accounted companies

31 December 2018

(Expressed in thousands of Euros)

	Gasoducto de Morelos, S.A. Promotora de Inversión de C.V.	Dioxipe Solar, S.L.	Aries Solar Termoeléctrica, S.L.	Subgroup Celeo Redes	Morelos EPC, S.A.P.I. de CV
Information from the statement of financial position
Non-current assets	270,571	243,699	450,215	1,229,881	--
Non-current liabilities	167,090	214,643	402,429	841,077	--
Non-current financial liabilities	126,877	210,680	388,189	793,291	--
Total non-current net assets	103,481	29,056	47,786	388,804	--
Current assets	30,223	8,376	17,017	188,193	8,213
Cash and cash equivalents	15,705	1,852	3,648	128,491	7,307
Current liabilities	97,878	15,044	21,022	82,317	--
Current financial liabilities	9,778	10,481	18,172	42,656	-
Total current net assets	(67,655)	(6,668)	(4,005)	105,876	8,213
Net assets	35,826	22,388	43,781	494,680	8,213
Percentage ownership	0.50	0.55	0.56	0.51	0.50
Share of net assets	17,913	12,313	24,386	252,287	4,107
Carrying amount of the investment	17,913	24,033	34,360	254,186	4,107
Information from the income statement
Revenue	34,827	28,260	58,674	65,697	5,186
Depreciation and amortisation	(12,596)	(12,081)	(24,992)	(5,882)	-
Interest income	-	-	-	97,783	-
Interest expense	(12,192)	(11,436)	(24,842)	(50,336)	-
Income tax expense/(income)	(3,996)	44	1,775	(20,159)	730
Profit/loss from continued operations
Continuity	4,525	(7,088)	(7,615)	50,376	(1,184)
Profit/loss for the year	4,525	(7,088)	(7,615)	50,376	(1,184)
Other comprehensive income	3,750	1,973	4,018	19,585	(74)
Total comprehensive income	8,275	(5,115)	(3,597)	69,961	(1,258)
Dividends received	-	-	-	40,109	7,335

1. Business model and economic context 3
1.1. Business model3
1.2. Economic context3
2. Economic and financial performance in the period 5
2.1. Profit/loss for the year5
2.2. Key figures in profit/loss for the year7
2.3. Financial position 10
2.4. Material changes in accounting policies12
2.5. Results at the Group's Parent, Elecnor, S.A. 13
2.6. Average payment period13
2.7. Turnover by activity 13
3. Stock market information 14
4. Capital management policy 14
5. Financial risk management policy 14
5.1. Currency risks 15
5.2. Interest rate risk15
5.3. Other price risks 15
5.4. Liquidity risk 15
5.5. Credit risk16
5.6. Regulatory risk 16
5.7. Other risks17
6. Environment 17
7. Human Resources 18
8. RDI 18
9. Significant events subsequent to year-end 19
10. Outlook for 2020 20
10.1. Economic context20
10.2. Elecnor Group20
11. Share capital and acquisition of own shares 21
12. Related-party transactions 21
13. Annual Corporate Governance Report 21
14. Non-financial information 21

14.1. About this report21
14.2. Business model23
14.3. Our people 24
14.4. Operating excellence 48
14.5. Commitment to the Environment 50
14.6. Technology, innovation and new business opportunities 61
14.7. Responsible management66
14.8. Social impact83
Appendix I 102
Appendix II. 106
Appendix. Alternative Performance Measures 113

1. Business model and economic context

1.1. Business model

Elecnor is a Spanish corporation that operates in more than 50 countries globally, with two complementary and mutually enriching major business areas:

• Infrastructure: execution of engineering, construction and services projects, most notably in the electricity, power generation, gas, telecommunications and systems, railways, maintenance, facilities, construction, water, environment and space sectors.
• Concessions: operation of services through investment in energy transportation, wind, solar PV and solar thermal power and other strategic assets.

1.2. Economic context¹

In addition to its huge toll on public health, the coronavirus crisis will also have an impact on the macroeconomic environment that is difficult to gauge at the time of writing this report.

A coordinated response by the European Union, its Member States and the Spanish government will be crucial to mitigate the impact on economic activity, employment, output, the liquidity of companies and individuals alike, and to accelerate the subsequent reactivation phase. The European Commission has stated its intention to use all the resources available to it to support companies and citizens, increasing the availability of cohesion funds, rendering fiscal policies and deficit monitoring criteria more flexible, thereby suggesting that Member States will implement aggressive fiscal policies. Meanwhile, the Spanish government is implementing a raft of social and economic measures by means of programmes infused with sizeable funds. Other countries, like the United States, have also unveiled significant fiscal and monetary measures. The main questions are how far the effects of this pandemic will reach, the scale of the disaster it has unleashed in markets and the potential macroeconomic implications. Accordingly, the response of governments and central banks is crucial to avoid an entering an even more negative scenario and undermining growth forecasts.

Below is a description of the macroeconomic outlook available prior to the crisis. This scenario will have to be adjusted in accordance with the duration and depth of the crisis, and the aforementioned measures introduced by public institutions. At present, it is too soon to attempt to depict a new macroeconomic scenario, so the Group has opted to continually monitor the crisis as it unfolds and to keep close track of its impact on operations.

According to estimates by the International Monetary Fund (IMF), global growth is projected to rise from an estimated 2.9% in 2019 to 3.3% in 2020 and 3.4% for 2021. These growth estimates are down 0.1 percentage point for 2019, compared to the figures presented in the previous edition of the report. This downward revision primarily reflects negative surprises in economic activity in some emerging economies, most notably India. On the other hand, these negative effects were offset by the improved performance in international trade, a broad-based shift toward accommodative monetary policy, diminished fears of a no-deal Brexit and an intermittent easing of trade tensions between the United States and China.

¹Sources:

^- International Monetary Fund (IMF). World Economic Outlook. World Economic Outlook Update. January 2020

^- World Economic Outlook (WEO). October 2019 Report

^- Situation report. Fourth quarter of 2019. Author: Antxon Pérez Calleja

In general, growth across advanced economies is expected to stabilise at around 1.6% between 2020 and 2021. This growth slowdown is due mainly to downward revisions for the United States, euro area and United Kingdom, and downgrades to other advanced economies in Asia.

Growth in the US is expected to moderate to 2% in 2020 and 1.7% in 2021, reflecting a return to a more neutral fiscal stance and the anticipated waning support from further loosening of financial conditions.

With regard to the euro area, growth is expected to pick up from 1.2% in 2019 to 1.3% in 2020. The WEO forecasts are unchanged for France and Italy: Italy is expected to continue to bear its financial risks. Forecasts for Germany continue to decrease due to the contraction of manufacturing activity. In the United Kingdom, growth is expected to stabilise at 1.4% in 2020, based on an orderly exit from the European Union followed by a gradual transition to a new economic relationship.

Spain is slowly but surely nearing the levels of activity of the euro area on which it is so dependent. In terms of average annual rates, the increase in GDP in 2019 is projected to be 2% (four ticks less than in 2018), and it is expected to ease to 1.7%, 1.6% and 1.5% through 2022. The pace of growth in the Spanish economy and employment in the country have contracted more swiftly than expected, although, for now, a recession appears unlikely. Spain's growth, which was underpinned by internal demand, stalled due to households and companies adjusting their levels of consumer spending and investment to a less favourable outlook. Conversely, public spending is still out of control.

The coming deceleration brings with it certain patterns already well-known in Spain: an external impact triggered by stagnation in Europe coupled with an internal problem that resides in the inability to prevent public spending from clashing with the economy. This is not a transitory or temporary problem. Government debt currently amounts to Euros 1.2 trillion, a deficit that has not been used to boost growth but to finance current expenditure, most notably the pensions system and Spain's regions. These items account for 56% of public expenditure, something the economy will struggle to maintain.

Emerging and developing economies are expected to post 4.4% growth in 2020 and 4.6% in 2021.

In Latin America, the World Economic Outlook (WEO) projects a recovery in growth from 0.1% in 2019 to 1.6% in 2020 and 2.3% in 2021. By country, the experts expect a decrease in Mexico's growth prospects in 2020-21, due to sluggish investment. In this connection, the OECD has urged Mexico to tackle the lack of competition to relaunch productivity and growth. Forecast growth for Chile has also been cut, amid social unrest in the country. These revisions in the forecasts for the two countries (in relation to the forecasts of previous months) are offset by an improvement in the outlook for Brazil in 2020, owing to the passage of pension reform and the fading of supply disruptions in the mining sector.

The IMF expects growth in emerging and developing economies in Asia to inch up slightly from 5.6% in 2019 to 5.8% in 2020 and 5.9% in 2021. These forecasts are due to the markdown in the projection for India, where domestic demand slowed more sharply than expected amid stress in the non-bank financial sector and a decline in credit growth. As for China, growth is expected to slip slightly from an estimated 6.1% to 6.0% in 2020 and 5.8% in 2021, according to the WEO update. The envisaged partial roll-back of tariffs and the pause in additional tariff hikes as part of a "Phase I" trade deal with the US will likely alleviate near-term cyclical weakness. However, according to the IMF economists, unresolved disputes on broader US-China economic relations can be expected to continue weighing on activity.

The situation in Africa remains a complex one, with inherited constraints that hamper its real but fragile growth. The opportunities in Sub-Saharan Africa are huge, and the region is expected to log 3.5% growth in 2020 and 2021. These figures conceal vast differences between the different countries. Four of the world's fastest-growing economies in 2019 are located in Africa: Côte d'Ivoire, Ethiopia, Ghana and Rwanda. At the

same time, the recovery in Nigeria, Angola and South Africa remains slow. In Nigeria, growth outside the oil sector has slowed, while in Angola the oil sector remains lacklustre. In South Africa, the perception of sluggish investment is hampering economic activity. Excluding Nigeria, South Africa and Angola, growth in the rest of Sub-Saharan Africa is expected to remain robust, although it will be slower in some countries than in others.

With regard to Australia, in mid-December the country's government cut its economic growth forecast to 2.25% for the 2019-2020 fiscal year amid a weakened global economy and on the back of the severe drought and bushfires that have beset the country. In their report, the Australian authorities forecast an increase in growth to 2.75% for the 2020-21 fiscal year. The economy remains strong in the face of global economic weakness and domestic challenges such as the devastating effects of the drought and bushfires.

Although growth forecasts are positive, the reality points to a set of risks the materialisation of which could trigger a decline in global growth below the forecast levels. Downside risks include a worsening of geopolitical tensions, especially between the United States and Iran, increased social unrest, a further souring of relations between the US and its trade partners, and deepening economic friction between other countries.

To strengthen economic activity and prevent these downside risks, policy missteps that would further enfeeble an already weak global economy must be avoided. More solid multilateral cooperation is necessary, and national policies that strengthen social cohesion must be adopted. Closer cross-border cooperation is needed on multiple fronts and tariff grievances must be ended. If trade- and technology-related disputes are not resolved, confidence will be further undermined and investment will weaken. Low investment leads to job losses, low productivity and a decline in levels of well-being. Consequently, the economic policies of the most advanced economies must focus on allocating a pivotal role to investment, to mitigate climate change, underpin potential growth and ensure that gains are widely shared in areas such as education, health, workforce skills and infrastructure.

2. Economic and financial performance in the period

2.1. Profit/loss for the year

The Elecnor Group's Consolidated Net Profit in 2019 amounted to Euros 126.4 million, a 53.9% increase on the previous year (Euros 82.1 million²). This increase was the result of sustained and organic business growth, and was buoyed by positive results from the strategic partnership with APG which amply offset other, nonrecurring negative results described below.

Corporate transactions

On 7 November 2019, Elecnor, S.A. and Dutch group APG, which manages the world's second-largest pension fund, entered into a strategic partnership to jointly invest and develop transmission and renewable energy projects other than wind power. This agreement was sealed on 17 December 2019, having fulfilled all the conditions and obtained all the approvals required for the operation, from both lending financial institutions and the relevant competition authorities. This positive agreement includes a commitment by both parties to make capital investments in new projects of Euros 400 million over the next five years, which will unquestionably be a growth lever for the Elecnor Group's Concessions and Infrastructure businesses.

² Restated as indicated in Note 2.e concerning Comparative Information on the Annual Accounts of Elecnor, S.A. and subsidiaries and in the Appendix hereto concerning Alternative Performance Measures.

Prior to the date of the operation, Elecnor, via its subsidiary Celeo Concesiones e Inversiones, S.L. (hereinafter, Celeo) held a 51% shareholding in Celeo Redes (the company that manages the electricity transmission systems in Brazil and Chile, by means of concession), while APG owned the remaining 49% shareholding. Under the agreement, APG joins Celeo Concesiones e Inversiones, S.L., a company 100% owned by the Elecnor Group, with 49% of the shareholding. This involves the contribution of APG's shares in Celeo Redes and a payment of Euros 43 million, whereby Celeo Redes becomes fully-owned by Celeo Concesiones e Inversiones, S.L. As a result of the operation, Celeo Concesiones e Inversiones, S.L. is jointly managed by Elecnor and APG.

In application of IFRS 3 Business Combinations, this operation implies recognition of the fair value of the shared assets. In 2019, this recognition generates a positive impact on the consolidated income statement of the Elecnor Group amounting to Euros 178.3 million (see Note 2.f of the Notes to the Annual Accounts of Elecnor, S.A. and subsidiaries).

• On 31 July 2019, the Group acquired 42.57% and 44.30% interests in the companies Dioxipe Solar, S.L. and Aries Solar Termoeléctrica, S.L., respectively, via the company Celeo Termosolar, S.L. (which is fully owned by Celeo Inversiones y Concesiones, S.L.). This affords it control of these businesses, whose statutory activities comprise the construction and operation of three parabolic trough technology solar thermal power plants in Extremadura and Castilla-La Mancha. Said control was maintained up to the date of the aforementioned operation with APG. The most significant effect of this operation on the Group's income statement is the recognition of a loss amounting to Euros 47.4 million as a result of valuation adjustments in the balance sheets of those companies on the date their control was obtained (see Note 7 concerning Business Combinations in the Notes to the Annual Accounts of Elecnor, S.A. and subsidiaries).
• In another notable corporate milestone, although it has not had a significant impact on the bottom line in the year, in May, Elecnor signed a strategic agreement with international engineering and construction company Vinccler to enter the oil and gas business in Ecuador. In this connection, the Group invested in Wayra Energy, S.A., Vinccler's subsidiary operating in Ecuador. The goal of this operation is to jointly develop projects awarded to that company by the government of Ecuador through contracts with Stateowned company Petroamazonas EP. This agreement heralds the start of Elecnor's activity, on both the domestic and international stage, in the upstream sector.

Other non-recurring impacts on profit/loss for the year

• On 31 May 2017, Spain's competition watchdog (CNMC) notified Elecnor, S.A., that it was opening disciplinary proceedings against it and another 15 companies, for a potential infringement in the sphere of the construction and maintenance of electrification systems and electromechanical equipment in railway lines. On 14 March 2019, the CNMC Council issued a resolution establishing a Euros 20.4 million fine. In May 2019, Elecnor lodged an appeal and on 16 July 2019 the National Court (Audiencia Nacional) suspended execution of the CNMC resolution of 14 March 2019, dependent upon the presentation of bank guarantees. In light of these events, a provision was allocated to cover this risk in its entirety (see Note 19 to the Annual Accounts of Elecnor, S.A. and subsidiaries and Note 12 to the Annual Accounts of Elecnor, S.A.).
• In 2019, due to the situation of Odebrecht, the Group recognised an impairment in the amount owed by the subsidiary Elecnor Perú, S.A.C. to the client Consorcio Constructor Ductos del Sur which is payable primarily by Odebrecht (see Note 14 to the Annual Accounts of Elecnor, S.A. and subsidiaries).
• The Group has decided to this year recognise the amounts claimed by the Tax Authority in the settlement agreements against which appeals have been lodged in connection with discrepancies of interpretation in

relation to related-party transactions, as well as the impact for the rest of the years open to inspection (see Note 22 to the Annual Accounts of Elecnor, S.A. and subsidiaries and Note 16 to the Annual Accounts of Elecnor, S.A.).

As a result of the partnership between the Elecnor Group and APG to jointly manage the subgroup Celeo Concesiones e Inversiones, formalised on 17 December 2019 (see section 2.f of the Consolidated Annual Accounts), and after various meetings with the National Securities Market Commission (CNMV), the comparative amounts for 2018 have been restated in the Consolidated Annual Accounts for 2019 in order to retroactively reflect the effects had the assets and liabilities of the subgroup Celeo Redes been accounted for using the equity method since the outset of the agreement with APG.

2.2. Key figures in profit/loss for the year

As a result of the foregoing, the following are key figures in the Consolidated Income Statement:

KEY FIGURES

	2018
(thousands of Euros)	2019	Restated	Change (%)
Turnover	2,453,726	2,250,899	9.0%
Domestic	1,168,656	987,979	18.3%
International	1,285,070	1,262,920	1.8%
EBITDA	386,996	254,168	52.3%
Profit before income tax	190,077	125,391	51.6%
Consolidated net profit	126,377	82,117	53.9%

Elector continues its internationalisation process and is a flagship company in the sectors of the domestic market in which it operates. The Group's Turnover in 2019 amounted to Euros 2,453.7 million, an increase of 9% with respect to the previous year. The international market contributed Euros 1,285.1 million to Turnover.

On the other hand, the Group has implemented a constant policy of cost containment and control which is at present underpinned by the development of various digitalisation projects to enhance the efficiency of its business processes, some of which were launched in the year and which are expected to start yielding returns in the short term.

The backlog of contracts pending amounts to Euros 2,222.7 million. Compared with the previous year-end figure, and considering the restatement, the backlog of contracts pending has increased by 4.5%. 75% of the backlog corresponds to the international market.

Turnover by segments

	2018
(thousands of Euros)	2019	Restated	Change (%)
Infrastructure	2,279,501	2,096,046	8.8%
Concessions business	190,769	158,643	20.3%
Operations between segments	(16,544)	(3,790)	-
	2,453,726	2,250,899	9.0%

By segment, the Infrastructure Business logged revenues amounting to Euros 2,279.5 million, an 8.8% increase on the previous year, while the Concessions Business logged revenue growth of 20.3%, compared with 2018, to Euros 190.8 million.

EBITDA by segments

	2018
(thousands of Euros)	2019	Restated	Change (%)
Infrastructure	176,717	171,481	3.1%
Concessions business	144,712	114,921	25.9%
Corporation	72,637	(30,693)
Operations between segments	(7,070)	(1,541)
EBITDA	386,996	254,168	52.3%
NET EBITDA FROM CORPORATE TRANSACTIONS	265,350	248,518	6.8%

NET EBITDA from corporate transactions³ rose 6.8% in the year to Euros 265.3 million. This positive EBITDA performance evidences the robustness of the Group's two businesses: Infrastructure and Concessions (with growth of 3.1% and 25.9%, respectively). We highlight the sound performance by the activities conducted by the Parent in Spain and its permanent establishments abroad, and that of the Group's subsidiaries operating in Brazil, United States, Chile, Angola, Australia, etc.).

The effect of the business combination on EBITDA in the year (Euros 121.6 million) is set forth in the Corporation segment of the attached table and contributed to increasing EBITDA in 2019 to Euros 387.0 million.

Both Revenues and EBITDA in Operations between segments evidence the construction by the Infrastructure Business in wind farms both domestically and abroad, developed by Group subsidiaries corresponding to the Concessions Business. The increase in these operations this year is due mainly to new investments in energy-generating assets using renewable sources, such as the Cofrentes wind farm (Spain), and the San Fernando wind farms (Brazil).

Business performance

The Infrastructure Business logged growth of 9% in Revenues and 3% in EBITDA. Net profit, amounted to Euros 66.5 million, an increase of 2%.

Infrastructure

(thousands of Euros)		2018
	2019	Restated	Change (%)
Turnover	2,279,501	2,096,046	8.8%
EBITDA	176,717	171,481	3.1%
Attributable net profit	66,519	65,104	2.2%

In this business, Elecnor remains a leader in the national market for services to large operators, mainly electric utilities and telecommunications companies. Moreover, the construction of six wind farms in Zaragoza

³ See appendix on Alternative Performance Measures.

(Spain) with a total installed capacity of 231 MW, developed by Forestalia, and of one 50 MW wind farm in Cofrentes (Valencia, Spain), developed by the Elecnor Group's wind energy development subsidiary Enerfín, contributed to the Group's increased activity in the Spanish renewables sector.

In addition, the Infrastructure Business in the international market is developing significant projects, including, most notably, on the basis of their positive contribution to results:

• The construction of electricity transmission lines in Brazil;
• Growth in operations in Africa on the back of involvement in various construction projects, including: Hydroelectric plants and transmission lines in Angola (electromechanical assembly of the 2,070 MW Laúca hydroelectric plant); Balance of Plant (BOP) contract and water treatment plant for the Bellara steel complex in Algeria; Refurbishment of the Inga hydropower sub-station in the Democratic Republic of Congo; construction project of the electricity interconnection grid for OMVG ("Organisation pour la Mise en Valeur du Fleuve Gambie").
• Construction of the solar PV plant in Canoa Solar, Dominican Republic (25 MW).
• Development of wind farms in Toabré (Panama), Tafilah (Jordan), the Magallanes Region (Chile), and Boulenouar (Mauritania)
• Railway tunnels in Norway

In addition, the Group's subsidiaries continue to provide construction and maintenance services to strategic sectors in countries offering excellent opportunities for organic growth:

• In the United States, the operations focus on the electricity and traffic sectors
• In the United Kingdom, on the electricity and telecommunications sectors

Last December, Elecnor was awarded the Vilnius-Klaipeda railway electrification project, one of the strategic projects in the coming years for Lithuania's state-run railway company Lietuvos Geležinkeliai (Lithuanian Railways, LG), valued at Euros 350 million. For this project, Elecnor joined forces with Abengoa in a 50% owned consortium. The project's engineering and construction is expected to last four years.

After the balance sheet date, the Group was awarded a contract to carry out one of the largest efficient water transmission and supply projects in Oman. The contract, worth Euros 192 million, was awarded by the Public Authority for Water (Diam) in a highly competitive international tender. Elecnor will build this project in a consortium with Omani company Target. The construction of this infrastructure strengthens the Group's position in the Sultanate, where Elecnor was awarded another, Euros 50 million project to transport drinking water in 2016.

Moreover, Elecnor will build four solar PV facilities for AES Panamá, with a total installed capacity of 40 megawatts (MW) (USD 50 million)

The Concessions Business, which comprises the operation of wind farms, solar PV and solar thermal facilities, electric power transmission lines and water treatment plants, logged growth of 20.3% in Revenues and 25.9% in EBITDA. Net profit increased by 44.3% to Euros 36.7 million in the year.

Concessions business

	2018
(thousands of Euros)	2019	Restated	Change (%)
Turnover	190,769	158,643	20.3%
EBITDA	144,712	114,921	25.9%

Attributable net profit	36,726	25,442	44.4%

These rates of growth were driven: firstly, by the higher electric power output at domestic wind farms; secondly, by the growth of the transmission business underpinned by new projects acquired last year; thirdly, by the proceeds from the sales of solar PV developments, an activity also encompassed by this business; and, finally, by the results of having fully consolidated for five months the income from the solar thermal plants which the previous year were equity-accounted (see Note 7 to the Annual Accounts of Elecnor, S.A. and subsidiaries).

Results at wind projects were boosted by the increased output of electric power in farms in Spain, Brazil and Canada. The Group has an installed capacity of 1,349 MW in wind farms in operation and construction in these three countries. Currently under construction are the wind farms in Cofrentes (50 MW) in Spain and San Fernando (173 MW) in Brazil. Note the recent adjudication of a new phase to expand the wind projects at San Fernando (83 MW). The development, operation and maintenance of these wind farms will be carried out by subsidiaries of the Group's Concessions Business.

With regard to electric power transmission projects, the Group is involved in the operation of 5,740 km of power lines in Chile and Brazil. In Brazil, results were boosted by the contribution of transmission line concession companies: Jaurú Transmisosora de Energia, S.A. and Cachoeira Paulista Transmissora de Energia, S.A. acquired from Grupo Isolux (shareholdings of 33.3% and 100%, respectively). In Chile and Brazil, the Group is involved in the construction of new electric power transmission lines, to be operated by the subsidiaries of Celeo Redes Chile and Celeo Redes Brazil, respectively.

The Group is building six solar PV plants (179.8 MW) in the Brazilian state of Piauí, whose energy sales were adjudicated in 2018 to the Brazilian subsidiaries in which the Elecnor has an interest.

2.3. Financial position

Corporation net financial debt in (Euros 135.7 million) decreased by 33.5% with respect to the previous year (Euros 204 thousand as per the restated Consolidated Annual Accounts for 2018). This was due to the positive cash generation performance of the Group's businesses as a result of their operating activities.

The indebtedness ratio at year-end was 0.92x (Corporation net financial debt/EBITDA with recourse), below 1x, thereby amply meeting the benchmark ratio established in the syndicated financing contract (see Note 17 to the Annual Accounts of Elecnor, S.A. and subsidiaries).

Meanwhile, total net financial debt (Euros 494.1 million) decreased by 13.4% with respect to that calculated based on the restated figures for 2018 (Euros 570.4 million).

Net Financial Debt (thousands of euros, at year-end)

	2019
Corporation net financial debt	135,672
Net EBITDA of corporate transactions	265,350
With recourse	122,633
Without recourse	142,717
Ratio of Debt/EBITDA with recourse + projects div.	0.92
Total Net Financial Debt	494,133
With recourse	135,672
Without recourse	358,461
Net EBITDA of corporate transactions	265,350
Ratio of total net financial debt to net EBITDA of

corporate transactions 1.86

With regard to the Group's financial strategy, we note:

• Elecnor has renewed its Syndicated Financing Contract, arranged in 2014, previously renewed in 2015, 2016, 2017 and 2018, extending the maturity, improving the original conditions and including the voluntary advanced repayment of Euros 100 million in 2018. The financing has a cap of Euros 400 million, distributed between the Loan Tranche of Euros 200 million and a Credit Facility Tranche of Euros 200 million. In the wake of this renewal, the Credit Facility Tranche is subdivided into two parts: one denominated in US Dollars, up to a limit of USD 75 million and available for Elecnor and its subsidiary Elecdor, and one denominated in euros up to a limit of Euros 134 million, available only to Elecnor. This renewal will afford Elecdor sufficient financial capacity to tackle the new projects in the oil and gas business being developed by the company in Ecuador. The renewal was signed by fourteen entities taking part in the financing.
• Elecnor's strategy is to diversify its short- and medium-term financing sources, beyond traditional banking sources, by issuing another Commercial Paper programme in the Alternative Fixed-Income Market (MARF) that will enable it to finance itself in euros and US Dollars over periods of up to 24 months, optimising the costs of funding working capital. The equivalent value of outstanding issues in euros may not exceed the ceiling of Euros 300 million. In deciding to renew the programme, Elecnor valued the flexibility of the financing periods and the lower cost than that of alternative funding sources over the same maturities.
• Elecnor, via its wind power development and operation subsidiary Enerfín, successfully completed the issuance of bonds to strengthen its wind farm business in Brazil. It issued bonds without recourse to the shareholder in the Brazilian securities market in the amount of BRL 325 million (Euros 73 million) for the Ventos do Sul wind farms (150 MW) located in the Brazilian state of Rio Grande do Sul. These farms commenced operation in 2006 and the financing arranged for their construction had been fully repaid before the issuance of these bonds. The funds from this bond placement will be used for investment in future projects. The issue was placed in two tranches at different costs. 70% was subscribed at the Brazilian Interbank Deposit Certificate (CDI) rate, with a spread of 0.75%, whereas the remaining 30% was linked to Brazil's Extended Consumer Price Index (IPCA) with a spread of 3.25%.
• On 25 November 2019, the Celeo Redes subgroup, which belongs to the Elecnor Group and is accounted for using the equity method, signed a bond issue to refinance transmission line projects in Chile (Diego Almagro, Casablanca and Mataquito) amounting to USD 365 million. These bonds were issued by private placement and in accordance with New York legislation, and were fully subscribed

by Alliance Global Investors. The bonds, which will be fully redeemed over the course of the next 30 years, will be used to finance those projects. On 6 December 2019, the first draw-down, amounting to USD 78.7 million, was made effective.

The Elecnor Group tackles its investment projects by arranging project financing, as described in section 5.1.2 "Interest rate risk" herein, while it finances its equity with the resources generated by the businesses of which the Group is comprised.

2.4. Material changes in accounting policies

IFRS 16 Leases comes into force on 1 January 2019. This standard eliminates the double-entry accounting model for lessees that distinguishes between finance leases, which are recognised in the balance sheet, and operating leases, for which future lease payments do not have to be recognised. A single model has been developed in its place for the balance sheet, which is similar to the current finance lease model.

In addition, IFRIC 23 Uncertainty over Income Tax Treatments applies to annual reporting period starting from 1 January 2019. It introduces guidelines as to how to measure and recognise uncertainty relating to income tax treatments, tax bases, unused tax losses, unused tax credits and tax rates.

The Group adopted IFRS 16 Leases and IFRIC 23 Uncertainty over Income Tax Treatments on 1 January 2019. The main effects of applying these standards correspond to:

A reduction of Euros 5.3 million in cumulative gains arising from the difference in expenses recognised on a straight-line basis over the operating lease term and the depreciated cost of recognition when applying IFRS 16 and using the modified retroactive method, in other words, as though the standard had been applied since the start date of each lease contract. The Group booked depreciation charges for right-of-use assets and finance expenses instead of lease

expenses, which in the consolidated statement of profit and loss at 31 December 2019 were included under the heading "Other operating expenses". In 2019, the Group booked depreciation charges amounting to Euros 6,362 thousand and finance expenses for lease liabilities amounting to Euros 2,688 thousand, instead of "Other finance expenses" amounting to Euros 7,875 thousand.

Reduction of cumulative gains amounting to Euros 6.3 million due to the tax uncertainties estimated by the Group.

The accounting policies and methods used to prepare the consolidated annual accounts in 2019 are the same as those applied to the consolidated annual accounts in 2018, except as detailed previously.

The accounting policies and methods used to prepare the separate annual accounts in 2019 are the same as those applied to the separate annual accounts in 2018, except as detailed below.

All accounting principles with a significant effect have been applied in the drawing up of these consolidated annual accounts.

2.5. Results at the Group's Parent, Elecnor, S.A.

KEY FIGURES
(thousands of Euros)	2019	2018	Change (%)
Turnover	1,368,728	1,315,286	4.1%
Domestic	987,643	859,507	14.9%
International	381,085	455,779	-16.4%
Income from operating activities	(7,203)	27,391	-126.3%
Profit before income tax	54,659	59,850	-8.7%
Profit after tax	30,122	44,136	-31.8%

The operating income of the Parent's, Elecnor, S.A., was lower than in the previous year, since the international projects that have contributed most to consolidated income (in Brazil, Chile, United States, Australia) were carried out through subsidiaries.

Profit before tax totalled Euros 54.7 million, i.e. 8.7% lower than in the previous year. Finance income rose compared with the previous year (increased amount of dividends from subsidiaries), a positive effect that partially offsets the lower operating income.

2.6. Average payment period

The average payment period to suppliers of the Group's Parent, Elecnor, S.A., calculated as per Additional Provision Three of Law 15/ 2010, dated 15 July, is 65 days. The average payment period to suppliers of the Group, calculated in the same way, is 63 days.

2.7. Turnover by activity

At 31 December each year and in thousands of euros

Turnover by activity

	2018
(thousands of Euros)	2019	Restated	Change (%)
Electricity	908,347	744,732	22.0%
Power generation	573,375	631,087	-9.1%
Telecommunications and space	247,719	252,914	-2.1%
Facilities	215,105	165,821	29.7%
Construction, environment and water	181,276	169,725	6.8%
Maintenance	171,830	160,396	7.1%
Oil & Gas	106,793	102,594	4.1%
Railways	49,281	23,630	108.6%
	2,453,726	2,250,899	9.0%

Once again, the core business in terms of turnover was Electricity, with Euros 908.3 million, up 22% on 2018, due to improvements in both the domestic market and foreign subsidiaries (especially those in the United States). It was followed by Power Generation, with Euros 573.4 million, 9.1% lower than in 2018 due to the impact of the depreciation of the Brazilian Real and the completion of large power generation plants, primarily in Australia and Mexico. Note the comparative year-on-year increase in Facilities, into which category part of US production falls, and in Railways, which includes revenues from the railway tunnel projects in Norway.

3. Stock market information

	2019	2018
Closing share price (€)	10.95	13.20
Total volume of securities (million)	3.3	4.3
Total cash traded (€ million)	37.7	53.9
Number of shares (million)	87	87
Market capitalisation (€ million)	952.6	1,148.4
PER	7.5	15.5
Dividend yield	2.4%	2.6%

Dividend yield in 2019 was 2.4%, compared to 2.6% the year before. This decrease was due to the payment of an interim dividend in 2018, which has traditionally been paid in January of the following year, but was brought forward to December 2018.

Accordingly, in 2018 three dividends were paid to shareholders (interim dividend charged to 2017, the 2017 supplementary dividend and the interim dividend charged to 2018), while in 2019 two dividends were paid (the 2018 supplementary dividend and the interim dividend charged to 2019).

4. Capital management policy

Key to Elecnor's strategy is its policy of maximum financial prudence. The capital structure is defined by the commitment to solvency and the aim of maximising shareholder returns.

5. Financial risk management policy

Elecnor is exposed to certain financial risks, which it manages by grouping together its systems for identifying, measuring and supervising risks and limiting the concentration thereof. Financial risk management and containment is performed on a coordinated basis by corporate management and the various business units and subsidiaries that comprise the Group. Financial risk management activities are approved at the highest executive level, in accordance with the rules, policies and procedures in place.

5.1. Currency risks

Exchange risk to be mitigated arises from the transactions that the Group performs on the international markets in the course of its business, namely market risk due primarily to foreign currency risk. Certain income and procurement costs are denominated in currencies other than the Euro. For this reason, the risk of fluctuating exchange rates of these currencies against the functional currency could have an impact on the Group's profits.

In order to manage and minimise this risk, Elecnor uses hedging strategies, since its objective is to generate profits only through its ordinary business, and not by speculating in relation to exchange rate fluctuations.

The instruments used to achieve this hedging are essentially borrowings tied to the contract's collection currency, foreign currency hedges and swaps, whereby Elecnor and the bank exchange the cash flows arising from a loan denominated in Euros for the flows of another loan denominated in the currency in question, as well as the use of "currency baskets" in order to hedge mixed financing tied to various currencies.

5.2. Interest rate risk

Interest rate fluctuations change the fair value of assets and liabilities that accrue interest at fixed rates and the future cash flows from assets and liabilities indexed to floating interest rates. Elecnor has arranged borrowings to enable it to carry on its operations, mainly in connection with the development, construction and operation of wind farms, thermosolar projects and electricity infrastructure concessions, which it does under project financing arrangements. This kind of arrangement requires under contract that interest rate risk be covered using hedging instruments.

In the case of both project and corporate financing, borrowings are arranged mainly at floating rates and, where appropriate, hedging instruments are used to minimise the related interest rate risk. The hedging instruments, which are specifically assigned to financial debt and are limited to the same nominal value as the latter and the same maturity dates as the hedged items, are essentially IRSs, the aim of which is to convert loans originally arranged at variable rates to fixed rates. In any case, the interest rate hedges arranged are all effective for accounting purposes.

5.3. Other price risks

The Group is also exposed to its risk that cash flows and profits may be affected by changes in energy prices and by oil prices, among other issues. In order to manage and minimise these risks the Group occasionally uses hedging strategies.

5.4. Liquidity risk

Liquidity risk is mitigated through Elecnor's policy of holding cash and highly liquid non-speculative short-term instruments, such as the acquisition of treasury bills under non-optional repurchase agreements and very short-term US dollar deposits, through leading banks in order to be able to meet its future commitments and the arrangement of committed credit facilities of sufficient amount to cover its projected needs.

5.5. Credit risk

The main credit risk arises from trade receivables, when the counterparty or customer does not meet their contractual obligations. To mitigate this risk, the Group operates with customers that have adequate credit records. In view of its activities and the sectors in which it operates, Elecnor has customers with very high credit ratings. However, in the case of non-recurrent international sales to customers, mechanisms such as advances, irrevocable letters of credit and insurance policies are used to ensure collection. Furthermore, the financial solvency of customers is analysed and specific terms and conditions are included in contracts, aimed at guaranteeing customer payments of the stipulated price.

In the case of the wind farms, the power produced - in accordance with the legislative framework in force for the electricity industry - is sold in the Iberian Electricity Market (MIBEL) and income is collected from the operator of the Spanish Electricity Market (OMIE) through a payment-guarantee system and from the Spanish National Markets and Competition Commission (CNMC), which regulates energy markets in Spain and reports to the Ministry of Industry. Ventos do Sul Energia, S.A., Parques Eólicos Palmares, S.A., Ventos da Lagoa, S.A., Ventos do Litoral Energia, S.A. and Ventos dos Índios Energia, S.A. (Brazil) entered into long-term agreements with the corresponding Brazilian electricity distribution companies to sell the electric power that they will generate for a period of 20 years. Furthermore, Eóliennes de L'Érable has signed a 20-year contract to sell the electricity it generates to Canadian electric utility Hydro-Québec.

With regard to transmission lines, specifically those operated as concessions in Brazil, Operador Nacional do Sistema Elétrico (ONS) is responsible for coordinating collections and payments within the country's electricity system and notifies the concession holder of the companies from which collections must be made: generators, major consumers and transmission entities. Prior to connecting to the system these companies deposit a guarantee. In the event of non-payment this guarantee will be executed, they will be immediately disconnected from the system and the payment obligation will be shared among the remaining users of the system. Accordingly, the concessionaire has the guaranteed payment from the national power grid system. In this connection, in the years in which the Group has been operating these lines, there has been no non-payment by users thereof.

The transmission lines Chile belong to that country's national grid (previously known as the backbone system), in which Coordinador Eléctrico Nacional (CEN) coordinates the flow of payments to transmission companies. The current system remained until December 2018, whereby those responsible for paying the transmission companies were the generating companies. From 2019 onwards, distributors also are liable for payments, so the portfolio of payers will be more diversified from that date on. The payment guarantee of the national transmission grid is based on a CEN Procedure that establishes that, in the event of non-payments by a coordinated company (company coordinated by CEN), the defaulting party is disconnected from the grid, and the payment obligation is spread among the remaining coordinated companies.

Elecnor seeks always to implement the strictest measures to mitigate this risk and conducts periodic analyses of its exposure to credit risk, making the relevant impairment corrections where necessary.

5.6. Regulatory risk

Elecnor closely monitors regulatory risk, particularly that affecting renewable energy, to adequately reflect its impact on the consolidated income statement.

5.7. Other risks

In addition to the risks outlined above, the Elecnor Group is exposed to various risk factors (governance, strategic, planning and economic environment, operating, reporting and compliance risks) linked to the sectors in which it operates and the long list of countries in which it operates, either consistently or by means of oneoff projects. The Group uses its Risk Management System to continually manage and prevent these risks, reducing to acceptable levels the probability of their materialising and mitigating their potential impact, where applicable, on business volume, profitability and efficiency, reputation and sustainability. The pillars of this Risk Management System are the ongoing identification and assessment of the risks to which the Group is exposed, the improvement of related management mechanisms and tools and the permanent oversight and monitoring of the entire process.

6. Environment

The commitment to the protection of the environment and efficiency in the use of energy resources are common denominators in the Group's activities.

In this connection, and with the aim of contributing to UN Global Compact Sustainable Development Goal 13 "Climate Action", Elecnor fosters the development of its activity in a sustainable manner adapted to climate conditions and always with the involvement and commitment of all persons belonging to the Group. Climate change is a challenge in respect of which the Group has worked hard in recent years, in particular by calculating its carbon footprint in accordance with internationally accepted standards and by implementing measures to reduce GHG emissions within its scope of action.

Elecnor also conducted a strategic diagnosis of adaptation to climate change based on the recommendations of the Intergovernmental Panel on Climate Change, in order to identify opportunities and risks in that connection. On this basis it has developed its 2030 Climate Change Strategy, establishing the framework for all the Group's actions to reduce greenhouse gas emissions, adapt to climate change impacts and tap into the associated opportunities.

At present, the environmental control mechanisms of the company are based on certified Environmental Management Systems and Energy Management Systems in accordance with ISO 14001:2004 and ISO 50001 standards. The Environmental Management System defines the procedure to identify, assess and record the environmental aspects originating in Elecnor's activities in order to determine which are significant.

In global terms, the Environmental Management strategy is governed by the following guiding principles:

• » The permanent quest for a balance between financial rewards and environmental protection, nurturing approaches that enable these aspects to be mutually strengthening.
• » Taking into consideration the environmental component when deciding to invest in new projects and activities.
• » Involving employees through relevant training and awareness actions.
• » Also involving our other stakeholders (shareholders, customers, suppliers and society at large) in the joint quest for useful solutions to the challenges of preserving the environment and energy resources.

The Non-Financial Information section of this report outlines the goals, strategies and initiatives implemented in 2019 in accordance with the Group's environmental management policy.

7. Human Resources

Elecnor's workforce (*)

	2018
At 31 December each year	2019	Restated	Changes
Domestic	9,336	8,836	5.7%
International	5,519	4,741	16.4%
	14,855	13,577	9.4%

*This calculation does not include directors who are not on the Group's workforce.

People are Elecnor's main asset, and its overall strategy is underpinned by values such as talent, transparency and team work in conditions of the utmost safety. In this connection, occupational risk prevention is a common denominator throughout all the Group's activities. The commitment to prevention is part of our culture. And it is a commitment that goes beyond legal regulations and customers' requirements, with exacting and very clear goals: zero accidents and zero tolerance to non-compliances with the preventive measures established by the company.

At 2019 year-end, the Group's workforce had increased by 1,278 (9.4 %) to 14,855 employees. In the domestic market the increase was of 5.7%, largely to cover the need to support the international business. Abroad, there was a general increase of 16.4 %. There have been increases in the workforce in Angola, Brazil, Cameroon, Ghana and Panama, as well as the inclusion of two new countries: El Salvador and Senegal.

Note that this year-end figure does not include the workforce of Celeo Concesiones e Inversiones which is now an equity-accounted investee. Had it been included, the total workforce would be 15,255 (9,370 domestic and 5,885 international), and the increase on the previous year would have been 9.8%.

8. RDI

The initiatives undertaken in the year 2019 were:

• Launch of the 2019 edition of the internal call for INNOVA project proposals for financing.
• Maintaining UNE 166.002 certification for the RDI Management systems of Elecnor and Audeca.
• Conducting a technical workshop with SAS on Industry 4.0.
• Two projects financed by Spain's Centre for the Development of Industrial Technology (CDTI). Audeca and Enerfín.
• Launch of a project with partners (Environment at the request of the Ministry for Development).
• Using RDI to boost business competitiveness.

Improvements planned for 2020:

• Technical workshops to be held in partnership with technological companies.
• Increasing the number of projects with customers and partners.
• Creation of a working panel with representatives from all the general business divisions and sub-divisions of Elecnor. RDI panel of experts.

9. Significant events subsequent to year-end

Between 31 December 2019 and the time of preparation of the Individual and Consolidated Financial Statements there were no significant events that might materially alter the true and fair view of said financial statements, except what follows.

The outbreak of the novel coronavirus causing the disease known as COVID-19 in China in January 2020 and its recent spread to numerous countries across the globe led the World Health Organisation to declare a pandemic on 11 March 2020.

Considering the complexity of markets due to their globalisation and the absence, for now, of an effective treatment against the virus, the consequences for the operations of the Elecnor Group are uncertain, and will depend largely on how the pandemic evolves and spreads over the next few months, as well as the capacity of all the economic agents involved to react and adapt.

Consequently, on the date of authorising these Annual Accounts for issue it is too soon to perform a detailed assessment or quantification of the potential impact of COVID-19 on Elecnor and its group of companies, as the short-, medium- and long-term consequences remain uncertain. In any event, the consequences of COVID-19 are considered a subsequent event that does not require an adjustment of the consolidated annual accounts of 2019, without prejudice to their being recognised in the consolidated annual accounts of 2020.

In this regard, there has already been a downturn in the Group's estimated activity in the first few months of 2020 as a result of the COVID-19 outbreak, and it is not yet possible to gauge whether this situation will persist and to what extent.

Nevertheless, the Company's directors and Management, considering the measures adopted by the various governments of the countries in which the Elecnor Group operates to help manage the health crisis unleashed by the COVID-19 pandemic, has conducted a preliminary assessment of the current situation based on the best available information. Due to the aforementioned considerations, this information may be incomplete. Of the findings of that assessment, we highlight the following aspects:

• Liquidity risk: the general market situation may foreseeably trigger a widespread increase in liquidity stresses in the economy, as well as a contraction in the credit market. In this regard, the Group's financial situation is solid and it has sizeable undrawn credit lines (Note 17), which, coupled with the launch of specific plans to boost and efficiently manage liquidity, will enable it to tackle these stresses.
• Operating risk: the changing and unpredictable nature of events could lead to the risk of the temporary disruption of some of the Group's activities. Accordingly, specific working groups and procedures have been established aimed at monitoring and managing developments in its operations at all times, in order to minimise the impact on its business.
• Risk of variation of certain financial figures: the aforementioned factors could trigger a reduction in the next financial statements of the amounts booked under significant headings for the Elecnor Group, such as "Net turnover" or "Profit after tax", or key indicators thereof (EBITDA/Net financial debt ratio) although

for now it is not possible to reliably quantify the impact of this, considering the conditioning factors and restrictions we have already mentioned.

Lastly, note that the directors and Management of Elecnor are constantly monitoring the situation as it unfolds, in order to successfully tackle any potential impacts, both financial and non-financial.

10. Outlook for 2020

10.1. Economic context

As explained in section 1.2 herein, Economic context, the outlook for the coming year were for global growth, although experts have revised down growth forecasts for both advanced economies and emerging and developing markets. The Spanish economy faces a deceleration in growth and internal demand is shrinking to adjust to the unfavourable outlook.

In any event, these projections have already been superseded by the crisis unleashed by the COVID-19 outbreak.

10.2. Elecnor Group

The Elecnor Group is facing an uncertain global outlook in 2020, after logging a brilliant performance in 2019, when it successfully completed the corporate transactions outlined in this report, and posting excellent results in the ordinary course of its business, in terms of both income and cash generation and the reduction of corporate debt.

Its current situation will enable the Elecnor Group to tackle the period of uncertainty ahead on a strong footing. It is presently analysing the situation triggered by COVID-19 and its potential effects on the Group. The company will swiftly take the necessary measures at each given time to minimise the negative impact of this health crisis on its activity, as explained in the note concerning events after the reporting period in the Annual Accounts of Elecnor, S.A. and subsidiaries, and in that section of this report.

Accordingly, and despite the robust backlog, the Group is not in a position to sufficiently reliably estimate the Group's revenues or profits for 2020.

With regard to the Group's assets aimed at generating electricity using renewable energy sources in Spain, we highlight Royal Decree-Law 17/2019, implementing urgent measures for the necessary adaptation of remuneration parameters affecting the electricity system. This legislation established a reasonable return of 7.09% for renewable, cogeneration and waste facilities, applicable in the second regulatory period (2020- 2025). However, renewable, cogeneration and waste facilities that were remunerated when Royal Decree-Law 9/2013 came into force were allowed to maintain, during the second and third regulatory periods (2020-2031) the reasonable return established for the first regulatory period, of 7.398%.

11. Share capital and acquisition of own shares

At 31/12/2019, the share capital of Elecnor, S.A. was represented by 87,000,000 shares, each with a par value of 10 Euro cents, fully subscribed and paid in, implying a share capital of Euros 8,700,000.

Elecnor, S.A.'s shares are traded in Spain's SIBE electronic trading system, where shares in the leading Spanish companies are traded, and the market with the largest trading volume in Spain.

At 31 December 2018, Elecnor had a portfolio of 2,336,496 treasury shares. In 2019 it acquired 104,509 securities, and sold 120,196. Accordingly, at 31 December 2019 it had a total of 2,320,809 own shares, 2.7% of all shares in the company, unchanged on the previous year.

12. Related-party transactions

With regard to the disclosures on related party transactions, see the details in the notes to the individual and consolidated financial statements at 31 December 2019, as provided in article 15 of Royal Decree 1362/2007.

13. Annual Corporate Governance Report

In compliance with the legal stipulations and in accordance with the model circulated by the Spanish Securities Market Commission (CNMV), the Board of directors of Elecnor, S.A. has drawn up the Annual Corporate Governance Report for the year ended 31 December 2019. Said document is available on the CNMV website and at www.elecnor.com.

14. Non-financial information

14.1. About this report

This section of the Directors' Report is produced in compliance with the provisions of Law 11/2018, of 28 December, concerning non-financial information and diversity (preceded by Royal Decree-Law 18/2017, of 24 November).

Within this framework, information is included on the activities and the main economic, social and environmental impacts of the Elecnor Group, and any aspects considered relevant for the company's main stakeholders in 2019. As Appendix I, "Table of Contents of Law 11/2018, dated 28 December, concerning non-financial information and diversity" shows, in the preparation process the selected Global Reporting Initiative (GRI) standards were used as a reference, considering the requirements identified as being material for the business.

The scope of information contained in this Report encompasses the whole Elecnor Group (Elecnor, S.A. And subsidiaries), unless otherwise indicated (for example when reporting applies only to the national sphere). With regard to the environmental information, its scope is confined to those countries in which the organisation has a permanent presence. And social information concerning the Elecnor Group and the Elecnor Foundation is included.

In 2018, the Elecnor Group conducted an analysis of the material topics for the company and its stakeholders with the dual purpose of defining significant issues in connection with sustainability and prioritising the contents of this section of the Directors' Report. This materiality analysis is considered to be current.

With that in mind, the first step was to conduct an external analysis to determine the matters most significant to stakeholders (material topics). This entailed an analysis of the news and regulations concerning sustainability (especially Law 11/2018), and a benchmarking of the sustainability matrices of customers and companies in the sector, as published in their Sustainability Reports or Comprehensive Reports.

Once these material topics were identified, the next step was to prioritise those topics, a task carried out by key personnel at the organisation, in other words, persons identified by the company as being in responsible in respect of one or other of the Group's main stakeholder groups. The head of strategic planning was also involved. The list of material topics was then approved by the Group's chief executive.

As a result of this process, the following material topics were identified, listed in accordance with their criticality.

	Impact
	Material topics	Criticality	Internal	External
1	Occupational health and safety of employees/contractors		X	X
2	Ethics and Compliance		X	X
3	Capturing and retaining talent and developing human capital		X
4	Management of equality and diversity		X
5	Work-life balance		X	X
6	Clients. Service quality		X	X
7	Renewable energy development		X	X
8	Business opportunities		X
9	Risk management		X
10	Cybersecurity		X
11	Financial management		X
12	Digital transformation		X
13	Communication/Transparency		X	X
14	Sustainable investment		X
15	Good governance		X
16	Technology and innovation		X	X
17	Management of intangibles		X
18	Environmental management/resource efficiency		X	X
19	Human rights		X	X
20	Supply chain management		X	X
21	Stable regulatory framework		X
22	Featuring in sustainability indices		X
23	Impact management and dialogue with local communities			X
24	Biodiversity			X
25	Inclusive businesses		X	X
26	Climate change strategies and impacts		X	X
27	Energy transition		X	X
28	Water footprint		X	X
29	Circular economy		X	X
30	Inclusion of social and environmental criteria in public contracting		X

14.2. Business model

Information on the company's business model is contained in section Business model and Economic context of this Directors' Report. Information concerning the outlook for 2020 can be found in the section with that name.

Strategic goals

At Elecnor, all our business strategies are aimed at generating sustainable value for our stakeholders.

Consistent with this, the main axes of our strategic framework are

FINANCIAL	CUSTOMERS / MARKET	INTERNAL PROCESSES	KNOWLEDGE AND GROWTH
Debt reduction Value creation	Profitability and margin Internationalis ation Concessions lever	Digital transformation Process optimisation	People	GENERATION OF VALUE FOR SHAREHOLDERS AND SUSTAINABILITY

14.3. Our people

More talent, better management

People are Elecnor's main asset. A team of more than 14,000 people of 50 different nationalities contribute their talent with the aim of boosting management efficacy and efficiency.

The Integrated Human Resources Management System is designed to deploy, foster and nurture the talent existing within the organisation. For this purpose, it encompasses aspects relating to selection, performance, compensation, development and training.

Integrated Human Resources Management System

Selection	20% increase in recruitment
As a means of acquiring and attracting the best available talent in the market, prioritising internal talent	25 positions covered by internal promotion through the eTalent system
Performance This is a process of analysis of the actions and results of each person in their post, as well as the identification of improvement areas.	2,678 people Evaluation phase (assessment of skills and individual targets)
Compensation	Salary surveys
Focused on fair remuneration, that rewards and recognises merits.	Benefits Club Continuation of role mapping in Chile and Italy	14,855 employees
Development This means a maximum commitment to existing potential in order to offer employees opportunities for growth and improvement over the course of their career.
Training	285,281
Aimed at developing skills and broadening knowledge to achieve optimal suitability of person to post.	Training hours 19.2

In a global Group it is indispensable to perform efficient management. Achieving this in a company with more than 14,000 employees and sustained foreign growth involves implementing efficient management and reporting systems.

Training hours/employee

Based on this approach, a number of improvement programmes have been undertaken for some time now. This year, among other projects, the company has rolled out initiatives relating to the implementation and good operation of the record of working hours, the adoption of regulatory requirements in connection with personal data protection and guaranteeing digital rights and the introduction of Iberper payroll systems for the entire foreign workforce, except for Celeo.

Selection

Aware of the difficulties inherent to international selection processes and the level of competition in some countries due to the scarcity of skilled profiles, work is ongoing to boost the Elecnor brand as a standardbearing company at which to work. In this regard, improvements have commenced, such as the coordination of publication of job vacancies in the foreign market by means of a single LinkedIn account.

With regard to internal promotion, a number of processes have been implemented, with the company's own employees covering as many as 25 vacancies. Moreover, the Group has an internal selection and mobility policy aimed at attracting and retaining the best available talent in the market.

At the same time, Elecnor continued to collaborate with universities and professional training schools to attract students and new graduates. Accordingly, it has attended information days and been present in on-site and virtual employment forums, including: Networking in Barcelona, Forum hosted by Universidad Carlos III, Faculty of Engineering in Seville and Aerotelecom in Barcelona.

Fostering internal talent

Elecnor is committed to efficiently managing talent by identifying key posts and talent groups (high potential, key people and successors), thereby helping to devise specific development and career plans.

Performance management provides relevant, objective and transparent information with a view to establishing remuneration, training and development plans.

In the evaluation process which commenced in 2018 and concluded in February 2019, 2,311 employees were assessed in Spain. In 2019, the evaluation process assessed 2,678 people, 70% of whom were men (1,872) and 30% (806) women. The process was scheduled for completion in February 2020.

Accordingly, 618 people participated in various training itineraries designed to strengthen the four "core" skills and reduce the gap between expected and actual performance that emerges during the performance evaluation.

• Developing leaders at Elecnor
• Elecnor finances
• Our way of doing things: project management
• We are all sales

Training

The Group's commitment to training has been sustained over the years. These are the main indicators of the Group

Item	2019
Investment in training (euros)	6,867,450
Total training hours	285,281
No. of attendees*	37,952
Training hours/employee	19.20

			Attendees*	Hours
Area	No. of courses	Male	Female	Total	Male	Female	Total
Management	374	731	269	1,000	7,617	2,656	10,273
Technology	1022	6,816	162	6,978	87,440	2,450	89,890
IT	56	276	116	392	2,600	1,253	3,853
Languages	534	343	193	536	12,371	5,808	18,179
Quality and Environment	206	988	230	1,218	2,777	1,159	3,936
Prevention	2,671	26,535	1,293	27,828	152,193	6,957	159,150
Total	4,863	35,689	2,263	37,952	264,998	20,283	285,281

Group	Attendees*	Hours
Management	182	3,544
Executive	1,767	18,042
Technician	3,517	47,912
Base	32,486	215,783
Total	37,952	285,281

* The number of attendees measures the number of people who have received training, and one person may have completed several courses.

Average hours of training by category in the Elecnor group

Group	Employees	Average
Management	164	21.61
Executive	1,098	20.12
Technician	3,425	13.52
Base	10,348	20.85

After completing each training itinerary, the attendees' opinions are compiled through an anonymous survey. In the global satisfaction survey, 96.48% of respondents valued the training received very highly.

This year, once again, the Management Team took part in the "People First" event for new recruits, offering a global vision of the company and the corporate essence, culture and values.

Moreover, note the launch of a personalised training and updating programme in specific skills for the members of the Group's Board of directors.

Remuneration and benefits

Elecnor has a job chart that clarifies and simplifies its organisational structure, the responsibilities of each post and the profiles required. This model is based on functional groups and organisational dependencies that prepare the organisation for possible developments. This definition of jobs and responsibilities makes it easier to adapt remuneration in a more objective and fair way, rewarding and recognising merit where due.

Elecnor offers its employees certain social benefits such as the Flexible Compensation Plan, in which employees can use part of their salary for products with tax benefits, such as health insurance, vouchers and food cards, childcare and transport.

Elecnor also offers workers help with their children's studies, regardless of their contract and working hours, provided they have been at the company for at least one year. This help goes from second-cycle pre-school and primary education to secondary education (ESO). For children with a disability, the financial aid is increased.

Moreover, in accordance with the employees' needs, circumstances and responsibility, Elecnor strives to implement other measures such as life and accident insurance, travel insurance, medical insurance, car insurance or a retirement plan.

Lastly, this year the Elecnor Benefits Club was launched for all staff at Elecnor, S.A. and its domestic subsidiaries. This is a savings and loyalty programme that affords employees access to products and services in preferential conditions. This is founded upon an agreement with 500 suppliers of all kinds of categories and services.

Remunerations Policy

Within the framework of the Integrated Human Resources Management System at Elecnor, compensation is based on a criterion of fairness, which rewards and acknowledges merits. Salary surveys were conducted in the previous year to gauge internal fairness and external competitiveness.

Average remuneration by gender, age and professional category

Below are the key figures with regard to the workforce by geographical area.

	Management		Executive		Technician		Base
Age	Male	Female	Male	Female	Male	Female	Male	Female
Spain
>50	125,526	96,542	53,767	56,619	33,694	27,316	22,503	20,353
From 30 to 50	93,480	92,250	47,933	47,026	32,229	27,473	21,040	19,537
<30	-	-	47,734	30,159	26,921	24,833	18,350	17,585
Europe (Italy, Norway, Portugal, United Kingdom and Romania)
>50	-	-	50,491	46,189	52,445	22,910	31,399	-
From 30 to 50	-	-	53,476	36,943	34,371	31,192	26,886	21,334
<30	-	-	-	-	31,228	22,168	24,658	19,993
North America (United States and Canada)
>50	180,269	*	88,627	86,510	119,041	50,676	76,368	27,666
From 30 to 50	163,507	-	88,975	71,249	63,019	49,637	63,167	81,131
<30	-	-	63,604	56,394	53,275	34,078	48,276	-
Latin America
(Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Honduras, Mexico, Panama, Peru, Dominican Republic and Uruguay)
>50	-	-	60,313	40,180	27,283	10,770	9,918	5,407
From 30 to 50	-	-	47,085	46,460	19,579	14,875	7,135	5,118
<30	-	-	-	-	10,570	7,931	4,611	3,506
Asia (Jordan and Oman)
>50	-	-	-	-	104,323	-	-	-
From 30 to 50	-	-	-	-	37,260	-	12,898	-

<30	-	-	-	-	25,038	-	5,311	*
Africa (Angola, Algeria, Cameroon, Ghana, Mauritania and Senegal)
>50	-	-	71,822	-	17,393	11,689	5,301	1,660
From 30 to 50	-	-	29,072	26,035	21,111	5,390	6,420	1,837
<30	-	-	-	7,697	5,345	6,040	2,731	1,722
Oceania (Australia)
>50	-	-	74,766	*	-	24,277	-	74,766
From 30 to 50	-	-	88,687	-	79,837	-	82,260	88,687
<30	-	-	-	-	30,834	-	51,735	-

* This information is not shown in the interest of protecting the data of the persons represented, since there is only one employee in that professional category.

The wage gap

Elecnor's wage policy is for men and women performing jobs with equal responsibility to receive equal pay.

The table below details the wage gap ratio, which represents the difference in wages by professional category in Spain.

	Ratio
Management	14.66%
Executive	2.65%
Technician	13.17%
Base	3.45%

Internationally, the wage gap is 10.4%. This figure excludes Spain as the Group's workforces abroad present significant differences in terms of headcount and categories. Accordingly, if the data were compared the ratio might be distorted.

The wage gap has been calculated as the median wage difference between men and women, expressed as a percentage. This year, the result is a lower median wage among women than among men.

The difference in salary in these results is in line with the sector track record, caused mainly by the historical trend regarding gender in the industry, which affords men presence average seniority than women, while also resulting in a majority of men in positions of responsibility within the company. In the Technical Expert category, the difference arises due to the greater presence of women in administrative support roles and of men in project execution.

Profile of the workforce

The Elecnor Group has an international, multicultural and diverse profile with a presence across five continents.

At the end of 2019, the Elecnor Group employed 14,855 people, a 9.4% increase on the previous year (13,577 employees). The increase was due mainly to the international market where the workforce grew by 16.4%. Note the 15.7% growth in the number of women in the Group as compared with 2018.

Changes in the workforce

Total Elecnor's workforce

	2018	2019	% Change
	13,577	14,855	9.4%
Male	12,028	13,062	8.6%
Female	1,549	1,793	15.7%

Workforce by gender in 2019

In 2019, the Elecnor Group's workforce comprised 30% Structural staff and 70% Works staff. In terms of gender, in Structure, 30% were women (1,340) and 70% men (3,167). In line with the historical trend in the sector, Works staff are predominantly male, with women representing just 4% of this group. This being the case, it is worth showing the breakdown by gender of the Structural workforce.

Workforce data (year end)

Geographical area	2018	2019
Spain	8,836	9,336
Europe	705	796
North America	525	585
Latin America	2,778	3,140
Asia	25	15
Africa	687	969
Oceania	21	14
Total	13,577	14,855

Country	2018	2019
Spain	8,836	9,336
Europe	705	796
England	265	260
Italy	287	312
Norway	1	57
Portugal	138	153
Romania	14	14
North America	525	585
Canada	6	5
United States	519	580
Latin America	2,778	3,140
Argentina	80	92
Bolivia	1	1
Brazil	1,722	1,955
Chile	273	189
Colombia	-	3
Ecuador	16	6
El Salvador	-	17
Honduras	47	59
Mexico	66	86
Panama	45	140
Paraguay	1	1
Peru	8	8
Dominican Republic	221	280
Uruguay	237	271
Venezuela	61	32
Asia	25	15
Jordan	22	11
Oman	3	4
Africa	687	969
Angola	629	712
Algeria	1	1
Cameroon	26	102

Country	2018	2019
Ghana	15	123
Mauritania	16	14
Senegal	-	17
Oceania	21	14
Australia	21	14
Total	13,577	14,855

		2018			2019
Age	Male	Female	Total	Male	Female	Total
More than 50 years	2,287	189	2,476	2,659	209	2,868
30 to 50 years	8,036	1,051	9,087	8,630	1,206	9,836
Less than 30 years	1,705	309	2,014	1,773	378	2,151
	12,028	1,549	13,577	13,062	1,793	14,855

Professional		2018			2019
category	Male	Female	Total	Male	Female	Total
Management	135	20	155	145	19	164
Executive	683	239	922	897	201	1,098
Technician	1,406	868	2,274	2,125	1,120	3,245
Base*	9,804	422	10,226	9,895	453	10,348
	12,028	1,549	13,577	13,062	1,793	14,855

*The "Base" professional category comprises mainly men as it corresponds primarily to Works personnel.

As part of its efforts to continue providing quality employment, the Group has increased the percentage of open-ended contracts by 18.2% compared to the 2018 figure. Furthermore, full-time employment has risen by 10.2%.

Type of contract by age	2018	2019
Open-ended	7,997	9,455
More than 50 years	1,740	2,120
30 to 50	5,359	6,273
Under 30	898	1,062
Temporary	5,580	5,400
More than 50 years	736	748
30 to 50	3,728	3,563
Under 30	1,116	1,089
Total	13,577	14,855
Type of contract by region	2018	2019

Open-ended	7,997	9,455
Spain	4,868	5,586
Europe	465	450
North America	224	288
Latin America	2,495	2,938
Africa	113	179
Asia	4	4
Oceania	10	10
Temporary	5,580	5,400
Spain	4,150	3,750
Europe	240	346
North America	301	297
Latin America	283	202
Africa	574	790
Asia	21	11
Oceania	11	4
Total	13,577	14,855

Type of contract by professional category	2018	2019
Open-ended	7,997	9,455
Management	155	164
Executive	825	956
Technician	1,459	2,284
Base	5,558	6,051
Temporary	5,580	5,400
Management	-	-
Executive	97	142
Technician	815	961
Base	4,668	4,297
Total	13,577	14,855

Type of contract by gender	2018	2019
Open-ended	7,997	9,455
Male	6,909	8,128
Female	1,088	1,327
Temporary	5,580	5,400
Male	5,119	4,934
Female	461	466
Total	13,577	14,855

Type of employment by age	2018	2019
Full-time	13,260	14,613
More than 50 years	2,292	2,691
30 to 50	9,011	9,791
Under 30	1,957	2,131
Part-time	317	242
More than 50 years	184	177
30 to 50	76	45
Under 30	57	20
Total	13,577	14,855

Type of employment by professional category	2018	2019
Full-time	13,260	14,613
Management	155	160
Executive	912	1,085
Technician	2,216	3,185
Base	9,977	10,183
Part-time	317	242
Management	0	4
Executive	10	13
Technician	58	60
Base	249	165
Total	13,577	14,855

Type of employment by gender	2018	2019
Full-time	13,260	14,613
Male	11,802	12,868
Female	1,458	1,745
Part-time	317	242
Male	226	194
Female	91	48
Total	13,577	14,855

Type of contract by age (Average)	2019
Open-ended	8,844
More than 50 years	2,075
30 to 50	5,843
Under 30	926
Temporary	5,709
More than 50 years	880
30 to 50	3,833
Under 30	996
Total	14,553

Type of contract by Gender (Average)	2019
Open-ended	8,844
Male	7,631
Female	1,213
Temporary	5,709
Male	5,209
Female	500
Total	14,553

Type of contract by

professional category	2019
(Average)
Open-ended	8,844
Management	178
Executive	929
Technician	2,085
Base	5,652
Temporary	5,709
Management	-
Executive	152
Technician	925
Base	4,632
Total	14,553

Type of employment by gender (Average)	2019
Full-time	14,288
Male	12,634
Female	1,654
Part-time	265
Male	206
Female	59
Total	14,553
Type of employment by age
(Average)	2019
Full-time	14,288
More than 50 years	2,776
30 to 50	9,622
Under 30	1,890
Part-time	265
More than 50 years	179
30 to 50	54
Under 30	32

Type of employment by professional category (Average)	2019
Full-time	14,288
Management	174
Executive	1,069
Technician	2,941
Base	10,104
Part-time	265
Management	4
Executive	12
Technician	69
Base	180
Total	14,553

The number of hours of absenteeism in the Elecnor Group totalled 1,187,192, implying an absenteeism** ratio of 3.7%.

*The following countries are not included in this scope: Algeria, Cameroon, Colombia, El Salvador, USA, Ghana, Honduras, Norway and Oman.

** Hours of absenteeism including all absences (unjustified, remunerated and non-remunerated leave, illness, accident, maternity and paternity)/actual hours worked.

Workforce rotation by age range, gender and region

Location	Disposals	Average employment	% rotation in 2019
Spain	2,179	9,283	23%
Male	1,996	8,141	25%
More than 50 years	358	2,018	18%
30 to 50	1,265	5,467	23%
Under 30	373	657	57%
Female	183	1,142	16%
More than 50 years	22	155	14%
30 to 50	119	829	14%
Under 30	42	158	27%
Europe	234	772	30%
Male	214	686	31%
More than 50 years	50	162	31%
30 to 50	124	411	30%
Under 30	40	113	35%
Female	20	86	23%
More than 50 years	3	10	30%
30 to 50	10	51	20%
Under 30	7	25	28%
North America	385	657	59%
Male	351	603	58%
More than 50 years	94	156	60%

30 to 50	184	345	53%
Under 30	73	102	72%
Female	34	54	63%
More than 50 years	7	12	58%
30 to 50	21	35	60%
Under 30	6	7	86%
Latin America	2,434	3,079	79%
Male	2,293	2,784	82%
More than 50 years	229	371	60%
30 to 50	1,409	1,806	53%
Under 30	655	607	72%
Female	141	295	63%
More than 50 years	7	27	58%
30 to 50	83	183	60%
Under 30	51	85	86%
Asia	44	23	191%
Male	41	21	195%
More than 50 years	2	1	60%
30 to 50	9	7	53%
Under 30	30	13	72%
Female	3	2	63%
More than 50 years	0	0	58%
30 to 50	0	0	60%
Under 30	3	2	86%
Africa	322	725	44%
Male	297	594	50%
More than 50 years	13	30	60%
30 to 50	182	450	53%
Under 30	102	114	72%
Female	25	131	63%
More than 50 years	0	8	58%
30 to 50	17	88	60%
Under 30	8	35	86%

Oceania	7	14	50%
Male	5	11	45%
More than 50 years	2	2	60%
30 to 50	3	6	53%
Under 30	0	3	72%
Female	2	3	63%
More than 50 years	0	1	58%
30 to 50	1	1	60%
Under 30	1	1	86%
Total Group	5,605	14,553	39%

Due to the type of activity carried out by the Group, rotation levels are high as they include contract completions taking place over the course of the year. In order to implement projects, 6,426 new recruitments were made in 2019, which implies a 20% increase compared to 2018. Meanwhile, of the total of 5,605 derecognitions, dismissals amounted to 722, the details of which are shown below.

New hirings

Location	2018	2019
Spain	1,895	1,969
Male	1,741	1,725
Female	154	244
Europe	265	341
Male	246	315
Female	19	26
North America	346	535
Male	326	486
Female	20	49
Latin America	2,349	2,911
Male	2,190	2,686
Female	159	225
Asia	23	37
Male	23	35
Female	0	2
Africa	324	630
Male	318	535
Female	6	95
Oceania	12	3
Male	10	2
Female	2	1
Total	5,214	6,426

Dismissals* by gender and age

	2019
Age	Male	Female	Total
More than 50 years	154	6	160
30 to 50	384	43	427
Under 30	126	9	135
Total	664	58	722

Dismissals* by gender and professional category

		2019
Professional category	Male	Female	Total
Management	1	1	2
Executive	32	5	37
Technician	59	30	89
Base	572	22	594
Total	664	58	722

*These figures do not include temporary contract completions in Brazil, although in that country these are counted as dismissals.

Work-life balance

Work time at the Group is organised accordance with sector-specific and conventional standards applicable to the company and by means of negotiations with the labour representatives at each work centre.

The Group sees work-like balance in its broadest sense, as per some market certification systems such as EFR. In this connection, this concept encompasses measures to improve job quality, support for families, professional development, equality of opportunities and flexibility. The Group is working to improve each of these areas based on the circumstances of the company, country and individual worker.

Although there is currently no formal policy to facilitate disconnection from work, the company encourages the implementation of policies, wherever possible, that facilitate a work-life balance, such as avoiding late meetings, having flexible working hours, training in equality issues, compressed work schedules in summer or, where applicable, shorter working days, with all measures provided in the various applicable regulations being implemented.

Elecnor, S.A. and its Spanish subsidiaries also have a "Flexible Compensation Plan" to which structural personnel with open-ended contracts have access. This plan includes health insurance, meal vouchers, transport passes, training, IT and daycare.

Moreover, there is a study support programme available to all staff at Elecnor and its Spanish subsidiaries with children aged 4 to 16. 2,873 people benefited in 2019.

In aspects linked to employees' health and well-being, in addition to the stipulations in relation to prevention, within the framework of the Elecnor Benefits Club agreements have been signed with physiotherapy clinics and insurers.

Equality and diversity

The Group's Gender Equality Plan reflects its commitment to equal opportunities for men and women and nondiscrimination in its guiding principles.

Elecnor is committed to equal opportunities, as set forth in its Code of Conduct: "Elecnor applies criteria of non-discrimination and equal opportunities in its selection processes as well as in the development of the professional careers of its employees. More precisely, race, colour, nationality, social origin, age, sex, marital status, sexual orientation, ideology, religion and kinship are excluded as factors for professional assessment. The only professional differentiation features used are merit, effort, the results of hard work, training, experience and future potential. Promoting equality entails a special part concerning gender balance, as stated in the recruiting and professional promotion procedures, training and general work conditions."

At the end of 2019, the Group employed a total of 14,855 people, 30% in Structure and 70% in Works. In line with historical trends in the sector, men are more highly represented in the Group, especially because Works personnel tend to be mostly men. However, in the Structure category, there is a greater balance between men and women. In Structure, 30% were women and 70% men at 31 December 2019. In Works, 4% were women and 96% men.

The commitment outlined in the Equality Plan is configured through various axes that determine the actions planned for each: training, remuneration, communication, recruitment, work-life balance, improvements in social protection and protection from harassment.

Moreover, the Group has a compliance policy and internal controls to ensure all forms of discrimination are prevented; these controls include workplace harassment, sexual harassment and pregnancy risk protocols, among others.

This year the Group set the goal of adapting the Equality Plan to the latest developments introduced in Royal Decree-Law 6/2019, of 1 March, concerning urgent measures to ensure equality of treatment and of opportunities between men and women at work. The Equality Plan Monitoring Committee held one meeting over the course of 2019.

There is an e-mail in-box, igualdad@elecnor.com, for employees to submit suggestions of any kind or to resolve conflicts, among other matters. No lawsuits have been filed against the Group for harassment or discrimination.

In the year, 271 male employees were entitled to paternity leave and 269 took said leave, while 100% of the female employees entitled to maternity leave (43) took said leave.

Diversity in Governing Bodies

On 22 November 2017, the Board of directors approved the "Policy for the Selection of directors and for Board Diversity", which can be accessed on the corporate website and which contains all the measures adopted in relation to the selection of directors, gender, age, experience and other diversity policies. In addition, the Appointments and Remuneration Committee regularly examines the Policy for the Selection of directors and for Board Diversity so as to make further improvements on an ongoing basis.

With regard to the goal of the number of women directors on the Board accounting for at least 30% of the total in 2020, the Company's Board of directors continues to work in this connection, with the support of the

Appointments and Remuneration Committee, and fostering the actions necessary to ensure that this goal is achieved as soon as possible.

There are currently no disabled directors.

Representation of women in executive positions	2019
% of women in executive positions*	11.59%
% of women in the Board of Directors**	13.33%

* Considering Management category of Elecnor Group

** The Board in December of the reporting year

Disability

The Elecnor Group in Spain employs a total of 72 people with various disabilities, accounting for 0.5% of the total workforce. In parallel, and in compliance with Spain's Disabled Persons and Social Inclusion Act (LGD), Elecnor implemented alternative measures through services contracting to Special Employment Centres for a total of Euros 3.46 million.

In Euros
1,688,508
69,361
41,329
55,468
471,086
19,347
16,803
960,302
83,070
53,562

The Group does not currently have a formal policy on universal accessibility.

In the interests of data confidentiality, no information is reported regarding the disabled persons in the rest of countries in which the Group is present.

Communicating with everyone

During the year, the Group maintained its communication channel to continue disseminating the corporate values and culture in order to foster the commitment and motivation of all our professionals.

At the same time, and consistent with its philosophy of transparency, it has nurtured dialogue with all its stakeholders through various tools, especially in the digital environment, such as social media by means of Twitter and LinkedIn.

Some of the main campaigns developed in 2019:

Launch of new corporate Intranet, Buenos Días Elecnor (Good Morning Elecnor). This new tool, available in both Spanish and English, is a collaborative platform in which all Group employees in all countries have access to all the available information, documents and applications. Updated daily, Good Morning Elecnor is a new link between all those working at Elecnor.

Adherence to the Ethical Code and Compliance Policy. To comply with the most stringent ethical standards and with legislation in force, a campaign was launched to ensure that all employees expressly ratify their commitment to respect and fully uphold the Group's Ethical Code and Compliance Policy, and confirmation was obtained from everyone from whom it was sought.

In line with Elecnor's firm commitment to occupational risk prevention, in 2019 another campaign was launched to commemorate World Day for Safety and Health at Work. As always, the aim is to raise awareness among everyone working at Elecnor by means of specific drives aimed at achieving safe conduct at work.

This main message of this year's campaign was: Prevention is your best superpower. Use it. The aim is to convey that the only way to prevent workplace accidents is through prevention, even though so often, at work and in life in general, we behave as though we had superpowers that protect us from all unforeseen events.

Improving prevention. In order to raise awareness regarding the importance of prevention from an early age, this campaign consisted of school visits to instil preventive values in children and, by doing so, make them more sensitive in this connection over the course of their future development.

Social dialogue

In Spain, 100% of the workforce is covered by collective bargaining agreements. In the rest of countries where the Group operates, there is only comparable legislation in Argentina, Brazil, the United States, Uruguay, Jordan and Italy, and it covers our professionals in those countries.

Elecnor also has Human Resources Departments to ensure compliance with and application of the current legislation throughout the Group.

Moreover, the work centres in Spain with between 10 and 49 employees have staff delegates, with Workers' Committees representing employees at centres with 50 workers or more. Both the staff delegates and the Committee members are designated through trade union elections, in which both unions and independent groups may field candidates. At present, the majority union is Comisiones Obreras (CCOO), but others are also represented: UGT, ELA, LAB, CGT, ESK, CSIF and independent groups. In this connection, in the rest of countries the Group is compliant with legislation in force.

Labour relations at the Group are managed on the basis of provincial collective bargaining agreements within the sector. In certain cases, specific agreements are signed with particular groups. The most notable agreements were in matters such as bonuses for voltage work, travel bonuses, on-call and standby, rest periods, shifts, change of working hours, discontinuous work and schedules.

The Group has numerous channels for employee dialogue and participation, such as Intranet, eTalent and the e-mail addresses codigoetico@elecnor.com and igualdad@elecnor.com

Safety Excellence

Our commitment to employee health and safety has always been a priority for Elecnor. Consequently, working is ongoing to achieve the goal of zero accidents, zero tolerance to any breaches of preventive measures and the continuous fostering of safe conduct among employees.

Occupational risk prevention is a part of the Group's Integrated Management System. Within this framework and in order to eliminate or minimise risk situations potentially faced by persons implementing the Group's projects, a broad set of activities are conducted, such as:

• Control of the conditions in which projects are executed, through safety inspections and internal works audits.
• Information and training on health and safety for all workers.
• Monitoring and awareness meetings.
• Campaigns to increase awareness and change behaviours.

In 2019, 21 internal audits were performed in accordance with OHSAS 18001 standards. Furthermore, external audits were carried out of Elecnor and its subsidiaries Atersa, Audeca, Ehisa, Enerfín and Jomar Seguridad, all with a satisfactory outcome.

More than 92% of the Group's employees are represented in formal health and safety committees, in which aspects such as work procedures, protection equipment, etc. are discussed. In Spain the committees are specific to work centres and in other countries they may be specific to work centres or project sites.

Accident rates

	2017	2018	2019
Frequency rate	8.6	4.6	3.5
Seriousness	0.27	0.16	0.14
Incident rate	16.55	8.91	6.71

Frequency rate = (number of accidents involving more than one day's leave, not counting those on way to or from work/hours worked) x 10^6

Seriousness = (number of days lost/hours worked) x 10 ^3

Incident rate = (number of accidents involving more than one day's leave/Average number of employees) x 10^3

Figures broken down by gender

	2018		2019
	Male	Female	Male	Female
Frequency rate	5.4	0.0	3.9	0.0
Seriousness	0.19	0.0	0.16	0.0
Occupational illness rate	0.3	0.0	1.1	1.5

* Occupational illness rate = (number of occupational illnesses/hours worked) x 10^6

In 2019, the Group's frequency rate was 3.5, compared with 4.6 in 2018, and seriousness scored 0.14, compared with 0.16 in 2018. With regard to occupational illnesses, 35 cases were recorded (30 men and 5 women), of which 31 corresponded to cases of malaria and dengue fever contracted in countries where these diseases are endemic, and the remaining 4 were due to musculo-skeletal disorders in Spain.

Domestically, the final Frequency Rate was 4.1, compared with 5.8 the previous year, and was the lowest value ever obtained; and the Severity Rate was 0.20, compared with 0.23 in 2018. Note that there were fewer accidents (77 accidents, vs. 99 in 2018).

Internationally, the final Frequency Rate was 2.6, compared with 2.8 in 2018; while the Severity Rate was 0.05, unchanged on the previous year. Elecnor is very sorry to report that there was a fatal accident in 2019 involving its own employees in Africa. This tragedy has served to spur the Group on in its firm commitment to working to reach its target of zero accidents.

Main actions

• 1,236 internal works audits were conducted.
• More than 62,300 safety inspections were conducted throughout the Group, as a result of which more than 20,350 corrective measures were implemented.
• Training activities. Training actions were held in Spain for a total of 23,000 attendees, most of whom attended more than one training action. Training hours in the Occupational Risk Prevention area amounted to a total of 129,750, a 7.7% increase on the 120,484 hours offered in 2018. There are other technological and management training areas that also have an impact on Prevention, and that are not included in that total (qualifications/electrical permits, machinery operators, etc.). Actions were held abroad for a total of 26,800 attendees, most of whom attended more than one training action. Training hours in Occupational Risk Prevention amounted to a total of more than 145,500.
• Campaign for World Day for Safety and Health at Work to raise workers' awareness and disseminate the Group's commitment in this connection. Some key figures from this landmark event were:
  • o Recognition of 24 work centres which in 2018 logged excellent results in terms of safety.
  • o Award of recognition to Endesa for its work in Health and Safety in the Electricity Sector.
  • o Award of recognition to a sub-contractor for its engagement and improvements in Health and Safety.
  • o Induction of three new workers into the "Blue Jacket Club", a group of workers distinguished for their commitment to health and safety.
  • o A tribute to 9 workers in Spain who earned all four "PES Stars".
  • o Workshops in all business units in which the campaign was divulged. Communication was disseminated in all countries in which the Group is present.

• Some recognitions:

• o Celeo Redes Chile received the recognition granted by the Chilean Chamber of Construction's Safety Mutuality for the proper operation of its Occupational Health and Safety System in accordance with OHSAS 18001 standards.
• o Audeca won the ACEX awards, in Category A (Magnetic Beacon System) and Category B (Rotatruck. Truck rear signalling system).

• Other information on training:

Courses	Participants	Hours
Basic course	760	45,590
First cycle of the TPC	1,340	10,720
Second cycle of the TPC	1,402	13,070
Working at heights	2,205	24,115
Confined spaces	1,579	12,720
First aid	1,070	4,778

"Safety Excellence" project

The project continued to make progress along different action lines: risk management, awareness, organisation, learning, motivation and continuous improvement.

Some milestones:

• Contracts with subcontractors were revised, including new Occupational Risk Prevention clauses.
• The subcontractor evaluation and monitoring system was completed to detect those least committed. Accordingly, measures can be implemented for improvement, prioritising those of the largest scale and/or risk.
• Launch of REDUX project with advice from RACE (Spain's Automobile Club) concerning road safety.
• Mandatory use of the Notific@ application and web environment for notification and investigation of accidents and incidents.
• Design of a star-rating-based motivation system for works personnel that is rewarded by personal and financial recognition.
• Continuation of the "Risk Factor" programme, attended by 590 people with a total of 3,990 training hours.
• Development of a procedure to compile ideas for improvement (Ideas MAS), having presented a total of 448 initiatives in Spain.
• Start of phase two of the project in Spain and deployment of working groups in several countries.

The digital transformation of occupational health and safety

In 2019 initiatives were launched or consolidated within the framework of the Group's Digital Transformation project. Some of them are listed below.

• Use in Spain of the Notific@ app and web environment to notify and investigate accidents, and launch its implementation in various countries.
• Use in Spain of the SegurT app and web environment to put an end to safety inspections on paper.
• The PRP (Principal Risk Permit) tool has been almost 100% rolled out in Spain, and includes an app and web environment for its management and control. PRP enables brigades to identify key aspects to prevent serious accidents and errors in the implementation of work, before the work begins.

• Roll-out of e-coordina, an evaluation process carried out by OHS experts at various business units.
• Restructuring and update of Intranet.

Health monitoring

In general terms, Elecnor employees do not perform activities with a high rate or risk of occupational illnesses. In those activities in which there might be a risk of developing an occupational illness (work at nuclear plants, involving asbestos, plant protection products, etc.) the necessary preventive measures are implemented and health monitoring performed, including checking physiological parameters that may help detect any problems in those tasks that may harm employees' health and safety.

With regard to occupational illnesses, as mentioned above, 35 cases were recorded (30 men and 5 women), of which 31 corresponded to cases of malaria and dengue fever contracted in countries where these diseases are endemic, and the remaining 4 were due to musculo-skeletal disorders in Spain.

When Elecnor employees are working in areas where there are endemic diseases (malaria, dengue, yellow fever, typhoid, AIDS, etc.), these are tackled through vaccines or preventive/prophylactic measures, backed by the relevant information campaigns.

Awareness initiatives are implemented such as campaigns to combat AIDS and sexually transmitted diseases in various countries, with actions and campaigns to foster healthy habits (avoiding cardio-respiratory disease and musculo-skeletal disorders, nurturing a healthy and balanced diet, etc.), back training, etc.

The pilot physiotherapy programme to prevent musculo-skeletal injuries (first implemented in Madrid and Logroño) was expanded to include Barcelona, Bilbao, Valladolid and Badajoz.

14.4. Operating excellence

Elecnor has an Integrated Management System encompassing the following aspects: Environment, Quality, Occupational Risk Prevention, Energy Management and RDI Management.

The Management System is configured around the following broad criteria, on which basis specific commitments and actions lines are established by each specific sphere: strict compliance with applicable legislation and any other requirements binding upon Elecnor in the markets in which it operates; accurate knowledge of the nature and scale of environmental impacts, customers' requirements; the health and safety of all workers and collaborators; and improvements in competitiveness through RDI enabling it to contribute value and differentiation with respect to competitors.

The Integrated Management System Policy is available in the corporate website www.elecnor.com.

In 2019, multisite certification audits were conducted according to ISO standards 9001:2015 and 14001:2015. This is a single certificate for all of the organisations in the Elecnor infrastructures area that contains all of the scopes of the various activities and all of the work centres.

Quality management

Elecnor's strategy in connection with Quality Management is aimed mainly at strengthening customer satisfaction management and the process of continuous improvement.

In 2019, quality targets focused on improving risk and opportunities management in operating processes, optimising quality processes and achieving further progress in the quality control of critical suppliers.

Main achievements

• Implementing a new methodology for managing risks and opportunities in the various processes.
• Development of a new platform for managing procurements.
• Launch of the Quality and Environment Management System in Elecnor Chile and Elecnor Angola.
• Performance of the relevant internal audits and System Monitoring Committees.

Customers, at the heart of the business

Elecnor periodically measures customer satisfaction by means of digital surveys. This information enables it to gauge the degree of satisfaction with the services offered, as well as to identify the strengths and areas for improvement.

The results obtained in 2019 are similar to those obtained the previous year.

Satisfaction surveys	2018	2019
Number of surveys	453	688
Average score	8.17	8.32
  The most highly valued aspects 	Training and technical capacity  Degree of communication,  service and response Compliance with the safety requirements	Training and technical capacity Degree of communication, service and response Compliance with the safety requirements

Any customer complaints are managed in accordance with the "Internal and external communication and consultation" procedure that sets forth the system to detect non-compliances and opportunities for improvement, fielding complaints from customers and suppliers, implementing solutions, analysing the causes and defining efficient remedial and preventive actions.

In 2019, 129 customer complaints were filed, most of which were linked to technical management (49%), materials and equipment (26%) and workforce (9%).

All the complaints were properly managed within the established period.

Supply chain

Guaranteeing the most stringent quality standards to customers requires constant attention to and control of the supply chain. In this connection, Elecnor affords priority to those suppliers of materials and services that can have a significant impact on the final quality provided by the Group to its customers.

The Elecnor Group's suppliers are classified as suppliers of materials or suppliers of services. Elecnor currently has more than 3,000 approved suppliers at local, national and international level.

Elecnor's Quality Management, Environment and Compliance Systems comprise procedures, policies and manuals that describe supply chain management. These are the Quality Management Procedures:

• Procurement procedure. Defines the general procurement conditions, including specific quality, environment and compliance requirements, among others. These conditions must be accepted and fulfilled by suppliers wishing to work with Elecnor.
• Procedure assessing suppliers of materials/services. Describes the system for managing suppliers of important materials/services.
• Procedure for drafting agreements with sub-contractors. Establishes subcontracting conditions, including quality, environment, energy management and compliance requirements.
• Ethical code. Among the requirements expressly stated is the evidence by the supplier of commitments in relation to conduct comparable to those set forth in Elecnor's own Ethical Code. This condition is especially important in those countries considered to pose a risk by qualified international bodies. Elecnor's employees will ensure that its image, reputation and values are safeguarded by contractors and collaborating companies.

The main risks identified in the processes relating to the supply chain currently related to communicating requirements to suppliers, past-deadline delivery or faulty material. The risks identified are assessed and in accordance with the results actions are established to mitigate their effects.

In 2019, as a result of the risks and opportunities assessment, a logistics procedure was devised, along with various actions implemented in the procurements tool.

In the suppliers approval and assessment process, suppliers of materials/services classified as important are requested to provide documentation concerning quality, environment, energy management, occupational health and safety (risk prevention), compliance, RDI, data security and other documentation in regard to ethical, employment, social and environmental issues that suppliers may provide. Depending on the requirements fulfilled, the is afforded a score.

Some indicators

• 253 suppliers were approved in 2019.
• Within the framework of improvements to the environmental control of critical suppliers, 3 internal audits were conducted on site.
• With a view to starting to calculate Scope 3 of the carbon footprint, information was requested from certain suppliers.
• Re-assessment of 26 suppliers in accordance with the quality requirements established in the Management System.
• Commercial relations were not severed with any suppliers.

14.5. Commitment to the Environment

Elecnor aims to contribute actively and decisively to the construction of a sustainable, low-carbon future by generating renewable energies, implementing energy efficiency measures, reducing its carbon footprint and through proper environmental management.

In this connection, and with the aim of contributing to UN Global Compact Sustainable Development Goal 13 "Climate Action", Elecnor fosters the development of its activity in a sustainable manner adapted to climate conditions and always with the involvement and commitment of all persons belonging to the Group.

Environmental management

The commitment to the protection of the environment and efficiency in the consumption of energy resources remain common denominators in Elecnor's activities.

The environmental control mechanisms in place at the company are based on certified Environmental Management Systems and Energy Management Systems in accordance with ISO 14001:2004 and ISO 50001 standards. The Environmental Management System defines the procedure to identify, assess and record the environmental aspects originating in Elecnor's activities in order to determine which are significant.

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Elecnor S.A. has an Environmental Liability policy for its subsidiaries in Spain, the US, Canada, Brazil, Mexico, Venezuela and Chile. The figure of €20,000,000 is the general limit on the policy per claim and in the annual aggregate for all the policy guarantees and coverages.

The General Services area jointly managements the Quality Management, Environmental Management, Occupational Health and Safety (Risk Prevention), Energy Management and RDI of the organisations belonging to the Elecnor Group with the firm aim of extracting opportunities for improvement applicable to the various businesses and activities and thereby fostering synergies between them. In the Quality and Environmental Management spheres, there are 48 people focused on requiring and leading compliance with legislation, plans, programmes and SAQP ((Environment, Quality and Prevention System) documentation, taking all necessary actions to achieve this. These people are distributed between the General Services area and the various organisations of the Group, both in Spain and internationally, in order to ensure compliance with Elecnor's established Management Systems.

In 2019, environmental goals were focused on optimising environmental processes, improving the management of risks and opportunities in operating processes, and making headway to control critical suppliers and boost the Group's CDP rating.

Accordingly, during the year multi-site certification audits were performed in accordance with ISO 9001:2015 and 14001:2015 standards and the Environmental Management certificates were maintained at the following subsidiaries: Audeca, Deimos, Hidroambiente, Enerfín, Elecnor México, Elecnor do Brasil, Elecnor de Argentina, IQA and Montelecnor.

In the international sphere, the Quality and Environmental Management Systems have been implemented at Elecnor Chile and Elecnor Angola.

Moreover, Elecnor renewed its Verified AENOR CO² Environmental certification pursuant to standard ISO 14064-1 and its Energy Management System certification pursuant to standard UNE-EN ISO 50001:2011.

Also notable this year were the 2019 GRESB scores obtained by Celeo Redes Chile and Celeo Redes Brasil. GRESB is an independent international index that analyses companies' environmental, social and governance (ESG) performance. In the 2019 edition, Celeo Redes Chile and Celeo Redes Brasil ranked ninth and nineteenth, respectively, among the 393 infrastructure companies assessed. Furthermore, the results ranked Celeo Redes Chile as the world's top company within the electric power transmission infrastructure sector, and Celeo Redes Brasil as the world's second best electric power distribution company.

The fight against climate change

Generating electricity using renewable energy sources avoid the emission of greenhouse gases, the main culprits of climate change. In this connection, Elecnor undertakes projects in the areas of wind power, solar PV and solar thermal power, hydroelectric and biomass plants.

Climate change strategy

Climate change is a challenge in respect of which Elecnor has worked hard in recent years, in particular by calculating the carbon footprint in accordance with internationally accepted standards and by implementing measures to reduce GHG emissions within its scope of action. Elecnor also conducted a strategic diagnosis of adaptation to climate change based on the recommendations of the Intergovernmental Panel on Climate Change, in order to identify opportunities and risks in that connection.

On that basis, the Elecnor 2030 Climate Change Strategy was devised. With two main goals and three lines of action, it creates the framework for all the Group's actions to reduce greenhouse gas emissions, adapt to climate change impacts and tap into the associated opportunities.

The Group's climate change strategy aims to achieve two main goals:

• Mitigation: reduce GHG emissions by 25% by 2030 (as compared with 2014). The aim is to reduce emissions by around 1.6% every year.
• Adaptation: ensure the resilience of Elecnor's concessions business as climate change advances and become a leader in the sector thanks to the opportunities afforded by climate change.

There are three strategic actions lines (people, assets and knowledge) which derive in 22 climate change mitigation and adaptation actions, including aspects such as fostering training and awareness policies to help save and reduce energy, paper and water consumption by the workforce; a commitment to technology that enables unnecessary journeys associated with the business to be reduced; the gradual replacement of the company's energy-consuming equipment and vehicles by others with lower emissions; improving renewable energy facilities; and the commitment to best practices, among others.

Monitoring, evaluation and review of the climate change strategy

To ensure that the implementation of the strategy is attaining the expected results, Elecnor carries out periodic and systematic monitoring of the measures in place, as well as of the GHG emissions linked to the organisation's carbon footprint.

The initiatives carried out in 2018 led to a saving of 382,63 tCO2e. The saving achieved in 2019 will be reported in the next fiscal year.

Below are details of some of the actions that have a particular impact on annual savings achieved in each strategic axis

Strategic axis	Action	Objective	Annual saving of tCO2e	Scope of carbon footprint
People	Conference calls encouraged to avoid journeys	Reduction of greenhouse gas emissions associated with business travel avoided	225.56	3

Assets	Installation of timers for electronic devices and automatic off switches. LED lighting to replace existing fixtures	Reduce energy consumption associated with lighting and, consequently, the related emissions	113.99	2
Knowledge	RDI projects	Implementation of RDI projects linked to climate change	15.41	Not estimated

*New action not initially included in the strategy

Emissions

Carbon footprint

Since 2014, Elecnor has calculated its carbon footprint on an annual basis in accordance with internationally recognised standards by means of a tool that enables each organisation belonging to the Group to report its electricity consumption, fuel consumption, use of coolants, with the data broken down by offices, warehouses, work sites and plants. Moreover, the Group devises strategies and plans to reduce greenhouse gas emissions.

For the fifth consecutive year, Elecnor verified direct and indirect greenhouse gas emissions in all of its activities, in accordance with UNE ISO 14064-1:2012 standards. In 2108, Elecnor obtained the "Calculo y Reduzco" seal granted by Spain's Ministry for Ecological Transition's Office for Climate Change (OECC) as part of the National Register for Carbon Footprint, Offsetting and Absorption of CO2. Through this verification the Group has an independent and rigorous endorsement of the amount of GHG emissions caused by its activities, thereby seeking to improve its environmental and energy management.

Also notably, Elecnor is listed in the CDP international sustainability index, and obtained a B rating in 2018 and 2019 (above the average in the electric utilities sector and above the European average). This rating recognises Elecnor's strategy and management in the fight against climate change.

In 2019, for the first time, Elecnor included Scope 3 in the calculation of its carbon footprint, thereby ramping up its commitment to the environment. Accordingly, the Group has moved to address Scope 3 emissions, having managed to engage both suppliers and sub-contractors, as well as its own employees.

Elecnor's carbon footprint in 2019, in connection with Scopes 1 and 2, amounted to 63,096.03 tonnes of CO2e. Factoring in Scope 3 emissions (value chain), the organisation's total emissions amounted to 107,164.63 tCO2e.

Emissions (t CO2e)

Scope	2018	2019
Scope 1 Stationary and mobile combustion*	45,357.24	48,797.73
Scope 2 Consumption of electricity	16,964.96	14,298.30
Scope 1 & 2 totals	62,322.20	63,096.03
Scope 3	-	44,068.60
Suppliers and sub-contractors		19,827.26
Business travel		5,885.51
Commutes		17,836.95
Waste, water and paper		518.88
Total	62,322.20	107,164.63

*Fugitive emissions were counted, but not reported since they are only reported every three years due to their representing less than 1% of the total carbon footprint.

Elecnor's carbon footprint in 2019, in connection with Scopes 1 and 2, amounted to 63,096.03 tCO2e, and the ratio between emissions generated and number of hours worked was 2.0 kgCO2e/hour. This implies a 13.58% decrease compared with the previous year (2.3 kgCO2e/hour).

Examining Scope 1 and 2 emissions as a function of the type of facility where they were generated, work sites account for 76%, plants account for 20%, and offices and warehouses account for 4%.

As for Scope 3 emissions, suppliers and sub-contractors accounted for 45% of the total, commutes for 41% and business travel for 13%. Emissions from consumables and waste generated at the facilities accounted for just 1% of the total.

Mitigation through activities. Emissions avoided

The Group's electricity generation activity using renewable sources avoid the emission of greenhouse gases. Elecnor, by means of its Concessions Business, has holdings in 1,464 MW of renewable energy facilities in operation and construction in Spain, Brazil and Canada, broken down as follows:

Renewable energy	MW
Wind energy	1,299
Solar thermal energy	150
Solar PV energy	15
Total	1,464

Below are some of the most significant renewables projects awarded in 2019:

Wind projects

San Matías wind farm, Mexico. This involves the installation of eight wind turbine generators of 3.8 MW, providing 30 MW of installed capacity in an area of some 250 hectares.

The first wind farm in the Valencia region of Spain. Through Enerfín, the Group's wind power development subsidiary, Elecnor has commenced the construction of a new, 50 MW wind farm in the municipality of Cofrentes, in Valencia. This project, scheduled to come on stream in March 2020, will comprise 13 wind turbine generators. The project will provide clean energy for the consumption of 43,705 households, thereby avoiding 66,000 tonnes of CO² emissions. This wind farm is one of the projects awarded within the framework of the Valencia Regional Wind Power Plan, and it will be the first wind farm to be built in the region in the last 8 years.

La Monlora and La Sarda wind farms, Spain. Elecnor will build six wind farms in Zaragoza, with a total installed capacity of 231 MW. This project also includes the construction of three 132/30 kV sub-stations and two 132 kV power evacuation lines.

Vientos Patagónicos, Chile. This project consists of the installation of three 3.45 MW wind turbine generators, each with a height of 69 m, adding more than 10 MW to the Chilean Regional Electricity Grid. This project comes on the heels of the recent construction by Elecnor of the San Juan Wind Farm, located in the Atacama Region, with a total installed capacity of 184.8 MW.

Hydroelectric project

Nachtigal hydroelectric plant, Cameroon. By means of the 420 MW Nachtigal hydroelectric plant, the central African country will increase its installed capacity by 30%. Elecnor's work includes the installation and launch of seven 60 MW generators, the power evacuation sub-station and the ancillary systems (balance of plant - BOP)

Biomass project

Project in Ghent, Belgium. This project entails the construction of a new 19 MW electric power generation plant that includes steam production to provide service to an adjacent industry. It will be fuelled by recycled and re-usable demolition timber. The project is located in the port of the city of Ghent, in Belgium.

Note the change in regulations on solar PV power for self-consumption in Spain. Publication in the Official State Gazette (BOE) of 6 April 2019 of Royal Decree 244/2019, dated 5 April 2019, led to the regulation of self-consumption such that producers and consumers can benefit from the advantages of generating their own power.

Elecnor is working to adapt to the requirements of the market opened on the back of the new regulation. Since the Royal Decree's approval, 15 facilities have been adjudicated (the vast majority with installed capacities of less than 100 kW).

Consumption management

Generally, consumption increased in 2019 compared with the previous year, due mainly to the increase in the Group's activity.

The various energy consumptions are presented below.

Energy consumption (TJ)

	2018	2019
Natural gas	27.88	28.14
Diesel	54.13	37.05
Petrol	37.02	61.55
Gas oil	417.97	470.09
Biodiesel	64.48	53.57
Electricity	147.15	149.80
Non-renewable source	147.15	132.80
100% Renewable source	0	17.00*
Other fuels	1.96	2.88
Total	750.59	803.08

*The consumption of renewable energy reported in 2019 was at the centres in Burgos, Cádiz, Lugo, Madrid and Navarre, belonging to the wind power subsidiary Enerfín, which signed a contract to supply 100% renewable electricity.

Energy efficiency initiatives

Energy management is one of the Group's areas of activity. Elecnor is certified as an Energy Services Company (ESC), empowering it to develop projects to boost energy efficiency in buildings and facilities.

In 2019, 76,635 new street lights were added to the portfolio of energy efficient contracts. At present, Elecnor manages 283,190 street lights in 92 Spanish municipalities.

In this connection, we highlight the adjudication of the CLIME innovation and energy efficiency project aimed at improving street lighting in 58 municipalities in Spain's Castilla-La Mancha region. This project entails renewing the energy facilities in these municipalities and replacing their street lighting with LED lamps. The CLIME project implies an 82.36% saving in street lighting, a 61.79% saving in the indoor lighting of buildings, and a heat saving of 10.21%. The contract includes the maintenance of 83,398 street lights, 1,250 street light command and control centres and 983 buildings.

Meanwhile, internally, over the course of 2019, a number of energy-saving and energy efficiency actions were implemented, most notably:

• o Fleet renewal, including the organisation of new hybrid vehicles.
• o One-off modifications to the facilities at water treatment plants to reduce electricity consumption, installing more energy-efficient machines.
• o Installation of a conference calls system.
• o Courses in efficient driving practices to drivers of vans and heavy vehicles.
• o Installation of timers for electronic devices and automatic off switches.

• o LED lighting to replace existing fixtures
• o In the Páramo de Poza wind farms (Burgos) 100% of the lights in the control building and 20% in the wind turbine generators.
• o In the Faro-Farelo wind farms (Galicia) 50% of lights in wind turbine generators were replaced.
• o Energy audits at various drinking water treatment services, such as Pedraza and Campana de Oropesa.

Consumption of renewable energy

In 2019, the Group's wind subsidiary signed electricity supply contracts guaranteeing that the power supplied at both offices and in national wind parks is from 100% renewable sources.

In Brazil, the production of solar PV power in the Uberlândia Maintenance Base is already responsible for the production of 75% of the energy consumed at that unit. Between January and October 2019, 15.27 MWh were generated, meaning renewable energy consumption accounts for 0.7% of the total consumed at the facilities of Celeo Redes Brasil.

Other consumption

	2018	2019
Mains water consumption (hm3)	1.7	2.3

The Group also provides water infrastructure specialist services. Celeo, the Group's Concessions subsidiary, has three water treatment subsidiaries located in the Spanish region of Aragón, called SADAR, SADEP and SAPIR, comprising 39 water treatment plants. In 2019, they treated a total of 6.5 hm³ of water.

Elecnor uses the following raw materials: steel, cables, insulators, electrical panels, cells, pumps and pipelines. The company currently implements initiatives to recycle and re-use some of these, such as cables and steel.

Waste management

Elecnor's Environmental Management System includes the protocol for managing waste generated in order to ensure adequate protection of people's health and the environment, as well as compliance with applicable legislation. The waste generated is treated in accordance with current legislation for authorised management, seeking the best available techniques for recycling, wherever possible.

Waste (Kg)	2018	2019
Non-hazardous waste	27,817,757	32,339,288
Hazardous waste	623,073	292,693

Nurturing the circular economy

Consistent with the change of economic culture represented by the circular economy, Elecnor takes measures to reduce the use of natural resources by means of a commitment to decarbonisation and electrification, or the most sustainable use of natural resources by fostering the use of more efficient and cleaner technologies

and processes. In addition, it supports research to develop new technologies and present new solutions for the use of waste and fosters responsible consumption through environmental awareness programmes. In this connection, based on the Catalogue of Waste Usable in Construction compiled periodically by the Ministry for Ecological Transition, the managers of each project establish a list of potential recycled and recyclable materials, as well as those with an ecological label.

Other initiatives

Enerfín, the Group's wind power subsidiary is highly active in its efforts to promote the principles of reducing, re-using and recycling at its offices and wind farms. Below are some of the initiatives introduced:

• Use of recycled paper and FSC (Foral Sostenible Council).XXX
• Campaign "Use both sides of paper" to reduce the number of printed sheets.
• Continuing with the campaign "We are thinking of a better world", 100% recycled bottles were purchased linked to the "Water to change the world project" by Aura, a social enterprise that spends its dividends on bringing water to those who don't have access to it, through projects in Cambodia, Cameroon and Ethiopia.
• More efficient monitoring and control of printing by means of PaperCut user registrations in the main office printers to reduce paper consumption.
• Measures to reduce plastic consumption.

Through Audeca the company also took part in awareness campaigns on waste in various municipalities.

For its part, Celeo continued with the "Celeo Recycles" campaign, whose purpose is to raise awareness about responsible consumption, re-use and recycling of waste, and in which 277 kg of plastic and 123 kg of paper were recycled. Moreover, in Chile it carried out a participative environmental improvement project at Escuela Charrúa, the only school in the locality of Charrúa, very close to the sub-station of that name. The initiative, involving 135 pupils, consists of environmental awareness drives and the installation of a recycling centre to separate and recycle waste.

Management of biodiversity and protection of the natural environment

The Elecnor Group has a positive impact on biodiversity by means of Audeca, the subsidiary focused on the preservation of protected areas and the conservation of the natural environment.

Some of the actions implemented by Audeca in 2019 are outlined below.

Restoration of the Zapardiel river in Lomoviejo (Valladolid)

Within the framework of this project, river restoration actions were implemented to improve the surface water masses in the section of the Zapardiel river that passes through the public land area known as "La Dehesa, Las Navas, Mullidar and Canalijas" in the municipality of Lomoviejo (Valladolid).

The main actions were the removal of dykes, connection of the main course of the river with the former mill canal and the old abandoned arm enabling water to flow through this former channel, and environmental recovery by means of the plantation of small groves of riverbank tree species along the course of the river.

Environment 4.0 Project

In consortium with INCLAM and ALVAC the Environment 4.0 RDI Project commenced, consisting of optimising brush clearing works to maintain roads by means of the analysis of weather forecast data, teledetection and other multi-spectral sensors. Moreover, the project seeks to boost the resilience of roads to climate change. Consequently, a series of scenarios will be examined in which action in connection with vegetation impacts on the state of conservation of especially vulnerable areas.

This project is backed by Spain's Centre for the Development of Industrial Technology (CDTI), supported by the Ministry of Science, Innovation and Universities and co-funded by the European Regional Development Fund (ERDF).

The rest of Elecnor's activities do not generate significant impacts on biodiversity, except those projects implemented in areas in which species of flora and fauna may be affected. In these cases, the Group complies with the legislation applicable in each country where it operates.

In addition, when so required by the environmental assessment of the project, an environmental monitoring plan is executed, including periodic controls of the impacts and preventive or remedial measures taken to reduce them.

With regard to the Group's wind projects, the potential impacts on the environment (including flora and fauna) are taken into account throughout every phase of the project. Once the facility has entered into service, by means of a proper environmental supervision programme, the actual impacts are evaluated and, where necessary, any suitable measures are taken.

A specific example is Aerogeneradores del Sur, S.A, which owns La Herrería y Pasada de Tejeda wind farms in Cádiz, managed by Enerfín, and carries out remedial environmental measures including: a preventive shutdown of the wind turbines in situations of risk to birds, continuous monitoring of birds, periods of increased monitoring due to mass influx of birds during migration and ongoing annual control of the presence of carrion in the area in which the wind farms are located. The final goals of these measures are to minimise bird mortality in the various wind farms and ascertain the degree to which this mortality affects local populations.

For several years Enerfín has been managing the Malpica Wind Farm (La Coruña, Spain), part of which is located in the Red Natura environmental protection network, which means it is necessary to have various monitoring plans in place for birds and bats, as well as a plan for morphological, soil and plant restoration or the monitoring of noise, among others.

In October 2019, the second year in the wind farm's operating phase was completed without having generated significant impacts on the fauna and immediate surroundings of the wind farm.

During the year, no projects were carried out inside or near protected areas in any of the countries in which Elecnor manages wind farms.

The main impacts on biodiversity from the operation of electricity transmission lines by Celeo Redes subsidiaries in Brazil and Chile relate to the removal or loss of vegetation. The impacts are managed through an environmental impact assessment that defines mitigation, repair and compensation measures. The mitigation of impacts relating to the operation of electricity distribution lines is achieved through the optimisation and reduction of interventions to the minimum necessary, as well as the environmental regeneration of the areas affected.

In this connection, in Chile 65.49 hectares were replanted as part of the environmental commitments linked to AJTE (Alto Jahuel Transmisora de Energía) and CHATE (Charrúa Transmisora de Energia) projects, and in Brazil 35.7 hectares were restored under the framework of electricity transmission projects in Cantareira (15.63 ha) and Jaurú (20.4 ha).

Environmental awareness

At Elecnor a number of initiatives were launched to raise environmental awareness, some at global level and others at local level.

• Antesdeimprimir #Responsabilidad #Compromiso #MedioAmbiente (#Beforeyouprint #Responsability #Commitment #Environment). A new signature was created to raise awareness about whether it is really necessary to print e-mails and documents received daily in corporate in-boxes.

• To mark the 4th anniversary of the approval of the 2030 Agenda, the Group joined the campaign #aliadosdelosODS (#partnersofSDGs) to help familiarise people with the SDGs and encourage them to work towards them.
• World Environment Day. Elecnor marked this day with a video that conveyed its commitment to the protection of and respect for the environment, disseminating the Group's Climate Change Strategy.

• CombatirLaContaminaciónDelAire (#CombatingAirPollution). This is an initiative rolled out by Elecnor in Angola to encourage people to cooperate with a venture such as planting a tree, using a non-polluting means of transport, and evidencing a commitment to reduce this environmental problem.

• On World Car Free Day, a competition was held to promote the use of more sustainable means of transport.
• As evidence of our commitment to reduce plastic, the company stopped buying water bottles made of that material for its meetings. Instead, jugs and recyclable glasses were provided and, when necessary, 100% recycled water bottles are used.
• Waste separation in the cafeterias and coffee corners of some offices.
• Audeca took part in the IMPERDIBLES_04 initiative, a festival offering various innovative experiences in connection with the Sustainable Development Goals.

14.6. Technology, innovation and new business opportunities

Elecnor's digital transformation. An efficient management model that aligns processes, technologies and people.

In 2016, the Elecnor Group commenced a strategic digital transformation project in order to effect cultural change, enhance processes, and boost operating efficiency and competitiveness. Since then Elecnor has managed to develop a transversal technological innovation process for management that is now in a mature phase.

INITIATIVES

This project focuses on the design, digitalisation and roll-out of an innovative management model, with organic capacity to create value in a sustainable manner over time, with technology and people as the drivers of change.

To ensure the project's success, the Digitalisation Office was created to ensure compliance with the established goals and measure progress by means of certain indices such as the Digitalisation Index or the Adoption Index.

Through various working panels, the Office coordinates all the initiatives for innovation in processes, technologies and people. Each panel examines a series of initiatives on a specific matter and involves the

required number of people within the organisation to reach a decision on which process to implement and the most suitable IT medium.

The decision adopted is assessed by the Operating Committee, which includes a representation from all areas of the company and contributes a transversal business approach.

Lastly, the Operating Committee refers the decision to the Steering Committee, responsible for analysing the next steps and, where applicable, allocate the necessary resources to carry out the relevant initiatives.

Achievements 2019

• Compliance with standards and requirements defined in connection with time frames, progress, milestones or participation.
• Digitalisation rate of 79.9%, compared with 71% in the previous year.
• A significant increase in the number of initiatives sponsored by the Digitalisation Office.
• Headway in process digitalisation, both transversal (procurement management, financial reporting, closing estimates, new Intranet, etc.) and business processes (control of large construction projects, framework agreement management, work reports, CRM, etc.).
• Launch and activation of initiatives to improve and digitalise tax management, consolidation, insurance management, clocking in, management of gas contracts, various aspects of OHS and fleet management, among others.
• Continuity of initiatives regarding compliance, security and cyber-risks.
• Generation of synergies, reduction of technological risk and enhancement of intra-entrepreneurship within the organisation.
• Incorporation of Celeo with specific initiatives within the Digitalisation Office.
• 10 working panels and +50 initiatives underway.
• Increased levels of involvement: +320 participants, +5,200 users, +7,000 third parties, 800 working sessions, +70 training sessions and 18 committee meetings held.

In 2020, progress will continue to deploy the changes and tools designed and implemented at the various business units and some of the Group's subsidiaries. The aim is to ramp up the adoption of the change and materialise the benefits sought by the company as a whole. At the same time, new initiatives will be added to cover business areas and processes with scope for improvement.

Innovation and new business opportunities

Through innovation, Elecnor aims to guarantee the company's sustainability, competitiveness and differentiation by contributing greater added value to the services it provides to its customers.

The Group's main strategic lines of RDI target the following areas of activity.

Infrastructure Energy Facilities

• Railway
• Electricity transmission/distribution
• Gas transmission/distribution
• Roads
• Construction and building solutions
• Singular projects

Environment Water

• Management and treatment of waste and waste-to-energy
• Carbon capture systems (CCS)
• Soil decontamination
• Improvements in efficiency, O&M and management of plants

• Singular projects

• Renewable/conventional generation

• Sub-stations
• Energy storage systems
• Hybrid fossil fuel + solar PV systems
• Biomass
• Construction solutions
• Improvements in efficiency, O&M and management of generation plants

• Singular projects

• Systems for desalinating sea water and brackish water

• Waste water treatment systems
• Drinking water purification systems
• Water transport and distribution networks
• Improvements in efficiency, O&M and management of plants and water networks
• Singular projects

Innovation is a part of the Group's Integrated Management System. Elecnor, S.A. and Audeca are currently certified in accordance with UNE standard 166002:2014.

• Electrical installations
• Energy services
• Safety
• Buildings and large facilities (ports, airports, industry, hospitals, etc.)
• Construction solutions
• Smart Cities
• Singular projects

Achievements 2019

• Maintenance of UNE 166.002 certification for RDI Management Systems of Elecnor and Audeca.
• Launch of INNOVA 2019 internal call for proposals for RDI project funding.
• Performance of various projects with customers, most notably the Entorno 4.0 Project by Audeca for Ministry for Development and the Appide Project by Elecnor Deimos in partnership with Gudnus.
• A technical workshop on Industry 4.0 and RDI was attended by 26 persons from the Group.

Innovation projects

In 2019, the Group was involved in more than 30 projects, of which 14 commenced in the year. In some of these projects, Elecnor is collaborating with various universities and technological centres and institutes, including Universidad Politécnica de Cartagena, CEBAS-CSIC, Universidad de Valladolid and UPV/EHU.

Highlighted projects

LED Project

The project's main goal is to develop and implement a passenger information system based on LED technology. This system is aimed at helping people to consult information at public transport stations and on public thoroughfares in towns and cities, so that the visual, technological and energy quality offered by LED lighting enables a step forward in visual information (with digital panels and lighted signs) towards a high-efficiency, versatile system offering a broad range of possibilities for use.

Smart Cities Project

This project consists of the design, development and integration of a new model of smart cities by means of automating irrigation and lighting systems.

This project is within the framework of the process to deploy the smart cities concept. The aim is to integrate autonomous watering systems in parks by means of a centralised system, allowing local operation in each park and in the command centre. Accordingly, resources are optimised and, using historical data, it is possible to make suitable tweaks to ensure continuous improvement in efficiency terms.

Moreover, the system can also read 100 temperature and humidity sensors over a Siemens IoT 2040 gateway through its open source programming system. This programming consists of capturing signals and processing and delivering data to the cloud by means of the SIGFOX protocol.

In addition, the project tackles the control aspect of street lighting and pilot plans for waste integration via an online platform with global access.

Meanwhile, Elecnor Deimos, the Group's technological subsidiary, is permanently involved in innovation projects, some of which are already generating business for the Group.

Some examples:

• Operating space monitoring systems commenced in international R&D projects in the sphere of the ESA and the EU.
• Kyros, a positioning-based service with approximately 10,000 mobile units in operation, began with an innovation project and subsequent product action drives.
• Marketing of a complete satellite land segment, the NAOS project, in which Deimos is the lead contractor. This project is based on developments made within the sphere of the ESA and the specific development of the ground segment of Deimos-2

Innova 2019 calls for proposals

Innova is the Elecnor Group's platform for proposals for RDI project funding. Its aim is to align RDI with the development of new business for the Group, to boost competitiveness, achieve early identification of RDI projects and enhance internal collaboration.

All Elecnor Group organisations based in Spain and foreign subsidiaries can apply for funding for RDI projects.

No. of proposals submitted: 4 No. of projects approved: 2

Highlighted project

Breaking the barriers of energy storage at wind farms

Renewables are the future of the energy sector. This, coupled with the fact that the vast majority of renewables present a problem of intermittency, means it is vital to develop new technology to integrate renewables on a large scale without compromising the quality and reliability of the electricity supply. Accordingly, it will be possible to dispense with the known back-up technologies (primarily thermal plants), which are the biggest emitters of greenhouse gases.

This technological revolution is spearheaded by the batteries sector, which is growing exponentially on the back of the economy electrification (electric vehicles, electrification of buildings, renewable energies, etc.).

In this context, the least advanced area is that of battery-assisted wind farm management, so that, by means of a pilot project, Enerfín aims to develop a control system to efficiently develop a battery and wind project.

The control system in development will enable Enerfín to boost its technological excellence, both as a developer and as an operator of wind farms.

The project targets the design, simulation, implementation and optimisation of a novel, integrated windbattery control system to manage the power generated by a wind farms in accordance with the conditions in the electricity market and the farm/battery at any given time (the control system will take into account both the wind power generation uncertainty and the market uncertainty).

Innovating through startups

Collaboration with startups enables Elecnor to access greater knowledge, develop innovative solutions and create new business opportunities that may contribute added value to customers.

Along these lines, Elecnor again took part in the BIND 4.0 project for the acceleration of startups within the framework of Industry 4.0. Backed by the Basque Agency for Business Development, Elecnor is one of the programme's technological partners, along with other large corporations.

Since 2018, Elecnor Deimos has held a stake in the share capital of the Anglo-Danish startup ORBEX, which focuses on the development of small satellite launchers. It is also involved in developing key areas of the launcher, such as the guidance, navigation and control system, the on-board software or the ground control segment.

Membership of RDI associations and platforms

• • An associate member of Eraikune Construction Cluster in the Basque Country. Eraikune helps boost the competitiveness of companies in the Construction Industry by means of training, innovation and internationalisation.
• • Founding member of Instituto Tecnológico de la Energía and, at present, member of its Governing Council. This association also affords access to the REDIT network of technological institutes in Valencia (Red de Institutos Tecnológicos de la Comunidad Valenciana), a private, non-profit organisation that has 11 associate members and offers a broad range of advanced RDI services.
• • We belong to the R&D committees of TEDAE (Patronal Española de Empresas Tecnológicas de Aeronáutica, Espacio y Defensa), the European Association of Remote Sensing Companies, the European Association of Space Companies Eurospace and the Open Geospatial Consortium.

14.7. Responsible management

Corporate Governance

Elecnor fulfils the requirements established in Spanish Companies Act and the Code of Corporate Governance for Listed Companies issued by the National Securities Commission⁴ .

⁴ This information is available under Corporate Governance in the Investors section of the website www.elecnor.com

Ownership structure

Elecnor S.A. is controlled by a group of shareholders comprising ten family groups that act as the company's unit of decision and control, instrumented by means of the company Cantiles XXI, S.L.

Under the heading "Other" are shareholders with an insignificant percentage stake (less than 3%), as well as own shares in Elecnor, S.A., which accounted for 2.67% at 2019 year-end.

Governance structure

The governing bodies of the Parent are its General Shareholders' Meeting and the Board of Directors. The Executive Committee, Audit Committee and Appointments and Remuneration Committee report to the Board of Directors.

The General Shareholders' Meeting was held on 22 May 2019, with an attendance rate of 81.66%.

Board of Directors

15 directors 2 Female directors 10 Proprietary directors 3 Independent directors 1 Executive director 1 External director

12 Meetings Board of Directors

100% attendance Meetings of the Board

Director name	Position on the Board	Professional category	Date last appointed
Jaime Real de Asúa Arteche	Chair	Proprietary	01/06/2018
	(non-executive)
Fernando León Domecq	Vice-Chair	Proprietary	01/06/2018
Ignacio Prado Rey-Baltar	Vice-Chair	Proprietary	01/06/2018
Rafael Martín de Bustamante Vega	Director and Chief Executive Officer	Executive	16/05/2017
Joaquín Gómez de Olea y Mendaro	Secretary	Proprietary	18/05/2016
Cristóbal González de Aguilar Alonso-Urquijo*	Deputy-Secretary	Proprietary	22/05/2019
Fernando Azaola Arteche	Director	External	01/06/2018
Miguel Cervera Earle	Director	Proprietary	01/06/2018
Isabel Dutilh Carvajal*	Director	Independent	22/05/2019
Irene Hernández Álvarez	Director	Independent	01/06/2018
Juan Landecho Sarabia	Director	Proprietary	01/06/2018
Miguel Morenés Giles	Director	Proprietary	01/06/2018
Gabriel de Oraa y Moyúa	Director	Proprietary	01/06/2018
Rafael Prado Aranguren	Director	Proprietary	01/06/2018
Emilio Ybarra Aznar*	Director	Independent	22/05/2019

*Re-appointed in 2019

Board of Directors' Committees

Executive Committee

The main purpose of the Executive Committee is to analyse, prior to the monthly meeting of the Board, the performance of the company and its businesses, in accordance with the strategic policies established by the Board of Directors, reporting the content of its meetings to the Board's plenary session, as per the Committee's regulations.

Name	Position	Type
Jaime Real de Asúa Arteche	Chair	Proprietary
Fernando Azaola Arteche	Secretary	External
Fernando León Domecq	Director	Proprietary
Rafael Martín de Bustamante Vega	Director	Executive
Miguel Morenés Giles	Director	Proprietary
Cristóbal González de Aguilar Alonso-Urquijo	Director	Proprietary
Executive Committee	Number	% of total
Executive directors	1	16.67%
Proprietary directors	4	66.66%

External directors 1 16.67%

Committee meetings	22
--------------------	----	--

Audit Committee

This committee supports the Board in the supervision of accounting, tax and financial information, internal and external audit services, compliance, internal control and risk management.

Name	Position	Type
Irene Hernández Álvarez	Chair*	Independent
Miguel Morenés Giles	Secretary	Proprietary
Emilio Ybarra Aznar	Director	Independent
Ignacio Prado Rey-Baltar	Director	Proprietary
Isabel Dutilh Carvajal	Director	Independent
* Appointed Chair in 2019
Audit Committee	Number	% of total
Independent directors	3	60%
Proprietary directors	2	40%
Female directors	2	40%
Committee meetings	11

Over the course of the year, the Audit Committee performed the following actions:

• The review of annual, half-yearly and quarterly financial information published in markets and the goals and forecasts at year end.
• The monitoring of the main risks with the potential impact on the statement of profit and loss and other material matters relating to the annual accounts, the Risk Management System and the Internal Audit system.
• The relationship with the Group's external auditors, supervision of their independence and approval of fees.
• Supervision of the Compliance System and the activities of the Compliance Committee.
• Monitoring of the Group's Digital Transformation Project.
• Information to the General Shareholders' Meeting
• Preparation of a new Regulation for the Committee itself and its submittal to the Board for approval.

Comprehensive information of the Report on the Activities of the Audit Committee is contained in the Annual Corporate Governance Report.

Appointments and Remuneration Committee

This Committee assesses the competencies, knowledge and experience necessary in the Board. It proposes and reviews the remuneration policy for directors and Management.

Name	Position	Type
Emilio Ybarra Aznar	Chair	Independent
Fernando León Domecq	Secretary	Proprietary
Jaime Real de Asúa Arteche	Director	Proprietary
Isabel Dutilh Carvajal	Director	Independent
Appointments and Remuneration Committee	Number	% of total
Proprietary directors	2	50%
Independent directors	2	50%
Female directors	1	25%
Committee meetings	10

The Appointments and Remuneration Committee has carried out the following actions:

• It continued to analyse the structure of the Board with the contribution of Spencer Stuart as an external consultant.
• Examination of the directors' scores.
• Review of the directors' questionnaire in relation to conflicts of interest.
• The action plan resulting from the assessments of the Board and its Committees continued, and further progress was made in compliance with recommendation 36 of the Code of Good Governance.
• Prior analysis of the Board of Directors' needs in connection with the appointment and re-appointment of directors which it has conveyed to the Board of Directors.
• Review of the models for assessment of the Board, its Chairman and its Committees, and assessment of the Committee itself.
• It was agreed to propose the re-appointment of Isabel Dutilh Carvajal and Emilio Ybarra Aznar as independent directors for a term of four years. Also at the Board of Directors' behest, the Committee reported favourably in connection with the re-appointment as a Proprietary Director of Cristóbal González de Aguilar Alonso-Urquijo, for a term of four years.
• The directors' remuneration policy was submitted to the General Shareholders' Meeting of 22 May 2019 and approved for the years 2020-2021 and 2022. In this connection, the justifying reports were prepared for the Board in connection with both the amendment of article 12 of the Bylaws and various articles of the Board's own Regulations.
• Proposed annual remuneration, fixed and variable, for the Executive Committee and Remuneration Reports for 2018.
• Proposed remuneration policy for the Management Team and its application, including the proposed variable remuneration linked to the targets set.
• Review of the Succession Plan for the Chairman, Chief Executive Officer, and Management, including a management assessment of the Management Committee.
• The work-life balance, equality, allowances and international mobility in connection with the Group's expatriates, along with the Talent Plan, were examined.
• A training plan for the Board of Directors was implemented.
• Moreover, in compliance with CNMV guidelines and with the Code of Good Governance, a new Regulation for the Committee itself was approved.
• The Board was apprised of all the Committee's activities, and the directors were provided with a copy of the minutes of all its meetings and the related appendices.

Comprehensive information of the Report on the Activities of the Appointments and Remuneration Committee is contained in the Annual Corporate Governance Report.

Selection of Directors and Board diversity

Elecnor has a "Policy for the Selection of Directors and Board diversity", available on the company website, which outlines all the measures adopted in relation to the selection of directors, diversity policies in connection with gender, age, experience, etc. This policy was applied in the appointment of a second female Independent Director in 2018.

This policy establishes that the Board of Directors and the Appointments and Remuneration Committee will be responsible for the selection of members of the Board of Directors.

Procedures for this selection will ensure that a diversity of experience, knowledge, competencies and gender is fostered; and that, in general, there are no implicit biases that might imply any kind of discrimination.

In particular, in no case must the selection procedures imply discrimination against the selection of female directors, so that the company can move closer to its Corporate Governance targets.

Accordingly, when the Appointments and Remuneration Committee or the Board itself, where applicable, seeks a professional profile, it will first take into account corporate interests, but when faced with two similar professional profiles it will opt for whichever belongs to the gender that is least represented.

Within the framework of this policy, in 2018, the second female Independent Director, Irene Hernández Álvarez, was appointed; Ms Hernández Álvarez was designated Chair of the Audit Committee in May 2019. On the same date, Isabel Dutilh was re-appointed as an Independent Director.

With regard to the goal of the number of women directors on the Board accounting for at least 30% of the total in 2020, the Company's Board of Directors continues to work in this connection, with the support of the Appointments and Remuneration Committee, and fostering the actions necessary to ensure that this goal is achieved as soon as possible.

In compliance with legal stipulations, the Board of Directors of Elecnor, S.A. compiled the Annual Corporate Governance Report for the year ended 31 December 2019. Said document is available on the CNMV and Elecnor websites amounted to.

Remuneration Policy

On 15 March 2017, at the proposal of the Appointments and Remuneration Committee, the Board of Directors of Elecnor approved the Remuneration Policy corresponding to the years 2017, 2018 and 2019.

Total remuneration accrued by the Board of Directors of the Elecnor Group in 2019 amounted to Euros 5,199.9 thousand, including remuneration deriving from their executive functions (CEO) and their non-executive functions.

The table below shows a breakdown of this amount, in thousands of euros, on an individual basis for each member of Elecnor's Board of Directors. This breakdown is also available in the Annual Report on Remuneration to the directors of the Company, published by the National Securities Market Commission (CNMV) and the corporate website.

Fixed remuneration	Per diems	for sitting on Board committees	Salary	Short-term variable remunerati on	Long-term variable remunerati on	Compens ation	Other items	Total in 2019
143.5	18	37.5					282.5	481.5
143.5	18	37.5					12.5	211.5
143.5	18	15					12.5	189
143.5	18	25	568	1,014			12.5	1,781
143.5	18						32.5	194
143.5	18	25					12.5	199
143.5	18	25					12.5	199
143.5	18						12.5	174
143.5	18	29.4						190.9
143.5	18	18						179.6
143.5	18						86.3	247.8

Miguel Morenés Giles PROPRIETARY	143.5	18	40	12.5	214
Gabriel Oraa y Moyúa PROPRIETARY	143.5	18			161.5
Rafael Prado Aranguren PROPRIETARY	143.5	18			161.5
Emilio Ybarra Aznar INDEPENDENT	143.5	18	32.5		194

On 22 May 2019, a majority of shareholders at General Shareholders' Meeting of Elecnor agreed to approve the Remuneration Policy for directors of Elecnor, S.A. for 2020, 2021 and 2022 (hereinafter, the "Policy"), agreed by the Company's Board of Directors at its meeting on 27 March 2019, at the proposal of and subject to a prior justifying report by the Appointments and Remuneration Committee of Elecnor, in its session of 18 February 2019, establishing the maximum amount of annual remuneration to all directors, for all their duties, executive and non-executive, included in the aforementioned Remuneration Policy. This maximum amount was set at Euros 10 million and will remain valid unless and until a modification is approved by shareholders in a General Shareholders' Meeting.

This new Policy aims to reduce potential mercantile and tax risks emerging in the future in relation to the remuneration of Elecnor directors in the event of a change of legislation, as occurred at non-listed companies.

The Policy is governed by the following guiding principles:

• Moderation: remuneration must be reasonable, in accordance with trends and references of similar companies and in proportion to the Company's situation and the economic context at each given time.
• Suitability: the Policy is designed to attract, motivate and retain directors. It rewards directors' quality, dedication, responsibility and knowledge of the business, as well as their professional track record and commitment to the Company.
• Profitability and sustainability: remuneration to directors' performing executive duties will provide an incentive for performance and reward value creation in the long term.
• Transparency: the design, establishment and application of the Policy will be implemented in strict observance of transparency. In particular, the Company will make available to shareholders, at the General Meeting, this Policy and the related Report, and it will be outlined in both the notes to the Company's annual accounts and its Annual Corporate Governance Report.
• Safeguarding shareholders' interests

Both the new Policy and the Annual Report on Remuneration to the directors of the Company are available on Elecnor's corporate website.

Board of Directors' Evaluation

The Company's Board of Directors evaluates, by means of various questionnaires to be completed by all of its members, its own activity and that of its Committees, as well as the activity and actions of its Chair, Secretary and Chief Executive Officer, pinpointing the strengths and areas for improvement and applying the adequate remedial measures. Said questionnaires are reviewed by the respective Committees and the Appointments and Remuneration Committee reviews the questionnaire completed by the Board and the Chair.

Said questionnaires include the evaluation of areas such as the degree of compliance with targets, value creation, the strategy, composition and dynamic of the Board, risk management, transparency and relations with shareholders, Corporate Governance and Corporate Social Responsibility, the operation of the Board Committees and the duties of the Chair of the Board.

The annual evaluation performed by members of the Board of Directors in 2019 did not give rise to material changes in its internal organisation, procedures and/or activities.

Organisational structure at 31 December 2019

On 17 December 2019, Celeo Concesiones e Inversiones, S.L., became an investee of the Elecnor Group after a strategic partnership was arranged with the Dutch group APG, which manages the world's second-largest pension fund. This partnership implied the entrance of APG in the share capital of Celeo Concesiones e Inversiones, S.L., which is now jointly controlled by Elecnor (51%) and APG (49%).

Risk management

Elecnor is exposed to various risk factors linked to the sectors in which it operates and the long list of countries in which it is present, either consistently or by means of one-off projects.

The Group continually manages and prevents these risks, reducing to acceptable levels the probability of their materialising and mitigating their potential impact, where applicable, on business volume, profitability and efficiency, reputation and sustainability.

For this purpose, the Group has a structured and dynamic Risk Management System the main pillars of which are as follows:

• Continuous risk identification and evaluation and prioritisation.
• Identification of the management and control mechanisms and tools in place in connection with the main risks and assessment of their efficacy.
• Continuous improvement of risk management by means of the development and implementation of initiatives and projects aimed at enhancing management mechanisms and tools.
• Permanent supervision and monitoring of the System.

These management and control mechanisms and tools are integrated in the organisation's various processes so as to operate continuously in the daily course of business, without prejudice to other standalone initiatives and actions that may be determined for each individual case.

Elecnor's main risks are grouped into five broad categories:

• Governance risks. Relating to the organisation's governance structure and method (structure and composition of the governing body, risk management, social responsibility and sustainability strategy and management of stakeholders' expectations).
• Strategic, planning and economic environment-related risks. Those linked to the main strategic variables and decisions, with the manner in which the strategy is executed and with movements or changes in the economic environment that might have a material impact on the organisation's activities and compliance with its goals. These include:
  • o Business model.
  • o Managing and fulfilling the daily requirements of customers.
  • o Growth.
  • o Sub-contracting strategy.
  • o Business concentration.
  • o Changes in the market, industry and competition.
  • o Laws and regulations.
  • o Political or social situation.
  • o Changes in exchange and interest rates.
• Operating risks. Comprising the manner in which the organisation carries out its activity and administers its resources in accordance with the established processes and procedures. These include, among others, risks relating to the management of projects, management and maintenance of assets, supply chain,

commercial management, financing, credit, liquidity, financial and budget planning, legal aspects, human resources, information systems, etc.

• Reporting risks. Risks relating to information at both internal and external level, including risks ranging from the capture and processing of information to the preparation of reports and distribution thereof to designated recipients, whether management reports or mandatory reports (annual accounts, reports and tax filings, etc.).
• Compliance risks. Relating to the mechanisms in place to ensure compliance with laws and regulations and with the organisation's policies and procedures, emphasising areas such as the promotion and consolidation of the culture of compliance, management of risks of this kind, communications or incident management.

With regard to Compliance risks and within the framework of its Compliance System, the Group has identified those situations in which, in accordance with the provisions of Spain's current Criminal Code and equivalent local regulations, legal persons may be criminally liable for certain offences committed by their employees or by certain related parties. Accordingly, the Group has implemented the necessary controls to ensure adequate prevention and management of the risk that such situations might arise.

Due to the very nature of these risks, inasmuch as they imply a potential criminal liability, their possible impacts would be both short- and long-term, so the Group lays particular emphasis on preventive management in this regard.

The main risks associated with these offences potentially imputable to legal persons and that could potentially affect the Group are described below:

Type of risk	Impact
Foreign citizens and human trafficking	Imposition of forced labour or services, slavery or similar practices and helping persons to remain unlawfully
Bribery and corruption	Inducement to lack of impartiality or obtaining undue benefits by delivering or promising gifts, favours, etc.
Natural resources and environment	Failure to comply with laws, legal provisions or regulations
Taxation authorities and Social Security	Evading taxes or Social Security contributions (including false accounting) and improperly obtaining grants, aid or funds
Money laundering	Using, performing transactions with or concealing the unlawful origin of goods obtained through criminal activity
Financing of terrorism	Performing activities with goods or securities in the knowledge that they will be used in terrorist activities
Market and consumer fraud	Deceiving in order to make a profit, changing prices, disseminating, revealing or passing on trade secrets and using insider information
Industrial and intellectual property	Profit from goods protected by industrial and/or intellectual property rights without the rights holder's consent
Discovery and revelation of secrets	Discovering secrets or breaching privacy or using private information without permission

IT damage	Erasing or damaging computer data or hampering the operation of systems
Illegal financing of political parties	Performing donations or making contributions to political parties or similar organisations in breach of the law

For each of the risks identified, Elecnor has specific controls in place, including the Ethical Code, Compliance Policy, periodic internal and external audits of the Integrated Management System, Payment Management and Control Procedure, Recruitment Policy, Ethical Code whistleblower channel, Supplier Assessment System, etc.

Ethical management and regulatory compliance

Guaranteeing responsible management and ethical, honest and transparent conduct with stakeholder groups is underpinned by the definition of the organisation's own values and the implementation of ethical management and regulatory compliance systems. Hence, the Company has the necessary tools to ensure compliance with legislation in force and a responsible corporate style in its relations with shareholders, employees, customers, suppliers, competitors and social representatives.

Mission: Elecnor's mission is to contribute, in the performance of all its activities, to the economic and technological progress, social welfare and sustainable development of the markets in which it operates. Accordingly, the Group aspires to lead the market as a highly competitive, ground-breaking company, in continuous growth and with an international presence.

The goal is to be known for the quality of our actions, the high standards of our team of professionals, and our social responsibility, commitment to customers, technical and financial solvency and values.

Values:

• Reliability
• Commitment and effort
• Customer focus
• Solvency
• Innovation

Compliance system

The Elecnor Group and each of its employees undertake, as expressed in its Ethical Code and its Compliance Policy, to discharge their activities in accordance with applicable legislation in the territories and countries in which it operates, as well as to comply with and uphold human rights and respect labour rights, act in a diligent and professional manner, with integrity, quality, care for the environment, ensuring occupational health and safety and exercising corporate social responsibility.

The Elecnor Group's Compliance System has embodied those principles and values and strives for the ongoing improvement of its practices and management procedures with a view to strengthening its Corporate Governance.

The scope of the System covers all countries in which Elecnor and its subsidiaries and investees operate, notwithstanding the necessary adaptations in line with each country's specific characteristics.

Elecnor was the first company in its sector in Spain to achieve certification under the UNE-ISO 37001 antibribery management system standard and also one of the first nationwide and internationally, reflecting the Group's commitment to the ongoing improvement of its management practices and procedures, an area in which the organisation has led the way.

Furthermore, in 2019, Elecnor obtained UNE 19601 criminal compliance management system certification, the main benchmark in Spain for the design and articulation of criminal risk prevention systems and based on one of the highest international standards in this connection.

Certification to UNE-ISO 37001 anti-bribery management system standard.

UNE-ISO 37001 is the most modern and stringent international standard on anti-bribery management systems and the adoption of compliance protocols in

Certification to UNE 19601 criminal compliance management standard.

A national standard based on the requirements of UNE-ISO 37001. This standard establishes the requirements to implement, maintain and continuously improve the criminal compliance management system in order to prevent crimes being committed inside the organisation and to reduce criminal risk by

The main elements of the System are as follows:

general.

Ethical Code Compliance

Policy

Compliance Management System Manual

Compliance Committee

fostering a culture of ethical behaviour and compliance.

Map of Compliance Risks and Procedures and mandatory internal controls

Ethical Code whistleblower channel

The Compliance Committee compiles an Annual Compliance Report describing the main actions conducted during the year in the spheres of prevention and monitoring of and response to compliance risks, and this report is submitted to the Audit Committee and the Management Team to help them in their duties of supervision of the system.

In this connection, the Elecnor Group permanently seeks to ensure that all its actions are carried out in accordance with the strictest ethical standards, applying a principle of zero tolerance to ethical malpractice and a lack of professional integrity, and it expects its employees and the persons with whom it interacts to adhere to the Code's principles, guiding rules and implementing procedures. The maximum exponent of this commitment is the Group's Ethical Code.

Elecnor has set up a procedure to enable all its employees to report, confidentially, in good faith and with no fear of reprisals, any irregular conduct in connection with matters covered by the Code, the rules on which it is based, its implementing policies and procedures, or the law. For this purpose, the e-mail address codigoetico@elecnor.com and post office box 26-48080 are in use.

The organisation's employees may also resolve queries or propose improvements in the internal control systems in place.

In 2019, no complaints were received in the sphere of human rights in connection with respect for freedom of association and the right to collective bargaining, the abolition of forced or compulsory labour or the effective abolition of child labour. Likewise, neither were any complaints received in connection with corruption, bribery or money laundering.

The nine complaints received over the course of the year via the Ethical Code whistleblower channel and managed by the Compliance Committee refer mainly to job-related issues. At the time of completing this report, six of those complaints had been resolved and the remainder were in the process of investigation and resolution.

Actions in 2019

• Review and improvement of the procedures and controls established to prevent and avoid antitrust practices. As part of this project, in the first few months of 2020 specific training on this topic is scheduled to be provided to the Group's management team (more than 150 people). To implement this initiative, Elecnor has benefited from the specialist advice of Deloitte.
• Campaign to confirm compliance with the main principles and values established in the Ethical Code and Compliance Policy by those persons who received training on this topic in the last three years and by the Board of Directors and members of the Management Committee (more than 750 people). Over the coming months, this initiative will be extended to the rest of the workforce of the Elecnor Group.
• Signing of a collaboration agreement with IE Law School to create the "IE-Elecnor Observatory on Sustainable Compliance Cultures". The Observatory, with an initial duration of two years, is aimed at analysing the adoption of compliance at medium-sized and even large companies from a global and comparative perspective, with a view to gleaning an in-depth understanding of the reality of the challenges involved, examining potential solutions and disseminating the knowledge generated.
• Compliance Training

2019 Design and approval of in-person and online training for +2,000 people

Last 3 years +3,000 people within the Group (national and international level), ranging from the Management Team to middle management and personnel devoted to supporting, advisory and control duties.

In this connection, for the third consecutive year, the Chair of the Compliance Committee, supported by an external expert, shared with new recruits the main elements of the Compliance System as well as the main messages, principles and values of the Group.

• Procedural review encompassing from the detection and assessment of the opportunity to the negotiation and signing of a contract for singular projects so as to continue to improve their structure, systematisation, risk assessment (including compliance risk), interdepartmental coordination and the review and monitoring of the process by advisory and supervisory functions.
• Continuation of the consolidation and improvement of the Compliance System at the various subsidiaries and organisations belonging to the Group, in accordance with the Compliance System Rollout Plan. There was notable activity in US operations in 2019.

• The technological subsidiary Deimos obtained certification to UNE-ISO 37001 anti-bribery management system standard and UNE 19601 criminal compliance management system standard. Moreover, Celeo's subsidiary in Chile also has a certified model for preventing crime.
• The Compliance Committee's capacities were further strengthened by the participation of some of its members and other persons responsible for the Compliance System in an "Advanced Compliance Programme" taught by a prestigious business school in partnership with external experts in this area.
• A specific working group was set up to improve compliance risk management, led by a member of the Group's Management Committee.
• Improvement in visibility of the Compliance scope in the corporate Intranet.

In 2020, work will be working in relation to the following goals:

• Improvement in systems relating to the preparation, issuance and approval, dissemination, review and monitoring of the mandatory Corporate Policies and Procedures.
• Development and consolidation of the IE-Elecnor Observatory on Sustainable Compliance Cultures.
• Design and implementation of a Compliance Training Model for the on-boarding stage of new recruits.
• Continuation of the consolidation and improvement of the Group's Compliance System at the various subsidiaries in accordance with the Compliance System Rollout Plan.

The Elecnor Group has partnered various sector associations in order to continue driving the sectors of activity in which it operates. Nevertheless, in accordance with its Compliance System, it never makes financial contributions that are unlawful or aimed at obtaining special treatment. In 2019, the Elecnor Group contributed Euro 1.3 million to sector associations.

Human rights

Since it commenced its activities, the Elecnor Group has been fully committed to supporting, respecting and safeguarding human rights in all spheres of action, based on its ethical principles and its corporate social responsibility.

As outlined in its Human Rights Policy, all the Group's companies are unwaveringly committed to compliance with and defence of human rights in developing their activities in all of the countries where they operate. Moreover, this Policy extends to all the Company's stakeholders with a view to sharing and requiring the same exacting level of commitment in its relationships with them.

This Policy is fully aligned with the Group's Corporate Social Responsibility Policy and its Ethical Code, as well as with the UN Universal Declaration of Human Rights, the principles of the UN Global Compact and the Sustainable Development Goals, the ILO Declaration on Fundamental Principles and Rights at Work and the OECD Guidelines for Multinational Enterprises.

The Human Rights Policy lays particular emphasis on equality of opportunities regardless of people's characteristics, as well as the avoidance of child labour and forced labour and respect for the rights of ethnic or indigenous minorities.

The Group is also a Signatory of the UN Global Compact, and has undertaken to incorporate the 10 principles in relation to human rights, labour, environment and anti-bribery into its corporate strategy, and to promote the Sustainable Development Goals (SDGs), primarily linked to the defence of human rights and the fight against climate change.

Celeo Redes in Chile and Brazil have also subscribed to the Global Compact.

With regard to ethical management and regulatory compliance, this report includes detailed information on the Elecnor Group's commitment to responsible management and ethical and honest conduct that is transparent with its stakeholders.

Fiscal transparency

Elecnor publishes its tax information in an exercise of reporting transparency.

Elecnor has made its best estimate of the breakdown of results by country, as well as the payments made in income tax by country, based on the data available at the time of preparing these Annual Accounts. For this breakdown by country, the same criteria were used as applied to preparing the Consolidated Annual Accounts, likewise breaking down harmonisations and removals as required for the presentation of the Consolidated Income Statement.

Profit before tax by country

Figures in thousands of Euros

Country	2019
Germany	- 18
Angola	19,991
Algeria	-884
Argentina	1,690
Australia	-130
Bolivia	-91
Brazil	57,422
Cameroon	704
Canada	1,430
Chile	11,247
Colombia	- 2,952
Ecuador	-879
El Salvador	267
Spain	94,756
United States	6,520
France	2,589

Country	2019
Ghana	-537
Guatemala	-2
Guinea	21
Honduras	1,592
Italy	4,318
Jordan	2,638
Kuwait	3
Morocco	-91
Mauritania	557
Mexico	-11,212
Norway	3,946
Oman	56
Panama	4,129
Peru	-1,270
Portugal	-632
UK	781
Dominican Republic	-7,888
Senegal	90
South Africa	37
Uruguay	869
Venezuela	1,010
Total	190,077

Income taxes

Figures in thousands of Euros

Country	2019
Angola	6,192.99
Argentina	204.86
Australia	4,358.24
Bolivia	9.00
Brazil	14,468.00
Cameroon	124.00
Canada	63.23
Chile	-479.06
Ecuador	230.58
El Salvador	34.00
Spain	1,815.53
United States	5,433.37
France	76.00
Ghana	7.00
Great Britain	472.87
Honduras	519.71
Italy	183.39
Jordan	244.25

Country	2019
Kuwait	17.00
Morocco	0.28
Mauritania	120.00
Mexico	13.70
Panama	215.00
Peru	551.33
Portugal	-27.09
Dominican Republic	263.48
Romania	1.10
Senegal	10.00
Uruguay	375.94
Venezuela	6.53
Total	35,505.23

Estimated corporate income tax payments in countries in which the Group operates, correspond mainly to the final settlement of taxes accrued in 2018, and to payments on account of taxes accrued in 2019 which will be settled in 2020.

Public grants received

In 2019, the Elecnor Group received public grants amounting to Euros 3,240.6 thousand, compared with Euros 3,376.6 thousand in the previous year, as detailed below.

Figures in thousands of Euros

Country	2019
Spain	1,947.0
Canada	119.8
Great Britain	478.5
Portugal	695.3
Total	3,240.6

14.8. Social impact

Via its various activities, Elecnor has a direct impact on employment, progress and social well-being, while helping to resolve some of the major challenges facing society (tackling climate change, reducing the energy gap, safe access to essential resources like energy or drinking water, etc.) which are currently included in the 2030 Agenda and the Sustainable Development Goals (SDGs).

Meanwhile, the Elecnor Foundation strengthens the Group's social commitment through social infrastructure projects in the countries where these are most necessary and through a commitment to the training and employability of young people.

In addition, there are a number of social and/or environmental programmes being carried out with local communities.

Thanks to sustained growth, the Elecnor Group can also distribute direct financial value to its main stakeholders: shareholders, suppliers, employees, governments, etc.

Value generation

Direct financial value generated and distributed

In thousands of Euros

	2018	2019
Generated financial value	2,283,177	2,703,775
Income1	2,283,177	2,703,775
Distributed financial value	1,961,874	2,435,948
Operating costs2	1,245,020	1,630,566
Personnel expenses3	599,994	669,018
Payments to capital providers4	69,600	100,259
Tax contribution5	49,960	35,505
Investment in the community6	300	600

Source. Figures from the income statement in the consolidated annual accounts for 2019, except for dividend payments and income tax payments shown in the statement of cash flows included in the annual accounts.

• 1. Including: Net turnover + changes in inventories of finished goods + own work capitalised + other operating income + capital grants + profit/loss on disposals and others + negative difference in business combinations + finance income + change in the fair value of financial instruments.
• 1. Including: Materials consumed + external services + taxes + other management expenses + impairment and losses from tangible and intangible assets + minority interest + income from equity accounted investees (negative).
• 1. Including: Salaries and social benefits for employees.
• 1. Including: finance expenses + exchange losses + dividend payments (statement of cash flows).
• 1. Including: income tax payments (from the statement of cash flows).
• 1. Including: Contributions to the Elecnor Foundation.

Job creation

Elecnor contributes to the development and well-being of local communities by means of direct job creation and by contracting local employees and suppliers.

Workforce	2018	2019	Changes
Domestic	8,836	9,336	5.6%
International	4,741	5,519	16.4%
Total	13,577	14,855	9.4%

At the end of 2019, the Group's workforce had increased by 1,278 people (up 9.4% on the previous year).

Local employment

	2019
Location	Employees	% local employment
Africa	969	90%
America	3,725	98%

Asia	15	93%
Spain	9,336	95%
Europe	796	77%
Oceania	14	50%
Total	14,855	94%

Procurements from local suppliers

In Euros

		Grupo Elecnor
Location	Procurements	% of local
		procurements
Spain	292,570,830	100%
Europe
Italy	6,587,194	100%
Portugal	7,090,339	100%
Norway	5,815,997	50%
France	442,232	50%
UK	12,190,737	50%
Romania	-30,802	50%
North America
United States	55,313,759	50%
Mexico	20,121,147	75%
Panama	11,312,028	98%
El Salvador	119,667	25%
Latin America
Venezuela	181,318	97%
Dominican Republic	5,962,632	99%
Chile	25,972,227	50%
Ecuador	516,671	50%
Honduras	856,188	65%
Guatemala	500	50%
Uruguay	3,483,173	50%
Peru	315,861	50%
Brazil	113,841,159	50%
Argentina	487,354	50%
Bolivia	103,935	50%
Asia
Jordan	17,634,464	45%
Oman	48,027	0%
Oceania
Australia	16,184,704	50%
Africa
Algeria	1,390,933	100%
Angola	5,167,910	65%
Congo	6,277,123	8%
Ghana	7,730,450	28%
Guinea	7,921,033	1%
Cameroon	9,148,707	8%
Senegal	1,054,793	29%

Location	Procurements	Grupo Elecnor % of local procurements
Liberia	1,919,082	0%
Morocco	4,127	50%
Mauritania	7,993,313	50%
Total	645,728,811

Profitability for shareholders

Elecnor, S.A.'s shares are traded in Spain's SIBE electronic trading system, where shares in the leading Spanish companies are traded, and the market with the largest trading volume in Spain.

The Company has been able to consistently create value for its shareholders in the last few years.

Stock market indicators	2018	2019
Closing share price (€)	13.20	10.95
Dividend yield	2.6%	2.4%

Dividend yield in 2019 was 2.4%, compared to 2.6% the year before. This decrease was due to the payment of an interim dividend in 2018, which has traditionally been paid in January of the following year, but was brought forward to December 2018.

Accordingly, in 2018 three dividends were paid to shareholders (interim dividend charged to 2017, the 2017 supplementary dividend and the interim dividend charged to 2018), while in 2019 two dividends were paid (the 2018 supplementary dividend and the interim dividend charged to 2019).

The Elecnor Group's social action

The Group's social action is articulated mainly by means of the Elecnor Foundation.

In 2019, Elecnor donated a total of Euros 621,505 to various associations, foundations and non-profit entities to support a range of social causes initiatives. Of that amount, Elecnor contributed Euros 600,000 to Elecnor Foundation.

Elecnor Foundation

The Foundation's work is closely linked to Elecnor's own activity. The Foundation's purpose is to help improve the living conditions and enhance the economic and social progress of the communities in which Elecnor has a stable presence.

The Foundation continued bringing to the fore the most human aspect of engineering through various projects in its two areas of action:

• The development of water and energy infrastructure for social purposes to benefit those who most need it as well as the environment.
• Fostering training and research to nurture the professional development and projection of young people.

In 2019, the Foundation had a presence in Spain, Honduras, Dominican Republic, Ghana, Chile, Uruguay, Angola, Nicaragua Cameroon and Mexico. Since it was first set up, Elecnor has donated funds amounting to

Euros 5.5 million. Moreover, the Foundation has obtained Euros 4.2 million in funds. Combining the two, the Elecnor Foundation has led projects worth a total of Euros 9.7 million.

Social Infrastructure Projects

Énergie Solaire pour l'Éducation, Cameroon. Third project in Africa

This project combines the development of social infrastructure with training and employment opportunities.

The aim of the project is to consolidate the socio-educational activities of the Salesians of Don Bosco in Ebolowa, providing stable and quality electricity to projects underway via a solar PV system to guarantee the activities being conducted at the technical institute, boarding school, youth centre, radio and free water supply to the community.

Through this renewable facility, the Elecnor Foundation helps improve the education of more than 750 pupils.

The proposed design comprises a 62 kWp solar array of 180 panels each with a unit capacity of 345 W, capable of providing 63% of the energy consumed. This array will work together with a cluster of 48 kWn inverse chargers able to supply the necessary power and with 3500 Ah 48 V batteries providing up to 12 hours of autonomy, sufficient to last overnight.

With the cooperation of the Joint Workplace Health and Safety Service and Elecnor Cameroon, safety training was provided to people working in the project's execution and a large number of students at the professional training centre.

Training data

• 24 pupils from the institute
• 8 graduates
• 6 Elecnor employees
• teachers from the institute

The most salient aspect of this project is that 7 graduates were hired to join the Group workforce. These students, along with Elecnor's professional team, will install the solar PV systems on the institute's roof.

Rebuilding La Nopalera, Mexico

The Board of Trustees of the Elecnor Foundation unanimously approved the solar street lighting project in the town of La Nopalera, in Mexico. This small, underprivileged town in the State of Morelos suffered the devastating consequences of the earthquake of 19 September.

The aim of this project is to light the entire town with the same quality and intensity as any other developed town, all in accordance with the strictest quality standards. The smart street lighting to be installed will improve security in urban areas and enhance the quality of life of the inhabitants of La Nopalera. This is a commitment to a kind of renewable energy that will help nurture an optimum environment.

The Elecnor Foundation and Fundación de la Casa de México in Madrid signed an agreement to explore channels for collaboration in social infrastructure projects in Mexico. The project was unveiled to mark the first anniversary of Casa de México in Spain.

Luces para aprender, Uruguay

The Elecnor Foundation, Administración Nacional de Usinas y Transmisiones Eléctricas (UTE) and the Organisation of Ibero-American States (OEI) in June 2018 signed an addendum to the Luces Para Aprender (Lights to Learn) agreement, in another step forward in the installation of solar PV systems in rural areas of Uruguay.

This addendum allows for the relocation of renewable energy equipment previously installed in rural schools when they did not have energy or connectivity. Of the 85 rural schools originally benefiting from this project, 35 were hooked up to the national grid.

In this latest phase, the proposal is to continue promoting inter-institutional actions in inland areas of the country so as to further the development of knowledge, capacities and commitments in connection with renewable energies.

Work was ongoing on identifying sites to install solar PV systems at university centres and social undertakings. Within the framework of the second phase of the Luces para Aprender project, the first renewable energy hub was installed at UTEC's South-Central Regional Technological Institute, in Durazno.

The aim is to develop a university-based one-stop-shop for information, awareness and promotion of clean energies and their impact on the environment and development. This is targeted to the Durazno community and its surrounding area, and is aimed especially at children and school-aged children.

The Luces para Aprender project has expanded its horizon of solidarity to reach Africa. Two solar PV systems were installed in the Amour and Turisemi orphanages in Goma, a city in the Democratic Republic of Congo with 160,000 inhabitants. These two solar power systems were installed by the Blue Helmet peacekeeping force from the Uruguayan Army. They were equipped by technical experts from UTE and the Elecnor Foundation, who will also be responsible for their future maintenance.

National Energy Efficiency Awards 2019

A rural school in Cerro Largo, a town in Minas (Lavalleja) and a lycée in Colonia, along with the Montevideo council and various private sector companies were winners of the National Energy Efficiency Awards in 2019. These awards are a recognition of institutions, bodies and companies for their efforts and achievements in relation to electricity saving and usage in various sectors of activity.

The National Energy Efficiency Awards, an initiative of the Industry, Energy and Mining Ministry, were first launched more than 10 years ago to raise the visibility of institutional commitment and foster investment in the development of new projects.

This time, the Elecnor Foundation, the UTE and the OEI gave an energy efficiency award within the framework of the Luces para Aprender programme.

Volunteering 2019

A new corporate volunteer initiative was launched within the framework of the Cameroon project. The challenge is to provide training to teachers and alumni of the Institute of Professional Training in Ebolowa.

60 people received training in solar PV power over the two weeks in which four volunteers were in the country.

With the collaboration of experts from Atersa, the Group's solar PV subsidiary, and of employees from Cameroon, the volunteers audited the solar energy system installed and compiled training course content, which included a module on occupational health and safety (risk prevention).

Training courses

The Elecnor Foundation's participation in the SDG MOOC: an inevitable transformation, organised by Madrid's Universidad Politécnica.

Compliance Observatory for medium-sized enterprises

The Elecnor Foundation and Fundación IE, with the collaboration of the Eversheds Sutherland legal offices, signed a collaboration agreement to create the IE-Elecnor Observatory on Sustainable Compliance Cultures which responds to the Elecnor Foundation's concern for the compliance development at small and medium-sized enterprises.

The main goals of the Observatory are to:

• Harness and develop know-how to understand the challenges facing medium-sized enterprises in the implementation of a culture of compliance.
• Develop proposals to facilitate the implementation of compliance at medium-sized enterprises and those with limited resources.
• Disseminate the know-how generated in order to enhance the development of compliance in the business fabric outside of large corporations, multinationals and early adopters.
• Facilitate understanding and a common framework in connection with compliance by tackling collaborative and inter-company initiatives and projects, especially in highly integrated value chains.

Cities Lab chair of excellence, Universidad de Deusto

The Elecnor Foundation is a member of the Board of Trustees of the Cities Lab chair of excellence, pursuant to an agreement signed with Deusto Business School.

The aim is to examine integrated solutions for smart cities, cross-checking and analysing information from urban services to adapt public policies to the needs of cities, cutting costs and providing a better service to citizens.

At present, a laboratory scheme is underway in cooperation with the municipal council of Alcalá de Guadaira, focusing on the role of technological solutions in the sustainable development of cities. The aim is to make Alcalá de Guadaira into an innovation ecosystem to better integrate sustainable urban development using technological innovation.

Awards and Grants Programme with Escuela Técnica Superior de Industriales (Universidad Politécnica de Valencia — UPV)

In the 2018-2019 edition, five students received grants for their end-of-Master's theses. The Foundation also awarded the prize (Euros 1,500) to the best project presented.

Visit to the ASTE solar thermal plant

42 students from the Industrial and Electrical Engineering Master at ETSII (the Industrial Engineering Faculty of Madrid's Universidad Politécnica) visited Elecnor's facilities in Ciudad Real (Spain).

Specialist Post-Cycle Course in Medium- and Low-Voltage Electrical Installations

The Group continued to train future professionals within the framework of our cooperation with Colegio Salesianos Deusto. This year, two students who attended the course in 2016 were hired.

Telecommunications Specialisation Course

The course aimed at students of middle grade vocational training was conducted in Valencia at Colegio Juan Comenius.

Impact on and dialogue with local communities

Social factors in project development are becoming increasingly significant, so suitable dialogue with and proximity to the communities is considered a key aspect for a project's success.

Elecnor has a clear commitment to the communities where it operates, and programmes to foster social, environmental and economic development in the surrounding communities have become especially significant. Below are some of the initiatives launched by the Concessions subsidiaries Celeo and Enerfín.

Canada

• Enerfín held an open day at its Winnifred project in the province of Alberta, to keep the local community informed regarding the progress and to enable local inhabitants to express their opinions, comments and concerns in connection with the project. The public consultation project includes sending information bulletins to residents within a radius of 2 km of the project's area, and direct contact with residents.
• The wind power subsidiary, continued, as in previous year, providing support to community organisations and events in the municipalities of Saint Ferdinand, Saint-Pierre-Baptiste and Sainte-Sophie-d'Halifax. Note the sponsorship of initiatives and activities such as annual festivals, cultural activities for the elderly, families day, the summer sports camp, a local traditional music competition, funds for the construction of a centre for the elderly experiencing loss of independence, etc. Total collaboration is estimated to have amounted to CAD 40 thousand.
• In Saskatchewan, Enerfín sponsored a kite festival in a community near an area where there are various wind projects under development.
• Guided tours of the L'Erable wind farm, organised in collaboration with the local tourism office, continued in 2019, with more than 480 tourists and 133 school children visiting.

Brazil

• Ventos do Sul, Enerfín's operating subsidiary in Brazil, with the aim of fostering culture, sports and social investment, contributed with social projects approved by the Brazilian government and in accordance with tax incentive legislation. For example, with Futebol de Rua pela Educação, a social and sports programme that presents an education proposal based on the concept of sport for human development.
• In 2019, more than 6,000 people visited the Osorio wind complex's visitor centre. Visits are organised every year, mainly for school children, and content divulged regarding wind power and sustainability, and information is disseminated regarding the main tourist attractions in the municipality of Osorio.
• Within the framework of legislation on incentives for culture, and backed by the Ministry of Citizenship, Celeo Redes took part in various initiatives such as the following:

• o Story chest. This initiative is aimed at encouraging reading by means of free distribution of small mobile libraries to schools, entities and public institutions, as well as story-telling workshops.
• o These stories arrived by train, and were a fun and entertaining way to tackle topics linked to railways, focusing on the benefits of this means of transport. Furthermore, the play dealt with accident prevention in regions where there are railway lines. Five children's theatre projects were conducted in the year at schools and social institutions.
• "Vivir bien en Caetetuba" project. This consists of the refurbishment and construction of an appendix at a train station in the district of Caetetuba, which will enable a social centre to be installed. Moreover, the project will involve professional training courses for the residents of the district, as well as the revitalisation of the square outside the train station. This project is conducted in partnership with the municipal council's social welfare and works and infrastructure departments.
• Celeo has implemented the Integra programme, aimed at ascertaining the needs and characteristics of the communities in those areas, enabling it to perform actions to support their development and protection. Within the framework of this programme, communication campaigns are also conducted in relation to the restrictions on the use of rights of way and fire prevention, among other matters.

Chile

• The impacts generated by the Mataquito and Casablanca projects on the local communities were analysed. These impacts consist essentially of noise, dust particles in suspension and the emission of electromagnetic fields. To mitigate these impacts the Company considered installing noise barriers in those areas where it is necessary, limiting the speed of works trucks, watering down access routes, and launching drives to measure noise levels and electromagnetic fields to ensure compliance with regulations.
• Environmental education project focusing on biodiversity. The contents will encompass the study of birds, interaction between birds and plant life and the ecosystem. The aim is to work with annual goals designed in partnership with the community.
• Club Deportivo Celeo Redes will host an activity involving 20 children at social risk in order to help reinforce the concept of team work.

Integration and respect for the environment

In some cases, infrastructure projects are carried out in areas that are considered vulnerable. Specifically, Elecnor executes some projects close to indigenous communities. In these cases, the social and/or environmental impacts on the affected areas are analysed and, where necessary, measures are implemented to mitigate them.

Colombia

• Enerfín, continuing the dialogue established with local communities and respecting the habits, customs and traditions of the various ethnic groups, conducted preliminary consultation processes with a number of indigenous peoples, such as the Koguis, Wiwas, Arhuacos, Kankuamos and Wayuus, establishing a real and effective engagement with these communities.
• The subsidiary in Colombia (Guajira Eólica I SAS) conducted a preliminary consultation process regarding the El Ahumado wind farm and its 110 KV transmission line with indigenous peoples in the Sierra Nevada de Santa Marta area (Koguis, Wiwas, Arhuacos and Kankuamos). In the inter-cultural dialogue established with the elders of these ancestral peoples, they highlighted the good relations, as evidenced by the agreements reached with all four indigenous communities.

• Likewise, in the 110 KV transmission line project, 12 preliminary consultations were held with indigenous Wayuu communities. Several meetings were held, involving State entities and supervisory bodies, to present the project and explain each of its phases. The communities were actively involved in these processes and all of them gave their approval and consent. As a result, various measures were agreed in connection with prevention, mitigation and compensation, with the ultimate aim of preserving and maintaining the ethnic identity of these ancestral communities.
• Enerfín, as part of its expansion into new areas and with a view to developing environmentally and socially sustainable projects, at the end of 2019 planned to commence more than 22 preliminary consultation processes involving indigenous Wayuu communities, since dialogue, engagement and respect for ethnic communities are a binding commitment.

Canada

• Enerfín belongs to various associations that foster initiatives to promote wind power and optimise its integration into the environment and rural communities. At a national level, these initiatives include the Canadian Wind Energy Association (CANWEA), and at a provincial level L'Association des Producteurs d'Énergie Renouvelable du Québec (AQPER) and the First Nation Power Authority (FNPA) in Saskatchewan.
• The FNPA seeks to promote the involvement of aboriginal communities in renewable energy projects, advocating the inclusion of minimum quotas of aboriginal participation in provincial tenders and nurturing dialogue and partnerships between these communities and private promoters
• Talks that began in previous years with first nations and tribal councils in the province of Saskatchewan continued in the year, and an agreement was reached with the Moossomin First Nation.

Mexico

• In the second half of the previous year, the Energy Department and Enerfín together commenced a free and informed preliminary consultation with five Mayan indigenous communities located in the catchment areas of the Panabá 1A, Panabá 1B, Panabá 2 and Sucilá projects in the state of Yucatan, in accordance with ILO Convention 169. The aim is to obtain the community's consent to develop the projects and its agreement on the social benefits deriving therefrom.

Brazil

• Talks continued with FUNAI (Fundação Nacional do Índio) to approve the Indigenous Component Study (ICS) of Caiuá, a study which presents the impacts on indigenous communities in the area around the project.
• Furthermore, during execution of the environmental impact study of Parintins Amazonas Transmissora de Energia, two remaining quilombo settlements were identified in the project's implementation area. Studies were carried out to gauge the impact of the project on these communities, and subsequently to propose measures to mitigate this impact on their populations.

Elecnor, committed to the SDGs

Elecnor's sustainability vision, embodied by the Elecnor Foundation and in the actions carried out by the Group, is fully in step with the challenges presented by the Sustainable Development Goals. Because of the nature of its activity, the Elecnor Group is a key player in society's development and progress. Its infrastructure, renewable energy, water and environmental projects contribute solutions to some of the current and future challenges such as climate change, the reduction of inequalities, the energy gap, and others.

Contribution deriving from the main businesses

Contribution deriving from social action

Elecnor Foundation

However, the Elecnor Group's contribution is much broader, and is embodied by its active commitment to the health and safety of its employees and collaborators, setting a zero accidents target (SDG 3); the quality training and development it offers its employees (SDGs 4 and 10); and value generation for its stakeholders (SDG 8).

SDGs	Some projects and initiatives by the Elecnor Group and Elecnor Foundation
1 END POVERTY	Atersa Rural electrification project Celeo Energy transportation projects Social projects (Chile and Brazil) Enerfín Social projects (Canada and Brazil)
ZERO 2 HUNGER	Elecnor Foundation Sinergia project (Chile) Luces para Aprender (Uruguay) H2OMe project (Angola)
HEALTH 3 AND WELLBEING	Grupo Elecnor Safety Excellence project Awareness campaign coinciding with World Day for Safety and Health at Work Campaigns linked to healthy habits

Grupo Elecnor

Collaboration with universities and vocational training centres Project Talent Training itineraries Elecnor Foundation Project in Ebolowa (Cameroon) Specialist Post-Cycle Course in Medium- and Low-Voltage Electrical Installations Celeo Initiatives with children from rural schools in Chile Enerfín School visits to L'Erable wind farm (Canada) Atersa Local training in Africa to maintain projects

4

QUALITY EDUCATION

Grupo Elecnor

Equality Plan

A 15.7% increase in the number of women in the workforce in 2019

Grupo Elecnor

Water infrastructure specialist services (e.g. waste water treatment concessions)

Atersa

Water pumping projects in developing countries

6 CLEAN WATER AND SANITATION

Audeca

Water and waste water treatment projects

Celeo

Waste water treatment plant in Aragón

Hidroambiente

Water treatment solutions

Elecnor Foundation

H2OMe Project (Angola)

Grupo Elecnor

Energy efficiency initiatives

Projects to boost energy efficiency

Celeo

Energy transportation projects

Enerfín Wind farms

Atersa

Solar PV plants

Elecnor Foundation

Luces para Aprender (Uruguay)

Project in Ebolowa (Cameroon)

Grupo Elecnor

AFFORDABLE AND CLEAN 7 ENERGY

Creation and promotion of local employment Hiring local suppliers Signatories of the Global Compact Elecnor Foundation Specialist post-cycle course in medium- and low-voltage electrical installations

Collaboration with universities and vocational training centres

Project in Ebolowa (Cameroon)

Grupo Elecnor

Initiatives involving startups BIND 4.0 Project Innova calls for proposals Innovation projects Digital Transformation Plan

Elecnor

Atersa

Equality plan

Rural electrification project

Celeo Energy transportation projects Social projects (Chile and Brazil) Enerfín Social projects (Canada and Brazil) Elecnor Foundation

All projects

Elecnor

Smartcities projects Managing street lighting Energy efficiency projects Audeca Urban waste collection projects

Elecnor

12RESPONSIBLE PRODUCTION AND CONSUMPTION

Smartcities projects Managing street lighting Energy efficiency projects Projects to foster efficient energy consumption Audeca Environmental management projects Enerfín Consumption of 100% renewable energy at some offices Celeo

45% of the energy consumed by Celeo Redes Chile is from renewable sources

Elecnor Group

Renewable energy projects: wind, solar PV, biomass, hydroelectric Climate change strategy Calculation and verification of the carbon footprint Emission reduction plan World Environment Day campaign

Audeca

Water and waste water treatment projects Projects to preserve natural spaces Hidroambiente Water treatment solutions

Celeo

Compensatory measures

Bird identification workshop

Birdwatching club

Enerfín

Plan to monitor bird life in wind projects

Audeca

Projects to preserve natural spaces

Grupo Elecnor

Certification to ISO 37001 anti-bribery management system standard and UNE 19601 criminal compliance management system standard

Review and improvement of the procedures and controls established to prevent and avoid anti-trust practices

Compliance Training

Deimos

Certification to ISO 37001 anti-bribery management system standard and UNE 19601 criminal compliance management system standard

Grupo Elecnor

Partnerships and collaborations with entities and associations Participation in forums Elecnor Foundation

Partnerships and collaborations with entities and associations

Other channels for engagement with society

Dialogue with stakeholders

Elecnor is in fluent and constant dialogue with its various stakeholder groups through a number of channels, through which it aims to ascertain and respond to their needs and expectations. The main communication channels are outlined below:

General Shareholders' Meeting Individual and consolidated annual and half-yearly accounts Comprehensive report Elecnor Foundation report Shareholders and investors Group website Shareholder services channel Shareholder forum Meetings with investors Periodic visits Periodic communications Individual and consolidated annual and half-yearly accounts Trade fairs Customers Corporate websites Satisfaction surveys Comprehensive report Elecnor Foundation report Social media Periodic meetings Work groups Comprehensive report Communication campaigns Employees Training sessions and courses Corporate websites	Stakeholder group	Communication channel
		Intranet
Newsletter
eTalent

Stakeholder group	Communication channel
	Ethical Code whistleblower channels
	E-mail igualdad@elecnor.com
	Group website
	Official filings
Public administrations and	Individual and consolidated annual and half-yearly accounts
regulatory bodies	Comprehensive report
	Elecnor Foundation report
	Social media
	Meetings and work groups
	Conventions, fairs and congresses
	Audits
Suppliers and partners	Comprehensive report
	Group website
	Social media
	Corporate websites
	Specific project websites
	Elecnor Foundation report
Local community	Sponsorships and patronage
	Social projects
	Comprehensive report
	Social media
	Press releases
	Information briefings
	Group website
Media	Individual and consolidated annual and half-yearly accounts
	Comprehensive report
	Elecnor Foundation report
	Social media
	Collaboration agreements
	Forums, fairs and congresses
Technological centres and	Comprehensive report
universities	Elecnor Foundation report
	Elecnor Foundation website
	Social media

Involvement in associations and forums

The Elecnor Group is actively involved in the flagship associations in the industries and countries where it operates. Those considered to be most significant are listed below:

Spain

ACEX, Asociación de Empresas de Conservación y Explotación de Infraestructura ADEMI, Asociación de Empresas de Ingeniería, Montajes, Mantenimientos y Servicios Industriales AEDYR, Asociación de Desalación y Reutilización del Agua AEE, Asociación Empresarial Eólica

AELEC, Asociación de Empresas de Energía Eléctrica AESPLA, Asociación Española de Servicios de Prevención Laboral ANESE, Asociación Nacional de Empresas de Servicios Energéticos APECYL, Asociación de Promotores de Energía Eólica de Castilla y Léon APPI-Almussafes, Asociación de Propietarios del Parque Industrial de Almussafes ASAGUA, Asociación Española de Empresas de Tecnologías del Agua ASEJA, Asociación Española de Empresas de Jardinería ASERPYMA, Asociación de Empresas Restauradoras del Paisaje y Medio Ambiente ATC, Asociación Técnica de Carreteras y Asociación Mundial de Carreteras CEOE, Confederación Española de Organizaciones Empresariales CONFEMETAL, Confederación Española de Organizaciones Empresariales del Metal AET, Asociación Eólica de Tarifa Plataforma enerTIC ESF, Energía sin Fronteras FEMEVAL, Federación Metalúrgica Valenciana ITE, Instituto Tecnológico de la Energía PROTERMOSOLAR, Asociación Española para la Promoción de la Industria Termosolar SERCOBE, Asociación Nacional de Fabricantes de Bienes de Equipo UNEF, Unión Española Fotovoltaica

Brazil

Spanish Chamber of Commerce in Brazil

CIGRE, Comitê Nacional Brasileiro de Produção e Transmissão de Energia Elétrica

COGEN - Associação da Indústria de Cogeração de Energia

Canada

Canadian Chamber of Commerce

Elecnor also took part in various significant events:

• Feria Energyear Tour 2019, Dominican Republic. This event fosters discussions and synergies between the main players in the energy, technology and mobility sectors, tackling political, industrial, financial and technological issues.
• Achilles Live trade show, Oslo. This is an event connecting buyers and suppliers in the power and utilities sector in order to share insights and knowledge.
• INTERSOLAR Europe trade exhibition, Munich. This is world's leading exhibition for the solar industry. At this event, Elecnor Deimos presented the prototype for the Automatic Photovoltaic Plant Inspection and Data Explotation (APPIDE) project.
• National Congress on Women in Engineering, Technology and Industry, in Valencia.
• EnerTIC Energy Efficiency and Sustainability Forum at Industry 4.0, in Bilbao.
• First Mixed Commission on Economic and Commercial Cooperation between Jordan and Spain.
• Partnership for Safety, organised by Enel in Rome. Elecnor was one of the presenters as a standardbearer in policies and campaigns to raise awareness with a view to improving occupational health and safety.

• Audeca organised an event to mark World Wood Day in Boqueijón (La Coruña), which was presided over by King Felipe VI of Spain.

Elecnor is a member of the Spain-Peru Council Foundation, an organisation launched in 2018 to boost economic, commercial, business, scientific and cultural cooperation between Spain and Peru, to strengthen mutual recognition and the image of Peru in Spain and Spain in Peru, and to propose to the two countries' governments actions aimed at nurturing the bilateral relationship.

The Foundation's board of trustees comprises prestigious members of the business community, the public administration, politics and cultural and academic institutions of the two countries. Elecnor's Chairman sits on the board.

Some recognitions

• » Viesgo recognised Elecnor's Health and Safety Policies in the Health and Safety Awards, an annual event at which it rewards best health and safety practices among its collaborators.
• » Orange recognised the telecommunications activity for the Fiber to the Home (FTTH) project.
• » Elecnor won the "Award for construction excellence in solar PV EPC projects" within the framework of the "2nd Solar + Energy Storage & Finance Summit", in China.
• » Audeca received two distinctions in the 15th edition of the ACEX National Awards for Safety in Road Maintenance.
• » Finalists in the 10th edition of the Premios Corresponsables Awards in the categories "Best Press Ad" and "Best Social Media Campaign" for the campaign A Fairy Tale Come True in Malawi. These awards recognise the best initiatives and best practices in CSR, sustainability and communication.
• » Finalists in the 2019 Ocare Awards for the awareness campaign Estrellas PES. Ocare is the Corporate Responsibility Communication and Action Observatory.
• » The Technical Road Association (Asociación Técnica de Carreteras – ATC) and Spain's PIARC National Committee awarded the subsidiary Audeca a medal in recognition of its "Technical Contribution to Roadways".
• » The Elecnor Foundation's H2OMe Project was a finalist in the 2nd edition of the go!ODS awards organised by the Spanish Network of the UN Global Compact. This award is to recognise and support those innovative projects that help achieve the UN Sustainable Development Goals.

Appendix I

Index of content required by Law 11/2018, of 28 December, concerning non-financial reporting and diversity.

Contents	Page of the report featuring response	Materiality	Reporting criterion GRI chosen5
General information
Description of the business model	24-25	Material	GRI 102-2 GRI 102-7
Markets where it operates	24-25	Material	GRI 102-4 GRI 102-6
Goals and strategies	24-25; 64-65	Material	GRI 102-14
Main factors and trends affecting future performance	76-78	Material	GRI 102-14 GRI 102-15
Reporting framework used	22-23	Material	GRI 102-54
Principle of Materiality	22-24	Material	GRI 102-46 GRI 102-47
Social matters and issues concerning staff
Management approach	25-48	Material	GRI 102-15 GRI 103-2
Employment
Total number of employees and breakdown by country, gender, age and professional category	31-36	Material	GRI 102-8 GRI 405-1
Total number and distribution of contract modalities and annual average numbers of open-ended, temporary and part-time contracts by gender, age and professional category	36-38	Material	GRI 102-8
Number of layoffs by gender, age and professional category	38-41	Material	GRI 103-2
Average remuneration and evolution thereof by gender, age and professional category or equal value	30-31	Material	GRI 103-2 GRI 405-2
Wage gap, remuneration of equal jobs or company average	30-31	Material	GRI 103-2 GRI 405-2
Average remuneration of directors and executives, including variable remuneration, per diem expenses, termination benefits, payments to long-term benefit schemes and any other items, broken down by gender	72-74	Material	GRI 103-2 GRI 405-2
Policies to facilitate disconnection from work	41-42	Material	GRI-103
Number of disabled employees	43	Material	GRI 405-1
Organisation of work
Organisation of work time	41-42	Material	GRI-103-2
Number of hours of absenteeism	38	Material	GRI 403-2
Measures aimed at facilitating work-life balance and fostering a mutually responsible approach thereto by both parents	41-42	Material	GRI 103-2 GRI 401-3

⁵ Unless otherwise indicated, this refers to the GRI content chosen in the 2016 version.

Health and Safety
Occupational health and safety conditions	44-48	Material	GRI 103-2
Workplace accidents, in particular their frequency and severity, as well as occupational illnesses; broken down by gender	45-46	Material	GRI 403-2 GRI 403-3
Social relations
Organisation of social dialogue, including procedures to inform and consult employees and to negotiate with them	43-45; 99-101	Material	GRI 103-2
Percentage of employees covered by collective bargaining agreements by country	44-45	Material	GRI 102-41
Balance of collective bargaining agreements, especially in connection with occupational health and safety	44-45	Material	GRI 403-1
Training
Training policies implemented	25-29	Material	GRI 103-2 GRI 404-2
Total number of training hours by professional category	28-29	Material	GRI 404-1
Integration and universal access for disabled people	42-43	Material	GRI 103-2
Equality
Measures implemented to promote equal treatment and equal opportunities for women and men	41-44	Material	GRI 103-2
Equality plans, measures adopted to promote employment, protocols against sexual harassment and gender-based harassment	42-43	Material	GRI 103-2
Policy against any kind of discrimination and, in the event, for managing diversity	42-45; 72	Material	GRI 103-2
Environmental issues
Management approach	51-62	Material	GRI 102-15 GRI 103-2
Detailed general information
Detailed information concerning current and foreseeable effects of the Company's activities on the environment and, where applicable, health and safety	51-52	Material	GRI 102-15
Procedures for environmental assessment or certification	51-52	Material	GRI 103-2
Resources allocated to preventing environmental risks	51-52	Material	GRI 103-2
Application of the precautionary principle	51-52	Material	GRI 102-11
Amount of provisions and guarantees for environmental risks	51-52	Material	GRI 103-2
Pollution
Measures to prevent, reduce or remedy severe environmental emissions; taking into account any kind of atmospheric pollution specific to an activity, including noise and light pollution.	52-58	Material	GRI 103-2
Circular economy and waste prevention and management
Prevention, recycling, re-use, other methods of waste recovery and elimination	58-59	Material	GRI 103-2 GRI 306-2
Actions for combating food wastage		Not material
Sustainable use of resources

Consumption of raw materials and measures implemented to boost efficiency in their usage	58	Material	GRI 301-1
Direct and indirect energy consumption	57-58	Material	GRI 302-1
Measures to boost energy efficiency	53-58	Material	GRI 302-4
Renewable energy use	57-58	Material	GRI 302-1
Climate change
Greenhouse gas emissions generated as a result of the Company's activities, including the use of the goods and services it produces	52-56	Material	GRI 305-1 GRI 305-2 GRI 305-3
Measures implemented to adapt to the consequences of climate change	52-59	Material	GRI 201-2
Targets established voluntarily in the medium and long term to reduce greenhouse gas emissions and the measures implemented for that purpose	52-56	Material	GRI 305-5
Biodiversity
Measures to preserve or restore biodiversity	59-61	Material	GRI 103-2 GRI 304-3
Impacts of the activities or operations on protected areas	59-61	Material	GRI 103-2 GRI 304-2
Information on respect for human rights
Management approach	76-82	Material	GRI 102-15 GRI 103-2
Application of due diligence procedures
Application of due diligence procedures in connection with the prevention of risks of human rights breaches and, where applicable, measures to mitigate, manage and remedy potential abuse	76-82	Material	GRI 102-16 GRI 102-17 GRI 410-1
Complaints human rights breaches	80	Material	GRI 103-2 GRI 406-1

Measures implemented for the promotion and compliance with the provisions of ILO fundamental conventions relating to respect for freedom of association and the right to collective bargaining; elimination of discrimination in the workplace and occupation; elimination of forced or compulsory labour; effective abolition of child labour	76-82	Material	GRI 103-2
Information concerning combating
bribery and corruption			GRI 102-15
Management approach	67-82	Material	GRI 103-2
Measures to prevent bribery and corruption	76-82	Material	GRI 103-2 GRI 102-16 GRI 102-17
Anti-money laundering measures	76-82	Material	GRI 103 GRI 102-16 GRI 102-17 GRI 205-2 GRI 205-3
Contributions to foundations and non-profit organisations	81; 85; 101	Material	GRI 102-13 GRI 201-1
Company information
Management approach	49-51; 81-84; 84-103	Material	GRI 102-15
The company's commitment to sustainable development			GRI 103-2
Impact of the business on society, with regard to jobs and local development	85-87	Material	GRI 103-2 GRI 203-2 GRI 204-1
The impact of the business on local communities and territory	91-99	Material	GRI 413-1 GRI 413-2
Relations with the stakeholders in local communities and modalities of dialogue with them	87-94; 99-103	Material	GRI 102-43 GRI 413-1
Association or sponsorship actions	67; 81; 85; 87-91; 101- 102	Material	GRI 103-2 GRI 201-1
Subcontracting and suppliers
Inclusion in procurements policy of social issues, equality and environmental considerations	50-51	Material	GRI 103-2
Consideration, in relations with suppliers and sub-contractors, of their social and environmental responsibility	50-51	Material	GRI 102-9 GRI 308-1 GRI 414-1
Supervisory system and audits, and findings thereof	50-51	Material	GRI 102-9 GRI 308-1 GRI 414-2
Consumers
Measures to ensure consumer health and safety	49-51	Material	GRI 103-2 GRI 416-1
Complaints systems, complaints received and results	50	Material	GRI 103-2
Tax disclosures and transparency
Profit/loss obtained by country	82-83	Material	GRI 207-4 (2019 version)
Income tax paid	83-84	Material	GRI 207-4 (2019 version)
Public grants received	84	Material	GRI 201-4

Appendix II.

Index of GRI indicators

General contents

GRI standard	Contents	Page of the report featuring response	Omissions
GRI 101: 2016 background
	GRI 102: 2016 general content
Profile of the organisation
102-1	Name of the organisation	23
102-2	Activities, brands, products and/or services	24-25
102-3	Location of the organisation's headquarters	Paseo de la Castellana, 81 - Planta 20 28046 - Madrid Spain
102-4	Number of countries where the organisation operates	24-25
102-5	Nature of ownership and legal form	22-23
102-6	Markets served	24-25
102-7	Size of organisation	85-87
102-8	Information on employees	31-41
102-9	Supply chain	50-51
102-10	Significant changes in the organisation and its supply chain	There have not been any significant changes
102-11	Precautionary principle or approach	51-52
102-12	Support for external initiatives	82; 94-99
102-13	Membership of associations	67; 81; 85; 101
Strategy
102-14	Declaration from the person charged with ultimate authority in the organisation	The Chairman's Letter is published in the 2019 Integrated Report available at https://www.elecnor. com/annual-reports
Ethics and integrity
102-16	Values, principles, standards and rules of conduct	76-82
	Governance
102-18	The organisation's governance structure	68-69
Involvement of stakeholders
102-40	List of stakeholders	99-101

GRI standard	Contents	Page of the report featuring response	Omissions
102-41	Collective bargaining agreements	44-45
102-42	Identification and selection of stakeholders	22-23
102-43	Focus for the involvement of stakeholders	22-23
102-44	Key topics and concerns mentioned	99-101
	Best practices for preparing reports
102-45	Entities included in the consolidated financial statements	22-23
102-46	Definition of the contents of reports and coverage of the topic	24
102-47	List of material topics	24
102-48	Restatement of information	Note6
102-49	Changes in how reports are compiled	There have not been any significant changes
102-50	Period covered by the report	2019
102-51	Date of the last report	2018
102-52	Report drafting cycle	Annual
102-53	Contact address for queries regarding the report	elecnor@elecnor.com
102-54	Declaration that the report was compiled in accordance with GRI standards	This report was prepared in accordance with the Essential option of GRI standards
102-55	Index of GRI indicators	107-113
102-56	External verification	114-116

⁶ In accordance with CNMV guidelines, in the 2019 the comparative figures for 2018 have been restated in order to retroactively reflect the effects that would have derived from equity-accounting the assets and liabilities of the Celeo Redes subgroup from the initial agreement with APG. This restatement will enhance the comparability of the information for the year 2018 with that of the year 2019.

Material topics

GRI standard	Contents	Page of the report featuring response	Omissions
Economic performance
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	51-53; 84-87
103-2	Management approach and components thereof	51-53; 84-87
103-3	Assessment of the management approach	51-53; 84-87
GRI 201: Economic performance 2016
201-1	Direct financial value generated and distributed	85
201-2	Financial implications and other risks and opportunities deriving from climate change	52-59
201-4	Financial aid received from the government	84
Indirect economic impacts
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	85-91
103-2	Management approach and components thereof	85-91
103-3	Assessment of the management approach	85-91
GRI 203: Indirect economic impacts 2016
203-1	Investment investments in infrastructures and services supported	88-91
203-2	Significant indirect economic impacts	85-87
Acquisition practices
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	85-87
103-2	Management approach and components thereof	85-87
103-3	Assessment of the management approach	85-87
GRI 204: Procurement practices 2016
204-1	Proportion of spending on local suppliers	85-87
Anti-Corruption
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	67-82
103-2	Management approach and components thereof	67-82
103-3	Assessment of the management approach	67-82
GRI 205: Anti-Corruption 2016
205-1	Operations assessed for risks related to corruption	76-82
205-2	Communication and training about anti corruption policies and procedures	76-82

GRI standard	Contents	Page of the report featuring response	Omissions
205-3	Confirmed incidents of corruption and actions taken	80
Energy
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	57-58
103-2	Management approach and components thereof	57-58
103-3	Assessment of the management approach	57-58
GRI 302: Energy 2016
302-1	Energy consumption within the organisation	57-58
302-4	Reduction of energy consumption	53-58
Water
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	58
103-2	Management approach and components thereof	58
103-3	Assessment of the management approach	58
GRI 303: Water 2016
303-1	Water withdrawal (by sources)	58
303-3	Water recycling and re-use	58
Biodiversity
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	59-61
103-2	Management approach and components thereof	59-61
103-3	Assessment of the management approach	59-61
GRI 304: Biodiversity 2016
304-1	Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas	59-61
304-2	Significant impacts of activities, products, and services on biodiversity	59-61
304-3	Habitats protected or restored	59-61
Emissions
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	52-56
103-2	Management approach and components thereof	52-56
103-3	Assessment of the management approach	52-56
GRI 305: Emissions 2016
305-1	Direct (Scope 1) GHG emissions	55
305-2	Energy indirect (Scope 2) GHG emissions	55
305-3	Other indirect (Scope 3) GHG emissions	55

GRI standard	Contents	Page of the report featuring response	Omissions
305-4	GHG emissions intensity	54-55
305-5	Reduction of GHG emissions	54-55
Effluents and discharges
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	58-59
103-2	Management approach and components thereof	58-59
103-3	Assessment of the management approach	58-59
GRI 306: Effluents and waste 2016
306-2	Waste by type and disposal method	58-59	Note7
Environmental compliance
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	51-52
103-2	Management approach and components thereof	51-52
103-3	Assessment of the management approach	51-52
GRI 307: Environmental Compliance 2016
307-1	Non-compliance with environmental laws and regulations	Note8
Supplier Environmental Assessment
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	50-51
103-2	Management approach and components thereof	50-51
103-3	Assessment of the management approach	50-51
	GRI 308: Supplier Environmental Assessment 2016
308-1	New suppliers that were screened using environmental criteria	51
Employment
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	29-32; 38-40
103-2	Management approach and components thereof	29-32; 38-40
103-3	Assessment of the management approach	29-32; 38-40
GRI 401: Employment 2016
401-1	New employee hires and employee turnover	38-40
401-2	Benefits provided to full-time employees that are not provided to temporary or part-time employees	29-30
Occupational Health and Safety

⁷ The Group is working to provide a breakdown of waste by type and disposal method in 2021.

⁸ No noteworthy incidents or aspects are known.

GRI standard	Contents	Page of the report featuring response	Omissions
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	44-48
103-2	Management approach and components thereof	44-48
103-3	Assessment of the management approach	44-48
GRI 403: Occupational Health and Safety 2016
403-1	Workers representation in formal joint management–worker health and safety committees	44-45
403-2	Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities	45-46
403-3	Workers with high incidence or high risk of diseases related to their occupation	45-46
Training and education
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	25-29
103-2	Management approach and components thereof	25-29
103-3	Assessment of the management approach	25-29
GRI 404: Training and Education 2016
404-1	Average hours of training per year per employee	28-29
404-2	Programs for upgrading employee skills and transition assistance programs	27-28
404-3	Percentage of employees receiving regular performance and career development reviews	27
Diversity and Equal Opportunity
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	30-36; 43; 72-74
103-2	Management approach and components thereof	30-36; 43; 72-74
103-3	Assessment of the management approach	30-36; 43; 72-74
GRI 405: Diversity and Equal Opportunity 2016
405-1	Diversity of governance bodies and employees	31-36; 43
405-2	Ratio of basic salary and remuneration of women to men	30-31; 72-74
Non-discrimination
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	42-45; 72
103-2	Management approach and components thereof	42-45; 72
103-3	Assessment of the management approach	42-45; 72

GRI standard	Contents	Page of the report featuring response	Omissions
GRI 406: Non-Discrimination 2016
406-1	Incidents of discrimination and corrective actions taken	80
Human Rights Assessment
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	81-82
103-2	Management approach and components thereof	81-82
103-3	Assessment of the management approach	81-82
GRI 412: Human Rights Assessment 2016
412-2	Employee training on human rights policies or procedures	80; 81-82
Local communities
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	87-99
103-2	Management approach and components thereof	87-99
103-3	Assessment of the management approach	87-99
GRI 413: Local communities 2016
413-1	Operations with local community engagement, impact assessments, and development programs	91-99
413-2	Operations with significant actual and potential negative impacts on local communities	91-99
Supplier Social Assessment
GRI 103: Management approach 2016
103-1	Explanation of the material topic and its coverage	50-51
103-2	Management approach and components thereof	50-51
103-3	Assessment of the management approach	50-51
GRI 414: Supplier Social Assessment 2016
414-1	New suppliers that were screened using social criteria	51

-

-

-

-

-

-

Appendix. Alternative Performance Measures

Alternative measurements of the Elecnor Group's performance

Key figures

(thousands of Euros)	2019	2018 Restated	Change (%)
Turnover	2,453,726	2,250,899	9.0%
Domestic	1,168,656	987,979	18.3%
International	1,285,070	1,262,920	1.8%
EBITDA	386,996	254,168	52.3%
Profit before income tax	190,077	125,391	51.6%
Consolidated net profit	126,377	82,117	53.9%

Turnover by segments

	2019	2018 Restated	Change (%)
(thousands of Euros)
Infrastructure	2,279,501	2,096,046	8.8%
Concessions business	190,769	158,643	20.3%
Operations between segments	(16,544)	(3,790)	-
	2,453,726	2,250,899	9.0%

Turnover by activity	2019	2018 Restated	Change (%)
(thousands of Euros)
Electricity	908,347	744,732	22.0%
Power generation	573,375	631,087	-9.1%
Telecommunications and space	247,719	252,914	-2.1%
Facilities	215,105	165,821	29.7%
Construction, environment and water	181,276	169,725	6.8%
Maintenance	171,830	160,396	7.1%
Oil & Gas	106,793	102,594	4.1%
Railways	49,281	23,630	108.6%
	2,453,726	2,250,899	9.0%

EBITDA:

Earnings before interest, taxes, depreciation and amortisation, or gross operating profit.

	2019	2018 Restated	Change (%)
EBITDA = Gross operating profit:	386,996	254,168	52.3%
Results from operating activities	239,676	149,375
+ Expense for amortisation, depreciation, impairment and charges to provisions	162,122	104,793
+ Negative difference in business combinations	-14,802	0
EBITDA from corporate transactions in the year	121,646	5,650

NET EBITDA FROM CORPORATE TRANSACTIONS	265,350	248,518	6.8%
EBITDA from corporate transactions
(thousands of Euros)	2019	2018 Restated
Income at equity-accounted investees:
Income from business combinations as per Note 2.f of the Annual Accounts of Elecnor, S.A. and Subsidiaries	178,345
Income from business combinations as per Note 7 of the Annual Accounts of Elecnor, S.A. and Subsidiaries	-47,445
Income from business combinations (solar thermal companies) as per Note 7 of the Annual Accounts of Elecnor, S.A. and Subsidiaries	-9,254
Assignment of purchase price of Jaurú to Celoe Redes (as per Note 13 of the Annual Accounts of Elecnor, S.A. and Subsidiaries)		5,650
EBITDA from corporate transactions in the year	121,646	5,650

Note on income from operating activities:

As explained in the accompanying Annual Accounts, operating income for 2018 has been restated to include income from equity-accounted investees.

The calculation of EBITDA last year is as follows.

In addition, as explained in Note 2.e to the Annual Accounts of Elecnor, S.A. and subsidiaries, income for 2018 was modified by adjusting the provisional values relating to the acquisition in December 2018 of shares in Jaurú Transmissora de Energia, S.A. and Cachoeira Paulista Transmissora, S.A. from Isolux Energia de Participacoes, S.A., allocating the purchase price of the shareholdings in those companies in accordance with the principles of IFRS 3. Accordingly, in the Consolidated Income Statement for 2018, there is additional income of Euros 5,650 thousand under the heading "Share in profit/loss of equity-accounted investees in the consolidated income statement".

	2018
EBITDA not restated from 2018	338,603
Operating income not restated	151,860
+ Expense for amortisation, depreciation, impairment and charges to provisions	112,012
+ amortisation and depreciation + harmonisation of sales in Brazil concessions due to the effect of applying IFRIC 12	74,731

EBITDA by segments
(thousands of Euros)	2019	2018 Restated	Change (%)
Infrastructure	176,717	171,481	3.1%
Concessions business	144,712	114,921	25.9%
Corporation	72,637	(30,693)
Operations between segments	(7,070)	(1,541)
EBITDA	386,996	254,168	52.3%
NET EBITDA FROM CORPORATE TRANSACTIONS	265,350	248,518	6.8%

Consolidated net profit	2019
(thousands of euros, at year-end)		2018 Restated	Change (%)
Infrastructure	66,519	65,104	2.2%
Concessions business	36,726	25,442	44.4%
Corporation	29,560	(7,388)	-
Operations between segments	(6,428)	(1,041)	-
	126,377	82,117	53.9%

Alternative measures of income of the Parent of the Elecnor Group

Key figures
(thousands of Euros)	2019	2018	Change (%)
Turnover	1,368,728	1,315,286	4.1%
Domestic	987,643	859,507	14.9%
International	381,085	455,779	-16.4%
Results from operating activities	(7,203)	27,391	-126.3%
Profit before income tax	54,659	59,850	-8.7%
Profit after tax	30,122	44,136	-31.8%

	2019	2018	Change (%)
EBITDA = Gross operating profit	18,160	77,461	-76.6%
Results from operating activities	(7,203)	27,391
+ Expense for amortisation, depreciation, impairment and charges to provisions	25,364	50,072

Stock market information

	2019	2018
Closing share price (€)	10.95	13.20
Total volume of securities (million)	3.3	4.3
Total cash traded (€ mn)	37.7	53.9
Number of shares (million)	87	87
Market capitalisation (€ mn)	952.6	1,148.40
PER	7.5	15.5
Dividend yield	2.4%	2.6%

Group backlog

Backlog

(thousands of euros, at year-end)	2019	2018 Restated	% of total (2019)
Domestic	547,368	445,698	25 %
International	1,675,349	1,681,685	75 %
TOTAL	2,222,717	2,127,383
Percentage growth	4.5%

Alternative debt measures; indebtedness ratio

Net Financial Debt

(thousands of euros, at year-end)	2019
Corporation Net Financial Debt	135,672
Net EBITDA of corporate transactions With recourse Without recourse	265,350 122,633 142,717
Ratio of Debt/EBITDA with recourse + projects div.	0.92
Total Net Financial Debt	494,133
With recourse	135,672
Without recourse	358,461
Net EBITDA of corporate transactions	265,350
Ratio of total net financial debt to net EBITDA of corporate transactions	1.86

	2019
Corporation Net Financial Debt	135,672
(Net Financial Debt in Note 17 of the Annual Accounts of Elecnor, S.A. and Subsidiaries)
Net EBITDA of corporate transactions	265,350
EBITDA without recourse (from projects financed via funding without recourse)	142,717
EBITDA with recourse	122,633
Dividends from projects financed via funding without recourse	30,719
Reversal of the effect on EBITDA with recourse of the application of IFRS 16	-6,385
EBITDA with recourse + Dividends from projects without recourse net of the effect of IFRS 16	146,967
Indebtedness ratio = Net corporate financial debt/(EBITDA with recourse + Dividends from projects)	0.92

	2019	2018
Calculation of Total Net Financial Debt		Restated
Financial liabilities from issuing bonds and other marketable	135,120	192,010
securities
+ Finance liabilities on loans and borrowings	680,898	657,256
+ Derivative financial instruments (from Non-current liabilities	19,854	17,982
and Current liabilities in the Consolidated Statement of
Financial Position)
- Current investments in related companies	(128)	(297)
- Derivative financial instruments	(3,873)	(871)
- Cash and cash equivalents	(325,116)	(293,399)
- Other current financial investments	(6,429)	(4,947)
	5,277	6,243
Loans granted by public entities (Note 17)
		871
+ Derivative financial instruments (from Current assets in the
Consolidated Statement of Financial Position) for currency
exchange hedges (Note 18)
- Derivative financial instruments (from Non-current liabilities	(11,469)	(4,468)
and Current liabilities in the Consolidated Statement of
Financial Position) for currency exchange hedges (Note 18)
Total Net Financial Debt	494,134	570,380
	-13.4%

ANNUAL CORPORATE GOVERNANCE REPORT FOR LISTED COMPANIES

In compliance with the applicable legal obligations and based on the model circulated by the CNMV, the Board of Directors of ELECNOR, S.A. (hereinafter Elecnor or the Company) has prepared this Annual Corporate Governance Report (hereinafter the REPORT) for the financial year ending 31 December 2019.

The REPORT was approved by the Company's Board of Directors at its meeting held on 25 March 2020 and the CNMV shall immediately be notified and sent the REPORT by electronic means for its dissemination.

The REPORT shall also be made available to the shareholders upon the publication of the announcement of the Annual General Shareholders' Meeting to decide on the approval of the Annual Financial Statements for the financial year ending 31 December 2019.

A CAPITAL STRUCTURE

A.1 Complete the table below with details of the share capital of the company:

Date of last change	Share capital (Euros)	Number of shares	Number of voting
			rights
20/05/2009	8,700,000	87,000,000	87,000,000

Remarks

Please state whether there are different classes of shares with different associated rights:

Yes � No

Class	Number of shares	Par value	Number of votes	Associated rights

Remarks

A.2 Please provide details of the company's significant direct and indirect shareholders at year end, excluding any directors:

Name of	% of shares carrying voting rights		% of voting rights through financial instruments		% of total
shareholder	Direct	Indirect	Direct	Indirect	voting rights
CANTILES XXI, S.L.	52.759%				52.759%
SANTANDER ASSET MANAGEMENT, S.A., SGIIC		3.089%			3.089%

Remarks

Breakdown of the indirect holding

Name of indirect shareholder	Name of direct shareholder	% of shares carrying voting rights	% of voting rights through financial instruments	% of total voting rights
SANTANDER ASSET MANAGEMENT, S.A., SGIIC	SANTANDER SMALL CAPS ESPAÑA, FI SANTANDER SOSTENIBLE 1, FI SANTANDER SOSTENIBLE 2, FI SANTANDER SOSTENIBLE ACCIONES, FI	3.089%		3.089%

Remarks

State the most significant shareholder structure changes during the year:

Name or corporate name of the shareholder	Date of the operation	Description of the operation
BESTINVER GESTIÓN, S.A., SGIIC	26/04/2019	DECREASE BELOW 3%

Most significant movements

A.3 In the following tables, list the members of the Board of Directors (hereinafter "directors") with voting rights in the company:

Name of director	% of shares carrying voting rights		% of voting rights through financial instruments		% of total voting	% voting rights that can be transmitted through financial instruments
	Direct	Indirect	Direct	Indirect	rights	Direct	Indirect
MR. JAIME REAL DE ASÚA ARTECHE	0.012%				0.012%
MR. FERNANDO LEÓN DOMECQ	0.403%				0.403%
MR. IGNACIO PRADO REY BALTAR	0.464%				0.464%
MR. FERNANDO AZAOLA ARTECHE	0.326%				0.326%
MR. MIGUEL CERVERA EARLE	0.164%	0.005%			0.170%
MS. ISABEL DUTILH CARVAJAL	0.010%				0.010%
MR. CRISTÓBAL GONZÁLEZ DE AGUILAR ALONSO URQUIJO	0.135%				0.135%
MS. IRENE HERNÁNDEZ ÁLVAREZ	0.007%				0.007%
MR. JUAN LANDECHO SARABIA	0.003%	0.082%			0.085%
MR. RAFAEL MARTÍN DE BUSTAMANTE VEGA	0.025%				0.025%
MR. MIGUEL MORENÉS GILES		1.011%			1.011%
MR. RAFAEL PRADO ARANGUREN	0.148%				0.148%
MR. JOAQUÍN GÓMEZ DE OLEA Y MENDARO	0.001%				0.001%

Total percentage of voting rights held by the Board of Directors	2.797%
------------------------------------------------------------------	--------

Breakdown of the indirect holding:

Name of director	Name of direct shareholder	% of shares carrying voting rights	% of voting rights through financial instruments	% of total voting rights	% voting rights that can be transmitted through financial instruments
MR. MIGUEL CERVERA EARLE	MS MARÍA DEL MAR MANCA DÍAZ	0.005%		0.005%
MR. JUAN LANDECHO SARABIA	MS SOFIA CANOSA CASTLE	0.082%		0.082%
MR. MIGUEL MORENÉS GILES	KEROW INVERSIONES, S.L.	1.011%		1.011%

A.4 If applicable, state any family, commercial, contractual or corporate relationships that exist among significant shareholders to the extent that they are known to the company, unless they are insignificant or arise in the ordinary course of business, except those that are reported in Section A.6:

Not applicable.

A.5 If applicable, state any commercial, contractual or corporate relationships that exist between significant shareholders and the company and/or group, unless they are insignificant or arise in the ordinary course of business:

Not applicable.

A.6 Describe the relationships, unless insignificant for the two parties, that exist between significant shareholders or shareholders represented on the Board and directors, or their representatives in the case of proprietary directors.

Explain, as the case may be, how the significant shareholders are represented. Specifically, state those directors appointed to represent significant shareholders, those whose appointment was proposed by significant shareholders and/or companies in its group, specifying the nature of such relationships or ties. In particular, mention the existence, identity and post of directors, or their representatives, as the case may be, of the listed company, who are, in turn, members of the Board of Directors or their representatives of companies that hold significant shareholdings in the listed company or in group companies of these significant shareholders.

Name or company name of	Name or company	Company name of the	Description of
related director or	name of related	group company of the	relationship/post
representative	significant shareholder	significant shareholder

MR. JAIME REAL DE ASÚA ARTECHE	CANTILES XXI, S.L.	DIRECTOR
MR. FERNANDO LEÓN DOMECQ	CANTILES XXI, S.L.	CHAIRMAN
MR. IGNACIO PRADO REY BALTAR	CANTILES XXI, S.L.
MR. JOAQUÍN GÓMEZ DE OLEA Y MENDARO	CANTILES XXI, S.L.	DIRECTOR
MR. MIGUEL CERVERA EARLE	CANTILES XXI, S.L.
MR. CRISTÓBAL GONZÁLEZ DE AGUILAR ALONSO-URQUIJO	CANTILES XXI, S.L.	ALTERNATE DIRECTOR
MR. JUAN LANDECHO SARABIA	CANTILES XXI, S.L.	DIRECTOR
MR. MIGUEL MORENÉS GILES	CANTILES XXI, S.L.	DIRECTOR
MR. GABRIEL DE ORAA Y MOYUA	CANTILES XXI, S.L.	DIRECTOR
MR. RAFAEL PRADO ARANGUREN	CANTILES XXI, S.L.

A.7 State whether the company has been notified of any shareholders' agreements that may affect it, in accordance with Articles 530 and 531 of the Ley de Sociedades de Capital ("Corporate Enterprises Act" or "LSC"). If so, describe these agreements and list the party shareholders:

State whether the company is aware of any concerted actions among its shareholders. If so, provide a brief description:

Yes �	No 
-------	------	--

Parties to the concerted action	Percentage of affected shares	Brief description of the agreement	Date of termination of agreement, if applicable

If any of the aforementioned agreements or concerted actions have been modified or terminated during the year, please specify expressly:

Not applicable.

A.8 State whether any individual or company exercises or may exercise control over the company in accordance with Article 5 of the Ley de Mercados de Valores ("Spanish Securities Market Act" or "LMV"). If so, please identify them:

Yes 	No �
Name of individual or company

CANTILES XXI, S.L.

Remarks

In accordance with the provisions of Article 42 of the Code of Commerce.

A.9 Complete the following table with details of the company's treasury shares:

At the close of the year:

Number of direct shares	Number of indirect shares (*)	Total percentage of share
		capital

Explain any significant changes during the year:

Explain significant changes
There have been no significant variations.

A.10 Provide a detailed description of the conditions and terms of the authority given to the Board of Directors to issue, repurchase, or dispose of treasury shares.

On 16 May 2017, Elecnor's General Shareholders' Meeting approved by a majority of 95.73% of the present and represented share capital, the Fifth Agreement of the Agenda, the literal transcription of which is as follows:

"it is hereby agreed, by a majority, to authorise the Board of Directors to acquire through purchase or by "inter vivos" disposition for a consideration of the Company's own shares by the Company, or of the Controlled Companies, in accordance with the provisions of Articles 146(a) and 509 of the Capital Companies Act, authorising it to acquire at most, the number of shares that the Law and/or the legal provisions of mandatory compliance provide for at all times and that, at present, in addition to those already owned by the Company, do not exceed 10% of its share capital, with a minimum acquisition price of the nominal value of the shares and a maximum price not to exceed 30% of its listed value on the stock exchange and for a period of five years, leaving without effect the authorisation granted at the General Shareholders' Meeting of 23 May 2012.

This authorisation could be used in whole or in part for the acquisition of own shares for delivery or transmission to Executive Directors or members of the Senior Management of the Company or its group's companies".

On the other hand, there is no current mandate from the General Shareholders' Meeting to Elecnor's Board of Directors to issue company shares.

A.11 Estimated working capital:

	%
Estimated working capital	25%

A.12 State whether there are any restrictions (article of associations, legislative or of any other nature) placed on the transfer of shares and/or any restrictions on voting rights. In particular, state the existence of any type of restriction that may inhibit a takeover attempt of the company through acquisition of its shares on the market, and those regimes for the prior authorisation or notification that may be applicable, under sector regulations, to acquisitions or transfers of the company's financial instruments.

A.13 State if the shareholders have resolved at a meeting to adopt measures to neutralise a take-over bid pursuant to the provisions of Act 6/2007.

Yes �	No 
-------	------

A.14 State if the company has issued shares that are not traded on a regulated EU market.

Yes �	No 

B GENERAL SHAREHOLDERS' MEETING

B.1 State whether there are any differences between the quorum established by the LSC for General Shareholders' Meetings and those set by the company and if so, describe them in detail:

Yes �	No 
-------	------

B.2 State whether there are any differences in the company's manner of adopting corporate resolutions and the manner for adopting corporate resolutions described by the LSC and, if so, explain:

B.3 State the rules for amending the company's Articles of Association. In particular, state the majorities required for amendment of the Articles of Association and any provisions in place to protect shareholders' rights in the event of amendments to the Articles of Association.

These rules are contained in Article 11 of the Company's Articles of Association and in Article 13 of the Regulations of the Shareholders' General Meeting, shown below:

ARTICLES OF ASSOCIATION

"Article 11.-

Notwithstanding the provisions set forth in the previous article, in order for the Ordinary or Extraordinary General Shareholders' Meeting to validly agree on the issuance of obligations, the increase or decrease of capital, the transformation, merger or division of the Company, and in general, any modification of the Articles of Association, it shall be necessary, in the first call, to have the attendance of shareholders present or represented who hold at least fifty per cent of the subscribed capital with the right to vote.

In the second call, the attendance of twenty-five per cent of the capital shall be sufficient.

For the adoption of the agreements referred to in this Article, if the capital present or represented exceeds fifty per cent, it shall be sufficient for the agreement to be adopted by an absolute majority. However, a vote in favour by two-thirds of the capital present or represented in the Meeting shall be required when shareholders representing twenty-five per cent or more of the subscribed capital with the right to vote are in the second call without reaching fifty per cent".

REGULATIONS OF SHAREHOLDERS' GENERAL MEETING

"Article 13 Voting.

After discussing each of the items on the Agenda, the respective votes shall be cast, giving each share the right to one vote and adopting each of the agreements by a simple majority of votes.

All agreements that are substantially independent shall be voted on separately.

In any case, and even if they appear in the same item of the Agenda, they must be voted on separately:

• a) The appointment, ratification, re-election or separation of each administrator.
• b) The amendment of the articles of association, and the amendment of each article or group of articles that have their own autonomy.
• c) All matters set forth in this way in the Company's articles of association.

In order for the Ordinary or Extraordinary General Shareholders' Meeting to validly agree on the issuance of obligations, the increase or decrease of capital, the transformation, merger or division of the Company, and in general, any modification of the Articles of Association, it shall be necessary, in the first call, to have the attendance of shareholders present or represented who hold at least fifty per cent of the subscribed capital with the right to vote. In the second call, the attendance of twenty-five per cent of the capital shall be sufficient.

For the adoption of the agreements referred to in the previous section, if the capital present or represented exceeds fifty per cent, it shall be sufficient for the agreement to be adopted by an absolute majority. However, a vote in favour by two-thirds of the capital present or represented in the Meeting shall be required when shareholders representing twenty-five per cent or more of the subscribed capital with the right to vote are in the second call without reaching fifty per cent.

The Articles of Association may raise the quorums and majorities provided for in the preceding paragraphs.

Electronic voting systems may be established, in accordance with Chapter III of these Regulations, to the extent that they allow the identity and status – shareholder or representative – of voters to be recorded, the number of shares with which they vote, and the way the vote is cast.

For each agreement put up for vote at the General Meeting, at least the number of shares for which valid votes have been cast, the proportion of the share capital represented by those votes, the total number of valid votes, the number of votes in favour and against each agreement and, where appropriate, the number of abstentions must be determined".

B.4 Give details of attendance at General Shareholders' Meetings held during the year of this report and the previous year:

	Attendance data
Date of General Meeting	% of people present	% of people represented	% of votes cast remotely	Total %
22/05/2019	7.07%	74.59%		81.66%
1/06/2018	5.35%	76.64%		81.99%
16/05/2017	4.65%	75.50%		80.15%

B.5 State whether any point on the agenda of the General Shareholders' Meetings during the year has not been approved by the shareholders for any reason.

Yes �	No 
-------	------	--

Points on agenda not approved	% votes against (*)
(*) If the non-approval of the point is for a reason other than the votes against, this will be explained in the

text part and "N/A" will be placed in the "% votes against" column.

B.6 State if the Articles of Association contain any restrictions requiring a minimum number of shares to attend General Shareholders' Meetings, or on distance voting:

Yes No �

Number of shares required to attend General Meetings	10
Number of shares required for distance voting	10

B.7 State whether it has been established that certain decisions other than those established by law exist that entail an acquisition, disposal or contribution to another company of essential assets or other similar corporate transactions that must be subject to the approval of the General Shareholders' Meeting.

Yes � No

Explain the decisions that must be subject to the General Shareholders' Meeting, other than those established by law

B.8 State the address and manner of access to the page on the company website where one may find information on corporate governance and other information regarding General Shareholders' Meetings that must be made available to shareholders through the company website.

All information concerning the Corporate Governance of the Company is available through the "Corporate Governance" section of the "Shareholders and Investors" section of its website, "www.elecnor.com", and can be downloaded and printed in full.

All information concerning the Company's General Meetings is available through the "Corporate Governance" section of the "Shareholders and Investors" section of its website, "www.elecnor.com", and can be downloaded and printed in full.

C COMPANY ADMINISTRATIVE STRUCTURE

C.1 Board of Directors

C.1.1 Maximum and minimum number of directors established in the Articles of Association and the number set by the general meeting:

Maximum number of directors	15
Minimum number of directors	5
Number of directors set by the general	15
meeting

C.1.2 Please complete the following table on directors:

Name of director	Natural person representative	Director category	Position on the Board	Date first appointed to Board	Last re election date	Method of selection to Board	Date of birth
MR. JAIME REAL DE ASÚA ARTECHE		Proprietary Director	Chairman	19/12/2001	01/06/2018	General Meeting Election	09/09/1954
MR. FERNANDO LEÓN DOMECQ		Proprietary Director	Deputy Chairman	20/05/1986	01/06/2018	General Meeting Election	21/08/1954
MR. IGNACIO PRADO REY BALTAR		Proprietary Director	Deputy Chairman	01/06/2018	01/06/2018	General Meeting Election	21/08/1952
MR. JOAQUÍN GÓMEZ DE OLEA Y MENDARO		Proprietary Director	Secretary	15/10/2009	18/05/2016	General Meeting Election	02/05/1964
MR. CRISTÓBAL GONZÁLEZ DE AGUILAR ALONSO URQUIJO		Proprietary Director	Deputy Secretary	18/03/2015	22/05/2019	General Meeting Election	23/11/1954
MR. FERNANDO AZAOLA ARTECHE		External	Member	18/06/1998	01/06/2018	General Meeting Election	04/12/1940
MR. MIGUEL CERVERA EARLE		Proprietary Director	Member	25/10/2017	01/06/2018	General Meeting Election	29/09/1963
MS. ISABEL DUTILH CARVAJAL		Independent	Member	20/05/2015	22/05/2019	General Meeting Election	13/09/1963

MS. IRENE HERNÁNDEZ ÁLVAREZ	Independent	Member	01/06/2018	01/06/2018	General Meeting Election	03/01/1965
MR. JUAN LANDECHO SARABIA	Proprietary Director	Member	05/10/2005	01/06/2018	General Meeting Election	04/08/1956
MR. RAFAEL MARTÍN DE BUSTAMANTE VEGA	Executive	Member and CEO	18/05/2011	16/05/2017	General Meeting Election	27/01/1958
MR. MIGUEL MORENÉS GILES	Proprietary Director	Member	23/07/1987	01/06/2018	General Meeting Election	03/03/1948
MR. GABRIEL DE ORAA Y MOYUA	Proprietary Director	Member	20/07/1989	01/06/2018	General Meeting Election	09/04/1938
MR. RAFAEL PRADO ARANGUREN	Proprietary Director	Member	18/11/1993	01/06/2018	General Meeting Election	27/06/1965
MR. EMILIO YBARRA AZNAR	Independent	Member	20/05/2015	22/05/2019	General Meeting Election	12/07/1964

Total number of directors	15

State if any directors, whether through resignation, dismissal or any other reason, have left the Board during the period subject to this report:

Name of director	Director type at time of leaving	Date of last appointment	Date director left	Specialised committees of which he/she was a member	Indicate whether the director left before the end of the term

Reason for leaving and other remarks

C.1.3 Complete the following tables regarding the members of the Board and their categories:

EXECUTIVE DIRECTORS

Name or company name of director	Post in organisational chart of the company	Profile
Mr. Rafael Martín de Bustamante Vega	Managing Director	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website

Total number of executive directors	1
Percentage of Board	6.66%

	Name or company name
	of the significant	Profile
Name of director	shareholder represented
	or that has proposed
	their appointment
Mr. Jaime Real de Asúa Arteche	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Fernando León Domecq	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Ignacio Prado Rey Baltar	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Joaquín Gómez de Olea y Mendaro	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Cristóbal González de Aguilar Alonso-Urquijo	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Miguel Cervera Earle	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Juan Landecho Sarabia	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Miguel Morenés Giles	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Gabriel de Oraa y Moyua	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Rafael Prado Aranguren	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website

PROPRIETARY DIRECTORS

Total number of proprietary directors	10
Percentage of the Board	66.66%

INDEPENDENT DIRECTORS

Name of director	Profile
Ms. Isabel Dutilh Carvajal	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Ms. Irene Hernández Álvarez	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Emilio Ybarra Aznar	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website

Number of independent directors	3
Percentage of the Board	20%

State whether any independent director receives from the company or any company in the group any amount or benefit other than compensation as a director, or has or has had a business relationship with the company or any company in the group during the past year, whether in his or her own name or as a significant shareholder, director or senior executive of a company that has or has had such a relationship.

In this case, include a statement by the Board explaining why it believes that the director in question can perform his or her duties as an independent director.

Name of the director	Description of the relationship	Statement of the Board

OTHER EXTERNAL DIRECTORS

Identify the other external directors and state the reasons why these directors are considered neither proprietary nor independent, and detail their ties with the company or its management or shareholders:

Name of director	Reason	Company, director or shareholder to whom the director is related	Profile
Mr. Fernando Azaola Arteche	He does not have a shareholding legally considered as significant and was Executive	__	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website

Director of
the Company
until
31/12/2016

Total number of other external directors	1
Percentage of the Board	6.66%

State any changes in status that has occurred during the period for each director:

Name of director	Date of change	Previous Status	Current status

C.1.4 Complete the following table with information relating to the number of female directors at the close of the past 4 years, as well as the category of each:

2016 financial year: 1 Independent Director. 2017 financial year: 1 Independent Director. 2018 financial year: 2 Independent Directors. 2019 financial year: 2 Independent Directors.

C.1.5 State whether the company has diversity policies in relation to the Board of Directors of the company on such questions as age, gender, disability and training and professional experience. Small and medium-sized enterprises, in accordance with the definition set out in the Accounts Audit Act, will have to report at least the policy they have implemented in relation to gender diversity.

Yes No � Partial policies �

Should this be the case, describe these diversity policies, their objectives, the measures and way in which they have been applied and their results over the year. Also state the specific measures adopted by the Board of Directors and the appointments and remuneration committee to achieve a balanced and diverse presence of directors.

In the event that the company does not apply a diversity policy, explain the reasons why.

Description of policies, objectives, measures and how they have been implemented, including results achieved

On 22 November 2017, the Board of Directors approved the "Policy for the Selection of Directors and Diversity of the Board of Directors", which is accessible on the Company's website and which contains all the measures taken in relation to the selection of directors, policies on gender diversity, age, experience, etc.

The bodies in charge of the selection processes for Board members shall be the Board of Directors and the Appointments and Remunerations Commission.

The procedures for such selection shall ensure that they favour the diversity of experience, knowledge, skills and gender; and that, in general, they do not suffer from implicit biases that may lead to discrimination of any kind.

In particular, it will be ensured that selection procedures cannot involve discrimination in the selection of female Directors, bringing us closer to the objectives of Corporate Governance.

For this purpose, when the Appointments and Remunerations Commission or the Board itself, as the case may be, seeks a professional profile, the corporate interests shall first be taken into consideration, without prejudice to the fact that, when faced with two similar professional profiles, the one with the least-represented gender will be chosen.

Within the framework of this policy, in 2018, a second Independent Director, Ms. Irene Hernández Álvarez was appointed as the Chairwoman of the Audit Committee in May 2019. Likewise, on the same date, Ms. Isabel Dutilh was re-elected as an Independent Director.

C.1.6 Describe the means, if any, agreed upon by the appointments committee to ensure that selection procedures do not contain hidden biases which impede the selection of female directors and that the company deliberately seeks and includes women who meet the target professional profile among potential candidates and which makes it possible to achieve a balance between men and women:

Explanation of means

The "Policy for the Selection of Directors and Diversity of the Board of Directors" already mentioned in the previous point, states that the people responsible for the processes of selecting members of the Board of Directors shall be the Board of Directors itself and the Appointments and Remunerations Commission.

The procedures for such selection, in line with the aforementioned Policy for the Selection of Directors and Diversity of the Board of Directors, shall ensure that they favour the diversity of experience, knowledge, skills and gender; and that, in general, they do not suffer from implicit biases that may cause discrimination of any kind.

In particular, it will be ensured that selection procedures cannot involve discrimination in the selection of female Directors, bringing us closer to the objectives of Corporate Governance.

For this purpose, when the Appointments and Remunerations Commission or the Board of Directors itself, as the case may be, seeks a professional profile, the corporate interests shall first be taken into consideration, without prejudice to the fact that, when faced with two similar professional profiles, the one with the least-represented gender will be chosen.

In the event that there are few or no female directors in spite of any measures adopted, please explain the reasons that justify such a situation:

Explanation of means

See the explanation in section C.1.5., considering that the Company is promoting a gradual increase in the number of female Directors as soon as possible.

C.1.7 Describe the conclusions of the appointments committee regarding verification of compliance with the selection policy for directors; in particular, as it relates to the goal of ensuring that the number of female directors represents at least 30% of the total membership of the Board of Directors by the year 2020.

Since the incorporation in 2015 of the first woman as a member of the Board of Directors, the adaptation of Article 15b of the Articles of Association in 2016 and the adoption of the "Policy for the Selection of Directors and Diversity of the Board of Directors" in 2017, the Company continues to work toward achieving Corporate Governance Recommendations in this area.

Ms. Irene Hernández Álvarez has been appointed as the second Independent Director at the Company's General Shareholders' Meeting held on 1 June 2018, and Ms. Isabel Dutilh has been re-elected as Independent Director at the General Meeting held on 22 May 2019.

With regard to the objective of ensuring that in 2020 the number of female Directors represents at least 30% of the total membership of the Board of Directors, the Company's Board continues to work in this regard, relying on the Appointments and Remuneration Commission to do so, and promoting the actions necessary to ensure that this objective is achieved as soon as possible.

C.1.8 If applicable, please explain the reasons for the appointment of any proprietary directors at the request of shareholders with less than a 3% equity interest:

Name of shareholder	Reason

State whether the Board has failed to meet any formal requests for membership from shareholders whose equity interest is equal to or higher than that of others at whose request proprietary directors have been appointed. If this is the case, please explain why the aforementioned requests were not met:

Yes � No

There has been no formal request in this regard.

C.1.9 State the powers delegated by the Board of Directors, as the case may be, to directors or Board committees:

Name of director	Brief description
MR. RAFAEL MARTÍN DE BUSTAMANTE VEGA	All powers except the Company's debt and those non-delegable by Law or the Articles of Association.
	All powers of the Board of Directors except those which, legally or statutorily, are non-delegable, and the following:
EXECUTIVE COMMITTEE	(i) The ability to approve investments or operations of all kinds, which leads to the Company's debt;
	(ii) The power to approve investments or operations of all kinds of value greater than EUR 6,000,000 per operation.

The power to approve investments or operations of all kinds worth less than EUR 6,000,000 per operation also cannot be delegated when this power cannot be delegated by the Board of Directors and/or falls within the competence of the General Meeting.
(iii) The power to approve the constitution, merger, split, global transfer of assets and liabilities, dissolution, and/or liquidation of any type of entity having its own legal personality, as well as the power to approve operations that produce effects on those entities that are similar to those of said operations.
The power to approve the above operations is delegated to entities that do not have their own legal personality, such as, for information purposes, but not limited to, joint ventures or joint ownership arrangements.

C.1.10 Identify any members of the Board who are also directors or officers in other companies in the group of which the listed company is a member:

Title				Code
CHAIRMAN				C
	SECRETARY			S
DEPUTY SECRETARY				DS
MEMBER				M
JOINT AND SEVERAL ADMINISTRATOR				JSA
TITLES HELD BY REPRESENTATIVES				X
EXECUTIVE FUNCTIONS			e
WITHOUT EXECUTIVE FUNCTIONS				ne
Board members holding the position of administrators or executives in companies of the Elecnor Group	Miguel Cervera Earle Mr.	mez de Mendaro Joaquín Gó Olea y Mr.	Cristóbal González de Aguilar Alonso Urquijo Mr.	Juan Landecho Sarabia Mr.	Fernando León mecq Do Mr.	Martín de mante Vega Rafael Busta Mr.	Morenés Giles Miguel Mr.	Gabriel de Oraa y Moyua Mr.	Rafael Prado Aranguren Mr.	Ignacio Prado Rey Baltar Mr.	me Real de Asúa Arteche Jai Mr.
ELECTRIFICACION ES DEL NORTE, ELECNOR, S.A.						JSA e
ELECRED SERVICIOS, S.A.U.						JSA e
ENERFIN SOCIEDAD DE ENERGIA, S.L.U.	M	DS	M	M	S	M	M	M	M	M	M

C.1.11 List any legal-person directors of your company who are members of the Board of Directors of other companies listed on official securities markets other than group companies, and have communicated that status to the Company:

Name of director	Name of listed company	Position
Mr. Jaime Real de Asúa Arteche	VISCOFAN, S.A.	Member of the Board of Directors and

		Chairman of the
		Appointments and
		Remunerations
		Commission
		Independent Director.
		Member of the Audit
		Commission and
Ms. Isabel Dutilh Carvajal	Millenium Hotels Real State I	Member of the
	SOCIMI	Appointments and
		Remunerations
		Commission
		Coordinator Director,
		Chairwoman of the
	Saint Croix Holding Immobilier SOCIMI, S.A.	Audit Commission and
		Member and Secretary
		of the Appointments
Ms. Irene Hernández		and Remunerations
Álvarez		Commission
		Independent Director,
	ENCE ENERGIA Y CELULOSA,	Member of the
	S.A.	Executive Committee
		and Member of the
		Audit Commission
Mr. Emilio Ybarra Aznar		Deputy Chairman of
	TUBOS REUNIDOS, S.A.	the Board of Directors
		and member of the
		Executive Committee

C.1.12 State whether the company has established rules on the number of boards on which its directors may hold seats, providing details if applicable, identifying, where appropriate, where this is regulated:

$$\begin{array}{l} \mathsf{Yes} \boxed{\begin{array}{l} \mathsf{No} \ \mathsf{und} \end{array}} \qquad \mathsf{No} \ \mathsf{und} \end{array} $$

$$\begin{array}{l} \mathsf{Explanation of the rules and identifying of the document where this is regulated} \ \hline \text{Articles 18 of the Results of the Board ofDirect costs established} \ \text{Directors of the Company may not sit on the Board ofDirectory of more than THRE listed compounds, in addition to that of Electric, \mathsf{S.A.} } \end{array} $$

C.1.13 State total remuneration received by the Board of Directors:

Board remuneration in financial year (thousand euros)	5,199.6
Amount of vested pension interests for current members (thousand euros)	0
Amount of vested pension interests for former members (thousand euros)	0

C.1.14 Identify senior management staff who are not executive directors and their total remuneration accrued during the year:

Name	Position
Mr. Francisco Javier Cruces López	General Manager of Infrastructure
Mr. Argimiro Ramón Rodríguez	General Deputy Director of Facilities and Networks

Mr. Eduard Pinyol Escardo	General Deputy Director of International Development
Mr. José Martí Soler	General Deputy Director of Engineering
Mr. Pablo Díaz Miguel Sánchez	General Deputy Director of Energy
Mr. Armando Pérez Medina	General Deputy Director of Major Networks
Mr. José Castellanos Ybarra	General Deputy Director
Mr. Luis Alcíbar Villa	General Deputy Director of Finances and Internal Audit
Ms. Úrsula Albizuri Delclaux	Director of Corporate Development
Mr. Pedro Enrile Mora-Figueroa	General Secretary

Total senior management remuneration (thousand euros) 4,661

C.1.15 State whether the Board rules were amended during the year:

	Yes 	No �
		Description of amendment
	risks that could materialise in the future.	On 27 March 2019, the Board of Directors unanimously amended Articles 5 "General oversight function", 14 "Appointments and Remuneration Commission" and 24 "Director of Remuneration" of the Regulations of the Board of Directors, to adapt the Regulations of the Board of Directors of the Company to the interpretation contained in Supreme Court Ruling 98/2018 of 26 February and adjust the profit-based remuneration system to the reality of the Company and its Group (understood in the terms of Article 42 of the Code of Commerce), reducing the commercial and tax
		These amendments were subject to the approval of the amendment to Article 12 of the Company's Articles of Association, for the same purpose, as was the case at the Company's General Meeting, held on 22 May 2019, in which this amendment was unanimously approved, and therefore, the amendments to the Regulations of the Board of Directors were approved.
Audit	Commission"), 14 ("The assets"), 31 ("Business Remuneration Commissions of Spainish	Also, on 18 December 2019, the Board of Directors approved the amendment to Articles 3 ("Interpretation"), 5 ("General oversight function"), 7 ("Qualitative composition"), 9 ("The Chairman of the Board"), 11 ("The Secretary of the Board"), 11 bis ("Deputy Secretary of the Board"), 12 ("Delegated Bodies of the Board of Directors"), 13 ("The Appointments and Remuneration Commission"), 15 ("Meetings of the Board of Directors"), 16 ("Conducting meetings"), 17 ("Use of telematic means"), 18 ("Appointment of Directors"), 19 ("Re-election of Directors"), 20 ("Duration of role"), 21 ("Removal of Directors"), 22 ("Powers of information and inspection"), 23 ("Expert advice"), 26 ("General obligations of the Director"), 27 ("Duty of confidentiality"), 28 ("Conflicts of interest"), 29 ("Use of corporate opportunities"), 35 ("Relations with shareholders"), 36 ("Relations with markets") and 37 ("Relations with auditors") of the Regulations of the Board of Directors, for the purpose of incorporating the principles of both Technical Guide 3/2017 on Audit Commissions and Technical Guide 1/2019 on the Appointments and National Securities Market Commission, the developments introduced in the Capital Companies Act (LSC) by Law 11/2018 in relation to the diversity in the composition of

the Board and with the non-delegable powers of this body, as well as to introduce certain amendments of a technical nature.

C.1.16 Specify the procedures for selection, appointment, re-election and removal of directors: the competent bodies, steps to follow and criteria applied in each procedure.

The Company is governed by the provisions set forth in its Articles of Association, Articles 13 (requirements for membership of the Board, duration of the role and re-election) and 15 (Appointment, removal and appointment by co-optation), the content of which is reproduced below:

"Article 13.-

The Board of Directors shall not comprise fewer than five nor more than 15 Directors.

Being a Director requires having at least 5% of the Company's shares with the right to vote at least five years prior to appointment. The abovementioned advance of at least five years in the possession of the shares and the requirement to hold at least 5% of the Company's capital shall not be necessary when the appointment, re-election or ratification of the Director shall be carried out by the General Meeting with a quorum of attendance of 25% of the capital subscribed in the first call or without a minimum quorum in the second call, and shall be approved – in both cases – by a simple majority of the capital present or represented. The appointment, re-election or ratification of Independent Directors, which in all cases must comply with the provisions of the applicable regulations, these Articles of Association and the Regulations of the Board of Directors, shall be exempt from the foregoing.

Administrators shall serve for a term of four years, and may be re-elected, once or several times, for periods of equal duration.

The appointment of administrators shall expire when, following expiry of the term, the next General Meeting has been held or the legal period has lapsed to hold the Meeting to resolve the approval of accounts for the previous financial year.

To be a member of the Board of Directors, it is necessary not to be subject to any of the statutory grounds for incompatibility or prohibition established by Law.

Article 15.-

With regard to the Board of Directors, it may appoint an Executive Committee and/or one or more Chief Executive Officers and delegate to them, permanently, all or some of the powers it has been conferred, except those which are especially reserved for it by Law.

The Chairman of the Board of Directors shall be the Chairman of the Company. The election of the Chairman, Deputy Chairmen, Secretary and Deputy Secretary shall be the responsibility of the Board of Directors, which, if deemed appropriate, may appoint as Secretary and/or Deputy Secretary a person who does or does not have the status of Director.

In the absence of the Chairman, the Deputy Chairman shall perform this role, and in the absence of the Deputy Chairman, the Member designated by the Board shall perform this role. Likewise, in the absence of the Secretary, the Deputy Secretary shall perform this role.

The Directors are freely appointed and separated by the General Meeting.

If vacancies occur during the term for which the Administrators were appointed, the Board may appoint people to occupy them until the first General Meeting.

The Board of Directors shall meet at least quarterly. The Board of Directors shall also meet whenever necessary for the best progress of the Company, and when so ordered by the Chairman. In addition, Directors who constitute at least one third of the members may call meetings of the Board directly, stating the Agenda of the meeting to be held in the location of the registered address if, after the request to the Chairman, the latter, without justified causes, fails to call the meeting within one month. The Chairman shall conduct the debate and give the floor in order of request.

The Board of Directors shall be validly constituted when a half of its members are present or represented at the meeting, plus one.

The Board's agreements shall be adopted, subject to legal exceptions, by an absolute majority of the Directors attending the session.

The Board of Directors shall be governed by the provisions of the Articles of Association, the Regulations of the Board of Directors and the current Capital Companies Act".

In addition, on 22 November 2017, the Board of Directors of Elecnor approved the "Policy for the Selection of Directors and Diversity of the Board of Directors", which sets out the objectives, procedures, requirements and supervision of the policy for the selection of Directors. This policy has been made public through the Company's website.

C.1.17 Explain how the annual evaluation of the Board has given rise to significant changes in its internal organisation and to procedures applicable to its activities:

Description of changes

The annual evaluation carried out by members of the Board of Directors during the 2019 financial year has led to preparing an Action Plan proposal, which highlights the implementation of a specific and personalised training and knowledge update programme for Directors, in accordance with Recommendation No. 30 of the Good Governance Code Code of Listed Companies of the Spanish National Securities Market Commission (CNMV).

Describe the evaluation process and the areas evaluated by the Board of Directors with the help, if any, of external advisors, regarding the function and composition of the board and its committees and any other area or aspect that has been evaluated.

Description of the evaluation process and evaluated areas

The Company's Board of Directors evaluates, through several questionnaires to be completed by all its members and by the members of its Commissions, its activity and that of all its Commissions, as well as the activity and actions carried out by the Chairman, the Secretary and the Chief Executive Officer, detecting the strengths and points to improve and applying the appropriate corrective measures. These questionnaires are reviewed by the respective Commissions and, in addition, the Appointments and Remuneration Commission reviews the questionnaire of the Board and that of the Chairman.

The questionnaires mentioned include the evaluation of areas such as the degree of achievement of the objectives, the creation of value and strategy, the composition and dynamics of the Board, risk management, transparency and the relationship with shareholders, Corporate Governance and Corporate Social Responsibility, the functioning of the Commissions of the Board, the performance of the functions of the Board Chairman, etc.

Continuing the action plan resulting from the evaluations of the Board and its Commissions and to advance the implementation of recommendation 36 of the Good Governance Code Code, a work assessment was carried out in 2019 and, as already reported in the previous year, the consultant Russell Reynolds was hired in 2018 for the questionnaires of that year, to analyse the best practices regarding the performance of the Board, its Commissions, the Chairman, CEO and Secretary.

• C.1.18 Describe, in those years in which the external advisor has participated, the business relationships that the external advisor or any group company maintains with the company or any company in its group.
• C.1.19 State the situations in which directors are required to resign.

The Directors who were involved in any of the prohibitions in Article 213 of the Capital Companies Act shall be immediately dismissed, at the request of any shareholder, without prejudice to the liability that they may incur, in accordance with Article 236 of the same legal text, due to their disloyal conduct.

Directors who were from another competing company and people who in any way have interests contrary to those of the Company shall step down from their position at the request of any member and by agreement of the General Meeting.

For its part, Article 21 of the Regulations of the Board of Directors establishes in this respect:

"Directors shall resign either voluntarily or when the period for which they were appointed has lapsed and when so decided by the General Meeting by virtue of the powers conferred to it by law or statute.

Without prejudice to the foregoing, Directors who are considered proprietary shall submit their resignation when the shareholder whom they represent sells their shareholding in full.

Directors must make their role available to the Board of Directors and, if the latter deems it appropriate, formalise the corresponding resignation in cases where they may harm the credit and reputation of the Company or in any way adversely affect the functioning of the Board of Directors or the Company and, in particular, when involved in any of the legally foreseen cases of incompatibility or prohibition.

The Board of Directors may only propose the removal of an Independent Director to the General Meeting before the statutory deadline when there is just cause, as assessed by the Board of Directors after advance notification to the Appointments and Remuneration Commission.

When a Director ceases from his role before the end of their term of office, due to resignation or any other reason, he must send a letter to all members of the Board of Directors explaining the reasons for ceasing".

C.1.20 Are qualified majorities other than those established by law required for any specific decision?

Yes �	No 
-------	------

C.1.21 Explain whether there are any specific requirements, other than those relating to directors, to be appointed as chairman of the Board of Directors.

Yes � No

C.1.22 State whether the Articles of Association or the Board Rules establish any limit as to the age of directors:

C.1.23 State whether the Articles of Association or the Board Rules establish any term limits for independent directors other than those required by law:

	Yes �	No 
Additional requirements and/or maximum number of term	limits		12 years (Art. 20 of the Regulations of the Board of Directors)

C.1.24 State whether the Articles of Association or Board Rules establish specific proxy rules for votes at Board meetings, how they are to be delegated and, in particular, the maximum number of delegations that a director may have, as well as if any limit regarding the category of director to whom votes may be delegated and whether a director is required to delegate to a director of the same category. If so, please briefly describe the rules.

Within the Company's Board of Directors, there are formal processes for delegating the vote in the event that any of the Directors cannot personally attend the meetings. The Regulations of the Board of Directors, in its Article 16, establishes the following:

"Article 16.-

The Directors may delegate for each session and in writing to have any other Director represent them in said session for all purposes, and the same Director can hold several delegations".

The Board of Directors has no specific limitation on the categories of Director in which it is possible to delegate the vote.

C.1.25 State the number of meetings held by the Board of Directors during the year, and if applicable, the number of times the Board met without the chairman present. Meetings where the chairman sent specific proxy instructions are to be counted as attended.

Number of Board meetings	12
Number of Board meetings without the chairman	0

State the number of meetings held by the coordinating director with the other directors, where there was neither attendance nor representation of any executive director:

Number of meetings	--

Please specify the number of meetings held by each committee of the Board during the year:

Number of meetings of the Executive Committee	22
Number of meetings of the Audit Commission	11
Number of meetings of the Appointments and Remunerations
Commission	10
Number of meetings of the Boards of the Subsidiaries	45

C.1.26 State the number of meetings held by the Board of Directors during the year in which all of its directors were present. For the purposes of this section, proxies given with specific instructions should be considered as attendance

Number of meetings when all directors attended	12
% of attendance over total votes during the year	100%
Number of meetings in situ or representations made with specific	12
instructions of all directors
% of votes issued at in situ meetings or with representations made with	100%
specific instructions out of all votes cast during the year

C.1.27 State if the individual and consolidated financial statements submitted to the Board for preparation were previously certified:

C.1.28 Explain any measures established by the Board of Directors to prevent the individual and consolidated financial statements prepared by the Board from being submitted to the General Shareholders' Meeting with a qualified audit opinion.

In the 30 years in which Elecnor's annual financial statements have been audited by internationally recognised firms, annual financial statements with exceptions in the Audit Report have never been submitted to the General Meeting. The Company, through the Audit Commission and its Internal Audit, has the necessary mechanisms to avoid exceptions in the Audit Report of its individual and consolidated annual financial statements.

C.1.29 Is the secretary of the Board also a director?

Yes No �

If the secretary is not a director, please complete the following table:

Not applicable.

Name of the secretary	Representative

C.1.30 State, if any, the concrete measures established by the entity to ensure the independence of its external auditors, financial analysts, investment banks, and rating agencies, including how legal provisions have been implemented in practice.

Article 15 bis of the Company's Articles of Association and Article 13 of the Regulations of the Board of Directors, as well as the Internal Regulations of the Audit Commission itself, establish the powers of the Audit Commission.

With regard to the Accounts Auditor, the Audit Commission shall have the following functions:

• a) Send to the Board of Directors for submission to the General Shareholders' Meeting the proposals for the selection, appointment, re-appointment and replacement of the accounts auditor, taking responsibility for the selection process, in accordance with the provisions of the applicable regulations as well as the conditions for their hiring, and regularly collect information on the audit plan and its implementation.
• b) Establish appropriate relations with the external auditor to receive information on any issues that may pose a threat to their independence for consideration by the Commission, and any other information related to the process of auditing the accounts, and, where appropriate, the authorisation of services other than those prohibited under the terms of the applicable rules for the independence regime, as well as other communications set out in the account audit legislation and audit standards.

In any case, the external auditors shall provide them with an annual declaration of their independence with regard to the Company or entities directly or indirectly linked to it, as well as detailed and individualised information regarding additional services of any kind provided and the corresponding fees collected from these entities by the external auditor or by the persons or entities linked to it, in accordance with the provisions of the governing regulations on account audit activity.

• c) Issue an annual report, prior to the issuance of the account audit report, expressing an opinion on whether the accounts auditor's independence has been compromised. In any event, this report shall contain the reasoned assessment of each and every additional service provided as referred to in the previous paragraph, considered individually and as a whole, other than the legal audit and in relation to the independence regime or the governing regulations on account audit activity.
• d) Preserve the independence of the external auditor in exercising their functions and, in particular:
• (i) should the external auditor resign, examine the circumstances that may have led to this resignation;
• (ii) ensure that the Company formally reports any change of auditor to the CNMV accompanied by a statement regarding the existence or absence of disagreements with the outgoing auditor and, if applicable, the subject matter thereof;
• (iii) ensure that the remuneration the external auditor receives for their work does not compromise their quality or independence; and
• (iv) ensure that the Company and the external auditor comply with existing rules on the provision of non-audit services, the limits on the concentration of the auditor's business and, in general, other applicable rules to ensure the auditor's independence.
• e) Ensure that the external auditor has at least one annual meeting with the Board of Directors in full to inform them of the work executed and developments in the company's risk and accounting situation.
• C.1.31 State whether the company changed its external auditor during the year. If so, please identify the incoming and outgoing auditor:

Yes �	No 
Outgoing auditor	Incoming auditor

If there were any disagreements with the outgoing auditor, please provide an explanation:

Yes � No

C.1.32 State whether the audit firm provides any non-audit services to the company and/or its Group and, if so, the fees paid and the corresponding percentage of total fees invoiced to the company and/or Group:

$$\mathsf{Yes} \boxed{\mathsf{Xi}} \qquad\qquad\qquad\qquad\mathsf{No}\boxed{\bot}$$

	Company	Group	Total
		Companies
Amount invoiced for non-audit
services	1,494	13	1,507
(thousand euros)
Amount invoiced for non-audit
services/Amount for audit work (in	91.1%	3.5%	74.9%
%)

C.1.33 State whether the auditors' report on the financial statements for the preceding year contains a qualified opinion or reservations. If so, please explain the reasons given by the chairman of the audit committee to explain the content and extent of the aforementioned qualified opinion or reservations.

Yes � No

<-- PDF CHUNK SEPARATOR -->

C.1.34 State the number of consecutive years the current audit firm has been auditing the financial statements of the company and/or group. Furthermore, state the number of years audited by the current audit firm as a percentage of the total number of years that the financial statements have been audited:

	Individual	Consolidated
Number of consecutive years	7	7

	Individual	Consolidated
Number of years audited by the current audit
firm/number of fiscal	23.33%	23.33%
years the company has been audited
(by %)

C.1.35 State whether there is a procedure whereby directors have the information necessary to prepare the meetings of the governing bodies with sufficient time and provide details if applicable:

Yes 	No �
-------	------

Explanation of procedure
Article 9 of the Regulations of the Board of Directors determines that one of the Chairman's functions is to:

"Ensure that the Directors receive the necessary information in advance in order to deliberate on the items on the agenda and diligently carry out their role".

Thus, the Directors have a digital platform in which the relevant information on the items contained in the Agenda of each meeting of the Board and its Commissions is made available.

C.1.36 State whether the company has established rules whereby directors must provide information regarding and, if applicable, resign, in circumstances that may damage the company's standing and reputation. If so, provide details:

$$\begin{array}{c} \mathsf{Yes} \ \overline{\mathsf{Xi}} \end{array} \qquad\qquad\qquad\qquad\qquad\qquad\mathsf{Not}\ \mathsf{Box}$$

Explain the rules Article 21 of the Regulations of the Company's Board of Directors specifies that:

"Directors must make their role available to the Board of Directors and, if the latter deems it appropriate, formalise the corresponding resignation in cases where they may harm the credit and reputation of the Company or in any way adversely affect the functioning of the Board of Directors or the Company and, in particular, when involved in any of the legally foreseen cases of incompatibility or prohibition.

The Board of Directors may only propose the removal of an Independent Director to the General Meeting before the statutory deadline when there is just cause, as assessed by the Board of Directors after advance notification to the Appointments and Remunerations Commission.

When a Director ceasesfrom his role before the end of their term of office, due to resignation or any other reason, he must send a letter to all members of the Board of Directors explaining the reasons for ceasing".

C.1.37 State whether any member of the Board of Directors has notified the company that he or she has been tried or notified that legal proceedings have been filed against him or her, for any offences described in Article 213 of the LSC:

State whether the Board of Directors has examined the case. If so, explain in detail the decision taken as to whether the director in question should continue in his or her post or, if applicable, describe any actions taken by the Board up to the date of this report, or which it intends to take.

Yes � No

C.1.38 Detail any material agreements entered into by the company that come into force, are modified or are terminated in the event of a change in control of the company following a public takeover bid, and their effects.

They do not exist.

C.1.39 Identify individually for director, and generally in other cases, and provide detail of any agreements made between the company and its directors, executives or employees containing indemnity or golden parachute clauses in the event of resignation or dismissal or termination of employment without cause following a takeover bid or any other type of transaction.

There are no indemnities agreed upon between the Company and its nonexecutive management positions, nor executives or employees.

With regard to the Executive Director, their contract provides for indemnification in their favour, provided that the termination is not the result of a violation attributable to them nor is it due to their exclusive will, except in the cases of death or invalidity of the Executive Director, which do not provide any right to indemnification.

The amount of indemnification amounts, as a general rule, to an amount equivalent to two (2) years of their total remuneration, including fixed and variable remuneration, but excluding that which is obtained in annual or multiannual programmes or incentives, without prejudice to the fact that, depending on the type of assumption that results in the termination of contracts, it may reach an amount equivalent to three (3) years of their total remuneration.

State if these contracts have been communicated to and/or approved by management bodies of the company or of the Group. If they have, specify the procedures, events and nature of the bodies responsible for their approval or for communicating this:

	Board of Directors	General Shareholders' Meeting
Body authorising the severance	Yes
clauses

Are these clauses notified to the General Shareholders'
Meeting?

Remarks

C.2 Committees of the Board of Directors

C.2.1 Provide details of all committees of the Board of Directors, their membership, and the proportion of executive, proprietary, independent and other external directors that comprise them:

	EXECUTIVE COMMITTEE
--	---------------------

Name	Post	Category
Mr. Jaime Real de Asúa Arteche	Chairman	Proprietary Director
Mr. Fernando Azaola Arteche	Secretary	External
Mr. Cristóbal González de Aguilar Alonso Urquijo	Member	Proprietary Director
Mr. Fernando León Domecq	Member	Proprietary Director
Mr. Rafael Martín de Bustamante Vega	Member	Executive
Mr. Miguel Morenés Giles	Member	Proprietary Director

% of executive directors	16.67%
% of proprietary directors	66.66%
% of independent directors	0%
% of external directors	16.67%

Remarks

Explain the duties exercised by this committee, other than those that have already been described in Section C.1.10, and describe the rules and procedures it follows for its organisation and function. For each one of these functions, briefly describe its most important actions during the year and how it has exercise in practice each of the functions attributed thereto by law, in the Articles of Association or other corporate resolutions.

In accordance with the constitution of the Company's Executive Committee, it shall have the following Rules of Procedure:

● The members of the Executive Committee shall step down from their role when they do so in their capacity as Director or when agreed upon by the Board of Directors.

● In the absence of the Chairman of the Executive Committee, or having vacated this office, their functions shall be exercised by the member who is elected for that purpose by the majority of the attendees of the meeting.

● The Executive Committee shall be convened by its Chairman, at their own initiative, or at the request of two of its members, by letter, telegram, e-mail or fax, addressed to each of its members at least 48 hours before the date of the meeting, but may, however, be convened for reasons of urgency, in which case the agenda shall be limited to the points which were the grounds for the meeting.

● The Executive Committee shall be validly constituted when at least a majority of its members are present and represented.

● The Executive Committee shall, through its Chairman, inform the Board of Directors of the matters dealt with and of the decisions made by the Committee.

The activity of the Executive Committee in 2019, a year in which it held 22 meetings, was mainly as follows:

Analysing the progress of the Company and its business, in accordance with the strategic policies established by the Board of Directors, reporting the contents of its meetings to the full Board of Directors and, all of this, in accordance with the rules of operation of said Committee.

Name	Post	Category
Ms. Irene Hernández Álvarez	Chairman	Independent
Mr. Miguel Morenés Giles	Secretary	Proprietary Director
Ms. Isabel Dutilh Carvajal	Member	Independent
Mr. Ignacio Prado Rey Baltar	Member	Proprietary Director
Mr. Emilio Ybarra Aznar	Member	Independent

AUDIT COMMISSION

% of Executive Directors	0%
% of Proprietary Directors	40%
% of Independent Directors	60%
% of External Directors	0%

Explain the duties exercised by this committee, describe the rules and procedures it follows for its organisation and function. For each one of these functions, briefly describe its most important actions during the year and how it has exercise in practice each of the functions attributed thereto by law, in the Articles of Association or other corporate resolutions.

The Board of Directors must appoint an Audit Commission from among the members of the Board that do not have the category of Executive Directors.

The Audit Commission shall act as the Permanent Commission of the Board of Directors and shall consist of a minimum of three and a maximum of five Directors, two of whom, at least, must be Independent Directors and one of whom shall be appointed taking into account their knowledge and experience in accounting, auditing or both.

Except as provided in the following point, and unless expressly stated to the contrary, Commission members shall be appointed for the term for which they have been nominated by the Company's Directors.

The Audit Commission shall designate a Chairman from among the Independent Directors as set forth in this article. The appointment must be made for a maximum of four years, for which they may be reappointed for the same term once a period of one year has elapsed from the date on which their role expires or the date their removal had been agreed upon.

The Audit Commission shall be validly constituted when half plus one of its members are present or represented.

The loss of Director status will also result in the loss of the status of a member of the Audit Commission.

Appointments shall be agreed upon with the quorum and majorities set forth in Article 15 of these Articles of Association and shall be registered for their effectiveness in the Commercial Registry.

The Audit Commission shall meet at least three times per year and, in addition, as often as required in the interest of the Company, at the request of any of the Commission's members.

The Audit Commission shall have at least the powers listed below, without prejudice to those whose delegation the Company itself, through the Governing Body, considers necessary:

1) Report to the General Shareholders' Meeting on the issues raised by shareholders in matters within their competence.

2) Propose to the Board of Directors for submission to the General Shareholders' Meeting the appointment, re-election and replacement of the external account auditors referred to in Article 264 of Royal Legislative Decree 1/2010, of 2 July, approving the consolidated text of the Capital Companies Act, as well as the terms of their procurement, and regularly collecting information on the audit plan and its implementation from the external account auditors, in addition to preserving their independence in exercising their functions.

3) Monitor the effectiveness of the Company's internal control, internal audit, where appropriate, and risk management systems, including tax risks, as well as discussing with the account auditors or audit companies the significant weaknesses of the internal control system detected during the audit.

4) Monitor the preparation and submission of regulated financial information.

5) Establish appropriate relations with the account auditors or audit companies to receive information on any issues that may pose a threat to their independence for consideration of the Commission, and any other information related to the process of auditing the accounts, as well as other communications set out in the account audit legislation and audit standards. In any case, the account auditors or audit companies shall provide them with a written, annual declaration of their independence with regard to the Company or entities directly or indirectly linked to it, as well as information regarding additional services of any kind provided to these entities by the external auditors or audit firms or by the persons or entities linked to the auditors or audit firms, in accordance with the provisions of the governing regulations on account audit activity.

6) Issue an annual report, prior to the issuance of the account audit report, expressing an opinion on whether the independence of the accounts auditor or audit companies has been compromised. In any event, this report shall contain the reasoned assessment of each and every additional service provided as referred to in the previous paragraph, considered individually and as a whole, other than the legal audit and in relation to the independence regime or the governing regulations on account audit activity.

7) Inform the Board of Directors, in advance, regarding all matters provided for by Law, in the Company Articles of Association and the Regulations of the Board, and, in particular:

a) the financial information that the Company must regularly report;

b) the creation or acquisition of holdings in special-purpose entities or entities with registered offices in countries or territories classified as tax havens; and

c) related-party transactions.

The Audit Committee shall record all agreements adopted in a book of minutes, indicating the date of the session, attendees, and adopted agreements.

The Audit Commission's activity in 2019, during which it held 11 meetings, mainly involved the following:

1. Review of the annual, half-year and quarterly economic information disclosed to the markets and of the objectives and forecasts at year-end.

The Commission monitors the preparation and completeness of all financial reporting on the Company and the consolidated group.

Prior to submission to the Board of Directors, the Commission reviews the quarterly (March and September), half-year (June, subject to limited review by the Group's auditor) and annual (December, subject to review by the Group's auditor) earnings reports to be sent to the CNMV and to be disclosed to the markets (key financials, performance versus the previous period, performance of the main businesses and geographical areas, etc.). With regard to this information, the General Internal Audit and Finance Sub-division provides the Audit Commission with appropriate explanations regarding the income statement and information on the composition and changes in the main balance sheet headings and cash flows.

Throughout the year, reassessments of year-end objectives and forecasts are presented and any deviations from the objectives are explained.

2. Monitoring of the main risks with a potential impact on the income statement and other significant issues affecting the

annual financial statements, the Risk Management System and Internal Audit activity.

The main risks with a potential impact on the income statement are exhaustively monitored in conjunction with the General Internal Audit and Finance Sub-division. The risks are structured by Business Areas and General Sub-divisions and Elecnor Group's exposure to them is quantified. In addition, and in particular, contingent trade receivables and receivables from public entities, as well as financial exposure in certain countries considered to be high risk are presented and reviewed. The appropriateness of recognising a provision for these risks is considered on a case-by-case basis once the risks are known.

The Audit Commission also monitors the most significant judgements and estimates with an impact on the financial information, especially those relating to impairment tests of goodwill, intangible and tangible assets and deferred tax assets, as well as the recognition, control and measurement of derivative financial instruments.

Various meetings have been held to analyse the proposed accounting treatment of certain extraordinary transactions, as well as the tax treatment of certain material transactions, which is previously discussed with the Group's auditors and/or advisers.

The Audit Commission also continuously monitors the main risks to which the Group is exposed (governance, strategic and environmental, operational, reporting and compliance) by overseeing the Risk Management System and, in particular, the risks identified, evaluation of their potential impact and probability of occurrence and of the action plans established to better manage them.

The Audit Commission monitors the Internal Audit work plan and oversees its monitoring and reviewing of the main risks affecting the organisation and its processes and controls. To do this, it invited the Internal Audit Officer to attend nine of its meetings.

3. Relations with the Group's external auditors, supervision of their independence and approval of fees.

The Audit Commission met with the Group's external auditors three times in 2019, without other members of the organisation being in attendance.

The main issues discussed with the external auditors at these meetings are as follows:

Annual audit planning and strategy (materiality, scope, main audit risks identified, schedule, etc.) for the individual annual financial statements of Elecnor, S.A. and the Group's consolidated annual financial statements.

Results of the annual audit of the individual and consolidated annual financial statements and the limited review of the Group's half-year condensed financial statements.

Any internal control weaknesses identified and improvement points, where appropriate.

Written statement and confirmation by the external auditors of their independence and detailed information on any non-audit services provided by them.

The Audit Commission reviews proposals for non-audit services submitted by the external auditor or the external auditor's related parties and pre-approves them in terms of independence under the law.

The Commission has concluded that the auditor of the Company's individual and consolidated accounts has carried out their audit work independently.

The proposed fees submitted by KPMG for the 2019 audit of the individual and consolidated annual financial statements were also reviewed and it was decided to submit them to the Board of Directors for approval.

4. Monitoring of the compliance system and activity of the Compliance Committee.

Six of the meetings held in 2019 were attended by members of the Group's Compliance Committee, who reported on the Committee's activity and on the initiatives, actions and/or incidents arising in the field of compliance, obtaining the Commission's approval and authorisation when necessary.

In summary, the tasks carried out by the Audit Commission in this area in 2019 have been as follows:

Review and approval of the 2018 Annual Compliance Report.

Monitoring of the main risks to which the Group is exposed.

Approval and follow-up of compliance targets for 2019.

Approval and follow-up of the 2019 Compliance Training Plan.

Monitoring of the campaign to confirm compliance with the principles and values set out in the Code of Ethics and Compliance Policy by the Group's staff in 2019.

Follow-up of the implementation and embedding of the Compliance System in the Group's various subsidiaries and branches and, in particular, of the project to obtain UNE-ISO 37001 and UNE 19601 certification for the Deimos Space Compliance System.

Project monitoring of the review and improvement of established procedures and controls to prevent and avoid anti-competitive practices (advice from Deloitte).

Follow-up of the work carried out by the Working Group set up to improve compliance risk management within the Management Committee and within the framework of the Group's Risk Management System.

Follow-up of the launch and initial stages of the IE-Elecnor Observatory on Sustainable Compliance Cultures.

Follow-up of complaints and/or concerns submitted through the Code of Ethics Channel, analysis of findings and decision on action to be taken.

In addition, the Commission monitors developments in various judicial and administrative proceedings with a potential impact on legal persons belonging to the Elecnor Group.

5. Follow-up of the Group's Digital Transformation Project.

The Group's Chief Information and Technology Officer, in conjunction with the General Internal Audit and Finance Sub-division, has reported on the degree of progress of the digitisation and process re-engineering project under way at Elecnor since 2016. The project aims to achieve operational excellence, understood as the capacity of the organisation, processes and systems to contribute to efficiency, information control, quality of service and regulatory compliance.

6. Reporting to the General Shareholders' Meeting.

Ms Isabel Dutilh Carvajal, Chairwoman of the Audit Commission, informed Elecnor shareholders at the General Meeting on 22 May 2019 of the Commission's activity in 2018 and up to that date.

7. Preparation of new regulations for the Commission and submission to the Board for approval.

In compliance with the recommendations of the CNMV and the Good Governance Code, new internal regulations for the Commission were drawn up and subsequently approved by the Board of Directors on 18 December 2019.

Identify the directors who are member of the audit committee and have been appointed taking into account their knowledge and experience in accounting or audit matters, or both, and state the date that the Chairperson of this committee was appointed.

Name of directors with experience	Ms. Irene Hernández Álvarez Mr. Miguel Morenés Giles Ms. Isabel Dutilh Carvajal Mr. Ignacio Prado Rey-Baltar Mr. Emilio Ybarra Aznar
Date of appointment of the chairperson	22/05/2019

APPOINTMENTS AND REMUNERATION COMMISSION

Name	Post	Category
Mr. Emilio Ybarra Aznar	Chairman	Independent
Mr. Fernando León Domecq	Secretary	Proprietary Director
Ms. Isabel Dutilh Carvajal	Member	Independent
Mr. Jaime Real de Asúa Arteche	Member	Proprietary Director

% of Executive Directors	0%
% of Proprietary Directors	50.00%
% of Independent Directors	50.00%
% of External Directors	0%

Explain the duties exercised by this committee, describe the rules and procedures it follows for its organisation and function. For each one of these functions, briefly describe its most important actions during the year and how it has exercise in practice each of the functions attributed thereto by law, in the Articles of Association or other corporate resolutions.

The Board of Directors must appoint an Appointments and Remuneration Commission from among the members of the Board that are not Executive Directors. The Appointments and Remuneration Commission will be composed of a minimum of three and a maximum of five Directors, at least two of whom must be Independent Directors.

The Appointments and Remuneration Commission shall appoint the Chairman thereof from among the Independent Directors. The Secretary of the Board of Directors may be appointed as the Secretary of the Appointments and Remuneration Commission, provided they are not an Executive Director.

The Appointments and Remuneration Commission shall have the following functions:

• Evaluating the required skills, knowledge and experience for the Board of Directors. For this purpose, it shall define the necessary functions and aptitudes for the candidates to fill each vacancy and shall evaluate the time and dedication required so they may effectively perform their functions.

• Establishing a target representation number for the less represented gender on the Board of Directors and drawing up guidelines for achieving that target.

• Submitting to the Board of Directors proposals for the appointment of Independent Directors for appointment by co-optation or for submission to the decision of the General Shareholders' Meeting, as well as proposals for the re-appointment or removal of said Directors by the General Shareholders' Meeting.

• Reporting the appointment proposals of the remaining Directors for their designation by co-option or for submission to the decision of the General Shareholders' Meeting, as well as proposals for their re-election or removal by the General Shareholders' Meeting.

• Reporting proposals for the appointment and removal of senior executives and the basic terms of their contracts.

• Examining and organising the succession of the Chairman of the Board of Directors and the CEO of the Company and, where appropriate, making proposals to the Board of Directors so that such succession takes place in an orderly and planned manner.

• Proposing to the Board of Directors the remuneration policy for Directors and General Managers or those who perform their senior management duties under the direct supervision of the Board, Executive Committees or Managing Directors, as well as individual remuneration and other contractual and statutory conditions of Executive Directors, confirming their observance.

These duties shall be understood as non-limiting and without prejudice to others that the Board of Directors may assign to the Committee. The Board may request that the Commission prepare reports on matters lying within the Commission's remit.

The Commission met on 10 occasions in 2019. In addition, when the Commission considered it appropriate, the Managing Director and members of the management team were invited to attend.

The activity of the Appointments and Remuneration Commission in 2019 mainly involved the following:

The Commission fulfilled all its own duties of both a regulatory nature and those contained in the Company's Articles of Association and the Regulations of the Board of Directors, and carried out actions related to the recommendations to comply with the principles of good corporate governance.

The Commission examined the qualification or status of the Directors. Responses to the questionnaire sent to all Directors on any potential conflicts of interests in 2019 were also reviewed; no conflicts were detected.

Continuing the action plan resulting from the evaluations of the Board and its Commissions and to advance the implementation of recommendation 36 of the Good Governance Code, a work assessment was carried out in 2019 and, as already reported in the previous year, the consultant Russell Reynolds was hired in 2018 for the questionnaires of that year, to analyse the best practices regarding the performance of the Board, its Commissions, the Chairman, CEO and Secretary.

During the year, the Commission continued with the work to examine the Board of Directors' structure, which began in mid-2017, the year in which Spencer Stuart was appointed as an international top-tier external consulting firm.

A preliminary analysis was performed of the Board of Directors' needs including the necessary expertise, knowledge and skills required on the Board. This analysis was considered when preparing proposals and reports for the appointment and re-election of Directors submitted to the Board of Directors.

In particular, the Commission agreed to propose the re-election of Ms. Isabel Dutilh Carvajal and Mr. Emilio Ybarra Aznar as Independent Directors for a term of four years. The General Shareholders' Meeting approved the appointment of these two Directors.

As recommended by the Board of Directors, it was also proposed that Mr. Cristóbal González de Aguilar Alonso-Urquijo be re-elected as Proprietary Director for a term of four years. The General Shareholders' Meeting approved the appointment of this Director.

The Directors' Remuneration Policy for the years 2020-2021 and 2022 was submitted for approval at the Shareholders' General Meeting on 22 May 2019. The policy follows on from the previous version running from 2017 to 2019 but has been adapted to the current situation. In this regard, supporting reports had to be prepared for the Board relating to both the amendment of Article 12 of the Articles of Association and to several articles in the Regulations of the Board of Directors, all of which relate to the Directors' remuneration. These were also approved at the General Meeting.

Similarly, in the area of remuneration, the annual fixed and variable remuneration for the Executive Director was proposed, and the Annual Directors' Remuneration Report for 2018 prepared, which the Board of Directors submitted to the General Meeting for its advisory vote.

The Commission also proposed the remuneration policy for the management team and the application thereof, including its proposal for variable remuneration tied to specific objectives.

The succession plan for the Chairman, Managing Director and management team was revised, including a management performance assessment of the Management Commission, the latter being carried out with the support of the external consulting firm, Pedersen and Partners.

The Group's performance vis-à-vis work-life balance, equality, assignments and international mobility for expatriates in the Group, along with the Talent Plan was also reviewed.

In addition, a proposal was prepared with the Chairman of the Board of Directors, approved by the Board, and a training plan put in place for the Board.

Moreover, in compliance with the recommendations of the CNMV and the Good Governance Code, new regulations for the Commission were approved.

Finally, the Commission reported all its activities to the Board of Directors, providing all Directors with the minutes of its meetings with their corresponding annexes.

C.2.2 Complete the following table with information regarding the number of female directors who were members of Board committees at the close of the past four years:

2016:

Isabel Dutilh Carvajal was the Chairwoman of the Audit Commission and a Member of the Appointments and Remunerations Commission, which equates to 33% of the Audit Commission and 20% of the Appointments and Remunerations Commission being female.

2017:

Isabel Dutilh Carvajal was the Chairwoman of the Audit Commission and a Member of the Appointments and Remunerations Commission, which equates to 33% of the Audit Commission and 25% of the Appointments and Remunerations Commission being female.

2018:

Ms. Isabel Dutilh Carvajal was the Chairwoman of the Audit Commission and a Member of the Appointments and Remunerations Commission and Ms Irene Hernández Álvarez was a Member of the Audit Commission, which equates to 40% of the Audit Commission and 25% of the Appointments and Remunerations Commission being female.

2019:

Ms. Irene Hernández Álvarez was the Chairwoman of the Audit Commission and Ms Isabel Dutilh Carvajal was a Member of this Commission, which equates to 40% of that Commission being female. Ms Isabel Dutilh Carvajal was also a Member of the Appointments and Remunerations Commission, which equates to 25% of that Commission being female.

C.2.3 State, where applicable, the existence of any regulations governing Board committees, where these regulations may be found, and any amendments made to them during the year. Also state whether any annual reports on the activities of each committee have been voluntarily prepared.

On 18 December 2019, the Board of Directors approved the new internal Regulations of the Audit Commission and the Regulations of the Appointments and Remunerations Commission, as per the recommendations of both Technical Guide 3/2017 on Audit Commissions and Technical Guide 1/2019 on Appointments and Remunerations Commissions of the CNMV.

The functions of the Audit Commission and the Appointments and Remuneration Commission are laid down in Articles 15 bis and 15b of the Articles of Association, as well as in Articles 13 and 14 of the Regulations of the Board of Directors and the aforesaid Commissions' respective regulations.

The existence and functions of the Executive Committee, meanwhile, are regulated in Article 15 of the Articles of Association, in Article 12 of the Regulations of the Board of Directors, as well as in its own deed of incorporation.

Both the Regulations of the Board of Directors, the Regulations of the Audit Commission and the Regulations of the Appointments and Remunerations Commission are available on the Company's website (www.elecnor.com).

Reports on the activities of the Appointments and Remunerations Commission and the Audit Commission were voluntarily prepared in 2019.

D RELATED-PARTY AND INTRAGROUP TRANSACTIONS

D.1 Describe, if applicable, the procedure for approval of related-party and intragroup transactions.

Procedures and bodies for reporting on the approval of transactions with related parties This matter is covered in Article 33: "Transactions with significant shareholders" of the Regulations of the Board of Directors:

"Any relevant transaction between the Company and its significant shareholders shall be authorised by the Board of Directors.

Exempt from this approval are operations that simultaneously meet the following three characteristics:

• 1. They are carried out under contracts whose conditions are standardised and apply en masse to a large number of customers.
• 1. They are carried out at prices or rates generally established by the person acting as a supplier of the goods or services concerned.
• 1. Their value does not exceed one percent of the Company's annual income".
• D.2 Describe any transactions which are significant, either because of the amount involved or subject matter, entered into between the company or entities within its group and the company's significant shareholders:

They do not exist.

D.3 Describe any transactions that are significant, either because of their amount or subject matter, entered into between the company or entities within its group and directors or managers of the company:

They do not exist.

D.4 Report any material transactions carried out by the company with other entities belonging to the same group, provided that these are not eliminated in the preparation of the consolidated financial statements and do not form part of the company's ordinary business activities in terms of their purpose and conditions.

Not applicable.

In any event, note any intragroup transaction conducted with entities established in countries or territories which are considered tax havens:

They do not exist.

D.5 State the amount of any transactions conducted with other related parties that have not been reported in the previous sections.

Name of entity within the group	Brief description of the transaction	Amount (thousand euros)

D.6 Describe the mechanisms in place to detect, determine and resolve potential conflicts of interest between the company and/or its group and its directors, senior management or significant shareholders.

There are Internal Code of Conduct in Matters Relating to the Securities Markets (RIC), approved by the Company's Board of Directors on 21 May 2003 and amended through successive resolutions of the Company's Board of Directors on 16 June 2004, 21 March 2007, 19 December 2007, 20 July 2016 and 20 February 2019, all duly reported to the CNMV. The latest version is available on the Company's website and explicitly and exhaustively sets out these mechanisms.

D.7 Is there more than one company in the group listed in Spain?

Yes � No

Identify the other companies that are listed in Spain and their relationship to the company:

They do not exist.

E RISK MANAGEMENT AND CONTROL SYSTEMS

E.1 Explain the scope of the company's Risk Management and Control System, including tax compliance risk.

BOARD OF DIRECTORS, CHIEF EXECUTIVE OFFICER

In its monthly meetings, the Board of Directors reviews the Company's key economic indicators, the general market situation, and the position and business strategy of the Company and its Group, to identify any risks in the economic and business environment, adjusting the Company's strategic approach where necessary; all within its general supervisory remit.

In this regard, the Group performs continuous and preventive management of these risks, so that the probability of them occurring and their potential impact, as the case may be, on turnover, profitability and efficiency, reputation and sustainability is reduced to acceptable levels.

To this end, the Group has a structured and dynamic risk management system whose main pillars are as follows:

• Continuous risk identification and assessment and prioritisation in terms of impact and probability of occurrence.

• Identification of the mechanisms and tools in place to manage and control the main risks, and evaluation of their effectiveness.

• Continuous improvement of risk management through the development and implementation of initiatives and projects aimed at improving management mechanisms and tools.

• Ongoing monitoring and oversight of the system.

To ensure better identification and management of the main risks, these are grouped into five major categories:

• Governance risks,
• Strategy, planning and environment risks,
• Operational risks,
• Reporting risks,
• Compliance risks.

On the other hand, the Chief Executive Officer takes decisions following the guidelines established by the Board of Directors in its meetings.

As to the powers granted to the Board of Directors, these are conferred, taking into account the specific functions and needs of the Company's general divisions and sub-divisions and the different business areas.

Decisions on the Company's overall strategy or on the use of its resources, as well as those involving a risk due to the Company becoming indebted – such as the arrangement of credit facilities, loans, guarantees, sureties, asset disposals, etc. – are adopted in resolutions of the entire Board of Directors by an absolute majority of its members.

Management (General Managers and General Deputy Directors) are responsible for the Company's operational and management decisions, such as the signing of contracts, management of human resources, etc., always pursuant to the instructions of the Chief Executive Officer and the strategic guidelines of the Board of Directors.

MANAGEMENT OF RISKS DERIVING FROM PARTICIPATION IN TEMPORARY JOINT OPERATIONS, CONSORTIA AND JOINT VENTURES

The risks to which the Company may be exposed through its involvement in a temporary joint operation, joint ventures, economic interest group or any other form of joint arrangement, whether it be Spanish or foreign, to carry out a particular project or business, are controlled, on the one hand, by management (with the support of the business areas and other productive units and, where applicable external advisers) analysing the viability of the business to be developed and assessing the potential associated risk, and authorising, if applicable. On the other hand, the powers of the governing and management bodies of the joint arrangement are agreed with representatives of all its members to ensure they are consistent with Elecnor's internal risk control systems.

MANAGEMENT OF RISKS DERIVING FROM THE COMPANY'S CORPORATE PURPOSE IN THE DOMESTIC MARKET

In relation to the specific risks arising from the Company's activity (construction, operation and maintenance of all kinds of facilities), all business arms are adequately insured through appropriate insurance policies offering the necessary cover (public liability insurance, assembly insurance, construction insurance, etc.).

MANAGEMENT OF RISKS DERIVING FROM THE COMPANY'S CORPORATE PURPOSE IN THE INTERNATIONAL MARKET

A significant part of Elecnor's business is conducted outside Spain, so special mechanisms have been put in place to control the potential risks stemming from this activity:

All powers conferred on Company representatives to sign contracts outside Spain or manage such contracts are granted by the Company's CEO on a case-by-case basis for each operation and subject to prior analysis of all the risks that could affect the Company. Monthly meetings of the Board of Directors are held to monitor these activities when they involve significant operations for the Company.

Likewise, all the Company's international business arms, deriving from its corporate purpose, are also adequately insured through appropriate insurance policies offering the necessary cover (public liability insurance, assembly insurance, construction insurance, etc.).

ENVIRONMENTAL RISK MANAGEMENT

Environmental protection and efficient consumption of energy resources are at the top of Elecnor's agenda whilst carrying out all of its business activities. These objectives have put respect for the environment and sustainability at the heart of our culture and values throughout the organisation.

The environmental control mechanisms currently in place at the Company are based on AENOR-certified Environmental Management and Energy Management systems that are ISO 14001 and ISO 50001 compliant. These systems offer excellent benefits, including analysis and mitigation of environmental risks. Environmental liability insurance has also been taken out covering all the activities of Elecnor and its subsidiaries.

Climate change is a long-standing challenge for Elecnor. Thus, it has calculated its carbon footprint since 2013 according to internationally recognised standards, and has rolled out greenhouse gas (GHG) emission reduction measures across its business. In March 2019, AENOR verified for the fifth consecutive year the inventory of greenhouse gas emissions in accordance with the UNE ISO 14064- 1:2012 standard, for direct and indirect emissions of all the Company's activities. The Company has been awarded the "Calculate and Reduce" seal from the Spanish Office of Climate Change (OECC by its Spanish acronym), as part of the process to register its carbon footprint and the carbon offset and absorption projects established by the Ministry for Ecological Transition (MITECO by its Spanish acronym).

As part of its staunch battle against climate change, Elecnor developed a Climate Change Strategy in 2018 to reduce its impact, increase its resilience and unlock the potential opportunities arising from climate change, thereby growing as a group in a sustainable manner. It has also joined the international sustainability CDP (Carbon Disclosure Project) ranking, earning a B rating. This is international recognition of its strategy to combat climate change because it means that in 2018, Elecnor was seen as having among the best levels of climate change management. Elecnor's B score is above average for the electricity sector and for the European region.

Our Group aims to contribute actively and decisively to a sustainable, low-carbon future in a world in which, increasingly, we must all play an active part in protecting the environment.

COMPLIANCE RISK MANAGEMENT

The Elecnor Group's Compliance System forms part of Elecnor's principles and values in force since its foundation, and the continuous improvement of its management practices and procedures to enhance its corporate governance. Thus, in the context of the reform of the Spanish Penal Code in 2010 introducing the criminal liability of legal persons for the first time in Spain's legislative system, Elecnor began a process in 2011 to adapt its compliance system to the new circumstances. The aim of this work was to reinforce the Company's guarantee to detect, react to and prevent potential non-compliance and/or criminal acts by its staff and related parties.

The key features of this system are as follows:

• Elecnor Group Code of Ethics (initial approval by Elecnor's Board of Directors in November 2011; last revision approved by Elecnor's Board of Directors in September 2016).
• Elecnor Group Compliance Policy (initial approval by Elecnor's Board of Directors in September 2016; last revision approved by Elecnor's Audit Committee in September 2017).
• Compliance Management System Manual (initial approval by Elecnor's Board of Directors in November 2011; last revision approved by Elecnor's Compliance Committee in November 2018).
• Compliance Committee.
• Crimes, Risk Behaviours and Controls Catalogue.
• Code of Ethics Channel.
• Annual Compliance Report.

All these documents and bodies are approved by the Governing Body (where applicable, through the Audit Committee) or by the Compliance Committee, by delegation of the aforementioned bodies. The Audit Committee oversees the effectiveness of the system through its meetings with representatives of the Compliance Committee and approval of the Annual Compliance Report. In addition, the management team oversees the system through the Compliance Committee and, at least annually, by receiving and reviewing the Annual Compliance Report.

The scope of this system is the set of countries in which Elecnor and its subsidiaries and investees operate, although it is adapted where necessary to the specific circumstances of these countries.

Elecnor's Compliance System is designed to identify and prioritise the compliance risks to which it is exposed. In this sense, Elecnor's objective is that this system is perfectly tailored to the organisation and its specific risks to ensure that it is an effective risk management tool. For this purpose, both the risks identified and their importance are continuously monitored and updated, where appropriate, by the Compliance Committee – a collegiate body entrusted with supervising, monitoring and controlling the Compliance System. The main risks identified and managed through the Compliance System include those related to: bribery, influence peddling and corruption in business; tax and social security (fiscal); foreign citizens and people trafficking; money laundering and terrorist financing; market scams; industrial and intellectual property; and discovery and disclosure of secrets, etc.

As explained beforehand, the aforesaid Compliance System is underpinned additionally by the raft of procedures, protocols and controls established in the various areas.

The Compliance Committee continuously monitors the Compliance System and periodically verifies, through various audit tests, that the controls associated with the identified compliance risks are effective.

Elecnor's Compliance System is aligned with the highest domestic and international standards in this field, having received certification pursuant to the international ISO 37001 Anti-bribery Management Systems standard and the domestic UNE 19601 Criminal Compliance Management Systems standard.

TAX RISK MANAGEMENT

The Elecnor Group has established a Corporate Tax Policy setting out its Tax Strategy, as well as the principles and core aspects of tax risk management.

As part of this, it has a tax oversight, control and management procedure containing guidelines for identifying, assessing, managing as well as monitoring risks.

Obligations and responsibilities within the organisation are regulated through this strategy, including a description of the measures that must be in place to mitigate any tax risks identified.

INTERNAL AUDIT AND CONTROL SYSTEMS

Internal control: in the Elecnor Group rests on two pillars that are considered fundamental to ensuring decisions are made based on accurate information:

The System: a raft of computer applications and procedures.

Internal Audits: audits arranged with the business areas covering the most relevant components of working capital such as, work in progress, receivables, inventories, etc. and the recognition of margins, among others. In addition, the Internal Audit area periodically reviews the main procedures and controls in place.

All the internal audits of Elecnor's businesses are scheduled so that at least two audits are conducted per division every year; if not of all, at least of the most important ones: The aim is to have conducted the first audit before the end of the first half of the calendar year, and the second before year-end.

These internal audits are supplemented by the review of other documentation carried out by Central Administration and, above all, by controls over banking transactions involving sharing data with banks (importing of bank entries, expense settlement payments through files, etc.), centralisation of the payment process, and monthly reconciliations of bank balances, among other control mechanisms.

This document includes information on "INTERNAL RISK MANAGEMENT AND CONTROL SYSTEMS IN RELATION TO THE FINANCIAL REPORTING PROCESS (ICFRS)", which has also been verified by the External Auditor.

As part of the Digital Transformation project, progress has been made during the year to develop and roll out tools for the consolidation and reporting of the annual financial statements and accounting close simulations.

The System

The procedures and manuals that make up the System are designed to ensure there is a general control environment that is fit for purpose and that good governance principles in the field of administration are adhered to.

All tasks are set out in procedures based on audit criteria. There is an operating manual for each task (explaining the objective pursued, applicable criteria, etc.), along with a user manual (which includes the steps to be taken when inputting data into the appropriate computer application).

The software used is based on the FICOS-38 application purchased from Arthur Andersen in 1984, which has been heavily developed to tailor it to the Company's requirements at any point in time (need for more information, changes in accounting standards, etc.).

The IT system works in real time and is end-to-end. Very powerful interfaces are used to integrate all systems so as to minimise data entry errors.

The initial version of the FICOS-38 system offers a General Accounting system and an Analytical Accounting system, serving Elecnor's specific needs and requirements.

Compared to the General Accounting system (covering the Company's assets and liabilities and outward-facing aspects), the Analytical Accounting system can be used to carry out budget controls of overheads or expenses, fixed or structural, through income and expense accounts at various levels (corporation, business area, production centre, work centre), as well as detailed bottom-line analysis (value added at factor cost, Tajo margin, net margin) to meet internal management needs and forecast future scenarios using standards.

The Analytical Accounting system includes a specific module on the perpetual inventory account: the project costs system. This system can be used to generate cost reports for different items (labour, materials, sub-contractors, equipment, etc.) for each project in progress and calculate their value at sales price, while also controlling costs and income compared to the estimates made at the start of each project.

This system is used to recognise results using the Tajo margin.

The criterion for recognising results is based on the accounting standards in force, as disclosed in the notes to Elecnor's separate and consolidated annual financial statements.

In addition, there is a set of peripheral systems created around the primary system. These are designed to manage the various work areas (Treasury, Procurements, Invoicing, Fixed Assets, etc.) and capture data and report back to the primary system in an integrated and real-time manner.

Data reliability

The Central Administration departments adhere to permanent audit criteria with respect to transactions reported to the system by the various local offices.

An Ordering System based on segregation of duties (expenses are approved, invoices logged, administrative approvals given and payments ordered by different people in the organisation) and a Collections and Payments Registration System involving the computerised importing of bank statement entries into the system form the basis of controls over the Company's procurements and payments.

Inputting of transactions can be decentralised because all transactions are registered using standard documentation and transaction keys. In other words, local offices do not need to have knowledge of accounting. Each document used to input data into the system has mandatory fields (customer code, work centre, project, VAT rate, etc.) which, as systems are integrated, prevents any information mismatches.

On the other hand, the system limits which sources are authorised to make changes to the accounting records (for example: transactions from the fixed assets system cannot be added to the receivables accounts). These restrictions ensure that potential errors are reduced.

Once the "daily close" (validation of transactions) has been performed, all entries are verified by Central Administration and any erroneous entries corrected.

All supporting documentation for the registered transactions is archived at Central Administration, and reviewed according to the criteria established in the procedures, in full or randomly depending on the channel through which it has been inputted. A high percentage of transactions are reviewed.

Exceptions to the procedure are registered by inputting "manual" entries, solely processed by the corporate departments reporting to the General Internal Audit and Finance Sub-division and by authorised persons.

As the Group's primary external auditor, KPMG AUDITORS through personnel specialised in annual auditing verify that the IT environment ensures data reliability and that no significant risks are detected.

Controlled access

Each local office can only report on the areas of activity within its jurisdiction, while each user only accesses the tasks assigned to them through their user profile.

Tasks are organised based on the segregation of duties principle.

For security reasons, passwords for local offices to log in to the Central System are automatically changed every two months by the system itself.

The system detects any access made from a different place than usual, even if authorised, by generating a daily list of incidents.

Access security

All access to the system is protected with firewalls and antivirus software both on web servers and local workstations.

Digitisation

In late 2015, Elecnor launched a process to assess the suitability of its systems and the need to evolve to fulfil business demands today and in the future.

While it was concluded as a result of this analysis that the current systems were robust and adequately met the information and operational needs of the organisation, findings of this assessment included the recommendation to develop existing processes, the organisation (people) and systems, without necessarily having to change ERP. As has already been mentioned, this resulted in the design and roll-out of a Digital Transformation process.

The Group's Digital Transformation process continued throughout 2019, which is involving the re-engineering and digitisation of a significant part of the organisation's processes.

Domestic and foreign subsidiaries

As in the case of the parent company, all or at least the most significant subsidiaries are subject to two internal audits each financial year.

Following the same criterion adopted in Elecnor, the aim is to conduct a first audit before the close of the first half of the year, and a second before the year-end close.

It was considered that it would not be reasonable to roll out the Elecnor IT management system across all the Group's companies on a wholesale basis because of the varying sizes of the subsidiaries compared to Elecnor, the different accounting standards applicable to foreign subsidiaries and the varying management needs.

Two IT solutions were therefore adopted in order to maintain a certain level of standardisation between the systems to be rolled out.

Domestic subsidiaries

The general accounting system adopted as a common solution was LOGIC CLASS.

An analytical accounting system was developed and bolted on to this general accounting system. This secondary system is similar to that used by Elecnor, S.A., which was developed by IPARTEK and generates information similar to that produced in Elecnor as per the same criteria.

The Group's Financial Reporting and Consolidation Department and Internal Audit team are responsible for the monitoring and control of all domestic subsidiaries, both ultimately reporting to the General Internal Audit and Finance Sub-division.

Foreign subsidiaries

In general, the SCALA General Accounting System (ERP) was rolled out in the foreign subsidiaries, as it allows tax reporting to be tailored to the requirements in each country.

As with the domestic subsidiaries, an analytical accounting module similar to that used in Elecnor – also developed by IPARTEK – was also bolted on to the SCALA system.

The Financial Reporting and Consolidation Department and Internal Audit team are responsible for the monitoring and control of all foreign subsidiaries, both ultimately reporting to the General Internal Audit and Finance Sub-division.

Elecnor's Board of Directors monitors each and every subsidiary of the Group.

Internal audit

The Internal Audit area, which lies within the General Internal Audit and Finance Sub-division, identifies and continuously monitors the main risks to which the organisation is exposed and is responsible, among others, for contributing to the continuous improvement of established control procedures and mechanisms. It also works with the Consolidation and Management Control departments to coordinate the audits of the Business Areas and control and monitor all subsidiaries.

On a regular basis, it informs the Audit Committee of the outcome of its work, making it easier for the Audit Committee to fulfil its own supervisory duties.

External audit

A professional relationship is maintained, at all levels, with the members of the KPMG Auditors team.

All the team's work revolves around analysing the organisation's degree of "internal control", which is evaluated annually through a software audit and a financial audit (substantive testing and procedures).

Regarding the financial audit, both the individual annual financial statements and consolidated statements are subject to external audit at the close of each financial year. In addition, the consolidated interim financial statements (first half) are also subject to review by the external auditor.

All testing of procedures is random, which means they must be kept permanently up-to-date.

In all its work, Elecnor's administration adopts the same criteria as those applied by the external auditors, remaining in close contact with them to discuss any matters that could give rise to different interpretations. The criteria to be adopted are agreed in advance.

FINANCIAL RISK MANAGEMENT POLICY

Elecnor is exposed to certain financial risks, which it manages through the grouping of identification, measurement, concentration limitation and supervision systems. The management and mitigation of financial risks is carried out in a coordinated manner by the Corporate area and the different business units and subsidiaries of the Group. Measures to manage financial risk are approved at the highest decision-making level and in accordance with the established rules, policies and procedures.

Exchange rate risks

The market risk due to exchange rate risk stems from the Group's operations in international markets in the course of its business. Some of its revenue and expenses are denominated in currencies other than the functional currency, and so there is a risk that fluctuations in the exchange rates of these currencies against the functional currency could impact the Group's bottom line.

In order to manage and minimise this risk, Elecnor uses hedging strategies, given that the objective is to generate results exclusively through the development of the ordinary activities it carries out, and not through speculation on exchange rate fluctuations.

The instruments used to achieve this hedging are basically debt referenced to the contract's collection currency, exchange rate insurance and cross currency swaps through which Elecnor and the Financial Institution exchange the flows of a loan expressed in euros for the flows of another loan expressed in another currency, as well as the use of "currency baskets" to cover mixed financing indexed to different currencies.

Interest rate risk

Changes in interest rates change the fair value of assets and liabilities that accrue a fixed interest rate, as well as the future flows of assets and liabilities linked to a variable interest rate. Elecnor has external financing to carry out its operations, mainly in relation to the promotion, construction and operation of wind farms, solar thermal projects and electricity infrastructure tenders, which are carried out through "Project Financing". This type of financing requires that interest rate risk be contractually closed by the arrangement of interest rate hedging instruments.

Both project financing and corporate financing are mostly arranged at floating (variable) interest rates, using, where appropriate, hedging instruments so as to minimise the interest rate risk of the financing. The hedging instruments, which are specifically assigned to financial debt, have at most the same nominal value and the same maturity dates as the hedged items, and are basically interest rate swaps (IRSs) whose purpose is to have a fixed interest cost for financing originally arranged at floating interest rates. In any event, interest rate hedges are contracted subject to accounting efficiency criteria.

Other price risks

The Group is also exposed to the risk that cash flows and results will be affected by, inter alia, energy price trends and the price of oil. The Group manages and minimises this risk through effective hedging strategies.

Liquidity risk

Liquidity risk is mitigated by a policy of maintaining a highly liquid treasury position, holding non-speculative, short-term instruments, such as the temporary acquisition of treasury bills in non-optional reverse repurchase agreements and very short-term US dollar deposits at leading banks, ensuring we can meet our obligations. We also contract credit facilities with a suitable limit and terms to meet projected needs.

Credit risk

Our main credit risk relates to counter parties or customers not meeting their contractual obligations with regard to accounts receivable for commercial transactions. In order to minimise this risk, we work with customers with an appropriate credit history; moreover, given the activity and the sectors in which we operate, Elecnor has customers with high credit ratings. However, we use mechanisms such as advances, irrevocable letters of credit and take out credit insurance policies for international sales to non-recurring customers. We also analyse the financial solvency of the customer, stipulating specific contract conditions to ensure collection of monies due.

Under the current Spanish regulatory framework, the electricity generated by our wind farms is sold into the Iberian Electricity Market (MIBEL by its Spanish acronym) and we collect revenues from the market operator, OMIE, subject to a payment guarantees system, and the National Markets and Competition Commission (CNMC), the Spanish energy-market regulator, which reports to the Ministry of Industry. Ventos do Sul Energía, S.A., Parques Eólicos Palmares, S.A., Ventos da Lagoa, S.A., Ventos do Litoral Energía, S.A. and Ventos dos Indios Energía S.A. (Brazil) have signed 20-year electricity sales contracts for their output with the corresponding Brazilian electricity distribution companies. Eóliennes de L'Érable has also signed a 20-year contract with the Canadian electricity company Hydro-Québec for the sale of the electricity it generates.

With regard to transmission lines, specifically those that provide their services in Brazil under concession arrangements, the National Electricity System Operator (ONS) is responsible for the system's collections and payments and informs the concessionaire on a monthly basis of the companies that must pay it: generators, large-scale consumers and distributors connected to the system. Prior to their connection to the system, these companies deposited a guarantee which will be executed in the event of non-payment, resulting in immediate disconnection from the system and distribution of the payment liability among other users of the system. In this way, the concessionaire is guaranteed to be paid by the national electricity system. As a result, in the years in which the Group has been operating these lines, there has been no default on the part of users.

The transmission lines in Chile belong to the national transmission system (formerly known as the trunk system), where the National Electricity Coordinator (CEN) is responsible for coordinating the flow of payments to the transmitters. Until December 2018, a scheme was in place whereby generators were responsible for making payments to transmitters. From 2019 onwards, distributors are incorporated into those responsible for making payments and, therefore, from that date onwards, there is a more diversified portfolio of payers. The payment guarantee of the national transmission system is underpinned by a CEN Procedure that establishes that in the event of possible non-payment by a coordinator (company subject to coordination by the CEN), the defaulting generator is disconnected from the system, distributing the payment obligation among the rest of the coordinated companies.

Elecnor is always striving to take the utmost measures to mitigate this risk and periodically analyses its exposure to credit risk, making the corresponding accumulated impairment losses.

Regulatory risk

Elecnor pays close attention to regulatory risks, particularly with regard to renewable energies, so as to monitor potential impacts on its consolidated income statement.

Other risks

In addition to the risks described above, the Elecnor Group is exposed to various risk factors (governance, strategy, planning and environment, operating, reporting and compliance risks) relating both to the industries in which it operates and to the wide range of countries in which it operates, either on a stable basis or through specific projects. The Group, through its Risk Management System, carries out continuous and preventive management of these risks, so as to reduce the likelihood of their occurrence and their potential impact, if any, in terms of turnover, profitability and efficiency, reputation and sustainability, to acceptable levels. The pillars of this Risk Management System are the continuous identification and evaluation of the risks to which the Group is exposed, the improvement of the related management mechanisms and tools and the permanent supervision and monitoring of the whole process.

OCCUPATIONAL HEALTH AND SAFETY/OHS MANAGEMENT

Continuing with the commitment contained in our Integrated Environmental Management, Quality and Occupational Health and Safety Policy, approved and implemented in our Group, of continuous improvement of working conditions in order to raise the level of health and safety protection of all persons involved in our works and projects, the following noteworthy activities have been undertaken in 2019:

• In 2019, 21 internal audits were carried out in accordance with the requirements of OHSAS 18001, for a total of 60 days. During these, several Deviation Notes were opened, related to divergent points from the standard, most of them due to specific errors/non-compliance.

In the Foreign Market, nine internal audits were carried out in accordance with the requirements of OHSAS 18001, for a total of 27 days.

• In terms of external audits, those of Elecnor (25 days) and the subsidiaries ATERSA, AUDECA, EHISA, ENERFIN and JOMAR SEGURIDAD (10 days) were carried out, with a satisfactory result, with one non-conformity in the multisite certification that includes Elecnor and all the aforementioned subsidiaries, except AUDECA and ENERFIN, which have an independent certificate and no nonconformities.

In the Foreign Market, as far as external audits are concerned, six audits were carried out in various countries, for a total of 20 days.

• A total of 1,236 internal site audits were carried out, as a control measure by a central, independent SPM Department, which enables an in-depth analysis of the on-site safety situation. Significantly, these audits were also conducted in countries with a stable presence in Europe: Italy, Portugal and the United Kingdom.
• More than 62,300 safety inspections have been carried out in the Group to monitor the current conditions in which work is performed. As a result, 20,350 corrective measures were taken to improve safety conditions.
• The scheduled training and informational activities for workers continued, with activities conducted in Spain for an overall group of 23,000 attendees who, for the most part, attended more than one training activity. The total number of training hours in the area of Occupational Health and Safety amounted to 129,750 hours, an increase of 7.7% compared to 2018. There are also other technological and management training areas that also have a significant impact on Occupational Health and Safety, which are not included in this total (electrical qualifications/authorisations, work equipment operators, etc.).

Abroad, actions have been organised for an overall group of more than 26,800 people, most of whom attended more than one training event. The total number of training hours in the area of Occupational Health and Safety amounted to more than 145,500 hours.

• A Special Campaign for the International Day for Occupational Health and Safety was held on 28 April 2019, to raise workers' awareness of Health and Safety issues. This year, workers have been made to reflect that they are not superheroes and that they truly need the power of prevention to return home from work unharmed, with the campaign video reflecting the difference between one idea and another.

One of the Campaign's main events was held in the Beatriz Madrid Auditorium, which was attended by representatives of client companies, employers' associations and trade unions, in addition to our CEO, General Manager, Directors, Command Line and employees of Elecnor and its subsidiaries. At this event, recognition was given to 19 TPPs that demonstrated excellent safety results in 2018 compared to previous years. Endesa was also recognised for its work in the field of health and safety in the electricity sector. An acknowledgement was also given to a subcontractor for its commitment and improvement in Health and Safety.

As a side note, three new employees, one from Spain, one from Angola and one from the Dominican Republic, joined the "Blue Jackets" Club, a club for workers who stand out for their commitment to Health and Safety.

Also present were the nine workers who had won four "Estrellas PES" (PES Stars) in Spain, to pay tribute to them for this achievement among more than 6,000 workers.

Workshops were held in all Units, where workers were shown a video and a presentation prepared for the campaign. The campaign poster and video were translated into English, French, Italian, Portuguese, Brazilian Portuguese and Arabic and distributed throughout the Group for workers to see.

• In addition to the day-to-day activities determined by the Management System, which enables us to comply with the legislation in force with the numerous tasks that are carried out, we are working on two major lines of action that will enable us to continue to make progress towards our goal of zero accidents:
  • The "Excellence in Safety" project continued its development. The six lines of action defined have been developed by the Working Groups for each of them, and most of them are in the final phase of development and implementation.

This year, the second phase of the PES assessment was carried out in Spain, and the report was presented in September, defining the Working Groups to develop the new lines of action. At the same time, the International Phase of the "Excellence in Safety" project has begun, with assessments having been made in Angola, Argentina, Chile, the United Kingdom and Uruguay, and the Working Groups in each country having begun their work, which will be completed in 2020.

• "Digital Transformation" project, aimed at Prevention, which seeks to improve day-to-day responsibilities by eliminating bureaucratic tasks which add no value, allowing Safety Officers and Line Managers to instead spend this time on visiting sites, training, etc., thus generating added value.

Thus, in 2019, some initiatives that were foreseen in the Digital Transformation project have been launched or strengthened. Among the most significant of these are as follows:
In Spain, the "Notific@" app and web environment are already used as the only means of notification and investigation of accidents. It has also begun to be implemented in several countries in the Foreign Market.
Likewise, since 01/01/2019, the "SegurT" app and web environment has also been exclusively used in Spain. This means that the traditional way of carrying out safety inspections, i.e. on paper, has been abandoned in favour of carrying them out using the app and following them up using the web environment.
Likewise, the tool for carrying out MR.Ps has been implemented virtually throughout Spain, with an app for carrying them out and a web environment for their management and control. MR.Ps, which stands for "Main Risk Permits", are a computerised checklist to be carried out before work commences, allowing the brigades to identify key aspects to avoid risks that could cause them serious accidents, and to avoid errors in carrying out the work.
There have also been other initiatives of a lesser scope that have assisted in the development of activities: implementation of "e coordina" in various units, restructuring and reform of the Intranet, etc.
- Control measures on subcontractors continued, with a large part of the inspections carried out being directed at work performed by these companies, with coordination and information meetings being held with them.
Within the Excellence in Safety project, there is a line of action dedicated to improving the control and monitoring of subcontractors. As part of this, the system for evaluating and monitoring subcontractors has been updated to allow for the detection of those that are less committed, and to take action for their improvement, giving priority to those that are larger and/or pose a greater risk. This system is based on a pre-qualification process based on the data from "e-coordina", an evaluation process carried out by the SPM technicians, and a subsequent monitoring and control system, visible in a computer application called "evalu@" based on the safety inspections, accidents, incidents and improvement actions of the subcontractors, which determine a score that, in the event of a significant decrease, makes it possible to activate Action Plans or even suspend contracts with the subcontractor in question.
- In the Foreign Market, in addition to continuing with the preparation of indexes with the data on subsidiaries and branches, and tending towards a greater approximation of the activities developed in the Domestic Market, and the actions framed within the PES Project in its internationalisation phase mentioned above, various visits were made to Foreign Market countries.
All these activities have been reflected in the obtaining of the best

injury frequency index values since 1967, when these indexes were first compiled by our company. In the Domestic Market, the injury frequency index closed at 4.1 compared to 5.8 in 2018.

In the Foreign Market, the injury frequency index closed at 2.6 this year, while in 2018 it was 2.7.

With regard to the Elecnor Group total, the injury frequency index reached a value of 3.4 this year, compared with 4.6 in 2018.

E.2 Identify the bodies within the company responsible for creating and executing the Risk Management and Control System, including tax compliance risk.

The purpose of the Audit Commission is to supervise the effectiveness of the Company's internal control, internal audit and risk management systems, including tax systems, and to discuss with the account auditors or audit firms the significant weaknesses in the internal control system detected during the course of the audit.

In particular, the Audit Commission supervises the process of preparing and presenting the regulated financial information.

E.3 State the primary risks, including tax compliance risks, and those deriving from corruption (with the scope of these risks as set out in Royal Decree Law 18/2017), to the extent that these are significant, which may affect the achievement of business objectives

As indicated in point E.1.

E.4 State whether the entity has a risk tolerance level, including tolerance for tax compliance risk.

Section E.1. describes all the policies and actions developed by the Company in the area of risk management, to ensure that it has an adequate tolerance level for the risks that may arise in the course of its business.

E.5 State which risks, including tax compliance risks, have materialised during the year.

The following are the policies and actions we consider most relevant:

1.- In relation to Legal Risks

The Company has a Legal Department and legal services in its main Business Areas and Subsidiaries, which provide a multidisciplinary advisory service (corporate, powers of attorney, industrial property, review of contracts, joint venture-consortia, trials, claims, arbitration, subcontracting, etc.), both for domestic and international business. However, despite this advisory service, the Group is currently involved in several proceedings whose resolution is not expected to affect its income statement.

On 31 May 2017, the CNMC notified the Company of the initiation, together with 15 other companies, of a sanctioning procedure for a possible infringement in the field of construction and maintenance of electrification systems and electromechanical equipment on railway lines. On 14 March 2019, the Council of the CNMC issued a decision reducing the penalty with respect to the draft resolution dated 31 August 2018 to EUR 20.4 million. In May 2019, the Company filed an appeal which was accepted and on 16 July 2019 the Spanish National Court of Justice announced the suspension of the execution of the CNMC's decision of 14 March 2019, subject to the provision of guarantees in the form of a bank guarantee.

On 26 September 2019, Elecnor, S.A. received a Measure of Organisation from the Spanish National Court of Justice summoning it to file a lawsuit, which it submitted on 11 November 2019 in a timely and proper manner.

In view of these facts and, based on the assessments of the Company's legal advisers, despite considering that there are still solid arguments to challenge the CNMC's inspection activities, due to recent events in the framework of other appeals against the resolution, as well as the development of other proceedings in the Spanish National Court of Justice in the last 12 months, where the arguments presented by the parties have been rejected, thus confirming the CNMC's decision, the Company's administrators have recorded a provision to cover this risk for an amount of EUR 20.4 million.

On 17 January 2020, the Central Court of Investigation No. 5 issued an order for the opening of oral proceedings with respect to a former employee of the Group and with respect to the company Deimos Space, S.L., due to its alleged criminal liability as a legal person for possible corruption offences in international commercial transactions and money laundering, and the institution is required to provide bonds amounting to EUR 1,460,000 for civil liability, as well as additional bonds amounting to EUR 10,240,000 and EUR 2,625,000, the latter in order to respond to possible and future pecuniary and commissary responsibilities.

The Group is in complete disagreement with the aforementioned court decision and is exercising its rights in the proceedings, appealing against the bond issued and requesting its full acquittal, as is the former Group employee, with their own legal defence, and deems that there is no evidence in these proceedings to support the conviction of Deimos Space, S.L. to a sufficient degree of certainty beyond all reasonable doubt, nor of its former employee, and, therefore, the Administrators of the Company, in accordance with the terms of the defence brief presented, consider that the probable result of the oral proceedings will be acquittal, which, consequently, will not entail criminal or civil liability.

2.- In relation to the Fiscal Risks

In 2018, the inspections carried out by the Central Office of High-Income Taxpayers at the Spanish Tax Agency were concluded, with the signing of disputed assessments with the settlement agreements, which entailed an obligation to pay a total amount of EUR 14,208,000.

Contrary to settlement agreements arising from the signed disputed assessments, the Company filed economic-administrative claims with the Central Economic-Administrative Tribunal on 28 December 2018, which, having been the subject of suspension of the obligation to pay while the proceedings are being processed, Administrative proceedings have been pending at the date of the creation of the annual financial statements for the financial year 2019, without the record being revealed and the processing of allegations by the Central Economic and Administrative Tribunal having been granted.

In addition to the above, the Company currently has a new open inspection process covering the following taxes and periods:

• Income tax for the years 2014 to 2016,

• Value added tax for the tax period 09/2015 to 12/2016,

• Withholdings and payments on account for personal income and professional activities for the tax period 09/2015 to 12/2016,

• Withholdings and payments on account for income from movable capital for the tax period 09/2015 to 12/2016,

• Withholdings and payments on account for property capital income for the tax period 09/2015 to 12/2016 and,

• Withholding taxes on non-residents for the tax period 09/2015 to 12/2016.

In view of this situation, the Company's Directors, in collaboration with its tax advisers, consider that although there are relevant arguments to support the Company's position, following a criterion of prudence, they have decided to make a provision this year for the amounts claimed in the contested settlement agreements relating to interpretative discrepancies in the area of related-party transactions, since they consider that the possibility of retroactive action has been ruled out for 2019 and, therefore, there is a greater probability that the review bodies will validate the Tax Authorities' approach than they would have done otherwise.

In addition, and taking into account the results of the previous inspection, this year a provision was recorded to cover the potential impact on 2014 to 2019 of the assessments issued in disagreement due to interpretative discrepancies in related-party transactions, since the same transfer pricing policies were applied as in previous years.

3.- In relation to the Financial Risks

The syndicated financing contracted between Elecnor and a group of financial institutions was novated on 27 June 2019, in order to: i) Divide the financing credit tranche (Tranche B), with a pre-novation limit of EUR 200 million and maturing in July 2024, into two sub-tranches: A B1 sub-tranche, with a limit of EUR 134.18 million and maturity in July 2024 and a B2 sub-tranche with a limit of USD 75 million and maturity in January 2022, at which time the distinction between the two sub-limits will cease to operate and a single sublimit of EUR 200 million will be applied again and (ii) the company Electrificaciones del Ecuador will be added as an additional accredited party of the B2 sub-tranche.

4.- In relation to the Economic Risks

Certain risks of an economic and financial nature have emerged, most notably those relating to the management, negotiation and collection of claims submitted in the context of project execution, delays in the collection and/or non-payment of commercial debts, the correction of margins expected at the end of the work, the management of discrepancies and disputes at project closure and changes in the exchange rates. The Company, within the framework of its Risk Management System, identifies and continuously monitors these risks, evaluating the impact that they may have on its economic and financial performance, taking the measures that, in each case, and based on these analyses, are deemed appropriate. In this regard, and by virtue of this ongoing analysis and monitoring, the Company records the appropriate entries and breakdowns in its annual financial statements so that they accurately reflect the impact of these risks, and adjusts its cash forecasts and plans its financial needs and identifies the causes that have given rise to the occurrence of these risks, implementing measures that reinforce its risk monitoring and control activities in a process of continuous improvement.

5.- In relation to Occupational Health and Safety/OHS

During the 2019 financial year, the biggest issue that has been observed in the Group is the serious occupational accidents of construction workers, both the Group's own workers and those of subcontractors, in the performance of their tasks, many of which are the result of non-compliance or errors on the part of the workers themselves.

In order to reduce this accident rate, the development of the "Excellence in Safety" project has made significant progress in 2019. The fundamental objective of this project is to achieve a behavioural change in all our workers in order to raise the level of risk perception and reduce the number of accidents. The second phase of this Project has begun in Spain, which will be implemented in 2020, and the International Phase of this Project has also begun this year. The health and safety initiatives developed as part of the "Digital Transformation" Project have also contributed to raising the level of health and safety standards in our works and projects.

In any case, when a significant accident occurs, regardless of the result of the injuries, action plans continue to be implemented in the event of these accidents, with the implementation of additional training measures, work supervision and the organisation of the necessary human and material resources.

6.- In relation to Labour Relations.

It should be noted that massive labour inspections are taking place (selfemployed workers and subcontractors). At present, there are inspections monitoring the situation of the self-employed and subcontractors, in order to detect false self-employment and illegal transfer of labour. These inspections, which were becoming more widespread and more stringent in the companies that work for Telefónica, have been extended to all companies that work for the major telecommunications companies.

In 2019, important regulatory changes were made which, depending on how they are interpreted by the courts, may represent a new way of understanding labour relations. The main changes are focused on the work-life balance through different measures (adaptation of the schedule in an individual fashion and without a reduction of the working day, daily record of the working day, etc.). It seems that these normative changes, together with the membership of the New Government, will result in institutions pursuing and promoting measures to help with this balance.

7.- In relation to all the other Compliance risks.

In 2019, there were no compliance risks that had a significant impact on the Group's results, image and/or reputation.

E.6 Explain the response and monitoring plans for all major risks, including tax compliance risks, of the company, as well as the procedures followed by the company in order to ensure that the board of directors responds to any new challenges that arise.

The supervision of the Risk Control and Management System indicated in point E.1 is carried out at the highest level in the Company, i.e. by the Chairman, the Managing Director, the Audit Commission and the Board of Directors.

Notwithstanding the above, and in order to mitigate or redirect the risks described in section E.5, the Company has the necessary Corporate Organisations, resources and working methods, which analyse, supervise and propose specific actions so that any risks detected affect the Company as little as possible, reporting their conclusions and suggestions to the affected Areas and informing the persons and bodies mentioned in the previous paragraph.

F INTERNAL RISK MANAGEMENT AND CONTROL SYSTEMS RELATED TO THE PROCESS OF PUBLISHING FINANICAL INFORMATION (ICFR)

Describe the mechanisms comprising the System of Internal Control over Financial Reporting (ICFR) of your company.

F.1 Control environment

Report on at least the following, describing their principal features:

F.1.1. The bodies and/or departments that are responsible for (i) the existence and maintenance of an adequate and effective ICFR; (ii) their implementation; and (iii) their supervision.

The responsibility for the existence and maintenance of an adequate and effective Internal Control System in relation to the process of issuing Financial Information (ICFRS), as well as its supervision, is assumed by the Audit Commission, a body which has delegated the tasks of designing and verifying the effective implementation and operation of the ICFRS to Elecnor's General Internal Audit and Finance Sub-division, by means of the relevant audits.

To this end, the Regulations of the Board of Directors of Elecnor expressly establish that one of its functions is to identify the main risks of the Company and to implement and monitor the appropriate internal control and information systems. Furthermore, these Regulations, as well as the Company's own Articles of Association, establish among the responsibilities of the Audit Commission the supervision of the effectiveness of the Company's internal control, internal audit, where appropriate, and risk management systems, including tax systems, as well as the process of preparing and presenting the regulated financial information. The Audit Commission is also responsible for establishing appropriate relations with the account auditors in order to receive information on any matters that may jeopardise their independence and any other matters related to the account auditing process. In the specific area of auditor independence, the Audit Commission, through the internal procedure established in this respect, is responsible for pre-approving, directly or indirectly through the Internal Audit and from an independent perspective, any proposal for non-audit services submitted by the Group's external auditor. It also obtains, on an annual basis, written confirmation from the auditors of their independence and information on the additional services provided by them, and issues the required report in this respect prior to issuing the account audit report.

• F.1.2. State whether the following are present, especially if they relate to the creation of financial information:
  • Departments and/or mechanisms in charge of: (i) design and review of corporate structure; (ii) clear definition of lines of responsibility and authority with an adequate distribution of tasks and functions; and (iii) assurance that adequate procedures exist for proper communication throughout the entity.

The General Internal Audit and Finance Sub-division, together with the heads of each department, with regard to functions related to the process of preparing financial information, is responsible for designing the organisational structure and the lines of responsibility and authority in their respective areas of action. Any changes to the organisational structure made during the financial year are reported to the Communications Area, which periodically updates the organisational charts, which are then incorporated into the common computer directory to which all employees have access.

Persons responsible for the administration and recording of transactions with a direct impact on the process of preparing financial information (corporation, delegations and subsidiaries) are functionally dependent on the General Internal Audit and Finance Sub-division.

• Code of conduct, the body approving this, degree of dissemination and instruction, including principles and values, (state if there is specific mention of transaction recording and creation of financial information), a body charged with analysing breaches and proposing corrective actions and sanctions.

The Elecnor Group's Compliance System is structured through a series of documents and management tools, including the Code of Ethics and the Group's Compliance Policy. These documents were initially approved by Elecnor's Board of Directors and are available on Elecnor's website, in the Corporate Responsibility section, which is available to all employees and interested third parties.

The Code of Ethics and the Compliance Policy are applicable to all the companies that make up the Elecnor Group and to all the businesses and activities it carries out in each country in which it operates.

The Elecnor Group's Code of Ethics and the documents that implement it have the core mission of extending its business philosophy to all employees and collaborators and determining the expected behaviour of the same in matters of an ethical nature, in relation to the organisation's commitments in this field or to the applicable regulations. Among the documents that implement the Code of Ethics is the Compliance Policy, which was approved by the Board of Directors in 2016, and which outlines the expected behaviour of Elecnor employees and of the individuals or legal entities that are routinely associated with the Company in order to guarantee compliance with the law.

Elecnor enforces a zero-tolerance policy for bad practices in terms of ethics and integrity, and expects its employees and people with whom it has dealings to conduct themselves in accordance with the principles of its Code of Ethics, the rules on which it is based and the procedures that govern it.

Among the "Principles of Action in relation to shareholders" included in the Code of Ethics, the Elecnor Group includes the commitment to "favour among its shareholders – and, in general, in the investment and financial community – the creation of an opinion based on truthful data and facts regarding the development of its businesses, the main lines of its strategy and its future prospects. To this end, the Elecnor Group assumes as a principle of behaviour the transparency and reliability of financial information and compliance with the applicable regulations. Employees must transmit such information in a truthful, complete and understandable manner... The dissemination of this information is done in an expeditious manner and by means of common and simultaneous access to guarantee equity, mainly communications to the CNMV on relevant facts and press releases to the media".

The body responsible for analysing possible breaches of these principles or of the law is the Compliance Committee, which reports its conclusions to the Audit Committee so that the latter may determine, where appropriate, the possible corrective actions and disciplinary measures to be adopted. The Compliance Committee is the collegiate body entrusted with the functions of supervision, monitoring and control of the Compliance System, guaranteeing its permanent review and updating and effective operation, and is currently composed of five people, mostly from corporate areas. This body depends organically and functionally on the Audit Committee, to which it periodically reports its activity.

The Compliance Committee is in charge of organising recurring annual training cycles, which are intended for as many of the organisation's employees as possible, covering the organisation's values and unwanted risk behaviour. Training cycles are carried out through classroom sessions, on-line training or the delivery of outreach brochures. This training plan is part of the organisation's training programme. When new employees are hired, including temporary ones, the Elecnor Group provides them with a copy of the Code of Ethics.

• Whistleblower channel, that allows notifications to the audit committee of irregularities of a financial and accounting nature, in addition to potential breaches of the code of conduct and unlawful activities undertaken in the organisation, reporting, as the case may be, if this is of a confidential nature.

Employees may communicate any concerns or questions in the area of Compliance or about irregular, illegal or contrary conduct in terms of the Code of Ethics, including financial and accounting matters that occur in the course of the activities carried out by the Company, through an Intranet and/or postal address, which are fully operational and explained in the Code of Ethics, the Compliance Policy and other communications or publications of a public nature, such as the Integrated Report.

Only named communications are admitted and all of them are analysed and treated in a confidential manner and with respect for the regulations on personal data protection. Notwithstanding the above, and in the case of receiving anonymous communications, these will be analysed by the Compliance Committee, which, in view of the soundness of the arguments, will propose their processing in order to further the investigation. The Elecnor Group does not tolerate any retaliation against people who make use of the procedures established for the communication of irregular behaviour.

The Compliance Committee, which is responsible for processing communications received through this channel in the first instance, will identify and determine the nature and importance of the complaints received. Based on this analysis, it will determine the most appropriate department or unit for their resolution.

• Training and periodic refresher programmes for staff involved in the preparation and revision of financial information, as well as assessment of the ICFR (Internal Control System for Financial Information), that covers at least accounting rules, audits, internal control and risk management.

The training and development policy is integrated into the Human Resources Integrated Management System.

The Department of Performance Management, Training and Development is responsible for designing and configuring training itineraries for Elecnor's structural personnel, based on the results of performance management and the training needs identified by the different areas. In particular, for staff with responsibilities in the financial field or who need to improve their skills in this area, there is a specific financial training programme. Elecnor also provides its employees with regular training in the field of compliance, which, among other issues, provides them with a better understanding of the main risks of this nature and the internal control elements established for their adequate prevention and management.

In addition, the heads of the departments most directly involved in the preparation and review of the financial information as well as in the evaluation of the ICFRS maintain permanent and fluid communication with the external auditors and other accounting experts, who inform them promptly of new developments in accounting matters and risk management and internal control of financial information and provide them with material and assistance for its updating. If necessary, depending on the extent and importance of the new developments, as well as the group concerned, specific courses are designed on the subject.

F.2 Assessment of financial information risks

Report on at least the following:

• F.2.1. The main characteristics of the risk identification process, including error and fraud risk, as regards:
  • Whether the process exists and is documented.
  • If the process covers all of the objectives of financial information, (existence and occurrence; completeness; valuation; delivery; breakdown and comparability; and rights and obligations), whether it is updated and with what frequency.
  • The existence of a process for identifying the scope of consolidation, taking into account, among other factors, the possible existence of complex company structures, shell companies, or special purpose entities.
  • If the process takes into account the effects of other types of risk (operational, technological, financial, legal, tax, reputational, environmental, etc.) to the extent that they affect the financial statements.
  • The governing body within the company that supervises the process.

The process of identifying risks in relation to the process of generating and issuing financial information falls within the responsibilities attributed to the General Internal Audit and Finance Sub-division by the Audit Commission.

This risk identification process has, in summary, the following characteristics:

• An analysis of the consolidated annual financial statements for the year in order to identify the relevant headings in the financial statements and breakdowns.
• On the basis of this information, those processes from which transactions are processed are identified and finally reflected in the aforementioned relevant headings and breakdowns.
• Lastly, the relevant risks that may lead to errors in the process of generating and issuing financial information are identified and prioritised for each of the aforementioned processes. Accordingly, each risk identified relates to one or more of the potential errors in the process of generating and issuing financial information, such as integrity, accuracy, occurrence, cut-off, valuation and allocation, and classification and comprehensibility.

The operation of the ICFRS Oversight Model is structured around the Elecnor Group's Annual Internal Audit Work Plan. The Annual Plan is prepared by the General Internal Audit and Finance Sub-division and presented to the Elecnor Audit Commission for approval. Once approved, the Annual Plan is executed by the corporate areas of the Elecnor Group (General Accounting, Management Control, Consolidation, Financial Area, Internal Audit and Tax Advisory). One of the tasks included in this Annual Plan is the review of significant risks.

The review of the scope of consolidation is carried out twice a year to coincide with the consolidation process. Corporate transactions are approved by the Board of Directors and reported to the General Internal Audit and Finance Sub-division for the updating of the Group's scope of consolidation.

The General Internal Audit and Finance Sub-division, in the performance of its tasks, continuously monitors the Group's activity, which enables it to identify any significant risk in the different areas of business and activity that could have a significant impact on the financial statements. These risks, as well as their potential impact on the financial statements, are reported to the Audit Commission by the General Internal Audit and Finance Sub-division in the various meetings held by the former.

F.3 Control activities

Report on whether the company has at least the following, describing their main characteristics:

F.3.1. Review and authorisation procedures for financial information published by the stock markets and a description of the ICFR, indicating those responsible, as well as documentation describing the flow of activity and controls (including those relating to the risk of fraud) of the various types of transactions which may materially affect the financial statements, including financial closing procedures and the specific review of judgements, estimates, valuations and relevant forecasts.

With respect to the accounting closing procedure, the General Internal Audit and Finance Sub-division draws up the annual closing calendar which includes the closing dates, rules and instructions. This calendar is made available to all staff involved through the computer directory. Furthermore, Elecnor's General Accounting Department supports the accounting closing process by means of a monthly and annual accounting closing checklist.

With respect to subsidiaries, the Management Control, Consolidation and Internal Audit Departments permanently monitor the subsidiaries that make up the Elecnor Group, assigning the monitoring of the various investees to the Subsidiary Controllers. In addition, regular meetings are held to monitor subsidiaries, in which the financial information of these subsidiaries and any other relevant aspects are analysed.

The Management Control and Consolidation departments prepare all the documentation relating to the analysis of the Group's performance on a monthly basis for presentation to the Board of Directors, which is previously reviewed by the General Internal Audit and Finance Sub-division. A checklist is available to carry out this review, indicating the control tasks and the persons responsible for each task.

With regard to the procedures for reviewing and authorising financial information to be published on the securities markets, a distinction is made between three levels of relevant information:

• Annual financial statements and interim financial statements

The head of Elecnor's General Accounting Department is responsible for preparing the individual annual financial statements. The Head of Consolidation is also responsible for preparing the consolidated annual financial statements and the interim consolidated financial statements.

Subsequently, the individual and consolidated annual financial statements are reviewed by the heads of the various corporate areas of Elecnor by the General Internal Audit and Finance Sub-division, by the Audit Commission and by the Board of Directors. The Audit Commission receives the annual financial statements sufficiently in advance to ensure their adequate review and meets with the external auditors prior to the Board of Directors where the annual financial statements are prepared.

• Description of the ICFRS

Elecnor periodically reviews the financial information prepared, as well as the description of the ICFRS, in order to ensure the quality of the information. The General Internal Audit and Finance Sub-division is responsible for preparing the description of the ICFRS. This process culminates in a review by the Audit Commission and its approval through the Annual Corporate Governance Report that is validated by the Board of Directors.

• Relevant facts reported to the CNMV

The department or subsidiary in which the operation to be communicated originates prepares a note that is reviewed by the General Secretary and the Communications Area. The relevant facts are also reviewed by the General Internal Audit and Finance Sub-division in the case that they include financial or accounting information.

• Uploading of information to CNMV applications

The burden of information on CNMV applications is the responsibility of the General Secretary, which is supported in this process by the General Internal Audit and Finance Sub-division. The validation and sending of this information is the responsibility of the General Secretary, who has exclusive use of a cryptographic card for sending the information.

Elecnor has documented accounting and administrative procedures for "Purchases and Payments", "Contracting, Invoicing and Collection", "Control of Fixed Assets", "Treasury Control" and "Cash Control", among others. These procedures include the type of transactions for each process, the procedures for recording and accounting for them and the corresponding controls as established by Elecnor.

These procedures are reviewed annually by Elecnor's General Accounting Department, which updates them if necessary.

In addition, the General Internal Audit and Finance Sub-division has a matrix of risks and controls of financial information, which includes controls related to fraud risks. The risks and controls are reviewed within the Annual Internal Audit Plan, and the matrix is updated annually.

With regard to the procedures and controls established in relation to the relevant trials, estimates and projections, the Group has identified the main risks related to these aspects. In particular, the main areas exposed to trials and estimates have been identified as those related to:

• The recognition of income from construction contracts under the percentageof-completion method.

• The registration of provisions of any nature.
• The recoverable value of goodwill.

All significant estimates are reviewed by the General Internal Audit and Finance Sub-division and, where appropriate, are submitted to the Board of Directors for analysis and approval.

Elecnor's Board of Directors meets on a monthly basis. Beforehand, the Group's financial information is analysed by the General Internal Audit and Finance Subdivision and the Managing Director.

F.3.2. Internal IT control policies and procedures (access security, change controls, their operation, operational continuity, and segregation of duties, among others) which support relevant processes within the company and relate to the creation and publication of financial information.

Currently, Elecnor has a series of controls that mitigate the main risks related to the integrity, availability, validity and confidentiality of accounting and financial information. In addition, Elecnor has procedures related to Information Security and System Operation.

The management of access to the systems is carried out in accordance with procedures established for this purpose.

Elecnor has a documented Contingency Plan in the event of a Disaster, as well as a Backup Policy and Procedures for the organisation's critical systems.

F.3.3. Internal control policies and procedures intended to guide the management of subcontracted activities and those of third parties, as well as those aspects of assessment, calculation or evaluation entrusted to independent experts, which may materially affect financial statements.

The Elecnor Group participates in various temporary joint ventures (UTEs by its Spanish acronym). Although the Elecnor Group itself manages and administers most of them, sometimes the other partner is in charge of these tasks. In these cases, when the Elecnor Group does not manage the administration, it is the Elecnor Group that assumes the management. Once the joint venture has been legally constituted, its Management Committee, in which all the partners participate, meets and agrees on the accounting and analytical criteria for the management of the works. The partner in charge of management sends the monthly financial information (balance sheet, profit and loss account and worksheet) to Elecnor for review. On 30 June and 31 December, the Elecnor Group integrated the UTEs. This process is carried out by the Management Control Department, once the information sent by the other partner has been reviewed and the corresponding homogenisation entries have been made in the event that there are accounting criteria different from those assumed by Elecnor.

With respect to the assessments, judgements or calculations made by third parties, the Elecnor Group arranges interest rate and exchange rate hedging derivatives, the valuation of which is entrusted to leading financial institutions.

The identification of the need or convenience of contracting a financial instrument is the ultimate responsibility of the General Internal Audit and Finance Sub-division. Once the need has been determined, the application for the contract is sent to the Board of Directors for approval. The Board only approves hedging derivatives.

The Treasury Area receives monthly valuations of the derivatives from financial institutions and evaluates their reasonableness. In the event of a discrepancy, the financial institutions are contacted for clarification and, if necessary, to obtain new valuations.

F.4 Information and communication

State whether the company has at least the following, describing their main characteristics:

F.4.1. A specifically assigned function for defining and updating accounting policies (accounting policy area or department) and resolving doubts or conflicts arising from their interpretation, maintaining a free flow of information to those responsible for operations in the organisation, as well as an up-to-date accounting policy manual distributed to the business units through which the company operates.

The responsibility for defining and keeping the Group's accounting policies upto-date is attributed to Elecnor's General Internal Audit and Finance Subdivision. The Management Control and Consolidation departments permanently monitor subsidiaries and branches. The resolution of doubts and queries regarding accounting policies is primarily the responsibility of the Corporate Controllers of each of the subsidiaries. In the event that the query is not resolved or there is a conflict of interpretation, these are raised with the Head of Consolidation and/or Internal Audit, both of which are part of the General Internal Audit and Finance Sub-division.

If necessary, queries are made to the external auditor by the Head of Consolidation of the General Internal Audit and Finance Sub-division.

F.4.2. Measures for capturing and preparing financial information with consistent formats for application and use by all of the units of the entity or the group, and which contain the main financial statements and notes, as well as detailed information regarding ICFR.

All transactions are recorded at Elecnor on a documentary basis and using an operation key format. Each document used to report data to the system has some mandatory data (customer code, centre, work, VAT rate, etc.). After the "end of day" (transaction validation) is complete, all the resulting entries are verified by the corresponding corporate departments, correcting, if necessary, those considered erroneous.

As for the reporting tool, a standardised "Consolidation Report Package" is used for all subsidiaries. This "Consolidation Report Package" is reviewed on an annual basis by the external auditor in order to validate that it includes all the required information and breakdowns. Subsidiaries generally report under IFRS. The consolidation process takes place in the Consolidation Department.

The Consolidation Department prepares a schedule and reporting instructions on an annual basis. Each of the subsidiaries, once the closing has been prepared and supervised by each of the heads of the corresponding Accounting and Financial Departments, sends the required information to the Consolidation Department. The reporting instructions establish the obligation for the information included in the report package to coincide with that obtained from the subsidiary's accounting records, as well as forbidding the inclusion of subsequent entries in the accounts once the report package has been sent to Elecnor. If a significant subsequent entry is detected, the Management Control and Consolidation departments are informed and the corresponding report package is modified.

F.5 Supervision of system performance

Describe at least the following:

F.5.1. The activities of the audit committee in overseeing ICFR as well as whether there is an internal audit function that has among its mandates support of the committee and the task of supervising the internal control system, including ICFR. Additionally, describe the scope of ICFR assessment made during the year and the procedure through which the person responsible prepares the assessment reports on its results, whether the company has an action plan describing possible corrective measures, and whether its impact on financial reporting is considered.

Among the functions assumed by the Audit Commission is that of periodically reviewing the internal control and risk management systems, so that the main risks are properly identified, managed and reported. Furthermore, its powers include supervising the preparation process and the integrity of the financial information, reviewing compliance with regulatory requirements, the appropriate delimitation of the scope of consolidation and the correct application of accounting criteria.

In carrying out these functions, the Audit Commission relies on the internal audit function. The Elecnor Group's internal audit function is structured around six major control areas: General Accounting, Management Control, Consolidation, Financial Area, Internal Audit and Tax Advice. These departments act, in their respective areas of competence and under audit criteria, as internal corporate control/audit bodies, carrying on their activities with complete independence from both Elecnor's production departments and the domestic and foreign subsidiaries that comprise the Elecnor Group. The internal audit is integrated within the General Internal Audit and Finance Sub-division, whose main functions and activities are the supervision of financial information and internal control. The Elecnor Group prepares an Internal Audit Plan, which is presented to the Audit Commission, and a periodic report on the execution of the plan and on the incidents that have occurred at the various meetings of the Audit Commission by the General Internal Audit and Finance Sub-division.

Elecnor conducts coordinated audits of the Business Areas, the scope of which focuses on the most relevant chapters within the ICFRS, such as Work in Progress, Customers, Warehouses and the recognition of margins, among others. All internal audits of Elecnor's Business Areas are scheduled so that at least two audits are carried out per Area per year, ensuring that the first audit of all the Areas has been carried out before the end of the first half of the calendar year and the second before the end of the financial year. For both types of audit, an audit schedule is made at the beginning of the year and there is a checklist of tests to be performed.

As with the parent company, all subsidiaries are subject to two internal audits each financial year. Following the same criteria as in the case of Elecnor, we try to conduct an initial audit before the closing corresponding to the first half of the year and a second audit before the closing of the fiscal year.

The Elecnor Group's Audit Commission, with respect to the ICFRS, is informed of the internal control structure existing in the organisation, approves the annual internal audit plan, meets at least twice a year with the external auditors and is informed monthly, during the meetings of the Board of Directors, of the developments within the business and its activities. In addition, and if relevant, it is informed of certain judgements or estimates included in the financial information. The Audit Commission reports on all its relevant activities carried out during the year in its annual Activity Report.

F.5.2. If there is a procedure by which the account auditor (in accordance with the contents of the Normas Técnicas de Auditoría (NTA) - "Auditing Standards"), internal auditor and other experts may communicate with senior management and the audit committee or senior managers of the company regarding significant weakness in internal control identified during the review of the annual accounts or any others they have been assigned. Additionally, state whether an action plan is available for correcting or mitigating any weaknesses found.

The Elecnor Audit Commission meets at least three times a year, in accordance with the provisions of the Company's Articles of Association and the Regulations of the Board of Directors of the Company, and as many times as required according to the interests of the Company.

During the 2019 financial year, the Audit Commission held 11 meetings, three of which were attended by the external auditors. The purpose of the meetings was to:

• Review the planning and scope of audit work.

• Review the annual financial statements and analyse, if they exist, the monitoring weaknesses detected by the external auditor in his review of the main business processes and general controls that are implemented in the Group, as well as the suggested corrective actions. Prior to this meeting, the external auditors meet with the Chairman, the CEO and members of the General Internal Audit and Finance Sub-division.

• Review the interim financial statements.

F.6 Other relevant information

There is no additional relevant information to consider that has not been collected from the previous points.

F.7 External auditor´s report

Report from:

F.7.1. If the ICFR information submitted to the markets has been subject to review by the external auditor, in which case the entity shall include its report as an attachment. If not, reasons why should be given.

This information in relation to ICFRS has been submitted for review by the external auditor.

G EXTENT OF COMPLIANCE WITH CORPORATE GOVERNANCE RECOMMENDATIONS

Specify the company's level of compliance with recommendations from the Good Governance Code of Listed Companies.

In the event that a recommendation is not followed or only partially followed, a detailed explanation should be included explaining the reasons in such a manner that shareholders, investors and the market in general have enough information to judge the company´s actions. General explanations are not acceptable.

1. That the Articles of Association of listed companies do not limit the maximum number of votes that may be cast by one shareholder or contain other restrictions that hinder the takeover of control of the company through the acquisition of shares on the market.

Complies Explanation �

• 2. That when the parent company and a subsidiary are listed on the stock market, both should publicly and specifically define:
  • a) The respective areas of activity and possible business relationships between them, as well as those of the listed subsidiary with other group companies.
  • b) The mechanisms in place to resolve any conflicts of interest that may arise.

Complies � Complies Partially � Explanation � Not Applicable

• 3. That, during the course of the ordinary General Shareholders' Meeting, complementary to the distribution of a written Annual Corporate Governance Report, the chairman of the Board of Directors makes a detailed oral report to the shareholders regarding the most material aspects of corporate governance of the company, and in particular:
  • a) Changes that have occurred since the last General Shareholders' Meeting.
  • b) Specific reasons why the company did not follow one or more of the recommendations of the Code of Corporate Governance and, if so, the alternative rules that were followed instead.

Complies Complies partially � Explanation �

4. That the company has defined and promoted a policy of communication and contact with shareholders, institutional investors and proxy advisors that complies in all aspects with rules preventing market abuse and gives equal treatment to similarly situated shareholders.

And that the company has made such a policy public through its web page, including information related to the manner in which said policy has been implemented and the identity of contact persons or those responsible for implementing it.

Complies Complies partially � Explanation �

5. That the Board of Directors should not propose to the General Shareholders' Meeting any proposal for delegation of powers allowing the issuance of shares or convertible securities without pre-emptive rights in an amount exceeding 20% of equity at the time of delegation.

And that whenever the Board of Directors approves any issuance of shares or convertible securities without pre-emptive rights the company immediately publishes reports on its web page regarding said exclusions as referenced in applicable company law.

Complies Complies partially � Explanation �

• 6. That listed companies which draft reports listed below, whether under a legal obligation or voluntarily, publish them on their web page with sufficient time before the General Shareholders' Meeting, even when their publication is not mandatory:
  • a) Report regarding the auditor's independence.
  • b) Reports regarding the workings of the audit committee and the appointments and remuneration committee.
  • c) Report by the audit committee regarding related-party transactions
  • d) Report on the corporate social responsibility policy.

Complies Complies partially � Explanation �

7. That the company reports in real time, through its web page, the proceedings of the General Shareholders' Meetings.

Complies Explanation �

8. That the audit committee ensures that the Board of Directors presents financial statements in the audit report for the General Shareholders' Meetings which do not have qualifications or reservations and that, in the exceptional circumstances in which qualifications may appear, that the chairman of the audit committee and the auditors clearly explain to the shareholders the content and scope of said qualifications or reservations.

Complies Complies partially � Explanation �

9. That the company permanently maintains on its web page the requirements and procedures for certification of share ownership, the right of attendance at the General Shareholders' Meetings, and the exercise of the right to vote or to issue a proxy.

And that such requirements and procedures promote attendance and the exercise of shareholder rights in a non-discriminatory fashion.

Complies Complies partially � Explanation �

• 10. That when a verified shareholder has exercised his right to make additions to the agenda or to make new proposals to it with sufficient time in advance of the General Shareholders' Meeting, the company:
  • a) Immediately distributes the additions and new proposals.
  • b) Publishes the attendance card credential or proxy form or form for distance voting with the changes such that the new agenda items and alternative

proposals may be voted upon under the same terms and conditions as those proposals made by the Board of Directors.

• c) Submits all of these items on the agenda or alternative proposals to a vote and applies the same voting rules to them as are applied to those drafted by the Board of Directors including, particularly, assumptions or default positions regarding votes for or against.
• d) That after the General Shareholders' Meeting, a breakdown of the results of said additions or alternative proposals is communicated.

Complies � Complies Partially � Explanation � Not Applicable

11. That, in the event the company intends to pay for attendance at the General Shareholders' Meeting, it establish in advance a general policy of long-term effect regarding such payments.

Complies � Complies Partially � Explanation � Not Applicable

12. That the Board of Directors completes its duties with a unity of purpose and independence, treating all similarly situated shareholders equally and that it is guided by the best interests of the company, which is understood to mean the pursuit of a profitable and sustainable business in the long term, and the promotion of continuity and maximisation of the economic value of the business.

And that in pursuit of the company's interest, in addition to complying with applicable law and rules and in engaging in conduct based on good faith, ethics and a respect for commonly accepted best practices, it seeks to reconcile its own company interests, when appropriate, with the interests of its employees, suppliers, clients and other stakeholders, as well as the impact of its corporate activities on the communities in which it operates and the environment.

Complies Complies partially � Explanation �

13. That the Board of Directors is of an adequate size to perform its duties effectively and collegially, and that its optimum size is between five and fifteen members.

Complies Explanation �

• 14. That the Board of Directors approves a selection policy for directors that:
  • a) Is concrete and verifiable.
  • b) Ensures that proposals for appointment or re-election are based upon a prior analysis of the needs of the Board of Directors.
  • c) Favours diversity in knowledge, experience and gender.

That the resulting prior analysis of the needs of the Board of Directors is contained in the supporting report from the appointments committee published upon a call from the General Shareholders' Meeting submitted for ratification, appointment or re-election of each director.

And that the selection policy for directors promotes the objective that by the year 2020 the number of female directors accounts for at least 30% of the total number of members of the Board of Directors.

The appointments committee will annually verify compliance with the selection policy of directors and explain its findings in the Annual Corporate Governance Report.

Complies Complies partially � Explanation �

15. That proprietary and independent directors constitute a substantial majority of the Board of Directors and that the number of executive directors is kept at a minimum, taking into account the complexity of the corporate group and the percentage of equity participation of executive directors.

Complies Complies partially � Explanation �

16. That the percentage of proprietary directors divided by the number of nonexecutive directors is no greater than the proportion of the equity interest in the company represented by said proprietary directors and the remaining share capital.

This criterion may be relaxed:

• a) In companies with a high market capitalisation in which interests that are legally considered significant are minimal.
• b) In companies where a diversity of shareholders is represented on the Board of Directors without ties among them.

Complies � Explanation

Elecnor is a company with a long tradition in its sector, and since its inception it has been managed by a variety of family groups, the founders of the company. Through the significant shareholder CANTILES XXI, S.L., and the Directors who represent it in the Company, the Family Groups that make it up are represented in the broadest and most diverse manner possible, with a profile that is suitable for the exercise of their obligations and always with the aim of giving value to the shareholder.

Elecnor's Proprietary Directors perform a supervisory task similar to that attributed to Independent Directors. The composition of Elecnor's Board of Directors corresponds to its shareholder structure.

17. That the number of independent directors represents at least half of the total number of directors.

Nonetheless, when the company does not have a high level of market capitalisation or in the event that it is a high cap company with one shareholder or a group acting in a coordinated fashion who together control more than 30% of the company's equity, the number of independent directors represents at least one third of the total number of directors.

Complies � Explanation

Elecnor is a company with a long tradition in its sector, and since its inception it has been managed by a variety of family groups, the founders of the company. Through the significant shareholder CANTILES XXI, S.L., and the Directors who represent it in the Company, the Family Groups that make it up are represented in the broadest and most diverse manner possible, with a profile that is suitable for the exercise of their obligations and always with the aim of giving value to the shareholder.

Elecnor's Proprietary Directors perform a supervisory task similar to that attributed to Independent Directors. The composition of Elecnor's Board of Directors corresponds to its shareholder structure.

• 18. That companies publish and update the following information regarding directors on the company website:
  • a) Professional profile and biography.
  • b) Any other Boards to which the director belongs, regardless of whether the companies are listed, as well as any other remunerated activities engaged in, regardless of type.
  • c) Category of directorship, indicating, in the case of individuals who represent significant shareholders, the shareholder that they represent or to which they are connected.
  • d) The date of their first appointment as a director of the company's Board of Directors, and any subsequent re-election.
  • e) The shares and options they own.

Complies Complies partially � Explanation �

19. That the Annual Corporate Governance Report, after verification by the appointments committee, explains the reasons for the appointment of proprietary directors at the proposal of the shareholders whose equity interest is less than 3%. It should also explain, where applicable, why formal requests from shareholders for membership on the Board meeting were not honoured, when their equity interest is equal to or exceeds that of other shareholders whose proposal for proprietary directors was honoured.

Complies � Complies Partially � Explanation � Not Applicable

20. That proprietary directors representing significant shareholders must resign from the Board if the shareholder they represent disposes of its entire equity interest. They should also resign, in a proportional fashion, in the event that said shareholder reduces its percentage interest to a level that requires a decrease in the number of proprietary directors representing this shareholder.

Complies � Complies Partially � Explanation � Not Applicable

21. That the Board of Directors may not propose the dismissal of any independent director before the completion of the director's term provided for in the Articles of Association unless the Board of Directors finds just cause and a prior report has been prepared by the appointments committee. Specifically, just cause is considered to exist if the director takes on new duties or commits to new obligations that would interfere with his or her ability to dedicate the time necessary for attention to the duties attendant to his post as a director, fails to complete the tasks inherent to his or her post, or enters into any of the circumstances which would cause the loss of independent status in accordance with applicable law.

The dismissal of independent directors may also be proposed as a result of a public share offer, joint venture or similar transaction entailing a change in the shareholder structure of the company, provided that such changes in the structure of the Board are the result of the proportionate representation criteria provided for in Recommendation 16.

22. That companies establish rules requiring that directors inform the Board of Directors and, where appropriate, resign from their posts, when circumstances arise which may damage the company's standing and reputation. Specifically, directors must be required to report any criminal acts with which they are charged, as well as the consequent legal proceedings.

And that should a director be indicted or tried for any of the offences set out in company law legislation, the Board of Directors must investigate the case as soon as possible and, based on the particular situation, decide whether the director should continue in his or her post. And that the Board of Directors must provide a reasoned written account of all these events in its Annual Corporate Governance Report.

Complies Complies partially � Explanation �

23. That all directors clearly express their opposition when they consider any proposal submitted to the Board of Directors to be against the company's interests. This particularly applies to independent directors and directors who are unaffected by a potential conflict of interest if the decision could be detrimental to any shareholders not represented on the Board of Directors.

Furthermore, when the Board of Directors makes significant or repeated decisions about which the director has serious reservations, the director should draw the appropriate conclusions and, in the event the director decides to resign, explain the reasons for this decision in the letter referred to in the next recommendation.

This recommendation also applies in the case of the secretary of the Board of Directors, despite not being a director.

Complies Complies Partially � Explanation � Not Applicable �

24. That whenever, due to resignation or any other reason, a director leaves before the completion of his or her term, the director should explain the reasons for this decision in a letter addressed to all the directors of the Board of Directors. Irrespective of whether the resignation has been reported as a relevant fact, it must be included in the Annual Corporate Governance Report.

Complies Complies Partially � Explanation � Not Applicable �

25. That the appointments committee ensures that non-executive directors have sufficient time in order to properly perform their duties.

And that the Board rules establish the maximum number of company Boards on which directors may sit.

Complies Complies partially � Explanation �

26. That the Board of Directors meet frequently enough so that it may effectively perform its duties, at least eight times per year, following a schedule of dates and agenda established at the beginning of the year and allowing each director individually to propose items do not originally appear on the agenda.

Complies Complies partially � Explanation �

27. That director absences only occur when absolutely necessary and are quantified in the Annual Corporate Governance Report. And when absences occur, that the director appoints a proxy with instructions.

Complies Complies partially � Explanation �

28. That when directors or the secretary express concern regarding a proposal or, in the case of directors, regarding the direction in which the company is headed and said concerns are not resolved by the Board of Directors, such concerns should be included in the minutes, upon a request from the protesting party.

Complies Complies Partially � Explanation � Not Applicable �

29. That the company establishes adequate means for directors to obtain appropriate advice in order to properly fulfil their duties including, should circumstances warrant, external advice at the company's expense.

Complies Complies partially � Explanation �

30. That, without regard to the knowledge necessary for directors to complete their duties, companies make refresher courses available to them when circumstances require

Complies Explanation � Not Applicable �

31. That the agenda for meetings clearly states those matters about which the Board of Directors are to make a decision or adopt a resolution so that the directors may study or gather all relevant information ahead of time.

When, under exceptional circumstances, the chairman wishes to bring urgent mattersfor decision or resolution before the Board of Directors which do not appear on the agenda, prior express agreement of a majority of the directors shall be necessary, and said consent shall by duly recorded in the minutes.

Complies � Complies partially � Explanation

The agenda does not specify which items are for decision, although the information is sent sufficiently in advance.

32. That directors shall be periodically informed of changes in equity ownership and of the opinions of significant shareholders, investors and rating agencies of the company and its group.

Complies Complies partially � Explanation �

33. That the chairman, as the person responsible for the efficient workings of the Board of Directors, in addition to carrying out his duties required by law and the Articles of Association, should prepare and submit to the Board of Directors a schedule of dates and matters to be considered; organise and coordinate the periodic evaluation of the Board as well as, if applicable, the chief executive of the company, should be responsible for leading the Board and the effectiveness of its work; ensuring that sufficient time is devoted to considering strategic issues, and approve and supervise refresher courses for each director when circumstances so dictate.

Complies Complies partially � Explanation �

34. That when there is a coordinating director, the Articles of Association or the Board rules should confer upon him the following competencies in addition to those conferred by law: chairman of the Board of Directors in the absence of the chairman and deputy chairmen, should there be any; reflect the concerns of non-executive directors; liaise with investors and shareholders in order to understand their points of view and respond to their concerns, in particular as those concerns relate to corporate governance of the company; and coordinate a succession plan for the chairman.

Complies � Complies Partially � Explanation � Not Applicable

35. That the secretary of the Board of Directors should pay special attention to ensure that the activities and decisions of the Board of Directors take into account the recommendations regarding good governance contained in this Good Governance Code and which are applicable to the company.

Complies Explanation �

• 36. That the Board of Directors meet in plenary session once a year and adopt, where appropriate, an action plan to correct any deficiencies detected in the following:
  • a) The quality and efficiency of the Board of Directors' work.
  • b) The workings and composition of its committees.
  • c) Diversity of membership and competence of the Board of Directors.
  • d) Performance of the chairman of the Board of Directors and the chief executive officer of the company.
  • e) Performance and input of each director, paying special attention to those in charge of the various Board committees.

In order to perform its evaluation of the various committees, the Board of Directors will take a report from the committees themselves as a starting point and for the evaluation of the Board, a report from the appointments committee.

Every three years, the Board of Directors will rely upon the assistance of an external advisor for its evaluation, whose independence shall be verified by the appointments committee.

Business relationships between the external adviser or any member of the adviser's group and the company or any company within its group shall be specified in the Annual Corporate Governance Report.

The process and the areas evaluated shall be described in the Annual Corporate Governance Report.

Complies Complies partially � Explanation �

37. That if there is an executive committee, the proportion of each different director category must be similar to that of the Board itself, and its secretary must be the secretary of the Board.

Complies � Complies Partially � Explanation Not Applicable �

The Executive Committee is composed of an Executive Director, another External Director, formerly an Executive Director, and four Proprietary Directors, all of whom have extensive knowledge of the business and the sector in which the Company operates.

The Secretary of this Committee is not the same as the Secretary of the Board of Directors.

38. That the Board of Directors must always be aware of the matters discussed and decisions taken by the executive committee and that all members of the Board of Directors receive a copy of the minutes of meetings of the executive committee.

Complies Complies Partially � Explanation � Not Applicable �

39. That the members of the audit committee, in particular its chairman, are appointed in consideration of their knowledge and experience in accountancy, audit and risk management issues, and that the majority of its members be independent directors.

Complies Complies partially � Explanation �

40. That under the supervision of the audit committee, there must be a unit in charge of the internal audit function, which ensures that information and internal control systems operate correctly, and which reports to the non-executive chairman of the Board or of the audit committee.

Complies Complies partially � Explanation �

41. That the person in charge of the group performing the internal audit function should present an annual work plan to the audit committee, reporting directly on any issues that may arise during the implementation of this plan, and present an activity report at the end of each year.

Complies Complies Partially � Explanation � Not Applicable �

• 42. That in addition to the provisions of applicable law, the audit committee should be responsible for the following:
  • 1. With regard to information systems and internal control:
    • a) Supervise the preparation and integrity of financial information relative to the company and, if applicable, the group, monitoring compliance with governing rules and the appropriate application of consolidation and accounting criteria.
    • b) Ensure the independence and effectiveness of the group charged with the internal audit function; propose the selection, appointment, re-election and dismissal of the head of internal audit; draft a budget for this department; approve its goals and work plans, making sure that its activity is focused primarily on material risks to the company; receive periodic information on its activities; and verify that senior management takes into account the conclusions and recommendations of its reports.
    • c) Establish and supervise a mechanism that allows employees to report confidentially and, if appropriate, anonymously, any irregularities with important consequences, especially those of a financial or accounting nature, that they observe in the company.
• 2. With regard to the external auditor:
  • a) In the event that the external auditor resigns, examine the circumstances which caused said resignation.
  • b) Ensure that the remuneration paid to the external auditor for its work does not compromise the quality of the work or the auditor's independence.
  • c) Insist that the company file a relevant fact with the CNMV when there is a change of auditor, along with a statement on any differences that arose with the outgoing auditor and, if applicable, the contents thereof.
  • d) Ensure that the external auditor holds an annual meeting with the Board of Directors in plenary session in order to make a report regarding the tasks accomplished and regarding the development of its accounting and risks faced by the company.
  • e) Ensure that the company and the external auditor comply with applicable rules regarding the rendering of services other than auditing, proportional limits on the auditor's billing, and all other rules regarding the auditor's independence.

Complies Complies partially � Explanation �

43. That the audit committee may require the presence of any employee or manager of the company, even without the presence of any other member of management.

Complies Complies partially � Explanation �

44. That the audit committee be kept abreast of any corporate and structural changes planned by the company in order to perform an analysis and draft a report beforehand to the Board of Directors regarding economic conditions and accounting implications and, in particular, any exchange ratio involved.

Complies Complies Partially � Explanation � Not Applicable �

• 45. That the risk management and control policy identify, as a minimum:
  • a) The various types of financial and non-financial risks (among those operational, technological, legal, social, environmental, political and reputational) which the company faces, including financial or economic risks, contingent liabilities and other off-balance sheet risks.
  • b) Fixing of the level of risk the company considers acceptable.
  • c) Means identified in order to minimise identified risks in the event they transpire.
  • d) Internal control and information systems to be used in order to control and manage identified risks, including contingent liabilities and other off-balance sheet risks.

Complies Complies partially � Explanation �

46. That under the direct supervision of the audit committee or, if applicable, of a specialised committee of the Board of Directors, an internal control and management function should exist delegated to an internal unit or department of the company which is expressly charged with the following responsibilities:

• a) Ensure the proper functioning of risk management and control systems and, in particular, that they adequately identify, manage and quantify all material risks that may affect the company.
• b) Actively participate in the creation of the risk strategy and in important decisions regarding risk management.
• c) Ensure that the risk management and control systems adequately mitigate risks as defined by policy issued by the Board of Directors.

Complies Complies partially � Explanation �

47. That members of the appointment and remuneration committee -- or of the appointments committee and the remuneration committee if they are separate – are chosen taking into account the knowledge, ability and experience necessary to perform the duties they are called upon to carry out and that the majority of said members are independent directors.

Complies � Complies partially Explanation �

The Appointments and Remunerations Commission is made up of two Independent Directors and two Proprietary Directors, and as established in Article 529 quindecies of the Spanish Capital Companies Act (LSC by its Spanish acronym), this commission will be made up exclusively "of Non-executive Directors appointed by the Board of Directors, at least two of whom must be Independent Directors".

The Company fully complies with the provisions of the LSC.

48. That high market capitalisation companies have formed separate appointments and remuneration committees.

Complies � Explanation � Not Applicable

49. That the appointments committee consult with the chairman of the Board of Directors and the chief executive of the company, especially in relation to matters concerning executive directors.

And that any director may ask the appointments committee to consider potential candidates he or she considers appropriate to fill a vacancy on the Board of Directors.

Complies Complies partially � Explanation �

• 50. That the remuneration committee exercises its functions independently and that, in addition to the functions assigned to it by law, it should be responsible for the following:
  • a) Propose basic conditions of employment for senior management.
  • b) Verify compliance with company remuneration policy.
  • c) Periodically review the remuneration policy applied to directors and senior managers, including remuneration involving the delivery of shares, and guarantee that individual remuneration be proportional to that received by other directors and senior managers.
• d) Oversee that potential conflicts of interest do not undermine the independence of external advice rendered to the Board.
• e) Verify information regarding remuneration paid to directors and senior managers contained in the various corporate documents, including the Annual Report on Director Remuneration.

Complies Complies partially � Explanation �

51. That the remuneration committee consults with the chairman and the chief executive of the company, especially in matters relating to executive directors and senior management.

Complies Complies partially � Explanation �

• 52. That the rules regarding composition and workings of supervision and control committees appear in the rules governing the Board of Directors and that they are consistent with those that apply to mandatory committees in accordance with the recommendations above, including:
  • a) That they are comprised exclusively of non-executive directors, with a majority of them independent.
  • b) That their chairmen be independent directors.
  • c) That the Board of Directors select members of these committees taking into account their knowledge, skills and experience and the duties of each committee; discuss their proposals and reports; and detail their activities and accomplishments during the first plenary session of the Board of Directors held after the committee's last meeting.
  • d) That the committees be allowed to avail themselves of outside advice when they consider it necessary to perform their duties.
  • e) That their meetings be recorded and the minutes be made available to all directors.

Complies � Complies Partially � Explanation � Not Applicable

• 53. That verification of compliance with corporate governance rules, internal codes of conduct and social corporate responsibility policy be assigned to one or split among more than one committee of the Board of Directors, which may be the audit committee, the appointments committee, the corporate social responsibility committee in the event that one exists, or a special committee created by the Board of Directors pursuant to its powers of self-organisation, which at least the following responsibilities shall be specifically assigned thereto:
  • a) Verification of compliance with internal codes of conduct and the company's corporate governance rules.
  • b) Supervision of the communication strategy and relations with shareholders and investors, including small- and medium-sized shareholders.
  • c) The periodic evaluation of the suitability of the company's corporate governance system, with the goal that the company promotes company interests and take into account, where appropriate, the legitimate interests of other stakeholders.
• d) Review of the company's corporate social responsibility policy, ensuring that it is orientated towards value creation.
• e) Follow-up of social responsibility strategy and practice, and evaluation of degree of compliance.
• f) Supervision and evaluation of the way relations with various stakeholders are handled.
• g) Evaluation of everything related to non-financial risks to the company, including operational, technological, legal, social, environmental, political and reputational.
• h) Coordination of the process of reporting on diversity and reporting nonfinancial information in accordance with applicable rules and international benchmarks.

Complies Complies partially � Explanation �

• 54. That the corporate social responsibility policy include principles or commitments which the company voluntarily assumes regarding specific stakeholders and identifies, as a minimum:
  • a) The objectives of the corporate social responsibility policy and the development of tools to support it.
  • b) Corporate strategy related to sustainability, the natural environment and social issues.
  • c) Concrete practices in matters related to: shareholders, employees, clients, suppliers, social issues, the natural environment, diversity, fiscal responsibility, respect for human rights, and the prevention of unlawful conduct.
  • d) Means or systems for monitoring the results of the application of specific practices described in the immediately preceding paragraph, associated risks, and their management.
  • e) Means of supervising non-financial risk, ethics, and business conduct.
  • f) Communication channels, participation and dialogue with stakeholders.
  • g) Responsible communication practices that impede the manipulation of data and protect integrity and honour.

Complies Complies partially � Explanation �

55. That the company reports, in a separate document or within the management report, on matters related to corporate social responsibility, following internationally recognised methodologies.

Complies Complies partially � Explanation �

56. That director remuneration be sufficient in order to attract and retain directors who meet the desired professional profile and to adequately compensate them for the dedication, qualifications and responsibility demanded of their posts, while not being so excessive as to compromise the independent judgment of non-executive directors.

Complies Explanation �

57. That only executive directors receive remuneration linked to corporate results or personal performance, as well as remuneration in the form of shares, options or rights to shares or instruments whose value is indexed to share value, or long-term savings plans such as pension plans, retirement accounts or any other retirement plan.

Shares may be given to non-executive directors under the condition that they maintain ownership of the shares until they leave their posts as directors. The forgoing shall not apply to shares that the director may be obliged sell in order to meet the costs related to their acquisition.

Complies Complies partially � Explanation �

58. That as regards variable remuneration, the policies incorporate limits and administrative safeguards in order to ensure that said remuneration is in line with the work performance of the beneficiaries and are not based solely upon general developments in the markets or in the sector in which the company operates, or other similar circumstances.

And, in particular, that variable remuneration components:

• a) Are linked to pre-determined and measurable performance criteria and that such criteria take into account the risk undertaken to achieve a given result.
• b) Promote sustainability of the company and include non-financial criteria that are geared towards creating long term value, such as compliance with rules and internal operating procedures and risk management and control policies.
• c) Are based upon balancing short-, medium- and long-term objectives, permitting the reward of continuous achievement over a period of time long enough to judge creation of sustainable value such that the benchmarks used for evaluation are not comprised of one-off, seldom occurring or extraordinary events.

Complies Complies Partially � Explanation � Not Applicable �

59. That a material portion of variable remuneration components be deferred for a minimum period of time sufficient to verify that previously established performance criteria have been met.

Complies Complies Partially � Explanation � Not Applicable �

60. That remuneration related to company results takes into account any reservations which may appear in the external auditor's report which would diminish said results.

Complies Complies Partially � Explanation � Not Applicable �

61. That a material portion of variable remuneration for executive directors depends upon the delivery of shares or instruments indexed to share value.

Complies � Complies Partially � Explanation Not Applicable �

The Company has not deemed it appropriate at this time to establish financial remuneration for its Executive Director through the delivery of shares.

62. That once shares or options or rights to shares arising from remuneration schemes have been delivered, directors are prohibited from transferring ownership of a number of shares equivalent to two times their annual fixed remuneration, and the director may not exercise options or rights until a term of at least three years has elapsed since they received said shares.

The forgoing shall not apply to shares which the director may need to sell in order to meet the costs related to their acquisition.

Complies � Complies Partially � Explanation � Not Applicable

63. That contractual arrangements include a clause which permits the company to seek reimbursement of variable remuneration components in the event that payment does not coincide with performance criteria or when delivery was made based upon data later deemed to be inaccurate.

Complies Complies Partially � Explanation � Not Applicable �

64. That payments made for contract termination shall not exceed an amount equivalent to two years of total annual remuneration and that it shall not be paid until the company has verified that the director has fulfilled all previously established criteria for payment.

Complies � Complies Partially Explanation � Not Applicable �

The amount of the compensation of the Executive Director amounts, as a general rule, to an amount equivalent to two (2) years of their total remuneration, including fixed and variable remuneration, but excluding that obtained in programmes or incentives of an annual or multi-year nature, without prejudice to the fact that, depending on the type of event that leads to the termination of the contracts, it may reach an amount equivalent to three (3) years of their total remuneration.

H FURTHER INFORMATION OF INTEREST

• 1. If there is any aspect regarding corporate governance in the company or other companies in the group that have not been included in other sections of this report, but which are necessary in order to obtain a more complete and comprehensible picture of the structure and governance practices in the company or group, describe them briefly below.
• 1. This section may also be used to provide any other information, explanation or clarification relating to previous sections of the report, so long as it is relevant and not redundant.

Specifically, state whether the company is subject to any corporate governance legislation other than that prevailing in Spain and, if so, include any information required under this legislation that differs from the data requested in this report.

1. The company may also state whether it voluntarily complies with other ethical or best practice codes, whether international, sector-based, or other. In such a case, name the code in question and the date the company began following it. It should be specifically mentioned that the company adheres to the Code of Good Tax Practices of 20 July, 2010

In accordance with the provisions of Article 2 of Law 11/2018 of 28 December, which amends the Code of Commerce, the consolidated text of the Law on Corporations approved by Royal Legislative Decree 1/2010 of 2 July and Law 22/2015 of 20 July on the Auditing of Accounts, in the area of non-financial information and diversity and with the amendment made by this Law in sub-section 6. of Article 540.4.c) of the Spanish Law on Corporations, it is expressly stated that the provisions of points C.1.5 and C.1.6. of this report are exactly applicable to the Commissions of the Board of Directors of the Company and to the Management of the Company.

Shareholders were also provided with the appropriate information on diversity criteria and objectives when electing or reappointing members of the Board of Directors, its Commissions and Management.

Furthermore, on 22 May 2019, the General Shareholders' Meeting of Elecnor unanimously agreed to approve the amendment of Article 12 of the Company's Articles of Association, with regard to the remuneration of Directors for the performance of non-executive and executive duties, in order to adapt it to the interpretation contained in Supreme Court Ruling 98/2018 of 26 February and to adapt the profit-based remuneration system to the reality of the Company and its Group (this being understood in the terms of Article 42 of the Code of Commerce), reducing the commercial and tax risks that may materialise in the future.

Also, at the aforementioned General Shareholders' Meeting it was agreed, by a majority vote, to approve the Policy on the Remuneration of the Directors of Elecnor applicable to the 2020, 2021 and 2022 financial years, as agreed by the Company's Board of Directors in its meeting held on 27 March 2019, on the proposal and following a report from the Appointments and Remunerations Commission, setting the maximum amount of annual remuneration for all Directors, for all the functions they perform, i.e. both executive and non-executive functions, included in the aforementioned Remuneration Policy, in the amount of EUR 10 million. This maximum amount will remain in force until its modification by the General Shareholders' Meeting is approved.

With this new Remuneration Policy, based on the principles of Moderation, Suitability, Profitability and Sustainability, Transparency and Protection of Shareholders' interests, the Company seeks to reduce any possible commercial and fiscal risks that could materialise in the future, in relation to the remuneration of Elecnor's Directors in the event of a possible change in jurisprudence, as has occurred with non-listed companies.

Finally, on 17 December 2019, Elecnor and the Dutch group APG (hereinafter APG) signed a strategic alliance for the development and joint investment in energy transmission and renewable energy projects, except for wind projects, once all the conditions had been met and all the approvals required for the operation had been obtained from both the creditor financial institutions and the corresponding competition authorities.

The agreement implies the entry of APG, with 49%, in the capital of Celeo Concesiones e Inversiones, S.L. (hereinafter "Celeo"), a company which until now has been wholly owned by Elecnor, and which is now jointly managed by Elecnor and APG.

In this regard, it should be noted that, despite Elecnor holding 51% of Celeo's share capital, in accordance with the partners' agreement signed with APG, Elecnor does not hold control of Celeo, either directly or indirectly, in accordance with the provisions of Article 42 of the Code of Commerce.

Consequently, the Celeo Group, of which Celeo is the Parent, no longer consolidates for accounting purposes in the Elecnor Group and will be accounted for by the Elecnor Group using the equity method instead of the full consolidation method.

This Annual Corporate Governance Report was approved by the Board of Directors of the company at the meeting held on 25 March 2020.

State whether any directors voted against or abstained from voting on this report.

Yes � No

ANNUAL REPORT ON REMUNERATION OF DIRECTORS OF LISTED COMPANIES

A REMUNERATION POLICY OF THE COMPANY FOR THE CURRENT FINANCIAL YEAR

A.1 Explain the current director remuneration policy applicable to the year in progress. To the extent that it is relevant, certain information may be included in relation to the remuneration policy approved by the General Shareholders' Meeting, provided that these references are clear, specific and concrete.

The specific determinations for the year in progress should be described, both the remuneration of directors in their status as such and as a result of their executive functions carried out for the Board pursuant to the contracts signed with executive directors and to the remuneration policy approved by the General Shareholders' Meeting

At any event, the following aspects should be reported:

• Description of the procedures and company bodies involved in determining and approving the remuneration policy and its terms and conditions.
• Indicate and, where applicable, explain whether comparable companies have been taken into account in order to establish the company's remuneration policy.
• Information on whether any external advisors took part in this process and, if so, their identity.

Existing remuneration policy for the current year:

On 22 May 2019, the General Shareholders' Meeting of Elecnor, S.A. ("Elecnor" or the "Company") approved the "Remuneration Policy for Directors for the 2020, 2021 and 2022 financial years" (the "Policy") with 95.07% of votes in favour. This Policy had previously been approved by the Company's Board of Directors by virtue of a resolution dated 27 March 2019, following a proposal and a report justifying the decision by Elecnor's Appointments and Remunerations Commission, in a meeting held on 18 February 2019.

In accordance with the By-laws and the Regulations of the Board of Directors of the Company, the General Shareholders' Meeting shall determine the maximum remuneration to be paid to the Directors for all the functions they perform, both for the performance of executive and non-executive functions.

In accordance with the foregoing and the principles governing this Policy, the maximum amount of annual remuneration for the Directors as a whole is set at EUR ten (10) million. This maximum amount shall remain in force until its modification is approved.

A. The Director remuneration system for the performance of non-executive functions

In accordance with the By-laws and the Regulations of the Company's Board of Directors, there are three (3) cumulative remuneration systems for all Directors for the performance of non-executive functions:

• a. the maximum amount of 7% of the profits obtained by the consolidated group during the year, after the provision for the payment of taxes and requirements established by law for this purpose has been met, as well as,
• b. a fixed cash allowance to be determined by the General Meeting, and
• c. attendance allowances which, depending on the circumstances, are to be assigned as compensation for attendance expenses and others that they must assume in the exercise of their roles and functions.

Likewise, and in keeping with the previous remuneration policy, the remuneration shall not necessarily be the same for all Directors for the performance of non-executive functions, and its distribution shall be agreed by the Board of Directors of the Company in accordance with Article 12 of the Company's By-laws, for which it shall consider:

• a. membership or performance of positions within the different Board of Directors' Commissions,
• b. membership of other Boards of Directors of companies belonging to Elecnor Group and attendance at the various meetings of the Board of Directors,
• c. the dedication of the Directors and the responsibility assumed by them, and
• d. their functions and trajectory on the Board of Directors.

For all of the above, during the financial year 2020, in order to determine the remuneration of each Director, a basic remuneration shall be set for all of them, for their status as Directors, which shall be increased according to the fulfilment of the different parameters listed above.

Furthermore, and on an exceptional basis, the Company may grant, by agreement of the General Meeting, a fixed allocation to those Directors, who do not have executive functions, which it considers appropriate, for any reason, and which has been duly justified by the Board of Directors to the General Shareholders' Meeting of the Company.

B. The Director remuneration system for the performance of executive functions

The remuneration of the Directors for the performance of executive functions is independent and compatible with the remuneration and compensation established for the performance of non-executive functions, which are established in both the Company By-laws as in the contract that to this effect is signed between them and the Company, and which conforms to the remuneration Policy.

As a relevant change, Directors with executive functions shall receive the remuneration set in their respective contracts for the performance of such functions, as follows:

• a. A fixed cash remuneration, which may be modified during the period referred to in the Policy, by agreement of the Board of Directors, provided that it does not exceed the maximum remuneration to be received as remuneration of the Directors for all the functions they perform, both for the performance of executive and non-executive functions, as determined by the General Shareholders' Meeting.
• b. A variable remuneration, calculated on indicators or benchmarks, qualitative or quantitative, based on the degree of compliance with the

objectives by the executive Directors (as agreed by the Board of Directors upon proposal of the Appointments and Remuneration Commission, such as turnover, operating profit, profit after tax ("PAT"), recruitment and debt or others). Variable remuneration may be much more relevant than fixed remuneration components.

• c. Remuneration based on the delivery of shares or option rights over shares of the Company itself.
• d. The following social benefits or remuneration in kind: (i) they shall be included in the civil liability policy for Directors and board members that the Company has agreed upon at all times; (ii) they shall continue to have the right to participate in social security systems (for coverage of their survival, illness, accidents, etc.) in terms similar to those generally established at all times for the Company's Directors; and (iii) likewise, the Executive Chair shall continue to enjoy all those benefits that, if applicable, the Company makes available to the management group.
• e. In addition to any compensation for termination of the contract, provided that the termination was not caused by breach of their duties as administrator.
• Relative importance of variable remuneration items vis-à-vis fixed remuneration (remuneration mix) and the criteria and objectives taken into consideration in their determination and to guarantee a suitable balance between the fixed and variable components of the remuneration. In particular, state the actions adopted by the company in relation to the remuneration system to reduce exposure to excessive risks and adapt this to the long-term objectives, values and interests of the company, which will include, as the case may be, mention of the measures to guarantee that the long-term results of the company are taken into account in the remuneration policy, the measures adopted in relation to those categories of staff whose professional activities have a material impact on the risk profile of the company and measures to avoid conflict of interest, as the case may be.

Furthermore, state whether the company has established any period for the accrual or consolidation of certain variable remuneration items, in cash, shares or other financial instruments, any deferral period in the payment of amounts or the handover of accrued and consolidated financial instruments, or if any clause exists reducing the deferred remuneration or that obliges the director to return remuneration received, when such remuneration has been based on certain figures that have clearly been shown to be inaccurate has been agreed.

The only Director foreseen to receive a variable remuneration is the Executive Director.

The variable remuneration of the Executive Director is based on the Company's performance and their personal performance, which is calculated on indicators or benchmarks, either qualitative or quantitative, linked to the degree of compliance with the objectives thereof.

As such, the variable remuneration of the Executive Director is established, in accordance with their Contract, depending on the degree of achievement of a series of objectives, such as turnover, operating profit, profit after tax ("PAT"), recruitment and debt, regulatory compliance and occupational risk prevention, among others.

Variable remuneration may be much more relevant than fixed remuneration components.

The Board of Directors, on the proposal of the Appointments and Remunerations Commission, shall determine the objectives, the degree of their achievement, and the final amount corresponding to the variable remuneration.

The possibility of establishing variable incentives in the long term is also envisaged.

Lastly, the system for the remuneration of the Company's Directors for the performance of non-executive functions establishes a maximum amount of 7% of the profits obtained by the consolidated group in the financial year, after the provision for the payment of taxes has been made and the requirements established by law for this purpose have been met.

• Amount and nature of fixed components that are due to be accrued during the year by directors in their status as such.

The fixed annual remuneration for each of the Directors for the performance of their non-executive functions is expected to be EUR 143,500 and EUR 1,500 for attendance fees for each meeting of the Board of Directors, plus the amount they receive for their membership of the various Board of Director Committees and Commissions as detailed below:

For membership of the Executive Committee: EUR 25,000.

For membership of the Audit Commission: Member: EUR 15,000. Chair: EUR 20,000.

For membership of the Appointments and Remunerations Commission: Member: EUR 12,500. Chair: EUR 17,500.

The annual remuneration for the performance of positions on the Board of Directors, which is expected to remain the same as in the previous year, is detailed below:

Non-Executive Chair: EUR 270,000. Secretary: EUR 20,000.

• Amount and nature of fixed components that are due to be accrued during the year for the performance of senior management functions of executive directors.

They will be set once the Annual Accounts have been approved.

• Amount and nature of any component of remuneration in kind that will accrue during the year, including, but not limited to, insurance premiums paid in favour of the director.

During the financial year 2020, there will be no remuneration in kind.

• Amount and nature of variable components, differentiating between those established in the short and long term. Financial and non-financial, including social, environmental and climate change parameters selected to determine variable remuneration in the year in progress, explaining the extent to which these parameters are related to performance, both of the director and of the company, together with their risk profile, and the methodology, deadline necessary and techniques established to determine the degree of compliance with the parameters used in the design of the variable remuneration at the end of the year.

State the range, in monetary terms, of the different variable components according to the degree of compliance with the objectives and parameters established, and whether any maximum monetary amounts exist in absolute terms.

They will be set once the Annual Accounts have been approved.

• Main characteristics of long-term savings systems. Among other information, state the contingencies covered by the system, whether through defined contributions or benefits, the annual contribution that needs to be made to the defined contribution system, the benefits directors are entitled to in the event of defined benefit systems, the conditions under which economic rights are consolidated for directors and their compatibility with any other type of payment or severance pay as a result of the early termination or dismissal of the director, or deriving from the termination of the contractual relation, in the terms provided, between the company and the director.
• State if the accrual or consolidation of any of the long-term savings plans is linked to achieving certain objectives or parameters related to the short- or long-term performance of the director.

The Company does not consider these systems.

• Any type of payment or severance pay for early termination or dismissal of the director, or deriving from the termination of the contractual relation, in the terms provided, between the company and the director, whether voluntary resignation by the director or dismissal of the director by the company, as well as any type of agreement reached, such as exclusivity, post-contractual non-competition, permanence or loyalty, which entitle the director to any type of remuneration.

There are no agreed or paid compensation payments in the event of termination of a Director's duties.

The only compensation provided for are those that the Executive Director may receive for the termination of their contract for the performance of their senior management functions, which are explained below:

The contract with the Executive Director provides for compensation in their favour in the event of termination, provided that the termination is not the result of a breach attributable to the same, nor is it due to their exclusive will.

The amount of the compensation amounts, as a general rule, to an amount equivalent to two (2) years of their total remuneration, including fixed and variable remuneration, but excluding that obtained in programmes or incentives of an annual or multi-year nature, without prejudice to the fact that, depending on the type of event that results in the termination of the contracts, it may reach an amount equivalent to three (3) years of their total remuneration.

The contract with the Executive Director also contains a clawback clause, under which the Executive Director must reimburse the Company for amounts received as variable remuneration or resulting from the settlement of incentive plans, if at any time during (1) year after payment thereof, as a result of the Executive Director's wilful or grossly negligent actions, the following circumstances have arisen: (i) there have been alterations or inaccuracies in the relevant business data for the purposes of calculating the variable remuneration or incentive plans and these are confirmed by the Company's external auditors; (ii) as a result of the above circumstance, the Company is obliged to significantly reformulate its accounts.

The Executive Director must pay the amount notified by the Company within fortyfive (45) days following the date of the request for payment.

• State the conditions that contracts should respect for those exercising senior management functions as executive directors. Among others, information should be provided on the duration, limits on amounts of severance pay, minimum contract term clauses, notice periods and payment in lieu of these notice periods, and any other clauses relating to hiring bonuses, compensation and golden parachute clauses for early termination of the contractual relationship between the company and the executive director. Include, among others, the pacts or agreement on con-competition, exclusivity, permanence and loyalty, and postcontractual non-competition, unless these have been explained in the previous section.

Main terms and conditions of the contracts of the Executive Directors with the Company

The contract that the Executive Director signs with the Company is based on the following conditions:

(a) Duration:

The contract of the Executive Director shall remain in force as long as they remain in office.

(b) Compensation:

The contract with the Executive Director provides for compensation in their favour in the event of termination, provided that the termination is not the result of a breach attributable to the same, nor is it due to their exclusive will.

The amount of the compensation amounts, as a general rule, to an amount equivalent to two (2) years of their total remuneration, including fixed and variable remuneration, but excluding that obtained in programmes or incentives of an annual or multi-year nature, without prejudice to the fact that, depending on the type of event that results in the termination of the contracts, it may reach an amount equivalent to three (3) years of their total remuneration.

(c) Compliance with the Company's corporate governance system:

The Executive Director has the obligation to observe strictly and to the extent that it is applicable, the standards and provisions contained in the corporate governance system of the Company.

(d) Post-contractual exclusivity and non-competition agreement: The contract may establish an obligation of exclusivity and full dedication to the Company and of post-contractual non-competition for a maximum period of two (2) years from the termination of the contract.

(e) Confidentiality:

The contract of the Executive Director shall establish a strict duty of confidentiality. In addition, once their relationship with the Company has concluded, they must return to the Company any documents and objects related to their activity that they may hold.

(f) Refund clause (clawback):

The contract with the Executive Director includes a refund clause under which the Executive Director must reimburse the Company for any amounts received as variable remuneration or resulting from the settlement of incentive plans, if at any time during (1) year after payment thereof, as a result of the fraudulent or grossly negligent actions of the Executive Director, the following circumstances have arisen: (i) there have been alterations or inaccuracies in the relevant business data for the purposes of calculating the variable remuneration or incentive plans and these are confirmed by the Company's external auditors; (ii) as a result of the above circumstance, the Company is obliged to significantly reformulate its accounts.

The Executive Director must pay the amount notified by the Company within fortyfive (45) days following the date of the request for payment.

• The nature and estimated amount of any other supplementary remuneration accrued by directors in the year in progress in consideration for services rendered other than those inherent in the post.

They do not exist.

• Other remunerative items or by-products, as the case may be, of the company granting the director advance payments, loans, guarantees or any other remuneration.

They do not exist.

• The nature and estimated amount of any other planned supplementary remuneration accrued by directors in the year in progress that are not included in the previous sections, whether payment is satisfied by the company or another group company.

They do not exist.

A.2 Explain any significant change in the remuneration policy applicable in the current year resulting from:

• A new policy or a modification of the policy already approved by the General Meeting.

• Significant changes in the specific determinations established by the board for the current year regarding the remuneration policy in force with respect to those applied in the previous year.

• Proposals that the board of directors has agreed to submit to the general shareholders' meeting to which this annual report will be submitted and which are proposed to be applicable to the current year.

On 22 May 2019, the Shareholders' General Meeting of the Company approved, with 95.07% of votes in favour, the new "Remuneration Policy for Directors for the 2020, 2021 and 2022 financial years", which had previously been approved by the Company's Board of Directors by virtue of a resolution dated 18 February 2019 at the proposal of the Elecnor Appointments and Remunerations Commission, at its meeting held on 18 February 2019.

The drafting of this Policy is the result of the new interpretation of the concept of directors in their "status" (Supreme Court ruling 98/2018 of 26 February), under Articles 23.e), 217 and 529 novodecies of the Law on Corporations ("LSC" by its Spanish acronym).

Although the aforementioned ruling does not apply to listed companies, since it expressly excludes this type of company in its arguments, Elecnor decided to anticipate a possible extrapolation of its arguments to listed companies by modifying Article 12 of the Company's by-laws, which was worded as follows:

"ARTICLE 12

Management of the Company shall correspond to the Board of Directors.

The General Shareholders' Meeting shall determine and approve the maximum remuneration to be received as remuneration of the board directors for all items and for any duties they perform, both for the performance of executive and nonexecutive functions. The maximum amount set by the General Meeting shall remain in force until the General Meeting approves the amendment thereof.

A. Director remuneration for the performance of non-executive functions.

For the performance of non-executive functions, all Directors shall receive as remuneration:

• (i) the maximum amount of 7% of the profits obtained by the consolidated group during the year, after the provision for the payment of taxes and requirements established by law for this purpose have been met, as well as,
• (ii) a fixed cash allowance to be determined by the General Meeting, and
• (iii) attendance allowances which, depending on the circumstances, are to be assigned as compensation for attendance expenses and others that they must assume in the exercise of their roles and functions.

The Board of Directors shall be responsible for determining the annual remuneration amount, in accordance with the above items, and the distribution of the remuneration of each Director for the performance of non-executive functions.

B. Director remuneration for the performance of executive functions.

In addition to the remuneration they receive for the performance of non-executive functions, the Directors who perform executive functions within the Company shall receive the remuneration established in their respective contracts for the following items:

• (i) A fixed remuneration in cash.
• (ii) Variable remuneration, calculated on qualitative or quantitative indicators or reference parameters, linked to the degree of compliance with their objectives (agreed by the Board of Directors at the proposal of the Appointments and Remunerations Commission).
• (iii) Remuneration based on the delivery of shares or option rights over shares of the Company itself.
• (iv) The following social benefits or remuneration in kind: (i) they shall be included in the civil liability policy for Directors and board members that the Company has agreed upon at all times; (ii) they shall continue to have the right to participate in social security systems (for coverage of their survival, illness, accidents, etc.) in terms similar to those generally established at all times for the Company's Directors; and (iii) likewise, the Executive Chair shall continue to enjoy all those benefits that, if applicable, the Company makes available to the management group.
• (v) In addition to any compensation for termination of the contract, provided that the termination was not caused by breach of their duties as administrator.

These contracts must be previously approved by the Board of Directors at the proposal of the Appointments and Remunerations Commission, complying with the requirements established in the applicable law.

In any case, the aggregate sum of all the resulting amounts to be received by all Directors and for any items in each financial year shall never be greater than the maximum amount approved by the General Meeting".

The new Remuneration Policy, which main characteristics and new features are described in section A.1., is a continuation of the previous policy and also aims to comply with the principles of good corporate governance, facilitating greater transparency and control of Directors' remuneration, as the By-laws set out the remuneration items for all Directors, regardless of the functions they perform.

A.3 Identify the direct link to the document where the current company remuneration policy is posted, which must be available on the web page of the company.

https://www.elecnor.com/resources/files/1/Gobierno\_Corporativo/49240992a8. pdf

A.4 Explain, taking into account the data provided in Section B.4, the outcome of voting, of a consultative nature, by shareholders at the General Shareholders' Meeting on the annual report on remuneration for the previous year.

Elecnor's annual remuneration report for the 2018 financial year was approved by the General Shareholders' Meeting with 92.25% of the share capital present and represented.

Voting on the resolution:

Votes in favour: 65,541,705 Votes against: 3,154,855 Abstaining: 0

B OVERALL SUMMARY OF HOW REMUNERATION POLICY HAS BEEN APPLIED DURING THE YEAR ENDED

B.1 Explain the process followed to apply the remuneration policy and determine the individual remuneration contained in Section C of this report. This information will include the role played by the remuneration committee, the decisions taken by the Board of Directors and, as the case may be, the identity and the role of the external advisors whose services have been used in the process to apply the remuneration policy in the year ended.

The remuneration policy applicable to the 2019 financial year was approved by the Company's Board of Directors by virtue of a resolution dated 15 March 2017 and was proposed by the Appointments and Remunerations Commission of Elecnor, S.A., which, in a meeting held on 13 March 2017, drafted the report explaining the Company's remuneration policy described herein. The Ordinary Shareholders' General Meeting of 15 May 2017, approved the remuneration policy for financial years 2017, 2018 and 2019.

For the preparation of this policy, the Company was advised by Russell Reynolds, a toplevel consultant of recognised prestige and experience, for the analysis and drafting of a report on the Company's remuneration system. The aim was to verify, among other parameters, (i) whether the agreed remuneration was adequate to attract and retain Directors, but not so high as to compromise the independence of non-executive Directors, (ii) whether it was in line with market conditions and (iii) whether it complied as far as possible with the Recommendations on Good Corporate Governance.

Subsequently, in 2019, Elecnor agreed to modify its remuneration system for Directors. The Appointments and Remunerations Commission agreed to propose to the Board of Directors of Elecnor the modification of Article 12 of the Company's By-laws with regard to Directors' remuneration. This modification of the By-laws was approved by Elecnor's Shareholders' General Meeting, as detailed in section B.2. below, which should be taken into account in order to understand how the remuneration policy was applied during the financial year ending on 31 December 2019.

B.2 Explain the different actions taken by the company in relation to the remuneration system and how they have contributed to reducing exposure to excessive risks and adapting them to the long-term objectives, values and interests of the company, including a reference to the measures that have been adopted to guarantee that the long-term results of the company have been taken into consideration in the remuneration accrued and that a suitable balance has been attained between the fixed and variable components of the remuneration, the measures that have been adopted in relation to those categories of staff whose professional activities have a material repercussion on the company's risk profile and the measures that have been adopted to avoid conflicts of interest, if appropriate.

As a continuation of section B.1. above, on 18 February 2019, the Appointments and Remunerations Commission agreed to propose to the Board of Directors of Elecnor the amendment of Article 12 of the Company's By-laws with regard to the remuneration of Directors for the performance of all their functions, both executive and non-executive, for the purpose of adapting it to the interpretation contained in Supreme Court Ruling 98/2018 of 26 February and to adapt the profit-based remuneration system to the reality of the Company and its Group (understood in the terms of Article 42 of the Commercial Code).

To this end, the Appointments and Remunerations Commission issued the corresponding report, which was approved by the Board of Directors in its meeting of 27 March 2019, thereby proposing the aforementioned amendment of the by-laws to the General Shareholders' Meeting. Consequently, the Shareholders' General Meeting of Elecnor, in its meeting held on 22 May 2019, unanimously approved the modification of Article 12 of the Company's By-laws, which is worded as follows:

"ARTICLE 12

Management of the Company shall correspond to the Board of Directors.

The General Shareholders' Meeting shall determine and approve the maximum remuneration to be received as remuneration of the board directors for all items and for any duties they perform, both for the performance of executive and non-executive functions. The maximum amount set by the General Meeting shall remain in force until the General Meeting approves the amendment thereof.

A. Director remuneration for the performance of non-executive functions.

For the performance of non-executive functions, all Directors shall receive as remuneration:

• (i) the maximum amount of 7% of the profits obtained by the consolidated group during the year, after the provision for the payment of taxes and requirements established by law for this purpose have been met, as well as,
• (ii) a fixed cash allowance to be determined by the General Meeting, and
• (iii) attendance allowances which, depending on the circumstances, are to be assigned as compensation for attendance expenses and others that they must assume in the exercise of their roles and functions.

The Board of Directors shall be responsible for determining the annual remuneration amount, in accordance with the above items, and the distribution of the remuneration of each Director for the performance of non-executive functions.

B. Director remuneration for the performance of executive functions.

In addition to the remuneration they receive for the performance of non-executive functions, the Directors who perform executive functions within the Company shall receive the remuneration established in their respective contracts for the following items:

• (i) A fixed remuneration in cash.
• (ii) Variable remuneration, calculated on qualitative or quantitative indicators or reference parameters, linked to the degree of compliance with their objectives (agreed by the Board of Directors at the proposal of the Appointments and Remunerations Commission).
• (iii) Remuneration based on the delivery of shares or option rights over shares of the Company itself.
• (iv) The following social benefits or remuneration in kind: (i) they shall be included in the civil liability policy for Directors and board members that the Company has agreed upon at all times; (ii) they shall continue to have the right to participate in social security systems (for coverage of their survival, illness, accidents, etc.) in terms similar to those generally established at all times for the Company's Directors; and (iii) likewise, the Executive Chair shall continue to enjoy all those benefits that, if applicable, the Company makes available to the management group.
• (v) In addition to any compensation for termination of the contract, provided that the termination was not caused by breach of their duties as administrator.

These contracts must be previously approved by the Board of Directors at the proposal of the Appointments and Remunerations Commission, complying with the requirements established in the applicable law.

In any case, the aggregate sum of all the resulting amounts to be received by all Directors and for any items in each financial year shall never be greater than the maximum amount approved by the General Meeting".

In addition, the aforementioned General Shareholders' Meeting approved, with 95.07% of votes in favour, the new Directors' Remuneration Policy for the next three years in the terms described in Section A.1., agreed by the Company's Board of Directors in its meeting on 27 March 2019, following a proposal and a report justifying it by the Appointments and Remunerations Commission, setting the maximum amount of annual remuneration for all directors, for all the functions they perform, i.e. both executive and non-executive functions, at the amount of EUR 10 million. This maximum amount will remain in force until its modification by the General Shareholders' Meeting is approved.

These measures are aimed at mitigating the risks that could arise from extrapolating the conclusions of the aforementioned Supreme Court Ruling 98/2018 of 26 February to listed companies while aligning them with shareholders' interests by offering, if possible, greater transparency of the existing remuneration systems, as well as control of the maximum amounts to be paid to all Directors for all items, since it is the shareholders who agree to set this maximum amount.

Thus, with this amendment of the By-laws and the preparation of this new Policy, the Company has anticipated a possible extrapolation of this Ruling to listed companies, reducing possible risks, both commercial and tax, which may arise in the future.

B.3 Explain how the remuneration accrued over the year meets the provisions contained in the current remuneration policy.

Furthermore, report on the relationship between the remuneration obtained by the directors and the results or other performance measures of the company in the short and long term, explaining, as the case may be, how the variations in the performance of the company have influenced changes in the remuneration of directors and how the latter contribute to the short- and long-term results of the company.

The remuneration of Elecnor's Board of Directors for all items has been maintained during the 2019 financial year, in line with the cost containment policy approved by all the members of the Board of Directors.

B.4 Report on the result of the consultative vote at the General Shareholders'' Meeting on remuneration in the previous year, indicating the number of votes against that may have been cast:

	Number	% of the total
Votes cast	68,696,560	78.96%
	Number	% of votes cast
Negative votes	3,154,855	4.59%
Votes in favour	65,541,705	95.41%
Abstaining	0	0.00%
	Remarks

B.5 Explain how the fixed components accrued during the year by the directors in their capacity as such have been determined and how they have changed with respect to the previous year

The fixed annual remuneration for each of the Directors, in their capacity as such, for membership of the Board of Directors was EUR 143,500 and EUR 1,500 for attendance fees for each meeting of the Board of Directors, plus the amount received for membership of the various Commissions of the Board of Directors and the Committees detailed below:

Remuneration for membership of the various Committees:

• For membership of the Executive Committee: EUR 25,000.
  • For membership of the Audit Commission: Member: EUR 15,000.
  • Chair: EUR 20,000. • For membership of the Appointments and Remunerations Commission: Member: EUR 12,500. Chair: EUR 17,500.

The annual remuneration for the performance of positions on the Board of Directors is detailed below:

Non-Executive Chair: EUR 270,000. Secretary: EUR 20,000.

There have been no changes over the previous year.

B.6 Explain how the salaries accrued by each one of the executive directors over the past financial year for the performance of management duties were determined, and how they have changed with respect to the previous year.

The amount and nature of the fixed components of remuneration for the performance of management duties by the Executive Director shall be as follows:

Mr. Rafael Martín de Bustamante Vega (Managing Director) • Salary: EUR 568,000.

There has been an upwards variation of 0.88% over the previous year.

B.7 Explain the nature and the main characteristics of the variable components of the remuneration systems accrued in the year ended.

In particular:

– Identify each one of the remuneration plans that have determined the different types of variable remuneration accrued by each of the directors in the year ended, including information on their scope, their date of approval, their date of incorporation, the periods of accrual and validity, the criteria used to evaluate performance and how this has affected the establishment of the variable amount accrued, as well as the measurement criteria used and the period necessary to be in a position to suitably measure all the conditions and criteria stipulated.

In the case of share options and other financial instruments, the general characteristics of each plan will include information on both the conditions to acquire unconditional ownership (consolidation) and to exercise these options or financial instruments, including the price and term to exercise them.

• Each one of the directors, together with their category (executive directors, proprietary external directors, independent external directors and other external directors), that are beneficiaries of remunerations systems or plans that include variable remuneration.
• As the case may be, information is to be provided on periods for the accrual or deferment of payment applied and/or the periods for withholding/unavailability of shares or other financial instruments, if they should exist.

Explain the short-term variable components of the remuneration systems

The only Director who has received variable remuneration is the Executive Director, and his variable remuneration during 2019 has amounted to the following:

Mr. Rafael Martín de Bustamante Vega (Managing Director) Variable remuneration: EUR 1,014,000.

Explain the long-term variable components of the remuneration systems

B.8 Indicate whether certain variable components have been reduced or clawed back when, in the case of the former, payment has been consolidated and deferred or, in the case of the latter, consolidated and paid, on the basis of data that have subsequently proved to be inaccurate. Describe the amounts reduced or clawed back through the application of the reduction or clawback clauses, why they were implemented and the years to which they refer.

No amount has been claimed or refunded under the refund (clawback) clause in the contract between the Company and the Executive Director.

B.9 Explain the main characteristics of the long-term savings systems where the amount or equivalent annual cost appears in the tables in Section C, including retirement and any other survivor benefit that are financed, totally or partially, by the company, whether through internal or external contributions, indicating the type of plan, whether it is a defined contribution or benefit, the contingencies covered, the conditions to consolidate economic rights for directors and their compatibility with any type of severance pay for early termination or termination of the contractual relationship between the company and the director.

The Company does not consider these systems.

B.10Explain, where appropriate, the severance pay or any other type of payment deriving from early dismissal or early resignation, or from the termination of the contract in the terms provided for therein, accrued and/or received by directors during the year ended.

There are no agreed or paid compensation payments in the event of termination of a Director's duties.

The only compensation provided for are those that the Executive Director may receive for the termination of their contract for the performance of their senior management functions, which are explained below:

The contract with the Executive Director provides for compensation in their favour in the event of termination, provided that the termination is not the result of a breach attributable to the same, nor is it due to their exclusive will.

The amount of the compensation amounts, as a general rule, to an amount equivalent to two (2) years of their total remuneration, including fixed and variable remuneration, but excluding that obtained in programmes or incentives of an annual or multi-year nature, without prejudice to the fact that, depending on the type of event that results in the termination of the contracts, it may reach an amount equivalent to three (3) years of their total remuneration.

In addition, no such compensation was accrued or received in 2019.

B.11Indicate whether there have been any significant changes in the contracts of persons exercising senior management functions, such as executive directors, and, where appropriate, explain such changes. In addition, explain the main conditions of the new contracts signed with executive directors during the year, unless these have already been explained in Section A.1.

In 2019, the contract with the Executive Director was amended to include a clawback clause under which the Executive Director must reimburse the Company for any amounts received as variable remuneration or resulting from the settlement of incentive plans, if at any time during (1) year after the payment thereof, as a result of wilful misconduct or gross negligence on the part of the Executive Director, the following circumstances have arisen: (i) there have been alterations or inaccuracies in the business data that are relevant for the purposes of calculating the variable remuneration or incentive plans and these are confirmed by the Company's external auditors; (ii) as a result of the above circumstance, the Company is obliged to significantly reformulate its accounts.

The Executive Director must pay the amount notified by the Company within forty-five (45) days following the date of the request for payment.

B12 Explain any supplementary remuneration accrued by directors as consideration for services rendered outside of their post.

The Director Mr. Juan Landecho Sarabia had an employment relationship with an Elecnor Group company for which he was paid EUR 86,300.

B.13Explain any remuneration deriving from advance payments, loans or guarantees granted, indicating the interest rate, their key characteristics and the amounts eventually returned, as well as the obligations taken on by way of guarantee or collateral.

They do not exist.

B.14Itemise the remuneration in kind accrued by the directors over the year, briefly explaining the nature of the different salary components.

They do not exist.

B.15Explain the remuneration accrued by directors by virtue of payments settled by the listed company to a third company at which the director renders services when these payments seek to remunerate the director's services to the company.

They do not exist.

B.16Explain any other items of remuneration other than those mentioned in the previous sections, whatever their nature or the group company that settles the payment, particularly when this is a related operation or its settlement distorts the true image of the total remuneration accrued by the director.

They do not exist.

C ITEMISED INDIVIDUAL REMUNERATION ACCRUED BY EACH DIRECTOR

Name	Type	Period of accrual in year t
MR. JAIME REAL DE ASÚA ARTECHE	PROPRIETARY DIRECTOR	519.8
MR. FERNANDO LEÓN DOMECQ	PROPRIETARY DIRECTOR	249.8
MR. IGNACIO PRADO REY BALTAR	PROPRIETARY DIRECTOR	227.3
MR. RAFAEL MARTÍN DE BUSTAMANTE VEGA	EXECUTIVE	1,819.3
MR. JOAQUÍN GÓMEZ DE OLEA Y MENDARO	PROPRIETARY DIRECTOR	232.3
MR. CRISTOBAL GONZÁLEZ DE AGUILAR ALONSO URQUIJO	PROPRIETARY DIRECTOR	237.3
MR. FERNANDO AZAOLA ARTECHE	EXTERNAL	199
MR. MIGUEL CERVERA EARLE	PROPRIETARY DIRECTOR	212.3
MS. ISABEL DUTILH CARVAJAL	INDEPENDENT	190.9
MS. IRENE HERNÁNDEZ ÁLVAREZ	INDEPENDENT	179.6

MR. JUAN LANDECHO SARABIA	PROPRIETARY DIRECTOR	286.1
MR. MIGUEL MORENÉS GILES	PROPRIETARY DIRECTOR	252.3
MR. GABRIEL ORAA Y MOYUA	PROPRIETARY DIRECTOR	199.8
MR. RAFAEL PRADO ARANGUREN	PROPRIETARY DIRECTOR	199.8
MR. EMILIO YBARRA AZNAR	INDEPENDENT	194

• C.1 Complete the following tables regarding the individual remuneration of each director (including the salary received for performing executive duties) accrued during the year.
  • a) Remuneration from the reporting company:
    • i) Remuneration in cash (thousand euros)

Name	Fixed remune ration	Per diem allow ances	Remunerati on for membership of Board's Commission s	Salary	Short term variable remunera tion	Long term variable remune ration	Severance pay	Other grounds	Total in year t	Total in year t-1
------	---------------------------	-------------------------------	---------------------------------------------------------------------	--------	-----------------------------------------------	----------------------------------------------	------------------	------------------	--------------------	----------------------

MR. JAIME REAL DE ASÚA ARTECHE/PROPRIETARY DIRECTOR	143.5	18	37.5				282.5	481.5	481.5
MR. FERNANDO LEÓN DOMECQ/PROPRIETARY DIRECTOR	143.5	18	37.5				12.5	211.5	211.5
MR. IGNACIO PRADO REY BALTAR/PROPRIETARY DIRECTOR	143.5	18	15				12.5	189	17.8
MR. RAFAEL MARTÍN DE BUSTAMANTE VEGA/EXECUTIVE	143.5	18	25	568	1,014		12.5	1,781	1,636
MR. JOAQUIN GÓMEZ DE OLEA Y MENDARO/PROPRIETARY DIRECTOR	143.5	18					32.5	194	194
MR. CRISTOBAL GONZÁLEZ DE AGUILAR ALONSO URQUIJO/PROPRIETARY DIRECTOR	143.5	18	25				12.5	199	174
MR. FERNANDO AZAOLA ARTECHE/CONSULTANT	143.5	18	25				12.5	199	197.5
MR. MIGUEL CERVERA EARLE/PROPRIETARY DIRECTOR	143.5	18					12.5	174	61
MS. ISABEL DUTILH CARVAJAL/INDEPENDENT	143.5	18	29.4					190.9	194
MS. IRENE HERNÁNDEZ ÁLVAREZ/INDEPENDENT	143.5	18	18					179.6	10.5
MR. JUAN LANDECHO SARABIA/PROPRIETARY DIRECTOR	143.5	18					86.3	247.8	424.3
MR. MIGUEL MORENÉS GILES/PROPRIETARY DIRECTOR	143.5	18	40				12.5	214	212.5
MR. GABRIEL ORAA Y MOYUA/PROPRIETARY DIRECTOR	143.5	18						161.5	161.5
MR. RAFAEL PRADO ARANGUREN/PROPRIETAR Y DIRECTOR	143.5	18						161.5	161.5
MR. EMILIO YBARRA AZNAR/INDEPENDENT	143.5	18	32.5					194	194

Remarks

ii) Table of changes in share-based remuneration schemes and gross profit from consolidated shares or financial instruments

Name	Name of Plan	Financial instruments at start of year t	Financial instruments granted at start of year t	Financial instruments consolidated during the year	Instrume nts matured	Financial instruments at end of year t
------	--------------	---------------------------------------------	-----------------------------------------------------	----------------------------------------------------	----------------------------	-------------------------------------------

										but not exercised
		No. of instruments	No. of equivalent shares	No. of instruments	No. of equivalent shares	No. of instrume nts	No. of equivalent shares/han ded over	Price of the consolida ted shares	Gross profit from shares handed over or consolidated financial instruments (thousand €)	No. of instrume nts	No. of instruments	No. of equivale nt shares
	Plan 1
Director 1	Plan 2

Remarks

iii) Long-term saving systems

	Remuneration from consolidation of rights to savings system
Director 1

	Contribution over the year from the company (thousand €)				Amount of accumulated funds (thousand €)
		Savings systems with consolidated economic rights	Savings systems with unconsolidated economic rights
Name	Year t	Year t-1	Year t	Year t-1	Year t		Year t-1
					Systems with consolidated economic rights	Systems with unconsolidated economic rights	Systems with consolidated economic rights	Systems with unconsolidated economic rights
Director 1

Remarks

iv) Details of other items

Name	Item	Amount remunerated
MR. RAFAEL MARTÍN DE BUSTAMANTE VEGA/EXECUTIVE	LIFE INSURANCE PREMIUMS	EUR 4,116.60

Remarks

b) Remuneration of the company directors for seats on the boards of other group companies:

i) Remuneration in cash (thousand euros)

Name	Fixed remunera tion	Per diem allowances	Remunerati on for membership of Board's Commission s	Salary	Short-term variable remuneration	Long-term variable remuneration	Severance pay	Other grounds	Total in year t	Total in year t-1
MR. JAIME REAL DE ASÚA ARTECHE/PRO PRIETARY DIRECTOR	38.3								38.3	40
MR. FERNANDO LEÓN DOMECQ/PRO PRIETARY DIRECTOR	38.3								38.3	40
MR. IGNACIO PRADO REY BALTAR/PROP RIETARY DIRECTOR	38.3								38.3	23.3
MR. MARTÍN DE BUSTAMANTE VEGA/EXECUT IVE	38.3								38.3	40
MR. JOAQUIN GÓMEZ DE OLEA Y MENDARO/PR OPRIETARY DIRECTOR	38.3								38.3	40
MR. CRISTOBAL GONZÁLEZ DE AGUILAR ALONSO URQUIJO/PRO PRIETARY DIRECTOR	38.3								38.3	40
MR. FERNANDO AZAOLA ARTECHE/CON SULTANT	0								0	0
MR. MIGUEL CERVERA EARLE/PROPRI ETARY DIRECTOR	38.3								38.3	23.3
MS. ISABEL DUTILH CARVAJAL/IND EPENDENT	0								0	0
MS. IRENE HERNÁNDEZ ÁLVAREZ/IND EPENDENT	0								0	0
MR. JUAN LANDECHO SARABIA/PRO PRIETARY DIRECTOR	38.3								38.3	40
MR. MIGUEL MORENÉS GILES/PROPRI ETARY DIRECTOR	38.3								38.3	40
MR. GABRIEL ORAA Y MOYUA/PROPR IETARY DIRECTOR	38.3								38.3	40
MR. RAFAEL PRADO ARANGUREN/P ROPRIETARY DIRECTOR	38.3								38.3	40
MR. EMILIO YBARRA AZNAR/INDEP ENDENT	0								0	0

Remarks

ii) Table of changes in share-based remuneration schemes and gross profit from consolidated shares or financial instruments

		Financial instruments at start of year t		Financial instruments granted at start of year t		Financial instruments consolidated during the year				Instrume nts matured but not exercised	Financial instruments at end of year t
Name	Name of Plan	No. of instrume nts	No. of equivale nt shares	No. of instrume nts	No. of equivale nt shares	No. of instrume nts	No. of equivale nt shares/h anded over	Price of the consolida ted shares	Gross profit from shares handed over or consolidate d financial instruments (thousand €)	No. of instrume nts	No. of instruments	No. of equivalent shares
Director 1	Plan 1
	Plan 2

Remarks

iii) Long-term saving systems

	Remuneration from consolidation of rights to savings system
Director 1

		Contribution over the year from the	company (thousand €)		Amount of accumulated funds (thousand €)
		Savings systems with consolidated economic rights	Savings systems with unconsolidated economic rights
Name		Year t-1	Year t	Year t-1	Year t		Year t-1
	Year t				Systems with consolidated economic rights	Systems with unconsolidated economic rights	Systems with consolidated economic rights	Systems with unconsolidated economic rights
Director 1

Remarks

iv) Details of other items

Name	Item	Amount remunerated
Director 1

Remarks

c) Summary of remunerations (thousand €):

This should include a summary of the amounts corresponding to all the remuneration items included in this report that have accrued to each director (thousand €).

	Remuneration accrued in the company			Remuneration accrued in group companies
Name	Total cash remune ration	Gross profit of consolidat ed shares or financial instrumen ts	Remuneration for saving systems	Remuneration for other items	Total FY2019 company	Total cash remuneratio n	Gross profit of consolidated shares or financial instruments	Gross profit from options exercised	Remunera tion for other items	Total year t group
MR. JAIME REAL DE ASÚA ARTECHE/PROPRIETARY DIRECTOR	481.5				481.5	38.3				38.3
MR. FERNANDO LEÓN DOMECQ/PROPRIETARY DIRECTOR	211.5				211.5	38.3				38.3
MR. IGNACIO PRADO REY BALTAR/PROPRIETARY DIRECTOR	189				189	38.3				38.3
MR. RAFAEL MARTÍN DE BUSTAMANTE VEGA/EXECUTIVE	1,781				1,781	38.3				38.3
MR. JOAQUIN GÓMEZ DE OLEA Y MENDARO/PROPRIETARY DIRECTOR	194				194	38.3				38.3
MR. CRISTOBAL GONZÁLEZ DE AGUILAR ALONSO URQUIJO/PROPRIETARY DIRECTOR	199				199	38.3				38.3
MR. FERNANDO AZAOLA ARTECHE/CONSULTANT	199				199	0				0
MR. MIGUEL CERVERA EARLE/PROPRIETARY DIRECTOR	174				174	38.3				38.3
MS. ISABEL DUTILH CARVAJAL/INDEPENDENT	190.9				190.9	0				0
MS. IRENE HERNÁNDEZ ÁLVAREZ/INDEPENDENT	179.6				179.6	0				0
MR. JUAN LANDECHO SARABIA/PROPRIETARY DIRECTOR	247.8				247.8	38.3				38.3
MR. MIGUEL MORENÉS GILES/PROPRIETARY DIRECTOR	214				214	38.3				38.3
MR. GABRIEL ORAA Y MOYUA/PROPRIETARY DIRECTOR	161.5				161.5	38.3				38.3
MR. RAFAEL PRADO ARANGUREN/PROPRIETAR Y DIRECTOR	161.5				161.5	38.3				38.3
MR. EMILIO YBARRA AZNAR/INDEPENDENT	194				194	0				0
Total:	4,778.3				4,778.3	421.3				421.3

Remarks

D OTHER INFORMATION OF INTEREST

If there are any relevant issues relating to directors' remuneration that you have not been able to address in the previous sections of this report, but which are necessary to provide more comprehensive and fully reasoned information on the remuneration structure and practices of the company with regard to its directors, list them briefly.

This annual remuneration report has been approved by the Board of Directors of the company on_25 March 2020_.

State whether any director has voted against or abstained from approving this report

Yes � No

Name or company name of the member of the Board of Directors who has not voted for the approval of this report	Reasons (against, abstention, non- attendance)	Explain the reasons

Elecnor, S.A.

Annual Accounts 31 December 2019

Directors' Report 2019

(With Auditor's Report Thereon)

Elecnor, S.A.

Notes to the Annual Accounts for the year ended 31 December 2019

1. Nature, Activities of the Company and Composition of the Group

Elecnor, S.A. (hereinafter, the Company) was incorporated for an indefinite period on 6 June 1958.

The Company's statutory activity, according to its bylaws, is:

• Wide-ranging commercial activity in connection with the engineering, design, construction, erection, repair, maintenance and upkeep of all manner of construction projects and installation work in the broadest sense, i.e. the entire execution thereof with or without the supply of materials, on its own account or through third parties, on an exclusive basis or through associations of any kind.
• The provision of public and private services in relation to the collection of all types of waste; sweeping and cleaning of streets; transfer and transport of waste to the place of end disposal; the end disposal of such waste, recycling, treatment and deposit of public, private, industrial, hospital and pathological waste; cleaning, maintenance and upkeep of sewers; and, in general, urban water treatment services and all other ancillary services related directly or indirectly to the aforementioned services in their broadest sense.
• The design, research, development, construction, operation, maintenance and marketing of waste treatment, recovery and elimination facilities, and the purchase and sale of the by-products originating from these treatments.
• The design, research, development, construction, operation, maintenance and marketing of plants and facilities for the treatment of water, wastewater and waste, the recovery and elimination of waste, and the purchase and sale of the by-products originating from these treatments.
• The use, transformation and marketing of water of all types.

The aforementioned business activities can also be fully or partially carried out indirectly by the Company through investments in other companies with a similar statutory activity, both in Spain and abroad. The Company may not carry out any business activity for which specific conditions or limitations are imposed by law, unless it fully meets such conditions.

The Company's registered office is located at Marqués de Mondéjar, 33, in Madrid.

The Company is shareholder in various joint ventures with other venturers, which are included in the annual accounts in accordance with the criteria set forth in Note 4.b. The information concerning joint ventures incorporated as Temporary Business Associations (UTEs) is presented in Appendix II.

The Company is the head of a group of subsidiaries, and, in accordance with applicable legislation, it discloses consolidated annual accounts separately. The consolidated annual accounts of the Elecnor Group in 2019 were authorised for issue by the Company's Directors at the meeting of the Board of Directors held on 26 February 2020. In accordance with the content of the consolidated annual accounts prepared in accordance with the International Financial Reporting Standards as adopted by the European Union (IFRS-EU), consolidated equity at 31 December 2019 amounted to Euros 737,320 thousand (Euros 566,346 thousand at 31 December 2018), consolidated profit/loss attributable to the Parent amounted to Euros 126,377 thousand (Euros 82,117 thousand at 31 December 2018), and the total volume of assets and revenues amounted to Euros 2,979,244 thousand and Euros 2,453,726 thousand, respectively (Euros 2,579,972 thousand and Euros 2,250,899 thousand at 31 December 2018, respectively).

The Elecnor Group's consolidated annual accounts for 2018 were approved by the General Shareholders' Meeting of Elecnor, S.A. at their meeting held on 22 May 2019 and have been filed in the Madrid Companies Register.

Revenue from construction contracts
See Note 4.o to the annual accounts
Key audit matter	How the matter was addressed in our audit
The revenues of Elecnor, S.A. are generated	Our auditing procedures included, among others, the following:
mainly by construction and services provision	- Evaluating the design and implementation of
contracts, in which the revenue is recognised by the extent of progress method, i.e. on the	controls related to the process of recognition
basis of the extent of completion of the	and valuation of revenue by the extent of
contract at the end of each accounting period,	progress method and the budgetary control
it being necessary, for determining the	process and verification of the effectiveness
revenue to be recognised, for the Company to	of the key controls identified;
make estimates of the costs, revenues and	- Checking that the methodology used by the
result foreseen for each of the contracts.	Company for determining the revenues,
	calculated taking as a basis the proportion of
The application of this method therefore calls	services performed with respect to the total of
for a high degree of judgment on the part of	services to be rendered, is one of the
the directors, and exhaustive control of the	methodologies accepted by the regulatory financial-reporting framework applicable;
estimates made and of the deviations that may	- Evaluating the hypotheses used in drawing
occur throughout the life of the contract. The estimates should take into account all the	up the budgets for the contracts;
costs and revenues related to the contracts,	- On the basis of certain quantitative and
including any additional cost to the one	qualitative selection criteria, we selected a
initially budgeted, and the risks for claims that	sample of the construction contracts to assess
are in dispute, and the revenues that are in a	the estimates made in drawing up the results
negotiation process or in the process of being	forecast of the contract and in the recognition
claimed from the client. In this respect, the	of revenues. In this respect, we obtained the
revenues are only recognised when they can	contracts and the support documentation on
be measured reliably, there is a likelihood that	which those estimates and the judgments
the Company will receive economic benefits	made by the Company are based; - Comparative analysis of the result of
from the transaction and the costs incurred	contracts finalised with the budgeted result,
and those yet to be incurred, and the extent of completion of the contract, on the closing	analysing the historical evolution, the
date, can be assessed reliably.	budgetary control performed by the Company
Because of the uncertainty associated with the	and the judgment applied, and assessing
aforementioned estimates and the fact that	whether on the whole the budgets represent
changes in them might give rise to material	the best estimate considering the risks that
differences in the revenues registered, it was	exist at each moment;
considered a key audit matter.	- Assessing whether the provisions recognised
	at the close of the year relating to each of the
	reasonably reflect present contracts
	obligations that will probably generate an
	outflow of economic benefits in future, as laid
	down in the contracts and obtaining the documentary evidence that substantiates their
	recognition and assessing the judgment
	applied by the Company in its estimates; and
	- Assessing whether the information disclosed
	in the annual accounts meets the requirements
	the regulatory financial-reporting of
	framework that is applicable to the Company.

Ingresos por contratos de construcción Véase Nota 4.o de las cuentas anuales
Cuestión clave de la auditoria	Cómo se abordó la cuestión en nuestra auditori
Los ingresos de Elecnor, S.A. se generan principalmente por contratos de construcción y prestación de servicios, en los que el ingreso se reconoce por el método de grado de avance, es decir, en base al grado de realización del contrato al final de cada periodo contable, siendo necesario para determinar el ingreso a reconocer, que la Sociedad realice estimaciones de los costes, ingresos y resultado previstos de cada uno de los contratos. La aplicación de este método, por tanto, exige un elevado grado de juicio por parte de los Administradores y un exhaustivo control de las estimaciones realizadas y de las desviaciones que se puedan producir a lo largo de la duración del contrato. Las estimaciones deben tener en cuenta todos los costes e ingresos relacionados con los contratos, incluyendo cualquier coste adicional al inicialmente presupuestado, los riesgos por reclamaciones que se encuentren en disputa, así como los ingresos que se encuentran en proceso de negociación o reclamación al cliente. En este sentido, los ingresos se reconocen únicamente cuando se pueden valorar con fiabilidad, es probable que la sociedad reciba beneficios económicos de la transacción y los costes incurridos y los pendientes de incurrir, así como el grado de realización del contrato, en la fecha de cierre, se pueden valorar de manera fiable. Debido a la incertidumbre asociada a las citadas estimaciones y a que los cambios en las mismas podrían dar lugar a diferencias materiales en los ingresos registrados, se ha considerado una cuestión clave de la auditoria.	Nuestros procedimientos de auditoría han incluido, entre otros, los siguientes: Evaluación del diseño e implementación de los controles relacionados con el proceso de reconocimiento y valoración de ingresos por el método de grado de avance y con el proceso de control presupuestario y verificación de la efectividad de los controles claves identificados Comprobación de que la metodología utilizada por la Sociedad para la determinación de los ingresos, calculados tomando como base la proporción de los servicios realizados respecto a total de servicios a prestar, es una de las metodologías aceptadas por el marco normativo de información financiera aplicable; Evaluación de las hipótesis utilizadas en la elaboración de los presupuestos de los contratos; A partir de determinados criterios de selección cuantitativos y cualitativos, hemos seleccionado una muestra de los contratos de construcción para evaluar las estimaciones realizadas en la elaboración de la previsión de resultados del contrato y en el reconocimiento de ingresos. En este sentido, hemos obtenido los contratos y la documentación soporte en la que se basan dichas estimaciones y los juicios realizados por la Sociedad; Análisis comparativo del resultado de los contratos finalizados con el resultado presupuestado, analizando la evolución histórica el control presupuestario realizado por la Sociedad y el juicio aplicado, y evaluando si en general los presupuestos representan la mejor estimación considerando los riesgos existentes en cada momento; Evaluación de si las provisiones reconocidas al cierre del ejercicio relativas a cada uno de los contratos reflejan de manera razonable obligaciones presentes que es probable que generen una salida de beneficios económicos e el futuro, de acuerdo con lo establecido en los contratos y obteniendo el soporte documental que justifica su reconocimiento y evaluando el juicio aplicado por la Sociedad en sus estimaciones; y

-

-

-

CHAIRMAN (Nox-executive):	MR. JAIME REAL DE ASUA ARTECHE	D.N.I. 14.906.314-Z
DEPUTY CHAIRMAN:	MR. FERNANDO LEON DOMECQ	D.N.I. 31.582.770-K
DEPUTY CHAIRMAN:	MR. IGNACIO PRADO REY-BALTAR	D.N.I. 14.899.260-K
CEO:	MR. RAFAEL MARTIN DE BUSTAMANTE VEGA	D.N.I. 788.886-D
MEMBERS:	MR. FERNANDO AZAOLA ARTECHE	D.N.I. 14.500.614-B
	MR. MIGUEL CERVERA EARLE	D.N.I. 05.390.195-F
	MRS. ISABEL DUTILH CARVAJAL	D.N.I. 5.392.056-M
	MRS. IRENE HERNANDEZ ALVAREZ	D.N.I. 00.811.866-N
	MR. JUAN LANDECHO SARABIA	D.N.I. 16.025.693-Y
	MR. MIGUEL MORENES GILES	D.N.I. 31.552.959-H
	MR. GABRIEL DE ORAA Y MOYUA	D.N.I. 14.170.156-V
	MR. RAFAEL PRADO ARANGUREN	D.N.I. 16.042.601-D
	MR. EMILIO YBARRA AZNAR	D.N.I. 16.039.261-G
	MR. JOAQUÍN GÓMEZ DE OLEA Y MENDARO	D.N.I. 16.038.401-H
MEMBER DEPUTY SECRETARY:	D. CRISTÓBAL GONZÁLEZ DE AGUILAR ALONSO-URQUIJO	D.N.I. 1.397.142-F

In compliance with current legislation, all the members of the Board of Directors of ELECNOR, S.A. as of signing date have drafted the annual accounts of ELECNOR, S.A. corresponding to fiscal year ended on 31 December 2019, as herein detailed and identified.

Likewise, and compliant to paragraph one, letter b) of article 8 of the Royal Decree 1362/2007, the members of the Board of Directors of ELECNOR, S.A. state that, to their best knowledge, the Annual Accounts of ELECNOR, S.A. corresponding to fiscal year ended on 31 December 2019 have been prepared according to the Spanish Accounting General Plan, approved by the R.D. 1514/2007 and published in the Official Gazette on 20 November 2007, applying the corresponding accounting principles and policies and valuation criteria, showing a truthful image of the net equity, financial situation and the results of the company, changes in equity and cash flow, and that the Management Report of ELECNOR, S.A. corresponding to fiscal year ended on 31 December 2019 includes the truthful assessment of the evolution and business results and the position of the company, together with the description of the main risks and uncertainties facing ELECNOR, S.A.

The Annual Accounts are comprised by the documents herein attached.

Madrid, 25 March 2020.

Elecnor, S.A.

Annual Accounts 31 December 2019

Directors' Report 2019

(With Auditor's Report Thereon)

Elecnor, S.A.

Notes to the Annual Accounts for the year ended 31 December 2019

1. Nature, Activities of the Company and Composition of the Group

Elecnor, S.A. (hereinafter, the Company) was incorporated for an indefinite period on 6 June 1958.

The Company's statutory activity, according to its bylaws, is:

• Wide-ranging commercial activity in connection with the engineering, design, construction, erection, repair, maintenance and upkeep of all manner of construction projects and installation work in the broadest sense, i.e. the entire execution thereof with or without the supply of materials, on its own account or through third parties, on an exclusive basis or through associations of any kind.
• The provision of public and private services in relation to the collection of all types of waste; sweeping and cleaning of streets; transfer and transport of waste to the place of end disposal; the end disposal of such waste, recycling, treatment and deposit of public, private, industrial, hospital and pathological waste; cleaning, maintenance and upkeep of sewers; and, in general, urban water treatment services and all other ancillary services related directly or indirectly to the aforementioned services in their broadest sense.
• The design, research, development, construction, operation, maintenance and marketing of waste treatment, recovery and elimination facilities, and the purchase and sale of the by-products originating from these treatments.
• The design, research, development, construction, operation, maintenance and marketing of plants and facilities for the treatment of water, wastewater and waste, the recovery and elimination of waste, and the purchase and sale of the by-products originating from these treatments.
• The use, transformation and marketing of water of all types.

The aforementioned business activities can also be fully or partially carried out indirectly by the Company through investments in other companies with a similar statutory activity, both in Spain and abroad. The Company may not carry out any business activity for which specific conditions or limitations are imposed by law, unless it fully meets such conditions.

The Company's registered office is located at Marqués de Mondéjar, 33, in Madrid.

The Company is shareholder in various joint ventures with other venturers, which are included in the annual accounts in accordance with the criteria set forth in Note 4.b. The information concerning joint ventures incorporated as Temporary Business Associations (UTEs) is presented in Appendix II.

The Company is the head of a group of subsidiaries, and, in accordance with applicable legislation, it discloses consolidated annual accounts separately. The consolidated annual accounts of the Elecnor Group in 2019 were authorised for issue by the Company's Directors at the meeting of the Board of Directors held on 26 February 2020. In accordance with the content of the consolidated annual accounts prepared in accordance with the International Financial Reporting Standards as adopted by the European Union (IFRS-EU), consolidated equity at 31 December 2019 amounted to Euros 737,320 thousand (Euros 566,346 thousand at 31 December 2018), consolidated profit/loss attributable to the Parent amounted to Euros 126,377 thousand (Euros 82,117 thousand at 31 December 2018), and the total volume of assets and revenues amounted to Euros 2,979,244 thousand and Euros 2,453,726 thousand, respectively (Euros 2,579,972 thousand and Euros 2,250,899 thousand at 31 December 2018, respectively).

The Elecnor Group's consolidated annual accounts for 2018 were approved by the General Shareholders' Meeting of Elecnor, S.A. at their meeting held on 22 May 2019 and have been filed in the Madrid Companies Register.

ELECNOR, S.A.

BALANCE SHEET AT 31 DECEMBER 2019

(Thousands of Euros)

	Notes to the	Year	Year
ASSETS	nnual Accoun	2019	2018
NON-CURRENT ASSETS		988.608	1.017.224
Intangible assets	Note 6	4.766	4.422
Concessions and patents		38	40
Goodwill		619	722
Computer software		4.109	3.660
Property, plant and equipment	Note 7	63.294	62.132
Land and buildings		16.959	18.821
Technical installations and other property, plant and equipment		46.335	43.311
Long-term investments in Group companies and associates		871.077	903.126
Equity instruments	Note 9	860.516	876.173
Credits to Group companies	Notes 9 & 19	10.561	26.953
Long-term financial investments	Note 9	7.261	4.684
Equity instruments		1.040	1.040
Credits to third parties		2.176	12
Derivatives	Note 10	23	109
Other financial assets		4.022	3.523
Deferred tax assets	Note 16	42.210	42.860
CURRENT ASSETS		953.883	848.310
Non-current assets held for sale	Note 5	10.784	131
Inventories		13.494	22.955
Raw materials and other materials consumed		2.359	2.182
Finished goods – short cycle		823	811
Advances to suppliers		10.312	19.962
Trade and other receivables	Note 9	830.513	732.856
Customers, sales and services rendered		774.940	684.445
Customers, Group companies and associates	Note 19	18.537	20.643
Sundry receivables		10.530	3.653
Personnel		159	31
Current tax assets	Note 16	6.588	8.581
Public Administrations, other Short-term investments in Group companies and associates	Note 16 Notes 9 & 19	19.759 8.650	15.503 11.113
Credits to companies		6.887	9.272
Other financial assets		1.763	1.841
Short-term financial investments	Note 9	1.624	1.510
Credits to companies		56	17
Derivatives	Note 10	384	330
Other financial assets		1.184	1.163
Short-term accruals		1.285	538
Cash and cash equivalents		87.533	79.207
Cash		87.110	78.878
Cash equivalents		423	329
TOTAL ASSETS		1.942.491	1.865.534

The accompanying notes form an integral part of the annual accounts.

ELECNOR, S.A. BALANCE SHEET AT 31 DECEMBER 2019

(Thousands of Euros)

	Notes to the	Year	Year
EQUITY AND LIABILITIES	Annual Account	2019	2018
EQUITY		591.200	588.743
EQUITY	Note 11	596.828	593.523
Capital		8.700	8.700
Subscribed capital		8.700	8.700
Reserves		584.956	567.366
Legal and statutory		1.743	1.743
Other reserves		583.213	565.623
Own shares and equity		(21.963)	(21.884)
Profit/loss for the year		30.122	44.136
Interim dividend		(4.987)	(4.795)
VALUATION ADJUSTMENTS
Hedges		(5.628)	(4.780)
NON-CURRENT LIABILITIES		323.840	260.891
Long-term provisions	Note 12	40.653	-
Other provisions		40.653	-
Long-term payables	Note 13	279.421	257.014
Loans and borrowings		268.826	246.839
Finance lease payables	Note 8	4.352	4.803
Derivatives	Note 10	6.243	5.372
Deferred tax liabilities	Note 16	3.766	3.877
CURRENT LIABILITIES		1.027.451	1.015.900
Short-term provisions	Note 12	41.518	60.939
Short-term payables	Note 13	132.689	203.955
Bonds and other marketable securities		69.989	154.816
Loans and borrowings		52.932	42.156
Finance lease payables	Note 8	437	415
Derivatives	Note 10	1.656	1.428
Other financial liabilities		7.675	5.140
Short-term payables to Group companies and associates	Note 19	27.612	46.832
Trade and other payables		823.975	702.512
Suppliers		336.786	312.262
Suppliers, Group companies and associates	Note 19	6.722	5.763
Sundry payables		42.693	29.414
Personnel		23.918	16.439
Current tax liabilities	Note 16	4.717	12.999
Public Administrations, other	Note 16	35.261	31.819
Advances from customers	Note 15	373.878	293.816
Short-term accruals		1.657	1.662
TOTAL EQUITY AND LIABILITIES		1.942.491	1.865.534

The accompanying notes form an integral part of the annual accounts.

	Notes to the	Year	Year
	Annual Accounts	2019	2018
CONTINUING OPERATIONS
Net turnover	Note 17	1.368.728	1.315.286
Sales		1.368.728	1.315.286
Changes in inventories of finished goods		12	(513)
Self-constructed assets		2.156	3.837
Materials consumed		(740.717)	(685.388)
Consumption of raw materials and other consumables	Note 17	(374.157)	(305.727)
Work carried out by other companies		(366.560)	(379.661)
Other operating income		8.046	8.917
Non-trading income and other day-to-day income		7.265	8.173
Operating grants included in profit/loss for the year		781	744
Personnel expenses	Note 17	(428.427)	(387.333)
Salaries, wages and similar		(336.420)	(302.200)
Employee benefit costs		(92.007)	(85.133)
Other operating expenses		(201.521)	(217.802)
External services		(182.985)	(164.269)
Taxes		(5.540)	(10.272)
Losses, impairment and changes in trade provisions	Notes 9 & 12	(9.886)	(40.685)
Other day-to-day expenses	Note 7	(3.110)	(2.576)
Depreciation/Amortisation	Notes 6 & 7	(12.975)	(9.388)
Impairment and profit/loss on disposals of fixed assets	Note 7	(2.505)	(225)
Profit/Loss on disposals and others		(2.505)	(225)
PROFIT/LOSS FROM OPERATING ACTIVITIES		(7.203)	27.391
Finance income		87.141	50.795
From holdings in equity instruments
– Group companies and associates	Note 19	83.278	46.817
Marketable securities and other financial instruments
– Group companies and associates	Notes 9 & 19	3.764	3.736
- Third parties	Note 9	99	242
Finance expenses	Note 13	(13.009)	(17.402)
Payables to Group companies and associates	Note 19	(567)	(444)
Payables to third parties		(12.442)	(16.958)
Translation differences		243	7.602
Impairment and profit/loss on disposals of financial instruments		(12.513)	(8.536)
Impairment and losses	Note 9	(27.372)	(8.809)
Profit/Loss on disposals and others	Note 9.2	14.859	273
FINANCE INCOME/EXPENSES		61.862	32.459
PROFIT/LOSS BEFORE TAXES		54.659	59.850
Income taxes	Note 16	(24.537)	(15.714)
PROFIT/LOSS FROM CONTINUING OPERATIONS		30.122	44.136
PROFIT/LOSS FOR THE YEAR		30.122	44.136

The accompanying notes form an integral part of the annual accounts.

INCOME STATEMENT

ELECNOR, S.A.

(Thousands of Euros)

FOR 2019

	Notes to the	Year	Year
	Annual Accounts	2019	2018
PROFIT/LOSS IN THE INCOME STATEMENT (I)		30.122	44.136
Income and expenses recognised directly in equity:
- Cash flow hedges	Note 10	(3.483)	(4.139)
- Tax effect	Note 16	871	1.035
TOTAL INCOME AND EXPENSES RECOGNISED DIRECTLY IN EQUITY (II)		(2.612)	(3.104)
Transfers to the income statement
- Cash flow hedges	Note 10	2.352	2.831
- Tax effect	Note 16	(588)	(708)
TOTAL TRANSFERS TO THE INCOME STATEMENT (III)		1.764	2.123
TOTAL RECOGNISED INCOME AND EXPENSES (I+II+III)		29.274	43.155

The accompanying notes form an integral part of the annual accounts.

ELECNOR, S.A.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR 2019 STATEMENT OF RECOGNISED INCOME AND EXPENSES

(Thousands of Euros)

ELECNOR, S.A.

						Valuation
	Capital	Reserves	Own shares	Profit/Loss for the year	Interim dividend	adjustments	TOTAL
CLOSING BALANCE FOR 2017	8.700	542.484	(21.232)	48.508	(4.611)	(3.799)	570.050
Total recognised income and expenses	-	-	-	44.136	-	(981)	43.155
Transactions with shareholders:
– Distribution of profit for 2017
Reserves	-	23.551	-	(23.551)	-	-	-
Interim dividend	-	-	-	(4.611)	4.611	-	-
Supplementary dividend	-	-	-	(20.346)	-	-	(20.346)
- Transactions with own shares (net) (Note 11.3)	-	334	(652)	-	-	-	(318)
- Interim dividend	-	-	-	-	(4.795)	-	(4.795)
- Others	-	997	-	-	-	-	997
CLOSING BALANCE FOR 2018	8.700	567.366	(21.884)	44.136	(4.795)	(4.780)	588.743
Total recognised income and expenses	-	-	-	30.122	-	(848)	29.274
Transactions with shareholders:
– Distribution of profit for 2018
Reserves	-	17.401	-	(17.401)	-	-	-
Interim dividend	-	-	-	(4.795)	4.795	-	-
Supplementary dividend	-	-	-	(21.940)	-	-	(21.940)
- Transactions with own shares (net) (Note 11.3)	-	189	(79)	-	-	-	110
- Interim dividend	-	-	-	-	(4.987)	-	(4.987)
CLOSING BALANCE FOR 2019	8.700	584.956	(21.963)	30.122	(4.987)	(5.628)	591.200

(Thousands of Euros) B) STATEMENT OF TOTAL CHANGES IN EQUITY

The accompanying notes form an integral part of the annual accounts.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR 2019

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	Notes to the	Year	Year
	Annual Accounts	2019	2018
CASH FLOWS FROM OPERATING ACTIVITIES (I)		117.948	12.585
Profit/Loss for the year before taxes		54.659	59.850
Adjustments to profit/loss:
- Depreciation/Amortisation	Notes 6 & 7	12.975	9.388
- Changes in provisions		17.238	33.483
- Impairment adjustments		33.300	28.716
- Profit/Loss on disposals of fixed assets		740	225
- Finance income		(87.141)	(50.795)
- Finance expenses		13.009	17.402
- Exchange rate differences		(243)	(7.602)
- Profit/Loss on derecognitions and disposals of financial instruments	Note 9	(14.859)	(261)
- Other income and expenses	Note 7	3.110	2.576
Changes in current capital
- Inventories		9.461	888
- Trade and other receivables		(103.536)	(100.383)
- Other current assets		(768)	4.082
- Trade and other payables		129.745	7.620
- Other current liabilities		(5)	83
- Provisions (payments)		(14.744)	(20.286)
Other cash flows from operating activities
- Interest paid		(10.908)	(15.087)
- Dividends received		84.668	46.817
- Interest received		2.513	11.921
- Income tax received (paid)		(11.266)	(15.553)
- Other items (paid) received		-	(499)
CASH FLOWS FROM INVESTMENT ACTIVITIES (II)		(9.052)	37.196
Payments for investments
- Group companies and associates		(38.419)	(3.936)
- Intangible assets	Note 6	(2.410)	(2.272)
- Property, plant and equipment	Note 7	(15.367)	(15.779)
- Other financial assets		(2.702)	(1.040)
Proceeds from divestments
- Group companies and associates		49.656	60.105
- Property, plant and equipment		155	82
- Other financial assets		35	36
CASH FLOWS FROM FINANCING ACTIVITIES (III)		(100.570)	(33.811)
Proceeds from and payments for equity instruments
– Acquisition of own equity instruments	Note 11	(1.213)	(1.563)
– Disposal of own equity instruments	Note 11	1.323	1.245
Proceeds from (payments for) financial liabilities
- Issuance of bonds and other marketable securities		1.601.100	658.122
- Issuance of loans and borrowings		67.581	20.008
- Issuance of payables to Group companies and associates		9.000	34.669
- Issuance of other payables		1.641	11.222
- Repayment and cancellation of loans and borrowings		(35.000)	(120.410)
- Repayment and cancellation of payables to Group companies and associates		(29.800)	(3.109)
- Repayment of bonds and other marketable securities		(1.685.927)	(603.122)
- Repayment of other payables		(2.348)	(1.120)
Payments for dividends and remuneration on other equity instruments
- Dividends		(26.927)	(29.753)
NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (I+II+III)		8.326	15.970
Cash and cash equivalents at beginning of period		79.207	63.237
Cash and cash equivalents at end of period		87.533	79.207

The accompanying notes form an integral part of the annual accounts.

ELECNOR, S.A.

STATEMENT OF CASH FLOWS FOR 2019

(Thousands of Euros)

Notes to the Annual Accounts

2. Basis of presentation

2.1. True and fair view

The accompanying annual accounts have been prepared on the basis of the accounting records of Elecnor, S.A. (and of the consolidated temporary business associations (UTEs)). The annual accounts for 2019 were prepared in accordance with applicable commercial legislation and the rules established in the Spanish General Chart of Accounts to provide a true and fair view of the equity and financial position at 31 December 2019 and the results of its transactions, changes in equity and cash flows corresponding to the financial year ended on that date.

The Directors of the Company consider that the annual accounts for 2019, authorised for issue on 25 March 2020, will be approved with no changes by the General Shareholders' Meeting.

2.2. Comparative information

For comparative purposes, the annual accounts include figures for 2018 alongside the 2019 figures for each item in the balance sheet, the income statement, the statement of changes in equity, the statement of cash flows and the notes thereto. The 2018 figures were included in the annual accounts for 2018, which were approved at the Ordinary Annual General Shareholders' Meeting on 22 May 2019.

2.3. Functional currency and presentation currency

The figures disclosed in the annual accounts are expressed in thousands of Euros, the Company's functional and presentation currency.

2.4. Critical aspects of measurement and uncertainty estimates and significant judgements in applying accounting policies

The information contained in the annual accounts is the responsibility of the Company's Directors. The preparation of annual accounts requires the application of significant accounting estimates and judgements, estimates and assumptions in the process of applying the Company's accounting policies. In this connection, there follows a detailed summary of the aspects that have involved the greatest degree of judgement, complexity or in which the assumptions and estimates are not significant for preparing the annual accounts.

Significant accounting estimates and assumptions

• The Company performs a significant portion of its activities in construction contracts with customers. This method is based on performing estimates in relation to the stage of completion of projects. Depending on the methodology used to determine the completion of projects, significant estimates include the total cost of contracts, remaining completion costs, total income from contracts, contract risk and other judgements.
• Adjustments due to customer insolvencies, the revision of individual balances based on the credit ratings of customers, current market trends and a historical analysis of insolvencies on an aggregate basis involve significant judgements.
• The Company tests investments in Group companies and associates for impairment when they present signs thereof. Generally, the Company uses discounted cash flow methods to determine these values. Discounted cash flow calculations are based on the projections contained in approved budgets. The flows take into account past experience and represent the best estimate on future market performance. Cash flows from the last year of the projection are extrapolated using individual growth rates. The key assumptions to determine value in use include growth rates, weighted average cost of capital and tax rates. The estimates, including the methodology used, may have a significant impact on the values and on impairment losses.
• The calculation of provisions for negative margins, guarantees and litigation is subject to considerable uncertainty. The Company recognises provisions for negative margins when the estimate of total costs exceeds estimated income from contracts. These estimates are subject to changes based on new information regarding the stages of completion.

Notes to the Annual Accounts

The Company is subject to regulatory and legal processes and inspections. If it is likely that there will be an obligation at the end of the year that will imply an outflow of resources, a provision is recognised if the amount can be reliably estimated. Legal processes usually imply complex legal matters and are subject to considerable uncertainty. Consequently, the Directors exercise significant judgement in determining whether it is likely that the process will result in an outflow of resources and in estimating the amount thereof.

Changes in estimates

Although the estimates performed by the Company's Directors were calculated based on the best information available at 31 December 2019, it is possible that future events might oblige their modification in the next few years. The effect on the annual accounts of modifications that, in the event, may derive from adjustments over the next few years would be recognised prospectively.

2.5. Going concern principle

At 31 December 2019, the Company presents negative working capital of Euros 73,568 thousand as a result of the high volume of advances from customers in the normal course of the business. Excluding advances from customers, since, due to their nature, they will not imply an outflow of funds, working capital at 31 December 2019 is positive in the amount of Euros 300,310 thousand.

3. Distribution of Profit/Loss

The proposed distribution of the Company's profit/loss for 2019, to be presented to the General Shareholders' Meeting, is as follows:

	2019
Basis of distribution
Profit/loss for the year	30,122
Voluntary reserves	2,151
Total	32,273
Distribution
Voluntary reserves	1,249
Capitalisation reserves Law 27/2014	2,151
Interim dividend	4,987
Supplementary dividend	23,886
Total	32,273

At the General Shareholders' Meeting held on 22 May 2019 a supplementary dividend of Euros 21,939 thousand (Euros 0.31 per share) was approved, taking into account the interim dividend of Euros 4,795 thousand out of profit for 2018 paid in December 2018.

At the meeting held on 23 October 2019, the Board of Directors of the Company agreed to distribute an interim dividend for 2019 of Euros 4,987 thousand (Euros 4,795 thousand for 2018), which was recognised as a reduction in equity under "Interim dividend" on the liability side of the accompanying balance sheet, and paid on 11 December 2019.

These distribution amounts did not exceed the profit obtained in the last year by the Company, having deducted the estimated Corporate Income Tax payable on said profit, in accordance with the provisions of article 277 of the Revised Spanish Companies Act.

Notes to the Annual Accounts

The provisional accounting statement prepared in accordance with legal requirements evidencing the existence of sufficient liquidity for the distribution of the dividend was as follows:

WORKING CAPITAL POSITION AT 30 SEPTEMBER 2019

(Thousands of Euros)

(Excluding inventories and accruals)

	Thousands
	of Euros
Realisable values -
Customers	694,611
Other accounts	112,119
	806,730
Short-term payables -
Suppliers	272,406
Short-term loans	293,745
Other accounts	187,613
	753,764
Total working capital	52,966
Liquidity available:
Cash on hand and at banks (including foreign currency)	66,949
Total cash available	66,949
Gross interim dividend proposed -
(Euros 0.057320 for 87,000,000 shares)	4,987
% of net profit at the end of the year	75.03%
% of working capital + liquidity available	4.16%

At 31 December, the amounts of reserves not available for distribution are as follows:

	Thousands of Euros
	2019	2018
Reserves not available for distribution:
Legal reserve	1,743	1,743
Goodwill reserve	619	722
Capitalisation reserve	4,408	3,149
Differences for adjustments of share capital to euros	15	15
	6,785	5,629

Profit recognised directly in equity cannot be distributed, either directly or indirectly.

4. Accounting and Measurement Standards

In preparing its annual accounts for 2019, the Company has applied the main accounting and measurement standards in accordance with the Spanish General Chart of Accounts, as follows:

a) Business combinations

Business combinations from 1 January 2010 are recognised by applying the acquisition method established in Accounting and Measurement Standard 19 of the Spanish General Chart of Accounts, as amended by article 4 of Royal Decree 1159/2010, approving the standards for preparing consolidated annual accounts and amending the Spanish General Chart of Accounts.

Notes to the Annual Accounts

In business combinations, except mergers, spin-offs and non-monetary contributions of a business between Group companies, the Company applies the acquisition method.

The acquisition date is the date on which the Company obtains the control of the acquired business.

b) Jointly-controlled operations and assets

Joint ventures are those in which there is a contractual or statutory agreement to share the control over an economic activity, in such a way that strategic operating and financial decisions concerning the activities require the unanimous consent of the Company and the remaining venturers.

In jointly-controlled operations and assets, the Company recognises in the annual accounts the assets that are under its control, the liabilities in which it has incurred and the proportionate part in accordance with its interest percentage in the jointly-controlled assets and the jointly-incurred liabilities; and the part of the proceeds of the sale of goods or provision of services and the expenses incurred by the joint venture. Moreover, the statement of changes in equity and the statement of cash flows also include the proportionate part corresponding to the Company pursuant to the agreements reached.

The transactions, balances, income, expenses and reciprocal cash flows were eliminated in proportion to the Company's interest in the joint ventures.

Profit or loss not realised in non-monetary contributions or descendent transactions by the Company with joint ventures are recognised based on the substance of the transactions. In this connection, in the event that the transferred assets are maintained in the joint ventures and the Company has substantially transferred the risks and rewards inherent to ownership thereof, it only recognises the proportionate part of the profit or loss that correspond to the rest of venturers. Moreover, losses not realised are not eliminated to the extent that they constitute evidence of an impairment in the value of the transferred asset.

Profit or loss on transactions between joint ventures and the Company are only recognised in the proportion thereof that corresponds to the rest of venturers, applying the same recognition criteria in the case of losses as are described in the previous paragraph.

The Company has made the necessary valuation and timing adjustments to integrate the joint ventures in the annual accounts.

The information concerning jointly-controlled economic activities pertaining to Temporary Business Associations (UTEs) is presented in Appendix II.

c) Intangible assets

Assets under Intangible assets are recognised at their acquisition price or production cost. Intangible assets are presented in the balance sheet at cost less amortisation and cumulative impairment adjustments.

Subsequent costs incurred on intangible assets are recognised as an expense, unless they increase the expected future economic benefits attributable to the assets.

Computer software

The Company recognises under this heading the costs incurred in acquiring and developing software. Maintenance costs of computer software are recognised in the income statement for the year in which they are incurred. Computer software is amortised using the straight-line method over a period of 3 years.

Goodwill

Goodwill is measured as outlined in the section on business combinations.

Notes to the Annual Accounts

The Company allocates the goodwill resulting from business combinations to each of the cash-generating units (CGU) that are expected to benefit from the synergies from the combination and determines the useful life thereof separately for each CGU. After initial recognition, goodwill is measured at cost less amortisation and cumulative impairment adjustments. The Company amortises goodwill over the course of its useful life, which is 10 years.

Impairment

The Company measures and determines the intangible assets' impairment adjustments and reversals in accordance with the criteria set forth in section e) Impairment of non-financial assets carried at amortised or depreciated cost.

d) Property, plant and equipment

Initial recognition

Property, plant and equipment are accounted for at acquisition price or production cost and include updates conducted in accordance with various applicable legal provisions (Royal Decree-Law 7/1996). Property, plant and equipment are presented in the balance sheet at cost less depreciation and cumulative impairment adjustments.

Improvements to properties under operating leases that are definitively added to the leased property are capitalised as higher costs under the relevant heading and depreciated over the contractual term or, if shorter, the estimated useful life of the asset.

Self-constructed property, plant and equipment is capitalised under Self-constructed assets in the income statement and recognised at accumulated cost; i.e. external costs plus in-house costs, determined on the basis of materials consumed, direct labour costs incurred and overall manufacturing costs calculated using absorption rates similar to those used for the measurement of inventories.

With regard to "Hand and machine tools" recognised under Property, plant and equipment (Note 7), the Company performs an annual adjustment based on a physical count under "Other operating expenses - Other day-to-day expenses" in the income statement, directly removing said amount from the cost of the asset account. In 2019, this kind of write-off amounted to Euros 3,110 thousand (Euros 2,576 thousand in 2018).

Depreciation

Property, plant and equipment is depreciated by distributing the depreciable amount using the straight-line method over its useful life.

The Company determines depreciation of property, plant and equipment by applying the following criteria:

	Years of Useful Life
Buildings	25
Technical installations and machinery	8 – 10
Furniture and fixtures	10
Information technology equipment	4 – 7
Motor vehicles	6 – 10

The Company reviews the residual value, useful life and depreciation method of the property, plant and equipment at the end of each financial year. Any changes to the initially established criteria are recognised as a change in estimate.

Notes to the Annual Accounts

Subsequent costs

Subsequent to the initial recognition of the asset, the Company only capitalises those costs incurred that imply an increase in its capacity, productivity or lengthening of useful life, and the carrying amount of the replaced items must be derecognised. In this connection, the costs deriving from the daily upkeep of property, plant and equipment are recognised as they are incurred.

The replacement of items of property, plant and equipment that may potentially be capitalised implies reducing the carrying value of the items replaced.

Impairment

The Company measures and determines the property, plant and equipment's impairment adjustments and reversals in accordance with the criteria set forth in section e) Impairment of non-financial assets carried at amortised or depreciated cost.

e) Impairment of non-financial assets carried at amortised or depreciated cost

The Company evaluates whether there are indications of possible impairment losses on non-financial assets subject to amortisation or depreciation to verify whether the carrying amount of these assets exceeds the recoverable amount, understood as the higher between fair value less the costs to sell and value in use.

Impairment losses are recognised in the income statement.

The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. If this is the case, recoverable amount is determined for the CGU to which the asset belongs.

A cash-generating unit (CGU) is the smallest identifiable group of assets that generates cash flows that are largely independent of the cash flows from other assets or group of assets.

Impairment losses for the CGU are allocated, first, to reduce the value of any goodwill allocated to the cashgenerating unit; and then, to the other non-current assets of the CGU pro rata on the basis of the carrying amount of each asset in the CGU, while not reducing the carrying amount of an asset below the highest of its fair value less costs to sell, its value in use and zero.

Reversal of the impairment loss is recognised with a credit in the income statement. However, reversal of the impairment loss cannot exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset.

f) Non-current assets held for sale

The Company recognises under this heading non-current assets or disposal groups of items whose carrying amount will be recovered primarily through a sale transaction, rather than through continuing use. To be classified as non-current assets or disposal groups as held for sale, they must be available in their current state for immediate disposal, subject only to the usual and widely accepted terms of sale transactions, and the derecognition of the asset must also be considered to be highly probable.

Non-current assets or disposal groups classified as held for sale are measured at the lower of the carrying amount and fair value less the costs of sale and are not depreciated.

g) Leases

The Company classifies leases as finance leases when substantially all the risks and rewards incidental to ownership of the leased asset are transferred to the lessee under the terms and conditions of the lease at the start of the lease period, otherwise they are classified as operating leases.

Notes to the Annual Accounts

Finance leases

At the start of the lease period, the Company recognises an asset and liability as the lower of the fair value of the leased asset or the current value of the minimum lease payments. Initial direct costs are included as the higher asset value. Minimum payments are divided between the financial charge and the reduction of the outstanding debt. Finance expenses are allocated to income statement, by applying the effective interest rate method.

The accounting principles applied to the assets used by the Company pursuant to lease agreements classified as finance leases are those outlined in section d) Property, plant and equipment. Nevertheless, if there is no reasonable certainty that the Company will obtain ownership at the end of the asset lease period, they are amortised over the shorter of the useful life or the term thereof.

Operating leases

The payments from operating leases are recognised as an expense on a straight-line basis over the lease term.

Any collection or payment that may be made upon contracting an operating lease will be treated as an advanced collection or payment that will be taken to profit and loss throughout the period of the lease, as the profits from the leased asset are assigned or received.

h) Financial instruments

Recognition

The Company recognises a financial instrument when it becomes a party to the contract or legal transaction, in accordance with the terms set out therein.

Classification and separation of financial instruments

Financial instruments are classified on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the economic substance of the contractual arrangement and the definitions of a financial asset, a financial liability and an equity instrument.

The Company classifies financial instruments in the various categories based on the characteristics and intentions of the Company at the time of their initial recognition.

At 31 December 2019 and 2018, financial assets relate entirely to loans and receivables booked at amortised cost or cost/carrying amount, except for hedge derivatives that are accounted for at their fair value.

Offsetting principles

The Company only offsets financial assets against financial liabilities when it has a legally enforceable right to offset the amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Loans and receivables

Loans and receivables comprise trade and non-trade receivables with fixed or determinable payments that are not quoted in an active market other than those classified in other categories of financial assets. These assets are initially recognised at fair value, including transaction costs incurred, and are subsequently measured at amortised cost using the effective interest method.

However, financial assets with no established interest rate, the amount of which is due or receivable in the short term and where the effect of discounting is not material are measured at their nominal amount.

Notes to the Annual Accounts

Investments in Group companies, associates and jointly-controlled entities

Group companies are understood to be companies over which the Company exercises control, either directly or indirectly through subsidiaries, as provided in article 42 of the Commercial Code, or companies that are controlled by any means by one or several physical or legal persons acting jointly or under single management through agreements or statutory clauses.

Control is the power to govern the financial and operating policies of an entity or business so as to obtain profits from its activities, considering potential voting rights held by the Company or third parties that are exercisable or convertible at the end of each reporting period for these purposes.

Associates are companies over which the Company, either directly or indirectly through subsidiaries, exercises significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the company but is not control or joint control over those policies. The existence of potential voting rights that are exercisable or convertible at the end of each reporting period, including potential voting rights held by the Company or other companies, are considered when assessing whether an entity has significant influence.

Jointly-controlled entities are those managed jointly by the Company or one or more Group companies, including parent entities or physical persons, and one or more third parties external to the Group.

Investments in Group companies, associates and jointly-controlled entities are initially recognised at cost, which is equivalent to the fair value of the consideration paid, including for investments in associates and jointly-controlled entities the transaction costs incurred and subsequently measured at cost, less cumulative impairment adjustments. Investments in Group companies acquired prior to 1 January 2010 include in the acquisition cost the transaction costs incurred.

Non-monetary contributions in exchange for investments in the equity of other companies

In non-monetary business contributions, including investments in Group companies, Group companies themselves, investments in equity received are measured on the transaction date, at the carrying amount of the equity items delivered or the representative amount of the interest percentage equivalent to the carrying amount of the net assets of the investment contributed, in the consolidated annual accounts of the Group, in accordance with the Standards for Preparing Consolidated Annual Accounts. Any difference between the carrying amount of investments received and the carrying amount of the equity items delivered is recognised in reserves.

Interest and dividends

Interest is recognised using the effective interest rate method.

Dividends from investments in equity instruments are recognised when the Company is entitled to receive them. If dividends paid unequivocally come from profit generated prior to the acquisition date because amounts have been distributed in excess of the profits generated by the investee since the acquisition, they are deducted from the carrying amount of the investment.

Derecognition of financial assets

Financial assets are derecognised when the associated rights to receive cash flows have expired or been transferred and the Company has substantially transferred the risks and rewards deriving from their ownership.

The Company applies the weighted average price criterion to measure and derecognise the cost of equity or debt instruments belonging to homogeneous portfolios and having the same rights.

Notes to the Annual Accounts

Impairment of financial assets

A financial asset or a group of financial assets is impaired and impairment losses have been incurred when there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that event or events have an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The Company follows the criterion of recognising the pertinent impairment adjustments on loans and receivables when debtor insolvency has prompted a reduction or delay in estimated future cash flows.

Moreover, in the case of equity instruments, there is impairment when the carrying amount of the asset becomes non-recoverable due to a prolonged or significant decline in its fair value.

Impairment of financial assets measured at amortised cost

The amount of the impairment loss of financial assets measured at amortised cost is measured as the difference between the asset's carrying amount and the current value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate.

The impairment loss is recognised against profit and loss and is reversible in subsequent years, if the reduction may objectively be linked to an event subsequent to its recognition. However, the reversal is capped at the amortised cost of the assets had the impairment loss not been recognised.

Investments in Group companies, associates and jointly-controlled entities measured at cost.

Impairment is calculated as the difference between the carrying amount of the investment and its recoverable amount, the latter of which is understood as the higher of the asset's value in use and fair value less costs to sell.

In this connection, value in use is calculated as a function of the Company's interest in the current value of estimated cash flows in ordinary activities and the final disposal or the estimated flows expected from the distribution of dividends and resulting from the final disposal of the investment.

However, in certain cases, barring better proof of the recoverable amount of the investment, in estimating the impairment of this kind of asset, the investee's equity is taken into consideration, corrected for any unrealised gains existing at the measurement date and in accordance with generally applicable accounting principles and standards in Spain. If the investee forms a subgroup of companies, the equity shown in the consolidated annual accounts is taken into account, provided that these annual accounts have been authorised for issue. Otherwise, the equity reflected in the separate annual accounts is considered.

In subsequent years, reversals of impairment in the form of increases in the recoverable amount are recognised, up to the limit of the carrying amount that would have been determined for the investment if no impairment had been recognised.

Financial liabilities

Financial liabilities, including trade and other payables, that are not classified as held for trading or financial liabilities at fair value through the income statement are initially recognised at fair value less, in the event, transaction costs that are directly attributable to their issuance. Subsequent to initial recognition, liabilities classified under this heading are measured at amortised cost using the effective interest rate method.

However, financial liabilities with no established interest rate, the amount of which is due or payable in the short term and where the effect of discounting is not material, are measured at their nominal value.

Notes to the Annual Accounts

Confirming

The Company has arranged confirming lines with various financial institutions to manage supplier payments. Trade payables the settlement of which is managed by financial institutions are shown under "Trade and other payables" on the balance sheet until such time as they have been settled, cancelled or expired.

Income received from financial institutions in consideration for the assignment of business due to acquisition of invoices or payment documents from customers are recognised on accrual under "Other operating income" in the income statement.

Moreover, bank borrowings as a result of the assignment of trade payables are recognised as trade payables advanced by credit institutions, under "Trade and other payables" in the balance sheet.

Guarantees

Guarantees delivered are measured in accordance with the criteria set forth for financial assets.

Derecognitions and modifications of financial liabilities

The Company derecognises a financial liability or a portion thereof when it has fulfilled the obligation contained in the liability or when it is legally released from the principal responsibility contained in the liability either pursuant to judicial proceedings or by the creditor.

The exchange of debt instruments between the Company and the counterparty or substantial modifications to initially recognised liabilities are recognised as an extinguishment of the original financial liability and recognition of a new financial liability, provided the instruments have substantially different terms.

The Company considers that the terms are substantially different if the current value of the cash flow discounted under the new terms, including any fees paid net of any fees received, and using for the purpose of the discount the original effective interest rate, differs by at least 10 per cent from the current discounted value of the remaining cash flows of the original financial liability.

If the exchange is recognised as the extinguishment of the original financial liability, the costs or fees are recognised in the income statement. Otherwise, the costs or fees adjust the liability's carrying value and are amortised using the amortised cost method during the remaining life of the modified liability.

The Company recognises the difference between the carrying amount of the financial liability or a part thereof cancelled or assigned to a third party and the consideration paid as a charge or credit against the income statement.

Hedge accounting

Derivative financial instruments that meet hedge accounting criteria are initially recognised at fair value.

The Company uses cash flow hedges.

At the inception of the hedge the Company formally designates and documents the hedging relationships and the objective and strategy for undertaking the hedges. Hedge accounting is only applicable when the hedge is expected to be highly effective at the inception of the hedge and in subsequent years in achieving offsetting changes in fair value or cash flows attributable to the hedged risk, throughout the period for which the hedge was designated (prospective analysis), and the actual effectiveness is within a range of 80%- 125% (retrospective analysis) and can be reliably measured.

Notes to the Annual Accounts

Cash flow hedges

The Company books as income and expenses recognised in equity the gains or losses from fair value measurement of the hedge instrument corresponding to the part identified as effective hedge.

The separate equity component associated with the hedged item is adjusted to the lower of the cumulative gain or loss on the hedging instrument from inception of the hedge and cumulative change in the fair value of the hedged item (i.e. the current value of the hedged expected future cash flows from inception of the hedge).

In hedges of planned transactions that give rise to the recognition of a financial asset or liability, the associated gains or losses that were recognised in equity are reclassified to profit and loss in the same year or years during which the asset acquired or liability assumed affects profit and loss and under the same heading of the income statement.

i) Own equity instruments held by the Company and shares in the Parent

The acquisition by the Company of equity instruments is presented separately at acquisition cost as a decrease in the shareholders' equity in the balance sheet. No profit or loss was recognised in the income statement for transactions with own equity instruments.

The acquisition of shares in the Parent is recognised and measured as provided in section h) Investments in Group companies, associates and jointly-controlled entities, with the relevant amount being allocated to the legal reserve.

j) Inventories

Inventories are initially measured at acquisition or production cost.

Acquisition cost includes the amount invoiced by the seller after deducting any discount, price cut or other similar item and the interest on the nominal amount of debits, plus additional expenses incurred until the goods are ready for sale and expenses directly attributable to the acquisition.

Advances on inventories are initially recognised at cost. In subsequent years and provided that the period between payment and receipt of the inventories exceeds one year, advances accrue interest at the supplier's incremental rate.

When the cost of inventories exceeds net realisable value, inventories are written down to net realisable value.

The previously recognised adjustment is reversed against profit or loss, if the circumstances that caused the impairment have ceased to exist or when there is clear evidence of an increase in net realisable value as a result of changes in economic circumstances. The impairment reversal is limited to the lower between cost and the new net realisable value of inventories.

Inventories impairment adjustments and reversals are recognised under Changes in inventories of finished goods and work in progress and Materials consumed, depending on the type of inventories.

k) Foreign currency transactions and balances

Foreign currency transactions and balances

Foreign currency transactions were translated into Euros by applying to the amount in foreign currency the spot exchange rate on the dates on which the transactions were carried out.

Notes to the Annual Accounts

Where there are different exchange rates, the rate that best reflects the value at which the transactions will be settled is used.

Monetary assets and liabilities denominated in foreign currencies have been translated into Euros at the closing rate, while non-monetary assets and liabilities measured at historical cost have been translated at the exchange rates at the transaction dates.

Exchange gains and losses emerging when foreign currency transactions are settled and in translating monetary assets and liabilities denominated in foreign currencies into Euros are recognised in profit or loss.

l) Income tax

Income tax revenue or expenses include both current and deferred taxes.

Current income tax assets or liabilities are measured by the amounts expected to be paid to or recovered from the taxation authority, based on the prevailing tax rules and rates or on those that have been approved and are pending publication at the end of the year.

Current or deferred income tax is recognised in profit and loss unless there is a transaction or economic event that has been recognised in the same financial year or another year, against equity or from a business combination.

Recognition of deferred tax liabilities

The Company recognises deferred tax liabilities in all cases except those arising from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affect neither accounting profit/loss nor taxable income.

Recognition of deferred tax assets

The Company recognises deferred tax assets provided that it is likely that sufficient taxable profits will be obtained in the future to offset those items, or when tax legislation allows for the future conversion of deferred tax assets into an enforceable credit in respect of the Public Administration.

The Company only recognises deferred tax assets deriving from tax loss carryforwards to the extent that it is likely that the Company will have future taxable profits against which the tax assets can be utilised within the legally established period, up to a maximum of ten years, unless they are likely to be recovered in a longer period, when tax legislation allows them to be utilised in a longer period or does not establish any time limits in this connection.

At the end of each reporting period the Company reviews the recognised deferred tax assets, making any appropriate adjustments to the extent that there is uncertainty regarding their future recovery. Likewise, at the end of each year, the deferred tax assets not recognised on the balance sheet are evaluated and these are recognised to the extent that their recovery with future taxable profit becomes likely.

In determining future taxable profit, the Company takes into account tax planning opportunities, provided it intends to adopt them or is likely to adopt them.

Measurement of deferred tax assets and liabilities

Deferred tax assets and liabilities are measured by the applicable tax rates in the years in which the assets are expected to be realised or the liabilities paid, based on prevailing rules and rates or those that have been approved and are pending publication and having considered the fiscal consequences deriving from the manner in which the Company expects to recover the assets or settle the liabilities. In this connection, the Company has considered the deduction due to the reversal of temporary measures pursuant to transitory provision thirty-seven of Corporate Income Tax Law 27/2014, of 27 November, as an adjustment in the tax rate applicable to the deductible temporary difference associated with the non-deductibility of amortisations performed in 2013 and 2014.

Notes to the Annual Accounts

Classification

Deferred tax assets and liabilities are recognised in the balance sheet as non-current assets or liabilities, irrespective of the expected date of realisation or settlement.

m) Cash and cash equivalents

Cash and cash equivalents include cash on hand and sight bank deposits placed with credit institutions. This heading also includes other highly liquid short-term investments which can be readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Accordingly, this heading includes investments that are due within less than three months from their acquisition date.

n) Provisions and contingencies

In preparing the annual accounts, the Company's Directors distinguish between:

• Provisions: current obligations, whether legal, contractual, implicit or tacit, as a result of a past event; recognised by the Company when there is likely to be an outflow of resources requiring future profits to cancel the obligation; and it is possible to reliably estimate the amount of the obligation.
• Contingent liabilities: possible obligations arising from past events, the materialisation of which will be confirmed only by the occurrence or non-occurrence of one or more future events beyond the control of the Company.

The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the year, taking into account all risks and uncertainties surrounding the amount to be recognised as a provision and, where it is material, the financial effect of discounting provided that the expenditure to be made each period can be reliably estimated.

Provisions are reversed against profit and loss when it is not likely to be an outflow of resources to extinguish the obligation.

Unless these are considered as remote, contingent liabilities are not recognised in the annual accounts, but are instead disclosed in the notes to the annual accounts.

Tax provisions

Tax provisions related to the estimated amount of taxes payable determined on the basis of the general criteria set forth above. Provisions are allocated against income tax for the annual rate, to finance expenses for late payment interest and to other profit/loss for fines. The effect of changes in estimated provisions from prior years are recognised under their related headings except when correcting an error.

Provisions for termination benefits

Involuntary termination benefits are recognised when the Company has a detailed formal plan and it has raised a valid expectation that it will carry out the process by starting to implement the plan or announcing its main features to those affected by it.

In 2019, the amount recognised in this connection under "Personnel expenses – Wages, salaries and similar" in the accompanying income statement amounted to approximately Euros 2,903 thousand (approximately Euros 4,162 thousand in 2018). Furthermore, on 31 December 2019 it had booked a provision for this item amounting to Euros 2,420 thousand (Euros 2,032 thousand in 2018). The Company's Directors consider that potential future staff cuts will not have a material impact on the accompanying annual accounts.

Notes to the Annual Accounts

o) Construction contracts and income from the sales and services rendered

Construction contracts

Income from construction contracts include the initial amount of the agreed income, any changes to the scope of the contractual work and the amounts linked to claims and incentives, provided that these can be reliably measured and it is likely to obtain them. Penalties for non-compliances associated with the contractor's quality or efficiency are accounted for as an expense with a negative sign under Net turnover.

The costs of construction contracts include costs directly linked to the contract, those relating to the contract activity in general that might be attributable thereto and any other cost that may be passed on to the customer on the basis of the contract terms.

Ordinary income and costs associated with a construction contract are recognised considering their stage of completion at the end of the year, when they can be reliably estimated. In this regard, in fixed-price contracts, this happens when the amount of income, the stage of completion, the attributable costs and the cost yet to be incurred can be reliably estimated; attributable costs can be clearly identified, so that real costs can be compared with the estimates; and the economic benefits deriving from the contracts are likely to be received.

The Company determines the stage of completion of the contracts in accordance with the proportion of contract costs incurred in the work carried out on that date with respect to the total estimated contract costs.

Changes to estimated contract income and costs are recognised prospectively in the current year and in future years as a change in estimates.

Estimated losses from construction contracts are recognised immediately as expenses in the year.

Income from sales and services rendered

Income from sales or services is recognised at the fair value of the consideration received or receivable.

The recognition of sales income occurs when the significant risks and benefits inherent to the ownership of the asset sold have been transferred to the buyer, and the day-to-day management or the effective control over such asset is no longer maintained.

Income from services rendered is recognised considering the stage of completion at the end of the year when the amount of income, stage of completion, costs already incurred and those pending can be reliably measured and it is likely that the economic benefits deriving from rendering the service will be received.

p) Environment

The Company takes measures to prevent, reduce or repair the damage caused to the environment by its activities.

Expenses derived from environmental activities are recognised as other operating expenses in the year in which they are incurred.

Items of property, plant and equipment acquired by the Group for consistent use in its activity and whose main purpose is to minimise the environmental impact of its activity and protect and improve the environment, including the reduction and elimination of future pollution from the Company's activities, are recognised as assets, applying the measurement, presentation and disclosure criteria described in section d) Property, plant and equipment.

Notes to the Annual Accounts

q) Transactions between Group companies

Transactions between Group companies, except those relating to mergers, spin-offs and non-monetary business contributions, are recognised at the fair value of the consideration delivered or received. The difference between that value and the amount agreed is recognised in accordance with the underlying economic substance.

5. Non-current assets held for sale

The Company has classified investments in Group companies and associates and loans to companies that operate water treatment plants amounting to Euros 10,687 thousand (Euros 10,362 thousand in investments in Group companies and associates and Euros 325 thousand in loans) as held for sale, on the basis of sale agreements signed on 11 July 2019. The sale transactions are expected to be effective in the first half of 2020, once all the relevant permits are obtained (Note 9.2). No impairment resulted from these transactions since the fair value less costs to sell is higher than the carrying amount.

6. Intangible assets

Details of "Intangible assets" were as follows:

2019

	Thousands of Euros
	Administrativ e Concessions	Computer software	Goodwill	Commercial rights	Total
COST:
Balance at 31 December 2018	79	10,563	1,031	2,228	13,901
Additions	-	2,410	-	-	2,410
Disposals	-	(35)	-	-	(35)
Balance at 31 December 2019	79	12,938	1,031	2,228	16,276
ACCUMULATED AMORTISATION:
Balance at 31 December 2018	(39)	(6,903)	(309)	(2,228)	(9,479)
Charges	(2)	(1,961)	(103)	-	(2,066)
Disposals	-	35	-	-	35
Balance at 31 December 2019	(41)	(8,829)	(412)	(2,228)	(11,510)
Net cost at 31 December 2019	38	4,109	619	-	4,766

2018

	Thousands of Euros
	Administrati ve Concession s	Patents	Computer software	Goodwill	Commercial rights	Total
COST:
Balance at 31 December 2017	79	54	8,379	1,031	2,228	11,771
Additions	-	-	2,271	-	-	2,271
Disposals	-	(54)	(87)	-	-	(141)
Balance at 31 December 2018	79	-	10,563	1,031	2,228	13,901
ACCUMULATED AMORTISATION:
Balance at 31 December 2017	(38)	(54)	(5,652)	(206)	(2,228)	(8,178)
Charges	(1)	-	(1,340)	(103)	-	(1,444)
Disposals	-	54	89	-	-	143
Balance at 31 December 2018	(39)	-	(6,903)	(309)	(2,228)	(9,479)
Net cost at 31 December 2018	40	-	3,660	722	-	4,422

Notes to the Annual Accounts

The Company's fully amortised Intangible assets at 31 December 2019 amounted to Euros 8,780 thousand (Euros 7,472 thousand at 31 December 2018), approximately, and correspond mainly to computer software and commercial rights.

Notes to the Annual Accounts

At the end of 2019 and 2018, the Company has no investments commitments in intangible assets.

7. Property, plant and equipment

Details of "Property, plant and equipment" were as follows:

2019

	Thousands of Euros
	Land	Buildings	Technical Installations and Machinery	Hand and machine tools (Note 4.d) Furniture and fixtures	Other Property, Plant and Equipment	Total
COST:
Balance at 31 December 2018	14,649	10,257	106,545	16,292	9,770	157,513
Additions	-	34	9,278	4,640	3,889	17,841
Disposals	-	(1,252)	(8,459)	(3,346)	(620)	(13,677)
Balance at 31 December 2019	14,649	9,039	107,364	17,586	13,039	161,677
ACCUMULATED DEPRECIATION:
Balance at 31 December 2018	-	(4,186)	(77,083)	(4,288)	(6,658)	(92,215)
Charges	-	(307)	(7,725)	(509)	(2,368)	(10,909)
Disposals	-	1,117	6,199	197	603	8,116
Balance at 31 December 2019	-	(3,376)	(78,609)	(4,600)	(8,423)	(95,008)
CUMULATIVE IMPAIRMENT:
Balance at 31 December 2018	(1,432)	(467)	(1,245)	(22)	-	(3,166)
Impairment losses	-	(1,765)	-	-	-	(1,765)
Irreversible impairment losses	-	311	1,245	-	-	1,556
Balance at 31 December 2019	(1,432)	(1,921)	-	(22)	-	(3,375)
Net cost at 31
December 2019	13,217	3,742	28,755	12,964	4,616	63,294

2018

	Thousands of Euros
				Hand and
				machine tools
			Technical	(Note 4.d)	Other Property,
	Land	Buildings	Installations and Machinery	Furniture and fixtures	Plant and Equipment	Total
COST:
Balance at 31 December 2017	14,649	9,939	99,055	14,336	9,138	147,117
Additions	-	318	9,648	4,735	3,081	17,782
Disposals	-	-	(3,982)	(2,880)	(524)	(7,386)
Transfers	-	-	1,824	101	(1,925)	-
Balance at 31 December 2018	14,649	10,257	106,545	16,292	9,770	157,513
ACCUMULATED DEPRECIATION:
Balance at 31 December 2017	-	(3,900)	(74,958)	(4,122)	(5,794)	(88,774)
Charges	-	(286)	(5,467)	(417)	(1,774)	(7,944)
Disposals	-	-	3,708	279	516	4,503
Transfers	-	-	(366)	(28)	394	-
Balance at 31 December 2018	-	(4,186)	(77,083)	(4,288)	(6,658)	(92,215)

Notes to the Annual Accounts

CUMULATIVE IMPAIRMENT:
Balance at 31 December 2017	(1,432)	(467)	(1,245)	(22)	-	(3,166)
Balance at 31 December 2018	(1,432)	(467)	(1,245)	(22)	-	(3,166)
Net cost at 31 December 2018	13,217	5,604	28,217	11,982	3,112	62,132

Notes to the Annual Accounts

Additions in 2019 and 2018 correspond mainly to the machinery necessary for Elecnor, S.A. to execute projects.

At 31 December 2019 and 2018, the Company did not have individually significant items of property, plant and equipment.

Cost disposals in 2019 and 2018 include the annual adjustment of machine tools that implied an expense of Euros 3,110 thousand and Euros 2,576 thousand, respectively, recognised under Other day-to-day management expenses in the accompanying income statement.

The cost of property, plant and equipment which, at 31 December 2019 and 2018, is fully depreciated and in use as follows:

	Thousands of Euros
	2019	2018
Buildings, technical installations and machinery	50,048	52,214
Furniture and fixtures	2,110	2,042
Information technology equipment	3,049	2,865
Motor vehicles and others	517	508
	55,724	57,629

The Company's procedures include taking out insurance policies to cover possible risks to which various items within its property, plant and equipment are exposed. At 31 December 2019 and 2018, the policies taken out covered the net carrying amount of the property, plant and equipment.

As indicated in Note 8, at the end of 2019 and 2018 the Company had finance lease agreements pertaining to its property, plant and equipment.

At the end of 2019 and 2018, the Company had no significant investments commitments in property, plant and equipment.

Moreover, at 31 December 2019 and 2018, the Company had the following items of property, plant and equipment located abroad:

	Thousands of Euros
		Accumulated
Country	Cost	depreciation	Net
Venezuela	242	(242)	-
Angola	1,504	(560)	944
Dominican Republic	1,223	(610)	613
Mexico	615	(589)	26
Brazil	254	(254)	-
Italy	5,767	(2,807)	2,960
Ghana	982	(136)	846
Mauritania	448	(111)	337
Cameroon	499	(128)	371
Panama	1,445	(315)	1,130
Senegal	240	(46)	194
El Salvador	120	(32)	88
Other	241	(125)	116
	13,580	(5,955)	7,625

2019

Notes to the Annual Accounts

2018

	Thousands of Euros
Country	Net	Accumulated depreciation	Cost
Venezuela	242	(242)	-
Angola	237	(227)	10
Dominican Republic	1,019	(343)	676
Mexico	589	(589)	-
Brazil	254	(254)	-
Italy	5,365	(1,921)	3,444
Ghana	170	(104)	66
Mauritania	304	(20)	284
Cameroon	250	(40)	210
Panama	1,207	(36)	1,171
Other	206	(69)	137
	9,843	(3,845)	5,998

8. Leases

Finance leases – Lessee

At the end of 2019 and 2018, as a finance lessee, the Company recognised finance leases as follows:

2019

	Thousands of Euros
	2019
	Land Buildings Total
Cost	6,651	2,480	9,131
Accumulated amortisation	-	(1,248)	(1,248)
Total	6,651	1,232	7,883

2018

	Thousands of Euros
	2018
	Land Buildings Total
Cost	6,651	2,480	9,131
Accumulated amortisation	-	(1,149)	(1,149)
Total	6,651	1,331	7,982

The Company's only finance lease agreement at the end of 2019 and 2018 corresponds to its offices in Bilbao, signed on 11 June 2007, and recognised in the gross amount of Euros 9,131 thousand, an amount that corresponds to the updated value on the date of signing the minimum payments agreement for the duration of the contract term.

Said contract expires in 2027 and payment will be over 240 monthly instalments.

The contract is subject to annual increases linked to Euribor + 55 basis points and the Company has arranged a swap to hedge against interest rate fluctuations which expires on the same date as the contract (Note 10).

Notes to the Annual Accounts

At the end of 2019 and 2018, the Company has contractually agreed the following minimum finance lease payments with lessors (including, if any, purchase options), based on the leases currently in force, without taking into account any shared expenses passed on, future CPI increases or future contractual lease payment reviews:

	Thousands of Euros
	2019		2018
Finance leases	Nominal	Current	Nominal	Current
minimum payments	amount	value	amount	value
Less than one year	705	437	708	415
Between 1 and 5 years	2,775	2,027	2,793	1,936
More than 5 years	2,545	2,325	3,232	2,867
Total	6,025	4,789	6,733	5,218

The reconciliation between the amount of future minimum lease payments and their current value is as follows:

	Thousands of Euros
	2019	2018
Future minimum payments	5,125	5,833
Purchase option	900	900
Unaccrued finance expenses	(1,236)	(1,515)
Current value	4,789	5,218

Operating leases – Lessee

In addition, in 2019 and 2018 the operating lease expenses included under "Other operating expenses – External services" in the accompanying income statement amounted to approximately Euros 46,948 thousand and Euros 42,828 thousand, respectively. At the end of 2019 and 2018, the Company's most significant operating leases were for machinery and motor vehicles, and buildings used to carry out its business activities. This amount includes machinery and motor vehicle leases which, due to their inherent activity, are leased for the duration of the works, and amount to Euros 38,609 thousand (Euros 34,385 thousand in 2018).

At the end of 2019 and 2018, the Company has contractually agreed the following minimum lease payments with lessors, based on the leases currently in force, without taking into account any shared expenses passed on, future CPI increases or future contractual lease payment reviews:

	Thousands of Euros
Non-cancellable future	Nominal amount
minimum payments	2019	2018
Less than one year	6,719	4,184
Between 1 and 5 years	9,660	11,070
More than 5 years	9,321	10,927
Total	25,700	26,181

Notes to the Annual Accounts

9. Investments in equity instruments of Group companies and associates, Financial investments and Trade receivables

9.1. Long- and short-term financial investments

The amounts under the headings "Long-term financial investments" and "Short-term financial investments" in the balance sheets at 31 December 2019 and 2018 are as follows:

Thousands of Euros
Category	2019		2018
	Non-current	Current	Non-current	Current
Equity instruments	1,040	-	1,040	-
Credits	2,176	487	12	441
Deposits and securities	4,022	1,184	3,523	1,163
Derivatives (Note 10)	23	384	109	330
Impairment adjustments	-	(431)	-	(424)
Total	7,261	1,624	4,684	1,510

Non-current "Deposits and securities" in the above table at 31 December 2019 and 2018 corresponds to security and other deposits delivered in relation to the various operating leases entered into by the Company (Note 8).

9.2. Investments in equity instruments of Group companies and associates

The breakdown of non-current investments in equity instruments of Group companies and associates at 31 December 2019 and 2018 is as follows:

	Thousands of Euros
	Balance				Transfers to non current assets held for sale	Balance
	31/12/2018	Additions	Derecognitions	Transfers		31/12/2019
Group companies:
Interests	891,854	34,638	(29,305)	(407,948)	(6,600)	482,639
Disbursements pending Impairment	(90)	(1,874)	-	-		(1,964)
adjustments	(35,742)	(8,503)	570	-	-	(43,675)
	856,022	24,261	(28,735)	(407,948)	(6,600)	437,000
Associates:
Interests	21,052	-	(821)	-	(3,762)	16,469
Disbursements			2	-	-
pending	(4)	-				(2)
Impairment
adjustments	(899) 20,149	(3) (3)	- (819)	- -	- (3,762)	(902) 15,565
Jointly
controlled entities:
Interests	2	1	-	407,948	-	407,951
	2	1	-	407,948	-	407,951
Total	876,173	24,259	(29,554)	-	(10,362)	860,516

The most significant information concerning interests in Group companies, jointly-controlled entities and associates at the end of 2019 and 2018 is shown in Appendix I to these annual accounts.

Equity instruments

The main movements in 2019 under "Equity instruments" in the above table were as follows:

Notes to the Annual Accounts

Shareholder contributions to the subsidiary Celeo Concesiones e Inversiones, S.L.U. amounting to Euros 6,967 thousand.

Notes to the Annual Accounts

• On 30 July 2019, the Company granted a loan to Celeo Concesiones e Inversiones, S.L.U. amounting to Euros 10,000 thousand, which was capitalised in the same year.
• On 17 December 2019, the Company signed a shareholders' agreement with APG to jointly control the subgroup Celeo Concesiones, pursuant to which the Company would hold a 51% interest in Celeo Concesiones e Inversiones, S.L. This agreement implied a loss of the control hitherto held by the Elecnor Group over the subgroup Celeo Concesiones. This new agreement is instrumented by means of the contribution by APG to the subgroup Celeo Concesiones of 49% of the interests it hitherto held in the subgroup Celeo Redes plus a cash payment of Euros 42,912 thousand to the Company for a 3.51% interest in Celeo Concesiones e Inversiones, S.L., affording it a 49% interest in the subgroup Celeo Concesiones. This sale of interests implied a reduction in the value of the interest of Euros 28,053 thousand, applying the weighted average cost method, and the recognition of income amounting to Euros 14,859 thousand under Impairment and profit/loss on disposal of financial instruments – Profit/loss on disposals and others in the accompanying income statement.
• On 10 July 2019, Sociedad Aguas Residuales Pirineos, S.A., agreed to reduce share capital by Euros 1,635 thousand by means of reimbursing the amount of shareholder contributions in a proportionate manner, which reduced the amount of the interest by Euros 817 thousand.
• On 11 July 2019, the Company arranged to sell interests in Sociedad Aragonesa de Aguas Residuales, S.A. and Sociedad Aguas Residuales Pirineos, S.A. the cost of which came to Euros 6,600 thousand and Euros 3,762 thousand, respectively. Since the sale transactions are expected to be effective in the first half of 2020, once all the relevant permits are obtained, the Company has classified its investments in these companies as non-current assets held for sale in the amount of Euros 10,362 thousand (Note 5).
• According to the minutes of 4 April 2019, Electrificaciones del Norte Elecnor, S.A. has agreed to a share capital increase that was fully subscribed by the Company in the amount of Euros 13,485 thousand.
• According to the deed of 28 October 2019, the Company dissolved Elecfrance, S.A.S.U., whose investment cost totalled Euros 1,179 thousand and which was impaired in the amount of Euros 568 thousand. This operation implied a loss of Euros 577 thousand recognised under Impairment and profit/loss on disposals of financial instruments – Impairment and losses, in the accompanying income statement.

The main movements in 2018 under "Equity instruments" in the above table were as follows:

• Pursuant to the minutes of 28 February 2018, Celeo Concesiones e Inversiones, S.L.U. agreed to return to shareholders the amount of Euros 40,109 thousand charged to the available share premium reserve, thereby reducing the amount of the interest by Euros 22,921 thousand and implying recognition of finance income amounting to Euros 17,188 thousand under Finance income from holdings in equity instruments in the accompanying income statement, in accordance with the profit/loss generated by the subgroup Celeo Concesiones e Inversiones.
• According to the minutes of 25 February 2018, Elecnor Do Brasil, LTDA agreed to reduce capital by Euros 22,000 thousand Brazilian reals, thereby reducing the amount of the interest by Euros 5,743 thousand in accordance with the reduction in the company's equity on the date of the operation. In addition, according to the minutes of 10 December 2018, Elecnor Do Brasil, LTDA agreed to increase its share capital by Euros 1,019 thousand, and the increase was fully subscribed by the Company by means of the non-monetary contribution of its interests in Vilhena Montagens Elétricas, Ltda, Elecnor Montagens Eletricas, Ltda and Montagens Eletricas Da Serra, Ltda, which had a positive impact on reserves of Euros 997 thousand.
• According to the minutes of 2 January 2018, Elecnor Perú SAC agreed to a share capital increase that was fully subscribed by the Company by means of the capitalisation of trade receivables in the amount of Euros 13,369 thousand.

Notes to the Annual Accounts

According to a minutes of 18 September 2018, Montelecnor S.A. agreed to a share capital increase that was fully subscribed by the Company by means of the capitalisation of trade receivables in the amount of Euros 2,000 thousand.

The functional currency of foreign interests is the currency of the countries in which their registered offices are located.

Provision for impairment of equity instruments

In accordance with the criteria set forth in Note 4.h, the Company assesses impairment and, where appropriate, calculates the relevant amounts, when there is objective evidence that the future cash flows from its investments in equity instruments are being reduced.

Details of provisions for impairment of equity instruments at 31 December 2019 and 2018 are as follows:

	Thousands of Euros
	2019	2018
Omninstal Electricidade, S.A.	1,996	1,996
Elecnor de Argentina, S.A.	16,127	16,127
Elecven, S.A.	2,216	620
Montelecnor, S.A.	13,224	13,224
Elecnor Energie and BAU Gmbh	1,145	1,145
Elecnor South África, Ltd.	2,138	2,000
Elecnor Perú, S.A.	5,593	-
Elecfrance, S.A.S.U.	-	568
Other	2,138	961
	44,577	36,641

In 2019, given the current situation of Elecnor Perú, S.A., the Company has allocated an impairment of Euros 5,593 thousand in the value of its interest and the loan granted to that company in the amount of Euros 11,867 thousand (Note 9.4). Elecnor Perú, S.A. had a contract with Consorcio Constructor Ductos del Sur to build the Gasoducto Sur Peruano (Southern Peruvian Gas Pipeline) which was cancelled in 2017, with Euros 27 million pending payment to the company, of which Euros 25 million are payable by the Odebrecht Group in 2021. Due to Odebrecht's financial difficulties and the fact that Elecnor Perú, S.A. does not currently have any other contracts in execution, the Company booked an impairment based on the underlying carrying amount of that company and considering that it is unlikely to recover the amount payable from Odebrecht.

Moreover, due to the recurring losses and weak equity position of Elecven, S.A., the Company has impaired the entire amount of its interest in that company.

9.3. Information on the nature and level of risk of financial instruments

Elecnor, S.A. is exposed to certain financial risks, which it manages by grouping together its systems for identifying, measuring and supervising risks and limiting the concentration thereof. Financial risk management and containment is performed on a coordinated basis by corporate management and the various business units and subsidiaries that comprise the Group. Financial risk management activities are approved at the highest executive level, in accordance with the rules, policies and procedures in place.

Notes to the Annual Accounts

Market risk

Foreign currency risk

The first risk to be mitigated arises from the transactions that the Company performs on the international markets in the course of its business, namely market risk due primarily to foreign currency risk. Certain income and costs of materials consumed are denominated in currencies other than the Euro. For this reason, the risk of fluctuating exchange rates of these currencies could have an impact on the Company's profits. In order to manage and minimise this risk, the Company uses hedging strategies (see note 10), since its objective is to generate profits only through its ordinary business, and not by speculating in relation to exchange rate fluctuations. The instruments used to achieve this hedge are essentially borrowings tied to the contract's collection currency, foreign currency hedges and swaps, whereby Elecnor, S.A. and the bank exchange the cash flows arising from a loan expressed in Euros for the flows of another loan expressed in the currency in question, as well as the use of "currency baskets" in order to hedge mixed financing tied to various currencies.

Interest rate risk

Interest rate fluctuations change the fair value of assets and liabilities that accrue interest at fixed rates and the future cash flows from assets and liabilities indexed to floating interest rates. Elecnor, S.A. obtains external financing to execute its projects in the form of syndicated loans. The hedging instruments, which are specifically assigned to financial debt instruments and are limited to the same nominal value as the latter and the same maturity dates as the hedged items, are essentially IRSs, the aim of which is to convert loans originally arranged at floating rates to fixed rates. In any case, the interest rate hedges arranged are all effective for accounting purposes.

Liquidity risk

Liquidity risk is mitigated through a policy of holding cash and highly liquid non-speculative short-term instruments, such as the acquisition of treasury bills under non-optional repurchase agreements and very short-term US Dollar deposits, through leading credit institutions in order to be able to meet its future commitments and the arrangement of committed credit facilities of sufficient amount to cover its projected needs.

Credit risk

The main credit risk arises from trade receivables, when the counterparty or customer does not meet their contractual obligations. To mitigate this risk, the Group operates with customers that have adequate credit records. In view of its activities and the sectors in which it operates, Elecnor, S.A. has customers with very high credit ratings. However, in the case of non-recurring international sales to customers, mechanisms such as advances, irrevocable letters of credit and insurance policies are used to ensure collection. Furthermore, the financial solvency of customers is analysed and specific terms and conditions are included in contracts, aimed at guaranteeing customer payments of the stipulated price.

In an economic scenario such as the present one, credit risk continues to be an overriding risk compared to other financial risks. Faced with this situation, Elecnor, S.A. continues to step up the measures taken to mitigate this risk, regularly analysing its exposure to credit risk, including the performance of individual analyses when transactions so require, and also recognising impairment as required (see note 9.5).

Notes to the Annual Accounts

9.4 Financial investments in Group companies and associates

Details of "Long- and short-term investments in Group companies and associates", except Investments in equity instruments, on the assets side of the balance sheet at 31 December 2019 and 2018, is as follows:

	Thousands of Euros
Category 2019			2018
	Non-current	Current	Non-current	Current
Credits to companies	22,428	20,118	26,953	16,081
Other financial assets	-	1,763	-	1,841
Impairment adjustments	(11,867)	(13,231)	-	(6,809)
Total	10,561	8,650	26,953	11,113

Long-term credits to Group companies

The breakdown by company of "Long-term investments in Group companies and associates – Credits to Group companies" under non-current assets at 31 December 2019 and 2018, is as follows:

	Thousands of Euros
	2019	2018
Sociedad Aragonesa de Aguas Residuales, S.A.U. (Note 5)	-	325
Gasoducto de Morelos S.A.P.I. de C.V.	10,561	16,176
Elecnor Perú, S.A.C.	-	10,452
	10,561	26,953

In 2012, the Company made various contributions to subsidiary Gasoducto de Morelos S.A.P.I. de C.V. for future capital increases amounting to a total of approximately USD 33,483 thousand, some of which were instrumented through various loans whose balance at 31 December 2019 and 2018 amounted to Euros 10,561 thousand and Euros 16,176 thousand, respectively (USD 11,801 thousand and USD 18,255 thousand, respectively), and which accrue interest at an annual rate of 7.5%. In 2019 the Company received approximately Euros 5.8 million in payments relating to these credits (Euros 6 million in 2018).

On 3 May 2017, the Company and Elecnor Perú, SAC agreed to raise the ceiling of the credit granted in 2016 from an initial amount of US dollars 10,500 thousand to US dollars 14,000 thousand, due to that company's financing needs. This credit accrues fixed annual interest at a rate of 2%, payable half-yearly. The duration of this credit is of one year, extendable monthly, although the Company reclassified it in 2018 to non-current assets since its collection is subject to the receipt of that company's trade receivables, estimated for 2021. In 2019, the balance receivable, of Euros 11,867 thousand, was fully impaired (see Note 9.2).

Short-term credits to Group companies

The breakdown by company of "Short-term investments in Group companies and associates – Credits to Group companies" under current assets at 31 December 2019 and 2018, is as follows:

	Thousands of Euros
	2019	2018
Elecdor, S.A.	1,230	1,219
Elecven, S.A.	-	4
Dunor Energía, SAPI de CV	-	6,070
Parque Solar Porton de SAS		133
Elecnor, INC	4,936	1,413
Audeca, S.L.	600	275
Gasoducto de Morelos S.A.P.I. de C.V.	118	158
Other	3	-
	6,887	9,272

Notes to the Annual Accounts

On 27 February 2018, the Company granted Elecnor INC a credit of up to USD 2,000 thousand. This credit accrues fixed annual interest at a rate of 1.5%, payable half-yearly. The term of this credit is of one year, and it may be extended annually. On 12 March 2019, an addendum was signed to this contract, establishing an increase in the ceiling of the mercantile credit agreement from USD 2,000 thousand to USD 10,000 thousand, and the amount drawn down at 31 December 2019 was Euros 4,936 thousand.

On 29 September 2016, the Company and Duro Felguera, S.A. (shareholders in Dunor Energía S.A.P.I. de CV) agreed to grant a credit to Dunor Energía S.A.P.I. de CV amounting to a total of USD 13,700 thousand, granted proportionately by each shareholder. The term of this credit is of one year, and it may be extended annually. The Company impaired the outstanding balance at 31 December 2019, of Euros 6,422 thousand, since it considers it unlikely to be recovered due to the recurring losses and the company's weak equity position.

9.5 Trade and other receivables

Details of trade and other receivables at 31 December 2019 and 2018 are as follows:

	Thousands of Euros
	2019	2018
Group (note 19.2) Customers Impairment adjustments	15,113 (1,729)	15,030 (842)
Associates and Joint ventures (note 19.2)
Customers	6,128	6,455
Impairment adjustments	(975)	-
Non-related Customers Other receivables Personnel Public Administrations, Corporate Income Tax (Note 16) Public Administrations, other (note 16)	839,238 11,351 159 6,588 19,759	769,391 9,383 31 8,581 15,503
Impairment adjustments	(65,119)	(90,676)
Total	830,513	732,856

The analysis of movements in 2019 and 2018 under changes in allowance accounts related to impairment losses due to credit risk of trade and other receivables is as follows:

	Thousands of Euros
	Current
	Customers	Receivables	Total
Balance at 31 December 2017	(63,713)	(5,662)	(69,375)
Charges	(20,730)	(70)	(20,800)
Applications	2,038	-	2,038
Reversals	-	2	2
Transfers	(3,383)	-	(3,383)
Balance at 31 December 2018	(85,788)	(5,730)	(91,518)
Charges	(6,844)	(76)	(6,920)
Applications	25,135	4,963	30,098
Reversals	495	22	517
Balance at 31 December 2019	(67,002)	(821)	(67,823)

Notes to the Annual Accounts

At 31 December 2019, non-related customer receivables included Euros 85,655 thousand in unprovisioned debt past due (Euros 64,975 thousand in 2018), of which Euros 22,206 thousand is past over one year due (Euros 19,402 thousand in 2018).

The carrying amount of financial assets. recognised in the balance sheet at amortised cost does not present significant differences with respect to their fair value.

Net income and expense by categories of financial assets at 31 December 2019 amounted to an expense of Euros 2,540 thousand and corresponds to finance income from loans and receivables applying the amortised cost method totalling Euros 3,863 thousand and impairment losses on loans and receivables totalling Euros 6,403 thousand (expense of Euros 23,631 thousand at 31 December 2018 corresponding to finance income on receivables applying the amortised cost method totalling Euros 3,978 thousand and impairment losses on loans and receivables totalling Euros 27,609 thousand).

9.6 Amounts denominated in foreign currencies

The breakdown at 31 December 2019 and 2018 of the main monetary financial assets denominated in foreign currency is as follows:

2019
------

	Thousands of Euros
				Short-term
	Long-term			investments
	credits to	Long-term	Trade and	in Group	Short-term
	Group	financial	other	companies	financial	Cash and cash
	companies	investments	receivables		investments	equivalents
AOA	-	95	14,229	-	-	1,974
BOB	-	-	452	-	3	826
DOP	-	42	26,355	1	3	4,859
DZD	-	943	19,741	-	-	30
GHS	-	12	5,778	-	-	239
GMD	-	-	601	-	-	-
GNF	-	-	1,593	-	-	-
HNL	-	5	4,195	-	-	611
HTG	-	-	12,921	-	-	-
JOD	-	-	8,695	-	6	157
KWD	-	-	1,589	-	-	-
MAD	-	-	302	-	-	3,970
MRO	-	1	11,056	-	-	701
MXN	-	2	567	-	-	808
NOK	-	-	7,394	-	4	5,999
OMR	-	-	13,380	-	-	791
USD	10,561	49	41,134	7,499	7	13,360
XAF	-	30	4,813	-	-	3,578
XOF	-	17	3,028	-	-	865
Other	-	44	401	3	3	370
Total	10,561	1,240	178,224	7,503	26	39,138

Notes to the Annual Accounts

2018

	Thousands of Euros
				Short-term
	Long-term			investments	Short-term
	credits to	Long-term	Trade and	in Group	financial
	Group	financial	other	companies	investments	Cash and cash
	companies	investments	receivables			equivalents
MXN	-	5	316	-	-	13
USD	26,628	63	24,793	8,864	3	3,363
DZD	-	935	22,788	-	-	107
GBP	-	-	208	-	-	-
HTG	-	-	9,402	-	-	-
JOD	-	-	5,451	-	3	761
OMR	-	-	2,120	21	-	98
AOA	-	16	867	-	-	896
AUD	-	-	-	430	-	-
DOP	-	35	25,222	-	3	2,795
NOK	-	-	7,005	-	3	1,518
PAB	-	21	14,859	899	-	1,388
XAF	-	13	2,381	-	-	390
MAD	-	13	1,099	-	-	3,403
MRO	-	1	5,533	-	-	1,698
Other	-	75	7,479	109	5	3,168
Total	26,628	1,177	129,523	10,323	17	19,598

10. Derivative financial instruments

The Company uses derivative financial instruments to cover the risks to which its business activities, transactions and future cash flows are exposed, mainly risks as a result of changes in exchange rates and interest rates. Details of hedging instruments in force at 31 December 2019 and 2018 are as follows:

Interest rate swaps:

	Thousands of Euros
		2019			2018
Year of contract	Notional amount	Measurement of swaps floating to fixed rate	Measurement of swaps floating to floating rate	Notional amount	Measurement of swaps floating to fixed rate	Measurement of swaps floating to floating rate
2014	-	-	-	145,000	(1,231)	330
2015	145,000	(1,510)	291	80,000	(2,358)	109
2016	80,000	(862)	(168)	45,000	(545)	(255)
2017	45,000	(1,967)	(14)	30,000	(1,158)	(18)
2018	-	(2,757)	(219)	-	(825)	(134)
2019	-	(75)	(1)	-	-	-
Total	270,000	(7,171)	(111)	300,000	(6,117)	32

The total amount of cash flow hedges recognised in equity at 31 December 2019 was an expense of Euros 3,483 thousand, before the tax effect (an expense of Euros 4,139 thousand, before the tax effect, at 31 December 2018).

The total amount of cash flow hedges transferred from income and expenses recognised in equity to finance expenses in the income statement was Euros 2,352 thousand, before the tax effect (Euros 2,831 thousand, before the tax effect, at 31 December 2018).

Notes to the Annual Accounts

Interest rate swaps do not exceed the nominal amount of outstanding principals of hedged financing and their settlement dates coincide with the settlement dates of the financing they cover.

In 2019, the Company arranged interest rate hedges tied to the syndicated financing obtained the previous year, pursuant to the novation contract of 14 November 2018, and described in Note 13. Specifically, these are 8 interest rate swaps of an initial nominal amount of Euros 1.5 million and a maximum nominal amount of Euros 54 million with 8 banks and a basis swap transaction for an initial nominal amount of Euros 1.5 million and a maximum nominal amount of Euros 54 million, in which floating interest rates are swapped. The maturities and interest settlement dates of the swaps coincide with those of the contracts to which they are assigned. These contracts were arranged in June 2019, their start date is 19 January 2021 and they expire on 19 July 2024.

In 2018, the Company arranged interest rate hedges tied to the syndicated financing obtained in the year and described in Note 13. Specifically, these are 8 interest rate swaps of an initial nominal amount of Euros 3.5 million and a maximum nominal amount of Euros 126 million with 8 banks and a basis swap transaction for an initial nominal amount of Euros 3.5 million and a maximum nominal amount of Euros 126 million, in which floating interest rates are swapped. The maturities and interest settlement dates of the swaps coincide with those of the financing agreements to which they are assigned. At 31 December 2019, these contracts remain in force.

Interest rate swaps assigned to the lease agreement:

	Thousands of Euros
	2019		2018
		Measurement of		Measurement of
Year of		swaps floating		swaps floating to
contract	Notional amount	to fixed rate	Notional amount	fixed rate
2009	-	-	5,269	(48)
2018	4,840	(180)	5,128	(79)

Exchange rate hedging instrument:

	Thousands of Euros
Year	2019	2018
Notional amount (USD sale) (*)	7,100	6,731
Exchange rate measurement	107	(149)
Notional amount (USD purchase) (*)	1,678	-
Exchange rate measurement	(146)	-
Notional amount (GBP) (*)	120	-
Exchange rate measurement	9

(*) Figures expressed in the pertinent currency

The Company has fulfilled the requirements set forth in Note 4.h to be able to classify as hedges the financial instruments detailed. Specifically, they have formally been designated as such and the coverage has been verified to be effective. In this regard, no transactions are planned that affect those others for which a hedge accounting policy was adopted.

Notes to the Annual Accounts

In addition to exchange rate insurance, in 2018, the Company, in order to reduce exchange rate risk in its net monetary flows in dollars, performed a number of cross-currency swaps with credit institutions whereby the Company and the bank exchanged the flows of a loan expressed in euros for the flows of another loan expressed in dollars, settling the resulting difference on maturity. The Company translates the loan into dollars (plus the accrued interest) at the closing exchange rate and compares it with the loan in Euros (plus the accrued interest), and the net value (i.e. the difference) is recognised under "Cash and cash equivalents", "Long-term financial investments – Other financial assets" or "Long-term payables – Loans and borrowings" or "Short-term payables – Loans and borrowings", depending on whether the difference is positive or negative and on the maturity thereof, giving rise to a balancing entry under translation differences.

Below is a breakdown of the notional amounts of cross-currency swaps at 31 December 2018 whose maturity is less than one year, and their negative measurement amounts to Euros 510 thousand:

	Thousands
	2019	2018
Cross-currency swap:
Flow in USD (*)	-	11,600

(*) Figures expressed in the pertinent currency

11. Equity

The composition and movement of equity is presented in the statement of changes in net equity.

11.1. Capital

At 31 December 2019 and 2018, the share capital of Elecnor, S.A. was represented by 87,000,000 book entry shares, each with a par value of Euros 0.10, fully subscribed and paid in.

The shares of the Company are listed on the Spanish electronic trading system.

At 31 December 2019 and 2018, the Company's shares were held as follows:

Interest %	2019	2018
Cantiles XXI, S.L. Bestinver Gestión, S.A., S.G.I.I.C. Santander Asset Management, S.A., SGIIC	52.76% - 3.09%	52.76% 4.76% -
Other (*)	44.15%	42.48%
	100.00%	100.00%

(*) All with an interest % of less than 3%.

Notes to the Annual Accounts

11.2. Reserves

Details of "Reserves" are as follows:

	2019
	Thousands of Euros
	Legal and statutory reserve	Voluntary reserve	Capitalisation reserve	Goodwill reserve	Differences for adjustments of capital to euros	Profit/loss for the year	Total
Balance at 31 December 2018	1,743	561,737	3,149	722	15	44,136	611,502
Profit for 2019 Distribution of profit	-	-	-	-	-	30,122	30,122
for 2018 Voluntary reserves Dividends Transfers Profit/loss on disposal of	- - -	17,401 - (1,156)	- - 1,259	- - (103)	- - -	(17,401) (26,735) -	- (26,735) -
own shares	-	189	-	-	-	-	189
Balance at 31 December 2019	1,743	578,171	4,408	619	15	30,122	615,078

	2018
	Thousands of Euros
	Legal and statutory reserve	Voluntary reserve	Capitalisation reserve	Goodwill reserve	Differences for adjustments of capital to euros	Profit/loss for the year	Total
Balance at 31 December 2017	1,743	538,145	1,756	825	15	48,508	590,992
Profit for 2018 Distribution of profit	-	-	-	-	-	44,136	44,136
for 2017 Voluntary reserves Dividends Other movements (Note 9)	- - -	23,551 - 997	- - -	- - -	- - -	(23,551) (24,957) -	- (24,957) 997
Transfers Profit/loss on disposal of own shares	- -	(1,290) 334	1,393 -	(103) -	- -	- -	- 334
Balance at 31 December 2018	1,743	561,737	3,149	722	15	44,136	611,502

a. Legal reserve

The legal reserve has been allocated in accordance with article 274 of Spanish Companies Act, which establishes that, in any event, a figure equal to 10% of the profit for the year must be earmarked to the reserve until it reaches at least 20% of share capital.

The legal reserve can be used to increase capital provided that the balance left on the reserve is at least equal to 10% of the nominal amount of the total capital after the increase. Except for the aforementioned purpose, unless the legal reserve exceeds 20% of the share capital it may only be used to offset losses if no other reserves are available.

At 31 December 2019 and 2018, the Company has appropriated to this reserve the minimum amount required by the Spanish Companies Act.

Notes to the Annual Accounts

b. Goodwill reserve

The goodwill reserve was appropriated in compliance with article 273.4 of the Revised Spanish Companies Act, which requires companies to transfer profits equivalent to 5% of goodwill to a non-distributable reserve until this reserve reaches an amount equal to goodwill recognised in the balance sheet. In the absence of profit, or if profit was insufficient, freely available reserves were to be used. This reserve has been freely available since 1 January 2016, for the amount exceeding the net carrying amount of the goodwill recorded in the balance sheet.

c. Voluntary reserves

Voluntary reserves are freely available.

Other movements in 2018 under "Voluntary reserves" include the effect of a non-monetary contribution totalling Euros 997 thousand (Note 9).

d. Capitalisation reserve

The capitalisation reserve has been appropriated in accordance with article 25 of the Corporate Income Tax Law, which requires that an amount equal to the reduction in taxable income for the year be appropriated to the reserve. The amount by which taxable income may be reduced is equal to 10% of the increase in equity, as defined in the aforementioned article. In no case may the amount of the reduction exceed 10% of the taxable income for the tax period prior to the reduction, before the integration referred to in article 11.12 of the Law and before offsetting tax loss carryforwards. However, if the reduction cannot be applied due to insufficient taxable income, the outstanding amounts may be applied in the tax periods ending in the two years immediately after the end of the tax period in which the reduction entitlement was generated, together with any reduction applicable in that period, subject to the limit indicated. The reserve is non-distributable and the increase in equity must be maintained for a five-year period from the end of the tax period in which the reduction is generated, unless accounting losses are incurred.

11.3. Own shares

According to the minutes of the General Shareholders' Meeting of 16 May 2017, the Board of Directors is authorised to acquire own shares in the Company on behalf of the latter or of subsidiaries, up to a maximum established by law and in mandatory legal provisions at each given time and which, at present, in combination with those already held by the Company, may not exceed 10% of its share capital, with a minimum acquisition price of the nominal value of the shares and a maximum price that may not exceed 30% of its share price, over a period of five years, superseding and leaving without effect the authorisation granted in the General Shareholders' Meeting of 23 May 2012.

At 31 December 2019 and 2018, the Company held own shares amounting to Euros 21,963 thousand and Euros 21,884 thousand, respectively, which are booked under "Own shares and equity" in equity in the balance sheet.

Movement of own shares and movement in 2019 and 2018 is as follows:

	No. of
	Shares
Own shares at 31 December 2017	2,310,650
Acquisition of own shares	124,061
Sale of own shares	(98,215)
Own shares at 31 December 2018	2,336,496
Acquisition of own shares	104,509
Sale of own shares	(120,196)
Own shares at 31 December 2019	2,320,809

In 2019, the Company acquired 104,509 own shares and sold 120,196 own shares, for an approximate global amount of Euros 1,213 thousand and Euros 1,323 thousand, respectively, obtaining a profit of Euros 189 thousand which was recognised directly against Reserves (in 2018, the Company acquired 124,061 own shares and sold 98,215 own shares, for an approximate global amount of Euros 1,563 thousand and Euros 1,245 thousand, respectively, obtaining a profit of Euros 334 thousand which was recognised directly against Reserves).

Notes to the Annual Accounts

All the own shares held by the company at 31 December 2019 represented 2.67% of the total share capital of Elecnor, S.A. at that date (2.69% at 31 December 2018).

12. Provisions

The breakdown of "Long-term provisions" and "Short-term provisions" of non-current and current liabilities in the balance sheet at the end of 2019 and 2018, and the movements in 2019 and 2018, are as follows:

		Thousands of Euros
	Balance at					Balance at
Provisions	31/12/2018	Charges	Reversals	Application	Transfers	31/12/2019
Other employee benefits Provisions for litigation and	4,131	2,055	-	(2,129)	-	4,057
other liabilities	56,808	50,451	(16,526)	(12,733)	114	78,114
Total	60,939	52,506	(16,526)	(14,862)	114	82,171

	Thousands of Euros
	Balance at					Balance at
Provisions Other employee	31/12/2017	Charges	Reversals	Application	Transfers	31/12/2018
benefits	2,980	2,639	-	(1,488)	-	4,131
Provisions for litigation and other liabilities	41,549	33,526	(2,682)	(18,798)	3,213	56,808
Total	44,529	36,165	(2,682)	(20,286)	3,213	60,939

On 31 May 2017, Spanish National Markets and Competition Commission (CNMC) notified the Company, that it was opening disciplinary proceedings against it and another 15 companies, for a potential infringement in the sphere of the construction and maintenance of electrification systems and electromechanical equipment in railway lines. On 14 March 2019, the CNMC Council issued a resolution reducing the fine with respect to that proposed in the resolution of 31 August 2018 to Euros 20.4 million. In May 2019, the Company successfully lodged an appeal and on 16 July 2019 the National Court (Audiencia Nacional) suspended execution of the CNMC resolution of 14 March 2019, dependent upon the presentation of bank guarantees.

On 26 September 2019, the Company received an incidental request of the National Court to bring proceedings, said proceedings having been brought in proper and timely manner on 11 November 2019.

In light of these events, and based on the assessment of the Company's legal advisers, although they consider that there are still solid arguments to challenge the CNMC's inspection, due to recent events in connection with other appeals against the Resolution, and the developments in other proceedings in the National Court in the last 12 months when the arguments presented by the parties have been rejected and the CNMC's decision confirmed, the Directors of the Company have booked a provision of Euros 20.4 million to cover this risk, since they estimate that there is a probability of the appeal prospering of less than 50%.

Furthermore, under Provisions for litigation and other liabilities at 31 December 2019 the tax provision was recognised on the basis of what has been described in note 16.

Lastly, Provisions for litigation and other liabilities at 31 December 2019 includes the Company's best estimate with regard to penalties and other contingencies in relation to the execution of various projects, mainly abroad, the amount of which is not yet determined and whose disbursement is estimated to take place in the short term, including provisions for negative works margins the amounts of which are individually not material making up a total amount of Euros 9,298 thousand (Euros 8,222 thousand at 31 December 2018). Reversals in 2019 and 2018 correspond to penalties and other contingencies in relation to the execution of various projects that were completed in 2019 and 2018, respectively, in a manner favourable to the Group.

Notes to the Annual Accounts

Other employee benefits include the cost payable by the Company to early-retiring employees using the replacement contract modality.

13. Financial debts

13.1. Classification and maturity of financial liabilities

The classification of financial liabilities by categories and classes under "Long- and short-term payables" in current and non-current liabilities at the end of 2019 and 2018 is as follows:

	2019
		Thousands of Euros
		Non-current			Current
Category	At amortised cost or cost	At fair value	Total	At amortised cost or cost	At fair value	Total
Trade and other payables Bonds and other marketable
securities Loans and borrowings Finance lease payables	- 268,826	- -	- 268,826	69,989 52,932	- -	69,989 52,932
(Note 8)	4,352	-	4,352	437	-	437
Other financial liabilities	-	-	-	7,675	-	7,675
Hedge derivatives (Note 10)	-	6,243	6,243	-	1,656	1,656
Total	273,178	6,243	279,421	131,033	1,656	132,689

		2018
	Thousands of Euros
		Non-current		Current
Category	At amortised cost or cost	At fair value	Total	At amortised cost or cost	At fair value	Total
Trade and other payables Bonds and other securities securities	-	-	-	154,816	-	154,816
Loans and borrowings Finance lease payables	246,839	-	246,839	42,156	-	42,156
(Note 8) Other financial liabilities	4,803 -	- -	4,803 -	415 5,140	- -	415 5,140
Hedge derivatives (Note 10)	-	5,372	5,372	-	1,428	1,428
Total	251,642	5,372	257,014	202,527	1,428	203,955

The breakdown by maturity of "Long-term payables" is as follows:

Notes to the Annual Accounts

2019

	Thousands of Euros
					2025 and
Category	2021	2022	2023	2024	thereafter	Total
Loans and borrowings Finance lease payables	1,561	21,474	31,361	148,975	65,455	268,826
(Note 8)	472	495	518	543	2,324	4,352
Derivatives (Note 10)	1,562	1,761	1,667	1,165	88	6,243
Total	3,595	23,730	33,546	150,683	67,867	279,421

2018

		Thousands of Euros
					2024 and
Category	2020	2021	2022	2023	thereafter	Total
Loans and borrowings	1,484	1,789	21,289	31,083	191,194	246,839
Finance lease payables
(Note 8)	451	472	495	518	2,867	4,803
Derivatives (Note 10)	1,386	1,005	1,105	1,045	831	5,372
Total	3,321	3,266	22,889	32,646	194,892	257,014

The amount of net income and expense by category of financial liabilities at 31 December 2019 was Euros 13,009 thousand and corresponds to finance expenses from Trade and other payables amounting to Euros 10,657 thousand and reclassification from equity to profit and loss for Hedge derivatives amounting to Euros 2,352 thousand, applying the amortised cost method (Euros 17,402 thousand and corresponding to finance expenses from Trade and other payables amounting to Euros 14,571 thousand and reclassification from equity to profit and loss for Hedge derivatives amounting to Euros 2,831 thousand, applying the amortised cost method, in 2018).

13.2. Payables

Details of payables are as follows:

	Thousands of Euros
	Non-current			Current
	2019	2018	2019	2018
Promissory notes	-	-	69,989	154,816
Loans and borrowings	268,826	246,839	51,631	40,824
Interest	-	-	1,301	1,332
Finance lease payables
(Note 8)	4,352	4,803	437	415
Financial instruments,
hedge derivatives (note 10)	6,243	5,372	1,656	1,428
Suppliers of fixed assets	-	-	5,237	2,763
Other	-	-	2,438	2,377
Total	279,421	257,014	132,689	203,955

Loans and borrowings - syndicated loan

On 21 July 2014, Elecnor arranged syndicated financing of Euros 600 million with a group of 19 banks, which replaced the Euros 401 million that had been drawn down at that date in the syndicated financing arranged in 2012. This financing was structured into two tranches: one loan tranche totalling Euros 300 million, repayable in instalments, and a revolving credit tranche with a limit of Euros 300 million, maturing in July 2019.

Notes to the Annual Accounts

On 2 July 2015, Elecnor signed an initial novation of this agreement, subscribed by 18 of the 19 lenders, in order to amend the financial conditions (reducing the applicable margin) and extend the term of the financing.

On 29 June 2016, Elecnor signed a second novation of this agreement, subscribed by 17 of the 18 lenders. Bankinter assigned Euros 22 million, of which Euros 16 million were subscribed by Abanca and Euros 6 million by Kutxabank, while Crédit Agricole assigned Euros 25 million entirely to Abanca.

On 31 October 2017, Elecnor signed a third novation of this agreement, subscribed by 16 of the 17 lenders. This novation implied:

• a decrease in the available limit of the credit tranche (tranche B) of the syndicated financing to Euros 200 million,
• a new tranche in the margin scale applicable as a function of the net financial debt-EBITDA ratio,
• extend the term of the financing. One-year deferral of the date of each loan instalment and the repayment of the credit facility, thereby pushing back its maturity to July 2022.

On 14 November 2018, Elecnor signed a fourth novation of this contract, subscribed by 14 of the lenders (two of them merged), agreeing to:

• voluntary prepayment of the loan tranche (tranche A), amounting to Euros 100 million, bringing the total limit of this tranche to Euros 200 million;
• the extension of the financing term, delaying final maturity until July 2024.

On 27 June 2019, Elecnor signed a fifth novation of this agreement, subscribed by the 14 lenders. This renewal entailed the addition as a borrower of Electrificaciones del Ecuador (Elecdor), the division of the credit tranche (tranche B) into two sub-tranches, one sub-tranche (sub-tranche B1) with a ceiling of Euros 134.2 million available for Elecnor and one sub-tranche (sub-tranche B2) with a ceiling of USD 75 million available for both Elecnor and Elecdor.

The Company analysed whether or not the conditions had been substantially modified, and concluded that there was no extinguishment of the original liabilities in any of the years.

With respect to interest rate hedging, swaps had been arranged prior to the novation to cover the loan for 70% of the loan calendar generated by the novation of 2018. In June 2019, it was decided to hedge the interest rate risk of the remaining 30%, for which purpose another 8 interest rate swaps (IRSs) were arranged, with an initial notional amount of Euros 1.5 million and a maximum notional amount of Euros 54 million and a new basis swap with an initial notional amount of Euros 1.5 million and a maximum notional amount of Euros 54 million. At 31 December 2019, there are 39 IRSs and 5 basis swaps, assigned mainly to hedging interest rate risk in syndicated financing and, to a lesser extent, to hedging interest rate risk on promissory note issuance in the Alternative Fixed Income Market (MARF). The maturities and interest settlement dates of the swaps coincide with those of the financing agreements to which they are assigned (Note 10).

This syndicated financing bears interest indexed to Euribor for the interest term chosen by the borrower (1, 3 or 6 months) for drawdowns in euros and to Libor for the interest period chosen by the borrower (1, 3 or 6 months), plus a spread tied to the net financial debt/(EBITDA + dividends from projects) ratio. The Company has undertaken to comply with different ratios over the term of the bank financing agreement ((Net financial debt/EBITDA), (EBITDA/Net finance expenses), and (Net financial debt/Equity)), which will be calculated on the basis of the ELECNOR Group's consolidated figures. Non-compliance could be cause for terminating the contract, although, at 31 December 2019, all the ratios linked to this financing were compliant.

At 31 December 2019, the drawn down amount of the syndicated financing agreement totals Euros 257 million and corresponds to Euros 200 million of the loan tranche, Euros 30 million of the credit tranche in Euros and Euros 27 million (USD 30 million) of the credit tranche in US Dollars (Euros 235 million at 31 December 2018, Euros 200 million corresponding to the loan tranche and Euros 35 million to the credit tranche).

Notes to the Annual Accounts

Taking into account the effect of the hedges amounting to Euros 2,273 thousand, the aforementioned syndicated financing agreement (loan tranche and credit tranche) accrues interest at an average rate of 2.37%, totalling Euros 5,182 thousand in 2019 (Euros 6,319 thousand in 2018, including hedging finance expenses amounting to Euros 2,831 thousand), which the Company has recognised as "Finance expenses" in the accompanying income statement for 2019.

Moreover, at 31 December 2019, the credit tranche accrued finance expenses relating to availability fees amounting to Euros 689 thousand (Euros 736 thousand in 2018).

Loans and borrowings - other debts

Current and non-current loans and borrowings corresponded entirely to a financing agreement for Euros 9,200 thousand, arranged on 18 August 2017, with the European Energy Efficiency Fund, S.A., SICAV-SIF, maturing in 2031 and linked to the assignment of future credit rights of the Company. The amount pending repayment at 31 December 2019 is approximately Euros 8,350 thousand (Euros 8,900 thousand at 31 December 2018).

Moreover, on 13 March 2018, the Company arranged a financing agreement through a policy for the assignment of credit rights with the Efficiency Solutions fund, amounting to Euros 11,500 thousand, and maturing in June 2027. The amount outstanding at 31 December 2019 is approximately Euros 9,311 thousand (Euros 10,042 thousand at 31 December 2018).

In 2019 these borrowings accrued interest of Euros 818 thousand (Euros 782 thousand in 2018).

Promissory notes

At the beginning of 2019, Elecnor, S.A. had issued promissory notes on the Alternative Fixed Income Market for an amount of Euros 155 million. New issues in 2019 totalled Euros 1,601 million while maturities totalled Euros 1,686 million. The outstanding balance at 31 December 2019 was therefore Euros 70 million, reflecting 700 securities with a nominal value of Euros 100 thousand each.

At the beginning of 2018, Elecnor, S.A. had issued promissory notes on the Alternative Fixed Income Market for an amount of Euros 100 million. New issues in 2018 totalled Euros 658 million while maturities totalled Euros 603 million. The outstanding balance at 31 December 2018 was therefore Euros 155 million, reflecting 1,550 securities with a nominal value of Euros 100 thousand each.

The promissory note programmes in force in 2019 and 2018 provided for a maximum number of outstanding issues at all times of Euros 300 million.

In 2019, these promissory notes accrued interest and fees totalling Euros 1,216 thousand (Euros 1,276 thousand in 2018) which the Company recognised under "Finance expenses" in the accompanying income statement.

Credit facilities

Furthermore, the Company has credit facilities granted with the following limits (excluding the credit facility of tranche B of the syndicated loan):

	Thousands of Euros
	2019		2018
		Amount		Amount not
Category	Limit	not drawn	Limit	drawn down
		down
Credit facilities	111,000	61,087	111,000	72,400
Total	111,000	61,087	111,000	72,400

Excluding tranche B of the syndicated financing, at 31 December 2019 and 2018 Elecnor, S.A. had seven open credit facilities with financial institutions, with a maximum total limit of Euros 111 million. These bilateral credit facilities bear interest indexed to EURIBOR/LIBOR plus a market spread, and most of them mature at one year, or at a maximum three years with automatic annual renewals.

All the above financing facilities have a personal guarantee attached.

Notes to the Annual Accounts

This bank financing accrued interest during 2019 of approximately Euros 380 thousand, which the Company recognised under "Finance expenses" in the accompanying income statement (approximately Euros 1,280 thousand in 2018).

13.3. Amounts denominated in foreign currencies

The breakdown at 31 December 2019 and 2018 of the main financial liabilities denominated in foreign currency is as follows, in Thousands of Euros:

2019

Loans and
	Trade and payables
	234
	11,429
	17,012
	451
	1,596
	446
	2,601
	5,082
	2,048
	4,158
	786
	14,681
	766
	2,095
-	2,644
	66,029
	borrowings - - - - - - - - - - - 26,848 - - 26,848

2018

Currency	Trade and payables
USD	9,921
DZD	22,914
HTG	1,120
JOD	3,717
OMR	1,051
VEF	-
MXN	48
AOA	7,225
BOB	462
DOP	6,211
HNL	876
VES	2,372
MRO	4,031
NOK	4,221
PAB	5,819
Other	2,601
Total	72,589

Notes to the Annual Accounts

14. Information on the average supplier payment period. Additional Provision Three. "Duty of Information" pursuant to Law 15/2010 of July 5

Information on the average supplier payment period in 2019 and 2018 is as follows:

	Days
	2019	2018
Average supplier payment period	65	66
Transactions paid ratio	73	73
Transactions payable ratio	42	41
	Expressed in Thousands of Euros
Total payments made	776,103	739,406
Total payments outstanding	237,042	198,727

15. Advances from customers

The breakdown of this heading of current liabilities on the balance sheet at the end of 2019 and 2018 is as follows:

	Thousands of Euros
	2019	2018
Advance invoices Advances from customers	304,212 69,666	241,184 52,632
	373,878	293,816

Advance invoices comprise invoices on account issued in accordance with the timing conditions specified in the agreements for works currently in progress.

Advances from customers basically reflect payments made in advance by customers prior to the start of the related contracts. These advances are discounted from invoices issued during the execution of the contracts and tend to be linked to projects carried out abroad.

16. Taxation

16.1. Current balances with Public Administrations

The breakdown of balances with Public Administrations at the end of 2019 and 2018 is as follows:

	Thousands of Euros
	2019	2018
Assets:
Current tax assets	6,588	8,581
Value Added Tax and similar	12,230	10,222
Withholdings	4,415	2,730
Other	3,114	2,551
	26,347	24,084
Liabilities:
Current tax liabilities	4,717	12,999
Value Added Tax and similar	18,778	17,203
Social security	9,118	8,043
Withholdings	6,937	5,651
Other	428	922
	39,978	44,818

Notes to the Annual Accounts

In its estimated corporate income tax settlement for 2019, the Company applied withholdings and payments on account performed in the year amounting to approximately Euros 14 thousand and Euros 3,546 thousand, respectively (approximately Euros 30 thousand and Euros 3,768 thousand, respectively, in 2018).

The Company has the following years open to inspection by the taxation authority in respect of the main taxes applicable to it:

Tax	Years open to inspection
Corporate Income Tax (*)	2014 – 2018
Value Added Tax	2015 – 2019
Personal Income Tax	2015 – 2019
Social security	2015 – 2019
Capital Gains Tax	2015 – 2019
Non-residents	2015 – 2019

(*) The deadline for filing Corporate Income Tax returns is 25 calendar days after the six months subsequent to conclusion of the tax periods, so corporate tax corresponding to 2019 will not be open to inspection until 25 July 2020.

Inspections conducted by the Tax Authority's Large Taxpayers Division at the Company, and commenced by notification on 1 July 2016, concluded in 2018.

Said inspections encompassed the following taxes and periods:

• Corporate Income Tax for the tax periods 2011 to 2013,
• Value Added Tax for the tax periods 06/2012 to 12/2014,
• Withholdings and payments on account for earnings for personal work and professional activities for the tax periods 06/2012 to 12/2014,
• Withholdings and payments on account for capital gains for the periods 06/2012 to 12/2014,
• Withholdings and payments on account for real estate earnings for the tax periods 06/2012 to 12/2014,
• Withholdings on account for non-residents tax for the tax periods 06/2012 to 12/2014,

The aforementioned inspections concluded in 2018 and the Group signed statements of conformity for a total payment of Euros 10,915 thousand in tax, late payment interest and, where applicable, fines, the expense of which is recognised in the accompanying income statement; it also signed statements of disconformity whose settlement implies a payment obligation totalling Euros 14,208 thousand.

Against the settlement agreements deriving from the disconformity statements, the Company filed economicadministrative appeals on 28 December 2018 before the Central Economic-Administrative Court which, the payment obligation having been suspended while the proceedings are completed, are pending administrative processing on the date of authorising these annual accounts for issue, the records of the proceedings not yet having been made available or the procedure for presenting arguments yet arranged by the Central Economic-Administrative Court.

In light of this situation, the Company's Directors, in cooperation with its tax advisers, and although they consider that there are weighty arguments to underpin the position of the Company, have decided to allocate a provision this year for the amounts claimed in the appealed settlement agreements in connection with differences in interpretation in relation to related party transactions amounting to Euros 7,559 thousand, since they consider that in 2019 retroactivity has been ruled out and, accordingly, the reviewing bodies are more likely to approve the Tax Administration's position than not (Note 12), and considering the impact for the rest of years open to inspection.

In addition to the foregoing, on 29 October 2019, the Company received a notification of the commencement of an inspection in relation to the following taxes and years:

• Corporate Income Tax for the tax periods 2014 to 2016,
• Value Added Tax for the tax periods 09/2015 to 12/2016,

Notes to the Annual Accounts

• Withholdings and payments on account for earnings for personal work and professional activities for the tax periods 09/2015 to 12/2016,
• Withholdings and payments on account for capital gains for the periods 09/2015 to 12/2016,
• Withholdings and payments on account for real estate earnings for the tax periods 09/2015 to 12/2016,
• Withholdings on account for non-residents tax for the tax periods 09/2015 to 12/2016,

However, the Administration's entitlement to verify or investigate tax loss carryforwards offset or pending offsetting, deductions for double taxation and deductions to encourage certain activities applied or pending application prescribes after 10 year from the day after the end of the established period for filing the tax return or self-assessment for the tax period in which the Company's entitlement to offsetting or application was generated. Once that period has elapsed, the Company must accredit tax losses or deductions by presenting the settlement or self-assessment and the accounts, and also evidencing that they have been filed during the aforementioned period in the Companies Register.

Due to the treatment permitted by prevailing fiscal legislation, additional tax liabilities that cannot be objectively quantified could arise in the event of inspection. In any case, the Company's Directors consider that the aforementioned taxes have been correctly paid and therefore, even in the event of discrepancies in the interpretation of prevailing fiscal legislation of certain transactions, they consider that any such liabilities that could arise would not have a significant effect on the accompanying annual accounts.

16.2. Reconciliation between accounting profit/loss and taxable income

The reconciliation between accounting profit/loss and taxable income for Corporate Income Tax purposes is as follows:

2019

	Thousands of Euros
	Increase	Decrease	Total
Accounting profit/loss before taxes			54,659
Permanent differences:
Income obtained abroad	18,634	(9,148)	9,486
Dividends (Note 19)	-	(83,278)	(83,278)
Capitalisation reserve	-	(353)	(353)
Non-deductible expenses	34,340	-	34,340
Gains on financial investments	-	(14,859)	(14,859)
Portfolio provision	9,303	-	9,303
Temporary differences:
Originating in previous years:
Fixed assets	505	(289)	216
Other provisions (note 12)	-	(26,121)	(26,121)
Originating in the current year:
Insolvency provision	2,630	-	2,630
Other provisions (note 12)	24,848	-	24,848
Offsetting of tax losses			(2,806)
Taxable income			8,065

Notes to the Annual Accounts

2018

		Thousands of Euros
	Increase	Decrease	Total
Accounting profit/loss before taxes			59,850
Permanent differences:
Income obtained abroad	5,535	(31,917)	(26,382)
Dividends (Note 19)	-	(46,817)	(46,817)
Non-deductible expenses	2,865	-	2,865
Gains on financial investments	394	-	394
Portfolio provision	3,365	-	3,365
Temporary differences:
Originating in previous years:
Fixed assets	545	(376)	169
Other provisions	-	(76,128)	(76,128)
Originating in the current year:
Insolvency provision	962	-	962
Other provisions	19,104	-	19,104
Offsetting of tax losses			-
Taxable income			(62,618)

Applicable fiscal legislation provides for certain credits whose aim is, in certain circumstances, to avoid double taxation of income obtained abroad, in connection with both permanent establishments located in foreign countries and dividends paid by non-resident subsidiaries. When applying these two tax credits, the Company has made the adjustments indicated in the tables above to the basis for calculating Corporate Income Tax in 2019 and 2018.

16.3. Tax recognised in Equity

The breakdown of tax recognised directly in Equity in 2019 and 2018 is as follows:

2019

	Thousands of Euros
	Increases	Decreases	Total
Deferred tax: Originating in previous years: Measurement of cash flow hedges	-	283	283
Total deferred tax			283
Total tax recognised directly in equity			283

2018

	Thousands of Euros
	Increases	Decreases	Total
Deferred tax: Originating in previous years: Measurement of cash flow hedges	-	327	327
Total deferred tax			327
Total tax recognised directly in equity			327

In both 2019 and 2018, tax recognised directly in equity corresponds to the tax effect of fair value measurement of derivative instruments in force at the close of each of those years.

Notes to the Annual Accounts

16.4. Reconciliation between the accounting profit/loss and the Corporate Income Tax expense

The reconciliation between the accounting profit/loss and the Corporate Income Tax expense for 2019 and 2018 is as follows:

	Thousands of Euros
	2019	2018
Accounting profit/loss before taxes	54,659	59,850
Rate of 25%	13,665	14,963
Permanent differences:
Impairment of investments in Group companies	2,326	841
Dividends	(20,820)	(11,704)
Profit/loss on disposals of investments in Group companies	(3,715)	98
Capitalisation reserve	(88)	-
Income obtained abroad	2,371	(6,595)
Other non-deductible expenses	8,585	716
Tax branches	4,569	12,288
Prior years' adjustments	(623)	(1,029)
Deductions	-	(739)
Other	18,267	6,875
Total tax expense recognised in the income statement	24,537	15,714

As established by applicable legislation, taxes cannot be deemed as definitively settled until the tax returns filed have been audited by taxation authority or until relevant statute of limitations has concluded.

Other non-deductible expenses at 31 December 2019 correspond to the impairment of the loan granted to Elecnor Perú SAC (Note 9) and the provision for the fine imposed by the CNMC (Note 12).

Others in 2019 correspond mainly to the effect of the tax provision (in 2018 this corresponded mainly to part of the statements of conformity signed in connection with the inspections to which the Company had been subject) (notes 12 and 16.1).

16.5. Deferred tax assets

The breakdown of the balance of this account at the end of 2019 and 2018 is as follows:

	Thousands of Euros
	2019	2018
Temporary differences (prepaid taxes)
Provisions for PV plants	232	232
Remuneration provision	5,332	3,668
Insolvency and credit provisions	4,843	2,001
Other provisions	11,021	15,917
Fair value measurement of derivative instruments (Note 10)	1,975	1,701
Corporate transactions	739	739
Other	983	448
Tax credits and deductions	17,085	18,154
Total	42,210	42,860

These aforementioned deferred tax assets were recognised in the balance sheet since the Company's Directors consider, based on the best estimates of the Company's future results, including certain tax planning actions, that the recovery of such assets is likely.

Notes to the Annual Accounts

16.6. Deferred tax liabilities

The breakdown of the balance of this account at the end of 2019 and 2018 is as follows:

	Thousands of Euros
	2019	2018
Temporary differences
Fair value measurement of derivative instruments (Note 10)	103	111
Corporate transactions	515	515
Leases	-	4
Accelerated amortisation	162	285
Other	2,986	2,962
Total	3,766	3,877

Deferred tax assets and liabilities that are expected to be realised or reversed in periods of less than 12 months are not significant.

17. Income and expenses

17.1. Net turnover

The breakdown of the turnover in 2019 and 2018, by both geographic areas and products, is as follows:

		Thousands of Euros
By geographic area	2019	2018
Domestic	987,643	859,507
International	381,085	455,779
Total	1,368,728	1,315,286
By product or activity
Electricity	457,194	381,231
Power generation	230,404	274,164
Telecommunications	206,738	215,473
Construction, environment and water	98,189	112,658
Maintenance	167,389	143,622
Facilities	122,306	122,984
Gas	37,227	41,427
Railways	49,281	23,727
Total	1,368,728	1,315,286

17.2. Materials consumed

The breakdown of Consumption of goods, Raw materials and other materials consumed for 2019 and 2018 is as follows:

	Thousands of Euros
	2019	2018
Consumption of raw materials and others
Domestic purchases	300,820	213,455
EU purchases	23,853	33,910
Imports	52,977	61,150
Discounts and returns	(3,315)	(3,631)
Changes in inventories	(178)	843
	374,157	305,727

Notes to the Annual Accounts

17.3. Personnel expenses

The breakdown of "Personnel expenses" in the accompanying income statements for 2019 and 2018 is as follows:

	Thousands of Euros
	2019	2018
Salaries and wages Social security Other employee benefits expenses	336,420 86,782 5,225	302,200 77,442 7,691
	428,427	387,333

17.4. Transactions denominated in foreign currencies

Details of income and expenses denominated in foreign currency at 31 December 2019 and 2018 are as follows:

		Thousands of Euros
	2019	2018
Income
Net sales	562,162	611,535
Rendering of services	439	201
Financial Instruments
Finance income	5	325
Dividends	24,007	21,829
Other	2,387	1,410
	589,000	635,300
Expenses
Net purchases	(105,451)	(94,732)
Expenses on operating leases	(6,611)	(6,313)
Other services received	(30,087)	(29,292)
Personnel expenses	(28,414)	(28,933)
Financial Instruments
Finance expenses	(117)	(123)
Taxes	(9,657)	(21,250)
Other	(3,812)	(5,812)
	(184,149)	(186,455)

18. Information on employees

The average headcount, by professional category, in 2019 and 2018 was as follows:

	Average headcount
	2019	2018
Management	122	106
Executive	685	633
Technician	1,921	1,576
Base	7,192	7,164
Total	9,920	9,479

Of the average headcount at Elecnor, S.A. in 2019, 4,743 employees had temporary contracts (4,794 in 2018).

Notes to the Annual Accounts

Moreover, the breakdown by gender at the end of 2019 and 2018, specified by professional category, of staff and Directors is as follows:

	2019		2018
Professional category	Male	Female	Male	Female
Directors	13	2	13	2
Management	107	13	105	14
Executive	555	126	553	145
Technician	1,345	765	980	604
Base	6,978	351	6,622	308
Total	8,998	1,257	8,273	1,073

The average number of Company employees with a disability equal to or higher than 33% (or equivalent local rating) in 2019 and 2018, detailed by professional category, is as follows:

Professional category	2019	2018
Technical area	6	6
Administration	7	5
Specialists	34	32
Total	47	43

19. Related Party Balances and Transactions

19.1. Related Party Transactions

The Company's transactions with related parties are as follows:

2019

	Thousands of Euros
		2019
	Group	Associates	Joint
	companies		ventures	Total
Income
Sales	17,414	14,922	-	32,336
Other operating income	3,020	190	116	3,326
Financial Instruments
Finance income	1,827	1,382	555	3,764
Dividends	81,799	1,479	-	83,278
Profits on disposals (Note 9)	14,859	-	-	14,859
	118,919	17,973	671	137,563
Expenses
Materials consumed	(20,938)	-	-	(20,938)
External services	(4,539)	-	-	(4,539)
Personnel expenses	(3)	-	-	(3)
Adjustments to customers	(893)	-	(975)	(1,868)
Financial Instruments
Finance expenses	(567)	-	-	(567)
Impairment and losses
Equity instruments	(9,080)	(3)	-	(9,083)
Credits	(11,867)	-	(6,422)	(18,289)
	(47,887)	(3)	(7,397)	(55,287)
	71,032	17,970	(6,726)	82,276

Notes to the Annual Accounts

	Thousands of Euros
	2018
	Group	Associates	Joint
	companies		ventures	Total
Income
Sales	15,265	22,365	-	37,630
Other operating income Financial Instruments	2,914	283	-	3,197
Finance income	567	2,916	253	3,736
Dividends	39,481	7,336	-	46,817
Profits on disposals	345	-	-	345
	58,572	32,900	253	91,725
Expenses
Materials consumed	(6,975)	-	-	(6,975)
External services	(5,237)	(17)	-	(5,254)
Personnel expenses	(1,189)	-	-	(1,189)
Financial Instruments
Finance expenses	(444)	-	-	(444)
Adjustments for
credit risk (Note 8)	(2,842)	(6,809)	-	(9,651)
	(16,687)	(6,826)	-	(23,513)
	41,885	26,074	253	68,212

Financial Instruments – dividends at 31 December 2018 included Euros 17,188 thousand corresponding to income from the return of the share premium by Celeo Concesiones e Inversiones, S.L., for a total of Euros 40,109 thousand, in accordance with the profit/loss generated by the subgroup Celeo Concesiones e Inversiones, S.L.

Notes to the Annual Accounts

19.2. Related party balances

The breakdown of balances with Group companies and related parties at 31 December 2019 and 2018 is as follows:

2019

	Thousands of Euros
	2019
	Group companies	Associates	Joint ventures	Total
Long-term investments in Group companies and associates Equity instruments Credits to companies	437,000 -	15,565 10,561	407,951 -	860,516 10,561
Total non-current assets	437,000	26,126	407,951	871,077
Advances to suppliers Trade and other receivables	2,297	-	-	2,297
Customers, short-term Group companies and associates	13,384	5,055	98	18,537
Short-term investments in Group companies and associates Credits to companies Other financial assets	6,770 1,691	117 -	- 72	6,887 1,763
Total current assets	24,142	5,172	170	29,484
Total assets	461,142	31,298	408,121	900,561
Short-term payables to Group companies and associates Trade and other payables	(27,607)	(5)	-	(27,612)
Suppliers, Group companies and associates	(6,722)	-	-	(6,722)
Total current liabilities	(34,329)	(5)	-	(34,334)
Total liabilities	(34,329)	(5)	-	(34,334)

Notes to the Annual Accounts

2018

	Thousands of Euros
	2018
	Group	Associates	Joint
	companies		ventures	Total
Long-term investments in Group companies and associates
Equity instruments	856,022	20,149	2	876,173
Credits to companies	10,777	16,176	-	26,953
Total non-current assets	866,799	36,325	2	903,126
Advances to suppliers	3,345	-	-	3,345
Trade and other receivables Customers, short-term Group companies and associates	14,188	5,861	594	20,643
Short-term investments in Group companies and associates
Credits to companies	3,044	158	6,070	9,272
Other financial assets	1,769	72	-	1,841
Total current assets	22,346	6,091	6,664	35,101
Total assets	889,145	42,416	6,666	938,227
Short-term payables to Group companies and associates	(46,827)	(5)	-	(46,832)
Trade and other payables Suppliers, Group companies and associates	(5,743)	(20)	-	(5,763)
Total current liabilities	(52,570)	(25)	-	(52,595)
Total liabilities	(52,570)	(25)	-	(52,595)

On 11 July 2019, the Group company Ehisa Construcciones y Obras, S.A. granted the Company a mercantile loan amounting to Euros 5,000 thousand, with a term of one year that may be extended annually, accruing interest at a fixed annual rate of 1.5%.

On 30 September 2019, the Group company Hidroambiente S.A.U. granted the Company a mercantile loan amounting to Euros 1,000 thousand, with a term of one year that may be extended annually, accruing interest at a fixed annual rate of 1.5%.

On 29 June 2018, Enerfin Sociedad de Energía, S.L.U. granted the Company a loan amounting to Euros 44,900 thousand, with a term of one year that may be extended annually, accruing interest at a fixed annual rate of 1.5%, the drawn down amount of which at 31 December 2019 was Euros 3,100 thousand (Euros 37,900 thousand at 31 December 2018). Moreover, in 2019, Enerfin Enervento Exterior, S.L.U. a member of the group Enerfin Sociedad de Energía, S.L., granted the Company a mercantile loan of Euros 7,000 thousand, with a term of one year that may be extended annually, accruing interest at a fixed annual rate of 1.5%, which had been fully drawn down at close of the year.

On 28 December 2017, the Group company Deimos Space. S.L.U. granted the Company a mercantile loan amounting to Euros 4,000 thousand with a term of one year that may be extended annually, accruing interest at a fixed annual rate of 1.5%. In 2018, the Company repaid 50% of the outstanding amount and in 2019 it repaid the loan in its entirety.

On 28 May 2018, the Group company Aplicaciones Técnicas de la Energía, S.L. granted the Company a mercantile loan amounting to Euros 6,000 thousand, with a term of one year that may be extended annually, accruing interest at a fixed annual rate of 2%. In 2019, Euros 500 thousand of this loan was repaid. In December 2019, the Company arranged a new mercantile loan for Euros 3,500 thousand, with a term of one year that may be extended annually, accruing interest at a fixed annual rate of 2%.

Notes to the Annual Accounts

19.3. Remuneration of the Board of Directors

a) Remuneration and other benefits

In 2019 the members of the Company's Board of Directors received remuneration amounting to Euros 5,200 thousand (Euros 4,937 thousand in 2018). This remuneration includes that earned in their capacity as management personnel.

The Company has paid approximately Euros 4.1 thousand for life insurance arranged for former or current members of its Board of Directors (Euros 4.1 thousand in 2018).

At 31 December 2019 and 2018, the Company does not have any pension obligations with former or current members of the Board of Directors nor has it extended any guarantees on their behalf or granted any loans thereto.

At 31 December 2019 and 2018, the Board of Directors of the Company is formed by 15 individuals, two of whom are female.

At 31 December 2019 and 2018, the amount paid by the Company with regard to public liability insurance for all or some of the directors in relation to damage caused due to acts or omissions in discharging their duties was not significant.

b) Conflicts of interest concerning the Directors-

The members of the Board of Directors of Elecnor, S.A. and their related parties have had no conflicts of interest requiring disclosure in accordance with article 229 of the Revised Spanish Companies Act.

c) Transactions other than ordinary business or under terms differing from market conditions carried out by the Directors-

In 2019 and 2018 the Directors of the Company have not carried out any transactions other than ordinary business or applying terms that differ from market conditions with the Company or any other Group company.

19.4. Remuneration to the Management Team

In 2019, the Company's Management Team received remuneration amounting to Euros 4,661 thousand (Euros 1,186 thousand in 2018).

20. Bonds and guarantees

At 31 December 2019 and 2018, the breakdown of bonds and guarantees for bids, completion or performance, generally provided by banks on behalf of the Company in respect of third parties, is as follows:

	Thousands of Euros
	2019	2018
Completion bonds	498,153	411,845
Advances on contracts	203,054	160,756
Performance bonds	130,701	125,594
Bid bonds	63,033	52,829
Standby	25,209	11,948
	920,150	762,972

At 31 December 2019 and 2018, the Company had provided bonds to the customer Empresa de Transmisión Energía for Euros 33 million and Euros 29 million, respectively. It had also provided bonds to the customer Toabré for Euros 26 million and Euros 25 million, respectively. These are the most significant amounts among the rest of bonds.

Notes to the Annual Accounts

The Company's Directors consider that any liabilities that might arise from the bank guarantees provided would not give rise to significant losses in the accompanying annual accounts.

Contingencies-

On 17 January 2020, the Central Court of Instruction No. 5 issued an order decreeing the commencement of a trial concerning a former employee of the subsidiary Deimos Space, S.L., the latter for alleged criminal liability as a legal person for possible crimes of corruption in international commercial transactions and money laundering, requiring that the company provide a guarantee of Euros 1,460 thousand to cover civil liability, and additional guarantees of Euros 10,240 thousand and Euros 2,625 thousand to cover possible future pecuniary sanctions and confiscations.

The Group is in complete disagreement with the legal decision and is exercising its rights in the proceedings, appealing the guarantee amount required and requesting its free acquittal, as is the former Company employee and the latter's legal team, and it considers that there has been no proof in the proceedings to presume with a sufficient degree of certainty, beyond all reasonable doubt, that either Deimos Space, S.L. or its former employee will be sentenced, so that the Directors of the Company, in accordance with the terms of the plaintiff's defence writ, consider that the probable result of the trial will be an acquittal, and that therefore no criminal or civil liability will be enforced. On this basis, the Company's Directors do not estimate that this will have any impact on the recoverable value of the investment in Deimos Space, S.L. (Note 9.2).

21. Temporary Business Associations (UTEs)

The balance sheets and income statements of the Temporary Business Associations in which Elecnor, S.A. is involved are proportionately consolidated in the accompanying annual accounts, in accordance with the provisions for adaptation of the Spanish General Chart of Accounts to the construction sector.

Details of UTEs and the Company's interest percentage therein at 31 December 2019 and 2018, the amount of revenues from construction work performed in 2019 and 2018 and the order book at said dates are attached as Appendix II to these annual accounts.

Details of the contribution of UTEs to the various headings in the accompanying balance sheet and income statement at 31 December 2019 are as follows:

	Thousands		Thousands
ASSETS	of Euros	LIABILITIES	of Euros
Property, plant and equipment	615	Profit/loss for the year	(7,652)
Inventories	1,546	Short-term payables	85,087
Trade receivables	52,083
Current investments	(430)
Cash	23,621
Total	77,435	Total	77,435

Details of the contribution of UTEs to the various headings in the accompanying balance sheet and income statement at 31 December 2018 were as follows:

	Thousands		Thousands
ASSETS	of Euros	LIABILITIES	of Euros
Property, plant and equipment	1,548	Profit/loss for the year	10,320
Inventories	3,493	Short-term payables	67,595
Receivables	39,553
Current investments	(469)
Cash	33,790
Total	77,915	Total	77,915

Notes to the Annual Accounts

The heading "Inventories" at 31 December 2019 includes advance payments by Temporary Business Associations to their suppliers amounting to Euros 1,425 thousand (Euros 3,257 thousand at 31 December 2018).

Furthermore, the heading "Short-term payables" in the attached table includes advance invoices and advances from customers amounting to Euros 27,198 thousand (Euros 12,844 thousand in 2018).

Below is a breakdown of the UTEs' contributions to the various headings of the income statement:

	Thousands of Euros
Income statement	2019	2018
Net turnover	71,611	97,994
Materials consumed	(50,220)	(65,325)
Non-trading income	1,015	2,393
Personnel expenses	(6,594)	(6,132)
External services	(14,589)	(14,422)
Taxes	(1,593)	(1,500)
Losses, impairment and changes in trade provisions	(2,125)	(1,006)
Depreciation and amortisation	(2,414)	(1,032)
Impairment and profit/loss on disposal of fixed assets	(6)	17
Finance income	25	100
Finance expenses	(116)	(33)
Translation differences	(1,081)	2,819
Foreign tax expense	(1,565)	(3,553)
Total	(7,652)	10,320

22. Order book

Details, by line of business, of the Elecnor, S.A.'s order book at 31 December 2019 and 2018, excluding UTEs, are as follows:

	Thousands of Euros
By geographic area	2019	2018
Domestic	460,249	363,388
International	1,128,920	922,596
Total	1,589,169	1,285,984
By line of business
Electricity	632,051	488,849
Power generation	288,748	442,738
Telecommunications	169,774	129,509
Construction, environment and water	314,918	48,778
Maintenance	28,559	40,671
Facilities	64,056	29,457
Gas	24,754	30,701
Railways	66,309	75,281
Total	1,589,169	1,285,984

The above order book does not include projects that are expected to generate losses.

Notes to the Annual Accounts

23. Audit fees

The auditor (KPMG Auditores, S.L.) of the Company's annual accounts invoiced the following net fees for professional services at 31 December 2019 and 2018:

	Thousands of Euros
Description	2019	2018
For audit services	185	144
For other Verification services	98	98
For other services	8	10
Total	291	252

The above amounts include all fees relating to services provided in 2019 and 2018, regardless of when they were invoiced.

Other verification services refer to the limited review of interim financial statements and procedures in regard to ICSFR, provided by KPMG Auditores, S.L. to Elecnor S.A. in the years ended 31 December 2019 and 2018.

Other services refer to procedural reports regarding compliance with covenants and other procedures agreed provided by KPMG Auditores, S.L. to Elecnor, S.A. in the years ended 31 December 2019 and 2018.

Moreover, other affiliates of KPMG International invoiced the Company in the years ended on 31 December 2019 and 2018 for net fees relating to professional services, as follows:

	Thousands of Euros
Description	2019	2018
For other Verification services	38	-
For tax advisory services	-	17
For other services	1,350	2,368
Total	1,388	2,385

24. Environmental information

Respect for the environment and sustainability are an integral part of Elecnor's core values and culture. The Company is committed to protecting the environment and fostering efficiency in the consumption of energy resources. Elecnor's Environmental Management System defines a procedure to identify, assess and record the environmental aspects originating in the company's activities in order to determine which are significant and apply the most efficient corrective measures to minimise their impact.

In 2019, AENOR multi-site certification audits were conducted according to ISO standards 9001: 2015 and ISO 14001:2015 This is a single certificate for all of the Organisations in the Elecnor infrastructures area that contains all of the scopes of the various activities and all of the work centres which, up until now, obtained certification individually.

The Quality Management (ER-0096/1995) and Environmental Management (GA-2000/0294) certification includes the following Group areas:

• Major Networks Unit
• Energy Unit
• Engineering Unit
• Facilities and Networks Unit: Central Regional Office and Northern Branches, North-Eastern Regional Office, Eastern Regional Office, Southern Regional Office, Elecnor Medio Ambiente, Elecnor Seguridad, Area 3 Equipamiento, Diseño e Interiorismo; Elecnor Infrastrutture S.R.L. (Italy); Ehisa Construcciones y Obras; Aplicaciones Técnicas de la Energía and Jomar Seguridad.

Notes to the Annual Accounts

Environmental Management certificates are also held for the following affiliates:

• Audeca, (GA-1999/0134)
• Deimos, (ES 028048-2)
• Hidroambiente, (SGI 1201167/12)
• Enerfín, (GA-2003/0416)

In 2019, Elecnor renewed its environment certificate for carbon dioxide emissions, obtained from the Spanish Association for Standardisation and Certification (AENOR) and verified in accordance with ISO standard 14064- 1. Through this verification the Company obtains independent and rigorous endorsement of the amount of GHG emissions caused by its activities, thereby seeking to improve its environmental and energy management.

Elecnor renewed its certification of registration in the National Register for Carbon Footprint, Offsetting and Absorption of Carbon Dioxide at Spain's Ministry for Ecological Transition's Office for Climate Change (OECC), obtaining the REDUZCO seal, having managed to reduce its carbon footprint for 5 consecutive years.

It also renewed its AENOR Energy Management System certification (GE-2013/0033), as per the UNE-EN ISO 50001:2011 standard.

In 2018, Elecnor devised a Climate Change Strategy to reduce its impact, boost its resilience and tap into the potential opportunities provided by climate change, so as to grow as a Group in a sustainable manner.

Lastly, Elecnor joined the CDP sustainability index and has been rated a B for two consecutive years (2018 and 2019), which implies international recognition of its strategy to combat climate change, since it means that in 2019 Elecnor was recognised as having the highest level of climate change management. Elecnor's B rating is above the electric utilities sector average and above the regional European average.

25. Events after the reporting period

The outbreak of the novel coronavirus causing the disease known as COVID-19 in China in January 2020 and its recent spread to numerous countries across the globe led the World Health Organisation to declare a pandemic on 11 March 2020.

Considering the complexity of markets due to their globalisation and the absence, for now, of an effective treatment against the virus, the consequences for the operations of the Elecnor Group are uncertain, and will depend largely on how the pandemic evolves and spreads over the next few months, as well as the capacity of all the economic agents involved to react and adapt.

Consequently, on the date of authorising these Annual Accounts for issue it is too soon to perform a detailed assessment or quantification of the potential impact of COVID-19 on Elecnor and its group of companies, as the short-, medium- and long-term consequences remain uncertain. In any event, the consequences of COVID-19 are considered a subsequent event that does not require an adjustment of the annual accounts of 2019, without prejudice to their being recognised in the consolidated annual accounts of 2020.

In this regard, there has already been a downturn in the estimated activity in the first few months of 2020 as a result of the COVID-19 outbreak, and it is not yet possible to gauge whether this situation will persist and to what extent.

Notes to the Annual Accounts

Nevertheless, the Company's Directors and Management, considering the measures adopted by the various governments of the countries in which the Elecnor Group operates to help manage the health crisis unleashed by the COVID-19 pandemic, has conducted a preliminary assessment of the current situation based on the best available information. Due to the aforementioned considerations, this information may be incomplete. Of the findings of that assessment, we highlight the following aspects:

• ꞏ Liquidity risk: the general market situation may foreseeably trigger a widespread increase in liquidity stresses in the economy, as well as a contraction in the credit market. In this regard, the Company's financial position is solid and it has sizeable undrawn credit lines (Note 13), which, coupled with the launch of specific plans to boost and efficiently manage liquidity, will enable it to tackle these stresses.
• ꞏ Operating risk: the changing and unpredictable nature of events could lead to the risk of the temporary disruption of some of the Company's activities. Accordingly, specific working groups and procedures have been established aimed at monitoring and managing developments in its operations at all times, in order to minimise the impact on its business.
• ꞏ Risk of variation of certain financial figures: the aforementioned factors could trigger a reduction in the next financial statements of the amounts booked under significant headings for the Elecnor Group, such as "Net turnover" or "Profit after tax", or key indicators thereof (EBITDA/Net financial debt ratio) although for now it is not possible to reliably quantify the impact of this, considering the conditioning factors and restrictions we have already mentioned.

Lastly, note that the Directors and Management of Elecnor are constantly monitoring the situation as it unfolds, in order to successfully tackle any potential impacts, both financial and non-financial.

(Thousands of Euros)

						Direct or indirect
			Registered			ownership percentage
2019	Parent	Company	office	Auditor	Activity
Consolidation method
Fully consolidated companies
	Elecnor, S.A.
					Development and operation of
		Andes Solares, SAS (****) Aplicaciones Técnicas de la	COLOMBIA	***	renewable energy sources	100.00%
		Energía, S.L.U.(ATERSA) Area 3 Equipamiento y Diseño	SPAIN	Deloitte	Solar energy	100.00%
		Interiorismo, S.L.U.	SPAIN	***	Interior design	100.00%
		Audeca, S.L.U.			Environmental restoration and reforestation and operation of
			SPAIN	KPMG	roads.	100.00%
		Betonor, S.L.	ANGOLA	***	Dormant	51.00%
		Celeo Concesiones E			Management and
		Inversiones, S.L.U.	SPAIN	KPMG	administration of companies	51.00%
		Corporacion Electrade, S.A.	VENEZUELA	***	Construction and assembly Analysis, engineering and	100.00%
		Deimos Space, S.L.U.	SPAIN	KPMG	development of space missions and software	100.00%
				Jose Francisco
		Ehisa Construcciónes y Obras,		Villamonte
		S.A.U.	SPAIN	Fernando	Construction and assembly	100.00%
		Elecdal, URL	ALGERIA	***	Construction and assembly	100.00%
		Elecdor, S.A.	ECUADOR	Seel & Company, S.A.	Construction and assembly	100.00%
		Elecen, S.A.	HONDURAS	***	Construction and assembly	100.00%
		Elecnor Argentina, S.A.	ARGENTINA	SMS	Construction and assembly	100.00%
		Elecnor Australia PTY LTD	AUSTRALIA	ESV	Management and administration of companies	100.00%
		Elecnor Cameroun Société
		Anonyme	CAMEROON	***	Construction and assembly	100.00%
		Elecnor Chile, S.A.	CHILE	KPMG	Construction and assembly	100.00%
		Elecnor de Mexico, S.A.	MEXICO	KPMG	Construction and assembly	100.00%
		Elecnor Do Brasil, L.T.D.A.	BRAZIL	KPMG	Construction and assembly A broad range of business	100.00%
					activities in the areas of engineering, development,
		Elecnor Energie und Bau,			construction, assembly, repairs
		GmbH	GERMANY	***	and maintenance of all types of works, installation work of any	100.00%
					kind, particularly in energy efficiency and renewable
					energies.
		Elecnor Infrastruttre e Aerospaziale, S.R.L.	ITALY	***	Construction and assembly	100.00%
		Elecnor Infrastruture, LLC	OMAN	***	Construction and maintenance	70.00%
				Portal Vega &
		Elecnor Perú, S.A.C.	PERU	Asociados	Construction and assembly	100.00%

Page 1 of 17

(Thousands of Euros)

			Registered			Direct or indirect ownership percentage
2019	Parent	Company	office	Auditor	Activity
		Elecnor Seguridad, S.L.U.	SPAIN	***	Installation and maintenance of fire prevention and safety systems	100.00%
		Elecnor South Africa (PTY) LTD	South Africa	***	Construction and assembly	100.00%
		Elecnor, INC	USA	RP&B	Facilities	100.00%
		Electrificaciones Del Norte, S.A.	SPAIN	***	A broad range of business activities	100.00%
		Electrolineas del Ecuador, S.A.	ECUADOR	Seel & Company, S.A.	Construction and assembly	100.00%
		Elecven Construcciones, S.A.	VENEZUELA	Deloitte	Construction and assembly	100.00%
		Enertel, S.A. de C.V. Eresma Solar, S.L.U. (****)	MEXICO SPAIN	KPMG ***	Construction and assembly Development, construction and operation of companies linked	99.99% 100.00%
		Elecnor Angola Group	ANGOLA	***	to renewable energy Activities in the areas of public works and civil engineering	55.00%
		Hidroambiente, S.A.U.	SPAIN	KPMG	Environmental activities	100.00%
	IDDE, S.A.U.		SPAIN	***	Sales	100.00%
		IQA Operatios Group, LTD	SCOTLAND	KPMG	Electrical installations Sales, installation and maintenance of fire prevention	100.00%
		Jomar Seguridad, S.L.U.	SPAIN	***	and safety systems	100.00%
		Montelecnor, S.A.	URUGUAY	Ernst & Young	Construction and assembly	100.00%
		Omninstal Electricidade, S.A. Parque Eólico Montañes,	PORTUGAL	KPMG	Construction and assembly Construction and operation of	100.00%
		S.L.U. (****)	SPAIN	***	wind farm	100.00%
		Parque Solar Porton, SAS	COLOMBIA	***	Power generation	100.00%
		Stonewood Desarrollos, S.L.	SPAIN	***	Sales Development and operation of	100.00%
	CORPORACION ELECTRADE	Yariguies Solar, SAS (****)	COLOMBIA	***	renewable energy sources	100.00%
	DEIMOS SPACE, S.L.U.	Electrade Investment, Ltda (*)	BARBADOS	***	Sale of materials	100.00%
		Deimos Atlantic Launchers, S.A. (*)	ITALY	***	Space transport, launch of satellites and space vehicles	100.00%
		Deimos Engenharia, S.A.	PORTUGAL	ESAC Espirito Santo Associados	Services in the areas of telecommunications and aeronautic and space energy Software development,	100.00%
		Deimos Engineering and Systems, S.L.U. .(*)	SPAIN	KPMG	engineering and technical assistance in the field of remote sensing	100.00%
		Deimos Space UK, Limited (*)	ENGLAND	James Cowper Kreston	Analysis, engineering and development of space missions and software	100.00%

Page 2 of 17

(Thousands of Euros)

						Direct or indirect
2019	Parent	Company	Registered office	Auditor	Activity	ownership percentage
		S.C. Deimos Space, S.R.L. (*)	ROMANIA	***	Analysis, engineering and development of space missions	100.00%
					and software
	ELECNOR AUSTRALIA
	ELECNOR INC	Green Light Contractors PTY, LTD (*)	AUSTRALIA	ESV	Construction of a PV farm	100.00%
		Belco Elecnor Electric, INC (*)	USA	RP&B	Electrical installations	100.00%
		Elecnor Hawkeye, LLC (*)	USA	RP&B	Electrical installations	100.00%
	ELECTRIFICACIONES DEL NORTE, ELECNOR, S.A.
		WAYRA ENERGY, S.A. () Zogu, S.A.()	ECUADOR ECUADOR	*** Seel & Company, S.A.	Oil and natural gas extraction Construction and assembly	50.00% 100.00%
		ENERFÍN ENERGY CO OF CANADA Lambton Enerwind General Partner Inc (Gp)(*)	CANADA	***	Administration and advisory services	100.00%
		Lambton Enerwind Limited Partnership (Sec)(*) ENERFÍN ENERGY	CANADA	***	Wind farm development	100.00%
		COMPANY OF CANADA, INC Investissements Éoliennes de L´Érable, INC. (*) Investissements Éoliennes de	CANADA	***	Administration and advisory services Administration and advisory	100.00%
		L´Érable, SEC. (*) ENERFÍN ENERVENTO EXTERIOR, S.L.	CANADA	***	services	100.00%
		Gran Sul Geração de Energia (*)	BRAZIL	***	Wind farm development	100.00%
		Guajira Eolica II, S.A.S. (*)	COLOMBIA	***	Wind farm development	100.00%
		Prairie Winds General Partner (*)	CANADA	***	Management and administration of companies	70.00%
		Prairie Winds Limited Partner (*)	CANADA	***	Wind farm development	25.00%
		Rio Norte I Energia (*)	BRAZIL	***	Management and administration of companies Management and	100.00%
		Rio Sul 1 Energia, Ltda (*)	BRAZIL	Deloitte	administration of companies Management and	100.00%
		Rio Sul 2 Energia, Ltda (*) Vientos De Panabá, S.A. de	BRAZIL	***	administration of companies	100.00%
	ENERFÍN	CV (*)	MEXICO	***	Wind farm development	100.00%
	ENERVENTO, S.L.U.
		Aerogeneradores del Sur, S.A. (*)	SPAIN	Deloitte	Construction, operation and use of wind farm resources	100.00%
		Eólica Montes de Cierzo, S.L. (*)	SPAIN	Deloitte	Operation of power plants	100.00%

Page 3 of 17

(Thousands of Euros)

						Direct or indirect
			Registered			ownership
2019	Parent	Company	office	Auditor	Activity	percentage
		Eólica Páramo de Poza, S.A.
		(*)	SPAIN	Deloitte	Operation of power plants	70.00%
		Galicia Vento, S.L. (*)	SPAIN	Deloitte	Operation of power plants	90.60%
		Parque Eólico Malpica, S.A.(*)	SPAIN	Deloitte	Operation of power plants	95.55%
	ENERFÍN SOCIEDAD
	DE ENERGÍA, S.L.	Enerfera, S.R.L. (*)	ITALY	***	Construction, operation and use of wind farm resources	100.00%
		Enerfín Developments British Columbia, Inc (*)	CANADA	***	Development and management of wind farm activities	100.00%
		Enerfín do Brasil Sociedad de Energia, LTDA (*)	BRAZIL	***	Development and management of wind farm activities	100.00%
		Enerfín Energy Company, INC (*)	USA	***	Development and management of wind farm activities	100.00%
		Enerfín Energy Company of Canada, INC (*)	CANADA	***	Management and administration of companies	100.00%
		Enerfín Enervento Exterior, S.L. (*)	SPAIN	Deloitte	Management and administration of companies Administration and advisory	100.00%
		Enerfín Enervento, S.L.U. (*) Enerfín Québec Services, INC	SPAIN	***	services Management and	100.00%
		(*) Enerfín Sociedad de Energía,	CANADA	***	administration of companies Management and	100.00%
		S.L.U.	SPAIN	Deloitte	administration of companies	100.00%
		Eolica La Vela (*)	COLOMBIA	***	Wind farm development	100.00%
		Eolica Los Lagos (*)	CHILE	***	Wind farm development	100.00%
		Eolica Musichi (*)	COLOMBIA	***	Wind farm development	100.00%
		Guajira Eólica I, S.A.S. (*) Parque Eólico Cofrentes,	COLOMBIA	***	Wind farm development	100.00%
		S.L.U. (*) Vientos de Sucilá, S.A. de CV	SPAIN	***	Operation of power plants	100.00%
		(*) Vientos De Yucatán, S.A. De	MEXICO	***	Wind farm development	100.00%
	ÉOLIENNES DE	Cv (*)	MEXICO	***	Wind farm development	100.00%
	L'ÉRABLE COMMANDITAIRE
		Éoliennes de L´Érable, SEC. (*)	CANADA	Deloitte	Operation of power plants	51.00%
		Éoliennes De L'Érable Commandite Inc(*)	CANADA	***	Administration and advisory services	100.00%
	INVESTISSEMENTS ÉOLIENNES DE L'ÉRABLE SEC
		Éoliennes L'Érable Commanditaire Inc (*)	CANADA	***	Operation of power plants	100.00%

Page 4 of 17

(Thousands of Euros)

						Direct or indirect
			Registered			ownership
2019	Parent RIO NORTE I	Company	office	Auditor	Activity	percentage
	ENERGIA, LTDA
		Ventos do São Fernando I
		Energia (*) Ventos do São Fernando II	BRAZIL	***	Wind farm development	100.00%
		Energia (*) Ventos do São Fernando III	BRAZIL	***	Wind farm development	100.00%
		Energia (*)	BRAZIL	***	Wind farm development	100.00%
	RIO SUL 1 ENERGIA, Ltda
					Operation of electricity
		Parques Eólicos Palmares, S.A. (*)	BRAZIL	Deloitte	transmission service concessions	80.00%
		Ventos da Lagoa, S.A. (*)	BRAZIL	Deloitte	Operation of power plants	80.00%
		Ventos do Litoral Energia, S.A.
		(*)	BRAZIL	Deloitte	Operation of power plants	80.00%
		Ventos do Sul, S.A. (*) Ventos Dos Índios Energia,	BRAZIL	Deloitte	Operation of power plants	80.00%
		S.A.(*)	BRAZIL	Deloitte	Operation of power plants	80.00%
	Equity-accounted investees (Note 13)
	ELECNOR, S.A.
		Cosemel Ingenieria, Aie	SPAIN	***	Development, construction and operation of installations and electrifications of high-speed railway lines Construction of the Empalme II	33.33%
		Dunor Energía, Sapi De Cv	MEXICO	KPMG	combined cycle power plant 313	50.00%
		GASODUCTO DE MORELOS,
		S.A.P.I. (Sdad Anónima Promotora de Inversión) DE C.V.	MEXICO	Deloitte	Operation and maintenance of the Morelos gas pipeline	50.00%
		Morelos Epc S.A.P.I. De Cv	MEXICO	Deloitte	Construction, engineering and supply of Morelos gas pipeline	50.00%
		Morelos O&M, Sapi, Cv	MEXICO	***	Maintenance of the Morelos gas pipeline	50.00%
	CELEO CONCESIONES E INVERSIONES, S.L.U.
		Celeo Energía, S.L. (*)	SPAIN	***	Development, construction and operation of all types of energy and services, utilities, waste treatment, etc. Management and	51.00%
		Celeo Redes, S.L.U. (*)	SPAIN	KPMG	administration of companies	51.00%

Page 5 of 17

(Thousands of Euros)

						Direct or indirect
			Registered			ownership
2019	Parent	Company	office	Auditor	Activity	percentage
	CELEO ENERGÍA,	Celeo Termosolar, S.L. () Helios Inversión Y Promoción Solar, S.L.U. ()	SPAIN SPAIN	KPMG ***	Construction and subsequent operation of thermosolar plants Development, construction and operation of PV farms	51.00% 51.00%
	S.L.U.	Celeo Energia Brasil, LTDA (*)	BRAZIL	***	Development, construction and operation of all types of energy and services, utilities, waste treatment, etc.	51.00%
		Celeo Energía Chile, SPA (*)	CHILE	KPMG	Development, construction and operation of all types of energy and services, utilities, waste treatment, etc.	51.00%
		Celeo Luz de Mexicali I, S.A. de C.V. (*) Celeo Luz de Mexicali II, S.A.	MEXICO	***	Development, energy production Development, energy	51.00%
	CELEO REDES	de C.V. (*)	MEXICO	***	production	51.00%
	BRASIL, S.A.	Brilhante II Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	25.50%
		Brilhante Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	25.50%
		Cachoeira Paulista Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
		Caiuá Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	26.01%
		Cantareira Transmissora de Energia, S.A.(*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	26.01%
		Celeo Redes Expansoes, S.A. ()(***)	BRAZIL	***	Holdings in other national or foreign entities and in consortia	51.00%
		Celeo Redes Transmissao de Energia, S.A. (*)	BRAZIL	KPMG	Holdings in other national or foreign entities and in consortia	51.00%
		Celeo Redes Transmissao e Renovaveis, S.A. (*)	BRAZIL	KPMG	Comercialiçao enegia eletrica de origem solar e manutençao redes de transmissao	51.00%

Page 6 of 17

(Thousands of Euros)

						Direct or
			Registered			indirect ownership
2019	Parent	Company	office	Auditor	Activity	percentage
		Coqueiros Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
		Encruzo Novo Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
		Integraçao Maranhense Tranmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	26.01%
		Linha De Transmissão Corumbá, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
		Parintins Amazonas Transmissora de Energia, S.A. (*)	BRAZIL	***	Operation of public service concessions for electricity transmission	51.00%
		Pedras Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
		Serra De Ibiapa Transmissora de Energia, S.A. - SITE(*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
	CELEO REDES CHILE, LTDA.
		Celeo Redes Operación Chile, S.A.	CHILE	KPMG	Operation of power plants	51.00%
	CELEO REDES EXPANSOES, S.A.	CRC Transmisión, SPA (*)	CHILE	KPMG	Operation of power plants	51.00%
		Jaurú Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
	CELEO REDES OPERACIÓN CHILE, S.A.
		Alto Jahuel Transmisora de Energia, S.A.	CHILE	KPMG	Development, construction and operation of electrical facilities	51.01%
		Charrúa Transmisora de Energia, S.A.	CHILE	KPMG	Assembly, installation, operation of the new 2 x 500 Charrúa – Ancoa line	51.01%
	CELEO REDES T. DE ENERGÍA, S.A.	Lt Triângulo, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%

Page 7 of 17

(Thousands of Euros)

						Direct or
			Registered			indirect ownership
2019	Parent	Company	office	Auditor	Activity	percentage
		Vila Do Conde Transmissora			Operation of public service
		de Energia, S.A. (*)			concessions for electricity
	CELEO REDES T. E		BRAZIL	KPMG	transmission	51.00%
	RENOVAVEIS, S.A.
		Celeo São João Do Piaui FV I,			Generation and sale of solar
		S.A. (*)	BRAZIL	KPMG	power	51.00%
		Celeo São João Do Piaui FV II,			Generation and sale of solar
		S.A. (*) Celeo São João Do Piaui FV	BRAZIL	KPMG	power Generation and sale of solar	51.00%
		III, S.A. (*)	BRAZIL	KPMG	power	51.00%
		Celeo São João Do Piaui FV			Generation and sale of solar
		IV, S.A. (*)	BRAZIL	KPMG	power	51.00%
		Celeo São João Do Piaui FV V, S.A. (*)	BRAZIL	KPMG	Generation and sale of solar power	51.00%
		Celeo São João Do Piaui FV			Generation and sale of solar
		VI, S.A. (*)	BRAZIL	KPMG	power	51.00%
	CELEO REDES, S.L.
		Celeo Redes Brasil, S.A. (*)	BRAZIL	KPMG	Development, construction and	51.00%
					operation of electrical facilities
		Celeo Redes Chile, Ltda (*)	CHILE	KPMG	Operation of power plants	51.00%
	CELEO
	TERMOSOLAR	Aries Solar Termoeléctrica,	SPAIN	KPMG	Development, construction and	51.00%
		S.L. (*)			operation of thermosolar plants
		Dioxipe Solar, S.L. (*)	SPAIN	KPMG	Development, construction and	49.76%
					operation of thermosolar plants
		Solar Renewables Spain, S.A.R.L. ()(***)	LUXEMBOURG	***	Development, construction and operation of thermosolar plants	51.00%
	CRC TRANSMISION,
	SPA
		Casablanca Transmisora de	CHILE	KPMG	Development, construction and	51.00%
		Energía, S.A. (*) Diego de Almagro Transmisora	CHILE	KPMG	operation of electrical facilities Development, construction and	51.00%
		de Energía, S.A. (*)			operation of electrical facilities
		Charrúa Transmisora de	CHILE	KPMG	Development, construction and	51.00%
		Energia, S.A. ()(***)			operation of electrical facilities
	ENERFÍN
	ENERVENTO EXTERIOR, S.L
		Woolsthorpe Holding Pty, Ltd			Management and
		()(***)	AUSTRALIA	***	administration of companies	50.00%
					Management and
		Woolsthorpe Holding Trust (*)	AUSTRALIA	***	administration of companies	50.00%

Page 8 of 17

(Thousands of Euros)

2019	Parent	Company	Registered office	Auditor	Activity	Direct or indirect ownership percentage
	ENERFÍN ENERVENTO, S.L.U. ENERFÍN SOCIEDAD DE ENERGÍA, S.L.	Parque Eólico La Gaviota,S.A.(*)	SPAIN	Ernst & Young	Operation of power plants	37.33%
	HELIOS INVERSION	Gestión de Evacuación La Serna, S.L. (Gelaserna) (*)	SPAIN	***	Wind farm development	15.00%
		Celeo Fotovoltaico, S.L.U. (*)	SPAIN	KPMG	Development, construction and operation of PV farms	51.00%

Page 9 of 17

(Thousands of Euros)

						Direct or indirect
			Registered			ownership
2018	Parent	Company	office	Auditor	Activity	percentage
Método Consolidación
Fully consolidated companies
	ELECNOR, S.A.	Aplicaciones Técnicas de la
		Energía, S.L.U. (ATERSA) Area 3 Equipamiento y Diseño	SPAIN	Deloitte	Solar energy	100.00%
		Interiorismo, S.L.U.	SPAIN	***	Interior design	100.00%
		Audeca, S.L.U.	SPAIN	KPMG	Environmental restoration and reforestation and operation of roads.	100.00%
		Barcaldine Remote Community Solar Farm PTY, LTD(*)	AUSTRALIA	ESV	Development, construction and operation of PV farms	20.00%
		Betonor, S.L. Celeo Concesiones E	ANGOLA	***	Dormant Management and	51.00%
		Inversiones, S.L.U.	SPAIN	KPMG	administration of companies	100.00%
		Corporacion Electrade, S.A.	VENEZUELA	***	Construction and assembly Analysis, engineering and	100.00%
		Deimos Space, S.L.U.	SPAIN	KPMG	development of space missions and software	100.00%
		Ehisa Construcciónes y Obras,
		S.A.U.	SPAIN	Luis Ruiz Apilanez	Construction and assembly	100.00%
		Elecdal, URL	ALGERIA	*** Batallas & Batallas	Construction and assembly	100.00%
		Elecdor, S.A.	ECUADOR	Auditores	Construction and assembly	100.00%
		Elecen, S.A.	HONDURAS	***	Construction and assembly Study and performance of	100.00%
		Elecfrance, SASU	FRANCE	Excelia Conseil	electricity activities	100.00%
		Elecnor Argentina, S.A.	ARGENTINA	SMS	Construction and assembly Management and	100.00%
		Elecnor Australia PTY LTD	AUSTRALIA	ESV Armando Vergara	administration of companies	100.00%
		Elecnor Chile, S.A.	CHILE	Gutiérrez	Construction and assembly	100.00%
		Elecnor de Mexico, S.A.	MEXICO	KPMG	Construction and assembly	100.00%
		Elecnor Do Brasil, L.T.D.A.	BRAZIL	KPMG	Construction and assembly A broad range of business activities in the areas of engineering, development,	100.00%
		Elecnor Energie und Bau, GmbH	GERMANY	***	construction, assembly, repairs and maintenance of all types of works, installation work of any kind, particularly in energy efficiency and renewable energies.	100.00%
		Elecnor Infrastruttre e Aerospaziale, S.R.L.	ITALY	***	Construction and assembly	100.00%
		Elecnor Peru, S.A.C	PERU	KPMG	Construction and assembly	100.00%

Page 10 of 17

(Thousands of Euros)

						Direct or indirect
			Registered			ownership
2018	Parent	Company	office	Auditor	Activity Installation and maintenance of	percentage
		Elecnor Seguridad, S.L.U.	SPAIN	***	fire prevention and safety systems	100.00%
		Elecnor South Africa (PTY) LTD	South Africa	***	Construction and assembly	100.00%
		Elecnor, INC	USA	RP&B Batallas & Batallas	Facilities	100.00%
		Electrolineas del Ecuador, S.A.	ECUADOR	Auditores	Construction and assembly	100.00%
		Elecven Construcciones, S.A.	VENEZUELA	Deloitte	Construction and assembly	100.00%
		Enertel, S.A. de C.V.	MEXICO	KPMG	Construction and assembly Activities in the areas of public	99.99%
		Elecnor Angola Group	ANGOLA	***	works and civil engineering	55.00%
		Hidroambiente, S.A.U.	SPAIN	KPMG	Environmental activities	100.00%
	IDDE, S.A.U.		SPAIN	***	Sales	100.00%
		IQA Operatios Group, LTD	SCOTLAND	KPMG	Electrical installations Sales, installation and maintenance of fire prevention	100.00%
		Jomar Seguridad, S.L.U.	SPAIN	***	and safety systems	100.00%
		Montelecnor, S.A.	URUGUAY	Ernst & Young	Construction and assembly	100.00%
		Omninstal Electricidade, S.A. PARQUE SOLAR PORTON	PORTUGAL	KPMG	Construction and assembly	100.00%
		DEL SOL, SAS (****)	COLOMBIA	***	Power generation Construction and operation of	100.00%
		Sociedad Aragonesa De Aguas Residuales, S.A.U.	SPAIN	KPMG	plants under the special water treatment plan	100.00%
		Stonewood Desarrollos, S.L.	SPAIN		Sales	100.00%
	CELEO CONCESIONES E INVERSIONES, S.L.U.
		Celeo Energía, S.L. (*)	SPAIN	***	Development, construction and operation of all types of energy and services, utilities, waste treatment, etc.	100.00%
		Celeo Redes, S.L.U. (*)	SPAIN	KPMG	Management and administration of companies Construction and subsequent	51.00%
		Celeo Termosolar, S.L.	SPAIN	KPMG	operation of thermosolar plants.	100.00%
		Helios Inversión Y Promoción Solar, S.L.U. (*)	SPAIN	***	Development, construction and operation of PV farms	100.00%
		Tramperase, S.L.(*)	SPAIN	***	Development	100.00%
	CELEO ENERGÍA, S.L.U.				Development, construction and
		Celeo Energia Brasil, LTDA (*)	BRAZIL	***	operation of all types of energy and services, utilities, waste treatment, etc.	100.00%

Page 11 of 17

(Thousands of Euros)

						Direct or indirect
			Registered			ownership
2018	Parent	Company	office	Auditor	Activity	percentage
		Celeo Energía Chile, SPA (*)	CHILE	KPMG	Development, construction and operation of all types of energy and services, utilities, waste treatment, etc.	100.00%
		Celeo Luz de Mexicali I, S.A. de C.V. ()(***)	MEXICO	***	Development, energy production	100.00%
	CORPORACION	Celeo Luz de Mexicali II, S.A. de C.V. ()(***)	MEXICO	***	Development, energy production	100.00%
	ELECTRADE
	DEIMOS SPACE, S.L.U.	Electrade Investment, Ltda (*)	BARBADOS	***	Sale of materials	100.00%
		Deimos Atlantic Launchers, S.A.(*)	ITALY	***	Space transport, launch of satellites and space vehicles Software development, engineering and technical	100.00%
		Deimos Castilla la Mancha, S.L.U.(*)	SPAIN	KPMG	assistance in the field of remote sensing Services in the areas of	100.00%
		Deimos Engenharia, S.A.	PORTUGAL	ESAC Espirito Santo Associados	telecommunications and aeronautic and space energy Analysis, engineering and	100.00%
		Deimos Space UK, Limited (*)	ENGLAND	James Cowper Kreston	development of space missions and software Analysis, engineering and	100.00%
	ELECNOR	S.C. Deimos Space, S.R.L. (*)	ROMANIA	***	development of space missions and software	100.00%
	AUSTRALIA	Green Light Contractors PTY, LTD (*)	AUSTRALIA	ESV	Construction of a PV farm	100.00%
	ELECNOR INC
		Belco Elecnor Electric, INC (*)	USA	RP&B	Electrical installations	100.00%
		Elecnor Hawkeye, LLC (*)	USA	***	Electrical installations	100.00%
	ELECTROL, S.A.	Zogu, S.A. (*)	ECUADOR	Batallas & Batallas Auditores	Construction and assembly	100.00%
	ENERFÍN ENERGY CO OF CANADA
		Lambton Enerwind General Partner Inc (Gp)(*)	CANADA	***	Administration and advisory services	100.00%
		Lambton Enerwind Limited Partnership (Sec)(*)	CANADA	***	Wind farm development	100.00%
	ENERFÍN ENERGY COMPANY OF CANADA, INC
		Investissements Éoliennes de L´Érable, INC. (*)	CANADA	***	Administration and advisory services	100.00%
		Investissements Éoliennes de L´Érable, SEC. (*)	CANADA	***	Administration and advisory services	100.00%

Page 12 of 17

(Thousands of Euros)

						Direct or indirect
2018	Parent	Company	Registered office	Auditor	Activity	ownership percentage
	ENERFÍN
	ENERVENTO EXTERIOR, S.L.
		Eolica La Vela (*)	COLOMBIA	***	Wind farm development	100.00%
		Eolica Los Lagos (*)	CHILE	***	Wind farm development	100.00%
		Eolica Musichi (*) Gran Sul Geração de Energia	COLOMBIA	***	Wind farm development	100.00%
		()(***)	BRAZIL	***	Wind farm development	100.00%
		Guajira Eólica I, S.A.S. (*)	COLOMBIA	***	Wind farm development	100.00%
		Guajira Eolica II, S.A.S. (*) Parques Eólicos Palmares,	COLOMBIA	***	Wind farm development Operation of electricity	100.00%
		S.A. (*)	BRAZIL	Deloitte	transmission service concessions	80.00%
		Prairie Winds General Partner (*)	CANADA	***	Management and administration of companies	70.00%
		Prairie Winds Limited Partner (*)	CANADA	***	Wind farm development	25.00%
		Río Norte I Energia ()(***)	BRAZIL	***	Management and administration of companies Management and	100.00%
		Rio Sul 1 Energia, Ltda (*)	BRAZIL	Deloitte	administration of companies Management and	100.00%
		Rio Sul 2 Energia, Ltda (*)	BRAZIL	***	administration of companies	100.00%
		Ventos da Lagoa, S.A. (*) Ventos do Litoral Energia, S.A.	BRAZIL	Deloitte	Operation of power plants	80.00%
		(*) Ventos do São Fernando I	BRAZIL	Deloitte	Operation of power plants	80.00%
		Energia ()(***) Ventos do São Fernando II	BRAZIL	***	Wind farm development	100.00%
		Energia ()(***)	BRAZIL	***	Wind farm development	100.00%
		Ventos do Sul, S.A. (*) Ventos Dos Índios Energia,	BRAZIL	Deloitte	Operation of power plants	80.00%
		S.A.(*) Vientos De Panabá, S.A. de	BRAZIL	Deloitte	Operation of power plants	80.00%
		CV (*) Vientos de Sucilá, S.A. de CV	MEXICO	***	Wind farm development	100.00%
		(*) Vientos De Yucatán, S.A. De	MEXICO	***	Wind farm development	100.00%
		Cv (*)	MEXICO	***	Wind farm development	100.00%
	ENERFÍN ENERVENTO, S.L.U.
		Aerogeneradores del Sur, S.A. (*)	SPAIN	Deloitte	Construction, operation and use of wind farm resources	100.00%
		Eólica Montes de Cierzo, S.L. (*)	SPAIN	Deloitte	Operation of power plants	100.00%
		Eólica Páramo de Poza, S.A. (*)	SPAIN	Deloitte	Operation of power plants	70.00%
		Galicia Vento, S.L. (*)	SPAIN	Deloitte	Operation of power plants	90.60%
		Parque Eólico Malpica, S.A.(*)	SPAIN	Deloitte	Operation of power plants	95.55%

Page 13 of 17

(Thousands of Euros)

						Direct or
						indirect
2018	Parent	Company	Registered office	Auditor	Activity	ownership percentage
	ENERFÍN SOCIEDAD
	DE ENERGÍA, S.L.
		Enerfera, S.R.L. (*)			Construction, operation and
			ITALY	***	use of wind farm resources	100.00%
		Enerfín Developments British			Development and management
		Columbia, Inc (*)	CANADA	***	of wind farm activities	100.00%
		Enerfín do Brasil Sociedad de Energia, LTDA (*)	BRAZIL	***	Development and management of wind farm activities	100.00%
		Enerfín Energy Company, INC			Development and management
		(*)	USA	***	of wind farm activities	100.00%
		Enerfín Energy Company of			Management and
		Canada, INC (*)	CANADA	***	administration of companies	100.00%
		Enerfín Enervento Exterior,			Management and
		S.L. (*)	SPAIN	Deloitte	administration of companies	100.00%
					Administration and advisory
		Enerfín Enervento, S.L.U. (*)	SPAIN	***	services	100.00%
		Enerfín Québec Services, INC (*)	CANADA	***	Management and administration of companies	100.00%
		Enerfín Sociedad de Energía,			Management and
		S.L.U.	SPAIN	Deloitte	administration of companies	100.00%
		Parque Eólico Cofrentes,
		S.L.U. (*)	SPAIN	***	Operation of power plants	100.00%
	ÉOLIENNES DE
	L'ERABLE
		Eoliennes de L´Érable, SEC.
		(*)	CANADA	Deloitte	Operation of power plants	51.00%
	ÉOLIENNES DE				Administration and advisory
	L'ÉRABLE	Éoliennes De L'Érable	CANADA	***	services	100.00%
	COMMANDITAIRE	Commandite Inc(*)
	HELIOS INVERSION
		Celeo Fotovoltaico, S.L.U. (*)			Development, construction and	100.00%
			SPAIN	KPMG	operation of PV farms
	HIDROAMBIENTE,
	S.A.
		Sdad Aragonesa De			Construction and operation of
		Estaciones Depuradoras, S.A.	SPAIN	KPMG	plants under the special water	60.00%
	INVESTISSEMENTS	(*)			treatment plan
	ÉOLIENNES DE
	L'ÉRABLE SEC
		Éoliennes L'Érable
		Commanditaire Inc (*)	CANADA	***	Operation of power plants	100.00%

Page 14 of 17

(Thousands of Euros)

						Direct or indirect
			Registered			ownership
2018	Parent	Company	office	Auditor	Activity	percentage
Equity accounted investees (Note 10)
	Elecnor, S.A.
		Cosemel Ingenieria, Aie	SPAIN	***	Development, construction and operation of installations and electrifications of high-speed railway lines	33.33%
		GASODUCTO DE MORELOS, S.A.P.I. (Sdad Anónima Promotora de Inversión) DE C.V.	MEXICO	Deloitte	Operation and maintenance of the Morelos gas pipeline	50.00%
		Morelos Epc S.A.P.I. De Cv	MEXICO	Deloitte	Construction, engineering and supply of Morelos gas pipeline	50.00%
		Morelos O&M, Sapi, Cv	MEXICO	***	Maintenance of the Morelos gas pipeline Construction and operation of	50.00%
	CELEO REDES	Sdad. Aguas Residuales Pirineos, S.A.	SPAIN	***	plants under the special water treatment plan	50.00%
	BRASIL, S.A.	Brilhante II Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	25.50%
		Brilhante Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	25.50%
		Jaurú Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	16.99%
		Caiuá Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	26.01%
		Cantareira Transmissora de Energia, S.A.(*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	26.01%
		Celeo Redes Transmissao de Energia, S.A. ()(***)	BRAZIL	KPMG	Holdings in other national or foreign entities and in consortia	51.00%
		Coqueiros Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%
		Encruzo Novo Transmissora de Energia, S.A. (*)	BRAZIL	KPMG	Operation of public service concessions for electricity transmission	51.00%

Page 15 of 17

(Thousands of Euros)

						Direct or
						indirect
			Registered			ownership
2018	Parent	Company	office	Auditor	Activity	percentage
		Integraçao Maranhense			Operation of public service	26.01%
		Tranmissora de Energia, S.A.	BRAZIL	KPMG	concessions for electricity
		(*)			transmission
		Linha De Transmissão			Operation of public service	51.00%
		Corumbá, S.A. (*)	BRAZIL	KPMG	concessions for electricity
					transmission Operation of public service	51.00%
		Lt Triângulo, S.A. (*)	BRAZIL	KPMG	concessions for electricity
					transmission
		Pedras Transmissora de			Operation of public service	51.00%
		Energia, S.A. (*)	BRAZIL	KPMG	concessions for electricity
					transmission
		Serra De Ibiapa Transmissora			Operation of public service	51.00%
		de Energia, S.A. - SITE ()(***)	BRAZIL	***	concessions for electricity
					transmission
		Vila Do Conde Transmissora			Operation of public service	51.00%
		de Energia, S.A. (*)	BRAZIL	KPMG	concessions for electricity
	CELEO REDES CHILE				transmission
	LTDA
		Celeo Redes Operación Chile,
		S.A. (*)	CHILE	KPMG	Operation of power plants	51.00%
	CELEO REDES
	OPERACIÓN CHILE,
	S.A.
		Alto Jahuel Transmisora de
		Energia, S.A.	CHILE	KPMG	Development, construction and	50.99%
					operation of electrical facilities
		Charrúa Transmisora de Energia, S.A.	CHILE	KPMG	Assembly, installation, operation of the new 2 x 500	51.00%
					Charrúa – Ancoa line
		Diego de Almagro Transmisora	CHILE	KPMG	Development, construction and	51.00%
		de Energía, S.A. (*)			operation of electrical facilities
	CELEO REDES, S.L.
		Celeo Redes Brasil, S.A. (*)	BRAZIL	KPMG	Development, construction and	51.00%
					operation of electrical facilities
		Celeo Redes Chile, Ltda (*)
			CHILE	KPMG	Operation of power plants	51.00%
	CELEO
	TERMOSOLAR
		Aries Solar Termoeléctrica, S.L. (*)	SPAIN	KPMG	Development, construction and operation of thermosolar plants	55.70%
		Dioxipe Solar, S.L.(*)	SPAIN	KPMG	Development, construction and	55.00%
					operation of thermosolar plants

Page 16 of 17

(Thousands of Euros)

2018	Parent	Company	Registered office	Auditor	Activity	Direct or indirect ownership percentage
	ENERFÍN ENERVENTO EXTERIOR, S.L.
		Woolsthorpe Holding Pty Ltd ()() Woolsthorpe Holding Trust ()(**)	AUSTRALIA AUSTRALIA		Management and administration of companies Management and administration of companies	50.00% 50.00%
	ENERFÍN ENERVENTO, S.L.U. ENERFÍN SOCIEDAD	Parque Eólico La Gaviota,S.A.(*)	SPAIN	Ernst & Young	Operation of power plants	37.33%
	DE ENERGÍA, S.L.	Gestión de Evacuación La Serna, S.L. (Gelaserna)()(***)	SPAIN	***	Wind farm development	15.00%

Page 17 of 17

Appendix II: List of consolidated joint ventures (UTEs)
Page 1 of 8

		Thousands of Euros (*)
		2019		2018
	Percentage	Construction	Backlog	Construction	Backlog
	of	work settled	not yet settled	work settled	not yet settled
	ownership	2019	2019	2018	2018
UTE PUENTE MAYORGA	50.00%	--	--	--	--
UTE ELNR-CONSTUCSA E. HIDROGENO	50.00%	--	--	--	--
UTE PARQUESUR OCIO	90.00%	--	--	--	--
UTE INSTALACIONES ELÉCTRICAS SINCROTRÓN ALBA	50.00%	--	--	--	--
UTE CAMPO ARAÑUELO	50.00%	--	--	--	--
UTE MUVIM	30.00%	--	--	--	--
UTE ROTA HIGH SCHOOL	50.00%	--	--	--	--
UTE ELECNOR OSEPSA	50.00%	--	--	2	--
UTE CAN COLOMER	50.00%	--	--	--	--
UTE VILLASEQUILLA - VILLACAÑAS	21.00%	--	--	543	--
UTE AVELE	22.00%	--	--	--	--
UTE AVELE 2	22.00%	--	--	--	--
AEROPUERTO LANZAROTE SAMPOL-ELECNOR UTE	50.00%	--	--	--	--
UTE NIÑO DE ORO	100.00%	--	--	--	--
UTE EXPLOTACION ZONA 07-A	60.00%	--	--	1,039	--
CONSORCIO ELECNOR DYNATEC	100.00%	--	--	1,535	4,683
UTE ZONA P-2	50.00%	--	--	--	--
UTE SUBESTACION JUNCARIL	50.00%	--	--	(25)	--
UTE AEROPOLIS	50.00%	--	--	--	--
UTE CASA DE LAS ARTES	50.00%	--	--	--	--
UTE 2ª FASE NIÑO DE ORO	100.00%	--	--	--	--
UTE SSAA EIX DIAGONAL	50.00%	--	--	--	--
UTE MARINA BAIXA	40.00%	--	--	--	--
UTE AUDIO BARAJAS	50.00%	--	--	--	--
UTE LOS CARAMBOLOS	100.00%	--	--	--	--
UTE CENTRO DE PROSPECTIVA RURAL	100.00%	--	--	--	--
UTE CENTRO MAYORES BAENA	100.00%	--	--	--	--
UTE TARAZONA	100.00%	--	--	--	--

Appendix II: List of consolidated joint ventures (UTEs)
Page 2 of 8

		Thousands of Euros (*)
		2019			2018
	Percentage	Construction	Backlog not yet	Construction	Backlog not yet
	of	work settled	settled	work settled	settled
	ownership	2019	2019	2018	2018
UTE TERMINAL DE CARGA	50.00%	--	--	--	--
UTE PCTH	100.00%	--	--	--	--
UTE LED MOLLET	70.00%	--	--	--	--
UTE VIA LA CARTUJA	20.00%	--	--	--	--
UTE GALINDO	100.00%	--	--	--	--
UTE DESVIOS LAV Sevilla	28.85%	--	--	--	--
UTE MTO. SEG. Y EMERG. MADRID	100.00%	--	--	--	--
UTE AMPLIACION MUSEO MORERIA	100.00%	--	--	--	--
UTE FIGUERES WIFI	50.00%	--	--	--	--
UTE PLANTA RSU ACAHUALINCA	70.00%	--	--	--	--
UTE CENTRO OUPACIONAL FERROL	50.00%	--	--	--	--
UTE ELECNOR ONILSA	85.00%	--	--	--	--
UTE SAN CRISPIN	100.00%	--	--	122	--
UTE UBE LA ISLA	100.00%	--	--	40	--
UTE EXPLOTACION ZONA P2	50.00%	--	--	641	650
UTE AS SOMOZAS	50.00%	--	--	--	--
UTE SAN JERONIMO	100.00%	--	--	37	--
UTE JARDINES MOGAN	100.00%	--	--	805	--
UTE URBANIZACION PEDRO III	100.00%	--	--	--	--
UTE ELECNOR-ONDOAN SERVICIOS	50.00%	--	--	899	900
UTE ELECNOR - DEIMOS SIPA	100.00%	--	--	--	--
UTE COMUNICACIONS SANT CUGAT	100.00%	--	--	--	--
UTE VENCILLON	100.00%	--	--	--	--
UTE PATRIMONIO SEGURIDAD	66.66%	--	--	480	500
UTE ESPACIOS VERDES SAN VICENTE DEL RASPEIG	100.00%	--	--	334	--
UTE PLAZAS COMERCIALES T4	100.00%	--	--	--	--
UTE BT HOSPITAL DE ZAMORA	50.00%	--	--	--	--

	Thousands of Euros (*)
	2019		2018
Percentage	Construction	Backlog not yet	Construction	Backlog not yet
of	work settled	settled	work settled	settled
ownership	2019	2019	2018	2018

Appendix II: List of consolidated joint ventures (UTEs) Page 3 of 8

	of	work settled	settled	work settled	settled
	ownership	2019	2019	2018	2018
UTE TRANVIA OUARGLA	49.50%	--	--	6,961	2,545
UTE ENERGIA GALICIA	20.00%	--	--	18,238	28,451
UTE AEROPUERTO DE PALMA	100.00%	--	--	--	--
GROUPEMENT INTERNATIONAL SANTÉ POUR HAITI	100.00%	--	--	5,241	2,658
UTE MANCOMUNIDAD DE DURANGO	60.00%	--	--	4	--
UTE ENERGIA GRANADA	33.34%	--	--	62	356
UTE MOBILIARIO HUCA	100.00%	--	--	--	--
UTE ANILLO GALINDO	25.00%	--	--	1,193	--
UTE SICA BCN	100.00%	--	--	--	--
UTE DEINOR NOAIN	100.00%	--	--	--	--
Consorcio Nueva Policlínica de Chitre	100.00%	--	--	3,611	821
Consorcio Nueva Policlínica de Chepo	100.00%	--	--	1,203	125
UTE ADEC LOCALES CERCANIAS	100.00%	--	--	--	--
UTE CRA ENAGAS	100.00%	--	--	--	--
UTE CAMPO DE VUELO TF NORTE	100.00%	--	--	--	--
UTE MATIKO	20.00%	--	--	--	--
UTE VOPI4-ELNR CA L'ALIER	50.00%	--	--	1,589	440
UTE REUBIC EQUIP NAV BARAJAS	100.00%	--	--	38	--
UTE MANTENIMIENTO AVE ENERGIA	12.37%	--	--	15,933	103,002
UTE ASEGOP IBIZA	65.00%	--	--	54	38
UTE ELECNOR BUTEC BELLARA	60.00%	--	--	54,397	26,597
UTE AVELE3	22.00%	--	--	--	--
UTE AVELE4	22.00%	--	--	--	--
UTE EDARES SEGOVIA	70.00%	--	--	73	--
UTE VIGILANCIA BOADILLA	100.00%	--	--	--	--
UTE SICA	100.00%	--	--	71	425
UTE CASTELFLORITE	100.00%	--	--	--	--

		Thousands of Euros (*)
		2019		2018
	Percentage	Construction	Backlog	Construction	Backlog
	of	work settled	not yet settled	work settled	not yet settled
	ownership	2019	2019	2018	2018
UTE MANTENIMIENTO AEROPUERTO DE PALMA	50.00%	--	--	1,822	--
UTE CUETO DEL MORO	25.00%	--	--	--	--
UTE Elecnor Alghanim	60.00%	--	--	285	3,201
UTE MANTENIMIENTO VALEBU	50.00%	--	--	366	2,087
UTE EMBARQUE DESEMBARQUE T4	100.00%	--	--	20	--
UTE CONTAR	100.00%	--	--	53	--
UTE INST. RECERCA SANT PAU	50.00%	--	--	999	282
UTE INST. MERCAT DE SANT ANTONI	60.00%	--	--	3,589	102
UTE TUNELES ABDALAJIS	100.00%	--	--	471	397
UTE TORRENTE - XATIVA	50.00%	--	--	--	--
UTE EMPALME II	50.00%	--	--	3,942	--
UTE CENTRO LOG. IBEREBRO	41.90%	--	--	6	--
UTE AEROPUERTO TERUEL	50.00%	--	--	--	--
UTE NAVE SESTAO	50.00%	--	--	(246)	--
UTE ENERGIA GALICIA MANTENIMIENTO	20.00%	--	--	1,599	31,626
UTE URDULIZ BARRIA	50.00%	--	--	--	--
UTE TERMINAL DE CARGA TF NORTE	50.00%	--	--	165	1
UTE URBANIZADORA RIODEL	50.00%	--	--	--	--
UTE OFICINAS IBEREBRO	100.00%	--	--	760	--
UTE FIRA PAVELLO 2	70.00%	--	--	--	--
ELECNOR TARGET LLC, JV	60.00%	--	--	4,975	5,388
UTE LINEA 1	20.00%	--	--	--	--
UTE INSTALACIONES LOIOLA	50.00%	--	--	--	--
UTE CEIP SOBRADIEL	100.00%	--	--	695	--
UTE TERMINAL E	50.00%	--	--	1,961	80
UTE QUEVEDO	50.00%	--	--	52	3
UTE HERNANI-IRUN	50.00%	--	--	2,136	1,998

Appendix II: List of consolidated joint ventures (UTEs) Page 4 of 8

		Thousands of Euros (*)
		2019		2018
	Percentage	Construction	Backlog	Construction	Backlog
	of	work settled	not yet settled	work settled	not yet settled
	ownership	2019	2019	2018	2018
UTE ACTUAC ETAPS CYII LOTE2	50.00%	--	--	144	160
UTE CARPIO Y POLLOS	50.00%	--	--	130	82
UTE METRO SAN INAZIO	100.00%	--	--	--	--
UTE CAMPO DE VUELOS ASTURIAS	100.00%	--	--	421	868
UTE BIOMASA HUERTA DEL REY	50.00%	--	--	596	15
UTE MOPAEL	80.00%	--	--	4,527	1,576
UTE OFICINAS GENCAT	60.00%	--	--	16,411	11
UTE UYUNI-YUNCHARA	49.00%	--	--	21,623	--
UTE MEGAFONIA AENA	70.00%	--	--	34	--
UTE MANTENIMIENTO SIGMA AENA	100.00%	--	--	199	249
UTE LINEA 8	20.00%	--	--	--	--
UTE RENFE AGENTE UNICO	100.00%	--	--	889	1,498
UTE RENFE CCTV	100.00%	--	--	704	4,316
UTE UCA	100.00%	--	--	216	--
UTE SIPA AENA	100.00%	--	--	510	--
JV ELECNOR AL OWN	70.00%	--	--	13,769	913
UTE BILBOPORTUA	50.00%	--	--	407	353
UTE BIZKAIKO ARGIAK	23.00%	--	--	556	--
ELECNOR AND RAY, J.V.V	60.00%	--	--	1,536	--
UTE MANTENIMIENTO LOTE 1	50.00%	--	--	1,648	587
UTE ILSSA ELECNOR	100.00%	--	--	--	--
UTE ELECNOR - EIFFAGE	50.00%	--	--	28,516	15,456
UTE LINEA 5	20.00%	--	--	3	244
UTE TIL TIL	100.00%	--	--	13,484	--
UTE EDAR LAGUNA DE NEGRILLOS	80.00%	--	--	338	150
UTE CIP ARCOSUR	100.00%	--	--	1,235	--
UTE PORTUKO ARGIAK	23.00%	--	--	1,388	501

Appendix II: List of consolidated joint ventures (UTEs) Page 5 of 8

		Thousands of Euros (*)
		2019		2018
	Percentage	Construction	Backlog	Construction	Backlog
	of	work settled	not yet settled	work settled	not yet settled
	ownership	2019	2019	2018	2018
UTE E&C M.I. BUSTURIA AUXILIAR	51.00%	--	--	824	721
UTE PARQUE FOTOVOL. CARRODILLA	100.00%	--	--	281	--
UTE URBANITZACIÓ MERCAT DE SANT ANTONI	60.00%	--	--	3,094	11
UTE ING PUY DU FOU	50.00%	--	--	186	274
UTE SICA 2018-2021	100.00%	--	--	339	--
UTE ELECTRIFICACIÓN VILLAFRANCA	90.00%	--	--	503	2,993
UTE TREBALLS PREVIS 1 CAMP NOU	45.00%	--	--	7,709	3,899
UTE CLINICA EUGIN BALMES	50.00%	--	--	373	4,377
UTE SALAS VIP AEROP BCN	100.00%	--	--	290	7,876
JV TAFILAH	70.00%	--	--	4,713	18,490
UTE ACCESOS BANCO DE ESPAÑA	100.00%	--	--	0	619
VARIANTE PAJARES UTE	20.00%	--	--	0	(0)
CONSORCIO CHIELEC DOMINICANA	100.00%	--	--	3,005	131
UTE CASETAS AEROPUERTO DE MÁLAGA	100.00%	--	--	263	716
UTE AMPLIACIÓN TRANVÍA VITORIA	50.00%	--	--	0	535
UTE ALSTOM RENOVABLES-ELECNOR II	25.64%	--	--	--	--
UTE OVERTAL - ELECNOR	24.00%	--	--	--	--
UTE ENERGÍA LÍNEA 9	20.00%	--	--	5,011	1,500
S.E.I. UTE (ELECNOR, S.A.-TERRES)	50.00%	--	--	--	--
UTE REMOLAR	23.51%	--	--	--	--
UTE AGENTE URBANIZADOR SECTOR 13 DE LA PLAYA DE TAVERNES	50.00%	--	--	--	--
UTE SERRANO - ELECNOR CANSALADES	40.00%	--	--	--	113
UTE ELECNOR GONZALEZ SOTO	50.00%	--	--	35	--
TERMINAL ALICANTE, UTE	20.00%	--	--	--	--
UTE VILLAGONZALO, Z - 3	35.00%	--	--	--	--
UTE LLANERA ELECNOR SECTOR TULELL	50.00%	--	--	--	--
UTE TARAGUILLA	25.00%	--	--	--	--
UTE Binaced	50.00%	--	--	--	--

Appendix II: List of consolidated joint ventures (UTEs) Page 6 of 8

Appendix II: List of consolidated joint ventures (UTEs)
Page 7 of 8

		Thousands of Euros (*)
		2019		2018
	Percentage	Construction	Backlog	Construction	Backlog
	of	work settled	not yet settled	work settled	not yet settled
	ownership	2019	2019	2018	2018
UTE SAICA	50.00%	--	--	--	--
UTE ROEA EBRO	34.00%	--	--	--	--
UTE Caleta Olivia	100.00%	--	--	--	--
UTE Enarsa Ear-Bmsa	50.00%	--	--	--	--
Consorcio UTE Elecdor Electrol	100.00%	--	--	--	--
Consorcio Elecven Elecdor	100.00%	--	--	2,598	--
UTE AERONAVE TIERRA	20.00%	2	--	1,712	--
UTE MELIALABS	55.00%	16	--	56	--
UTE DEIMOS -IECISA	50.00%	2,745	--	339	--
UTE NAVENTO DEIMOS, File 2017-02371	27.46%	232	--	155	--
AUCOSTA CONSERVACION UTE	50.00%	907	--	1,468	629
CONSERVACIÓN MAQUEDA UTE	50.00%	1,609	--	1,728	1,258
CÓRDOBA NORTE II UTE	50.00%	945	327	820	873
PARQUE PATERNA UTE	50.00%	1,122	--	158	1,087
HUELVA SURESTE II UTE	50.00%	924	--	1,111	388
MADRID NOROESTE UTE	50.00%	--	--	--	--
MANZANARES UTE	60.00%	--	--	1,114	--
MANZANARES II UTE	50.00%	2,272	4,420	979	6,692
PONTESUR UTE	50.00%	1,784	2,176	1,509	1,621
PONTEVEDRA SUR UTE	50.00%	--	--	--	--
PONTENORTE UTE	50.00%	959	2,359	321	3,319
TALAVERA UTE	50.00%	2,249	5,562	1,313	7,828
PUERTO GANDIA UTE	50.00%	--	--	--	--
LEÓN-3 UTE	80.00%	4,803	310	2,584	1,025
UTE MURCIA-SAN JAVIER	50.00%	--	--	97	--
SMA OLVEGA UTE	60.00%	713	3,428	711	5,283
GUADIX-BAZA UTE	51.00%	533	472	492	1,006
UTE SIERRA ESPUÑA	65.00%	(3)	--	(72)	--

Appendix II: List of consolidated joint ventures (UTEs) Page 8 of 8

		Thousands of Euros (*)
			2019	2018
	Percentage	Construction	Backlog	Construction	Backlog
	of	work settled	not yet settled	work settled	not yet settled
	ownership	2019	2019	2018	2018
UTE SIERRA BURETE	65.00%	--	--	76	--
UTE HOSPITAL REINA SOFÍA	20.00%	475	1,429	749	1,904
C.S. ANTONIO GARCÍA	20.00%	56	--	386	22
SEVILLA A66 UTE	50.00%	1,942	5,531	468	7,474
BURGUILLO UTE	50.00%	--	--	419	108
RIBERAS II UTE	50.00%	--	--	--	--
UTE PEDRERA	50.00%	--	--	--	--
UTE ULTZANUETA	50.00%	--	--	--	--
UTE KARRANTZA	41.50%	--	--	--	--
ACCIONA INFRAESTRUCTURAS-ELECNOR HOSPITAL DAVID, S.A.	25.00%	952	--	10,189	(3,781)
PROYECTOS ELECTRICOS AQUAPRIETA, SAPI DE CV	50.00%	14,898	--	(3,161)	--
DUNOR ENERGIA	50.00%	19,142	--	57,132	21,443
WAYRA	50.00%	12,236	15,165	--	--
SAN CIPRIANO UTE	70.00%	757	9,019	--	--
MAQUEDA II UTE	50.00%	634	2,026	--	--
UTE CIRCUNVALACION LUCENTUM	50.00%	549	4,225	--	--
UTE AUDECA CIVISGLOBAL SECTOR O-03	70.00%	45	12,793	--	--

(*) 100% information provided, not taking into account removals.

1.1. Business model 3 1.2. Economic context 3 2. Economic and financial performance in the period 5 2.1. Profit/loss for the year 5 2.2. Key figures in profit/loss for the year 7 2.3. Financial position 10 2.4. Material changes in accounting policies12 2.5. Results at the Group's Parent, Elecnor, S.A. 13 2.6. Average payment period13 2.7. Turnover by activity 13 3. Stock market information 14 4. Capital management policy14 5. Financial risk management policy 14 5.1. Currency risks 15 5.2. Interest rate risk15 5.3. Other price risks 15 5.4. Liquidity risk 15 5.5. Credit risk16 5.6. Regulatory risk 16 5.7. Other risks17 6. Environment17 7. Human Resources18 8. RDI 18 9. Significant events subsequent to year-end 19 10. Outlook for 2020 20 10.1. Economic context20 10.2. Elecnor Group20 11. Share capital and acquisition of own shares21 12. Related-party transactions 21 13. Annual Corporate Governance Report 21 14. Non-financial information21	1. Business model and economic context 3

14.1. About this report ¡Error! Marcador no definido.
14.2. Business model ¡Error! Marcador no definido.
14.3. Our people ¡Error! Marcador no definido.
14.4. Operating excellence ¡Error! Marcador no definido.
14.5. Commitment to the Environment ¡Error! Marcador no definido.
14.6. Technology, innovation and new business opportunities ¡Error! Marcador no definido.
14.7. Responsible management ¡Error! Marcador no definido.
14.8. Social impact ¡Error! Marcador no definido.
Appendix I ¡Error! Marcador no definido.
Appendix II. ¡Error! Marcador no definido.
Appendix. Alternative Performance Measures 22

1. Business model and economic context

1.1. Business model

Elecnor is a Spanish corporation that operates in more than 50 countries globally, with two complementary and mutually enriching major business areas:

• Infrastructure: execution of engineering, construction and services projects, most notably in the electricity, power generation, gas, telecommunications and systems, railways, maintenance, facilities, construction, water, environment and space sectors.
• Concessions: operation of services through investment in energy transportation, wind, solar PV and solar thermal power and other strategic assets.

1.2. Economic context1

In addition to its huge toll on public health, the coronavirus crisis will also have an impact on the macroeconomic environment that is difficult to gauge at the time of writing this report.

A coordinated response by the European Union, its Member States and the Spanish government will be crucial to mitigate the impact on economic activity, employment, output, the liquidity of companies and individuals alike, and to accelerate the subsequent reactivation phase. The European Commission has stated its intention to use all the resources available to it to support companies and citizens, increasing the availability of cohesion funds, rendering fiscal policies and deficit monitoring criteria more flexible, thereby suggesting that Member States will implement aggressive fiscal policies. Meanwhile, the Spanish government is implementing a raft of social and economic measures by means of programmes infused with sizeable funds. Other countries, like the United States, have also unveiled significant fiscal and monetary measures. The main questions are how far the effects of this pandemic will reach, the scale of the disaster it has unleashed in markets and the potential macroeconomic implications. Accordingly, the response of governments and central banks is crucial to avoid an entering an even more negative scenario and undermining growth forecasts.

Below is a description of the macroeconomic outlook available prior to the crisis. This scenario will have to be adjusted in accordance with the duration and depth of the crisis, and the aforementioned measures introduced by public institutions. At present, it is too soon to attempt to depict a new macroeconomic scenario, so the Group has opted to continually monitor the crisis as it unfolds and to keep close track of its impact on operations.

According to estimates by the International Monetary Fund (IMF), global growth is projected to rise from an estimated 2.9% in 2019 to 3.3% in 2020 and 3.4% for 2021. These growth estimates are down 0.1 percentage point for 2019, compared to the figures presented in the previous edition of the report. This downward revision primarily reflects negative surprises in economic activity in some emerging economies, most notably India. On the other hand, these negative effects were offset by the improved performance in international trade, a broad-based shift toward accommodative monetary policy, diminished fears of a no-deal Brexit and an intermittent easing of trade tensions between the United States and China.

¹Sources:

^- International Monetary Fund (IMF). World Economic Outlook. World Economic Outlook Update. January 2020

^- World Economic Outlook (WEO). October 2019 Report

^- Situation report. Fourth quarter of 2019. Author: Antxon Pérez Calleja

In general, growth across advanced economies is expected to stabilise at around 1.6% between 2020 and 2021. This growth slowdown is due mainly to downward revisions for the United States, euro area and United Kingdom, and downgrades to other advanced economies in Asia.

Growth in the US is expected to moderate to 2% in 2020 and 1.7% in 2021, reflecting a return to a more neutral fiscal stance and the anticipated waning support from further loosening of financial conditions.

With regard to the euro area, growth is expected to pick up from 1.2% in 2019 to 1.3% in 2020. The WEO forecasts are unchanged for France and Italy: Italy is expected to continue to bear its financial risks. Forecasts for Germany continue to decrease due to the contraction of manufacturing activity. In the United Kingdom, growth is expected to stabilise at 1.4% in 2020, based on an orderly exit from the European Union followed by a gradual transition to a new economic relationship.

Spain is slowly but surely nearing the levels of activity of the euro area on which it is so dependent. In terms of average annual rates, the increase in GDP in 2019 is projected to be 2% (four ticks less than in 2018), and it is expected to ease to 1.7%, 1.6% and 1.5% through 2022. The pace of growth in the Spanish economy and employment in the country have contracted more swiftly than expected, although, for now, a recession appears unlikely. Spain's growth, which was underpinned by internal demand, stalled due to households and companies adjusting their levels of consumer spending and investment to a less favourable outlook. Conversely, public spending is still out of control.

The coming deceleration brings with it certain patterns already well-known in Spain: an external impact triggered by stagnation in Europe coupled with an internal problem that resides in the inability to prevent public spending from clashing with the economy. This is not a transitory or temporary problem. Government debt currently amounts to Euros 1.2 trillion, a deficit that has not been used to boost growth but to finance current expenditure, most notably the pensions system and Spain's regions. These items account for 56% of public expenditure, something the economy will struggle to maintain.

Emerging and developing economies are expected to post 4.4% growth in 2020 and 4.6% in 2021.

In Latin America, the World Economic Outlook (WEO) projects a recovery in growth from 0.1% in 2019 to 1.6% in 2020 and 2.3% in 2021. By country, the experts expect a decrease in Mexico's growth prospects in 2020-21, due to sluggish investment. In this connection, the OECD has urged Mexico to tackle the lack of competition to relaunch productivity and growth. Forecast growth for Chile has also been cut, amid social unrest in the country. These revisions in the forecasts for the two countries (in relation to the forecasts of previous months) are offset by an improvement in the outlook for Brazil in 2020, owing to the passage of pension reform and the fading of supply disruptions in the mining sector.

The IMF expects growth in emerging and developing economies in Asia to inch up slightly from 5.6% in 2019 to 5.8% in 2020 and 5.9% in 2021. These forecasts are due to the markdown in the projection for India, where domestic demand slowed more sharply than expected amid stress in the non-bank financial sector and a decline in credit growth. As for China, growth is expected to slip slightly from an estimated 6.1% to 6.0% in 2020 and 5.8% in 2021, according to the WEO update. The envisaged partial roll-back of tariffs and the pause in additional tariff hikes as part of a "Phase I" trade deal with the US will likely alleviate near-term cyclical weakness. However, according to the IMF economists, unresolved disputes on broader US-China economic relations can be expected to continue weighing on activity.

The situation in Africa remains a complex one, with inherited constraints that hamper its real but fragile growth. The opportunities in Sub-Saharan Africa are huge, and the region is expected to log 3.5% growth in 2020 and 2021. These figures conceal vast differences between the different countries. Four of the world's fastest-growing economies in 2019 are located in Africa: Côte d'Ivoire, Ethiopia, Ghana and Rwanda. At the

same time, the recovery in Nigeria, Angola and South Africa remains slow. In Nigeria, growth outside the oil sector has slowed, while in Angola the oil sector remains lacklustre. In South Africa, the perception of sluggish investment is hampering economic activity. Excluding Nigeria, South Africa and Angola, growth in the rest of Sub-Saharan Africa is expected to remain robust, although it will be slower in some countries than in others.

With regard to Australia, in mid-December the country's government cut its economic growth forecast to 2.25% for the 2019-2020 fiscal year amid a weakened global economy and on the back of the severe drought and bushfires that have beset the country. In their report, the Australian authorities forecast an increase in growth to 2.75% for the 2020-21 fiscal year. The economy remains strong in the face of global economic weakness and domestic challenges such as the devastating effects of the drought and bushfires.

Although growth forecasts are positive, the reality points to a set of risks the materialisation of which could trigger a decline in global growth below the forecast levels. Downside risks include a worsening of geopolitical tensions, especially between the United States and Iran, increased social unrest, a further souring of relations between the US and its trade partners, and deepening economic friction between other countries.

To strengthen economic activity and prevent these downside risks, policy missteps that would further enfeeble an already weak global economy must be avoided. More solid multilateral cooperation is necessary, and national policies that strengthen social cohesion must be adopted. Closer cross-border cooperation is needed on multiple fronts and tariff grievances must be ended. If trade- and technology-related disputes are not resolved, confidence will be further undermined and investment will weaken. Low investment leads to job losses, low productivity and a decline in levels of well-being. Consequently, the economic policies of the most advanced economies must focus on allocating a pivotal role to investment, to mitigate climate change, underpin potential growth and ensure that gains are widely shared in areas such as education, health, workforce skills and infrastructure.

2. Economic and financial performance in the period

2.1. Profit/loss for the year

The Elecnor Group's Consolidated Net Profit in 2019 amounted to Euros 126.4 million, a 53.9% increase on the previous year (Euros 82.1 million2). This increase was the result of sustained and organic business growth, and was buoyed by positive results from the strategic partnership with APG which amply offset other, nonrecurring negative results described below.

Corporate transactions

• On 7 November 2019, Elecnor, S.A. and Dutch group APG, which manages the world's second-largest pension fund, entered into a strategic partnership to jointly invest and develop transmission and renewable energy projects other than wind power. This agreement was sealed on 17 December 2019, having fulfilled all the conditions and obtained all the approvals required for the operation, from both lending financial institutions and the relevant competition authorities. This positive agreement includes a commitment by both parties to make capital investments in new projects of Euros 400 million over the next five years, which will unquestionably be a growth lever for the Elecnor Group's Concessions and Infrastructure businesses.

² Restated as indicated in Note 2.e concerning Comparative Information on the Annual Accounts of Elecnor, S.A. and subsidiaries and in the Appendix hereto concerning Alternative Performance Measures.

Prior to the date of the operation, Elecnor, via its subsidiary Celeo Concesiones e Inversiones, S.L. (hereinafter, Celeo) held a 51% shareholding in Celeo Redes (the company that manages the electricity transmission systems in Brazil and Chile, by means of concession), while APG owned the remaining 49% shareholding. Under the agreement, APG joins Celeo Concesiones e Inversiones, S.L., a company 100% owned by the Elecnor Group, with 49% of the shareholding. This involves the contribution of APG's shares in Celeo Redes and a payment of Euros 43 million, whereby Celeo Redes becomes fully-owned by Celeo Concesiones e Inversiones, S.L. As a result of the operation, Celeo Concesiones e Inversiones, S.L. is jointly managed by Elecnor and APG.

In application of IFRS 3 Business Combinations, this operation implies recognition of the fair value of the shared assets. In 2019, this recognition generates a positive impact on the consolidated income statement of the Elecnor Group amounting to Euros 178.3 million (see Note 2.f of the Notes to the Annual Accounts of Elecnor, S.A. and subsidiaries).

• On 31 July 2019, the Group acquired 42.57% and 44.30% interests in the companies Dioxipe Solar, S.L. and Aries Solar Termoeléctrica, S.L., respectively, via the company Celeo Termosolar, S.L. (which is fully owned by Celeo Inversiones y Concesiones, S.L.). This affords it control of these businesses, whose statutory activities comprise the construction and operation of three parabolic trough technology solar thermal power plants in Extremadura and Castilla-La Mancha. Said control was maintained up to the date of the aforementioned operation with APG. The most significant effect of this operation on the Group's income statement is the recognition of a loss amounting to Euros 47.4 million as a result of valuation adjustments in the balance sheets of those companies on the date their control was obtained (see Note 7 concerning Business Combinations in the Notes to the Annual Accounts of Elecnor, S.A. and subsidiaries).
• In another notable corporate milestone, although it has not had a significant impact on the bottom line in the year, in May, Elecnor signed a strategic agreement with international engineering and construction company Vinccler to enter the oil and gas business in Ecuador. In this connection, the Group invested in Wayra Energy, S.A., Vinccler's subsidiary operating in Ecuador. The goal of this operation is to jointly develop projects awarded to that company by the government of Ecuador through contracts with Stateowned company Petroamazonas EP. This agreement heralds the start of Elecnor's activity, on both the domestic and international stage, in the upstream sector.

Other non-recurring impacts on profit/loss for the year

• On 31 May 2017, Spain's competition watchdog (CNMC) notified Elecnor, S.A., that it was opening disciplinary proceedings against it and another 15 companies, for a potential infringement in the sphere of the construction and maintenance of electrification systems and electromechanical equipment in railway lines. On 14 March 2019, the CNMC Council issued a resolution establishing a Euros 20.4 million fine. In May 2019, Elecnor lodged an appeal and on 16 July 2019 the National Court (Audiencia Nacional) suspended execution of the CNMC resolution of 14 March 2019, dependent upon the presentation of bank guarantees. In light of these events, a provision was allocated to cover this risk in its entirety (see Note 19 to the Annual Accounts of Elecnor, S.A. and subsidiaries and Note 12 to the Annual Accounts of Elecnor, S.A.).
• In 2019, due to the situation of Odebrecht, the Group recognised an impairment in the amount owed by the subsidiary Elecnor Perú, S.A.C. to the client Consorcio Constructor Ductos del Sur which is payable primarily by Odebrecht (see Note 14 to the Annual Accounts of Elecnor, S.A. and subsidiaries).
• The Group has decided to this year recognise the amounts claimed by the Tax Authority in the settlement agreements against which appeals have been lodged in connection with discrepancies of interpretation in

relation to related-party transactions, as well as the impact for the rest of the years open to inspection (see Note 22 to the Annual Accounts of Elecnor, S.A. and subsidiaries and Note 16 to the Annual Accounts of Elecnor, S.A.).

• As a result of the partnership between the Elecnor Group and APG to jointly manage the subgroup Celeo Concesiones e Inversiones, formalised on 17 December 2019 (see section 2.f of the Consolidated Annual Accounts), and after various meetings with the National Securities Market Commission (CNMV), the comparative amounts for 2018 have been restated in the Consolidated Annual Accounts for 2019 in order to retroactively reflect the effects had the assets and liabilities of the subgroup Celeo Redes been accounted for using the equity method since the outset of the agreement with APG.

2.2. Key figures in profit/loss for the year

As a result of the foregoing, the following are key figures in the Consolidated Income Statement:

KEY FIGURES

	2018
(thousands of Euros)	2019	Restated	Change (%)
Turnover	2,453,726	2,250,899	9.0%
Domestic	1,168,656	987,979	18.3%
International	1,285,070	1,262,920	1.8%
EBITDA	386,996	254,168	52.3%
Profit before income tax	190,077	125,391	51.6%
Consolidated net profit	126,377	82,117	53.9%

Elector continues its internationalisation process and is a flagship company in the sectors of the domestic market in which it operates. The Group's Turnover in 2019 amounted to Euros 2,453.7 million, an increase of 9% with respect to the previous year. The international market contributed Euros 1,285.1 million to Turnover.

On the other hand, the Group has implemented a constant policy of cost containment and control which is at present underpinned by the development of various digitalisation projects to enhance the efficiency of its business processes, some of which were launched in the year and which are expected to start yielding returns in the short term.

The backlog of contracts pending amounts to Euros 2,222.7 million. Compared with the previous year-end figure, and considering the restatement, the backlog of contracts pending has increased by 4.5%. 75% of the backlog corresponds to the international market.

Turnover by segments

		2018
(thousands of Euros)	2019	Restated	Change (%)
Infrastructure	2,279,501	2,096,046	8.8%
Concessions business	190,769	158,643	20.3%
Operations between segments	(16,544)	(3,790)	-
	2,453,726	2,250,899	9.0%

By segment, the Infrastructure Business logged revenues amounting to Euros 2,279.5 million, an 8.8% increase on the previous year, while the Concessions Business logged revenue growth of 20.3%, compared with 2018, to Euros 190.8 million.

EBITDA by segments

	2018
(thousands of Euros)	2019	Restated	Change (%)
Infrastructure	176,717	171,481	3.1%
Concessions business	144,712	114,921	25.9%
Corporation	72,637	(30,693)
Operations between segments	(7,070)	(1,541)
EBITDA	386,996	254,168	52.3%
NET EBITDA FROM CORPORATE TRANSACTIONS	265,350	248,518	6.8%

NET EBITDA from corporate transactions3 rose 6.8% in the year to Euros 265.3 million. This positive EBITDA performance evidences the robustness of the Group's two businesses: Infrastructure and Concessions (with growth of 3.1% and 25.9%, respectively). We highlight the sound performance by the activities conducted by the Parent in Spain and its permanent establishments abroad, and that of the Group's subsidiaries operating in Brazil, United States, Chile, Angola, Australia, etc.).

The effect of the business combination on EBITDA in the year (Euros 121.6 million) is set forth in the Corporation segment of the attached table and contributed to increasing EBITDA in 2019 to Euros 387.0 million.

Both Revenues and EBITDA in Operations between segments evidence the construction by the Infrastructure Business in wind farms both domestically and abroad, developed by Group subsidiaries corresponding to the Concessions Business. The increase in these operations this year is due mainly to new investments in energy-generating assets using renewable sources, such as the Cofrentes wind farm (Spain), and the San Fernando wind farms (Brazil).

Business performance

The Infrastructure Business logged growth of 9% in Revenues and 3% in EBITDA. Net profit, amounted to Euros 66.5 million, an increase of 2%.

Infrastructure

	2018
(thousands of Euros)	2019	Restated	Change (%)
Turnover	2,279,501	2,096,046	8.8%
EBITDA	176,717	171,481	3.1%
Attributable net profit	66,519	65,104	2.2%

In this business, Elecnor remains a leader in the national market for services to large operators, mainly electric utilities and telecommunications companies. Moreover, the construction of six wind farms in Zaragoza

³ See appendix on Alternative Performance Measures.

(Spain) with a total installed capacity of 231 MW, developed by Forestalia, and of one 50 MW wind farm in Cofrentes (Valencia, Spain), developed by the Elecnor Group's wind energy development subsidiary Enerfín, contributed to the Group's increased activity in the Spanish renewables sector.

In addition, the Infrastructure Business in the international market is developing significant projects, including, most notably, on the basis of their positive contribution to results:

• The construction of electricity transmission lines in Brazil;
• Growth in operations in Africa on the back of involvement in various construction projects, including: Hydroelectric plants and transmission lines in Angola (electromechanical assembly of the 2,070 MW Laúca hydroelectric plant); Balance of Plant (BOP) contract and water treatment plant for the Bellara steel complex in Algeria; Refurbishment of the Inga hydropower sub-station in the Democratic Republic of Congo; construction project of the electricity interconnection grid for OMVG ("Organisation pour la Mise en Valeur du Fleuve Gambie").
• Construction of the solar PV plant in Canoa Solar, Dominican Republic (25 MW).
• Development of wind farms in Toabré (Panama), Tafilah (Jordan), the Magallanes Region (Chile), and Boulenouar (Mauritania)
• Railway tunnels in Norway

In addition, the Group's subsidiaries continue to provide construction and maintenance services to strategic sectors in countries offering excellent opportunities for organic growth:

• In the United States, the operations focus on the electricity and traffic sectors
• In the United Kingdom, on the electricity and telecommunications sectors

Last December, Elecnor was awarded the Vilnius-Klaipeda railway electrification project, one of the strategic projects in the coming years for Lithuania's state-run railway company Lietuvos Geležinkeliai (Lithuanian Railways, LG), valued at Euros 350 million. For this project, Elecnor joined forces with Abengoa in a 50% owned consortium. The project's engineering and construction is expected to last four years.

After the balance sheet date, the Group was awarded a contract to carry out one of the largest efficient water transmission and supply projects in Oman. The contract, worth Euros 192 million, was awarded by the Public Authority for Water (Diam) in a highly competitive international tender. Elecnor will build this project in a consortium with Omani company Target. The construction of this infrastructure strengthens the Group's position in the Sultanate, where Elecnor was awarded another, Euros 50 million project to transport drinking water in 2016.

Moreover, Elecnor will build four solar PV facilities for AES Panamá, with a total installed capacity of 40 megawatts (MW) (USD 50 million)

The Concessions Business, which comprises the operation of wind farms, solar PV and solar thermal facilities, electric power transmission lines and water treatment plants, logged growth of 20.3% in Revenues and 25.9% in EBITDA. Net profit increased by 44.3% to Euros 36.7 million in the year.

Concessions business

(thousands of Euros)	2019	Restated	Change (%)
Turnover	190,769	158,643	20.3%
EBITDA	144,712	114,921	25.9%

Attributable net profit	36,726	25,442	44.4%

These rates of growth were driven: firstly, by the higher electric power output at domestic wind farms; secondly, by the growth of the transmission business underpinned by new projects acquired last year; thirdly, by the proceeds from the sales of solar PV developments, an activity also encompassed by this business; and, finally, by the results of having fully consolidated for five months the income from the solar thermal plants which the previous year were equity-accounted (see Note 7 to the Annual Accounts of Elecnor, S.A. and subsidiaries).

Results at wind projects were boosted by the increased output of electric power in farms in Spain, Brazil and Canada. The Group has an installed capacity of 1,349 MW in wind farms in operation and construction in these three countries. Currently under construction are the wind farms in Cofrentes (50 MW) in Spain and San Fernando (173 MW) in Brazil. Note the recent adjudication of a new phase to expand the wind projects at San Fernando (83 MW). The development, operation and maintenance of these wind farms will be carried out by subsidiaries of the Group's Concessions Business.

With regard to electric power transmission projects, the Group is involved in the operation of 5,740 km of power lines in Chile and Brazil. In Brazil, results were boosted by the contribution of transmission line concession companies: Jaurú Transmisosora de Energia, S.A. and Cachoeira Paulista Transmissora de Energia, S.A. acquired from Grupo Isolux (shareholdings of 33.3% and 100%, respectively). In Chile and Brazil, the Group is involved in the construction of new electric power transmission lines, to be operated by the subsidiaries of Celeo Redes Chile and Celeo Redes Brazil, respectively.

The Group is building six solar PV plants (179.8 MW) in the Brazilian state of Piauí, whose energy sales were adjudicated in 2018 to the Brazilian subsidiaries in which the Elecnor has an interest.

2.3. Financial position

Corporation net financial debt in (Euros 135.7 million) decreased by 33.5% with respect to the previous year (Euros 204 thousand as per the restated Consolidated Annual Accounts for 2018). This was due to the positive cash generation performance of the Group's businesses as a result of their operating activities.

The indebtedness ratio at year-end was 0.92x (Corporation net financial debt/EBITDA with recourse), below 1x, thereby amply meeting the benchmark ratio established in the syndicated financing contract (see Note 17 to the Annual Accounts of Elecnor, S.A. and subsidiaries).

Meanwhile, total net financial debt (Euros 494.1 million) decreased by 13.4% with respect to that calculated based on the restated figures for 2018 (Euros 570.4 million).

Net Financial Debt (thousands of euros, at year-end)

	2019
Corporation net financial debt	135,672
Net EBITDA of corporate transactions	265,350
With recourse	122,633
Without recourse	142,717
Ratio of Debt/EBITDA with recourse + projects div.	0.92
Total Net Financial Debt	494,133
With recourse	135,672
Without recourse	358,461
Net EBITDA of corporate transactions	265,350
Ratio of total net financial debt to net EBITDA of
corporate transactions	1.86

With regard to the Group's financial strategy, we note:

• Elecnor has renewed its Syndicated Financing Contract, arranged in 2014, previously renewed in 2015, 2016, 2017 and 2018, extending the maturity, improving the original conditions and including the voluntary advanced repayment of Euros 100 million in 2018. The financing has a cap of Euros 400 million, distributed between the Loan Tranche of Euros 200 million and a Credit Facility Tranche of Euros 200 million. In the wake of this renewal, the Credit Facility Tranche is subdivided into two parts: one denominated in US Dollars, up to a limit of USD 75 million and available for Elecnor and its subsidiary Elecdor, and one denominated in euros up to a limit of Euros 134 million, available only to Elecnor. This renewal will afford Elecdor sufficient financial capacity to tackle the new projects in the oil and gas business being developed by the company in Ecuador. The renewal was signed by fourteen entities taking part in the financing.
• Elecnor's strategy is to diversify its short- and medium-term financing sources, beyond traditional banking sources, by issuing another Commercial Paper programme in the Alternative Fixed-Income Market (MARF) that will enable it to finance itself in euros and US Dollars over periods of up to 24 months, optimising the costs of funding working capital. The equivalent value of outstanding issues in euros may not exceed the ceiling of Euros 300 million. In deciding to renew the programme, Elecnor valued the flexibility of the financing periods and the lower cost than that of alternative funding sources over the same maturities.
• Elecnor, via its wind power development and operation subsidiary Enerfín, successfully completed the issuance of bonds to strengthen its wind farm business in Brazil. It issued bonds without recourse to the shareholder in the Brazilian securities market in the amount of BRL 325 million (Euros 73 million) for the Ventos do Sul wind farms (150 MW) located in the Brazilian state of Rio Grande do Sul. These farms commenced operation in 2006 and the financing arranged for their construction had been fully repaid before the issuance of these bonds. The funds from this bond placement will be used for investment in future projects. The issue was placed in two tranches at different costs. 70% was subscribed at the Brazilian Interbank Deposit Certificate (CDI) rate, with a spread of 0.75%, whereas the remaining 30% was linked to Brazil's Extended Consumer Price Index (IPCA) with a spread of 3.25%.
• On 25 November 2019, the Celeo Redes subgroup, which belongs to the Elecnor Group and is accounted for using the equity method, signed a bond issue to refinance transmission line projects in Chile (Diego Almagro, Casablanca and Mataquito) amounting to USD 365 million. These bonds were issued by private placement and in accordance with New York legislation, and were fully subscribed

by Alliance Global Investors. The bonds, which will be fully redeemed over the course of the next 30 years, will be used to finance those projects. On 6 December 2019, the first draw-down, amounting to USD 78.7 million, was made effective.

The Elecnor Group tackles its investment projects by arranging project financing, as described in section 5.1.2 "Interest rate risk" herein, while it finances its equity with the resources generated by the businesses of which the Group is comprised.

2.4. Material changes in accounting policies

IFRS 16 Leases comes into force on 1 January 2019. This standard eliminates the double-entry accounting model for lessees that distinguishes between finance leases, which are recognised in the balance sheet, and operating leases, for which future lease payments do not have to be recognised. A single model has been developed in its place for the balance sheet, which is similar to the current finance lease model.

In addition, IFRIC 23 Uncertainty over Income Tax Treatments applies to annual reporting period starting from 1 January 2019. It introduces guidelines as to how to measure and recognise uncertainty relating to income tax treatments, tax bases, unused tax losses, unused tax credits and tax rates.

The Group adopted IFRS 16 Leases and IFRIC 23 Uncertainty over Income Tax Treatments on 1 January 2019. The main effects of applying these standards correspond to:

• A reduction of Euros 5.3 million in cumulative gains arising from the difference in expenses recognised on a straight-line basis over the operating lease term and the depreciated cost of recognition when applying IFRS 16 and using the modified retroactive method, in other words, as though the standard had been applied since the start date of each lease contract.

The Group booked depreciation charges for right-of-use assets and finance expenses instead of lease expenses, which in the consolidated statement of profit and loss at 31 December 2019 were included under the heading "Other operating expenses". In 2019, the Group booked depreciation charges amounting to Euros 6,362 thousand and finance expenses for lease liabilities amounting to Euros 2,688 thousand, instead of "Other finance expenses" amounting to Euros 7,875 thousand.

• Reduction of cumulative gains amounting to Euros 6.3 million due to the tax uncertainties estimated by the Group.

The accounting policies and methods used to prepare the consolidated annual accounts in 2019 are the same as those applied to the consolidated annual accounts in 2018, except as detailed previously.

The accounting policies and methods used to prepare the separate annual accounts in 2019 are the same as those applied to the separate annual accounts in 2018, except as detailed below.

All accounting principles with a significant effect have been applied in the drawing up of these consolidated annual accounts.

2.5. Results at the Group's Parent, Elecnor, S.A.

KEY FIGURES
(thousands of Euros)	2019	2018	Change (%)
Turnover	1,368,728	1,315,286	4.1%
Domestic	987,643	859,507	14.9%
International	381,085	455,779	-16.4%
Income from operating activities	(7,203)	27,391	-126.3%
Profit before income tax	54,659	59,850	-8.7%
Profit after tax	30,122	44,136	-31.8%

The operating income of the Parent's, Elecnor, S.A., was lower than in the previous year, since the international projects that have contributed most to consolidated income (in Brazil, Chile, United States, Australia) were carried out through subsidiaries.

Profit before tax totalled Euros 54.7 million, i.e. 8.7% lower than in the previous year. Finance income rose compared with the previous year (increased amount of dividends from subsidiaries), a positive effect that partially offsets the lower operating income.

2.6. Average payment period

The average payment period to suppliers of the Group's Parent, Elecnor, S.A., calculated as per Additional Provision Three of Law 15/ 2010, dated 15 July, is 65 days. The average payment period to suppliers of the Group, calculated in the same way, is 63 days.

2.7. Turnover by activity

At 31 December each year and in thousands of euros

Turnover by activity

	2018
(thousands of Euros)	2019	Restated	Change (%)
Electricity	908,347	744,732	22.0%
Power generation	573,375	631,087	-9.1%
Telecommunications and space	247,719	252,914	-2.1%
Facilities	215,105	165,821	29.7%
Construction, environment and water	181,276	169,725	6.8%
Maintenance	171,830	160,396	7.1%
Oil & Gas	106,793	102,594	4.1%
Railways	49,281	23,630	108.6%
	2,453,726	2,250,899	9.0%

Once again, the core business in terms of turnover was Electricity, with Euros 908.3 million, up 22% on 2018, due to improvements in both the domestic market and foreign subsidiaries (especially those in the United States). It was followed by Power Generation, with Euros 573.4 million, 9.1% lower than in 2018 due to the impact of the depreciation of the Brazilian Real and the completion of large power generation plants, primarily in Australia and Mexico. Note the comparative year-on-year increase in Facilities, into which category part of US production falls, and in Railways, which includes revenues from the railway tunnel projects in Norway.

3. Stock market information

	2019	2018
Closing share price (€)	10.95	13.20
Total volume of securities (million)	3.3	4.3
Total cash traded (€ million)	37.7	53.9
Number of shares (million)	87	87
Market capitalisation (€ million)	952.6	1,148.4
PER	7.5	15.5
Dividend yield	2.4%	2.6%

Dividend yield in 2019 was 2.4%, compared to 2.6% the year before. This decrease was due to the payment of an interim dividend in 2018, which has traditionally been paid in January of the following year, but was brought forward to December 2018.

Accordingly, in 2018 three dividends were paid to shareholders (interim dividend charged to 2017, the 2017 supplementary dividend and the interim dividend charged to 2018), while in 2019 two dividends were paid (the 2018 supplementary dividend and the interim dividend charged to 2019).

4. Capital management policy

Key to Elecnor's strategy is its policy of maximum financial prudence. The capital structure is defined by the commitment to solvency and the aim of maximising shareholder returns.

5. Financial risk management policy

Elecnor is exposed to certain financial risks, which it manages by grouping together its systems for identifying, measuring and supervising risks and limiting the concentration thereof. Financial risk management and containment is performed on a coordinated basis by corporate management and the various business units and subsidiaries that comprise the Group. Financial risk management activities are approved at the highest executive level, in accordance with the rules, policies and procedures in place.

5.1. Currency risks

Exchange risk to be mitigated arises from the transactions that the Group performs on the international markets in the course of its business, namely market risk due primarily to foreign currency risk. Certain income and procurement costs are denominated in currencies other than the Euro. For this reason, the risk of fluctuating exchange rates of these currencies against the functional currency could have an impact on the Group's profits.

In order to manage and minimise this risk, Elecnor uses hedging strategies, since its objective is to generate profits only through its ordinary business, and not by speculating in relation to exchange rate fluctuations.

The instruments used to achieve this hedging are essentially borrowings tied to the contract's collection currency, foreign currency hedges and swaps, whereby Elecnor and the bank exchange the cash flows arising from a loan denominated in Euros for the flows of another loan denominated in the currency in question, as well as the use of "currency baskets" in order to hedge mixed financing tied to various currencies.

5.2. Interest rate risk

Interest rate fluctuations change the fair value of assets and liabilities that accrue interest at fixed rates and the future cash flows from assets and liabilities indexed to floating interest rates. Elecnor has arranged borrowings to enable it to carry on its operations, mainly in connection with the development, construction and operation of wind farms, thermosolar projects and electricity infrastructure concessions, which it does under project financing arrangements. This kind of arrangement requires under contract that interest rate risk be covered using hedging instruments.

In the case of both project and corporate financing, borrowings are arranged mainly at floating rates and, where appropriate, hedging instruments are used to minimise the related interest rate risk. The hedging instruments, which are specifically assigned to financial debt and are limited to the same nominal value as the latter and the same maturity dates as the hedged items, are essentially IRSs, the aim of which is to convert loans originally arranged at variable rates to fixed rates. In any case, the interest rate hedges arranged are all effective for accounting purposes.

5.3. Other price risks

The Group is also exposed to its risk that cash flows and profits may be affected by changes in energy prices and by oil prices, among other issues. In order to manage and minimise these risks the Group occasionally uses hedging strategies.

5.4. Liquidity risk

Liquidity risk is mitigated through Elecnor's policy of holding cash and highly liquid non-speculative short-term instruments, such as the acquisition of treasury bills under non-optional repurchase agreements and very short-term US dollar deposits, through leading banks in order to be able to meet its future commitments and the arrangement of committed credit facilities of sufficient amount to cover its projected needs.

5.5. Credit risk

The main credit risk arises from trade receivables, when the counterparty or customer does not meet their contractual obligations. To mitigate this risk, the Group operates with customers that have adequate credit records. In view of its activities and the sectors in which it operates, Elecnor has customers with very high credit ratings. However, in the case of non-recurrent international sales to customers, mechanisms such as advances, irrevocable letters of credit and insurance policies are used to ensure collection. Furthermore, the financial solvency of customers is analysed and specific terms and conditions are included in contracts, aimed at guaranteeing customer payments of the stipulated price.

In the case of the wind farms, the power produced - in accordance with the legislative framework in force for the electricity industry - is sold in the Iberian Electricity Market (MIBEL) and income is collected from the operator of the Spanish Electricity Market (OMIE) through a payment-guarantee system and from the Spanish National Markets and Competition Commission (CNMC), which regulates energy markets in Spain and reports to the Ministry of Industry. Ventos do Sul Energia, S.A., Parques Eólicos Palmares, S.A., Ventos da Lagoa, S.A., Ventos do Litoral Energia, S.A. and Ventos dos Índios Energia, S.A. (Brazil) entered into long-term agreements with the corresponding Brazilian electricity distribution companies to sell the electric power that they will generate for a period of 20 years. Furthermore, Eóliennes de L'Érable has signed a 20-year contract to sell the electricity it generates to Canadian electric utility Hydro-Québec.

With regard to transmission lines, specifically those operated as concessions in Brazil, Operador Nacional do Sistema Elétrico (ONS) is responsible for coordinating collections and payments within the country's electricity system and notifies the concession holder of the companies from which collections must be made: generators, major consumers and transmission entities. Prior to connecting to the system these companies deposit a guarantee. In the event of non-payment this guarantee will be executed, they will be immediately disconnected from the system and the payment obligation will be shared among the remaining users of the system. Accordingly, the concessionaire has the guaranteed payment from the national power grid system. In this connection, in the years in which the Group has been operating these lines, there has been no non-payment by users thereof.

The transmission lines Chile belong to that country's national grid (previously known as the backbone system), in which Coordinador Eléctrico Nacional (CEN) coordinates the flow of payments to transmission companies. The current system remained until December 2018, whereby those responsible for paying the transmission companies were the generating companies. From 2019 onwards, distributors also are liable for payments, so the portfolio of payers will be more diversified from that date on. The payment guarantee of the national transmission grid is based on a CEN Procedure that establishes that, in the event of non-payments by a coordinated company (company coordinated by CEN), the defaulting party is disconnected from the grid, and the payment obligation is spread among the remaining coordinated companies.

Elecnor seeks always to implement the strictest measures to mitigate this risk and conducts periodic analyses of its exposure to credit risk, making the relevant impairment corrections where necessary.

5.6. Regulatory risk

Elecnor closely monitors regulatory risk, particularly that affecting renewable energy, to adequately reflect its impact on the consolidated income statement.

5.7. Other risks

In addition to the risks outlined above, the Elecnor Group is exposed to various risk factors (governance, strategic, planning and economic environment, operating, reporting and compliance risks) linked to the sectors in which it operates and the long list of countries in which it operates, either consistently or by means of oneoff projects. The Group uses its Risk Management System to continually manage and prevent these risks, reducing to acceptable levels the probability of their materialising and mitigating their potential impact, where applicable, on business volume, profitability and efficiency, reputation and sustainability. The pillars of this Risk Management System are the ongoing identification and assessment of the risks to which the Group is exposed, the improvement of related management mechanisms and tools and the permanent oversight and monitoring of the entire process.

6. Environment

The commitment to the protection of the environment and efficiency in the use of energy resources are common denominators in the Group's activities.

In this connection, and with the aim of contributing to UN Global Compact Sustainable Development Goal 13 "Climate Action", Elecnor fosters the development of its activity in a sustainable manner adapted to climate conditions and always with the involvement and commitment of all persons belonging to the Group. Climate change is a challenge in respect of which the Group has worked hard in recent years, in particular by calculating its carbon footprint in accordance with internationally accepted standards and by implementing measures to reduce GHG emissions within its scope of action.

Elecnor also conducted a strategic diagnosis of adaptation to climate change based on the recommendations of the Intergovernmental Panel on Climate Change, in order to identify opportunities and risks in that connection. On this basis it has developed its 2030 Climate Change Strategy, establishing the framework for all the Group's actions to reduce greenhouse gas emissions, adapt to climate change impacts and tap into the associated opportunities.

At present, the environmental control mechanisms of the company are based on certified Environmental Management Systems and Energy Management Systems in accordance with ISO 14001:2004 and ISO 50001 standards. The Environmental Management System defines the procedure to identify, assess and record the environmental aspects originating in Elecnor's activities in order to determine which are significant.

In global terms, the Environmental Management strategy is governed by the following guiding principles:

• » The permanent quest for a balance between financial rewards and environmental protection, nurturing approaches that enable these aspects to be mutually strengthening.
• » Taking into consideration the environmental component when deciding to invest in new projects and activities.
• » Involving employees through relevant training and awareness actions.
• » Also involving our other stakeholders (shareholders, customers, suppliers and society at large) in the joint quest for useful solutions to the challenges of preserving the environment and energy resources.

<-- PDF CHUNK SEPARATOR -->

The Non-Financial Information section of this report outlines the goals, strategies and initiatives implemented in 2019 in accordance with the Group's environmental management policy.

7. Human Resources

Elecnor's workforce (*)

	2018
At 31 December each year	2019	Restated	Changes
Domestic	9,336	8,836	5.7%
International	5,519	4,741	16.4%
	14,855	13,577	9.4%

*This calculation does not include directors who are not on the Group's workforce.

People are Elecnor's main asset, and its overall strategy is underpinned by values such as talent, transparency and team work in conditions of the utmost safety. In this connection, occupational risk prevention is a common denominator throughout all the Group's activities. The commitment to prevention is part of our culture. And it is a commitment that goes beyond legal regulations and customers' requirements, with exacting and very clear goals: zero accidents and zero tolerance to non-compliances with the preventive measures established by the company.

At 2019 year-end, the Group's workforce had increased by 1,278 (9.4 %) to 14,855 employees. In the domestic market the increase was of 5.7%, largely to cover the need to support the international business. Abroad, there was a general increase of 16.4 %. There have been increases in the workforce in Angola, Brazil, Cameroon, Ghana and Panama, as well as the inclusion of two new countries: El Salvador and Senegal.

Note that this year-end figure does not include the workforce of Celeo Concesiones e Inversiones which is now an equity-accounted investee. Had it been included, the total workforce would be 15,255 (9,370 domestic and 5,885 international), and the increase on the previous year would have been 9.8%.

8. RDI

The initiatives undertaken in the year 2019 were:

• Launch of the 2019 edition of the internal call for INNOVA project proposals for financing.
• Maintaining UNE 166.002 certification for the RDI Management systems of Elecnor and Audeca.
• Conducting a technical workshop with SAS on Industry 4.0.
• Two projects financed by Spain's Centre for the Development of Industrial Technology (CDTI). Audeca and Enerfín.
• Launch of a project with partners (Environment at the request of the Ministry for Development).
• Using RDI to boost business competitiveness.

Improvements planned for 2020:

• Technical workshops to be held in partnership with technological companies.
• Increasing the number of projects with customers and partners.
• Creation of a working panel with representatives from all the general business divisions and sub-divisions of Elecnor. RDI panel of experts.

9. Significant events subsequent to year-end

Between 31 December 2019 and the time of preparation of the Individual and Consolidated Financial Statements there were no significant events that might materially alter the true and fair view of said financial statements, except what follows.

The outbreak of the novel coronavirus causing the disease known as COVID-19 in China in January 2020 and its recent spread to numerous countries across the globe led the World Health Organisation to declare a pandemic on 11 March 2020.

Considering the complexity of markets due to their globalisation and the absence, for now, of an effective treatment against the virus, the consequences for the operations of the Elecnor Group are uncertain, and will depend largely on how the pandemic evolves and spreads over the next few months, as well as the capacity of all the economic agents involved to react and adapt.

Consequently, on the date of authorising these Annual Accounts for issue it is too soon to perform a detailed assessment or quantification of the potential impact of COVID-19 on Elecnor and its group of companies, as the short-, medium- and long-term consequences remain uncertain. In any event, the consequences of COVID-19 are considered a subsequent event that does not require an adjustment of the consolidated annual accounts of 2019, without prejudice to their being recognised in the consolidated annual accounts of 2020.

In this regard, there has already been a downturn in the Group's estimated activity in the first few months of 2020 as a result of the COVID-19 outbreak, and it is not yet possible to gauge whether this situation will persist and to what extent.

Nevertheless, the Company's directors and Management, considering the measures adopted by the various governments of the countries in which the Elecnor Group operates to help manage the health crisis unleashed by the COVID-19 pandemic, has conducted a preliminary assessment of the current situation based on the best available information. Due to the aforementioned considerations, this information may be incomplete. Of the findings of that assessment, we highlight the following aspects:

• Liquidity risk: the general market situation may foreseeably trigger a widespread increase in liquidity stresses in the economy, as well as a contraction in the credit market. In this regard, the Group's financial situation is solid and it has sizeable undrawn credit lines (Note 17), which, coupled with the launch of specific plans to boost and efficiently manage liquidity, will enable it to tackle these stresses.
• Operating risk: the changing and unpredictable nature of events could lead to the risk of the temporary disruption of some of the Group's activities. Accordingly, specific working groups and procedures have been established aimed at monitoring and managing developments in its operations at all times, in order to minimise the impact on its business.
• Risk of variation of certain financial figures: the aforementioned factors could trigger a reduction in the next financial statements of the amounts booked under significant headings for the Elecnor Group, such as "Net turnover" or "Profit after tax", or key indicators thereof (EBITDA/Net financial debt ratio) although

for now it is not possible to reliably quantify the impact of this, considering the conditioning factors and restrictions we have already mentioned.

Lastly, note that the directors and Management of Elecnor are constantly monitoring the situation as it unfolds, in order to successfully tackle any potential impacts, both financial and non-financial.

10. Outlook for 2020

10.1. Economic context

As explained in section 1.2 herein, Economic context, the outlook for the coming year were for global growth, although experts have revised down growth forecasts for both advanced economies and emerging and developing markets. The Spanish economy faces a deceleration in growth and internal demand is shrinking to adjust to the unfavourable outlook.

In any event, these projections have already been superseded by the crisis unleashed by the COVID-19 outbreak.

10.2. Elecnor Group

The Elecnor Group is facing an uncertain global outlook in 2020, after logging a brilliant performance in 2019, when it successfully completed the corporate transactions outlined in this report, and posting excellent results in the ordinary course of its business, in terms of both income and cash generation and the reduction of corporate debt.

Its current situation will enable the Elecnor Group to tackle the period of uncertainty ahead on a strong footing. It is presently analysing the situation triggered by COVID-19 and its potential effects on the Group. The company will swiftly take the necessary measures at each given time to minimise the negative impact of this health crisis on its activity, as explained in the note concerning events after the reporting period in the Annual Accounts of Elecnor, S.A. and subsidiaries, and in that section of this report.

Accordingly, and despite the robust backlog, the Group is not in a position to sufficiently reliably estimate the Group's revenues or profits for 2020.

With regard to the Group's assets aimed at generating electricity using renewable energy sources in Spain, we highlight Royal Decree-Law 17/2019, implementing urgent measures for the necessary adaptation of remuneration parameters affecting the electricity system. This legislation established a reasonable return of 7.09% for renewable, cogeneration and waste facilities, applicable in the second regulatory period (2020- 2025). However, renewable, cogeneration and waste facilities that were remunerated when Royal Decree-Law 9/2013 came into force were allowed to maintain, during the second and third regulatory periods (2020-2031) the reasonable return established for the first regulatory period, of 7.398%.

11. Share capital and acquisition of own shares

At 31/12/2019, the share capital of Elecnor, S.A. was represented by 87,000,000 shares, each with a par value of 10 Euro cents, fully subscribed and paid in, implying a share capital of Euros 8,700,000.

Elecnor, S.A.'s shares are traded in Spain's SIBE electronic trading system, where shares in the leading Spanish companies are traded, and the market with the largest trading volume in Spain.

At 31 December 2018, Elecnor had a portfolio of 2,336,496 treasury shares. In 2019 it acquired 104,509 securities, and sold 120,196. Accordingly, at 31 December 2019 it had a total of 2,320,809 own shares, 2.7% of all shares in the company, unchanged on the previous year.

12. Related-party transactions

With regard to the disclosures on related party transactions, see the details in the notes to the individual and consolidated financial statements at 31 December 2019, as provided in article 15 of Royal Decree 1362/2007.

13. Annual Corporate Governance Report

In compliance with the legal stipulations and in accordance with the model circulated by the Spanish Securities Market Commission (CNMV), the Board of directors of Elecnor, S.A. has drawn up the Annual Corporate Governance Report for the year ended 31 December 2019. Said document is available on the CNMV website and at www.elecnor.com.

14. Non-financial information

In compliance with Law 11/2018, of 28 December, concerning non-financial information and diversity, Elecnor, S.A. includes its Non-Financial Information Statement in the Consolidated Directors' Report of the Elecnor Group.

Appendix. Alternative Performance Measures

Alternative measurements of the Elecnor Group's performance

Key figures

(thousands of Euros)	2019	2018 Restated	Change (%)
Turnover	2,453,726	2,250,899	9.0%
Domestic	1,168,656	987,979	18.3%
International	1,285,070	1,262,920	1.8%
EBITDA	386,996	254,168	52.3%
Profit before income tax	190,077	125,391	51.6%
Consolidated net profit	126,377	82,117	53.9%

Turnover by segments ^{2019 2018}Restated Change (%) (thousands of Euros) Infrastructure 2,279,501 2,096,046 8.8% Concessions business 190,769 158,643 20.3% Operations between segments (16,544) (3,790) - 2,453,726 2,250,899 9.0%

Turnover by activity (thousands of Euros)	2019	2018 Restated	Change (%)
Electricity	908,347	744,732	22.0%
Power generation	573,375	631,087	-9.1%
Telecommunications and space	247,719	252,914	-2.1%
Facilities	215,105	165,821	29.7%
Construction, environment and water	181,276	169,725	6.8%
Maintenance	171,830	160,396	7.1%
Oil & Gas	106,793	102,594	4.1%
Railways	49,281	23,630	108.6%
	2,453,726	2,250,899	9.0%

EBITDA:

Earnings before interest, taxes, depreciation and amortisation, or gross operating profit.

	2019	2018 Restated	Change (%)
EBITDA = Gross operating profit:	386,996	254,168	52.3%
Results from operating activities	239,676	149,375
+ Expense for amortisation, depreciation, impairment and charges to provisions	162,122	104,793
+ Negative difference in business combinations	-14,802	0
EBITDA from corporate transactions in the year	121,646	5,650

NET EBITDA FROM CORPORATE TRANSACTIONS	265,350	248,518	6.8%
EBITDA from corporate transactions
(thousands of Euros)	2019	2018 Restated
Income at equity-accounted investees:
Income from business combinations as per Note 2.f of the Annual Accounts of Elecnor, S.A. and Subsidiaries	178,345
Income from business combinations as per Note 7 of the Annual Accounts of Elecnor, S.A. and Subsidiaries	-47,445
Income from business combinations (solar thermal companies) as per Note 7 of the Annual Accounts of Elecnor, S.A. and Subsidiaries	-9,254
Assignment of purchase price of Jaurú to Celoe Redes (as per Note 13 of the Annual Accounts of Elecnor, S.A. and Subsidiaries)		5,650
EBITDA from corporate transactions in the year	121,646	5,650

Note on income from operating activities:

As explained in the accompanying Annual Accounts, operating income for 2018 has been restated to include income from equity-accounted investees.

The calculation of EBITDA last year is as follows.

In addition, as explained in Note 2.e to the Annual Accounts of Elecnor, S.A. and subsidiaries, income for 2018 was modified by adjusting the provisional values relating to the acquisition in December 2018 of shares in Jaurú Transmissora de Energia, S.A. and Cachoeira Paulista Transmissora, S.A. from Isolux Energia de Participacoes, S.A., allocating the purchase price of the shareholdings in those companies in accordance with the principles of IFRS 3. Accordingly, in the Consolidated Income Statement for 2018, there is additional income of Euros 5,650 thousand under the heading "Share in profit/loss of equity-accounted investees in the consolidated income statement".

	2018
EBITDA not restated from 2018	338,603
Operating income not restated	151,860
+ Expense for amortisation, depreciation, impairment and charges to provisions	112,012
+ amortisation and depreciation + harmonisation of sales in Brazil concessions due to the effect of applying IFRIC 12	74,731

EBITDA by segments
(thousands of Euros)	2019	2018 Restated	Change (%)
Infrastructure	176,717	171,481	3.1%
Concessions business	144,712	114,921	25.9%
Corporation	72,637	(30,693)
Operations between segments	(7,070)	(1,541)
EBITDA	386,996	254,168	52.3%
NET EBITDA FROM CORPORATE TRANSACTIONS	265,350	248,518	6.8%

Consolidated net profit	2019	2018 Restated	Change (%)
(thousands of euros, at year-end)
Infrastructure	66,519	65,104	2.2%
Concessions business	36,726	25,442	44.4%
Corporation	29,560	(7,388)	-
Operations between segments	(6,428)	(1,041)	-
	126,377	82,117	53.9%

Alternative measures of income of the Parent of the Elecnor Group

Key figures
(thousands of Euros)	2019	2018	Change (%)
Turnover	1,368,728	1,315,286	4.1%
Domestic	987,643	859,507	14.9%
International	381,085	455,779	-16.4%
Results from operating activities	(7,203)	27,391	-126.3%
Profit before income tax	54,659	59,850	-8.7%
Profit after tax	30,122	44,136	-31.8%

	2019	2018	Change (%)
EBITDA = Gross operating profit	18,160	77,461	-76.6%
Results from operating activities	(7,203)	27,391
+ Expense for amortisation, depreciation, impairment and charges to provisions	25,364	50,072

Stock market information

	2019	2018
Closing share price (€)	10.95	13.20
Total volume of securities (million)	3.3	4.3
Total cash traded (€ mn)	37.7	53.9
Number of shares (million)	87	87
Market capitalisation (€ mn)	952.6	1,148.40
PER	7.5	15.5
Dividend yield	2.4%	2.6%

Group backlog

Backlog

(thousands of euros, at year-end)	2019	2018 Restated	% of total (2019)
Domestic	547,368	445,698	25 %
International	1,675,349	1,681,685	75 %
TOTAL	2,222,717	2,127,383
Percentage growth	4.5%

Alternative debt measures; indebtedness ratio

Net Financial Debt

(thousands of euros, at year-end)	2019
Corporation Net Financial Debt	135,672
Net EBITDA of corporate transactions	265,350
With recourse	122,633
Without recourse	142,717
Ratio of Debt/EBITDA with recourse + projects div.	0.92
Total Net Financial Debt	494,133
With recourse	135,672
Without recourse	358,461
Net EBITDA of corporate transactions	265,350
Ratio of total net financial debt to net EBITDA of corporate transactions	1.86

	2019
Corporation Net Financial Debt	135,672
(Net Financial Debt in Note 17 of the Annual Accounts of Elecnor, S.A. and Subsidiaries)
Net EBITDA of corporate transactions	265,350
EBITDA without recourse (from projects financed via funding without recourse)	142,717
EBITDA with recourse	122,633
Dividends from projects financed via funding without recourse	30,719
Reversal of the effect on EBITDA with recourse of the application of IFRS 16	-6,385
EBITDA with recourse + Dividends from projects without recourse net of the effect of IFRS 16	146,967
Indebtedness ratio = Net corporate financial debt/(EBITDA with recourse + Dividends from projects)	0.92

	2019	2018
Calculation of Total Net Financial Debt		Restated
Financial liabilities from issuing bonds and other marketable	135,120	192,010
securities
+ Finance liabilities on loans and borrowings	680,898	657,256
+ Derivative financial instruments (from Non-current liabilities	19,854	17,982
and Current liabilities in the Consolidated Statement of
Financial Position)
- Current investments in related companies	(128)	(297)
- Derivative financial instruments	(3,873)	(871)
- Cash and cash equivalents	(325,116)	(293,399)
- Other current financial investments	(6,429)	(4,947)
	5,277	6,243
Loans granted by public entities (Note 17)
		871
+ Derivative financial instruments (from Current assets in the
Consolidated Statement of Financial Position) for currency exchange hedges (Note 18)
- Derivative financial instruments (from Non-current liabilities	(11,469)	(4,468)
and Current liabilities in the Consolidated Statement of
Financial Position) for currency exchange hedges (Note 18)
Total Net Financial Debt	494,134	570,380
	-13.4%

ANNUAL CORPORATE GOVERNANCE REPORT FOR LISTED COMPANIES

In compliance with the applicable legal obligations and based on the model circulated by the CNMV, the Board of Directors of ELECNOR, S.A. (hereinafter Elecnor or the Company) has prepared this Annual Corporate Governance Report (hereinafter the REPORT) for the financial year ending 31 December 2019.

The REPORT was approved by the Company's Board of Directors at its meeting held on 25 March 2020 and the CNMV shall immediately be notified and sent the REPORT by electronic means for its dissemination.

The REPORT shall also be made available to the shareholders upon the publication of the announcement of the Annual General Shareholders' Meeting to decide on the approval of the Annual Financial Statements for the financial year ending 31 December 2019.

A CAPITAL STRUCTURE

A.1 Complete the table below with details of the share capital of the company:

Date of last change	Share capital (Euros)	Number of shares	Number of voting
			rights
20/05/2009	8,700,000	87,000,000	87,000,000

Remarks

Please state whether there are different classes of shares with different associated rights:

Yes � No

Class	Number of shares	Par value	Number of votes	Associated rights

Remarks

A.2 Please provide details of the company's significant direct and indirect shareholders at year end, excluding any directors:

Name of	% of shares carrying voting rights		% of voting rights through financial instruments		% of total
shareholder	Direct	Indirect	Direct	Indirect	voting rights
CANTILES XXI, S.L.	52.759%				52.759%
SANTANDER ASSET MANAGEMENT, S.A., SGIIC		3.089%			3.089%

Remarks

Breakdown of the indirect holding

Name of indirect shareholder	Name of direct shareholder	% of shares carrying voting rights	% of voting rights through financial instruments	% of total voting rights
SANTANDER ASSET MANAGEMENT, S.A., SGIIC	SANTANDER SMALL CAPS ESPAÑA, FI SANTANDER SOSTENIBLE 1, FI SANTANDER SOSTENIBLE 2, FI SANTANDER SOSTENIBLE ACCIONES, FI	3.089%		3.089%

Remarks

State the most significant shareholder structure changes during the year:

Name or corporate name of the shareholder	Date of the operation	Description of the operation
BESTINVER GESTIÓN, S.A., SGIIC	26/04/2019	DECREASE BELOW 3%

Most significant movements

A.3 In the following tables, list the members of the Board of Directors (hereinafter "directors") with voting rights in the company:

Name of director	% of shares carrying voting rights		% of voting rights through financial instruments		% of total voting	% voting rights that can be transmitted through financial instruments
	Direct	Indirect	Direct	Indirect	rights	Direct	Indirect
MR. JAIME REAL DE ASÚA ARTECHE	0.012%				0.012%
MR. FERNANDO LEÓN DOMECQ	0.403%				0.403%
MR. IGNACIO PRADO REY BALTAR	0.464%				0.464%
MR. FERNANDO AZAOLA ARTECHE	0.326%				0.326%
MR. MIGUEL CERVERA EARLE	0.164%	0.005%			0.170%
MS. ISABEL DUTILH CARVAJAL	0.010%				0.010%
MR. CRISTÓBAL GONZÁLEZ DE AGUILAR ALONSO URQUIJO	0.135%				0.135%
MS. IRENE HERNÁNDEZ ÁLVAREZ	0.007%				0.007%
MR. JUAN LANDECHO SARABIA	0.003%	0.082%			0.085%
MR. RAFAEL MARTÍN DE BUSTAMANTE VEGA	0.025%				0.025%
MR. MIGUEL MORENÉS GILES		1.011%			1.011%
MR. RAFAEL PRADO ARANGUREN	0.148%				0.148%
MR. JOAQUÍN GÓMEZ DE OLEA Y MENDARO	0.001%				0.001%

Total percentage of voting rights held by the Board of Directors	2.797%
------------------------------------------------------------------	--------

Breakdown of the indirect holding:

Name of director	Name of direct shareholder	% of shares carrying voting rights	% of voting rights through financial instruments	% of total voting rights	% voting rights that can be transmitted through financial instruments
MR. MIGUEL CERVERA EARLE	MS MARÍA DEL MAR MANCA DÍAZ	0.005%		0.005%
MR. JUAN LANDECHO SARABIA	MS SOFIA CANOSA CASTLE	0.082%		0.082%
MR. MIGUEL MORENÉS GILES	KEROW INVERSIONES, S.L.	1.011%		1.011%

A.4 If applicable, state any family, commercial, contractual or corporate relationships that exist among significant shareholders to the extent that they are known to the company, unless they are insignificant or arise in the ordinary course of business, except those that are reported in Section A.6:

Not applicable.

A.5 If applicable, state any commercial, contractual or corporate relationships that exist between significant shareholders and the company and/or group, unless they are insignificant or arise in the ordinary course of business:

Not applicable.

A.6 Describe the relationships, unless insignificant for the two parties, that exist between significant shareholders or shareholders represented on the Board and directors, or their representatives in the case of proprietary directors.

Explain, as the case may be, how the significant shareholders are represented. Specifically, state those directors appointed to represent significant shareholders, those whose appointment was proposed by significant shareholders and/or companies in its group, specifying the nature of such relationships or ties. In particular, mention the existence, identity and post of directors, or their representatives, as the case may be, of the listed company, who are, in turn, members of the Board of Directors or their representatives of companies that hold significant shareholdings in the listed company or in group companies of these significant shareholders.

Name or company name of	Name or company	Company name of the	Description of
related director or	name of related	group company of the	relationship/post
representative	significant shareholder	significant shareholder

MR. JAIME REAL DE ASÚA ARTECHE	CANTILES XXI, S.L.	DIRECTOR
MR. FERNANDO LEÓN DOMECQ	CANTILES XXI, S.L.	CHAIRMAN
MR. IGNACIO PRADO REY BALTAR	CANTILES XXI, S.L.
MR. JOAQUÍN GÓMEZ DE OLEA Y MENDARO	CANTILES XXI, S.L.	DIRECTOR
MR. MIGUEL CERVERA EARLE	CANTILES XXI, S.L.
MR. CRISTÓBAL GONZÁLEZ DE AGUILAR ALONSO-URQUIJO	CANTILES XXI, S.L.	ALTERNATE DIRECTOR
MR. JUAN LANDECHO SARABIA	CANTILES XXI, S.L.	DIRECTOR
MR. MIGUEL MORENÉS GILES	CANTILES XXI, S.L.	DIRECTOR
MR. GABRIEL DE ORAA Y MOYUA	CANTILES XXI, S.L.	DIRECTOR
MR. RAFAEL PRADO ARANGUREN	CANTILES XXI, S.L.

A.7 State whether the company has been notified of any shareholders' agreements that may affect it, in accordance with Articles 530 and 531 of the Ley de Sociedades de Capital ("Corporate Enterprises Act" or "LSC"). If so, describe these agreements and list the party shareholders:

State whether the company is aware of any concerted actions among its shareholders. If so, provide a brief description:

Yes �	No 
-------	------	--

Parties to the concerted action	Percentage of affected shares	Brief description of the agreement	Date of termination of agreement, if applicable

If any of the aforementioned agreements or concerted actions have been modified or terminated during the year, please specify expressly:

Not applicable.

A.8 State whether any individual or company exercises or may exercise control over the company in accordance with Article 5 of the Ley de Mercados de Valores ("Spanish Securities Market Act" or "LMV"). If so, please identify them:

Yes 	No �
Name of individual or company

CANTILES XXI, S.L.

Remarks

In accordance with the provisions of Article 42 of the Code of Commerce.

A.9 Complete the following table with details of the company's treasury shares:

At the close of the year:

Number of direct shares	Number of indirect shares (*)	Total percentage of share
		capital

Explain any significant changes during the year:

Explain significant changes
There have been no significant variations.

A.10 Provide a detailed description of the conditions and terms of the authority given to the Board of Directors to issue, repurchase, or dispose of treasury shares.

On 16 May 2017, Elecnor's General Shareholders' Meeting approved by a majority of 95.73% of the present and represented share capital, the Fifth Agreement of the Agenda, the literal transcription of which is as follows:

"it is hereby agreed, by a majority, to authorise the Board of Directors to acquire through purchase or by "inter vivos" disposition for a consideration of the Company's own shares by the Company, or of the Controlled Companies, in accordance with the provisions of Articles 146(a) and 509 of the Capital Companies Act, authorising it to acquire at most, the number of shares that the Law and/or the legal provisions of mandatory compliance provide for at all times and that, at present, in addition to those already owned by the Company, do not exceed 10% of its share capital, with a minimum acquisition price of the nominal value of the shares and a maximum price not to exceed 30% of its listed value on the stock exchange and for a period of five years, leaving without effect the authorisation granted at the General Shareholders' Meeting of 23 May 2012.

This authorisation could be used in whole or in part for the acquisition of own shares for delivery or transmission to Executive Directors or members of the Senior Management of the Company or its group's companies".

On the other hand, there is no current mandate from the General Shareholders' Meeting to Elecnor's Board of Directors to issue company shares.

A.11 Estimated working capital:

	%
Estimated working capital	25%

A.12 State whether there are any restrictions (article of associations, legislative or of any other nature) placed on the transfer of shares and/or any restrictions on voting rights. In particular, state the existence of any type of restriction that may inhibit a takeover attempt of the company through acquisition of its shares on the market, and those regimes for the prior authorisation or notification that may be applicable, under sector regulations, to acquisitions or transfers of the company's financial instruments.

A.13 State if the shareholders have resolved at a meeting to adopt measures to neutralise a take-over bid pursuant to the provisions of Act 6/2007.

Yes �	No 
-------	------

A.14 State if the company has issued shares that are not traded on a regulated EU market.

Yes �	No 

B GENERAL SHAREHOLDERS' MEETING

B.1 State whether there are any differences between the quorum established by the LSC for General Shareholders' Meetings and those set by the company and if so, describe them in detail:

Yes �	No 
-------	------

B.2 State whether there are any differences in the company's manner of adopting corporate resolutions and the manner for adopting corporate resolutions described by the LSC and, if so, explain:

B.3 State the rules for amending the company's Articles of Association. In particular, state the majorities required for amendment of the Articles of Association and any provisions in place to protect shareholders' rights in the event of amendments to the Articles of Association.

These rules are contained in Article 11 of the Company's Articles of Association and in Article 13 of the Regulations of the Shareholders' General Meeting, shown below:

ARTICLES OF ASSOCIATION

"Article 11.-

Notwithstanding the provisions set forth in the previous article, in order for the Ordinary or Extraordinary General Shareholders' Meeting to validly agree on the issuance of obligations, the increase or decrease of capital, the transformation, merger or division of the Company, and in general, any modification of the Articles of Association, it shall be necessary, in the first call, to have the attendance of shareholders present or represented who hold at least fifty per cent of the subscribed capital with the right to vote.

In the second call, the attendance of twenty-five per cent of the capital shall be sufficient.

For the adoption of the agreements referred to in this Article, if the capital present or represented exceeds fifty per cent, it shall be sufficient for the agreement to be adopted by an absolute majority. However, a vote in favour by two-thirds of the capital present or represented in the Meeting shall be required when shareholders representing twenty-five per cent or more of the subscribed capital with the right to vote are in the second call without reaching fifty per cent".

REGULATIONS OF SHAREHOLDERS' GENERAL MEETING

"Article 13 Voting.

After discussing each of the items on the Agenda, the respective votes shall be cast, giving each share the right to one vote and adopting each of the agreements by a simple majority of votes.

All agreements that are substantially independent shall be voted on separately.

In any case, and even if they appear in the same item of the Agenda, they must be voted on separately:

• a) The appointment, ratification, re-election or separation of each administrator.
• b) The amendment of the articles of association, and the amendment of each article or group of articles that have their own autonomy.
• c) All matters set forth in this way in the Company's articles of association.

In order for the Ordinary or Extraordinary General Shareholders' Meeting to validly agree on the issuance of obligations, the increase or decrease of capital, the transformation, merger or division of the Company, and in general, any modification of the Articles of Association, it shall be necessary, in the first call, to have the attendance of shareholders present or represented who hold at least fifty per cent of the subscribed capital with the right to vote. In the second call, the attendance of twenty-five per cent of the capital shall be sufficient.

For the adoption of the agreements referred to in the previous section, if the capital present or represented exceeds fifty per cent, it shall be sufficient for the agreement to be adopted by an absolute majority. However, a vote in favour by two-thirds of the capital present or represented in the Meeting shall be required when shareholders representing twenty-five per cent or more of the subscribed capital with the right to vote are in the second call without reaching fifty per cent.

The Articles of Association may raise the quorums and majorities provided for in the preceding paragraphs.

Electronic voting systems may be established, in accordance with Chapter III of these Regulations, to the extent that they allow the identity and status – shareholder or representative – of voters to be recorded, the number of shares with which they vote, and the way the vote is cast.

For each agreement put up for vote at the General Meeting, at least the number of shares for which valid votes have been cast, the proportion of the share capital represented by those votes, the total number of valid votes, the number of votes in favour and against each agreement and, where appropriate, the number of abstentions must be determined".

B.4 Give details of attendance at General Shareholders' Meetings held during the year of this report and the previous year:

	Attendance data
Date of General Meeting	% of people present	% of people represented	% of votes cast remotely	Total %
22/05/2019	7.07%	74.59%		81.66%
1/06/2018	5.35%	76.64%		81.99%
16/05/2017	4.65%	75.50%		80.15%

B.5 State whether any point on the agenda of the General Shareholders' Meetings during the year has not been approved by the shareholders for any reason.

Yes �	No 
-------	------	--

Points on agenda not approved	% votes against (*)
(*) If the non-approval of the point is for a reason other than the votes against, this will be explained in the

text part and "N/A" will be placed in the "% votes against" column.

B.6 State if the Articles of Association contain any restrictions requiring a minimum number of shares to attend General Shareholders' Meetings, or on distance voting:

Yes No �

Number of shares required to attend General Meetings	10
Number of shares required for distance voting	10

B.7 State whether it has been established that certain decisions other than those established by law exist that entail an acquisition, disposal or contribution to another company of essential assets or other similar corporate transactions that must be subject to the approval of the General Shareholders' Meeting.

Yes � No

Explain the decisions that must be subject to the General Shareholders' Meeting, other than those established by law

B.8 State the address and manner of access to the page on the company website where one may find information on corporate governance and other information regarding General Shareholders' Meetings that must be made available to shareholders through the company website.

All information concerning the Corporate Governance of the Company is available through the "Corporate Governance" section of the "Shareholders and Investors" section of its website, "www.elecnor.com", and can be downloaded and printed in full.

All information concerning the Company's General Meetings is available through the "Corporate Governance" section of the "Shareholders and Investors" section of its website, "www.elecnor.com", and can be downloaded and printed in full.

C COMPANY ADMINISTRATIVE STRUCTURE

C.1 Board of Directors

C.1.1 Maximum and minimum number of directors established in the Articles of Association and the number set by the general meeting:

Maximum number of directors	15
Minimum number of directors	5
Number of directors set by the general	15
meeting

C.1.2 Please complete the following table on directors:

Name of director	Natural person representative	Director category	Position on the Board	Date first appointed to Board	Last re election date	Method of selection to Board	Date of birth
MR. JAIME REAL DE ASÚA ARTECHE		Proprietary Director	Chairman	19/12/2001	01/06/2018	General Meeting Election	09/09/1954
MR. FERNANDO LEÓN DOMECQ		Proprietary Director	Deputy Chairman	20/05/1986	01/06/2018	General Meeting Election	21/08/1954
MR. IGNACIO PRADO REY BALTAR		Proprietary Director	Deputy Chairman	01/06/2018	01/06/2018	General Meeting Election	21/08/1952
MR. JOAQUÍN GÓMEZ DE OLEA Y MENDARO		Proprietary Director	Secretary	15/10/2009	18/05/2016	General Meeting Election	02/05/1964
MR. CRISTÓBAL GONZÁLEZ DE AGUILAR ALONSO URQUIJO		Proprietary Director	Deputy Secretary	18/03/2015	22/05/2019	General Meeting Election	23/11/1954
MR. FERNANDO AZAOLA ARTECHE		External	Member	18/06/1998	01/06/2018	General Meeting Election	04/12/1940
MR. MIGUEL CERVERA EARLE		Proprietary Director	Member	25/10/2017	01/06/2018	General Meeting Election	29/09/1963
MS. ISABEL DUTILH CARVAJAL		Independent	Member	20/05/2015	22/05/2019	General Meeting Election	13/09/1963

MS. IRENE HERNÁNDEZ ÁLVAREZ	Independent	Member	01/06/2018	01/06/2018	General Meeting Election	03/01/1965
MR. JUAN LANDECHO SARABIA	Proprietary Director	Member	05/10/2005	01/06/2018	General Meeting Election	04/08/1956
MR. RAFAEL MARTÍN DE BUSTAMANTE VEGA	Executive	Member and CEO	18/05/2011	16/05/2017	General Meeting Election	27/01/1958
MR. MIGUEL MORENÉS GILES	Proprietary Director	Member	23/07/1987	01/06/2018	General Meeting Election	03/03/1948
MR. GABRIEL DE ORAA Y MOYUA	Proprietary Director	Member	20/07/1989	01/06/2018	General Meeting Election	09/04/1938
MR. RAFAEL PRADO ARANGUREN	Proprietary Director	Member	18/11/1993	01/06/2018	General Meeting Election	27/06/1965
MR. EMILIO YBARRA AZNAR	Independent	Member	20/05/2015	22/05/2019	General Meeting Election	12/07/1964

Total number of directors	15

State if any directors, whether through resignation, dismissal or any other reason, have left the Board during the period subject to this report:

Name of director	Director type at time of leaving	Date of last appointment	Date director left	Specialised committees of which he/she was a member	Indicate whether the director left before the end of the term

Reason for leaving and other remarks

C.1.3 Complete the following tables regarding the members of the Board and their categories:

EXECUTIVE DIRECTORS

Name or company name of director	Post in organisational chart of the company	Profile
Mr. Rafael Martín de Bustamante Vega	Managing Director	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website

Total number of executive directors	1
Percentage of Board	6.66%

	Name or company name
	of the significant	Profile
Name of director	shareholder represented
	or that has proposed
	their appointment
Mr. Jaime Real de Asúa Arteche	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Fernando León Domecq	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Ignacio Prado Rey Baltar	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Joaquín Gómez de Olea y Mendaro	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Cristóbal González de Aguilar Alonso-Urquijo	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Miguel Cervera Earle	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Juan Landecho Sarabia	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Miguel Morenés Giles	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Gabriel de Oraa y Moyua	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Rafael Prado Aranguren	CANTILES XXI, S.L.	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website

PROPRIETARY DIRECTORS

Total number of proprietary directors	10
Percentage of the Board	66.66%

INDEPENDENT DIRECTORS

Name of director	Profile
Ms. Isabel Dutilh Carvajal	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Ms. Irene Hernández Álvarez	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website
Mr. Emilio Ybarra Aznar	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website

Number of independent directors	3
Percentage of the Board	20%

State whether any independent director receives from the company or any company in the group any amount or benefit other than compensation as a director, or has or has had a business relationship with the company or any company in the group during the past year, whether in his or her own name or as a significant shareholder, director or senior executive of a company that has or has had such a relationship.

In this case, include a statement by the Board explaining why it believes that the director in question can perform his or her duties as an independent director.

Name of the director	Description of the relationship	Statement of the Board

OTHER EXTERNAL DIRECTORS

Identify the other external directors and state the reasons why these directors are considered neither proprietary nor independent, and detail their ties with the company or its management or shareholders:

Name of director	Reason	Company, director or shareholder to whom the director is related	Profile
Mr. Fernando Azaola Arteche	He does not have a shareholding legally considered as significant and was Executive	__	In accordance with current legislation, the profile and curriculum vitae of the Director is on the Company's website

Director of
the Company
until
31/12/2016

Total number of other external directors	1
Percentage of the Board	6.66%

State any changes in status that has occurred during the period for each director:

Name of director	Date of change	Previous Status	Current status

C.1.4 Complete the following table with information relating to the number of female directors at the close of the past 4 years, as well as the category of each:

2016 financial year: 1 Independent Director. 2017 financial year: 1 Independent Director. 2018 financial year: 2 Independent Directors. 2019 financial year: 2 Independent Directors.

C.1.5 State whether the company has diversity policies in relation to the Board of Directors of the company on such questions as age, gender, disability and training and professional experience. Small and medium-sized enterprises, in accordance with the definition set out in the Accounts Audit Act, will have to report at least the policy they have implemented in relation to gender diversity.

Yes No � Partial policies �

Should this be the case, describe these diversity policies, their objectives, the measures and way in which they have been applied and their results over the year. Also state the specific measures adopted by the Board of Directors and the appointments and remuneration committee to achieve a balanced and diverse presence of directors.

In the event that the company does not apply a diversity policy, explain the reasons why.

Description of policies, objectives, measures and how they have been implemented, including results achieved

On 22 November 2017, the Board of Directors approved the "Policy for the Selection of Directors and Diversity of the Board of Directors", which is accessible on the Company's website and which contains all the measures taken in relation to the selection of directors, policies on gender diversity, age, experience, etc.

The bodies in charge of the selection processes for Board members shall be the Board of Directors and the Appointments and Remunerations Commission.

The procedures for such selection shall ensure that they favour the diversity of experience, knowledge, skills and gender; and that, in general, they do not suffer from implicit biases that may lead to discrimination of any kind.

In particular, it will be ensured that selection procedures cannot involve discrimination in the selection of female Directors, bringing us closer to the objectives of Corporate Governance.

For this purpose, when the Appointments and Remunerations Commission or the Board itself, as the case may be, seeks a professional profile, the corporate interests shall first be taken into consideration, without prejudice to the fact that, when faced with two similar professional profiles, the one with the least-represented gender will be chosen.

Within the framework of this policy, in 2018, a second Independent Director, Ms. Irene Hernández Álvarez was appointed as the Chairwoman of the Audit Committee in May 2019. Likewise, on the same date, Ms. Isabel Dutilh was re-elected as an Independent Director.

C.1.6 Describe the means, if any, agreed upon by the appointments committee to ensure that selection procedures do not contain hidden biases which impede the selection of female directors and that the company deliberately seeks and includes women who meet the target professional profile among potential candidates and which makes it possible to achieve a balance between men and women:

Explanation of means

The "Policy for the Selection of Directors and Diversity of the Board of Directors" already mentioned in the previous point, states that the people responsible for the processes of selecting members of the Board of Directors shall be the Board of Directors itself and the Appointments and Remunerations Commission.

The procedures for such selection, in line with the aforementioned Policy for the Selection of Directors and Diversity of the Board of Directors, shall ensure that they favour the diversity of experience, knowledge, skills and gender; and that, in general, they do not suffer from implicit biases that may cause discrimination of any kind.

In particular, it will be ensured that selection procedures cannot involve discrimination in the selection of female Directors, bringing us closer to the objectives of Corporate Governance.

For this purpose, when the Appointments and Remunerations Commission or the Board of Directors itself, as the case may be, seeks a professional profile, the corporate interests shall first be taken into consideration, without prejudice to the fact that, when faced with two similar professional profiles, the one with the least-represented gender will be chosen.

In the event that there are few or no female directors in spite of any measures adopted, please explain the reasons that justify such a situation:

Explanation of means

See the explanation in section C.1.5., considering that the Company is promoting a gradual increase in the number of female Directors as soon as possible.

C.1.7 Describe the conclusions of the appointments committee regarding verification of compliance with the selection policy for directors; in particular, as it relates to the goal of ensuring that the number of female directors represents at least 30% of the total membership of the Board of Directors by the year 2020.

Since the incorporation in 2015 of the first woman as a member of the Board of Directors, the adaptation of Article 15b of the Articles of Association in 2016 and the adoption of the "Policy for the Selection of Directors and Diversity of the Board of Directors" in 2017, the Company continues to work toward achieving Corporate Governance Recommendations in this area.

Ms. Irene Hernández Álvarez has been appointed as the second Independent Director at the Company's General Shareholders' Meeting held on 1 June 2018, and Ms. Isabel Dutilh has been re-elected as Independent Director at the General Meeting held on 22 May 2019.

With regard to the objective of ensuring that in 2020 the number of female Directors represents at least 30% of the total membership of the Board of Directors, the Company's Board continues to work in this regard, relying on the Appointments and Remuneration Commission to do so, and promoting the actions necessary to ensure that this objective is achieved as soon as possible.

C.1.8 If applicable, please explain the reasons for the appointment of any proprietary directors at the request of shareholders with less than a 3% equity interest:

Name of shareholder	Reason

State whether the Board has failed to meet any formal requests for membership from shareholders whose equity interest is equal to or higher than that of others at whose request proprietary directors have been appointed. If this is the case, please explain why the aforementioned requests were not met:

Yes � No

There has been no formal request in this regard.

C.1.9 State the powers delegated by the Board of Directors, as the case may be, to directors or Board committees:

Name of director	Brief description
MR. RAFAEL MARTÍN DE BUSTAMANTE VEGA	All powers except the Company's debt and those non-delegable by Law or the Articles of Association.
	All powers of the Board of Directors except those which, legally or statutorily, are non-delegable, and the following:
EXECUTIVE COMMITTEE	(i) The ability to approve investments or operations of all kinds, which leads to the Company's debt;
	(ii) The power to approve investments or operations of all kinds of value greater than EUR 6,000,000 per operation.

The power to approve investments or operations of all kinds worth less than EUR 6,000,000 per operation also cannot be delegated when this power cannot be delegated by the Board of Directors and/or falls within the competence of the General Meeting.
(iii) The power to approve the constitution, merger, split, global transfer of assets and liabilities, dissolution, and/or liquidation of any type of entity having its own legal personality, as well as the power to approve operations that produce effects on those entities that are similar to those of said operations.
The power to approve the above operations is delegated to entities that do not have their own legal personality, such as, for information purposes, but not limited to, joint ventures or joint ownership arrangements.

C.1.10 Identify any members of the Board who are also directors or officers in other companies in the group of which the listed company is a member:

Title				Code
CHAIRMAN				C
	SECRETARY			S
DEPUTY SECRETARY				DS
MEMBER				M
JOINT AND SEVERAL ADMINISTRATOR				JSA
TITLES HELD BY REPRESENTATIVES				X
EXECUTIVE FUNCTIONS			e
WITHOUT EXECUTIVE FUNCTIONS				ne
Board members holding the position of administrators or executives in companies of the Elecnor Group	Miguel Cervera Earle Mr.	Joaquín Gómez de Mendaro Olea y Mr.	Cristóbal González de Aguilar Alonso Urquijo Mr.	Juan Landecho Sarabia Mr.	Fernando León Domecq Mr.	Martín de mante Vega Rafael Busta Mr.	Morenés Giles Miguel Mr.	Gabriel de Oraa y Moyua Mr.	Rafael Prado Aranguren Mr.	Ignacio Prado Rey Baltar Mr.	me Real de Asúa Arteche Jai Mr.
ELECTRIFICACION ES DEL NORTE, ELECNOR, S.A.						JSA e
ELECRED SERVICIOS, S.A.U.						JSA e
ENERFIN SOCIEDAD DE ENERGIA, S.L.U.	M	DS	M	M	S	M	M	M	M	M	M

C.1.11 List any legal-person directors of your company who are members of the Board of Directors of other companies listed on official securities markets other than group companies, and have communicated that status to the Company:

Name of director	Name of listed company	Position
Mr. Jaime Real de Asúa Arteche	VISCOFAN, S.A.	Member of the Board of Directors and

		Chairman of the
		Appointments and
		Remunerations
		Commission
		Independent Director.
		Member of the Audit
		Commission and
Ms. Isabel Dutilh Carvajal	Millenium Hotels Real State I	Member of the
	SOCIMI	Appointments and
		Remunerations
		Commission
		Coordinator Director,
		Chairwoman of the
	Saint Croix Holding Immobilier SOCIMI, S.A.	Audit Commission and
		Member and Secretary
		of the Appointments
Ms. Irene Hernández		and Remunerations
Álvarez		Commission
		Independent Director,
	ENCE ENERGIA Y CELULOSA,	Member of the
	S.A.	Executive Committee
		and Member of the
		Audit Commission
Mr. Emilio Ybarra Aznar		Deputy Chairman of
	TUBOS REUNIDOS, S.A.	the Board of Directors
		and member of the
		Executive Committee

C.1.12 State whether the company has established rules on the number of boards on which its directors may hold seats, providing details if applicable, identifying, where appropriate, where this is regulated:

$$\begin{array}{l} \mathsf{Yes} \boxed{\begin{array}{l} \mathsf{No} \ \mathsf{und} \end{array}} \qquad \mathsf{No} \ \mathsf{und} \end{array} $$

$$\begin{array}{l} \mathsf{Explanation of the rules and identifying of the document where this is regulated} \ \hline \text{Articles 18 of the Results of the Board ofDirect costs established} \ \text{Directors of the Company may not sit on the Board ofDirectory of more than THRE listed compounds, in addition to that of Electric, \mathsf{S.A.} } \end{array} $$

C.1.13 State total remuneration received by the Board of Directors:

Board remuneration in financial year (thousand euros)	5,199.6
Amount of vested pension interests for current members (thousand euros)	0
Amount of vested pension interests for former members (thousand euros)	0

C.1.14 Identify senior management staff who are not executive directors and their total remuneration accrued during the year:

Name	Position
Mr. Francisco Javier Cruces López	General Manager of Infrastructure
Mr. Argimiro Ramón Rodríguez	General Deputy Director of Facilities and Networks

Mr. Eduard Pinyol Escardo	General Deputy Director of International Development
Mr. José Martí Soler	General Deputy Director of Engineering
Mr. Pablo Díaz Miguel Sánchez	General Deputy Director of Energy
Mr. Armando Pérez Medina	General Deputy Director of Major Networks
Mr. José Castellanos Ybarra	General Deputy Director
Mr. Luis Alcíbar Villa	General Deputy Director of Finances and Internal Audit
Ms. Úrsula Albizuri Delclaux	Director of Corporate Development
Mr. Pedro Enrile Mora-Figueroa	General Secretary

Total senior management remuneration (thousand euros) 4,661

C.1.15 State whether the Board rules were amended during the year:

	Yes 	No �
		Description of amendment
	risks that could materialise in the future.	On 27 March 2019, the Board of Directors unanimously amended Articles 5 "General oversight function", 14 "Appointments and Remuneration Commission" and 24 "Director of Remuneration" of the Regulations of the Board of Directors, to adapt the Regulations of the Board of Directors of the Company to the interpretation contained in Supreme Court Ruling 98/2018 of 26 February and adjust the profit-based remuneration system to the reality of the Company and its Group (understood in the terms of Article 42 of the Code of Commerce), reducing the commercial and tax
		These amendments were subject to the approval of the amendment to Article 12 of the Company's Articles of Association, for the same purpose, as was the case at the Company's General Meeting, held on 22 May 2019, in which this amendment was unanimously approved, and therefore, the amendments to the Regulations of the Board of Directors were approved.
Audit	Commission"), 14 ("The assets"), 31 ("Business Remuneration Commissions of Spainish	Also, on 18 December 2019, the Board of Directors approved the amendment to Articles 3 ("Interpretation"), 5 ("General oversight function"), 7 ("Qualitative composition"), 9 ("The Chairman of the Board"), 11 ("The Secretary of the Board"), 11 bis ("Deputy Secretary of the Board"), 12 ("Delegated Bodies of the Board of Directors"), 13 ("The Appointments and Remuneration Commission"), 15 ("Meetings of the Board of Directors"), 16 ("Conducting meetings"), 17 ("Use of telematic means"), 18 ("Appointment of Directors"), 19 ("Re-election of Directors"), 20 ("Duration of role"), 21 ("Removal of Directors"), 22 ("Powers of information and inspection"), 23 ("Expert advice"), 26 ("General obligations of the Director"), 27 ("Duty of confidentiality"), 28 ("Conflicts of interest"), 29 ("Use of corporate opportunities"), 35 ("Relations with shareholders"), 36 ("Relations with markets") and 37 ("Relations with auditors") of the Regulations of the Board of Directors, for the purpose of incorporating the principles of both Technical Guide 3/2017 on Audit Commissions and Technical Guide 1/2019 on the Appointments and National Securities Market Commission, the developments introduced in the Capital Companies Act (LSC) by Law 11/2018 in relation to the diversity in the composition of

the Board and with the non-delegable powers of this body, as well as to introduce certain amendments of a technical nature.

C.1.16 Specify the procedures for selection, appointment, re-election and removal of directors: the competent bodies, steps to follow and criteria applied in each procedure.

The Company is governed by the provisions set forth in its Articles of Association, Articles 13 (requirements for membership of the Board, duration of the role and re-election) and 15 (Appointment, removal and appointment by co-optation), the content of which is reproduced below:

"Article 13.-

The Board of Directors shall not comprise fewer than five nor more than 15 Directors.

Being a Director requires having at least 5% of the Company's shares with the right to vote at least five years prior to appointment. The abovementioned advance of at least five years in the possession of the shares and the requirement to hold at least 5% of the Company's capital shall not be necessary when the appointment, re-election or ratification of the Director shall be carried out by the General Meeting with a quorum of attendance of 25% of the capital subscribed in the first call or without a minimum quorum in the second call, and shall be approved – in both cases – by a simple majority of the capital present or represented. The appointment, re-election or ratification of Independent Directors, which in all cases must comply with the provisions of the applicable regulations, these Articles of Association and the Regulations of the Board of Directors, shall be exempt from the foregoing.

Administrators shall serve for a term of four years, and may be re-elected, once or several times, for periods of equal duration.

The appointment of administrators shall expire when, following expiry of the term, the next General Meeting has been held or the legal period has lapsed to hold the Meeting to resolve the approval of accounts for the previous financial year.

To be a member of the Board of Directors, it is necessary not to be subject to any of the statutory grounds for incompatibility or prohibition established by Law.

Article 15.-

With regard to the Board of Directors, it may appoint an Executive Committee and/or one or more Chief Executive Officers and delegate to them, permanently, all or some of the powers it has been conferred, except those which are especially reserved for it by Law.

The Chairman of the Board of Directors shall be the Chairman of the Company. The election of the Chairman, Deputy Chairmen, Secretary and Deputy Secretary shall be the responsibility of the Board of Directors, which, if deemed appropriate, may appoint as Secretary and/or Deputy Secretary a person who does or does not have the status of Director.

In the absence of the Chairman, the Deputy Chairman shall perform this role, and in the absence of the Deputy Chairman, the Member designated by the Board shall perform this role. Likewise, in the absence of the Secretary, the Deputy Secretary shall perform this role.

The Directors are freely appointed and separated by the General Meeting.

If vacancies occur during the term for which the Administrators were appointed, the Board may appoint people to occupy them until the first General Meeting.

The Board of Directors shall meet at least quarterly. The Board of Directors shall also meet whenever necessary for the best progress of the Company, and when so ordered by the Chairman. In addition, Directors who constitute at least one third of the members may call meetings of the Board directly, stating the Agenda of the meeting to be held in the location of the registered address if, after the request to the Chairman, the latter, without justified causes, fails to call the meeting within one month. The Chairman shall conduct the debate and give the floor in order of request.

The Board of Directors shall be validly constituted when a half of its members are present or represented at the meeting, plus one.

The Board's agreements shall be adopted, subject to legal exceptions, by an absolute majority of the Directors attending the session.

The Board of Directors shall be governed by the provisions of the Articles of Association, the Regulations of the Board of Directors and the current Capital Companies Act".

In addition, on 22 November 2017, the Board of Directors of Elecnor approved the "Policy for the Selection of Directors and Diversity of the Board of Directors", which sets out the objectives, procedures, requirements and supervision of the policy for the selection of Directors. This policy has been made public through the Company's website.

C.1.17 Explain how the annual evaluation of the Board has given rise to significant changes in its internal organisation and to procedures applicable to its activities:

Description of changes

The annual evaluation carried out by members of the Board of Directors during the 2019 financial year has led to preparing an Action Plan proposal, which highlights the implementation of a specific and personalised training and knowledge update programme for Directors, in accordance with Recommendation No. 30 of the Good Governance Code Code of Listed Companies of the Spanish National Securities Market Commission (CNMV).

Describe the evaluation process and the areas evaluated by the Board of Directors with the help, if any, of external advisors, regarding the function and composition of the board and its committees and any other area or aspect that has been evaluated.

Description of the evaluation process and evaluated areas

The Company's Board of Directors evaluates, through several questionnaires to be completed by all its members and by the members of its Commissions, its activity and that of all its Commissions, as well as the activity and actions carried out by the Chairman, the Secretary and the Chief Executive Officer, detecting the strengths and points to improve and applying the appropriate corrective measures. These questionnaires are reviewed by the respective Commissions and, in addition, the Appointments and Remuneration Commission reviews the questionnaire of the Board and that of the Chairman.

The questionnaires mentioned include the evaluation of areas such as the degree of achievement of the objectives, the creation of value and strategy, the composition and dynamics of the Board, risk management, transparency and the relationship with shareholders, Corporate Governance and Corporate Social Responsibility, the functioning of the Commissions of the Board, the performance of the functions of the Board Chairman, etc.

Continuing the action plan resulting from the evaluations of the Board and its Commissions and to advance the implementation of recommendation 36 of the Good Governance Code Code, a work assessment was carried out in 2019 and, as already reported in the previous year, the consultant Russell Reynolds was hired in 2018 for the questionnaires of that year, to analyse the best practices regarding the performance of the Board, its Commissions, the Chairman, CEO and Secretary.

• C.1.18 Describe, in those years in which the external advisor has participated, the business relationships that the external advisor or any group company maintains with the company or any company in its group.
• C.1.19 State the situations in which directors are required to resign.

The Directors who were involved in any of the prohibitions in Article 213 of the Capital Companies Act shall be immediately dismissed, at the request of any shareholder, without prejudice to the liability that they may incur, in accordance with Article 236 of the same legal text, due to their disloyal conduct.

Directors who were from another competing company and people who in any way have interests contrary to those of the Company shall step down from their position at the request of any member and by agreement of the General Meeting.

For its part, Article 21 of the Regulations of the Board of Directors establishes in this respect:

"Directors shall resign either voluntarily or when the period for which they were appointed has lapsed and when so decided by the General Meeting by virtue of the powers conferred to it by law or statute.

Without prejudice to the foregoing, Directors who are considered proprietary shall submit their resignation when the shareholder whom they represent sells their shareholding in full.

Directors must make their role available to the Board of Directors and, if the latter deems it appropriate, formalise the corresponding resignation in cases where they may harm the credit and reputation of the Company or in any way adversely affect the functioning of the Board of Directors or the Company and, in particular, when involved in any of the legally foreseen cases of incompatibility or prohibition.

The Board of Directors may only propose the removal of an Independent Director to the General Meeting before the statutory deadline when there is just cause, as assessed by the Board of Directors after advance notification to the Appointments and Remuneration Commission.

When a Director ceases from his role before the end of their term of office, due to resignation or any other reason, he must send a letter to all members of the Board of Directors explaining the reasons for ceasing".

C.1.20 Are qualified majorities other than those established by law required for any specific decision?

Yes �	No 
-------	------

C.1.21 Explain whether there are any specific requirements, other than those relating to directors, to be appointed as chairman of the Board of Directors.

Yes � No

C.1.22 State whether the Articles of Association or the Board Rules establish any limit as to the age of directors:

C.1.23 State whether the Articles of Association or the Board Rules establish any term limits for independent directors other than those required by law:

	Yes �	No 
Additional requirements and/or maximum number of term	limits		12 years (Art. 20 of the Regulations of the Board of Directors)

C.1.24 State whether the Articles of Association or Board Rules establish specific proxy rules for votes at Board meetings, how they are to be delegated and, in particular, the maximum number of delegations that a director may have, as well as if any limit regarding the category of director to whom votes may be delegated and whether a director is required to delegate to a director of the same category. If so, please briefly describe the rules.

Within the Company's Board of Directors, there are formal processes for delegating the vote in the event that any of the Directors cannot personally attend the meetings. The Regulations of the Board of Directors, in its Article 16, establishes the following:

"Article 16.-

The Directors may delegate for each session and in writing to have any other Director represent them in said session for all purposes, and the same Director can hold several delegations".

The Board of Directors has no specific limitation on the categories of Director in which it is possible to delegate the vote.

C.1.25 State the number of meetings held by the Board of Directors during the year, and if applicable, the number of times the Board met without the chairman present. Meetings where the chairman sent specific proxy instructions are to be counted as attended.

Number of Board meetings	12
Number of Board meetings without the chairman	0

State the number of meetings held by the coordinating director with the other directors, where there was neither attendance nor representation of any executive director:

Number of meetings	--

Please specify the number of meetings held by each committee of the Board during the year:

Number of meetings of the Executive Committee	22
Number of meetings of the Audit Commission	11
Number of meetings of the Appointments and Remunerations
Commission	10
Number of meetings of the Boards of the Subsidiaries	45

C.1.26 State the number of meetings held by the Board of Directors during the year in which all of its directors were present. For the purposes of this section, proxies given with specific instructions should be considered as attendance

Number of meetings when all directors attended	12
% of attendance over total votes during the year	100%
Number of meetings in situ or representations made with specific	12
instructions of all directors
% of votes issued at in situ meetings or with representations made with	100%
specific instructions out of all votes cast during the year

C.1.27 State if the individual and consolidated financial statements submitted to the Board for preparation were previously certified:

C.1.28 Explain any measures established by the Board of Directors to prevent the individual and consolidated financial statements prepared by the Board from being submitted to the General Shareholders' Meeting with a qualified audit opinion.

In the 30 years in which Elecnor's annual financial statements have been audited by internationally recognised firms, annual financial statements with exceptions in the Audit Report have never been submitted to the General Meeting. The Company, through the Audit Commission and its Internal Audit, has the necessary mechanisms to avoid exceptions in the Audit Report of its individual and consolidated annual financial statements.

C.1.29 Is the secretary of the Board also a director?

Yes No �

If the secretary is not a director, please complete the following table:

Not applicable.

Name of the secretary	Representative

C.1.30 State, if any, the concrete measures established by the entity to ensure the independence of its external auditors, financial analysts, investment banks, and rating agencies, including how legal provisions have been implemented in practice.

Article 15 bis of the Company's Articles of Association and Article 13 of the Regulations of the Board of Directors, as well as the Internal Regulations of the Audit Commission itself, establish the powers of the Audit Commission.

With regard to the Accounts Auditor, the Audit Commission shall have the following functions:

• a) Send to the Board of Directors for submission to the General Shareholders' Meeting the proposals for the selection, appointment, re-appointment and replacement of the accounts auditor, taking responsibility for the selection process, in accordance with the provisions of the applicable regulations as well as the conditions for their hiring, and regularly collect information on the audit plan and its implementation.
• b) Establish appropriate relations with the external auditor to receive information on any issues that may pose a threat to their independence for consideration by the Commission, and any other information related to the process of auditing the accounts, and, where appropriate, the authorisation of services other than those prohibited under the terms of the applicable rules for the independence regime, as well as other communications set out in the account audit legislation and audit standards.

In any case, the external auditors shall provide them with an annual declaration of their independence with regard to the Company or entities directly or indirectly linked to it, as well as detailed and individualised information regarding additional services of any kind provided and the corresponding fees collected from these entities by the external auditor or by the persons or entities linked to it, in accordance with the provisions of the governing regulations on account audit activity.

• c) Issue an annual report, prior to the issuance of the account audit report, expressing an opinion on whether the accounts auditor's independence has been compromised. In any event, this report shall contain the reasoned assessment of each and every additional service provided as referred to in the previous paragraph, considered individually and as a whole, other than the legal audit and in relation to the independence regime or the governing regulations on account audit activity.
• d) Preserve the independence of the external auditor in exercising their functions and, in particular:
• (i) should the external auditor resign, examine the circumstances that may have led to this resignation;
• (ii) ensure that the Company formally reports any change of auditor to the CNMV accompanied by a statement regarding the existence or absence of disagreements with the outgoing auditor and, if applicable, the subject matter thereof;
• (iii) ensure that the remuneration the external auditor receives for their work does not compromise their quality or independence; and
• (iv) ensure that the Company and the external auditor comply with existing rules on the provision of non-audit services, the limits on the concentration of the auditor's business and, in general, other applicable rules to ensure the auditor's independence.
• e) Ensure that the external auditor has at least one annual meeting with the Board of Directors in full to inform them of the work executed and developments in the company's risk and accounting situation.
• C.1.31 State whether the company changed its external auditor during the year. If so, please identify the incoming and outgoing auditor:

Yes �	No 
Outgoing auditor	Incoming auditor

If there were any disagreements with the outgoing auditor, please provide an explanation:

Yes � No

C.1.32 State whether the audit firm provides any non-audit services to the company and/or its Group and, if so, the fees paid and the corresponding percentage of total fees invoiced to the company and/or Group:

$$\mathsf{Yes} \boxed{\mathsf{Xi}} \qquad\qquad\qquad\qquad\mathsf{No}\boxed{\bot}$$

	Company	Group	Total
		Companies
Amount invoiced for non-audit
services	1,494	13	1,507
(thousand euros)
Amount invoiced for non-audit
services/Amount for audit work (in	91.1%	3.5%	74.9%
%)

C.1.33 State whether the auditors' report on the financial statements for the preceding year contains a qualified opinion or reservations. If so, please explain the reasons given by the chairman of the audit committee to explain the content and extent of the aforementioned qualified opinion or reservations.

Yes � No

C.1.34 State the number of consecutive years the current audit firm has been auditing the financial statements of the company and/or group. Furthermore, state the number of years audited by the current audit firm as a percentage of the total number of years that the financial statements have been audited:

	Individual	Consolidated
Number of consecutive years	7	7

	Individual	Consolidated
Number of years audited by the current audit
firm/number of fiscal	23.33%	23.33%
years the company has been audited
(by %)

C.1.35 State whether there is a procedure whereby directors have the information necessary to prepare the meetings of the governing bodies with sufficient time and provide details if applicable:

Yes 	No �
-------	------

Explanation of procedure
Article 9 of the Regulations of the Board of Directors determines that one of the Chairman's functions is to:

"Ensure that the Directors receive the necessary information in advance in order to deliberate on the items on the agenda and diligently carry out their role".

Thus, the Directors have a digital platform in which the relevant information on the items contained in the Agenda of each meeting of the Board and its Commissions is made available.

C.1.36 State whether the company has established rules whereby directors must provide information regarding and, if applicable, resign, in circumstances that may damage the company's standing and reputation. If so, provide details:

$$\begin{array}{c} \mathsf{Yes} \ \overline{\mathsf{Xi}} \end{array} \qquad\qquad\qquad\qquad\qquad\qquad\mathsf{Not}\ \mathsf{Box}$$

Explain the rules Article 21 of the Regulations of the Company's Board of Directors specifies that:

"Directors must make their role available to the Board of Directors and, if the latter deems it appropriate, formalise the corresponding resignation in cases where they may harm the credit and reputation of the Company or in any way adversely affect the functioning of the Board of Directors or the Company and, in particular, when involved in any of the legally foreseen cases of incompatibility or prohibition.

The Board of Directors may only propose the removal of an Independent Director to the General Meeting before the statutory deadline when there is just cause, as assessed by the Board of Directors after advance notification to the Appointments and Remunerations Commission.

When a Director ceasesfrom his role before the end of their term of office, due to resignation or any other reason, he must send a letter to all members of the Board of Directors explaining the reasons for ceasing".

C.1.37 State whether any member of the Board of Directors has notified the company that he or she has been tried or notified that legal proceedings have been filed against him or her, for any offences described in Article 213 of the LSC:

State whether the Board of Directors has examined the case. If so, explain in detail the decision taken as to whether the director in question should continue in his or her post or, if applicable, describe any actions taken by the Board up to the date of this report, or which it intends to take.

Yes � No

C.1.38 Detail any material agreements entered into by the company that come into force, are modified or are terminated in the event of a change in control of the company following a public takeover bid, and their effects.

They do not exist.

C.1.39 Identify individually for director, and generally in other cases, and provide detail of any agreements made between the company and its directors, executives or employees containing indemnity or golden parachute clauses in the event of resignation or dismissal or termination of employment without cause following a takeover bid or any other type of transaction.

There are no indemnities agreed upon between the Company and its nonexecutive management positions, nor executives or employees.

With regard to the Executive Director, their contract provides for indemnification in their favour, provided that the termination is not the result of a violation attributable to them nor is it due to their exclusive will, except in the cases of death or invalidity of the Executive Director, which do not provide any right to indemnification.

The amount of indemnification amounts, as a general rule, to an amount equivalent to two (2) years of their total remuneration, including fixed and variable remuneration, but excluding that which is obtained in annual or multiannual programmes or incentives, without prejudice to the fact that, depending on the type of assumption that results in the termination of contracts, it may reach an amount equivalent to three (3) years of their total remuneration.

State if these contracts have been communicated to and/or approved by management bodies of the company or of the Group. If they have, specify the procedures, events and nature of the bodies responsible for their approval or for communicating this:

	Board of Directors	General Shareholders' Meeting
Body authorising the severance	Yes
clauses

Are these clauses notified to the General Shareholders'
Meeting?

Remarks

C.2 Committees of the Board of Directors

C.2.1 Provide details of all committees of the Board of Directors, their membership, and the proportion of executive, proprietary, independent and other external directors that comprise them:

	EXECUTIVE COMMITTEE
--	---------------------

Name	Post	Category
Mr. Jaime Real de Asúa Arteche	Chairman	Proprietary Director
Mr. Fernando Azaola Arteche	Secretary	External
Mr. Cristóbal González de Aguilar Alonso Urquijo	Member	Proprietary Director
Mr. Fernando León Domecq	Member	Proprietary Director
Mr. Rafael Martín de Bustamante Vega	Member	Executive
Mr. Miguel Morenés Giles	Member	Proprietary Director

% of executive directors	16.67%
% of proprietary directors	66.66%
% of independent directors	0%
% of external directors	16.67%

Remarks

Explain the duties exercised by this committee, other than those that have already been described in Section C.1.10, and describe the rules and procedures it follows for its organisation and function. For each one of these functions, briefly describe its most important actions during the year and how it has exercise in practice each of the functions attributed thereto by law, in the Articles of Association or other corporate resolutions.

In accordance with the constitution of the Company's Executive Committee, it shall have the following Rules of Procedure:

● The members of the Executive Committee shall step down from their role when they do so in their capacity as Director or when agreed upon by the Board of Directors.

● In the absence of the Chairman of the Executive Committee, or having vacated this office, their functions shall be exercised by the member who is elected for that purpose by the majority of the attendees of the meeting.

● The Executive Committee shall be convened by its Chairman, at their own initiative, or at the request of two of its members, by letter, telegram, e-mail or fax, addressed to each of its members at least 48 hours before the date of the meeting, but may, however, be convened for reasons of urgency, in which case the agenda shall be limited to the points which were the grounds for the meeting.

● The Executive Committee shall be validly constituted when at least a majority of its members are present and represented.

● The Executive Committee shall, through its Chairman, inform the Board of Directors of the matters dealt with and of the decisions made by the Committee.

The activity of the Executive Committee in 2019, a year in which it held 22 meetings, was mainly as follows:

Analysing the progress of the Company and its business, in accordance with the strategic policies established by the Board of Directors, reporting the contents of its meetings to the full Board of Directors and, all of this, in accordance with the rules of operation of said Committee.

Name	Post	Category
Ms. Irene Hernández Álvarez	Chairman	Independent
Mr. Miguel Morenés Giles	Secretary	Proprietary Director
Ms. Isabel Dutilh Carvajal	Member	Independent
Mr. Ignacio Prado Rey Baltar	Member	Proprietary Director
Mr. Emilio Ybarra Aznar	Member	Independent

AUDIT COMMISSION

% of Executive Directors	0%
% of Proprietary Directors	40%
% of Independent Directors	60%
% of External Directors	0%

Explain the duties exercised by this committee, describe the rules and procedures it follows for its organisation and function. For each one of these functions, briefly describe its most important actions during the year and how it has exercise in practice each of the functions attributed thereto by law, in the Articles of Association or other corporate resolutions.

The Board of Directors must appoint an Audit Commission from among the members of the Board that do not have the category of Executive Directors.

The Audit Commission shall act as the Permanent Commission of the Board of Directors and shall consist of a minimum of three and a maximum of five Directors, two of whom, at least, must be Independent Directors and one of whom shall be appointed taking into account their knowledge and experience in accounting, auditing or both.

Except as provided in the following point, and unless expressly stated to the contrary, Commission members shall be appointed for the term for which they have been nominated by the Company's Directors.

The Audit Commission shall designate a Chairman from among the Independent Directors as set forth in this article. The appointment must be made for a maximum of four years, for which they may be reappointed for the same term once a period of one year has elapsed from the date on which their role expires or the date their removal had been agreed upon.

The Audit Commission shall be validly constituted when half plus one of its members are present or represented.

The loss of Director status will also result in the loss of the status of a member of the Audit Commission.

Appointments shall be agreed upon with the quorum and majorities set forth in Article 15 of these Articles of Association and shall be registered for their effectiveness in the Commercial Registry.

The Audit Commission shall meet at least three times per year and, in addition, as often as required in the interest of the Company, at the request of any of the Commission's members.

The Audit Commission shall have at least the powers listed below, without prejudice to those whose delegation the Company itself, through the Governing Body, considers necessary:

1) Report to the General Shareholders' Meeting on the issues raised by shareholders in matters within their competence.

2) Propose to the Board of Directors for submission to the General Shareholders' Meeting the appointment, re-election and replacement of the external account auditors referred to in Article 264 of Royal Legislative Decree 1/2010, of 2 July, approving the consolidated text of the Capital Companies Act, as well as the terms of their procurement, and regularly collecting information on the audit plan and its implementation from the external account auditors, in addition to preserving their independence in exercising their functions.

3) Monitor the effectiveness of the Company's internal control, internal audit, where appropriate, and risk management systems, including tax risks, as well as discussing with the account auditors or audit companies the significant weaknesses of the internal control system detected during the audit.

4) Monitor the preparation and submission of regulated financial information.

5) Establish appropriate relations with the account auditors or audit companies to receive information on any issues that may pose a threat to their independence for consideration of the Commission, and any other information related to the process of auditing the accounts, as well as other communications set out in the account audit legislation and audit standards. In any case, the account auditors or audit companies shall provide them with a written, annual declaration of their independence with regard to the Company or entities directly or indirectly linked to it, as well as information regarding additional services of any kind provided to these entities by the external auditors or audit firms or by the persons or entities linked to the auditors or audit firms, in accordance with the provisions of the governing regulations on account audit activity.

6) Issue an annual report, prior to the issuance of the account audit report, expressing an opinion on whether the independence of the accounts auditor or audit companies has been compromised. In any event, this report shall contain the reasoned assessment of each and every additional service provided as referred to in the previous paragraph, considered individually and as a whole, other than the legal audit and in relation to the independence regime or the governing regulations on account audit activity.

7) Inform the Board of Directors, in advance, regarding all matters provided for by Law, in the Company Articles of Association and the Regulations of the Board, and, in particular:

a) the financial information that the Company must regularly report;

b) the creation or acquisition of holdings in special-purpose entities or entities with registered offices in countries or territories classified as tax havens; and

c) related-party transactions.

The Audit Committee shall record all agreements adopted in a book of minutes, indicating the date of the session, attendees, and adopted agreements.

The Audit Commission's activity in 2019, during which it held 11 meetings, mainly involved the following:

1. Review of the annual, half-year and quarterly economic information disclosed to the markets and of the objectives and forecasts at year-end.

The Commission monitors the preparation and completeness of all financial reporting on the Company and the consolidated group.

Prior to submission to the Board of Directors, the Commission reviews the quarterly (March and September), half-year (June, subject to limited review by the Group's auditor) and annual (December, subject to review by the Group's auditor) earnings reports to be sent to the CNMV and to be disclosed to the markets (key financials, performance versus the previous period, performance of the main businesses and geographical areas, etc.). With regard to this information, the General Internal Audit and Finance Sub-division provides the Audit Commission with appropriate explanations regarding the income statement and information on the composition and changes in the main balance sheet headings and cash flows.

Throughout the year, reassessments of year-end objectives and forecasts are presented and any deviations from the objectives are explained.

2. Monitoring of the main risks with a potential impact on the income statement and other significant issues affecting the

annual financial statements, the Risk Management System and Internal Audit activity.

The main risks with a potential impact on the income statement are exhaustively monitored in conjunction with the General Internal Audit and Finance Sub-division. The risks are structured by Business Areas and General Sub-divisions and Elecnor Group's exposure to them is quantified. In addition, and in particular, contingent trade receivables and receivables from public entities, as well as financial exposure in certain countries considered to be high risk are presented and reviewed. The appropriateness of recognising a provision for these risks is considered on a case-by-case basis once the risks are known.

The Audit Commission also monitors the most significant judgements and estimates with an impact on the financial information, especially those relating to impairment tests of goodwill, intangible and tangible assets and deferred tax assets, as well as the recognition, control and measurement of derivative financial instruments.

Various meetings have been held to analyse the proposed accounting treatment of certain extraordinary transactions, as well as the tax treatment of certain material transactions, which is previously discussed with the Group's auditors and/or advisers.

The Audit Commission also continuously monitors the main risks to which the Group is exposed (governance, strategic and environmental, operational, reporting and compliance) by overseeing the Risk Management System and, in particular, the risks identified, evaluation of their potential impact and probability of occurrence and of the action plans established to better manage them.

The Audit Commission monitors the Internal Audit work plan and oversees its monitoring and reviewing of the main risks affecting the organisation and its processes and controls. To do this, it invited the Internal Audit Officer to attend nine of its meetings.

3. Relations with the Group's external auditors, supervision of their independence and approval of fees.

The Audit Commission met with the Group's external auditors three times in 2019, without other members of the organisation being in attendance.

The main issues discussed with the external auditors at these meetings are as follows:

Annual audit planning and strategy (materiality, scope, main audit risks identified, schedule, etc.) for the individual annual financial statements of Elecnor, S.A. and the Group's consolidated annual financial statements.

Results of the annual audit of the individual and consolidated annual financial statements and the limited review of the Group's half-year condensed financial statements.

Any internal control weaknesses identified and improvement points, where appropriate.

Written statement and confirmation by the external auditors of their independence and detailed information on any non-audit services provided by them.

The Audit Commission reviews proposals for non-audit services submitted by the external auditor or the external auditor's related parties and pre-approves them in terms of independence under the law.

The Commission has concluded that the auditor of the Company's individual and consolidated accounts has carried out their audit work independently.

The proposed fees submitted by KPMG for the 2019 audit of the individual and consolidated annual financial statements were also reviewed and it was decided to submit them to the Board of Directors for approval.

4. Monitoring of the compliance system and activity of the Compliance Committee.

Six of the meetings held in 2019 were attended by members of the Group's Compliance Committee, who reported on the Committee's activity and on the initiatives, actions and/or incidents arising in the field of compliance, obtaining the Commission's approval and authorisation when necessary.

In summary, the tasks carried out by the Audit Commission in this area in 2019 have been as follows:

Review and approval of the 2018 Annual Compliance Report.

Monitoring of the main risks to which the Group is exposed.

Approval and follow-up of compliance targets for 2019.

Approval and follow-up of the 2019 Compliance Training Plan.

Monitoring of the campaign to confirm compliance with the principles and values set out in the Code of Ethics and Compliance Policy by the Group's staff in 2019.

Follow-up of the implementation and embedding of the Compliance System in the Group's various subsidiaries and branches and, in particular, of the project to obtain UNE-ISO 37001 and UNE 19601 certification for the Deimos Space Compliance System.

Project monitoring of the review and improvement of established procedures and controls to prevent and avoid anti-competitive practices (advice from Deloitte).

Follow-up of the work carried out by the Working Group set up to improve compliance risk management within the Management Committee and within the framework of the Group's Risk Management System.

Follow-up of the launch and initial stages of the IE-Elecnor Observatory on Sustainable Compliance Cultures.

Follow-up of complaints and/or concerns submitted through the Code of Ethics Channel, analysis of findings and decision on action to be taken.

In addition, the Commission monitors developments in various judicial and administrative proceedings with a potential impact on legal persons belonging to the Elecnor Group.

5. Follow-up of the Group's Digital Transformation Project.

The Group's Chief Information and Technology Officer, in conjunction with the General Internal Audit and Finance Sub-division, has reported on the degree of progress of the digitisation and process re-engineering project under way at Elecnor since 2016. The project aims to achieve operational excellence, understood as the capacity of the organisation, processes and systems to contribute to efficiency, information control, quality of service and regulatory compliance.

6. Reporting to the General Shareholders' Meeting.

Ms Isabel Dutilh Carvajal, Chairwoman of the Audit Commission, informed Elecnor shareholders at the General Meeting on 22 May 2019 of the Commission's activity in 2018 and up to that date.

7. Preparation of new regulations for the Commission and submission to the Board for approval.

In compliance with the recommendations of the CNMV and the Good Governance Code, new internal regulations for the Commission were drawn up and subsequently approved by the Board of Directors on 18 December 2019.

Identify the directors who are member of the audit committee and have been appointed taking into account their knowledge and experience in accounting or audit matters, or both, and state the date that the Chairperson of this committee was appointed.

Name of directors with experience	Ms. Irene Hernández Álvarez Mr. Miguel Morenés Giles Ms. Isabel Dutilh Carvajal Mr. Ignacio Prado Rey-Baltar Mr. Emilio Ybarra Aznar
Date of appointment of the chairperson	22/05/2019

APPOINTMENTS AND REMUNERATION COMMISSION

Name	Post	Category
Mr. Emilio Ybarra Aznar	Chairman	Independent
Mr. Fernando León Domecq	Secretary	Proprietary Director
Ms. Isabel Dutilh Carvajal	Member	Independent
Mr. Jaime Real de Asúa Arteche	Member	Proprietary Director

% of Executive Directors	0%
% of Proprietary Directors	50.00%
% of Independent Directors	50.00%
% of External Directors	0%

Explain the duties exercised by this committee, describe the rules and procedures it follows for its organisation and function. For each one of these functions, briefly describe its most important actions during the year and how it has exercise in practice each of the functions attributed thereto by law, in the Articles of Association or other corporate resolutions.

The Board of Directors must appoint an Appointments and Remuneration Commission from among the members of the Board that are not Executive Directors. The Appointments and Remuneration Commission will be composed of a minimum of three and a maximum of five Directors, at least two of whom must be Independent Directors.

The Appointments and Remuneration Commission shall appoint the Chairman thereof from among the Independent Directors. The Secretary of the Board of Directors may be appointed as the Secretary of the Appointments and Remuneration Commission, provided they are not an Executive Director.

The Appointments and Remuneration Commission shall have the following functions:

• Evaluating the required skills, knowledge and experience for the Board of Directors. For this purpose, it shall define the necessary functions and aptitudes for the candidates to fill each vacancy and shall evaluate the time and dedication required so they may effectively perform their functions.

• Establishing a target representation number for the less represented gender on the Board of Directors and drawing up guidelines for achieving that target.

• Submitting to the Board of Directors proposals for the appointment of Independent Directors for appointment by co-optation or for submission to the decision of the General Shareholders' Meeting, as well as proposals for the re-appointment or removal of said Directors by the General Shareholders' Meeting.

• Reporting the appointment proposals of the remaining Directors for their designation by co-option or for submission to the decision of the General Shareholders' Meeting, as well as proposals for their re-election or removal by the General Shareholders' Meeting.

• Reporting proposals for the appointment and removal of senior executives and the basic terms of their contracts.

• Examining and organising the succession of the Chairman of the Board of Directors and the CEO of the Company and, where appropriate, making proposals to the Board of Directors so that such succession takes place in an orderly and planned manner.

• Proposing to the Board of Directors the remuneration policy for Directors and General Managers or those who perform their senior management duties under the direct supervision of the Board, Executive Committees or Managing Directors, as well as individual remuneration and other contractual and statutory conditions of Executive Directors, confirming their observance.

These duties shall be understood as non-limiting and without prejudice to others that the Board of Directors may assign to the Committee. The Board may request that the Commission prepare reports on matters lying within the Commission's remit.

The Commission met on 10 occasions in 2019. In addition, when the Commission considered it appropriate, the Managing Director and members of the management team were invited to attend.

The activity of the Appointments and Remuneration Commission in 2019 mainly involved the following:

The Commission fulfilled all its own duties of both a regulatory nature and those contained in the Company's Articles of Association and the Regulations of the Board of Directors, and carried out actions related to the recommendations to comply with the principles of good corporate governance.

The Commission examined the qualification or status of the Directors. Responses to the questionnaire sent to all Directors on any potential conflicts of interests in 2019 were also reviewed; no conflicts were detected.

Continuing the action plan resulting from the evaluations of the Board and its Commissions and to advance the implementation of recommendation 36 of the Good Governance Code, a work assessment was carried out in 2019 and, as already reported in the previous year, the consultant Russell Reynolds was hired in 2018 for the questionnaires of that year, to analyse the best practices regarding the performance of the Board, its Commissions, the Chairman, CEO and Secretary.

During the year, the Commission continued with the work to examine the Board of Directors' structure, which began in mid-2017, the year in which Spencer Stuart was appointed as an international top-tier external consulting firm.

A preliminary analysis was performed of the Board of Directors' needs including the necessary expertise, knowledge and skills required on the Board. This analysis was considered when preparing proposals and reports for the appointment and re-election of Directors submitted to the Board of Directors.

In particular, the Commission agreed to propose the re-election of Ms. Isabel Dutilh Carvajal and Mr. Emilio Ybarra Aznar as Independent Directors for a term of four years. The General Shareholders' Meeting approved the appointment of these two Directors.

As recommended by the Board of Directors, it was also proposed that Mr. Cristóbal González de Aguilar Alonso-Urquijo be re-elected as Proprietary Director for a term of four years. The General Shareholders' Meeting approved the appointment of this Director.

The Directors' Remuneration Policy for the years 2020-2021 and 2022 was submitted for approval at the Shareholders' General Meeting on 22 May 2019. The policy follows on from the previous version running from 2017 to 2019 but has been adapted to the current situation. In this regard, supporting reports had to be prepared for the Board relating to both the amendment of Article 12 of the Articles of Association and to several articles in the Regulations of the Board of Directors, all of which relate to the Directors' remuneration. These were also approved at the General Meeting.

Similarly, in the area of remuneration, the annual fixed and variable remuneration for the Executive Director was proposed, and the Annual Directors' Remuneration Report for 2018 prepared, which the Board of Directors submitted to the General Meeting for its advisory vote.

The Commission also proposed the remuneration policy for the management team and the application thereof, including its proposal for variable remuneration tied to specific objectives.

The succession plan for the Chairman, Managing Director and management team was revised, including a management performance assessment of the Management Commission, the latter being carried out with the support of the external consulting firm, Pedersen and Partners.

The Group's performance vis-à-vis work-life balance, equality, assignments and international mobility for expatriates in the Group, along with the Talent Plan was also reviewed.

In addition, a proposal was prepared with the Chairman of the Board of Directors, approved by the Board, and a training plan put in place for the Board.

Moreover, in compliance with the recommendations of the CNMV and the Good Governance Code, new regulations for the Commission were approved.

Finally, the Commission reported all its activities to the Board of Directors, providing all Directors with the minutes of its meetings with their corresponding annexes.

C.2.2 Complete the following table with information regarding the number of female directors who were members of Board committees at the close of the past four years:

2016:

Isabel Dutilh Carvajal was the Chairwoman of the Audit Commission and a Member of the Appointments and Remunerations Commission, which equates to 33% of the Audit Commission and 20% of the Appointments and Remunerations Commission being female.

2017:

Isabel Dutilh Carvajal was the Chairwoman of the Audit Commission and a Member of the Appointments and Remunerations Commission, which equates to 33% of the Audit Commission and 25% of the Appointments and Remunerations Commission being female.

2018:

Ms. Isabel Dutilh Carvajal was the Chairwoman of the Audit Commission and a Member of the Appointments and Remunerations Commission and Ms Irene Hernández Álvarez was a Member of the Audit Commission, which equates to 40% of the Audit Commission and 25% of the Appointments and Remunerations Commission being female.

2019:

Ms. Irene Hernández Álvarez was the Chairwoman of the Audit Commission and Ms Isabel Dutilh Carvajal was a Member of this Commission, which equates to 40% of that Commission being female. Ms Isabel Dutilh Carvajal was also a Member of the Appointments and Remunerations Commission, which equates to 25% of that Commission being female.

C.2.3 State, where applicable, the existence of any regulations governing Board committees, where these regulations may be found, and any amendments made to them during the year. Also state whether any annual reports on the activities of each committee have been voluntarily prepared.

On 18 December 2019, the Board of Directors approved the new internal Regulations of the Audit Commission and the Regulations of the Appointments and Remunerations Commission, as per the recommendations of both Technical Guide 3/2017 on Audit Commissions and Technical Guide 1/2019 on Appointments and Remunerations Commissions of the CNMV.

The functions of the Audit Commission and the Appointments and Remuneration Commission are laid down in Articles 15 bis and 15b of the Articles of Association, as well as in Articles 13 and 14 of the Regulations of the Board of Directors and the aforesaid Commissions' respective regulations.

The existence and functions of the Executive Committee, meanwhile, are regulated in Article 15 of the Articles of Association, in Article 12 of the Regulations of the Board of Directors, as well as in its own deed of incorporation.

Both the Regulations of the Board of Directors, the Regulations of the Audit Commission and the Regulations of the Appointments and Remunerations Commission are available on the Company's website (www.elecnor.com).

Reports on the activities of the Appointments and Remunerations Commission and the Audit Commission were voluntarily prepared in 2019.

D RELATED-PARTY AND INTRAGROUP TRANSACTIONS

D.1 Describe, if applicable, the procedure for approval of related-party and intragroup transactions.

Procedures and bodies for reporting on the approval of transactions with related parties This matter is covered in Article 33: "Transactions with significant shareholders" of the Regulations of the Board of Directors:

"Any relevant transaction between the Company and its significant shareholders shall be authorised by the Board of Directors.

Exempt from this approval are operations that simultaneously meet the following three characteristics:

• 1. They are carried out under contracts whose conditions are standardised and apply en masse to a large number of customers.
• 1. They are carried out at prices or rates generally established by the person acting as a supplier of the goods or services concerned.
• 1. Their value does not exceed one percent of the Company's annual income".
• D.2 Describe any transactions which are significant, either because of the amount involved or subject matter, entered into between the company or entities within its group and the company's significant shareholders:

They do not exist.

D.3 Describe any transactions that are significant, either because of their amount or subject matter, entered into between the company or entities within its group and directors or managers of the company:

They do not exist.

D.4 Report any material transactions carried out by the company with other entities belonging to the same group, provided that these are not eliminated in the preparation of the consolidated financial statements and do not form part of the company's ordinary business activities in terms of their purpose and conditions.

Not applicable.

In any event, note any intragroup transaction conducted with entities established in countries or territories which are considered tax havens:

They do not exist.

D.5 State the amount of any transactions conducted with other related parties that have not been reported in the previous sections.

Name of entity within the group	Brief description of the transaction	Amount (thousand euros)

D.6 Describe the mechanisms in place to detect, determine and resolve potential conflicts of interest between the company and/or its group and its directors, senior management or significant shareholders.

There are Internal Code of Conduct in Matters Relating to the Securities Markets (RIC), approved by the Company's Board of Directors on 21 May 2003 and amended through successive resolutions of the Company's Board of Directors on 16 June 2004, 21 March 2007, 19 December 2007, 20 July 2016 and 20 February 2019, all duly reported to the CNMV. The latest version is available on the Company's website and explicitly and exhaustively sets out these mechanisms.

D.7 Is there more than one company in the group listed in Spain?

Yes � No

Identify the other companies that are listed in Spain and their relationship to the company:

They do not exist.

E RISK MANAGEMENT AND CONTROL SYSTEMS

E.1 Explain the scope of the company's Risk Management and Control System, including tax compliance risk.

BOARD OF DIRECTORS, CHIEF EXECUTIVE OFFICER

In its monthly meetings, the Board of Directors reviews the Company's key economic indicators, the general market situation, and the position and business strategy of the Company and its Group, to identify any risks in the economic and business environment, adjusting the Company's strategic approach where necessary; all within its general supervisory remit.

In this regard, the Group performs continuous and preventive management of these risks, so that the probability of them occurring and their potential impact, as the case may be, on turnover, profitability and efficiency, reputation and sustainability is reduced to acceptable levels.

To this end, the Group has a structured and dynamic risk management system whose main pillars are as follows:

• Continuous risk identification and assessment and prioritisation in terms of impact and probability of occurrence.

• Identification of the mechanisms and tools in place to manage and control the main risks, and evaluation of their effectiveness.

• Continuous improvement of risk management through the development and implementation of initiatives and projects aimed at improving management mechanisms and tools.

• Ongoing monitoring and oversight of the system.

To ensure better identification and management of the main risks, these are grouped into five major categories:

• Governance risks,
• Strategy, planning and environment risks,
• Operational risks,
• Reporting risks,
• Compliance risks.

On the other hand, the Chief Executive Officer takes decisions following the guidelines established by the Board of Directors in its meetings.

As to the powers granted to the Board of Directors, these are conferred, taking into account the specific functions and needs of the Company's general divisions and sub-divisions and the different business areas.

Decisions on the Company's overall strategy or on the use of its resources, as well as those involving a risk due to the Company becoming indebted – such as the arrangement of credit facilities, loans, guarantees, sureties, asset disposals, etc. – are adopted in resolutions of the entire Board of Directors by an absolute majority of its members.

Management (General Managers and General Deputy Directors) are responsible for the Company's operational and management decisions, such as the signing of contracts, management of human resources, etc., always pursuant to the instructions of the Chief Executive Officer and the strategic guidelines of the Board of Directors.

MANAGEMENT OF RISKS DERIVING FROM PARTICIPATION IN TEMPORARY JOINT OPERATIONS, CONSORTIA AND JOINT VENTURES

The risks to which the Company may be exposed through its involvement in a temporary joint operation, joint ventures, economic interest group or any other form of joint arrangement, whether it be Spanish or foreign, to carry out a particular project or business, are controlled, on the one hand, by management (with the support of the business areas and other productive units and, where applicable external advisers) analysing the viability of the business to be developed and assessing the potential associated risk, and authorising, if applicable. On the other hand, the powers of the governing and management bodies of the joint arrangement are agreed with representatives of all its members to ensure they are consistent with Elecnor's internal risk control systems.

MANAGEMENT OF RISKS DERIVING FROM THE COMPANY'S CORPORATE PURPOSE IN THE DOMESTIC MARKET

In relation to the specific risks arising from the Company's activity (construction, operation and maintenance of all kinds of facilities), all business arms are adequately insured through appropriate insurance policies offering the necessary cover (public liability insurance, assembly insurance, construction insurance, etc.).

MANAGEMENT OF RISKS DERIVING FROM THE COMPANY'S CORPORATE PURPOSE IN THE INTERNATIONAL MARKET

A significant part of Elecnor's business is conducted outside Spain, so special mechanisms have been put in place to control the potential risks stemming from this activity:

All powers conferred on Company representatives to sign contracts outside Spain or manage such contracts are granted by the Company's CEO on a case-by-case basis for each operation and subject to prior analysis of all the risks that could affect the Company. Monthly meetings of the Board of Directors are held to monitor these activities when they involve significant operations for the Company.

Likewise, all the Company's international business arms, deriving from its corporate purpose, are also adequately insured through appropriate insurance policies offering the necessary cover (public liability insurance, assembly insurance, construction insurance, etc.).

ENVIRONMENTAL RISK MANAGEMENT

Environmental protection and efficient consumption of energy resources are at the top of Elecnor's agenda whilst carrying out all of its business activities. These objectives have put respect for the environment and sustainability at the heart of our culture and values throughout the organisation.

The environmental control mechanisms currently in place at the Company are based on AENOR-certified Environmental Management and Energy Management systems that are ISO 14001 and ISO 50001 compliant. These systems offer excellent benefits, including analysis and mitigation of environmental risks. Environmental liability insurance has also been taken out covering all the activities of Elecnor and its subsidiaries.

Climate change is a long-standing challenge for Elecnor. Thus, it has calculated its carbon footprint since 2013 according to internationally recognised standards, and has rolled out greenhouse gas (GHG) emission reduction measures across its business. In March 2019, AENOR verified for the fifth consecutive year the inventory of greenhouse gas emissions in accordance with the UNE ISO 14064- 1:2012 standard, for direct and indirect emissions of all the Company's activities. The Company has been awarded the "Calculate and Reduce" seal from the Spanish Office of Climate Change (OECC by its Spanish acronym), as part of the process to register its carbon footprint and the carbon offset and absorption projects established by the Ministry for Ecological Transition (MITECO by its Spanish acronym).

As part of its staunch battle against climate change, Elecnor developed a Climate Change Strategy in 2018 to reduce its impact, increase its resilience and unlock the potential opportunities arising from climate change, thereby growing as a group in a sustainable manner. It has also joined the international sustainability CDP (Carbon Disclosure Project) ranking, earning a B rating. This is international recognition of its strategy to combat climate change because it means that in 2018, Elecnor was seen as having among the best levels of climate change management. Elecnor's B score is above average for the electricity sector and for the European region.

Our Group aims to contribute actively and decisively to a sustainable, low-carbon future in a world in which, increasingly, we must all play an active part in protecting the environment.

COMPLIANCE RISK MANAGEMENT

The Elecnor Group's Compliance System forms part of Elecnor's principles and values in force since its foundation, and the continuous improvement of its management practices and procedures to enhance its corporate governance. Thus, in the context of the reform of the Spanish Penal Code in 2010 introducing the criminal liability of legal persons for the first time in Spain's legislative system, Elecnor began a process in 2011 to adapt its compliance system to the new circumstances. The aim of this work was to reinforce the Company's guarantee to detect, react to and prevent potential non-compliance and/or criminal acts by its staff and related parties.

The key features of this system are as follows:

• Elecnor Group Code of Ethics (initial approval by Elecnor's Board of Directors in November 2011; last revision approved by Elecnor's Board of Directors in September 2016).
• Elecnor Group Compliance Policy (initial approval by Elecnor's Board of Directors in September 2016; last revision approved by Elecnor's Audit Committee in September 2017).
• Compliance Management System Manual (initial approval by Elecnor's Board of Directors in November 2011; last revision approved by Elecnor's Compliance Committee in November 2018).
• Compliance Committee.
• Crimes, Risk Behaviours and Controls Catalogue.
• Code of Ethics Channel.
• Annual Compliance Report.

All these documents and bodies are approved by the Governing Body (where applicable, through the Audit Committee) or by the Compliance Committee, by delegation of the aforementioned bodies. The Audit Committee oversees the effectiveness of the system through its meetings with representatives of the Compliance Committee and approval of the Annual Compliance Report. In addition, the management team oversees the system through the Compliance Committee and, at least annually, by receiving and reviewing the Annual Compliance Report.

The scope of this system is the set of countries in which Elecnor and its subsidiaries and investees operate, although it is adapted where necessary to the specific circumstances of these countries.

Elecnor's Compliance System is designed to identify and prioritise the compliance risks to which it is exposed. In this sense, Elecnor's objective is that this system is perfectly tailored to the organisation and its specific risks to ensure that it is an effective risk management tool. For this purpose, both the risks identified and their importance are continuously monitored and updated, where appropriate, by the Compliance Committee – a collegiate body entrusted with supervising, monitoring and controlling the Compliance System. The main risks identified and managed through the Compliance System include those related to: bribery, influence peddling and corruption in business; tax and social security (fiscal); foreign citizens and people trafficking; money laundering and terrorist financing; market scams; industrial and intellectual property; and discovery and disclosure of secrets, etc.

As explained beforehand, the aforesaid Compliance System is underpinned additionally by the raft of procedures, protocols and controls established in the various areas.

The Compliance Committee continuously monitors the Compliance System and periodically verifies, through various audit tests, that the controls associated with the identified compliance risks are effective.

Elecnor's Compliance System is aligned with the highest domestic and international standards in this field, having received certification pursuant to the international ISO 37001 Anti-bribery Management Systems standard and the domestic UNE 19601 Criminal Compliance Management Systems standard.

TAX RISK MANAGEMENT

The Elecnor Group has established a Corporate Tax Policy setting out its Tax Strategy, as well as the principles and core aspects of tax risk management.

As part of this, it has a tax oversight, control and management procedure containing guidelines for identifying, assessing, managing as well as monitoring risks.

Obligations and responsibilities within the organisation are regulated through this strategy, including a description of the measures that must be in place to mitigate any tax risks identified.

INTERNAL AUDIT AND CONTROL SYSTEMS

Internal control: in the Elecnor Group rests on two pillars that are considered fundamental to ensuring decisions are made based on accurate information:

The System: a raft of computer applications and procedures.

Internal Audits: audits arranged with the business areas covering the most relevant components of working capital such as, work in progress, receivables, inventories, etc. and the recognition of margins, among others. In addition, the Internal Audit area periodically reviews the main procedures and controls in place.

All the internal audits of Elecnor's businesses are scheduled so that at least two audits are conducted per division every year; if not of all, at least of the most important ones: The aim is to have conducted the first audit before the end of the first half of the calendar year, and the second before year-end.

These internal audits are supplemented by the review of other documentation carried out by Central Administration and, above all, by controls over banking transactions involving sharing data with banks (importing of bank entries, expense settlement payments through files, etc.), centralisation of the payment process, and monthly reconciliations of bank balances, among other control mechanisms.

This document includes information on "INTERNAL RISK MANAGEMENT AND CONTROL SYSTEMS IN RELATION TO THE FINANCIAL REPORTING PROCESS (ICFRS)", which has also been verified by the External Auditor.

As part of the Digital Transformation project, progress has been made during the year to develop and roll out tools for the consolidation and reporting of the annual financial statements and accounting close simulations.

The System

The procedures and manuals that make up the System are designed to ensure there is a general control environment that is fit for purpose and that good governance principles in the field of administration are adhered to.

All tasks are set out in procedures based on audit criteria. There is an operating manual for each task (explaining the objective pursued, applicable criteria, etc.), along with a user manual (which includes the steps to be taken when inputting data into the appropriate computer application).

The software used is based on the FICOS-38 application purchased from Arthur Andersen in 1984, which has been heavily developed to tailor it to the Company's requirements at any point in time (need for more information, changes in accounting standards, etc.).

The IT system works in real time and is end-to-end. Very powerful interfaces are used to integrate all systems so as to minimise data entry errors.

The initial version of the FICOS-38 system offers a General Accounting system and an Analytical Accounting system, serving Elecnor's specific needs and requirements.

Compared to the General Accounting system (covering the Company's assets and liabilities and outward-facing aspects), the Analytical Accounting system can be used to carry out budget controls of overheads or expenses, fixed or structural, through income and expense accounts at various levels (corporation, business area, production centre, work centre), as well as detailed bottom-line analysis (value added at factor cost, Tajo margin, net margin) to meet internal management needs and forecast future scenarios using standards.

The Analytical Accounting system includes a specific module on the perpetual inventory account: the project costs system. This system can be used to generate cost reports for different items (labour, materials, sub-contractors, equipment, etc.) for each project in progress and calculate their value at sales price, while also controlling costs and income compared to the estimates made at the start of each project.

This system is used to recognise results using the Tajo margin.

The criterion for recognising results is based on the accounting standards in force, as disclosed in the notes to Elecnor's separate and consolidated annual financial statements.

In addition, there is a set of peripheral systems created around the primary system. These are designed to manage the various work areas (Treasury, Procurements, Invoicing, Fixed Assets, etc.) and capture data and report back to the primary system in an integrated and real-time manner.

Data reliability

The Central Administration departments adhere to permanent audit criteria with respect to transactions reported to the system by the various local offices.

An Ordering System based on segregation of duties (expenses are approved, invoices logged, administrative approvals given and payments ordered by different people in the organisation) and a Collections and Payments Registration System involving the computerised importing of bank statement entries into the system form the basis of controls over the Company's procurements and payments.

Inputting of transactions can be decentralised because all transactions are registered using standard documentation and transaction keys. In other words, local offices do not need to have knowledge of accounting. Each document used to input data into the system has mandatory fields (customer code, work centre, project, VAT rate, etc.) which, as systems are integrated, prevents any information mismatches.

On the other hand, the system limits which sources are authorised to make changes to the accounting records (for example: transactions from the fixed assets system cannot be added to the receivables accounts). These restrictions ensure that potential errors are reduced.

Once the "daily close" (validation of transactions) has been performed, all entries are verified by Central Administration and any erroneous entries corrected.

All supporting documentation for the registered transactions is archived at Central Administration, and reviewed according to the criteria established in the procedures, in full or randomly depending on the channel through which it has been inputted. A high percentage of transactions are reviewed.

Exceptions to the procedure are registered by inputting "manual" entries, solely processed by the corporate departments reporting to the General Internal Audit and Finance Sub-division and by authorised persons.

As the Group's primary external auditor, KPMG AUDITORS through personnel specialised in annual auditing verify that the IT environment ensures data reliability and that no significant risks are detected.

Controlled access

Each local office can only report on the areas of activity within its jurisdiction, while each user only accesses the tasks assigned to them through their user profile.

Tasks are organised based on the segregation of duties principle.

For security reasons, passwords for local offices to log in to the Central System are automatically changed every two months by the system itself.

The system detects any access made from a different place than usual, even if authorised, by generating a daily list of incidents.

Access security

All access to the system is protected with firewalls and antivirus software both on web servers and local workstations.

Digitisation

In late 2015, Elecnor launched a process to assess the suitability of its systems and the need to evolve to fulfil business demands today and in the future.

While it was concluded as a result of this analysis that the current systems were robust and adequately met the information and operational needs of the organisation, findings of this assessment included the recommendation to develop existing processes, the organisation (people) and systems, without necessarily having to change ERP. As has already been mentioned, this resulted in the design and roll-out of a Digital Transformation process.

The Group's Digital Transformation process continued throughout 2019, which is involving the re-engineering and digitisation of a significant part of the organisation's processes.

Domestic and foreign subsidiaries

As in the case of the parent company, all or at least the most significant subsidiaries are subject to two internal audits each financial year.

Following the same criterion adopted in Elecnor, the aim is to conduct a first audit before the close of the first half of the year, and a second before the year-end close.

It was considered that it would not be reasonable to roll out the Elecnor IT management system across all the Group's companies on a wholesale basis because of the varying sizes of the subsidiaries compared to Elecnor, the different accounting standards applicable to foreign subsidiaries and the varying management needs.

Two IT solutions were therefore adopted in order to maintain a certain level of standardisation between the systems to be rolled out.

Domestic subsidiaries

The general accounting system adopted as a common solution was LOGIC CLASS.

An analytical accounting system was developed and bolted on to this general accounting system. This secondary system is similar to that used by Elecnor, S.A., which was developed by IPARTEK and generates information similar to that produced in Elecnor as per the same criteria.

The Group's Financial Reporting and Consolidation Department and Internal Audit team are responsible for the monitoring and control of all domestic subsidiaries, both ultimately reporting to the General Internal Audit and Finance Sub-division.

Foreign subsidiaries

In general, the SCALA General Accounting System (ERP) was rolled out in the foreign subsidiaries, as it allows tax reporting to be tailored to the requirements in each country.

As with the domestic subsidiaries, an analytical accounting module similar to that used in Elecnor – also developed by IPARTEK – was also bolted on to the SCALA system.

The Financial Reporting and Consolidation Department and Internal Audit team are responsible for the monitoring and control of all foreign subsidiaries, both ultimately reporting to the General Internal Audit and Finance Sub-division.

Elecnor's Board of Directors monitors each and every subsidiary of the Group.

Internal audit

The Internal Audit area, which lies within the General Internal Audit and Finance Sub-division, identifies and continuously monitors the main risks to which the organisation is exposed and is responsible, among others, for contributing to the continuous improvement of established control procedures and mechanisms. It also works with the Consolidation and Management Control departments to coordinate the audits of the Business Areas and control and monitor all subsidiaries.

On a regular basis, it informs the Audit Committee of the outcome of its work, making it easier for the Audit Committee to fulfil its own supervisory duties.

External audit

A professional relationship is maintained, at all levels, with the members of the KPMG Auditors team.

All the team's work revolves around analysing the organisation's degree of "internal control", which is evaluated annually through a software audit and a financial audit (substantive testing and procedures).

Regarding the financial audit, both the individual annual financial statements and consolidated statements are subject to external audit at the close of each financial year. In addition, the consolidated interim financial statements (first half) are also subject to review by the external auditor.

All testing of procedures is random, which means they must be kept permanently up-to-date.

In all its work, Elecnor's administration adopts the same criteria as those applied by the external auditors, remaining in close contact with them to discuss any matters that could give rise to different interpretations. The criteria to be adopted are agreed in advance.

FINANCIAL RISK MANAGEMENT POLICY

Elecnor is exposed to certain financial risks, which it manages through the grouping of identification, measurement, concentration limitation and supervision systems. The management and mitigation of financial risks is carried out in a coordinated manner by the Corporate area and the different business units and subsidiaries of the Group. Measures to manage financial risk are approved at the highest decision-making level and in accordance with the established rules, policies and procedures.

Exchange rate risks

The market risk due to exchange rate risk stems from the Group's operations in international markets in the course of its business. Some of its revenue and expenses are denominated in currencies other than the functional currency, and so there is a risk that fluctuations in the exchange rates of these currencies against the functional currency could impact the Group's bottom line.

In order to manage and minimise this risk, Elecnor uses hedging strategies, given that the objective is to generate results exclusively through the development of the ordinary activities it carries out, and not through speculation on exchange rate fluctuations.

The instruments used to achieve this hedging are basically debt referenced to the contract's collection currency, exchange rate insurance and cross currency swaps through which Elecnor and the Financial Institution exchange the flows of a loan expressed in euros for the flows of another loan expressed in another currency, as well as the use of "currency baskets" to cover mixed financing indexed to different currencies.

Interest rate risk

Changes in interest rates change the fair value of assets and liabilities that accrue a fixed interest rate, as well as the future flows of assets and liabilities linked to a variable interest rate. Elecnor has external financing to carry out its operations, mainly in relation to the promotion, construction and operation of wind farms, solar thermal projects and electricity infrastructure tenders, which are carried out through "Project Financing". This type of financing requires that interest rate risk be contractually closed by the arrangement of interest rate hedging instruments.

Both project financing and corporate financing are mostly arranged at floating (variable) interest rates, using, where appropriate, hedging instruments so as to minimise the interest rate risk of the financing. The hedging instruments, which are specifically assigned to financial debt, have at most the same nominal value and the same maturity dates as the hedged items, and are basically interest rate swaps (IRSs) whose purpose is to have a fixed interest cost for financing originally arranged at floating interest rates. In any event, interest rate hedges are contracted subject to accounting efficiency criteria.

Other price risks

The Group is also exposed to the risk that cash flows and results will be affected by, inter alia, energy price trends and the price of oil. The Group manages and minimises this risk through effective hedging strategies.

Liquidity risk

Liquidity risk is mitigated by a policy of maintaining a highly liquid treasury position, holding non-speculative, short-term instruments, such as the temporary acquisition of treasury bills in non-optional reverse repurchase agreements and very short-term US dollar deposits at leading banks, ensuring we can meet our obligations. We also contract credit facilities with a suitable limit and terms to meet projected needs.

Credit risk

Our main credit risk relates to counter parties or customers not meeting their contractual obligations with regard to accounts receivable for commercial transactions. In order to minimise this risk, we work with customers with an appropriate credit history; moreover, given the activity and the sectors in which we operate, Elecnor has customers with high credit ratings. However, we use mechanisms such as advances, irrevocable letters of credit and take out credit insurance policies for international sales to non-recurring customers. We also analyse the financial solvency of the customer, stipulating specific contract conditions to ensure collection of monies due.

Under the current Spanish regulatory framework, the electricity generated by our wind farms is sold into the Iberian Electricity Market (MIBEL by its Spanish acronym) and we collect revenues from the market operator, OMIE, subject to a payment guarantees system, and the National Markets and Competition Commission (CNMC), the Spanish energy-market regulator, which reports to the Ministry of Industry. Ventos do Sul Energía, S.A., Parques Eólicos Palmares, S.A., Ventos da Lagoa, S.A., Ventos do Litoral Energía, S.A. and Ventos dos Indios Energía S.A. (Brazil) have signed 20-year electricity sales contracts for their output with the corresponding Brazilian electricity distribution companies. Eóliennes de L'Érable has also signed a 20-year contract with the Canadian electricity company Hydro-Québec for the sale of the electricity it generates.

With regard to transmission lines, specifically those that provide their services in Brazil under concession arrangements, the National Electricity System Operator (ONS) is responsible for the system's collections and payments and informs the concessionaire on a monthly basis of the companies that must pay it: generators, large-scale consumers and distributors connected to the system. Prior to their connection to the system, these companies deposited a guarantee which will be executed in the event of non-payment, resulting in immediate disconnection from the system and distribution of the payment liability among other users of the system. In this way, the concessionaire is guaranteed to be paid by the national electricity system. As a result, in the years in which the Group has been operating these lines, there has been no default on the part of users.

The transmission lines in Chile belong to the national transmission system (formerly known as the trunk system), where the National Electricity Coordinator (CEN) is responsible for coordinating the flow of payments to the transmitters. Until December 2018, a scheme was in place whereby generators were responsible for making payments to transmitters. From 2019 onwards, distributors are incorporated into those responsible for making payments and, therefore, from that date onwards, there is a more diversified portfolio of payers. The payment guarantee of the national transmission system is underpinned by a CEN Procedure that establishes that in the event of possible non-payment by a coordinator (company subject to coordination by the CEN), the defaulting generator is disconnected from the system, distributing the payment obligation among the rest of the coordinated companies.

Elecnor is always striving to take the utmost measures to mitigate this risk and periodically analyses its exposure to credit risk, making the corresponding accumulated impairment losses.

Regulatory risk

Elecnor pays close attention to regulatory risks, particularly with regard to renewable energies, so as to monitor potential impacts on its consolidated income statement.

Other risks

In addition to the risks described above, the Elecnor Group is exposed to various risk factors (governance, strategy, planning and environment, operating, reporting and compliance risks) relating both to the industries in which it operates and to the wide range of countries in which it operates, either on a stable basis or through specific projects. The Group, through its Risk Management System, carries out continuous and preventive management of these risks, so as to reduce the likelihood of their occurrence and their potential impact, if any, in terms of turnover, profitability and efficiency, reputation and sustainability, to acceptable levels. The pillars of this Risk Management System are the continuous identification and evaluation of the risks to which the Group is exposed, the improvement of the related management mechanisms and tools and the permanent supervision and monitoring of the whole process.

OCCUPATIONAL HEALTH AND SAFETY/OHS MANAGEMENT

Continuing with the commitment contained in our Integrated Environmental Management, Quality and Occupational Health and Safety Policy, approved and implemented in our Group, of continuous improvement of working conditions in order to raise the level of health and safety protection of all persons involved in our works and projects, the following noteworthy activities have been undertaken in 2019:

• In 2019, 21 internal audits were carried out in accordance with the requirements of OHSAS 18001, for a total of 60 days. During these, several Deviation Notes were opened, related to divergent points from the standard, most of them due to specific errors/non-compliance.

In the Foreign Market, nine internal audits were carried out in accordance with the requirements of OHSAS 18001, for a total of 27 days.

• In terms of external audits, those of Elecnor (25 days) and the subsidiaries ATERSA, AUDECA, EHISA, ENERFIN and JOMAR SEGURIDAD (10 days) were carried out, with a satisfactory result, with one non-conformity in the multisite certification that includes Elecnor and all the aforementioned subsidiaries, except AUDECA and ENERFIN, which have an independent certificate and no nonconformities.

In the Foreign Market, as far as external audits are concerned, six audits were carried out in various countries, for a total of 20 days.

• A total of 1,236 internal site audits were carried out, as a control measure by a central, independent SPM Department, which enables an in-depth analysis of the on-site safety situation. Significantly, these audits were also conducted in countries with a stable presence in Europe: Italy, Portugal and the United Kingdom.
• More than 62,300 safety inspections have been carried out in the Group to monitor the current conditions in which work is performed. As a result, 20,350 corrective measures were taken to improve safety conditions.
• The scheduled training and informational activities for workers continued, with activities conducted in Spain for an overall group of 23,000 attendees who, for the most part, attended more than one training activity. The total number of training hours in the area of Occupational Health and Safety amounted to 129,750 hours, an increase of 7.7% compared to 2018. There are also other technological and management training areas that also have a significant impact on Occupational Health and Safety, which are not included in this total (electrical qualifications/authorisations, work equipment operators, etc.).

Abroad, actions have been organised for an overall group of more than 26,800 people, most of whom attended more than one training event. The total number of training hours in the area of Occupational Health and Safety amounted to more than 145,500 hours.

• A Special Campaign for the International Day for Occupational Health and Safety was held on 28 April 2019, to raise workers' awareness of Health and Safety issues. This year, workers have been made to reflect that they are not superheroes and that they truly need the power of prevention to return home from work unharmed, with the campaign video reflecting the difference between one idea and another.

One of the Campaign's main events was held in the Beatriz Madrid Auditorium, which was attended by representatives of client companies, employers' associations and trade unions, in addition to our CEO, General Manager, Directors, Command Line and employees of Elecnor and its subsidiaries. At this event, recognition was given to 19 TPPs that demonstrated excellent safety results in 2018 compared to previous years. Endesa was also recognised for its work in the field of health and safety in the electricity sector. An acknowledgement was also given to a subcontractor for its commitment and improvement in Health and Safety.

As a side note, three new employees, one from Spain, one from Angola and one from the Dominican Republic, joined the "Blue Jackets" Club, a club for workers who stand out for their commitment to Health and Safety.

Also present were the nine workers who had won four "Estrellas PES" (PES Stars) in Spain, to pay tribute to them for this achievement among more than 6,000 workers.

Workshops were held in all Units, where workers were shown a video and a presentation prepared for the campaign. The campaign poster and video were translated into English, French, Italian, Portuguese, Brazilian Portuguese and Arabic and distributed throughout the Group for workers to see.

• In addition to the day-to-day activities determined by the Management System, which enables us to comply with the legislation in force with the numerous tasks that are carried out, we are working on two major lines of action that will enable us to continue to make progress towards our goal of zero accidents:
  • The "Excellence in Safety" project continued its development. The six lines of action defined have been developed by the Working Groups for each of them, and most of them are in the final phase of development and implementation.

This year, the second phase of the PES assessment was carried out in Spain, and the report was presented in September, defining the Working Groups to develop the new lines of action. At the same time, the International Phase of the "Excellence in Safety" project has begun, with assessments having been made in Angola, Argentina, Chile, the United Kingdom and Uruguay, and the Working Groups in each country having begun their work, which will be completed in 2020.

• "Digital Transformation" project, aimed at Prevention, which seeks to improve day-to-day responsibilities by eliminating bureaucratic tasks which add no value, allowing Safety Officers and Line Managers to instead spend this time on visiting sites, training, etc., thus generating added value.

Thus, in 2019, some initiatives that were foreseen in the Digital Transformation project have been launched or strengthened. Among the most significant of these are as follows:
In Spain, the "Notific@" app and web environment are already used as the only means of notification and investigation of accidents. It has also begun to be implemented in several countries in the Foreign Market.
Likewise, since 01/01/2019, the "SegurT" app and web environment has also been exclusively used in Spain. This means that the traditional way of carrying out safety inspections, i.e. on paper, has been abandoned in favour of carrying them out using the app and following them up using the web environment.
Likewise, the tool for carrying out MR.Ps has been implemented virtually throughout Spain, with an app for carrying them out and a web environment for their management and control. MR.Ps, which stands for "Main Risk Permits", are a computerised checklist to be carried out before work commences, allowing the brigades to identify key aspects to avoid risks that could cause them serious accidents, and to avoid errors in carrying out the work.
There have also been other initiatives of a lesser scope that have assisted in the development of activities: implementation of "e coordina" in various units, restructuring and reform of the Intranet, etc.
- Control measures on subcontractors continued, with a large part of the inspections carried out being directed at work performed by these companies, with coordination and information meetings being held with them.
Within the Excellence in Safety project, there is a line of action dedicated to improving the control and monitoring of subcontractors. As part of this, the system for evaluating and monitoring subcontractors has been updated to allow for the detection of those that are less committed, and to take action for their improvement, giving priority to those that are larger and/or pose a greater risk. This system is based on a pre-qualification process based on the data from "e-coordina", an evaluation process carried out by the SPM technicians, and a subsequent monitoring and control system, visible in a computer application called "evalu@" based on the safety inspections, accidents, incidents and improvement actions of the subcontractors, which determine a score that, in the event of a significant decrease, makes it possible to activate Action Plans or even suspend contracts with the subcontractor in question.
- In the Foreign Market, in addition to continuing with the preparation of indexes with the data on subsidiaries and branches, and tending towards a greater approximation of the activities developed in the Domestic Market, and the actions framed within the PES Project in its internationalisation phase mentioned above, various visits were made to Foreign Market countries.
All these activities have been reflected in the obtaining of the best

injury frequency index values since 1967, when these indexes were first compiled by our company. In the Domestic Market, the injury frequency index closed at 4.1 compared to 5.8 in 2018.

In the Foreign Market, the injury frequency index closed at 2.6 this year, while in 2018 it was 2.7.

With regard to the Elecnor Group total, the injury frequency index reached a value of 3.4 this year, compared with 4.6 in 2018.

E.2 Identify the bodies within the company responsible for creating and executing the Risk Management and Control System, including tax compliance risk.

The purpose of the Audit Commission is to supervise the effectiveness of the Company's internal control, internal audit and risk management systems, including tax systems, and to discuss with the account auditors or audit firms the significant weaknesses in the internal control system detected during the course of the audit.

In particular, the Audit Commission supervises the process of preparing and presenting the regulated financial information.

E.3 State the primary risks, including tax compliance risks, and those deriving from corruption (with the scope of these risks as set out in Royal Decree Law 18/2017), to the extent that these are significant, which may affect the achievement of business objectives

As indicated in point E.1.

E.4 State whether the entity has a risk tolerance level, including tolerance for tax compliance risk.

Section E.1. describes all the policies and actions developed by the Company in the area of risk management, to ensure that it has an adequate tolerance level for the risks that may arise in the course of its business.

E.5 State which risks, including tax compliance risks, have materialised during the year.

The following are the policies and actions we consider most relevant:

1.- In relation to Legal Risks

The Company has a Legal Department and legal services in its main Business Areas and Subsidiaries, which provide a multidisciplinary advisory service (corporate, powers of attorney, industrial property, review of contracts, joint venture-consortia, trials, claims, arbitration, subcontracting, etc.), both for domestic and international business. However, despite this advisory service, the Group is currently involved in several proceedings whose resolution is not expected to affect its income statement.

On 31 May 2017, the CNMC notified the Company of the initiation, together with 15 other companies, of a sanctioning procedure for a possible infringement in the field of construction and maintenance of electrification systems and electromechanical equipment on railway lines. On 14 March 2019, the Council of the CNMC issued a decision reducing the penalty with respect to the draft resolution dated 31 August 2018 to EUR 20.4 million. In May 2019, the Company filed an appeal which was accepted and on 16 July 2019 the Spanish National Court of Justice announced the suspension of the execution of the CNMC's decision of 14 March 2019, subject to the provision of guarantees in the form of a bank guarantee.

On 26 September 2019, Elecnor, S.A. received a Measure of Organisation from the Spanish National Court of Justice summoning it to file a lawsuit, which it submitted on 11 November 2019 in a timely and proper manner.

In view of these facts and, based on the assessments of the Company's legal advisers, despite considering that there are still solid arguments to challenge the CNMC's inspection activities, due to recent events in the framework of other appeals against the resolution, as well as the development of other proceedings in the Spanish National Court of Justice in the last 12 months, where the arguments presented by the parties have been rejected, thus confirming the CNMC's decision, the Company's administrators have recorded a provision to cover this risk for an amount of EUR 20.4 million.

On 17 January 2020, the Central Court of Investigation No. 5 issued an order for the opening of oral proceedings with respect to a former employee of the Group and with respect to the company Deimos Space, S.L., due to its alleged criminal liability as a legal person for possible corruption offences in international commercial transactions and money laundering, and the institution is required to provide bonds amounting to EUR 1,460,000 for civil liability, as well as additional bonds amounting to EUR 10,240,000 and EUR 2,625,000, the latter in order to respond to possible and future pecuniary and commissary responsibilities.

The Group is in complete disagreement with the aforementioned court decision and is exercising its rights in the proceedings, appealing against the bond issued and requesting its full acquittal, as is the former Group employee, with their own legal defence, and deems that there is no evidence in these proceedings to support the conviction of Deimos Space, S.L. to a sufficient degree of certainty beyond all reasonable doubt, nor of its former employee, and, therefore, the Administrators of the Company, in accordance with the terms of the defence brief presented, consider that the probable result of the oral proceedings will be acquittal, which, consequently, will not entail criminal or civil liability.

2.- In relation to the Fiscal Risks

In 2018, the inspections carried out by the Central Office of High-Income Taxpayers at the Spanish Tax Agency were concluded, with the signing of disputed assessments with the settlement agreements, which entailed an obligation to pay a total amount of EUR 14,208,000.

Contrary to settlement agreements arising from the signed disputed assessments, the Company filed economic-administrative claims with the Central Economic-Administrative Tribunal on 28 December 2018, which, having been the subject of suspension of the obligation to pay while the proceedings are being processed, Administrative proceedings have been pending at the date of the creation of the annual financial statements for the financial year 2019, without the record being revealed and the processing of allegations by the Central Economic and Administrative Tribunal having been granted.

In addition to the above, the Company currently has a new open inspection process covering the following taxes and periods:

• Income tax for the years 2014 to 2016,

• Value added tax for the tax period 09/2015 to 12/2016,

• Withholdings and payments on account for personal income and professional activities for the tax period 09/2015 to 12/2016,

• Withholdings and payments on account for income from movable capital for the tax period 09/2015 to 12/2016,

• Withholdings and payments on account for property capital income for the tax period 09/2015 to 12/2016 and,

• Withholding taxes on non-residents for the tax period 09/2015 to 12/2016.

In view of this situation, the Company's Directors, in collaboration with its tax advisers, consider that although there are relevant arguments to support the Company's position, following a criterion of prudence, they have decided to make a provision this year for the amounts claimed in the contested settlement agreements relating to interpretative discrepancies in the area of related-party transactions, since they consider that the possibility of retroactive action has been ruled out for 2019 and, therefore, there is a greater probability that the review bodies will validate the Tax Authorities' approach than they would have done otherwise.

In addition, and taking into account the results of the previous inspection, this year a provision was recorded to cover the potential impact on 2014 to 2019 of the assessments issued in disagreement due to interpretative discrepancies in related-party transactions, since the same transfer pricing policies were applied as in previous years.

3.- In relation to the Financial Risks

The syndicated financing contracted between Elecnor and a group of financial institutions was novated on 27 June 2019, in order to: i) Divide the financing credit tranche (Tranche B), with a pre-novation limit of EUR 200 million and maturing in July 2024, into two sub-tranches: A B1 sub-tranche, with a limit of EUR 134.18 million and maturity in July 2024 and a B2 sub-tranche with a limit of USD 75 million and maturity in January 2022, at which time the distinction between the two sub-limits will cease to operate and a single sublimit of EUR 200 million will be applied again and (ii) the company Electrificaciones del Ecuador will be added as an additional accredited party of the B2 sub-tranche.

4.- In relation to the Economic Risks

Certain risks of an economic and financial nature have emerged, most notably those relating to the management, negotiation and collection of claims submitted in the context of project execution, delays in the collection and/or non-payment of commercial debts, the correction of margins expected at the end of the work, the management of discrepancies and disputes at project closure and changes in the exchange rates. The Company, within the framework of its Risk Management System, identifies and continuously monitors these risks, evaluating the impact that they may have on its economic and financial performance, taking the measures that, in each case, and based on these analyses, are deemed appropriate. In this regard, and by virtue of this ongoing analysis and monitoring, the Company records the appropriate entries and breakdowns in its annual financial statements so that they accurately reflect the impact of these risks, and adjusts its cash forecasts and plans its financial needs and identifies the causes that have given rise to the occurrence of these risks, implementing measures that reinforce its risk monitoring and control activities in a process of continuous improvement.

5.- In relation to Occupational Health and Safety/OHS

During the 2019 financial year, the biggest issue that has been observed in the Group is the serious occupational accidents of construction workers, both the Group's own workers and those of subcontractors, in the performance of their tasks, many of which are the result of non-compliance or errors on the part of the workers themselves.

In order to reduce this accident rate, the development of the "Excellence in Safety" project has made significant progress in 2019. The fundamental objective of this project is to achieve a behavioural change in all our workers in order to raise the level of risk perception and reduce the number of accidents. The second phase of this Project has begun in Spain, which will be implemented in 2020, and the International Phase of this Project has also begun this year. The health and safety initiatives developed as part of the "Digital Transformation" Project have also contributed to raising the level of health and safety standards in our works and projects.

In any case, when a significant accident occurs, regardless of the result of the injuries, action plans continue to be implemented in the event of these accidents, with the implementation of additional training measures, work supervision and the organisation of the necessary human and material resources.

6.- In relation to Labour Relations.

It should be noted that massive labour inspections are taking place (selfemployed workers and subcontractors). At present, there are inspections monitoring the situation of the self-employed and subcontractors, in order to detect false self-employment and illegal transfer of labour. These inspections, which were becoming more widespread and more stringent in the companies that work for Telefónica, have been extended to all companies that work for the major telecommunications companies.

In 2019, important regulatory changes were made which, depending on how they are interpreted by the courts, may represent a new way of understanding labour relations. The main changes are focused on the work-life balance through different measures (adaptation of the schedule in an individual fashion and without a reduction of the working day, daily record of the working day, etc.). It seems that these normative changes, together with the membership of the New Government, will result in institutions pursuing and promoting measures to help with this balance.

7.- In relation to all the other Compliance risks.

In 2019, there were no compliance risks that had a significant impact on the Group's results, image and/or reputation.

E.6 Explain the response and monitoring plans for all major risks, including tax compliance risks, of the company, as well as the procedures followed by the company in order to ensure that the board of directors responds to any new challenges that arise.

The supervision of the Risk Control and Management System indicated in point E.1 is carried out at the highest level in the Company, i.e. by the Chairman, the Managing Director, the Audit Commission and the Board of Directors.

Notwithstanding the above, and in order to mitigate or redirect the risks described in section E.5, the Company has the necessary Corporate Organisations, resources and working methods, which analyse, supervise and propose specific actions so that any risks detected affect the Company as little as possible, reporting their conclusions and suggestions to the affected Areas and informing the persons and bodies mentioned in the previous paragraph.

F INTERNAL RISK MANAGEMENT AND CONTROL SYSTEMS RELATED TO THE PROCESS OF PUBLISHING FINANICAL INFORMATION (ICFR)

Describe the mechanisms comprising the System of Internal Control over Financial Reporting (ICFR) of your company.

F.1 Control environment

Report on at least the following, describing their principal features:

F.1.1. The bodies and/or departments that are responsible for (i) the existence and maintenance of an adequate and effective ICFR; (ii) their implementation; and (iii) their supervision.

The responsibility for the existence and maintenance of an adequate and effective Internal Control System in relation to the process of issuing Financial Information (ICFRS), as well as its supervision, is assumed by the Audit Commission, a body which has delegated the tasks of designing and verifying the effective implementation and operation of the ICFRS to Elecnor's General Internal Audit and Finance Sub-division, by means of the relevant audits.

To this end, the Regulations of the Board of Directors of Elecnor expressly establish that one of its functions is to identify the main risks of the Company and to implement and monitor the appropriate internal control and information systems. Furthermore, these Regulations, as well as the Company's own Articles of Association, establish among the responsibilities of the Audit Commission the supervision of the effectiveness of the Company's internal control, internal audit, where appropriate, and risk management systems, including tax systems, as well as the process of preparing and presenting the regulated financial information. The Audit Commission is also responsible for establishing appropriate relations with the account auditors in order to receive information on any matters that may jeopardise their independence and any other matters related to the account auditing process. In the specific area of auditor independence, the Audit Commission, through the internal procedure established in this respect, is responsible for pre-approving, directly or indirectly through the Internal Audit and from an independent perspective, any proposal for non-audit services submitted by the Group's external auditor. It also obtains, on an annual basis, written confirmation from the auditors of their independence and information on the additional services provided by them, and issues the required report in this respect prior to issuing the account audit report.

• F.1.2. State whether the following are present, especially if they relate to the creation of financial information:
  • Departments and/or mechanisms in charge of: (i) design and review of corporate structure; (ii) clear definition of lines of responsibility and authority with an adequate distribution of tasks and functions; and (iii) assurance that adequate procedures exist for proper communication throughout the entity.

The General Internal Audit and Finance Sub-division, together with the heads of each department, with regard to functions related to the process of preparing financial information, is responsible for designing the organisational structure and the lines of responsibility and authority in their respective areas of action. Any changes to the organisational structure made during the financial year are reported to the Communications Area, which periodically updates the organisational charts, which are then incorporated into the common computer directory to which all employees have access.

Persons responsible for the administration and recording of transactions with a direct impact on the process of preparing financial information (corporation, delegations and subsidiaries) are functionally dependent on the General Internal Audit and Finance Sub-division.

• Code of conduct, the body approving this, degree of dissemination and instruction, including principles and values, (state if there is specific mention of transaction recording and creation of financial information), a body charged with analysing breaches and proposing corrective actions and sanctions.

The Elecnor Group's Compliance System is structured through a series of documents and management tools, including the Code of Ethics and the Group's Compliance Policy. These documents were initially approved by Elecnor's Board of Directors and are available on Elecnor's website, in the Corporate Responsibility section, which is available to all employees and interested third parties.

The Code of Ethics and the Compliance Policy are applicable to all the companies that make up the Elecnor Group and to all the businesses and activities it carries out in each country in which it operates.

The Elecnor Group's Code of Ethics and the documents that implement it have the core mission of extending its business philosophy to all employees and collaborators and determining the expected behaviour of the same in matters of an ethical nature, in relation to the organisation's commitments in this field or to the applicable regulations. Among the documents that implement the Code of Ethics is the Compliance Policy, which was approved by the Board of Directors in 2016, and which outlines the expected behaviour of Elecnor employees and of the individuals or legal entities that are routinely associated with the Company in order to guarantee compliance with the law.

Elecnor enforces a zero-tolerance policy for bad practices in terms of ethics and integrity, and expects its employees and people with whom it has dealings to conduct themselves in accordance with the principles of its Code of Ethics, the rules on which it is based and the procedures that govern it.

Among the "Principles of Action in relation to shareholders" included in the Code of Ethics, the Elecnor Group includes the commitment to "favour among its shareholders – and, in general, in the investment and financial community – the creation of an opinion based on truthful data and facts regarding the development of its businesses, the main lines of its strategy and its future prospects. To this end, the Elecnor Group assumes as a principle of behaviour the transparency and reliability of financial information and compliance with the applicable regulations. Employees must transmit such information in a truthful, complete and understandable manner... The dissemination of this information is done in an expeditious manner and by means of common and simultaneous access to guarantee equity, mainly communications to the CNMV on relevant facts and press releases to the media".

The body responsible for analysing possible breaches of these principles or of the law is the Compliance Committee, which reports its conclusions to the Audit Committee so that the latter may determine, where appropriate, the possible corrective actions and disciplinary measures to be adopted. The Compliance Committee is the collegiate body entrusted with the functions of supervision, monitoring and control of the Compliance System, guaranteeing its permanent review and updating and effective operation, and is currently composed of five people, mostly from corporate areas. This body depends organically and functionally on the Audit Committee, to which it periodically reports its activity.

The Compliance Committee is in charge of organising recurring annual training cycles, which are intended for as many of the organisation's employees as possible, covering the organisation's values and unwanted risk behaviour. Training cycles are carried out through classroom sessions, on-line training or the delivery of outreach brochures. This training plan is part of the organisation's training programme. When new employees are hired, including temporary ones, the Elecnor Group provides them with a copy of the Code of Ethics.

• Whistleblower channel, that allows notifications to the audit committee of irregularities of a financial and accounting nature, in addition to potential breaches of the code of conduct and unlawful activities undertaken in the organisation, reporting, as the case may be, if this is of a confidential nature.

Employees may communicate any concerns or questions in the area of Compliance or about irregular, illegal or contrary conduct in terms of the Code of Ethics, including financial and accounting matters that occur in the course of the activities carried out by the Company, through an Intranet and/or postal address, which are fully operational and explained in the Code of Ethics, the Compliance Policy and other communications or publications of a public nature, such as the Integrated Report.

Only named communications are admitted and all of them are analysed and treated in a confidential manner and with respect for the regulations on personal data protection. Notwithstanding the above, and in the case of receiving anonymous communications, these will be analysed by the Compliance Committee, which, in view of the soundness of the arguments, will propose their processing in order to further the investigation. The Elecnor Group does not tolerate any retaliation against people who make use of the procedures established for the communication of irregular behaviour.

The Compliance Committee, which is responsible for processing communications received through this channel in the first instance, will identify and determine the nature and importance of the complaints received. Based on this analysis, it will determine the most appropriate department or unit for their resolution.

• Training and periodic refresher programmes for staff involved in the preparation and revision of financial information, as well as assessment of the ICFR (Internal Control System for Financial Information), that covers at least accounting rules, audits, internal control and risk management.

The training and development policy is integrated into the Human Resources Integrated Management System.

The Department of Performance Management, Training and Development is responsible for designing and configuring training itineraries for Elecnor's structural personnel, based on the results of performance management and the training needs identified by the different areas. In particular, for staff with responsibilities in the financial field or who need to improve their skills in this area, there is a specific financial training programme. Elecnor also provides its employees with regular training in the field of compliance, which, among other issues, provides them with a better understanding of the main risks of this nature and the internal control elements established for their adequate prevention and management.

In addition, the heads of the departments most directly involved in the preparation and review of the financial information as well as in the evaluation of the ICFRS maintain permanent and fluid communication with the external auditors and other accounting experts, who inform them promptly of new developments in accounting matters and risk management and internal control of financial information and provide them with material and assistance for its updating. If necessary, depending on the extent and importance of the new developments, as well as the group concerned, specific courses are designed on the subject.

F.2 Assessment of financial information risks

Report on at least the following:

• F.2.1. The main characteristics of the risk identification process, including error and fraud risk, as regards:
  • Whether the process exists and is documented.
  • If the process covers all of the objectives of financial information, (existence and occurrence; completeness; valuation; delivery; breakdown and comparability; and rights and obligations), whether it is updated and with what frequency.
  • The existence of a process for identifying the scope of consolidation, taking into account, among other factors, the possible existence of complex company structures, shell companies, or special purpose entities.
  • If the process takes into account the effects of other types of risk (operational, technological, financial, legal, tax, reputational, environmental, etc.) to the extent that they affect the financial statements.
  • The governing body within the company that supervises the process.

The process of identifying risks in relation to the process of generating and issuing financial information falls within the responsibilities attributed to the General Internal Audit and Finance Sub-division by the Audit Commission.

This risk identification process has, in summary, the following characteristics:

• An analysis of the consolidated annual financial statements for the year in order to identify the relevant headings in the financial statements and breakdowns.
• On the basis of this information, those processes from which transactions are processed are identified and finally reflected in the aforementioned relevant headings and breakdowns.
• Lastly, the relevant risks that may lead to errors in the process of generating and issuing financial information are identified and prioritised for each of the aforementioned processes. Accordingly, each risk identified relates to one or more of the potential errors in the process of generating and issuing financial information, such as integrity, accuracy, occurrence, cut-off, valuation and allocation, and classification and comprehensibility.

The operation of the ICFRS Oversight Model is structured around the Elecnor Group's Annual Internal Audit Work Plan. The Annual Plan is prepared by the General Internal Audit and Finance Sub-division and presented to the Elecnor Audit Commission for approval. Once approved, the Annual Plan is executed by the corporate areas of the Elecnor Group (General Accounting, Management Control, Consolidation, Financial Area, Internal Audit and Tax Advisory). One of the tasks included in this Annual Plan is the review of significant risks.

The review of the scope of consolidation is carried out twice a year to coincide with the consolidation process. Corporate transactions are approved by the Board of Directors and reported to the General Internal Audit and Finance Sub-division for the updating of the Group's scope of consolidation.

The General Internal Audit and Finance Sub-division, in the performance of its tasks, continuously monitors the Group's activity, which enables it to identify any significant risk in the different areas of business and activity that could have a significant impact on the financial statements. These risks, as well as their potential impact on the financial statements, are reported to the Audit Commission by the General Internal Audit and Finance Sub-division in the various meetings held by the former.

F.3 Control activities

Report on whether the company has at least the following, describing their main characteristics:

F.3.1. Review and authorisation procedures for financial information published by the stock markets and a description of the ICFR, indicating those responsible, as well as documentation describing the flow of activity and controls (including those relating to the risk of fraud) of the various types of transactions which may materially affect the financial statements, including financial closing procedures and the specific review of judgements, estimates, valuations and relevant forecasts.

With respect to the accounting closing procedure, the General Internal Audit and Finance Sub-division draws up the annual closing calendar which includes the closing dates, rules and instructions. This calendar is made available to all staff involved through the computer directory. Furthermore, Elecnor's General Accounting Department supports the accounting closing process by means of a monthly and annual accounting closing checklist.

With respect to subsidiaries, the Management Control, Consolidation and Internal Audit Departments permanently monitor the subsidiaries that make up the Elecnor Group, assigning the monitoring of the various investees to the Subsidiary Controllers. In addition, regular meetings are held to monitor subsidiaries, in which the financial information of these subsidiaries and any other relevant aspects are analysed.

The Management Control and Consolidation departments prepare all the documentation relating to the analysis of the Group's performance on a monthly basis for presentation to the Board of Directors, which is previously reviewed by the General Internal Audit and Finance Sub-division. A checklist is available to carry out this review, indicating the control tasks and the persons responsible for each task.

With regard to the procedures for reviewing and authorising financial information to be published on the securities markets, a distinction is made between three levels of relevant information:

• Annual financial statements and interim financial statements

The head of Elecnor's General Accounting Department is responsible for preparing the individual annual financial statements. The Head of Consolidation is also responsible for preparing the consolidated annual financial statements and the interim consolidated financial statements.

Subsequently, the individual and consolidated annual financial statements are reviewed by the heads of the various corporate areas of Elecnor by the General Internal Audit and Finance Sub-division, by the Audit Commission and by the Board of Directors. The Audit Commission receives the annual financial statements sufficiently in advance to ensure their adequate review and meets with the external auditors prior to the Board of Directors where the annual financial statements are prepared.

• Description of the ICFRS

Elecnor periodically reviews the financial information prepared, as well as the description of the ICFRS, in order to ensure the quality of the information. The General Internal Audit and Finance Sub-division is responsible for preparing the description of the ICFRS. This process culminates in a review by the Audit Commission and its approval through the Annual Corporate Governance Report that is validated by the Board of Directors.

• Relevant facts reported to the CNMV

The department or subsidiary in which the operation to be communicated originates prepares a note that is reviewed by the General Secretary and the Communications Area. The relevant facts are also reviewed by the General Internal Audit and Finance Sub-division in the case that they include financial or accounting information.

• Uploading of information to CNMV applications

The burden of information on CNMV applications is the responsibility of the General Secretary, which is supported in this process by the General Internal Audit and Finance Sub-division. The validation and sending of this information is the responsibility of the General Secretary, who has exclusive use of a cryptographic card for sending the information.

Elecnor has documented accounting and administrative procedures for "Purchases and Payments", "Contracting, Invoicing and Collection", "Control of Fixed Assets", "Treasury Control" and "Cash Control", among others. These procedures include the type of transactions for each process, the procedures for recording and accounting for them and the corresponding controls as established by Elecnor.

These procedures are reviewed annually by Elecnor's General Accounting Department, which updates them if necessary.

In addition, the General Internal Audit and Finance Sub-division has a matrix of risks and controls of financial information, which includes controls related to fraud risks. The risks and controls are reviewed within the Annual Internal Audit Plan, and the matrix is updated annually.

With regard to the procedures and controls established in relation to the relevant trials, estimates and projections, the Group has identified the main risks related to these aspects. In particular, the main areas exposed to trials and estimates have been identified as those related to:

• The recognition of income from construction contracts under the percentageof-completion method.

• The registration of provisions of any nature.
• The recoverable value of goodwill.

All significant estimates are reviewed by the General Internal Audit and Finance Sub-division and, where appropriate, are submitted to the Board of Directors for analysis and approval.

Elecnor's Board of Directors meets on a monthly basis. Beforehand, the Group's financial information is analysed by the General Internal Audit and Finance Subdivision and the Managing Director.

F.3.2. Internal IT control policies and procedures (access security, change controls, their operation, operational continuity, and segregation of duties, among others) which support relevant processes within the company and relate to the creation and publication of financial information.

Currently, Elecnor has a series of controls that mitigate the main risks related to the integrity, availability, validity and confidentiality of accounting and financial information. In addition, Elecnor has procedures related to Information Security and System Operation.

The management of access to the systems is carried out in accordance with procedures established for this purpose.

Elecnor has a documented Contingency Plan in the event of a Disaster, as well as a Backup Policy and Procedures for the organisation's critical systems.

F.3.3. Internal control policies and procedures intended to guide the management of subcontracted activities and those of third parties, as well as those aspects of assessment, calculation or evaluation entrusted to independent experts, which may materially affect financial statements.

The Elecnor Group participates in various temporary joint ventures (UTEs by its Spanish acronym). Although the Elecnor Group itself manages and administers most of them, sometimes the other partner is in charge of these tasks. In these cases, when the Elecnor Group does not manage the administration, it is the Elecnor Group that assumes the management. Once the joint venture has been legally constituted, its Management Committee, in which all the partners participate, meets and agrees on the accounting and analytical criteria for the management of the works. The partner in charge of management sends the monthly financial information (balance sheet, profit and loss account and worksheet) to Elecnor for review. On 30 June and 31 December, the Elecnor Group integrated the UTEs. This process is carried out by the Management Control Department, once the information sent by the other partner has been reviewed and the corresponding homogenisation entries have been made in the event that there are accounting criteria different from those assumed by Elecnor.

With respect to the assessments, judgements or calculations made by third parties, the Elecnor Group arranges interest rate and exchange rate hedging derivatives, the valuation of which is entrusted to leading financial institutions.

The identification of the need or convenience of contracting a financial instrument is the ultimate responsibility of the General Internal Audit and Finance Sub-division. Once the need has been determined, the application for the contract is sent to the Board of Directors for approval. The Board only approves hedging derivatives.

The Treasury Area receives monthly valuations of the derivatives from financial institutions and evaluates their reasonableness. In the event of a discrepancy, the financial institutions are contacted for clarification and, if necessary, to obtain new valuations.

F.4 Information and communication

State whether the company has at least the following, describing their main characteristics:

F.4.1. A specifically assigned function for defining and updating accounting policies (accounting policy area or department) and resolving doubts or conflicts arising from their interpretation, maintaining a free flow of information to those responsible for operations in the organisation, as well as an up-to-date accounting policy manual distributed to the business units through which the company operates.

The responsibility for defining and keeping the Group's accounting policies upto-date is attributed to Elecnor's General Internal Audit and Finance Subdivision. The Management Control and Consolidation departments permanently monitor subsidiaries and branches. The resolution of doubts and queries regarding accounting policies is primarily the responsibility of the Corporate Controllers of each of the subsidiaries. In the event that the query is not resolved or there is a conflict of interpretation, these are raised with the Head of Consolidation and/or Internal Audit, both of which are part of the General Internal Audit and Finance Sub-division.

If necessary, queries are made to the external auditor by the Head of Consolidation of the General Internal Audit and Finance Sub-division.

F.4.2. Measures for capturing and preparing financial information with consistent formats for application and use by all of the units of the entity or the group, and which contain the main financial statements and notes, as well as detailed information regarding ICFR.

All transactions are recorded at Elecnor on a documentary basis and using an operation key format. Each document used to report data to the system has some mandatory data (customer code, centre, work, VAT rate, etc.). After the "end of day" (transaction validation) is complete, all the resulting entries are verified by the corresponding corporate departments, correcting, if necessary, those considered erroneous.

As for the reporting tool, a standardised "Consolidation Report Package" is used for all subsidiaries. This "Consolidation Report Package" is reviewed on an annual basis by the external auditor in order to validate that it includes all the required information and breakdowns. Subsidiaries generally report under IFRS. The consolidation process takes place in the Consolidation Department.

The Consolidation Department prepares a schedule and reporting instructions on an annual basis. Each of the subsidiaries, once the closing has been prepared and supervised by each of the heads of the corresponding Accounting and Financial Departments, sends the required information to the Consolidation Department. The reporting instructions establish the obligation for the information included in the report package to coincide with that obtained from the subsidiary's accounting records, as well as forbidding the inclusion of subsequent entries in the accounts once the report package has been sent to Elecnor. If a significant subsequent entry is detected, the Management Control and Consolidation departments are informed and the corresponding report package is modified.

F.5 Supervision of system performance

Describe at least the following:

F.5.1. The activities of the audit committee in overseeing ICFR as well as whether there is an internal audit function that has among its mandates support of the committee and the task of supervising the internal control system, including ICFR. Additionally, describe the scope of ICFR assessment made during the year and the procedure through which the person responsible prepares the assessment reports on its results, whether the company has an action plan describing possible corrective measures, and whether its impact on financial reporting is considered.

Among the functions assumed by the Audit Commission is that of periodically reviewing the internal control and risk management systems, so that the main risks are properly identified, managed and reported. Furthermore, its powers include supervising the preparation process and the integrity of the financial information, reviewing compliance with regulatory requirements, the appropriate delimitation of the scope of consolidation and the correct application of accounting criteria.

In carrying out these functions, the Audit Commission relies on the internal audit function. The Elecnor Group's internal audit function is structured around six major control areas: General Accounting, Management Control, Consolidation, Financial Area, Internal Audit and Tax Advice. These departments act, in their respective areas of competence and under audit criteria, as internal corporate control/audit bodies, carrying on their activities with complete independence from both Elecnor's production departments and the domestic and foreign subsidiaries that comprise the Elecnor Group. The internal audit is integrated within the General Internal Audit and Finance Sub-division, whose main functions and activities are the supervision of financial information and internal control. The Elecnor Group prepares an Internal Audit Plan, which is presented to the Audit Commission, and a periodic report on the execution of the plan and on the incidents that have occurred at the various meetings of the Audit Commission by the General Internal Audit and Finance Sub-division.

Elecnor conducts coordinated audits of the Business Areas, the scope of which focuses on the most relevant chapters within the ICFRS, such as Work in Progress, Customers, Warehouses and the recognition of margins, among others. All internal audits of Elecnor's Business Areas are scheduled so that at least two audits are carried out per Area per year, ensuring that the first audit of all the Areas has been carried out before the end of the first half of the calendar year and the second before the end of the financial year. For both types of audit, an audit schedule is made at the beginning of the year and there is a checklist of tests to be performed.

As with the parent company, all subsidiaries are subject to two internal audits each financial year. Following the same criteria as in the case of Elecnor, we try to conduct an initial audit before the closing corresponding to the first half of the year and a second audit before the closing of the fiscal year.

The Elecnor Group's Audit Commission, with respect to the ICFRS, is informed of the internal control structure existing in the organisation, approves the annual internal audit plan, meets at least twice a year with the external auditors and is informed monthly, during the meetings of the Board of Directors, of the developments within the business and its activities. In addition, and if relevant, it is informed of certain judgements or estimates included in the financial information. The Audit Commission reports on all its relevant activities carried out during the year in its annual Activity Report.

F.5.2. If there is a procedure by which the account auditor (in accordance with the contents of the Normas Técnicas de Auditoría (NTA) - "Auditing Standards"), internal auditor and other experts may communicate with senior management and the audit committee or senior managers of the company regarding significant weakness in internal control identified during the review of the annual accounts or any others they have been assigned. Additionally, state whether an action plan is available for correcting or mitigating any weaknesses found.

The Elecnor Audit Commission meets at least three times a year, in accordance with the provisions of the Company's Articles of Association and the Regulations of the Board of Directors of the Company, and as many times as required according to the interests of the Company.

During the 2019 financial year, the Audit Commission held 11 meetings, three of which were attended by the external auditors. The purpose of the meetings was to:

• Review the planning and scope of audit work.

• Review the annual financial statements and analyse, if they exist, the monitoring weaknesses detected by the external auditor in his review of the main business processes and general controls that are implemented in the Group, as well as the suggested corrective actions. Prior to this meeting, the external auditors meet with the Chairman, the CEO and members of the General Internal Audit and Finance Sub-division.

• Review the interim financial statements.

F.6 Other relevant information

There is no additional relevant information to consider that has not been collected from the previous points.

F.7 External auditor´s report

Report from:

F.7.1. If the ICFR information submitted to the markets has been subject to review by the external auditor, in which case the entity shall include its report as an attachment. If not, reasons why should be given.

This information in relation to ICFRS has been submitted for review by the external auditor.

G EXTENT OF COMPLIANCE WITH CORPORATE GOVERNANCE RECOMMENDATIONS

Specify the company's level of compliance with recommendations from the Good Governance Code of Listed Companies.

In the event that a recommendation is not followed or only partially followed, a detailed explanation should be included explaining the reasons in such a manner that shareholders, investors and the market in general have enough information to judge the company´s actions. General explanations are not acceptable.

1. That the Articles of Association of listed companies do not limit the maximum number of votes that may be cast by one shareholder or contain other restrictions that hinder the takeover of control of the company through the acquisition of shares on the market.

Complies Explanation �

• 2. That when the parent company and a subsidiary are listed on the stock market, both should publicly and specifically define:
  • a) The respective areas of activity and possible business relationships between them, as well as those of the listed subsidiary with other group companies.
  • b) The mechanisms in place to resolve any conflicts of interest that may arise.

Complies � Complies Partially � Explanation � Not Applicable

• 3. That, during the course of the ordinary General Shareholders' Meeting, complementary to the distribution of a written Annual Corporate Governance Report, the chairman of the Board of Directors makes a detailed oral report to the shareholders regarding the most material aspects of corporate governance of the company, and in particular:
  • a) Changes that have occurred since the last General Shareholders' Meeting.
  • b) Specific reasons why the company did not follow one or more of the recommendations of the Code of Corporate Governance and, if so, the alternative rules that were followed instead.

Complies Complies partially � Explanation �

4. That the company has defined and promoted a policy of communication and contact with shareholders, institutional investors and proxy advisors that complies in all aspects with rules preventing market abuse and gives equal treatment to similarly situated shareholders.

And that the company has made such a policy public through its web page, including information related to the manner in which said policy has been implemented and the identity of contact persons or those responsible for implementing it.

Complies Complies partially � Explanation �

5. That the Board of Directors should not propose to the General Shareholders' Meeting any proposal for delegation of powers allowing the issuance of shares or convertible securities without pre-emptive rights in an amount exceeding 20% of equity at the time of delegation.

And that whenever the Board of Directors approves any issuance of shares or convertible securities without pre-emptive rights the company immediately publishes reports on its web page regarding said exclusions as referenced in applicable company law.

Complies Complies partially � Explanation �

• 6. That listed companies which draft reports listed below, whether under a legal obligation or voluntarily, publish them on their web page with sufficient time before the General Shareholders' Meeting, even when their publication is not mandatory:
  • a) Report regarding the auditor's independence.
  • b) Reports regarding the workings of the audit committee and the appointments and remuneration committee.
  • c) Report by the audit committee regarding related-party transactions
  • d) Report on the corporate social responsibility policy.

Complies Complies partially � Explanation �

7. That the company reports in real time, through its web page, the proceedings of the General Shareholders' Meetings.

Complies Explanation �

8. That the audit committee ensures that the Board of Directors presents financial statements in the audit report for the General Shareholders' Meetings which do not have qualifications or reservations and that, in the exceptional circumstances in which qualifications may appear, that the chairman of the audit committee and the auditors clearly explain to the shareholders the content and scope of said qualifications or reservations.

Complies Complies partially � Explanation �

9. That the company permanently maintains on its web page the requirements and procedures for certification of share ownership, the right of attendance at the General Shareholders' Meetings, and the exercise of the right to vote or to issue a proxy.

And that such requirements and procedures promote attendance and the exercise of shareholder rights in a non-discriminatory fashion.

Complies Complies partially � Explanation �

• 10. That when a verified shareholder has exercised his right to make additions to the agenda or to make new proposals to it with sufficient time in advance of the General Shareholders' Meeting, the company:
  • a) Immediately distributes the additions and new proposals.
  • b) Publishes the attendance card credential or proxy form or form for distance voting with the changes such that the new agenda items and alternative

proposals may be voted upon under the same terms and conditions as those proposals made by the Board of Directors.

• c) Submits all of these items on the agenda or alternative proposals to a vote and applies the same voting rules to them as are applied to those drafted by the Board of Directors including, particularly, assumptions or default positions regarding votes for or against.
• d) That after the General Shareholders' Meeting, a breakdown of the results of said additions or alternative proposals is communicated.

Complies � Complies Partially � Explanation � Not Applicable

11. That, in the event the company intends to pay for attendance at the General Shareholders' Meeting, it establish in advance a general policy of long-term effect regarding such payments.

Complies � Complies Partially � Explanation � Not Applicable

12. That the Board of Directors completes its duties with a unity of purpose and independence, treating all similarly situated shareholders equally and that it is guided by the best interests of the company, which is understood to mean the pursuit of a profitable and sustainable business in the long term, and the promotion of continuity and maximisation of the economic value of the business.

And that in pursuit of the company's interest, in addition to complying with applicable law and rules and in engaging in conduct based on good faith, ethics and a respect for commonly accepted best practices, it seeks to reconcile its own company interests, when appropriate, with the interests of its employees, suppliers, clients and other stakeholders, as well as the impact of its corporate activities on the communities in which it operates and the environment.

Complies Complies partially � Explanation �

13. That the Board of Directors is of an adequate size to perform its duties effectively and collegially, and that its optimum size is between five and fifteen members.

Complies Explanation �

• 14. That the Board of Directors approves a selection policy for directors that:
  • a) Is concrete and verifiable.
  • b) Ensures that proposals for appointment or re-election are based upon a prior analysis of the needs of the Board of Directors.
  • c) Favours diversity in knowledge, experience and gender.

That the resulting prior analysis of the needs of the Board of Directors is contained in the supporting report from the appointments committee published upon a call from the General Shareholders' Meeting submitted for ratification, appointment or re-election of each director.

And that the selection policy for directors promotes the objective that by the year 2020 the number of female directors accounts for at least 30% of the total number of members of the Board of Directors.

The appointments committee will annually verify compliance with the selection policy of directors and explain its findings in the Annual Corporate Governance Report.

Complies Complies partially � Explanation �

15. That proprietary and independent directors constitute a substantial majority of the Board of Directors and that the number of executive directors is kept at a minimum, taking into account the complexity of the corporate group and the percentage of equity participation of executive directors.

Complies Complies partially � Explanation �

16. That the percentage of proprietary directors divided by the number of nonexecutive directors is no greater than the proportion of the equity interest in the company represented by said proprietary directors and the remaining share capital.

This criterion may be relaxed:

• a) In companies with a high market capitalisation in which interests that are legally considered significant are minimal.
• b) In companies where a diversity of shareholders is represented on the Board of Directors without ties among them.

Complies � Explanation

Elecnor is a company with a long tradition in its sector, and since its inception it has been managed by a variety of family groups, the founders of the company. Through the significant shareholder CANTILES XXI, S.L., and the Directors who represent it in the Company, the Family Groups that make it up are represented in the broadest and most diverse manner possible, with a profile that is suitable for the exercise of their obligations and always with the aim of giving value to the shareholder.

Elecnor's Proprietary Directors perform a supervisory task similar to that attributed to Independent Directors. The composition of Elecnor's Board of Directors corresponds to its shareholder structure.

17. That the number of independent directors represents at least half of the total number of directors.

Nonetheless, when the company does not have a high level of market capitalisation or in the event that it is a high cap company with one shareholder or a group acting in a coordinated fashion who together control more than 30% of the company's equity, the number of independent directors represents at least one third of the total number of directors.

Complies � Explanation

Elecnor is a company with a long tradition in its sector, and since its inception it has been managed by a variety of family groups, the founders of the company. Through the significant shareholder CANTILES XXI, S.L., and the Directors who represent it in the Company, the Family Groups that make it up are represented in the broadest and most diverse manner possible, with a profile that is suitable for the exercise of their obligations and always with the aim of giving value to the shareholder.

Elecnor's Proprietary Directors perform a supervisory task similar to that attributed to Independent Directors. The composition of Elecnor's Board of Directors corresponds to its shareholder structure.

• 18. That companies publish and update the following information regarding directors on the company website:
  • a) Professional profile and biography.
  • b) Any other Boards to which the director belongs, regardless of whether the companies are listed, as well as any other remunerated activities engaged in, regardless of type.
  • c) Category of directorship, indicating, in the case of individuals who represent significant shareholders, the shareholder that they represent or to which they are connected.
  • d) The date of their first appointment as a director of the company's Board of Directors, and any subsequent re-election.
  • e) The shares and options they own.

Complies Complies partially � Explanation �

19. That the Annual Corporate Governance Report, after verification by the appointments committee, explains the reasons for the appointment of proprietary directors at the proposal of the shareholders whose equity interest is less than 3%. It should also explain, where applicable, why formal requests from shareholders for membership on the Board meeting were not honoured, when their equity interest is equal to or exceeds that of other shareholders whose proposal for proprietary directors was honoured.

Complies � Complies Partially � Explanation � Not Applicable

20. That proprietary directors representing significant shareholders must resign from the Board if the shareholder they represent disposes of its entire equity interest. They should also resign, in a proportional fashion, in the event that said shareholder reduces its percentage interest to a level that requires a decrease in the number of proprietary directors representing this shareholder.

Complies � Complies Partially � Explanation � Not Applicable

21. That the Board of Directors may not propose the dismissal of any independent director before the completion of the director's term provided for in the Articles of Association unless the Board of Directors finds just cause and a prior report has been prepared by the appointments committee. Specifically, just cause is considered to exist if the director takes on new duties or commits to new obligations that would interfere with his or her ability to dedicate the time necessary for attention to the duties attendant to his post as a director, fails to complete the tasks inherent to his or her post, or enters into any of the circumstances which would cause the loss of independent status in accordance with applicable law.

The dismissal of independent directors may also be proposed as a result of a public share offer, joint venture or similar transaction entailing a change in the shareholder structure of the company, provided that such changes in the structure of the Board are the result of the proportionate representation criteria provided for in Recommendation 16.

22. That companies establish rules requiring that directors inform the Board of Directors and, where appropriate, resign from their posts, when circumstances arise which may damage the company's standing and reputation. Specifically, directors must be required to report any criminal acts with which they are charged, as well as the consequent legal proceedings.

And that should a director be indicted or tried for any of the offences set out in company law legislation, the Board of Directors must investigate the case as soon as possible and, based on the particular situation, decide whether the director should continue in his or her post. And that the Board of Directors must provide a reasoned written account of all these events in its Annual Corporate Governance Report.

Complies Complies partially � Explanation �

23. That all directors clearly express their opposition when they consider any proposal submitted to the Board of Directors to be against the company's interests. This particularly applies to independent directors and directors who are unaffected by a potential conflict of interest if the decision could be detrimental to any shareholders not represented on the Board of Directors.

Furthermore, when the Board of Directors makes significant or repeated decisions about which the director has serious reservations, the director should draw the appropriate conclusions and, in the event the director decides to resign, explain the reasons for this decision in the letter referred to in the next recommendation.

This recommendation also applies in the case of the secretary of the Board of Directors, despite not being a director.

Complies Complies Partially � Explanation � Not Applicable �

24. That whenever, due to resignation or any other reason, a director leaves before the completion of his or her term, the director should explain the reasons for this decision in a letter addressed to all the directors of the Board of Directors. Irrespective of whether the resignation has been reported as a relevant fact, it must be included in the Annual Corporate Governance Report.

Complies Complies Partially � Explanation � Not Applicable �

25. That the appointments committee ensures that non-executive directors have sufficient time in order to properly perform their duties.

And that the Board rules establish the maximum number of company Boards on which directors may sit.

Complies Complies partially � Explanation �

26. That the Board of Directors meet frequently enough so that it may effectively perform its duties, at least eight times per year, following a schedule of dates and agenda established at the beginning of the year and allowing each director individually to propose items do not originally appear on the agenda.

Complies Complies partially � Explanation �

27. That director absences only occur when absolutely necessary and are quantified in the Annual Corporate Governance Report. And when absences occur, that the director appoints a proxy with instructions.

Complies Complies partially � Explanation �

28. That when directors or the secretary express concern regarding a proposal or, in the case of directors, regarding the direction in which the company is headed and said concerns are not resolved by the Board of Directors, such concerns should be included in the minutes, upon a request from the protesting party.

Complies Complies Partially � Explanation � Not Applicable �

29. That the company establishes adequate means for directors to obtain appropriate advice in order to properly fulfil their duties including, should circumstances warrant, external advice at the company's expense.

Complies Complies partially � Explanation �

30. That, without regard to the knowledge necessary for directors to complete their duties, companies make refresher courses available to them when circumstances require

Complies Explanation � Not Applicable �

31. That the agenda for meetings clearly states those matters about which the Board of Directors are to make a decision or adopt a resolution so that the directors may study or gather all relevant information ahead of time.

When, under exceptional circumstances, the chairman wishes to bring urgent mattersfor decision or resolution before the Board of Directors which do not appear on the agenda, prior express agreement of a majority of the directors shall be necessary, and said consent shall by duly recorded in the minutes.

Complies � Complies partially � Explanation

The agenda does not specify which items are for decision, although the information is sent sufficiently in advance.

32. That directors shall be periodically informed of changes in equity ownership and of the opinions of significant shareholders, investors and rating agencies of the company and its group.

Complies Complies partially � Explanation �

33. That the chairman, as the person responsible for the efficient workings of the Board of Directors, in addition to carrying out his duties required by law and the Articles of Association, should prepare and submit to the Board of Directors a schedule of dates and matters to be considered; organise and coordinate the periodic evaluation of the Board as well as, if applicable, the chief executive of the company, should be responsible for leading the Board and the effectiveness of its work; ensuring that sufficient time is devoted to considering strategic issues, and approve and supervise refresher courses for each director when circumstances so dictate.

Complies Complies partially � Explanation �

34. That when there is a coordinating director, the Articles of Association or the Board rules should confer upon him the following competencies in addition to those conferred by law: chairman of the Board of Directors in the absence of the chairman and deputy chairmen, should there be any; reflect the concerns of non-executive directors; liaise with investors and shareholders in order to understand their points of view and respond to their concerns, in particular as those concerns relate to corporate governance of the company; and coordinate a succession plan for the chairman.

Complies � Complies Partially � Explanation � Not Applicable

35. That the secretary of the Board of Directors should pay special attention to ensure that the activities and decisions of the Board of Directors take into account the recommendations regarding good governance contained in this Good Governance Code and which are applicable to the company.

Complies Explanation �

• 36. That the Board of Directors meet in plenary session once a year and adopt, where appropriate, an action plan to correct any deficiencies detected in the following:
  • a) The quality and efficiency of the Board of Directors' work.
  • b) The workings and composition of its committees.
  • c) Diversity of membership and competence of the Board of Directors.
  • d) Performance of the chairman of the Board of Directors and the chief executive officer of the company.
  • e) Performance and input of each director, paying special attention to those in charge of the various Board committees.

In order to perform its evaluation of the various committees, the Board of Directors will take a report from the committees themselves as a starting point and for the evaluation of the Board, a report from the appointments committee.

Every three years, the Board of Directors will rely upon the assistance of an external advisor for its evaluation, whose independence shall be verified by the appointments committee.

Business relationships between the external adviser or any member of the adviser's group and the company or any company within its group shall be specified in the Annual Corporate Governance Report.

The process and the areas evaluated shall be described in the Annual Corporate Governance Report.

Complies Complies partially � Explanation �

37. That if there is an executive committee, the proportion of each different director category must be similar to that of the Board itself, and its secretary must be the secretary of the Board.

Complies � Complies Partially � Explanation Not Applicable �

The Executive Committee is composed of an Executive Director, another External Director, formerly an Executive Director, and four Proprietary Directors, all of whom have extensive knowledge of the business and the sector in which the Company operates.

The Secretary of this Committee is not the same as the Secretary of the Board of Directors.

38. That the Board of Directors must always be aware of the matters discussed and decisions taken by the executive committee and that all members of the Board of Directors receive a copy of the minutes of meetings of the executive committee.

Complies Complies Partially � Explanation � Not Applicable �

39. That the members of the audit committee, in particular its chairman, are appointed in consideration of their knowledge and experience in accountancy, audit and risk management issues, and that the majority of its members be independent directors.

Complies Complies partially � Explanation �

40. That under the supervision of the audit committee, there must be a unit in charge of the internal audit function, which ensures that information and internal control systems operate correctly, and which reports to the non-executive chairman of the Board or of the audit committee.

Complies Complies partially � Explanation �

41. That the person in charge of the group performing the internal audit function should present an annual work plan to the audit committee, reporting directly on any issues that may arise during the implementation of this plan, and present an activity report at the end of each year.

Complies Complies Partially � Explanation � Not Applicable �

• 42. That in addition to the provisions of applicable law, the audit committee should be responsible for the following:
  • 1. With regard to information systems and internal control:
    • a) Supervise the preparation and integrity of financial information relative to the company and, if applicable, the group, monitoring compliance with governing rules and the appropriate application of consolidation and accounting criteria.
    • b) Ensure the independence and effectiveness of the group charged with the internal audit function; propose the selection, appointment, re-election and dismissal of the head of internal audit; draft a budget for this department; approve its goals and work plans, making sure that its activity is focused primarily on material risks to the company; receive periodic information on its activities; and verify that senior management takes into account the conclusions and recommendations of its reports.
    • c) Establish and supervise a mechanism that allows employees to report confidentially and, if appropriate, anonymously, any irregularities with important consequences, especially those of a financial or accounting nature, that they observe in the company.
• 2. With regard to the external auditor:
  • a) In the event that the external auditor resigns, examine the circumstances which caused said resignation.
  • b) Ensure that the remuneration paid to the external auditor for its work does not compromise the quality of the work or the auditor's independence.
  • c) Insist that the company file a relevant fact with the CNMV when there is a change of auditor, along with a statement on any differences that arose with the outgoing auditor and, if applicable, the contents thereof.
  • d) Ensure that the external auditor holds an annual meeting with the Board of Directors in plenary session in order to make a report regarding the tasks accomplished and regarding the development of its accounting and risks faced by the company.
  • e) Ensure that the company and the external auditor comply with applicable rules regarding the rendering of services other than auditing, proportional limits on the auditor's billing, and all other rules regarding the auditor's independence.

Complies Complies partially � Explanation �

43. That the audit committee may require the presence of any employee or manager of the company, even without the presence of any other member of management.

Complies Complies partially � Explanation �

44. That the audit committee be kept abreast of any corporate and structural changes planned by the company in order to perform an analysis and draft a report beforehand to the Board of Directors regarding economic conditions and accounting implications and, in particular, any exchange ratio involved.

Complies Complies Partially � Explanation � Not Applicable �

• 45. That the risk management and control policy identify, as a minimum:
  • a) The various types of financial and non-financial risks (among those operational, technological, legal, social, environmental, political and reputational) which the company faces, including financial or economic risks, contingent liabilities and other off-balance sheet risks.
  • b) Fixing of the level of risk the company considers acceptable.
  • c) Means identified in order to minimise identified risks in the event they transpire.
  • d) Internal control and information systems to be used in order to control and manage identified risks, including contingent liabilities and other off-balance sheet risks.

Complies Complies partially � Explanation �

46. That under the direct supervision of the audit committee or, if applicable, of a specialised committee of the Board of Directors, an internal control and management function should exist delegated to an internal unit or department of the company which is expressly charged with the following responsibilities:

• a) Ensure the proper functioning of risk management and control systems and, in particular, that they adequately identify, manage and quantify all material risks that may affect the company.
• b) Actively participate in the creation of the risk strategy and in important decisions regarding risk management.
• c) Ensure that the risk management and control systems adequately mitigate risks as defined by policy issued by the Board of Directors.

Complies Complies partially � Explanation �

47. That members of the appointment and remuneration committee -- or of the appointments committee and the remuneration committee if they are separate – are chosen taking into account the knowledge, ability and experience necessary to perform the duties they are called upon to carry out and that the majority of said members are independent directors.

Complies � Complies partially Explanation �

The Appointments and Remunerations Commission is made up of two Independent Directors and two Proprietary Directors, and as established in Article 529 quindecies of the Spanish Capital Companies Act (LSC by its Spanish acronym), this commission will be made up exclusively "of Non-executive Directors appointed by the Board of Directors, at least two of whom must be Independent Directors".

The Company fully complies with the provisions of the LSC.

48. That high market capitalisation companies have formed separate appointments and remuneration committees.

Complies � Explanation � Not Applicable

49. That the appointments committee consult with the chairman of the Board of Directors and the chief executive of the company, especially in relation to matters concerning executive directors.

And that any director may ask the appointments committee to consider potential candidates he or she considers appropriate to fill a vacancy on the Board of Directors.

Complies Complies partially � Explanation �

• 50. That the remuneration committee exercises its functions independently and that, in addition to the functions assigned to it by law, it should be responsible for the following:
  • a) Propose basic conditions of employment for senior management.
  • b) Verify compliance with company remuneration policy.
  • c) Periodically review the remuneration policy applied to directors and senior managers, including remuneration involving the delivery of shares, and guarantee that individual remuneration be proportional to that received by other directors and senior managers.
• d) Oversee that potential conflicts of interest do not undermine the independence of external advice rendered to the Board.
• e) Verify information regarding remuneration paid to directors and senior managers contained in the various corporate documents, including the Annual Report on Director Remuneration.

Complies Complies partially � Explanation �

51. That the remuneration committee consults with the chairman and the chief executive of the company, especially in matters relating to executive directors and senior management.

Complies Complies partially � Explanation �

• 52. That the rules regarding composition and workings of supervision and control committees appear in the rules governing the Board of Directors and that they are consistent with those that apply to mandatory committees in accordance with the recommendations above, including:
  • a) That they are comprised exclusively of non-executive directors, with a majority of them independent.
  • b) That their chairmen be independent directors.
  • c) That the Board of Directors select members of these committees taking into account their knowledge, skills and experience and the duties of each committee; discuss their proposals and reports; and detail their activities and accomplishments during the first plenary session of the Board of Directors held after the committee's last meeting.
  • d) That the committees be allowed to avail themselves of outside advice when they consider it necessary to perform their duties.
  • e) That their meetings be recorded and the minutes be made available to all directors.

Complies � Complies Partially � Explanation � Not Applicable

• 53. That verification of compliance with corporate governance rules, internal codes of conduct and social corporate responsibility policy be assigned to one or split among more than one committee of the Board of Directors, which may be the audit committee, the appointments committee, the corporate social responsibility committee in the event that one exists, or a special committee created by the Board of Directors pursuant to its powers of self-organisation, which at least the following responsibilities shall be specifically assigned thereto:
  • a) Verification of compliance with internal codes of conduct and the company's corporate governance rules.
  • b) Supervision of the communication strategy and relations with shareholders and investors, including small- and medium-sized shareholders.
  • c) The periodic evaluation of the suitability of the company's corporate governance system, with the goal that the company promotes company interests and take into account, where appropriate, the legitimate interests of other stakeholders.
• d) Review of the company's corporate social responsibility policy, ensuring that it is orientated towards value creation.
• e) Follow-up of social responsibility strategy and practice, and evaluation of degree of compliance.
• f) Supervision and evaluation of the way relations with various stakeholders are handled.
• g) Evaluation of everything related to non-financial risks to the company, including operational, technological, legal, social, environmental, political and reputational.
• h) Coordination of the process of reporting on diversity and reporting nonfinancial information in accordance with applicable rules and international benchmarks.

Complies Complies partially � Explanation �

• 54. That the corporate social responsibility policy include principles or commitments which the company voluntarily assumes regarding specific stakeholders and identifies, as a minimum:
  • a) The objectives of the corporate social responsibility policy and the development of tools to support it.
  • b) Corporate strategy related to sustainability, the natural environment and social issues.
  • c) Concrete practices in matters related to: shareholders, employees, clients, suppliers, social issues, the natural environment, diversity, fiscal responsibility, respect for human rights, and the prevention of unlawful conduct.
  • d) Means or systems for monitoring the results of the application of specific practices described in the immediately preceding paragraph, associated risks, and their management.
  • e) Means of supervising non-financial risk, ethics, and business conduct.
  • f) Communication channels, participation and dialogue with stakeholders.
  • g) Responsible communication practices that impede the manipulation of data and protect integrity and honour.

Complies Complies partially � Explanation �

55. That the company reports, in a separate document or within the management report, on matters related to corporate social responsibility, following internationally recognised methodologies.

Complies Complies partially � Explanation �

56. That director remuneration be sufficient in order to attract and retain directors who meet the desired professional profile and to adequately compensate them for the dedication, qualifications and responsibility demanded of their posts, while not being so excessive as to compromise the independent judgment of non-executive directors.

Complies Explanation �

57. That only executive directors receive remuneration linked to corporate results or personal performance, as well as remuneration in the form of shares, options or rights to shares or instruments whose value is indexed to share value, or long-term savings plans such as pension plans, retirement accounts or any other retirement plan.

Shares may be given to non-executive directors under the condition that they maintain ownership of the shares until they leave their posts as directors. The forgoing shall not apply to shares that the director may be obliged sell in order to meet the costs related to their acquisition.

Complies Complies partially � Explanation �

58. That as regards variable remuneration, the policies incorporate limits and administrative safeguards in order to ensure that said remuneration is in line with the work performance of the beneficiaries and are not based solely upon general developments in the markets or in the sector in which the company operates, or other similar circumstances.

And, in particular, that variable remuneration components:

• a) Are linked to pre-determined and measurable performance criteria and that such criteria take into account the risk undertaken to achieve a given result.
• b) Promote sustainability of the company and include non-financial criteria that are geared towards creating long term value, such as compliance with rules and internal operating procedures and risk management and control policies.
• c) Are based upon balancing short-, medium- and long-term objectives, permitting the reward of continuous achievement over a period of time long enough to judge creation of sustainable value such that the benchmarks used for evaluation are not comprised of one-off, seldom occurring or extraordinary events.

Complies Complies Partially � Explanation � Not Applicable �

59. That a material portion of variable remuneration components be deferred for a minimum period of time sufficient to verify that previously established performance criteria have been met.

Complies Complies Partially � Explanation � Not Applicable �

60. That remuneration related to company results takes into account any reservations which may appear in the external auditor's report which would diminish said results.

Complies Complies Partially � Explanation � Not Applicable �

61. That a material portion of variable remuneration for executive directors depends upon the delivery of shares or instruments indexed to share value.

Complies � Complies Partially � Explanation Not Applicable �

The Company has not deemed it appropriate at this time to establish financial remuneration for its Executive Director through the delivery of shares.

62. That once shares or options or rights to shares arising from remuneration schemes have been delivered, directors are prohibited from transferring ownership of a number of shares equivalent to two times their annual fixed remuneration, and the director may not exercise options or rights until a term of at least three years has elapsed since they received said shares.

The forgoing shall not apply to shares which the director may need to sell in order to meet the costs related to their acquisition.

Complies � Complies Partially � Explanation � Not Applicable

63. That contractual arrangements include a clause which permits the company to seek reimbursement of variable remuneration components in the event that payment does not coincide with performance criteria or when delivery was made based upon data later deemed to be inaccurate.

Complies Complies Partially � Explanation � Not Applicable �

64. That payments made for contract termination shall not exceed an amount equivalent to two years of total annual remuneration and that it shall not be paid until the company has verified that the director has fulfilled all previously established criteria for payment.

Complies � Complies Partially Explanation � Not Applicable �

The amount of the compensation of the Executive Director amounts, as a general rule, to an amount equivalent to two (2) years of their total remuneration, including fixed and variable remuneration, but excluding that obtained in programmes or incentives of an annual or multi-year nature, without prejudice to the fact that, depending on the type of event that leads to the termination of the contracts, it may reach an amount equivalent to three (3) years of their total remuneration.

H FURTHER INFORMATION OF INTEREST

• 1. If there is any aspect regarding corporate governance in the company or other companies in the group that have not been included in other sections of this report, but which are necessary in order to obtain a more complete and comprehensible picture of the structure and governance practices in the company or group, describe them briefly below.
• 1. This section may also be used to provide any other information, explanation or clarification relating to previous sections of the report, so long as it is relevant and not redundant.

Specifically, state whether the company is subject to any corporate governance legislation other than that prevailing in Spain and, if so, include any information required under this legislation that differs from the data requested in this report.

1. The company may also state whether it voluntarily complies with other ethical or best practice codes, whether international, sector-based, or other. In such a case, name the code in question and the date the company began following it. It should be specifically mentioned that the company adheres to the Code of Good Tax Practices of 20 July, 2010

In accordance with the provisions of Article 2 of Law 11/2018 of 28 December, which amends the Code of Commerce, the consolidated text of the Law on Corporations approved by Royal Legislative Decree 1/2010 of 2 July and Law 22/2015 of 20 July on the Auditing of Accounts, in the area of non-financial information and diversity and with the amendment made by this Law in sub-section 6. of Article 540.4.c) of the Spanish Law on Corporations, it is expressly stated that the provisions of points C.1.5 and C.1.6. of this report are exactly applicable to the Commissions of the Board of Directors of the Company and to the Management of the Company.

Shareholders were also provided with the appropriate information on diversity criteria and objectives when electing or reappointing members of the Board of Directors, its Commissions and Management.

Furthermore, on 22 May 2019, the General Shareholders' Meeting of Elecnor unanimously agreed to approve the amendment of Article 12 of the Company's Articles of Association, with regard to the remuneration of Directors for the performance of non-executive and executive duties, in order to adapt it to the interpretation contained in Supreme Court Ruling 98/2018 of 26 February and to adapt the profit-based remuneration system to the reality of the Company and its Group (this being understood in the terms of Article 42 of the Code of Commerce), reducing the commercial and tax risks that may materialise in the future.

Also, at the aforementioned General Shareholders' Meeting it was agreed, by a majority vote, to approve the Policy on the Remuneration of the Directors of Elecnor applicable to the 2020, 2021 and 2022 financial years, as agreed by the Company's Board of Directors in its meeting held on 27 March 2019, on the proposal and following a report from the Appointments and Remunerations Commission, setting the maximum amount of annual remuneration for all Directors, for all the functions they perform, i.e. both executive and non-executive functions, included in the aforementioned Remuneration Policy, in the amount of EUR 10 million. This maximum amount will remain in force until its modification by the General Shareholders' Meeting is approved.

With this new Remuneration Policy, based on the principles of Moderation, Suitability, Profitability and Sustainability, Transparency and Protection of Shareholders' interests, the Company seeks to reduce any possible commercial and fiscal risks that could materialise in the future, in relation to the remuneration of Elecnor's Directors in the event of a possible change in jurisprudence, as has occurred with non-listed companies.

Finally, on 17 December 2019, Elecnor and the Dutch group APG (hereinafter APG) signed a strategic alliance for the development and joint investment in energy transmission and renewable energy projects, except for wind projects, once all the conditions had been met and all the approvals required for the operation had been obtained from both the creditor financial institutions and the corresponding competition authorities.

The agreement implies the entry of APG, with 49%, in the capital of Celeo Concesiones e Inversiones, S.L. (hereinafter "Celeo"), a company which until now has been wholly owned by Elecnor, and which is now jointly managed by Elecnor and APG.

In this regard, it should be noted that, despite Elecnor holding 51% of Celeo's share capital, in accordance with the partners' agreement signed with APG, Elecnor does not hold control of Celeo, either directly or indirectly, in accordance with the provisions of Article 42 of the Code of Commerce.

Consequently, the Celeo Group, of which Celeo is the Parent, no longer consolidates for accounting purposes in the Elecnor Group and will be accounted for by the Elecnor Group using the equity method instead of the full consolidation method.

This Annual Corporate Governance Report was approved by the Board of Directors of the company at the meeting held on 25 March 2020.

State whether any directors voted against or abstained from voting on this report.

Yes � No

ANNUAL REPORT ON REMUNERATION OF DIRECTORS OF LISTED COMPANIES

A REMUNERATION POLICY OF THE COMPANY FOR THE CURRENT FINANCIAL YEAR

A.1 Explain the current director remuneration policy applicable to the year in progress. To the extent that it is relevant, certain information may be included in relation to the remuneration policy approved by the General Shareholders' Meeting, provided that these references are clear, specific and concrete.

The specific determinations for the year in progress should be described, both the remuneration of directors in their status as such and as a result of their executive functions carried out for the Board pursuant to the contracts signed with executive directors and to the remuneration policy approved by the General Shareholders' Meeting

At any event, the following aspects should be reported:

• Description of the procedures and company bodies involved in determining and approving the remuneration policy and its terms and conditions.
• Indicate and, where applicable, explain whether comparable companies have been taken into account in order to establish the company's remuneration policy.
• Information on whether any external advisors took part in this process and, if so, their identity.

Existing remuneration policy for the current year:

On 22 May 2019, the General Shareholders' Meeting of Elecnor, S.A. ("Elecnor" or the "Company") approved the "Remuneration Policy for Directors for the 2020, 2021 and 2022 financial years" (the "Policy") with 95.07% of votes in favour. This Policy had previously been approved by the Company's Board of Directors by virtue of a resolution dated 27 March 2019, following a proposal and a report justifying the decision by Elecnor's Appointments and Remunerations Commission, in a meeting held on 18 February 2019.

In accordance with the By-laws and the Regulations of the Board of Directors of the Company, the General Shareholders' Meeting shall determine the maximum remuneration to be paid to the Directors for all the functions they perform, both for the performance of executive and non-executive functions.

In accordance with the foregoing and the principles governing this Policy, the maximum amount of annual remuneration for the Directors as a whole is set at EUR ten (10) million. This maximum amount shall remain in force until its modification is approved.

A. The Director remuneration system for the performance of non-executive functions

In accordance with the By-laws and the Regulations of the Company's Board of Directors, there are three (3) cumulative remuneration systems for all Directors for the performance of non-executive functions:

• a. the maximum amount of 7% of the profits obtained by the consolidated group during the year, after the provision for the payment of taxes and requirements established by law for this purpose has been met, as well as,
• b. a fixed cash allowance to be determined by the General Meeting, and
• c. attendance allowances which, depending on the circumstances, are to be assigned as compensation for attendance expenses and others that they must assume in the exercise of their roles and functions.

Likewise, and in keeping with the previous remuneration policy, the remuneration shall not necessarily be the same for all Directors for the performance of non-executive functions, and its distribution shall be agreed by the Board of Directors of the Company in accordance with Article 12 of the Company's By-laws, for which it shall consider:

• a. membership or performance of positions within the different Board of Directors' Commissions,
• b. membership of other Boards of Directors of companies belonging to Elecnor Group and attendance at the various meetings of the Board of Directors,
• c. the dedication of the Directors and the responsibility assumed by them, and
• d. their functions and trajectory on the Board of Directors.

For all of the above, during the financial year 2020, in order to determine the remuneration of each Director, a basic remuneration shall be set for all of them, for their status as Directors, which shall be increased according to the fulfilment of the different parameters listed above.

Furthermore, and on an exceptional basis, the Company may grant, by agreement of the General Meeting, a fixed allocation to those Directors, who do not have executive functions, which it considers appropriate, for any reason, and which has been duly justified by the Board of Directors to the General Shareholders' Meeting of the Company.

B. The Director remuneration system for the performance of executive functions

The remuneration of the Directors for the performance of executive functions is independent and compatible with the remuneration and compensation established for the performance of non-executive functions, which are established in both the Company By-laws as in the contract that to this effect is signed between them and the Company, and which conforms to the remuneration Policy.

As a relevant change, Directors with executive functions shall receive the remuneration set in their respective contracts for the performance of such functions, as follows:

• a. A fixed cash remuneration, which may be modified during the period referred to in the Policy, by agreement of the Board of Directors, provided that it does not exceed the maximum remuneration to be received as remuneration of the Directors for all the functions they perform, both for the performance of executive and non-executive functions, as determined by the General Shareholders' Meeting.
• b. A variable remuneration, calculated on indicators or benchmarks, qualitative or quantitative, based on the degree of compliance with the

objectives by the executive Directors (as agreed by the Board of Directors upon proposal of the Appointments and Remuneration Commission, such as turnover, operating profit, profit after tax ("PAT"), recruitment and debt or others). Variable remuneration may be much more relevant than fixed remuneration components.

• c. Remuneration based on the delivery of shares or option rights over shares of the Company itself.
• d. The following social benefits or remuneration in kind: (i) they shall be included in the civil liability policy for Directors and board members that the Company has agreed upon at all times; (ii) they shall continue to have the right to participate in social security systems (for coverage of their survival, illness, accidents, etc.) in terms similar to those generally established at all times for the Company's Directors; and (iii) likewise, the Executive Chair shall continue to enjoy all those benefits that, if applicable, the Company makes available to the management group.
• e. In addition to any compensation for termination of the contract, provided that the termination was not caused by breach of their duties as administrator.
• Relative importance of variable remuneration items vis-à-vis fixed remuneration (remuneration mix) and the criteria and objectives taken into consideration in their determination and to guarantee a suitable balance between the fixed and variable components of the remuneration. In particular, state the actions adopted by the company in relation to the remuneration system to reduce exposure to excessive risks and adapt this to the long-term objectives, values and interests of the company, which will include, as the case may be, mention of the measures to guarantee that the long-term results of the company are taken into account in the remuneration policy, the measures adopted in relation to those categories of staff whose professional activities have a material impact on the risk profile of the company and measures to avoid conflict of interest, as the case may be.

Furthermore, state whether the company has established any period for the accrual or consolidation of certain variable remuneration items, in cash, shares or other financial instruments, any deferral period in the payment of amounts or the handover of accrued and consolidated financial instruments, or if any clause exists reducing the deferred remuneration or that obliges the director to return remuneration received, when such remuneration has been based on certain figures that have clearly been shown to be inaccurate has been agreed.

The only Director foreseen to receive a variable remuneration is the Executive Director.

The variable remuneration of the Executive Director is based on the Company's performance and their personal performance, which is calculated on indicators or benchmarks, either qualitative or quantitative, linked to the degree of compliance with the objectives thereof.

As such, the variable remuneration of the Executive Director is established, in accordance with their Contract, depending on the degree of achievement of a series of objectives, such as turnover, operating profit, profit after tax ("PAT"), recruitment and debt, regulatory compliance and occupational risk prevention, among others.

Variable remuneration may be much more relevant than fixed remuneration components.

The Board of Directors, on the proposal of the Appointments and Remunerations Commission, shall determine the objectives, the degree of their achievement, and the final amount corresponding to the variable remuneration.

The possibility of establishing variable incentives in the long term is also envisaged.

Lastly, the system for the remuneration of the Company's Directors for the performance of non-executive functions establishes a maximum amount of 7% of the profits obtained by the consolidated group in the financial year, after the provision for the payment of taxes has been made and the requirements established by law for this purpose have been met.

• Amount and nature of fixed components that are due to be accrued during the year by directors in their status as such.

The fixed annual remuneration for each of the Directors for the performance of their non-executive functions is expected to be EUR 143,500 and EUR 1,500 for attendance fees for each meeting of the Board of Directors, plus the amount they receive for their membership of the various Board of Director Committees and Commissions as detailed below:

For membership of the Executive Committee: EUR 25,000.

For membership of the Audit Commission: Member: EUR 15,000. Chair: EUR 20,000.

For membership of the Appointments and Remunerations Commission: Member: EUR 12,500. Chair: EUR 17,500.

The annual remuneration for the performance of positions on the Board of Directors, which is expected to remain the same as in the previous year, is detailed below:

Non-Executive Chair: EUR 270,000. Secretary: EUR 20,000.

• Amount and nature of fixed components that are due to be accrued during the year for the performance of senior management functions of executive directors.

They will be set once the Annual Accounts have been approved.

• Amount and nature of any component of remuneration in kind that will accrue during the year, including, but not limited to, insurance premiums paid in favour of the director.

During the financial year 2020, there will be no remuneration in kind.

• Amount and nature of variable components, differentiating between those established in the short and long term. Financial and non-financial, including social, environmental and climate change parameters selected to determine variable remuneration in the year in progress, explaining the extent to which these parameters are related to performance, both of the director and of the company, together with their risk profile, and the methodology, deadline necessary and techniques established to determine the degree of compliance with the parameters used in the design of the variable remuneration at the end of the year.

State the range, in monetary terms, of the different variable components according to the degree of compliance with the objectives and parameters established, and whether any maximum monetary amounts exist in absolute terms.

They will be set once the Annual Accounts have been approved.

• Main characteristics of long-term savings systems. Among other information, state the contingencies covered by the system, whether through defined contributions or benefits, the annual contribution that needs to be made to the defined contribution system, the benefits directors are entitled to in the event of defined benefit systems, the conditions under which economic rights are consolidated for directors and their compatibility with any other type of payment or severance pay as a result of the early termination or dismissal of the director, or deriving from the termination of the contractual relation, in the terms provided, between the company and the director.
• State if the accrual or consolidation of any of the long-term savings plans is linked to achieving certain objectives or parameters related to the short- or long-term performance of the director.

The Company does not consider these systems.

• Any type of payment or severance pay for early termination or dismissal of the director, or deriving from the termination of the contractual relation, in the terms provided, between the company and the director, whether voluntary resignation by the director or dismissal of the director by the company, as well as any type of agreement reached, such as exclusivity, post-contractual non-competition, permanence or loyalty, which entitle the director to any type of remuneration.

There are no agreed or paid compensation payments in the event of termination of a Director's duties.

The only compensation provided for are those that the Executive Director may receive for the termination of their contract for the performance of their senior management functions, which are explained below:

The contract with the Executive Director provides for compensation in their favour in the event of termination, provided that the termination is not the result of a breach attributable to the same, nor is it due to their exclusive will.

The amount of the compensation amounts, as a general rule, to an amount equivalent to two (2) years of their total remuneration, including fixed and variable remuneration, but excluding that obtained in programmes or incentives of an annual or multi-year nature, without prejudice to the fact that, depending on the type of event that results in the termination of the contracts, it may reach an amount equivalent to three (3) years of their total remuneration.

The contract with the Executive Director also contains a clawback clause, under which the Executive Director must reimburse the Company for amounts received as variable remuneration or resulting from the settlement of incentive plans, if at any time during (1) year after payment thereof, as a result of the Executive Director's wilful or grossly negligent actions, the following circumstances have arisen: (i) there have been alterations or inaccuracies in the relevant business data for the purposes of calculating the variable remuneration or incentive plans and these are confirmed by the Company's external auditors; (ii) as a result of the above circumstance, the Company is obliged to significantly reformulate its accounts.

The Executive Director must pay the amount notified by the Company within fortyfive (45) days following the date of the request for payment.

• State the conditions that contracts should respect for those exercising senior management functions as executive directors. Among others, information should be provided on the duration, limits on amounts of severance pay, minimum contract term clauses, notice periods and payment in lieu of these notice periods, and any other clauses relating to hiring bonuses, compensation and golden parachute clauses for early termination of the contractual relationship between the company and the executive director. Include, among others, the pacts or agreement on con-competition, exclusivity, permanence and loyalty, and postcontractual non-competition, unless these have been explained in the previous section.

Main terms and conditions of the contracts of the Executive Directors with the Company

The contract that the Executive Director signs with the Company is based on the following conditions:

(a) Duration:

The contract of the Executive Director shall remain in force as long as they remain in office.

(b) Compensation:

The contract with the Executive Director provides for compensation in their favour in the event of termination, provided that the termination is not the result of a breach attributable to the same, nor is it due to their exclusive will.

The amount of the compensation amounts, as a general rule, to an amount equivalent to two (2) years of their total remuneration, including fixed and variable remuneration, but excluding that obtained in programmes or incentives of an annual or multi-year nature, without prejudice to the fact that, depending on the type of event that results in the termination of the contracts, it may reach an amount equivalent to three (3) years of their total remuneration.

(c) Compliance with the Company's corporate governance system:

The Executive Director has the obligation to observe strictly and to the extent that it is applicable, the standards and provisions contained in the corporate governance system of the Company.

(d) Post-contractual exclusivity and non-competition agreement: The contract may establish an obligation of exclusivity and full dedication to the Company and of post-contractual non-competition for a maximum period of two (2) years from the termination of the contract.

(e) Confidentiality:

The contract of the Executive Director shall establish a strict duty of confidentiality. In addition, once their relationship with the Company has concluded, they must return to the Company any documents and objects related to their activity that they may hold.

(f) Refund clause (clawback):

The contract with the Executive Director includes a refund clause under which the Executive Director must reimburse the Company for any amounts received as variable remuneration or resulting from the settlement of incentive plans, if at any time during (1) year after payment thereof, as a result of the fraudulent or grossly negligent actions of the Executive Director, the following circumstances have arisen: (i) there have been alterations or inaccuracies in the relevant business data for the purposes of calculating the variable remuneration or incentive plans and these are confirmed by the Company's external auditors; (ii) as a result of the above circumstance, the Company is obliged to significantly reformulate its accounts.

The Executive Director must pay the amount notified by the Company within fortyfive (45) days following the date of the request for payment.

• The nature and estimated amount of any other supplementary remuneration accrued by directors in the year in progress in consideration for services rendered other than those inherent in the post.

They do not exist.

• Other remunerative items or by-products, as the case may be, of the company granting the director advance payments, loans, guarantees or any other remuneration.

They do not exist.

• The nature and estimated amount of any other planned supplementary remuneration accrued by directors in the year in progress that are not included in the previous sections, whether payment is satisfied by the company or another group company.

They do not exist.

A.2 Explain any significant change in the remuneration policy applicable in the current year resulting from:

• A new policy or a modification of the policy already approved by the General Meeting.

• Significant changes in the specific determinations established by the board for the current year regarding the remuneration policy in force with respect to those applied in the previous year.

• Proposals that the board of directors has agreed to submit to the general shareholders' meeting to which this annual report will be submitted and which are proposed to be applicable to the current year.

On 22 May 2019, the Shareholders' General Meeting of the Company approved, with 95.07% of votes in favour, the new "Remuneration Policy for Directors for the 2020, 2021 and 2022 financial years", which had previously been approved by the Company's Board of Directors by virtue of a resolution dated 18 February 2019 at the proposal of the Elecnor Appointments and Remunerations Commission, at its meeting held on 18 February 2019.

The drafting of this Policy is the result of the new interpretation of the concept of directors in their "status" (Supreme Court ruling 98/2018 of 26 February), under Articles 23.e), 217 and 529 novodecies of the Law on Corporations ("LSC" by its Spanish acronym).

<-- PDF CHUNK SEPARATOR -->

Although the aforementioned ruling does not apply to listed companies, since it expressly excludes this type of company in its arguments, Elecnor decided to anticipate a possible extrapolation of its arguments to listed companies by modifying Article 12 of the Company's by-laws, which was worded as follows:

"ARTICLE 12

Management of the Company shall correspond to the Board of Directors.

The General Shareholders' Meeting shall determine and approve the maximum remuneration to be received as remuneration of the board directors for all items and for any duties they perform, both for the performance of executive and nonexecutive functions. The maximum amount set by the General Meeting shall remain in force until the General Meeting approves the amendment thereof.

A. Director remuneration for the performance of non-executive functions.

For the performance of non-executive functions, all Directors shall receive as remuneration:

• (i) the maximum amount of 7% of the profits obtained by the consolidated group during the year, after the provision for the payment of taxes and requirements established by law for this purpose have been met, as well as,
• (ii) a fixed cash allowance to be determined by the General Meeting, and
• (iii) attendance allowances which, depending on the circumstances, are to be assigned as compensation for attendance expenses and others that they must assume in the exercise of their roles and functions.

The Board of Directors shall be responsible for determining the annual remuneration amount, in accordance with the above items, and the distribution of the remuneration of each Director for the performance of non-executive functions.

B. Director remuneration for the performance of executive functions.

In addition to the remuneration they receive for the performance of non-executive functions, the Directors who perform executive functions within the Company shall receive the remuneration established in their respective contracts for the following items:

• (i) A fixed remuneration in cash.
• (ii) Variable remuneration, calculated on qualitative or quantitative indicators or reference parameters, linked to the degree of compliance with their objectives (agreed by the Board of Directors at the proposal of the Appointments and Remunerations Commission).
• (iii) Remuneration based on the delivery of shares or option rights over shares of the Company itself.
• (iv) The following social benefits or remuneration in kind: (i) they shall be included in the civil liability policy for Directors and board members that the Company has agreed upon at all times; (ii) they shall continue to have the right to participate in social security systems (for coverage of their survival, illness, accidents, etc.) in terms similar to those generally established at all times for the Company's Directors; and (iii) likewise, the Executive Chair shall continue to enjoy all those benefits that, if applicable, the Company makes available to the management group.
• (v) In addition to any compensation for termination of the contract, provided that the termination was not caused by breach of their duties as administrator.

These contracts must be previously approved by the Board of Directors at the proposal of the Appointments and Remunerations Commission, complying with the requirements established in the applicable law.

In any case, the aggregate sum of all the resulting amounts to be received by all Directors and for any items in each financial year shall never be greater than the maximum amount approved by the General Meeting".

The new Remuneration Policy, which main characteristics and new features are described in section A.1., is a continuation of the previous policy and also aims to comply with the principles of good corporate governance, facilitating greater transparency and control of Directors' remuneration, as the By-laws set out the remuneration items for all Directors, regardless of the functions they perform.

A.3 Identify the direct link to the document where the current company remuneration policy is posted, which must be available on the web page of the company.

https://www.elecnor.com/resources/files/1/Gobierno\_Corporativo/49240992a8. pdf

A.4 Explain, taking into account the data provided in Section B.4, the outcome of voting, of a consultative nature, by shareholders at the General Shareholders' Meeting on the annual report on remuneration for the previous year.

Elecnor's annual remuneration report for the 2018 financial year was approved by the General Shareholders' Meeting with 92.25% of the share capital present and represented.

Voting on the resolution:

Votes in favour: 65,541,705 Votes against: 3,154,855 Abstaining: 0

B OVERALL SUMMARY OF HOW REMUNERATION POLICY HAS BEEN APPLIED DURING THE YEAR ENDED

B.1 Explain the process followed to apply the remuneration policy and determine the individual remuneration contained in Section C of this report. This information will include the role played by the remuneration committee, the decisions taken by the Board of Directors and, as the case may be, the identity and the role of the external advisors whose services have been used in the process to apply the remuneration policy in the year ended.

The remuneration policy applicable to the 2019 financial year was approved by the Company's Board of Directors by virtue of a resolution dated 15 March 2017 and was proposed by the Appointments and Remunerations Commission of Elecnor, S.A., which, in a meeting held on 13 March 2017, drafted the report explaining the Company's remuneration policy described herein. The Ordinary Shareholders' General Meeting of 15 May 2017, approved the remuneration policy for financial years 2017, 2018 and 2019.

For the preparation of this policy, the Company was advised by Russell Reynolds, a toplevel consultant of recognised prestige and experience, for the analysis and drafting of a report on the Company's remuneration system. The aim was to verify, among other parameters, (i) whether the agreed remuneration was adequate to attract and retain Directors, but not so high as to compromise the independence of non-executive Directors, (ii) whether it was in line with market conditions and (iii) whether it complied as far as possible with the Recommendations on Good Corporate Governance.

Subsequently, in 2019, Elecnor agreed to modify its remuneration system for Directors. The Appointments and Remunerations Commission agreed to propose to the Board of Directors of Elecnor the modification of Article 12 of the Company's By-laws with regard to Directors' remuneration. This modification of the By-laws was approved by Elecnor's Shareholders' General Meeting, as detailed in section B.2. below, which should be taken into account in order to understand how the remuneration policy was applied during the financial year ending on 31 December 2019.

B.2 Explain the different actions taken by the company in relation to the remuneration system and how they have contributed to reducing exposure to excessive risks and adapting them to the long-term objectives, values and interests of the company, including a reference to the measures that have been adopted to guarantee that the long-term results of the company have been taken into consideration in the remuneration accrued and that a suitable balance has been attained between the fixed and variable components of the remuneration, the measures that have been adopted in relation to those categories of staff whose professional activities have a material repercussion on the company's risk profile and the measures that have been adopted to avoid conflicts of interest, if appropriate.

As a continuation of section B.1. above, on 18 February 2019, the Appointments and Remunerations Commission agreed to propose to the Board of Directors of Elecnor the amendment of Article 12 of the Company's By-laws with regard to the remuneration of Directors for the performance of all their functions, both executive and non-executive, for the purpose of adapting it to the interpretation contained in Supreme Court Ruling 98/2018 of 26 February and to adapt the profit-based remuneration system to the reality of the Company and its Group (understood in the terms of Article 42 of the Commercial Code).

To this end, the Appointments and Remunerations Commission issued the corresponding report, which was approved by the Board of Directors in its meeting of 27 March 2019, thereby proposing the aforementioned amendment of the by-laws to the General Shareholders' Meeting. Consequently, the Shareholders' General Meeting of Elecnor, in its meeting held on 22 May 2019, unanimously approved the modification of Article 12 of the Company's By-laws, which is worded as follows:

"ARTICLE 12

Management of the Company shall correspond to the Board of Directors.

The General Shareholders' Meeting shall determine and approve the maximum remuneration to be received as remuneration of the board directors for all items and for any duties they perform, both for the performance of executive and non-executive functions. The maximum amount set by the General Meeting shall remain in force until the General Meeting approves the amendment thereof.

A. Director remuneration for the performance of non-executive functions.

For the performance of non-executive functions, all Directors shall receive as remuneration:

• (i) the maximum amount of 7% of the profits obtained by the consolidated group during the year, after the provision for the payment of taxes and requirements established by law for this purpose have been met, as well as,
• (ii) a fixed cash allowance to be determined by the General Meeting, and
• (iii) attendance allowances which, depending on the circumstances, are to be assigned as compensation for attendance expenses and others that they must assume in the exercise of their roles and functions.

The Board of Directors shall be responsible for determining the annual remuneration amount, in accordance with the above items, and the distribution of the remuneration of each Director for the performance of non-executive functions.

B. Director remuneration for the performance of executive functions.

In addition to the remuneration they receive for the performance of non-executive functions, the Directors who perform executive functions within the Company shall receive the remuneration established in their respective contracts for the following items:

• (i) A fixed remuneration in cash.
• (ii) Variable remuneration, calculated on qualitative or quantitative indicators or reference parameters, linked to the degree of compliance with their objectives (agreed by the Board of Directors at the proposal of the Appointments and Remunerations Commission).
• (iii) Remuneration based on the delivery of shares or option rights over shares of the Company itself.
• (iv) The following social benefits or remuneration in kind: (i) they shall be included in the civil liability policy for Directors and board members that the Company has agreed upon at all times; (ii) they shall continue to have the right to participate in social security systems (for coverage of their survival, illness, accidents, etc.) in terms similar to those generally established at all times for the Company's Directors; and (iii) likewise, the Executive Chair shall continue to enjoy all those benefits that, if applicable, the Company makes available to the management group.
• (v) In addition to any compensation for termination of the contract, provided that the termination was not caused by breach of their duties as administrator.

These contracts must be previously approved by the Board of Directors at the proposal of the Appointments and Remunerations Commission, complying with the requirements established in the applicable law.

In any case, the aggregate sum of all the resulting amounts to be received by all Directors and for any items in each financial year shall never be greater than the maximum amount approved by the General Meeting".

In addition, the aforementioned General Shareholders' Meeting approved, with 95.07% of votes in favour, the new Directors' Remuneration Policy for the next three years in the terms described in Section A.1., agreed by the Company's Board of Directors in its meeting on 27 March 2019, following a proposal and a report justifying it by the Appointments and Remunerations Commission, setting the maximum amount of annual remuneration for all directors, for all the functions they perform, i.e. both executive and non-executive functions, at the amount of EUR 10 million. This maximum amount will remain in force until its modification by the General Shareholders' Meeting is approved.

These measures are aimed at mitigating the risks that could arise from extrapolating the conclusions of the aforementioned Supreme Court Ruling 98/2018 of 26 February to listed companies while aligning them with shareholders' interests by offering, if possible, greater transparency of the existing remuneration systems, as well as control of the maximum amounts to be paid to all Directors for all items, since it is the shareholders who agree to set this maximum amount.

Thus, with this amendment of the By-laws and the preparation of this new Policy, the Company has anticipated a possible extrapolation of this Ruling to listed companies, reducing possible risks, both commercial and tax, which may arise in the future.

B.3 Explain how the remuneration accrued over the year meets the provisions contained in the current remuneration policy.

Furthermore, report on the relationship between the remuneration obtained by the directors and the results or other performance measures of the company in the short and long term, explaining, as the case may be, how the variations in the performance of the company have influenced changes in the remuneration of directors and how the latter contribute to the short- and long-term results of the company.

The remuneration of Elecnor's Board of Directors for all items has been maintained during the 2019 financial year, in line with the cost containment policy approved by all the members of the Board of Directors.

B.4 Report on the result of the consultative vote at the General Shareholders'' Meeting on remuneration in the previous year, indicating the number of votes against that may have been cast:

	Number	% of the total
Votes cast	68,696,560	78.96%
	Number	% of votes cast
Negative votes	3,154,855	4.59%
Votes in favour	65,541,705	95.41%
Abstaining	0	0.00%
	Remarks

B.5 Explain how the fixed components accrued during the year by the directors in their capacity as such have been determined and how they have changed with respect to the previous year

The fixed annual remuneration for each of the Directors, in their capacity as such, for membership of the Board of Directors was EUR 143,500 and EUR 1,500 for attendance fees for each meeting of the Board of Directors, plus the amount received for membership of the various Commissions of the Board of Directors and the Committees detailed below:

Remuneration for membership of the various Committees:

• For membership of the Executive Committee: EUR 25,000.
  • For membership of the Audit Commission: Member: EUR 15,000.
  • Chair: EUR 20,000. • For membership of the Appointments and Remunerations Commission: Member: EUR 12,500. Chair: EUR 17,500.

The annual remuneration for the performance of positions on the Board of Directors is detailed below:

Non-Executive Chair: EUR 270,000. Secretary: EUR 20,000.

There have been no changes over the previous year.

B.6 Explain how the salaries accrued by each one of the executive directors over the past financial year for the performance of management duties were determined, and how they have changed with respect to the previous year.

The amount and nature of the fixed components of remuneration for the performance of management duties by the Executive Director shall be as follows:

Mr. Rafael Martín de Bustamante Vega (Managing Director) • Salary: EUR 568,000.

There has been an upwards variation of 0.88% over the previous year.

B.7 Explain the nature and the main characteristics of the variable components of the remuneration systems accrued in the year ended.

In particular:

– Identify each one of the remuneration plans that have determined the different types of variable remuneration accrued by each of the directors in the year ended, including information on their scope, their date of approval, their date of incorporation, the periods of accrual and validity, the criteria used to evaluate performance and how this has affected the establishment of the variable amount accrued, as well as the measurement criteria used and the period necessary to be in a position to suitably measure all the conditions and criteria stipulated.

In the case of share options and other financial instruments, the general characteristics of each plan will include information on both the conditions to acquire unconditional ownership (consolidation) and to exercise these options or financial instruments, including the price and term to exercise them.

• Each one of the directors, together with their category (executive directors, proprietary external directors, independent external directors and other external directors), that are beneficiaries of remunerations systems or plans that include variable remuneration.
• As the case may be, information is to be provided on periods for the accrual or deferment of payment applied and/or the periods for withholding/unavailability of shares or other financial instruments, if they should exist.

Explain the short-term variable components of the remuneration systems

The only Director who has received variable remuneration is the Executive Director, and his variable remuneration during 2019 has amounted to the following:

Mr. Rafael Martín de Bustamante Vega (Managing Director) Variable remuneration: EUR 1,014,000.

Explain the long-term variable components of the remuneration systems

B.8 Indicate whether certain variable components have been reduced or clawed back when, in the case of the former, payment has been consolidated and deferred or, in the case of the latter, consolidated and paid, on the basis of data that have subsequently proved to be inaccurate. Describe the amounts reduced or clawed back through the application of the reduction or clawback clauses, why they were implemented and the years to which they refer.

No amount has been claimed or refunded under the refund (clawback) clause in the contract between the Company and the Executive Director.

B.9 Explain the main characteristics of the long-term savings systems where the amount or equivalent annual cost appears in the tables in Section C, including retirement and any other survivor benefit that are financed, totally or partially, by the company, whether through internal or external contributions, indicating the type of plan, whether it is a defined contribution or benefit, the contingencies covered, the conditions to consolidate economic rights for directors and their compatibility with any type of severance pay for early termination or termination of the contractual relationship between the company and the director.

The Company does not consider these systems.

B.10Explain, where appropriate, the severance pay or any other type of payment deriving from early dismissal or early resignation, or from the termination of the contract in the terms provided for therein, accrued and/or received by directors during the year ended.

There are no agreed or paid compensation payments in the event of termination of a Director's duties.

The only compensation provided for are those that the Executive Director may receive for the termination of their contract for the performance of their senior management functions, which are explained below:

The contract with the Executive Director provides for compensation in their favour in the event of termination, provided that the termination is not the result of a breach attributable to the same, nor is it due to their exclusive will.

The amount of the compensation amounts, as a general rule, to an amount equivalent to two (2) years of their total remuneration, including fixed and variable remuneration, but excluding that obtained in programmes or incentives of an annual or multi-year nature, without prejudice to the fact that, depending on the type of event that results in the termination of the contracts, it may reach an amount equivalent to three (3) years of their total remuneration.

In addition, no such compensation was accrued or received in 2019.

B.11Indicate whether there have been any significant changes in the contracts of persons exercising senior management functions, such as executive directors, and, where appropriate, explain such changes. In addition, explain the main conditions of the new contracts signed with executive directors during the year, unless these have already been explained in Section A.1.

In 2019, the contract with the Executive Director was amended to include a clawback clause under which the Executive Director must reimburse the Company for any amounts received as variable remuneration or resulting from the settlement of incentive plans, if at any time during (1) year after the payment thereof, as a result of wilful misconduct or gross negligence on the part of the Executive Director, the following circumstances have arisen: (i) there have been alterations or inaccuracies in the business data that are relevant for the purposes of calculating the variable remuneration or incentive plans and these are confirmed by the Company's external auditors; (ii) as a result of the above circumstance, the Company is obliged to significantly reformulate its accounts.

The Executive Director must pay the amount notified by the Company within forty-five (45) days following the date of the request for payment.

B12 Explain any supplementary remuneration accrued by directors as consideration for services rendered outside of their post.

The Director Mr. Juan Landecho Sarabia had an employment relationship with an Elecnor Group company for which he was paid EUR 86,300.

B.13Explain any remuneration deriving from advance payments, loans or guarantees granted, indicating the interest rate, their key characteristics and the amounts eventually returned, as well as the obligations taken on by way of guarantee or collateral.

They do not exist.

B.14Itemise the remuneration in kind accrued by the directors over the year, briefly explaining the nature of the different salary components.

They do not exist.

B.15Explain the remuneration accrued by directors by virtue of payments settled by the listed company to a third company at which the director renders services when these payments seek to remunerate the director's services to the company.

They do not exist.

B.16Explain any other items of remuneration other than those mentioned in the previous sections, whatever their nature or the group company that settles the payment, particularly when this is a related operation or its settlement distorts the true image of the total remuneration accrued by the director.

They do not exist.

C ITEMISED INDIVIDUAL REMUNERATION ACCRUED BY EACH DIRECTOR

Name	Type	Period of accrual in year t
MR. JAIME REAL DE ASÚA ARTECHE	PROPRIETARY DIRECTOR	519.8
MR. FERNANDO LEÓN DOMECQ	PROPRIETARY DIRECTOR	249.8
MR. IGNACIO PRADO REY BALTAR	PROPRIETARY DIRECTOR	227.3
MR. RAFAEL MARTÍN DE BUSTAMANTE VEGA	EXECUTIVE	1,819.3
MR. JOAQUÍN GÓMEZ DE OLEA Y MENDARO	PROPRIETARY DIRECTOR	232.3
MR. CRISTOBAL GONZÁLEZ DE AGUILAR ALONSO URQUIJO	PROPRIETARY DIRECTOR	237.3
MR. FERNANDO AZAOLA ARTECHE	EXTERNAL	199
MR. MIGUEL CERVERA EARLE	PROPRIETARY DIRECTOR	212.3
MS. ISABEL DUTILH CARVAJAL	INDEPENDENT	190.9
MS. IRENE HERNÁNDEZ ÁLVAREZ	INDEPENDENT	179.6

MR. JUAN LANDECHO SARABIA	PROPRIETARY DIRECTOR	286.1
MR. MIGUEL MORENÉS GILES	PROPRIETARY DIRECTOR	252.3
MR. GABRIEL ORAA Y MOYUA	PROPRIETARY DIRECTOR	199.8
MR. RAFAEL PRADO ARANGUREN	PROPRIETARY DIRECTOR	199.8
MR. EMILIO YBARRA AZNAR	INDEPENDENT	194

• C.1 Complete the following tables regarding the individual remuneration of each director (including the salary received for performing executive duties) accrued during the year.
  • a) Remuneration from the reporting company:
    • i) Remuneration in cash (thousand euros)

Name	Fixed remune ration	Per diem allow ances	Remunerati on for membership of Board's Commission s	Salary	Short term variable remunera tion	Long term variable remune ration	Severance pay	Other grounds	Total in year t	Total in year t-1
------	---------------------------	-------------------------------	---------------------------------------------------------------------	--------	-----------------------------------------------	----------------------------------------------	------------------	------------------	--------------------	----------------------

MR. JAIME REAL DE ASÚA ARTECHE/PROPRIETARY DIRECTOR	143.5	18	37.5				282.5	481.5	481.5
MR. FERNANDO LEÓN DOMECQ/PROPRIETARY DIRECTOR	143.5	18	37.5				12.5	211.5	211.5
MR. IGNACIO PRADO REY BALTAR/PROPRIETARY DIRECTOR	143.5	18	15				12.5	189	17.8
MR. RAFAEL MARTÍN DE BUSTAMANTE VEGA/EXECUTIVE	143.5	18	25	568	1,014		12.5	1,781	1,636
MR. JOAQUIN GÓMEZ DE OLEA Y MENDARO/PROPRIETARY DIRECTOR	143.5	18					32.5	194	194
MR. CRISTOBAL GONZÁLEZ DE AGUILAR ALONSO URQUIJO/PROPRIETARY DIRECTOR	143.5	18	25				12.5	199	174
MR. FERNANDO AZAOLA ARTECHE/CONSULTANT	143.5	18	25				12.5	199	197.5
MR. MIGUEL CERVERA EARLE/PROPRIETARY DIRECTOR	143.5	18					12.5	174	61
MS. ISABEL DUTILH CARVAJAL/INDEPENDENT	143.5	18	29.4					190.9	194
MS. IRENE HERNÁNDEZ ÁLVAREZ/INDEPENDENT	143.5	18	18					179.6	10.5
MR. JUAN LANDECHO SARABIA/PROPRIETARY DIRECTOR	143.5	18					86.3	247.8	424.3
MR. MIGUEL MORENÉS GILES/PROPRIETARY DIRECTOR	143.5	18	40				12.5	214	212.5
MR. GABRIEL ORAA Y MOYUA/PROPRIETARY DIRECTOR	143.5	18						161.5	161.5
MR. RAFAEL PRADO ARANGUREN/PROPRIETAR Y DIRECTOR	143.5	18						161.5	161.5
MR. EMILIO YBARRA AZNAR/INDEPENDENT	143.5	18	32.5					194	194

Remarks

ii) Table of changes in share-based remuneration schemes and gross profit from consolidated shares or financial instruments

Name	Name of Plan	Financial instruments at start of year t	Financial instruments granted at start of year t	Financial instruments consolidated during the year	Instrume nts matured	Financial instruments at end of year t
------	--------------	---------------------------------------------	-----------------------------------------------------	----------------------------------------------------	----------------------------	-------------------------------------------

										but not exercised
		No. of instruments	No. of equivalent shares	No. of instruments	No. of equivalent shares	No. of instrume nts	No. of equivalent shares/han ded over	Price of the consolida ted shares	Gross profit from shares handed over or consolidated financial instruments (thousand €)	No. of instrume nts	No. of instruments	No. of equivale nt shares
	Plan 1
Director 1	Plan 2

Remarks

iii) Long-term saving systems

	Remuneration from consolidation of rights to savings system
Director 1

	Contribution over the year from the company (thousand €)				Amount of accumulated funds (thousand €)
		Savings systems with consolidated economic rights	Savings systems with unconsolidated economic rights
Name	Year t	Year t-1	Year t	Year t-1	Year t		Year t-1
					Systems with consolidated economic rights	Systems with unconsolidated economic rights	Systems with consolidated economic rights	Systems with unconsolidated economic rights
Director 1

Remarks

iv) Details of other items

Name	Item	Amount remunerated
MR. RAFAEL MARTÍN DE BUSTAMANTE VEGA/EXECUTIVE	LIFE INSURANCE PREMIUMS	EUR 4,116.60

Remarks

b) Remuneration of the company directors for seats on the boards of other group companies:

i) Remuneration in cash (thousand euros)

Name	Fixed remunera tion	Per diem allowances	Remunerati on for membership of Board's Commission s	Salary	Short-term variable remuneration	Long-term variable remuneration	Severance pay	Other grounds	Total in year t	Total in year t-1
MR. JAIME REAL DE ASÚA ARTECHE/PRO PRIETARY DIRECTOR	38.3								38.3	40
MR. FERNANDO LEÓN DOMECQ/PRO PRIETARY DIRECTOR	38.3								38.3	40
MR. IGNACIO PRADO REY BALTAR/PROP RIETARY DIRECTOR	38.3								38.3	23.3
MR. MARTÍN DE BUSTAMANTE VEGA/EXECUT IVE	38.3								38.3	40
MR. JOAQUIN GÓMEZ DE OLEA Y MENDARO/PR OPRIETARY DIRECTOR	38.3								38.3	40
MR. CRISTOBAL GONZÁLEZ DE AGUILAR ALONSO URQUIJO/PRO PRIETARY DIRECTOR	38.3								38.3	40
MR. FERNANDO AZAOLA ARTECHE/CON SULTANT	0								0	0
MR. MIGUEL CERVERA EARLE/PROPRI ETARY DIRECTOR	38.3								38.3	23.3
MS. ISABEL DUTILH CARVAJAL/IND EPENDENT	0								0	0
MS. IRENE HERNÁNDEZ ÁLVAREZ/IND EPENDENT	0								0	0
MR. JUAN LANDECHO SARABIA/PRO PRIETARY DIRECTOR	38.3								38.3	40
MR. MIGUEL MORENÉS GILES/PROPRI ETARY DIRECTOR	38.3								38.3	40
MR. GABRIEL ORAA Y MOYUA/PROPR IETARY DIRECTOR	38.3								38.3	40
MR. RAFAEL PRADO ARANGUREN/P ROPRIETARY DIRECTOR	38.3								38.3	40
MR. EMILIO YBARRA AZNAR/INDEP ENDENT	0								0	0

Remarks

ii) Table of changes in share-based remuneration schemes and gross profit from consolidated shares or financial instruments

		Financial instruments at start of year t		Financial instruments granted at start of year t		Financial instruments consolidated during the year				Instrume nts matured but not exercised	Financial instruments at end of year t
Name	Name of Plan	No. of instrume nts	No. of equivale nt shares	No. of instrume nts	No. of equivale nt shares	No. of instrume nts	No. of equivale nt shares/h anded over	Price of the consolida ted shares	Gross profit from shares handed over or consolidate d financial instruments (thousand €)	No. of instrume nts	No. of instruments	No. of equivalent shares
Director 1	Plan 1
	Plan 2

Remarks

iii) Long-term saving systems

	Remuneration from consolidation of rights to savings system
Director 1

		Contribution over the year from the	company (thousand €)		Amount of accumulated funds (thousand €)
		Savings systems with consolidated economic rights	Savings systems with unconsolidated economic rights
Name		Year t-1	Year t	Year t-1	Year t		Year t-1
	Year t				Systems with consolidated economic rights	Systems with unconsolidated economic rights	Systems with consolidated economic rights	Systems with unconsolidated economic rights
Director 1

Remarks

iv) Details of other items

Name	Item	Amount remunerated
Director 1

Remarks

c) Summary of remunerations (thousand €):

This should include a summary of the amounts corresponding to all the remuneration items included in this report that have accrued to each director (thousand €).

	Remuneration accrued in the company			Remuneration accrued in group companies
Name	Total cash remune ration	Gross profit of consolidat ed shares or financial instrumen ts	Remuneration for saving systems	Remuneration for other items	Total FY2019 company	Total cash remuneratio n	Gross profit of consolidated shares or financial instruments	Gross profit from options exercised	Remunera tion for other items	Total year t group
MR. JAIME REAL DE ASÚA ARTECHE/PROPRIETARY DIRECTOR	481.5				481.5	38.3				38.3
MR. FERNANDO LEÓN DOMECQ/PROPRIETARY DIRECTOR	211.5				211.5	38.3				38.3
MR. IGNACIO PRADO REY BALTAR/PROPRIETARY DIRECTOR	189				189	38.3				38.3
MR. RAFAEL MARTÍN DE BUSTAMANTE VEGA/EXECUTIVE	1,781				1,781	38.3				38.3
MR. JOAQUIN GÓMEZ DE OLEA Y MENDARO/PROPRIETARY DIRECTOR	194				194	38.3				38.3
MR. CRISTOBAL GONZÁLEZ DE AGUILAR ALONSO URQUIJO/PROPRIETARY DIRECTOR	199				199	38.3				38.3
MR. FERNANDO AZAOLA ARTECHE/CONSULTANT	199				199	0				0
MR. MIGUEL CERVERA EARLE/PROPRIETARY DIRECTOR	174				174	38.3				38.3
MS. ISABEL DUTILH CARVAJAL/INDEPENDENT	190.9				190.9	0				0
MS. IRENE HERNÁNDEZ ÁLVAREZ/INDEPENDENT	179.6				179.6	0				0
MR. JUAN LANDECHO SARABIA/PROPRIETARY DIRECTOR	247.8				247.8	38.3				38.3
MR. MIGUEL MORENÉS GILES/PROPRIETARY DIRECTOR	214				214	38.3				38.3
MR. GABRIEL ORAA Y MOYUA/PROPRIETARY DIRECTOR	161.5				161.5	38.3				38.3
MR. RAFAEL PRADO ARANGUREN/PROPRIETAR Y DIRECTOR	161.5				161.5	38.3				38.3
MR. EMILIO YBARRA AZNAR/INDEPENDENT	194				194	0				0
Total:	4,778.3				4,778.3	421.3				421.3

Remarks

D OTHER INFORMATION OF INTEREST

If there are any relevant issues relating to directors' remuneration that you have not been able to address in the previous sections of this report, but which are necessary to provide more comprehensive and fully reasoned information on the remuneration structure and practices of the company with regard to its directors, list them briefly.

This annual remuneration report has been approved by the Board of Directors of the company on_25 March 2020_.

State whether any director has voted against or abstained from approving this report

Yes � No

Name or company name of the member of the Board of Directors who has not voted for the approval of this report	Reasons (against, abstention, non- attendance)	Explain the reasons