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Message from the Chairman

José Manuel Entrecanales, Chairman of ACCIONA, discusses the way in which the company generates value in the medium and long term.

WHAT DO YOU THINK IS THE MOST OUTSTANDING FEATURE OF THE 2017 RESULTS?

The 2017 results were solid, and actually exceeded our expectations. ACCIONA's strategic decisions in recent years have contributed to strengthening its value generation model and fulfil the financial objectives, not only in terms of growth, but also in terms of the balance sheet.

This is confirmed by the figures, with 7 % EBITDA growth compared to 2016 despite lower power generation by the Energy division — attributable to events of force majeure such as the lower wind and rain, and the earthquakes in Mexico — which were offset by the good results in the Infrastructure division, with EBITDA up 33 % on the previous year.

2017 was also important from the perspective of disinvestment operations. With the recent culmination of the operation to sell solar thermal assets in Spain, a process of disinvestment that began in 2013 has now been concluded. The transaction allows us to free up capital for new international projects that offer greater returns and will contribute to balancing the company’s presence in different regions. The agreement to sell Trasmediterranea should also be mentioned. At the time of writing, we are awaiting the final administrative authorizations, which are imminent. The sale has been carried out at an opportune moment for the Company, following an efficiency and competitiveness drive.

As a result, we strengthened our balance sheet and improved our leverage projections, reaching our debt target one year ahead of schedule, with lower funding costs and better interest cover.

Moreover, in line with the commitment made during 2016, gross capital expenditure amounted to EUR 900 million in 2017, concentrated mainly in the Energy and Infrastructure divisions.

ACCIONA’s strategic decisions in recent years have contributed to enhancing its value creation model

WHAT ARE THE SHORT- AND MEDIUM-TERM GROWTH PROSPECTS FOR THE ENERGY AND INFRASTRUCTURE DIVISIONS? WHAT CHALLENGES DO THEY FACE?

In the field of energy, demand for renewables continues to grow, which translates into a solid short-term order book driven by the global will to contain the effects of climate change and by renewable energy's growing competitiveness in comparison with conventional energy sources.

However, we must be cautious and look for profitable alternatives to auctions, where competition has intensified in recent years following the excessive liquidity in financial markets and the entrance of new actors applying a speculative model that undermines the market's profitability.

Companies' greater sensitivity to the consequences of global warming and growing environmental awareness on the part of society as a whole are driving the renewable energy supply contracts market in the private sector. ACCIONA Energy's current client portfolio covers the most strategic markets, including important corporate and institutional clients from a broad range of industries, and that trend is expected to continue in the coming years. Moreover, microgrid technology hints at the possibility of realistically affordable storage.

As for the Infrastructure division, internationalisation has enabled us to continue expanding in the last ten years. The year 2017 will be a watershed not only because of the good results, including sizeable growth in construction volumes, but also in terms of new contracts that contribute to strengthening ACCIONA Infrastructure's position in markets where the division is already firmly established.

Some global trends are contributing to demand growth, such as significant expansion by urban and metropolitan areas; the need to adapt to social and environmental requirements, as extreme climate events create a demand for greater resilience; not to mention the growth of the middle class and rising living standards in developing markets.

In this context, ACCIONA is adopting a selective approach to choosing opportunities, focusing on large contracts that are more demanding in technology terms and require high levels of specialisation but offer more attractive returns and better risk profiles.

ACCIONA is positioned as a developer of infrastructure that is essential for society, taking a long view in pursuit of durability over time

IN 2017, THE COMPANY'S STRATEGY EMPHASISED FOCUSED GROWTH. HOW DO THE OTHER BUSINESSES FIT IN?

Our mission has not changed: ACCIONA is positioned as a developer of infrastructure — both energy and infrastructure — that is essential for society, taking a long view in pursuit of durability over time. We are also entrepreneurial and constantly seeking new opportunities that are in line with our track record.

Beyond the field of renewable energies and infrastructure development, we are involved in a range of other businesses which, while requiring less capital investment and debt, make a contribution to the group's consolidated bottom line.

Their potential for growth also allows us to maximize their value through strategic operations. In this respect, attention should be drawn to the contribution of productive real estate to Testa Residencial, in line with our strategy of obtaining value from the asset portfolio. ACCIONA Inmobiliaria is indeed centered on the residential development business, in a market that is growing again after several years of recession and which, as well as being more profitable, allows the monetization of our property portfolio and development of synergies with the Company’s own construction activities. Meanwhile, Bestinver has consolidated itself as the leader in the independent asset management sector in Spain.

ACCIONA is ready to meet the future. Our highly specialised teams of committed professionals work determinedly to offer sustainable solutions where there are opportunities with a balance between risk and return. Our focus on innovation enables us to handle the most demanding projects and makes us the best choice.

The commitment to sustainability that is a hallmark of ACCIONA is materialised in the Sustainability Master Plan 2020. We are also involved in the main sustainable initiatives worldwide and we participate in the dialogues and debates where decisions are made and major global commitments to the planet and future generations are adopted. We do this out of conviction, and we will continue in this line, encouraged by the progress that has been made in recent years and convinced that we will be part of the solution.

The commitment to sustainability that is a hallmark of ACCIONA is materialised in the Sustainability Master Plan 2020

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