Red Electrica de España S A : The Company submits the Presentation of Results for Financial Year 2019 and Progress on the 2018-2022 Strategic Plan.

PRESENTATION OF RESULTS FOR FINANCIAL YEAR 2019

AND PROGRESS ON THE 2018-2022

STRATEGIC PLAN

February 2020

Contents

1. Results for Financial Year 2019 and Compliance with the 2014-2019 Plan.
2. Regulatory Aspects.
3. Progress on the 2018-2022 Strategic Plan.
4. Commitment to the Energy Transition. 2030 Horizon.

2019 FY Results & Progress on 2018-20222 Strategic Plan.		2
February 2020

Significant Events for 2019

Results

• Net Profit was in the amount of €718m, 1.9% higher than the profit for financial year 2018, in line with the forecast.
• Dividend proposed to the General Sharholders Meeting in the amount of €1.05 per share. Complying with our commitment to the market in the 2014-2019 Plan.
• The Group invested €1,870.4m

Management and Operation of electrical infrastructure - National:

• Independent Regulator: Spanish Royal Decree-Law 1/2019 of 11 January, on urgent measures to adapt the authorities of the National Markets and Competition Commission (CNMC in Spanish) to the requirements derived from EU law.
• Predictability of cash flows for next regulatory period: Approval of Circular 5/2019, which establishes the compensation methodology for electricity transmission for the 2020-2025 period, and Circular 4/2019, which establishes the compensation methodology for the electrical system's operator.
• Roadmap for the Energy Transition: Submittal to the European Commission of a draft version of the 2021-2030 Integrated National Energy and Climate
  Plan (NECP). Spain's Ministry for the Ecological Transition and Demographic Challenge recently published a new draft version, which is now in the public consultation phase.
• Investments: Launching last 1 March of the new 2021-2026 Infrastructure Planning for the electricity transmission grid.
• Progress on integration of the European electricity market: A multilateral platform at the European level (8 operators) to manage the balance between generation and demand. Progress on environmental studies and tender specifications for the interconnection with France across the Bay of Biscay.

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February 2020

Significant Events for 2019

Management and Operation of electrical infrastructure - National

• Application procedure for access and connection to the Transmission Grid: 102 GW of wind and photovoltaic solar generation with access permit.
• Integration of renewables: Entry into operation of 6,456 new 'green' MW, 12.9% of installed power renewable.
• Reduction of CO2 emissions: Second consecutive year with 60% of generation being CO2-emission free.

Management and Operation of electrical infrastructure - International

• Entry into Brazil: Acquisition of 50% of Argo Energía, holder of 3 electricity transmission concessions in Brazil, for €382m.
• Consolidation of activities in Chile and Peru: Acquisition of CCNCM in northern Peru, valued at $205m, and incorporation of REDELNOR for purposes of that acquisition.

Management and Operation of telecommunications infrastructure

• Positioning as a global telecommunications operator: Acquisition of 89.68% of the share capital of Hispasat for €933m.
• Fibre optics business: 5th consecutive year of growth, increased customer portfolio.

Other Activities

• Creation of RETIT: Contribution to development of the energy transition and telecommunications by conceptualisation, incubation, and acceleration of technology-based initiatives.

2019 FY Results & Progress on 2018-20222 Strategic Plan.		4
February 2020

Significant Events for 2019

ESG

• Appointment of Beatriz Corredor Sierra as Non-ExecutiveChair of the Board of Directors and Chairwoman of the company, following the resignation of Jordi Sevilla Segura from his position.
• Appointment of Roberto Garcia Merino as CEO of the Group, in order to strengthen our response to the challenges of the energy transition and promote the telecommunications area and the Group's international expansion.
• Changes to the Board of Hispasat: Reduction of the number of Directors (now 13 versus 23 previously) and appointment of Miguel Ángel Panduro as the new CEO.
• Red Eléctrica has produced its green financing framework, through which it intends to issue 'green' financial instruments to finance and/or refinance projects that promote environmental progress.
• Issuance of a bond on the euromarket for an amount of €700m, in order to finance and/or refinance Eligible Projects within the Green Financing Framework.
• The company has adapted its risk management model to the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

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February 2020

Results for FY2019

Main Financial Figures vs 2018

€2,007.2m		€1,582.4m		€718.0m
Revenues		EBITDA			Net
	+3.0%				+2.8%		Profit	+1.9%
€6,025.6m		€1,870.4m		€396.4m
Net		Total			Investment
Financial	+28.7%	Investment	+242.2%		Trans. Grid	+4.8%
Debt					in Spain
2.29%		3.8 x					20,8%
Cost of Debt		ND/EBITDA			FFO/Debt
2.42% in FY2018				3.0x in		26.0% in
					FY2018		FY2018

Profit for the financial year increased by 1.9%

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February 2020

Results for FY2019. Breakdown by Type of Business

Turnover

2018

Turnover €1,949m

93%

EBITDA

2018

EBITDA €1,540m

92%

2019

Turnover €2,007m

90%

2019

EBITDA

€1,582

89%

• Electrical Infrastructure Business represented 91% of EBITDA during 2019:

• 1. 89% National and 2% International.
• 9% Telecommunications Infrastructure Business.
• The segment for Management and Operation of electrical infrastructure, International includes the activities currently carried out in Peru and Chile.
• Telecommunications includes leasing of the dark fibre optic grid trunk line and operation of satellite infrastructure in Spain, Portugal, and Latin America.

Diversification of the results is in line with the Strategic Plan

Management & Operational of electrical infrastructure, National	Telecommunications (fibre optics and satellites)
Management & Operational of electrical infrastructure, International	Other business, Corporation and Adjustments

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February 2020

Results for FY2019 - Corporate Debt
Balance Sheet Strength					• Average debt life: 5.2 years.
Maturities (€m)					1,990	• Liquidity sources: €2,096.7mn.
							•	Rating: 'A-' Standard & Poor's and 'A-' Fitch, outlook stable.
1,125								• REE's financing is sustainable. €800m syndicated loan and
		947		830				€375m in bilateral credit facilities linked to ESG criteria.
				740
				481		•	First multi-currency syndicated loan, €150m based on
	241
								blockchain.
2020	2021		2022	2023	2024	2025	2026-
	• To finance acquisition of Hispasat, REC has signed a credit
							thereafter
Debt Structure							facility agreement for €500m at 5+1+1 years.
					• Issuance of a bond on the euromarket for an amount of
Gross debt: €6,354m as at 31/12/2019
									€700m, to finance and/or refinance Eligible Projects within
	6%		Eurobonds						the Green Financing Framework.
6%		Long-term loans		22 %	6%	Variable rate
14%						6%		Fixed rate
	45%
		Long-term credit facilities		14%
				45%
							Long-term credit facilities
			USPP						Debt diversified by markets and financial
29%						78 %		instruments.
					29%	USPP
			Others				Proactive management of maturities and market
							Others
								risks.
		2019 FY Results & Progress on 2018-20222 Strategic Plan.		8
		February 2020

Compliance with the 2014-2019 Strategic Plan

Commitments to the market

Investments

Improved EBITDA margin in 2019

Avg. Net Debt/EBITDA

EPS (CAGR 2019/13)

DPS 7% (CAGR since 2014)

Market commitments

• €4.500mn
• • 200 bp

3.5x

5 - 6%

7.0%

Compliance with

2014-2019 Plan

4,861€ 

479 bp 

3.4x 

5.2% 

7.0% 

Successful achievement of all the objectives of the Plan 2014-2019

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February 2020

Contents

1. Results for Financial Year 2019 and Compliance with the 2014-2019 Plan.
2. Regulatory Aspects.
3. Progress on the 2018-2022 Strategic Plan.
4. Commitment to the Energy Transition. 2030 Horizon.

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February 2020

2020-2025 Regulatory Period

Circular 5/2019 Compensation methodology for electricity transmission

2nd Regulatory Period (2020-2025)

1st Reg.	2020	2021	2022	2023-2025	3rd Reg.
Period	Period
(2013-2019)					(2026-2031)
2013-2019	2020		2021-2025
WACC 6.5%
WACC 6.0%		WACC 5.58%

Regulatory stability. Methodology provides continuity as applied during the first regulatory period.

Weighted average cost of capital (WACC) model

established for calculating the compensation rate for regulated activities in the energy sector.

Extension of useful life:

• 30% added to annual maintenance amount during first 5 years. Incentive increased each year by 1%, 2%, or 3% as applicable, up to a permissible maximum of 100%.
• Plans for renewal and improvement of facilities that have finished their useful life, with a compensation mechanism already established for them.

Incentives for availability and efficiency. Adjustment to compensation for O&M.

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February 2020

2020-2025 Regulatory Period

Circular 4/2019 Compensation methodology for the electrical system's operator

• The first time a methodology is being established for compensation of the electrical system's operator.
• Incorporates a system for recognising costs plus an additional margin, compensation for investments based on one element for amortisation and another for financial compensation (5.58%), as well as an additional compensation element for incentives.
• The regulatory parameters are established for 3-year periods, with the first period being 2020-2022.
• Application of the new compensation model to the system operation activities represents €74.7m in revenues during the first regulatory period.

A clear and transparent compensation methodology is being established for the first time.

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February 2020

2021-2026 Energy Planning

1	A participatory process
	v
Ministry for the Ecological	Transition
publishes in Official State Gazette (BOE in
Spanish), process begins. Autonomous
Communities and agents in the sector
produce grid development proposals, which

are sent to the Ministry and REE. In parallel,

the National Markets and Competition Commission (CNMC) produces report with recommendations on economic-financial sustainability.

4 Ministry forwards considerations received to REE, which analyses them and produces 'Development Proposal', which is sent to the Ministry.

5	Once the evaluation by the CNMC on
compliance with initial	economic-financial
	sustainability criteria has	been received and
	reviewed, the Ministry produces the 'Plan on
	Development of the Electricity Transmission Grid',
	which will include the Strategic Environmental
	Declaration. During the public information
	period for the 'Strategic Environmental
	Evaluation', any individual or entity may submit
	comments.

Study Phase Finalised

(phase 2)

2

Based on the information

received and

the

3

6

criteria established by the Ministry, REE

The Ministry sends the 'Initial Proposal' to

carries out the technical studies and

Finally, the 'Transmission

Grid

the Autonomous Communities for their

produces the 'Initial Development

Proposal

',

Development Plan' is approved by the

comments.

which is sent to the Ministry.

Government after being submitted to

the Congress of Deputies.

2019 FY Results & Progress on 2018-20222 Strategic Plan.

1.Proposal pase - 1 month.

2.Study pase - 6 months.

3.Allegation pase - 1 month.

13

February 2020

4.Study pase - 2 months.

5.Consolidation pase - 4 months.

6.Approval phase.

Contents

1. Results for Financial Year 2019 and Compliance with the 2014-2019 Plan.
2. Regulatory Aspects.
3. Progress on the 2018-2022 Strategic Plan.
4. Commitment to the Energy Transition. 2030 Horizon.

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February 2020

Progress on the 2018-2022 Strategic Plan

Significant progress on Strategic Investments, 2018-2019 period

Trans. Grid Investments	Mallorca-Menorca
in Spain €774.6m	Interconnection: laying
through 2019.	submarine electrical link

Western interconnection with France: marine studies to determine the best location for the

submarine cable section

Brazil. Acquisition of 50%of Argo Energía, €382m: Three

30-year electrical concessions. 1,430 km of high-voltage (500 kV and 230 kV) circuit and 11 substations. 30 year concession.

Peru investment, €219m:

• Entry into service of TES 2.
• Construction completed for TES 3, with entry into service in 2020.
• Environmental Impact Study for TES 4.
• Acquisition of 100% OF CCNCM**

Chile investment, €145m:

• Redenor: good construction pace for the line and substations.
• Redenor 2: Acquisition of100% Centinela Transmisión S.A., 3 lines, 265 km.

Acquisition of Hispasat, €933m #1 satellite infrastructure operator for Spain and Portugal,

#4 operator in Latin America, and #9worldwide.

Start-up of fabrication for new Amazonas Nexus satellite, with HTS*** technology. It will have coverage over North and South America, the North Atlantic corridor, and Greenland.

Total investment target for 2018-2022: €6.000bn. 46% progress in 2018-2019*

TES: Transmisora Eléctrica del Sur

2019 FY Results & Progress on 2018-20222 Strategic Plan.

February 2020

*Includes acquisition of Argo Energía.

**CCNCM: line Carhuaquero - Cajamarca Norte - Cáclic - Moyobamba. 372 km circuit of 220 kV and 138 kV and 4 substations.

***HTS: High Throughput Satellite.

15

Progress on the 2018-2022 Strategic Plan

Development of an investment portfolio in countries with stable regulation and a favourable economy

Peru. 1,686 km
Legend
Substation		Peru
Line 220 kV
Line 138 kV
	Moyobamba	Lima
Cáclic	Existing
Carhuaquero	Moyobamba
New
Cajamarca
Norte		Parinacota

	Azángaro		Pozo
Tintaya Nueva	Cóndores	Almonte
Tintaya Exist.	Pumiri	Nueva Pozo
			Almonte
	T18	San Román
		Puno
Socabaya
Montalvo	Moquegua
	Los Héroes

El Encuentro

El Tesoro

Esperanza

El Cobre

Mejillones

Los Changos

Santiago

Chile

Cumbre

Nueva Cardones

	Brazil. 1,430 km
	Legend
	Substation
Brazil	Line 500 kV
Line 230 kV

	Parnaíba III	Acaraú
Brasilia	Bacabeira
	Tinguá	Pecém

Janaúba-Mantiqueira

Samuel

Coletora

Porto Velho

Ariquemes

Jarú

Ji-Paraná

Chile. 1,729 km

Legend

Substation

Line 500 kV

Line 220 kV

PERU: 30 years concessions

1,558Km in operation

128 Km under construction

2020 Revenues: USD 53 m

CHILE: ownership of assets

1,471 Km in operation

258 Km under construction

2020 Revenues: USD 86 (*)

BRAZIL: 30 years concessions

1,110 Km in operation

320 Km under construction

1. Includes all revenues coming from TEN and ARGO, both companies consolidated using the equity method.

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February 2020

Progress 2018-2022 Strategic Plan

Telecommunications

Satellites in

orbit

Fibre + satellites 2019

Turnover:

306.8 M€ EBITDA: 234.7 M€

Note: pro-forma data, including all of 2019

Hispasat.

Reintel

Hispasat

• Reintel is positioned as the largest dark-fibre operator in Spain and guarantees transparent and neutral access.
• Generation of organic growth in the fibre business through increased penetration into existing customers and the development of new market segments.
• Unique positioning to provide fibre-optic infrastructure, towers and nodes to 5G technology.

• Hispasat: The 9th largest operator in the world, and the 4th largest satellite operator by revenue in Latin America with 30 years of experience
• Fleet of 9 satellites, which will be joined in 2022 by the Amazonas-Nexus with HTS technology.
• Leader in the distribution of content and connectivity services in the Spanish and Portuguese markets.
• Coverage of new demand for mobility and connectivity

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February 2020

Progress on the 2018-2022 Strategic Plan

Average EBITDA margin ˃ 76% during the period

• Efficiency and attraction of new capacities.
• Progressive reduction of external operating expenses in order to achieve target EBITDA margins.
• Adaptation of amortisation policies to the new compensation framework.

Financial discipline: Average Net Debt/EBITDA ~4x

8.000

10,0

8,0

6.000

6,0

4.000

4,0

2.000

											2,0
0												0,0
2014	2015	2016	2017	2018	2019	2020E	2021E	2022E
						Debt		Net Debt

2019 FY Results & Progress on 2018-20222 Strategic Plan.

February 2020

78.9% EBITDA margin

for 2018-2019

3.4x Net Debt/EBITDA

for 2018-2019

18

Progress on the 2018-2022 Strategic Plan

Our commitment: Sustainability of Net Profit and Dividends

• PAT > 1% CAGR 2018-2022.*

• Dividend Policy:		Average	per share during each period
o 2018: €0.89 per share.	Average dividend perdividendshare uring each period
o 2019: €1.05 per share.
o 2020-2022: at least €1 per share			€1.01
		€0.98
		2014-2019 Strategic Plan	2018-2022 Strategic Plan

Commitment to shareholder returns. Dividend yield above 5% during the 2019 year.

* Base year 2017

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February 2020

Contents

1. Results for Financial Year 2019 and Compliance with the 2014-2019 Plan.
2. Regulatory Aspects.
3. Progress on the 2018-2022 Strategic Plan.
4. Commitment to the Energy Transition. 2030 Horizon.

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February 2020

Commitment to the Energy Transition. 2030 Horizon.

Integrated National Energy And Climate Plan

Evolution of Installed Power for electricity (GW)

		Wind; 26GW
		PV Solar; 9GW
		Th Solar; 2GW
		Hydro; 17GW
		Thermal, Res; 1GW
2019		Others; 0GW	2030
	Pumping; 3GW

Nuclear; 7GW

Coal; 10GW

GCCGT; 26GW

Fuel+Gas; 2GW

Thermal non RES; 6GW

Storage; 0GW

Wind; 50GW

PV Solar; 39GW

Th Solar; 7GW

Hydro; 15GW

Thermal, Res; 2GW

Others; 1GW

Pumping; 7GW

Nuclear; 3GW

Coal; 0GW

GCCGT; 27GW

Fuel+Gas; 2GW

Thermal non RES; 6GW Storage; 3GW

• Reduction in thermal power: nuclear and elimination of coal
• Storage
• Renewable installation > 5 GW annual

Metrics for integration of renewables in the electricity sector

• Grid development: Development and strengthening of grids at pace with development of new renewable capacity.
• Grid access and connection: Optimisation of grid access capacity and transparency to provide indications for locating projects.
• National and international interconnections.
• Tools for flexibility: Storage.
• Promoting demand management and flexibility.

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February 2020

Commitment to the Energy Transition. 2030 Horizon.

Most significant projects for decarbonisation of the electricity sector

Integration of the European market

Decarbonisation of systems on islands

• Submarine interconnection via the Bay of Biscay
• • Interconnection 370 km in length.
  • Transmission capacity 2x 1000: Increase exchange capacity up to 5,000 MW.

• Second Peninsula-Balearic Islands link.
• Energy storage.
• Development of Transmission Grid in isolated systems.

• Trans-Pyrenean Interconnections
• • Projects of Common European Interest.
  • Projects included in the Comprehensive National Energy and Climate Plan (PNIEC)

Interconnection ratio in Spain
		15%
10%					2030 Target
8%			8%
6%
	7%	10%
4%	5%
			2020 Target
2%
0%
Situación actual (2019) Interconexión submarina	Interconexiones
		Golfo de Bizcaia	Transpirenaicas

2019 FY Results & Progress on 2018-20222 Strategic Plan.		22
February 2020

Thank you for your attention

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