• 2016 has been witness to significant investments made by Red Eléctrica in both Chile and Peru.
• The telecommunications business has become a long-term priority for the Red Eléctrica Group.
• The goal of a 5% to 6% annual increase in profit after tax and a dividend growth of 7% has been achieved.
• In 2017, Red Eléctrica will have a new sustainability model with a 2030 horizon.

Red Eléctrica plans to meet the objectives of its 2014-2019 Strategic Plan while prepares to face the challenges linked to the relevant role the Company will play in the energy transition, as José Folgado, Chairman of the Company, emphasised today at a press meeting held prior to the General Shareholders' Meeting which will be held tomorrow in Madrid.

The Chairman stated that at this moment, at the halfway stage of the strategic plan, the results are clearly positive, both with regard to the development of the regulated activity and that relating to the consolidation and expansion of the telecommunications business and the international activity in Chile and Peru.

Mr. Folgado expressed his satisfaction regarding the achievements of 2016, the first full year in which Red Eléctrica has had a CEO, because goals such as the 5% to 6% annual increase in profit after tax and a dividend growth of 7% have been achieved.

Solid results and the strengthening of the main solvency ratios

Regarding the results for 2016, he stressed that revenue reached €1,932 million, 0.3% less than the previous year. This figure includes the remuneration for transmission activity in 2015, which includes the facilities commissioned during that year; revenues associated to the provision of telecommunications services, €86 million; regulated revenue from system operation, €56 million, and the income derived from transmission activity abroad, €19.8 million.

Profit for the year amounted to €637 million, an increase of 5.1% year-on-year. Investments totalled €643 million, of which €399 million was earmarked primarily for the development of the transmission grid and €200 million for the acquisition of 50% of the Chilean company TEN.

Investments in 2016

Noteworthy among the actions carried out last year was the commissioning, in June, of the Majorca-Ibiza double link, the longest submarine cable in alternating current in the world. In addition, some facilities have been commissioned that strengthen the meshing of the transmission grid, such as the Boimente-Pesoz line in the Asturias-Galicia axis; the Mezquita-Morella line in the Aragón-Levante axis; the Godelleta substation in Valencia; the Torremendo substation and the Torremendo-San Miguel line from Salinas in the Torremendo axis in Murcia and Alicante, and the Sabinal substation in Gran Canaria.

In total, 674 kilometres of line has been commissioned, bringing the transmission grid to a total of 43,664 kilometres and 61 substation bays, increasing transformer capacity by 600 MVA.

At an international level, in 2016, the investment in Chile reached 379 million US dollars. The level of progress made on the Mejillones-Cardones 500 kilovolt (kV) transmission line, which is 600 km in length, is over 80% complete, and its commissioning is scheduled for the second half of the year.

Regarding Peru, Red Eléctrica is constructing the 220 kV Azángaro-Juliaca-Puno line and by the end of this year, work will begin on the 220 kV Montalvo-Los Héroes line. The planned investment in both projects is about 90 million US dollars, of which 19.6 million was made during 2016. Based on the progress made so far, it is foreseen that it will be commissioned between 2018 and 2019.

2016 was the year of the definitive consolidation of the telecommunications business and of the positioning of the Company as the neutral operator of reference in Spain in the management of dark fibre optic networks. In the last three years, the telecommunications business has contributed with 86 million euros per year to the Company’s revenue.

At the halfway stage of the 2014-2019 Strategic Plan

The Chairman took stock of the first three years of the 2014-2019 Strategic Plan and indicated that Red Eléctrica has already invested half of the total planned in the Company’s consolidated activities. In addition, steps forward have been made regarding investment in new tools for system operation, such as the energy storage, and in opportunities in electricity transmission in stable markets that offer an adequate level of profitability.

Mr. Folgado pointed out that significant operational efficiencies have been achieved, after the review of the operation and maintenance policies and that of the procurement and construction criteria. The greater requirement of unit costs of the operation and maintenance, approved at the end of 2015, represent a greater effort by Red Eléctrica in the review of these policies, while maintaining, at the same time, its quality standards in both construction and operation.

These accomplishments have been achieved by maintaining an average ratio of net debt solvency/EBITDA of approximately 3.5 times over the period, which has allowed the Company to maintain a credit rating above that of the sovereign rating.

An investment plan that lays the foundation for the future growth of the Company

José Folgado underlined that the forecasted investment plan will set the stage for the growth of Red Eléctrica, maintaining an investment level in 2017 similar to that of 2016, concentrating the remaining investment in 2018 and 2019.

Among the investments to be made in Spain, Mr. Folgado highlighted the project for the Soria-Chira pumped-storage hydropower station, as it is estimated that 60% will be invested during the period established for the strategic plan.

At an international level, the Company will continue to seek investment opportunities in countries with low-risk scenarios and stable regulatory frameworks, focusing on Latin America and paying special attention to projects in Chile and Peru.

Regarding investments beyond 2019, the Chairman stated that the Company's activity will be determined by the European Union's targets regarding the reduction of greenhouse gas emissions and the increased use of renewable energy in order to promote a more competitive, secure and sustainable energy system.

José Folgado also pointed out the unquestionable role that international interconnections will play in order to achieve this new energy model. In the case of Spain, investment will be concentrated on the interconnection through the Bay of Biscay, with an estimated cost of 1.9 billion euros, which is currently in the technical study phase. Additionally, there will be two other projects with a post 2020 horizon, which will cross the Pyrenees, one via the Basque Country or Navarra and another via Aragón, with estimated budgets of 900 million and 1.2 billion respectively and that will allow the exchange capacity between France and Spain to be increased up to 8,000 MW.

Corporate governance

According to Mr. Folgado, 2016 was very significant for Red Eléctrica in matters of corporate governance for several reasons, some of which are: the culmination of the process of separation of the positions of Chairman and CEO; the publication on the website of the Company's corporate governance story since its initial public offering in 1999; the annual self-assessment of the Board of Directors with the advice of independent external professionals, and the carrying out of a plan to raise awareness on the regulatory compliance system throughout the organisation.

Commitment to society and the environment

Red Eléctrica addresses all its projects from the point of view of ethics and the commitment to sustainability. José Folgado highlighted the respect for the natural and social environment as a basic principle of action for the Company. This commitment is present throughout the entire process associated to the development of new infrastructures, seeking at all times the solutions that generate the least possible environmental impact and promoting the participation of society, through ongoing dialogue.

All this is reflected in the social projects in which the Company collaborated on during 2016, representing an investment of more than 6.4 million euros, which represented more than 1% of the Company’s net profit.

Also, and as proof of Red Eléctrica's strong commitment to the environment, José Folgado has announced a new environmental plan that, with a budget of approximately 23 million euros, aims to improve the monitoring of the different planned actions, identify opportunities for ongoing improvement and promote the dissemination of the Company's environmental activity and its visibility.

A new sustainability model with a 2030 horizon

The Chairman announced the upcoming approval and implementation of the Sustainability Model of the Red Eléctrica Group, which was developed in 2016 and is based on the United Nations Sustainable Development Goals.

With a 2030 horizon, its purpose is to establish a common framework that brings together the actions undertaken in all the companies of the Group, in order to give a better response to stakeholders, improve efficiency and showcase the Company’s performance regarding sustainability.

Lastly, José Folgado confirmed that Red Eléctrica's main objective is to face the challenges of the energy transition, fulfilling its investment goals both in regulated activities and in those that represent an expansion of the business base, maintaining the quest for excellence in the field of good governance and corporate social responsibility.

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