consolidated financial statement

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(1)Consolidated. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. Financial Statement and Directors’ Report 2008.

(2) WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. 2 Acciona Consolidated Financial Statement and Directors’ Report. consolidated financial statement.

(3) A. CONsolidateD report | 4. 9. Investments in associates | 55. • Consolidated balance sheets for. 10. Interests in joint ventures | 59. 2008 and 2007 | 5. • Consolidated income statements for 2008 and 2007 | 7. • Consolidated statements of. 11. Current and non-current financial assets | 61 12. Biological assets | 65 13. Inventories | 65. 30. Proposed distribution of profit |131 31. Environmental matters |132 32. Earnings per share |136 33. Events after the balance sheet date |136. recognised income and expense. 14. Trade and other receivables | 67. 34. Related party transactions |138. for 2008 and 2007 | 9. 15. Cash and cash equivalents | 69. 35. Remuneration and other benefits. • Consolidated cash flow statements for 2008 and 2007 |13 1. Group activities |15 2. Basis of presentation of the. 16. Equity | 70 17. Provisions | 81 18. Bank borrowings and other. |140 36. Other disclosures concerning the board of directors |148. financial liabilities | 87. consolidated financial statements. 19. Risk management policy | 90. • APPENDIXES. and basis of consolidation |16. 20. Derivative financial instruments. i.- Group companies |150. 2.1. basis of presentation |16 2.2. Basis of consolidation |17 3. Principal accounting policies |20 3.1. adoption of new standards and interpretations issued | 20 3.2. Accounting policies | 21. | 94 21. Preference shares, debt. iii.- Companies accounted for using the. instruments and other held-for-. equity method |194. trading financial liabilities |102. iv.- Changes in the scope of. 22. Other current and non-current liabilities |104. 3.3. Accounting estimates and. 23. Tax matters |106. judgments | 35. 24. Discontinued operations and. 3.4. changes in accounting. non-current assets and liabilities. estimates and policies and. classified as held for sale |112. correction of fundamental error |36. ii.- Jointly controlled entities |166. 25. Guarantee commitments to third. consolidation |196 v.- Detail of consolidated reserves and translation differences | 206. B. Directors’ reporT | 210. • Corporate Governance Report | 238. functioning of the electricity. 26. Revenue |114. C. Remuneration policy report | 299. system | 37. 27. Expenses |117. • 2008 Report on remuneration. 4. Industry regulation and. parties |114. 5. Property, plant and equipment |4 3. 28. Segment reporting |121. 6. Investment property | 46. 29. Finance income and costs. 7. Goodwill | 48. and other income and. 8. Other intangible assets | 53. expenses for the year |130. 3 Acciona Consolidated Financial Statement and Directors’ Report. policy | 300. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. INDEX.

(4) WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. a.consolidated Balance Sheets.

(5) CONSOLIDATED BALANCE SHEETS FOR 2008 AND 2007 ASSETS (Thousands of euros). Note. 2008. 2007. Property, plant and equipment. 5. 17,236,470. 15,661,281. Investment property. 6. 615,913. 570,617. Goodwill. 7. 3,962,434. 5,218,702. Other intangible assets. 8. 3,845,609. 4,018,512. 11. 1,783,468. 1,271,533. Non-current financial assets Investments accounted for using the equity method. 9. 108,580. 214,434. Biological assets. 12. 6,689. 5,045. Deferred tax assets. 23. 1,016,110. 790,983. Other non-current assets. 132,262. 207,424. NON-CURRENT ASSETS. 28,707,535. 27,958,531. Biological assets. 12. --. --. Inventories. 13. 2,217,375. 2,141,515. Trade and other receivables. 14. 3,963,088. 4,156,619. Other current financial assets. 11. 210,351. 256,025. Current income tax assets. 23. 153,574. 158,429. 344,429. 424,333. 2,862,017. 1,565,933. Other current assets Cash and cash equivalents. 15. Non-current assets classified as held for sale and discontinued operations. 24. CURRENT ASSETS. TOTAL ASSETS. 5 ACCIONA Consolidated Financial Statement and Directors’ Report. --. 1,974,039. 9,750,834. 10,676,893. 38,458,369. 38,635,424. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. ACCIONA, S. A. and Subsidiaries.

(6) Note. Share capital. 2008. 2007. 63,550. 63,550. Retained earnings. 4,834,050. 5,025,264. Treasury shares. (159,978). (153,894). Translation differences. (347,602). (19,861). --. (85,157). Equity attributable to equity holders of the Parent. 4,390,020. 4,829,902. Minority interests. 1,928,998. 2,449,698. Interim dividend. EQUITY. 16. 6,319,018. 7,279,600. Preference shares, debt instruments and other held-for-trading financial liabilities. 21. 2,980,774. 3,426,217. Bank borrowings and other financial liabilities. 18. 15,448,610. 12,471,428. Deferred tax liabilities. 23. 2,337,367. 2,468,146. Provisions. 17. 1,275,756. 1,350,324. Other non-current liabilities. 22. 1,499,093. 1,337,060. 23,541,600. 21,053,175. NON-CURRENT LIABILITIES Preference shares, debt instruments and other held-for-trading financial liabilities. 21. 155,140. 104,669. Bank borrowings and other financial liabilities. 18. 2,384,897. 3,623,193. 4,482,569. 4,325,458. 450,223. 219,119. Trade and other payables Provisions Current income tax liabilities. 23. 222,052. 138,477. Other current liabilities. 22. 902,870. 1,199,956. Liabilities classified as held for sale and discontinued operations. 24. --. 691,777. 8,597,751. 10,302,649. 38,458,369. 38,635,424. CURRENT LIABILITIES. TOTAL EQUITY AND LIABILITIES. 6 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. EQUITY AND LIABILITIES (Thousands of euros).

(7) CONSOLIDATED INCOME STATEMENTS FOR 2008 AND 2007 (continued on next page). EQUITY AND LIABILITIES (Thousands of euros). Note. 2008. 2007. 26. 12,665,301. 7,952,552. 1,647,660. 875,872. 240,872. 215,226. Revenue Other income Changes in inventories of finished goods and work in progress Procurements. 27. (5,891,257). (2,827,425). Staff costs. 27. (1,724,424). (1,342,222). 5, 6 and 8. (1,149,083). (517,310). 27. (4,111,424). (3,467,198). 1,677,645. 889,495. Depreciation and amortisation charge and change in allowances Other expenses PROFIT FROM OPERATIONS Finance income. 29. 336,284. 671,507. Finance costs. 29. (1,282,389). (722,839). (20,909). (32,078). --. --. --. --. (73,055). (5,944). 9. 20,025. 8,996. 26. 94,659. 287,869. (6,611). (23,753). 745,649. 1,073,253. Exchange differences Gains resulting from changes in fair value of financial instruments at fair value. 26. Gains resulting from changes in value of non-financial assets at fair value Net impairment losses (recognised)/reversed Result of companies accounted for using the equity method Gain on disposal of non-current assets Other gains and losses PROFIT BEFORE TAX FROM CONTINUING OPERATIONS. 7 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. ACCIONA, S. A. and Subsidiaries.

(8) CONSOLIDATED INCOME STATEMENTS FOR 2008 AND 2007 (continued from previous page). EQUITY AND LIABILITIES (Thousands of euros). Note. 2008. 2007. 23. (178,318). (109,585). 567,331. 963,668. 87,785. 48,269. 655,116. 1,011,937. (190,645). (61,520). 464,471. 950,417. Income tax expense PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS Post-tax profit of discontinued operations PROFIT FOR THE YEAR Minority interests. 16. PROFIT ATTRIBUTABLE TO THE PARENT BASIC EARNINGS PER SHARE (Euros). 32. 7.48. 15.31. DILUTED EARNINGS PER SHARE (Euros). 32. 7.48. 15.31. 8 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. ACCIONA, S. A. and Subsidiaries.

(9) CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR 2008 (continued on next page). Amount. (Thousands of euros). Tax Effect. Total. A) CONSOLIDATED PROFIT FOR THE YEAR. 655,116. 1. Profit attributable to the Parent. 464,471. 2. Minority interests. 190,645. B) INCOME AND EXPENSES RECOGNISED DIRECTLY IN EQUITY:. (1,470,281). 419,140. (1,051,141). --. --. --. (25,233). 7,495. (17,738). (25,233). 7,495. (17,738). --. --. --. (534,557). 150,688. (383,869). --. --. --. (35,880). --. (35,880). (828,154). 248,446. (579,708). (47,269). 12,755. (34,514). --. --. --. 812. (244). 568. --. --. --. 1. Revaluation / (reversal of the revaluation) of property, plant and equipment and intangible assets 2. Measurement of financial instruments: a) Available-for-sale financial assets b) Other income / (expenses) 3. Cash flow hedges 4. Step acquisitions (IFRS 3) 5. Additional share acquisitions 6. Translation differences 7. Actuarial gains and losses and other adjustments 8. Companies accounted for using the equity method 9. Gains on disposal of treasury shares 10. Other income and expenses recognised directly in equity. 9 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. ACCIONA, S. A. and Subsidiaries.

(10) CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR 2008 (continued). Amount. Tax Effect. Total. 10,525. (3,157). 7,368. 1. Measurement of financial instruments:. --. --. --. a) Available-for-sale financial assets. --. --. --. b) Other income / (expenses). --. --. --. 10,525. (3,157). 7,368. 3. Translation differences. --. --. --. 4. Companies accounted for using the equity method. --. --. --. 5. Other income and expenses recognised directly in equity. --. --. --. (1,459,756). 415,983. (388,657). (Thousands of euros). C) TRANSFERS TO THE CONSOLIDATED INCOME STATEMENT:. 2. Cash flow hedges. TOTAL RECOGNISED INCOME / (EXPENSES) (A+B+C) a) Attributable to the Parent. (280,469). b) Attributable to minority interests. (108,188). 10 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. ACCIONA, S. A. and Subsidiaries.

(11) CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR 2007 (continued on next page). Amount. (Thousands of euros). Tax Effect. A) CONSOLIDATED PROFIT FOR THE YEAR. Total 1,011,937. 1. Profit attributable to the Parent. 950,417. 2. Minority interests. 61,520 (294,715). 125,766. (168,949). 1. Revaluation / (reversal of the revaluation) of property, plant and equipment and intangible assets. --. --. --. 2. Measurement of financial instruments:. (383,853). 125,293. (258,560). a) Available-for-sale financial assets. (383,853). 125,293. (258,560). --. --. --. 27,822. (6,760). 21,062. 114,698. (5,390). 109,308. --. --. --. (47,685). 9,971. (37,714). (6,002). 2,751. (3,251). --. --. --. 305. (99). 206. --. --. --. B) INCOME AND EXPENSES RECOGNISED DIRECTLY IN EQUITY:. b) Other income / (expenses) 3. Cash flow hedges 4. Step acquisitions (IFRS 3) 5. Additional share acquisitions 6. Translation differences 7. Actuarial gains and losses and other adjustments 8. Companies accounted for using the equity method 9. Gains on disposal of treasury shares 10. Other income and expense recognised directly in equity. 11 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. ACCIONA, S. A. and Subsidiaries.

(12) CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR 2007 (continued). Amount. Tax effect. Total. (5,552). 1,605. (3,947). 1. Measurement of financial instruments:. --. --. --. a) Available-for-sale financial assets. --. --. --. b) Other income / (expenses). --. --. --. (5,552). 1,605. (3,947). 3. Translation differences. --. --. --. 4. Companies accounted for using the equity method. --. --. --. 5. Other income and expenses recognised directly in equity. --. --. --. (300,267). 127,371. 839,041. (Thousands of euros). C) TRANSFERS TO THE CONSOLIDATED INCOME STATEMENT:. 2. Cash flow hedges. TOTAL RECOGNISED INCOME / (EXPENSES) (A+B+C) a) Attributable to the Parent. 794,771. b) Attributable to minority interests. 44,270. 12 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. ACCIONA, S. A. and Subsidiaries.

(13) CONSOLIDATED CASH FLOW STATEMENTS FOR 2008 AND 2007 (continued). 2008. 2007. 1,181,120. 224,186. 745,649. 1,073,253. 1,882,523. 188,959. 1,315,907. 521,468. 566,616. (332,509). Changes in working capital. (673,939). (640,671). Other cash flows from operating activities:. (773,113). (397,355). (1,413,894). (820,321). (Thousands of euros). CASH FLOWS FROM OPERATING ACTIVITIES Consolidated profit for the year before tax Adjustments for: Depreciation and amortisation Other adjustments to profit (net). Interest paid Interest received. 592,704. 742,109. Income tax recovered (paid). (76,211). (372,449). Other amounts received from (paid for) operating activities. 124,288. 53,306. (619.488). (3.171.555). (3,246,600). (3,990,177). (137,962). (1,830,537). (3,108,638). (2,159,640). 2,627,303. 876,504. 2,318,928. 319,947. 308,375. 556,557. CASH FLOWS FROM INVESTING ACTIVITIES Payments due to investment: Group companies, associates and business units Property, plant and equipment, intangible assets and investment property Proceeds from disposals: Group companies, associates and business units Property, plant and equipment, intangible assets and investment property Other cash flows from investing activities: Dividends received Other amounts received from (paid for) investing activities. 13 Acciona Consolidated Financial Statement and Directors’ Report. (191). (57,882). 12,753. 14,530. (12,944). (72,412). WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. ACCIONA, S. A. and Subsidiaries.

(14) CONSOLIDATED CASH FLOW STATEMENTS FOR 2008 AND 2007 (continued). 2008. 2007. 734,452. 2,900,958. (7,233). (19,020). (7,233). (20,184). --. 1,164. 1,052,132. 3,050,160. 1,052,132. 3,050,160. (344,601). (234,403). 34,154. 104,221. 34,154. 104,221. NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS. 1,296,084. (46,411). CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR. 1,565,933. 1,612,344. CASH AND CASH EQUIVALENTS AT END OF YEAR. 2,862,017. 1,565,933. (Thousands of euros). CASH FLOWS FROM FINANCING ACTIVITIES Proceeds and (payments) relating to equity instruments: Acquisition Disposal Proceeds and (payments) relating to financial liability instruments: Issue Dividends and returns on other equity instruments paid Other cash flows from financing activities Other amounts received from (paid for) financing activities. COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF YEAR Cash on hand and at banks. 1,812,508. 517,567. Other financial assets. 1,049,509. 1,048,366. TOTAL CASH AND CASH EQUIVALENTS AT END OF YEAR. 2,862,017. 1,565,933. 14 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. ACCIONA, S. A. and Subsidiaries.

(15) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2008 1 group activities ACCIONA, S.A. (“the Parent” or “the Company”) and its subsidiaries compose the ACCIONA Group (“ACCIONA” or “the Group”). ACCIONA, S.A.’s registered office and headquarters are in Alcobendas (Madrid), at Av. Europa, 18. The ACCIONA Group companies operate in several industries through the following major divisions: • ACCIONA Infrastructure: including construction and engineering activities and transport and hospital concessions. • ACCIONA Real Estate: real estate portfolio and property development. • ACCIONA Energy: including the various industrial and commercial activities of the electricity business, ranging from the construction of wind farms to the generation, distribution and retailing of various energy sources. • ACCIONA Logistics and Transport Services: this division is an integral provider of passenger and goods transportation services (land, sea and air). • ACCIONA Urban and Environmental Services: carries on activities relating to urban services and environmental protection, and also performs all kinds of activities, work and services, specific or related to the water cycle. • Other activities: businesses relating to fund management and stock market brokerage, wine production and other investments. • Business activity of the Endesa Group: this became a new segment for the ACCIONA Group in 2007, since in the year ACCIONA acquired joint control of the Endesa Group with a 25.01% holding (see Note 2-2.h). The Endesa Group’s object is to carry on activities in the electricity business in its various industrial and commercial areas; the exploitation of primary energy resources of all types; the provision of. industrial services, particularly in the areas of telecommunications, water and gas and those preliminary or supplementary to the business activities composing the Group’s object, and the management of the corporate Group comprising investments in other companies. With respect to the ownership interest in Endesa, Note 33, “Events after the Balance Sheet Date”, includes information on the agreement entered into on 20 February 2009 between the ACCIONA Group and Enel, S.p.A. relating to the transfer to the latter of all the shares held by the ACCIONA Group in Endesa, S.A. The agreement, subject to compliance with certain conditions precedent, also provides for the dissolution of the agreements reached to exercise joint control over Endesa, S.A. and will give rise to the exclusion of Endesa, S.A. from the scope of consolidation of the ACCIONA Group in 2009, once all of the conditions precedent determining the effectiveness of the transfer have been met. Also, the debt relating specifically to the acquisition of Endesa (see Note 18) will foreseeably be offset by the amounts received from this transaction. In accordance with IFRS 3 and IAS 10, the resulting effects and the related gains will be recognised when the agreements become effective. Note 28, “Segment Reporting”, and other notes to the accompanying consolidated financial statements include detailed information relating to the assets, liabilities and transactions carried out in each of the above businesses, particularly with respect to Endesa, which is considered to be a segment in itself.. 15 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. ACCIONA, S. A. and Subsidiaries (Consolidated group).

(16) 2.1 Basis of presentation The consolidated financial statements for 2008 of the ACCIONA Group were prepared by the directors of ACCIONA, S.A. at the Board of Directors Meeting held on 25 February 2009, so that they present fairly the Group’s consolidated equity and financial position at 31 December 2008 and 2007, and the results of its operations, the changes in the consolidated statement of recognised income and expense and the consolidated cash flows in the years then ended. They were prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, in conformity with Regulation (EC) no. 1606/2002 of the European Parliament and of the Council. The principal mandatory accounting policies and measurement bases applied, the alternative treatments permitted by the relevant legislation in this connection and the standards and interpretations issued but not yet in force at the date of preparation of these consolidated financial statements are summarised in Note 3. These consolidated financial statements were prepared on the basis of the accounting records kept by the Parent and by the other Group companies. These records include the figures relating to the joint ventures, groupings and consortia in which the Group companies participate, which are proportionately consolidated through the inclusion of the proportion of the assets, liabilities and transactions of these entities relating to the Group’s ownership interest therein, after the appropriate eliminations of asset and liability balances and inter-company transactions in the year. The ACCIONA Group’s consolidated financial statements for 2007 were approved by the shareholders at the Annual General Meeting on 19 June 2008. The 2008. consolidated financial statements of the Group and the 2008 financial statements of the Group companies have not yet been approved by their shareholders at the respective Annual General Meetings. However, the Parent’s Board of Directors considers that the aforementioned financial statements will be approved without any material changes. As permitted by IFRS 3 (paragraph 62), the provisional recognition of the acquisition of 25.01% of the Endesa Group at 31 December 2007 was reviewed in 2008 (within the twelve-month period permitted by the standard) following completion of the valuation of the Endesa Group’s assets and liabilities which allowed the goodwill to be definitively allocated. In accordance with IFRS 3 and IAS 8, the Group restated the 2007 financial statements which are presented for comparison purposes in the accompanying consolidated financial statements, in relation to the recognition of this business combination. Consequently, the aforementioned financial statements differ from those included in the 2007 financial statements approved by the shareholders at the Annual General Meeting. The Group also restated all of the related comparative information included in the accompanying consolidated financial statements. The impact of the definitive allocation of the goodwill of Endesa, S.A. is detailed in Note 7. These consolidated financial statements are presented in thousands of euros (unless stated otherwise) because the euro is the functional currency of the principal economic area in which the ACCIONA Group operates. Foreign operations are accounted for in accordance with the policies established in Notes 2.2-g and 3.2-p.. 16 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. 2 Basis of presentation of the consolidated financial statements and basis of consolidation.

(17) a. Consolidation methods The Group’s subsidiaries, considered to be the companies over which effective control is exercised by virtue of ownership of a majority of the voting rights in their representation and decision-making bodies, were fully consolidated (see Appendix I). Joint ventures -entities managed jointly with third parties on the basis of contractual arrangements- were proportionately consolidated (see Appendix II). Associates, i.e. the companies not classified as subsidiaries or joint ventures over whose management the Group is in a position to exercise significant influence, were accounted for using the equity method (see Appendix III). As a general rule, associates are deemed to be those companies in which the Group holds more than 20% of the share capital or of the voting power in its governing bodies. In addition, certain companies were considered to be associates, even though the aforementioned percentage was not reached, because significant influence is deemed to exist (basically through membership of the Board of Directors and/or significant transactions with the associate). b. Eliminations on consolidation All material balances and effects of the transactions performed among the subsidiaries, associates and joint ventures were eliminated on consolidation. The corresponding gains on transactions with associates and jointly controlled entities are eliminated to the extent of the Group’s ownership interest in the share capital thereof. Exceptionally, the profits and losses on internal transactions with Group companies, jointly controlled entities or associates in connection with certain concession-related activities were not eliminated. c. Uniformity The Spanish resident companies included in the scope of consolidation were consolidated on the basis of their individual financial statements prepared in accordance with the Spanish National Chart of Accounts and foreign companies were consolidated in accordance with local standards. All material adjustments required to adapt these financial statements to International Financial Reporting Standards and/or make them compliant with the Group’s accounting policies were considered in the consolidation process. d. Subsidiaries “Subsidiaries” are defined as companies over which the Parent has the capacity to exercise effective control; control is, in general but not exclusively, presumed to exist when the Parent owns directly or indirectly more than half of the voting. power of the investee. In accordance with IAS 27, control is the power to govern the financial and operating policies of a company so as to obtain benefits from its activities. The financial statements of the subsidiaries are fully consolidated with those of the Parent. Accordingly, all material balances and effects of the transactions between consolidated companies are eliminated on consolidation. On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition on which control is obtained, as indicated in IFRS 3 - Business Combinations. Any excess of the cost of acquisition over the fair values of the identifiable net assets is recognised as goodwill. If the cost of acquisition is less than the fair values of the identifiable net assets, the difference is credited to profit and loss on the acquisition date. The results of subsidiaries acquired during the year are included in the consolidated income statement from the date of acquisition to year-end. Similarly, the results of subsidiaries disposed of during the year are included in the consolidated income statement from the beginning of the year to the date of disposal. The interest of minority shareholders is stated at the minority’s proportion of the fair values of the assets and liabilities recognised. The share of third parties of the equity of their investees is presented within the Group’s equity under “Minority Interests” in the consolidated balance sheet. Similarly, their share of the profit or loss for the year is presented under “Minority Interests” in the consolidated income statement. e. Joint ventures Joint ventures are deemed to be ventures in which the investee (jointly controlled entity) is jointly managed by a Group company and one or several unrelated third parties, none of which individually exercises control over the investee. The financial statements of jointly controlled entities are proportionately consolidated with those of the Company and, therefore, the aggregation of balances and subsequent eliminations are only made in proportion to the Group’s ownership interest in the capital of these entities. When a joint venture is acquired, its assets, liabilities and contingent liabilities are measured at their fair values at the date of acquisition or, in the case of step. 17 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. 2.2 Basis of consolidation.

(18) The assets and liabilities relating to jointly controlled operations and the Group’s share of the jointly controlled assets are recognised in the consolidated balance sheet classified according to their specific nature. Similarly, the Group’s share of the income and expenses of joint ventures is recognised in the consolidated income statement on the basis of the nature of the related items. f. Equity method In the consolidated financial statements, investments in associates are accounted for using the equity method, i.e. at the Group’s share of net assets of the investee, after taking into account the dividends received therefrom and other equity eliminations. The value of these investments in the consolidated balance sheet includes, where applicable, the goodwill arising on the acquisition thereof. In order to present results uniformly, the Group’s share of the profit or loss before and after tax of associates is disclosed in the consolidated income statement. g. Translation differences On consolidation, the assets and liabilities of the Group’s foreign operations with a functional currency other than the euro are translated to euros at the exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly. Equity and reserves are translated at the historical exchange rates. Any translation differences arising are classified as equity. Such translation differences are recognised as income or as expenses in the year in which the operation is disposed of. h. Changes in the scope of consolidation Appendix IV includes the changes in the scope of consolidation in 2008 and 2007. Of the detail shown in Appendix IV, the main change in the scope of consolidation in 2008 was the transfer to C3 Investments II, Sarl of 75% of the share capital of Mémora Inversiones Funerarias, S.L. and the sale to FCC Construcción, S.A. and Corporación Financiera Caja Madrid, S.A. of the ownership interest held by the. ACCIONA Group in the following concession operators: Concesiones de Madrid, S.A., Ruta de los Pantanos, S.A., Transportes Ferroviarios de Madrid, S.A., Tranvía de Parla, S.A. and Túnel de Envalira, S.A. The main change in the scope of consolidation in 2007 was the inclusion of 25.01% of the Endesa Group as a joint venture from 1 October 2007, following the steps indicated below: At 31 December 2006, the ACCIONA Group held an ownership interest of 20.3% of the share capital of Endesa, S.A. (see Note 11), which was recognised under “Available-for-Sale Financial Assets” at a cost of EUR 7,303 million. In January 2007 ACCIONA, S.A. acquired an additional 0.733% for EUR 279 million through ordinary purchases in the secondary market. Subsequently, on 26 March 2007, ACCIONA, S.A. and Enel, S.p.A entered into an agreement to jointly manage Endesa, S.A. The two companies undertook to launch a takeover bid for all of the share capital of Endesa, S.A. As a result, on 11 April 2007, they presented to the Spanish National Securities Market Commission (CNMV), jointly and severally, the request for authorisation of a takeover bid for Endesa, S.A. shares. On 25 July 2007, the Board of the CNMV authorised the takeover bid for all of the share capital of Endesa, S.A., previously launched by ACCIONA, S.A. and Enel Energy Europe, S.r.L. Lastly, on 5 October 2007, the CNMV announced the successful outcome of the takeover bid. As a result of the settlement of the takeover bid, ACCIONA, S.A. acquired an additional holding of 3.974% for EUR 1,690 million and the remaining shares acquired in the takeover were owned by Enel, S.p.A. Accordingly, at that date, the ACCIONA Group held a total ownership interest of 25.01% in the share capital of Endesa, S.A. Once the takeover bid was successfully completed, the aforementioned agreement between ACCIONA and Enel for the implementation of their joint management project became effective and, accordingly, for accounting purposes, the date of first-time consolidation was 1 October 2007 and, from that date, the ownership interest in the capital of Endesa became an interest in a jointly controlled entity to be proportionately consolidated in the ACCIONA Group and, therefore, the aggregation of balances and subsequent eliminations are made only in proportion to the Group’s ownership interest in the capital of Endesa, S.A. On the date of. 18 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. acquisitions described in IFRS 3 Business Combinations, the dates of successive share purchases until control is achieved. Any excess of the cost of acquisition over the fair values of the identifiable net assets is recognised as goodwill. If the cost of acquisition is less than the fair values of the identifiable net assets, the difference is credited to profit and loss on the acquisition date..

(19) • Proportional distribution of the voting rights of Endesa, S.A. The agreement includes the required provisions regarding each company’s participation in Endesa’s control and governing bodies and participation in strategic decisionmaking and in the supervision of the management of its operations that guarantee joint control over Endesa • Generation of synergies from the two companies’ energy experience. To this end, a given number of Endesa shares (to enable this new company to retain control over Endesa) will foreseeably be contributed to a newly-created company. ACCIONA will own 50.01% of the share capital of this holding company and Enel will own the remainder. The other shares of Endesa, S.A. that are directly owned by Enel must vote the same way as the new holding company. This contribution has not yet been made. • The combination of ACCIONA’s and Endesa’s renewable energy assets and the contribution thereof to a newly-created renewable energy company under the majority control of ACCIONA. This company will be managed by ACCIONA. This combination has not yet been made. • From the third year onwards up until the tenth year in which the agreement is in place, ACCIONA is entitled to sell to Enel, which is obliged to buy, the shares of Endesa at a market price not lower than the acceptance price of the takeover bid. In accordance with provision 10 of this agreement, ACCIONA, S.A. may exercise this put option unconditionally and irrevocably at any time between 27 March 2010 and 26 March 2017. Due to the inseparable nature of the agreement between ACCIONA and Enel and the absence of an active reference market in order to measure this option, management of the ACCIONA Group decided not to recognise any amount in this connection in the accompanying consolidated financial statements as it considers it not to be a financial instrument that should be measured at fair value.. These acquisitions were financed as described in Note 18. In order to facilitate the success of the takeover bid, on 2 April 2007, ACCIONA and Enel entered into an agreement with E.ON, A.G. whereby, once ACCIONA and Enel acquired control of Endesa, they would commence a divestment of certain assets of Endesa (subsidiaries in Europe and certain operating assets in Spain), which were classified in the 2007 consolidated financial statements as assets classified as held for sale and discontinued operations which are detailed in Note 24. In 2008 these assets were sold as described in Note 24, giving rise to a gain of EUR 1,134 million. The main aggregates of the Endesa Group included in these consolidated financial statements are contained in Note 28 on segment reporting. Had this change in the scope of consolidation taken place at the beginning of 2007, the balances of the following accounts would have changed by the amounts shown below with respect to the amounts included in the accompanying consolidated income statements: (Thousands of euros). Revenue. 2007 3,193,277. Profit for the year. 464,588. Profit for the year attributable to the Parent. 363,060. It should be noted that the foregoing figures do not take into consideration the consolidation adjustments that would have been made in relation to the elimination of dividends from Endesa, S.A. amounting to EUR 428 million that, had this change in the scope of consolidation taken place at the beginning of 2007, would have been eliminated. Similarly, had this change in the scope of consolidation taken place at the beginning of 2007, the balance of the Group’s borrowing costs incurred would have been higher since the debt incurred to acquire the last tranche of shares after the resolution of the takeover bid only incurred a finance cost in the last quarter of 2007.. 19 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. first-time consolidation, the goodwill was calculated by treating the transaction as a step acquisition pursuant to IFRS 3 (see Notes 3.2-c and Note 7). The ACCIONA - Enel agreement was for a minimum period of ten years, automatically renewable for additional periods of five years, and governed the mechanisms for establishing joint control over Endesa. The main terms and conditions of the agreement are summarised as follows:.

(20) 3.1 Adoption of new standards and interpretations issued IFRIC 11 IFRS 2 – Group and Treasury Share Transactions and the amendment to IAS 39 and IFRS 7 – Reclassification of Financial Assets became effective in 2008. The adoption of these new interpretations and amendments did not have any impact. on the Group’s consolidated financial statements. in 2007 the ACCIONA Group adopted IFRS 7 Financial Instruments: Disclosures, which entered into force on 1 January 2007 for the years beginning on or after that date, and the amendments to IAS 1 - Presentation of Financial Statements in relation to capital disclosures.. At the date of preparation of these consolidated financial statements, following are the most significant standards and interpretations which had been published by the IASB but had not yet come into force, either because they became effective after the date of the consolidated financial statements or because they have not yet been adopted by the European Union.. Standards and amendments to standards:. Obligatory application in the years beginning on or after:. IFRS 8. Operating Segments. 1 January 2009. Revision of IAS 23. Borrowing Costs. 1 January 2009. Revision of IAS 1. Presentation of Financial Statements. 1 January 2009. Revision of IFRS 3 (*). Business Combinations. Amendment to IAS 27 (*). Consolidated and Separate Financial Statements. Amendment to IFRS 2. Share-based Payment. 1 January 2009. Amendment to IAS 32 and IAS 1. Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation. 1 January 2009. Amendment to IFRS 1 and IAS 27. Cost of an Investment in an Entity’s Separate Financial Statements. 1 January 2009. Amendment to IAS 39 (*). Eligible Hedged Items. 1 July 2009 1 July 2009. 1 July 2009. Interpretations: IFRIC 12. Service Concession Arrangements. (* *). IFRIC 13. Customer Loyalty Programmes. 1 January 2009. IFRIC 14. IAS 19-The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. 1 January 2009. IFRIC 15 (*). Agreements for the Construction of Real Estate. 1 January 2009. IFRIC 16 (*). Hedges of a Net Investment in a Foreign Operation. 1 October 2008. IFRIC 17 (*). Distributions of Non-Cash Assets to Owners. 1 July 2009. (*) Standards and interpretations not adopted by the European Union at the date of preparation of these consolidated financial statements. (* *) This interpretation has not yet been endorsed. As published by the EU’s Accounting Regulatory Committee (ARC), this interpretation will foreseeably be approved for use in the EU at a new effective date which would defer obligatory application until 2010. (The initial theoretical date established by the IASB for the entry into force of the interpretation was 1 January 2008).. 20 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. 3 Principal accounting policies.

(21) Except as described in the preceding paragraph, the Group’s directors do not expect significant changes to arise as a result of the introduction of other standards, amendments and interpretations that have been published but not yet come into force, since they are to be applied prospectively, the amendments relate to presentation and disclosure issues and/or the matters are not applicable to the Group’s operations.. 3.2 Accounting policies The principal accounting policies used in preparing the Group’s consolidated financial statements, in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, were as follows: A) Property, plant and equipment Property, plant and equipment acquired for use in the production or supply of goods or services or for administrative purposes are stated in the balance sheet at the lower of acquisition or production cost (less any accumulated depreciation) and their recoverable amounts. The costs of expansion, modernisation or improvements leading to increased productivity, capacity or efficiency or to a lengthening of the useful lives of the assets are capitalised. Acquisition cost includes professional fees and borrowing costs incurred during the construction period that are directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use. The interest rate used is that corresponding to specific-purpose financing or, in the absence thereof, the average financing rate of the company making the investment.. The acquisition cost of assets acquired before 31 December 2003 includes, where appropriate, the asset revaluations permitted in the various countries to adjust the value of the property, plant and equipment for the effect of inflation until that date. The balances of assets retired as a result of modernisation or for any other reason are derecognised from the related cost and accumulated depreciation accounts. In-house work on non-current assets is recognised at accumulated cost (external costs, internal costs calculated on the basis of in-house consumption of warehouse materials, and manufacturing costs incurred). Upkeep and maintenance costs are charged to the income statement for the year in which they are incurred. In general, depreciation is calculated using the straight-line method, on the basis of the acquisition cost of the assets less their residual value; the land on which the buildings and other structures stand has an indefinite useful life and, therefore, is not depreciated. The companies depreciate their property, plant and equipment over the years of estimated useful life, giving rise in 2008 to the following annual depreciation rates::. Property, plant and equipment assigned to the electricity business Generating facilities: Hydroelectric power plants. 2 - 3%. Coal-fired/fuel-oil power plants. 3 - 4%. Nuclear power plants. 3 - 3%. Combined cycle plants. 4 - 10%. Renewable energy plants. 3 – 5%. Transmission and distribution facilities: High-voltage network. 3 – 5%. Low- and medium-voltage network. 3 – 5%. Measuring and remote control equipment. 3 – 10%. Other fixtures. 4 – 25%. 21 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. IFRIC 12 Service Concession Arrangements defines service concessions as arrangements whereby a government or other public entity grants contracts for the supply of public services, such as roads, airports, hospitals, water and electricity supply to private-sector operators, which are areas of business the Group participates in. The government retains control over the assets but the private operator is responsible for the construction, management and maintenance of the public infrastructure. The interpretation addresses the manner in which service concession operators should apply existing IFRSs in the recognition of the rights and obligations assumed in this type of arrangement. This IFRIC has not yet been adopted by the European Union. 2010 will foreseeably be the year of the new effective date of obligatory application of this IFRIC once it has been approved. The Group’s directors are currently assessing the impact of the application of this interpretation on the consolidated financial statements..

(22) Buildings. 2 – 10%. Special plant. 3 – 30%. Machinery . 5 – 33%. Furniture . 5 – 33%. Computer hardware. 13 – 33%. Transport equipment. 7 – 25%. Other items of property, plant and equipment. 2 – 33%. The Endesa Group’s nuclear power plants have an estimated useful life of 40 years. These power plants require administrative authorisation in order to operate. The operating permits granted to these plants at the date of preparation of these financial statements do not cover their full estimated useful life, since the permits are generally granted for 30 years, which is shorter than the useful life of the facilities, and the permits are not renewed until they are close to expiry. The directors consider that these permits will be renewed to cover at least the currently estimated 40 years of operations of the power plants. Revertible assets For operations which have a finite operating period, the items of property, plant and equipment must revert to the related entities at the end of which, the annual depreciation charge is recognised so that the accumulated amount sufficiently covers the estimated carrying amount of the revertible asset at the time of reversion plus any expenses required to effect its reversion. Assets related to the closure of facilities The future costs that the Endesa Group will have to incur in respect of the closure of its facilities are capitalised to the cost of the asset, at present value, and the related provision is recognised. The Endesa Group reviews each year its estimate of these future costs, increasing or decreasing the value of the asset in question based on the results of this estimate. In the case of nuclear power plants, this provision includes the amount that the Group estimates that it will have to incur until, pursuant to Royal Decree 1349/2003, of 31 October, and Law 24/2005, of 18 November, the public radioactive waste management entity Endesa assumes responsibility for the decommissioning of these plants.. Finance leases Assets held under finance leases are recorded in the corresponding asset category and are depreciated over their expected useful lives on the same basis as owned assets. Property, plant and equipment financed with project finance Through subsidiaries or associates, the ACCIONA Group has invested mainly in transport, energy, water supply and hospital infrastructures that are operated by subsidiaries, jointly controlled entities or associates and which are financed under project finance arrangements. These financing structures are applied to projects capable in their own right of providing sufficient guarantees to the participating banks with regard to the repayment of the funds borrowed to finance them. Each project is usually performed through specific companies in which the project’s assets are financed, on the one hand, through a contribution of funds by the developers, which is limited to a given amount, and on the other, generally of a larger amount, through borrowed funds in the form of long-term debt. The debt servicing of these credit facilities or loans is mainly supported by the cash flows generated by the project in the future and by security interests in the project’s assets. These assets are valued at the costs directly allocable to construction until they come into service (studies and designs, compulsory purchases, reinstatement of services, project execution, project management and administration expenses, installations and facilities and similar items) and the portion relating to other indirectly allocable costs, to the extent that they relate to the construction period. Also included under this heading are the borrowing costs incurred prior to the entry into operation of the assets arising from the external financing thereof. Capitalised borrowing costs arise from specific borrowings expressly used for the acquisition of an asset. Property, plant and equipment related to concession businesses Through subsidiaries or associates, the ACCIONA Group has invested mainly in transport, energy, water supply and hospital infrastructures that are operated by subsidiaries, jointly controlled entities or associates (concession operators) and which are related to concession agreements, the detail being as follows: • The concession assets are owned by the concession grantor in most cases. • The concession provider controls or regulates the service offered by the concession operator and the conditions under which it should be provided.. 22 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. Other assets.

(23) In November 2006 the IASB approved IFRIC 12 relating to the accounting treatment for concession arrangements, which was expected to come into force on 1 January 2008. This IFRIC has not yet been adopted by the European Union. 2010 will foreseeably be the year of the new effective date of obligatory application of this IFRIC once it has been approved. Since this standard has not yet been approved (see Note 3.1), the ACCIONA Group has used the same methods as in the previous year. The most significant accounting methods used by the ACCIONA Group in relation to its concession arrangements are as follows: • Capitalisation of the borrowing costs incurred during the construction period and non-capitalisation of the borrowing costs after the entry into service of the related assets. • Depreciation of the concession infrastructure on a straight-line basis over the concession term. • Concession operators cover all the investment made plus the costs considered necessary to return the assets in working order on completion of the concession term by way of amortisation.. Each year the Group determines the fair value of its investment property items based on appraisals undertaken by professional valuers or in-house appraisals (see Note 6). Investment property is depreciated on a straight-line basis over the years of estimated useful life of the assets, which constitute the period over which the companies expect to use them. The average depreciation rate is as follows:. Annual depreciation rates Buildings held for rental. 2 – 20%. C) Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities, including contingent liabilities of a subsidiary or jointly controlled entity at the date of acquisition or, in the case of step acquisitions described in IFRS 3 Business Combinations, the dates of successive share purchases until control is achieved. The assets and liabilities acquired are measured provisionally at the date on which control is acquired, and the resulting value is reviewed in a maximum period of one year from the date of acquisition. Until the fair value of the assets and liabilities has been definitively determined, the difference between the cost of acquisition and the carrying amount of the company acquired is recognised provisionally as goodwill.. As indicated in Note 3.1, “Adoption of New Standards and Interpretations Issued”, the Group’s directors are assessing the impact that the application of this interpretation will have on the consolidated financial statements.. Any excess of the cost of the investments in the consolidated companies over the corresponding underlying carrying amounts acquired, adjusted at the date of firsttime consolidation, is allocated as follows:. B) Investment property “Investment Property” in the accompanying consolidated balance sheet reflects the net values (i.e. less any accumulated depreciation) of the land, buildings and other structures held either to earn rentals or for capital appreciation.. • If it is attributable to specific assets and liabilities of the companies acquired, increasing the value of the assets (or reducing the value of the liabilities) whose market values were higher (lower) than the carrying amounts at which they had been recognised in their balance sheets and whose accounting treatment was similar to that of the same assets (liabilities) of the Group: amortisation, accrual, etc. • If it is attributable to specific intangible assets, recognising it explicitly in the consolidated balance sheet provided that the fair value at the date of acquisition can be measured reliably.. Investment property is stated at acquisition cost and for all purposes the Group applies the same policies as those used for identical items of property, plant and equipment.. 23 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. • The infrastructure is operated by the concession operator as established in the concession tender specifications for an established concession term. At the end of this period, the assets are returned to the concession provider, and the concession operator has no right whatsoever over these assets. • The concession operator receives revenues for the services provided either directly from the users or through the concession provider..

(24) Goodwill is only recognised when it has been acquired for consideration and represents, therefore, a payment made by the acquirer in anticipation of future economic benefits from assets of the acquired company that are not capable of being individually identified and separately recognised. Goodwill acquired on or after 1 January 2004 is measured at acquisition cost and that acquired earlier is recognised at the carrying amount at 31 December 2003. In both cases, at the end of each reporting period goodwill is reviewed for impairment (i.e. a reduction in its recoverable amount to below its carrying amount) and any impairment is written down with a charge to “Net Impairment Losses” in the consolidated income statement. An impairment loss recognised for goodwill must not be reversed in a subsequent period. On disposal of a subsidiary or jointly controlled entity, the attributable amount of goodwill is included in the determination of the gain or loss on disposal. Goodwill arising on the acquisition of companies with a functional currency other than the euro is translated to euros at the exchange rates prevailing at the date of the consolidated balance sheet. D) Other intangible assets Intangible assets are recognised initially at acquisition or production cost and are subsequently measured at cost less any accumulated amortisation and any reductions required to reflect accumulated impairment losses. Intangible assets with indefinite useful lives are not amortised. Intangible assets with finite useful lives are amortised over those useful lives using methods similar to those used to depreciate property, plant and equipment. The amortisation rates, which were determined on the basis of the average years of estimated useful life of the assets, are basically as follows:. Annual amortisation rate Development. 10 – 20%. Administrative concessions. 2 – 25%. Leasehold assignment rights. 10 – 20%. Computer software. 7 – 33%. The consolidated companies recognise any impairment loss on the carrying amount of these assets with a charge to “Net Impairment Losses” in the consolidated income statement. The criteria used to recognise the impairment losses on these assets and, where applicable, any subsequent recovery thereof are similar to those used for property, plant and equipment (see Note 3.2-E). Research and development As a general rule, expenditure on research activities is recognised as an expense in the year in which it is incurred, except in development projects in which an identifiable asset is created, it is probable that the asset will generate future economic benefits, and the development cost of the asset can be measured reliably. The Group’s development expenditure, which relates basically to the wind power business, is only recognised as an asset if it is probable that it will generate future economic benefits and the development cost of the asset can be measured reliably. Development expenditure is amortised on a straight-line basis over its useful life. Unless the aforementioned conditions for recognition as an asset are met, development expenditure is recognised as an expense in the year in which it is incurred. Administrative concessions “Administrative Concessions” includes the concessions that have been acquired by the Company for consideration (in the case of concessions that can be transferred) or for the amount of the expenses incurred to directly obtain the concession from the State or from the related public agency. Administrative concessions are amortised on a straight-line basis over the term of the concession. Computer software The acquisition and development costs incurred in relation to the basic. 24 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. • The remaining amount is recognised as goodwill, which is allocated to one or more specific cash-generating units. • In the case of step acquisitions, the difference between the sum of the goodwill arising at each stage and the excess that might finally arise of the cumulative cost of acquisition over the fair value of the net assets acquired at the date that control is obtained is taken to reserves..

(25) Computer system maintenance costs are recognised with a charge to the consolidated income statement for the year in which they are incurred. E) Impairment of property, plant and equipment, intangible assets and investment property excluding goodwill At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment, intangible assets and investment property to determine whether there is any indication that those assets might have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the smallest identifiable cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use, which is taken to be the present value of the estimated future cash flows. Independent experts are consulted in certain divisions, particularly the real estate division. The principal methods used by these experts to determine fair value are described in Note 13. In assessing value in use, the Group prepares the projections of future pre-tax cash flows internally on the basis of the budgets most recently approved by the Company’s directors. These budgets include the best available estimates of the income and costs of the cash-generating units using industry projections, past experience and future expectations. These projections cover the coming five years and the flows for future years are estimated by applying reasonable growth rates (generally between 0% and 3.5%), consistent with those obtained in prior years, that in no case are increasing or exceed the growth rates of prior years. These flows are discounted at a given pre-tax rate in order to calculate their present value. This rate reflects the cost of capital of the specific business in question and the geographical area in which it is carried on. The calculation thereof takes into account the current time value of money and the risk premiums generally used by analysts for these businesses and geographical areas in which they are carried on.. The discount rates applied in 2008 ranged from 6.64% to 12.85%. The range is wide because the ACCIONA Group operates in different geographical areas and carries on dissimilar businesses, thus generating different discount rates. In general, higher rates relate to businesses carried on in countries with high country risk. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cashgenerating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. F) Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the leased asset to the lessee. All other leases are classified as operating leases. Finance leases When the consolidated companies act as the lessee, they present the cost of the leased assets in the consolidated balance sheet, based on the nature of the leased asset, and, simultaneously, recognise a liability for the same amount (which will be the lower of the fair value of the leased asset and the aggregate present values of the amounts payable to the lessor plus, where applicable, the price of exercising the purchase option). These assets are depreciated using the same criteria as those applied to similar items of property, plant and equipment that are owned. The finance charges arising under finance lease agreements are charged to the consolidated income statement so as to produce a constant periodic finance cost over the term of the agreements.. 25 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. computer systems used in the Group’s management are recognised with a charge to “Other Intangible Assets” in the consolidated balance sheet..

(26) H) Financial instruments Non-current and current financial assets except hedging derivatives Financial assets are initially recognised at fair value, including, in general, transaction costs.. The finance costs arising from the financing obtained to arrange these deposits were capitalised as an addition to property, plant and equipment amounting to EUR 7 million at 31 December 2008 (31 December 2007: EUR 3 million).. The financial assets held by the Group companies are classified as::. Operating leases In operating leases, the ownership of the leased asset and substantially all the risks and rewards relating to the leased assets remain with the lessor, which recognises the assets at their acquisition cost. These assets are depreciated using a policy consistent with the lessor’s normal depreciation policy for similar items and lease income is recognised in the income statement on a straight-line basis. When the consolidated companies act as the lessee, lease costs, including any incentives granted by the lessor, are recognised as an expense on a straight-line basis. Amounts received and receivable as incentives for the arrangement of operating leases are also allocated on a straight-line basis over the term of the lease. G) Financial instrument disclosures As a result of the adoption in 2007 of IFRS 7 and the amendments to IAS 1, the qualitative and quantitative disclosures of financial instruments and risk and capital management were extended and are detailed in the following notes: • financial asset and liability categories, including derivative financial instruments and accounting policies are detailed in Note 3.2-h. • (qualitative and quantitative) capital disclosure requirements are detailed in Note 16-h). • accounting and risk management policies are detailed in Note 19. • derivative financial instruments and hedge accounting are detailed in Note 20. • transfers from equity to profit for the year of settlements of hedging derivative financial instrument transactions are detailed in Note 29.. • Held-for-trading financial assets: assets acquired by the companies with the intention of generating a profit from short-term fluctuations in their prices or from differences between their purchase and sale prices. This heading also includes financial derivatives not considered to qualify for hedge accounting, as well as other assets which upon initial recognition are designated, as permitted under IFRSs, as financial assets at fair value through profit or loss. Held-for-trading financial assets classified as at fair value through profit or loss are measured at fair value at the date of subsequent measurement where this can be determined reliably. In these cases, the gains and losses arising from changes in fair value are recognised in profit or loss for the year. At 31 December 2008 and 2007, the ACCIONA Group did not have a material amount of these financial assets. • Available-for-sale financial assets: ithese include securities acquired that are not classified in the other categories, substantially all of which relate to investments in the capital of companies. Changes in the fair value of these assets are recognised in reserves, net of the related tax effect. Fair value is recognised when it can be determined reliably, based on either the market price or, in the absence thereof, the price established in recent transactions or the discounted present value of the future cash flows. If it is not possible to determine fair value reliably, these assets are measured at acquisition cost adjusted for any impairment losses disclosed. The gains and losses from changes in fair value are recognised directly in equity until the asset is disposed of, at which time the cumulative gains or losses previously recognised in equity are recognised in the net profit or loss for the year. If fair value is lower than acquisition cost and there is objective evidence that the asset has suffered an impairment loss that cannot be considered reversible, the difference is recognised directly in the consolidated income statement. • Held-to-maturity investments: assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold from the date of purchase to the date of maturity. This category includes mainly short-term deposits but not loans and receivables originated by the companies. • Originated loans and receivables: financial assets originated by the companies in exchange for supplying cash, goods or services directly to a debtor.. 26 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. When the Compañía Trasmediterránea Subgroup acquires vessels under finance lease agreements, it is obliged to arrange deposits with a pre-established payment schedule and preset interest to cover future finance lease payments, from the moment construction of the vessels begins..

(27) In specific cases where liabilities are the underlying of a fair value hedge, they are measured, exceptionally, at fair value for the portion of the hedged risk.. In 2008 and 2007 no financial assets were reclassified among the categories defined in the preceding paragraphs. Purchases and sales of financial assets are recognised using the trade date method.. Derivative financial instruments and hedge accounting The Group’s activities expose it mainly to the financial risks of changes in foreign exchange rates and interest rates and in certain fuel stocks and fuel supplies. The Group uses foreign exchange forward contracts and interest rate swap contracts to hedge these exposures. Electricity and fuel price and supply hedging transactions are also arranged. The Group does not use derivative financial instruments for speculative purposes.. Transfer of financial assets The ACCIONA Group derecognises financial assets when they expire or when the rights on the cash flows from the related assets and substantially all the risks and rewards of ownership have been transferred, such as firm sales of assets, assignments of commercial credits in factoring transactions in which the company does not retain any credit or interest risk, sales of financial assets with a buy-back agreement at fair value or securitisations of financial assets in which the transferor does not retain any subordinate financing or award any type of guarantee or assume any other type of risk. Bank borrowings other than derivatives Interest-bearing bank loans and overdrafts are recognised at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are recognised in the income statement on an accrual basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. In subsequent periods, these obligations are measured at amortised cost using the effective interest method.. To calculate the fair value of the liabilities, for the purpose of their recognition and for the disclosure of the information on their fair value included in Notes 18 and 21, fair value has been divided into liabilities bearing interest at a fixed rate (“fixed-rate debt”) and liabilities bearing interest at floating rates (“floating-rate debt”). Fixed-rate debt is that on which fixed-interest coupons established at the beginning of the transaction are paid explicitly or implicitly over its term. These liabilities are measured by discounting the future flows by the market interest rate curve, depending on the payment currency. Floating-rate debt is that issued at a floating interest rate, i.e. each coupon is established at the beginning of each period on the basis of the reference interest rate. These liabilities are measured at the face value of each issue, unless there is a difference between the capitalisation rate and the discount rate. If such a difference exists, it is measured by discounting the difference and aggregating it to the nominal value of the transaction.. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors. Accounting policies: Derivatives are recognised at fair value (see measurement procedures below) at the consolidated balance sheet date under current or non-current financial assets if positive and under “Bank Borrowings and Other Financial Liabilities” if negative. Changes in the fair value of derivative financial instruments are recognised in the consolidated income statement as they arise. If the derivative has been designated as a hedge which is highly effective, it is recognised as follows: • Fair value hedges: these hedges are arranged to fully or partially reduce the risk of fluctuations in the value of assets and liabilities (underlyings) recognised in the consolidated balance sheet. The portion of the underlying for which the risk is. 27 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. These items are measured at amortised cost, which is basically the initial market value, minus principal repayments, plus the accrued interest receivable calculated using the effective interest method. • Deposits and guarantees: in the specific case of the acquisition of vessels under finance lease agreements, as indicated in Note 3.2-F, the Compañía Trasmediterránea Subgroup is obliged to give deposits with a pre-established payment schedule and preset interest to cover future finance lease payments. These deposits are recognised under “Non-Current Financial Assets” and “Other Current Financial Assets” in the accompanying consolidated balance sheet, based on the dates on which the related lease payments payable fall due. Both headings include the amounts effectively delivered and interest until year-end calculated on a time proportion basis and are taken to profit or loss over the term of the lease, also on a time proportion basis. The interest earned on these deposits was netted off from the interest expenses on finance lease agreements under “Finance Costs” in the accompanying 2008 consolidated income statement (EUR 3,517 thousand and EUR 6,194 thousand in 2008 and 2007, respectively)..

(28) losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. Conversely, for hedges that do not result in recognition of a non-financial asset or a liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net profit or loss. Compound financial instruments with multiple embedded derivatives The ACCIONA Group has not issued compound financial instruments with embedded derivatives. Derivatives embedded in other financial instruments originate from the Endesa Group only and are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contract and the host contract is not carried at fair value, with changes in value reported in the consolidated income statement. Accounting procedures The fair value of the various derivative financial instruments is calculated as follows:. The Group does not hedge forecast transactions, but rather only firm financing commitments. If the cash flows of forecasted transactions were hedged, the Group would assess whether such transactions are highly probable and whether they are exposed to changes in cash flows that might ultimately affect profit for the year.. • Interest rate swaps are valued by discounting future settlements between fixed and floating interest rates to their present value, in line with implicit market rates, obtained from long-term interest rate swap curves. Implicit volatility is used to calculate the fair values of caps and floors using option valuation models. • Foreign currency hedging and option contracts are valued using the spot exchange rate, the forward interest rate curves of the related currencies and, in the case of options, implicit volatility until maturity. • Commodities contracts (for fuel) are valued in a similar way, in this case, taking into account the futures prices of the underlying and the implicit volatility of the options. • The Group measures derivatives not traded on an organised market by discounting the expected cash flows and using generally accepted option valuation models based on spot and futures market conditions at the end of each year.. If the cash flow hedge of a firm commitment or forecasted transaction results in the recognition of a non-financial asset or a non-financial liability, then, at the time the asset or liability is recognised, the associated gains or. Trade payables Trade payables are not interest bearing and are stated at their nominal value, which does not vary substantially from their fair value.. Group policy on hedging: At the inception of the transaction, the Group designates and formally documents the hedging relationship and strategy for undertaking the hedge. Hedges are only recognised when it is expected, prospectively, to be highly effective from inception of the hedge and in subsequent years to manage to offset the changes in the fair value or cash flows of the hedging instrument during the life of the hedge and, retrospectively, that the actual effectiveness of the hedge, which can be reliably calculated, is within a range of 80 125% of the results of the hedged item.. 28 Acciona Consolidated Financial Statement and Directors’ Report. WorldReginfo - cef87981-fc5f-4c4b-854c-5a553c019205. consolidated financial statement. being hedged is measured at fair value, as is the related hedging instrument, and changes in the fair values of both items are recognised under the same heading in the consolidated income statement. • Cash flow hedges: these hedges are arranged to reduce the risk of potential changes in the cash flows associated with the interest payments on non-current floating-rate financial liabilities, exchange rates and fuel stock and fuel hedges. Changes in the fair value of derivatives are recognised, with the respect to the effective portion of the hedge, under “Equity - Reserves - Changes Due to Derivatives”. The cumulative gain or loss recognised in this heading is transferred to the consolidated income statement to the extent of the impact of the underlying (resulting from the risk hedged) on the consolidated income statement; thus this effect is netted off under the same heading in the consolidated income statement. Gains or losses on the ineffective portion of the hedges are recognised directly in the consolidated income statement. • Hedges of a net investment in a foreign operation: changes in fair value are recognised, in respect of the effective portion of these hedges, net of the related tax effect, as “Translation Differences” in equity, and are transferred to the consolidated income statement when the hedged investment is disposed of..