Economic and financial review of Government of Extremadura

Presentation to investors

October 2014 Extremadura in Europe Communication hub between and

Extremadura is situated to the southwest of Spain, bordering with Castilla y León in the north, Castilla- La Mancha to the east, to the south and with Portugal to the west.

Extremadura Spain Population density (inhabitants/km2) 26 92 Area population 41,635 505,963 Population (1 Jan 2014) 1,097,743 46,725,164

Presentation to investors 2 Extemadura’s economy in focus The change in the GDP´s trend is consolidating in 2014

Since 2002, Extremadura’s economic growth has been above the national average and that of the European Union, with an average differential between 2002 and 2008 of 0.2 versus Spain and 1.1 versus the Union as a whole. In 2013 Extremadura has started a change in the GDP´s trend that is consolidating in 2014. The economic scenario is optimistic and in 2014 the GDP trend is expected to be positive as a result of the good performance of economic indexes during the last months. GDP growth Growth differential of Extremadura regarding (% YOY change at constant prices) Spain and the EU (%)

5 3,0 4 Ext vs. España Ext vs UE 3 2,0 2 1,0 1

0 0,0 -1 -2 Extremadura -1,0 España -3 UE-28 -2,0 -4

-5 -3,0

2002 2009 2003 2004 2005 2006 2007 2008 2010 2011 2012 2013

2007 2002 2003 2004 2005 2006 2008 2009 2010 2011 2012 2013

Source: INE, Eurostat Source: INE

Presentation to investors 3 Extemadura’s economy in focus

The service sector leads the productive structure in Extremadura

GDP evolution by components 2013 Structure of GVA (% total), 2013 (% YOY change at constant prices) Extremadura Act. Leisure Public Sector Agriculture Profesionales 4% 30% 6% Industry 5% 13% 2 1,1 Extremadura Spain 0,9 1 Extremadura 0 -0,2 -1 -0,2 -0,3 -0,2-0,2 0,0 Real -0,9 -0,6 -0,7 Estate -2 -0,7 -1,2 -1,1 -1,1 -0,9 -1,2 -1,4 6% Finance Construcción -3 4% 12% -4 -3,3 -3,3 Communications Trade -5 20% -6 2% -7 -8 -7,4 -7,7 -9 Spain

Public Sector GDP Professional

Trade act. 18% Leisure

Leisure Industry Finance Real Estate 8% 4% Agriculture

Agriculture 3%

Real Estate Real 8% Construction

Public Sector Public Spain Communications

Industry

Professional activities Professional 17% Finance 4% Trade Construction Communications 26% 4% 8% Source: INE Source: INE The production structure of Extremadura is distinguished by a greater weight of the entire agricultural sector in comparison with Spain, involving about 6% of regional GVA in 2013. The sectors which have affected more negatively in the GDP of the region in 2013 were Construction (-7.4% inter-annual), Industry (-3.3% inter-annual) and Trade (-0.9% inter-annual). The public sector was the only activity which contributed positively with the GDP (+0,9% inter-annual). Presentation to investors 4 Extemadura’s economy in focus External demand continues to contribute positively to GDP growth, due to the good behavior of tourism and the trade balance

Guest in hotels Exports and imports in Extremadura (Average annual rate) (accumulated 12 months)

25% Saldo comercial (eje dcha) Imports Exports España Extremadura 60% 1.500 20% 50% 15% 40% 1.000 10% 30% 5% 20% 500 0% 10% -5% 0% 0 -10% -10% -15% -20% -500 -20% -30%

-25% -40% -1.000

dic.-07 dic.-08 dic.-09 dic.-10 dic.-11 dic.-12 dic.-13

jun.-10 jun.-07 jun.-08 jun.-09 jun.-11 jun.-12 jun.-13 jun.-14

jun.-10 jun.-13 jun.-07 jun.-08 jun.-09 jun.-11 jun.-12 jun.-14

Source: INE Source: DG Aduanas and IIEE The number of passengers and guests in hotels dropped in 2012 and 2013 after Extremadura reached the peak in 2011 with 1.2 million people. Better news for 2014, while the number of travelers in June increased 8% comparing with last year exercise. Improvement of the number of exports during the last year. In June 2014 its trade balance achieved 567 million euros (accumulated 12 months). This balance has been decreasing since its maximum (741 million euros) registered at the beginning of 2013 due to the increasing of imports.

Presentation to investors 5 Extemadura’s economy in focus

Unemployment rate above 29% and negative price differential

Unemployment rate Inflation (%) (% YOY change CPI index and differential of Extremadura regarding Spain)

6% 0,9% Differential Extremadura

4% 0,6%

2% 0,3% Differential

YOY YOY change 0% 0,0%

-2% -0,3%

dic.-07 dic.-08 dic.-09 dic.-10 dic.-11 dic.-12 dic.-13

jun.-10 jun.-08 jun.-09 jun.-11 jun.-12 jun.-13 jun.-14 jun.-07 Source: INE Source: INE

With more than 148,000 unemployed in 2Q14, Extremadura’s unemployment rate rises to 29.4%, higher than the national average (24.5%). However, the job market in the region is blooming stronger than the rest of the country. On the contrary of Spain, Extremadura is registering positive inter-annual employment rates since last December. Inflation has been declining throughout the last year, reaching the negative zone.

Presentation to investors 6 Extremadura in the context of Spanish Public Sector Expenditure powers assignment by level of Government.

The Government of Extremadura is one of GRAPHIC 1. Levels of Government in Spanish Public Sector and powers assignment seventeen regional EXCLUSIVELY RESERVED POWERS: - Defence and Armed Forces governments existing in CENTRAL PUBLIC SECTOR - Foreign Affairs Spain. Like other - Justice Management - Commercial Law, Prison, Criminal, Labour and Civil regional governments, it Central Administration - Basic rules about healthcare and education. - Public investment of general interest and transport that runs through has extensive legislative more than a region. and executive Social Security Administration Management of assistance and social benefits in situations of need, implementation Specially unemployment. regarding essential LIST OF ASSUMED POWERS*: public services: REGIONAL PUBLIC SECTOR - Legislative development and management of healthcare and education - Social Services healthcare, education - Agriculture and cattle raising Autonomous Communities - Public Investment of interest for the region. and social welfare. (17) - Transport that only runs through the region Management thereof is - Regional economic development. Provincial ASSIGNED POWERS: the main destination of LOCAL Councils - Water supply and lighting. its total expenses: 68% of PUBLIC (51) - Paving, parks and gardening. SECTOR - Traffic management in urban roads. its budget – excluded Municipalities - Public passenger transport (8.115) - Civil defence and fire fighters. CAP and refinancing in - Housing development and management . the year. * Non- exhaustive list. Source: AFI

Presentation to investors 7 Extremadura in the context of Spanish Public Sector The regional public sector from an economic viewpoint . Porcentage allocation of non financial expenditure between Spanish Public Deficit by level of government in Spain Administracion (%) (% on GDP) 2013. Estimated figure 2011(f) Central Social Security Autonomous Local public Local public Central Administration Administration Communities sector sector; 12.3% Administration; -4.81% 21.6% -5% -4% -3% -1.54% -2% -1.16% Autonomous -1% Communities; Social Security 34.3% Administration; 0% 31.9% 0.41% 1% Source: Ministry of Finance and Public Administration (f) forecast Source: Ministry of Finance and Public Administration Decentralization of Spain's Public Administration is apparent in the light of the data on distribution of public Allocation of public debt by level of government in Spain expenditure among different levels of government: December 2013 situation (% on total public debt)

autonomous communities manage approximately 34% of 80% total public expenditure. 60% Despite the autonomic deficit in 2013 was 1.54% of 74.8% 40% GDP (only 21% of the Spanish public deficit), the debt 0,26% Junta de Extremadura 20% of the autonomous communities is around 20.8% of 21.0% 4.2% 0% total outstanding public debt (20.2% of GDP), which is Central Autonomous Local Public a manageable level for any economy. Extremadura Administration Communities Sector Source: Bank of Spain only represents 0,26% of total public debt. Note: Total PP.AA. excluded Social Security Administrations

Presentation to investors 8 Extremadura in the context of Spanish Public Sector

Control and coordination of Autonomous Communities debts Spain has highly developed legislation that ensures fiscal discipline of Autonomous Communities. In fact, the State is able to: 1. Monthly monitoring individualised annual budget stability targets. Autonomous Communities may only exceed these targets if they submit a Medium-term economic-financial rebalancing plan to incorporate corrective income and expenditure measures to ensure a return to budgetary balance. If they have already submitted it, they must approve additional measures.

2. Setting individualized annual budget stability targets. Given the current economic-financial situation, all the Autonomous Communities can incur a maximum deficit of 1% of GDP in 2014, 0.7% in 2015, 0.3% in 2016 y 0% in 2017. Moreover, annual debt targets for all Autonomous Communities have been set: 21.1% in 2014; 21.5% in 2015; 21.3% in 2016 and 20.6% in 2017.

3. Approval of debt issues and currency operations in the Autonomous Communities. The authorization is also compulsory for the use of loans if the region fails to comply with the deficit and debt targets, as well as the spending rule.

4. The CCAA must submit monthly information to the State in relation to the use given to the authorizations granted debt transactions.

5. The requirements to the autonomous communities to send information: outstanding debt at the beginning of the year, estimates of credit operations, debt issues and debt repayments during the year disaggregated by entities and the situation provided for each at the end of each year.

Presentation to investors 9 Extremadura in the context of Spanish Public Sector How does the Junta of Extremadura finance its responsibilities?

GRAPHIC 3: Sources of autonomous communities financing according to the new common system. LOFCA SOURCE TYPE CURRENT SYSTEM DETAIL In Spain, fifteen Inheritance and Gift Tax, Property Transfer Tax and Stamp Autonomous Total assigned taxes Duty, Gambling Tax Rate

Communities, Personal Income Tax, at 50% including the Junta Partially assigned taxes V.A.T, at 50%

de Extremadura, are TAX REVENUES Excise Duties (alcohol, tobacco, hydrocarbons) at 58% governed by the Own fiscal Specific tax of Extremadura: on deposits of credit common financing Own Taxes space (each institution, on hunting exploitation, and on facilities affecting on environment. system. This system community) differs from the Fees and other resources statutory system Global Sufficiency Fund (specially for Basque Transfer (positive) * of Essential Public Services Guarantee Fund Autonomic Convergence Funds Country and TRANSFERS Inter-territorial Compensation Fund ) as its tax Other transfers autonomy is more limited. Economic returns OTHER RESOURCES Issues and loans

* The transfer because of Essential Public Services Guarantee Fund may be positive or negative. In case of Junta of Extremadura is positive. Every Autonomous Community receive the same financing for adjusted population to cover health, education and social services. The common system financing scheme was reformed in December 2009. Its basic guiding principles are adequacy of resources, solidarity among territories within the Spanish State, financial autonomy and guarantee of economic equilibrium of Autonomous Communities. Presentation to investors 10 Extremadura in the context of Spanish Public Sector Financial autonomy and adequacy of resources of the Junta de Extremadura

Financial autonomy of the Junta de Extremadura is determined by the relative weigh of its tax revenues, for 2014 representing over 37% of its total resources. The adequacy of resources is strengthened thanks to current transfers, mainly from State.

Allocation of sources of financing of Junta of Extremadura (% on total resource. Budget 2014)

Capital Transfers 12.2% Credit operations Economic returns 11.7% 0,4% Other Current Transfers Partially assigned 1,2% Taxes Tax resources 30,1% 37,2% Own Taxes UE Current Transfers 3.4% 12,1% Fees and other State Current Totally assigned resources Transfers Taxes 1.7% 29% 2.9%

Source: Gobierno de Extremadura

Presentation to investors 11 Fiscal Discipline: track record and outlook Fast process of fiscal consolidation

The efforts made by the Government of Extremadura in recent years have led to the process of fiscal consolidation in Extremadura is developing faster than total regions. Thus, solvency indicators of the Junta de Extremadura in 2013 improve significantly: the Autonomous Community not only presents positive primary savings, but also is configured as the autonomous community with lower deficit during the year, below the target of 1% of GDP and well below the regional average (1.54%).

MAIN BUDGET INDICATORS OF JUNTA OF EXTREMADURA (Million euros and porcentage) 2009 2010 2011 2012 2013 (a) Gross Saving 276.48 -194.84 -266.00 -335.81 -94.28 Gross Operating Balance / Current Income 6.01 -4.76 -6.86 -9.13 -2.50 Gross Operating Balance / Current Income (autonomic average)1.89 -6.07 -9.74 -13.12 -6.55 Net Operating Balance 208.80 -295.31 -394.00 -477.85 -284.83 Primary Gross Operating Balance 309.1 -157.2 -199.0 -237.0 17.9 Primary G. Balance / Current Income 6.7 -3.8 -5.1 -6.4 0.5 Capital Balance -523.17 -171.85 -447.00 -115.85 -78.36 Non - Financial Balance -246.68 -366.69 -713.00 -451.66 -172.64 Non - Financial Balance / Current Income -5.4 -9.0 -18.4 -12.3 -4.6 Non- Financial Balance / Current Income (autonomic average)-10.09 -16.71 -18.68 -21.39 -12.8 Deficit(-) or surplus(+) / GDP -1.67 -2.57 -4.77 -1.03 -0.99 Deficit (-) or surplus (+)/ GDP (autonomica average) -1.92 -3.24 -3.41 -1.86 -1.54 Net Lending (-) or Borrowing (+) -251.05 -368.76 -722.00 -461.94 -190.25 Financial Burden 2.18 3.38 5.03 6.55 8.04 Self- financing capital expenditure 75.6 48.6 9.7 -10.1 56.7 Source: Gobierno de Extremadura and Ministry of Economy (a) Advance budget execution 2013 at the end of december

Presentation to investors 12 Fiscal Discipline: track record and outlook Lower deficit on GDP in 2013 than the autonomic aggregate.

Average Average 1,54 1,3

-1.54 -1.08 VAL -2.33 RIO -1.04 PVA -1.55 NAV -3.17 MUR -1.01 MAD -1.1 GAL -0.99 EXT -1.96 CLM -1.1 CYL -2.13 CAT -1 CNT -1 CAN -1.28 BAL -1.06 AST -2.06 ARA -1.55 AND

Presentation to investors 13 Fiscal Discipline: track record and outlook Better performance of tax revenues than the average

The crisis has had less economic impact on tax revenues of the Autonomous Community of Extremadura than on the aggregate of regions of common system: the improvement –by the change by funding system with final implementation in 2011- has been higher and the subsequent decrease was less pronounced.

EVOLUTION OF TAX RESOURCES EXTREMADURA VS. COMMON FINANCING AUTONOMIC AVERAGE Consolidated budget, in terms of recognised rights and obligations 50% 40% y.o.y. % tax resources Extremadura

30% y.o.y. % tax resources AA.CC. 20%

y.o.y. % y.o.y. 10% 0% -10% -20% -30% 2009 2010 2011 2012 2013

Source: Gobierno de Extremadura

Presentation to investors 14 Fiscal Discipline: track record and outlook Less impact of the crisis on the solvency indicators

The key figures solvency evolve according to the average of common financing regime communities., although recorded significantly higher levels. The negative balance of gross savings shrinks significantly in 2013 to -2.2.% on current resources and deficit reduces to 4,9% on current resources. Both figures show an adjustment next seven percentage points.

CAPACITY TO GENERATE GROSS OPERATING BALANCE EVOLUTION OF NON FINANCIAL BALANCE Consolidated budget, in terms of recognised rights and obligations ON CURRENT RESOURCES Consolidated budget, in terms of recognised rights and 10 obligations

5 6.0 5 1.9 -5.4 -4.6 0 -5 -2.5 -9.0 -4.8 -5 -6.9 resources current % on -10.1 -12.3 % % resources on current -6.1 -6.6 -15 -18.4 -12.8 -9.1 -16.7 -10 -9.7 -18.7 Extremadura Autonomic average -25 Extremadura Media autonómica -21.4 -13.1 -15 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Note: Common financing regime communities average. Data from Note: Common financing regime communities average. Data from executions. Data 2013, advance by monthly Budget execution. executions. Data 2013, advance by monthly Budget execution. Source: Junta of Extremadura. Source: Junta of Extremadura.

Presentation to investors 15 Fiscal Discipline: track record and outlook Mantains compliance of the objective of budgetary stability in 2013

MEASURES OF % 2013 The strict fiscal discipline applied CONSOLIDATION s/total by the Government of mill. € Extremadura in 2012 has enabled Measures of income 94.0 100.0% to relax the pace of fiscal Direct taxes 30.58 32.5% adjustment in 2013 and still Indirect taxes 43.72 46.5% continue to meet the objective of Fees and public tariffs 19.39 20.6% Current transfers 0.00 0.0% budgetary stability for that year, Property income 0.00 0.0% 1% of GDP (a more demanding Disposal real investments 0.26 0.3% target than the 1.3% of GDP for Measures Rates 7.72 100.0% the regional aggregate). Staff costs -27.93 -361.9% Purchases of goods and services 1.20 15.5% financial charges 0.00 0.0% current transfers 10.09 130.8% real Investment 0.00 0.0% Capital transfers 24.36 315.6% Source: Gobierno de Extremadura

Presentation to investors 16 Fiscal Discipline: track record and outlook Outlook 2014: Growth content spending to boost the regional economy.

y.o.y. (%) The budget performance of 2013 INITIAL BUDGET 2014 % / total 2014/2013 set the Autonomous Community in Staff Costs 1,782.3 33.3% 1.7% a good position to adjust back to Purchase Goods and Services 538.0 10.0% 4.9% 2014 target, without additional Financial charges 130.5 2.4% 7.1% efforts. Current transfers 1,580.2 29.5% 2.2% Contingency fund 9.1 0.2% 0.0% The 2014 budget has grown 4.8% current expenses 4,040.2 75.2% 2.5% over 2013. This growth has been Real Investment 343.4 6.4% 2.4% reflected in almost all items of Capital transfers 319.6 6.0% -0.8% 663.0 12.4% 0.8% expenditure Capital Expenditure Non Interest Expenses 4,703.2 87.6% 2.2% Financial assets 10.0 6.4% 25.0% Financial liabilities 309.3 6.0% 68.9% TOTAL EXPENDITURE 5,022.5 100.0% 4.8% Source: Gobierno de Extremadura

Presentation to investors 17 Fiscal Discipline: track record and outlook Outlook 2014: Growth aimed at improving employment and competitiveness.

The successful performance of the last two years have allowed in 2014 to increase the budget in areas with higher impact on employment and competitiveness: employment, enterprise and innovation (with a growth of 9.6%) or promotion, housing, spatial planning and tourism (with an increase of 11.4% compared to 2013).

Initial budget by sections 2013-2014

1650

1500

1350

1200

1050

900

750 millioneuros 600

450

300

150

0 Public Agriculture, Education and Jobs, Enterprise Health and Development, Public debt other sections Administration Rural D., M. Culture and Innovation Social Policy Housing, Terr. Environment Manag. and and Energy Tourism 2013 2014

Source: Gobierno de Extremadura

Presentation to investors 18 Fiscal Discipline: track record and outlook Execution at the end of July 2014 with prudent criteria: significant savings implicit.

Budget execution at the end of July Ejecución presupuestaria y ahorro a cierre de julio de 2014 2014 stood at 49.2% of total non- Execution % Execution % Execution financial expenditure, below the ac. july on budget RECOGNIZED OBLIGATIONS on budget 55.9% corresponding to the (thousand € and %) 2014 total AA.CC. autonomic aggregate. Staff cost 1,045.6 58.7% 56.8% Purchase of good and services 291.7 54.2% 61.0% Financial charges 50.7 38.8% 52.5% With an degree of execution budget Current transfers 515.5 52.5% 61.3% similar to the average, the expenses Contingency Fund 0.0 0.0% 0.0% recognized in the Autonomous Current Expenditure 1,903.4 55.3% 58.5% Community had exceeded 2,020 Real Investment 76.0 22.1% 34.2% Capital Transfers 40.6 12.8% 30.4% million euros effectively recognized Capital Expenditure 116.7 17.7% 32.1% in 274 million euros. Non Financial Expenditure 2,020.1 49.2% 55.9% Source: Junta of Extremadura Indeed, Autonomous Community Note: Common financing regime communities average. Data from executions. Data 2013, advance has a more prudent budget by monthly Budget execution. performance tan the aggregate. Source: Gobierno de Extremadura.

Presentation to investors 19 In short,

 In 2012 the Junta de Extremadura fulfilled its commitment to fiscal consolidation through a significant adjustment of non-financial expenditure. The result in terms of deficit over GDP was comfortably below the 1.5% target set for that year: 1.03% of GDP.  The Autonomous Community meet again in 2013 with the budgetary stability target, that was more demanding than the one set for the aggregate, 1% versus 1.3% overall, with a less intense effort that applied in the previous year.  Since the 2014 deficit target set for the autonomic aggregate is 1% of GDP, the Autonomous Community is in a good position to adjust back to that objective, having approved a budget for that year with limited non-financial spending growth. Items that have grown are precisely geared to promoting employment, competitiveness and innovation.  It is expected that the Autonomous Community meets again with its deficit target, especially the degree of execution budget remains below the regional average at the end of July.

Presentation to investors 20 Debt and funding policy Track record of high creditworthiness and debt control and stability.

Extremadura has historically been one of the regions with lower debt stock. This is 1.27% of the 228.000 million euros of debt of Autonomous Communities as a whole.

€ Mill. Debt's amount standing evolution % % Debt over GDP 3,500 100% 24 21.7 Total debt YoY 3,000 2,904.4 21 20.0 2,630.1 80% 17.9 2,435.6 18 2,500 2,020.8 17.4 60% 15 13.5 2,000 15.8 1,746.760.9% 11.4 12 14.5 1,500 8.6 11.6 40% 9 1,085.7 6.6 9.8 1,000 903.8 5.7 784.7 20.5% 6 20% 8.0% 10.4% 6.1 500 20.1% 3 5.0 15.7% 4.4 0.1% 15.2% Extremadura Total regional 0 0% 0 2007 2008 2009 2010 2011 2012 2013 jun-14 2007 2008 2009 2010 2011 2012 2013 Jun-14 Source: Bank of Spain and CAP. Data published by the Bank of Spain, in accordance with the Source: Bank of Spain and CAP. Data published by the Bank of Spain, in accordance with the Excessive Deficit Procedure (EDP), according to the National Accounting sectoral breakdown Excessive Deficit Procedure (EDP), according to the National Accounting sectoral breakdown (base 2000) and Eurostat's EDP notification. (base 2000) and Eurostat's EDP notification..

The stability in the level of debt in the most recent expansive period, and a smaller increase in recent years than the regional aggregate supports a high creditworthiness, over the Autonomous Communities average.

Presentation to investors 21 Debt and funding policy Track record of high creditworthiness and debt control and stability.

The main debt indicators affirm the privileged situation of the Government of Extremadura, opposite the Autonomous Communities. The capacity to attend debt services, with the current incomes and gross savings, is glaringly higher than the level reached by the group of Autonomous Communities. % Debt service over operating income % Debt over GDP 24 21.7 28% 24.6% 20.0 21 24% 17.9 Extremadura Total regional 18 20% 15 13.5 17.4 15.8 16.0% 11.4 16% 14.7% 12 14.5 8.6 11.6 9 12% 10.4% 6.6 9.8 5.7 11.5% 6 8% 6.6% 6.1 4.0% 3.7% 4.6% 7.8% 3 4.4 5.0 4% 6.5% Extremadura Total regional 5.0% 0 3.4% 2007 2008 2009 2010 2011 2012 2013 Jun-14 0% 2.0% 2.2% 2.2% Source: Bank of Spain and CAP. Data published by the Bank of Spain, in accordance with the 2007 2008 2009 2010 2011 2012 2013 2014* Excessive Deficit Procedure (EDP), according to the National Accounting sectoral breakdown Presupuestos liquidados consolidados del ejercicio.* Presupuestos iniciales consolidados. En ambos (base 2000) and Eurostat's EDP notification.. casos, Baleares y País Vasco corresponden a la Administración General. Fuente: CAP.

A less affected incomes, debt and its service to the economic cycle explain a lower deterioration of Extremadura situation in recent years.

Presentation to investors 22 Debt and funding policy Aims of funding policy: Control of debt’s level

Debt variation 2004-2013 CLM 973% MUR 641% BAL 624% PVA 497% RIO 493% CYL 488% CA… 477% NAV 385% CAT 375% ARA 374% CAN 348% AST 280% VAL 245% EXT 236% AND 229% GAL 182% MAD 146% Source: Bank of Spain and CAP. Data published by the Bank of Spain, in accordance with the EDP, according to the National Accounting sectoral breakdown (base 2000) and Eurostat's EDP notification.

The stability in financing, strict control and the forecast of financial needs have characterized the Autonomous Community of Extremadura, one of the regions with a lower debt growth in the last ten years.

Presentation to investors 23 Debt and funding policy Aims of funding policy: Diversification of the sources

Distribution by lender (JUN14)

2.7% 22.5% Others* 25.5% 3.6% 4.6% 15.6% 11.6% 4.1% 5.6% 4.4% FFPP

*Others include : Auriga, Bankinter, Barclays, Ceis, Banco Cooperativo, Bankia, Banco Popular, Banca Pueyo, Banco , Caja Rural Extremadura, Depfa, Dexia, HSBC, Cajamar, Intesa San Paolo, Abanca, Hypovereinsbank, Baaderbank

Extremadura has maintained a broad and diversified investor base. Besides having launched the first three bonds issues, the portfolio comprises 115 credit transactions arranged with 29 different banks (less than 80% of total debt with national ones).

Presentation to investors 24 Debt and funding policy Aims of funding policy: Minimization of the financial cost

The financing strategy developed by the Government of Extremadura, based on the modulation in the financing portfolio of the weight of each type of financing, allowed to reduce the impact of the increasing average cost of financing. It has drop 30 bp decrease of the regional cost of funding.

% Portfolio's fixed-floating debt distribution Average cost 100% 5 90% 32.1% 80% 34.5% 36.3% 43.8% 45.4% 40.4% 4.1 50.3% 51.3% 70% 4 3.8 3.8 4.1 60% 3.9 50%

3.5 40% 3.0 67.9% 3 3.2 30% 65.5% 63.7% 56.2% 54.6% 59.6% 49.7% 48.7% 20% 10%

2 0% 2007 2008 2009 2010 2011 2012 2013 Jun-14 2007 2008 2009 2010 2011 2012 2013 Jun-14 Fixed rate Floating rate

This strategy, and the effective application of debt indicators like duration or refixing risk in the management of debt portfolio, has also allowed to prevent and minimise the main risk of the portfolio, the interest rate risk.

Presentation to investors 25 Debt and funding policy Aims of funding policy: Term or maturity placement

€ Mill. Maturities schedule 400 Distribution by maturity (JUN14)

350 >10 years, 8-10 years, 7.4% 300 1-3 years, 22.6% 37.8% 250 6-7 years, 4-5 years, 200 13.6% 18.7%

150

100

50

0

The smooth profile of maturities schedule and the downside refunding risk aim at an adequacy of the period of financing to the maturity profile and control of the degree of concentration, which constitute additional reinforcements of the solvency of Extremadura.

Presentation to investors 26 Debt and funding policy 2012 funding strategy

2014 funding needs (€ mill) 2014 covered funding needs (€ Mill.) Importe Redemptions 2014 368.0 Completed 63% Pending Short term 60.0 37% Long term 308.0 Deficit 169.5 Negative settlements 08-09 96.6

Total funding needs 634.1

In a context of favorable financing conditions it was possible not only to advance in covering its financing needs for the current period, but also to refinance its portfolio in order to adjust it to current market conditions and thus reduce its borrowing costs.

Presentation to investors 27 Debt and funding policy Creditworthiness, compromise of the portfolio management

Regional of credit rating Moody´s S&P Fitch Ratings Rating Outlook Rating Outlook Rating Outlook NAVARRA A- Negative PAÍS VASCO Baa1 Positive A- Negative BBB+ Negative ARAGÓN BBB Negative BBB Negative Baa2 Positive BBB Negative BBB Negative Baa2 Positive BBB Negative CANARIAS BBB Negative BBB- Negative BBB Negative EXTREMADURA Baa3 Positive BBB Stable ANDALUCÍA Ba1 Positive BBB- Negative BBB- Negative CYL Baa2 Positive BALEARES BBB- Negative CATALUÑA Ba2 Positive BB Negative BBB- Negative Ba2 Positive BBB- Negative Ba2 Positive BB- Negative BBB- Stable CLM Ba2 Positive BBB- Negative

The current rating of Extremadura mirrors the previous statements about the region. The latest reviews on the rating of Extremadura have had an essential sovereign trigger, which has favored the Autonomous Government of Extremadura. Nonetheless, the rating agencies have emphasized on many positive aspects such as the fiscal consolidation effort, the lower indebtedness, and the financing alternatives.

Presentation to investors 28 Extremadura’s Outlook In sum,

 The Autonomous Community meet again in 2013 with the budgetary stability target, that was more demanding than the one set for the aggregate, 1% versus 1.3% overall, with a less intense effort that applied in the previous year.  Since the 2014 deficit target set for the autonomic aggregate is 1% of GDP, the Autonomous Community is in a good position to adjust back to that objective, having approved a budget for that year with limited non-financial spending growth.  Extremadura holds one of the strongest borrowing positions of all Autonomous Communities. This region is characterized by the historical stability in terms of issued debt volume and the control of the debt indicators below the limits established by all the Autonomous Communities.  The financing strategy, designed under strict control of risks of the debt portfolio, is based on the definition of the features of the operations in order to minimize the impact on the entire portfolio and maximize the yield-risk binomial.  To sum up, the Autonomous Community of Extremadura is stated as a solid borrower, as its debt indicators proves, and it shows a respectable solvency. These characteristics give an essential added value to Extremadura taking into consideration the current economic context.

Presentation to investors 29