Financial Statements and Directors’ Report of Canal de Isabel II, S.A. 2019 Canal de Isabel II, S.A. Annual Financial Statements and Directors’ Report 31 December 2019 Canal de Isabel II, S.A. Canal de Isabel II, S.A. TABLE OF CONTENTS 2019 FINANCIAL STATEMENTS BALANCE SHEETS AT 31 DECEMBER 2019 AND 2018 ............................................................................... 1 INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2019 AND 31 DECEMBER 2018 ................. 3 STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2019 AND 31 DECEMBER 2018 ............................................................................................................................ 4 STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2019 AND 31 DECEMBER 2018 ............................................................................................................................ 5 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2019 AND 31 DECEMBER 2018. .............................................................................................................................................. 6 1. NATURE AND ACTIVITIES OF THE COMPANY AND COMPOSITION OF THE GROUP .......................... 11 2. PRESENTATION PRINCIPLES .......................................................................................................... 13 3. NON-MONETARY CONTRIBUTION AND CONTRACT-PROGRAMME................................................. 15 4. DISTRIBUTION OF PROFIT/(LOSS) .................................................................................................. 20 5. STANDARDS OF ENTRY AND VALUATION ...................................................................................... 22 6. JOINT VENTURES .......................................................................................................................... 37 7. NON-CURRENT ASSETS HELD FOR SALE ......................................................................................... 38 8. INTANGIBLE FIXED ASSETS ............................................................................................................ 38 9. PROPERTY, PLANT AND EQUIPMENT............................................................................................. 51 10. INVESTMENT PROPERTY ............................................................................................................... 53 11. FINANCIAL RISK MANAGEMENT POLICY ........................................................................................ 56 12. CLASSIFICATION OF FINANCIAL ASSETS BY CATEGORY AND INVESTMENTS IN EQUITY INSTRUMENTS OF GROUP COMPANIES AND ASSOCIATES ............................................................. 57 13. FINANCIAL INVESTMENTS AND TRADE RECEIVABLES ..................................................................... 61 14. INVENTORIES ............................................................................................................................... 70 15. ASSET ACCRUALS .......................................................................................................................... 72 16. CASH AND CASH EQUIVALENTS..................................................................................................... 73 17. OWN FUNDS ................................................................................................................................ 73 18. SUBSIDIES, GIFTS AND BEQUESTS RECEIVED ................................................................................. 75 19. PROVISIONS AND CONTINGENT LIABILITIES .................................................................................. 77 20. FINANCIAL LIABILITIES BY CATEGORIES ......................................................................................... 82 21. FINANCIAL DEBTS AND TRADE DEBTORS ....................................................................................... 86 22. ACCRUALS OF LIABILITIES ............................................................................................................. 94 23. TAX STATUS .................................................................................................................................. 95 24. ENVIRONMENTAL INFORMATION ............................................................................................... 100 25. RELATED PARTY BALANCES AND TRANSACTIONS ........................................................................ 102 26. INCOME AND EXPENSES ............................................................................................................. 108 27. INFORMATION ON EMPLOYEES .................................................................................................. 111 28. AUDIT FEES ................................................................................................................................ 113 29. INFORMATION ON AVERAGE TERM OF PAYMENT TO SUPPLIERS. THIRD ADDITIONAL PROVISION. <<RIGHT TO INFORMATION>> OF LAW 15/2010, OF 5 JULY. .................................... 113 Canal de Isabel II, S.A. 30. EVENTS AFTER THE REPORTING DATE ......................................................................................... 114 APPENDIX I.- DETAILS OF JOINT VENTURES AT 31 DECEMBER 2019 AND 2018 ..................................... 116 APPENDIX II (1). - INFORMATION RELATING TO GROUP COMPANIES AT 31 DECEMBER 2019 AND 2018 ........................................................................................................................................... 117 APPENDIX II (2). - INFORMATION RELATING TO ASSOCIATES AT 31 DECEMBER 2019 AND 2018........... 120 APPENDIX III.- DETAILS OF CHANGES IN RESERVES AND PROFIT/(LOSS) CORRESPONDING TO THE FINANCIAL YEARS ENDED 31 DECEMBER 2019 AND 2018 ..................................................... 121 DIRECTORS’ REPORT FOR 2019………………………………………………………………………………………… 1-58 (INCLUDES 2019 ANNUAL CORPORATE GOVERNANCE REPORT) Canal de Isabel II, S.A. 2019 Financial Statements Financial Statements and Directors’ Report of Canal de Isabel II, S.A. 2019 Financial Statements BALANCE SHEETS AT 31 DECEMBER 2019 AND 2018 BALANCE SHEETS AT 31 DECEMBER 2019 AND 2018 (In thousands of euros) Note 2019 2018 ASSETS A) NON-CURRENT ASSET 4,530,398 4,555,301 I. Intangible fixed assets 8 4,098,467 4,153,256 1. Concession arrangement, regulated assets 3,954,108 3,929,716 2. Concession agreement, financial capitalisation 62,901 64,597 3. Concession arrangements, regulated assets under construction 81,458 158,943 II. Property, plant and equipment 9 7,248 7,284 1. Land and construction works 7,248 7,284 III. Investment property 10 9,859 10,231 1. Lands 4,253 4,270 2. Construction works 5,606 5,961 IV. Non-current investments in group companies and associates 12 and 13 273,312 248,625 1. Equity instruments 137,303 136,625 2. Loans to companies 136,009 112,000 V. Non-current financial investments 12 and 13 74,486 68,796 1. Loans to third parties 63,974 57,513 2. Other financial assets 10,512 11,283 VI. Deferred tax assets 23 90 108 VII. Non-current accruals 15 66,936 67,001 B) CURRENT ASSETS 513,296 538,336 I. Non-current assets held for sale 7 4,019 4,019 1. Non-current assets held for sale 4,019 4,019 II. Inventory 14 6,445 5,640 1. Raw materials and other short-cycle supplies 6,445 5,640 2. Raw materials and other long-cycle supplies - - III. Trade and other receivables 12, 13 and 179,981 166,412 23 1. Trade and service provision customers 131,236 135,529 2. Customers, group companies and associates 1,560 2,701 3. Sundry debtors 46,264 25,715 4. Other loans from Public Administrations 23 921 2,467 IV. Short-term investments in group companies and associates 12 and 13 8,254 9,157 1. Loans to companies 6,575 5,426 2. Other financial assets 1,679 3,731 V. Short-term financial investments 12 and 13 8,036 10,148 1. Loans to third parties 7,928 10,129 2. Other financial assets 108 19 VI. Short-term accruals 15 4,278 3,599 VII. Cash and cash equivalents 16 302,283 339,361 1. Cash 302,283 339,361 TOTAL ASSETS (A+B) 5,043,694 5,093,637 The accompanying Notes form an integral part of the Financial Statements for the year ended 31 December 2019. Canal de Isabel II, S.A. · 1 Financial Statements and Directors’ Report of Canal de Isabel II, S.A. 2019 Financial Statements BALANCE SHEETS AT 31 DECEMBER 2019 AND 2018 (In thousands of euros) Note 2019 2018 NET EQUITY AND LIABILITIES A) NET EQUITY 3,449,031 3,482,970 A.1) Own funds 17 2,699,962 2,764,654 I. Share capital 1,074,032 1,074,032 II. Share premium 1,074,032 1,074,032 III. Reserves 443,680 268,482 1. Legal reserve 149,333 102,147 2. Other reserves 294,347 166,336 IV. Profit/loss for previous financial year - 261,886 V. Profit/(loss) for the financial year 241,912 209,971 VI. (Interim dividend) (133,694) (123,750) A.2) Subsidies, gifts and bequests received 18 749,069 718,316 B) NON-CURRENT LIABILITIES 1,243,243 774,146 I. Long-term provisions 19 404,861 379,462 1. Provisions for infrastructure works 381,495 360,000 2. Other provisions 23,366 19,462 II. Long-term debt 20 and 21 573,867 97,957 1. Debentures and other marketable securities 498,955 - 2. Other financial liabilities 74,912 97,957 III. Long-term debts with group companies and associates 20 and 21 240,714 269,762 IV. Deferred tax liabilities 23 1,877 1,800 V. Non-current accruals 22 21,924 25,165 C) CURRENT LIABILITIES 351,420 836,521 I. Short-term provisions 19 95,904 94,893 1. Provisions for infrastructure works 89,993 90,014 2. Other provisions 5,911 4,879 II. Short-term debt