This news article was originally written in Spanish. It has been automatically translated for your convenience. Reasonable efforts have been made to provide an accurate translation, however, no automated translation is perfect nor is it intended to replace a human translator. The original article in Spanish can be viewed at Red Eléctrica apuesta por una red de transporte de la electricidad de calidad

The group go to the transport network an investment of 1,500 million until 2008

Electrical network committed to a quality electricity transport network

María Escribano01/04/2004

Major investment effort provided by REE for the period 2004-2008 aims to strengthen the network of transport of electricity in Spain structurally to answer, basically, to the growth of the new generation under the energy planning of the Government for the next decade.

The new strategic plan of the group for the period 2004-2008, presented by Peter Mielgo, its President, involves investment of 1.5 billion euros in the transport network of electricity, at a rate of between 200 and 300 million per year. Investments will that also take into account the dispersion of the wind megawatts to be installed (not located already in the traditional areas), the development of the rail network of high-speed, the increase in international connections (especially Portugal)(, Morocco and France) and the new social demands.

This investment plan also includes the acquisition of the assets of transport of Hidrocantábrico and Viesgo, issue that the parties are still negotiating, even though, according to Mielgo, "it is on track and could be closed this year".

However, the draft excludes the exercise of the option to purchase on Inalta (society which brings together the assets of transport of Iberdrola), which expires in 2008. At this point, the President of REE has confirmed the intention of the company from exercising the option but at the end of the period of maturity, "except for unexpected changes".

In 2003, REE earmarked investments a total of 778,3 million euros, 215.3 them for transport and 535,2 million for the acquisition of assets (basically, the Endesa and Union Fenosa).

Regulated income growth

Responsible for managing the electrical system technician explained that this increase in investments will be accompanied by a growth "stable and secure" transport revenues. In fact, the company expects that revenues regulated by this concept will grow at an annual average rate of 5 per cent until 2008.

In 2004, REE will receive 626 million in this area, 8.1 per cent more than in 2003. The average annual growth since 1998 has been 6 percent.

This situation will also allow a further increase of 5 per cent in the gross operating profit (Ebitda) of the main business in the period 2004-2008. In addition, REE has the risk regulatory in the coming years be under given their level of efficiency, the consistency of regulation in electricity and gas and the low cost of transport in Spain against the European average.

With transport, Mielgo emphasized the importance, from this year, the activity of operation of the system, which will report to the company pay EUR 33 million in 2004. "This year, will the compensation be practically in balance with the costs", he said.

Financial targets

With regard to the financial targets of the period, Mielgo emphasized that REE has achieved an average annual growth of profit per share of between 14 and 16 percent, driven mainly by the main business in Spain.

Also committed to maintain a policy of "pay-out" (percentage of dividends for profit) "generous", with an average annual growth of between 10 and 12 per cent.

In addition, the company will seek to consolidate its financial profile, while maintaining or even improving their credit ratings and a stable leveraged (closed 2003 with a level of 69 per cent).

In the area of telecommunications, it pointed out that forecasts that sapwood record positive Ebitda this year or the next remain, and so, between benefits to the following financial year.

International connections

As regards international connections, the time limits are both complying with Morocco (enter into service the new networks in the spring of 2006), as with Portugal.

In the Portuguese case, the Balboa-Alqueva interconnection will be completed by the end of this year or early in 2005, which will make it possible to double the current capacity of Exchange and will reduce to a minimum the congestion of the system occur in some moments of the year.

In this way, said, along with the rest of measures articulated in doing so, the predictable is the Iberian market of electricity (Mibel) to function as a market truly integrated "this year".

Regarding the reduction of the participation of the State-owned company of Participaciones Industriales (Sepi) in the capital of REE, recalled that the "holding" public has already announced its intention to sell a 18.5 per cent when the conditions of the market are the most favourable possible.

Results 2003

Red Eléctrica Group obtained in 2003 a consolidated result after tax of 115.8 million euros, compared to the previous year 99.9 million, representing an increase of 15.9 per cent.

The financial year 2003 has been the consolidation of the Group's main business after the new dimension achieved by the company, as a result of the incorporation of the assets of transport of Endesa and Union Fenosa, which has resulted in a quantitative and qualitative leap in the key figures of the group for the financial year 2002, and investments in the network of transport carried out in recent years.

Consolidated gross operating (Ebitda) result has amounted to 439,8 million euros, representing a growth of 59.1 per cent over the same period of the previous year.

Net consolidated result of exploitation (Ebit) was EUR 246,4 million, 57 per cent more than the of the previous year, amounting to EUR 156,9 million.

Repayments have promoted to 195,5 million euros, an increase of 65.6 per cent for the year 2002. This increase is a consequence of the acquisition of assets of transport to Endesa and Union Fenosa, of the entry into service of 710 km of new lines and circuits 88 positions during the financial year 2002, of the integration of the amortization of the TDE society and service in the telecommunications network implementations.

During the financial year 2003 have made investments consolidated by a total of 778,3 million euros, compared to 1.158,7 million from the previous year. These investments, EUR 535,2 million has been earmarked to the final payment of the purchase of the assets of Endesa and Union Fenosa (801 million euros in 2002), 215.3 million for the extension and improvement of the network of transport10.8 million to telecommunications and 17 million to other investment activity.