Gas Natural SDG : Fenosa posts adjusted net profit of 980 million euros and confirms forecasts for 2016

• In spite of the unfavourable economic climate, progress in the year enables forecasts to be made with the company posting an EBITDA of approximately 5 billion euros and a profit of between 1.3 and 1.4 million euros at year end, thus confirming implementation of the Strategic Vision for 2016-2020 currently in place.

• The company, which distributed an interim dividend of 0.33 euros per share in September, maintains a dividend policy for the period 2016-2018 that will represent a pay out of 70%, with at least one euro per share.

• The EBITDA has fallen by 6.8% compared to the same period of the previous financial year within a macroeconomic environment where energy raw material prices have fallen significantly. Furthermore, the effect of currency depreciation - especially in Brazil and Colombia - had a negative impact of 117 million euros. Without this effect, the EBITDA would have fallen by 3.8%.

• In Chile, the company is preparing to launch an important gas infrastructure plan in accordance with government schedules following the start of a process to reorganise and restructure the activities by the group in the country.

• Capital expenditure and intangible assets amounted to 1.294 billion euros - an increase of 23.9%, due to the addition of a new LNG tanker in the third quarter, among other things.

• GPG, the international power generation subsidiary, is set to invest approximately 85 million euros in building two solar farms in Brazil with an installed power of 60 MW. Furthermore, the company signed contracts in August to develop renewable power projects in Australia and Chile.

• This quarter, GAS NATURAL FENOSA finalised its purchase of the Irish power company Vayu as part of its commercialisation growth strategy in Europe.

• GAS NATURAL FENOSA supplies energy to 24.3 million natural gas and electricity supply points around the world, a figure that rose by 641,000 in the last year.

GAS NATURAL FENOSA posted an adjusted net profit of 980 million euros in the first nine months of 2016. This figure represents a decrease of 10.4% when taking into consideration the sale of 20% of GNL Quintero (Chile), which should be finalised at some point during the first fortnight of November and which brings a net capital gain of 50 million.

The EBITDAbetween January and September stood at 3.64 billion euros, down 6.8% on the same period of the previous financial year, mainly due to the depreciation of Latin American currencies (with a negative impact of 117 million euros) and failing natural gas prices and margins, in turn due to the overall situation in the international hydrocarbons market. Without the effect caused by currency depreciation, the EBITDA would have fallen by 3.8%.

Despite this difficult scenario, which has particularly affected the gas procurement and marketing businesses, GAS NATURAL FENOSA's results reflect a sound business model.

The gas distribution businesses contributed 34.9% of EBITDA; electricity distribution contributed 27.8%; power generation and commercialisation contributed 20.4%; and gas supply and commercialisation contributed 17%.

The EBITDA on activities in Spain remained stable until September and accounted for 55.1% of the total. The remaining 44.9% corresponded to international activities.

Capital expenditure and intangible assets amounted to 1.294 billion euros - an increase of 23.9%, due to the addition of an LNG tanker for 206 million euros. Without including this tanker, investment is up by 4.2%. Investment mainly focused on the natural gas distribution business, which represented 36.6% of total capital expenditure and intangible assets, compared with 32.1% from electricity distribution.

In the last quarter, the company acquired 37.88% of Gas Natural Chile for the sum of 306 million euros, raising its stake in this business to 95%.

In August, the company finalised the acquisition of the Irish gas and electricity marketing company Vayu, the purchase of which forms part of the new strategic plan aimed at increasing wholesale supply in Europe. Vayu has a market share of 15% of Ireland's major customers.

The company's strict financial policy placed its level of indebtedness at 46.9% on 30 September, a similar percentage to that posted on the same date in 2015. Net interest-bearing debt, at 16.144 billion euros, was 0.7% higher than in September last year. 91.1% of the debt matures in or after 2018 and it has an average life of five years.

At the close of the quarter, GAS NATURAL FENOSA had 10.842 billion of liquidity available, equivalent to all financial obligations in over 24 months.

In July, the Board of Directors approved an interim dividend for 2016 of 0.33 euros per share, to be paid fully in cash on 27 September. This payment is part of the dividend policy for 2016-2018, which plans for an annual pay out of 70%, with a minimum of one euro per share. The new dividend policy brings forward to September the interim dividend, which was traditionally received in January.

With performance meeting expectations, GAS NATURAL FENOSA confirms its outlook for 2016 following continued strong underlying growth in Latin America and forecast stability for the local currencies.

Furthermore, stable margins are expected for 2016 in terms of gas commercialisation, albeit at levels lower than those seen in 2015. In turn, lower than pool electricity prices will be seen in Spain for 2016, but showing business model benefits within the company.

Furthermore, added value investments are in line with the disciplined growth strategy.

The successful investment of new capital in regulated businesses with strong growth outlooks and investment-linked remuneration continues, as does the disciplined focus on international renewable energy projects with added value and the streamlining efforts on the asset portfolio, with divestments in non-core assets and acquisitions in strategic activities, thereby maintaining the cost saving effort.

• Gas distribution in Spain

The EBITDA from gas distribution activity in Spain stood at 653 million euros, down 1.8% on the first nine months of 2015.

Sales from regulated gas activity in Spain rose by 2.5% on the same period in 2015 to 131,237 GWh. Residential demand grew by over 2% (+702 GWh) due to increased consumption in the second quarter, while industrial demand grew by 3% (+1,069 GWh).

At 30 September, the company had 5,311,000 supply points (+1.5%) and a distribution network of 51,790 kilometres, up by 2.6% on the figure reported at the close of the third quarter in 2015. The number of municipalities with access to natural gas rose by 31 and ended the quarter at 1,217.

Gas Natural Fenosa signed an agreement worth 450 million euros in September 2015 to acquire networks from GLP Repsol Butano with a natural gas transformation potential of one million supply points. The National Markets and Competition Commission (CNMC) approved this operation in July, which will be finalised in the final quarter of 2016.

• Gas distribution in Italy

The EBITDA on gas distribution in Italy stood at 44 million euros, 12% less than the same period last year, mainly due to lower revenue from updating the WACC recognised by the Italian regulator as a consequence of the lower risk-free rate.

Gas distribution activity stood at 2,541 GWh, a reduction of 9.5% on 2015 due to an unfavourable climate. The distribution network stood at 7,226 kilometres on 30 September 2016, with an increase of 83 kilometres in the last 12 months. At the close of the period, the company had 458,386 supply points in Italy. This is an increase of 0.4% compared to the same date last year.

• Gas distribution in Latin America

The EBITDA from gas distribution in Latin America stood at 573 million euros, a decrease of 6.8% on the first nine months of 2015, due to the performance of Latin America currencies vis-à-vis the Euro in Argentina (-37.2%), Mexico (-13.8%), Colombia (-13.8%) Brazil (-9.8%) and Chile (-4.7%). Without the exchange rate effect, EBITDA would have increased by 5%.

By country, it is worth highlighting the EBITDA in Chile, which contributed 151 million euros (+10.2%).

Sales from gas activity in Latin America stood at 200,805 GWh and the distribution network in Latin America grew by 3,396 kilometres (+4.3%) in the last 12 months to a total of 82,778 kilometres at the close of the third quarter.

GAS NATURAL FENOSA has 7,690,867 supply points in Latin America, following the addition of 332,000 new points in the last year. Noteworthy increases were seen in this regard in Colombia (123,000 points) and Mexico (117,000 points).

• Electricity distribution in Spain

The EBITDA for electricity distribution stood at 457 million euros between January and September, 1.3% more than the same period in 2015.

At 30 September, supplied energy stood at 23,838 GWh. This is 0.1% less than in the same period of 2015. At the close of the third quarter, the company had 3,697,000 supply points, representing a growth of 0.5% in the last 12 months.

The Interruption Time Equivalent to Installed Capacity (TIEPI) stood at 35 minutes, slightly higher than in 2015 due to the effects of adverse weather conditions at the start of the year.

• Electricity distribution in Moldova

The EBITDA from electricity distribution activity in Moldova amounted to 35 million euros in the first nine months of the year, up 45.8% on 2015. This increase is due to higher payments from the base tariff after the annual update, reduced network losses, and the effect of the exchange rate.

Sales from electricity activity stood at 1,945 GWh (-2.2%) and the number of supply points stood at 876,000 (+1.4%) at the close of the period.

• Electricity distribution in Latin America

The EBITDA from electricity distribution in Latin America, which included Argentina, Chile, Colombia and Panama, stood at 519 million euros at the close of the third quarter, up 1.6% on the close of the third quarter 2015. When disregarding the exchange rate effect, the EBITDA would increase by 9%.

The distribution business in Chile contributed 227 million euros to the EBITDA, in line with the previous year. The distribution companies in Panama contributed 92 million euros and Colombia contributed 191 million euros.

However, due to the current situation of late payments and fraud in Colombia, the profit after tax from the subsidiary of the group in the Caribbean region posted losses of approximately 24 million euros, compared with the 14 million in losses posted in the same period of 2015. At 30 September 2016, the total sum of unpaid invoices amounted to 1.259 billion euros, an amount that is approximately 83% provided for.

Sales from electricity distribution activity in Latin America rose by 2.4% to 26,049 GWh, due to growth in demand in both Colombia and Panama. Overall, the number of supply points increased by 3.3% to 6,232,000.

The EBITDA from the infrastructure business, which includes operation of the gas pipeline between the Maghreb and Europe, shipping management, and hydrocarbon exploration, development, production and storage, amounted to 221 million euros in the first nine months of the year, up 2.3%, due largely to the 3% increase in the international transport tariff on the Maghreb-Europe gas pipeline.

At 30 September, the gas transport activity carried out in Morocco through EMPL and Metragaz achieved a total volume of 83,239 GWh, 1.3% more than in the same period 2015. Of this figure, 52,485 GWh (-5.2%) were transported for GAS NATURAL FENOSA through the company Sagane and 30,754 GWh (+14.5%) for Portugal and Morocco.

• Gas: Procurement and sales

The EBITDA from global gas supply and commercialisation activity amounted to 398 million euros, a reduction of 33.1% and in line with the energy price adjustment trend seen in the period.

Between January and September, wholesale supply by GAS NATURAL FENOSA stood at 213,010 GWh. This is 0.9% lower than in the same period of 2015, mainly due to the decrease in gas commercialised in Spain (down 4.8%). In contrast, international gas commercialisation followed the trend set in the previous quarters and stood at 101,627 GWh, (up 4.5%), with a noteworthy increase in commercialisation to end customers in the rest of Europe.

Gas Natural Europe, the commercialisation subsidiary in Europe, posted sales in France during the period amounting to 33.4 TWh, with customers in various sectors that range from companies in the industry sector to local authorities and the public sector. Sales in Belgium, Luxembourg, the Netherlands and Germany stood at 8.4 TWh in the same period.

In Italy, GAS NATURAL FENOSA posted sales of 4.5 TWh at the close of the third quarter.

In the Portuguese market, GAS NATURAL FENOSA remains the second-largest operator in the country -and the largest overseas operator- with a market share of over 15%. In the industrial market, where its business is focused, this market share stands above 17%.

Within the retail market, the company reported a figure of 12.2 million active gas, electricity and maintenance service contracts at 30 September, of which 569,000 are in Italy. GAS NATURAL FENOSA, a pioneer in the integration of joint gas and electricity supply, now has over 1.5 million households in Spain with contracts for both energies. Furthermore, a large proportion of these households also receive the maintenance service.

The EBITDA for the electricity business in Spain (generation, wholesale and retail supply and PVPC supplies) stood at 553 million euros, a similar figure to that posted last year.

In the first nine months of the year, electricity demand with weather conditions and the number of working days taken into consideration fell by 0.1%. Meanwhile, net national generation shrank by 4%. The average weighted daily market price for the July-September period stood at €42.3/MWh, €14.74/MWh lower than the price in the same quarter in 2015. In the year as a whole, the average weighted price stands at €34.77/MWh, lower than the €51.45/MWh in the first three quarters of last year.

GAS NATURAL FENOSA generated 20,073 GWh to September, down 15.3%. Of this figure, 18,095 GWh corresponded to generation under the traditional regime (down 18.5%), while renewable generation and cogeneration stood at 1,978 GWh (up 33.8%). The company's accumulated quota in power generation stood at 16.4%.

By technology, hydropower production stood at 3,691 GWh to September, 72.4% higher than in 2015. Nuclear production stood at 3,329 GWh (up 0.1%), combined cycles generated 8,028 GWh (down 26.6%) and coal-powered thermal plants produced 3,047 (down 47.6%). Electricity sales, including sales in the liberalised market and the Voluntary Price for the Small Consumer (PVPC), stood at 27,554 GWh at 30 September (up 3.7%).

Gas Natural Fenosa Renovables closed September with a total installed capacity in operation of 1,145 MW, of which 977 MW came from wind technology, 110 MW from mini-hydropower plants and 58 MW from cogeneration.

Production between January and September grew by 33.8% due to increased hydropower production and the addition of facilities acquired during the purchase of Gecalsa.

• Global Power Generation (GPG)

The EBITDA for Global Power Generation stood at 190 million (down 4.5%), mainly due to the lower EBITDA in Mexico (-6.1%) caused by the exchange rate effect. The electricity generated in all assets increased by 1% to 13,361 GWh.

GPG was awarded renewable energy development projects in Chile and Australia in August. In Chile, GPG will build the Cabo Leones II wind farm (204 MW) and a solar photovoltaic power plant (120 MW), with a total scheduled investment of 325 million euros. In Australia, GPG was awarded its first wind farm in the country (91 MW), located in New South Wales. The investment planned for this project amounts to 120 million.

In addition, GPG has acquired its first power generation project in Brazil, with 60 MW. For approximately 85 million euros, the company has acquired a majority stake (85%) in two solar power plants belonging to Grupo Gransolar.

Barcelona, 02 November 2016.

Consolidated balance account

The consolidated profit and loss account corresponding to the financial year 2015 has been redrafted to reclassify the liquid petroleum gas business in Chile as discontinued operations in application of IFRS 5.

Consolidated balance sheet

Main aggregates

Distribution business

Electricity Business