INVESTMENTS AND FINANCING POLICY

Transcription

1 INVESTMENTS AND FINANCING POLICY The Board of Directors of Gamesa Corporación Tecnológica, S.A. (the Company ), according to articles 19 of the Bylaws and 5 of the Board of Directors Regulations, has the responsibility of approve the general policies and strategies of the Company and, in particular, to approve, among others, the risk identification, control and management, in which the investments and financing policy is included, whose basis are detailed as follows: 1. OBJECT The investments and financing policy of the Company has the object to establish a common frame for: 2. SCOPE the analysis, monitoring and control of the new investment or divestment projects; the financial risk control and management; and the monitoring of the risks related in the current legislation and of the general guidelines established in the risks control and management policy approved by the Board of Directors of the Company. The present policy is to be applied to the investment and divestment projects and to the financing operations of all the business which integrate the Gamesa Group. As for the established risks, the present policy is to be put into practice to: the main market, credit, business and operation risks, specific of each investment or divestment project, regardless of being quantifiable or not; and the following financial risks: interest rate risk, exchange rate risk, credit risk and liquidity risk. 3. DEFINITIONS 3.1. Definitions to be applied to the investments policy Project: each commitment before a third party which involves the resources expenditure and/or assignment in a future, annual or multi annual period, with the purpose of create or obtain stockholdings in companies, develop and build fixed asset or design and implement management tools oriented and justified for the achievement of results and future increasing profitability. Likewise, the divestment projects related to the sale of assets or stockholdings in companies are contemplated. IRR: Internal Rate of Return or expected return of the project. WACC: Weighted Average Cost of Capital or requested remuneration of the funds suppliers of the company (shareholders and financing operators).

2 3.2. Financing policy applicable definitions On a general basis, risk is any threat that an event, action or omission, could prevent the Gamesa Group to achieve its targets and execute its strategies with success. In particular, the following risks related to the financial sector have been identified: Interest rate risk: is the risk derived from: The exposition of the financial income/spending to adverse movements of interest rates which can lead to an increase of the expected financial net spending. The exposition of other non financial incomes/spending to adverse movements of the interest rates which can lead to a lower net profit of the Group. The exposition of the reasonable price or value of the fixed-rate debt, to adverse movements of the interests rates which can lead to a indebtedness cost over the one in the market, and as a result a higher latent value. The movements in the debt cost can come from the markets situation (interests rates) and/or from variations in the credit quality of the Company or of the companies of the Group (rating), which will have as result an increase in the financial spending through the financial operations margin. Exchange rate risk: is the risk derived from the fluctuations, in front of the accounting currency, of the parity of the foreign currencies in which they are implemented: the debts, which may affect the debt service cost and the DVFCs (Differences of Valuation of Foreign Currency); the collections and payments for supplies, services or investments, which could affect the incomes and spending of exploitation; the incomes and spending which in some foreign subsidiary are index-linked to the evolution of a foreign currency in relation to the functional currency, can lead to a lower exploitation margin and, as a consequence, to a lower net profit; to enter in the accounts, for tax purposes, in another local currency from the functional currency, which can lead to a higher tax payment and, as a consequence, to a lower profit after taxes; and to enter in the accounts the foreign subsidiaries as consolidated, which can affect to their contribution in euros to the consolidated result of the Gamesa Group and to their net patrimonial consolidated value as conversion differences. Commodities cover risk (steel copper, oil, etc). Credit risk: is the risk derived from the exposition of the financial creditors positions to the situation of the credit quality of the balancing entries of them, which finally can result in a non fulfilment of its financial duties. Liquidity risk: is the risk derived from the exposition to adverse situations of the debt or capital markets which make it difficult or impossible to cover the financial needs required for the appropriate development of the activities of the Gamesa Group.

3 4. BASIC POLICIES AND PRINCIPLES 4.1. Investments policy The investments are one of the mainstays for the growth and value creation of the Gamesa Group. The investments decisions will be developed according to the principles established on a corporate level and will comply with the following Basic Principles of Action: To assign the resources in an effective way, according to the strategic targets and the profitability/risk of each project. To delimit the responsibility of each organization involved in the processes of justification, approval and monitoring of the projects. To guarantee the balance between the identification capacity and proposal of operations made by the promoters of the project, and the supervision and approval by the Company To homogenize the criteria and methodology for the investment or divestment decisions. To act at any moment under the protection of the current rules and law and of the values included in the Corporate Social Responsibility Principles and Code of Conduct of Gamesa Corporación Tecnológica Financing policy The Company shall develop a financing policy which allows obtaining the necessary funds to cover the investments and operative needs of the companies of the Gamesa Group, in optimum conditions of cost and risk: minimizing the financial spending and optimizing the cash flow and the balance sheet of the Group; establishing the appropriate risk levels to be assumed to optimize the cost-risk binomial inside the established limits; transferring the risk level of financial variables which does not want to assume to external entities specialized in their management; and maintaining a financial leverage ratio and other solvency ratios which allow maintaining the rating of the Group according to the targets which at each moment are approved by the Board of Directors of the Company. Every action against the financial risk will be developed in line with the principles established on a corporate level and being part of the risk general policy of the Group and will comply with the following Basic Principles of Action: To centralize the financial risk management of the whole Group in the Managing Unit of Management Control. To guarantee the correct use of the financial instruments implementing the appropriate procedures for the analysis and approval and applying the financial prudence principles in every action with those fulfilled. To document all the cover operations according to the requirements established in the International Financial Reporting Standards ( IFRS ). To inform with transparency in the financial statements of the Company and associated risks.

4 To act at any moment under the protection of the current law and the values included in the Corporate Social Responsibility Principles and Code of Conduct of Gamesa Corporación Tecnológica and in the Rules of Procedure in Securities Market. 5. GUIDELINES 5.1. Investments policy To properly mitigate and limit the risks associated to the investment or divestment projects the following guidelines and limits are established: All the projects shall be designed to the creation of value and be coherent with the strategy of the Gamesa Group. The mechanisms which may assure the strategic reserve of the projects and the effective existence of funds to finance them, will be established. The expected profitability of each project shall be adjust to risk and observe some minimum profitability limits (IRR), in terms of weighted average cost of capital (WACC) plus a bonus. Every project shall include an analysis of quantitative and qualitative risks which contemplates the main risks of it. The result of the risk analysis of the project shall not throw a probability of value destruction (percentile for which IRR < WACC) higher than the limit which shall be established. In the investments analysis and approval process, the guidelines and limits established in the risk specific policies of the business approved by the Board of Directors which affect the project, shall be additionally contemplated. Once approved, a monitoring of the projects will be made to anticipate possible risks of non fulfilment or deviations, with the purpose of taking the most appropriate corrective management measures with the sufficient anticipation. For projects which have been approved but not yet executed, if additional information which can substantially change the analysis made is known, they should pass through the approval process again Financing policy With the aim of mitigating the financial risks of the Gamesa Group and limiting the maximum value in risk of the global financial spending of the debt, the following guidelines and limits are established: Interest rate risk Several balance sheet items are subjected to variations in the interest rates. With the aim of limiting this risk, the desired annual structure of the debt between fixed and variable rate will be fixed, and the actions to be carried out among the fiscal year will be established. In addition to the market variations, the credit quality of the Company or of the companies of the Group (rating) has an impact in the debt cost and will be an additional risk factor to be controlled and managed. To minimize this risk the Managing Unit of Management Control: will follow up the respective indicators (ratios, liquidity, etc.). will propose the appropriate actions to maintain the credit quality in accordance with the previously established targets. will maintain the information channels with investors and rating agencies to explain the evolution of the financial magnitudes and of its deviations when they occurred.

5 Exchange rate risk The currency to enter in the accounts of the Gamesa Group is the Euro. The fluctuations in the parities of the currencies in which the debts are implemented, against the currency to enter in the accounts, and which affect the cost of the debt service and the value of the DVFCs (Differences of Valuation of Foreign Currency), may negatively impact in the financial spending of the fiscal year. With the purpose of limiting this risk, funds in the currency to enter in the accounts of each company of the Group will be taken, as it may be possible and economically viable, or will pass to that currency using derived instruments of change when funds in another currency are taken. The fluctuations in the parities of the currencies in which the purchases/sells of supplies and services against the currency to enter the accounts are done, may be translated in a higher spending or lower exploitation income and, consequently, in a lower operative margin or fixed asset value. With the purpose of limiting this risk the purchases/sells, investments and contracting of services will be made in the currency to enter the accounts of each company of the Group, as it may be possible and economically viable, unless the global analysis of the exchange rate advises to do it in a different currency. The exposition to adverse movements (depreciation) of the currencies to enter in the accounts of the foreign subsidiaries against the Euro, may lead to a lower consolidated result as it converts each of its results account lines to a lower average exchange rate than the one in the budget. In this respect, and for risk volumes with high signification, the Company will be able to mitigate this risks contracting indebtedness operations in the transactional currency of the respective foreign subsidiary, or with the contracting of exchange derivatives being the underlying the expected results to be consolidated. With the purpose of optimizing the management of this risk the result positions of the expected profits of the foreign subsidiaries will be integrated with the other positions in currency for its global management. The businesses will inform of each of its positions and of the natural covers or indirect effects of them, if those exist, to the Managing Unit of Management Control, which will integrate them with the rest of positions and will manage them with global optimizing criteria of the cost-risk, within the risk limits that shall be established. The exposition to adverse movements (depreciation) of the currencies to enter the accounts of the foreign subsidiaries against the Euro may lead to a lower consolidated net patrimonial value as negative conversion differences. With the purpose of mitigating this risk and protect the value in Euros of the net investments in foreign companies, if appropriate, loans in foreign currency, forward contracts and currency swaps will be used, or any other instrument which provides an effective cover and whose use is considered within the financial prudence principles and always if those admit cover treatment under the IFRS, in which case the variation of the debt exchange or from the derivatives will enter the accounts, on a consolidated level, in an account of conversion differences which will compensate Credit risk The exposition of the financial creditors positions to the situation of the credit quality of the balancing entries of them may lead to a non fulfilment of the financial duties. With the aim of limiting this risk::

6 A limit for the minimum acceptable credit qualification of the other parties, or companies which guarantee them, will be established in the operations with derivatives, surplus placing, guarantees received from third parties and any other asset operation. When the other party suffers damage in his credit level under the investment level the appropriate correction actions will be taken which will go from the exercise of the automatic cancellation clauses (if included in the contract) until the anticipated liquidation of the operation. The risk concentration in one balance entry will be properly limited, as well as the credit risk in the whole financial assets operations. The Managing Unit of Management Control shall regularly value, according to the market standards, the credit risk for compensation of all the financial assets operations (financial derivatives, surplus investments, loans given to subsidiaries). Guidelines will be established to set the transfer prices to be applied to the financial operations with subsidiaries regarding market value principles, based in the credit quality of the companies, the cover cost of the exchange rate (if appropriate) and the possible political risks that may be applicable, if necessary Liquidity risk The exposition to adverse situations of the debt or capital markets may make it difficult or impossible to cover the financial needs required for the appropriate development of the targets approved by the Board of Directors of the Company. The Gamesa Group has the target of assuring the fulfilment of the payment commitments undertaken and the cover of the financial needs of the Group, without having to resort to receiving the funds in costly conditions. With the aim of mitigating this risk: The Managing Unit of the Management Unit will have to apply the liquidity policy decided at the preparation of the financial budget. Credit facilities committed for a sufficient quantity to support the expected needs will be contracted, without taking into consideration new financing, for a period which is set regarding the debts and capital markets situation and the credit situation of the Group. The liquidity cover instruments which are most efficient in terms of cost, flexibility and commitment level will be used. The financing needs cover through the access to different markets as well as to different geographical areas, will be diversified. The refinancing risk for the diversification of the issued debt expirations will be reduced, with the double target of distributing in time its repayments and of establishing references (benchmarks) at different terms which make the secondary market liquidity of our issues grow. The fulfilment of the duties will be guaranteed in those financial operations which may endanger the cover of the liquidity needs of the Group.

7 6. LIMITS With the aim of adapting the risk impacts to the established appetite, the Managing Unit of Management Control will define and present to the President and Chief Executive Officer of the Company the specific numerical values of the risk limits included in this policy and the President and CEO will be able to decide the amendment of those values and exceptionally authorized that they are exceeded, taking into consideration the proposals that the affected units may raise through the specific committee. At the same time, the directors of the affected units may establish additional risk limits and indicators which allow guaranteeing an appropriate control of this policy, as well as the necessary control and reporting of information systems.