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ABENGOA Activity Report 200569

Industrial Engineering and Construction

Abeinsa is Abengoa’s holding company for this Business Unit, whose activity focuseson engineering, construction and maintenance of electric, mechanical andinstrumentation infrastructures for the energy, industry, transport and services sectors:Promotion, construction and operation of industrial and conventional (cogenerationand combined cycle) power plants, and renewable energy (bioethanol, biodiesel,biomass, wind, solar and geothermal) power plants. Turnkey telecommunicationnetworks and projects.

Leader in Spain and Latin America

With engineering... we construct and operate conventional andrenewable energy power plants, power transmission systems andindustrial infrastructures

www.abeinsa.com



For Abengoa’s Industrial Engineering andConstruction Business Unit, the year 2005 saw itconsolidate the growth process it initiated inprevious financial years. This growth, based oncompliance with the basic pillars of our strategyplan: customer satisfaction, internationalization,innovation, human resource development, andsocial involvement, ensures that we will be able, inthe future, to provide our customers with the bestpossible service while maintaining our currentgrowth and profitability level.In developing our activity, we offer our customersintegrated solutions in the Energy, Transport,Telecommunications, Industry, Services andEnvironment sectors. These solutions are alwaysfocused on sustainable development, which enablesthe creation of value for Abengoa, our customersand employees, while also ensuring the profitabilityof our businesses and our international projectionand future.During the year, we kept our commitment to theenvironment and developed a wide range ofactivities related to fuel cells and hydrogen and CO2

capturing.In the hydrogen and fuel cell sector, HynergreenTechnologies, a subsidiary dedicated to theproduction of electricity utilizing fuel cells andhydrogen, became a member of the Advisory Boardof the European Hydrogen and Fuel Cell TechnologyPlatform created by the European Commission and,in 2005, began to develop, together with theEnergy and Environment and Technology ResearchCenter (Ciemat), a project to produce clean andrenewable hydrogen utilizing water and solarthermal energy.As regards CO2 capturing, we participated in thesetting up of the Spanish Technological Platform forthe reduction, capturing, transportation and storageof CO2, and we continue to participate very activelyin different Work Groups.In 2005, in addition to this growth in sustainableenergies, important milestones in our traditionalengineering activity were reached, and this enabledus to increase our prestige and capacity forexecuting major infrastructure projects on the homeand international markets.

Of note among these achievements are:

The completion of the combined cycle increase to230 MW of Hermosillo thermoelectric power plant(Mexico).The completion of the turnkey financing, detaileddesign, construction, start-up and operation of theelectricity supply system project for the city of SanJose (Costa Rica).The acceptance by the Government of Mauritaniaof the oil storage depot in Nouakchott, with 60,000cubic meter storage capacity for petroleum derivedproducts.The construction of Europe’s largest bioethanolfrom grain production plant (200,000 m3/year) inSalamanca and the pre-engineering works for a 180million liter bioethanol plant in Lacq (France).Our consolidation as an installer company in Francethrough the 2004-2005 framework contract worksfor RTE.This fulfillment of our commitments, together withmany others, has met our customers’ expectationsupon us providing them with integrated solutionsadapted to their needs.This greater confidence and our internationalizationstrategy enabled us to obtain new contracts in2005, of note among which are:



The construction of the 800 kV Sipat-Seonitransmission line for Power Grid, the scope of whichincludes the civil works, assembly and raising oftowers, and the stringing of conductors.The activity in North Africa developed greatly, withimportant contracts for MV/LV rural electrification;the reinforcing of 400 kV lines and the connectionof 400 and 225 kV lines to Mediouna and Qualilisubstations, in Morocco; the construction of a 400kV transmission line in Algeria; and the constructionof four armored 400/200 kV GIS type substations(FS6 gas substation).The construction and operation, under anadministrative concession contract, of the TajoHospital in Aranjuez (Madrid), including all theassociated services, with the exception of the clinicservices.The construction and operation, under anadministrative concession contract, of threecourthouse buildings in the province of Barcelona,in the municipalities of Olot, Cerdanyola, and SantaColoma de Gramanet.Construction of a 5 million liter bioethanol frombiomass plant for Biocarburantes de Castilla y León.

In short, our strategy for the future is based on thecorrect development of the energy integratedproduct, the construction of Bioenergy plants, astrong and sustained growth in the higher value-added infrastructures, concessions, singular projectsand installations activity and a greater degree ofinternationalization with the aim being to continueto offer our customers projects with a high degreeof quality that meet their needs.We here-below provide more detailed informationon the main achievements during the year in thelines of business we operate in: Energy, Installations,Telecommunications, and Marketing and AncillaryManufacturing.

Energy

The activity in the energy sector focuses mainly onthe promotion, construction and operation ofindustrial and conventional energy (cogenerationand combined-cycle) and renewable energy(bioethanol, biodiesel, biomass, solar andgeothermal) power plants, and the exploitation ofbusinesses and activities related with electricityproduction utilizing fuel cells.In 2005, we consolidated our leading position ininternational markets such as that of Mexico wherewe commenced important construction works. Wealso expanded to new markets in Europe (Franceand Belgium).Likewise, R&D&I activities continued in differentfields of application such as fuel cell based systemsand the production of renewable hydrogen.

Abener Energía

2005 was a year in which Abener took on majorproject execution challenges. Work commenced onthe execution of two new projects contracted inDecember 2004 with the Federal ElectricityCommission (CFE): the construction of the 37.5 MWBaja California Sur II internal combustion powerplant (Baja California Sur, Mexico), and theremodeling of the 187.5 MW Emilio Portes Gilthermal power plant (Tamaulipas, Mexico). Inaddition, the combined-cycle increase to 230 MWof Hermosillo thermal power plant (Sonora, Mexico)was completed.

In the solar thermal power plant sector, workcontinued on the construction of Europe’s largesttower technology plant, total installed output 11MW, located in Sanlúcar la Mayor (Seville, Spain).This project will be the first of its kind to be built onthe continent of Europe for commercial operationand represents Abener’s first project in the solarthermal power plant market. The construction of asecond 20 MW solar thermal power plant with thesame technology is due to begin in January 2006 onthe same site. This line of solar thermal projects isbacked by Abengoa’s strategy plan for thistechnology, with the in-house promotion of 300MW in new facilities.



In the industrial sector, construction continued onthe bioethanol (alcohol produced for use as fuelthrough the fermentation of grain and subsequentdistillation) plant, in Babilafuente (Salamanca,Spain) which, with an annual production of 200million liters, will be Europe’s largest and the thirdto be constructed by Abener in Spain. As regardsnew contracts, the company was awarded thecontract to construct a 5-million liter per yearcapacity biomass bioethanol production plant nextto the aforementioned Babilafuente plant.In addition, of note are the new constructioncontracts that are currently at the pre-engineeringand feasibility stages, such as the works for Noun’s230 MW combined-cycle plant in Antwerp,Belgium; the Abengoa Bioenergía 180-million literbioethanol plant in Lacq, France, and the 200-million kilo biodiesel plant at Cepsa’s Refinery inAlgeciras, promoted jointly with AbengoaBioenergía.

Main Works11 MW Solar Thermal Power Plant with towertechnology, in Seville (Spain)

Abener continues the turnkey construction of an 11MW tower technology solar thermal power plant,the commencement of the commercial operation ofwhich is scheduled for September 2006. This powerplant is the first of its kind to be constructed inEurope for commercial operation.The power plant consists of 624 heliostats, eachwith a 120 m2 surface area, suitably arranged on asurface area known as the “solar field”. They trackthe sun’s position automatically and concentrate itsrays on an aquotubular receiver situated on top of a115-meter high tower in which steam is generatedand driven to a turboalternator, where it expandsand thus delivers 11 MW to the power transportnetwork.

37.5 MW Internal Combustion Engine PowerPlant in Baja California Sur (Mexico).

Abener began this project for the Federal ElectricityCommission (CFE) in December 2004. It consists ofthe turnkey construction of the Baja California Sur IIInternal Combustion Engine Power Plant, in theMunicipal District of La Paz, in the State of BajaCalifornia Sur (Mexico). Provisional acceptance ofthe project is scheduled for January 2007.The project consists of the design, supply, testingand commissioning of a total net capacity 37.5 MW(+ 15%) internal combustion engine power plant. Italso includes a 230 kV substation and the fuel andwater supply systems. The process will consist of theburning of liquid fuel in an internal combustionengine, generating exhaust gases that will betransferred to a heat recovery boiler where steamwill be generated to heat the fuel system. Thepower plant will be provided with a seawaterevaporation system to produce distilled water tofeed the heat recovery units and the closed coolingwater circuits, the fire-fighting and general servicessystems.



Remodeling of the 187.5 MW Emilio Portes GilThermal Power Plant (México).

This project also commenced in December 2004. Itcomprises the remodeling of the Emilio Portes GilThermal Power Plant and is the first power plantremodeling project to be undertaken by Abener forthe Federal Electricity Commission (CFE). The plantis located at kilometer point 68.5 on theMatamoros-Mazatlán road, in the city of Rio Bravo,State of Tamaulipas (Mexico). The plant will bebrought into operation in July 2006.The work comprises the modernization, supply,installation and construction of a heat recovery unitand its integration into combined-cycle togetherwith its equipment and ancillary systems, and all thenecessary conditioning works on the existinginstallations and systems for integral anddependable combined-cycle operation of the Plant’sexisting 150 MW gas turbine and 37.5 MW steamturbine.

Combined-cycle increase to 230 MW ofHermosillo thermoelectric power plant(Mexico).

This project is for the Federal Electricity Commissionof Mexico and consists of converting the existinggas turbine unit to combined-cycle, adding a netoutput of 88 MW. It is the second repowering tocombined-cycle to be executed by Abener inMexico, following the provisional acceptance of the450 MW El Sauz plant in December 2003.

Towards year-end 2005, the tests and start-upactivities were satisfactorily completed.

200 Ml Bioethanol from grain Production Plantin Salamanca (Spain).

Construction works commenced back in November2003, and the project is now at a very advancedstage, with commercial operation scheduled for thenear future.It is the third turnkey bioethanol (alcohol producedfor use as fuel through the fermentation of grainand subsequent distillation) plant to be constructedby Abener in Spain, and Europe’s largest capacityplant with annual production being 200,000 m3/year.

5 Ml Bioethanol from biomass Production Plantin Salamanca (Spain)

It is on the same site as the aforementionedSalamanca bioethanol project. The novelty with thisplant, which makes it the pioneer at industrial scaleworldwide, lies in the bioethanol productionprocess which utilizes lignocellulosic biomass toproduce the fuel. The biomass to ethanolproduction process is achieved throughpretreatment with diluted acid (sulfuric) and high-pressure steam, followed by cellulose enzymatichydrolysis and subsequent fermentation of the freedsugars with commercially available yeasts.The project will consume 50,400 tons of cerealstraw per year to produce 5 million liters ofbioethanol per year. With a 20-month constructionperiod, its start-up and the carrying out of theperformance tests is scheduled for early 2007.

Project pre-engineering works

During 2005, the pre-engineering works werecontracted for the following projects in whichAbener is opting for the turnkey constructionthereof, once the feasibility study, license obtainingand owner financing stages have been completed.

- 20 MW tower technology Solar Thermal PowerPlant in Seville (Spain).



Under Abengoa’s strategy plan for solar thermalpower plants, with more than 300 MW beingpromoted in Spain, a second 20 MW project ofsimilar characteristics to the aforementionedSanlúcar Solar plant will be constructed on a sitenext to that currently occupied by the 11 MW solarpower plant.

- Combined-Cycle Cogeneration Plant for Noun inAntwerp (Belgium).

The Dutch company Noun has awarded Abener thepre-engineering contract for the 230 MW “Delta”Combined-Cycle Thermal Power Plant to beconstructed in the port of the city of Antwerp(Belgium), alongside several chemical industries,who will purchase the new plant’s electric andthermal energy for their industrial processes.

- 180-million liter Bioethanol Plant in Lacq (France).

A bioethanol from corn production plant that willconsume 400,000 tons of corn per year to produce180 million liters of bioethanol. This is Abener’s firstincursion in the French market, with a product forwhich Abener has the major references for plantsbuilt in Europe following its construction of theEcocarburantes Cartagena, Bioetanol Galicia, andBioetanol Castilla y Leon facilities.

- 200-million kilo Biodiesel Plant in Algeciras.

A biodiesel from crude oil production plant withproduction capacity for 200,000 tons per year ofthis biofuel. The project consolidates Abener as themain renewable fuels plant constructor as aconsequence of its execution of the aforementionedbioethanol technology projects.

Operation and Maintenance

The Operation and Maintenance (O&M) line ofbusiness applied to generating plants includespreventive, scheduled and corrective maintenanceof equipment and systems, as well as theiroperation to achieve dependability of facilityoperation and ensure the specified designperformances in terms of output, availability andload factor.

The O&M Division is carrying out these activities inseven different plants (four cogeneration plants andthree gas strata generation plants), and it is alsoproviding technical assistance for the O&M of afurther cogeneration plant.These plants are located in six provinces in threedifferent Autonomous Regions. Their total installedoutput is 165 MW. In 2005, between them all theygenerated 1,032 GWh of electricity.In addition, Abener manages the production andsale of electricity from six cogeneration plantswhich, in 2005, produced 1,402 GWh of electricity,1,255 thousand tons of steam, 9.45 million cubicmeters of hot water, and 266 thousand cubicmeters of desalinated water.Of special note is the fact that three of these plantssell their surplus energy in the electricity productionmarket (the so-called electric “pool”). Themanagement of the sale of this energy to maximizeearnings according to the market rules, has beenincorporated as another task to be carried out bythe O&M Division which also provides these sameservices for two plants belonging to the BioenergyBusiness Unit. The annual energy managed forthese five facilities is 1,255 GWh.At all these cogeneration plants, the greenhouseeffect gas emission rights assigned to each facilitywere managed through the efficient economicoperation of each of them. This, together withchanges in operating regimes at some of the plants,enabled year-end to be reached with a positivebalance between the assigned rights and the realemissions.



Hynergreen

Hynergreen is a company dedicated to the design,development and construction of electric energyproduction systems base on the application of fuelcells and hydrogen, and to the production, handlingand storage of this gas as an energy vector.

To be specific, it focuses on developing systems thatintegrate fuel cells and hydrogen in the transportand portable sectors, in which in develops R&Dprojects and Works for the home and internationalmarkets. Overall, this is an ambitious plan thatcovers electric power ratings ranking between 30 Wand 500 kW, utilizing high and low temperaturefuel cellsThese sectors could greatly benefit from the use ofthese technologies that, in addition to being moreefficient, have other advantages such as lowemissions of pollutants, higher energy density,modularity or low noise level.Upon it being well aware of the need to pursuenew clean energy sources, Hynergreen alsoparticipates in projects related with the productionof hydrogen utilizing solar energy, and with theintegration of nanotechnology andmicrotechnology.In this sense, the hydrogen would act as arenewable energies storage system and would thusbecome a clean fuel that could be produced locally.To attain its objectives, Hynergreen collaborateswith public and private bodies and institutions, bothSpanish and foreign, in different frameworks andprograms, to combine synergies and achieve thebest results.Finally, it utilizes R&D&I Management Systems thatallow it to offer customized solutions to itscustomers, with maximum flexibility and which arebased on the latest advances made in thesetechnologies, and it thereby contributes to asustainable future.

Hynergreen is a member of the Board of Governorsof the Spanish Hydrogen Association (AEH),occupies the Vice-chairmanship of the Spanish FuelCell Association (Appice), and is a member ofRaitec, as a Technology Agent. In addition, it is amember of the Advisory Council of the EuropeanHydrogen and Fuel Cell Technology Platform, and inthis case it occupies the Chair.

Installations

This line of activity is led by the companyInstalaciones Inabensa, S.A. and includes all theactivities related with electrical, mechanical,instrumentation, large HV line, railway,maintenance, communications, and board andcabinet manufacturing activities, which have beenthe pioneering activities of Abengoa since 1941, aswell as the installation of insulation, refractory andpassive fire protection materials.Of note is the fact that Inabensa is making a greateffort in internationalization through its subsidiariesand permanent offices abroad (France, Morocco,India, Portugal, Romania, Libya, United ArabEmirates, and Costa Rica).



Inabensa

In 2005, Inabensa recorded an important advance inits diversification program, from both a productlevel and activity internationalization point of view,with these being the basic pillars of its growthstrategy. In addition, these factors contributedgreatly once again to it meeting its objectives.On the one hand, the awarding of two new projectsvia administrative concession contracts reinforce theeffective management the company has beendeveloping in this new sector which requires themaking of a very great effort, from the point ofview of investment, organization and knowledge ofthe different disciplines involved in these types ofprojects.On the other hand, Inabensa increased its presencein the international markets by adding thepermanent office in Abu Dhabi to the otherpermanent offices that are already operating orsubsidiary companies it has established. This hasenabled the company to approach an importantmarket such as that of the Persian Gulf. Newcontracts it was awarded in its traditional foreignmarkets represented slightly more than 30% of theannual contracting figure.The contracting figure was approximately 400million euro, and the Company’s works portfolio atyear-end had increased 36.5% on the previous year.Likewise, its earnings after tax increased 9% on theprevious year’s figure.In addition, Inabensa continued its constantoccupational training program for management andtechnical and administrative personnel. Some40,000 hours were dedicated to trainingthroughout the year with a view to providingemployees with the know-how required to increaseproductivity, a key component of our growth.The company maintained its commitment totraditional customer prestige and loyalty in thedifferent activity sectors it operates in and whichhas maintained it, year after year, as a company ofreference for its high degree of responsibility, know-how and management capacity.

Of note among he works executed by Inabensa in2005 (continued or completed) in the differentactivity sectors are:

Electric Installations

The generation, conveyance and distribution ofelectricity continued to be one of Inabensa’simportant growth sectors during the year. In saidsector, in addition to the continuity of the electricitydistribution works under pluri-annual frameworkcontracts with Endesa (Catalonia and Balearic Isles)and Iberdrola (North and Levant Regions). Of noteare the turnkey construction works for the newcapacitor bank and auto-triphasic positions in theBenajama 400/220 kV substation (Alicante) for REE,the Alcocero de Mola 220 kV substation forGenesa, the 123/20 kV substation for the newHeineken España, S.A. brewery, and the 55/12 kVAmbrosero substation for Electra de Viesgo, and theenlargement of the Calviá substation on Majorca,for Endesa.Also of note are the works carried out for energyconveyance, with the completion of section 3 of the132 kV D/C Vilanova-Gandía transmission line, forIberdrola, the construction of section 1 of the 220kV D/C Cartelle-Frieira transmission line, for UniónFenosa, the civil work and subterranean laying of aof a 66 kV D/C transmission line, the Centenario-Rastro urban route, and that corresponding to the66 kV T/C Zaudín-Bormujos transmission line, bothfor Endesa.Likewise, in this sector, we would mention thestringing of 400 and 220 kV fiber optic transmissionlines for REE, for whom more than 100 km werestrung under live-line and dead-line conditions.Of note in the environment sector are the electricinstallation works executed in the Atabaldesalination plant, in Malaga, for the Abensur-Gegremont joint venture, the enhancement and



conditioning of the electric, lighting and watersupply installations in El Portitxol, on Majorca, theCamis de Es Riquers rural electrification works forDracotel, and the installation of meteorologicaltowers on wind farms.There was also intense activity in the industrialsector in 2005. Of note therein were the MV and LVelectric installations performed in the automotiveindustry for Ford, Renault and Peugeot-Citroen attheir factories in Valencia, Seville, Valladolid andVigo, in the foodstuffs industry for Nestlé at itsMiajadas factory in Caceres, for Cruzcampo(Heineken) in Seville, for Productos Cárnicos deManacor and for El Pozo, in Murcia. Installationswere also executed for the aeronautical industry,such as the HV electricity network, including thetransformation centers and generating units for thenew EADS-CASA factory, in Seville, for the FAL A-400 M project, and the expansion of the Bahía deCadiz Center installations, also for EADS-CASA. Inaddition, different works were executed in thecement industry sector, such as the expansion ofthe Financiero Minero factory installations, inMalaga, for the new furnace.Of note in the transport sector were the worksexecuted for the ADIF, Aena and GIF, among whichwe would mention the rehabilitation of theVillasequilla, Torrelavega, Bárcena and Ávila tractionsubstations; the turnkey construction of three 400/2x25 kV, 2x60 MVA traction substations, and the50/25 kV, 2x15 MVA transformation centers for thenew Segovia-Valladolid high-speed railway accesson the northwest corridor, for ADIF; the ancillaryinstallations of the new 2x400 kVA emergency unitsat Gran Canaria airport, for Aena, and works toadapt the tunnels of the Zaragoza-Lerida high-speed line to the new European legislation.Of special note in the services sector were the MVand LV installations in the new Postal Sorting Officein Merida; the Educational Geriatric Center ofEspartinas, in Seville, for Econivel; the electric andcomputer installations in the new offices of theBoluda Group, in Las Palmas; the electricinstallations and TC at the Son Gual Golf Club inPalma de Majorca, for Agroquimics Inca; the firefighting and control installation for the Queen SofiaPalace of Arts in Valencia; the public lighting andtraffic light installations under the Public AreaIntegral Improvement Plan for the city of Barcelona;

the turnkey construction of the new Cobcesurfacilities in Seville; and the logistics centers for VolvoTrucks in Valdemoro and Aldi Supermarkets in Islade Dos Hremanas, in Seville.As regards singular buildings for publicadministrations, work continued on the HealthCampus and the administrative building ofAlmanjayar, in Granada and the City of Justice ofMalaga, for the Regional Government of Andalusia.Works commenced on the new Faculty of Law inSeville and on the remodeling of the Conde Ybarra,Puerta de Navarra and New Zealand Pavilionbuildings for the Directorate General of Heritage ofthe Regional Government of Andalusia.Important infrastructure works included civil,electrification and road lighting works on industrialor housing estates such as “La Morra” for the towncouncil of Villanueva del Rio Segura, las Bayas,Castillo del Sax, San Juan and Campes Baix.

Railways

For the Adif - Conventional 3,000 V dc Lines:modernization works were carried out in Chamartinand Atocha stations, in Madrid, and in theValdepeñas, Sitges and Santa Marta stations.Catenary conditioning works were also executed ondifferent sections of the national railway network.On 1,500 V dc lines: of special note are theremodeling works carried out on line 3 of theMadrid metro system and electrificationmaintenance works for Metrosur.Other important references include thosecorresponding to the completion of the Zaragoza-Huesca section of the northeast corridor; thecommencement of the northwest corridorelectrification works on the Segovia-Valdestillas



section of the Spanish high-speed network, for theAdif; the awarding of the 2006 to 2009 contactwire maintenance contract for the Madrid-Leridasection of the Madrid-Zaragoza-Barcelona-FrenchBorder high-speed line, and the AC and DCelectrification, 220 kV substation, communicationsand signaling installations for line 9 of theBarcelona metro system.

Mechanical Installations

Construction works were completed on theAlmendralejo gas compression station for ENAGASand assembly works continued on the differentmain bioethanol production process piping systemsand ancillary systems at the Biocarburantes Castillay Leon facility, for Abener, in Salamanca, and on theexpansion of the San Roque gas bottle filling plant,for Cepsa, in Cadiz.Also of note are the installation works executed onpillars, structures and solar panels with trackingmechanisms at the 1.2 MW photovoltaic powerplant, for Solúcar, in Seville, and the construction ofmechanical maintenance platforms for the Airbus400-M, for EADS-CASA.

Refractory/Insulation/Passive Fire ProtectionMaterials:

Inabensa continued to carry out intense activitiesrelated to ancillary thermal installations in thechemical and petrochemical sector. Of special notein this sense are the burner replacement works inNaphtha Furnaces in Tarragona for Dow ChemicalIbérica, S.L., those of refractory maintenance andrepair at the Tersa USW Plant, in Barcelona, forTractament i Selecció de Residus, the renewal of theSugimat boiler refractory lining for Utisa, and theinstallation of refractory linings in the F1014 andF1010 furnaces for Technip Benelux at the DowChemical plant in Tarragona.

On the other hand, of note in matters related withthermal insulation is the installation of equipmentand piping lagging at the Biocarburantes Castilla yLeon Facility (bioethanol production), for Abener, inSalamanca.As regards passive fire protection works, we wouldmention the fire resistant treatment of metallicstructures, equipment skirts and bearer-plates, cableconduits and valve activators of the G4 Unit, carriedout for Petronor in its Somorrosto – Muzkiz refineryunder the gasoline and gas oil environmentalquality enhancement project.

Maintenance and Instrumentation

For the electric sector, work continued throughoutthe year on electric and instrumentationmaintenance at Almaraz, for Endesa, and Trillo, forIberdrola, nuclear power plants; substation voltagemaintenance works for Gesa Endesa; HV Linemaintenance for Fecsa Endesa, in Catalonia; and thecleaning of insulation on live 400 kV lines, for REE.In the transport sector, a maintenance contract wasobtained for the catenary of the Madrid-Leridahigh-speed line for the ADIF and modernizationworks commenced of the Tudela Verguin parallelingcenter on the Soto del Rey-El Entrego line, for theADIF.In the industrial sector, maintenance workscontinued on the Lexan 1 and 2 compounding plantinstallations, for General Electric Plastics; the electric



maintenance of the Cepsa refinery installations inLa Rábida; the maintenance of the Enagás plant inHuelva and of the electric installations of FordEspaña; the preventive and corrective maintenanceof the Bioetanol Galicia production facility, inTeixeiro (La Coruña); the maintenance of the datanetwork of the Gkn Driveline y Faurecia factory, inVigo; and the lighting and power system at Cepsa’splant, in Algeciras.Of note as regards instrumentation installationswere the activities at the new chloride crystallizationplant in Sabiñanigo, for Aragonesas; of two 400MW units for the Arcos CCPP, for Iberdrola (Arcosde la Frontera); and the electric and instrumentationinstallation works for the BOP of the Aceca PowerPlant, for Iberdrola (Toledo).

Services Concessions

In this Division, it is important to mention theconstruction, financing, operation and maintenanceof the installations and infrastructure and servicesof the Tajo Hospital, in Aranjuez, for the MadridRegional Government, under a 20-yearadministrative concession contract.

Likewise of note were the construction, financing,operation and maintenance of the installations ofthe Olot, Cerdanyola del Vallès and Sta. Coloma deGramanet courthouses in Barcelona, for theInfrastructure Authority of the RegionalGovernment of Catalonia, under a 20-yearadministrative concession contract.

Manufacturing

The most important manufacturing works in 2005were as follows:

11 kV cabinets, inverter and control cubicles,ancillary services, motor control centers and powerboards for the PS10 Solar Thermal and Sevilla-PVSolar Photovoltaic power plants in Sanlúcar laMayor (Seville), for REE. Likewise, under the PIAproject, more than 500 relay rack cabinets andancillary services panels were supplied, andequipment was manufactured for substations suchas those of Castellet and Gornal, Sentmenet,Almaraz and Ascó.On the other hand, motor control centers for dieselpower plants, and medium voltage cabinets anddistribution boards were manufactured for the CasTresorer II and Barranco II combined-cycle powerplants, and in the distribution sector, 24 kV cabinetsfor substations in the southern area, for Endesa.For Petronor refineries, 6 and 12 kV cabinets forMuskiz, and for Repsol, in Murcia, for theWhitening and Paraffin project, a motor controlcenter and ancillary services boards.For Enagás, the equipping of 6 and 12 kV cabinetsand distribution boards for the expansions of theLNG depots in Barcelona, Cartagena, Tivissa, andZaragoza. 6.3 kV cabinets and power boards in



Huelva and Murcia, and the computer room at itsMéndez Álvaro Power Plant, for CLH.Work continued for nuclear power plants with themanufacturing of spare parts and assistance withthe reloading in Almaraz, Trillo, Vandellós and AscóNPPs.Low voltage supplies are being made for 18complete substations for the Madrid-Valladolid high-speed line; cabinets, LV boards and motor controlcenter for the Bioethanol facility in Babilafuente(Salamanca), which Abener is constructing; and 24kV cabinets for the Vinalopo Pumping Station.In the Alcala de Henares electronics manufacturingworkshop, numerous items of ticketing and accesscontrol equipment were manufactured for theEuskotren and Metro Bilbao projects, for Telvent.Of note in the energy sector were the itemsmanufactures for REE, such as the centralizationboxes for substations and the remote stations withassociated electronics such as the mini ULCs and theCCSs. In the solar energy sector, control electronicswere manufactured for the heliostats installed in thesolar plants of Sanlúcar la Mayor (Seville).In the Defense sector, control electronics continuedto be manufactured for both the turret and body ofthe Leopard tank. The Division is also participating inthe manufacturing of the prototypes of the newPizarro armored vehicle, and in the aeronauticalsector, it is manufacturing several test benches forEADS-CASA.

Abroad

The development of activities abroad has been avery important step in the company’s constantefforts in relation to its presence and consolidationin new markets, both of which are necessary tomeet the goals established in its strategy plan.We would mention the following as the mostimportant works abroad that were initiated,continued or completed in 2005:In the electric installations activity, works werecompleted on the underground laying of thedistribution network for the city of San Jose, inCosta Rica, for the CNFL, and civil and assemblyworks commenced on the Tabarca and Poassubstations, and on the turnkey construction of theCahuita, Palmar, and Cóbano substations for the ICEin Costa Rica.

As regards electricity transportation, of note werethe completion of the guard wire replacement withOPGW on 3,000 km of TL for Transeléctrica, inRumania; the continuation of the constructionworks on the 800 kV Sipat-Seoni TL in India; thecommencement of the works on the 225 kV D/CChichaoua-Agadir TL and the 400 kV Mediouna-Oualili TL for the ONE, in Morocco; the constructionworks on the 400 kV Wadialrabia-Rowies TL, inLibya; and the commencement of the execution ofthe 400 kV Hadjerat Emous-El Afroun II, El Afroun-Si Mustapha and El Kemis-Berouaguia TL, in Algeria,for Sonelgaz. In addition, the rural electrificationworks of phase II of Kenya and phase IIIB ofTanzania were successfully completed.In the mechanical installations field, maintenanceworks continued on the installations of the 60,000m3 capacity oil product storage depot in the port ofNouakchott, in Mauritania, during the guaranteeperiod that finalizes in 2006.In the railway sector, of note were the completionof the manufacturing and supply of a track grindingmachine; the commencement of the manufacturingof another unit for the Tianjin Binhai Mass TransitDevelopment in China; and the continuation of themaintenance works on the Basmane-Menemen-Aliaga and Alzancak-Cumaovasi railway lines, forthe TCDD, in Turkey.Of note in the communications sector were thedeployments of PLC (Power Line Communications)systems on the distribution networks of the ArabEmirate of Abu Dhabi, for Adwea, and for ONI inPortugal.



As regards ancillary manufacturing for the electricand electronic sectors, work intensified on themanufacturing and equipping of containers for thecontrol of gas turbines and analyzer panels indifferent energy generation stations abroad forGeneral Electric. In addition, urban traffic regulationand electronic control equipment was manufacturedand supplied for the cities of Xin Xang, in China,and Haipon, in Vietnam, as were 167 ticket vendingmachines for the metro of the city of Tianjin, inChina.

Inabensa Maroc

In 2005, the activity of Inabensa’s local company inMorocco focused on the development of the ruralelectrification contracts for the Office National del‘Electricité (ONE), with more than 350 townsthroughout the northern and southern regions ofMorocco having been provided with electricity. Inaddition, some 50 km of OPGW cable were strungon the 225 kV Step TL, for the ONE as well.In the communications sector, Inabensa Marocexecuted 7 km of channeling and laying of 12-pairfiber optic cable for Meditel’s communicationssystem, for whom the turnkey construction of 60mobile telephone stations with GSM and SDHsystems was also executed, electrifying 20 of thebase-station network Meditel has in Morocco.Also of special note is the execution of 11 km ofsewerage piping, the execution of the 20 kVelectricity supply ring and the external telephoneinstallations in the large tourist complex of Saidía,for Fadesa, in the north of Morocco, close to theborder with Algeria.Another aspect of note in Inabensa Maroc’s activitywas the manufacturing of prefabricated concretesupports for the rural electrification works, forwhich more than 5,000 units were manufactured inits two plants in Chichaoua and Taourirt.

Inabensa France

During 2005, Inabensa France consolidatedits position as an installations company inFrance and continued with the works underthe 2004-2005 framework contract forGestionnaire de Rèseau de TransportD’électricité (RTE), of note among whichwere the execution of the civil works, theraising of supports and stringing ofconductors on the 90 kV S/C Pleumartin-Preully TL, the reinforcement of the 63 kV S/C TL with the installation of anti-cascadesupports, the disassembly of 10 km of the90 kV D/C Cognac-Nicene TL, including thedemolition of the support pedestals. Inaddition, towards year-end, reinforcementworks began on the 225 kV S/C Bouteau-LaCapelle TL, including project engineeringand the changing of line insulators.Also of note was the participation ofInabensa France in RTE’s internal workshops onprevention and safety. It participated as a guestinstallation company of reference in this material.Some 100 km of fiber optic cable were strung forAlcatel on the 400 kV Dambron-Verger andCordemais-Louisfert TLs.

Inabensa Bharat

Inabensa Bharat continued to lead Inabensa’soperations in India and other Asian countries in thevicinity such as Bhutan or Nepal.In 2005, it commenced the construction of the 800kV Sipat-Seoni TL for Power Grid, and directlyexecuted the civil works, assembly and raising oftowers and the stringing of conductors.In addition, and as an export company, it managedthe manufacturing and CIF supply of the array ofheliostat mirror support structures for the PS10 11MW solar concentration power plant Abener isconstructing in Seville.

Inabensa Portugal

Of note in 2005 was the participation of InabensaPortugal as a subcontractor of Inabensa on the PLCtechnology deployment project for ONI. It performedthe MV and LV works on EDP’s distribution network,complementary to the communication equipmentinstallation works related with the deployment.



Telecommunications

The activity in the telecommunications sector focusedmainly on the integration of turnkey networks andprojects.In 2005, this line of business was consolidated in itstraditional external plant construction andmaintenance activity and in the provision andmaintenance of customer loops and equipment. Inrelation to the latter, there was an important increasein the provision and maintenance of ADSL broadbandand its entire range of associated products, mainlyimaging (TV through ADSL).In addition, work was carried out on the integrationof telecommunications networks and thedevelopment of new products, such as theimplementation of the PLC system on electricitydistribution networks.

Abentel

In the development of the global contract (for 2002to 2006) with Telefónica de España S.A.U., thevolume of work carried out for this customer washigher than in the previous year, with extra workhaving been obtained in Madrid and Tenerife. Thisconsolidates the company’s position as leader asregards awarded works volume and implementationin provinces, given that it is now operating in a totalof 10 (Alicante, Badajoz, Barcelona, Cadiz, LasPalmas, Jaen, Madrid, Seville, Tenerife and Valencia).On the other hand, it continued to be among theleaders as regards quality levels throughout the yearwith scoring higher than the average of the globalcontract. This was the result of the policy employedin the three previous years, further developed andexpanded in 2005, in relation to the achieving ofhigh levels of quality to meet the customer’sdemands.

In this sense, the following activities are of note:

Consolidation of the Integra Project, having beenpioneers in the dispatching and fulfillment of workorders via mobile telephone with GPRS technology. Itsuse was not only fully extended to the maintenanceactivity, it was also extended to the entire activityrelated with the provision of Broadband and BasicTelephone services associated therewith (Single Visit).

Likewise, for the Broadband activity, the technicalpersonnel were provided with a blackberry terminalas a work reception tool.The improvement groups continued operations.These are formed by personnel from different levelswith different specialties, who analyze the processesand opportunities for improvement. As aconsequence of these analysis processes,improvement actions are implemented, objectives areestablished and the results are monitored. Since theprevious year, the groups are utilizing 6-Sigmatechnology and a total of 20 projects have beenexecuted in Abentel’s regional offices and quite anumber of employees within the structure have beentrained up to “Green Belt” level. Numerousimprovement actions have been proposed as a resultof these projects.The centralization and globalization of faultdispatching, with a single work distribution office setup (DCA) to cover all activities and the whole country.The DCA has been made responsible for monitoringand diagnosing the tests carried out on the worksexecuted by the technical experts. The call center alsocontinued to operate. This is where the calls from thetechnical experts are received and the customer’sopinion is sought on the works carried out.



Development of new activity managementcomputerized applications and upgrading thosealready implemented. Of note among the former,the Simpa application which obtains a table of theCustomer View quality indexes at any level,including technical level. This tool is operative for allsupply and maintenance activities.In 2005, Abentel collaborated with Telefónica onthe implementation of a series of systems that areessential for both companies. These include the GIAC.G. (Integral Management of the Authority LayerActivity) for the provision and maintenance activityor NILO (External Plant Certification and Billing) forthe external plant activity. This collaboration has ledto important synergies that result in greaterefficiency in the start-up of the systems.The number of in-house technicians andmanagement personnel increased by almost 300throughout all the regional offices, with a specialeffort having been made in Madrid, Barcelona andDCA.

For this purpose, a great effort was made in thetraining of technical personnel, employees andmanagement, and the number of programmedcourses was trebled with more than 6,000 hoursbeing dedicated to training activities.Likewise, during the year, the cable operatorsdepartment continued supply works for theoperator Auna in Madrid, Barcelona and Seville, andcommenced supply of active and passive materialsfor the customer.During the financial year, the Quality Certificatesaccording to the Standard UNE-EN ISO 9001:2000and the Environmental Management Certificateaccording to the Standard UNE-EN ISO 14001:1996were maintained. These cover all the Regionaloffices.Furthermore, the Occupational Risk PreventionManagement System Certificate according to theOHSAS 18001:1999 specification was maintained.In addition, training was given to the entiremanagement team, including delegates, on theEFQM self-assessment model, which must becomplied with and completed in 2006.

Inabensa’s Telecommunications Division

During the course of 2005, the mobile telephoneinfrastructure construction activity increased. Thisrelated to railway signal applications and thedeployment of 3G/UMTS technology activitiescarried out by operators such as Telefónica Móviles,Amena and Vodafone, and by the main technologycompanies: Ericsson, Siemens and Nortel.In addition, the activities related to mimetization andthe reduction of the environmental impact of mobiletelephone base stations continued to increase andInabensa is now a reference company in the sector.On the other hand, the Research and Developmentactivity carried out by the Division is also of note,with the execution of the WIPAC (wi-ficommunications applied to the control and care ofAlzheimer sufferers) Project, funded under theMinistry of industry’s PROFIT program.

Marketing and Ancillary Manufacturing

In 2005, leadership in the national market wasmaintained and international implantation process(Mexico, United States, and Argentina) wasconsolidated as suppliers of electrical,instrumentation and communications material forthe chemical, energy, telecommunications andindustrial sectors.Of special note is the important development of newservices such as purchasing logistics and storehouseoutsourcing which, together with the execution ofnew turnkey projects, ensures our future growth.Also of note was the diversification in ancillarymanufacturing through the incorporation of theproduction of structures for solar energy powerplants as a new product.

Nicsa

This year was fundamental as regards theCompany’s evolution. The expected results weresurpassed and its international presence as aprovider of electric, instrumentation andcommunications material for the chemical andpetrochemical industries, refineries, combined-cycle,nuclear and thermal power plants, and the heavyindustry in general was consolidated.



The main references in Spain were:

Signing of a framework agreement with Repsol Ypffor the supply of medium and low voltage electricitycables for all its production centers.Supply, for Petronor’s (Repsol Ypf) Gas OilHydrodesulphurization Facility in Bilbao, of powercables, junction boxes, glands, telephony system,conduits, grounding system, lighting, handlingstations and current taps.Supply for Enagas for its main projects: Expansion ofthe Cartagena, Barcelona and Palos (Huelva) Plants.Framework agreement with Cepsa for the supply ofelectrical and instrumentation material, havingparticipated during the year in its main investmentproject, the Aromax project. The materials includedin the framework agreement are: medium and lowvoltage power cables, instrumentation cables,handling stations, current taps, trays, junction boxesand glands.Supply of cables, lighting, busbars, trays, conduitsand grounding system for the Cristóbal Colón(Huelva) and Castellnou (Teruel) combined-cyclepower plants Initec Energía is constructing forEndesa and Electrabel, respectively.For Técnicas Reunidas, the supply of handlingstations, lighting, current tap panels, conduits andbeaconing for the Modernization of the TuprasRefinery, in Izmir (Turkey), and handling stations andthe lighting system for the Diesel HydrotreatmentComplex in Yambu (Saudi Arabia), for Aramco.As regards international activity, we would mentionthat Nicsamex S.A. de CV, the subsidiary in Mexico,was awarded a 20-million dollar contract byConstrucciones Mecánicas de Monclova to procureand supply material and equipment for thefollowing activities: electric, telecommunications,mechanical, instrumentation, industrial security andpackage equipment for three oil-drilling platforms(Sihil A, Akal W y Akal Q) belonging to Pemex, inthe Gulf of Mexico. This contract represents a greatsuccess, not only for the value thereof, but also forthe value-add that has been given in relation toservice and commitment to the customer.The US subsidiary, Nicsa Industrial Supplies,underwent important restructuring that concludedwith the opening of a Commercial Office inHouston, which complements the activity of theoffice in Florida. The Argentina subsidiary Nicsa

Suministros Industriales is undergoing ahomologation process with the main potentialcustomers in the area.During the year, the Occupation Risk PreventionSystem was certified according to OHSAS18001:1999, and an Environmental ManagementSystem was implemented according to ISO14001:2004. It is currently at the certificationprocess stage.

Abencor

At year-end 2004, Abencor underwent a structurechange that focused its organization on thecustomer through the creation of four SalesDivisions, each dedicated to a specific sector of theMarket (Energy, Installers, Communications andEnvironment, Industries and Alternative Energies).The implementation of the new organization hasbeen satisfactory and this fact, together with thegood development of the market, in general,resulted in the objectives established in the StrategyPlan for the year being greatly surpassed. Thespecialization policy has led to the structuring of acoherent base of products in each of these sectors,to them being complemented with other newproducts, and the establishment of customer-individualized market strategies, which haveresulted in a more efficient commercial policy.



As is customary, the Energy market is that whichcontributed most to this improvement. Itrepresented 45% of the company’s EBITDA. Inaddition, the sale of high voltage cables was addedto the products that were on sale up until 2004(mainly transformers, auto-valves, stringingequipment, insulators, naked cables, low andmedium voltage insulated cables), and thehomologation of a new type of static meter isnearing conclusion.The Installers Division focused, mainly, on the worksthat are executed in the railway transport sector.The homologation of different products, such asmineral insulated cable and catenary hanger cable,has already been achieved or is at a very advancedstage.The Communications Sector appears to be comingout of the atony of recent years and importantinvestments are expected to be made inforthcoming years. In Abencor, the same sales policywas employed and power and communicationscables, and huts and encapsulated transformerswere supplied.As regards renewable energies, Solar Energy wasthe main focal point, and different sanitary hotwater panels and photovoltaic panels weresupplied.

The main supplies throughout the year were:

- Sale of power transformers to Endesa.- Sale of autotransformers to Endesa.- Catenary contact wire to the Semelcosur joint

venture to be installed on the Cordoba-MalagaHigh-Speed Line.

- Sale of 45 and 66 kV cable for Endesa and CobraInstalaciones y Servicios.

- Fiber Optic cable to be installed on the A-8 inCantabria, Aumar A-7, in Levant, and for the M-50 in Madrid.

- Supply of meters for Unión Fenosa and Iberdrola.- HV cable for the Jucar Vinalopo joint venture.- MV cable and encapsulated transformers for

Madrid metro.- Sale of stringing equipment to Elecnor, Semi and

Inabensa.

In relation to the logistics activity, work continuedon the development of the outsourcing of Endesa’s

distribution products in Andalusia and the CanaryIslands. Also of note was the increase in the activityin Andalusia due to the handling of the AlboradaPlan materials. This activity, which has been thetraditional one up until now, has beencomplemented by the incorporation of the materialsfrom the stores of the Unelco-Endesa ownedgenerating plants of S Bartolomé de Tirajana andJinámar, on Gran Canaria, and those of Granadillaand Candelaria, on Tenerife.Finally, towards year-end, work commenced, in theAndalusia Region, on transport material logistics forEndesa. To undertake this new responsibility, thestorage facilities were expanded, and the store itselfwas transferred to a new location where there ismore than 13,000 m2 of storage space available.The warehouse has been fitted with 14 loading andunloading bays, traveling crane, hoist, etc., andthere are 500 m2 of office space.In addition, an agreement was signed with REE tostore some of its materials at our Seville facilities.Abencor continues with its commitment to qualityand conservation of the environment. It holds theQuality Certificate according to UNE-EN ISO9001:2000 and Environmental Managementaccording to UNE-EN ISO 14001:1996.Throughout 2005, it expanded its EnvironmentalManagement certificate to cover the new centers inLas Palmas and Tenerife according to Standard ISO14001:2004.As regards the Occupational Risk Prevention System,it was certified according to the OHSAS18001:1999 specifications by the company TÜVInternacional Grupo TÜV Rheinland S.L.



Eucomsa

A good part of the activity lost in 2004 as aconsequence of the revaluation of the euro againstthe dollar, which led to an unavoidable loss ofcompetitiveness in the international markets withan economy based on the dollar as the currency ofreference, was recovered.Although the aforementioned difficulty remained in2005, this was compensated with exports to euroarea countries and manufacturing was diversifiedtowards structures for solar power plants as a newproduct.The most noteworthy activities for the year are:

- Supply of 400 kV towers for REE for different linessuch as those of Galapagar-SS de los Reyes,Tordesillas-Segovia, Mesón-Puentes, etc.

- Supply of towers for CSE-Endesa for the 220 kVCartuja-Puerto de Sta. María and D. Rodrigo-Santiponce lines.

- Supply of towers for Fecsa-Endesa for differentlines.

- Export of towers to Ireland for 110 kV lines.

- Supply of 400 kV towers for CME of Portugal.

- Supply of telecommunication towers for Inabensafor different operators and for Morocco.

- Supply of telecommunication towers for CEC inPortugal.

- Supply of structures for the PS10 solar powerplant to Abener, and for the AT, IS and ST plantsto Inabensa.

The Plate Division concentrated on themanufacturing of signals, and during the yearluminous signals based on low-consumptiontechnology and photovoltaic supply using LEDs, andthe manufacturing of fiber optic distributioncabinets for Telefónica and other customers such asEuskaltel, Uni2, REE, etc., were incorporated.

As regards the tower testing station, an activity thatcommenced in 2004, tests were carried out fordifferent national and foreign customers. Of noteamong which are the tests for REE on 2 towers forthe ONE of Morocco; the testing of a 3-circuit towerfor MADE-Endesa; tests on two 400 kV towers forGam-Arak of Iran; and tests on differentstandardized towers and crossheads for Funtam,Iberdrola, Afeme, Tecgra, etc.Tests will be carried out early in 2006 on a special100-ton tower for RTE (France), as will other testsfor different foreign customers.

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