30th September 2019

BUSINESS & HUMAN RIGHTS RESOURCE CENTRE - ENAGÁS RESPONSE

In connection with the reference report, Enagás would like to clarify about the following projects:

1. Castor 2. MIDCAT3. Trans Adriatic Pipeline (TAP)4. El Musel LNG plant5. Proyecto Integral Morelos6. Board of Directors

1. CASTOR

Enagás has not built, neither is it proprietary of the Castor storage plant.

In accordance with the provision of the Royal Decree Law 13/2014 of October 3, by virtue of which urgent measures were adopted in connection with the gas system and title to the nuclear power plants, the Spanish Government entrusted to Enagás the hibernation and maintenance of the facilities with a view to guaranteeing the security and integrity of the facilities, of people, goods and the environment, as well as the regulatory compliance and provisions of the different administrations.

2. MIDCAT

Enagás’ current focus is on the STEP project, different from MidCat, and which consists in a smaller number of infrastructures that allows a new connection between France and Spain. The STEP Project was ratified as Project of Common Interest in November 2017 by the European Commission. It was subject of a European public consultation from March to June 2017 and subsequently validated by the European Parliament at the beginning of 2018.

Despite this, both regulators indicated that the interconnections are a key tool to achieve internal market objectives and the Iberian Peninsula is one of the regions, which due to its geographical position has a relatively limited level of interconnection with the rest of the European market. Hence, they recommended continuing the efforts to increase gas and electricity interconnection capacity in the southeast Europe. Enagás and Teréga are studying if it is possible a configuration adjustment with a similar investment, in a context where the actual interconnection use has skyrocketed and moments of contractual and physical congestion are frequent.

3. TRANS ADRIATIC PIPELINE (TAP)

As domestic gas production declines in Europe, TAP will contribute to energy security and diversity in Europe and in the region, opening a direct and cost-effective transportation route from the Caspian Basin to South East European countries and beyond. Once built it will provide an estimated 33% of Bulgaria’s gas needs, 20% for Greece and approximately 10.5% for Italy.

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TAP is also a key project that will facilitate Europe’s energy transition, helping to replace more carbon intensive sources of energy.

TAP will attract direct foreign investment for the transit countries, while economic development will be stimulated by the introduction of new energy supplies and more competitive energy markets. According to independent experts, jobs are created by TAP, directly by its contractors and indirectly through various ‘spill-over’ effects, in manufacturing, utilities, transport, communications, financial and business services. While most of the immediate employment gains are during the pipeline’s construction, TAP will also have a lasting economic legacy.

A cornerstone of TAP’s commitment to the future of the communities along its route are the financing of social and environmental investment (SEI) projects. In total, TAP is investing over €55 million in the communities along its route. SEI programmes are developed in consultation and cooperation with communities along the pipeline route, and their positive legacy will continue long after the construction is completed.

The ESIAs (Environmental and Social Impact Assessments) of TAP in Greece, Albania and Italy have been conducted in full accordance with both national and EU legislation and followed the stringent requirements of the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC), recognised as benchmarks for international best practice. They included an analysis of risks and opportunities linked to the pipeline project, considering its environmental and socio-economic and cultural heritage effects, and describing how any possible negative impacts will be mitigated or eliminated.

As regards the olives trees, to avoid any impact on the San Foca beach, TAP is building a 1.5km micro-tunnel. This state-of-the-art engineering minimises environmental impact and renders the pipeline invisible. To start building the micro-tunnel – at a site approximately 800m inland from the beach – TAP, as a first step, moved and stored 231 olive trees, to be later be replanted at the same location. As a second step, TAP needs to move and store an additional approximately 2,000 olive trees along the pipeline’s 8km route, from the micro-tunnel exit to the Pipeline Receiving Terminal (PRT).

Before starting this procedure, TAP has received the two main permits needed in Italy to start working: the Environmental Impact Assessment (EIA) decree (in September 2014) and the Single Authorization (in May 2015), issued respectively by the Ministry of Environment and by the Ministry of Economic Development. The Ministerial Decree of environmental compatibility requires TAP to fulfil 65 conditions (so-called Verifications of Compliance). Additionally, at the end of 2016, TAP had received all the relevant secondary authorisations (Verifications of Compliance) for moving the first batch of olive trees found in the project micro-tunnel area (A44, A29 and A45).

Olive trees moved are transported to a specially designated nursery area, located in Masseria del Capitano, close to the PRT, 8 km inland. In the nursery they are stored and cared for a period of around three years. This involves

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30th September 2019systematic and regular treatments aimed to make the trees stronger and protect them against the xylella bacterium. Once the pipeline construction activities are completed, the olive trees will be brought back and planted in their original perimeter.

Moving olive trees is a standard practice in the Region. In the Puglia Region alone tens of thousands of olive trees are moved annually to allow the construction of infrastructure and energy projects, including roads, aqueducts, etc.

4. EL MUSEL LNG PLANT

The infrastructures built and operated by Enagás in Spain have been developed according to the mandatory energy infrastructures planning approved by the Government of Spain.

El Musel LNG Plant was considered necessary and strategic in accordance with the mandatory planning of the Ministry, which was approved by the Spanish Government.

5. PROYECTO INTEGRAL MORELOS

Morelos pipeline (affiliate in which Enagás participates with a stake of 50%) is part of Morelos integral project consisting on a thermal plant, an aqueduct and Morelos pipeline.

CFE (Federal Commission of Electricity of Mexico) is the promoter of the project, and thus is responsible for performing public consultations prior to the construction of the project.

Morelos pipeline has been functioning since the 15th April 2016 in normal operation conditions. Controversies regarding the operation of the thermal plant are beyond the interests of Morelos pipeline and its partners and, for that reason, neither Morelos pipeline nor its partners have pronounced in favour or either.

6. BOARD OF DIRECTORS

Pursuant to article 8 of the Regulations of the Organisation and Functioning of the Board of Directors of Enagás:

1.- Directors shall be appointed at the General Shareholders’ Meeting or by the Board of Directors in conformity with the provisions of the Corporate Enterprises Act and the company’s Articles of Association.

2.- Appointments are limited to persons of recognised prestige, that comply with the legal and statutory requirements the position entails, and who possess knowledge and experience suited to the exercise of their functions.

The Appointments, Remuneration and Corporate Social Responsibility Committee is responsible for proposing the appointment of Independent Directors. The proposals for

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30th September 2019the appointment or re-election of Non-independent Directors which the Board of Directors submits to the General Shareholders’ Meeting, as well as appointments adopted by the Board by virtue of its powers of co-option, must be made subject to a report from the Appointments, Remuneration and Corporate Social Responsibility Committee. When the Board of Directors does not agree with the Committee’s recommendations, it must explain its reasons and duly record them in the minutes. Proposals shall always be accompanied by a report from the Board justifying the competencies, experience and merits of the proposed candidate. This report shall be attached to the minutes of the General Meeting or of the Board. The foregoing will also be applicable to natural persons appointed as representatives of a legal person Director. The proposal for a natural person representative must be submitted to the Appointments, Remuneration and Corporate Social Responsibility Committee.

3.- The Board of Directors must ensure that the procedures for selecting its members promote diversity of gender, experience and knowledge, that do not suffer from implicit biases that entail any discrimination and, in particular, that facilitate the selection of female directors.

The company's General Shareholders' Meeting is sovereign and, as such, it is the one that appoints and removes the directors. Its election and renewal has received a large majority of votes in favour, close to 100%.

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