SEPI Sociedad Estatal de Participaciones Industriales

• The facilities have been awarded to the bids which received the best valuation by the independent adviser of the sale process
• The sale meets the objective set by the Framework Agreement of maintaining the activity and guaranteeing the facilities continuity. It is the result of the incapacity on the part of IZAR for returning the aid granted by the previous Government, which were declared as incompatible with Community law, and which resulted in the entry into liquidation of IZAR
• The award of the Manises factory has been delayed, since the European Commission has requested further clarifications regarding the bid submitted in order to examine whether it is compatible
• The Buyers include among their action plans the improvement of the activity, and provide new workload

The Board of Directors of the state-owned holding company Sociedad Estatal de Participaciones Industriales (SEPI) has resolved, in its meeting which took place today, to authorize to the IZAR´s Liquidation Commission to award, this very morning, Sestao´s assets to Construcciones Navales del Norte, S.L.; those corresponding to Gijón to Factorías Vulcano, S.A.; and those of Seville to the Consortium headed by Astilleros de Huelva. In all the cases mentioned above, the assets have been awarded to the Buyers whose bids have received the best valuation on the part of the independent advisor in the sale process, of the 8 bidding offers valid which were submitted on February 10th, 2006.

The European Commission has kept watch at all times of the sale process, and it has requested further clarifications about the bid submitted for the Manises factory, in order to examine its compatibility, which has resulted in the postponement of the award of this facility. About all the above, and before taking these decisions, the Commission for the Follow-Up of IZAR´s Framework Agreement was informed, which met yesterday.

The above sale of IZAR´s assets meets the goal of the Framework Agreement subscribed on December 16th, 2004 among SEPI, the Company and the trade unions, for maintaining the activity and guaranteeing the continuity, present and future, of those production facilities. The sale is the result of the impossibility for IZAR for returning the 1,200 million Euros which it received as state aid, granted by the previous Government and which were declared as incompatible with the Community law, and which provoked IZAR´s entry into liquidation on April 2005.

The European Commission, when it gave its approval to the Plan about IZAR included in the Framework Agreement, required to IZAR´s Liquidators to carry out the sale of the commercial shipyards according to the criteria stipulated by Community law, that is to say, according to market terms and conditions, with full transparency, concurrence and without previously stipulated terms and conditions.

New workload for all the work centers

In awarding the facilities, IZAR´s Liquidation Commission took into account the price offered for the assets, the workforce assumed and the price offered for finishing the work in progress, criteria the Commission itself established and by SEPI´s Board of Directors. For their part, the Buyers of each one of the different assets include in their plans a number of actions aimed at improving the activity, and at the same time providing new workload.

The Sestao´s assets have been awarded to Construcciones Navales del Norte (CNN), which assumes 340 workers and the conclusion of the work in progress. In order to adapt Sestao´s workforce to the winning offer, a compulsory special redundancy program for 236 persons will be carried out, with terms and conditions similar to those included in the commitment dated on December 16th, 2004.

CNN is made up by Astilleros de Murueta, Inversor para el Desarrollo de Iniciativas Empresariales, Marlon 25, Iniciativas Navales del Norte and Naviera del Nervión. The products which it aims to develop in Sestao are LNG, dredgers, oil-tankers and shuttles, and also containerships and chemical product carriers. As part of its activities, it envisages to maximize the collaboration with third party companies in the engineering area, in partnerships relations, as well as carrying out a significant investment effort in its own technology and in R&D; besides having in mind the materialization of new orders.

The Consorcio Astilleros de Huelva, which is made up by Astilleros de Huelva itself, by Contenemar and Clipper Group, assumes the totality of the workforce (188 workers) and the conclusion of the work in progress. Its aim is to destine the Sevilles´ shipyard to building ferries, roll-in roll-off and ropax, as its main activity, having already some final agreements for building a number of these kind of ships. It also foresees the building, in the near future, of ships for carrying chemical products, oil-tankers and ships for transporting different cargoes.

Astilleros de Huelva is considering the possibility of carrying out the investments required for serving the market sectors to which it aims to orient its production, and to refurbish the building berths and other facilities which might be necessary for widening the lock. The building of the new lock in the Port of Seville will make possible to increase the maximum beam of the ships built at the shipyard, a key element for its market position.

Factorías Vulcano takes over Gijón´s assets and also assumes all the workforce (159 workers) as well as the conclusion of the work in progress. It will focus on the building of medium-sized ships for carrying chemical products, so that it will be specialized in these ships with over 18,000 tons deadweight, besides in the building of the ships traditionally built in Gijón, such as ships for carrying chemical products, dredges and for product carrying.

El adjudicatario de IZAR-Gijón está participado por Astilleros La Mecánica y por Gestión de Negocios Argos. Tiene ya en vigor contratos para la construcción de buques quimiqueros, alguno de los cuales podrá destinarse a Gijón, y prevé realizar nuevas inversiones para facilitar la construcción de buques e incrementar su competitividad.

An open and transparent process

On July 22nd, 2005 SEPI´s Board of Directors opened the sale process for IZAR´s assets, selecting The Boston Consulting Group as the Advisor for the transaction. The Advisor made the transaction known through advertisements both in the domestic and in the international press, as well as in IZAR´s and SEPI´s Web pages and it sent information to 172 potentially interested parties, 17 of which were interested. On November 2005, 9 valid non-bidding offers were submitted, of which 8 were for single facilities and 1 for two facilities. Not a single valid offer was made for the totality of the centers.

Due to the lack of global offers for all the centers, SEPI has carried out a great effort for making it possible to complete the sale process with the agreement of the trade unions. As a result of the above, SEPI and the federations of the trade unions CC.OO. and UGT reached a draft agreement which included work guarantees for the workforce during a ten-year period, in case that the Buyer project were to fail, which among other things contemplates early retirement for those who are at least 52 years old, according to terms and conditions similar to those applying to IZAR, and outplacements for those who are younger.

The threat of closure of all these centers and the workload commitments which have the Buyers and which they might lose in case the process were delayed even more required SEPI to proceed immediately and to award the centers, notwithstanding the fact that the workers have not accepted the draft agreement reached with the trade unions, making it impossible to apply it. The European Commission itself had warned about the need of carrying out the sale as soon as possible, reconciling it with the optimizing of the results of the above sale.

Once it has been approved by SEPI´s Board of Directors, the sale transaction must be subjected to its authorization by the Council of Ministers, after the report made by the Consultative Board of Privatizations.