SEPI Sociedad Estatal de Participaciones Industriales

Its companies recorded a 24% improvement in their operating results

The SEPI Group recorded in the financial year 2006 an interim loss of 1,302 Million Euros, due to the losses recorded at the parent holding company SEPI - 1,496 Million Euros - as a result of the need to make reserves for facing the liabilities derived from HUNOSA´s Company Plan for the period 2006-2012.

If we exclude this effect, the SEPI Group would have recorded a very similar result to that recorded in the previous year. The general improvement in the results of the companies during this year compared with those recorded the year before -a 24% improvement in the operating results, has compensated to a large extent the effect which had the capital gains recorded in 2005 as a result of the sale of the minority shareholdings in Red Eléctrica, Aldeasa and Altadis, and of the Inisas and Clinisas companies.

The SEPI Group´s operating income in 2006 amounted to 3,049.8 Million Euros, a 23% increase on those recorded a year before, increase which has been mostly recorded at the TRAGSA Group, NAVANTIA and the ENUSA Group. 38% of this income has been provided by the NAVANTIA Group; 32%, by the TRAGSA Group; 9%, by ENUSA; 5%, by the HUNOSA Group; while the remaining 16% corresponds to the other companies which make up the Group.

The operating costs of the SEPI Group have amounted to 3,351 Million Euros, a 17% increase on those recorded a year before, of which 43% are due to the procurements costs, which have recorded a 14% increase compared with the previous year, as a result of the increase in the activity, mostly in the NAVANTIA and ENUSA Groups. The costs of personnel represent 32% of all operating costs, and they recorded an increase during the year of just 1%.

The most significant orders recorded in 2006 were those won by the NAVANTIA Group, which amounted to 3,145 Million Euros, and which include two contracts for patrol ships for Venezuela, the F-105 frigate and four BAM-1 for the Spanish Navy, the hulks for 3 chemical-products-transport ships and 2 roll-on roll-off ships; those of the TRAGSA Group, which amounted to 1,516 Million Euros ; those for the ENUSA Group, which recorded orders for 426 Million Euros; and those for the ENSA Group, for a value of 96 Million Euros.

As for the order books, it is worthwhile to single out that of NAVANTIA, valued at 5,522 Million Euros, which includes as the most significant projects, besides those mentioned above, the S-80 submarines, the battle-supply ship and the strategic projection ship, for the Spanish Navy, as well as the frigates for Norway. It is also worthwhile to mention the TRAGSA´s Group order book, which amounts to 1,531 Million Euros, basically for water-irrigation schemes and water management and technology, the environment and countryside infrastructures; that of the ENUSA Group, valued at 1,393 Million Euros; and the order book of the ENSA Group, which amounts to 126 Million Euros.

The average workforce of SEPI at the end of 2006 is of 29,740 persons, of which 54% correspond to the TRAGSA Group, 19% to NAVANTIA, 11% to HUNOSA, 4% to the Agencia EFE Group, another 4% to IZAR, while the remaining 8% to the other companies which make up the Group. With regard to the financial year 2005, stands out the increase of the average workforce of the TRAGSA Group, in 3,143 workers, as a result of the increase in its activity, which required more fixed-term workers, and which in part compensates the reduction of the average workforce of HUNOSA and IZAR, as a result of their reorganization processes.

The most relevant facts during the financial year 2006

With regard to the purchase and sale deals carried out by the SEPI Group during the financial year, the Council of Ministers authorized on July 28th, 2006 the privatization of the company Wesser Engineering, an affiliated company of IZAR en Liquidación, to the company Taim-Tgf, S.A., for the amount of 250,100 euros. On October 27th, 2006, SEPI´s Board of Directors authorized SEPIDES to proceed to sell the shares of SODIAR which it had (23%) to the regional government of Aragón, for the amount of 2 Million Euros. Equally, on March took place the sale to Fertiberia of the 49% stake in the corporate capital of Química del Estroncio, for ¿ 5.1 M. Besides, on October SEPI sold its stake (7,34%) in the Banco Árabe Español, S.A. (Aresbank) to the Lybian Foreign Bank for 1.84 Million Euros.

On July 18th, 2006, SEPI´s Board of Directors authorized to IZAR´s Liquidation Committee to award the factories at Gijón, Sestao and Seville to Factorías Juliana, Construcciones Navales del Norte and to Astilleros de Sevilla, respectively, deals which were authorized by the Council of Ministers on November 3rd, 2006, and which took place on the same month.

It also stands out the purchase by the company Alimentos y Aceites, S.A., in which SEPI has a 91.96% participation, of 9,627,465 shares in Ebro Puleva, S.A., which represent 6.25% of this company´s corporate capital. After that purchase, the stake owned by SEPI´s affiliated company in Ebro Puleva reaches 8.446%.

One of the most significant events which took place in 2006 was the passing of the Act 20/2006, on June 5th, 2006, which amends SEPI´s net worth and financial scheme, as well as of those of the companies in which it has a majority stake, either directly or indirectly, so that, among other changes, they will be able to receive contributions from the State general budget.

Also it was passed Act 17/2006, on June 5th, 2006, for the state-owned radio and television, which stipulates that SEPI will assume the management and representation of the state entity RTVE in liquidation. In this field, SEPI has participated, as a founding partner, in the incorporation of the Corporación de Radio y Televisión Española, S.A., through the subscription and disbursement in full of 20,000 shares, which represent the totality of its corporate capital. Later, SEPI´s Board of Directors authorized to Corporación RTVE to approve in its Annual General Meeting of Shareholders a capital increase for the amount of 1,510 Million Euros; capital increase which was authorized by the Council of Ministers on December 22nd, 2006, and fully subscribed by the state entity RTVE through contributions in kind of assets and liabilities, afterwards, this state entity went into receivership for its liquidation.

Besides, on May 24th, 2006 the Company Plan 2006/2012 for Hunosa was signed. This Plan envisages new workforce and production reductions, and it includes investments in policies for expanding the activity in new industries, helping in this way to change the economic structure of the coal mining area in Asturias.

During the financial year 2006, SEPI made contributions to some of its companies for a total amount of more than 327 Million Euros. It also subscribed all the capital increase carried out in the company Hipódromo de La Zarzuela and which was approved at the General Shareholders Extraordinary meeting on May 17th, 2006, disbursing 10 Million Euros. Equally, it subscribed 26,612 shares (80%) in the capital increase of the state-owned company Sociedad Anónima Estatal de Caución Agraria, S.A.

In June and October, SEPI transferred to its company COFIVACASA the shares for the totality of the capital of Babcock & Wilcox Española and of ADARO en Liquidación, for the amount of 5.8 Million Euros and 15,591 Euros, respectively.