C o n s o l i d a t e d A n n u a l A c c o u n t s
2021 C o n s o l i d a t e d S t a t e m e n t o f F i n a n c i a l P o s i t i o n
I n d e p e n d e n t A u d i t o r s’ R e p o r t
C o n s o l i d a t e d A n n u a l A c c o u n t s
C o n s o l i d a t e d D i r e c t o r s’ R e p o r t
Consolidated Annual Accounts | 2021 | www.ree.es/en3142 1
Independent
Auditors’
Report
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Consolidated
Statement
of Financial
Position
3
Consolidated
Annual
Accounts
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4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents1INDEPENDENTAUDITORS’REPORT 1
Independent
Auditors’
Report
2
Consolidated
Statement
of Financial
Position
Independent Auditor’s Report
on the Consolidated Annual Accounts
3
1
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
2
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
Audit Report on the Consolidated Annual Accounts issued by an
Independent Auditor
Additions to property, plant and equipment (Euros 413,427 thousand)
See note 8 to the consolidated annual accounts
To the Shareholders of Red Eléctrica Corporación, S.A.
Key audit matter
How the matter was addressed in our audit
REPORT ON THE CONSOLIDATED ANNUAL ACCOUNTS
Opinion__________________________________________________________________
We have audited the consolidated annual accounts of Red Eléctrica Corporación, S.A. (the “Parent”) and
subsidiaries (together the “Group”) which comprise the consolidated statement of financial position at 31
December 2021, and the consolidated income statement, consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for the year then
ended, and consolidated notes.
In our opinion, the accompanying consolidated annual accounts give a true and fair view, in all material
respects, of the consolidated equity and consolidated financial position of the Group at 31 December 2021
and of its consolidated financial performance and its consolidated cash flows for the year then ended in
accordance with International Financial Reporting Standards as adopted by the European Union (IFRS-EU) and
other provisions of the financial reporting framework applicable in Spain.
Basis for Opinion _________________________________________________________
We conducted our audit in accordance with prevailing legislation regulating the audit of accounts in Spain. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of
the Consolidated Annual Accounts section of our report.
We are independent of the Group in accordance with the ethical requirements, including those regarding
independence, that are relevant to our audit of the consolidated annual accounts pursuant to the legislation
regulating the audit of accounts in Spain. We have not provided any non-audit services, nor have any situations
or circumstances arisen which, under the aforementioned regulations, have affected the required
independence such that this has been compromised.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters ________________________________________________________
Key audit matters are those matters that, in our professional judgement, were of most significance in the
audit of the consolidated annual accounts of the current period. These matters were addressed in the context
of our audit of the consolidated annual accounts as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
KPMG Auditores S.L., a limited liability Spanish company and a member firm of the KPMG
global organisation of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee.
All rights reserved.
Paseo de la Castellana, 259C 28046 Madrid
On the Spanish Official Register of Auditors (“ROAC”) with No. S0702, and the
Spanish Institute of Registered Auditors’ list of companies with No. 10.
Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9
N.I.F. B-78510153
Most of the Group's property, plant and equipment
pertain to Red Eléctrica de España, S.A.U., the
regulated activity of which mainly consists of
managing the transmission network of the Spanish
electricity system. Each year, Red Eléctrica de
España, S.A.U. makes substantial investments in
property, plant and equipment in accordance with the
Electricity Transmission Network Development Plan
for 2015 – 2020 approved by agreement of the
Council of Ministers on 16 October 2015, and it has
started to move forward with certain initiatives laid
down in the draft 2021-2026 Planning published by
the Ministry for the Ecological Transition and
Demographic Challenge in February 2021. In 2021
additions
the Group’s property, plant and
equipment totalled Euros 537,586 thousand, of
which Euros 413,427 thousand pertains to the
investee Red Eléctrica de España, S.A.U.
to
the method
for calculating
Considering the nature of the business carried out by
this investee, the remuneration for these services is
set by the Spanish National Markets and Competition
Commission (CNMC) through Circular 5/2019, which
determines
the
remuneration of the transmission activity based on
the costs necessary to construct, operate and
maintain the technical electricity facilities, pursuant
to the powers bestowed upon this Commission by
Royal Decree-Law 1/2019. As
the Parent’s
transmission revenues are directly related to the
recognised electricity transmission facilities, and
bearing in mind the significance of these facilities, we
have considered the additions to property, plant and
equipment to be a key audit matter.
Our audit procedures
included evaluating the
relevant controls associated with processes
involving fixed assets and acquisitions, as well as
performing substantive procedures on property,
plant and equipment. We also assessed the
consistency of the Group's accounting policies on
fixed assets and acquisitions with the applicable
accounting framework.
Our procedures for evaluating and analysing the
control environment were focused on:
-
Testing the design, implementation and
operating effectiveness of key manual and
automated controls related to the cycles of
“additions and disposals of fixed assets”
and “acquisition of goods and services,
progress billings for construction”.
Our substantive procedures on property, plant and
equipment mainly consisted of:
- Analysing asset additions during the year
and assessing whether they have been
correctly recognised.
- Analysing documentation supporting the
cost allocation for a sample of projects in
progress.
We also assessed whether the disclosures in the
consolidated
the
requirements of the financial reporting framework
applicable to the Company.
accounts meet
annual
KPMG Auditores S.L., a limited liability Spanish company and a member firm of the KPMG
global organisation of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee.
All rights reserved.
Paseo de la Castellana, 259C 28046 Madrid
On the Spanish Official Register of Auditors (“ROAC”) with No. S0702, and the
Spanish Institute of Registered Auditors’ list of companies with No. 10.
Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9
N.I.F. B-78510153
Continued on next page
3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
1
Independent
Auditors’
Report
2
Consolidated
Statement
of Financial
Position
Independent Auditor’s Report
on the Consolidated Annual Accounts / continued
4
3
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
4
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
Recoverable amount of goodwill and other non-current assets
See notes 7, 8, 11 and 19 to the consolidated annual accounts
Key audit matter
How the matter was addressed in our audit
As mentioned in notes 7 and 8 to the consolidated
annual accounts, at 31 December 2021, the Group’s
property, plant and equipment, intangible assets and
goodwill amount to Euros 9,576 million, Euros 489
million and Euros 232 million, respectively, allocated
to the various cash-generating units (CGUs) or, in the
case of Hispasat, S.A. goodwill, to groups of CGUs.
Furthermore, as mentioned in notes 11 and 19 to the
consolidated annual accounts, the Group holds an
investment of Euros 210 million in Transmisora
Eléctrica del Norte, S.A., which is accounted for using
the equity method, and has extended a loan of Euros
12 million to this investee. The Group tested both of
these
identifying
for
items
indications thereof.
impairment after
There is a risk that the carrying amount of the CGUs
may exceed their recoverable amount in the case of
CGUs or groups of CGUs that show indications of
impairment. The Group calculates the recoverable
amount of goodwill and intangible assets with
indefinite useful lives annually and tests property,
plant and equipment and intangible assets for
indications of impairment, for the purposes of
determining their recoverable amount.
The mentioned recoverable amounts are calculated
considering their value in use or fair value less costs
to sell, applying valuation techniques which require
the exercising of judgement by the Directors and
management and the use of estimates. Due to the
high level of judgement, the uncertainty associated
with these estimates, and the significance of the
carrying amount of non-current assets subject to
impairment testing, this has been considered a key
audit matter.
Our audit procedures included the following:
Assessing the design and implementation of key
controls related to the process of evaluating the
criteria used to identify indications of impairment
and for estimating the recoverable amount of
goodwill and other non-current assets.
-
the methodology
Evaluating
and
reasonableness of the assumptions used
by management and the Directors to
estimate the recoverable amount using the
discounted cash flow method at cash-
generating unit level, with the involvement
of our valuation specialists and based on
the reports drawn up by the independent
experts engaged by the Group to contrast
the reasonableness of the assumptions
used.
- Contrasting the information contained in
the model used
the
recoverable amount with the business
plans of the companies.
calculate
to
- Analysing the sensitivity of the estimated
recoverable amount to changes in the
relevant assumptions and judgements.
We also assessed whether the disclosures in the
consolidated
the
requirements of the financial reporting framework
applicable to the Entity.
accounts meet
annual
Other Information: Consolidated Directors’ Report _________________________
Other information solely comprises the 2021 consolidated directors' report, the preparation of which is the
responsibility of the Parent's Directors and which does not form an integral part of the consolidated annual
accounts.
Our audit opinion on the consolidated annual accounts does not encompass the consolidated directors' report.
Our responsibility regarding the information contained in the consolidated directors’ report is defined in the
legislation regulating the audit of accounts, as follows:
a)
b)
Determine, solely, whether the consolidated non-financial information statement and certain
information included in the Annual Corporate Governance Report, as specified in the Spanish Audit Law,
have been provided in the manner stipulated in the applicable legislation, and if not, to report on this
matter.
Assess and report on the consistency of the rest of the information included in the consolidated
directors’ report with the consolidated annual accounts, based on knowledge of the Group obtained
during the audit of the aforementioned consolidated annual accounts. Also, assess and report on
whether the content and presentation of this part of the consolidated directors’ report are in accordance
with applicable legislation. If, based on the work we have performed, we conclude that there are
material misstatements, we are required to report them.
Based on the work carried out, as described above, we have observed that the information mentioned in
section a) above has been provided in the manner stipulated in the applicable legislation, that the rest of the
information contained in the consolidated directors' report is consistent with that disclosed in the consolidated
annual accounts for 2021, and that the content and presentation of the report are in accordance with applicable
legislation.
In accordance with the requirements set forth in article 540 of the Revised Spanish Companies Act and in
Spanish National Securities Market Commission (CNMV) Circular 5/2013 of 12 June 2013, which was
subsequently amended by CNMV Circular 7/2015 of 22 December 2015, by CNMV Circular 2/2018 of 12 June
2018 and by CNMV Circular 3/2021 of 28 of September 2021, which provides the models for the Annual
Corporate Governance Report for listed corporations; and for the purposes of the description of Internal
Control over Financial Reporting in Annual Corporate Governance Reports; and as mentioned in section F.7.1
of the Annual Corporate Governance Report, which forms part of the accompanying consolidated directors'
report for 2021; on 22 February 2022, at the Company’s request, we issued our Independent Reasonable
Assurance Report on the Internal Control over Financial Reporting (ICOFR) of the Red Eléctrica Group for
2021, based on our examination, which was performed in accordance with ISAE 3000 (Revised) (International
Standard on Assurance Engagements 3000, Assurance Engagements Other than Audits or Reviews of
Historical Financial Information) issued by the International Auditing and Assurance Standards Board (IAASB)
of the International Federation of Accountants (IFAC), for the issue of reasonable assurance reports.
KPMG Auditores S.L., a limited liability Spanish company and a member firm of the KPMG
global organisation of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee.
All rights reserved.
Paseo de la Castellana, 259C 28046 Madrid
On the Spanish Official Register of Auditors (“ROAC”) with No. S0702, and the
Spanish Institute of Registered Auditors’ list of companies with No. 10.
Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9
N.I.F. B-78510153
KPMG Auditores S.L., a limited liability Spanish company and a member firm of the KPMG
global organisation of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee.
All rights reserved.
Paseo de la Castellana, 259C 28046 Madrid
On the Spanish Official Register of Auditors (“ROAC”) with No. S0702, and the
Spanish Institute of Registered Auditors’ list of companies with No. 10.
Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9
N.I.F. B-78510153
Continued on next page
3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
1
Independent
Auditors’
Report
2
Consolidated
Statement
of Financial
Position
Independent Auditor’s Report
on the Consolidated Annual Accounts / continued
5
5
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
6
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
Directors’ and audit committee’s responsibility for the consolidated annual accounts
_________________________________________________________________________
The Parent's Directors are responsible for the preparation of the accompanying consolidated annual accounts
in such a way that they give a true and fair view of the consolidated equity, consolidated financial position and
consolidated financial performance of the Group in accordance with IFRS-EU and other provisions of the
financial reporting framework applicable to the Group in Spain, and for such internal control as they determine
is necessary to enable the preparation of consolidated annual accounts that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated annual accounts, the Parent's Directors are responsible for assessing the
Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative but to do so.
The Parent’s Audit Committee is responsible for overseeing the preparation and presentation of the
consolidated annual accounts.
Auditor's responsibilities for the audit of the consolidated annual accounts _
Our objectives are to obtain reasonable assurance about whether the consolidated annual accounts as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with prevailing legislation regulating the audit of accounts in Spain will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these consolidated annual accounts.
As part of an audit in accordance with prevailing legislation regulating the audit of accounts in Spain, we
exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated annual accounts, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the Parent's Directors.
Conclude on the appropriateness of the use by the Parent's Directors of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in our auditor's report to the related
KPMG Auditores S.L., a limited liability Spanish company and a member firm of the KPMG
global organisation of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee.
All rights reserved.
Paseo de la Castellana, 259C 28046 Madrid
On the Spanish Official Register of Auditors (“ROAC”) with No. S0702, and the
Spanish Institute of Registered Auditors’ list of companies with No. 10.
Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9
N.I.F. B-78510153
disclosures in the consolidated annual accounts or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated annual accounts, including the
disclosures, and whether the consolidated annual accounts represent the underlying transactions and events
in a manner that achieves a true and fair view.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated annual accounts. We are responsible for
the direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.
We communicate with the audit committee of the Parent regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the Parent's audit committee with a statement that we have complied with the applicable
ethical requirements, including those regarding independence, and to communicate with them all matters that
may reasonably be thought to bear on our independence and, where applicable, related safeguards.
From the matters communicated to the audit committee of the Parent, we determine those that were of most
significance in the audit of the consolidated annual accounts of the current period and which are therefore the
key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter.
KPMG Auditores S.L., a limited liability Spanish company and a member firm of the KPMG
global organisation of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee.
All rights reserved.
Paseo de la Castellana, 259C 28046 Madrid
On the Spanish Official Register of Auditors (“ROAC”) with No. S0702, and the
Spanish Institute of Registered Auditors’ list of companies with No. 10.
Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9
N.I.F. B-78510153
Continued on next page
3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
1
Independent
Auditors’
Report
2
Consolidated
Statement
of Financial
Position
Independent Auditor’s Report
on the Consolidated Annual Accounts / continued
6
7
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
8
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
KPMG Auditores, S.L.
On the Spanish Official Register of Auditors (“ROAC”) with No. S0702
(Signed on original in Spanish)
Ana Fernández Poderós
On the Spanish Official Register of Auditors (“ROAC”) No. 15547
22 February 2022
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
European Single Electronic Format ________________________________________
We have examined the digital files of Red Eléctrica Corporación, S.A. and its subsidiaries for 2021 in European
Single Electronic Format (ESEF), which comprise the XHTML file that includes the consolidated annual
accounts for the aforementioned year and the XBRL files tagged by the Company, which will form part of the
annual financial report.
The Directors of Red Eléctrica Corporación, S.A. are responsible for the presentation of the 2021 annual
financial report in accordance with the format and mark-up requirements stipulated in Commission Delegated
Regulation (EU) 2019/815 of 17 December 2018 (hereinafter the “ESEF Regulation”). In this regard, they have
incorporated the Annual Corporate Governance Report and Annual Report on Directors’ Remuneration by
means of a reference thereto in the directors’ consolidated report.
Our responsibility consists of examining the digital files prepared by the Directors of the Parent, in accordance
with prevailing legislation regulating the audit of accounts in Spain. This legislation requires that we plan and
perform our audit procedures to determine whether the content of the consolidated annual accounts included
in the aforementioned digital files fully corresponds to the consolidated annual accounts we have audited, and
whether the consolidated annual accounts and the aforementioned files have been formatted and marked up,
in all material respects, in accordance with the requirements of the ESEF Regulation.
In our opinion, the digital files examined fully correspond to the audited consolidated annual accounts, and
these are presented and marked up, in all material respects, in accordance with the requirements of the ESEF
Regulation.
Additional Report to the Audit Committee of the Parent ____________________
The opinion expressed in this report is consistent with our additional report to the Parent's Audit Committee
dated 22 February 2022.
Contract Period __________________________________________________________
We were appointed as auditor of the Group by the shareholders at the ordinary general meeting on 29 June
2021 for a period of two years, from the year commenced 1 January 2021.
Previously, we had been appointed for a period of three years, by consensus of the shareholders at their
general meeting, and have been auditing the annual accounts since the year ended 31 December 2013.
KPMG Auditores S.L., a limited liability Spanish company and a member firm of the KPMG
global organisation of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee.
All rights reserved.
Paseo de la Castellana, 259C 28046 Madrid
On the Spanish Official Register of Auditors (“ROAC”) with No. S0702, and the
Spanish Institute of Registered Auditors’ list of companies with No. 10.
Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9
N.I.F. B-78510153
KPMG Auditores S.L., a limited liability Spanish company and a member firm of the KPMG
global organisation of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee.
All rights reserved.
Paseo de la Castellana, 259C 28046 Madrid
On the Spanish Official Register of Auditors (“ROAC”) with No. S0702, and the
Spanish Institute of Registered Auditors’ list of companies with No. 10.
Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9
N.I.F. B-78510153
3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
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2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents CONSOLIDATEDSTATEMENT FINANCIALPOSITION2of Red Eléctrica Group. Consolidated Statement of Financial Position / Thousands of Euros
at 31 December 2021
8
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment property
Equity-accounted investees
Non-current financial assets
At fair value through other comprehensive income
At fair value through profit or loss
At amortised cost
Non-current derivatives
Deferred tax assets
Other non-current assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Trade receivables
Other receivables
Current tax assets
Other current financial assets
At fair value through other comprehensive income
At fair value through profit or loss
At amortised cost
Current derivatives
Cash and cash equivalents
Total current assets
Total assets
Notes 1 to 35 and Appendix I form an integral part of these consolidated annual accounts.
Note
31/12/2021
31/12/2020
7
8
10
11
19
20
23
12
13
23
19
20
720,619
9,575,848
1,772
587,983
114,689
85,368
5,379
23,942
23,592
70,567
1,998
690,850
9,511,245
1,325
519,312
116,205
79,363
7,973
28,869
146
88,015
2,442
11,097,068
10,929,540
26,535
34,875
1,260,956
1,342,099
59,709
43,054
1,193,686
1,288,342
7,561
25,401
-
-
25,401
91
1,574,427
2,887,410
10,703
35,812
-
-
35,812
19,991
481,772
1,914,549
13,984,478
12,844,089
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Red Eléctrica Group. Consolidated Statement of Financial Position / Thousands of Euros
at 31 December 2021
9
Equity and Liabilities
Equity
Capital and reserves
Capital
Reserves
Own shares (-)
Profit attributable to the Parent
Interim dividend (-)
Valuation adjustments
Financial assets at fair value through other comprehensive income
Hedging transactions
Translation differences
Equity attributable to the Parent
Non-controlling interests
Total equity
Non-current liabilities
Grants and other
Non-current provisions
Non-current financial liabilities
Loans and borrowings, bonds and other marketable securities
Other non-current financial liabilities
Deferred tax liabilities
Non-current derivatives
Other non-current liabilities
Total non-current liabilities
Current liabilities
Current provisions
Current financial liabilities
Loans and borrowings, bonds and other marketable securities
Other current financial liabilities
Trade and other payables
Suppliers
Other payables
Current tax liabilities
Current derivatives1,574,427
Total current liabilities
Total equity and liabilities
Notes 1 to 35 and Appendix I form an integral part of these consolidated annual accounts.
Note
31/12/2021
31/12/2020
3,762,199
270,540
2,989,711
(31,618)
680,627
(147,061)
(131,117)
18,766
(62,170)
(87,713)
3,631,082
54,049
3,685,131
726,002
129,965
5,953,434
5,896,170
57,264
397,811
16,436
102,288
7,325,936
21,202
2,144,425
1,391,722
752,703
802,655
382,309
409,459
10,887
5,129
2,973,411
13,984,478
3,613,425
270,540
2,905,234
(36,550)
621,185
(146,984)
(177,823)
12,761
(93,559)
(97,025)
3,435,602
56,351
3,491,953
707,920
135,986
6,485,404
6,427,644
57,760
417,353
50,350
96,233
7,893,246
57,183
823,767
214,973
608,794
577,720
460,502
92,257
24,961
220
1,458,890
12,844,089
14
15
16
19
23
20
17
16
19
21
23
20
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Red Eléctrica Group. Consolidated Income Statement / Thousands of Euros
2021
10
Revenue
Self-constructed assets
Share of profit of equity-accounted investees (with a similar activity to that of the Group)
Supplies
Other operating income
Personnel expenses
Other operating expenses
Depreciation and amortisation
Non-financial and other capital grants
Impairment and gains/(losses) on disposal of fixed assets
Results from operating activities
Finance income
Finance costs
Change in fair value of financial instruments
Exchange gains/(losses)
Net finance cost
Share of profit of equity-accounted investees
Profit before tax
Income tax
Consolidated profit for the year
A) Consolidated profit for the year attributable to the Parent
B) Consolidated profit/(loss) for the year attributable to non-controlling interests
Earnings per share in Euros
Basic earnings per share in Euros
Diluted earnings per share in Euros
Notes 1 to 35 and Appendix I form an integral part of these consolidated annual accounts.
Note
24.a
7 and 8
11
24.c
24.b
24.d
24.c
7, 8 and 10
8
24.e
24.e
11
23
14
33
33
31/12/2021
31/12/2020
1,952,958
1,985,751
55,737
29,546
(18,655)
10,644
(187,341)
(344,252)
(522,114)
14,717
730
991,970
10,488
(115,453)
376
696
57,690
27,980
(27,307)
17,189
(175,915)
(316,870)
(548,184)
30,248
(121,575)
929,007
16,014
(133,613)
-
(5,417)
(103,893)
(123,016)
-
-
888,077
805,991
(201,793)
686,284
680,627
5,657
(194,751)
611,240
621,185
(9,945)
1.26
1.26
1.15
1.15
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Red Eléctrica Group. Consolidated Statement of Comprehensive Income / Thousands of Euros
2021
11
Note
31/12/2021
31/12/2020
A) Consolidated profit for the year (income statement)
B) Other comprehensive income – Items that will not be reclassified to profit or loss:
Actuarial gains and losses
Equity instruments through other comprehensive income
Tax effect
C) Other comprehensive income – Items that could be reclassified to profit or loss:
Hedging transactions:
a) Revaluation gains/(losses)
b) Amounts transferred to the income statement
Translation differences:
a) Revaluation gains/(losses)
Share of other comprehensive income from investments in joint ventures and associates:
a) Revaluation gains/(losses)
Tax effect
Total comprehensive income for the year (A + B + C)
a) Attributable to the Parent
b) Attributable to non-controlling interests
Notes 1 to 35 and Appendix I form an integral part of these consolidated annual accounts.
16
19
11
686,284
611,240
14,460
11,273
6,005
(2,818)
(18,425)
(8,781)
(11,843)
2,199
40,960
(119,858)
9,935
3,987
5,948
12,760
12,760
23,938
23,938
(5,673)
1,233
(4,380)
5,613
(145,334)
(145,334)
(11,807)
(11,807)
36,050
741,704
472,957
735,789
5,915
489,246
(16,289)
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Red Eléctrica Group.
Consolidated Statement
of Changes in Equity
at 31 December 2021
Equity
Balances at 1 January 2020
I. Comprehensive income for the year
II. Transactions with shareholders or owners
- Distribution of dividends
- Transactions with own shares
III. Other changes in equity
- Transfers between equity line items
- Other changes
Balances at 31 December 2020
Balances at 1 January 2021
I. Comprehensive income for the year
II. Transactions with shareholders or owners
- Distribution of dividends
- Transactions with own shares
III. Other changes in equity
- Transfers between equity line items
- Other changes
Sub-
scribed
capital
Note
Reserves
Interim
dividend
Own
shares
270,540
2,763,196
(147,002)
(36,504)
/ Thousands of Euros
12
Profit
attributable
to the
Parent
714,752
621,185
Valuation
adjust-
ments
Equity
attributable
to the
Parent
Non-
controlling
interests
Total
equity
(52,466)
3,512,516
72,640
3,585,156
(125,357)
489,246
(16,289)
472,957
-
-
-
-
-
-
-
-
(6,582)
(421,939)
(421,609)
(330)
570,559
567,768
2,791
-
18
18
-
-
-
-
(46)
(146,984)
-
(146,984)
(46)
-
-
-
-
(567,768)
(567,768)
-
-
-
-
-
-
-
(568,951)
(568,575)
(376)
2,791
-
2,791
-
-
-
-
-
-
(568,951)
(568,575)
(376)
2,791
-
2,791
270,540
2,905,234
(146,984)
(36,550)
621,185
(177,823)
3,435,602
56,351
3,491,953
270,540
2,905,234
(146,984)
(36,550)
-
-
-
-
-
-
-
8,456
(393,318)
(393,450)
132
469,339
474,124
(4,785)
-
(77)
(77)
-
-
-
-
-
4,932
-
4,932
-
-
-
621,185
680,627
(147,061)
(147,061)
-
(474,124)
(474,124)
-
(177,823)
3,435,602
56,351
3,491,953
46,706
735,789
5,915
741,704
-
-
-
-
-
-
(535,524)
(540,588)
(8,217)
(543,741)
-
(540,588)
5,064
(4,785)
-
(4,785)
(8,217)
-
-
-
(3,153)
(4,785)
-
(4,785)
14
14
14
14
14
14
Balances at 31 December 2021
270,540
2,989,711
(147,061)
(31,618)
680,627
(131,117)
3,631,082
54,049
3,685,131
Notes 1 to 35 and Appendix I form an integral part
of these consolidated annual accounts.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Red Eléctrica Group. Consolidated Statement of Cash Flows / Thousands of Euros
2021
13
Cash flows from operating activities
Profit before tax
Adjustments to profit:
Depreciation and amortisation
Other adjustments (net)
Equity-accounted investees
(Gains)/losses on disposal/impairment of non-current assets and financial instruments
Accrued finance income
Accrued finance costs
Charge to/surplus provisions
Capital and other grants taken to income
Changes in operating assets and liabilities
Changes in inventories, receivables, current prepayments and other current assets
Changes in trade payables, current contract liabilities and other current liabilities
Other cash flows used in operating activities:
Interest paid
Dividends received
Interest received
Income tax received/(paid)
Other proceeds from and payments for operating activities
Notes 1 to 35 and Appendix I form an integral part of these consolidated annual accounts.
Note
31/12/2021
31/12/2020
1,605,176
1,380,422
888,077
805,991
7, 8 and 10
24.e
24.e
12, 14 and 16
15
24.e
584,630
522,114
62,516
(29,546)
(1,106)
(10,488)
115,453
16,654
(28,451)
426,768
98,582
328,186
(294,299)
(121,920)
4,848
4,867
745,792
548,184
197,608
(27,980)
121,575
(16,014)
133,613
16,662
(30,248)
173,528
8,821
164,707
(344,889)
(158,909)
4,848
7,907
(181,263)
(196,903)
(831)
(1,832)
Continued on next page
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Red Eléctrica Group. Consolidated Statement of Cash Flows
2021
/ Thousands of Euros
14
Cash flows used in investing activities
Payments for investments
Property, plant and equipment, intangible assets and investment property
Group companies, associates and business units
Other financial assets
Proceeds from sale of investments
Property, plant and equipment, intangible assets and investment property
Other financial assets
Other cash flows from investing activities
Other proceeds from investing activities
Cash flows from (used in) financing activities
Proceeds from and payments for equity instruments
Issue
Redemption
Acquisition
Disposal
Proceeds from and payments for financial liability instruments
Issue and drawdowns
Redemption and repayment
Dividends and interest on other equity instruments paid
Other cash flows used in financing activities
Interest paid
Other proceeds from and payments for financing activities
Effect of exchange rate fluctuations on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at year end
Notes 1 to 35 and Appendix I form an integral part of these consolidated annual accounts.
Note
31/12/2021
31/12/2020
(537,638)
(905,547)
7, 8 and 10
11
19
7, 8 and 10
19
15
15
14
19
14
(581,435)
(555,905)
(9,316)
(16,214)
11,031
317
10,714
32,766
32,766
(925,379)
(545,329)
(374,262)
(5,788)
(1,641)
755
(2,396)
21,473
21,473
22,323
(314,666)
6,075
1,011
-
-
5,064
(376)
-
-
(22,851)
22,475
587,301
1,094,790
(507,489)
276,095
2,590,079
(2,313,984)
(538,995)
(566,773)
(32,058)
-
(32,058)
2,794
1,092,655
481,772
1,574,427
(23,612)
(174)
(23,438)
(7,007)
153,202
328,570
481,772
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents 15
r
e
t
p
a
h
C
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContentsCONSOLIDATED ANNUAL ACCOUNTS3 Contents of Consolidated
Annual Accounts
16
1 Activities of the Group Companies / p 17
20 Derivative Financial Instruments / p 94
2 Basis of Presentation of the Consolidated Annual Accounts / p 17
21 Trade and Other Payables / p 100
3 Sector Regulation / p 24
4 Significant Accounting Policies / p 30
5 Considerations Regarding COVID-19 in the Consolidated
Annual Accounts / p 48
6 Business Combinations / p 50
7
Intangible Assets / p 54
8 Property, Plant and Equipment / p 61
9 Right-of-Use Assets and Lease Liabilities / p 66
10
Investment Property / p 67
11 Equity-accounted Investees / p 68
12
Inventories / p 71
13 Trade and Other Receivables / p 71
14 Equity / p 72
22 Average Supplier Payment Period. "Reporting
Requirement". Third Additional Provision of Law 15/2010
of 5 July 2010 / p 101
23 Taxation / p 101
24
Income and Expenses / p 106
25 Transactions with Equity-accounted Investees
and Related Parties / p 110
26 Remuneration of the Board of Directors / p 112
27 Remuneration of Senior Management / p 115
28 Segment Reporting / p 117
29
Interests in Joint Arrangements / p 120
30 Guarantees and Other Commitments with Third Parties
and Other Contingent Assets and Liabilities / p 120
31 Environmental Information / p 121
15 Grants and Other Non-current Revenue Received in Advance / p 78
32 Other Information / p 121
16 Non-current and Current Provisions / p 79
33 Earnings per Share / p 122
17 Other Non-current Liabilities / p 81
34 Share-based Payments / p 123
18 Financial Risk Management Policy / p 82
35 Events after 31 December 2021 / p 123
19 Financial Assets and Financial Liabilities / p 86
Appendix I: Details of equity investments at 31 December 2021
and 2020 / p 124
In order to facilitate comprehension of the
information provided in this document, certain
alternative performance measures have been
included. A definition of these is available at
https://www.ree.es/es/accionistas-e-inversores/
informacion-financiera/medidas-alternativas-
rendimiento
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
1
A ct i vi ti es
of t h e Group
Comp a ni es
Red Eléctrica Corporación, S.A. (hereinafter the Parent or the Company) is the
Parent of a Group formed by subsidiaries. The Group is also involved in joint
operations along with other operators. The Parent and its subsidiaries form
the Red Eléctrica Group (hereinafter the Group or Red Eléctrica Group). The
Company's registered office is located at Paseo del Conde de los Gaitanes,
177, Alcobendas (Madrid) and its shares are traded on the Spanish automated
quotation system as part of the selective IBEX 35 index.
The Group’s activity is focused on three main segments:
∫ Management and operation of domestic electricity infrastructure, which includes
electricity transmission, system operation and management of the transmission
network for the Spanish electricity system. These regulated activities are carried
out through Red Eléctrica de España, S.A.U. (hereinafter REE).
∫ Management and operation of international electricity infrastructure: electricity
transmission activities performed outside Spain through Red Eléctrica
Internacional, S.A.U. (hereinafter REI) and its investees.
∫ Telecommunications (fibre optics and satellites): furthermore, the Group
provides telecommunications services to third parties through Red Eléctrica
Infraestructuras de Telecomunicación, S.A.U. (hereinafter REINTEL), essentially
via dark fibre backbone network rental, and through the HISPASAT subgroup
(hereinafter HISPASAT), by means of satellite infrastructure operation.
In addition, the Group carries out activities through its subsidiaries aimed at
financing its operations and covering risks by reinsuring its assets and activities.
It also develops and builds electricity infrastructure and facilities through its
subsidiaries and/or investees, Red Eléctrica Infraestructuras en Canarias, S.A.U.
(REINCAN) and Interconexión Eléctrica Francia-España, S.A.S. (INELFE). Moreover,
the Group carries out activities aimed at driving and fostering technological
innovation through its subsidiary Red Eléctrica y de Telecomunicaciones,
Innovación y Tecnología, S.A.U. (RETIT).
17
Appendix I provides details of the activities and registered offices of the Parent
and its subsidiaries, as well as the direct and indirect investments held by the
Parent in the subsidiaries.
2
B asis of Presentation
of the Consolidated
Annual Accounts
A) GENERAL INFORMATION
The accompanying consolidated annual accounts have been prepared by the
directors of the Parent to give a true and fair view of the consolidated equity
and consolidated financial position of the Company and its subsidiaries at
31 December 2021, as well as the consolidated results of operations and
consolidated cash flows and changes in consolidated equity for the year then
ended.
The accompanying consolidated annual accounts, authorised for issue by the
Company's directors at their board meeting held on 22 February 2022, have been
prepared on the basis of the individual accounting records of the Company and
the other Group companies, which together form the Red Eléctrica Group (see
Appendix I). Each company prepares its annual accounts applying the accounting
principles and criteria in force in its country of operations. Accordingly, the
adjustments and reclassifications necessary to harmonise these principles
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents and criteria with International Financial Reporting Standards as adopted by the
European Union (IFRS-EU) have been made on consolidation. The accounting
policies of the consolidated companies are changed when necessary to ensure
their consistency with the principles adopted by the Company.
The consolidated annual accounts for 2020 were approved by the shareholders
at their general meeting held on 29 June 2021. The consolidated annual
accounts for 2021 are currently pending approval by the shareholders. However,
the directors of the Company consider that these consolidated annual accounts
will be approved with no changes.
These consolidated annual accounts have been prepared on the historical cost
basis, except in the case of financial assets measured at fair value through
other comprehensive income, financial assets at fair value through profit or
loss, financial instruments at fair value through profit or loss and business
combinations.
The figures disclosed in the consolidated annual accounts are expressed in
thousands of Euros, the Parent’s functional and presentation currency, rounded
off to the nearest thousand. The consolidated annual accounts have been
prepared in accordance with IFRS-EU, and other applicable provisions in the
financial reporting framework.
with no significant effect
on the consolidated annual
accounts of the Group:
The amendments adopted are as follows:
Amendments
adopted by the EU
18
Effective from:
1 January 2021
Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16 – Interest
Rate Benchmark Reform - Phase 2
Amendment to IFRS 4 Insurance
Contracts – Extension of the
Temporary Exemption from
Applying IFRS 9 until 2023
Effective from:
1 April 2021
Amendment to IFRS 16
Leases – Covid-19-Related
Rent Concessions beyond 30
June 2021
The Group has not omitted any mandatory accounting principle with a significant
effect on the consolidated annual accounts.
B) NEW IFRS-EU AND IFRIC
The consolidated annual accounts have been prepared in accordance with IFRS-
EU and taking into consideration the standards, amendments and interpretations
adopted by the European Union which came into force on 1 January 2021, albeit
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest
Rate Benchmark Reform - Phase 2
These amendments provide for certain exceptions in relation to the interest
rate benchmark reform (IBOR). The exceptions pertain to hedge accounting
and the outcome is that the IBOR reform should not generally give rise to the
discontinuation of hedge accounting. However, any hedge ineffectiveness must
continue to be recognised in the income statement.
With regard to the IBOR reform, the Group has various hedging relationships to
hedge interest rate risk, using derivatives and underlyings whose benchmark
rate is generally the EURIBOR. No hedging relationships have been affected, and
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
New requirements or amendments effective
as of 1 January 2022
The new standards not yet adopted by the European Union for which application
is not mandatory in 2021 but which will enter into force for annual periods
beginning on or after 1 January 2022 are as follows:
19
moreover, the Group is only minimally exposed to intraday benchmark interest
rates (EONIA). With respect to the EURIBOR, in 2019 a new hybrid calculation
methodology was developed based on actual market transactions, which
distinguishes between three levels of estimates, depending on the extent to
which such transactions are observable. This new methodology was approved
by the authorities, and therefore no
amendments to existing or future
contracts are expected to be required,
on considering that these financial
instruments are not exposed to a high
level of uncertainty at 31 December
2021
The remaining benchmark interest
rates are undergoing a reform on
a global scale, although this is not
expected to affect the long-term
hedging relationships currently in
place. The Group has adopted a
proactive stance with respect to this
process, carrying out its monitoring
and analysis sufficiently in advance
to prevent any negative impacts that may arise. On this basis, the changes
in benchmark interest rates have not had a significant impact on the Group’s
consolidated annual accounts.
The amendments to IFRS 4 and IFRS 16 have not had an impact on the
consolidated annual accounts of the Group at 31 December 2021.
New requirements or amendments
Effective from: 1 January 2022
Amendment to IFRS 3 – Reference to the
Conceptual Framework
Amendment to IAS 16 Property, Plant and
Equipment – Proceeds before Intended Use
Amendment to IAS 37 – Onerous Contracts - Cost
of Fulfilling a Contract
Annual Improvements to IFRS. 2018-2020 Cycle
Effective from: 1 January 2023
New standard - IFRS 17 Insurance Contracts
Amendment to IAS 1 – Classification of Liabilities
as Current or Non-current
Amendment to IAS 1 – Disclosure of Accounting Policies
Amendment to IAS 8 – Definition of Accounting Estimates
Amendment to IAS 12 – Deferred Tax related to Assets
and Liabilities arising from a Single Transaction
None of these standards or amendments have been early applied. The Company
is analysing these impacts in detail and application of these amendments is not
expected to have a significant impact in 2022 or 2023.
C) ESTIMATES AND ASSUMPTIONS
The preparation of the consolidated annual accounts in accordance with
IFRS-EU requires Group management to make judgements, estimates and
assumptions that affect the application of accounting standards and the
amounts of assets, liabilities, income and expenses. Estimates and judgements
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents are assessed continually and are based on past experience and other factors,
including expectations of future events that are considered reasonable given the
circumstances. Actual results could differ from these estimates.
The consolidated annual accounts for 2021 occasionally include estimates
calculated by management of the Group and of the consolidated companies, and
subsequently endorsed by their directors, to quantify certain assets, liabilities,
income, expenses and commitments disclosed therein.
Liabilities are generally recognised when it is probable that an obligation will give
rise to an indemnity or a payment. The Group assesses and estimates amounts to
be settled in the future, including additional amounts for income tax, contractual
obligations, pending lawsuit settlements and other liabilities. These estimates
are subject to the interpretation of existing facts and circumstances, projected
future events and the estimated financial effect of those events (see note 16).
The Company has taken out insurance policies to cover the risk of possible claims
that might be lodged by third parties in relation to its activities.
20
These estimates are essentially as follows:
∫ Estimated asset recovery calculated by determining the recoverable amount
thereof. The recoverable amount is understood to be the higher of fair value less
costs to sell and value in use. Asset impairment is generally calculated using
discounted cash flows based on financial projections used by the Group. The
discount rate applied is the weighted average cost of capital (see notes 7 and 8).
∫ Estimated useful lives of property, plant and equipment (see note 4.c).
∫ The assumptions used in the actuarial calculations of liabilities and obligations
to employees (see note 16).
In the absence of International Financial Reporting Standards (IFRS) that give
guidance on the accounting treatment for a particular situation, in accordance
with IAS 8, management uses its best judgement based on the economic
substance of the transaction and considering the most recent pronouncements
of other standard-setting bodies that use the same conceptual framework as
IFRS. Accordingly, as tax credits for investments are not within the scope of
IAS 12 and IAS 20, after analysing the related facts and circumstances, Group
management has considered that credits for fixed asset investments in the
Canary Islands granted to the Group by public entities are similar to capital
grants. Therefore, in these cases management has taken into account IAS 20
on government grants (see note 4j).
∫ The assumptions used to calculate the fair value of derivatives (see note 20).
To facilitate comprehension of the consolidated annual accounts, details of the
different estimates and assumptions are provided in each separate note.
∫ The calculation of revenue from electricity transmission facilities in Spain
(see note 3).
∫ The assumptions used to calculate the fair value of assets and liabilities
acquired in a business combination (see note 6).
Although estimates are based on the best information available at 31 December
2021, future events may require increases or decreases in these estimates
in subsequent years, which would be accounted for prospectively in the
corresponding consolidated income statement as a change in accounting
estimates, as required by IFRS.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents D) CONSOLIDATION PRINCIPLES
The types of companies included in the consolidated Group and the consolidation
method used in each case are as follows:
Subsidiaries
Subsidiaries are entities over which the Company, either directly or indirectly
through subsidiaries, exercises control. The Company controls a subsidiary
when it is exposed, or has rights, to variable returns from its involvement with
the subsidiary and has the ability to affect those returns through its power over
the subsidiary. The Company has power over a subsidiary when it has existing
substantive rights that give it the ability to direct the relevant activities. The
Company is exposed, or has rights, to variable returns from its involvement with
the subsidiary when its returns from its involvement have the potential to vary
as a result of the subsidiary’s performance.
The income, expenses and cash flows of subsidiaries are included in the
consolidated annual accounts from the date of acquisition, which is when the
Group takes control, until the date that control ceases.
Transactions and balances with Group companies and unrealised gains or losses
have been eliminated on consolidation. Nevertheless, unrealised losses have
been considered as an indicator of impairment of the assets transferred.
Joint arrangements
Joint arrangements are those in which there is a contractual agreement to share
the control over an economic activity, in such a way that decisions about the
relevant activities require the unanimous consent of the Group and the remaining
venturers or operators. The existence of joint control is assessed considering the
definition of control over subsidiaries.
The Group assesses all the facts and circumstances relating to each joint
arrangement for the purpose of its classification as a joint venture or joint
operation, including whether the arrangement contains rights over the assets
and obligations for liabilities.
21
In joint operations there is a joint arrangement whereby the parties that have
joint control have rights to the assets, and obligations for the liabilities, relating
to the arrangement. For joint operations, the Group recognises the assets,
including its share of any assets held jointly, the liabilities, including its share
of any liabilities incurred jointly with the other operators, the revenue from the
sale of its share of the output arising from the joint operation, and the expenses,
including its share of any expenses incurred jointly, in the consolidated annual
accounts.
Joint ventures are those in which there is a contractual agreement with a third
party to share control over an activity and the strategic financial and operating
decisions relating to the activity require the unanimous consent of all the
venturers that share control. The Group's interests in jointly controlled entities
are accounted for using the equity method in accordance with IFRS 11.
The Group's acquisition of an initial and subsequent share in a joint operation
that is a business is recognised following the same criteria used for business
combinations, at the percentage of ownership of each individual asset and liability.
However, in subsequent acquisitions of additional shares in a joint operation, the
previous share in each asset and liability is not subject to revaluation.
In sales or contributions by the Group to the joint operation, it recognises
the resulting gains and losses only to the extent of the other parties’ interests
in the joint operation. When such transactions provide evidence of a reduction in
net realisable value or an impairment loss of the assets transferred, such losses
are recognised in full.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents In purchases by the Group from a joint operation, it only recognises the resulting
gains and losses when it resells the acquired assets to a third party. However,
when such transactions provide evidence of a reduction in net realisable value
or an impairment loss of the assets, the Group recognises its entire share
of such losses.
Associates
Associates are entities over which the Company, either directly or indirectly
through subsidiaries, exercises significant influence. Significant influence is the
power to participate in the financial and operating policy decisions of the investee
but is not control or joint control over those policies. The existence of potential
voting rights that are exercisable or convertible at the end of each reporting
period, including potential voting rights held by the Group or other entities,
are considered when assessing whether an entity has significant influence.
Investments in associates are accounted for using the equity method from
the date that significant influence commences until the date that significant
influence ceases. However, if on the acquisition date all or part of the investment
qualifies for recognition as non-current assets or disposal groups held for sale,
it is recognised at fair value less costs of disposal.
Investments in associates are initially recognised at cost of acquisition, including
any cost directly attributable to the acquisition and any consideration receivable
or payable contingent on future events or on compliance with certain conditions.
Any excess of the cost of the investment over the Group’s share of the net
fair value of the associate’s identifiable net assets at the acquisition date is
recognised as goodwill under equity-accounted investees in the consolidated
statement of financial position. Any excess of the Group’s share of the net fair
value of the associate’s identifiable net assets over the cost of the investment
at the acquisition date (bargain purchase) is recognised as income in the period
in which the investment is acquired.
The Group classifies the profit or loss of these companies in results from
operating activities when the entity’s activity is similar to the Group’s operating
activities. Conversely, when their activity is different, the profit or loss of these
companies is classified outside results from operating activities.
22
Appendix I provides details of the Company's subsidiaries, joint arrangements,
joint ventures and associates, as well as the consolidation or measurement
method used in preparing the accompanying consolidated annual accounts
and other relevant information.
The financial statements of the subsidiaries, joint arrangements, joint ventures
and associates used in the consolidation process have the same reporting date
and refer to the same period as those of the Parent.
The operations of the Company and its subsidiaries have been consolidated
applying the following basic principles:
∫ The accounting principles and criteria used by the Group companies have been
harmonised with those applied by the Parent.
∫ Translation of foreign operations:
- Balances in the financial statements of foreign companies have been
translated using the closing exchange rate for assets and liabilities, the
average exchange rate for income and expenses and the historical exchange
rate for capital and reserves.
- All resulting exchange differences are recognised as translation differences
in other comprehensive income.
- These criteria are also applicable to the translation of the financial statements
of equity-accounted investees, with translation differences attributable to the
Group recognised in other comprehensive income.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents ∫ All balances and transactions between fully consolidated companies have been
eliminated on consolidation.
∫ Margins on invoices between Group companies for capitalisable goods
or services were eliminated at the transaction date.
F) COMPARATIVE INFORMATION
The consolidated statement of financial position, consolidated income statement,
consolidated statement of comprehensive income, consolidated statement
of changes in equity and consolidated statement of cash flows in these
consolidated annual accounts include comparative figures for the prior year.
23
E) NON-CONTROLLING INTERESTS
For each business combination, the Group measures at the acquisition date
components of non-controlling interests in the acquiree that are present
ownership interests and entitle their holders to a proportionate share of the
entity's net assets in the event of liquidation at either: (a) fair value; or (b) the
present ownership instruments’ proportionate share in the recognised amounts
of the acquiree’s identifiable net assets. Non-controlling interests are disclosed
in consolidated equity separately from equity attributable to shareholders of
the Company. Non-controlling interests’ share in consolidated profit or loss for
the year and in consolidated comprehensive income for the year is disclosed
separately.
Transactions with non-controlling interests are recognised as transactions with
equity holders of the Group. As such, the difference between the consideration
paid in the acquisition of a non-controlling interest and the corresponding
proportion of the carrying amount of the subsidiary's net assets is recognised in
equity. Similarly, the gains or losses on disposal of non-controlling interests are
also recognised in the Group's equity.
G) CHANGES IN THE CONSOLIDATED GROUP
The changes in the consolidated Group in 2021 are as follows:
∫ On 15 January 2021, the Peruvian company Hispasat Perú S.A.C. was
incorporated. Its principal activity is the provision of telecommunications
services. This company is a wholly owned subsidiary of Hispasat, S.A. and is fully
consolidated. On 1 May 2021, Hispasat Peru acquired a series of assets for the
management and transmission of video signals in Latin America.
∫ In 2021, through its subsidiary Red Eléctrica y de Telecomunicaciones,
Innovación y Tecnología, S.A.U. (RETIT), the Company included Nearby
Computing, S.L, Zeleros Global, S.L., Hybrid Energy Storage Solutions, S.L.
and Aerolaser System, S.L. in its consolidated group, in view of the significant
influence it holds over all of these companies. These companies are accounted
for in the Group’s financial statements using the equity method.
∫ On 28 December 2021, Hispasat, S.A. and Hispasat Brasil, Ltda. acquired
the entire non-controlling interest (19.04 %) held in Hispamar Satélites, S.A.
As a result, the Hispasat Group became the sole shareholder of both the
acquired company Hispamar Satélites, S.A. and the latter’s investee Hispamar
Exterior, S.L.U. Following this acquisition, the Red Eléctrica Group now holds
89.68 % of both companies. This transaction has no impact on the consolidation
method, which continues to be full consolidation.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The Group has also entered into the following agreements, which are still
to be completed:
∫ On 3 November 2021, Argo Energia Empreendimentos e Participações S.A.
(“Argo”), in which Red Eléctrica Brazil holds a 50 % stake, entered into a share
sale-purchase agreement with Rialma Administração e Participações S.A.
to acquire shares representing 100 % of the share capital of Rialma
Transmissora de Energia III S.A., subject to certain conditions being met and
to the regulatory authorities approving the acquisition. This company will be
accounted for in the Group’s financial statements using the equity method,
through the interest held in Argo.
∫ On 16 December 2021, the Company announced the agreement, subject
to the pertinent authorisations, for the sale of a minority stake of 49 % in
REINTEL. On completion of the agreed transaction, the Red Eléctrica Group
will maintain a 51 % stake in REINTEL, as well as control and management
of this company. Thus, once the conditions precedent has been met, there
will be no impact on the consolidation method applied to REINTEL, which will
continue to be fully consolidated (see note 14.c).
The changes in the consolidated Group in 2020 were as follows:
∫ On 31 January 2020 the Brazilian company “Red Eléctrica Brasil Holding
LTDA” (hereinafter REB) was incorporated. This company’s statutory activity
mainly consists of the acquisition, holding, management and administration of
securities. This company is wholly owned by Red Eléctrica Internacional, S.A.U.
∫ On 25 March 2020, once the conditions precedent laid down in the purchase
agreement had been met, a 50 % interest was acquired in the Brazilian company
Argo and its subsidiaries. This company’s statutory activity mainly consists
of the acquisition, holding, management and administration of securities.
This company is the parent of a group of electricity transmission concession
operator companies in Brazil. REB holds a 50 % interest in this company.
It is accounted for using the equity method.
24
3
Sector
Re gulation
A) ELECTRICITY SECTOR IN SPAIN
The electricity sector liberalisation process in Spain began with Electricity
Industry Law 54/1997 of 27 November 1997. This Law prompted the start of a
vertical disintegration of the different activities, whereby activities carried out
under a natural monopoly regime (transmission and distribution) were segregated
from those operating on a free competition basis (generation and supply).
A reform process prompted by the imbalance between revenues and costs of
the electricity system in previous years got underway in 2013, culminating in the
publication of Electricity Industry Law 24/2013 of 26 December 2013 (hereinafter
the “Law”). This Law has progressively been updated since then and partly
transposes Directive 2019/944 of the European Parliament and of the Council
of 5 June 2019, on common rules for the internal market for electricity and
amending Directive 2012/27/EU, into Spanish law.
The Law lays down the following regulatory framework with respect to the
activities conducted by the Company:
∫ The Law acknowledges the natural monopoly in the transmission activity, arising
from the economic efficiency afforded by a sole grid. Transmission is liberalised
by granting widespread third-party access to the network, which is made
available to the different electricity system agents and consumers in exchange
for payment of a regulated access charge.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The remuneration for this activity is set by the government based on the
general principles defined in the Law and on the method essentially enshrined
in Spanish National Markets and Competition Commission (CNMC) Circular
5/2019 of 5 December 2019, on the calculation of the remuneration for
the electricity transmission activity. Until the 2019 regulatory period, the
calculation method was set forth in Royal Decree 1047/2013 of 27 December
2013; however, due to the change in remit introduced through Royal Decree-
Law 1/2019 of 11 January 2019, on urgent measures to adapt powers to the
requirements of Community law in respect of Directives 2009/72/EC and
2009/73/EC of the European Parliament and of the Council of 13 July 2009,
concerning common rules for the internal market in electricity and natural
gas, respectively, the CNMC approved Circular 5/2019, which stipulates the
methodology for the 2020-2025 regulatory period.
In addition, other remuneration parameters for the new model were set
for the aforementioned regulatory period: Circular 2/2019, which defines the
methodology for calculating the financial rate of return (FRR) for electricity
transmission and distribution, regasification, and natural gas transmission
and distribution, and Circular 7/2019, approving the standard facilities and
reference unit values for operation and maintenance per asset that are to be
used in calculating the remuneration allocable to companies that own electricity
transmission facilities. This Circular also provided that the reference unit values
for investment that were in force in the previous regulatory period, which were
established by Ministry of Industry, Energy and Tourism Order IET/2659/2015,
were to be extended to cover the 2020-2025 period.
Regulated revenue for the transmission activity for the first year of application
of Royal Decree 1047/2013 (i.e., 2016) was determined definitively in Ministry
of Industry, Energy and Tourism Order IET/981/2016. Subsequently, between
2017 and 2021, the regulated revenue for this activity was determined on a
25
provisional basis and settled on account. The regulators (the Ministry until
2019 and the CNMC for revenue pertaining to 2020 onwards) provisionally
opted to replicate the amount of remuneration stipulated for 2016, and this
therefore remained constant until 2021. This provisional approach stems from
the “detriment proceedings” brought by the Spanish State Attorney against
the aforementioned Ministerial Order IET/981/2016, seeking that the Spanish
Supreme Court declare certain articles therein null and void, thus enabling
the definitive revenue for 2016 to be corrected. The Spanish Supreme Court
Judgment was published on 29 June 2020, ordering that Order IET/981/2016
and the revenue for 2016 be corrected. To comply with this Judgment, at the end
of 2021 the Ministry for the Ecological Transition and Demographic Challenge
(MITERD) submitted for public consultation the proposed Order stipulating
the remuneration for 2017, 2018 and 2019 allocable to companies that own
electricity transmission facilities. The CNMC is still to publish the remuneration
for 2020 and 2021. Both processes are expected to be finalised in 2022.
∫ As electricity system operator, the Company's main function is to guarantee
the continuity and security of the electricity supply, as well as to ensure the
correct coordination of the production and transmission system, exercising
its duties in cooperation with the operators and agents of the Iberian Electricity
Market (MIBEL) while observing the principles of transparency, objectivity and
independence. Law 24/2013 also bestows upon the system operator the role
of transmission network manager.
As provided in article 31.1 of the aforementioned law, the Ministry shall assign
the role of transmission network manager for the Spanish electricity system to
Red Eléctrica following certification by the CNMC, and the European Commission
shall be notified in order for such assignment to be published in the Official
Journal of the European Union. In 2015 the certification process for Red
Eléctrica as transmission network manager for the Spanish electricity system,
as envisaged in the law, was completed following publication in the Official
Journal of the European Union of 12 February 2015 of the Notification of the
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
has applied the remuneration methodology laid down in Circular 4/2019 to
determine the remuneration of the system operator for 2020 and thereafter.
26
Nonetheless, the power to approve the methodology applicable to the
calculation of the system operator’s remuneration for the 2014-2019 period
lies with the MITERD, and in the absence of such a methodology, the successive
ministerial orders through which the electricity access tolls for the 2014-2019
period were approved stipulated provisional annual remuneration, envisaging
the amendment of the amounts reflected therein once the MITERD had approved
the methodology. In 2021 the MITERD submitted for public consultation the draft
Royal Decree defining the methodology for calculating the remuneration of the
system operator applicable to each year of the specified period. However, this
Royal Decree is still pending approval at the 2021 reporting date.
Regarding the Company’s remit in the non-mainland electricity systems, in
2015 the Salto de Chira pumped-storage hydroelectric power plant project in
Gran Canaria was transferred to the system operator, as stipulated in Order
IET/728/2014 of 28 April 2014. Having taken ownership, in 2016 Red Eléctrica
submitted a project amending the initial project, which included technical and
environmental improvements aimed at increasing the capacity for integrating
renewable energy and reducing the impact of this new infrastructure on the
environment. The Canary Islands government declared the new project to be
of strategic interest, and on 15 December 2021 the Department for Ecological
Transition, the Fight against Climate Change and Territorial Planning of the
Canary Islands government, through the Directorate-General for Energy, issued
the administrative authorisation for the project.
In 2021, the new regime of tolls and charges began to be applied, likewise as a
consequence of the entry into force of Royal Decree-Law 1/2019. This action was
implemented through the publication of Royal Decree 148/2021 of 9 March 2021,
establishing the methodology to calculate electricity system charges, and CNMC
Circular 3/2020 of 15 January 2020, establishing the methodology to calculate
electricity transmission and distribution tolls.
Spanish Government regarding the designation of Red Eléctrica de España,
S.A.U. as transmission system operator in Spain. Under this assignment,
Red Eléctrica de España S.A.U operates on an ownership unbundling basis as
provided for in article 43 of Directive 2019/944 on common rules for the internal
market for electricity (formerly article 9 of Directive 2009/72/EC).
The Company is also responsible for the functions of settlement, notification
of payments and receipts, and management of guarantees relating to security
of supply and the effective diversion of units generated and consumed, as
well as for short-term energy exchanges aimed at maintaining the quality and
security of supply.
Furthermore, the Company manages the technical and economic dispatch
for electricity supply from non-mainland electricity systems (Balearic Islands,
Canary Islands, Ceuta and Melilla), and is responsible for the settlement of
payments and receipts arising from the economic dispatch of electricity
generated by these systems.
Following the publication of Royal Decree-Law 1/2019, the CNMC established
the first ever remuneration methodology for the system operation activity,
through Circular 4/2019, which defines the remuneration methodology for the
electricity system operator. The core principle of this remuneration model is
that of providing suitable remuneration for a low-risk activity, considering those
costs prudently incurred by an efficient and well-managed company. The CNMC
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Specifically, this new tolls and charges framework came into force from 1 June
2021 onwards. As a result, all consumers now have a tariff that distinguishes
between peak and off-peak times for both the power and energy factors, and
the price difference between peak and off-peak hours has increased.
As regards access and connection to electricity networks, on 1 July 2021 the
moratorium on new access requests, introduced a year previously by Royal
Decree-Law 23/2020 of 23 June 2020, came to an end. Following the approval of
Royal Decree 1183/2020 of 29 December 2020 on access and connection to the
electricity transmission and distribution networks, the CNMC approved Circular
1/2021 establishing the methodology and conditions for electricity generation
facilities to access and connect to the transmission and distribution networks,
and the Resolution establishing the detailed specifications for determining
network access capacity. This latter piece of legislation requires transmission
and distribution network managers to publish the available capacity at each
network node and to accept new requests as of 1 July.
B) INTERNATIONAL ELECTRICITY SECTOR
The Red Eléctrica Group has built and acquired electricity transmission facilities
through REI. At international level, it now operates and maintains these facilities
in Peru, Chile and Brazil. Various electricity transmission facilities were also under
construction by subsidiaries of REI in these countries at the end of 2020.
Electricity sector in Peru
In Peru, the liberalisation of the electricity sector began in 1992 with the
publication of the “Electricity Concessions Law” (LCE). The shaping of the
electricity sector was subsequently completed by the 2006 reform (Law 28832,
“Law for the Efficient Development of Electricity Generation”, LGE).
These two laws and certain amendments and/or extensions, together with
the Regulation implementing the Electricity Concessions Law (Supreme Decree
No. 009-93-EM enacted in 1993), make up the basic regulatory framework for the
electricity sector in Peru.
The basic regulatory framework for the transmission activity also includes the
“Transmission Regulation” (Supreme Decree No. 027-2007-EM). Certain major
regulatory developments instituted by the regulatory agency OSINERGMIN should
also be highlighted, such as the Resolutions approving the annual settlement
procedure for electricity transmission service revenue (Resolutions No. 055-
2020-OS/CD and No. 056-2020-OS/CD), as well as Resolution No. 217-2013-OS/
CD, regulating “Tariffs and Remuneration for Secondary Transmission Systems
(STS) and Complementary Transmission Systems (CTS)”.
27
For the transmission activity, the 2006 reform (LGE) entailed the introduction
of auctions as a mechanism for awarding contracts to construct new facilities
in the backbone transmission network. The auction procedure required an energy
planning process to be developed, which did not exist prior to the publication
of the LGE.
The Peruvian regulatory framework is currently open to discussion. On 20 June
2019 Supreme Resolution No. 006-2019-EM was published, which created the
CRSE (multi-sector power reform commission), for the purpose of reviewing
and adjusting the existing legal and regulatory framework in order to optimise
the efficient development of the Peruvian electricity market while adhering to
international standards and best practice, seeking to guarantee the sustainability
of the electricity subsector. At the 2021 reporting date this process is still
ongoing.
Electricity sector in Chile
The legal framework governing the electricity transmission business in Chile
is contained in Decree with Force of Law (DFL) No. 4/2006, which sets out the
revised, coordinated and systematised text of Ministry of Mining Decree with
Force of Law (DFL) No. 1 of 1982, the General Electricity Services Law (DFL No.
1/1982) and subsequent amendments thereto. Such amendments include
Law 19,940 (Short Law I) enacted on 13 March 2004, Law 20,018 (Short Law II)
enacted on 19 May 2005, and Law 20,257 (Generation through Non-conventional
Renewable Energy Sources) enacted on 1 April 2008. These regulations are
supplemented by the Regulation of the General Electricity Services Law of 1997
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents (Ministry of Mining Supreme Decree No. 327 of 1997) and respective amendments
thereto, and by the Technical Standard for Safety and Quality of Service (Exempt
Ministerial Resolution No. 40 of 16 May 2005) and subsequent amendments
thereto.
The new Transmission Law was enacted on 11 July 2016. This law provides for
a new independent coordinating body for the National Electricity System, known
as the National Electricity Coordinator (“CEN”). It also defines a new electricity
transmission system wherein the facilities forming part of the Backbone, Sub-
transmission and Additional Transmission Systems were amalgamated into the
National, Zonal and Dedicated Transmission Systems, respectively.
One of the most relevant processes carried out during 2021, which got underway
in 2019, is the National Value Assessment for the 2020-2023 period, conducted
by the National Energy Commission (CNE) in Chile. Pursuant to Chilean Law
20,936, a review must be conducted every four years to determine the annual
remuneration for transmission assets, including both local transmission networks
and the national transmission grid.
The review of the useful life of installed facilities and the discount rate was
completed in 2019, whereas the task of determining the investment values, and
the annual cost of operation and maintenance, had yet to be concluded in 2021.
In August 2021, the CNE in Chile published the Final Technical Report (FTR)
reducing the return on investment. Subsequently, on 12 January 2022, the Expert
Panel published its decision regarding the discrepancies presented to the CNE in
view of the FTR on the transmission valuation process for the 2020-2023 period.
The CNE will apply this decision when publishing its Definitive Technical Report on
the valuation.
At the date of authorising the issue of these annual accounts, the CNE has not yet
issued its definitive report, which will serve as the basis for the Ministry of Energy
to set the annual value of transmission facilities through a decree. In 2021,
therefore, the Group recognised its Chilean subsidiaries’ revenue based on its
best estimate of the final figures to be approved in the aforementioned process
and considers that the revenue resulting from the final resolution of this process
will not differ significantly from the estimated revenue recognised.
28
Electricity sector in Brazil
The transmission model in Brazil is based on government concessions,
for which the core principles of public service are enshrined in the Constitution
of 1988, and the principles that govern concessions in Law 8,987 and Law 9,974
of 1995, respectively. This framework provides that concession agreements are
administrative contracts entered into with the federal government (national),
represented by the regulatory agency ANEEL, which cannot be amended or early
terminated by the government, except for duly supported reasons deemed to be
in the public interest.
Under this model, the concession for backbone network facilities is put out for
tender by ANEEL through auctions. The auctions determine which transmission
companies will build, maintain and operate the electricity assets during the
concession period. By way of remuneration for the service rendered during this
period, transmission companies receive the revenue specified in the auction, i.e.,
the Receita Anual Permitida (Annual Permitted Remuneration – RAP as per the
Portuguese acronym).
In terms of sector regulations, there are no laws that govern the transmission
activity in general; rather, specific aspects are regulated (e.g., extension of
concession terms under Law 12,783 of 2013). There are also ministerial and
government orders, and specific rules are included in the concession agreements
themselves.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
C) TELECOMMUNICATIONS
Telecommunications in Spain
The telecommunications sector in Spain is regulated by General
Telecommunications Law 9/2014 of 9 May 2014 (GTL), which mainly seeks to
foster competition in the market and guarantee access to the networks, and by
Royal Decree 330/2016 of 9 September 2016, on measures to reduce the actual
cost of deploying high-speed electronic communications networks.
Aforementioned Law 9/2014 is developed by Royal Decree 123/2017 of 24
February 2017 approving the regulation on the use of public domain radio,
which in turn also regulates the award of the right to use the orbit and spectrum
resource and the permits for the satellite ground segment and the related
spectrum. Accordingly, REINTEL and HISPASAT have been entered on the CNMC’s
Register of Electronic Communications Operators. HISPASAT, meanwhile, has
been awarded the permits for the ground segment and the concessions to use
the related radio spectrum, as well as concessions to operate various orbit and
spectrum resources.
The European regulatory framework comprises Directive (EU) 2018/1972
establishing the European Electronic Communications Code (Recast), Directive
2009/136/EC of the European Parliament and of the Council of 25 November 2009
(regarding users' rights), and Directive 2009/140/EC (regulatory improvements).
Based on this legislation, the General Telecommunications Law introduces
measures aimed at creating an appropriate framework for investing in the
deployment of new generation networks, thereby enabling operators to offer
innovative services that are more technologically adapted to people's needs.
At present, the draft General Telecommunications Law, which is essentially
intended to transpose those aspects of aforementioned Directive (EU) 2018/1972
that have not yet been transposed into Spanish law, is being processed through
the upper and lower chambers (Senate and Congress of Deputies, respectively)
of Spanish parliament.
29
In line with the foregoing, special note should also be taken of Directive
2014/61/EU on measures to reduce the cost of deploying high-speed electronic
communications networks, which mainly seeks to expedite implementation
of the "Digital Agenda" of the European Union (EU), published in May 2010.
This directive was transposed into Spanish law by Royal Decree 330/2016, on
measures to reduce the cost of deploying high-speed electronic communications
networks. The legislation (Directive 2014/61/EU and Royal Decree 330/2016)
stipulates that access to infrastructure that may be used to host public electronic
communications networks must be guaranteed for operators of public electronic
communications networks. In this respect, the legislation requires owners and
managers of, and holders of rights-of-use to, infrastructure that may be used to
host public high-speed electronic communications networks (including network
operators that provide physical infrastructure for electricity transmission)
to address all requests from telecommunications operators to access such
infrastructure applying fair and reasonable terms and conditions.
On 11 January 2022, the CNMC published Communication 1/2021 of 20 December
2021, which contains guidelines regarding the resolution of conflicts concerning
access to physical infrastructure that may be used to host high-speed electronic
communications networks (Communication/DTSA/001/21). As the CNMC
indicates in the text, the Communication is intended to serve as guidance with
respect to the content of the applicable legislation (Royal Decree 330/2016) and
existing administrative practices and could be revised periodically in the light of
amendments to that legislation, new pronouncements issued by this body, and
such jurisprudence as may be enacted in this regard.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Telecommunications in Latin America
The Group provides services in different Latin American countries. In most Latin
American countries, an entitlement must be obtained in order to provide satellite
capacity to telecommunications service providers. Such entitlement may be
in the form of permits, concessions, entry in a register or inclusion on a list of
authorised satellites. The satellites in the fleet are duly authorised in all countries
where this is required, except where there is no commercial interest or no
satellite coverage.
The main countries where such entitlements are held are as follows:
∫ In Brazil, the Group holds rights to operate various orbit and spectrum
resources, as well as a multimedia communications permit that entitles it to
provide electronic communications services. The applicable legislation in this
case is Resolution no. 220 of 5 April 2000 approving the Regulation on Satellite
Operation Rights for the Transmission of Telecommunication Signals, Resolution
no. 614 of 28 May 2013 approving the Multimedia Communications Service
Regulation, and General Telecommunications Law no. 9,472 of 16 July 1997.
∫ In Mexico the Group is authorised to provide wholesale satellite internet services
and satellite cellular backhaul services. To this end, it holds the sole concession
for commercial use, in accordance with the Federal Tele-communications and
Broadcasting Law of 14 July 2014.
∫ In Colombia the Group has been authorised by the ICT Single Register
of providers of telecommunications networks and services to render satellite
telecommunications services. The applicable legislation is essentially Law 1978
of 2019 on the modernisation of ICT, and Law 1341 of 2009 defining principles
and concepts relating to the information society and the organisation of
information and communication technologies.
4
Significant
Accounting
Pol icies
30
The accounting principles used in preparing the accompanying consolidated
annual accounts have been applied consistently to the reported periods
presented and are as follows:
A) BUSINESS COMBINATIONS
The Group accounts for business combinations by applying the acquisition
method when control is transferred to the Group. The acquisition date is the date
on which the Group obtains control of the acquiree. The consideration transferred
in a business combination is calculated as the sum of the acquisition-date
fair values of the assets transferred, the liabilities incurred or assumed, the
equity instruments issued and any consideration contingent on future events
or compliance with certain conditions in exchange for control of the acquiree.
The consideration transferred excludes any payment that does not form part of
the exchange for the acquired business. Acquisition costs are recognised as an
expense when incurred.
For each business combination, the Group measures at the acquisition date
components of non-controlling interests in the acquiree that are present
ownership interests and entitle their holders to a proportionate share of the
entity's net assets in the event of liquidation at either: (a) fair value; or (b) the
present ownership instruments’ proportionate share in the recognised amounts
of the acquiree’s identifiable net assets.
At the acquisition date the Group recognises the assets acquired and liabilities
assumed and any non-controlling interest at the amount of the proportionate
share of the net assets acquired. This criterion is only applicable for non-
controlling interests which grant present access to economic benefits and
entitlement to the proportionate share of net assets of the acquiree in the
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents event of liquidation. Otherwise, non-controlling interests are measured at fair
value or value based on market conditions. Liabilities assumed include any
contingent liabilities that represent present obligations arising from past events
for which the fair value can be reliably measured. The Group also recognises
indemnification assets transferred by the seller at the same time and following
the same measurement criteria as the item that is subject to indemnification
from the acquiree, taking into consideration, where applicable, the insolvency
risk and any contractual limit on the indemnity amount.
Any excess of the consideration given, plus the value assigned to non-controlling
interests, over the value of net assets acquired and liabilities assumed is
recognised as goodwill. Any shortfall, after evaluating the consideration given
and the value assigned to non-controlling interests, and after identifying and
measuring the net assets acquired, is recognised separately in the consolidated
income statement.
If the business combination can only be determined provisionally the identifiable
net assets are initially recognised at their provisional values and adjustments
made during the measurement period are recognised as if they had been
known at the acquisition date. Comparative figures for the previous year are
restated where applicable. In any event, adjustments to provisional amounts
only reflect information obtained about facts and circumstances that existed at
the acquisition date and, if known, would have affected the measurement of the
amounts recognised at that date.
After a period of one year, the initial measurement is only adjusted when
correcting errors.
B) INTANGIBLE ASSETS
Intangible assets are recognised at acquisition cost, which is periodically
reviewed and adjusted in the event of a decline in value. Amortisation for the year
is expensed and determined on a straight-line basis over the estimated useful
life allocated to each item or type of intangible asset.
31
Intangible assets include the following:
Administrative concessions
The Group operates various assets, located mainly in Peru, under service
concession contracts awarded by different public entities. Based on the
characteristics of the contracts, the Group analyses whether they fall within
the scope of IFRIC 12 Service Concession Arrangements.
For concession arrangements subject to IFRIC 12, construction and other
services rendered are recognised using the criteria applicable to income and
expenses.
The consideration received by the Group is recognised at the fair value of the
service rendered, as a financial asset or intangible asset, based on the contract
clauses. The Group recognises the consideration received for construction
contracts as an intangible asset to the extent that it is entitled to pass on to
users the cost of access to or use of the public service, or it has no unconditional
contractual right to receive cash or another financial asset. Where it does have
an unconditional right to receive cash or another financial asset from or at the
direction of the grantor, and the grantor has little, if any, discretion to avoid
payment, the consideration for the service is recognised as a financial asset
applying a financial model.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Upon initial recognition, an intangible asset received as consideration
for construction or upgrade services rendered is recognised at fair value.
The intangible asset is subsequently recognised at cost, including capitalised
borrowing costs, less accumulated amortisation and accumulated impairment.
Trademark
Amounts recognised under trademark reflect the cost incurred in acquiring
trademarks, less any accumulated amortisation and any impairment. This item is
amortised over a period of 10 years.
32
The contractual obligations assumed by the Group to maintain the infrastructure
during the operating period, or to carry out renovation work prior to returning the
infrastructure to the transferor upon expiry of the concession arrangement, are
recognised using the accounting policy described for provisions, to the extent
that such activity does not generate revenue.
Concession arrangements not subject to IFRIC 12 are recognised using general
criteria.
Administrative concessions have a finite useful life and are recognised
at acquisition cost, less accumulated amortisation and any impairment.
Concessions are amortised on a straight-line basis over the concession period,
as detailed in note 7.
Licences and industrial property
Licences have a finite useful life and are recognised at acquisition cost,
less accumulated amortisation and any impairment. Licences are amortised
on a straight-line basis to allocate the cost over their estimated useful lives
of five years.
Industrial property is initially measured at cost of acquisition or production and is
subsequently carried at cost less accumulated amortisation and any impairment.
These assets are amortised over their useful lives of five years.
Development expenses
Development expenses directly attributable to the design and execution of tests for
new or improved computer programs that are identifiable, unique and likely to be
controlled by the Group are recognised as intangible assets when it is probable that
the project will be successful, based on its technical and commercial feasibility,
and the associated costs can be estimated reliably. Costs that do not meet these
criteria are charged as expenses when incurred. Development expenses are
capitalised and amortised, from the date the associated asset comes into service,
on a straight-line basis over a period of no more than five years. Computer software
maintenance costs are charged as expenses when incurred.
Computer software
This item includes computer software licences acquired, which are capitalised
on the basis of the costs incurred to acquire and bring the specific software to
use. Computer software must be amortised on a straight-line basis over a period
of three to five years from the date on which each program comes into use.
Computer software maintenance costs are charged as expenses when incurred.
Goodwill
Goodwill is determined using the same criteria as for business combinations.
Goodwill is not amortised but is tested for impairment annually or more
frequently where events or circumstances indicate that an asset may be
impaired. After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. Internally generated goodwill is not recognised
as an asset.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Other intangible assets
This item primarily reflects the right to regulated tariffs arising from the business
combination, specifically the right to receive revenue in perpetuity, as well as
the purchase price allocation attributable to customers acquired in business
combinations (see note 6, “Business Combinations”). These assets are initially
measured at fair value.
The right to regulated tariffs has an indefinite useful life and is tested for
impairment on an annual basis.
The customer portfolio is amortised on a straight-line basis over the estimated
period during which the customers are expected to be retained, which in this
case is deemed to be 20 months.
Intangible assets under development
Administrative concessions at the construction stage are recognised as intangible
assets under development and measured in line with the amount to be disbursed
until completion of the construction works, in accordance with IFRIC 12.
C) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment primarily comprise technical electricity and
telecommunications facilities and are measured at cost of production or
acquisition, as appropriate, less accumulated depreciation and impairment.
Property, plant and equipment acquired in a business combination are initially
recognised at fair value.
This cost includes the following items, where applicable:
∫ Borrowing costs directly related to property, plant and equipment under
construction accrued on external financing solely during the construction
period. Nevertheless, capitalisation of borrowing costs is suspended when active
development is interrupted for extended periods, except where a temporary
delay is a necessary part of the process of getting an asset ready for its
intended use.
33
∫ Operating expenses directly related to property, plant and equipment under
construction for projects executed under the supervision and management
of Group companies.
∫ The initial estimate of the costs of decommissioning and retiring items of
property, plant and equipment.
Assets under construction (works underway) are capitalised as work in progress.
Work in progress is transferred to property, plant and equipment in use once
these items come into service and provided that the assets are in working
condition. Property, plant and equipment under construction are not depreciated.
After initial recognition, items of property, plant and equipment are measured
on a cost basis, and recognised at cost less accumulated depreciation and any
accumulated impairment.
Enlargement or improvement expenses which lead to an increase in productivity
or capacity and lengthen the useful life of the assets are stated as an increase
in the carrying amount of the asset.
Repair and maintenance costs on property, plant and equipment that do not
increase productivity or capacity and which do not lengthen the useful life of the
assets are charged directly as expenses when incurred.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Depreciation
Property, plant and equipment are depreciated on a straight-line basis over
the estimated useful life of the assets, which is the period during which the
assets are expected to be used, and in any case applying the following ranges
of depreciation rates:
Buildings
Technical electricity facilities
Technical telecommunications facilities (fibre optics)
Annual depreciation rate
2 % - 10 %
2 % - 8.5 %
5 % - 12.5 %
Technical telecommunications facilities (satellite)
As per depreciation schedule
Other installations, machinery, equipment,
furniture and other items
4 % - 33 %
programmes were upheld, these facilities may have a longer useful life than
that initially determined, ensuring security of operations in accordance with
legal requirements. Consequently, depreciation and amortisation in the
consolidated income statement at December 2020 included the impact of this
change in estimate from 1 January 2020 onwards, which entailed a reduction of
approximately Euros 50 million in the depreciation charge at the 2020 reporting
date. The average remaining useful life of these assets was 14 years at that point
(see note 8).
34
Impairment
When the carrying amount of assets exceeds their estimated recoverable
amount, it is immediately written down to the recoverable amount. Recoverable
amount is understood to be the higher of:
∫ Fair value less costs to sell.
Most undepreciated items of property, plant and equipment are depreciated
at a rate of 2.5 %. The depreciation charge for each period is recognised in profit
or loss.
∫ Value in use, i.e. the present value of the estimated future cash flows from
continued use of the asset and disposal thereof.
The residual values and useful lives of assets are reviewed at least annually and
adjusted, if necessary, to reflect actual circumstances. Thus, in 2021 the Group
decided to re-estimate prospectively as of 1 January 2021 the useful life of its
fleet of satellite assets, except for the Hispasat 55W-1, Hispasat 74W-1 and
Amazonas 2 satellites, which continue to have a useful life of between 13 and 15
years, and adjusted annual depreciation to a useful life of 16.5 years based on the
technical analyses performed. The impact of this change in estimate is a Euros
16 million reduction in the depreciation charge (see note 8).
The Group performs complementary analyses of these indicators in view
of the substantial changes to the remuneration regime applicable to electricity
transmission assets in Spain.
In 2020 the Group recognised an impairment loss in respect of the assets
allocated to the traditional satellite business (Legacy) CGU. This resulted in a
Euros 12 million reduction in the depreciation charge for those assets in 2021
(see note 8).
In 2020 the Company conducted a study on the useful life of transmission assets
that came into service before 1998, in the light of the modified remuneration
model. This study was based on internal and external sources and demonstrated
that, if certain operating conditions and appropriate operating and maintenance
The Group measures and determines impairment to be recognised or reversed
in respect of the value of its cash-generating units (CGUs) based on the criteria
in section h) of this note.
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Other aspects
Government grants and similar subsidies received in relation to the acquisition
of these assets are recognised as deferred income and taken to the income
statement over the useful lives of the assets.
Property, plant and equipment are derecognised when retired; or when no
future economic benefits are expected from their use or disposal. Gains or
losses on disposal of an item are calculated based on the difference between
any net proceeds from selling the asset and its carrying amount (initial cost less
depreciation and impairment). The gains or losses are taken to profit or loss in
the year when the item is derecognised. These gains and losses are not included
within results from ordinary activities.
D) INVESTMENT PROPERTY
The Group companies measure their investment property at cost of acquisition.
When the carrying amount of these assets exceeds their estimated recoverable
amount, it must be written down immediately. The market value of the Group's
investment property is disclosed in note 10 to the consolidated annual accounts.
Investment property, except land, is depreciated on a straight-line basis over
the estimated useful life, which is the period during which the companies expect
to use the assets. Investment property is depreciated at a rate of 2 %.
E) LEASES
As a result of applying IFRS 16, the Group assesses at the inception of a contract
whether that contract contains a lease. A contract is or contains a lease if it
conveys the right to control the use of an identified asset for a period of time in
exchange for consideration. The period of time during which the Group uses an
asset includes consecutive and non-consecutive periods of time. The Group only
reassesses the terms and conditions when the contract is modified.
Lessee
In contracts that contain one or more lease components or non-lease
components, the Group assigns the consideration of the contract to each lease
component in accordance with the independent sale price of the lease component
and the aggregate individual price of the non-lease components.
35
Payments made by the Group that do not constitute a transfer of goods or
services thereto by the lessor, do not constitute a separate lease component,
but form part of the total consideration of the contract.
At the commencement date of the lease the Group recognises a right-of-use
asset and a lease liability. The right-of-use asset comprises the amount of
the lease liability; any lease payments made at or before the commencement
date, less incentives received; initial direct costs incurred; and an estimate
of dismantling or restoration costs to be incurred, pursuant to the criteria for
provisions.
The Group measures the lease liability at the present value of the lease payments
that are not paid at the commencement date. The Group discounts lease
payments at the appropriate incremental borrowing rate, unless the implicit
interest rate of the lessor can be determined reliably.
Outstanding lease payments comprise fixed payments, less any incentive
receivable, variable payments that depend on an index or rate, initially measured
using the index or rate as at the commencement date, amounts expected to
be payable by the lessee under residual value guarantees, the exercise price of
purchase options if the lessee is reasonably certain to exercise that option, and
payments of penalties for terminating the lease, providing the lease term reflects
the lessee exercising the option to terminate the lease.
The Group measures right-of-use assets at cost, less accumulated depreciation
and accumulated impairment losses, adjusted for any remeasurement of the lease
liability.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents If the contract transfers ownership of the underlying asset to the Group by the end
of the lease term or if the cost of the right-of-use asset reflects that the Group
will exercise a purchase option, the Group depreciates the right-of-use asset from
the commencement date to the end of the useful life of the underlying asset.
Otherwise, the Group depreciates the right-of-use asset from the commencement
date to the earlier of the end of the useful life of the right-of-use asset or the end
of the lease term.
The Group applies the impairment criteria for non-current assets described in
section 4.c) to the right-of-use asset.
The Group measures the lease liability by increasing the carrying amount
to reflect interest on the lease liability, reducing the carrying amount to reflect
the lease payments made and remeasuring the carrying amount to reflect any
reassessment or lease modifications or to reflect revised in-substance fixed lease
payments.
The Group recognises variable payments not included in the initial measurement
of the lease liability in profit or loss in the period in which the event or condition
that triggers those payments occurs.
The Group recognises remeasurements of the lease liability as an adjustment
to the right-of-use asset, until the latter is reduced to zero, after which, it is taken
to profit or loss.
The Group remeasures the lease liability by discounting the lease payments at
a revised discount rate, if there has been a change in the lease term or a change
in the assessment of an option to purchase the underlying asset.
The Group remeasures the lease liability if there is a change in the amounts
expected to be payable under a residual value guarantee or a change in the index
or rate used to determine those payments, including a change to reflect changes
in market rental rates following a market rent review.
The Group accounts for a lease modification as a separate lease if the
modification increases the scope of the lease by adding the right to use one
or more underlying assets; and the consideration for the lease increases by an
amount commensurate with the stand-alone price for the increase in scope
and any appropriate adjustments to that stand-alone price to reflect the
circumstances of the particular contract.
36
For a lease modification that is not accounted for as a separate lease, at the
effective date of the lease modification the Group allocates the consideration in
the modified contract applying the criteria described above, determines the lease
term of the modified lease and remeasures the lease liability by discounting the
revised lease payments using a revised discount rate. The Group decreases the
carrying amount of the right-of-use asset to reflect the partial or full termination
of the lease for lease modifications that decrease the scope of the lease. The
Group recognises in profit or loss any gain or loss relating to the partial or full
termination of the lease. The Group adjusts the carrying amount of the right-of-
use asset for all other lease modifications.
The Group has elected not to apply the accounting policies indicated for short-
term leases and leases in which the value of the underlying asset is less than
Euros 5,000.
In the statement of cash flows, payments associated with leases that fall within
the scope of IFRS 16, included in the above-mentioned policy, are recognised at
the amount of the principal under Other payments for financing activities, within
Cash flows from financing activities. Interest payments associated with the lease
are classified under Interest paid and other, within Cash flows from operating
activities.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Lessor
The Group recognises operating lease income on a straight-line basis over the
lease term, unless another systematic basis is more representative of the pattern
in which benefits deriving from the leased asset are diminished.
F) FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Initial recognition and measurement
Financial instruments are classified on initial recognition as a financial asset,
a financial liability or an equity instrument in accordance with the economic
substance of the contractual arrangement and the definitions of a financial asset,
a financial liability and an equity instrument in IAS 32 Financial Instruments:
Presentation.
The Group recognises financial instruments when it becomes party to the
contract or legal transaction, in accordance with the terms set out therein.
A financial asset or financial liability is initially measured at its fair value plus, in
the case of an item not measured at fair value through profit or loss, transaction
costs that are directly attributable to the acquisition or issue of the financial
asset or financial liability. Trade receivables that do not contain a significant
financing component are initially measured at their transaction price.
Classification and subsequent measurement
Financial assets:
Upon initial recognition, a financial asset is classified as measured at amortised
cost, at fair value through other comprehensive income or at fair value through
profit or loss. Assets are classified on the basis of the business model and
contractual terms of the assets.
37
A financial asset shall be measured at amortised cost if both of the following
conditions are met and it is not measured at fair value through profit or loss:
∫ The financial asset is held within a business model whose objective is to hold
financial assets in order to collect contractual cash flows.
∫ The contractual terms of the financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest on the principal amount
outstanding.
A financial asset shall be measured at fair value through other comprehensive
income if both of the following conditions are met and it is not measured at fair
value through profit or loss:
∫ The financial asset is held within a business model whose objective is achieved
by both collecting contractual cash flows and selling financial assets.
∫ The contractual terms of the financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest on the principal amount
outstanding.
Upon initial recognition of an investment in an equity instrument that is not
held for trading, the Group may make an irrevocable election to present in other
comprehensive income changes in the fair value. This election is made on an
instrument-by-instrument basis.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents All financial assets not classified as measured at amortised cost or at fair value
through other comprehensive income as described above are measured at fair
value through profit or loss.
Financial assets shall not be reclassified after initial recognition, unless the Group
changes its business model for managing financial assets.
The Group classifies financial assets, excluding equity-accounted investments,
into the following categories:
∫ Amortised cost: financial assets classified under this category are subsequently
measured at amortised cost using the effective interest method. Amortised cost
is reduced for impairment losses. Interest income, exchange gains and losses
and impairment are recognised in profit or loss. Any gains or losses arising on
derecognition are recognised directly in the consolidated income statement.
∫ Fair value through other comprehensive income: these assets are subsequently
measured at fair value. The resulting net gain or loss is recognised in other
comprehensive income. Cumulative gains or losses in other comprehensive
income are not reclassified to profit or loss upon derecognition. In the case
of equity instruments classified in this category, gains or losses arising from
changes in fair value at the reporting date are recognised directly in other
comprehensive income and are never reclassified to profit or loss.
Dividends from equity investments classified as at fair value through other
comprehensive income are recognised in the consolidated income statement
when the Company's right to receive payment is established.
∫ Fair value through profit or loss: these assets are subsequently measured
at fair value. Net gains or losses, including any interest or dividend income,
are recognised in profit or loss.
Financial liabilities:
Financial liabilities, which include loans, payment obligations and similar
commitments, are initially recognised at fair value less any transaction costs
incurred. Such debt is subsequently measured at amortised cost, using the
effective interest method, except in the case of transactions for which hedges
have been arranged (see section n).
38
Financial debt is classified under current liabilities unless the debt falls due
more than 12 months after the reporting date, in which case it is classified as
non-current.
Derecognition
Financial assets:
The Group derecognises a financial asset when the contractual rights to receive
cash flows from the asset expire or are transferred in a transaction in which
it transfers substantially all the risks and rewards of ownership of the financial
asset or it neither transfers nor retains substantially all the risks and rewards
of ownership and it does not retain control of the transferred assets.
Financial liabilities:
The Group derecognises a financial liability when the obligation in the contract
is discharged or cancelled or expires. The Group also derecognises a financial
liability when the terms are modified and the cash flows of the modified liability
are substantially different. In this case, a new financial liability is recognised at
fair value, based on the new terms. Upon derecognition of a financial liability, the
difference between the carrying amount of a financial liability extinguished and
the consideration paid, including any non-cash assets transferred or liabilities
assumed, is recognised in profit or loss.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
G) INVENTORIES
Inventories of materials and spare parts are measured at cost of acquisition,
which is calculated as the lower of weighted average price and net realisable
value.
The cost of acquisition comprises the purchase price, import duties and other
non-recoverable taxes, as well as transport, handling and other costs directly
attributable to the acquisition of the materials or services. Trade discounts,
rebates and other similar items are deducted in determining the cost of
acquisition.
The cost of any financing used to acquire the inventories can be recognised
as an increase in the cost of the inventories until the assets are substantially
ready for use or sale.
The Group assesses the net realisable value of inventories at the end of each
reporting period, recognising impairment in the consolidated income statement
when the cost exceeds market value or when it is uncertain whether the
inventories will be used. When the circumstances that caused inventories to be
written down no longer exist or when there is clear evidence of an increase in net
realisable value because of changed economic circumstances, the previously
recognised impairment is reversed and recognised as income.
H) IMPAIRMENT
Financial assets
Impairment is calculated by applying the general approach used to calculate
expected credit losses on financial assets; except trade receivables, for which the
simplified approach set out in IFRS 9 is used, whereby impairment is measured at
an amount equal to the lifetime expected credit losses of the asset.
39
In order to determine whether there has been a significant increase in credit
risk of a financial asset since its initial recognition, or to estimate the lifetime
expected credit losses of the asset, the Group considers all reasonable and
supportable information that is relevant and available without undue cost
and effort. This includes quantitative and qualitative information based on
the experience of the Group or of other entities of historical credit losses, and
observable market information about the credit risk of the specific financial
instrument or similar financial instruments. The Group assumes that the credit
risk of a financial asset has increased significantly if it is more than 30 days past
due. The Group also considers that a financial asset is in default when it is more
than 90 days past due, unless there is reasonable and supported information that
demonstrates its recoverability.
The Group considers that a debt instrument presents a low level of risk when
its credit rating is at least “investment grade” at one of the prestigious rating
agencies. The maximum period over which expected credit losses are measured
is the maximum contractual period over which the Group is exposed to credit risk.
In general terms, IFRS 9 defines expected credit losses as the weighted average
of credit losses with the respective risks of a default occurring as the weights.
Credit losses are measured as the difference between all contractual cash flows
that are due to an entity in accordance with the contract and all the cash flows
that the entity expects to receive (i.e. all cash shortfalls), discounted at the
original effective interest rate.
In broad terms, expected loss is calculated as follows:
EAD (Exposure at Default) x PD (Probability of default) x LGD (Loss Given
Default) x DF (Discount factor).
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Where EAD is the exposure to risk and is measured based on the accounting
balances (outstanding balances receivable in the form of a cash flow or other
financial asset) less any prepayments and any bank or other guarantees provided
by the customer. PD is the probability of default. LGD is the loss that would be
incurred in the event of debtor default and is calculated as (1 – recovery rate).
The recovery rate depends on the specific guarantees of the receivable or loan.
DF is the time value of money.
Following a hierarchy in accordance with IFRS 13, i.e. from most observable
inputs to least observable inputs, the following methods are used:
∫ If the debtor has quoted credit default swaps (CDS), the probability of default
is generally obtained from the CDS, as this is the most objective market credit
measure of the probability of default of a company at a specific point in time.
∫ If the debtor does not have a quoted CDS, the company’s rating from each
credit rating agency that has issued a report is selected and used to calculate
the probability of default.
∫ If the debtor does not have a rating, a theoretical rating can be calculated
by comparing the debtor's ratios with those of other companies that do have
a rating.
Provisions for impairment of financial assets measured at amortised cost are
deducted from the gross carrying amount of these assets.
Impairment related to trade and other receivables, including, where appropriate,
contract assets under IFRS 15, is presented in the consolidated income
statement.
Non-financial assets
The Group companies analyse the recoverability of their assets at each reporting
date and whenever events or changes in circumstances indicate that the carrying
amount might not be recoverable. Assets with indefinite useful lives are tested
for impairment at least annually and the remaining assets are tested whenever
there are indications of impairment.
40
Impairment is deemed to exist when the carrying amount of an asset exceeds its
recoverable amount. Impairment losses are recognised in the income statement.
An impairment loss is the difference between the carrying amount of an asset
and its recoverable amount. The recoverable amount of the assets is the higher
of their fair value less costs of disposal and their value in use. Value in use is
calculated on the basis of expected future cash flows.
Impairment losses recognised for an asset in prior years are reversed when
a change arises in the estimate of its recoverable amount, increasing the value
of the asset with a credit to results up to the limit of the carrying amount that the
asset would have had if no impairment loss had been recognised. Impairment
losses on goodwill are not reversed in subsequent years.
Impairment is calculated for individual assets. Where the recoverable amount
of an individual asset cannot be determined, the recoverable amount of the
cash-generating unit (CGU) to which that asset belongs is calculated.
The Group has cash-generating units (CGUs) that group together items of
property, plant and equipment and intangible assets. CGUs are the smallest
identifiable group of assets that generate cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. The CGUs
identified in property, plant and equipment and intangible assets are related to
electricity transmission in Spain and Chile, fibre optic telecommunications in
Spain, the satellite business and certain individual assets.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Within the Group’s satellite telecommunications business, a new strategy
was approved at the end of 2020 that brought in a particularly relevant change
as regards the management of that business. In this respect, the assets
of the traditional business (Legacy) continue to be allocated to the Legacy
cash-generating unit (CGU), while investments associated with new business
are grouped in other CGUs, inasmuch as the new satellite assets are unlikely
to be able to be operated in conjunction with those of the traditional (Legacy)
fleet in view of foreseeable differences in their technical characteristics and the
different services they will provide, and because they will also generate inflows
that are separate from those obtained from the traditional business using the
Legacy fleet (see note 5).
The Group tests for impairment when it observes indications, such as
amendments to sector regulations, changes in investment plans, or changes
in business performance, that could bring to light possible impairment losses
on non-financial assets subject to amortisation or depreciation. In order to
calculate impairment, the Group verifies that the recoverable amount of each
cash-generating unit with which the assets are associated, or of individual
assets, exceeds the carrying amount.
Otherwise, an impairment loss is recognised in the consolidated income
statement for the difference between the two, with a charge to impairment
and gains/losses on disposal of fixed assets, up to the limit of the higher of:
(i) its fair value less costs to sell and (ii) its value in use.
I) SHARE CAPITAL, OWN SHARES AND DIVIDENDS
Share capital is represented by ordinary shares. The cost of issuing new
shares, net of taxes, is deducted from equity.
41
Own shares are measured at cost of acquisition and recognised as a reduction
in equity in the consolidated statement of financial position. Any gains or losses
on the purchase, sale, issue or redemption of own shares are recognised directly
in equity.
Interim dividends are recognised as a reduction in equity for the year in which
the dividend is declared, based on the consensus of the board of directors.
Supplementary dividends are not deducted from equity until approved by the
shareholders at their general meeting.
J) GRANTS AND OTHER
Non-repayable government capital grants and similar subsidies awarded by
different official bodies to finance the Group's fixed assets are recognised once
the corresponding investments have been made.
The Group recognises these grants under non-financial and other capital grants
each year during the period in which depreciation is charged on the assets for
which the grants were received. Wherever the grant is awarded on the basis of
product units sold and is part of the selling price of the goods and services, the
amount is included in the revenue item to which it relates.
Government assistance provided in the form of income tax deductions and
considered as government capital grants is recognised applying the general
criteria described in the preceding sections.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents K) CONTRACT LIABILITIES
Non-current contract liabilities, generally arising from long-term contracts
or commitments, are recognised in the appropriate revenue item over the term
of the contract or commitment.
L) PROVISIONS
Employee benefits
Pension obligations
The Group has defined contribution plans, whereby the benefit receivable
by an employee upon retirement – usually based on one or more factors such
as age, fund returns, years of service or remuneration – is determined by the
contributions made. A defined contribution plan is a pension plan under which
the Group pays fixed contributions into a separate entity, and will have no legal
or constructive obligation to pay further contributions if the fund does not hold
sufficient assets to pay all employee benefits relating to employee service in
the current and prior periods. The contributions are recognised under employee
benefits when accrued.
Other long-term employee benefits
Other long-term employee benefits include defined benefit plans for benefits
other than pensions (such as health insurance) for certain serving and retired
personnel of the Group. The expected costs of these benefits are recognised
under provisions over the working life of the employees. These obligations
are measured each year by independent qualified actuaries. Changes in actuarial
assumptions are recognised, net of taxes, in reserves under equity in the year
in which they arise, while the past service cost is recorded in the consolidated
income statement.
This item also includes deferred remuneration schemes, which are approved
by the competent bodies in each of the Group companies (see note 16).
42
In 2015 the Group's Appointments and Remuneration Committee approved
the implementation of a Structural Management Plan (hereinafter the “Plan”)
for certain members of the management team, with the aim of processing,
in an orderly and efficient manner, the replacement and administration of the
management positions covered in the Plan. Upon reaching the age stipulated in
the Plan, the executives included in the Plan will be entitled to receive an amount
equal to a maximum of 3.5 times their annual salary, depending on their category
and annual fixed and variable remuneration at the date of leaving the Group.
Participation in the Plan is subject to meeting certain conditions, and the Plan
may be modified or withdrawn by the Group under certain circumstances,
including a prolonged decline in the Group's results (see note 16).
Other provisions
The Group makes provision for present obligations (legal or constructive) arising
as a result of a past event whenever it is probable that an outflow of resources
will be required to settle that obligation and a reliable estimate can be made of
the amount of the obligation. Provision is made when the liability or obligation is
recognised. No provision is made for proceedings with a probability of occurrence
of less than 50% as it is considered that their future resolution will be favourable.
Provisions are measured at the present value of the estimated expenditure
required to settle the obligation using a pre-tax risk-free discount rate that
reflects assessments of the time value of money. The increase in the provision due
to the passage of time is recognised as a finance cost in the consolidated income
statement.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents M) TRANSACTIONS IN CURRENCY OTHER THAN THE EURO
Foreign currency transactions
Foreign currency transactions are translated to the respective functional currency
of the Group companies at the transaction date. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are translated to the
functional currency using the closing exchange rate. Exchange gains and losses
arising during the year due to balances being translated at the exchange rate
at the transaction date rather than the exchange rate prevailing on the date of
collection or payment are recognised as income or expenses in the consolidated
income statement.
Fixed income securities and balances receivable and payable in currencies other
than the Euro at 31 December each year are translated at the closing exchange
rate. Any exchange differences arising are recognised under exchange gains/
losses in consolidated profit or loss.
Transactions conducted in foreign currencies for which the Group has chosen
to mitigate currency risk by arranging financial derivatives or other hedging
instruments are recorded using the criteria for derivative financial instruments
and hedging transactions.
Foreign operations
The assets and liabilities of foreign operations are translated to Euros
using the exchange rates at the reporting date. The income and expenses
of foreign operations are translated to Euros using the exchange rates at the
transaction dates.
Translation differences are recognised in other comprehensive income and
presented within equity.
N) DERIVATIVE FINANCIAL INSTRUMENTS
AND HEDGING TRANSACTIONS
The Group holds derivative financial instruments to cover its exposure to currency
risk and interest rate risk. The Group designates certain derivatives as hedging
instruments for covering variability in the cash flows associated with highly
probable forecast transactions as a result of fluctuations in interest rates and
exchange rates.
43
At the inception of the hedge the Group formally designates and documents
the hedging relationships and the objective and strategy for undertaking
the hedges.
Hedge accounting is only applicable when the hedge is expected to be highly
effective at the inception of the hedge and in subsequent years in achieving
offsetting changes in fair value or cash flows attributable to the hedged risk,
throughout the period for which the hedge was designated.
Derivative financial instruments are initially recognised in the consolidated
statement of financial position at their fair value on the date the arrangement
is executed (acquisition cost) and this fair value is subsequently adjusted as
necessary. The criterion used to recognise the resulting gain or loss depends
on whether the derivative is designated as a hedging instrument and, if so,
the nature of the hedged item.
When a hedging instrument expires or is sold, or when it no longer qualifies
for hedge accounting, any cumulative gain or loss recorded in equity at that time
remains in equity, and is immediately reclassified to the consolidated income
statement as and when changes in cash flows of the hedged item occur. Any
cumulative gain or loss is also reclassified from equity to the consolidated income
statement if the forecast transaction is no longer expected to occur.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The Group recognises the portion of the gain or loss on the measurement at fair
value of a hedging instrument that is determined to be an effective hedge in other
comprehensive income. The ineffective portion and the specific component of the
gain or loss or cash flows on the hedging instrument, excluding the measurement
of the hedge effectiveness, are recognised with a debit or credit to finance costs
or finance income.
The separate component of other comprehensive income associated with
the hedged item is adjusted to the lesser of the cumulative gain or loss on the
hedging instrument from inception of the hedge and the cumulative change in fair
value or present value of the expected future cash flows on the hedged item from
inception of the hedge. However, if the Group expects that all or a portion of a loss
recognised in other comprehensive income will not be recovered in one or more
future periods, it reclassifies into finance income or finance costs the amount
that is not expected to be recovered.
Details of the fair value of the hedging derivatives used are disclosed in note 20.
Details of changes in equity are provided in note 14.
∫ Level 1: measurement is based on quoted prices for identical instruments
in active markets.
44
∫ Level 2: measurement is based on inputs that are observable for the asset
or liability.
∫ Level 3: measurement is based on inputs derived from unobservable market
data.
If there is no quoted price in an active market, the Group uses valuation techniques
that maximise the use of relevant observable inputs and minimise the use of
unobservable inputs. Specifically, the Group calculates the fair value of derivative
financial instruments that are not traded on organised markets using valuation
techniques, including recent arm’s length transactions between knowledgeable,
willing parties, reference to other instruments that are substantially the same,
discounted cash flow analyses using the market interest rates and exchange rates
in force at the reporting date, and option pricing models enhanced to reflect the
particular circumstances of the issuer.
O) FAIR VALUE MEASUREMENT
Fair value is the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the
measurement date, whether that price is directly observable or estimated using
another valuation technique.
P) TRADE PAYABLES
Trade payables are initially recognised at fair value and subsequently measured
at amortised cost using the effective interest method. Trade payables falling due
in less than one year that have no contractual interest rate and are expected
to be settled in the short term are measured at their nominal amount.
The fair value measurements of financial assets and financial liabilities are
classified on the basis of a hierarchy that reflects the relevance of the inputs
used in measuring the fair value. The hierarchy comprises three levels:
Q) INCOME AND EXPENSES
Revenue is measured at the fair value of the consideration received or receivable.
Revenue is recognised according to the pattern of transfer of goods and services
to the customer at an amount that reflects the consideration to which the entity
expects to be entitled in exchange for transferring these goods or services.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The majority of the Group's revenues are regulated revenues from transmission
and system operation activities in Spain (see notes 3, 24 and 28). The Group
subsidiary Red Eléctrica de España, S.A.U. (REE) has been designated by the
Spanish electricity sector regulator (currently the Ministry for the Ecological
Transition and Demographic Challenge – MITERD) to carry out the electricity
transmission and system operation activities on an exclusive basis. Both of these
activities are regulated by Electricity Industry Law 24/2013. This legislation,
which was subsequently enacted by Royal Decree 1047/2013 and by the CNMC
Circulars approved in 2019, sets on an annual basis the amount of remuneration
to be received for both activities in order to cover the services that REE renders
to consumers and other electricity sector agents on an uninterrupted basis
throughout the year.
The obligation arising from rendering the electricity transmission service is
considered to be a single performance obligation, and the total price is therefore
allocated in full to that obligation. Similarly, the legal obligations included within
the obligation of the electricity system operator are understood to comprise
a single performance obligation, identified as “providing the electricity system
operation service”. As a result, revenue from the performance obligations
of transmission and system operation services is recognised over time,
on a straight-line basis, for each year.
Revenue associated with the telecommunications business essentially derives
from the following:
∫ contracts to provide satellite capacity lease services to different customers in
the telecommunications sector, which are considered to be a single performance
obligation for which the revenue is recognised on a straight-line basis over time,
as the service is rendered to the customer.
∫ contracts whereby the rights to use the fibre optic backbone network and cables
are granted to different customers in the telecommunications sector, as well
as services rendered to those customers, which are considered to be a single
performance obligation. Revenue from these contracts is recognised over time,
as the service is rendered to the customer.
45
Initial estimates of revenue are reviewed where circumstances so require.
These reviews may result in an increase or reduction in revenue, which would be
recognised in profit or loss for the period in which the circumstances giving rise
to the review become known to and are agreed upon by the parties.
Interest income is recognised using the effective interest method.
Dividends are recognised when the right to receive payment is established.
R) TAXATION
The income tax expense or tax income for the year comprises current tax and
deferred tax. Current and deferred taxes are recognised as income or an expense
and included in profit or loss for the year, except to the extent that the tax arises
from a transaction or event that is recognised in the same year, directly in equity,
or from a business combination.
Current tax is the estimated tax payable for the year using the enacted tax rates
applicable to the current year and to any adjustment to tax payable in respect
of previous years.
Tax credits and deductions arising from economic events occurring in the year
are deducted from the income tax expense, unless there are doubts as to whether
they can be realised.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Deferred taxes and the income tax expense are calculated and recognised using
the liability method, based on temporary differences arising between the balances
recognised in the financial information and those used for tax purposes. This
method entails calculating deferred tax assets and liabilities on the basis of the
differences between the carrying amount of the assets and liabilities and their
tax base, applying the tax rates that are objectively expected to apply to the years
when the assets are realised, and the liabilities settled.
∫ Temporary differences arising from the elimination of profits and losses
on transactions between tax group companies are recognised by the company
that generates the profit or loss, using the applicable tax rate.
46
∫ The Parent of the Group records the total consolidated income tax payable
(recoverable) with a debit (credit) to receivables (payables) from/to Group
companies and associates.
Deferred tax assets are recognised provided that it is probable that sufficient
taxable profits will be available against which the deductible temporary differences
can be utilised.
∫ The amount of the debt (credit) relating to the subsidiaries is recognised with
a credit (debit) to payables (receivables) to/from Group companies and
associates.
Deferred tax assets and liabilities are recognised in respect of the temporary
differences that arise from investments in subsidiaries and associates, except
where the Group is able to control the timing of the reversal of the temporary
differences and it is probable that they will reverse in the foreseeable future.
In addition to the factors to be considered for individual taxation, set out
previously, the following factors are taken into account when determining the
accrued income tax expense for the companies forming the consolidated tax
group:
∫ Temporary and permanent differences arising from the elimination of profits
and losses on transactions between Group companies, derived from the process
of determining consolidated taxable income.
∫ Deductions and credits corresponding to each company forming the
consolidated tax group. For these purposes, deductions and credits are allocated
to the company that carried out the activity or generated the profit necessary
to obtain the right to the deduction or tax credit.
If the Group considers that it is not probable that the taxation authorities
will accept an uncertain tax treatment or a group of uncertain tax treatments,
this uncertainty is taken into account when determining taxable income, tax
bases, tax loss carryforwards, deductions or tax rates. Tax assets or tax liabilities
calculated using these criteria that exceed the amount presented in the self-
assessments are presented in the consolidated statement of financial position.
Changes in events or circumstances relating to tax uncertainties are recognised
as a change in accounting estimates.
The Group only offsets deferred tax assets and liabilities if it has a legally
enforceable right to offset the recognised amounts, and they relate to income
taxes levied by the same taxation authority on the same taxable entity or on
different taxable entities which intend either to settle current tax liabilities
and assets on a net basis, or to realise the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of deferred
tax liabilities or assets are expected to be settled or recovered.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents S) EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net profit for the year
attributable to the Parent by the weighted average number of ordinary shares
outstanding during the year, excluding own shares.
According to the consolidated annual accounts of the Red Eléctrica Group at
31 December 2021 and 2020, basic earnings per share are the same as diluted
earnings per share, as no transactions that could have resulted in a change
in those figures were conducted during those years.
T) INSURANCE
The Red Eléctrica Group companies have taken out various insurance policies
to cover the risks to which the companies are exposed through their activities.
These risks mainly comprise damage that could be caused to the Group
companies' facilities and possible claims that might be lodged by third parties
due to the companies’ activities. Insurance premium expenses and income
are recognised in the consolidated income statement on an accrual’s basis.
Payouts from insurance companies in respect of claims are recognised
in the consolidated income statement when they are receivable.
U) ENVIRONMENT
Costs derived from business activities intended to protect and improve the
environment are charged as expenses in the year in which they are incurred.
Property, plant and equipment acquired to minimise environmental impact
and to protect and improve the environment are recognised as an increase
in property, plant and equipment.
V) SHARE-BASED PAYMENTS
The Group has implemented share purchase schemes whereby employees
can opt to receive part of their annual remuneration in the form of shares in the
Parent. This remuneration is measured based on the closing quotation of these
shares at the delivery date. The costs incurred on such schemes are recognised
under personnel expenses in the consolidated income statement. All shares
delivered as payment are taken from the own shares held by the Parent.
47
W) CONTINGENT ASSETS AND LIABILITIES
Contingent assets are not recognised in financial statements since this
could result in the recognition of income that may never be realised, except in
business combinations to the extent that they represent indemnification assets.
Contingent assets are assessed continually to ensure that developments are
appropriately reflected in the financial statements. If it has become virtually
certain that an inflow of economic benefits will arise, the asset and the related
income are recognised in the financial statements of the period in which the
change occurs.
Contingent liabilities are not recognised in the financial statements, except
in business combinations to the extent that they represent present obligations
arising from past events for which the fair value can be reliably measured.
Contingent liabilities are assessed continually and if it becomes probable that
an outflow of future economic benefits will be required for an item previously
dealt with as a contingent liability, a provision is recognised in the financial
statements of the period in which the change in probability occurs.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents 5
Co n si d e ratio ns Regardi ng
COVI D-19 in t he Cons olida ted
A n n ua l Ac coun ts
The onset of Coronavirus (COVID-19) in 2020 and its subsequent declaration
as a pandemic by the World Health Organization (WHO) had a major impact
around the world in 2020 and continued to do so in 2021 due to the emergence
of new variants. The recovery of global economic activity back to pre-pandemic
levels is largely dependent on the vaccination rates of the population in order
to reach herd immunity and the effectiveness of vaccination against new variants
of the virus.
All operation and maintenance of the facilities was conducted normally in 2021,
as was work to build new infrastructure. No incidents occurred during the year
that posed a risk as regards meeting electricity demand and keeping the system
up and running correctly; neither were any transmission network incidents
recorded that in any way compromised the operation of the Spanish electricity
system.
Moreover, both the international electricity infrastructure business and the
telecommunications business have been providing essential services with
no incidents arising. As regards international business, in 2021 and 2020 the
availability of facilities remained at its consistently high level and no service
quality incidents were reported.
Within this context, the Red Eléctrica Group has continued to apply the guidelines
adapted to the recommendations issued by the different pertinent authorities
in Spain as well as in each market of operations, with the priority of preserving
the health and safety of all of its employees, customers and suppliers.
With this in mind, these flexibility and remote working measures remain
in place for all staff, although they have varied in line with the progression
of the pandemic and the recommendations of the health authorities in each
market of operations, thus guaranteeing security of supply for electricity and
telecommunications at any given time. The measures implemented have been
aimed at ensuring the health and safety of employees, customers and suppliers.
48
From a financial and economic perspective, the Group’s financial position
remains robust, enabling it to continue to address these circumstances, and
the measures aimed at bolstering its liquidity continue to be applied. In 2021 the
Group carried out a bond issue for an amount of Euros 600 million (two issues
in 2020 for a total amount of Euros 1,100 million), and arranged loan agreements
amounting to Euros 610 million and US Dollars 30 million. Following these
transactions, and having already settled due debts and the payments arising
from the Group’s activity, the Group’s liquidity position at December 2021 stands
at Euros 3,427 million, specifically Euros 1,574 million in available cash and
Euros 1,853 million in undrawn credit facilities. This position ensures the Group’s
ability to meet its operating cash flow requirements and to honour forecast debt
maturities up to 2025.
The situation brought on by COVID-19 did not have a significant impact on
the continuity of the Group’s operations in 2021 nor on its financial-economic
indicators. The forecasts laid out across all the Group’s business units at the
beginning of the year, which are aligned with the Strategic Plan, have been met
at 31 December 2021.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Over the course of 2021, the Group has been continuously monitoring the
estimated possible impact that the situation arising from management of
the COVID-19 fall-out could have on its profits and its investments in projects
underway. The main conclusions drawn from the analyses performed and from
the impact assessment are as follows:
∫ Most of the sectors in which the Group has its operations in Spain and Latin
America are regulated sectors. As such, and despite lingering uncertainties
as to the impact of the pandemic on the economies of the different countries
in which the Group operates, it has not had an effect on revenue from the
Group’s regulated activities, which makes up most of the overall revenue. The
pandemic did have an impact on the revenue of the telecommunications activity,
primarily in 2020.
∫ The construction of new electricity transmission and telecommunications
infrastructure was not significantly impacted by the pandemic situation in 2021.
However, these activities were impacted in 2020, especially at the beginning
of the pandemic, by temporary delays due to the total or partial stoppage
of economic activities imposed by the authorities. The time lost through these
delays was almost entirely recovered in the closing months of the year.
∫ At no point in 2021 or 2020 did the Group stop providing the essential services
that are its remit. Therefore, the Group’s operations were not interrupted to
any great extent, employment was maintained, and it has not had to resort
to furlough measures (see note 16).
∫ Likewise, considering the Group’s liquidity position, it was not necessary to
resort to the financial aid offered by the different authorities in 2021 or 2020
(see note 18). The financial covenants written into the contracts signed were also
met at all times (see note 14).
∫ Neither were any lease agreements arranged within the scope of IFRS 16
amended in 2021 or 2020 (see note 9).
49
∫ The Group incurred extraordinary expenditure in 2021 and 2020 to purchase
personal protective equipment and for additional cleaning of workplaces.
Contributions were also made to the healthcare authorities and other
organisations in 2020, essentially for the purchase of healthcare supplies to
fight the pandemic. These expenses amount to approximately Euros 0.6 million
in 2021 (Euros 5 million in 2020) (see note 24).
∫ The satellite telecommunications activity was affected in 2020 both by the
duration of the crisis, which proved far more protracted and severe than could
have initially been foreseen, and the situation in the Latin American markets
where it operates. This situation was exacerbated in the second half of the year
particularly. There were price renegotiations, contract rescissions, delays or
cancellations of government projects, whether announced or already awarded
and underway, and certain customers filed for insolvency. This impact was
expected to continue affecting revenue in the coming years. Another factor
that could largely be attributed to the COVID-19 crisis was the deterioration of
exchange rates in terms of both the US Dollar and the Brazilian Real, currencies
in which HISPASAT receives a substantial portion of its revenue.
These factors – price renegotiations, cancellations of contracts and projects,
and the performance of the US Dollar and the Brazilian Real – had a negative
impact of around Euros 20 million on revenue from the Group’s satellite business
in 2020.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
All of these factors prompted HISPASAT to engage in a strategic reflection
process, which culminated in the approval, at the end of 2020, of new
strategies aimed at repositioning HISPASAT as a benchmark operator in the
provision of advanced satellite communications services (new business), while
also endeavouring to protect its traditional activity centred on the operation
of communications satellites and the wholesale lease of spatial capacity,
maximising the useful life of the existing fleet (see note 4.h). On the basis of this
new strategy, a new Strategic Plan for the 2021-2025 period was approved.
In view of this situation and given the indications of impairment, at the
2020 year end the Group tested the assets of the Legacy CGU for impairment,
considering the cash flows obtained under the new Business Plan. As a result
of this exercise and the effects of the pandemic, the Group had to recognise
a provision of approximately Euros 122 million for impairment of the intangible
assets and property, plant and equipment pertaining to the Legacy CGU.
Both the industry context and the main assumptions underpinning this Business
Plan remained largely unchanged in 2021, enabling satisfactory commercial
performance and results for the telecommunications business with respect to
the forecasts laid out in the Business Plan. Trends in exchange rates of the main
currencies in which revenue is received also contributed to this situation.
Consequently, as a result of the analyses performed no additional indications
of impairment have been identified.
50
Notes 7 and 8 detail the analyses performed in 2021 and the assumptions used
to test non-financial assets for impairment in 2020.
The Group’s management and directors will continue to assess the situation
and closely monitor any incidents arising in the infrastructure it manages,
as well as trends in other external factors and the impact such factors could
have on the financial statements.
6
B usiness
Combinations
BUSINESS COMBINATIONS CARRIED OUT IN 2021
Acquisition of a satellite television broadcast business in Peru
On 1 May 2021, through Hispasat Perú S.A.C. (hereinafter Hispasat Peru), a wholly
owned subsidiary of Hispasat, S.A., a series of assets for the management and
transmission of video signals in Latin America were acquired.
The transaction consisted of the transfer of fixed assets and customer
agreements, as well the operational infrastructure required to provide the service
and employees, who will now form part of the Hispasat Peru workforce.
The transaction price totalled Euros 6.7 million (US Dollars 7.7 million), which
was fully paid on 31 December 2021; consequently, no liability is now recognised
in connection with this purchase.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The transaction was considered a business combination, and, at the reporting
date of these consolidated financial statements, the Red Eléctrica Group had
completed the purchase price allocation (PPA), for which purpose an independent
expert was engaged.
The table below summarises the amounts recognised for the assets acquired
and liabilities assumed at the acquisition date:
Thousands of Euros
Intangible assets
- Customer portfolio
Property, plant and equipment
- Technical telecommunications facilities
- Under construction and advances
Total net assets
01/05/2021
3,788
3,788
2,890
1,957
933
6,678
Consolidated revenue and consolidated net profit at 31 December 2021,
contributed since the date of acquisition, amount to Euros 19.1 million and Euros
3.5 million, respectively.
The Group incurred acquisition costs of Euros 0.8 million. These costs were
included under other operating expenses in the consolidated income statement.
51
In addition to the price paid for the assets to manage the above-mentioned video
signal transmission business in Latin America, the sale-purchase agreement
stipulates that the Hispasat Perú, S.A.C. Group, as the buyer, undertakes to
pay the vendor an amount in 2024 and 2025 that is subject to and contingent
on achieving a certain business indicator at 31 December 2023 and 2024,
respectively. At the 2021 year end this indicator is considerably below the level
that would entitle the seller to receive these payments and, consequently,
management of the Hispasat Perú, S.A.C. Group and their business advisors
consider that the risk of this contingency materialising has a probability of
occurrence of less than 50 % and have not therefore recognised any provision
for liabilities in this respect.
BUSINESS COMBINATIONS CARRIED OUT IN 2019
FOR WHICH THE PURCHASE PRICE ALLOCATION
WAS COMPLETED IN 2020
Acquisition of HISPASAT S.A.
On 12 February 2019 Red Eléctrica Corporación, S.A. announced the agreement
reached with Abertis Infraestructuras, S.A. (hereinafter Abertis) for Red Eléctrica
Corporación, through Red Eléctrica Sistemas de Telecomunicaciones, S.A.U.
(hereinafter RESTEL), a wholly owned subsidiary of Red Eléctrica Corporación, S.A.,
to acquire an 89.68 % interest in HISPASAT from Abertis. The purchase price for
89.68 % of the share capital of HISPASAT was Euros 933 million. In accordance
with applicable legislation, the parties sought the pertinent authorisation for the
transaction, this being one of the conditions precedents for the agreement signed
by the two parties to come into effect. The transaction payment was made, and
the Red Eléctrica Group assumed control of HISPASAT on 3 October 2019, once
the conditions precedent had been fulfilled.
The acquiree’s statutory and principal activity consists of the operation of satellite
communications systems.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The business combination was recognised provisionally in 2019, as indicated
in note 6 to the consolidated annual accounts for that year. After completing the
purchase price allocation (PPA) in 2020, the Group recognised the measurement
period adjustments as if they had been known at the acquisition date, i.e. 3
October 2019, and restated the comparative figures for the prior year. In any case,
the adjustments only included information relating to events and circumstances
that existed at the acquisition date.
At the acquisition date the Group recognised the assets acquired and liabilities
assumed at their fair value as determined by an independent expert. The
non-controlling interest in the acquiree was recognised in the amount of the
percentage interest in the fair value of the net assets acquired, inasmuch as a
non-controlling interest gives the holder a present entitlement to the economic
benefits and the right to the proportionate share of the net assets of the acquiree
in the event of liquidation.
The total cost of the business combination was Euros 933 million, reflecting
the purchase price for 89.68 % of the share capital of HISPASAT. Goodwill was
calculated as the difference between the purchase price and the share of the
fair value of the identifiable assets and liabilities existing at the transaction date,
i.e., Euros 228.1 million.
The table below summarises the net assets acquired at the acquisition date:
52
Thousands of Euros
Intangible assets
Property, plant and equipment
Other non-current assets
Other current assets
Cash and cash equivalents
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Total net assets
Price paid (89.68 %)
Goodwill
03/10/2019
Adjustments
Fair
value
66,961
929,344
118,799
83,977
29,911
15,234
27,402
24,021
66,657
1,228,992
(19,897)
(29,061)
(294,291)
(148,018)
(48,958)
(442,309)
17,699
-
-
786,683
933,000
228,072
51,727
929,344
91,397
59,956
29,911
1,162,335
(274,394)
(118,957)
(393,351)
768,984
-
-
As a result of the purchase price allocation, a portion of the price paid in excess
was not allocated to the property, plant and equipment and intangible assets
pertaining to the fleet being operated at the acquisition date, in view of the
maturity of the satellite market at that time, particularly the video business.
The fair value of the assets was analysed and the business projections allocable
to these assets were adjusted, considering reductions in capacity lease revenue.
The outcome of the calculations did not differ significantly from the carrying
amount of the assets at the acquisition date.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The main fair value adjustments applied to the identifiable assets and liabilities
of HISPASAT were as follows:
∫ Recognition of an intangible asset amounting to Euros 15.2 million, reflecting
the value of the “HISPASAT” trademark. This intangible asset has a finite useful
life of 10 years. The intangible asset representing the HISPASAT trademark was
essentially measured using the following methodology:
- The businesses were measured using the income approach, and in particular
using the discounted cash flow method, based on Level 3 (i.e., unobservable)
inputs.
- The main measurement parameters used were as follows:
• Post-tax discount rate for intangible assets: 8.5 %
• Royalty rate: 1 %
- The most sensitive assumptions included in the projections, which are
based on sector forecasts and the analysis of HISPASAT’s historical data,
were trends in royalties for use of the assets by the licensees, operating and
maintenance costs, and investments. In general terms the projections for
the acquired businesses could be reasonably estimated on the basis of the
agreements in place.
∫ Recognition of non-current and current assets amounting to Euros 51.4 million,
mainly comprising the following:
- Euros 23.7 million of deferred tax assets, primarily reflecting tax deductions
available at the transaction date, based on the Group’s assessment of their
future recoverability. These deferred tax assets are expected to be recovered
within a period of no more than 10 years. In any case, most of the capitalised
deductions would qualify for monetisation.
- Euros 25.3 million of contingent assets as the balancing entry for the
53
contingent liabilities arising from tax litigation in Brazil, which are guaranteed
by the seller under the sale-purchase agreement.
- Euros 3.7 million of deferred tax assets arising from the tax effect of fair
value adjustments.
∫ Increase of Euros 13.6 million in financial liabilities, reflecting the difference
between the estimated market value of financial debt and its carrying amount,
of which Euros 9.8 million were non-current and Euros 3.8 million were current.
∫ Recognition of Euros 25.3 million under current liabilities, reflecting the
contingent liabilities arising from tax litigation in Brazil related to the ICMS
(Brazilian tax on the circulation of goods and services) as well as other taxes,
mainly of an indirect nature, which have been contested and which are in
turn guaranteed by Abertis under the sale-purchase agreement. As these
contingencies were guaranteed by the seller, the corresponding indemnification
asset was recognised for the same amount.
∫ Euros 10.1 million of deferred tax liabilities arising from the tax effect of fair
value adjustments.
The goodwill resulting from this business combination is attributable to
the benefits and synergies expected to arise in the Red Eléctrica Group from
the acquisition and integration of HISPASAT.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents 7
In t an g i ble
A s s et s
Movement in intangible assets and details of accumulated amortisation during
2021 and 2020 are as follows:
Total intangible assets
803,622
(54,074)
33,638
599
783,785
34,960
(662)
(601)
857,846
31
December
2019
Exchange
differences
Additions
Transfers
31
December
2020
Exchange
differences
Changes in the
consolidated
Group
Additions
Disposals
Transfers
Thousands of Euros
Administrative concessions
and industrial property
Trademark
Development expenses and computer software
Goodwill
Other intangible assets
Intangible assets under development
402,262
(46,544)
673
47,233
388,390
29,462
15,234
65,327
231,724
49,418
54,891
-
(602)
(309)
(4,176)
(2,443)
-
25,336
-
-
430
-
7,629
(47,064)
15,234
90,491
231,415
45,242
13,013
-
360
279
3,774
1,085
Accumulated amortisation of administrative
concessions and industrial property
Accumulated amortisation of trademark
Accumulated amortisation of development
expenses and computer software
Accumulated amortisation of other
intangible assets
(40,171)
(382)
13,581
(17,806)
-
(1,523)
(25,927)
327
(15,355)
-
-
-
Total accumulated amortisation
(66,480)
13,908
(34,684)
Impairment of administrative concessions
and industrial property
Impairment of trademark
Impairment of development expenses
and computer software
Total impairment
Carrying amount
-
-
-
-
-
-
-
-
737,142
(40,166)
(5,357)
-
(322)
(5,679)
(6,725)
-
-
-
-
-
-
-
-
-
(44,396)
(1,905)
(4,639)
-
(40,955)
(18)
-
-
(87,256)
(4,657)
(5,357)
-
(322)
(5,679)
-
-
-
-
-
-
75
-
(662)
5,704
-
-
-
-
(6,380)
-
-
-
3,788
-
3,788
-
-
-
-
-
-
-
-
-
275
-
-
-
-
36,301
36,576
(18,027)
(1,523)
-
-
(18,900)
343
(1,528)
(39,978)
-
-
-
-
343
-
-
-
-
-
-
-
-
-
-
-
(67,062)
(3,428)
(59,530)
(1,528)
(131,548)
(5,357)
-
(322)
(5,679)
599
690,850
30,303
3,788
(3,402)
(319)
(601)
720,619
54
31
December
2021
418,202
15,234
95,893
231,694
52,804
44,019
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Gross intangible assets
Administrative concessions and industrial property mainly include the
service concession agreements awarded by different public entities to the Group
companies for the construction and operation of technical electricity facilities
in Peru, different bandwidth licences awarded to the Group for the use of orbital
slots above Brazilian territory, and the renewal of satellite orbital rights at
61º west.
Details of agreements for concessions under operation and/or construction
in Peru at 31 December 2021 are as follows:
55
Thousands of Euros
Redesur
Tesur
Tesur 2
Tesur 3
Tesur 4
CCNCM
Grantor
Activity
Concession period from start-up
of commercial operations
Remaining useful life
Tariff review frequency
Carrying amount at 31/12/2021
Carrying amount at 31/12/2020
Revenue in 2021
Revenue in 2020
Profit/(loss) for 2021
Profit/(loss) for 2020
Renewal options
Peruvian State
Peruvian State
Peruvian State
Peruvian State
Peruvian State
Peruvian State
Electricity
transmission
Electricity
transmission
Electricity
transmission
Electricity
transmission
Electricity
transmission
Electricity
transmission
30 years
10 years
30 years
23 years
30 years
27 years
30 years
29 years
Annual
32,756
33,480
15,843
16,375
4,951
5,337
Annual
50,637
48,822
6,204
6,266
250
3,061
Annual
45,447
43,534
4,966
5,116
1,222
799
Annual
27,519
26,302
2,333
1,895
207
103
30 years
6 months
construction
+ 30 years
operation
Annual
22,553
13,014
0
9
(259)
(116)
30 years
26 years
operation
Annual
145,377
139,359
14,653
15,123
(4,531)
(4,358)
Not stipulated
in contract
Not stipulated
in contract
Not stipulated
in contract
Not stipulated
in contract
Not stipulated
in contract
Not stipulated
in contract
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Trademark includes the HISPASAT trademark arising from the recognition of the
business combination resulting from the acquisition of HISPASAT in October 2019
for Euros 15,234 thousand. This item is amortised over a period of 10 years.
Other intangible assets include the perpetual right to regulated tariffs arising
from the acquisition of transmission facilities forming part of the Chilean
National Transmission System, included in REDENOR 2, in an amount of Euros
49,016 thousand (Euros 45,242 thousand in 2020). This item is not amortised
as it has an indefinite useful life, and is tested for impairment annually.
This item also includes the customer portfolio recognised as a result of the
business combination arising from the acquisition of the signal management and
transmission business in Peru (see note 6). An amount of Euros 3,788 thousand
is recognised under changes in the consolidated Group in 2021. The customer
portfolio is amortised over 20 months.
Goodwill amounting to Euros 228 million and Euros 4 million at 31 December
2021 (Euros 228 million and Euros 3 million in 2020) derives from the HISPASAT
and CCNCM business combinations, respectively. The goodwill does not give rise
to any deferred tax liability as it is not expected to be tax deductible in the future.
This item is not amortised and is tested for impairment annually.
Intangible assets under development at 31 December 2021 and 2020 mainly
include the acquisition and development of computer software for the Group’s
system operation and transmission activities, and the construction of facilities
under concession agreements, which is being carried out by the Peruvian
company TESUR 4
Capitalised expenditure
Operating expenses of Euros 9,559 thousand incurred directly in connection
with intangible assets were capitalised in 2021 (Euros 12,105 thousand in 2020).
The Group also recognised innovation and development expenditure amounting
to Euros 11,401 thousand in the consolidated income statement in 2021.
56
During 2021 the Group capitalised borrowing costs of Euros 262 thousand
as an increase in intangible assets (Euros 388 thousand in 2020).
Fully amortised intangible assets
At 31 December 2021 the Group has fully amortised intangible assets amounting
to Euros 27,943 thousand (Euros 17,788 thousand in 2020), most of which
comprise development expenses and computer software.
Investments in intangible assets located outside Spain
At 31 December 2021 the carrying amount of intangible assets located outside
of Spain is Euros 407,505 thousand (Euros 383,962 thousand in 2020).
Investment commitments
The Group has no firm commitments to purchase significant amounts
of intangible assets relative to its present volume of assets, and to the
investments it makes and plans to make.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Insurance
The Group has taken out insurance policies to cover the risks to which its
intangible assets are exposed. These policies provide adequate protection against
the risks covered.
Impairment analysis of intangible assets subject
to amortisation or depreciation
In 2021, the Group tested these assets for possible indications of impairment and
concluded from this analysis that there have been no events that would require
any changes to the impairment provision recognised in 2020.
In 2020, in view of intangible assets presenting indications of impairment, coupled
with the results of the impairment tests, the assets allocated to the traditional
satellite business (Legacy) CGU were written down by Euros 5.7 million to reflect
the impairment identified. With respect to the assets allocated to the traditional
satellite business (Legacy) CGU, the assumptions used in the calculation thereof
are explained in note 8.
As a result of recognising impairment losses on assets in 2020, the amortisation
charge in 2021 was reduced by approximately Euros 0.7 million.
Impairment analysis of intangible assets
with indefinite useful lives
At the 2021 and 2020 reporting dates, the Group has tested intangible assets with
indefinite useful lives (goodwill and the right to regulated tariffs) for impairment
in order to determine their recoverability, and has not identified the need for any
write-downs as a result.
Goodwill
The goodwill arising on the business combination entailing the acquisition
of the Hispasat subgroup for Euros 228 million in October 2019, in the
telecommunications segment, was allocated to the group of CGUs pertaining to
the satellite business, more specifically the traditional satellite business (Legacy)
CGU and the CGU(s) for new business and satellite services, as this is the level
of aggregation at which goodwill is controlled for internal management purposes
of the Red Eléctrica Group.
57
At 31 December 2021 the Group first tested the traditional business (Legacy)
CGU, excluding goodwill, for indications of impairment, and did not identify the
need for any further write-downs on the assets associated with this CGU in
addition to those recorded in 2020 (Euros 122 million, of which Euros 5.7 million
and Euros 116.6 million pertain to intangible assets and to property, plant and
equipment, respectively) (see note 8).
The Group then tested for impairment, also in 2021, the group of CGUs to which
goodwill was allocated (the Legacy CGU and the CGU(s) for new business and
satellite services).
No impairment was detected or recognised at 31 December 2020 on the basis
of the projections made, for which the assumptions used and the measurement
performed were contrasted with prestigious independent experts.
As a basis for the aforementioned impairment testing, in 2021 the Group took
the projections used in the prior year, updating them as necessary.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Overall, the Group considers that these baseline assumptions continue to be valid
for the 2021 impairment test, on the basis of the following analysis:
- There were no substantial changes in the satellite business in 2021.
- The results of the satellite business for 2021 and the latest updated forecasts
for this business for 2022 are consistent with the results and cash flows
contained in the baseline projections.
- Exchange rates of the currencies that make up a significant portion of the
business revenue have performed favourably with respect to the assumptions
used in 2020, supported by the arrangement of long-term ex-change rate
hedges to minimise volatility.
In view of the foregoing, the Group has concluded that, as in 2020, it is not
necessary to recognise any impairment.
The key assumptions used in the calculations for the impairment test on the
Group’s satellite business are similar to those used in the prior year and are
as follows:
∫ The test was performed estimating the fair value less costs to sell, taking
an income approach for the purpose of determining the recoverable amount
of the satellite business.
The income approach indicates the recoverable amount of a business based on
the present value of the future cash flows it is expected to generate, calculated
using a discounted cash flow (DCF) methodology. The DCF method is used to
discount the future free cash flow (FCF) to its estimated present value, applying
a discount rate (weighted average cost of capital or WACC) that reflects the time
value of money and the risks associated with the expected cash flows.
Costs to sell have been estimated considering the costs incurred on previous
transactions carried out by the Group.
58
In terms of the fair value hierarchy under IFRS 13, the fair value measurement
has been entirely categorised within Level 3, without consideration of whether
the costs of disposal are observable.
∫ The cash flow projections used are for the 2022-2040 period, which is consistent
with the useful life of the existing satellites, as well as that of the new satellite
assets expected to be launched in the coming years and the HISPASAT
subgroup’s expected adoption of new business models and technologies.
Cash flows estimated beyond five years are deemed to be reliable on the basis
of the Group’s experience of investments with a considerable technological
component that entail long-term contracts and commitments. The satellite
business gives rise to long-term contractual commitments with customers, and
it is common-place for contracts covering a substantial portion of the useful life
of the satellites to be signed, with a view to obtaining a minimum return before
the new satellites are launched, which then serves as a solid foundation on which
to secure the return expected from the satellite according to the estimates made
before undertaking the project.
The terminal value associated with the traditional technology is zero, given that
the infrastructure supporting this business will cease to generate revenue and
expenses once it reaches the end of its useful life. For new business and services,
a terminal value with a perpetuity growth rate of 0.75 % has been applied,
which is in line with that considered by analysts for comparable companies.
∫ The EBITDA margin considered for traditional business and new business jointly
is in line with the prior year and averages 55 %.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
∫ The main exchange rates considered for foreign currency cash flows were the
forward rates based on the inflation rate spread between different currencies,
starting from the closing spot exchange rate on the day of the test: 1.16 EUR/
USD and 6.57 EUR/BRL. As regards the impairment test at the 2020-year end, the
main exchange rates considered for foreign currency cash flows were 1.23 EUR/
USD and 6.38 EUR/BRL.
∫ A discount rate based on the weighted average cost of capital (WACC) has been
used to discount the cash flows, specifically a pre-tax rate of 7.60 % has been
applied (7.95 % in 2020) for the traditional satellite business, and an additional
risk premium has been included for new business, giving a pre-tax rate of 9.10 %
(9.45 % in 2020).
The Group has performed a sensitivity analysis considering reasonable
variations in the main operating and financial assumptions used in the calculation.
The following increases and decreases are assumed:
Revenue
Gross margin
USD exchange rate
BRL exchange rate
Discount rate
-2.5 %
-130 b.p.
-5 %
-15 %
+40 b.p.
+2.5 %
+130 b.p.
+5 %
+15 %
-40 b.p.
The range of variation for the sensitivity analysis of the main operating
assumptions has been estimated by weighting the relative weight of each one in
the different CGUs to which goodwill was allocated.
For the revenue sensitivity range, the sensitivity analysis performed considers
the impact of variations in revenue on the recoverable amount, applying a baseline
variation in revenue from services rendered of ± 4 % and ± 2 % for the Legacy CGU
and the new business CGU, respectively. These sensitivities are in line with those
used in the prior year.
59
A sensitivity analysis was also performed on the EBITDA margin reflected in the
projections supporting the recoverable amount, applying an increase/decrease in
operating expenses that entails a variation in the annual EBITDA margin over the
time horizon of the projections of ± 200 b.p. and ±100 b.p. for the Legacy CGU and
the new business CGU, respectively. This range of variation for the EBITDA margin
was deemed reasonable, considering that HISPASAT made a detailed estimate of
the cost structure necessary to carry out the projects considered in the Strategic
Plan, and taking as a reference the variation used by other operators with a degree
of verticalisation similar to that envisaged in the projections.
The currencies considered in the sensitivity analysis reflecting the impact of
a variation in the exchange rate used in the projections supporting the calculation
of the recoverable amount are those which represent virtually the entire currency
risk, namely the US Dollar (USD) and the Brazilian Real (BRL). The variations
included in the sensitivity analysis are ± 5 % for EUR/USD and ± 15 % for EUR/BRL.
These references are in line with those used for the prior year’s calculation.
For the discount rate sensitivity range, the sensitivity analysis performed
considers the impact on the recoverable number of variations in the rate of
± 10 b.p. and ± 50 b.p. for the Legacy CGU and the new business CGU, respectively.
These variations consider the risk spread associated with these two CGUs.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The analysis performed reveals that at 31 December 2021 any reasonably
possible variation in any of the key assumptions considered, on which the
recoverable amount of the Group’s satellite business is based, would not result
in the aggregate carrying amount of the group of CGUs (Euros 1,036 million in
2021 and Euros 1,037 million in 2020), to which the goodwill has been allocated,
exceeding the aggregate recoverable amount of the CGUs. The recoverable
amount at 31 December 2021 and 2020 is approximately 30 % higher than the
carrying amount.
Other intangible assets
With regard to the perpetual right to regulated tariffs included in this line item,
impairment testing did not bring to light the need for any write-downs at 31
December 2021, despite the indications of impairment detected as a result
of the valuation process ongoing in Chile (see note 3.b). No write-downs were
recognised at 31 December 2020.
When testing for impairment, the Group considered projections of future cash
flows. The projections refer to the 2022-2070 period and consider a perpetuity
growth rate thereafter. Cash flows estimated beyond five years are deemed
to be reliable on the basis of the Group’s experience of regulated business
in the Chilean electricity transmission market, which involves a perpetual
right to regulated tariffs.
The assumptions included in the projections used, based on updated business
forecasts and own past experience, are in line with those used in the previous
year, except for the regulated remuneration, which has been updated as
explained in note 3.b). The main assumptions used are as follows:
60
∫ Regulated remuneration was calculated taking into account the Final Technical
Report (FTR) published by Chile’s CNE in August 2021 (see note 3.b) and
has been updated for subsequent years based on the updating mechanisms
established by Chilean legislation.
∫ Investment: the best information available on the asset investment and
maintenance plans for the infrastructure throughout the estimated time period
has been used.
∫ Operating and maintenance costs: projected in line with the growth expected
to derive from the investment plan.
∫ Other costs: projected based on knowledge of the sector and past experience
and in line with the growth expected to derive from the investment plan.
∫ Growth rate: a perpetuity growth rate of 2 % has been estimated.
∫ Weighted average cost of capital (WACC) discount rate: a pre-tax rate of 7.26 %
has been used.
The sensitivity analysis was performed considering reasonably possible
changes in the main assumptions, such that a 0.5 % increase in the discount
rate and a 0.5 % decrease in the growth rate would not entail impairment.
No sensitivities have been applied to other assumptions, in view of the activity’s
regulated nature.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents 8
Prope r ty,
Pl an t an d E quipmen t
Movement in property, plant and equipment in 2021 and 2020, and details of accumulated
depreciation and impairment, are as follows:
61
Thousands of Euros
31.12.2019
Exchange
differences
Additions
and other
Exits, disposals,
reductions and
write-downs
Transfers
31.12.2020
Exchange
differences
Changes in the
consolidated
Group
Additions
and other
Exits, disposals,
reductions and
write-downs
Transfers
31.12.2021
C o s t
Land and buildings
118,221
(3,667)
2,465
(2,658)
1,404
115,765
122
-
221
(2,506)
477
114,079
Technical telecommunications
facilities
Technical electricity facilities
Other installations, machinery,
equipment, furniture and
other items
Under construction and advances
1,407,796
14,514,286
(8,436)
(4,522)
2,327
-
(242)
(334)
5,802
1,407,247
278,183
14,787,613
247,722
752,747
(592)
4,536
(2,887)
479,070
(213)
(800)
15,656
(301,644)
267,109
926,486
Total cost
17,040,772
(20,104)
488,398
(4,247)
(599)
17,504,220
A c c u m u l a t e d d e p r e c i a t i o n
Depreciation of buildings
(25,785)
373
(5,551)
1,093
-
(29,870)
Depreciation of technical
telecommunications facilities
Depreciation of technical
electricity facilities
Depreciation of other installations,
machinery, equipment, furniture
and other items
(142,876)
3,175
(132,936)
(6,881,674)
40
(358,522)
(220,556)
600
(16,471)
Total accumulated depreciation
(7,270,891)
4,188
(513,480)
I m p a i r m e n t
Impairment of land and buildings
-
-
(1,091)
Impairment of technical
telecommunications facilities
Impairment of technical electricity
facilities
Impairment of other installations,
machinery, equipment, furniture
and other items
Impairment
Carrying amount
(1,202)
(60)
(104,832)
(95,544)
-
-
-
-
(11,407)
(96,746)
(60)
(117,330)
-
-
251
1,344
-
-
-
-
-
(272,637)
-
(7,240,156)
-
-
-
-
-
-
-
(236,176)
(7,778,839)
(1,091)
(106,094)
(95,544)
(11,407)
(214,136)
9,673,135
(15,976)
(24,358)
(2,903)
(599)
9,511,245
865
5,693
1,524
1,665
9,869
(12)
(447)
(314)
(18)
(791)
-
(37)
-
-
(37)
9,041
1,957
16,680
(4,668)
6,473
1,428,554
-
-
547
-
345,960
15,139,813
18,573
(3,890)
(306)
283,010
933
501,565
(1,956)
(352,003)
1,076,691
2,890
537,586
(13,020)
601
18,042,147
(3,473)
(104,901)
(360,089)
(13,651)
-
(482,115)
-
-
-
-
-
-
(89)
-
-
(89)
2,890
55,382
2,208
3,220
-
2,203
7,631
-
2,077
-
-
2,077
(3,312)
(31,147)
(374,765)
(7,600,559)
(247,642)
-
(8,254,114)
-
-
-
-
-
(1,091)
(104,143)
(95,544)
(11,407)
(212,185)
601
9,575,848
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Gross property, plant and equipment
Technical electricity facilities are assets that are subject to regulated
remuneration (see note 3). The main additions to technical electricity facilities
in 2021 and 2020 are investments in electricity transmission facilities in Spain.
Moreover, during 2021 the Group companies capitalised construction-related
borrowing costs of Euros 7,412 thousand as an increase in property, plant
and equipment (Euros 7,100 thousand in 2020). The weighted average rate used
to capitalise borrowing costs was 1.1 % in 2021 (1.2 % in 2020).
62
Technical telecommunications facilities essentially consist of the investments
associated with the Group’s satellite fleet and the concession of the rights to
use and manage the operation of the fibre optic cable network and other related
items, pursuant to the 20-year agreement entered into by REINTEL with ADIF-AV
in 2014. Changes in the consolidated Group include the facilities incorporated
into the business combination following the acquisition of the satellite television
broadcast business in Peru (see note 6).
Property, plant and equipment include right-of-use assets in an amount
of Euros 27,379 thousand at 31 December 2021 (Euros 15,053 thousand at 31
December 2020). These assets are included under the various property, plant
and equipment headings based on their nature (“Land and buildings”, “Technical
telecommunications facilities” and “Other installations, machinery, equipment,
furniture and other items”) as detailed in note 9.
Fully depreciated property, plant and equipment
At 31 December 2021, the Group has fully depreciated property, plant and
equipment amounting to Euros 2,737,381 thousand (Euros 2,645,950 thousand
in 2020), of which Euros 2,535,627 thousand are technical electricity facilities
(Euros 2,451,876 thousand in 2020).
At 31 December 2021 and 2020, the amount shown under exits,
disposals, reductions and write-downs mainly includes the disposal of certain
fully-depreciated assets.
Investments in property, plant and equipment located outside Spain
At 31 December 2021 the carrying amount of property, plant and equipment
located outside of Spain is Euros 190,390 thousand (Euros 143,097 thousand
in 2020).
Capitalised expenditure
Operating expenses of Euros 46,178 thousand incurred directly in connection
with property, plant and equipment under construction were capitalised in 2021
(Euros 45,585 thousand in 2020). The Group's capitalised expenses directly
related to the construction of facilities include all operating expenses incurred
to provide support to the units directly involved in the activity.
Investment commitments
The Group periodically places orders to cover needs related to its investment
plans. The various amounts in the aforementioned orders will normally
materialise in the form of delivery orders as and when the different projects
included in the plans are capitalised. Therefore, they do not constitute firm
purchase commitments at the time of issue.
The Group has no firm commitments to purchase significant amounts
of property, plant and equipment relative to its present volume of assets,
and to the investments it makes and plans to make.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Details of capital grants and other non-current revenue received in advance,
in relation to property, plant and equipment, are provided in note 15.
Insurance
The Group has taken out insurance policies to cover the risk of damage
to its property, plant and equipment. These policies provide adequate protection
against the risks covered.
Impairment analysis of property, plant and equipment
subject to amortisation or depreciation
The Group assesses whether there are indications of possible impairment
losses on assets subject to amortisation or depreciation to determine whether
the carrying amount of these assets exceeds the recoverable amount. The
recoverable amount is the higher of the fair value less costs to sell and the value
in use (see note 4 h).
As regards the traditional satellite business (Legacy) CGU, in 2021 the Group
updated the calculation of the recoverable amount of assets that had been
impaired in 2020 in order to identify possible adjustments to impairment
recognised in the prior year. To that end, the Group corroborated that the context
of the industry in which the Group operates and the assumptions underpinning
the estimated future performance of the traditional business (Legacy), contained
in the financial projections approved at the end of 2020 (see note 5), remain
substantially the same, considering past experience and estimates based on the
best information available.
These projections covered a five-year period. After five years, cash flows were
extrapolated on the assumption that the cash flows of the traditional business
(“Legacy”) will remain constant, without growth, until the end of the re-estimated
useful life of the satellites that make up the current fleet (see note 4.c) and which
served as the basis for the impairment test in 2020, the key assumptions of
which are described later in these notes to the consolidated annual accounts.
At the 2021 reporting date, the Group concluded that there were no indications
of further impairment in addition to that recognised in 2020, on considering that:
63
∫ the commercial performance and results of the Legacy CGU in 2021
and the Group’s forecasts for 2022 are consistent with the forecast business
performance, cash flows and EBITDA margins contained in the approved
financial projections referred to in the preceding point.
∫ the exchange rates of the currencies in which a substantial portion of the
Group’s revenue is received have performed favourably against the Euro,
with respect to the assumptions used in the 2020 impairment test, supported
by the arrangement of long-term exchange rate hedges that minimise the
volatility of the financial projections.
In view of the circumstances that arose during 2020 and the transformation
of the industry in which the Group operates (see note 5), indications of impairment
were identified in the traditional business (Legacy) CGU, in respect of which
the Group calculated its recoverable amount, which is its fair value less costs
of disposal.
The calculation was based on discounted cash flow projections, the underlying
assumption being the estimated future performance of the traditional business
(Legacy) contained in the new financial projections approved at the end of 2020.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The key assumptions used to calculate the recoverable amount included
estimates of sales, operating margins and exchange rates for the explicit
projection period and the weighted average cost of capital (WACC), which was
corroborated by independent financial experts. The discount rates used were
pre-tax values and reflected the specific risks related to the markets and
currencies in which the Group operates.
On the basis of the analysis performed using the foregoing assumptions, the
present value of the projected future cash flows generated by the CGU was Euros
122 million lower than the carrying amount of the assets in the CGU (Euros 769
million after impairment). Accordingly, impairment was recognised in an amount
of Euros 6 million for intangible assets (see note 7) and Euros 116 million for
property, plant and equipment.
64
The Group applied the following key assumptions in calculating the recoverable
amount (fair value less costs to sell) of the traditional satellite business
(Legacy):
∫ Revenue estimated on the basis of the portfolio of existing contracts, the
historical renewal rate, past experience from renegotiations of contracts
executed in the second half of 2020 and new sales forecast for the expanding
vertical markets identified by sector market research and included in the
Strategic Plan of the Hispasat subgroup. Revenue after the five-year period
was extrapolated on the assumption that the cash flows of the traditional
business (Legacy) would remain constant, without growth.
∫ Useful lives: 16.5 years as of the date of entry into commercial service for the
fleet of satellites that make up the CGU, with the exception of the Amazonas-2,
H74W-1 and H55W-2 satellites, which have an estimated useful life of between
13 and 15 years (see note 4.c).
∫ Gross margin: the average gross margin for the projected period used in the
analysis was 66 %.
∫ 2020 year-end exchange rate for sales in foreign currency: 1.23 USD/EUR,
6.38 BRL/EUR and 24.36 MXN/EUR.
∫ Pre-tax discount rate (WACC): 7.95 %.
The events and circumstances that led to the recognition of these impairment
losses were as follows:
∫ The traditional business – which essentially centres on video applications
using wide beam capacity – is gradually being replaced by new data services
based on new technical solutions, although these have yet to become
consolidated. This has a significant impact on the Group given the substantial
contribution of video to its revenue.
∫ In this context, the crisis brought on by the COVID-19 pandemic aggravated
the conditions in which the commercial activity is carried out, having a particular
impact in the second half of 2020. Moreover, new outbreaks in the second half
of last year led to additional limitations as regards the fulfilment of certain
projects or commercial opportunities identified, which in many cases were
cancelled, resulting in the loss of forecast revenue.
∫ The deterioration of exchange rates triggered by COVID-19 in 2020, generally
as regards the currencies of the Latin American countries in which the Group
operates, had a sizeable impact on estimated future revenue.
∫ In consideration of these factors, HISPASAT redefined its strategy, the new
approach being approved by its board of directors in December 2020, for the
purpose of repositioning HISPASAT as a benchmark operator in the provision
of advanced satellite communications services (new business), while also
endeavouring to protect its traditional activity.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The new strategies identify business levers that will enable the loss of traditional
business to be offset while also protecting the remaining business, centred on
the operation of communications satellites and the wholesale lease of spatial
capacity, maximising the useful life of the existing fleet. The implementation
and consolidation of these business models calls for greater verticalisation
with a wider operating cost structure and, therefore, tighter margins.
The sensitivity analysis reflecting the impact on the recoverable number
of variations in revenue used a variation of ± 4 % in revenue from services
rendered as the baseline. This reference value was obtained by identifying
revenue that is subject to greater uncertainty depending on past experience
and the estimates calculated using the most recent information available
at the time.
65
The assets composing the traditional business (Legacy) cash-generating
unit have not changed since the previous estimate of the recoverable amount
of this CGU.
The sensitivity analysis on the variation in revenue was based on the assumption
that EBITDA margins would remain the same as those considered in the approved
financial projections.
The fair value measurement of the asset (CGU) has been entirely categorised
within Level 3 (in terms of the fair value hierarchy under IFRS 13), without
consideration of whether the costs of disposal are observable.
The sensitivity analysis reflecting the impact on the recoverable amount (in
millions of Euros) of reasonable possible variations in the key assumptions used
in the 2020 impairment test is presented below:
A sensitivity analysis was also performed on the EBITDA margin, applying
an increase/decrease in operating expenses that entails an annual variation
of ± 200 b.p. in this margin over the time horizon of the projections. This range
of variation was deemed reasonable to cover potential upward or downward
deviations in operating expenses in the most probable scenarios, considering
that a detailed estimate was made of the cost structure necessary to carry out
the projects considered in the Strategic Plan.
Revenue
Variation in recoverable amount
Gross margin
Variation in recoverable amount
USD exchange rate
Variation in recoverable amount
BRL exchange rate
Variation in recoverable amount
Discount rate
Variation in recoverable amount
-4.0 %
-31.6
+4.0 %
+31.6
-200 p.b.
+200 p.b.
-24.5
-5 %
42.9
-15 %
10.9
-10 p.b.
+5.1
+24.5
+5 %
-38.5
+15 %
-7.8
+10 p.b.
-5.1
The currencies considered in the sensitivity analysis reflecting the impact of
a variation in the exchange rate used in the projections supporting the calculation
of the recoverable amount are those which represent virtually the entire currency
risk, namely the US Dollar (USD) and the Brazilian Real (BRL). The variations
included in the sensitivity analysis were ± 5 % for EUR/USD and ± 15 % for EUR/
BRL. These references were obtained on the basis of the average annual daily
variations, in absolute terms, in each exchange rate during the 2015-2020
period: 1.14 for the US Dollar and 4.42 for the Brazilian Real.
As regards the electricity transmission in Chile CGU, in view of the indications
of impairment identified during the year as a consequence of the regulatory
change discussed in note 3.b, the Group tested the assets pertaining to this
CGU for impairment to ascertain their recoverability.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The test showed that the recoverable amount exceeds the carrying amount
and, consequently, the assets are not impaired (see note 7).
- Technical telecommunications facilities: these correspond to the lease of
66
satellite capacity.
9
Ri ght- of-U se
A s s et s and L ease
L i abi l it i es
The most significant finance leases arranged by the Group at 31 December
2021 are as follows:
∫ A satellite recognised under property, plant and equipment, which is leased
from the satellite operator Intelsat for an amount of Euros 31 million (Euros 35
million in 2020) until 2030.
∫ The technical telecommunications facilities in respect of which REINTEL
entered into a right-of-use agreement with ADIF-AV to manage the operation
of the fibre optic cable network and associated items. This agreement was
signed in 2014 for a 20-year period. At 31 December the net value reflected in
the consolidated statement of financial position amounts to Euros 303 million
(Euros 321 million in 2020).
In both cases the amount was fully disbursed in advance and, consequently,
no future minimum lease payments are recognised in respect of these assets.
There are also right-of-use assets under property, plant and equipment and lease
liabilities within other financial liabilities; The Group’s main assets to which IFRS
16 Leases applies are as follows:
- Vehicles: primarily vehicles under operating leases.
- Buildings: offices, premises and land needed to carry out the Group’s activity.
Right-of-use assets
Details of right-of-use assets and movement in 2021 and 2020 are as follows:
Thousands of Euros
Total at start of year
Additions during the year
Derecognitions during the year
Depreciation for the year
Translation differences
Total at year end
2021
15,053
18,920
(1,478)
(5,180)
64
27,379
2020
16,821
5,353
(1,132)
(5,989)
-
15,053
The main addition during the year is the lease of HTS satellite capacity in
the Ka-Konnect band from a satellite operator in November 2021 for an amount
of Euros 12,743 thousand.
Amounts recognised in profit or loss
Details of the amounts recognised in the consolidated income statement for
2021 and 2020 in relation to the application of IFRS 16 are as follows:
Thousands of Euros
Interest on lease liabilities
Depreciation charges
Total
2021
277
5,180
5,457
2020
174
5,989
6,163
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Euros 4,554 thousand has been recognised as operating expenses in respect
of leases not falling within the scope of IFRS 16 (Euros 3,662 thousand in 2020).
10
Investment
P roperty
Amounts recognised in the statement of cash flows
Details of lease payments made in 2021 and 2020 are as follows:
Movement in the Group’s investment property in 2021 and 2020 is as follows:
67
Thousands of Euros
Lease payments
Interest paid on leases
Total
2021
6,525
277
6,802
2020
4,392
174
4,566
Thousands of Euros
31
December
2019
Additions
31
December
2020
Additions
Disposals
31
December
2021
C o s t
Investment property
Total cost
2,397
2,397
-
-
2,397
2,397
-
-
Future minimum lease payments
Details of committed future minimum lease payments are provided in note 19.
A c c u m u l a t e d
d e p r e c i a t i o n
Investment property
(499)
(20)
(519)
(21)
Total accumulated
depreciation
Impairment
Carrying amount
(499)
(553)
1,345
(20)
(20)
(519)
(553)
1,325
(21)
(21)
-
-
-
-
468
468
2,397
2,397
(540)
(540)
(85)
1,772
At the 2021 year end, analysis of the market value of investment property led the
Group to reverse impairment associated with one of its buildings, on ascertaining
that the recoverable amount exceeded its carrying amount. The impairment
reversal is recognised under impairment and gains/(losses) on disposal of fixed
assets in the accompanying consolidated income statement in an amount of
Euros 468 thousand. No impairment losses have come to light in respect of the
remaining investment property.
Investment property has a market value of approximately Euros 2.6 million
in 2021 (Euros 1.9 million in 2020) and does not generate or incur significant
operating income or expenses.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
11
Equi t y-ac c oun t ed
Inve s t ees
This heading includes investments over which the Group has significant
influence and which, accordingly, are accounted for in the consolidated financial
statements using the equity method (see note 2.d):
∫ Argo Energia Empreendimentos e Participações S.A. (ARGO), in which the Red
Eléctrica Group holds a 50 % interest through Red Eléctrica Brasil Holding, Ltda.
ARGO was incorporated in Brazil in 2016 and holds three electricity concessions
in that country, encompassing 1,460 km of 500 kV and 230 kV voltage lines and
11 substations.
∫ Transmisora Eléctrica del Norte, S.A. (TEN), in which the Group holds a 50 %
interest through Red Eléctrica Chile SpA. TEN was incorporated on 1 March
2007 and undertook the project in Chile for the construction of a transmission
line spanning approximately 580 km and the corresponding substations.
This project has connected the Far North Interconnection System to the
Central Interconnected System in Chile since 2018. TEN currently operates
and maintains the facilities constructed. The acquisition price was US Dollars
217,560 thousand (Euros 199,816 thousand).
∫ Hisdesat Servicios Estratégicos, S.A. (HISDESAT), in which the Red Eléctrica
Group holds a 38.56 % interest through HISPASAT, S.A. HISDESAT engages in the
commercialisation of spatial systems for government use. This company forms
part of HISPASAT, which joined the Red Eléctrica Group on 3 October 2019.
∫ Grupo de Navegación Sistemas y Servicios, S.L. (GSS), in which the Red
Eléctrica Group holds a 12.82 % interest through HISPASAT, S.A. GSS engages
in the operation of satellite systems. This company forms part of HISPASAT,
which joined the Red Eléctrica Group on 3 October 2019.
68
∫ RETIT’s investments involving significant influence, which encompass the
investments made by RETIT in various innovative startups. The acquisition price
was Euros 4,150 thousand.
ARGO was included in the consolidated Group in 2020, because although
at the end of 2019 Red Eléctrica Internacional, S.A.U. (through its subsidiary Red
Eléctrica Brazil) and Grupo Energía Bogotá (GEB) jointly acquired, on a fifty-fifty
basis, all of the shares held by the funds managed by Patria Investments and
Temasek in Argo Energia Empreendimentos e Participações S.A. (“Argo Energia”),
this acquisition was subject to compliance with certain conditions.
In accordance with applicable legislation, the parties sought the pertinent
authorisation for the transaction, this being one of the conditions precedents
for the agreement signed by the two parties to come into effect. This condition
precedent was fulfilled on 25 March 2020, the date on which payment of
the transaction was made, and on which Red Eléctrica Corporación and GEB
assumed effective control of the board of directors of Argo Energia. Thus, on
25 March 2020 the Brazilian company in which the Group holds a 50 % interest
joined the Red Eléctrica consolidated Group. This company is the parent of
a group of electricity transmission concession operator companies in Brazil.
The purchase price for 50 % of the share capital of Argo Energia was Euros 374.3
million (Brazilian Reais 1,678.2 million).
The investment in Argo Energia was considered as a joint venture and was
therefore accounted for using the equity method, in accordance with IAS 28.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
In 2020, the Group performed a preliminary PPA through an independent
expert, which resulted in provisional implicit goodwill of Euros 238 million
(Brazilian Reais 930 million) being allocated to the concession as an intangible
asset.
On 11 March 2021, within the 12-month deadline established in IFRS 3,
which would have fallen on 25 March 2021, the Group completed the PPA work,
which did not give rise to differences with respect to the amount recognised
for 2020.
69
Movement in these investments in 2021 and 2020 was as follows:
Thousands of Euros
Company
Transmisora Eléctrica del Norte S.A. (TEN)
Argo Energia Empreendimentos e Participações S.A.
Hisdesat Servicios Estratégicos, S.A.
Grupo de Navegación Sistemas y Servicios S.L.
Interests constituting significant influence RETIT
Thousands of Euros
Company
Transmisora Eléctrica del Norte S.A. (TEN)
Argo Energia Empreendimentos e Participações S.A.
Hisdesat Servicios Estratégicos, S.A.
Grupo de Navegación Sistemas y Servicios S.L.
Interests constituting significant influence RETIT
31.12.2020
174,034
282,041.0
63,118.0
119.0
-
Exchange
differences
16,210
2,760
-
-
-
519,312
18,970
Changes
in the
consolidated
Group
-
-
-
-
4,150
4,150
Dividends
-
(780)
-
-
-
(780)
Profit/(loss)
attributable
to the
investment
Valuation
adjustments
and other
(4,251)
24,069
9,759
-
(31)
29,546
31.12.2021
209,931
300,937
72,877
119
4,119
23,938
(7,153)
-
-
-
16,785
587,983
31.12.2019
199,026
-
60,449
119
-
Exchange
differences
(18,065)
(112,652)
-
-
-
Changes
in the
consolidated
Group
-
374,262
-
-
-
Profit/(loss)
attributable
to the
investment
4,880
20,431
2,669
-
-
Valuation
adjustments
(11,807)
-
-
-
-
31.12.2020
174,034
282,041
63,118
119
-
259,594
(130,717)
374,262
27,980
(11,807)
519,312
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The key indicators of these companies at 31 December 2021 and 2020
are as follows:
70
Thousands of Euros
Ye a r
Non-current assets
Current assets
Cash and cash equivalents
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Net assets
Revenue from ordinary activities
Gross operating profit
Net operating profit
Profit/(loss) after tax
Comprehensive income
Dividends received by the Group
Transmisora Eléctrica del
Norte S.A. (TEN)
Argo Energia
Empreendimentos e
Participações S.A.
Hisdesat Servicios
Estratégicos, S.A.
Grupo de Navegación
Sistemas y Servicios S.L.
2 0 2 1
2 0 2 0
2 0 2 1
2 0 2 0
2 0 2 1
2 0 2 0
627,480
601,889
45,685
45,318
673,165
563,316
42,160
605,476
67,690
32,767
24,474
10,136
(8,503)
40,996
-
70,090
42,151
671,979
602,457
32,508
634,965
37,015
64,956
54,144
39,470
9,760
(17,598)
-
869,808
891,470
236,560
82,987
3,236
167
1,106,368
974,457
701,745
674,266
68,582
19,080
770,327
693,346
336,041
281,111
158,145
143,918
142,819
61,180
61,180
780
177,753
105,743
105,414
41,057
41,057
504,429
270,200
237,318
774,629
466,462
56,442
522,904
251,725
53,939
60,186
33,899
26,995
23,972
-
394,376
257,013
235,574
651,389
364,199
59,436
423,635
227,754
71,404
61,702
17,386
6,357
3,334
-
2 0 2 1
1,139
156
152
1,296
-
360
360
936
-
-
-
-
-
-
2 0 2 0
1,139
156
152
1,295
-
360
360
935
-
-
-
-
-
-
At 31 December 2021 and 2020 the balance of the loan extended by the
Group to TEN was Euros 12,338 thousand and Euros 17,457 thousand, respectively
(see note 19).
The most representative assumptions included in the projections used, based
on business forecasts and own past experience, are as follows:
The interest in TEN was tested in 2021 to determine its recoverability, in view
of the indications of possible impairment arising from the regulatory change
discussed in note 3. The test showed that the recoverable amount exceeded
the carrying amount and it was therefore concluded that the investment was
not impaired.
∫ Regulated remuneration: in 2021 revenue was calculated on the basis
of the best estimate, taking into account the process to review the annual
remuneration for the transmission assets in Chile, as mentioned in note 3.
Moreover, the same update mechanisms as those set out in the legislation
in force have been used for subsequent years.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
∫ Investment: the best information available on the asset investment and
maintenance plans for the infrastructure throughout the estimated time
period has been used.
∫ Operating and maintenance costs: projected in line with the growth expected
to derive from the investment plan.
∫ Other costs: projected based on knowledge of the sector and past experience
and in line with the growth expected to derive from the investment plan.
In order to calculate present value, the projected cash flows are discounted
using a pre-tax rate that considers the weighted average cost of capital (WACC)
of the business and the geographical area in which it is carried out. A pre-tax
discount rate of 7.4 % has been estimated at 31 December 2021 based on the
Group’s internal methodology for calculating the WACC, with a residual value that
assumes constant growth at 2 % as the rate of change into perpetuity for the
cash flows generated by the assets analysed; and an investment in fixed assets
equal to the amount of depreciation to stabilise net assets.
12
Inve n to ri es
Details of inventories at 31 December 2021 and 2020 are as follows:
Thousands of Euros
Inventories
Write-downs
Total
2021
63,175
(36,640)
26,535
2020
69,671
(34,796)
34,875
Inventories mainly reflect materials and spare parts related to the technical
electricity facilities.
71
The Group companies regularly test inventories for impairment based on the
following assumptions:
∫ Impairment of old inventories, using inventory turnover ratios.
∫ Impairment for excess inventories, on the basis of estimated use in future
years.
As a result, the Group recorded impairment losses of Euros 1,844 thousand in the
consolidated income statement for 2021 (Euros 1,392 thousand in 2020).
13
Tra de
and Other
Re ceivables
Details of trade and other receivables at 31 December 2021 and 2020 are
as follows:
Thousands of Euros
Trade receivables
Other receivables
Current tax assets (note 22)
Total
2021
59,709
1,193,686
7,561
1,260,956
2020
43,054
1,288,342
10,703
1,342,099
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Trade receivables primarily comprise balances receivable on the lease of
satellite capacity and related services. This item also includes assets arising
from contracts with customers in an amount of Euros 4,904 thousand at
31 December 2021.
At 31 December 2021 no rights to trade receivables affected by COVID-19 and
having a relevant impact on the Group have been identified, other than those
detailed in note 5, although provisions recognised during the year are not
significant.
72
Other receivables at 31 December 2021 and 2020 mainly reflect the trend in
settlements made by the CNMC in those years for regulated activities in Spain
as a result of changes in collections and payments. At 31 December 2021
and 2020 the balances mostly comprise amounts pending invoicing and/or
collection for regulated transmission and system operation activities. Under the
settlement system set up by the Spanish regulator, some of these receivables
are settled and collected in the following year. These amounts also include
the revenue receivable derived from applying the methodology set forth in
the remuneration model in force for transmission activities in Spain, which
stipulates that facilities entering into service in year ‘n’ are to be remunerated
from year ‘n+2’ onwards. Such revenue amounts to Euros 595 million at 31
December 2021.
Fair value estimates reflect the assumptions of market participants based
on the information available and market conditions at the estimation date
and incorporate any risk premiums related to the COVID-19 crisis. There are
no significant differences between the fair value and the carrying amount
at 31 December 2021 and 2020.
At 31 December 2021 and 2020 there are no significant amounts
over 12 months past due (see note 19). In connection with COVID-19, no
communications concerning breach of a contract in its entirety and having
a significant impact on the Company have been received.
In 2021, an impairment provision of Euros 634 thousand was recognised (an
impairment reversal of Euros 423 thousand in 2020). Impairment of trade and
other receivables based on the expected loss accumulated at 31 December 2021
amounts to Euros 1,947 thousand (Euros 1,170 thousand in 2020).
14
Equity
A) CAPITAL RISK MANAGEMENT
The Group’s management of its companies’ capital is aimed at safeguarding their
capacity to continue operating as a going concern, so as to provide shareholder
remuneration while maintaining an optimum capital structure to reduce the cost
of capital.
To maintain and adjust the capital structure, the Group can adjust the number
of dividends payable to shareholders, reimburse capital or issue shares.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The Group controls its capital structure on a gearing ratio basis, in line with
sector practice. This ratio is calculated as net financial debt divided by the sum
of the Group's equity and net financial debt. Net financial debt is calculated as
follows:
Thousands of Euros
Non-current payables (*)
Current payables (*)
Foreign currency derivatives
Cash and cash equivalents
Net financial debt
Equity
Gearing ratio
2021
5,896,053
1,341,053
(14,800)
(1,574,427)
5,647,879
3,685,131
60.5 %
2020
6,427,589
165,325
2,199
(481,772)
6,113,341
3,491,953
63.6 %
(*) In both 2021 and 2020 interest payable has been excluded.
At 31 December 2021 and 2020, the financial covenants stipulated in the contracts
entered into have been met.
On 15 March 2021 the credit rating agency Standard & Poor’s issued a new report
on the Company maintaining its long-term rating of ‘A-’ and short-term rating
of ‘A-2’, with a stable outlook.
On 31 March 2021 the credit rating agency Fitch Ratings gave the Company
a short-term rating of ‘F1’, with a stable outlook. Following this announcement,
the Company and its subsidiary Red Eléctrica de España, S.A.U. maintain long-term
ratings of ‘A-’ and short-term ratings of ‘F1’, with a stable outlook.
73
B) EQUITY ATTRIBUTABLE TO THE PARENT
Capital and reserves
Share capital
At 31 December 2021 and 2020 the Company's share capital is divided into
541,080,000 shares of Euros 0.50 par value each represented by book entries,
all subscribed and fully paid-in, and carrying the same voting and profit-sharing
rights (notwithstanding the limits stipulated in the following paragraph). The
shares are quoted on the four Spanish stock exchanges and traded through
the SIBE (Spanish Stock Exchange Interlink-ing System).
The Company is subject to the shareholder limitations stipulated in the
twenty-third additional provision of Law 54/1997 of 27 November 1997 and
article 30 of Electricity Industry Law 24/2013 of 26 December 2013.
Pursuant to this legislation, any individual or entity may hold investments
in the Company, provided that the sum of their direct or indirect interests
in its share capital does not exceed 5 % and their voting rights do not surpass
3 %. These shares may not be syndicated for any purpose. Voting rights at
the Parent are limited to 1 % in the case of entities that carry out activities in
the electricity sector, and individuals and entities that hold direct or indirect
interests exceeding 5 % of the share capital of such companies, without
prejudice to the limitations for generators and suppliers set forth in article 30 of
the aforementioned Law 24/2013. The shareholder limitations with regard to the
Parent's share capital are not applicable to Sociedad Estatal de Participaciones
Industriales (SEPI), which in any event will continue to hold an interest of no
less than 10 %. At 31 December 2021 and 2020 SEPI holds a 20 % interest
in the Company's share capital.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Reserves
This item comprises the following:
L e g a l r e s e r v e
Spanish companies are obliged to transfer 10 % of the profits for the year to
a legal reserve until such reserve reaches an amount equal to 20 % of the share
capital. Until this reserve exceeds this limit, it is not distributable to shareholders
and may only be used to offset losses, provided no other reserves are available.
Under certain circumstances, it may also be used to increase share capital.
At 31 December 2021 and 2020 the legal reserve amounts to 20 % of the Parent's
share capital (Euros 54,199 thousand).
O t h e r r e s e r v e s
This heading includes voluntary reserves of the Parent, reserves in consolidated
companies and first-time application reserves. At 31 December 2021 they
amount to Euros 2,570,603 thousand (Euros 2,513,953 thou-sand in 2020).
In addition, this item includes statutory reserves amounting to Euros 364,909
thousand (Euros 337,081 thousand in 2020), particularly the following:
∫ The property, plant and equipment revaluation reserve amounting to Euros
247,022 thousand created by the Parent in 1996 (this reserve may be used,
free of taxation, to offset accounting losses and increase share capital or,
10 years after its creation, it may be transferred to freely distributable reserves,
in accordance with Royal Decree-Law 2607/1996). Nonetheless, this balance
may only be distributed, indirectly or directly, when the revalued assets have
been fully depreciated, transferred or derecognised.
74
∫ As provided for by article 25 of Law 27/2014 of 27 November 2014, the tax
group headed by the Company has appropriated a capitalisation reserve of
Euros 100,363 thousand, which is held by REE and REC, as permitted by article
62.1 d) of the aforementioned Law, corresponding to 2015 (Euros 29,110
thousand), 2016 (Euros 15,406 thousand), 2017 (Euros 11,312 thousand),
2018 (Euros 16,707 thousand), 2019 (Euros 19,668 thousand) and 2020
(Euros 8,160 thousand). This reserve will be restricted for a period of five
years. Pursuant to article 62.1.d) of the aforementioned Law, the proposed
capitalisation reserve for the year ended 31 December 2021, in an amount
of Euros 4,548 thousand, will be appropriated in REC, as the parent of the
tax group. Each company forming part of the tax group has adjusted income
tax for 2021 in connection with this reserve (see note 23).
O w n s h a r e s
At 31 December 2021 the Parent held 1,803,403 own shares representing
0.33 % of its share capital, with a par value of Euros 0.50 per share and a total
par value of Euros 902 thousand, and an average acquisition price of Euros
17.53 per share (at 31 December 2020 the Parent held 2,084,729 own shares
representing 0.39 % of its share capital, with a par value Euros 0.50 per share
and a total par value of Euros 1,042 thousand, and an average acquisition price
of Euros 17.53 per share).
These shares have been recognised as a reduction in equity for an amount
of Euros 31,618 thousand at 31 December 2021 (Euros 36,550 thousand in 2020).
The Parent has complied with the requirements of article 509 of the Spanish
Companies Act, which provides, except in the case of freely acquired own shares,
that in listed companies the par value of own shares acquired directly or indirectly
by the Company, plus the par value of the shares already held by the Parent and its
subsidiaries, must not exceed 10 % of subscribed share capital. The subsidiaries
do not hold own shares or shares in the Parent.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The cash flow forecast for the period from 30 September 2021 to 7 January
2022 indicated sufficient liquidity to allow the distribution of this dividend
in accordance with article 277 section a) of the Spanish Companies Act.
75
As such, the following provisional liquidity statement was drawn up pursuant
to article 277 section a) of the Spanish Companies Act:
Liquidity statement of Red Eléctrica Corporación, S.A.
Thousands of Euros
Av a i l a b l e f u n d s a t 3 0 . 0 9 . 2 0 2 1 :
Non-current credit facilities available
Current credit facilities available
Current investments and cash
F o r e c a s t r e c e i p t s :
Current transactions
Financial transactions
F o r e c a s t p a y m e n t s :
Current transactions
Financial transactions
Forecast available funds at 07.01.2022
342,449
100,000
637,682
-
125,125
(141,490)
(728)
1,063,038
The Parent's board of directors proposed to the shareholders at their general
meeting the distribution of a supplementary dividend of Euros 0.7273 per share,
which would result in a total dividend for 2021 of Euro 1 per share (Euro 1 in
2020).
Profit attributable to the Parent
Profit for 2021 attributable to the Parent totals Euros 680,627 thousand (Euros
621,185 thousand at 31 December 2020).
Interim dividends and proposed distribution of dividends
by the Parent
The interim dividend authorised by the board of directors in 2021 has been
recognised as a Euros 147,061 thousand reduction in consolidated equity at 31
December 2021 (Euros 146,984 thousand at 31 December 2020) (see note 19).
On 26 October 2021 the Company's board of directors agreed to pay an interim
dividend of Euros 0.2727 (gross) per share with a charge to 2021 profit, which was
paid on 7 January 2022 (Euros 0.2727 (gross) per share in 2020).
Details of the dividends paid during 2021 and 2020 are as follows:
Thousands of Euros
2021
2020
% of par
value
Euros per
share
Amount
% of par
value
Euros per
share
Amount
Ordinary shares
200.00 %
1.0000 538,995
210.38 %
1.0519 566,773
Total
dividends paid
Dividends
charged to profit
200.00 %
1.0000 538,995
210.38 %
1.0519 566,773
200.00 %
1.0000 538,995
210.38 %
1.0519 566,773
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
In addition, given the Company’s cash generation capacity and the amount of
undrawn credit facilities (see note 18), the Company will have sufficient liquidity
within one year after the interim dividend distribution has been agreed.
of Euros 97,025 thou-sand in 2020). This increase is primarily due to the
performance of the US Dollar and, to a lesser extent, the Brazilian Real against
the Euro in 2021.
76
Valuation adjustments
Financial assets at fair value through other comprehensive income
At 31 December 2021 and 2020 this item reflects valuation adjustments
to equity instruments classified as financial assets measured at fair value
through other comprehensive income due to fluctuations in the share price of
the Group's 5 % investment in the listed company Redes Energéticas Nacionais,
S.G.P.S., S.A. (hereinafter REN), the
benchmark index for which is the
Portuguese PSI 20. At 31 December
2021 this item totals Euros 18,766
thousand (Euros 12,761 thousand
in 2020).
Thousands of Euros
31
December
2019
C) NON-CONTROLLING INTERESTS
Non-controlling interests under equity in the consolidated statement of financial
position reflect the non-controlling interests in all the HISPASAT subgroup
companies and in the Chilean company REDENOR in 2021 and 2020.
Movement in 2021 and 2020 is as follows:
Net
translation
differences
Profit/
(loss)
for the
year
31
December
2020
Changes in
consolidated
Group and
other
Net
translation
differences
Profit/
(loss)
for the
year
31
December
2021
Hedging transactions
This line item reflects changes in the
value of derivative financial instruments.
Non-controlling
interests
72,640
(6,344)
(9,945)
56,351
(8,217)
258
5,657
54,049
At 31 December 2021 this item totals a negative amount of Euros 62,170 thousand
(a negative amount of Euros 93,559 thousand in 2020).
Translation differences
This line item mainly comprises the exchange gains and losses arising from
translation of the financial statements of foreign operations whose functional
currency is not the Euro. At 31 December 2021 the balance of this item was
negative in an amount of Euros 87,713 thousand (a negative balance
Changes in consolidated Group and other include the acquisition of the
entire non-controlling interest of 19.04 % in Hispamar Satélites, S.A., which
resulted in the Hispasat Group becoming the sole shareholder of this company
(see note 2 g).
In addition, on 16 December 2021 Red Eléctrica Corporación, S.A. (REC)
announced the agreement, subject to the pertinent authorisations being
obtained, with Kohlberg Kravis Roberts & Co. L.P. (KKR), through its subsidiary
Rudolph Bidco S.À.R.L., for the sale of a minority stake of 49 % in Red Eléctrica
Infraestructuras de Telecomunicación, S.A.U. (REINTEL), a wholly owned
subsidiary of the Parent, for Euros 971 million.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
On completion of the agreed transaction, given that the Red Eléctrica Group
will retain a 51 % stake in REINTEL, as well as control and management of this
company, the agreement will be considered a transaction with non-controlling
shareholders. This will result in an increase in non-controlling interests in the
Group in 2022, once the conditions precedent have been met, albeit with no
impact on the consolidated income statement nor on the consolidation method
applied to REINTEL, which will continue to be fully consolidated.
77
At the date of authorising these annual accounts for issue, and in accordance
with applicable legislation, the parties have sought the pertinent authorisation
for the transaction, this being one of the conditions precedents for the agreement
signed by the two parties to come into effect.
Regarding the main non-controlling interests referred to above, a summary
of the financial information on assets, liabilities and profit/loss at 31 December
2021 and 2020 of the investees is as follows:
Thousands of Euros
Non-current assets
Current assets
Assets
Non-current liabilities
Current liabilities
Liabilities
Equity
Income
Expenses
Gross operating profit
Profit/(loss) after tax
Profit/(loss) attributable to non-controlling interests
REDENOR
HISPASAT SUBGROUP
31/12/2021
31/12/2020
31/12/2021
31/12/2020
117,630
14,684
132,314
91,050
13,892
104,942
27,372
1,331
1,450
(119)
117
-
103,908
8,262
112,170
81,207
5,289
86,496
25,674
1,194
1,464
(271)
(584)
(2)
925,011
143,254
916,569
127,654
1,068,265
1,044,223
226,527
121,959
348,486
719,779
181,017
57,380
123,637
55,375
5,631
242,432
117,028
359,459
684,764
157,528
41,393
116,135
(92,491)
(9,769)
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
15
Gran t s a nd Ot her
No n- cur ren t Revenue
Re cei ve d in Advan ce
Movement in grants and other non-current revenue received in advance
in 2021 and 2020 is as follows:
Thousands of Euros
Capital grants
Other grants and revenue received in advance
Total
235,519
470,243
705,762
13,353
19,110
32,463
(57)
-
(57)
31.12.2019
Additions
Derecognitions
Amounts
transferred to
the income
statement
(18,360)
(11,888)
(30,248)
31.12.2020
Additions
230,455
477,465
707,920
3,523
43,010
46,533
Amounts
transferred to
the income
statement
(9,812)
(18,639)
(28,451)
31.12.2021
224,166
501,836
726,002
78
Capital grants mainly include the amounts received by REE for the construction
of electricity facilities and by HISPASAT for the construction of satellite assets.
Amounts transferred to the income statement reflect the amounts taken to
consolidated profit or loss each year based on the useful life of these facilities.
Other grants and revenue received in advance include income tax deductions
for investments in fixed assets in the Canary Islands, which by their nature
are similar to capital grants (see note 2 c). This heading also includes amounts
or technical facilities received by the Group as a result of agreements with
third parties.
Amounts transferred to the income statement reflect the amounts taken to
consolidated profit or loss each year on the basis of the useful life of the assets
associated with those deductions and agreements.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
16
No n- cur ren t
an d C ur ren t
Prov is i ons
Movement in 2021 and 2020 is as follows:
Thousands of Euros
N o n - c u r r e n t p r o v i s i o n s
Provisions for employee benefits
Other provisions
Total non-current
C u r r e n t p r o v i s i o n s
Other provisions
Total current
Total provisions
Thousands of Euros
N o n - c u r r e n t p r o v i s i o n s
Provisions for employee benefits
Other provisions
Total non-current
C u r r e n t p r o v i s i o n s
Provisions for employee benefits
Other provisions
Total current
Total provisions
79
31.12.2020
Additions
Applications
Transfers
Actuarial
gains/(losses)
Exchange
differences
31.12.2021
81,723
54,263
135,986
57,183
57,183
193,169
6,268
8,578
14,846
2,530
2,530
17,376
(2,141)
(7,453)
(9,594)
(947)
(947)
(10,541)
(11,273)
-
74,577
55,388
-
(11,273)
-
129,965
(37,925)
(37,925)
(37,925)
-
-
(11,273)
361
361
361
21,202
21,202
151,167
31.12.2019
Additions
Applications
Transfers
Actuarial
gains/(losses)
Exchange
differences
31.12.2020
72,625
78,781
151,406
-
27,345
27,345
178,751
3,908
13,556
17,464
-
-
-
17,464
(1,894)
(92)
(1,986)
(1,697)
-
(1,697)
(3,683)
(1,697)
(37,925)
(39,622)
1,697
37,925
39,622
-
8,781
-
8,781
-
-
-
8,781
(57)
(57)
-
(8,087)
(8,087)
(8,144)
81,723
54,263
135,986
-
57,183
57,183
193,169
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Provisions for employee benefits reflect defined benefit plans, which essentially
include the future commitments – specifically health insurance – undertaken
by the Group vis-à-vis its personnel from the date of their retirement, calculated
using actuarial studies carried out by an independent expert. Details of the
aforementioned defined benefit plans are as follows:
Thousands of Euros
31.12.2020
Additions Applications
Actuarial
gains/(losses)
31.12.2021
Non-current liabilities
under defined benefit plans
80,823
2,621
(1,799)
(11,273)
70,372
Thousands of Euros
31.12.2019
Additions
Applications
gains/(losses) 31.12.2020
Actuarial
Non-current liabilities
under defined benefit plans
71,297
2,639
(1,894)
8,781
80,823
In 2021 and 2020 the increase is mainly due to the annual accrual of these
commitments, as well as changes in the actuarial assumptions used. These
additions are recognised as personnel expenses or finance costs, depending
on their nature. Changes in actuarial assumptions are recognised in reserves.
The personnel expenses and finance costs recognised in this connection in
the consolidated income statement for 2021 amount to Euros 1,646 thousand
and Euros 975 thousand, respectively (Euros 2,014 thousand and Euros 625
thousand, respectively, in 2020.
In 2021 actuarial losses of Euros 11,273 were recognised (actuarial gains of Euros
8,781 thousand in 2020). The actuarial gains and losses recognised are due to
changes in financial assumptions in a negative amount of Euros 5,670 thousand
(positive amount of Euros 3,365 thousand in 2020) and changes in demographic
assumptions in a negative amount of Euros 5,603 thousand (positive amount of
Euros 5,416 thousand in 2020).
80
The assumptions made with regard to 2021 and 2020 were as follows:
Discount rate
Cost increase
Mortality table
Actuarial assumptions
2020
0.87 %
3.0 %
2021
1.21 %
3.0 %
PERM/F2020 1st rank
PERM/F2020 1st rank
Details of the effect of an increase/decrease of one percentage point in the cost
of health insurance are as follows:
Thousands of Euros
Current service cost
Interest cost of net post-employment medical costs
Accumulated post-employment benefit obligation
for health insurance
2021
-1 %
(359)
(2)
+1 %
494
3
16,266
(12,243)
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Conversely, the effect of a decrease of half a percentage point in the discount
rate used in 2021 for health insurance costs from 1.2 1% to 0.71 %, in thousands
of Euros, is as follows:
In 2020, this item also included current provisions made to cover potential
unfavourable rulings in relation to the application of the remuneration model
for transmission activities in Spain (see note 3), which were reclassified to trade
payables in 2021 (see note 21).
81
Thousands of Euros
Discount rate
Current service cost
Interest cost of net post-employment medical costs
Accumulated post-employment benefit
obligation for health insurance
1.21 %
0.71 %
Sensitivity
1,490
1,718
863
507
228
(356)
61,695
69,254
7,559
Provisions for employee benefits also include deferred remuneration schemes
(see note 4 l). At 31 December 2021 personnel expenses recognised in the
consolidated income statement in this regard amount to Euros 2,138 thousand
(Euros 1,269 thousand in 2020).
Other provisions basically include the amounts recorded by the Group every year
to cover the potential unfavourable rulings relating to administrative proceedings,
administrative disciplinary proceedings, judicial reviews, primarily of expropriation
proceedings, and out-of-court claims, among others. The provisions recognised
to cover these events are measured on the basis of the potential economic
content of the ongoing appeals, litigation, claims and general legal or out-of-
court proceedings to which the Group companies are party.
This heading likewise reflects provisions relating to the fair value of the
contingent liabilities identified in the business combination resulting from the
acquisition of the HISPASAT subgroup, mainly those associated with legal and
tax contingencies in Brazil which have yet to be resolved.
At the 2021 reporting date, the Group is involved in a number of ongoing
proceedings, primarily judicial reviews and disciplinary proceedings. The Group
has assessed the risks and does not expect any events to arise that would
amount to liabilities not considered in its financial statements or that would
have a significant impact on its profits.
17
Ot her
Non-current
Li abilities
Other non-current liabilities basically include contract liabilities for the revenue
received in advance under agreements with various telecommunications
operators for the use of the telecommunications network capacity, recognised
in the consolidated income statement based on the duration of the agreements,
with expiry dates up to 2046, and amounting to Euros 26,714 thousand at 31
December 2021 (Euros 28,290 thousand at 31 December 2020).At 31 December
2021 this item also includes Euros 23,716 thousand of revenue received in
advance on account of future satellite capacity services to be rendered (Euros
22,293 thousand at 31 December 2020).
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
This item likewise includes the non-current liabilities arising from the
compensation paid by Électricité de France (hereinafter EDF) under the
agreement signed in 1997 for the adaptation of electricity supply contracts,
which amounted to Euros 23,625 thousand at 31 December 2021 and 2020.
These are multi-year commitments and are therefore subject to the construction
of facilities.
18
Fi na n c ial Ri s k
M an ag e me nt
Pol i c y
The Group’s risk management policy establishes principles and guidelines
to ensure that any significant risks that could affect the objectives and activities
of the Red Eléctrica Group are identified, analysed, assessed, managed and
controlled, and that these processes are carried out systematically and adhering
to uniform criteria.
The Group has continued to apply the same financial risk management policies
as in previous years, which were updated as a result of the health crisis
stemming from COVID-19. In this regard, a contingency plan was launched with
the primary objectives of protecting employee health, guaranteeing electricity
supply and connections through telecommunication assets at all times, and
preserving the Group’s liquidity. This plan continues to be applied in 2021.
A summary of the main guidelines that comprise this policy is as follows:
∫ Risk should generally be managed in accordance with consistent criteria,
distinguishing between the importance of the risk (probability/impact) and the
investment and resources required to reduce it.
82
∫ Financial risk management should be focused on avoiding undesirable
variations in the Group’s core value, rather than generating extraordinary profits.
The Group’s finance management is responsible for managing financial
risk, ensuring consistency with the Group’s strategy and coordinating risk
management across the various Group companies, by identifying the main
financial risks and defining the initiatives to be taken, based on different financial
scenarios.
The methodology for identifying, measuring, monitoring and controlling risk,
as well as the management indicators and measurement and control tools
specific to each risk, are implemented through the Group’s Comprehensive Risk
Management System, which is set forth in the Comprehensive Risk Management
Policy and in the General Comprehensive Risk Management and Control
Procedure.
The financial risks to which the Group is exposed are as follows:
A) MARKET RISK
Market risk reflects variations in the financial markets in terms of prices, interest
and exchange rates, credit conditions and other variables that could affect short-,
medium- and long-term finance costs.
∫ Risk management should be fundamentally proactive and directed towards the
medium and long term, taking into account possible scenarios in an increasingly
global environment.
Market risk is managed on the borrowings to be arranged (the currency, maturity
and interest rates), and through the use of hedging instruments that allow the
financial structure to be modified. Market risk specifically includes:
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Interest rate risk
Interest rate fluctuations change the fair value of assets and liabilities that
accrue interest at fixed rates and the future cash flows from assets and liabilities
indexed to floating interest rates. The financial debt structure at 31 December
2021 and 2020 is as follows:
83
Thousands of Euros
Non-current issues
Non-current bank borrowings
Current issues
Current bank borrowings
Total gross financial debt
Percentage
Fixed rate
3,966,864
1,041,714
405,027
418,292
5,831,897
81 %
2021
Variable rate
14,947
857,729
-
517,734
1,390,409
19 %
Fixed rate
3,756,014
1,516,216
4,329
131,694
5,408,253
82 %
2020
Variable rate
14,940
1,142,618
-
29,303
1,186,860
18 %
The financial debt structure is low risk with moderate exposure to fluctuations
in interest rates, as a result of the debt policy implemented, which aims to bring
the cost of debt into line with the financial rate of return applied to the Group's
regulated assets, among other objectives.
The interest rate risk to which the Group is exposed at 31 December
2021 and 2020 derives from changes in the fair value of derivative financial
instruments and mostly affects equity, but not consolidated profit for the year.
A sensitivity analysis of this risk is as follows (in thousands of Euros):
Thousands of Euros
Effect on consolidated
equity of market interest rate fluctuations
2021
2020
+0.10 %
-0.10 %
+0.10 % -0.10 %
I n t e r e s t r a t e h e d g e s :
Cash flow hedges. Interest rate swap
2,071
(2,042)
4,396
(4,431)
I n t e r e s t r a t e a n d exc h a n g e r a t e h e d g e s :
Cash flow hedges. Cross-currency swap
29
(30)
222
(226)
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
This rise or decline of 0.10 % in interest rates would have decreased or increased
consolidated profit by Euros 1,482 thousand in 2021 and by Euros 2,312
thousand in 2020.
The fair value sensitivity has been estimated using a valuation technique based
on discounting future cash flows at prevailing market rates at 31 December 2021
and 2020.
Currency risk
Currency risk management considers transaction risk arising on cash inflows
and outflows in currencies other than the Euro (essentially USD and BRL),
and translation risk, to which the Company is exposed when consolidating its
subsidiaries and/or assets located in countries where the functional currency
is not the Euro.
With a view to reducing the currency risk on issues in the US private placements
(USPP) market, the Group has arranged cash flow hedges through US Dollar/Euro
cross-currency swaps on the principal and interest, which cover the amount
and total term of the issue up to October 2035 (see notes 19 and 20).
To mitigate transaction risk, in 2021 and 2020 the Group companies arranged
forward cash flow hedges in the form of cross-currency swaps and currency
forwards to hedge highly probable cash flows of certain revenue in US Dollars
and Brazilian Reais and certain payment commitments in Brazilian Reais (see
note 20). Consequently, a strengthening or weakening of the Euro by 10 % against
the hedged currencies would have given rise to the following changes in the
market value of these derivatives at 31 December 2021:
84
Thousands of Euros
Effect on consolidated
equity of exchange rate fluctuations
US Dollar
Brazilian Real
Total
+10 % appreciation of Euro
-10 % depreciation of Euro
21,152
494
21,647
(25,730)
(604)
(26,334)
In order to mitigate the translation risk on assets located in countries whose
functional currency is not the Euro, the Group finances a portion of such
investments in the functional currency of those countries. The Group has also
arranged hedges of net investments in US Dollars using cross-currency swaps
up to January 2026 (see note 20). Consequently, had the Euro simultaneously
strengthened or weakened by 10 % against the currencies to which the Group
is exposed at year end, equity attributable to the Parent would have decreased
or increased by approximately Euros 34 million, of which Euros 10 million would
have been caused by the US Dollar and Euros 23 million by the Brazilian Real
(Euros 32 million at 31 December 2020, of which Euros 9 million would have been
caused by the US Dollar and Euros 23 million by the Brazilian Real).
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Price risk
The Group is exposed to price risk relating to equity instruments classified
as financial assets at fair value through other comprehensive income in
the consolidated statement of financial position. Equity investments on quoted
markets basically comprise the 5 % interest held by the Group in REN. At 31
December 2021 had the listed share price of the Portuguese company REN been
10 % higher or lower, equity would have increased or decreased, respectively,
by approximately Euros 6 million (Euros 6 million in 2020).
At year end the Group's exposure to credit risk in connection with the fair value
of its derivatives is insignificant, having entered into collateral assignment
agreements entailing collateral swaps with various counterparties since 2015
in order to mitigate this risk.
85
At 31 December 2021, less than 1 % of balances are past due (less than
2 % in 2020), and the companies do not consider there to be any risk as regards
recoverability. The credit quality of the receivables is considered to be high.
B) CREDIT RISK
In light of the nature of revenues from electricity transmission and electricity
system operation, and the solvency of the electricity system agents, the Red
Eléctrica Group’s principal activities are not significantly exposed to credit
risk. For the Group’s other activities, credit risk is mainly managed through
instruments to reduce or limit such risk.
In any event, credit risk is managed through policies that contain certain
requirements regarding counterparty credit quality, and further guarantees
are requested when necessary.
C) LIQUIDITY RISK
Liquidity risk arises due to differences between the amounts or dates
of collection and payment of the Group companies' assets and liabilities.
Liquidity risk is mostly managed by controlling the timing of financial debt and
maintaining a considerable volume of available capital during the year, setting
maximum limits of amounts falling due for each period defined. This process is
carried out at Group company level, in accordance with the practices and limits
set by the Group. The limits established vary according to the geographical area,
so as to ensure that the liquidity of the market in which the companies operate
is taken into account. Furthermore, the liquidity risk management policy entails
preparing cash flow projections in the main currencies in which the Group
operates, taking into consideration the level of liquid assets and funds available
according to these projections, and monitoring the liquidity indicators as per the
consolidated statement of financial position and comparing these with market
requirements.
The Group's financial debt at 31 December 2021 has an average maturity of
5.0 years (5.3 years at 31 December 2020). Details of the maturities of issues
and bank borrowings are provided in note 19.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The Group has a robust financial position which has been consistently
strengthened since the previous year to tackle the COVID-19 health crisis.
Moreover, liquidity has been bolstered through the issue of new bonds in
an amount of Euros 600 million in 2021 and Euros 1,100 million in 2020
(see note 19).
The Group's liquidity position for 2021 was based on its robust capacity to
generate cash flows, supported by undrawn credit facilities. At 31 December
2021 the undrawn amount of these credit facilities is Euros 1,853 million
(non-current balance of Euros 1,717 million and current balance of Euros 136
million). The Group's liquidity position ensures it will be able to meet operating
cash flow requirements, honour debt maturities in 2022 and 2023, and
address any adverse situations that might arise in the financial markets
in the coming months.
86
Thanks to its solid financial position, the Group has not had to request state aid
to alleviate the economic effects of the COVID-19 crisis.
19
Fin ancial
Assets and Financial
Li abilities
A) FINANCIAL ASSETS
Details of the Red Eléctrica Group's current and non-current financial assets
at 31 December 2021 and 2020 are as follows:
Thousands of Euros
Equity instruments
Derivatives
Other financial assets
Non-current
Other financial assets
Derivatives
Current
Total
At fair value through other
comprehensive income
At fair value
through profit or loss
At amortised cost
Hedging derivatives
85,368
-
-
85,368
-
-
-
85,368
4,329
-
1,050
5,379
-
-
-
5,379
-
-
23,942
23,942
25,401
-
25,401
49,343
-
23,592
-
23,592
-
91
91
23,683
31/12/2021
Total
89,697
23,592
24,992
138,281
25,401
91
25,492
163,773
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Thousands of Euros
Equity instruments
Derivatives
Other financial assets
Non-current
Other financial assets
Derivatives
Current
Total
At fair value through other
comprehensive income
At fair value
through profit or loss
At amortised cost
Hedging derivatives
79,363
-
-
79,363
-
-
-
79,363
4,078
-
3,895
7,973
-
-
-
7,973
-
-
28,869
28,869
35,812
-
35,812
64,681
-
146
-
146
-
19,991
19,991
20,137
31/12/2020
87
Total
83,441
146
32,764
116,351
35,812
19,991
55,803
172,154
Equity instruments
Equity instruments essentially comprise the 5 % interest held by the Group in
REN, a holding company that encompasses the operation and use of electricity
transmission assets and various gas infrastructures in Portugal. This interest
was acquired in 2007 for Euros 98,822 thousand. In 2017 the Group subscribed
6,659,563 new shares in the share capital increase carried out by REN for an
amount of Euros 12,500 thousand, thereby maintaining its 5 % interest in this
company.
At 31 December 2020 REN's consolidated equity totalled Euros 1,407,700
thousand and the profit after tax amounted to Euros 109,249 thousand.
These instruments were classified as financial assets measured at fair value
through other comprehensive income (see note 2 b). The value of this investment
is subject to the listed share price (Level 1). In 2021 the fair value of this
equity instrument increased, and the corresponding valuation adjustment was
recognised directly under equity.
At 31 December 2021 the Group has calculated the increase in value of this
investment as Euros 6,005 thousand (a Euros 11,843 thousand decrease in
2020).
In 2021 this item also includes the investments made by the Group company
Red Eléctrica de Telecomunicaciones, Innovación y Tecnología, S.A.U. (hereinafter
RETIT) in various innovative entities, primarily the investments in Adara Ventures
III, S.C.A. and Cardumen Fund I, FCRE, which are measured at fair value through
profit or loss. Gains of Euros 376 thousand were recognised in the consolidated
income statement in 2021 in relation to these investments.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Derivatives
Details of derivative financial instruments are provided in note 20.
Other financial assets
Other financial assets at amortised cost primarily reflect the loan of Euros 12,338
thousand extended to TEN (Euros 17,457 thousand at 31 December 2020), which
earns interest at a Libor-pegged rate plus 270 b.p., and guarantees and loans
extended by the Group to its personnel, which fall due in the long term. There are
no significant differences between the fair value and the carrying amount at 31
December 2021 and 2020.
Other financial assets at fair value through profit or loss also comprise
the investment in economic interest groups (EIGs), measured at Euros 1,050
thousand (Euros 3,895 thousand in 2020). These EIGs engage in the lease
of assets operated by an unrelated party, which retains most of the risks and
rewards of the activity, while the Group only avails of the tax incentives pursuant
to Spanish legislation. The Group recognises the tax losses incurred by these
EIGs against the investments, together with the corresponding finance income
(see note 24 e) reflecting the difference compared to income tax payable to the
taxation authorities.
Fair value hierarchy levels
Details of the Group's financial assets measured at fair value using the inputs
defined for this calculation at 31 December 2021 and 2020 are as follows:
88
Thousands of Euros
31/12/2021
Level 1
Level 2
Level 3
Total balance
Equity instruments
Derivatives
Other financial assets
84,900
-
4,797
-
-
23,683
1,050
-
-
89,697
23,683
1,050
31/12/2020
Equity instruments
Derivatives
Other financial assets
Level 1
Level 2
Level 3
Total balance
78,895
-
4,546
-
-
20,137
3,895
-
-
83,441
20,137
3,895
Level 1 equity instruments reflect the 5 % interest held by the Group in the listed
company REN. Level 3 includes the equity investments in ACEFAT and CORESO,
and the investments made by RETIT in innovative investment funds
and companies.
Other financial assets classified within Level 2 comprise the investments in
economic interest groups (EIGs).
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
B) FINANCIAL LIABILITIES
Details of the Red Eléctrica Group's current and non-current financial liabilities
at 31 December 2021 and 2020 are as follows:
89
Thousands of Euros
31/12/2021
Thousands of Euros
Loans and borrowings
Bonds and other marketable securities
Derivatives
Other financial liabilities
Non-current
Loans and borrowings
Bonds and other marketable securities
Derivatives
Other financial liabilities
Current
Total
Financial
liabilities
1,899,560
3,996,610
-
57,264
Hedging
derivatives
-
-
16,436
-
Total
1,899,560
3,996,610
16,436
57,264
Loans and borrowings
Bonds and other marketable securities
Derivatives
Other financial liabilities
Financial
liabilities
2,658,888
3,768,756
-
57,760
Hedging
derivatives
-
-
50,350
-
31/12/2020
Total
2,658,888
3,768,756
50,350
57,760
5,953,434
16,436
5,969,870
Non-current
6,485,404
50,350
6,535,755
945,757
445,965
-
752,703
2,144,425
8,097,859
-
-
5,129
-
5,129
21,565
945,757
445,965
5,129
752,703
2,149,554
8,119,424
Loans and borrowings
Bonds and other marketable securities
Derivatives
Other financial liabilities
Current
Total
171,799
43,174
-
608,794
823,767
-
-
220
-
220
171,799
43,174
220
608,794
823,987
7,309,171
50,570
7,359,742
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Loans and borrowings,
bonds and other marketable securities
The carrying amount and fair value of loans and borrowings and issues of bonds
and other marketable securities at 31 December 2021 and 2020, excluding
interest payable, are as follows:
Thousands of Euros
Carrying amount
Fair value
2021
2020
2021
2020
Issues in Euros
Issues in US Dollars
4,026,747
3,422,760
4,172,723
3,664,320
374,890
350,324
471,183
475,298
Bank borrowings in Euros
2,439,008
2,458,241
2,463,081
2,502,412
Bank borrowings in foreign currency
396,461
361,589
421,014
387,388
Total
7,237,106
6,592,914
7,528,001
7,029,418
The fair value of all bank borrowings and issues has been estimated using
valuation techniques based on discounting future cash flows at the market rates
in force at each date (Level 2 of the hierarchy).
At 31 December 2021 the accrued interest payable amounts to Euros 50,787
thousand (Euros 49,702 thousand in 2020).
90
Issues in Euros at 31 December 2021 reflect the Eurobonds issued by Red
Eléctrica Financiaciones, S.A.U. (hereinafter REF) and REC, totalling Euros
4,026,747 thousand (Euros 3,422,759 thousand in 2020). The Group issued debt
in an amount of Euros 600 million in 2021 under the Euro Medium Term Note
(EMTN) Programme in the Euromarket.
Issues in US Dollars at 31 December 2021 amounted to Euros 374,890 thousand
(Euros 350,324 thousand in 2020), comprising a US Dollars 500 million issue
on the US private placement (USPP) market, of which US Dollars 250 million
is still payable (Euros 220,731 thousand at the 2021 year end), as well as three
US Dollar bond issues made in Peru, of which Euros 179 million is still payable
at 31 December 2021 (Euros 147 million in 2020) (see note 18 for an analysis
of currency risk).
Bank borrowings in Euros at 31 December 2021 include non-current loans
and credit facilities totalling Euros 1,939,008 thousand (Euros 1,929,870
thousand in 2020) and syndicated credit facilities amounting to Euros 500,000
thousand (Euros 525,000 thousand in 2020).
Bank borrowings in foreign currency at 31 December 2021 mainly include
non-current loans and credit facilities in US Dollars amounting to Euros 396,461
thousand (Euros 361,589 thousand in 2020).
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Details of the maturities of bond issues and bank borrowings at 31 December
2021 are as follows:
91
Thousands of Euros
Issues in Euros
Issues in US Dollars
Bank borrowings in Euros
Bank borrowings in US Dollars
Total
2022
400,000
5,197
842,189
91,816
1,339,202
2023
300,000
5,583
195,120
91,436
592,139
2024
-
5,992
331,527
152,590
2025
2026
Thereafter
900,000
138,858
114,866
725
500,000
1,990,000
6,874
413,522
854
216,001
543,573
62,014
490,109
1,154,449
921,250
2,811,588
Maturities at 31 December 2021
Amortised cost and
other adjustments
(63,253)
(3,615)
(1,789)
(2,974)
(71,631)
Total
4,026,747
374,890
2,439,008
396,461
7,237,106
The average interest rate of loans and borrowings and bond issues was 1.52 %
in 2021 (1.74 % in 2020).
Thousands of Euros
Debt securities requiring a prospectus to be filed
Debt securities not requiring a prospectus to be filed
Other debt securities issued outside EU member states
Total
At 31 December 2021 Group companies have undrawn credit facilities amounting
to Euros 1,853 million, of which Euros 1,717 million expire in the long term (Euros
1,645 million at 31 December 2020) and Euros 136 million in the short term
(Euros 285 million at 31 December 2020).
Details of bonds and other marketable securities at 31 December 2021 and 2020
are as follows:
Opening
outstanding
balance at
31/12/2020
(+) Issues
3,422,760
600,000
-
350,324
3,773,084
-
600,000
(-)
Repurchases
or
redemptions
-
-
(4,586)
(4,586)
(+/-)
Exchange
rate and other
adjustments
3,987
-
29,152
33,139
31/12/2021
Closing
outstanding
balance at
31/12/2021
4,026,747
-
374,890
4,401,637
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Thousands of Euros
Debt securities requiring a prospectus to be filed
Debt securities not requiring a prospectus to be filed
Other debt securities issued outside EU member states
Total
Opening
outstanding
balance at
31/12/2019
(+) Issues
(-)
Repurchases
or
redemptions
3,086,602
2,165,356
(1,830,452)
-
544,496
-
-
-
(152,752)
3,631,098
2,165,356
(1,983,204)
(+/-)
Exchange
rate and other
adjustments
1,254
-
(41,420)
(40,166)
92
31/12/2020
Closing
outstanding
balance at
31/12/2020
3,422,760
-
350,324
3,773,084
In 2021 and 2020 changes in debt securities requiring a prospectus to be filed
relate to issues registered in Dublin and Luxembourg.
Details of changes in liabilities related to financing instruments during 2021,
distinguishing between those that entailed cash flows and those that did not,
are as follows:
Thousands of Euros
Movements not entailing cash flows
Issues in Euros
Issues in US Dollars
Bank borrowings in Euros
Bank borrowings in foreign currency
Total debt
31/12/2020
3,422,760
350,324
2,458,241
361,589
6,592,914
Movements
entailing
cash flows
600,000
(4,586)
(11,867)
3,754
587,301
Exchange
differences
-
29,275
-
30,668
59,943
Other
changes
3,987
(123)
(7,366)
450
(3,052)
31/12/2021
4,026,747
374,890
2,439,008
396,461
7,237,106
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Derivatives
Details of derivative financial instruments are provided in note 20.
Other financial liabilities
Details of other financial liabilities at 31 December 2021 and 2020 are
as follows:
Thousands of Euros
Non-current lease payables
Suppliers of fixed assets and other payables
Total non-current
Dividend payable (note 13)
Current lease payables
Suppliers of fixed assets
Other payables
Total current
Total other financial liabilities
31/12/2021
31/12/2020
19,865
37,399
57,264
147,061
8,068
315,374
282,200
752,703
809,967
13,079
44,681
57,760
146,984
2,490
310,901
148,419
608,794
666,554
Suppliers of fixed assets essentially reflect balances incurred on the construction
of electricity and telecommunication facilities.
As regards lease payables, details of the future minimum lease payments
are as follows:
Thousands of Euros
Future minimum lease
payments
2022
2023
2024
2025
2026
Thereafter
Total
8,068
7,865
4,154
2,768
827
4,250 27,933
In its position as lessee, the Group does not forecast significant future
cash outflows to which it may potentially be exposed, and it considers that all
estimated lease liabilities are duly detailed.
93
Other payables basically comprise certain items pending settlement with respect
to the Spanish electricity system and security deposits received.
Fair value hierarchy levels
The fair value hierarchy levels at 31 December 2021 and 2020 of non-current and
current financial liabilities measured at fair value are as follows:
Thousands of Euros
31/12/2021
Loans and borrowings
Bonds and other marketable securities
Derivatives
Total
Level 1
Level 2
Level 3
Total balance
-
-
-
-
2,835,469
4,401,637
21,565
7,258,671
-
-
-
-
2,835,469
4,401,637
21,565
7,258,671
Thousands of Euros
31/12/2020
Loans and borrowings
Bonds and other marketable securities
Derivatives
Total
Level 1
Level 2
Level 3
Total balance
-
-
-
-
2,819,830
3,773,084
50,571
6,643,485
-
-
-
-
2,819,830
3,773,084
50,571
6,643,485
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Loans and borrowings, bonds and other issuances, and exchange rate and
interest rate derivatives are all categorised within Level 2. There are no significant
differences between the fair value and the carrying amount at 31 December 2021
and 2020.
The Group’s fair value estimates reflect the assumptions of market participants
based on the information available and market conditions at the date these
financial statements were drawn up, incorporating, where appropriate, risk
premiums arising from the increased uncertainty and other impacts caused by
the COVID-19 crisis, adjusting the estimates for own and counterparty credit risk
and taking into consideration the fact that unobservable inputs have become
significant.
20
D er i vat i ve
Fi na n c ial
In s t rum en ts
In line with its financial risk management policy, the Red Eléctrica Group has
arranged four types of derivative financial instruments: interest rate swaps,
forward interest rate swaps, cross-currency swaps and currency forwards.
94
Interest rate swaps consist of exchanging debt at variable interest rates for
debt at fixed rates, in a swap where the future cash flows to be hedged are
the interest payments. Forward interest rate swaps cover the finance cost of
highly probable forecast future transactions. Similarly, cross-currency swaps
allow fixed- or variable-rate debt in US Dollars to be exchanged for fixed- or
variable-rate debt in Euros, thereby hedging future interest and capital flows
in US Dollars, future variable-rate interest flows in Euros and currency risk
related with highly probable forecast transactions in US Dollars. Lastly, currency
forwards hedge currency risk related with highly probably forecast transactions
denominated in a currency other than the Euro.
As regards the measurement of derivative financial instruments and hedging
instruments disclosed in these notes, the application of IFRS 13 (see note 4 n)
entails an adjustment to the valuation techniques used to calculate the fair value
of derivative financial instruments. The Group has incorporated a credit risk
adjustment to reflect own and counterparty risk in the fair value of derivatives
using generally accepted measurement models.
To eliminate the credit risk from the cross-currency swaps arranged to hedge
the exchange rate for USPP issuance, collateral assignment agreements
entailing collateral swaps were entered into with the counterparties in 2015.
When determining the credit risk adjustment for other derivatives, the Group
applied a technique based on calculating total expected exposure (which
considers current and potential exposure) through the use of simulations,
adjusted for the probability of default over time and for loss given default
allocable to the Group and to each counterparty.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The Group has observed that the impact of using Level 3 inputs for the overall
measurement of derivative financial instruments is not significant. Consequently,
the Group has determined that the entire derivative financial instrument portfolio
can be categorised within Level 2 of the fair value hierarchy.
95
As regards observable inputs, the Group uses mid-market prices obtained from
reputable external information sources in the financial markets.
The total expected exposure of derivative financial instruments is determined
using observable market inputs, such as interest rate curves, exchange rates
and volatilities based on market conditions at the measurement date.
The inputs used to determine own and counterparty credit risk (probability
of default) are mostly based on own credit spreads and those of comparable
companies currently traded on the market (credit default swap (CDS) curves,
IRR of debt issues, etc.).
Furthermore, adjustments of fair value for credit risk take into account credit
enhancements for guarantees and collateral when determining the loss given
default to be used for each position. Loss given default is considered to be
constant over time. A minimum recovery rate of 40 % has been used in cases
where there is no credit enhancement for guarantees or collateral.
Based on the fair value hierarchy levels detailed in note 4, the Group has
considered that the majority of the inputs used to determine the fair value of
derivative financial instruments are categorised within Level 2, including the data
used to calculate the own and counterparty credit risk adjustment.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Details of hedges at 31 December 2021 and 2020 in thousands of Euros
are as follows:
Average rate per derivative
Non-current
96
2021
Current
Principal
Term
to expiry
Payable
Receivable
Assets
Liabilities
Assets Liabilities
Thousands of Euros
I n t e r e s t r a t e h e d g e s :
- Cash flow hedges:
Interest rate swap
Interest rate swap
- Forward cash flow hedges:
E xc h a n g e r a t e h e d g e s :
- Hedges of a net investment:
Cross-currency swap
- Forward cash flow hedges:
Cross-currency swap
Currency forward
Currency forward
I n t e r e s t r a t e a n d exc h a n g e r a t e h e d g e s :
- Cash flow hedges (cross-currency swaps):
Interest rate hedges
Exchange rate hedges
Total
Euros 225,000 thousand
Up to 2022
0.34 %
EURIBOR
Euros 43,621 thousand
Up to 2031
0.72 %
EURIBOR+0.38 %
Forward interest rate swap beginning in 2022
Euros 20,921 thousand
Up to 2031
0.72 %
EURIBOR+0.38 %
Forward interest rate swap beginning in 2023
Euros 100,000 thousand
Up to 2029
Forward interest rate swap beginning in 2024
Euros 100,000 thousand
Up to 2030
Forward interest rate swap beginning in 2025
Euros 200,000 thousand
Up to 2031
0.32 %
0.06 %
0.20 %
EURIBOR
EURIBOR
EURIBOR
-
438
207
1,131
1,655
2,758
6,099
-
-
-
-
-
-
(1,673)
-
-
-
(9,535)
(5,228)
-
-
-
-
-
-
-
-
-
-
-
33
58
-
-
(1,544)
-
-
-
-
-
-
-
(3,585)
-
-
-
23,592
(16,436)
91
(5,129)
US Dollars 150,000 thousand
Up to 2026
US Dollars 161,432 thousand
Up to 2031
US Dollars 189,598 thousand
Up to 2025
Brazilian Reais 45,885 thousand
Up to 2022
-
-
-
-
-
-
-
-
US Dollars 250,000 thousand
US Dollars 250,000 thousand
Up to 2035
Up to 2035
4.12 % EUR
5.35% USD
-
-
(3,496)
14,800
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Thousands of Euros
I n t e r e s t r a t e h e d g e s :
- Cash flow hedges:
Interest rate swap
Interest rate swap
- Forward cash flow hedges:
Forward interest rate swap beginning in 2021
Forward interest rate swap beginning in 2022
Forward interest rate swap beginning in 2023
E xc h a n g e r a t e h e d g e s :
- Hedges of a net investment:
Cross-currency swap
- Forward cash flow hedges:
Currency forward
Currency forward
I n t e r e s t r a t e a n d exc h a n g e r a t e h e d g e s :
- Cash flow hedges (cross-currency swaps):
Interest rate hedges
Exchange rate hedges
Total
Principal
Term
to expiry
Assets
Liabilities
Assets
Liabilities
Non-current
2020
Current
97
Euros 225,000 thousand
Euros 21,249 thousand
Euros 260,000 thousand
Euros 300,000 thousand
Euros 100,000 thousand
Up to 2022
Up to 2021
Up to 2027
Up to 2028
Up to 2029
US Dollars 150,000 thousand
Up to 2021
-
-
-
-
-
-
US Dollars 40,833 thousand
Brazilian Reais 11,075 thousand
Up to 2021
Up to 2021
146
-
(3,597)
-
(17,523)
(15,096)
(3,639)
-
-
-
-
-
-
-
-
16,228
3,713
50
US Dollars 250,000 thousand
US Dollars 250,000 thousand
Up to 2035
Up to 2035
-
-
(8,297)
(2,198)
-
-
-
(220)
-
-
-
-
-
-
-
-
146
(50,350)
19,991
(220)
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Details of expected cash flows from derivatives at 31 December 2021 and 2020,
which are similar to the expected impact on profit or loss, by year of occurrence,
are as follows:
98
Principal
Term to
expiry
2022
2023
2024
2025
2026
2027 and
thereafter
Total
Maturities at 31 December 2021
Thousands of Euros
I n t e r e s t r a t e h e d g e s :
- Cash flow hedges:
Interest rate swap
Interest rate swap
- Forward cash flow hedges:
E xc h a n g e r a t e h e d g e s :
- Hedges of a net investment:
Cross-currency swap
- Forward cash flow hedges:
Cross-currency swap
Currency forward
Currency forward
I n t e r e s t r a t e a n d exc h a n g e r a t e h e d g e s :
- Cash flow hedges (cross-currency swaps):
Interest rate hedges
Exchange rate hedges
Total
Euros 225,000 thousand
Up to 2022
(1,544)
Euros 43,621 thousand
Up to 2031
Forward interest rate swap beginning in 2022
Euros 20,921 thousand
Up to 2031
Forward interest rate swap beginning in 2023
Euros 100,000 thousand
Up to 2029
Forward interest rate swap beginning in 2024
Euros 100,000 thousand
Up to 2030
Forward interest rate swap beginning in 2025
Euros 200,000 thousand
Up to 2031
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,544)
438
433
207
(542)
1,655
2,758
207
(542)
1,655
2,758
-
6,099
-
6,099
US Dollars 150,000 thousand
Up to 2026
US Dollars 161,432 thousand
Up to 2031
US Dollars 189,598 thousand
Up to 2025
(3,552)
(3,486)
(1,383)
(359)
Brazilian Reais 45,885 thousand
Up to 2022
58
US Dollars 250,000 thousand
US Dollars 250,000 thousand
Up to 2035
Up to 2035
-
-
-
-
-
(5,038)
(3,486)
(1,383)
-
-
-
-
-
(644)
8,880
7,877
-
-
-
-
-
6,099
(9,535)
-
-
(9,535)
(8,781)
58
(2,852)
5,920
(1,951)
(3,496)
14,800
2,118
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Principal
Term to
expiry
2021
2022
2023
2024
2025
2026 and
thereafter
Total
Maturities at 31 December 2020
99
Thousands of Euros
I n t e r e s t r a t e h e d g e s :
Cash flow hedges:
Interest rate swap
Interest rate swap
- Forward cash flow hedges:
E xc h a n g e r a t e h e d g e s :
- Hedges of a net investment:
Cross-currency swap
- Forward cash flow hedges:
Currency forward
Currency forward
I n t e r e s t r a t e a n d exc h a n g e r a t e h e d g e s :
- Cash flow hedges (cross-currency swaps):
Interest rate hedges
Exchange rate hedges
Total
Euros 225,000 thousand
Up to 2022
-
(3,597)
Euros 21,249 thousand
Up to 2021
(220)
Forward interest rate swap beginning in 2021
Euros 260,000 thousand
Up to 2027
Forward interest rate swap beginning in 2022
Euros 300,000 thousand
Up to 2028
Forward interest rate swap beginning in 2023
Euros 100,000 thousand
Up to 2029
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,597)
(220)
(17,523)
(17,523)
(15,096)
(15,096)
(3,639)
(3,639)
-
16,228
-
-
3,859
50
379
(1,319)
(940)
(8,676)
(879)
(8,297)
(2,198)
(45,813)
(30,433)
US Dollars 150,000 thousand
Up to 2021
16,228
US Dollars 40,833 thousand
Up to 2021
Brazilian Reais 11,075 thousand
Up to 2020
3,713
50
146
-
US Dollars 250,000 thousand
US Dollars 250,000 thousand
Up to 2035
Up to 2035
-
-
-
-
19,771
(3,451)
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The Group has recognised the following amounts in 2021 and 2020 as a result
of the cash flow hedges:
100
Thousands of Euros
Financial
liabilities at
amortised
cost
Hedging
derivatives (*)
Equity-
accounted
investees
2021
Total
Financial
liabilities at
amortised
cost
Hedging
derivatives (*)
Equity-
accounted
investees
2020
Total
Gains/(Losses) recognised in the consolidated income statement
3,540
2,408
-
5,948
4,094
Gains/(Losses) recognised in the consolidated statement
of comprehensive income
Total
(*) Cash flow hedge for a highly probably forecast transaction.
21
Tra d e
an d O t h er
Paya bles
12,503
16,043
(8,516)
(6,108)
23,938
27,925
23,938
33,873
(18,486)
(14,392)
1,519
2,299
3,818
-
5,613
(11,807)
(16,187)
(11,807)
(10,574)
Details of this item at 31 December 2021 and 2020 are as follows:
Thousands of Euros
Suppliers
Other payables
Current tax liabilities (note 22)
Total
2021
382,309
409,459
10,887
802,655
2020
460,502
92,257
24,961
577,720
Suppliers comprise amounts not yet due for the purchase of goods and services
in the course of trade operations, essentially payables arising from repairs,
maintenance work and modifications to facilities.
Suppliers include current liabilities arising from contracts with customers in
an amount of Euros 54,541 thousand at 31 December 2021. These liabilities were
recognised as advances on account of future services to be rendered, essentially
telecommunication capacity, work to modify third-party lines and the provision
of insurance services. An amount of Euros 36,251 thousand was recognised
in profit or loss under current liabilities from contracts with customers in 2021.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Other payables mainly reflect items pending reimbursement in respect of
provisional tariffs, which have arisen due to the difference between the amount
settled and collected and the revenue accrued from 2016 to 2021 (see notes 3
and 24). This item also includes VAT payable to the taxation authorities,
salaries payable and other amounts not yet due for the purchase of goods
and services.
22
Ave rag e S uppl ier Payme nt Peri od.
" Repor t in g Req ui rement". Third
A ddit i on al Provi s ion of Law 15/20 1 0
of 5 J uly 2 010
The Spanish Accounting and Auditing Institute (ICAC) resolution of 29 January
2016, concerning the information that must be disclosed in the notes to
the annual accounts in relation to the average supplier payment period in
commercial transactions, clarifies and systematises the information that
trading companies must include in the notes to individual and consolidated
annual accounts, in compliance with the reporting requirement of the third
additional provision of Law 15/2010 of 5 July 2010, which amends Law 3/2004
of 29 December 2004, establishing measures to combat late payments in
commercial transactions.
The scope of this resolution also extends to trading companies that prepare
consolidated annual accounts, although only with respect to fully consolidated
subsidiaries or equity-accounted investees registered in Spain, irrespective
of the financial reporting framework under which the accounts are prepared.
The information on the average supplier payment period for 2021 and 2020
is as follows:
101
2021
43
45
10
2020
46
47
13
2021
362,944
15,498
2020
372,430
14,187
Days
Average supplier payment period
Transactions paid ratio
Transactions payable ratio
Thousands of Euros
Total payments made
Total payments outstanding
23
Taxation
The tax group headed by Red Eléctrica Corporación, S.A. has filed consolidated
tax returns in Spain since 2002 (tax group No. 57/02). At 31 December 2021 the
tax group includes the Parent, REE, REI, REEF, REF, REINTEL, REINCAN, RESTEL,
RETIT, HISPASAT S.A. and Hispasat Canarias S.L.
In 2021, Red Eléctrica de España Finance, S.L.U. (formerly Red Eléctrica de
España Finance B.V.) relocated its registered office to Spain, joining the Red
Eléctrica tax group as a subsidiary with effect from 1 January 2021. Companies
that do not form part of the tax group are subject to the legislation applicable
in their respective countries.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents A reconciliation of the prevailing tax rate in Spain with the tax rate applicable
to the Group is as follows:
Thousands of Euros
Consolidated accounting profit for the year before tax
Permanent differences and consolidation adjustments
Consolidated taxable accounting income
Tax rate
2021
2020
888,077
(12,979)
875,098
25 %
805,991
(41,651)
764,340
25 %
Consolidated taxable accounting income multiplied by tax rate
218,775
191,085
Effect of applying different tax rates
Tax calculated at the tax rate of each country
Deductions
Other adjustments
Income tax
Current income tax
Deferred income tax
Effective tax rate
8,248
227,022
(8,423)
(16,806)
201,793
212,378
(10,585)
22.72 %
6,667
197,752
(8,115)
5,114
194,751
225,669
(30,918)
24.16 %
The effective rate of income tax is primarily influenced by permanent
differences and by deductions in tax payable. The effective tax rate in 2021
is 22.72 % (24.16 % in 2020).
In 2021 permanent differences essentially pertain to investment management
expenses associated with dividends from the subsidiaries in the year, regulated
in article 21.10 of Income Tax Law 27/2014 of 17 November 2014, which are
considered non-deductible, and to the capitalisation reserve adjustment arising
from the increase in equity in accordance with article 25 of Law 27/2014. As
permitted by article 62.1 d) of Law 27/2014, the capitalisation reserve for 2021
will be appropriated by the Parent (see note 14).
In 2020, permanent differences, not including consolidation adjustments,
mainly related to the adjustment in respect of the capitalisation reserve, which
was likewise appropriated by the Parent, in accordance with article 62.1 d) of
Law 27/2014.
102
In 2021 and 2020 permanent differences arising from consolidation adjustments
primarily stem from gains/losses on equity-accounted investments, associated
with different Group entities, which have no tax effect at consolidated level.
Deductions mainly relate to international double taxation relief, research,
development and technological innovation expenditure, and donations.
Given the financial nature of the deduction for investments in fixed assets
in the Canary Islands, it is treated as a grant, and its impact on the consolidated
income statement is deferred over several years based on the useful lives of
the assets associated with this incentive (see note 4 j).
Deductions recognised as grants in 2021 amount to Euros 4,892 thousand
(Euros 4,500 thousand in 2020) and the amount still to be recognised at 31
December 2021 is Euros 125,871 thousand (Euros 113,798 thousand in 2020).
Other adjustments essentially comprise the income tax expense from prior
years. The deduction for research and development expenditure applied
in 2020, amounting to Euros 19,570 thousand, was recognised in 2021.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Current receivables from and payables to public entities at 31 December 2021
and 2020 are as follows:
103
Thousands of Euros
2021
2020
D e f e r r e d t a x a s s e t s :
Originating in prior years
Movement in the year
Total gross deferred tax assets
Offsetting of deferred taxes from the tax group in Spain
Total net deferred tax assets
D e f e r r e d t a x l i a b i l i t i e s :
Originating in prior years
Movement in the year
Total gross deferred tax liabilities
Offsetting of deferred taxes from the tax group in Spain
Total net deferred tax liabilities
Income statement,
Business
combinations
and other
Income
and expense
recognised
directly in equity
Variation
Variation
Total
118,889
(8,062)
110,827
505,522
(18,647)
486,875
72,545
(8,491)
64,054
15,249
-
15,249
191,433
(16,553)
174,880
(104,313)
70,567
520,771
(18,647)
502,124
(104,313)
397,811
Income
statement
Variation
107,845
11,044
118,889
525,396
(19,874)
505,522
Income
and expense
recognised
directly in equity
Variation
Total
33,411
39,134
72,545
16,134
(885)
15,249
141,256
50,178
191,433
(103,418)
88,015
541,530
(20,759)
520,771
(103,418)
417,353
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Deferred tax assets and liabilities at 31 December 2021 and 2020 are
as follows:
104
Thousands of Euros
Commitments with personnel
Impairment of fixed assets
Financial derivatives
Unused deductions
Translation differences
Balance sheet revaluations - Law 16/2012
Limit on deductible depreciation/amortisation - Law 16/2012
Other
Offsetting of deferred assets and liabilities
Total deferred tax assets
Accelerated depreciation and amortisation
Non-deductible assets
Other
Offsetting of deferred assets and liabilities
Total deferred tax liabilities
2021
22,857
28,004
22,277
18,741
29,238
17,797
13,643
22,325
(104,313)
70,567
455,364
11,711
35,049
(104,313)
397,811
2020
24,944
30,942
24,763
22,842
32,279
18,715
17,302
19,646
(103,418)
88,015
473,717
13,251
33,803
(103,418)
417,353
In the consolidated statement of financial position the Group has offset deferred
tax assets and deferred tax liabilities arising from the Spanish tax group in an
amount of Euros 104,313 thousand, as permitted by IAS 12 (Euros 103,418
thousand in 2020).
At 31 December 2021, deferred tax assets and liabilities are expected to be
recovered and settled as follows:
Deferred tax assets
Deferred tax liabilities
Gross total
More than 1 year
Less than 1 year
174,880
502,124
169,270
481,689
5,610
20,435
Adjustment for offsetting
of assets and liabilities
(104,313)
(104,313)
Net total
70,567
397,811
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The recovery/settlement of the Group's deferred tax assets/liabilities is
dependent on certain assumptions, which could change.
Deferred tax assets include reversals of tax prepaid in 2013 and 2014 as
a result of applying the limitation on the tax deductibility of depreciation and
amortisation charges stipulated in article 7 of Law 16/2012 of 27 December
2012, which introduced several fiscal measures to consolidate public
finances and boost economic activity, and those arising as a result of the
commencement, in 2015, of depreciation and amortisation for tax purposes
of the net increase in value resulting from the revaluations applied to the
balance sheet at 31 December 2012, pursuant to article 9 of the same Law.
This item also comprises amounts relating to changes in value of cash flow
hedges, long-term employee benefits, asset impairment and unused tax
deductions.
At 31 December 2021 the Group has unrecognised deferred tax assets
amounting to Euros 10,045 thousand in respect of unused deductions for
R&D&i expenditure (Euros 10,365 thousand in 2020). These assets were
generated in 2011-2019 and are available until 2030-2038.
In 2021, the Group applied for monetisation of unused deductions of
Euros 1,279 thousand (Euros 10,565 thousand in 2020) in respect of R&D&i
expenditure. Moreover, the Group has deferred tax assets totalling Euros 6,947
thousand (Euros 8,226 thousand in 2020) for R&D&i deductions, for which it
may request a refund from the taxation authorities in future tax returns.
Deferred tax liabilities essentially relate to the accelerated depreciation for tax
purposes of certain fixed assets and the inclusion of the assets and liabilities
of REDALTA and INALTA, the companies absorbed by REC in 2006. In 2020,
deferred tax liabilities due to accelerated depreciation/amortisation as provided
for in the 11th additional provision of Royal Legislative Decree 4/2004, and
the 34th transitional provision of Income Tax Law 27/2014, amounted to Euros
396,760 thousand (Euros 415,377 thousand in 2020).
105
The notes to REC's annual accounts for 2006 contain disclosures on the merger
by absorption of REDALTA and INALTA, as required by article 86 of Law 27/2014.
The notes to the 2008 annual accounts include disclosures on REC's contribution
to REE of the branch of activities encompassing the duties of the system
operator, transmission network manager and transmission agent of the Spanish
electricity system.
The notes to the annual accounts of REC and REINTEL for 2015 also include
the disclosures stipulated in article 86 of Law 27/2014 regarding the spin-off of
the telecommunications services business from REI to REINTEL, while the notes
to the annual accounts of REC and REI for 2015 contain the disclosures regarding
the non-monetary contribution of shares in REN.
In accordance with current legislation, taxes cannot be considered definitive until
they have been inspected and agreed by the taxation authorities or before the
inspection period has elapsed.
Therefore, in general, Group companies in Spain have open to inspection by
the taxation authorities all main applicable taxes since 2018, except income tax,
which is open to inspection since 2017. However, this period may be different for
Group companies that are subject to other tax legislation.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents In Spain, the Group has certain tax proceedings ongoing in respect of
income tax for 2011 to 2016, which are currently undergoing judicial review.
The Company considers that its conduct was lawful based on reasonable
interpretations of the applicable legislation, and does not expect that any
penalties will be imposed or that any significant tax liabilities will arise for the
Group.
In addition, in 2020 the tax group applied for rectification of the instalments for
2016 to 2020. At the end of that year, the taxation authorities resolved to uphold
the rectification applied for in respect of 2016 and 2017, while the decision
received with regard to the remaining years is being appealed.
As a result of the HISPASAT acquisition, the Group has open tax proceedings in
Brazil relating to ICMS (Brazilian tax on the circulation of goods and services), as
well as other taxes, mainly of an indirect nature. These proceedings stem from
inspection assessments, which the Group companies have appealed. Moreover,
the Group has specific guarantees to cover this contingency (see note 16).
Due to the different possible interpretations of tax legislation, additional
tax liabilities could arise as a result of future inspections, which cannot be
objectively quantified at present. Nevertheless, any additional liabilities that
could eventually arise in the event of inspection are not expected to significantly
affect the Company’s future results.
24
Inc ome
and Expenses
A) REVENUE
Details of this item in 2021 and 2020, by geographical area, are as follows:
106
Thousands of Euros
Domestic market
International market
a) European Union
a.1) Eurozone
b) Other countries
Total
2021
2020
1,798,597
1,860,663
154,361
23,463
23,463
130,898
125,088
21,951
21,951
103,137
1,952,958
1,985,751
Domestic market essentially includes transmission and system operation
services rendered, essentially reflecting the regulated revenue (see note 3)
for electricity transmission and electricity system operation services.
The remuneration for these services is set by the CNMC through Circulars that
determine the methods and parameters for calculating the remuneration of the
transmission activity based on the costs necessary to construct, operate and
maintain the technical electricity facilities, and the remuneration for the system
operator, pursuant to the powers bestowed upon this Commission by Royal
Decree-Law 1/2019 (see note 3.a).
According to the calculations made by Red Eléctrica de España S.A.U. (REE),
transmission activity revenue in Spain in 2021 and 2020 was mainly accrued
on the basis of the regulations in force, given that, in view of the detriment
proceedings described in note 3.a, the CNMC provisionally opted to replicate the
amount of remuneration stipulated for 2016, and this remained constant until
2021, with settlements on account.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Moreover, inasmuch as the annual tariff orders have been provisionally rolling
forward the amount stipulated in Ministerial Order IET/981/2016 (see note 3.a)
since 2017, the consolidated statement of financial position includes a liability
reflecting the estimated figure to be reimbursed to the system in respect of the
difference between the amount settled provisionally and the revenue accrued
from 2016 to 2021 (see note 21).
In November 2021 the Ministry for the Ecological Transition and Demographic
Challenge (MITERD), which is tasked with approving the remuneration for 2017
to 2019, published the definitive remuneration proposal for the transmission
activity for those years. The revenue stipulated in this proposal, which is expected
to be approved in 2022, is broadly in line with REE’s calculations. The CNMC
is tasked with approving the definitive remuneration for 2020 and 2021. Both
processes were still to be finalised at the 2021 year end.
Furthermore, as regards the remuneration for the system operator, the
revenue for 2021 and 2020 has been accrued in accordance with CNMC Circular
4/2019, which determines the system operator’s remuneration for 2020 and
thereafter. However, revenue for 2014 to 2019, which is provisional, has been
accrued on a best estimate basis applying the remuneration methodology
for the activity in question. Thus, in 2021 the remuneration calculation
methodology laid down in the draft Royal Decree, which MITERD submitted for
public consultation in 2021, has been considered. At the reporting date this
legislation had yet to be published, as mentioned in note 3.a.
The Group considers that the revenue resulting from the final decisions in these
processes will not differ significantly from the estimated revenue recognised.
107
International market in 2021 and 2020 primarily includes revenue from
reinsurance services, presented under European Union; and revenue of the
Peruvian and Chilean companies from the rendering of transmission services,
and revenue mainly recognised in Brazil from satellite telecommunications
services, presented under other countries.
B) OTHER OPERATING INCOME
At 31 December 2021 and 2020 other operating income mostly includes insurance
payouts for accidents and breakdowns covered by the policies arranged and other
non-trading income of the Group.
C) SUPPLIES AND OTHER OPERATING EXPENSES
Details of these items in 2021 and 2020 are as follows:
Thousands of Euros
Supplies
Other operating expenses
Total
2021
2020
18,655
27,307
344,252
316,870
362,907
344,177
Supplies and other operating expenses mainly comprise repair and maintenance
costs incurred at facilities as well as IT, advisory, lease and other service costs.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents D) PERSONNEL EXPENSES
Details of this item in 2021 and 2020 are as follows:
Workforce
The average headcount of the Group in 2021 and 2020, distributed by
professional category, is as follows:
108
Thousands of Euros
Salaries, wages and other remuneration
Social security
Contributions to pension funds and similar obligations
Other items and employee benefits
2021
147,180
29,974
2,308
7,879
2020
135,451
29,762
2,375
8,327
Management team
Senior technicians and middle management
Technicians
Total
187,341
175,915
Specialist and administrative staff
2021
156
638
764
517
2020
152
627
740
522
Total
2,075
2,041
Salaries, wages and other remuneration include employee remuneration,
termination benefits and the accrual of deferred remuneration. This item also
includes the remuneration of the board of directors.
The Group companies have capitalised personnel expenses (see notes 7 and 8)
totalling Euros 41,160 thousand at 31 December 2021 (Euros 42,904 thousand
at 31 December 2020).
In 2021 and 2020 the Group did not apply for any furlough schemes (“ERTEs”
per the Spanish acronym) or carry out any dismissals or personnel restructuring
as a result of the COVID-19 crisis. Moreover, it has not changed any employee
remuneration policies due to the crisis.
The distribution of the Group's employees at 31 December, by gender and
category, is as follows:
Men
108
436
613
Women
56
223
163
2021
Total
164
659
776
395
1,552
123
565
518
2,117
Management team
Senior technicians and
middle management
Technicians
Specialist and
administrative staff
Total
Men
101
435
579
390
1,505
Women
49
220
146
131
546
2020
Total
150
655
725
521
2,051
Most of the increase in the headcount in 2021 is due to the employees transferred
in the acquisition process carried out in Peru by Hispasat Peru (see note 6).
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The average number of employees with a disability rating of 33 % or higher in
2021 and 2020, distributed by gender and category, is as follows:
arising from late payment interest relating to tax instalments settled in
prior years.
109
Men
Women
Management team
Senior technicians and
middle management
Technicians
Specialist and
administrative staff
Total
-
1
11
3
15
-
2
1
2
5
2021
Total
-
3
12
5
20
Men
Women
-
3
10
3
16
-
2
1
1
4
2020
Total
-
5
11
4
20
At 31 December 2021 the Parent’s board of directors, which is not included in the
employees of the Group, comprises 12 members (12 members in 2020), of which
6 are men and 6 are women (6 men and 6 women in 2020).
E) FINANCE INCOME AND COSTS
Finance income in 2021 mainly comprises the dividends received on the
Group's 5 % interest in REN, amounting to Euros 5,704 thousand (Euros 5,704
thousand in 2020).
In 2021 this item also includes Euros 3,257 thousand of finance income (Euros
2,918 thousand in 2020) on the investments in the EIGs (see notes 19 and 23)
and Euros 368 thousand of finance income (Euros 759 thousand in 2020) on the
loans extended to TEN (see note 24), as well as income accrued on fixed-term
deposits. In 2020 this item included finance income of Euros 3,977 thousand
Finance costs basically reflect those incurred on loans and borrowings,
net of any amounts capitalised, and on bonds and other marketable securities
for an amount of Euros 123,127 thousand (see note 19) (Euros 141,101 thousand
in 2020).
Capitalised borrowing costs (see notes 7 and 8) totalled Euros 7,674 thousand
in 2021 (Euros 7,488 thousand in 2020).
F) EXTRAORDINARY EXPENSES RESULTING
FROM THE COVID-19 CRISIS
The Group has spent an additional Euros 0.6 million in 2021, approximately
(Euros 5 million in 2020), as a result of the pandemic triggered by COVID-19,
mainly on the acquisition of personal protective equipment, as well as for
additional cleaning of workplaces.
The amount recognised in 2020 also included the contributions made to
the healthcare authorities and other organisations mainly for the purchase
of materials to fight the pandemic.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
25
Tra n s act i ons
wi t h Equity-a ccount ed
Inve s t ees an d Relat ed Pa rti es
A) BALANCES AND TRANSACTIONS
WITH EQUITY-ACCOUNTED INVESTEES
These balances and transactions reflect operations carried out with TEN and
Hisdesat. All transactions have been carried out at market prices. The main
transactions carried out by Group companies with TEN and Hisdesat in 2021
and 2020 were as follows:
110
Balances
Transactions
Balances
Transactions
2021
2020
Receivables
Payables
Expenses
Income
Receivables
Payables
Expenses
Income
Transmisora Eléctrica del Norte S.A. (TEN)
Hisdesat Servicios Estratégicos, S.A.
Total
12,503
8
12,511
-
-
-
(138)
-
(138)
368
2,170
2,537
17,706
540
18,246
12
40
52
(91)
-
(91)
777
1,594
2,371
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Directors and
management
Other related
parties
Directors and
management
Other related
parties
B) TRANSACTIONS WITH RELATED PARTIES
Related party transactions are carried out under normal market conditions.
Details are as follows:
Thousands of Euros
E x p e n s e s a n d i n c o m e :
Leases
Other expenses
Expenses
Services rendered
Finance income
Income
O t h e r t r a n s a c t i o n s :
Financing agreements, loans
and capital contributions (lender)
Other transactions
2021
Total
-
138
138
2,170
368
2,538
Thousands of Euros
E x p e n s e s a n d i n c o m e :
Leases
Other expenses
Expenses
Services rendered
Finance income
Income
-
138
138
2,170
368
2,538
12,338
12,338
12,338
12,338
O t h e r t r a n s a c t i o n s :
Financing agreements, loans
and capital contributions (lender)
Other transactions
-
-
-
-
-
-
-
111
2020
Total
4
87
91
1,612
759
2,371
-
-
-
-
-
-
-
4
87
91
1,612
759
2,371
17,457
17,457
17,457
17,457
Transactions with other related parties comprise those with TEN and Hisdesat
described in section a) of this note. The balance under financing agreements,
loans and capital contributions (lender) at 31 December 2021 and 2020 reflects
the amount receivable in respect of the credit facility extended to TEN (see note
19). The maximum amount drawn down on this facility in 2021 was Euros 17,651
thousand (maximum drawdown of Euros 28,474 thousand in 2020).
There were no transactions with directors and management in 2021 or 2020.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
26
Re mun erat ion
of t h e Board
of D i rec tors
At the proposal of the board of directors and in accordance with the articles
of association, the Annual Report on Directors’ Remuneration, which includes
the remuneration of the board of directors for 2021, was approved by the
shareholders at their general meeting on 29 June 2021. The remuneration policy
for directors of Red Eléctrica Corporación, S.A. for 2022, 2023 and 2024 was
also approved (the previous remuneration policy for 2019-2021 was approved
in 2019).
The new remuneration policy is a continuation of the previous one and does
not introduce significant changes. However, certain items have been reinforced,
such as the directors' contribution to the corporate strategy and to the interests
and sustainability of the Company over the long term, greater transparency as
to how the policy is determined, information on the management of possible
remuneration-related risks and their alignment with the remuneration policy
for Red Eléctrica Group employees as a whole, pursuant to the requirements
of the Spanish Companies Act.
The approved remuneration of the board of directors, including the remuneration
of the board members, the chairwoman and the CEO, has not changed vis-à-vis
2020.
The chairwoman receives fixed annual remuneration in respect of the non-
executive chair duties associated with this position, in addition to remuneration
for being a member of the board of directors. The remuneration scheme for this
position consists solely of fixed amounts, with no annual or multi-year variable
remuneration and no termination benefit. As mentioned already, in 2021 both
remuneration components are under the same terms as in 2020.
Further, in its meeting held on 25 February 2020 the board of directors approved,
inter alia, the appointment of Ms. Beatriz Corredor Sierra as a director of the
Company, in the category of “other external directors”, until the next general
shareholders’ meeting, and her appointment as non-executive chairwoman of the
board of directors and of the Company. At their general meeting held on 14 May
2020, the shareholders ratified the appointment of Ms. Beatriz Corredor Sierra
as a director of the Company.
112
As regards Mr. Jordi Sevilla Segura, at its meeting held on 28 January 2020,
the board of directors recorded the irrevocable resignation tendered by the latter
from his position as a director, and therefore as non-executive chairman of the
board of directors and of the Company. In accordance with his contract approved
by the board of directors on 31 July 2018, he did not receive any termination
benefit as a result of the end of his legal and labour relations with the Company
as chairman of the board of directors and of the Company.
The remuneration allocated to the CEO includes the fixed and variable annual
and multi-year components corresponding to executive duties and the fixed
remuneration for being a member of the board of directors. Employee benefits
form part of the remuneration for this position. A portion of the annual variable
remuneration is paid through the delivery of Company shares.
Moreover, the CEO has been included in a defined contribution benefit
scheme. This scheme covers the retirement, death and permanent disability
contingencies. Red Eléctrica's obligation is limited to an annual contribution
equal to 20 % of the CEO's fixed annual remuneration.
The annual variable remuneration of the CEO is set by the Appointments
and Remuneration Committee of the Parent at the start of each year, using
predetermined quantifiable and objective criteria. The targets are in line with
the strategies and actions established in the Company's Strategic Plan and the
degree of fulfilment is assessed by the Committee.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents At the end of 2020, the board of directors began the process of updating the
2018-2022 Strategic Plan in force at that time. This enabled it to approve, in
November 2020, the structure of the new Long-Term Incentive Plan for Promoting
the Energy Transition, Reducing the Digital Divide and for Diversification,
which encompasses the CEO. The objectives of this latter plan are linked to
those contained in the Group’s new Strategic Plan and are consistent with the
guidelines laid down in the Directors’ Remuneration Policy. This Long-Term
Incentive Plan covers a period of six years, until 31 December 2025.
Reasonable and duly supported expenses incurred as a result of their attendance
at meetings and other tasks directly related to carrying out their duties, such
as travel expenses, accommodation, meals and any other such costs that may
be incurred, will also be paid or reimbursed to the directors.
113
The total amounts accrued by the members of the Parent's board of directors in
2021 and 2020 are as follows:
Pursuant to the remunerations policy and in line with standard market practices,
the CEO’s contract provides for a termination benefit equal to one year’s salary
in the event that labour relations are terminated at the discretion of the Parent
or due to changes of control.
Thousands of Euros
Total remuneration of the board of directors
Directors’ remuneration in respect of executive duties (1)
Total
2021
2,502
743
3,245
2020
2,463
743
3,206
In line with market practices in such cases, as a result of the appointment
of the CEO, the pre-existing employment contract has been suspended. Should
the employment contract be terminated, he would accrue the remuneration due
at the date of suspension as an indemnity. For this purpose, his tenure at the
Group up to the date he was appointed CEO (15 years), plus the period in which he
rendered services – if any – following his termination as CEO, would be taken into
consideration, in accordance with employment legislation in force. Following the
corporatisation carried out in 2020, this obligation was taken on by Red Eléctrica
Corporación, S.A.
The remuneration of the board of directors includes fixed annual remuneration,
remuneration for attending board meetings, remuneration for work on the board
of directors’ committees and specific annual remuneration both for the chairs
of the committees and the coordinating independent director. The components
and amounts of this remuneration have not changed in 2021.
(1) Includes fixed and variable annual remuneration accrued during the year.
The slight increase in total remuneration of the board of directors with respect
to the prior year is primarily because during a certain period in 2020 there was
no chair of the board.
A breakdown of remuneration by type of director at 31 December 2021 and 2020
is as follows:
Thousands of Euros
Executive directors
External proprietary directors
External independent directors
Other remuneration
Total remuneration
2021
890
524
1,285
546
3,245
2020
890
525
1,285
506
3,206
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The remuneration accrued by individual members of the Company's board
of directors in 2021 and 2020, by components and director, is as follows:
114
Thousands of Euros
Fixed
remuneration
Variable
remuneration
Allowances
for attending
board
meetings
Committee
work
Chair of
committee
Board and
coordinating
independent
director
Other
remuneration (5)
Total 2021
Total 2020
Ms. Beatriz Corredor Sierra
Mr. Roberto García Merino
Ms. Carmen Gómez de Barreda Tous de Monsalve
Ms. Socorro Fernández Larrea
Mr. José Juan Ruiz Gómez
Mr. Antonio Gómez Ciria
Ms. María Teresa Costa Campi
Ms. Mercedes Real Rodrigálvarez (1)
Mr. Ricardo García Herrera
Mr. Marcos Vaquer Caballería (2)
Ms. Elisenda Malaret García (2)
Mr. José María Abad Hernández (2)
Ms. María José García Beato (3)
Mr. Arsenio Fernández de Mesa y Díaz del Río (3)
Mr. Alberto Carbajo Josa (3)
Other board members (4)
Total remuneration accrued
530
481
131
131
131
131
131
131
131
66
66
66
65
65
65
-
-
263
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16
16
16
16
16
16
16
16
16
9
9
9
7
7
7
-
-
-
28
28
28
28
28
28
27
14
14
14
14
14
14
-
-
-
15
15
14
1
-
-
-
-
-
-
-
-
-
-
-
-
15
-
-
-
-
-
-
-
-
-
-
-
-
-
-
130
-
-
-
-
-
-
-
-
-
-
-
-
-
-
546
890
205
190
189
176
175
175
174
89
89
89
86
86
86
-
464
890
205
190
176
189
175
175
3
-
-
-
175
175
175
214
2,321
263
192
279
45
15
130
3,245
3,206
(1) Amounts received by Sociedad Estatal de Participaciones Industriales (SEPI).
(2) New director since the general shareholders’ meeting held on 29 June 2021.
(3) Stepped down from the board of directors at the general shareholders’ meeting held on 29 June 2021.
(4) Board members who stepped down in 2020.
(5) Includes the employee benefits that form part of the CEO's remuneration.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
In addition to the foregoing, on 31 December 2019 the directors'
remuneration scheme for 2014-2019, which encompassed the CEO, drew
to a close. The amount paid to the CEO in 2020 under this plan, for his duties
as CEO from 27 May 2019, was Euros 59 thousand.
27
Re muneration
of Senior
Ma nagement
115
At 31 December 2021 and 2020 no loans or advances have been granted
to the members of the board of directors, nor have any guarantees been
extended on their behalf. The Group has no pension or life insurance
obligations with the members of the board of directors at those dates,
other than those previously mentioned, nor have any loans or advances
been extended to board members.
At 31 December 2021 and 2020 the Group has taken out public liability
insurance to cover claims from third parties in respect of possible damage
and loss caused by actions or omissions in performing duties as Group
directors. These policies cover the Group's directors and senior management
and the annual premiums amount to Euros 519 thousand, inclusive of tax,
in 2021 (Euros 328 thousand at 31 December 2020). These premiums
are calculated based on the nature of the Group's activity and its financial
indicators, thus they cannot be broken down individually or allocated to
directors and senior management separately.
In late 2020 the Group started a reorganisation process to address the
challenges posed by the new 2021-2025 Strategic Plan, involving the
centralisation of corporate activities in the Parent of the Group and culminating
in 2021 in the definition and approval of a new Group organisational structure
geared towards ensuring fulfilment of the Strategic Plan.
This reorganisation has entailed, inter alia, certain professionals who already
formed part of the Red Eléctrica Group, and who were carrying out management
duties, being acknowledged as senior management personnel.
The senior management personnel who have rendered services for the Group
during 2021, and the position they hold at the 2021 reporting date, are as follows:
Name
Position
Mr. Miguel Duvisón García
General Manager of Operations
Mr. Angel Luis Mahou Fernández
General Manager of Transmission
Mr. Mariano Aparicio Bueno
General Manager of Telecommunications Business
In 2021 and 2020 the members of the board of directors did not engage in
transactions with the Company or Group companies, either directly or through
intermediaries, other than ordinary operations under market conditions.
Ms. Eva Pagán Díaz
Mr. Emilio Cerezo Díez
Mr. José Antonio Vernia Peris
General Manager of International Business
Chief Financial Officer
Corporate Director of Transformation
and Resources
Ms. Fátima Rojas Cimadevila
Corporate Director of Sustainability and Research
Ms. Miryam Aguilar Muñoz
Corporate Director of External Relations,
Communication and Territory
Ms. Laura de Rivera García de Leániz
Manager of Regulatory Affairs and Legal Services
Ms. Silvia María Bruno De la Cruz
Chief Innovation and Technology Officer
Mr. Carlos Puente Pérez
Ms. Eva Rodicio González
Manager of Corporate Development
Manager of Internal Audit and Risk Control Management
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
guidelines laid down in the Directors’ Remuneration Policy. This Long-Term
Incentive Plan covers a period of six years, until 31 December 2025.
116
In order to strengthen the commitment to the independence of the System
Operator, specific objectives have been laid down for the General Management
of Operations of Red Eléctrica, which exclude those aspects that are not related
to the activity of the Electricity System Operator.
The contracts in place with serving senior management personnel do not
include guarantee or golden parachute clauses in the event of dismissal. Were
the employment relationship to be terminated, the indemnity to which senior
management personnel would be entitled would be calculated in accordance
with applicable legislation.
In 2015 the Red Eléctrica Group began to roll out a Structural Management Plan,
which applies to part of its senior management personnel. Inclusion in this Plan
is subject to certain conditions being met and it may be amended or revoked by
the Group under certain circumstances.
At 31 December 2021 and 2020 the Group has taken out public liability
insurance to cover claims from third parties in respect of possible damage
and loss caused by actions or omissions in performing duties as senior
management of the Group. These policies cover all the Group's directors and
senior management and the annual premiums amount to Euros 519 thousand,
inclusive of tax, in 2021 (Euros 328 thousand in 2020). These premiums
are calculated based on the nature of the Group's activity and its financial
indicators; thus, they cannot be broken down individually or allocated to
directors and senior management separately.
In 2021 total remuneration accrued by senior management personnel amounted
to Euros 3,103 thousand and is recognised as personnel expenses in the
consolidated income statement. In 2020, total remuneration accrued by senior
management personnel, applying the criteria resulting from the organisational
changes, amounted to Euros 2,939 thousand. These amounts include the accrual
of variable annual remuneration, on the assumption that the objectives set each
year will be met. After the fulfilment of these objectives has been assessed, the
variable remuneration, adjusted to the actual fulfilment rate, is paid in the first
few months of the following year.
Euros 38 thousand of the total remuneration accrued by these executives in 2021
consisted of contributions to life insurance and pension plans.
No advances or loans have been extended to these executives at 31 December
2021. At 31 December 2021, the Group has life insurance commitments vis-
à-vis these executives with annual premiums totalling approximately Euros 19
thousand.
At the end of 2020, the board of directors began the process of updating the
2018-2022 Strategic Plan in force at that time. This enabled it to approve, in
November 2020, the structure of the new Long-Term Incentive Plan for Promoting
the Energy Transition, Reducing the Digital Divide and for Diversification,
which encompasses the CEO. The objectives of this latter plan are linked to
those contained in the Group’s new Strategic Plan and are consistent with the
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents 28
S egme nt
Re po rt i n g
The Red Eléctrica Group segments its business activities based on their nature,
reflecting the main branches of activity used by the Group in its management
and decision-making.
At 31 December 2021, the Group’s operating segments and their main products,
services and operations are as follows:
Management and operation of domestic electricity infrastructure:
This segment comprises the Group’s principal activity, as sole transmission agent
and system operator for the Spanish electricity system (TSO). Its mission is to
guarantee the security and continuity of the electricity supply at all times and
manage high-voltage electricity transmission.
The Group engages in the high-voltage transmission of electricity, through REE.
To this end, it manages the electricity transmission network infrastructure that
connects the power plants to the consumer distribution points. As transmission
network manager, REE is responsible for the development and expansion of
the network, its maintenance, managing the transfer of electricity between
external systems and the mainland, and guaranteeing third-party access to the
transmission network under equal conditions.
In addition, REE operates the mainland Spanish electricity system and the non-
mainland systems in the Canary Islands, Balearic Islands, Ceuta and Melilla,
guaranteeing the security and continuity of the electricity supply at all times.
Operation of the system encompasses the necessary activities to guarantee such
security and continuity, as well as proper coordination between the generation
system and transmission network, ensuring that the energy produced by
generators is transmitted to the distribution networks with the requisite quality
under applicable legislation.
117
Management and operation of international electricity infrastructure:
This segment comprises activities related to international business development
as a natural form of growth, mainly focused on the construction and operation
of electricity transmission networks outside Spain; at 31 December 2021, in Peru,
Chile and Brazil specifically.
Telecommunications (satellites and fibre optics):
The telecommunications segment comprises the operation of satellite
infrastructure in Spain, Portugal and South America, as well as the lease in Spain
of a broad dark fibre backbone network, and technical sites and spaces for housing
customers’ telecommunications equipment.
The Group also carries out reinsurance activities and fosters innovation in
the electricity and telecommunications sectors. These activities do not meet
the quantitative thresholds to be presented separately.
Inter-segment sales prices are established based on the normal commercial
terms and conditions with unrelated third parties.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The key indicators of the operating segments identified are as follows:
118
Business segments at 31 December 2021
Thousands of Euros
Revenue
External customers
Inter-segment revenue
Investments in equity-accounted associates (similar activity)
Depreciation and amortisation
Impairment and gains/(losses) on disposal of fixed assets
Results from operating activities
Interest income
Interest expense
Income tax
Profit/(loss) of the Parent after tax
Segment assets
Equity-accounted investees
Segment liabilities
Management and
operation of domestic
electricity infrastructure
Management and
operation of international
electricity infrastructure
Telecommunications
(fibre optics and
satellites)
Satellites
Fibre optics
177,413
177,413
-
9,759
134,411
92,975
41,436
-
Other
corporate and
adjustments
(20,105)
24,524
(44,628)
Total
1,952,958
1,952,958
-
(31)
29,546
(91,366)
(23,562)
(3,583)
(522,114)
234
44,852
92
(6,603)
15,043
49,013
-
75,249
1
(1,091)
(18,510)
55,649
469
15,490
3,195
(2,064)
(14,050)
3,024
730
991,970
10,488
(115,453)
(201,793)
680,627
51,550
51,218
332
19,818
(16,442)
-
34,309
7,148
(18,935)
(1,762)
20,096
1,295,144
1,367,286
411,732
1,159,314
13,984,478
510,867
738,897
72,997
818,713
-
4,119
587,983
372,374
866,007
10,299,347
1,609,689
1,606,828
2,860
-
(387,160)
28
822,068
53
(86,761)
(182,514)
552,845
9,751,003
-
7,503,356
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Business segments at 31 December 2020
Thousands of Euros
Revenue
External customers
Inter-segment revenue
Investments in equity-accounted associates (similar activity)
Depreciation and amortisation
Impairment and gains/(losses) on disposal of fixed assets
Results from operating activities
Interest income
Interest expense
Income tax
Profit/(loss) of the Parent after tax
Segment assets
Equity-accounted investees
Segment liabilities
Management and
operation of domestic
electricity infrastructure
Management and
operation of international
electricity infrastructure
Telecommunications
(fibre optics and
satellites)
Satellites
Fibre optics
Other
corporate and
adjustments
1,668,263
1,661,902
6,361
-
(385,385)
164
915,474
3,398
(100,502)
(205,646)
612,779
9,686,711
-
7,539,289
50,926
50,591
335
25,311
(16,522)
534
45,592
8,488
(23,305)
(2,005)
27,954
154,994
154,994
-
2,669
(120,411)
(122,273)
(118,807)
1,104
(7,874)
37,457
(82,722)
137,312
95,353
41,959
-
(23,204)
-
80,500
111
(2,436)
(18,158)
60,017
(25,743)
22,912
(48,655)
-
(2,663)
-
6,245
2,914
503
(6,399)
3,155
1,172,871
1,355,788
441,180
187,538
12,844,087
456,075
669,242
63,237
833,091
-
-
519,312
354,349
(43,835)
9,352,136
119
Total
1,985,751
1,985,751
-
27,980
(548,184)
(121,575)
929,004
16,014
(133,613)
(194,751)
621,183
Details of revenue and non-current assets by geographical area are as follows:
Thousands of Euros
Revenue
Spain
Other
Total
2021
1,798,597
154,361
1,952,958
Thousands of Euros
2020
Fixed assets (*)
1,860,663
125,089
1,985,751
Spain
Other
Total
2021
9,791,652
1,111,082
10,902,734
2020
9,737,164
989,545
10,726,709
(*) Excludes non-current investments, deferred tax assets, and non-current trade and other receivables.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
29
In t eres t s
in Joi n t
A rra n geme nt s
The Group (through REE) and Réseau de Transport d’Électricité (RTE), the French
transmission system operator, each hold a 50 % investment in the INELFE joint
arrangement, which has its registered office in Paris. Its statutory activity is
the study and execution of interconnections between Spain and France that
will increase the electricity exchange capacity between the two countries.
Decisions are taken with the unanimous consent of the parties. RTE and REE
both have rights to the assets and obligations for the liabilities of INELFE. The
joint arrangement has therefore been classified as a joint operation. The Group
recognises the assets, including its interest in the jointly controlled assets, and
the liabilities, including its share of the liabilities that have been incurred jointly
in INELFE, in its consolidated annual accounts (see note 2 d).
The Group has an interest in a joint arrangement through Red Eléctrica
Chile S.P.A., which holds a 50 % stake in the Chilean company TEN, alongside
Engie Energía Chile, S.A. (E.C.L. S.A.). The Group has classified this joint
arrangement as a joint venture, inasmuch as the parties have rights to the
net assets (see note 11).
Since 2020, the Group has held a stake – through Red Eléctrica Brasil Holding
Ltda., which holds a 50 % interest alongside Grupo Energía Bogotá S.A E.S.P.
– in the Brazilian company Argo Energia Emprendimientos y Participaciones S.A.
(“Argo”), which in turn owns Argo Transmisión de Energia S.A. (“Argo I”), Argo
II Transmisión de Energia S.A. (“Argo II”) and Argo III Transmisión de Energia
S.A. (“Argo III”). The Group has classified this arrangement as a joint venture,
inasmuch as the parties have rights to the net assets (see note 11).
Due to the existence of contractual arrangements under which decisions on
relevant activities require the unanimous consent of both parties, the Group has
joint control of the “UTE” (Unión Temporal de Empresas – a form of temporary
business association) Balalink, through REINTEL. The Group has classified the
investments as joint operations because the parties have rights to the assets
and obligations for the liabilities. The UTE has been formed to provide dark fibre
services, with an availability guarantee, between the Balearic Islands and the
Mediterranean Coast of the Spanish mainland.
120
30
G uarantees and Other Commitments
w it h Third Parties and Other Contingent
Assets and Liabilities
In 2021 and 2020 the Company, together with REE, jointly and severally
guaranteed the private issue in the United States of bonds totalling US Dollars
250 million (US Dollars 250 million in 2020) carried out by the Group company
REEF, and REF's Eurobonds programme for an amount of up to Euros 5,000
million at 31 December 2021 and 2020. At 31 December 2021, Eurobonds issued
under this programme total Euros 3,690 million (Euros 3,090 million in 2020).
Furthermore, at 31 December 2021 and 2020 the Company and REE have
jointly and severally guaranteed the promissory notes issued under the Euro
Commercial Paper Programme (ECP Programme) by REF for an amount of up
to Euros 1,000 million. At 31 December 2021 and 2020 no amounts have been
drawn down under this programme.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents On 19 February 2015, REDESUR, TESUR and Scotia Sociedad Titulizadora
S.A. created a securitisation trust to hold the REDESUR-TESUR trust assets,
in order to back the obligations arising from the bond issues amounting
to US Dollars 82 million at 31 December 2021 (US Dollars 87 million at 31
December 2020).
At 31 December 2021 the Group has extended bank guarantees to third parties
in relation to its normal business operations, amounting to Euros 191,656
thousand (Euros 212,019 thousand in 2020).
The Group has no significant contingent liabilities that could entail an outflow
of resources for which the probability of occurrence is not remote.
31
Envi ron men tal
In for ma tion
The Group companies are not involved in any litigation relating to environmental
protection or improvement that could give rise to significant contingencies.
The Group companies received no significant environment-related grants in
2021 or 2020.
121
32
Ot her
Information
The main auditor of the accounts of the Group companies is KPMG. The total fees
accrued for audit services rendered to the Group companies in 2021 amounted
to Euros 710.0 thousand (Euros 657.5 thousand in 2020).
Details of the contractual fees for services provided to the Red Eléctrica Group
by the audit firm KPMG Auditores, S.L. in the years ended 31 December 2021 and
2020 are as follows:
In 2021 Group companies incurred ordinary expenses of Euros 23,421 thousand
in protecting and improving the environment (Euros 23,702 thousand in 2020),
essentially due to the implementation of environmental initiatives aimed at
protecting biodiversity, fire prevention, landscape integration, climate change,
and prevention of pollution.
In 2021 a total of Euros 3,498 thousand (Euros 5,448 thousand in 2020) was
spent on environmental issues associated with investment projects (including
environmental impact studies, environmental oversight of work, and the adoption
of preventive, corrective and accompanying measures).
Thousands of Euros
Audit services
Audit-related services
Other services
Total
2021
451.0
156.3
14.5
621.8
2020
362.8
181.0
14.4
558.2
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The amounts detailed in the above table include the total fees for services
rendered in 2021 and 2020, irrespective of the date of invoice.
Audit services include the fees for the audit of the individual and consolidated
annual accounts of Red Eléctrica Corporación and of certain Group companies.
Other audit-related services primarily include the limited review of the Group’s
consolidated interim financial statements, assurance services related to the
issuance of comfort letters, the reasonable assurance audit report on the
effectiveness of the Group’s ICOFR under ISAE 3000, covenant certificates
for the annual accounts and translations.
Other services include agreed-upon procedures performed for certain Group
companies.
Details of the contractual fees for audit services provided to the Group by
PwC for the audit of INELFE in the years ended 31 December 2021 and 2020 are
as follows:
122
Thousands of Euros
Audit services
Total
2021
8.3
8.3
2020
4.9
4.9
In addition, the auditors of the equity-accounted investees are KPMG in the case
of Hisdesat and Argo, and EY with regard to TEN.
Details of the contractual fees for services provided to the Red Eléctrica Group
by other entities affiliated with KPMG in the years ended 31 December 2021 and
2020, both in Spain and abroad, are as follows:
33
Earnings
per Share
Thousands of Euros
Audit services
Audit-related services
Total
2021
250.7
13.2
263.9
2020
289.8
24.2
314.0
Details of earnings per share in 2021 and 2020 are as follows:
Thousands of Euros
Net profit (thousands of Euros)
Number of shares
Average number of own shares
Basic earnings per share (Euros)
Diluted earnings per share (Euros)
2021
2020
680,627
621,185
541,080,000
541,080,000
2,050,819
2,239,931
1.26
1.26
1.15
1.15
At 31 December 2021 and 2020 the Group has not conducted any operations
that would result in any difference between basic earnings per share and diluted
earnings per share.
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S ha re -bas ed
Paymen t s
Details of share-based payments for management and employees at 31
December 2021 and 2020 are as follows:
123
Senior management personnel
Employees
Total
2021
Number of
shares
6,671
274,625
281,296
Average price
(Euros)
Amount in
thousands of Euros
18.000
18.000
18.000
120
4,943
5,063
Number of
shares
6,429
267,668
274,097
2020 (*)
Average price
(Euros)
Amount in
thousands of Euros
16.480
16.480
16.480
106
4,411
4,517
(*) Figures based on the changes made in 2021 which modified the Group’s organisational structure (see note 27).
These payments are those made to employees who have requested payment
by such means, with a charge to the salary for the year, and there are no assets
or liabilities associated with such payments. The 2021 management structure
was also taken into consideration for 2020.
35
Events after
31 December
2021
These shares have been valued at the listed price on the delivery date. All shares
delivered were approved by the Parent's shareholders at the general meeting, and
the related costs incurred have been recognised under personnel expenses in the
consolidated income statement.
On 3 November 2021, as indicated in note 2 g), Argo Energia Empreendimentos
e Participações S.A. (“Argo”), in which Red Eléctrica Brazil holds a 50 % stake,
entered into a share sale-purchase agreement with Rialma Administração
e Participações S.A. to acquire shares representing 100 % of the share capital of
Rialma Transmissora de Energia III S.A. (“Rialma III”), subject to certain conditions
being met and to the regulatory authorities approving the acquisition.
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At 31 January 2022, the conditions precedent laid down in the aforementioned
agreement have been fulfilled and the acquisition of all of the ordinary
registered shares, representing 100 % of the share capital of Rialma III, has
thus been completed. Accordingly, the acquiree will change its name to “Argo IV
Transmissão de Energia S.A.”.
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Red Eléctrica Group
Details of equity investments at 31 December 2021 and 2020
- Company
- Registered office
- Principal activity
Red Eléctrica Corporación, S.A., Parent, incorporated in 1985.
- Paseo Conde de los Gaitanes, 177. Alcobendas. Madrid. (Spain).
- Management of the business group, rendering of assistance or support services
to investees and operation of the property owned by the Company.
A ) F u l l y c o n s o l i d a t e d s u b s i d i a r i e s
Red Eléctrica de España, S.A.U. (REE)
2021
2020
Percentage ownership
(1)
Percentage ownership
(1)
Direct
Indirect
Direct
Indirect
- Paseo Conde de los Gaitanes, 177. Alcobendas. Madrid. (Spain).
- Transmission, operation of the Spanish electricity system and management of the transmission network.
Red Eléctrica Internacional, S.A.U. (REI)
- Paseo Conde de los Gaitanes, 177. Alcobendas. Madrid. (Spain).
- Acquisition and holding of international equity investments. Rendering of advisory, engineering
and construction services. Performance of electricity activities outside the Spanish electricity system.
100 %
100 %
-
-
100 %
100 %
-
-
Continued on next page
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- Company
- Registered office
- Principal activity
Red Eléctrica Infraestructuras de Telecomunicación, S.A.U. (REINTEL)
- Paseo Conde de los Gaitanes, 177. Alcobendas. Madrid. (Spain).
- Rendering of advisory, engineering, construction and telecommunications services.
Red Eléctrica Infraestructuras en Canarias, S.A.U (REINCAN)
- Calle Juan de Quesada, 9. Las Palmas de Gran Canaria. (Spain).
- Management of the construction of energy storage facilities and the water cycle.
Red Eléctrica de España Finance, S.L.U. (REEF)
- Paseo Conde de los Gaitanes, 177. Alcobendas. Madrid. (Spain).
- Financing activities.
Red Eléctrica Financiaciones, S.A.U. (REF)
- Paseo Conde de los Gaitanes, 177. Alcobendas. Madrid. (Spain).
- Financing activities.
Red Eléctrica Sistemas de Telecomunicaciones, S.A.U. (RESTEL)
- Paseo Conde de los Gaitanes, 177. Alcobendas. Madrid. (Spain).
- Acquisition, holding, management and administration of Spanish and
foreign equity securities.
Red Eléctrica y de Telecomunicaciones, Innovación y Tecnología, S.A.U. (RETIT)
- Paseo Conde de los Gaitanes, 177. Alcobendas. Madrid. (Spain).
- Activities geared towards driving and accelerating technological innovation.
2021
2020
Percentage ownership
(1)
Percentage ownership
(1)
Direct
Indirect
Direct
Indirect
100 %
100 %
100 % (2)
100 %
100 %
100 %
-
-
-
-
-
-
100 %
100 %
100 %
100 %
100 %
100 %
-
-
-
-
-
-
Continued on next page
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- Company
- Registered office
- Principal activity
Redcor Reaseguros, S.A (REDCOR)
- 26, Rue Louvigny. (Luxembourg).
- Reinsurance activities. Incorporated in 2010 in Luxembourg in order to reinsure the risks
of the Group companies, thereby guaranteeing better access to international reinsurance markets.
Red Eléctrica Andina, S.A.C. (REA)
- Av. Javier Prado Este 492 Int. 1001 Urb. Jardín San Isidro. Lima (Peru).
- Rendering of line and substation maintenance services.
Red Eléctrica del Sur, S.A. (REDESUR)
- Av. Javier Prado Este 492 Int. 1001 Urb. Jardín San Isidro. Lima (Peru).
- Electricity transmission and operation and maintenance of electricity transmission networks.
Transmisora Eléctrica del Sur , S.A.C. (TESUR)
- Av. Javier Prado Este 492 Int. 1001 Urb. Jardín San Isidro. Lima (Peru).
- Electricity transmission and operation and maintenance of electricity transmission networks.
Transmisora Eléctrica del Sur 2 , S.A.C. (TESUR 2)
- Av. Javier Prado Este 492 Int. 1001 Urb. Jardín San Isidro. Lima (Peru).
- Electricity transmission and operation and maintenance of electricity transmission networks.
Transmisora Eléctrica del Sur 3 , S.A.C. (TESUR 3)
- Av. Javier Prado Este 492 Int. 1001 Urb. Jardín San Isidro. Lima (Peru).
- Electricity transmission and operation and maintenance of electricity transmission networks.
2021
2020
Percentage ownership
(1)
Percentage ownership
(1)
Direct
Indirect
Direct
Indirect
100 %
-
100 %
-
-
-
-
-
-
100 % (a)
100 % (a)
100 % (c)
100 % (c)
100 % (c)
-
-
-
-
-
100 % (a)
100 % (a)
100 % (c)
100 % (c)
100 % (c)
Continued on next page
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- Company
- Registered office
- Principal activity
Transmisora Eléctrica del Sur 4 , S.A.C. (TESUR 4)
- Av. Javier Prado Este 492 Int. 1001 Urb. Jardín San Isidro. Lima (Peru).
- Electricity transmission and operation and maintenance of electricity transmission networks.
Red Eléctrica del Norte Perú, S.A.C. (REDELNOR)
- Av. Javier Prado Este 492 Int. 1001 Urb. Jardín San Isidro. Lima (Peru).
- Electricity transmission and operation and maintenance of electricity transmission networks.
Concesionaria Línea de Transmisión CCNCM, S.A.C. (CCNCM)
-Av. Javier Prado Este 492 Int. 1001 Urb. Jardín San Isidro. Lima (Peru).
- Electricity transmission and operation and maintenance of electricity transmission networks.
Red Eléctrica Chile S.P.A. (RECH)
- Isidora Goyenechea 3000, oficina 1602, Las Condes, Santiago (Chile).
- Acquisition, holding, management and administration of securities.
Red Eléctrica del Norte S.A. (REDENOR)
- Isidora Goyenechea 3000, oficina 1602, Las Condes, Santiago (Chile).
- Electricity transmission and operation and maintenance of electricity transmission networks.
Red Eléctrica del Norte 2 S.A. (REDENOR 2)
- Isidora Goyenechea 3000, oficina 1602, Las Condes, Santiago (Chile).
- Electricity transmission and operation and maintenance of electricity transmission networks.
2021
2020
Percentage ownership
(1)
Percentage ownership
(1)
Direct
Indirect
Direct
Indirect
-
-
-
-
-
-
100 % ( j)
100 % (a)
100 % (d)
100 % (a)
100 % (e)
100 % (e)
-
-
-
-
-
-
100 % ( j)
100 % (a)
100 % (d)
100 % (a)
100 % (e)
100 % (e)
Continued on next page
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- Company
- Registered office
- Principal activity
Red Eléctrica Brasil Holding Ltda. (REB)
- Calle Libero Badaró, 293. Sao Paulo. (Brazil).
- Acquisition, holding, management and administration of securities.
Hispasat, S.A.
- Calle de Anabel Segura, 11. Alcobendas. Madrid. (Spain).
- Parent of HISPASAT. Operation of the satellite communications system and rendering of space
segment services for the geostationary orbital slots allocated to the Spanish state.
Hispasat Canarias, S.L.U.
- Calle Practicante Ignacio Rodriguez s/n Edificio Polivalente IV. Las Palmas de Gran Canaria (Spain).
- Sale and lease of satellites and spatial capacity.
Hispasat Brasil, Ltda.
- Praia do Flamengo, 200 Rio de Janeiro, (Brazil).
- Commercialisation of satellite capacity.
Hispamar Satélites, S.A.
- Praia do Flamengo, 200 Rio de Janeiro, (Brazil).
- Commercialisation of satellite capacity.
Hispamar Exterior, S.L.U.
- Paseo de la Castellana 39, 28046 Madrid (Spain).
- Commercialisation of satellite capacity.
2021
2020
Percentage ownership
(1)
Percentage ownership
(1)
Direct
Indirect
Direct
Indirect
100 % (a)
-
100 % (a)
-
89.68 % (f) (3)
-
89.68 % (f) (3)
-
89.68 % (g) (3)
- 89.68 % (g) (3)
-
89.68 % (g) (3)
- 89.68 % (g) (3)
- 89.68 % (h) (3)
-
72.60 % (h) (3)
-
89.68 % (i) (3)
-
72.60 % (i) (3)
Continued on next page
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- Company
- Registered office
- Principal activity
Hispasat de México, S.A. de C.V.
- Agustín Manuel Chávez 1-001 Col. Centro de Ciudad Santa Fe, México D.F. (Mexico).
- Use of radio spectrum, telecommunications networks and satellite communication.
Hispamar Satélites, S.A. (Venezuela)
- Torre Phelps, piso 10 ofic. 10, Caracas (Venezuela).
- Commercialisation and rendering of satellite telecommunications services.
Hispasat Perú, S.A.C.
- Jr. Baca Flor N° 307, Dpto. N° 701, distrito de Magdalena del Mar. Lima (Peru).
- Commercialisation and rendering of satellite telecommunications services.
Consultek Inc.
- 1036 Country Club Drive, Suite 202, Moraga, CA 94556. (United States of America).
- Technical consultancy services.
Hispasat UK, LTD.
- 30 Finsbury Square, Londres. (England).
- Commercialisation and rendering of satellite telecommunications services.
B ) P r o p o r t i o n a t e l y c o n s o l i d a t e d c o m p a n i e s
Interconexión Eléctrica Francia-España, S.A.S. (INELFE)
- Inmueble Window, 7 C Place du Dôme. Paris. (France).
- Study and execution of Spain-France interconnections.
2021
2020
Percentage ownership
(1)
Percentage ownership
(1)
Direct
Indirect
Direct
Indirect
-
89.68 % (g) (3)
- 89.68 % (g) (3)
-
89.68 % (i) (3)
-
72.60 % (i) (3)
-
89.68 % (g) (3)
-
-
-
89.68 % (g) (3)
- 89.68 % (g) (3)
-
89.68 % (g) (3)
- 89.68 % (g) (3)
-
50 % (b)
-
50 % (b)
Continued on next page
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- Company
- Registered office
- Principal activity
C ) E q u i t y - a c c o u n t e d i n v e s t e e s
Transmisora Eléctrica del Norte S.A. (TEN)
- Avenida Apoquindo N°3721, piso 6, Las Condes, Santiago (Chile).
- Electricity transmission and operation and maintenance of electricity transmission networks.
Argo Energía Emprendimientos y Participaciones S.A.
- Calle Tabapuã, 841 – 5º andar – Itaim Bibi – São Paulo/SP (Brazil).
- Acquisition, holding, management and administration of securities.
Argo Transmisión de Energia S.A. (“Argo I”)
- Calle Tabapuã, 841 – 5º andar – Itaim Bibi – São Paulo/SP (Brazil).
- Electricity transmission and operation and maintenance of electricity transmission networks.
Argo II Transmisión de Energia S.A. (“Argo II”)
- Calle Tabapuã, 841 – 5º andar – Itaim Bibi – São Paulo/SP (Brazil).
- Electricity transmission and operation and maintenance of electricity transmission networks.
Argo III Transmisión de Energia S.A. (“Argo III”)
- Calle Tabapuã, 841 – 5º andar – Itaim Bibi – São Paulo/SP (Brazil).
- Electricity transmission and operation and maintenance of electricity transmission networks.
Hisdesat Servicios Estratégicos, S.A.
- Paseo de la Castellana 143, 28046 Madrid (Spain).
- Commercialisation of spatial systems for government use.
2021
2020
Percentage ownership
(1)
Percentage ownership
(1)
Direct
Indirect
Direct
Indirect
-
-
-
-
-
50 % (e)
50 % (k)
50 % (l)
50 % (l)
50 % (l)
-
-
-
-
-
50 % (e)
50 % (k)
50 % (l)
50 % (l)
50 % (l)
-
38.56 % (g) (3)
-
38.56 % (g) (3)
Continued on next page
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- Company
- Registered office
- Principal activity
Grupo de Navegación Sistemas y Servicios, S.L.
- Calle Isaac Newton 1, Madrid (Spain)
- Operation of satellite systems.
Zeleros Global, S.L.
- Muelle de la Aduana s/n, Edificio Lanzadera, 46024, Valencia
- Research and development of new technologies applied to the transport sector.
Nearby Computing, S.L.
- Travessera de Gràcia 18, 3r, 3a, 08021 Barcelona
- Development of software and/or IT applications.
Hybrid Energy Storage Solutions, S.L.
- Av. Benjamín Franklin, 12, Mód. Nº24, 46980 Paterna, Valencia
- Design, production and sale of technological energy storage solutions for the new generation of electricity grids.
Aerolaser System, S.L.
- Av. José Mesa y López, 45, L. D4, 35010 Las Palmas de Gran Canaria.
- Development and commercialisation of sensory technological solutions for geospatial technology.
2021
2020
Percentage ownership
(1)
Percentage ownership
(1)
Direct
Indirect
Direct
Indirect
-
12.82 % (g) (3)
-
12.82 % (g) (3)
-
6.62 % (m)
-
11.71 % (m)
-
19.61 % (m)
-
15.79 % (m)
-
-
-
-
-
-
-
-
(1) Equivalent to voting rights.
(2) Company changed its registered office and company name in 2021.
At 31 December 2020, Red Eléctrica de España Finance, B.V. with
registered office in Amsterdam (Netherlands).
(3) Company forming part of the Hispasat subgroup.
(a) Investment through Red Eléctrica Internacional, S.A.U.
(b) Investment through Red Eléctrica de España, S.A.U.
(c) Investment through Red Eléctrica del Sur, S.A.
(d) Investment through Red Eléctrica del Norte Perú, S.A.C.
(e) Investment through Red Eléctrica Chile SpA.
(f) Investment through Red Eléctrica Sistemas de
Telecomunicaciones, S.A.U.
(g) Investment through Hispasat, S.A.
(h) Investment through Hispasat, S.A. and Hispasat Brasil, Ltda.
( i ) Investment through Hispamar Satélites, S.A.
( j ) Investment through Red Eléctrica del Sur, S.A. and Red Eléctrica
Internacional, S.A.U.
(k) Investment through Red Eléctrica Brasil Holding Ltda.
( l ) Investment through Argo Energia Empreendimentos y
Participaciones S.A.
(m) Investment through Red Eléctrica y de Telecomunicaciones,
Innovación y Tecnología, S.A.U.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
132
r
e
t
p
a
h
C
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents4CONSOLIDATEDDIRECTORS’ REPORT Contents of Consolidated
Directors’ Report
133
1 Position of the entity / p 134
2
Business performance / p 148
3 Liquidity and capital / p 152
4 Risk management / p 153
5
Average supplier payment period. "Reporting Requirement".
Third additional provision of Law 15/2010 of 5 July 2010
/ p 157
6 Events after 31 December 2021 / p 157
7 Outlook / p 157
8
Innovation / p 160
9
Own shares / p 163
10 Other relevant information / p 164
11
Non-Financial Information Statement in compliance
with Law 11/2018 of 28 December 2018 / p 167
12 Annual Corporate Governance Report / p 227
13 Annual Report on Directors’ Remuneration / p 227
The various sections of this consolidated directors' report contain certain
prospective information that reflects projections and estimates based
on underlying assumptions, statements referring to plans, objectives
and expectations associated with future transactions, investments,
synergies, products and services, as well as statements concerning
results or future dividends, or estimates calculated by the directors and
based on assumptions that those directors consider reasonable.
While the Group considers the expectations reflected in those
statements to be reasonable, investors and holders of shares in the
Parent are advised that the information and statements containing
future projections are subject to risks and uncertainties, many of
which are difficult to foresee and generally beyond the Group's control.
As a result of such risks, actual results and developments could
differ substantially from those expressed, implied or forecast in the
information and statements containing future projections.
The affirmations and statements containing future projections do not
provide any guarantee as to future results and have not been reviewed
by auditors outside the Group or by other independent third parties.
It is recommended that no decisions be made on the basis of the
affirmations and statements containing future projections that refer
exclusively to the information available at the date of this report. All of
the affirmations and statements containing future projections that are
reflected in this report are expressly subject to the warnings given. The
affirmations and statements containing future projections included
in this document are based on the information available at the date
of this directors' report. Except as required by applicable legislation,
the Group is not obligated to publicly update its statements or review
the information containing future projections, even where new data is
published or new events arise.
In order to facilitate comprehension of the
information provided in this document, certain
alternative performance measures have been
included. A definition of these is available at
https://www.ree.es/es/accionistas-e-inversores/
informacion-financiera/medidas-alternativas-
rendimiento
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents 1
Pos i t i on
of t h e en ti ty
1.1 ORGANISATIONAL STRUCTURE
Corporate bodies
The Board of Directors and the shareholders are responsible for governing and
managing the Red Eléctrica Group and its Parent, Red Eléctrica Corporación, S.A.
(hereinafter REC).
The shareholders' general meeting is governed by the articles of association and
the general meeting regulations, in accordance with the Spanish Companies Act.
The ownership structure at the date of the 2021 shareholders' ordinary general
meeting was as follows:
Ownership
structure
Data 2021 AGM
12 %
Non-controlling
shareholders
63 %
Other
institutional
investors
20 %
SEPI
5 %
Pontegadea
The Company has three board committees, namely: the Audit Committee, the
Appointments and Remuneration Committee and the Sustainability Committee.
These three essentially technical committees created by the Board of Directors
to support it in its duties are designed to enhance efficiency and transparency.
134
The structure, composition, roles and responsibilities of the three board
committees are specified in articles 22 to 24 bis of the articles of association
and are implemented in articles 14 to 18 TER of the regulations of the Board of
Directors. Both sets of corporate regulations have been fully brought into line
with the latest reforms of the Spanish Companies Act, the Good Governance
Code of Listed Companies and the most up-to-date international practices
and recommendations on committee composition and committee member
independence and qualifications.
At its meeting on 25 May 2021, the Board of Directors agreed to amend the
regulations of the Company’s Board of Directors in line with the reform of the
Spanish Companies Act introduced by Law 5/2021 of 12 April 2021, which amends
the Revised Spanish Companies Act approved by Royal Legislative Decree 1/2010
of 2 July 2010, and other financial standards, as regards the encouragement of
long-term shareholder engagement in listed companies in matters essentially
pertaining to related party transactions, directors’ remuneration, the directors’
duty of care and the content of the Annual Corporate Governance Report and
the Annual Report on Directors’ Remuneration. This amendment has likewise
served to adjust the regulations of the Board of Directors to the wording of certain
recommendations set forth in the Good Governance Code of Listed Companies,
amended in June 2020. Lastly, the amendment has enabled the introduction
of certain clarifications and complementary information, as well as technical
specifications and other formal or style-related enhancements.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Furthermore, the articles of association and the general meeting regulations
were put before the shareholders at their general meeting held on 29 June
2021, likewise with a view to adjusting them to Law 5/2021 of 12 April 2021,
which amends the Revised Spanish Companies Act approved by Royal
Legislative Decree 1/2010 of 2 July 2010, and other financial standards, as
regards the encouragement of long-term shareholder engagement in listed
companies (essentially with respect to the possibility of holding virtual general
meetings; the powers of the general shareholders' meeting, the Board of
Directors and the Audit Committee as regards related party transactions;
forecasts relating to preferential rights in capital increases; directors’
remuneration; split voting by intermediaries; and confirmation of votes cast
at the general meeting; inter alia), and the partial modification of the Good
Governance Code of Listed Companies issued by the Spanish National Securities
Market Commission (CNMV) on 26 June 2020, and also to introduce certain
technical specifications and clarifications of the wording.
At 31 December 2021 the Board of Directors of REC has 12 members.
At its meeting held on 26 January 2021, the Board of Directors agreed
to appoint the proprietary director (representing SEPI) Mr. Ricardo García
Herrera to the Appointments and Remuneration Committee of Red Eléctrica
Corporación, S.A. for the three-year period envisaged in the regulations of the
Board of Directors. This appointment was proposed by the board chairwoman,
following a report from the Appointments and Remuneration Committee, to fill
the vacancy on this committee.
At their general meeting on 29 June 2021 the shareholders adopted the following
agreements regarding appointments to the Board of Directors:
135
∫ Appointment of Mr. Marcos Vaquer Caballería as an independent director of Red
Eléctrica Corporación, S.A. for the four-year term envisaged in the articles of
association, to replace the independent director Ms. María José García Beato.
This appointment was proposed by the Appointments and Remuneration
Committee, pursuant to article 529 decies of the Spanish Companies Act.
∫ Appointment of Ms. Elisenda Malaret García as an independent director of Red
Eléctrica Corporación, S.A. for the four-year term envisaged in the articles of
association, to replace the independent director Mr. Alberto Francisco Carbajo
Josa. This appointment was proposed by the Appointments and Remuneration
Committee, pursuant to article 529 decies of the Spanish Companies Act.
∫ Appointment of Mr. José María Abad Hernández as an independent director of
Red Eléctrica Corporación, S.A. for the four-year term envisaged in the articles
of association, to replace the independent director Mr. Arsenio Fernández de
Mesa y Díaz del Río. This appointment was proposed by the Appointments
and Remuneration Committee, pursuant to article 529 decies of the Spanish
Companies Act.
∫ Ratification of the appointment of Mr. Ricardo García Herrera as a proprietary
director of Red Eléctrica Corporación, S.A., as agreed by the Board of
Directors at their meeting held on 22 December 2020, thus appointing him
as a proprietary director to represent Sociedad Estatal de Participaciones
Industriales (SEPI) for the four-year term envisaged in the articles of
association, pursuant to article 529 decies of the Spanish Companies Act.
At its meeting held on 2 July 2021, the Board of Directors agreed, inter alia,
to appoint the independent director Mr. Marcos Vaquer Caballería to the
Appointments and Remuneration Committee of Red Eléctrica Corporación,
S.A. for the new four-year term envisaged in the regulations of the Board of
Directors, pursuant to article 24 of the articles of association and article 17 of
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents the regulations of the Board of Directors; to appoint the independent director
Ms. Elisenda Malaret García to the Sustainability Committee of Red Eléctrica
Corporación, S.A. for the new four-year term envisaged in the regulations of the
Board of Directors, pursuant to article 24 bis of the articles of association and
article 18 BIS of the regulations of the Board of Directors; and to appoint the
independent director Mr. José María Abad Hernández to the Audit Committee
of Red Eléctrica Corporación, S.A. for the new four-year term envisaged in the
regulations of the Board of Directors, pursuant to article 23 of the articles of
association and article 15 of the regulations of the Board of Directors.
Subsequently, at its meeting held on 30 November 2021, the Board of Directors
agreed, inter alia, to re-appoint the proprietary director Ms. Mercedes Real
Rodrigálvarez to the Audit Committee of Red Eléctrica Corporación, S.A. for a
four-year term; to re-appoint the independent director Ms. Socorro Fernández
Larrea to the Appointments and Remuneration Committee of Red Eléctrica
Corporación, S.A. for a four-year term; to re-appoint the proprietary director
Ms. María Teresa Costa Campi to the Sustainability Committee of Red Eléctrica
Corporación, S.A. for a four-year term; to appoint the independent director Ms.
Carmen Gómez de Barreda Tous de Monsalve to the Sustainability Committee
of Red Eléctrica Corporación, S.A., replacing Mr. José Juan Ruiz Gómez, for a
four-year term, thus terminating Ms. Gómez de Barreda’s seat on the Audit
Committee; and to appoint the independent director Mr. José Juan Ruiz Gómez
to the Audit Committee of Red Eléctrica Corporación, S.A., replacing Ms. Carmen
Gómez de Barreda Tous de Monsalve, for a four-year term, and thus terminating
Mr. Ruiz Gómez’s seat on the Sustainability Committee.
Lastly, also on 30 November 2021, the Sustainability Committee and the
Audit Committee agreed, respectively, to appoint the independent director Ms.
Carmen Gómez de Barreda Tous de Monsalve, and the independent director Mr.
Antonio Gómez Ciria, as the respective chairs of the Sustainability Committee
and the Audit Committee for a four-year term.
The composition of the board committees at 31 December 2021 was therefore
as follows:
136
∫ Audit Committee:
- Antonio Gómez Ciria (independent director and chairman)
- Mercedes Real Rodrigálvarez (proprietary director)
- José María Abad Hernández (independent director)
- José Juan Ruiz Gómez (independent director)
∫ Appointments and Remuneration Committee:
- Socorro Fernández Larrea (independent director and chairwoman)
- Ricardo García Herrera (proprietary director)
- Marcos Vaquer Caballería (independent director)
∫ Sustainability Committee:
- Carmen Gómez de Barreda Tous de Monsalve
(independent director and chairwoman)
- María Teresa Costa Campi (proprietary director)
- Elisenda Malaret García (independent director)
The composition and powers of the Board of Directors and the various
committees are as follows:
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Board of
Directors
58.33 %
independent
50 %
women
(54.54 % external directors)
Segregation of
the positions of
Chair of the Board of
Directors and CEO
Coordinating
independent
director
MAIN POW ERS :
• Approval of the general strategies and policies of both the
Company and the Group.
• Group and Company risk control.
• Authorisation for issue of the annual accounts and presentation
thereof to the shareholders at their general meeting.
• Annual assessment of the quality and efficiency of the Board
and functioning of its committees.
137
AU DIT
CO MMI TTE E
75 %
independent
APPO INTMENTS
AN D REMUNERATION
CO MMITTEE
S USTA INABI LITY
COMMITTEE
66.7%
independent
66.7%
independent
25 %
women
25 %
propietary
33.3 %
women
33.3 %
proprietary
100 %
women
33.3 %
proprietary
C H A I R :
Independent director
C H A I R :
Independent director
C H A I R :
Independent director
POWE RS
RE LATIN G TO:
POWE RS
RE LATI NG TO:
POW ER S
REL ATING TO:
• The process to prepare the Company's
and the Group’s financial-economic
and non-financial information.
• Appointments and dismissals of
directors and certain members
of management.
• The effectiveness of the internal
control and risk management systems.
• The remuneration policy for
directors.
• External auditor independence.
• Directors’ compliance with their duties.
• Compliance with legal provisions and
internal regulations on aspects within
its remit.
• Management of the process
of assessing the board and its
committees.
• Company shareholders.
• The diversity report.
• Ethical leadership, compliance with
the Group’s sustainability policy and
its relationship with the Strategic
Plan, the 2030 Sustainability
Commitment, the Group’s Annual
Report on Ethical Management and
oversight of compliance with the
Code of Ethics.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
In view of the commitment undertaken by the Company chairman at
the shareholders’ general meeting held in April 2012, and considering
international best practice in the field of corporate governance, at the
extraordinary meeting held on 17 July 2015, called specifically for this
purpose, the Board of Directors of Red Eléctrica Corporación, S.A. (REC)
submitted for the approval of the shareholders a proposal to segregate
the positions of chair of the Board of Directors and chief executive of the
Company, and to appoint an executive director. The two motions were
passed, with votes in favour from 99 % of the shareholders, compared to the
required quorum of 58 %. At its meeting held on 28 July 2015, the Board of
Directors appointed the new executive director as CEO of the Company.
Since 2016, following the specified transition period, the position of chair
of the Board of Directors has only had the responsibilities inherent in that
position.
138
Moreover, the position of coordinating independent director created in 2013
has been maintained, since the shareholders and proxy advisors consider that
this position embodies an efficient corporate governance practice through
the responsibilities attributed to it.
The Annual Corporate Governance Report, which is attached hereto, contains
detailed information regarding the composition and operation of the
governing bodies of the Parent.
Composition of the Red Eléctrica Group
The structure of the Group at 31 December 2021 is as follows:
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
R E D E L É C T R I C A C O R P O R A C I Ó N
139
TRANSMISSION
AND ELECTRICITY
SISTEM OPERATION
INTERNATIONAL
ELECTRICITY
INFRASTRUCTURE
TELECOMMUNICATIONS
PUMPED-STORAGE
HYDROELECTRIC POWER PLANT
PROJECT IN CANARY ISLANDS
OTHERS
100
%
100
%
100
%
CONSTRUCTION
OF INTERNATIONAL
INTERCONNECTIONS,
SPAIN-FRANCE
50
%
100
%
REDESUR
(Perú)
TESUR (100 %)
TESUR 2 (100 %)
TESUR 3 (100 %)
TESUR 4 (100 %)
Red
Eléctrica
Andina - REA
(Perú)
(100 %)
REDELNOR
(Perú)
Red Eléctrica
Chile
Red Eléctrica
Brasil
CCNCM
(100 %)
TEN (50 %)
REDENOR
(70 %)
REDENOR 2
(100 %)
ARGO ENERGÍA (50 %)
ARGO I (50 %)
ARGO II (50 %)
ARGO III (50 %)
100
%
RESTEL
RED ELÉCTRICA SISTEMAS
DE TELECOMUNICACIONES
89,68
%
100
%
100
%
RED ELÉCTRICA Y DE
TELECOMUNICACIONES,
INNOVACIÓN Y
TECNOLOGÍA
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents 1.2 ACTIVITIES AND BUSINESS PERFORMANCE
The Group carries out activities both in Spain and abroad. Most notably,
its principal activities comprise the management and operation of
electricity infrastructure in Spain, Peru, Chile and Brazil, and the rendering
of telecommunications services, entailing both the operation of satellite
infrastructure in Spain, Portugal and Latin America, as well as the lease in
Spain of a broad dark fibre backbone network, and technical sites and spaces
for housing customers’ telecommunications equipment.
Management and operation of domestic electricity infrastructure
The mission of REE, as transmission agent and system operator for the
Spanish electricity system, is that of guaranteeing the security and continuity
of the electricity supply at all times and managing high-voltage electricity
transmission. To this end, it oversees and coordinates the generation and
transmission system and manages the development of the transmission
network. The Company seeks to fulfil its mission while adhering to the
principles of neutrality, transparency, independence and economic efficiency,
so as to offer a secure, efficient and high-quality electricity service to society
as a whole.
The Group has executed its Investment Plan in Spain, entailing investments
in the transmission network, as per the 2015-2020 Planning, and has
started to move forward with certain initiatives laid down in the draft 2021-
2026 Planning published by the Ministry for the Ecological Transition and
Demographic Challenge (MITERD) in February 2021.
Investments in transmission network facilities in 2021 totalled Euros 391.0
million and were basically channelled into projects to address security
of supply, resolve technical restrictions, execute specific projects for
international interconnections and inter-island submarine connections, supply
the high-speed rail system, provide access for the evacuation of wind power
and to increase transmission line capacity.
During the year, 187 km of new lines came into service, bringing REE’s total
transmission network to 44,687 km at year end. Transformation capacity
likewise increased by 850 MVA to a nationwide total of 93,871 MVA.
140
In 2021 the most significant initiatives in terms of development of the
transmission network, by major axes, were as follows:
∫ Ibiza - Formentera Interconnection. This involves the laying of a 132 kV
underground-submarine transmission line to interconnect the islands of Ibiza
and Formentera, thus strengthening the inter-island transmission grid.
∫ Caletillas - El Rosario Axis. The purpose of this axis it to increase the security
of supply and transmission network reliability in the Santa Cruz de Tenerife
metropolitan area, as well as to make the transmission grid more robust
and reduce its vulnerability to incidents. The El Rosario substation came into
service in December 2021.
∫ Caparacena - Baza - Ribina Axis. The purpose of this axis is to facilitate
the evacuation of energy from the ordinary regime, renewable sources,
cogeneration and waste, as well as to improve the transmission network
mesh and support distribution and the structural function. The Caparacena
substation came into service in March 2021.
∫ North - East Axis. The purpose of this axis is to improve the evacuation of
electricity from Asturias to supply Cantabria and the Basque Country. The
initiatives in progress are the expansion of the Itxaso substation, which came
into service in September 2021, and the Güeñes - Itxaso line.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents ∫ Mainland - Balearic Islands Interconnection. This axis involves the laying of a
second 220 kV underground-submarine transmission line to interconnect the
Spanish mainland (Valencia) with the island of Mallorca, thus strengthening
the inter-island transmission grid.
∫ Viesgo - Eastern Cantabria Axis. The purpose of this axis is to reinforce the
transmission network with 220 kV lines in the area around Cantabria, and to
support the distribution network. The Cicero-Solórzano line came into service
in 2015 and the Astillero substation started up in December 2021.
∫ Lousame - Tibo - Mazaricos Axis. The purpose of this axis is to reinforce
the network, evacuate the electricity generated, and support distribution
in the northwest of Galicia. The Mazaricos and Lousame substations and
the Lousame 220 kV input and output came into service in 2019, while the
Lousame - Mazaricos line entered service in 2021.
∫ Oriol Axis. The purpose of this axis is to improve the quality and reliability of
supply in the Cáceres area, to increase the capacity to evacuate hydropower
generation and to boost Spain-Portugal interconnection capacity. These
facilities came into service in June 2021.
∫ Carmonita Axis. The purpose of this axis is to supply power for the high-
speed train service and to facilitate the evacuation of renewable energy. The
substation came into service in October 2021 and the line in December 2021.
∫ Lanzarote - Fuerteventura Interconnection. This axis involves the laying
of a 132 kV underground-submarine transmission line to bolster the
interconnection that has been in place since 2005 between the islands of
Lanzarote and Fuerteventura, thus allowing for an electricity system with
present installed capacity of 476 MW, combining both conventional and
renewable generation, and reinforcing the inter-island transmission grid.
∫ Tías - Playa Blanca Axis. The purpose of this axis is to guarantee electricity
supply in the south of Lanzarote and to reinforce the connection with
Fuerteventura. These measures, together with the 132 kV submarine cable
interconnecting Lanzarote and Fuerteventura, will increase security of supply
in the Lanzarote electricity system. The Playa Blanca and Tías substations
came into service in 2019 and 2020, respectively, and the Tías - Playa
Blanca line is currently under construction.
141
∫ Interconnection with France via the Bay of Biscay. The purpose of this axis
is to further increase the interconnection capacity with Europe in order to
achieve European energy targets. It consists of a submarine direct current dual
connection of approximately 400 km in length which will raise energy exchange
capacity to 5,000 MW. The project is currently at the pre-construction stage,
which entails the archaeological, technical and environmental studies required
before it can be submitted for administrative authorisation. In parallel, the
public consultation period also got underway in 2021.
The most notable occurrences in 2021 in terms of electricity system operation
were as follows:
Mainland system
∫ Mainland electricity demand closed the year at 242,401 GWh, up 2.4 % on
2020. Having corrected for the effect of working patterns and temperatures,
demand attributable primarily to economic activity was also up by 2.4 %.
Electricity demand is thus embarking upon a period of recovery in the wake
of the COVID-19 pandemic impacts. In comparison with a pre-COVID-19
period (2019) and after correcting for the effect of working patterns and
temperatures, mainland electricity demand has declined by 2.8 %.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents ∫ Maximum instantaneous power was recorded on Friday 8 January at 14:05
hours, at a rate of 42,225 MW. This is up 4.5 % on the maximum for the prior
year, and down 7.1 % compared with the record 45,450 MW documented on
17 December 2007. Peak demand in terms of time of day was likewise posted
on 8 January (between 13:00 and 14:00 hours) at 41,483 MWh, which is 7.6 %
below the all-time high recorded in 2007.
∫ Installed capacity on the mainland has risen compared to the prior year,
ending 2021 at 106,981 MW, which is 1,369 MW more than at December
2020 (up 1.3 %). In terms of additions, the increase was primarily driven
by the incorporation of solar photovoltaic and wind power to the system’s
installed capacity, with the former increasing by almost 25 % with respect
to the prior year, while the latter posted year-on-year growth of 2 %. On the
decommissioning side, there was a sharp drop in coal-fired installed capacity
in the wake of the closure of various electrical generators that supplied a
total of 1,969 MW. The capacity of other technologies either did not vary or
changed only insignificantly.
∫ Hydropower capacity stood at 26,839 GWh at the end of December 2021,
down 9.4 % on the historical average and 12.3 % lower than in 2020. Reserves
of hydroelectric power represented a fill level of 36.0 % of total capacity across
all reservoirs at the end of 2021, compared with 50.8 % in the prior year.
∫ In 2021, 24.0 % of demand was met by wind power (22.5 % in 2020), 21.9 %
by nuclear technology (23.3 % in 2020), 15.2 % by combined cycle generation
(16.0 % in 2020), 12.0 % by hydroelectric power (12.8 % in 2020), 10.6 % by
cogeneration (11.3 % in 2020), and 10.2 % by solar technologies (8.1 % in 2020).
With a contribution of less than 10 %, coal, other renewable sources, waste and
pump-as-turbine jointly covered the remaining 6.1 % of demand.
∫ Renewable energy's percentage contribution to total energy generation in the
electricity system rose to 48.4 % (45.5 % in 2020). In absolute terms, renewable
generation is up 9.6 % on the prior year, essentially due to the 29.3 % rise in
solar power output and the 10.0 % growth in wind power output.
142
∫ With respect to CO₂ emissions by the mainland electricity industry, the
decline in combined cycle and cogeneration and, conversely, the increase
in generation from renewable sources, except hydropower, place emission
levels for 2021 at 29.1 million tonnes, down 1.4 % compared to the 29.6 million
tonnes recorded in 2020. This made 2021 the year with the cleanest energy
since the Red Eléctrica Group’s records began (2007).
∫ Electricity exchanges through the mainland-Balearic Islands link resulted in
a net balance of exports to the islands of 890 GWh (down 37.6 % compared
to 2020), covering 16.1 % of their demand.
∫ International electricity exchanges resulted in a net import balance for the sixth
year running, totalling 884 GWh in 2021. Exports amounted to 16,505 GWh
(14,649 GWh in 2020) and imports totalled 17,389 GWh (17,928 GWh in 2020).
The quality indicators posted for the transmission network were particularly
high in 2021, closing the year at levels well below the upper thresholds
stipulated in Royal Decree 1955/2000. Availability of the national transmission
network in 2021 was 98.50 %, similar to the 2020 indicator (98.57 %). By
system, availability of the mainland transmission network in 2021 was 98.48 %
(98.57 % in 2020).
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Non-mainland systems
∫ At the 2021 year end, total annual demand for electricity in non-mainland
systems had risen by 5.2 % vis-à-vis the prior year. Per individual system,
demand climbed by 11.8 % in the Balearic Islands and by 1.4 % in the Canary
Islands, and dropped 1.2 % in Ceuta and 1.3 % in Melilla.
∫ Installed capacity in non-mainland systems grew by 1.8 %, essentially driven
by the expansion of solar photovoltaic and wind technology, which climbed
10.3 % and 16.8 %, respectively.
Availability of the Balearic Islands transmission system in 2021 was 98.6 %
(98.66 % in 2020). Lastly, network availability in the Canary Islands was
99.21 % (99.17 % in 2020).
Pursuant to Law 17/2013 the Group, through REE, is tasked with developing
pumped-storage hydroelectric power plants in the Canary Islands, geared
towards security of supply, system security and the integration of non-
dispatchable renewable energies.
As System Operator, REE is executing the Salto de Chira pumped-
storage hydroelectric power plant project in Gran Canaria. Red Eléctrica
Infraestructuras en Canarias, S.A.U. (hereinafter REINCAN) will be tasked with
providing certain consultancy, engineering, project management, monitoring
and technical assistance services relating to the implementation, start-up
and effective operation of the facilities that make up the hydroelectric power
plant complex.
In 2019 and 2020 the construction project for the hydroelectric power plant
was submitted for administrative authorisation, as was the associated
Environmental Impact Assessment, and the tender process for the Seawater
Desalination Plant (“EDAM” per the Spanish acronym) was launched. In
2021 the tenders for the main equipment (water-to-wire (WtW)) and civil
engineering works (civil EPC) contracts, the works to be carried out on the
Santa Águeda substation and the high-voltage 220 kV dual-circuit line, both
143
of which are intended for connection to the plant network, as well as the
tender for the water pumping system required to propel water from the EDAM
to the Soria dam, were launched.
A favourable Environmental Impact Statement (EIS) for the project was
received in July 2021. In August the Canary Islands government issued
the Declaration of Public Interest for the project, which was ratified by the
government cabinet in November. The operating permits were then obtained
in December, enabling the works to get underway.
Regarding the possible project to install a pumped-storage hydroelectric
power plant in Tenerife, the draft project was drawn up in 2021 and will be
submitted to the Ministry for the Ecological Transition and Demographic
Challenge (hereinafter MITERD) pursuant to article 74 of Royal Decree
738/2015.
Management and operation of international electricity infrastructure
In addition to its principal activity as the transmission agent and system operator
in Spain, the Red Eléctrica Group has been engaged for over 20 years now in
other businesses as a way to create value for shareholders through expansion
into the infrastructure management field and the provision of new services to
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents the Group. This vision saw the Group expand internationally into Peru in 1999 and
Portugal in 2007, through its ownership interest in Redes Energéticas Nacionais,
SGPS, S.A. (hereinafter REN), before moving into the Chilean market in 2016 and
Brazil in 2020.
The start-up of operations in Peru, Chile and Brazil is the outcome of an ongoing
analysis of business opportunities, and meets the Group’s criterion of undertaking
investments in countries with a favourable economic situation and a stable
regulatory framework that ensures an appropriate return on the investments.
144
The Group's business entailing the management and operation of international
electricity infrastructure is conducted through its subsidiary Red Eléctrica
Internacional, S.A.U. (hereinafter REI) with a presence in Peru, Chile and Brazil.
Overall, the Company manages a network spanning 4,865 km in Peru, Chile and
Brazil, of which 4,479 km are up and running at present.
REC
REI
REN
5%
REB
RECh
Redelnor
Redesur
REA
Argo
50%
TEN
50%
Redenor2
Redenor
70%
CCNCM
Tesur
Tesur2
Tesur3
Tesur4
Argo
Argo II
Argo III
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents 145
Presence of
Red Eléctrica
Internacional in
Peru, Chile and Brazil:
Activity in Peru
In Peru, the Red Eléctrica Group operates electricity transmission
infrastructure under a 30-year concession. It is the main transmission agent
in the south of Peru and since 2019, following REDELNOR’s acquisition of
CCNCM, it has also operated in the north of the country. The network spans a
total of 1,686 km of transmission lines, of which 1,558 km are in commercial
operation and 128 km are under construction.
In 2021, the management excellence of REDESUR, TESUR, TESUR 2, TESUR
3 and CCNCM, which all manage electricity transmission infrastructure on a
commercial operation basis, enabled them to offer an energy transmission
service with maximum availability, while supporting development in their
operating environment.
During this period, the average voltage levels remained within the limits set
out in the Technical Standard for Quality of Electricity Services, no incidents
were recorded in quality of service during the period, and network availability
stood at 99,83 % in REDESUR, 99.88 % in TESUR, 99.91 % in TESUR 2, 99.88 %
in TESUR 3 and 99.92 % in CCNCM.
The project awarded to TESUR 4 in 2018 is at the construction stage, the
Environmental Impact Assessment (EIA) having been approved in March 2021.
The project is rolling out as envisaged and is scheduled to be completed and
come into service in 2022.
In addition, REA renders maintenance services for the concessions under
operation, namely REDESUR, TESUR, TESUR 2, TESUR 3 and CCNCM, and is
also tasked with supervision and site management for the TESUR 4 works.
REA also carries out facilities maintenance and works supervision for other
customers, positioning it among the benchmark companies for such services
in the south of Peru.
Activity in Chile
The transmission business in Chile comes under the umbrella of the parent
company in that country, Red Eléctrica Chile (RECH), which was incorporated
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents by REI in 2015. This company holds 50 % of Transmisora Eléctrica del Norte
(TEN), 69.9 % of Red Eléctrica del Norte (REDENOR) and 100 % of Red Eléctrica
del Norte 2 (REDENOR 2). Overall, RECH operates 1,749 km of transmission
lines, of which 1,491 km are in commercial operation and 258 km are under
construction.
TEN operates the 500 kV Changos – Cumbre – Nueva Cardones axis, which
forms part of the National Transmission System, as well as the 220 kV
Mejillones – Changos dedicated line. In 2021, TEN reported an availability
factor for its facilities of 99.92 %, surpassing prior years' availability.
REDENOR has continued its construction of the transmission facilities
in northern Chile, awarded in 2017. In 2020 the first stage of the project
entered service (Nuevo Pozo Almonte 220 kV substation), and at year end the
availability of the facilities stood at 100%. REDENOR has also forged ahead
with Stage 2 of the project, which involves the construction of 258 km of 220
kV power lines and is scheduled for completion in 2022.
REDENOR 2 reported an availability factor for its transmission facilities of
99.92 % in 2021. The Seccionadora Centinela substation entered service in
2021.
In August 2021, the National Energy Commission (CNE) in Chile published the
Final Technical Report (FTR) reducing the return on investment. Subsequently,
on 12 January 2022, the Expert Panel published its decision regarding the
discrepancies presented to the CNE in view of the FTR on the transmission
valuation process for the 2020-2023 period. The CNE will apply this decision
when publishing its Definitive Technical Report on the valuation.
Activity in Brazil
On 25 March 2020, the Company (through its subsidiary Red Eléctrica Brazil
(REB)) and Grupo Energía Bogotá (GEB) each acquired 50 % of the Brazilian
holding company Argo, which in turn owns the Argo I, Argo II and Argo III
concessions. This acquisition enabled Red Eléctrica to kick off operations in Brazil
where it jointly manages, with GEB, three concessions encompassing high-
voltage power lines (500 kV and 230 kV) spanning a total of 1,430 km and 11
electrical substations.
146
Argo I operates 1,110 km of 500 kV power lines and five substations in the
northeast of Brazil (availability factor of 99.28 % in 2021).
Argo II is a project to expand a substation in the state of Minas Gerais.
Synchronous condenser 2 (SC2) came into service in 2021, while SC1 is expected
to enter service in 2022.
Argo III operates 320 km of 230 kV power lines and five substations in the state
of Rondônia (availability factor of 96.66 % in 2021). The final stage of the project
came into service in 2021 (the Jaru substation and the Colectora Porto Velho
substation).
On 3 November 2021, Argo entered into a share sale-purchase agreement with
Rialma Administração e Participações S.A. to acquire shares shares representing
100 % of the share capital of Rialma Transmissora de Energia III S.A., subject
to certain conditions being met and to the regulatory authorities approving the
acquisition, as indicated in section 6 Events after the reporting period.
Telecommunications
Satellite business
Red Eléctrica Sistemas de Telecomunicaciones, S.A. (RESTEL) holds an 89.68 %
interest in the Hispasat subgroup (hereinafter Hispasat). The other Hispasat
shareholders are SEPI, with a 7.41 % interest, and the CDTI, which holds 2.91 %.
Hispasat’s principal activity consists of leasing spatial capacity and providing
managed services for video and broadband data through the operation and
commercial exploitation of its fleet of satellites in orbit and the related ground
segment, primarily in Spain, Brazil, Peru and Mexico.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents In view of the situation triggered by the COVID-19 pandemic, and the
transformation process in which the satellite sector is immersed, Hispasat
embarked upon a strategic rethink, which led to the approval of a new 2021-2025
Strategic Plan at the end of 2020. The new strategy aims to reposition Hispasat
and shift it from an infrastructure operator to a provider of satellite services.
2021 saw the consolidation of certain trends that had already surfaced in the
market, such as the verticalisation of satellite operators, which continue to
evolve towards a service provider role in certain segments and/or geographical
areas. Hispasat is no stranger to this strategic repositioning, having completed
the acquisition in Peru, in 2021, of the signal management and transmission
business in the satellite audio-visual sphere, thus enabling the company to
position itself as a leading provider of wholesale video services in South America.
In addition, backhaul projects have continued to be rolled out, with Hispasat
taking on the role of turnkey service provider and offering comprehensive
projects in the fields of tele-education and telemedicine to Latin America
governments.
Bolstered by its managed video services business in Latin America, Hispasat
posted a rise in commercial revenues of almost 15 % in 2021. Excluding the
effect of this acquisition, commercial revenues have risen, testament to a
positive commercial trend that is outperforming the sector.
Fibre optics business
The Group's telecommunications business primarily operates in Spain, doing so
through the subsidiary Red Eléctrica Infraestructuras de Telecomunicación, S.A.U.
(hereinafter REINTEL), which is the Group company responsible for operating
telecommunications networks and rendering telecommunications services to
third parties.
REINTEL is a neutral provider of telecommunications infrastructure. Its principal
activity is leasing dark fibre and associated infrastructure. REINTEL also provides
maintenance services for fibre optic cables and telecommunications equipment.
At present, the company operates a fibre optic network in excess of 52,000
km rolled out over the electricity transmission grid and the railway network,
guaranteeing transparent access on equal terms to its customers and to
telecommunications sector players.
147
In addition, on 16 December 2021 REC announced the agreement, subject to
the pertinent authorisations being obtained, with Kohlberg Kravis Roberts & Co.
L.P. (KKR), through its subsidiary Rudolph Bidco S.À.R.L., for the sale of a minority
stake of 49 % in Red Eléctrica Infraestructuras de Telecomunicación, S.A.U.
(REINTEL), a wholly-owned subsidiary of the Parent, for Euros 971 million.
The parties sought the pertinent authorisation for the transaction, this being one
of the conditions precedents for the agreement signed by the two parties to come
into effect. At the 2021-year end authorisation has yet to be given.
Given that the Red Eléctrica Group will retain a 51 % stake in REINTEL, as well as
control and management of this company, the agreement will be considered a
transaction with non-controlling shareholders. This will result in an increase in
non-controlling interests in the Group in 2022, once the conditions precedent
have been met, albeit with no impact on the consolidation method applied to
REINTEL, which will continue to be fully consolidated.
5G business
The Red Eléctrica Group’s Strategic Plan envisages, among other initiatives, the
development of new opportunities associated with the roll-out of 5G networks, a
process in which the Group will be a significant player. 5G mobile communication
technology is not only revolutionary for telecommunications services, but also for
production and economic processes, where its speed, immediacy and capacity to
connect thousands of devices simultaneously come into play.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents In 2021 an enterprise-wide project was carried out within the Red Eléctrica Group,
which served to assess the Group’s infrastructure in terms of its capacity to host
5G network equipment. In addition, the value proposal for such networks was
defined and both the operating and commercial models were designed, with a
view to bringing the networks into commercial operation.
- The rise in revenue is thanks to greater income reported by the Chilean
148
companies REDENOR and REDENOR 2 and the Peruvian company TESUR 3,
partially offset by the negative impact of the new remuneration parameters
proposed by the Chilean regulator in respect of REDENOR 2.
2
Bus in e s s
pe r for mance
2.1 KEY FINANCIAL INDICATORS
Revenue
Total amalgamated revenues and profits of the investees amounted to Euros
1,982.5 million, down 1.6 % on the prior year. Details by activity are as follows:
- The profits of investees in the international business notably indicate the
positive performance of the Brazilian company Argo, whose earnings were
Euros 3.6 million higher than in the prior year. Conversely, the contribution
to earnings from TEN's investees was Euros 9.1 million lower, mainly as a
result of the new remuneration parameters; Euros 5.9 million of this amount
corresponds to prior years.
∫ Telecommunications: this activity generated revenues of Euros 311.8 million in
2021, which is a year-on-year increase of Euros 19.5 million. The share of profits
of equity-accounted investees amounted to Euros 9.8 million, compared to
Euros 2.7 million in 2020. The sum of these two figures is 9.0 % higher than the
figure posted in 2020.
∫ Management and operation of domestic electricity infrastructure: this activity
generated revenues of Euros 1,609.7 million, compared to Euros 1,668.3 million
in the previous year. The variation arises for two fundamental reasons. On the one
hand, the financial rate of return applied to electricity transmission assets in Spain
has dropped from 6% in 2020 to 5.58% in 2021, as stipulated in CNMC Circular
5/2019. On the other hand, the System Operator’s revenue for the 2014-20 period
has been re-estimated, applying the best information available at the reporting
date until such time as the Ministry for the Ecological Transition has issued its
definitive settlement.
- Satellite business: the revenue of the satellite business, of which Hispasat
forms part, has improved significantly, coming in at Euros 177.4 million in
2021, a rise of 14.5 %. This increase is largely explained by the Euros 13.3
million contribution of the video management business acquired in Latin
America, while the rest of the rise is thanks to new contracts of the organic
business, which has expanded 6.5 % year on year. Profits of the investees,
including Hisdesat, surged from Euros 2.7 million in 2020 to Euros 9.8
million in 2021, thanks to the sale of a minority stake in the Canadian
company ExactEarth, which generated a gain of close to Euros 8 million.
∫ International electricity transmission: revenues from this activity totalled Euros
51.6 million (Euros 50.9 million in 2020), whereas the investees’ profits amounted
to Euros 19.8 million, as opposed to Euros 25.3 million in the prior year. The sum of
these two figures is down 6.4% on the figure posted in 2020.
- Fibre optics: the fibre optics business, which encompasses REINTEL, posted
revenues of Euros 134.4 million, down Euros 2.9 million year-on-year. This
trend was mainly because certain contracts are indexed to inflation, which
was negative in 2020.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Operating expenses
Operating expenses amounted to Euros 550.2 million in 2021, up 5.8 % on the
previous year due to trends in these costs in the fourth quarter of the year and
the effect of certain non-recurring adjustments. In annual like-for-like terms, this
rise in operating expenses would stand at 3.6 % The reasons for this increase are
as follows:
- The cost of supplies and other operating expenses totalled Euros 362.9 million,
up 5.4 % on the prior year. This increase is largely due to higher maintenance
costs associated with regulated activities (specifically, bringing forward certain
maintenance work on critical assets to strengthen security of supply), higher
insurance premiums and higher costs in Hispasat due to the acquisition of the
inorganic business in Peru. If these effects were eliminated, the rise in these
expenses would have stood at 4.0 % in 2021 versus the prior year.
- Personnel expenses totalled Euros 187.3 million, an increase of 6.5 %
compared to 2020, rising 20.7 % in the fourth quarter of the year with respect
to the same quarter in 2020. Higher personnel expenses had to be factored
in due to the addition of the workforce of the business acquired in Peru and
the effect of the transformation plan underway at Hispasat. On a like-for-like
basis and eliminating these elements, personnel expenses would have risen
by 2.9 % in 2021.
The increase in operating expenses in the fourth quarter reflects some of the
impacts described above, such as the transformation plan and the stepped-up
maintenance. The performance of these items is responsible for 50 % of the rise
in costs in the quarter.
The headcount at 31 December was 2,117 employees, compared with 2,051 in
the prior year. The average headcount was 2,075 employees, and 2,041 in 2020.
This variation is mainly due to the addition of 40 employees from the satellite
business acquired in Peru.
Earnings
As a result, EBITDA totalled Euros 1,498.6 million, down by 4.5 % on the figure
for the prior year. As already mentioned, the Group’s EBITDA includes the profits
of the investees of the Chilean electricity transmission company TEN and the
Brazilian electricity transmission company Argo, and those of HISDESAT, this
latter company being an investee through Hispasat. EBITDA trends broken down
by activity are as follows:
149
∫ Management and operation of domestic electricity infrastructure: the
contribution to EBITDA is down by Euros 78.0 million. This decline is due to
the above-mentioned remuneration adjustments in an amount of Euros 62.8
million, a Euros 5.9 million drop in “other income” in view of insurance payouts
and other non-recurring income received in 2020, and operating income
coming in Euros 9.3 million lower. Operating income has been impacted by
the slight increase in expenses, despite the high inflation scenario, rising
insurance premiums in a complex insurance market, and certain critical asset
maintenance tasks being brought forward in order to mitigate risks and bolster
security of supply.
∫ International electricity transmission: the contribution to EBITDA from the
international business is down by Euros 10.8 million, essentially due to two
aspects. On the one hand, the previously mentioned revenue adjustment in
Chile; Euros 7.0 million of this amount relates to 2020 adjustments. On the
other hand, in 2020, unlike in the current year, other operating income included
an amount of Euros 3.3 million received from the Peruvian Ministry of Energy
and Mines when arbitration proceedings were resolved in favour of TESUR.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents ∫ Telecommunications: the improvements in the satellite business have
increased the contribution to EBITDA by Euros 14.6 million. Meanwhile, the drop
in revenues of the fibre optics business has reduced the contribution to EBITDA
by Euros 5.0 million.
∫ International electricity transmission: profit of Euros 20.1 million was
attributed to this activity, compared with Euros 28.0 million in the prior year.
This variation primarily stems from the negative impact sustained by the
Chilean investees.
150
Results from operating activities (EBIT) amounted to Euros 992.0 million, up
6.8% on 2020. This increase is largely due to no assets being impaired in 2021,
whereas in the prior year asset impairment of Euros 121.7 million was posted.
The net finance cost amounted to Euros 103.9 million, compared to Euros 123.0
million in 2020. The lion’s share of this improvement is explained by the decline
in the average cost of debt from 1.74 % in 2020 to 1.52 % in 2021. Average gross
financial debt was Euros 6,844 million versus Euros 6,953 million in the same
period of the prior year.
The effective income tax rate applicable to the Group was 22.7 %, whereas in
the previous year it was 24.2 %. This lower tax rate is essentially due to the
recognition of R&D&i deductions amounting to Euros 19.5 million in respect of
the investment in the Amazonas Nexus satellite.
Lastly, profit for the year totalled Euros 680.6 million, up 9.6 % compared to
2020. Performance of this item by line of business is as follows:
∫ Management and operation of domestic electricity infrastructure: the net
profit attributable to this activity is Euros 552.8 million, which is Euros 59.9
million less than in 2020. The decline is mainly due to lower EBITDA, as
explained above.
∫ Telecommunications: the net profit of this activity has surged to Euros 104.7
million, compared with a net loss of Euros 22.7 million in the prior year. This
change is largely thanks to Hispasat, improved business performance, tax
credits and deductions in respect of R&D&i recognised in 2021 and the effect
of including asset impairment in 2020, mentioned above.
Investments
The investments undertaken by the Group in 2021 amounted to Euros 575.8
million, which is 10.6 % higher than the investments made in the prior year, not
taking into consideration the Euros 374.3 million set aside for the acquisition of
the Brazilian company ARGO.
Euros 425.8 million were channelled into investments associated with the
management and operation of domestic electricity infrastructure, 5.1 % more
than in the previous year. The commencement of works for the previously
mentioned storage-related facilities in the Canary Islands, and the headway
being made on the Ibiza-Formentera interconnection, feature strongly.
Investments related with the management and operation of international
electricity infrastructure totalled Euros 44.5 million, just edging ahead of the
Euros 43.2 million invested in the prior year, if, once again, the ARGO acquisition
is not taken into consideration. The REDENOR and REDENOR 2 projects in Chile
benefitted from 80 % of the investments, with the remaining amount being
funnelled into rolling out the TESUR 4 project in Peru.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents As regards the telecommunications activity in the satellite segment,
investments totalled Euros 73.2 million, of which Euros 59.8 correspond to the
investment in the Amazonas Nexus satellite, and include the acquisition of the
assets of the managed video services business in Latin America. Investment in
the fibre optics business, meanwhile, totalled Euros 1.6 million, similar to the
amount invested in the prior year.
In addition, Euros 30.8 million was channelled into other investments,
predominantly infrastructure and buildings for the Group. This item also
includes the investments made by Elewit, the Red Eléctrica Group’s venture
capital investment vehicle, amounting to Euros 4 million, a similar figure to that
reported in 2020.
Cash flows
Post-tax operating cash flows (funds from operations – FFO) stood at Euros
1,178.4 million, reflecting a decline of 2.4 % with respect to the prior year. The
growth in pre-tax profit and the improved performance of other cash flows,
primarily as a result of lower income tax payments, was offset by the lesser
adjustments to profits, an item that in 2020 reflected impairment of Hispasat
assets.
Changes in operating assets and liabilities at December 2021 reflect a
contribution of Euros 426.8 million, compared with Euros 173.5 million in the
previous year, principally due to higher amounts being collected in respect of
the transmission tariff and items pending settlement vis-à-vis the system. The
higher amounts collected will revert over the coming quarters.
All of this has prompted cash flows from operating activities to climb by 16.3 %
from Euros 1,380.4 million in 2020 to Euros 1,605.2 million in 2021. The variation
in this item coupled with lower investments (2020 included the acquisition of
50 % of Argo) are the main drivers that have placed free cash flow to equity at
Euros 1,044.3 million, versus the Euros 443.9 million generated in 2020.
Dividends paid with a charge to the prior year's profit totalled Euros 539.0 million,
equivalent to Euro 1.0 per share.
151
The performance of these items has enabled a Euros 465.5 million reduction in
net financial debt, compared to a Euros 75.3 million increase in 2020.
Net financial debt
Net financial debt stood at Euros 5,647.8 million at 31 December, down 7.6 % on
the Euros 6,113.3 million reported at the 2020 year end.
At 31 December 2021, all of the Group's financial debt is non-current. In terms
of interest, 81 % of the Group's debt is fixed-rate and the remaining 19 % is
variable-rate.
In 2021, the average cost of the Group's financial debt was 1.52 %, compared to
1.74 % in the prior year.
Average gross debt was Euros 6,843 million in 2021, compared with Euros
6,953 million in the previous year.
The Red Eléctrica Group has set itself a target of arranging 100 % of its
financial debt under ESG criteria by 2030. On the path to achieving this target,
it is worth highlighting that 35 % of the Group’s financing at 31 December had
been arranged under ESG criteria, compared with 23 % at 31 December in the
prior year.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Equity
At 31 December 2021 the Red Eléctrica Group’s equity totalled Euros 3,685
million, which is 5.5 % more than at December 2020. This increase is mainly
due to the positive contribution of profit for the year and the variation in
valuation adjustments, stemming from better performance of interest rates
and exchange rates.
Financial indicators / millions of Euros
2021
2020
Revenue
Gross operating profit (EBITDA)
Results from operating activities (EBIT)
Net profit
ROE (post-tax profit/Equity)
Cash flows from operating activities
Dividends paid
Equity
Gearing
(Net financial debt / Net financial debt+Equity)
Total assets
1,953.0
1,498.6
992.0
680.6
18.5%
1,605.2
539.0
3,685.1
60.5%
13,984.5
Debt service coverage ratio (Net debt / EBITDA)
3.77
1,985.8
1,568.5
929.0
621.2
17.8%
1,380.4
566.8
3,492.0
63.6%
12,844.1
3.90
%
-1.7%
-4.5%
6.8%
9.6%
3.9%
16.3%
-4.9%
5.5%
-4.9%
8.9%
-3.3%
3
Li quidity
and capital
152
The Group's liquidity policy has been designed to ensure payment obligations
are met, by diversifying how financing requirements are covered and when debt
matures.
The Group’s robust liquidity position allows for prudent liquidity risk management.
This position is essentially based on cash flow generation, primarily through
regulated activities; appropriate management of collection and payment periods;
and the financial capacity obtained through short- and long-term credit facilities.
At 31 December 2021 the undrawn balance on credit facilities amounts to Euros
1,853 million and cash surpluses of Euros 1,574 million are available.
The average maturity of the debt drawn down at the end of the year is 5.0 years.
The Group's financial strategy has aimed to reflect the nature of its businesses,
at all times adhering to the legislation in force. The activities conducted by the
Group are very capital-intensive, wherein a major portion of investments mature
over extensive periods. In addition, these assets are remunerated over long
periods of time, meaning that financial debt is primarily long-term and fixed-rate.
The Group’s strategic commitment to long-term, enterprise-wide sustainability
is also present in its responsible and transparent management style, which
promotes sustainable sources of financing.
The Group's capital structure policy ensures a financial structure that
optimises the cost of capital through a sound financial position, which
balances the generation of value for shareholders with competitive costs of
financing. Capital is periodically monitored through the gearing ratio, which in
2021 stood at 60.5%, compared to 63.6% in 2020. This ratio is calculated as
net financial debt divided by equity plus net financial debt.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
To maintain and adjust the capital structure, the Company can adjust the
amount of dividends payable to shareholders, reimburse capital or issue
shares.
Fixed rate
vs. variable rate
19 %
Variable rate
Fixed vs. variable financial debt structure / %
153
4
Ri sk
ma n ageme nt
The Group has implemented a Comprehensive Risk Management System,
which aims to ensure that any risks that might affect its strategies and
objectives are systematically identified, analysed, assessed, managed and
controlled, according to uniform criteria and within the established risk
levels, in order to facilitate compliance with the strategies and objectives
of the Group. The Comprehensive Risk Management Policy was
approved by the Board of Directors of the Parent company of the Group.
This Comprehensive Risk Management System, the Policy and the General
Procedure regulating it are based on the COSO ERM 2017 (Committee of
Sponsoring Organizations of the Treadway Commission) Enterprise Risk
Management – Integrated Framework.
The risk management system is implemented in accordance with ISO 31000
on risk management principles and guidelines, which is comprehensive and
ongoing in nature. Risk management is also strengthened at the business
unit, subsidiary, support area and corporate level.
The types of risk to which the Group is exposed (corporate risks) as regards
the achievement of its strategies and objectives can be classified as
follows:
81 %
Fixed rate
a) Strategic
- Risks related to the regulatory framework in which the Group operates.
- Business risks associated with the business context itself or with decisions of
a strategic nature.
- Risks related to sustainability and good governance.
b) Operational
- Risks associated with planned assets and/or those in progress.
- Risks associated with assets currently in service.
- Risks related to information systems.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents - Risks related to personnel and the organisation thereof.
The Company’s Sustainability Report provides further details of the Group’s
main risks at present, as well as risks which could emerge in the future.
154
- Compliance risks.
c) Financial
- Market risk.
- Risks related to the solvency of the Company.
- Counterparty risk.
- Assurance risks.
The Corporate Risk Map depicts the Group's most significant risks and is
prepared applying a bottom-up methodology, whereby the risks are identified,
analysed and assessed by the different organisational units before being
escalated for validation by Directors, General Managers and Corporate
Directors, until their final presentation to the Chair of the Group, the Executive
Committee, the Audit Committee and the Board of Directors.
The main risks to which the Group is exposed and that could affect
achievement of its objectives are regulatory risk, including tax risks, inasmuch
as the Group's principal business lines are subject to regulations, operational
risk, primarily arising from the activity carried out in the electricity and
telecommunications sectors, financial risk and environmental risk.
The Comprehensive Risk Management Policy includes the policy for controlling
and managing tax risks. It also covers financial risk management, as detailed
in the note to the consolidated annual accounts on the Financial Risk
Management Policy.
Climate change risks
The Group has taken various steps to adapt the management of climate
change risks and opportunities to the recommendations of the Task Force
on Climate-related Financial Disclosures (TCFD). In addition to reviewing
the governance criteria, the Group has a specific methodology to prioritise
these criteria and quantify their economic impact, which was implemented by
taking into account different scenarios.
Governance
Significant risks relating to climate change have been included in the
Corporate Risk Map, adopting the governance model described above.
Moreover, the information on climate change risks and opportunities has been
passed on to the Sustainability Committee for supervision, in collaboration
with the Audit Committee, as part of its oversight role over the comprehensive
risk control system. The Sustainability Committee also supervises the
corporate responsibility and climate change policies in order to integrate the
results of the climate change risks and opportunities analysis into the Group's
decision-making.
The Group's strategic plans reflect the climate change strategy, considering
the risks and opportunities identified, detailing the lines of action, setting out
the objectives and defining high-level responsibilities.
Based on the strategic guidelines, the business areas will establish specific
climate change initiatives within their operational plans with a view to keeping
the exposure to these risks below acceptable levels. Such plans will include
specific objectives and responsibilities.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Identification and quantification of risks and opportunities
Climate change risks and opportunities comprise both physical risks and
opportunities related to changes in climate variables (which could have
a direct effect on the facilities or on the services rendered by the Group)
and transition risks and opportunities (related to changes stemming from
the fight against climate change: regulatory, technological, market and
reputational).
The Group has a specific methodology for identifying, assessing and
monetising these risks and opportunities.
A prioritisation process is carried out based on a catalogue of potential risks
and opportunities. This process takes into consideration exposure, sensitivity
and adaptation capacity variables. Risks and opportunities can thus be
prioritised based on their importance.
For the purpose of quantifying the Group’s exposure, relevant risks and
opportunities are analysed in-depth, evaluating both the economic
variables and other business variables (impact on electricity supply or on
telecommunications services).
The process to identify and quantify risks and opportunities is reviewed and
updated at least annually.
As indicated by the recommendations, the analysis is carried out taking into
account different physical and transition scenarios.
∫ The physical scenarios considered were the Assessment Report AR5 (1) of
the Intergovernmental Panel on Climate Change (IPCC) (Representative
Concentration Pathways RCP2.6, RCP 4.5 and RCP 8.5). Projections by the
Agencia Estatal de Meteorología (AEMET) in the case of Spain and by the
World Bank in the case of LATAM have been used to adjust the values of
climate variables.
155
∫ Scenarios published by the International Energy Agency (IEA) in its WEO2020
report are used as a reference for transition scenarios. These scenarios are
completed by additional information referring to relevant variables based on
the business and geographical area. Scenarios included in the integrated
National Energy and Climate Plan (NECP) (trend and target scenarios), which
would correspond to the International Energy Agency’s STEPS and NZE2050
scenarios, are used in the case of electricity business risks in Spain.
The transition risks and opportunities analysis focuses on the 2020-2030
horizon, while the physical risks and opportunities analysis focuses on a
longer time frame (2030-2050-2070). The economic impact or monetisation
of the risks has been quantified for a period of ten years in both cases.
Conclusions: risks and opportunities
High-priority risks are as follows:
Physical:
∫ Impact of extreme events (wind) on outdoor facilities (power lines).
∫ Fires beneath the lines and near substations.
(1) IPCC Fifth Assessment Report (2014) drawn up by scientists from various countries. RCP 4.5 is a target
scenario and RCP 8.5 is a trend scenario contemplating greater changes in climate parameters.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The impact of these risks would materialise as damage to infrastructure with
or without affecting the electricity supply; an increase in maintenance costs,
affecting third parties or the environment; and impacts on reputation.
The estimated economic impact of these risks is significantly reduced and
does not exceed 2 % of the Group’s results. This is due to the roll-out of specific
projects and the application of different measures, including insurance policies.
Transition:
∫ Claims due to caps on renewable energy production and incidents which
could affect the security of the supply in the Canary Islands, associated with
the significant rise in the share of renewables in the energy mix forecast for
future years.
∫ Loss of energy generation due to the closure of coal, combined cycle and
nuclear plants.
The impact of these risks would be associated with more difficulties with
regard to system operation, increased caps on production and additional
technical restrictions and a possible effect on supply, which in turn would be
detrimental to the Company’s reputation.
Red Eléctrica works hard to integrate renewables safely into the electricity
system, thus minimising the materialisation and impact of these risks.
∫ Stricter legal requirements related to the use of fluorinated gases (SF₆).
The new requirements could lead to a rise in taxes associated with the use of gas,
as well as increased management and maintenance costs to ensure that new
requirements are met. In extreme circumstances, restrictions on the use of gas
could entail technical problems and high costs.
It should be highlighted that the Company has implemented a raft of measures
to reduce SF₆ leaks as much as possible, and to roll out projects focused
on sourcing alternative solutions. Of particular relevance is the Company’s
participation in work groups and with the implementation of legislation, and
its close collaboration with the authorities, all of which paves the way for
anticipating risk.
156
∫ Difficulties in bringing into service the necessary infrastructure for the
energy transition (this risk is identified and analysed specifically for
international interconnections).
The latter has been identified as the most significant climate change
transition risk for the Group. In order to meet the objectives of the energy
transition, the transmission network must be developed, mainly in respect of
the evacuation and integration of renewable power generation. However, due
to social aversion to this type of infrastructure and the long waits to obtain
the necessary authorisations for its development, there could be difficulties in
bringing the required facilities into service.
In this regard, preliminary studies are key for analysing the viability of the
infrastructure proposed in the planning. A large number of programmes
have also been implemented relating to management of stakeholders and
public participation, together with other projects to improve infrastructure
development processes, such as planning the materials supply and service
requirements.
The annual economic impact estimated for these transition risks would be
less than 2 % of the Group’s profit.
Meanwhile, energy transition policies provide huge opportunities for the
Group, connected to the development of infrastructure to make the transition
possible: integration of new renewable energy capacity, interconnections,
high-speed trains and support for an increased electrification of society.
Investment opportunities have been identified in the transmission network
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
(lines and substations), storage and other technical solutions to address the
energy transition challenges (protection systems, FACTS equipment, and
other control and monitoring equipment).
6
Events after
31 December 2021
157
To a lesser extent, the Group’s improved performance in respect of mitigating
and adapting to climate change could be a boon for its reputation, leading to
better financing opportunities or higher stock prices.
5
Ave rag e s up pl ie r p ayme nt per io d.
" Rep or t in g Re qui rement". Th ird a ddit io nal
p rovi si on of L aw 15 / 2 010 of 5 Ju ly 20 1 0
In accordance with the Spanish Accounting and Auditing Institute (ICAC)
resolution of 29 January 2016 regarding the information that must be disclosed
in the notes to annual accounts on average payment periods to suppliers in
commercial transactions, the average supplier payment period in the case of
Spanish Group companies was 43 days at the 2021 year end.
The disclosures required by this resolution are contained in note 22 to the
Group's annual accounts for 2021.
On 3 November 2021, as indicated in note 2 g) to the Group’s consolidated annual
accounts, Argo Energia Empreendimentos e Participações S.A. (“Argo”), in which
Red Eléctrica Brazil holds a 50 % stake, entered into a share sale-purchase
agreement with Rialma Administração e Participações S.A. to acquire shares
representing 100% of the share capital of Rialma Transmissora de Energia III
S.A. (“Rialma III”), subject to certain conditions being met and to the regulatory
authorities approving the acquisition.
At 31 January 2022, the conditions precedent laid down in the aforementioned
agreement have been fulfilled and the acquisition of all of the ordinary
registered shares, representing 100% of the share capital of Rialma III, has
thus been completed. Accordingly, the acquiree will change its name to “Argo IV
Transmissão de Energia S.A.”.
7
Outlook
As regards the management of the different businesses, the Group will
continue to undertake its activities, implementing a model encompassing two
major lines of action in equal proportion: operations subject to market risk
which offset the concentration of regulatory risk, and regulated operations
which offset market risk. To this end, the Group will continue to carry out the
role of Spanish TSO, helping to make the energy transition in Spain a reality;
continue to foster connectivity as a leading operator of both fibre optic and
satellite telecommunications infrastructure; consolidate its international
business; and invest in technological acceleration and innovation.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Executing the strategy, underpinned by efficiency, digital transformation and
personnel development, will enable the Group to adapt to the new, stricter
regulatory and remuneration environment, and to generate more ways of
creating value.
The Group will uphold its commitment to maximising value for its
shareholders, offering an attractive return in the form of dividends and
generating value through efficient management of its activities, analysing
alternatives for expanding its core business, maintaining a robust capital
structure and working to guarantee supply with the utmost level of quality.
The Group will therefore continue to seek the generation of long-term value,
creating lasting, competitive advantages and improving our corporate
reputation, whilst focusing on providing optimum service to society – the
differentiating feature of the Group's management.
Likewise, the Group will concentrate on unlocking shared value by working in
collaboration with stakeholders and combatting inequality in territorial and
digital areas and with regard to gender.
The Group is determined to forge ahead with its fulfilment of the 2030
Sustainability Commitment and to leverage the contribution of all Group
companies in order to meet the global targets, noteworthy among which are
the United Nations Sustainable Development Goals (SDGs).
Outlook for the management and operation
of domestic electricity infrastructure
Advancements in regulated activities, aimed at making the energy transition in
Spain a reality, primarily observe the following lines of action:
∫ Making the user the centre of the electricity system, providing new services
for an increasingly demanding and discerning user in terms of data and
information.
158
∫ Development of storage based on the management needs of the system in
order to implement a more flexible electricity system.
∫ Digitalisation and roll-out of smart networks, proposing new technological
solutions to maximise the use of transmission assets.
∫ A higher degree of interconnection, furthering integration with the European
market and improving the functioning of non-mainland systems.
All of these challenges will require a significant level of investment in the
transmission network in the coming years, with a considerable technological
component, which will be rolled out in a new, stricter regulatory and
remuneration environment
The Group will ensure its financial policy is in line with the remuneration regime
for transmission activities, which involves maintaining a suitable financial
structure to safeguard the Group’s financial solvency, its compliance with the
ratios laid down by the Spanish National Markets and Competition Commission
(CNMC) and having a solid credit position.
Outlook for the management and operation
of international electricity infrastructure
The Group will continue to focus its international business activity on
strengthening its outreach in countries where it has a presence, specifically
Peru, Chile and Brazil, as a way to diversify business.
∫ The integration of more renewable sources of energy generation in the electricity
system, supporting the change to zero-emission carriers and greater energy
efficiency.
Work will also remain ongoing to explore viable and alternative financing streams
at opportune market junctures in order to optimise the Group’s capital structure
and as a way of expanding the core business.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Outlook for telecommunication activities
The satellite sector is undergoing a transformation due to structural changes
in demand for communications services: on the one hand, satellite video
services, a significant source of revenue for the industry over an extended
period of time, are immersed in a transformation process; on the other hand,
data transmission services are on an upward trend, but require a much higher
level of involvement by operators when providing an all-inclusive service.
Hispasat made progress in 2021 on the key lines of action defined in its new
Strategic Plan, based on shifting Hispasat’s commercial activity away from
the traditional business in an orderly and measured fashion, while gradually
and simultaneously bringing on board a new focus and direction towards
vertical business models with greater future growth potential.
The activities performed most notably include the acquisition of the managed
video services business in Latin America; the launch of the Conéctate
initiative for the provision of a wholesale service to furnish 100 Mbps Internet
access to the entire population across the whole territory in question;
the strengthening of the Hispasat subgroup’s satellite capacity through
agreements with other operators, such as Eutelsat; and Hispasat’s focus
on expanding into the mobility business through the new Amazonas Nexus
satellite, which is scheduled to be launched at the end of 2022.
A Transformation Plan has also been launched, the main objective of which
was to identify how Hispasat’s current structure should evolve, both in
terms of technical and human capacity, so as to expand its provision of
higher added value services. The aforementioned Plan is expected to enable
the Company to scale up and become a provider of services and solutions
via satellite to meet the growing demand for global connectivity and data
services with a guarantee of quality, security and resilience, whilst pushing
the Group forward to become the go-to supplier of innovating products and
services, ensuring yield and growth, and responding to the current and future
challenges of its customers and shareholders.
In addition, the telecommunications activities carried out by REINTEL, as a
provider of telecommunications infrastructure, will focus on the backbone
fibre network market, specifically the lease of dark fibre in the infrastructure
associated with telecommunications sector players.
159
The incorporation of KKR as a strategic long-term shareholder in REINTEL will
contribute towards enabling the Group to benefit from growth opportunities
and maximising its capacity to generate value from its telecommunications
business.
REINTEL will continue to implement its commercial plan and undertake the
investments requested by customers, as well as broadening its portfolio of
fibre products, in order to generate greater revenues. Furthermore, REINTEL
will keep making progress on interconnecting rail and electrical fibre networks
with the aim of offering new solutions to customers, such as new redundant
sources and access points, whilst continuing to uphold the high standard of
service quality offered to its customers.
In relation to the roll-out of 5G networks, in 2021 Project 5G was devised, with
a view to pursuing the line of work already underway. This project is intended
to drive the development of the 5G business in line with the initiatives
envisaged in the Red Eléctrica Group’s Strategic Plan, as well as to take the
business to market and maintain a multi-disciplinary overview of the actions
necessary to execute the project.
Other business
As regards innovation, RETIT will help the Group to capitalise on its commitment
to innovative initiatives, entrepreneurship and technological development, which
are the cornerstones of sustainability against a changing backdrop in both the
energy and telco sectors.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Through RETIT, the Group will harness the potential of technology to further the
Group’s business and activity, as well as to explore new value-added business
segments. Initiatives focused on new tech niches will be explored, such as
cybersecurity, energy, AI and advanced analytics, industry X.0, the Internet
of Thing (IoT), new communication technology and satellites, platforms and
networks of the future, and any other potential technology detected by the
Group while it is constantly scanning and interacting with the tech ecosystem.
RETIT will thus enable the Group to forge stronger ties with society, to
increase the availability of its infrastructure, to enhance system security, to
maximise the integration of renewables and the use of its assets, to improve
the efficiency and sustainable management of its assets, and to improve the
health and safety of people.
8
In n ovat ion
Since its incorporation in 2019, Red Eléctrica y de Telecomunicaciones,
Innovación y Tecnología (RETIT) has strengthened its position, under the
Elewit brand, as the Group’s tech platform and transformation engine. Elewit
drives innovation, entrepreneurship and technological development, which are
the cornerstones of sustainability against a changing backdrop in both the
energy and telco sectors.
Through Elewit, the Group harnesses the potential of technology to further the
Group’s business and activity, as well as to explore new value-added business
segments.
To achieve the objectives and take advantage of internal and external
opportunities, whether at a very incipient or a mature stage, Elewit has rolled
out the following tools or capacities:
∫ Venture Client programmes, which focus on the speedy introduction of
innovation within the Group, through different startup solutions that are
selected to explore different uses and applications that can benefit Group
activity and improve existing technologies and processes. In 2021, the
programmes involving the main work were as follows:
160
- 2nd Venture Client Programme
Programme finished in June 2021. Nine pilot programmes were conducted
(six with REE and three with HISPASAT), with six of the eight startups
chosen from among over 120 companies filtered and analysed in detail,
from more than 10 countries. After the programme, different interviews and
satisfaction surveys were held, with excellent results and testimonies.
- 3rd Venture Client Programme
The Company has pre-selected eight startups which will present their
solution to the Selection Committee at the beginning of 2022, and from
which between four and six companies will be chosen, depending on
their fit and response to the needs of the different startups and the Red
Eléctrica Group.
∫ Corporate Venture Capital (CVC), to invest in tech-based venture capital funds
or to acquire a stake in a tech startup, whose activity could potentially be used
as a launchpad to explore new digital businesses that are a strategic fit for the
energy and telco transition process.
The main activities performed by Elewit in this field in 2021 are as follows:
- Direct investments:
• Hesstec (Hybrid Energy Storage Solutions Ltd.): a company specialised
in providing energy storage solutions, specifically, the development and
exploitation of advanced energy management algorithms and asset
operation and degradation models, which allow storage systems to offer
a range of optimised services, ensuring that electricity grid connection
requirements are met and the return on assets is improved.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
• Aerolaser: a Spanish company specialising in providing innovative
technological solutions for the development of advanced geospatial sensors
and applications. Specifically, Aerolaser renders services in the areas of
geomatics and inspection based on very high-definition mass geospatial
data, designing, developing and creating proprietary systems thanks to its
marked technological and R&D&i experience.
- Collaboration:
• Space camp: collaboration agreement with the Seraphim Space Camp
accelerator. The accelerator seeks out companies in the aerospace sector
so that they can contribute all their sector experience to ensure that
companies which are at early stages can begin to scale and are ready for
the investment process. It also forges relationships with some of the most
important space companies and agencies in the world.
∫ Creation of an ecosystem
∫ In 2021, Elewit continued to position the Red Eléctrica Group within the
innovation ecosystem through collaboration with startups, universities,
technological centres and other corporations. As a member of the
ecosystem, Elewit identifies and generates opportunities and shared value via
collaboration between internal talent of the Red Eléctrica Group and external
talent, including:
Universities and
Technological
Centres
Elewit signed two new framework
agreements with universities for the
development of projects in different areas
of interest. Consequently, Elewit currently
has nine collaboration agreements with
universities and technological centres.
161
Companies and
Institutions
Elewit has signed 12 new collaboration
agreements with companies and
institutions for project development and
corporate scouting.
Communities and
innovation networks
Elewit has signed up to the High
Commissioner for Spain Entrepreneurial
Nation.
Other interactions
with our ecosystem
Elewit has rolled out a new tool, the
launch of technological challenges on the
ecosystem, contributing to technological
surveillance and providing novel and
disruptive solutions to some of our
business challenges.
∫ Intraentrepreneurship, DESPEGA is the Red Eléctrica Group’s first
intraentrepreneurship programme. Launched in 2021, it allows employees to
contribute directly to the generation of new products and services that could
result in new lines of business and even new companies.
Employees with an entrepreneurial spirit have the opportunity to convert their
ideas into actual projects, spearheading their development with the support
and resources of the Red Eléctrica Group, with the possibility of dedicating
100% of their time to the project.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
∫ Tech labs to explore new technologies and provide overarching support to
initiatives.
∫ A technology factory to industrialise minimal viable products swiftly and to
put into practice opportunities for the Group that stem from technological
innovation.
∫ Project management office to plan and manage innovation projects and
programmes.
∫ Global Innovation Hub to promote transformation, digitalisation and support
the growth of the Red Eléctrica Group's innovation ecosystem. During 2021
six sessions were held on satellite innovation, REINTEL, artificial intelligence,
overview of digital platforms, intrapreneurship and 5G.
∫ Go to Market to offer third parties added-value technological solutions
resulting from the Red Eléctrica Group's innovation and technological
development process.
SAGA, a more mature product of the Elewit portfolio, took up a substantial
proportion of the sales effort. In this regard, during the first half of 2021 the
collaboration agreement between Red Eléctrica de España and its Belgian
counterpart Elia was signed and sealed. Both TSOs will create an ‘Asset
Management Expertise Centre’ to jointly design innovative solutions for
managing their electricity grids, and since signing, they have been working
together to evolve the SAGA platform, the software developed by Red Eléctrica
that uses artificial intelligence to optimise management of assets in use.
In 2021 an analysis was conducted of the commercial potential of and market
interest in various technological solutions developed by the Group, including
the programme for the detection of overhead cable anomalies (DALIA as per
its Spanish acronym) or the programme for automatically identifying species
of trees and bushes.
162
∫ Venture Building, whose aim is to drive the creation of startups from zero,
involving us in their design, validation and governance.
A sample of the most significant projects carried out during 2021 is briefly
described below:
∫ Project 5G: with the aim of satisfying the new needs of mobile operators in
locating equipment and 5G antennae, projects have been carried out in the
Red Eléctrica Group with a twofold objective: gain experience in installing 5G
systems; and analyse from a technical and economic perspective whether the
installation of mobile/5G infrastructure to support the electricity transmission
network allows this equipment to function under the terms of service required
by the telecommunications operators, using FWA (Fixed Wireless Access)
technology.
∫ The call for bids under RED.es’s 5G National Plan banner: an initiative that
seeks to develop and assess various use cases for 5G technology.
∫ Project DALIA: this project aims to make overhead cable inspections more
efficient through technological developments and the redesigning of
information capture and management processes, with anomalies being
processed and diagnosed using AI (artificial intelligence), irrespective of how
the information is obtained (images and data).
∫ Cyber deception platform: a pilot programme has been launched with the
startup Countercraft, which has developed a cyber deception platform.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
As regards the satellite telecommunications business, in 2021 Hispasat
continued to dedicate time and effort to innovation activities. This entailed
carrying out initiatives in the company’s main business areas, as well as in new
lines, business models and new infrastructure. Highlights of the main projects
and activities carried out include:
∫ Europe: during 2021, Hispasat continued to bolster its presence in the
European institutional arena, becoming a relevant player within the European
space ecosystem. The most relevant initiatives include the following:
- Preparation of the “European Secure Space Connectivity” study. The
purpose of this European Commission study is to scale and design the future
European multi-orbital satellite infrastructure, which will enable it to provide,
inter alia, secure and resilient communications in the institutional arena
to protect and support critical infrastructure, surveillance tasks, European
external action and crisis management.
- Presentation of the proposal for the development of the GOVSATCOM HUB.
The purpose of this European Commission project is to develop the ground
infrastructure necessary to put the secure satellite communications
infrastructure into place.
- Preparation of the proposal and awarding of the ESA's ITT Pool and Share
project for the joint development of interfaces among satellite operators
in preparation for future GOVSATCOM (provision of government satellite
services) systems through “Pool and Share”.
∫ 5G: Hispasat is undertaking an important task in the 5G ecosystem with the
aim of ensuring satellite integration. These activities include developing the 5G
standard via 3GPP, as well as participating in projects that depict the value of
satellites in the future network.
∫ Rural/remote solutions: through the sourcing and incorporation of satellite
connectivity-based solutions that provide added value for rural or remote
environments such as telemedicine or the digitalisation of primary sectors.
163
Innovation investment
During 2021, the Red Eléctrica Group managed 124 innovation projects,
entailing an investment of Euros 9.1 million. Additionally, startup investment
processes were launched to the tune of Euros 2.3 million, bringing the total
investment in innovation and technological development to Euros 11.4 million,
Euros 11.4 million in keeping with the average spend on innovation over the
past five years.
9
Ow n shares
At their meeting on 31 March 2020, the Board of Directors of Red Eléctrica
decided to suspend own share transactions as of 14 April 2020, except where
such transactions are associated with employee remuneration.
Consequently, in 2021 only one transaction took place, for the sale of 281,296
own shares associated with Group employee remuneration, with a par value of
Euros 0.14 million and a cash value of Euros 5.06 million.
At 31 December 2021 the Company held 1,803,433 own shares, with a par value
of Euros 0.50 per share, representing 0.33% of its share capital. These shares
had an overall par value of Euros 0.90 million and an acquisition price of Euros
17.53 per share (see note 14 to the consolidated annual accounts), and the market
value was Euros 34.31 million.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The Parent has complied with the requirements of article 509 of the Spanish
Companies Act, which provides that the par value of acquired shares listed
on official secondary markets, together with those already held by the
Parent and its subsidiaries, must not exceed 10 % of the share capital. The
subsidiaries do not hold own shares or shares in the Parent.
Shareholder
structure / %
Free float
distribution / %
164
20 %
Strategic
investors
76 %
Foreign institutional
investor
10
O t h er
rel evan t
inform ati on
10.1 STOCK MARKET PERFORMANCE AND
SHAREHOLDER RETURNS
All of the shares in REC, the Group's listed company, are quoted on the four
Spanish stock exchanges and are traded through the Spanish automated
quotation system.
80 %
Free-float
10 %
Spanish institutional
investors
14 %
Non-controlling
shareholders
REC also forms part of the IBEX 35 index, of which it represented 2.16 % at
the end of 2021.
At 31 December 2021 and 2020, the share capital of REC amounted to Euros
270.5 million and was represented by 541,080,000 shares with a par value
of Euros 0.50 each, subscribed and fully paid.
During the year REC's free float was 80 %
At the date of the last shareholders' meeting – 29 June 2021 – the free float
comprised 432,864,000 shares, of which an estimated 14 % is held by non-
controlling shareholders, 10 % by Spanish institutional investors and 76 %
by foreign institutional investors, primarily in the United Kingdom and the
United States.
For yet another year COVID-19 has, to a large extent, scarred the performance
of stock markets throughout the period, and the main downturns recorded
by stock markets during the year have coincided with the emergence of new
waves of the pandemic, for example in January, July and at the end of 2021.
In addition to the pandemic, issues such as inflation and its effect on
the monetary policy followed by central banks or uncertainty regarding
economic growth caused by bottlenecks in the production system have been
of concern to investors throughout 2021. Following the standstill of the
previous year the economy has taken off and business results have become
the real market driver.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents A total of 427.8 million shares were traded on the Madrid Stock Exchange
during the year as a whole, which is equivalent to 79 % of the number of
shares comprising its share capital. Cash transactions amounted to Euros
6,980.2 million.
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10.2 DIVIDEND POLICY
Red Eléctrica will apply the dividend policy described in its 2021-2025 Strategic
Plan, which sets out a dividend payment of Euro 1 per share for 2021.
The dividend paid in 2021 with a charge to the prior year’s profit amounted to
Euros 539.0 million.
The dividend with a charge to 2021 profit proposed by the Board of Directors
and pending approval by the shareholders at their annual general meeting is
Euro 1 per share.
The dividend will be paid in two instalments – an interim dividend in January
and a supplementary dividend halfway through the year following approval of
the annual accounts by the shareholders at their general meeting.
Despite the pandemic, the year could be defined as the year of recovery.
Economic recovery has been accompanied by a stock market rebound.
Following the slowdown triggered by COVID-19 in 2020, it is estimated that
the global economy grew at a rate of more than 5% in 2021, which will enable
global GDP to exceed that reached in 2019.
Global stock markets have, on average, made headway at a rate of more than
15 %, which has led other indexes, such as the main US indexes or the French
CAC 40 and German DAX, to report all-time highs. The good performance of
the financial, energy and technology sectors can be highlighted, in contrast to
the telecommunications and utility sectors which are amongst those sectors
losing most ground during the year.
By geographical areas, noteworthy are the rises in the US and European
stock markets, with performance of the French CAC and US Standard &
Poor’s indexes standing out, both of which have had annual gains exceeding
25 %. Performance of the Asian stock markets has been more moderate. The
Japanese stock market has risen by approximately 5 %, whilst the Chinese
stock market has ended the year with losses, with the Shanghai stock
exchange recording a downturn of slightly more than 5 %. With regard to
the stock markets of emerging countries, the Mexican stock market gains
exceeding 20 % can be highlighted.
Spain’s selective index has closed the year with a 7.9 % rise. The poor
performance of the Spanish market can be explained, to a large extent, by
the significant weight on our economy and, as a result, on our stock market
indexes, of sectors such as tourism, which have been harshly affected by
the pandemic.
Red Eléctrica’s share performance has been notable this year. The share
topped the Spanish selective index in 2021 with a gain of 13.4 %, after closing
the year at a price of Euros 19.025. The share price has fluctuated between a
minimum of Euros 13.565, reported on 26 February and a maximum of Euros
19.470 posted on 17 December.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents 10.3 CREDIT RATING
On 15 March 2021 the credit rating agency Standard & Poor’s issued a new
report on the Company maintaining not only the same rating but also the
outlook. This means that REC and its subsidiary REE maintain long-term ratings
of ‘A-' and short-term ratings of 'A-2', with a stable outlook.
On 22 April 2021 the credit rating agency Fitch Ratings gave the Company a
long-term rating of 'A-' with a stable outlook. Following this announcement, REC
and REE maintain long-term ratings of 'A-' and short-term ratings of 'F1', with a
stable outlook.
10.4 EXCELLENCE
One of the cornerstones of the Red Eléctrica Group’s corporate culture
is its commitment to management excellence. The Group has a Policy
of Excellence, which was last reviewed in 2021. This policy sets out the
organisation's principles in relation to its commitment to management
excellence, which is focused on the creation of sustainable value that meets
or surpasses the requirements and expectations of the stakeholders within
the Red Eléctrica Group’s ecosystem, acting as a lever for achieving excellent
results in both the present and future.
In 1999 Red Eléctrica adopted the EFQM (European Foundation for
Quality Management) excellence management model as a tool to improve
management, to which end external assessments are performed periodically
in accordance with the model. Until 2020, Red Eléctrica retained its EFQM
500+ European Seal of Excellence, following the external assessment carried
out in 2017, with a score of more than 700 points.
Following the publication of the EFQM 2020 model, Red Eléctrica developed a
project for adaptation to the new model, prior to the external assessment that
is scheduled to take place in 2022.
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The Group’s commitment to excellence is corroborated through external
certifications from prestigious certifying entities, which guarantee that the
organisation successfully implements certifiable management systems in
the performance of its activities. The Group has quality systems in place in its
main subsidiaries that are certified in accordance with the ISO 9001 standard.
Of particular note is the certification under the international standard
UNE-ISO 19650-1 and 2 for information management in buildings and civil
engineering works using the BIM collaborative work methodology (Building
Information Modelling) in relation to the construction project for the Salto
de Chira pumped-storage hydroelectric power plant in Gran Canaria; which
complements the certification of project management systems under the
international standards ISO 10006 for quality management in projects and
ISO 21500 for project management.
Also noteworthy is the certification of Red Eléctrica’s criminal and anti-
bribery compliance system, in accordance with the standards UNE 19601 for
criminal compliance management systems and UNE 37001 for anti-bribery
management systems.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents 11
No n-Fi n anc ia l Informat ion St at e m e nt
in com pl ian ce wi th L aw 11/2018
of 2 8 D ecem be r 2018
In 2021 the Group worked with the subsidiary Argo on defining the criteria
and methodology to identify and assess the risks inherent to this Group
company.
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11.1 ABOUT THE NON-FINANCIAL INFORMATION STATEMENT
In compliance with Law 11/2018 of 28 December 2018, the Non-Financial
Information Statement forms an integral part of the directors' report and can
be viewed at the following address:
Section 11.9 of this document, “Content index required by Law 11/2018 of
28 December 2018 on non-financial and diversity information”, details the
specific reporting framework for each item required by the Law. For those
requirements that do not pertain to any specific reporting framework, the
company uses an internal framework and details in the respective section
what this internal framework entails in order to facilitate understanding.
The scope of the NFIS encompasses the entire consolidated Group
formed by Red Eléctrica Corporación, S.A. and Subsidiaries. Law 11/2018
of 28 December 2018 stipulates that the Group’s subsidiaries are not
required to prepare an NFIS as their information is included in the Group's
Consolidated NFIS.
As regards information on the main risks associated with the significant
investments accounted for using the equity method, the Group carries
out a risk assessment that takes into consideration both financial and
non-financial aspects, both at the point the investments are made and
subsequently as part of the Group’s regular monitoring of its risks. The results
of these analyses are not considered significant to warrant their inclusion in
the NFIS for 2021.
Please also note that, subsequent to this NFIS, the Red Eléctrica Group
publishes a sustainability report which supplements this document; this
sustainability report is also subjected to external assurance.
Materiality Study
In 2019, with a view to making progress in the 2030 Sustainability
Commitment, the Group updated its Materiality Study in accordance with
the Global Reporting Initiative (GRI) standards for the purpose of identifying
relevant issues.
The Materiality Study is based on an analysis of the Group’s sustainability
context in order to build an overall picture of the environment in which the
organisation operates. This then allows the Group to review sustainability
planning for the 2019-2022 period. To define the context, the Group
considers all the business activities and the geographical areas where
it operates.
The sustainability context includes: a trend analysis that defines and/or will
define the overall sustainability, industry and geographical framework in
which the Group carries out its activity; the identification of good practices
to ascertain the level of maturity of the Group’s sustainability performance
with respect to comparable benchmark companies; and an analysis of
internal information to identify the requirements and expectations of
stakeholders and other issues of relevance with a view to their incorporation
in the commitments and corporate planning. Please note that the Group’s
stakeholders were involved in this study in order to gauge their requirements
and expectations. In this respect, strategic interviews were conducted with
Group management, key technical personnel and representatives of external
stakeholders in order to collect knowledge on the challenges, risks and
opportunities regarding sustainability from both an internal and external
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents perspective. Specifically, representatives of the following stakeholder groups
were involved in the 2019 analysis of the sustainability context: business
partners, suppliers, technology research and development centres, social
agents and associations, environmental groups, consumer associations
and end consumers, rating agencies, the media, industry associations,
professional and business bodies and associations, other companies in the
sector and competitors.
The 2021 update of the Materiality Study builds upon the 16 relevant issues
identified previously and focuses on defining criteria to prioritise them in a
more technical manner so as to better reflect the Group’s current reality.
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The issues are prioritised based on the concept of double materiality, as
defined by the European Commission, the Spanish National Securities Market
Commission (CNMV) and the GRI, among others, which considers:
This analysis led to the identification of a total of 16 relevant issues.
- How sustainability topics influence enterprise value (financial materiality or
2021 update
Various events have occurred since then, such as the creation of the new
technology company (Elewit), the acquisition of a 89.68 % stake in Hispasat,
S.A., the acquisition of Argo, the situation triggered by COVID-19 and the
approval of the new 2021-2025 Strategic Plan, among others. The foregoing
factors make it necessary to update the Materiality Study.
outside-in impacts) and;
- How the company affects the economy, the environment and society
(environmental and social materiality or inside-out impacts).
On the basis of this dual approach, the table below details the technical
criteria used for the 2021 update of the Materiality Study.
Financial materiality and outside-in impacts
Environmental and social materiality or inside-out impacts
• Contribution to the Group’s Strategic Plan
• Contribution to the Group’s 2030 Sustainability Objectives
• Input of the management team (1)
• Inclusion in the corporate risk map (*)
• Contribution to the Sustainable Development Goals (SDGs)
• Impact of the ISO 26000 guidance on social responsibility on the criteria (2) (*)
• Results of the perception studies undertaken with external stakeholders (3) (*)
(1) A survey was conducted in 2021 with the Group’s management team (52% of which responded) in order to gain their insight as regards the priority and relevance of the
issues.
(2) The ISO 26000 guidance establishes whether poor management or a failure to address the issue represents: non-compliance with the law; inconsistency with
international norms of behaviour; potential violations of human rights; practices that could endanger life or health; and/or practices that could seriously affect the
environment.
(3) As part of the initiative to update the perception studies, a section on materiality was added in 2019 where participating stakeholders can assess the relevance and
priority of issues in terms of sustainability and score how they believe the company has performed on each one.
(*) New assessment criteria for the 2021 update of the Materiality Study.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Relevant issue
prioritisation matrix
Red Eléctrica Group
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The following remain priority issues: Energy Transition, Climate Emergency
and Innovation and Technology. Talent and the Digital Divide are still
considered issues with a lower priority. A change in the priority of the
social issues can also be observed. Notable in this respect is the greater
relevance of Safety, Health and Well-being (up from 11th to 5th place) and
Community Relations (from 12th to 7th place).
The definition of a new 2023-2025 Sustainability Plan has been slated
for 2022, which will be in line with the Group’s Strategic Plan and the
2030 Sustainability Objectives; to this end materiality will be thoroughly
reviewed.
The Red Eléctrica Group's response to COVID-19
The emergence of Coronavirus (COVID-19) in 2020 and its subsequent
declaration as a pandemic by the World Health Organization (WHO) had a
I n t e r n a l r e l e v a n c e
Energy transition
Climate emergency
Innovation and technology
Biodiversity and natural capital
Occupational health
& safety and well-being
Diversity
Ties with the communities
Circular economy
Financial strength
Corporate governance and ethics
Digital transformation
Supply Chain
Contribution to society
Customer orientation
Talent
Digital Divide
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
major impact around the world in 2020 and continued to do so in 2021. The
recovery of global economic activity back to pre-pandemic levels will largely
depend on the vaccination rates of the population in order to reach herd
immunity, and on the emergence of new variants.
All operation and maintenance of the facilities was conducted normally in
2021, as was work to build new infrastructure. No incidents occurred during
the year that posed a risk as regards meeting electricity demand and keeping
the system up and running correctly; neither were any transmission network
incidents recorded that in any way compromised the operation of the
Spanish electricity system.
Moreover, both the international electricity infrastructure business and the
telecommunications business have been providing essential services with no
incidents arising. As regards international business, in 2021 the availability
of facilities remained at its consistently high level and no service quality
incidents were reported.
Within this context, Red Eléctrica has continued to apply the guidelines
adapted to the recommendations issued by the different pertinent
authorities in Spain as well as in each market of operations, with the priority
of preserving the health and safety of all of its employees, customers and
suppliers.
170
With this in mind, measures remain in place to allow for flexibility and to
enable all staff whose physical presence in the workplace is not strictly
necessary (essential personnel) to work from home, thus guaranteeing
security of supply for electricity and telecommunications at any given time.
The rest of the workforce has continued to work in-situ since September
2020, albeit with the necessary flexibility (shift work, essentially) to ensure
compliance with the health and safety measures established at any given
time by the pertinent authorities, with particular attention paid to the health
situation in each market of operations, inasmuch as different measures
could be required to ensure the health and safety of employees, customers
and suppliers.
From a financial and economic perspective, the Group’s financial position
remains robust, enabling it to continue to address these circumstances
through measures aimed at bolstering its liquidity. In 2021 the Group carried
out a bond issue for an amount of Euros 600 million (two issues in 2020
for a total amount of Euros 1,100 million), and arranged loan agreements
amounting to Euros 860 million and US Dollars 200 million. Following these
transactions, and having already settled due debts and the payments arising
from the Group’s activity, the Group’s liquidity position at December 2021
stands at Euros 3,427 million, specifically Euros 1,574 million in available
cash and Euros 1,853 million in undrawn credit facilities. This position
ensures the Group’s ability to meet its operating cash flow requirements and
to honour forecast debt maturities up to 2025.
The situation brought on by COVID-19 did not have a significant impact
on the continuity of the Group’s operations in 2021 nor on its financial-
economic indicators. The forecasts laid out across all the Group’s business
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents units at the beginning of the year, which are aligned with the Strategic Plan,
have been met at 31 December 2021.
The Red Eléctrica Group continues to set its sights on a green recovery
as the cornerstone of the economic rebuilding process, given its massive
potential to generate activity and create jobs. In this vein, the pandemic
has clearly brought to the fore the need to up the pace of the ecological
transition and digital transformation in order to advance with the
decarbonisation of the economy. The Red Eléctrica Group, as operator
and sole transmission agent for the Spanish electricity system, plays an
essential role in this process by working towards and achieving the goals set
in the European Green Deal and the integrated National Energy and Climate
Plan (PNIEC).
The Red Eléctrica Group is responding to this new paradigm through its
2021-2025 Strategic Plan, which is focused on making the ecological
transition a reality in order to advance towards an efficient decarbonisation
of the economy, while also simultaneously strengthening the Group’s
position in major growth vectors, such as international operations and
driving connectivity through telecommunications. All of the above is
underpinned by a corporate culture in which innovation, talent and a
commitment to sustainability act as the levers to ensure the Group’s
continuity going forward.
The Group’s management and directors will continue to assess the situation
and closely monitor any incidents arising in the infrastructure it manages,
as well as trends in other external factors and the impact such factors could
have on the financial statements.
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11.2 DESCRIPTION OF THE GROUP’S BUSINESS MODEL
The Group has consolidated itself as a global operator of essential
infrastructure, managing electricity transmission networks in Spain
and Latin America, and telecommunications networks (fibre optics and
satellites).
Management and operation of domestic electricity infrastructure
Construction and maintenance of power lines and electricity substations
forming part of the transmission network (including international and
inter-island interconnections) that match generation with consumption
and operation in real time in the Spanish electricity system, guaranteeing
continuity of supply and the safe integration of renewable energy.
This also includes the design and construction of storage infrastructure in
the Canary Islands, which serves as a tool for the operation of the electricity
system to improve the integration of renewable energy and the security of
supply on the islands.
Management and operation of international electricity infrastructure
Construction and operation of energy transmission infrastructure in Peru, Chile
and Brazil, and provision of electricity infrastructure maintenance services
in Peru.
Telecommunications
Satellite communications services for video, data transmission and mobility
services through satellites in operation.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Commercial operation of the excess fibre optic network capacity associated
with both the electricity transmission network and the rail network, as well as
technical spaces for hosting telecommunications equipment in Spain.
and Studies reinforces the participation of the highest decision-making levels
and the involvement of all areas of the organisation in the implementation,
supervision and monitoring of the 2030 Sustainability Commitment.
172
Development of new opportunities stemming from the roll-out of 5G networks.
Innovation and technology
The Group is committed to innovation and technology, based on the
acceleration of technological innovation, the generation of competitive
advantages and business opportunities to turn the Group into a technological
benchmark in the energy transition, the traceability and accessibility
of information, as well as the provision of innovation and technological
development services to third parties.
In 2019, the Board of Directors approved the Group’s 2030 sustainability
objectives, which lay out 11 proposals to measure fulfilment of the
commitments established in the four sustainability priorities, focusing on those
aspects that provide answers to the great global challenges on the horizon
for 2030. The objectives, which are defined by the Sustainability Steering
Committee and validated by the Sustainability Committee of the Board of
Directors, are aligned with the priorities of the 2030 Sustainability Commitment,
the Group's Strategic Plan and the United Nations Sustainable Development
Goals (SDGs).
2030 Sustainability Commitment
The Group has made a strategic commitment to long-term, enterprise-wide
sustainability. In 2017, the Board of Directors approved the Group’s 2030
Sustainability Commitment. Through this commitment, the Group aims to
achieve long-term continuity through a business model that is capable of
responding to the challenges of the future and putting the principles set out in
the Sustainability Policy into practice.
The 2030 Sustainability Commitment is backed by the Board of Directors and
the Group's management team, whose message is transmitted to the entire
organisation with a view to encouraging a proactive attitude that incorporates
sustainability into day-to-day decision-making. It is worth noting the creation
of the Sustainability Committee within the Board of Directors in 2018 as a result
of the strategic importance of sustainability for the Group. The key role of the
Sustainability Steering Committee and the Corporate Division for Sustainability
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents T H E R E D E L É C T R I C A G R O U P ' S S U S TA I N A B I L I T Y P R I O R I T I E S A N D O B J E C T I V E S F O R 2 0 3 0
Decarbonisation
of the economy
Responsible
value chain
Contribution to
the development of
the local area
Anticipation and
action for change
173
Act as a proactive agent in the
energy transition towards a zero
emissions model, based on the
electrification of the economy and
the efficient integration of renewable
energy through a robust and
better-connected network and the
development and operation of energy
storage systems.
1
Reduce scope 1(2) and 2(3) emissions
by 55 % and scope 3(4) emissions by
28 % with respect to 2019.
0
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Empower 100 % of society to be
actively involved in the energy
transition process.
3
Safely integrate 100 % of the
renewable energy available in the
electricity system, minimising waste
and accelerating progress towards
meeting the energy transition
objectives.
Extend our responsibility
commitment to all the links in the
value chain, from employees to
our suppliers and customers, by
forging alliances, all underpinned
by our model of good governance
and integrity.
Contribute to economic, environmental and
social progress in the local area, by providing
an essential service in a safe and efficient
way, fostering environmental conservation,
enhancing people’s quality of life and social
well-being and involving communities in the
development of our activities so as to generate
tangible mutual benefits.
Foster a corporate culture of
innovation and flexibility that enables
us to identify growth opportunities and
tackle future challenges by staying
ahead of and adapting to global trends
and to the regulatory environment
emerging from the new energy model.
4
Be a catalyst for change in our
suppliers.
5
Receive (socially responsible) ESG
financing in 2030.
10
Become a benchmark technological
player, pushing at least 120
technological innovation initiatives
that contribute to the energy
transition and telecommunications,
making the world a more connected,
intelligent and sustainable place.
11
Become a leading company in circular
economy.
6
Be a benchmark in gender equality: parity
in the management team by 2030.
7
Be a benchmark in diversity: inclusion of
collectives at risk of social and workplace
exclusion.
8
Have a net positive impact on the natural
capital of the area surrounding our
facilities.
9
Fully eradicate the digital divide: 100 %
connection rate for people in the areas
surrounding our facilities.
(2) Scope 1 emissions: direct emissions from sources owned or controlled by the Group (SF6, emissions associated with vehicle fuel combustion, generators and air conditioning).
(3) Scope 2 emissions: indirect emissions from electricity consumption (including transmission network losses).
(4) Scope 3 emissions: indirect emissions linked to the Group’s operations, arising from sources not controlled by the Group (supply chain, business trips, employee commuting, logistics, waste, etc.).
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The Group's main objective is to achieve a lasting relationship of trust with its
stakeholders.
Work will continue in 2022 on the next stages of the project, consolidating
the new stakeholder management model through its progressive roll-out at
various Group companies.
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The Red Eléctrica Group's stakeholder management model incorporates the
requirements of regulations and benchmarks in the field, such as AA1000,
IQNet SR10, ISO26000 and Global Reporting Initiative standards. This model
ensures adequate management of the significant economic, social and
environmental impacts of the activities and services of the Red Eléctrica
Group on its stakeholders, avoiding the risk of not rapidly identifying any
problem that may affect the relationship with them. This model is composed
of the following stages: identification and segmentation of stakeholders,
prioritisation, definition of the framework and relationship channels, and
ways to identify requirements and expectations.
The Group undertakes an annual programme of perception studies aimed at
assessing stakeholders’ satisfaction with its performance and ascertaining
their requirements and expectations. As well as being a tool to foster
dialogue and closer relationships with stakeholders, the studies are also an
important driver of continuous improvement for the Group.
The thorough review of the stakeholder management model, which began in
2020, continued apace through 2021. The final aim is to build an up-to-date
and prioritised inventory for each Red Eléctrica Group company, which will
serve as the starting point to define new stakeholder relationship frameworks
that are tailored to each subsidiary and in line with the Group’s actual situation.
The work carried out in this area in 2021 has led to the identification
of the following stakeholder categories: regulatory bodies and public
administration, the economic-financial ecosystem, suppliers, customers, the
corporate ecosystem, the social ecosystem and people.
11.3 INFORMATION ON ENVIRONMENTAL ISSUES
The Red Eléctrica Group’s commitment to the environment stems from
management and is based on environmental policy, which includes an explicit
commitment to the prevention of pollution and the precautionary principle. The
involvement of all of the organisational units and the commitment of all of the
Group's employees are essential to the implementation of this commitment.
REE and REA have an Environmental Management System in place (ISO 14001
certified) to facilitate the continuous improvement of their environmental
performance. REE also meets the requirements established by the EU Eco-
Management and Audit Scheme (EMAS).
The Group companies incurred ordinary expenses of Euros 23.4 million in
protecting and improving the environment in 2021 (Euros 23.7 million in 2020),
essentially due to the adoption of measures aimed at protecting biodiversity, fire
prevention, landscape integration, climate change, and prevention of pollution. As
regards the business pertaining to the management and operation of domestic
electricity infrastructure (REE), these expenses amounted to Euros 22.7 million
(Euros 23.3 million in 2020).
A total of Euros 3.5 million (Euros 5.4 million in 2020) was spent on environmental
issues associated with investment projects (including environmental impact
studies, environmental oversight of work, and the adoption of preventive,
corrective and accompanying measures).
The Red Eléctrica Group’s main environmental impacts are those related to the
construction of the electricity transmission network facilities and their physical
presence in the area. The Group works to minimise these impacts, considering
the entire life cycle of its facilities and paying special attention to the protection
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents of biodiversity. In view of its role as a leading player in the transition towards
a carbon-free energy model, the Red Eléctrica Group has taken on board a
specific commitment in relation to the fight against climate change. The Group’s
environmental commitment is based on three pillars: environmental management
and the integration of electricity facilities into the environment; the protection of
biodiversity; and climate change.
a) Environmental management and integration of electricity
facilities into the environment
The main approach for making facilities compatible with the environment
is the selection of routes and sites so that the environmental impact is as
low as possible. Additionally, the application of preventive and corrective
measures and the monitoring of strict environmental criteria make it possible
for potential effects on the environment to be reduced significantly. The best
tool to guarantee this process is an Environmental Impact Assessment. By
law, most Red Eléctrica Group projects are subject to this procedure.
The measures implemented include those carried out during the construction
of facilities to minimise land clearing and the impact on vegetation, fauna and
the socio-economic environment (infrastructure, crops and archaeological
heritage), as well as pollution prevention measures.
Actions during the maintenance phase aimed at mitigating the noise
generated by certain electrical substations (programmes for measuring and
adjusting the operating parameters of certain power equipment to reduce
noise levels and the design of acoustic screens) and reducing light pollution
are also noteworthy. To address the latter issue, in recent years the Company
has worked on implementing the necessary measures to enable facilities to
be shut down at night, thereby limiting light pollution as much as possible
while also achieving significant energy savings.
Thanks to the criteria considered when designing the facilities, the
electromagnetic field (EMF) strength is kept within the exposure limits for
the general public as per the Official Journal of the European Communities
1999/519/EC.
175
Lastly, visual impact assessment methodologies and tools have been
improved, areas affected by works have been restored and specific landscape
integration projects have been undertaken so as to reduce the visual impact
of the facilities.
In addition to the measures aimed at making facilities compatible with the
environment, we should highlight the importance to the Group of working
towards and making significant headway on the sustainable use of resources.
The Group’s 2030 sustainability objectives include becoming a leading player
in circular economy. The goals to be achieved and the actions to be carried
out are enshrined in the Circular Economy Roadmap, which focuses on
improvement in various dimensions:
∫ Materials: reduction in raw material consumption, promoting the use of
materials that are or can be recycled. This notion includes action related to
eco-design, which entails close cooperation with suppliers.
∫ Waste: a target of zero landfill waste has been set for 2030.
∫ Land: steps aimed at minimising the risk of land or groundwater contamination
due to hydrocarbon leaks or spills, as well as the cleaning up of land affected
by accidents using sustainable techniques.
∫ Water: seeking solutions to improve efficiency and optimise the use of water.
Major actions undertaken in 2021 include the definition of circular economy
criteria as regards the consumption of raw materials, water, energy and
waste production for the Red Eléctrica Group’s supply chain and their
inclusion in certain purchase processes for large equipment in 2021.
These steps contribute towards the Group’s goal of having a circular supply
network by 2030.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Major progress has also been made on the “zero landfill waste” project,
thanks to the adoption of measures that resulted in 88 % of all waste
generated (hazardous and non-hazardous) being recycled (this generic
category includes reuse, recycling, composting, anaerobic digestion and
regeneration).
b) Protecting biodiversity
Protecting and preserving biodiversity has always been a priority in the
Group’s environmental management strategy. The specific commitment to
biodiversity management includes the goal of having a positive impact on
biodiversity wherever the Group is present by 2030.
To meet this ambitious goal, a 2030 biodiversity roadmap has been drawn
up based on a natural capital approach (nature versus society). The roadmap
is centred around five strategic pillars that involve lines of action for which
specific measures and steps need to be defined.
The two supporting pillars (governance and management) make up the
framework for the coordination, execution and monitoring of the roadmap.
They also envisage questions related to governance, financing, accounting
and measurement, reporting and management of risks and opportunities in
natural capital.
The three operational pillars include actions designed to create social and
environmental value and to strengthen the positive impact on biodiversity.
Details are as follows:
176
∫ Habitats and species: actions aimed at protecting and conserving significant
habitats and species, and at rolling out the mitigation and conservation
hierarchy to all Group activities.
∫ Social value: the contribution to social development encompasses various
environmental awareness-raising and training initiatives, and cooperation with
public bodies and other stakeholders. Noteworthy is the line of action aimed at
developing the green economy in rural, urban and industrial settings based on
the sustainable management of natural capital.
∫ Supply chain: measures designed to reduce the impact of the Group’s supply
chain on biodiversity.
Biodiversity management is carried out taking into account the mitigation and
conservation hierarchy. Avoiding areas that are protected or highly biodiverse
is a fundamental criterion when deciding on the location of facilities (in
electricity transmission infrastructure, only 15.45 % of lines and 5.7 % of
substations are located in protected areas). The second step is to minimise
possible repercussions and is achieved through the application of the
corresponding preventive and corrective measures, including the restoration
of habitats wherever possible. Lastly, different environmental improvement
initiatives and projects are implemented, aimed at offsetting any impacts that
may arise.
The main impacts of the Red Eléctrica Group’s activities on biodiversity are
the risk of birds colliding with earth wires in power lines and the effect on
vegetation of felling and pruning to open up firebreaks. The multi-year Action
Plan (2017-2021) currently in force contains, among other things, various
actions associated with these aspects:
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents 177
∫ Protection of birdlife, the primary objective being to minimise the risk of birds
colliding with earth wires, as mentioned above. A plan to use bird-saving
devices in sections with the greatest potential impact for birds (more than
790 km of lines) has been devised, installing them for 71.1 % of critical priority
lines by the end of 2021.
∫ Prevention of forest fires, through the appropriate design and maintenance
of firebreaks and the joint efforts of the pertinent authorities in this field.
There are currently 11 fire prevention agreements in force with an overall
associated budget of more than Euros 880 thousand allocated for a four-
year period and channelled into cleaning up forest land, acquiring fire
extinguishing and fire-fighting equipment, training and awareness.
∫ Offsetting the loss of native woodland affected by the construction of new
facilities through reforestation efforts. The Group entered into a collaboration
agreement in 2021 with the Vizcaya Provincial Authorities and the town halls
of Garai and Alonsotegui in respect of a reforestation and restoration project
covering approximately 100 hectares of mountainous terrain to be carried
out in 2022.
c) Climate change
The Group, mainly through its activities in the electricity business, is a key
and proactive agent in the energy transition towards a zero-emissions model,
the main elements of which should be: the electrification of the economy, the
full integration of renewable energy into the energy mix and efficiency, while
always ensuring the security of supply. Taking on this role, in 2011 the Group
decided to formalise a voluntary commitment in the fight against climate
change, which is reflected in the goals to reduce emissions and the Climate
Change Action Plan.
In 2021, in order to ramp up its climate ambitions and in keeping with the
global goal of limiting the average rise in temperature to no more than 1.5°,
the Group has updated its emission-reduction targets in accordance with
the criteria put out by the Science Based Target initiative (SBTi). It is worth
underlining at this point that in addition to ramping up efforts to cut scope 1
and 2 emissions, targets associated with the reduction of scope 3 emissions
have been added for the first time.
Approved objectives:
∫ Implementation of conservation projects in cooperation with the government,
NGOs and other bodies, notably including projects relating to birdlife
conservation or those devised for the restoration of degraded areas. The
latter include the “Red Eléctrica Forest” project, with more than 915 hectares
restored since 2009 and an investment in excess of Euros 2,127 thousand,
and the “Red Eléctrica Marine Forest” project to restore posidonia oceanica
seagrass, with 2 hectares restored in the bay of Pollensa, Mallorca.
- Reduction in scope 1 and 2 emissions of 55% by 2030 with respect
to 2019.
- Reduction in scope 3 emissions of 28% by 2030 with respect to 2019.
- Suppliers that account for 2/3 of supply chain emissions must have
science-based targets in place within five years.
In order to define the steps required to meet these new goals, the Climate
Change Action Plan has been duly updated.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The plan covers the following lines of action:
- Reduction in the emissions associated with the supply chain:
178
∫ Contribution to a more sustainable energy model, taking the necessary
actions to achieve the objectives of the National Energy and Climate Plan
(NECP) for 2030:
- Ongoing investor involvement to develop a robust, intelligent and
interconnected transmission network that enables the electrification
and connection of new renewable energy capacity.
- Maximum integration of renewables by optimising the operation of the
electricity system, the use of artificial intelligence as a decision-making
and predictive tool, the integration of more evenly distributed generation
and the development of storage systems.
- Furthering efficient network management by encouraging technological
innovation, incorporating new elements and services and applying new
flexibility measures.
∫ Reduction in greenhouse gas emissions resulting from the Group’s activities.
The main measures implemented apply to the following areas of action:
- Reduction in SF₆ emissions through the control and reduction of leaks, the
renewal of switchgear equipment and the establishment of measures to limit
the growth of installed gas, including the increased use of alternatives to gas.
- Reduction in energy consumption and the associated emissions: increased
use of renewable sources, the development of energy-efficiency measures
and more sustainable mobility initiatives.
• Roll-out of collaboration programmes with suppliers aimed at setting
reduction targets in line with the SBTi. On this front, the Group has already
embarked upon a working programme with its leading suppliers, which will
be continued and expanded over the coming years.
• The incorporation of sustainability criteria into procurement decisions,
prioritising more sustainable supplies and promoting changes that make
the reduction of emissions possible.
- Offsetting of emissions to make progress towards a carbon neutral position
for the Group, primarily through the Red Eléctrica Forest project.
∫ Positioning and outreach: ensuring all stakeholders are involved in Red
Eléctrica’s commitment, disseminating knowledge and providing complete
and transparent information on the electricity system and its role in the
energy transition, as well as on various energy efficiency measures.
∫ Adaptation: in order to address both the inevitable physical changes in the
climate parameters, as well as the social, economic and regulatory changes
associated with the fight against climate change, the Group regularly
identifies and evaluates the risks and opportunities arising from climate
change and applies various measures defined within the framework of this
analysis. In 2018 work began on the implementation of the recommenda-
tions of the Task Force on Climate-related Financial Disclosures (TCFD),
which gave rise to a thorough review of the assessment, considering
different scenarios and intensifying the economic quantification of risks and
opportunities identified. Details of the TCFD recommendations are provided
in note 4 of the Consolidated Directors’ Report.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Environmental indicators
Non-financial indicators
Direct greenhouse gas emissions (scope 1) (tCO₂ eq.) (1)
Indirect greenhouse gas emissions (scope 2) (tCO₂ eq.) (1)
Power consumption (MWh) (2)
Fuel consumption (MWh) (3)
Consumption of energy from renewable sources as a percentage of total energy consumption (%) (1) (4)
Water consumption (m³) (5)
Hazardous waste (kg) (6)
Non-hazardous waste (kg) (6)
Recycled waste (%) (7)
Number of environmental accidents (8)
Lines with bird-saving devices installed in critical priority areas
(accumulated kilometres at the end of each year)
2021
23,632
646,531
19,770
11,.015
52
34,894
584,894
696,535
88
8
2020
25,557
600,824
18,255
9,438
52
27,195
236,654
794,664
63
10
562.5 (71.1 % of the
total to be installed)
508.4 (66.5% of the
total to be installed)
179
%
-7.5
7.6
8.3
16.7
0
28.3
147.2
-12.3
39.7
-20.0
10.6
(1) The data on emissions and energy consumption includes information for all Group companies.
(2) Most of the energy supply contracts managed by the company are for green energy or offer guarantees of the renewable origin of the energy, which represents 80.6 % of the electricity consumed in 2021 (the remaining
consumption corresponds to workplaces that are leased, workplaces in Latin America or that do not have electrical hook-ups and therefore receive their supply from the transmission network).
(3) Fuel consumption of fleet vehicles, generators and heating.
(4) Includes renewable energy as a percentage of total energy consumed (electricity and fuels). It does not include the percentage of renewable energy corresponding to the energy mix of each country (only that acquired
contractually) or the percentage of biofuel contained in vehicle fuels.
(5) The data has a coverage of 97.7 % in terms of personnel, including collaborators. The water consumed comes from the municipal supply network (49.1 %), wells (48.5 %) and cisterns (2.4 %). In some centres there are reservoirs
for the accumulation of rainwater for sanitary use, fire prevention and irrigation. The reservoirs do not have mechanisms to record the stored water, so it is not possible to calculate the percentage usage of rainwater. While
water is not a material issue for the Red Eléctrica Group, the decision was made to disclose information in this respect and to seek assurance thereon, as it is nonetheless an aspect required by some sustainability indexes.
(6) When analysing the difference between the 2020 and 2021 data, it must be borne in mind that 2020 was anomalous due to the halt in maintenance and renovation activities because of the pandemic. Thus, 2021 does not
represent an increase in hazardous waste based on historical data, but rather a return to figures from previous years in which this activity was carried out normally.
(7) % of waste generated (hazardous and non-hazardous) that has been recycled (this generic category includes reuse, recycling, composting, anaerobic digestion and regeneration).
(8) Relevant accidents are considered to be those categorised as significant, severe or major in the internal classification (level 3 accidents and above on a scale of 1 to 5). They do not include birds striking equipment.
11.4 INFORMATION ON LABOUR AND
EMPLOYEE-RELATED ISSUES
Our people
Red Eléctrica is fully committed to the professional development of our
personnel and to maintaining their internal employability during their tenure,
through integration, development and mobility programmes.
Consequently, in 2021 the Red Eléctrica Group continued to work on its talent
management model, an essential part of the People and Culture Department's
Operational Plan, which uses a systematic approach to attract, discover,
develop, train, transform and retain talent and exchange knowledge. Through
the deployment of the following five lines of action, the model pursues
excellence in these processes, thus ensuring that the company retains
a foremost position both at home and abroad:
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
∫ Attracting, Selecting and Integrating Talent: Commitment to the future.
∫ Identifying Talent: Bonding.
∫ Professional training and development plans: Red Eléctrica virtual campus.
∫ Knowledge Management: Transfer plan.
∫ Transformative Leadership.
On this front, the Group worked on various initiatives in 2021, such as
developing the transformative leadership of the management team; rolling
out the Individual Learning Plan, which allows employees to create their own
training programmes; consolidating the virtual campus as the central jump-
off point for learning; and implementing 360º feedback as the key tool for
people to receive input regarding their contribution and skills.
The Group has also worked on rolling out the Sustainable People Management
project, which provides a new people management model that adapts the
organisational structure to the new realities of the Group, geared towards the
demands of the business, management and people.
In this context, efforts are being made to adapt the Group’s personnel to make
the Group companies more digital and efficient as part of the Red Eléctrica
Group’s cultural transformation project, “Imagina”, which is driving an
innovative, agile and collaborative culture powered by self-leadership with the
aim of making the organisation more resilient to change and equipped to take
on the major challenges of the Strategic Plan: energy transition, connectivity
drive, innovation and technology, international business development, all
underpinned by the talent of our people, efficiency and commitment to
sustainability.
The efficiency and effectiveness of the people management processes
deployed are continuously monitored through key indicators, thus enabling
the Group to marry its short-term objectives with its long-term goals and
driving improvements in the processes.
180
Details of the key indicators for people management in 2020 and 2021 are
as follows:
Indicator
Total headcount
Women (%)
Men (%)
Women in management positions (%)
People with disabilities (%)
Indicator
Net job creation (no. of positions)
Average age
Average length of service (years)
Overall turnover (%)
Internal movement (%)
Permanent contracts (%)
Management team as % of total headcount
Pay gap
Training hours per employee
Average investment in training per employee (€)
Accident frequency rate
Accident severity rate
2021
2,117
26.7
73.3
34.1
0.9
2021
66
45.9
15.8
4.9
12.1
98.6
7.7
7.0
65
2,407
2.0
0.1
2020
2,051
26.6
73.4
32.7
1.0
2020
-5
45.0
15.6
0.5
5.0
98
7.3
9.8
67
3,042
2.9
0.1
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents a) Employment
At the end of 2021, the Group’s workforce consisted of 2,117 professionals.
Of these, 90.6 % (1,917 employees) work in Spain, 9.4 % work in Latin America
(199 employees) and 1 person works in Luxembourg. Staff enjoy stable,
high-quality employment (98.6 % of staff are on a permanent contract), with
the focus on employability and functional mobility as a lever for growth and
professional development (12.1 % moved internally in 2021).
181
Our commitment to stable, high-quality employment is also reflected in our
low unwanted external turnover (4.9 %) and the average length of service of our
employees (16 years).
Structure of the workforce by country where the Group is present
2021
Spain
Management team
Technicians
Administrative personnel
Total
Peru
Management team
Technicians
Administrative personnel
Total
Chile
Management team
Technicians
Administrative personnel
Total
Luxembourg
Management team
Technicians
Administrative personnel
Total
Under 30
30 to 50
0
36
0
36
0
0
0
0
0
0
0
0
0
0
0
0
34
246
28
308
0
29
3
32
0
5
1
6
0
0
0
0
Women
Over 50
21
75
65
161
0
1
0
1
0
0
0
0
0
1
0
1
Under 30
30 to 50
0
46
0
46
0
1
1
2
0
2
0
2
0
0
0
0
43
837
1
881
2
62
3
67
4
17
0
21
0
0
0
0
Men
Over 50
53
411
21
485
4
6
0
10
0
2
0
2
0
0
0
0
Total
151
1,651
115
1,917
6
99
7
112
4
26
1
31
0
1
0
1
Continued on next page
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Structure of the workforce by country where the Group is present
182
2021
Argentina
Management team
Technicians
Administrative personnel
Total
Brazil
Management team
Technicians
Administrative personnel
Total
Colombia
Management team
Technicians
Administrative personnel
Total
Mexico (5)
Management team
Technicians
Administrative personnel
Total
(5) New country since 2021.
Under 30
30 to 50
Women
Over 50
Under 30
30 to 50
Men
Over 50
Total
0
0
0
0
0
4
3
7
0
0
0
0
0
0
0
0
0
1
0
1
1
4
3
8
0
0
0
0
0
0
0
0
0
0
0
0
0
3
1
4
0
0
0
0
0
0
0
0
0
0
1
1
0
1
5
6
0
0
0
0
0
0
0
0
0
1
0
1
1
11
5
17
0
1
0
1
0
1
0
1
0
0
0
0
1
4
4
9
0
0
0
0
0
0
0
0
0
2
1
3
3
27
21
51
0
1
0
1
0
1
0
1
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The information for 2020 is as follows:
183
Structure of the workforce by country where the Group is present
2021
Spain
Management team
Technicians
Administrative personnel
Total
Peru
Management team
Technicians
Administrative personnel
Total
Chile
Management team
Technicians
Administrative personnel
Total
Louxemburg
Management team
Technicians
Administrative personnel
Total
Argentina
Management team
Technicians
Administrative personnel
Total
Under 30
30 to 50
0
39
0
39
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
1
30
247
38
315
0
14
3
17
0
6
2
8
0
0
0
0
0
1
0
1
Women
Over 50
19
63
59
141
0
1
0
1
0
0
0
0
0
1
0
1
0
0
0
0
Under 30
30 to 50
0
52
0
52
0
2
0
2
0
2
0
2
0
0
0
0
0
0
0
0
43
836
4
883
3
42
0
45
3
12
0
15
0
0
0
0
0
0
0
0
Men
Over 50
48
399
20
467
3
6
0
9
0
1
0
1
0
0
0
0
0
0
0
0
Total
140
1,636
121
1,897
6
65
3
74
3
21
2
26
0
1
0
1
0
2
0
2
Continued on next page
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Structure of the workforce by country where the Group is present
184
2021
Brazil
Management team
Technicians
Administrative personnel
Total
Colombia
Management team
Technicians
Administrative personnel
Total
Under 30
30 to 50
0
6
6
12
0
0
0
0
0
4
2
6
0
0
0
0
Women
Over 50
0
3
1
4
0
0
0
0
Under 30
30 to 50
0
1
3
4
0
0
0
0
1
12
4
17
0
1
0
1
Men
Over 50
0
3
4
7
0
0
0
0
Total
1
29
20
50
0
1
0
1
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Details of the Group’s total workforce in 2021 and 2020 by age, gender and
professional category are as follows:
185
Age
Under 30
30 to 50
Over 50
Total
Gender
Women
Men
Total
Professional category
Management team
Technicians
Administrative personnel
Total
2021
100
1,344
673
2,117
2021
565
1,552
2,117
2021
164
1,808
145
2,117
2020
112
1,308
631
2,051
2020
546
1,505
2,051
2020
150
1,755
146
2,051
Workforce by contract type
Permanent contracts Temporary contracts
Age
Under 30
30 to 50
Over 50
Total
Gender
Women
Men
Total
Professional category
Management team
Technicians
Administrative personnel
Total
2021
82
1,333
672
2,087
2021
555
1,532
2,087
2021
164
1,778
145
2,087
2020
82
1,298
631
2,011
2020
527
1,484
2,011
2020
150
1,715
146
2,011
2021
2020
18
11
1
30
30
10
0
40
2021
2020
10
20
30
19
21
40
2021
2020
0
30
0
30
0
40
0
40
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Details of the average number of permanent and temporary contracts by
gender, professional category and age range in 2021, and a comparison with
the previous year, are shown below. The age ranges are different to those used
in 2020 (detailed further below) as a result of improvements being made to the
information systems in 2020 and 2021:
In 2021 and 2020, the Group’s workforce did not include any part-time personnel.
186
Details of dismissals (6) in the year
Gender
Women
Men
Average
permanent
contracts
542.85
1,503.01
2021
Average
temporary
contracts
9.78
19.62
Professional category
Management team
Technicians
Administrative personnel
162.40
1,737.26
146.28
0
29.31
0
Average
permanent
contracts
521.8
1,479.5
149.3
1,706.9
145.3
2020
Average
temporary
contracts
18.8
20.9
0
39.8
0
Age 2021
Under 30
30 to 50
Over 50
Age 2020
Under 25
26 to 35
36 to 45
46 to 55
Over 55
Average
permanent contracts
Average
temporary contracts
91.18
1,368.53
583.35
20.02
11.29
0.87
Average
permanent contracts
Average
temporary contracts
13.4
201.5
847.6
548.7
394.5
7.5
23.8
4.0
1.0
0.0
Age
Under 30
30 to 50
Over 50
Total
Gender
Women
Men
Total
Professional category
Management team
Technicians
Administrative personnel
Total
2021
0
6
3
9
2021
3
6
9
2021
4
5
0
9
2020
0
15
7
22
2020
5
17
22
2020
6
16
0
22
(6) Information pertaining to Group employees: including employees who have an employment relationship
with a Group company under the provisions of Article 1 of the Workers’ Statute, and excluding those
engaged under a service contract.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Remuneration in the Red Eléctrica Group
The Group is working to consolidate a remuneration model across every company
in the Group, which reflects the following common principles:
Moreover, the Group continues to make progress with the “total remuneration”
model, which consists of different elements (economic, financial, intangible
and emotional), and which enables and supports new ways of working and the
organisational and cultural transformation of the Group.
187
∫ Internal fairness and external competitiveness.
∫ Consistency with the organisational and development model.
∫ Opportunity for salary progression.
∫ Differentiating recognition of superior performance.
∫ Equal pay between men and women.
The Group has a flexible remuneration system that can be configured to
provide personalised employee remuneration, offering its personnel products
such as health insurance, training, life insurance, travel cards, luncheon
vouchers and childcare vouchers, as well as REC (Red Eléctrica Corporación,
S.A.) stock option programmes.
Red Eléctrica’s remuneration model for non-management personnel
comprises a fixed portion with broad pay bands that enable wage
differentiation and a variable portion or extraordinary bonus that allows for
outstanding contributions to be recognised.
The remuneration model for the management team includes a fixed portion
and a variable annual element which considers the contribution made to
the achievement of individual objectives, the company’s overall targets, and
leadership goals that promote and link the variable remuneration to the
management leadership model. Long-term variable remuneration is also
available to the management team at the level of director and above, the
purpose of which is to maximise motivation and commitment to achieving the
Strategic Plan and to develop leaders.
This approach includes recognition programmes linked to the development
of innovative and efficient ideas, as well as revenue generation, in order to
encourage the participation of all of the Group’s professionals.
Details of the average remuneration of the Red Eléctrica Group’s workforce
When calculating the average remuneration, all elements of employee
remuneration are included, as follows:
∫ Fixed remuneration.
∫ Annual variable remuneration.
∫ Remuneration in kind.
∫ Personal supplements.
∫ Job-related supplements.
∫ Expatriate supplements.
∫ Benefits.
∫ Indemnities.
∫ Payments into long-term savings schemes.
∫ Long-term variable remuneration.
∫ Overtime.
∫ Allowances.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The detail of the average remuneration of the Group’s workforce for 2021 would
be the following (in Euros):
188
Women
Men
Under 30
30 to 50
Over 50
Under 30
30 to 50
Over 50
0
121,878
197,368
0
137,814
175,826
35,346
12,387
33,471
53,879
37,644
59,219
62,990
44,421
70,364
35,815
16,830
54,854
31,065
33,832
59,200
68,319
48,927
79,195
Average
total for women
Average
total for men
Average
total
143,839
53,349
40,517
59,807
155,576
151,591
57,716
38,398
63,973
56,738
39,928
62,862
Average total salary for 2021
Management team
Technicians
Administrative personnel
Total
The information for 2020 is as follows:
Average total salary for 2020
Management team
Technicians
Administrative personnel
Total
Women
Men
Under 30
30 to 50
Over 50
Under 30
30 to 50
Over 50
0
121,550
199,155
0
144,021
176,098
33,711
11,774
55,321
36,571
31,130
58,616
62,861
44,247
72,948
36,408
13,698
56,169
34,511
35,291
60,560
69,949
46,811
79,987
Average
total for women
Average
total for men
Average
total
151,642
54,104
39,380
59,886
160,218
157,417
59,447
41,161
65,780
58,277
39,807
64,216
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The Red Eléctrica Group rewards its professionals under principles of fairness
based on their level of responsibility and professional experience, and its
annual salary review processes differentiate on the basis of the contribution
made over the year and the results of their achievements, never on the basis
of gender.
With a view to promoting transparency and complying with market
recommendations and best practices, the Red Eléctrica Group includes
all elements of remuneration and all amounts received by its employees
when calculating the gross pay gap, included allowances, overtime and
supplements for expatriate assignments. The calculation formula is as
follows:
Average salary for men – Average salary for women
Average salary for women
The gross pay gap in the Red Eléctrica Group in 2020 and 2021 is shown in the
following table:
Red Eléctrica Group
Gross pay gap
2021
6.96 %
2020
9.84 %
The Group takes great care as regards equal pay for men and women,
which has enabled it to reduce the gross pay gap by approximately three
percentage points this year.
In 2021 the Group has also worked on keeping record of remuneration, as
set out in RD 902/2020, with the aim of guaranteeing equal pay in equivalent
positions and ensuring transparency, following consultation with the workers’
representatives in the pertinent Red Eléctrica Group companies.
189
Over the coming years, the Group will continue working to develop initiatives
that enable us to make further progress in improving these values.
Details of the average remuneration in 2020 and 2021 by gender and age are
as follows:
Gender
Women
Men
Total
Age
Under 30
30 to 50
Over 50
Total
2021
59,807
63,973
62,862
2021
33,679
59,205
77,083
62,862
2020
59,886
65,780
64,216
2020
33,397
60,044
78,356
64,216
As regards the remuneration of the Board of Directors, there is no gender-based
pay difference amongst the members of the Board, as disclosed in note 26 to
the consolidated annual accounts.
As regards senior management, according to note 27 to the Group's consolidated
annual accounts, in late 2020 the Group started a reorganisation process to
address the challenges posed by the new 2021-2025 Strategic Plan, involving
the centralisation of corporate activities in the Group’s parent company and
culminating in the approval of a new Group organisational structure in the first
quarter of 2021, geared towards ensuring fulfilment of the Strategic Plan.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents This reorganisation has entailed, inter alia, certain professionals who
already formed part of the Red Eléctrica Group, and who were carrying out
management duties, being acknowledged as senior management personnel.
In 2021 total remuneration accrued by senior management personnel
amounted to Euros 3,103 thousand and is recognised as personnel expenses
in the consolidated income statement. In 2020, total remuneration accrued
by senior management personnel, applying the criteria resulting from the
organisational changes, amounted to Euros 2,939 thousand. These amounts
include the accrual of variable annual remuneration, on the assumption that
the objectives set each year will be met. After the fulfilment of these objectives
has been assessed, the variable remuneration, adjusted to the actual
fulfilment rate, is paid in the first few months of the following year.
Implementation of policies on disconnecting from work
Article 88, the Right to Digital Disconnection from the Working Environment, of
the Spanish Data Protection and Digital Rights Act (Organic Law 3/2018 of 5
December 2019), includes an obligation for companies to meet with workers’
representatives and draft an internal policy for employees (including those
in management positions) that defines how this right to disconnect can be
exercised and the actions taken to train employees and raise awareness about
the reasonable use of technology to prevent the risk of IT fatigue.
The Red Eléctrica Group’s Digital Disconnection Protocol, which defines how
the right to disconnect can be exercised and the actions to be taken to train
employees and raise awareness about the reasonable use of technology,
entered into effect in the first quarter of 2021.
b) Organisation of working time
The actual effective working day established for employees complies with legal
standards of minimum required rights and with the conventional framework
applicable at the corresponding Group company.
190
A real and effective timetable of 1,690 hours per annum is established for 78 %
of the Group’s workforce. This is distributed according to the circumstances
at each work centre, with a basic 7-hour day schedule on every working day of
the year, and flexible starting and finishing times.
Number of hours of absenteeism
The number of working hours lost due to common illness or occupational
accident are shown in the table below:
2021
Hours lost due to occupational accidents
Hours lost due to common illness
Hours lost due to health and safety
Men
2,148
63,720
65,868
Women
250
30,165
30,415
Total
2,398
93,885
96,283
No hours have been lost due to occupational accidents at Hispasat or at the Latin American companies.
Hours of absence due to occupational accidents include occupational accidents + commuting accidents.
Hours lost due to common illness is the sum of days of temporary disability due to common illness +
illness < 3 days.
Hours lost due to health and safety is the sum of days of common temporary disability + illness < 3 days +
commuting accidents.
When calculating this data, the number of calendar days of absence was multiplied by 5.20, which is the
coefficient deemed appropriate to take into account all days of absence without considering whether
they are working days or not in order to make them equivalent to the number of days actually lost.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Information on Group companies in 2020 is as follows:
∫ Personal and professional development.
191
2020
Hours lost due to occupational accidents
Hours lost due to common illness
Hours lost due to health and safety
Men
1,207
64,724
65,931
Women
884
22,932
23,816
Total
2,091
87,656
89,747
∫ Equal opportunities.
Another highlight of 2021 was the satisfactory result of the audit to renew the
Family-Responsible Company certificate, once again being recognised as a
proactive company (B+).
The number of hours lost due to common illness is 1,071.2 hours in Peru and 171.6 in Chile.
For the Group as a whole, 87,656 hours were lost due to common illness. Zero hours were lost due to
occupational accidents in Hispasat and the Latin American companies.
Hours of absence due to occupational accidents include occupational accidents + commuting accidents.
Hours lost due to common illness is the sum of days of temporary disability due to common illness +
illness < 3 days.
Hours lost due to health and safety is the sum of days of common temporary disability + illness < 3 days +
commuting accidents.
Health and safety
Through the commitment and leadership of the management team, the Red
Eléctrica Group promotes best practices in safety, health and well-being. Its
healthy company management model is aligned with the Group’s Strategic
Plan, the People Department’s Operational Plan and the 2030 Sustainability
Commitment of the Red Eléctrica Group.
Management of work-life balance
Following the approval in 2018 of the third Comprehensive Work-Life Balance
Plan, 2021 saw the continued roll-out of the objectives defined for the
year, with 75 % of the planned programme being executed, and the further
expansion of the culture promoting new ways of working.
This management model is one of the fundamental pillars of the Healthy
Company model and the Diversity model and includes over 70 work-life
balance measures, structured into different blocks:
∫ Leadership and management styles.
∫ Quality of employment.
∫ Flexible working time and workplace.
∫ Family support.
Within this framework, the healthy company model revolves around four
main lines of action:
∫ Physical work environment: providing all the means necessary in order to
perform our professional duties in the best possible safety conditions.
∫ Participation in the community: through actions performed by the company that
have an impact on improving the health and well-being of its employees’ families
and the communities in which it operates.
∫ Health resources: providing the workforce with tools to improve their physical
and mental health, contributing to their well-being and quality of life.
∫ Psychosocial work environment: implementing management and work
organisation tools and resources that favour the physical and psychosocial well-
being of workers.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The model is deployed through annual programmes that aim to facilitate the
continuity of the management model through continuous improvement and
to consolidate the Group as a leader in best practices for safety, health and
well-being, prevention, and promoting health.
∫ Culture of Prevention: to instil a culture of prevention focused on the well-
being of the people working at Red Eléctrica’s facilities, promoting a safe
working environment, strengthening the communication of all the aspects that
contribute to increased safety when performing an activity.
192
The Group has a strategy and a specific action plan that promotes best
practices in relation to occupational risk during activities and work carried
out at its facilities. The objective is to go beyond mere legal compliance,
by training, informing, and raising awareness about the obligations and
responsibilities that exist and to engage the whole Group to achieve this goal.
In this context, higher risk tasks and activities are monitored on an ongoing
basis by means of safety inspection programmes, which are essential to
achieving the high levels of safety required. Accordingly, in 2021, 11,004
safety inspections were carried out on works and facilities (10,285
inspections in 2020), incidents having been detected in 11.34% of cases. As a
result of all the activities performed to control and monitor works, over 1,800
corrective actions were required, of which 89.78% were resolved while the rest
are in the process of being resolved.
To minimise the risks associated with construction and maintenance tasks
at electricity facilities, the Group places special emphasis on training,
awareness, consultation and participation (through the Health & Safety
Committee, internal audits and working groups), improving safe conduct and
the safety measures employed while work is being carried out by internal
and external (contractors) personnel. In recent years, several initiatives
aimed at reducing accidents during the works execution phases have been
implemented.
In 2021 the initiatives set out in the 2020-2023 Health and Safety Action Plan
have been undertaken, aimed at addressing the strategic challenge of being a
Zero Accidents group. Two main lines of work have been established: Culture
of Prevention and Innovation.
∫ Innovation: focusing on innovation as a driver of digital transformation in the
field of occupational safety. We manage innovation in health and safety, putting
technology to work for people.
As part of the Culture of Prevention, efforts have been made in 2021 to
ingrain communication as one of the essential facets for creating and
fostering a long-lasting culture of prevention, with the aim of imbuing and
sharing the message across the organisation, raising awareness among the
Group’s personnel regarding the importance of prevention.
In this respect, the following actions were carried out in 2021 to develop a
Culture of Prevention:
- Strengthening of internal and external communication channels.
- Management of communication to improve the culture of prevention.
- Synergies and shared experiences across companies.
- Transfer of knowledge.
- Improvement and optimisation of communication protocols.
On the Innovation front, and in view of the opportunities offered by
digitalisation, the aim is to improve the health and safety conditions and well-
being of the Group’s employees and stakeholders, strengthening the strategic
areas where technology and people converge, as the most important assets of
the companies.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Red Eléctrica conducts preventive monitoring of the health of its employees
on an ongoing basis through its in-house medical service, which is responsible
for checking employees’ health through periodic medical examinations and
consultations. As a result of the preventive measures applied, no incidents or
risks of specific illnesses associated with the professional activities carried
out or related to the workplace have been identified.
193
Another highlight of 2021 was the satisfactory result of the audit to renew the
Healthy Company certificate and ISO 45001. Regulatory audits have also been
performed on the companies that form part of the Red Eléctrica Group’s Joint
Health and Safety Service.
Lastly, this year a psychosocial risk assessment was performed with 64 % of
employees completing the evaluation survey. Furthermore, 13 workshops and
interview sessions were held involving the direct participation of over 120
people.
The Group drew up an innovation strategy in 2021 to develop an innovative
organisation as regards health and safety, making it possible to design,
explore and execute specific actions in a proactive and shared manner within
the Group’s coordinated environment of innovation. The Group has also put
into motion various pilot projects seeking to make an impact on health and
safety processes and promote the use of technology, with the help of Elewit,
the Group’s technology company, and supported by the IT Department.
One of the main areas of development revolves around the concept of
“connected workers” and the underlying technology: from IoT devices (through
sensors that send alerts) to the roll-out of communication networks providing
connectivity. The value of this technology has been explored with the startup
ENGIDI in order to validate its usefulness in pre-empting and avoiding
situations that could compromise workers in electrical environments, such as
the Group's critical infrastructure facilities.
Likewise, artificial intelligence applied to knowledge management has
been used in a pilot project called ZAPIENS-CIRIS, and its use in employee
well-being has been investigated through a proof of concept with the startup
ERUDIT.
Such testing allows results to be obtained swiftly and facilitates decision-
making for future escalation. Following on from a pilot project carried out
in 2020 (“Protected Areas”, which applied blockchain technology) and the
usefulness proven during the testing, the Group launched a new platform in
2021 to continue to improve the execution of “Protected Areas” and increase
traceability in the process.
In the specific area of Health and Health Promotion, in addition to the basic
actions of health monitoring, various campaigns aimed at guaranteeing
physical, psychological and social well-being have continued, offering certain
services through digital platforms and gradually resuming some in-person
activities: consultations on nutrition, physical condition, physiotherapy and
other sports activities.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Workplace accidents and occupational illnesses
In 2021, the key accident rates for Group employees were 1.98 (frequency)
and 1.33 (severity ). In 2020 the frequency rate stood at 2.87 and the severity
rate was 0.10.
Unfortunately, in 2021 a Group employee suffered an accident classed as very
serious due to falling from a height while working on power lines. The worker
is currently recovering.
194
Red Eléctrica Group
Accidents with leave
Fatal accidents
Days lost due to accidents (1)
Accident frequency rate
Accident severity rate
Men
Women
7
0
4,699
2.70
1.84
0
0
0
0
0
2021
Total
7
0
4,699
1.98
1.33
Men
Women
9
0
173
3.52
0.07
1
0
170
1.08
0.18
2020
Total
10
0
343
2.87
0.10
Frequency rate: number of work-related accidents resulting in leave per million hours worked.
Severity rate: number of working days lost due to occupational accidents + incapacity scale, per thousand hours worked.
(1) The calculation is based on 6,000 working days for a fatal accident and 4,500 days for total permanent disability.
Moreover, there were no cases of occupational illness in either 2021 or 2020.
Red Eléctrica implemented measures at the first news of the spread of
COVID-19, which has allowed the contingency plans to be rolled out promptly
and effectively.
Since the start of the high-alert situation triggered by the pandemic, reported
cases have been monitored both in terms of illness and possible contact.
Essential personnel, system operators and technical maintenance specialists
have been identified and are subject to special monitoring. Exhaustive
monitoring of positive cases continued in 2021, equipping personnel with
the necessary protective equipment to perform their duties (face masks and
sanitiser gels), and adapting buildings in line with health recommendations.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The company has continued to increase leader communication cascading,
giving it a closer, more personal touch and designing new listening channels
between collaborators and their superiors.
195
In November 2021, the Red Eléctrica Group conducted a Climate Survey to
learn about how employees perceived different aspects of the company
(commitment, leadership, development, communication, etc.) and to identify
opportunities for improvement.
The methodology and the questionnaire have remained the same as prior
years to provide continuity when tracking results, although new items and
categories have been incorporated in response to current needs, for example
cultural or digital transformation and innovation.
The Group will publish its overall results during the first quarter of 2022
through the intranet (NuestraRED) and the results for each area will be
presented to the organisation in person by the management team, fostering
constructive dialogue.
Throughout 2022, work will continue apace on the design, development and
communication of action plans for areas needing improvement, whether the
area as a whole or the area leader.
c) Labour relations
Red Eléctrica considers internal communication a key factor for sharing its
mission and strategic goals, involving employees in the organisation’s various
projects and improving the work climate, thus helping to boost pride in
belonging.
The main focus of internal communications was as an adjunct to the
company's transformation and the introduction of new, more agile, flexible
and collaborative ways of working that enable the company to achieve the
challenges set out in the new Strategic Plan.
The various internal channels include NuestraRED, a new collaborative
intranet integrated with Office 365 that was launched in 2021. It contains the
most relevant news related to the company and offers users information on
their day-to-day activity (meetings, pending tasks, etc.), all without leaving
the corporate environment.
NuestraRED also has an exclusive area for the management team, the
leaders portal, providing all the specific information related to their team
management, people management processes, development and training,
thus helping to galvanise their leadership.
Users also have direct access to applications, areas and tools geared towards
boosting innovation and agility in the organisation, making it a simple, useful
and easy-to-access tool that is on hand for all employees during the cultural
transformation.
In 2021 the Group continued to explore new internal channels of
communication that bolster and complement the messages and reach of
NuestraRED. These have included the employee mailing and new instant
messaging channels through Teams chats, which has become the go-to
collaboration space for all Group staff.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Employees covered by a collective bargaining agreement
The Group guarantees its employees the right to trade union membership,
association and collective bargaining within the framework of the provisions of
the International Labour Organization (ILO), current labour laws and the applicable
collective bargaining agreement. This involves having workers’ representatives at
several Group companies as well as collective bargaining agreements and holding
talks and meetings on this topic.
Also, the Red Eléctrica de España Intercentre Committee has met and the
sitting workers’ representative has been briefed on matters of general interest
to the workforce. Other committees have also held various meetings which
have included the workers’ representatives of REE and the workers’ committees
of REC and REINTEL.
196
Consequently, labour relations in 2021 featured a high degree of union activity.
Employees covered by a collective bargaining agreement
Employees in Spain
Employees in Brazil
2021
86 %
94 %
2020
91 %
98 %
The Red Eléctrica Group promotes the involvement of workers in the company’s
management through various internal channels of communication (as indicated
above) and through social dialogue in the form of briefings, consultations and
participation of workers’ representatives via the different committees in place.
In 2021, the aggregate figure for the other countries where the Group is present
(Peru, Chile, Argentina, Colombia and Luxembourg) is as follows:
Employees covered by a collective bargaining agreement
(Peru + Chile + Argentina + Colombia + Luxembourg)
2021
3 %
2020
3%
In the second half of 2021 talks began regarding a framework collective
bargaining agreement for REE, REC, REINTEL, REINCAN and Elewit, as well as
individual equality plans for REE (adapting the existing equality plan), REC and
REINTEL.
2021 saw a significant number of union elections, resulting in the renewal of
directly elected representatives for the majority of REE's workforce, as well as
the appointment of a Workers’ Committee for REC and an employee delegate
for REINCAN.
Summary of the collective bargaining agreements in the area
of health and safety
Red Eléctrica de España has an occupational health and safety committee
whose composition and functions are set out in Chapter 7 of the 11th Collective
Bargaining Agreement.
This committee is a collegiate body with equal representation intended to
provide regular and periodic consultation regarding the company’s occupational
health and safety actions. The committee consists of six representatives
nominated by the company and six health and safety delegates chosen from
among the workers’ representatives, who represent 100 % of the employees.
Specialists from the company’s health and safety service also attend the
committee’s meetings.
The committee meets every quarter (in accordance with Occupational Risk
Prevention Law 31/1995) and at the request of any of the parties. In 2021 the
committee held four meetings as planned and two extraordinary meetings
at the behest of the company’s representatives and the health and safety
delegates to report on accidents that had occurred.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
These meetings serve to monitor all health and safety activities, any new
applicable legislation, the reviews of processes and internal regulations, as well
as analysing and tracking the results and the occupational health and safety
programmes and monitoring safety equipment and materials. The minutes to
these meetings are available to all employees under a dedicated section of the
NuestraRED corporate intranet. This committee also receives the results of the
internal and external audits that are carried out and any improvement actions
that are implemented.
The REINTEL Health and Safety Committee was set up in 2021, consisting of two
representatives nominated by the company and two health and safety delegates
chosen from among the workers’ representatives, who represent 100 % of the
employees. Specialists from the Group’s joint health and safety service also
attend the committee’s meetings.
d) Training
As regards training, our commitment focuses on the “Sustainable management
of diverse and committed talent”, through the development and fostering of
knowledge and continuous learning of the Red Eléctrica Group’s employees.
To do this, every year a Training and Development Plan is defined within the
framework of the Talent Management Model to combine the planning and
implementation of professional development programmes and training actions,
which will help achieve both the goals of the organisation and the people in
it. The content is aligned with the three levers of the philosophy of the Red
Eléctrica Group Campus: knowledge of the business and technical training;
strategy and leadership; cultural transformation and innovation.
197
A high component of self-development is encouraged in training, with the
launch of programmes and learning spaces this year wherein the employees
themselves decide how and when to participate based on their own interests.
This was formalised for the first time in 2021 through the new Individual
Learning Plan process.
This year, 137,010 hours of training were undertaken, equivalent to 65 hours per
employee, at an investment of Euros 2,406.86 per person.
Training hours by professional category and gender
Red Eléctrica Group
Management team
Technicians
Administrative personnel
Total
Men
7,940
98,955
1,779
Women
4,900
20,756
2,680
2021
Total
12,840
119,711
4,459
108,674
28,336
137,010
Men
8,708
94,164
1,995
104,867
Women
4,987
23,178
3,716
31,881
2020
Total
13,695
117,342
5,711
136,748
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
To help students on higher vocational training courses obtain qualifications,
the Group has remained actively involved in the vocational training programme
with theoretical and practical content, as part of the dual vocational training
system leading to the qualification of Senior Power Plant Technician. The third
graduating class completed their training on 30 November 2021.
The aims of this initiative is to produce professionals who are available to
immediately take up maintenance specialist technician positions; to furnish
the sector with trained professionals equipped with Red Eléctrica know-how;
and to enhance the job opportunities of young people in the Spanish industry.
Because the preventative measures applied by the Group as a result of
COVID-19 remained in place, the programme for the third graduating class
was designed and executed drawing on experience from the second year. This
entailed a mixed format which combined a wide range of virtual technical and
safety training with traineeships at the work centres.
Lastly, the Red Eléctrica Group runs a nine-month theoretical and practical
programme led by the company’s operators, that enables young engineering
graduates to qualify as Electricity Control Centre Operators.
REE achieves legal compliance through alternative, exceptional measures,
reaching 2.62 %. Of this percentage, 0.54 % corresponds to direct employment
and the remainder to the application of exceptional alternative measures within
the framework of the LGD, consisting of contracting goods and services from
Special Employment Centres and making donations to entities whose mission
is the social and labour integration of people with disabilities, and which
support the Group in carrying out actions related to disabilities as part of the
annual diversity programme and contribute to its social initiatives.
198
At present, 1.28 % of REC’s workforce have a disability, thus, in addition to its
efforts to hire a greater number of differently-abled employees, the Group is
working on obtaining the certificate of exceptional circumstances so as to
achieve legal compliance through alternative measures.
Hispasat’s direct employment percentage is 1.95 % and it complies with the
LGD by also applying alternative, exceptional measures.
The number of Group employees with disabilities is as follows:
e) Integration and universal accessibility for people with disabilities
Disabilities are one of the main areas of focus of the 2018-2022 Comprehensive
Diversity Plan.
People with disabilities
2021
20
2020
20
The General Law on the Rights of People with Disabilities (LGD) is applicable
to four of the Group’s companies, one of which complies with the law through
direct employment (REINTEL, 3.33 %).
The corporate website of Red Eléctrica was developed using website
accessibility criteria with Level AA Conformance to Web Content Accessibility
Guidelines 2.0 (WCAG 2.0) of the World Wide Web Consortium (W3C) Web
Accessibility Initiative (WAI).
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
One of the most valuable disability projects is the Family Plan, consisting of
personalised assistance to improve the social and labour integration of any
Group employees’ family members with disabilities. Red Eléctrica participates
in institutional and private campaigns fostering the employment of differently
abled people, as well as awareness campaigns.
f) Equality and diversity
The Group’s commitment to diversity, inclusion and non-discrimination is
materialised in the form of its 2018-2022 Comprehensive Diversity Plan,
which is aligned with the Group’s Strategic Plan and the 2030 Sustainability
Commitment. It seeks to inspire and become a benchmark for the Group itself
and in the wider social, labour and human environment, through the Group’s
commitment to talent diversity, social inclusion, employment and non-
discrimination, breaking down stereotypes and cultural barriers. The goals of
the Comprehensive Diversity Plan are:
∫ Create a corporate culture that encourages diversity among employees and
other stakeholders.
∫ Integrate diversity into all of the Group’s processes, especially people
management.
∫ Involve, raise awareness and promote the Group’s mission and approach to
diversity among collaborators and suppliers.
∫ Participate with official organisations, academic institutions and other
social agents in campaigns and projects that enable the Group to become a
leading social agent that contributes to building a more diverse society.
∫ The Comprehensive Diversity Plan has the following specific objectives:
- 35 % of all senior management positions to be held by women.
- Reduction in the pay gap.
- Family-Responsible Company (EFR) classification A
199
- 70 % of LGD compliance through direct employment.
Gender equality is one of the facets included in the new Comprehensive
Diversity Plan and refers to the principles of equal employment opportunities,
the promotion of women to positions of responsibility, equal pay between men
and women, the promotion of shared family responsibility, the prevention of
harassment on moral, sexual and gender grounds and the prevention of gender
violence. These aspects are monitored through indicators that enable the Group
to measure the progress of the objectives defined.
2021 saw the launch of a training and awareness programme called
Management of diversity and Female leadership, aimed at promoting leadership
among the women employed by the Group, separated into two different modules:
∫ The first, aimed at the entire workforce without exception, to raise
awareness regarding the importance of diversity and foster inclusion in the
organisation, reducing unconscious bias.
∫ The second, aimed at ascertaining the opinion of the Group’s professionals
regarding the opportunities offered in the organisation for professional
advancement and development, to discover potential individual limitations.
Focus groups and questionnaires have been used in both cases, making
enquiries with both management and non-management personnel. The first
phase of the programme ends in January 2022 and it will continue throughout
the year along with other actions.
Stemming from the Group’s commitment to equality, the percentage of women
in the workforce stood at 26.69 % in 2021 (26.62 % in 2020). The number of
women in management positions has once again increased, totalling 34.15 % in
2021 (32.67 % in 2020). These results are nearing the targets set for 2022.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The significant female presence on the Executive Committee is notable, with
50% women, as well as on the Board of Directors, where women have a 50 %
representation, the highest among the IBEX 35 companies.
Accordingly, efforts remain ongoing to achieve equality between men and
women. Details of the key indicators for 2020 and 2021 are as follows:
11.5 INFORMATION ON RESPECT
FOR HUMAN RIGHTS
Respect for human rights
The Group has an explicit and public commitment to respecting and
promoting human rights in every country in which it operates, with special
emphasis on the freedoms and rights of vulnerable groups such as
indigenous people, women, children and ethnic minorities, among others.
200
Hiring opportunities index
Selection opportunities index
Training opportunities index
Promotion opportunities index
Opportunities for internal promotion to the management team index
2021
2020
1.0
1.0
1.0
1.7
1.8
1.1
1.0
1.0
1.4
1.6
This commitment is included in the rules of conduct and guidelines
established in the Code of Ethics and Conduct and in the Sustainability Policy,
and it applies to the whole supply chain through the Code of Conduct for
Group suppliers. Lastly, as a member of the Spanish network of the United
Nations Global Compact, the Group has strengthened its commitment to
human rights by signing up to the ten principles of the Global Compact.
During the last quarter of the year talks began with workers’ representatives to
adapt REE’s Equality Plan and to establish Equality Plans for REINTEL and REC
in line with new legislation on equality.
This year the Group has collaborated with a number of entities related to this
subject matter and has participated in various observatories and academic
forums on diversity.
In 2017 Red Eléctrica formalised its human rights management model,
approved by the Group’s Sustainability Steering Committee. This Model follows
the methodology defined by the United Nations (UN) Guiding Principles on
Business and Human Rights. The Model covers all of the Red Eléctrica Group’s
activities and establishes global commitments and grievance mechanisms
for all of its business activities and in all the geographical areas in which it
operates.
Human rights are managed from a continuous improvement perspective.
In this connection, the Group has been conducting regular due diligence
assessments since 2013 in order to identify the actual and potential impact
of its activities on human rights. In 2020, due to the opening up of new
markets and the sourcing of supplies outside Europe, the company carried
out a project to update its due diligence mechanisms in order to identify and
analyse new direct or indirect risks that its activities might pose to human
rights. Among other things, it was ascertained that the company’s presence in
Peru and its more recent expansion to Chile and Brazil underlines the need to
consider the possible impact on local communities, with particular emphasis
on indigenous people, and it was determined that investment in new projects
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
increases the number of business partners in countries with different
standards and job markets, which could give rise to the violation of labour
rights or of the right to equality and non-discrimination.
In 2021 progress was made in various projects carried out in this connection,
aimed at contributing to improved management of potential and actual
impacts on human rights. Any impacts identified in respect of the Group’s
relations with its stakeholders will be assessed in the course of 2022 with the
ultimate aim of designing measures to prevent the violation of human rights
in its area of activity.
The Group takes an approach based on control and continuous improvement,
implementing actions that help to prevent potential human rights violations,
while searching for solutions and redressing them in the event that they arise.
In 2021 a total of 35 social audits were performed and seven action plans
were designed to redress the most significant non-conformances, affecting
six suppliers, for whom a specific deadline has been granted to remedy the
non-conformances identified, facilitating supplier development and verification
of the improvements made. The results of these audits and their findings are
shared internally, placing special emphasis on the detection of significant non-
conformances. As regards human rights commitments, improvements aimed
at fostering supplier development are agreed, and changes are measured so as
to verify whether such improvements have been made, and otherwise to ban
the supplier temporarily or permanently. In 2021 the company did not receive
any external complaints through the channels established for that purpose,
and it did not cancel any contracts or orders on grounds of respect for human
rights in its supply chain.
The Group has set up a whistleblowing channel that is available to all
stakeholders as a formal mechanism for addressing any human rights-related
enquiries or complaints. The company also has the DÍGAME and ASA services
(Procurement Support Services), through which stakeholders can express their
concerns about any grievances in this area. The DÍGAME Service did not receive
any human rights-related complaints in 2021.
201
The whistleblowing channels available to stakeholders have not received any
human rights-related complaints in respect of Hispasat. None were received in
previous years either.
Lastly, we highlight that in 2021 a total of 144 users from 104 suppliers took
part in the human rights training programme developed by the Group in
cooperation with the Spanish network of the United Nations Global Compact.
11.6 INFORMATION ON THE FIGHT AGAINST
CORRUPTION AND BRIBERY
Ethics and Compliance in the Red Eléctrica Group
Ethics and compliance are fundamental pillars of the proper course of business
at the Group. This means acting with the utmost integrity in discharging the
Group’s obligations and commitments, and in relations and cooperation with its
stakeholders.
The Group has a series of corporate rules of conduct establishing the values,
principles and standards of conduct that must be adhered to by all persons in the
Group in the performance of their professional activities.
Code of Ethics and Conduct
The Group’s Code of Ethics and Conduct applies to all Group personnel. It
establishes and facilitates commitment to the ethical values, principles and
standards of conduct that must govern our professional activity within the
organisation.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The latest version of the Red Eléctrica Group’s Code of Ethics and Conduct,
approved by the Board of Directors on 26 May 2020, addresses the ethics
management requirements and recommendations established by the United
Nations (primarily through the Sustainable Development Goals, the Ten
Principles of the Global Compact and the Universal Declaration of Human Rights
and its implementing conventions), the Organization for Economic Cooperation
and Development (OECD), the International Labour Organization (ILO) and
Transparency International, among others.
Ethics and Compliance Channel
The Red Eléctrica Group has set up an Ethics and Compliance Channel
available to all the organisation’s members and stakeholders, through which
they can:
∫ Raise any queries regarding interpretation of the ethical values, principles
and standards of conduct laid down in the Code, or propose improvements.
∫ Report any non-conformances in respect of the Code, legislation, internal
regulations or commitments taken on by the organisation.
∫ Report any potential irregularities or non-conformances related to financial,
accounting or business malpractice.
The Red Eléctrica Group's Ethics and Compliance Channel is managed by
the Ethics Office in coordination with the Compliance area and its activity is
governed by guidelines on the channel’s management, which are in line with
the Spanish Data Protection and Digital Rights Act and the EU Directive on
the protection of persons who report breaches of Union law.
Enquiries and complaints processed in 2021
A total of seven enquiries were made to the Ethics Officer via the Ethics
and Compliance Channel in 2021. Four complaints were received in relation
to compliance with the Code of Ethics and Conduct in 2021. None of the
complaints concerned non-conformances linked to the organisation’s
criminal risks.
202
The chart below shows the number of queries and complaints made in each of
the last five years.
Enquiries and complaints made
26
21
21
10
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
7
1
2
0
2
7
7
7
1
0
2
8
1
0
2
3
9
1
0
2
3
0
2
0
2
4
1
2
0
2
Enquiries
Complaints
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Compliance system
The Group’s Compliance System is aligned with the best practices in this area,
so as to support the organisation in fulfilling its obligations and commitments.
The Red Eléctrica Group's Compliance Policy, the latest version of which
was approved by the Board of Directors on 27 July 2021, expresses the
organisation's commitment to the prevention and detection of, and response to,
any conduct that contravenes the legal obligations and commitments assumed
voluntarily, in accordance with the values, principles and behaviour guidelines
of the Code of Ethics and Conduct. The Policy sets out the Red Eléctrica Group’s
express commitment to compliance with the criminal and anti-bribery laws
applicable to the organisation and its rejection of any form of criminal conduct,
in keeping with the values, principles and behaviour guidelines established in
the Red Eléctrica Group’s Code of Ethics and Conduct.
The Group has a Compliance area that is entrusted with the design, development,
implementation and monitoring of the organisation's compliance system.
The main goals of the compliance system are:
∫ Establish a control and supervision system to mitigate compliance risks,
optimising and improving their management.
∫ Make available to the entire organisation the content of the principles and rules
that should govern their performance within the Group and the instruments
required to this end.
∫ Raise awareness among Group members of the importance of the Compliance
System and the necessary adaptation of their conduct to the values and
behaviour guidelines of the Code of Ethics and Conduct.
∫ Formalise the Group's commitment to the prevention of any conduct that
is contrary to the applicable legislation and to the commitments assumed
voluntarily.
∫ Inform the persons subject to the Compliance System that violation of the
principles and guidelines of the System will lead to disciplinary measures.
203
∫ Establish appropriate control measures to mitigate the Group's compliance
risk, as well as reactive and corrective measures when non-conformances are
detected.
∫ Maintain supporting evidence of compliance with the Group’s obligations and
commitments.
Criminal and anti-bribery compliance system
The Group has a criminal and anti-bribery compliance system that aims to
identify the rules, procedures and tools in place in the Group to prevent non-
compliance with the criminal legislation applicable to the Group and its personnel.
The management and prevention of criminal risks that could affect the Group,
based on its activities and business sectors, are thus incorporated into the
Group's control processes.
The Board of Directors, as the ultimate body in charge of the Group's risk
management, in accordance with applicable regulations, has designated the
Criminal Compliance Committee as the specific body in control of the Group's
Criminal Compliance System. The Criminal Compliance Committee is responsible
for the supervision and monitoring of the Group's criminal and anti-bribery
compliance system and its objective is for the main criminal risks to be properly
identified, managed and disseminated internally.
The Criminal Compliance Committee is an independent body which reports its
activities to the Board of Directors, via the Audit Committee. It also provides the
Board of Directors with information on the adequacy and effectiveness of the
criminal and anti-bribery compliance system.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The criminal and anti-bribery compliance systems of the Parent of the Red
Eléctrica Group (REC) and its subsidiary REE have been certified under UNE
19601 and ISO 37001. The certification process for these systems was carried
out by AENOR in accordance with the aforementioned standards.
In 2021, none of the Group companies were investigated or found guilty of
acts of non-compliance linked to the organisation’s criminal risks. Likewise, no
complaints were filed in connection with potential cases of corruption and no
Group company was investigated or found guilty by any court in connection with
acts of non-compliance linked to corruption.
Prevention of corruption and money laundering
The Code of Ethics and Conduct and the criminal and anti-bribery compliance
system, which include aspects related to the fight against corruption and
money laundering, constitute an effective mechanism for the detection and
treatment of possible cases of corruption and fraud. The Group has a guide for
the prevention of corruption: zero tolerance, approved by the Board of Directors
in 2015, which establishes behaviour guidelines and commitments, as well as
the performance criteria and main controls in place at the company associated
with corruption, including money laundering.
204
No complaints were filed in 2021 in connection with potential cases of corruption
or money laundering, and no Group company was investigated or found guilty
by any court in connection with acts of non-compliance linked to corruption or
money laundering.
11.7 INFORMATION ON SOCIAL ISSUES
Impact of the activity on employment and local development
The activities carried out by the Red Eléctrica Group in the different territories
undoubtedly have benefits for society, notably that they maintain the continuity
and security of electricity supply in conditions of high quality.
Once again this year, the Red Eléctrica Group’s investment has benefitted
society due to its dynamic effect on economic activity because, by encouraging
production, it leads to an increase in wealth (as measured by GDP) and, as a
result, in jobs and tax revenue, which can be used to improve the general well-
being of society. All this stems not only from the Group's direct investments, but
also the increase in activity driven by the circular flows of the economy.
Since 2017, the Red Eléctrica Group has used a methodology based on
multipliers to estimate the level of general activity generated as a result of an
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents initial investment. The calculations take into account the direct, indirect and
induced effects.
205
E F F E C T S O F I N V E S T M E N T S
Direct effect
Indirect effect
Induced effect
Estimation and valuation of the
production chain and of jobs and income
generated in the economic system by an
initial investment.
Income and jobs created when the beneficiaries of the initial
investments acquire other goods and services (intermediate
consumption) from other production systems, which in turn acquire
goods and services from their own suppliers.
Impact arising from all the income generated in the previous stages. This
effect thus incorporates the effect of the final consumption arising from
the wage income generated and the tax revenue obtained by governments
when taxing the different economic activities and the income generated.
Socio-economic contribution in Spain
In 2021 the Red Eléctrica Group’s total investment in Spain, through the activity
of REE, REINTEL, Elewit and Hispasat, amounted to Euros 531 million, of which an
estimated Euros 122 million was spent on importing the products and services
needed for such investment.
The remainder, totalling around Euros 409 million, consisted of direct investment
in Spain, the effect of which, after applying the chosen methodology, is broken
down in the following table:
Spain
Production (millions of Euros)
Income - GDP (millions of Euros)
Employment (no. of jobs)
Tax revenue (millions of Euros)
Direct
408.6
184.0
3,000
72.6
Indirect
Induced
326.7
150.1
2,384
56.6
48.0
23.0
341
8.1
Total
783.3
357.1
5,725
137.3
The investment in Spain has generated Euros 783.3 million of output in the
business sectors concerned, which is almost double the investment made (Euros
409 million). This represents a contribution of some Euros 357 million to Spanish
GDP (around 18% of the Red Eléctrica Group’s revenues in 2021), generating
activity equivalent to 5,725 jobs. All of this combined has generated tax revenue
of Euros 137.3 million (approximately 12.6 % of the amount provisionally
collected in 2021 in respect of the special electricity tax).
Socio-economic contribution in Chile
In 2021, through its subsidiary Red Eléctrica Chile, the Red Eléctrica Group
invested a total of US Dollars 41 million, approximately, in the transmission
network, reflecting direct investment in Chile the effect of which, after applying
the chosen methodology, is broken down in the following table:
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Chile
Direct
Indirect
Induced
Production (millions of US$)
Income - GDP (millions of US$)
Employment (no. of jobs)
Tax revenue (millions of US$)
40.5
20.9
535
4.6
28.2
13.1
378
2.5
6.9
3.5
95
0.7
Total
75.6
37.5
1,008
7.8
The investment in Peru has generated around US Dollars 19 million of output in
the business sectors concerned, which is almost double the investment made
(US Dollars 9.8 million). This represents a contribution of US Dollars 8.7 million
to GDP, generating activity equivalent to 624 jobs. All of this combined has
generated tax revenue of US Dollars 1.7 million.
206
The investment made has generated US Dollars 75.6 million of output in the
business sectors concerned. This represents a contribution of US Dollars 37.5
million to GDP, generating activity equivalent to 1,008 jobs. All of this combined
has generated tax revenue of US Dollars 7.8 million.
Socio-economic contribution in Peru
In 2021, through its subsidiaries in Peru, the Red Eléctrica Group invested a total
of US Dollars 10 million, approximately, in the transmission network, almost all
of which was direct investment in Peru the effect of which, after applying the
chosen methodology, is broken down in the following table:
Peru
Direct
Indirect
Induced
Production (millions of US$)
Income - GDP (millions of US$)
Employment (no. of jobs)
Tax revenue (millions of US$)
9.8
4.4
216
0.8
7.1
3.4
328
0.7
1.8
0.9
80
0.2
Total
18.7
8.7
624
1.7
Impact of the activity on local communities and the local area
The Group focuses its socio-environmental commitment towards unlocking
shared value with society by pursuing actions and investments that are aligned
with its business goals and, while generating value for the Group, also have
a positive impact on society, the local area and its inhabitants. It also helps
tackle various challenges, such as the UN’s Sustainable Development Goals or
those envisaged as part of the European energy strategy.
Shared value is created by the Group both in the way it develops and builds
infrastructure and in the way it operates and delivers services to the effective
systems in which it operates and to its customers. This activity generates
opportunities to unlock shared value throughout the infrastructure life cycle.
In addition, the Group supplements its projects in the area with collaboration
schemes to nurture institutional and social relationships, transparently seeking
collaboration agreements, disseminating information about the electricity
network's performance and fostering involvement in projects and initiatives
that boost socio-economic development, education, social well-being,
biodiversity and the conservation, protection and enhancement of natural and
cultural heritage in the local areas.
In 2021 the Group contributed over Euros 8.5 million (amount calculated using
the London Benchmarking Group methodology) to social initiatives.
In 2021 REE signed 86 agreements with public and social entities, mainly
to execute socio-economic, environmental, educational and cultural
development projects.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Of the 457 social initiatives undertaken, 244 were focused on the socio-
economic development of the local area, including, among others,
municipal infrastructure construction or improvement projects, efforts
to nurture the area’s cultural wealth and restoration of emblematic and
socially significant buildings with an impact on tourism.
To further strengthen the Red Eléctrica Group’s commitment to local areas,
in 2021 a new Social Innovation approach has been defined, placing a
greater importance on the “S” of society, with a view to making it one of the
transformative levers capable of generating solutions to real needs.
The new approach aims to reduce digital, territorial, generational and
gender inequality so as to improve the lives of citizens in local communities.
It is deployed in an Action Plan with 11 lines of work linked to the UN’s
Sustainable Development Goals; the Demographic Challenge Action Plan
of the Spanish Ministry for the Ecological Transition and the Demographic
Challenge (MITERD); the company’s 2021-2025 Strategic Plan; and the
2030 Sustainability Commitment.
With regard to knowledge-sharing, the Group has always played an
important role through activities that seek to enhance knowledge of the
Spanish electricity system. This now takes on even greater importance
given the sizeable challenge posed by the new energy transition model
through the decarbonisation of the economy, since a better-informed
society has greater capacity to develop and maintain the new sustainable
energy model.
In this respect, the company welcomed 40 visits in 2021, adapting to the new
requirements brought about by the health crisis triggered by COVID-19. Over 800
people have visited Red Eléctrica’s facilities and the control centres (CECOEL,
CECRE and island control centres), both in person and virtually. School children
Social contribution / %
207
7 %
General
Management
Costs
7 %
Commitment
to Heritage
and Culture
7 %
Commitment
to Cooperation
and Volunteering
8 %
Institutional
commitment
6 %
Reputational
commitment
5 %
Commitment
presence sector
organizations and
institutions
18 %
Commitment
to Outreach,
Education and
Training
16 %
Commitment
to Biodiversity
15 %
Commitment to
Local Development
11 %
Commitment to
Climate Change
can learn through the educational game “entreREDes”, which aims to teach
children to be efficient consumers and environmentally friendly in the future. Over
14,000 school children from eight autonomous regions participated in 2021.
The company has 14 collaboration agreements with universities and educational
institutions.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Corporate volunteering
The Group’s corporate volunteering model was updated in 2021, extending its
social action by driving and reinforcing collaboration in solidarity activities that
respond to the social needs, problems and interests defined in its
action guidelines.
208
M A I N C O R P O R AT E V O L U N T E E R I N G A C T I O N S I N 2 0 2 1
Social
volunteering
Experiment kits with Escuelab
Fostering interest in science among disadvantaged groups with volunteers preparing experiment kits:
• 53 employees and 95 children participated.
• 72 experiment kits sent.
• Funding for scholarships of children in situations of social exclusion.
Aldeas Infantiles [Children’s
Villages] landing page
Virtual campaign to raise money (donations) for the purchase of school material for children at risk of social exclusion ahead of the
2021-2022 school year:
• 41 volunteers.
• Euros 1,110 raised.
Christmas activities with Cruz
Roja Española [Spanish Red
Cross]
Book drive for families at risk of social exclusion.
• 230 books collected.
Environmental
volunteering
“Diary of a Naturalist”, Telesforo
Bravo – Juan Coello Foundation in
the Canary Islands
Creation of a field notebook from nature outings of employees and their children during their holidays or free time.
• 28 volunteers and their children.
“Great waste cleanup” challenge
with HandsOn Spain
Cleaning of waste by the volunteers in any area close to their home. The volunteers received a collection kit and scales to weigh the
kilos of waste cleaned up.
• 50 volunteers and their families.
• 293 kg of waste cleaned up.
Educational workshops on seeds
with the Global Nature Foundation
Workshops aimed at fostering knowledge of the natural processes in food production, focusing on the need to promote zero-mile diets,
eco-friendly production, and aspects such as food safety.
• 8 volunteers and their families.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents The actions carried out in 2021 were in response to the interest shown by
participating volunteers and were targeted primarily at improving the quality of
life for groups at risk of social exclusion, fostering employability and meeting
specific, real needs of society.
The situation triggered by the COVID-19 pandemic has significantly affected
such actions as they have only been possible in virtual formats or small family
groups. Nevertheless, the company reached a level of participation of individual
volunteers of 23 % (26.48 % in 2020), which was once again higher than the
target set at the beginning of the year (20 %).
Participation in organisations
The Group is an active member of various international organisations and
associations, particularly within the European Union, with a view to raising
awareness of its stance on fundamental aspects of its activity, building strong
alliances and contributing to the achievement of common objectives.
The Group participates in international electricity-related organisations such as
ENTSO-E (European Network of Transmission System Operators for Electricity),
RGI (Renewable Grid Initiative), IESOE (Electricity Interconnection in South-
Western Europe), Med-TSO (Mediterranean Transmission System Operators),
EASE (European Association for the Storage of Energy), and CIGRE (International
Council on Large Electric Systems). Regarding the satellite business, Hispasat
participates in the International Telecommunication Union (ITU), the Spanish
Association of Technology Companies for Defence, Aeronautics and Space
(TEDAE), the Inter-American Telecommunications Commission (CITEL), the
Spanish Aerospace Technological Platform (PAE), the EMEA Satellite Operators
Association (ESOA), and the Inter-American Association of Telecommunications
Companies (ASIET).
The Group participates in national organisations and associations that seek
different objectives:
209
∫ Share and extend best business practices
Spanish Quality
Association (AEC)
An association aimed at defending
and promoting quality as a driver
of competitiveness in business and
improvement in society.
Spanish Compliance
Association (ASCOM)
The first association created to
professionalise the compliance function
and facilitate the exchange of ideas and
best practices.
Spanish Association
for Standardisation
and Certification
(AENOR)
An association that contributes to
improving the quality and competitiveness
of companies by developing technical
standards and certifications.
Spanish Issuers
(Emisores Españoles)
An association that fosters measures to
reinforce legal certainty in the issue of
listed securities and contributes to the
development of high standards of corporate
governance.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
∫ Enhance knowledge of the Group’s activities
210
Electricity sector
Spanish Energy Club
(ENERCLUB)
Madrid Energy Foundation
(Fundación de la Energía de la
Comunidad de Madrid)
Energy Cluster (Clúster de la
Energía) of various autonomous
regions
An association that contributes to a better understanding of various energy-
related issues among interested parties in society.
A foundation that drives initiatives and programmes for the research,
development and application of energy technologies.
A group that promotes the development and competitiveness of energy
companies in Spain.
Telecommunications and aerospace sector
Madrid aerospace cluster
(Clúster aeroespacial)
An association that fosters and contributes to development and innovation in
the aerospace industry in the Madrid Region.
Spanish Association of
Technology Companies for
Defence, Aeronautics and
Space (TEDAE)
This Spanish association brings together technology companies in the fields
of defence, security, aeronautics and space, encompassing the Spanish tech
industries in these domains, and makes a meaningful contribution to the
national objective of changing the Spanish economy’s production model.
Spanish Aerospace
Technological Platform (PAE)
A group which furthers aeronautics and space research consultancy in Spain,
currently charged with updating the Strategic Aerospace Research Agenda.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents ∫ Promote the Group’s commitment to sustainability
Sustainability
Excellence Club (Club
de Excelencia en
Sostenibilidad)
A business association aimed at driving
sustainability by sharing and building
awareness of good practices.
Forética
Excellence in
Management and
Innovation Club (Club
Excelencia en Gestión
e Innovación)
Integrity Forum
(Foro de Integridad)
of Transparency
International Spain
Voluntare Foundation
An association of companies and
sustainability professionals promoting the
integration of environmental, social and
good governance issues in companies’
strategy and management.
A business association aimed at
strengthening the global competitiveness
of organisations and professionals through
the values of excellence.
A think tank for improving compliance and
ethical management in companies.
A global corporate volunteering network
that helps to connect companies with third
sector organisations.
211
Subcontracting and suppliers
The globalisation of markets has extended the limits of companies’
responsibilities and triggered a change in the role of suppliers, which have
become a pivotal element. The Red Eléctrica Group focuses on the scope of its
responsibility over the supply chain and adheres to a responsible management
model based on the principles of non-discrimination, mutual recognition,
proportionality, equal treatment, transparency and free competition, as well as
a framework of legislation and internal Group codes, policies and rules.
A new aspect this year is the reporting on Hispasat supplies, both for the parent
in Spain and the subsidiaries in various countries in Latin America (7).
In 2021 the Red Eléctrica Group worked with 2,157 suppliers in transactions
worth Euros 702.8 million (8) (accredited investment and spending). Of that
amount, 80.7% relates to services and works, while the remaining 19.3 % pertains
to materials and equipment.
In addition to these suppliers, there are a further 880 subcontractors authorised
to perform work in the electricity transmission network facilities.
The overall local purchases indicator (percentage of purchases from suppliers
based in the same country as the company) of the Red Eléctrica Group is
85.6 %. The breakdown of this indicator is 86.5 % for Group companies based in
Spain, 98.3 % in Chile, 66.9 % in Peru, 68.9 % in Brazil, 92.5 % in Argentina, 62.3 %
in Colombia and 91.4 % in Mexico (9). This enables the Group to act as a driver of
local growth, fostering business, industrial and social development through job
creation across the supply chain.
(7) For subsidiaries domiciled outside the European Union which operate in US Dollars, a conversion rate of 1
USD = 1 EUR is applied for all purposes.
(8) As an indication, the incorporation of Hispasat has increased the number of suppliers of the rest of the
Red Eléctrica Group companies by 65 % and the expenditure by 25 %.
(9) The volume of purchases is very low in the latter three countries: Argentina (Euros 78 thousand),
Colombia (Euros 362 thousand) and Mexico (Euros 1,714 thousand).
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents of breakdowns, giving suppliers more visibility regarding future purchase plans,
and bringing forward the purchase of some material.
212
Consumers
Throughout 2021, the Group's services that receive enquiries from external
stakeholders worked on defining a corporate procedure to determine the
guidelines for managing all incoming communications. This shared procedure
has been adapted to the Group's various incoming communication channels in
order to reflect the specific characteristics of each of the different businesses.
Red Eléctrica de España (REE)
Since 2008 the “Dígame” service has provided a professional response
to enquiries from external stakeholders, who have several channels of
communication at their disposal (telephone, email, online contact form, post
or certified fax), regarding REE’s electricity system operation and transmission
network management services. The service is manned by employees of
Fundación Juan XXIII Roncalli, a non-profit entity that facilitates the workplace
integration of people with disabilities.
The Group verifies that approved suppliers meet the minimum requirements,
which vary depending on the supply contract: they must have accepted the
Code of Conduct for Suppliers, show evidence of a stable financial position,
fulfil certain minimum quality guarantee criteria, have adequate public liability
insurance, and provide references and records of previous work.
Should more specific environmental and social criteria be needed (in addition
to those required for approval), these are conveyed by the Group’s technical
areas as part of the technical specifications that will form part of the tender
process. Their evaluation would form part of the technical assessment of the
tender bids received.
The monitoring process verifies the suppliers’ performance in the context of
the contracts with the company and the ongoing fulfilment of the requirements
made upon approval. The main areas screened are: (1) business (monitoring
of the financial solvency of all approved suppliers and application of mitigating
measures, continuous oversight of legal matters such as being up-to-date
with payments to the Spanish taxation authorities, Social Security, public
liability insurance, etc.); (2) technical; (3) compliance (criminal risk, privacy
and cybersecurity); (4) integrity; (5) sustainability (ESG scoring); and (6) social
responsibility (verification of proper adherence to the Code of Conduct for
Suppliers through social audits).
Social audits were conducted at 35 suppliers during 2021 (45 in 2020) to verify
compliance with the Code of Conduct for Suppliers. As a result of the audits,
seven action plans have been agreed with six suppliers, facilitating supplier
development and verification of the improvements made. The results of these
audits and their findings are shared internally, placing special emphasis on the
detection of major non-conformances.
The effects of the pandemic triggered by COVID-19 have not had a notable
negative impact on the Group’s supply chain thanks to the actions taken, such
as continuous monitoring of the status of suppliers and their ability to supply,
analysis of the minimum stock of materials and equipment for the resolution
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Enquiries received
through the DÍGAME service in 2021 / %
213
Enquiries received through the Dígame service in 2021
In 2021 a total of 3,843 enquiries were received and managed (10), with
stakeholders from the local area accounting for the highest number (1,571),
followed by customers (858), business sectors and associations (653), and
then investors and shareholders (442). To a lesser extent the Group has
recorded interactions with regulatory bodies and governments, suppliers and
other stakeholders.
Claims admitted and handled through the Dígame service in 2021
Of the 103 claims received, 44 fell under REE’s remit and were admitted.
Of these, 34 were upheld (accepted on correct and reasonable grounds,
whether fully or partially).
The bulk of the claims admitted referred to the impact of REE’s facilities in
relation to felling and clearing of vegetation or damage to infrastructure.
11.5%
Investors
and
shareholders
17 %
Business
sectors
By type
Quality and continuity of supply
Impacts of facilities
Measures
Other
Total
By stakeholder
Local area
Business sectors and associations
Customers
Total
2021
2020
(11)
13
29
-
2
44
36
6
2
44
0
41
2
3
46
42
1
3
46
Regulatory
bodies
3.8 %
4.3 %
Suppliers
0.2 %
Opinion
generators
0.05%
Employed
people
40.9 %
Social
environment
22.3 %
Customers
(10) “Enquiries” comprise any communication between the Red Eléctrica Group and a stakeholder.
Enquiries are classified into: claims, incidents, queries, requests, grievances, suggestions,
information notifications and recognitions.
(11) The 2020 figures shown are different to those presented in the 2020 Non-Financial Information
Statement since various rulings have been handed down in favour of REE, ordering the distributor to
pay the damages resulting from the complete blackouts in Tenerife (the so-called “cero”) by virtue
of the contracts binding it to consumers. Consequently, the 170 claims previously admitted were
deemed inadmissible. Possible changes in the future cannot be ruled out because the Canary Islands
government might yet make a decision on the penalties.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Of the claims admitted, 89 % had been resolved by year end. Of the 11 claims
that remained open at the end of 2020, nine were fully closed in 2021 and
the other two more complex claims, relating to the impact of the facilities,
are in the process of being resolved.
Red Eléctrica de España regularly conducts perception studies among its
customers and business agents. A new study was devised in 2021 in which
450 customers and business agents were invited to take part. The results
indicate an overall satisfaction rate of 8.7 out of 10.
International business
In 2021 the Group consolidated the channel for queries, enquiries, grievances
and claims through a Latin America-wide procedure that establishes the
response times and prioritisation of communications received from external
stakeholders.
By type
Requests
Queries
Grievances
Claims
Total
Peru
532
46
5
-
583
Chile
29
35
-
5
69
No claims were logged in Peru in 2021, whereas five were filed in Chile, two
related to REDENOR and three to REDENOR 2. Five grievances were received
in Peru, two pertaining to REDESUR, one to CCNCM, one to TESUR and one to
TESUR 4. Chile, for its part, has not reported this type of request.
Enquiries received international business / %
214
Chile
Peru
13,0 %
Regulatory
bodies
1,4 %
Social
environment
11,6 %
Others
2,9 %
Customers
1,4 %
Business
associations
69,6 %
Suppliers
2,1 %
Suppliers
5,3 %
Customers
1,2 %
Business
associations
8,6 %
Others
37,9 %
Social
environment
44,9 %
Regulatory bodies
At the reporting date of this report, 13 enquiries in Peru are still being resolved
and one in Chile.
REINTEL
REINTEL has its own 24/7 service and supervision centre, which controls and
monitors the status of the network and handles incidents and scheduled work
of customers, with the aim of offering a reliable service of the utmost quality.
In 2021 a total of 506 network incidents affecting customers were handled. Of
these, 64 % stemmed from power failures, third party works, natural causes and
vandalism, while the remaining 36 % were due to scheduled network work.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
These incidents were handled and resolved as part of normal business within
the timeframes established in the customers’ contracts.
Hispasat
Hispasat also maintains an ongoing dialogue with its customers, providing
them with various tools for direct communication: 24/7 customer service call
centre offered in three languages (Spanish, Portuguese and English) with local
phone numbers, a support centre and a web portal, allowing customers to open
service incidents or request information.
Lastly, it is worth highlighting that the activity of the Group companies has no
impact on the health and safety of consumers. In the case of the electricity
transmission activity, it should be noted that due to the criteria applied in the
design of the facilities, the levels of the electric and magnetic fields (EMFs)
remain below those recommended by the Council of the European Union (Official
Journal of the European Communities 1999/519/EC: limitation of exposure of
the general public in areas where they spend significant time – 5 kV/m for the
electric field and 100 µt for the magnetic field). The main criteria applied are
as follows:
215
In 2021 it received a total of 5,113 enquiries, primarily queries (57 %).
∫ Construction of double circuits and phased translocation in lines.
By type
Queries (12)
Incidents (13)
Grievances - Claims
Total
2021
2,928
2,182
3
5,113
2020
2,207
1,558
4
3,769
∫ Raising the height of supports, thereby increasing the safety distances.
∫ Minimum distances from the lines to population centres and isolated homes.
To verify compliance with recommendations, the Group has a tool that uses
certain line parameters to accurately gauge the maximum levels of EMFs that
the facilities can generate.
Hispasat surveys customer satisfaction every two years. The overall net
satisfaction rate was 84.1 % in 2021. This year saw participation rise to 257
responses (47 %), compared to 175 in 2020 thanks to Hispasat’s social incentive
of donating Euros 2 to the UNHCR’s Afghanistan Emergency programme for each
survey completed.
(12) Includes operational matters, information requests, alignments, changes, service provisions
and others.
(13) Includes incidents, problems, terminal-related incidents, platform-related incidents, service incidents
and scheduled work.
Tax information
The Group is committed to compliance with tax laws and the fulfilment of its tax
obligations, seeks a cooperative relationship with the taxation authorities and
considers it important to contribute to economic and social development by
paying taxes in all the countries in which it operates.
The Red Eléctrica Group has been recognised by the Commitment and
Transparency Foundation for the second year running, topping the tax
transparency and responsibility ranking in the Transparency in Tax Responsibility
Management Report on the IBEX 35 in 2020. This analyses the voluntary
transparency of content related to the tax obligations of IBEX 35 companies.
The Red Eléctrica Group scored maximum points and led the transparent
companies category.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The Group’s tax strategy was approved by the Board of Directors on 30 June
2015 and is intended to define a consistent approach to tax matters in line
with the Group’s strategy. It embodies the Group’s vision and objectives in tax
matters and is based on three core values: transparency, good governance and
responsibility.
Considering the applicable legislation for the preparation of the CBCR
(Country-By-Country-Report) in Spain, details of aggregate profits and taxes,
by country, of the Red Eléctrica Group entities included in the consolidated
financial statements, except for those accounted for using the equity method,
are provided below.
216
On 29 September 2015 the Board of Directors approved the Group’s Tax
Risk Control and Management Policy and its inclusion in the Comprehensive
Risk Management Policy. The tax risk control and management systems are
described in the Corporate Governance Report.
The Group’s Tax Strategy and Comprehensive Risk Management Policy may be
consulted on the corporate website.
Both the Code of Ethics and Conduct and the Tax Strategy state the Group’s
commitment not to create companies in countries considered tax havens in
order to evade tax.
The Group has no presence and carries out no activity in countries considered
tax havens under applicable laws and regulations (14).
This information is prepared on the basis of the respective individual financial
statements.
Profit/(loss) before corporate income tax comprises the pre-tax income and
expenses of each company, excluding dividends received from Group entities,
aggregated at country level.
Pre-tax profits obtained by country
Millions of Euros
Spain
Peru
Chile
Brazil
Argentina
Others (*)
2021
844
11
-4
3
-
-
2020
726
10
-5
-2
-1
-
(*) Includes France, Luxembourg and the United Kingdom in Europe and other countries in the Americas,
with amounts under Euros 1 million.
(14) Royal Decree 1080/91 of 5 July 1991, subsequently amended by Royal Decree 116/2003 of 31
January 2003; EU list of non-cooperative countries and jurisdictions in taxation matters and list of
non-cooperative tax havens drawn up by the OECD.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Income tax paid
With a view to following best practices in sustainability and voluntarily
providing greater transparency in tax matters for its various stakeholders,
since 2014 the Group has calculated and published its total tax contribution,
highlighting the significant economic and social importance of its tax
contribution.
The Group’s total 2021 tax contribution in all the countries in which it operates
amounted to Euros 775 million, consisting of Euros 244 million paid and Euros
531 million collected.
Corporate income tax in 2021 accounts for 74 % of the taxes paid by the Group
to governments, mainly the Spanish government.
217
Government grants received
In 2021 Euros 3.5 million was received in grants from official bodies (Euros 1.8
million in 2020). The grants received in 2020 and 2021, broken down by country,
are as follows:
Government grants received
The corporate income tax paid in each country in 2020 and 2021 is as follows:
Millions of Euros
Spain
Total
2021
2020
3.5
3.5
1.8
1.8
Corporate income tax paid
Millions of Euros
Spain
Peru
Mexico
Others (*)
Total
2021
177
4
-
-
2020
192
3
2
-
181
197
(*) Includes France, Luxembourg and the United Kingdom in Europe and other countries in the Americas,
with amounts under Euros 1 million.
11.8 TAXONOMY INFORMATION
In 2018 the European Commission published its “Action Plan: Financing
Sustainable Growth”, thereby setting in motion a comprehensive strategy with
regard to sustainable finance. One of the objectives established in that action
plan was to reorient capital flows towards sustainable investment in order to
achieve sustainable and inclusive growth.
The most important and urgent measure envisaged in the action plan was the
establishment of a unified classification system for sustainable activities. The
action plan acknowledges that the reorientation of cash flows towards more
sustainable activities should be underpinned by a shared understanding of what
is meant by environmental sustainability of activities and investments.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
The first step, consisting of establishing clear guidance on activities potentially
qualifying as contributing to the achievement of environmental objectives,
helps to provide investors with information on investments that finance
environmentally sustainable economic activities.
- Circular economy.
- Pollution prevention.
Building on the aforementioned Action Plan, the European Parliament and the
Council of the European Union approved Regulation (EU) 2020/852 of 18 June
on the establishment of a framework to facilitate sustainable investment (or
Taxonomy Regulation) in June 2020.
∫ 2. Not causing significant harm to any of the other environmental objectives.
∫ 3. Compliance with minimum social safeguards (human rights).
- Healthy ecosystems (biodiversity).
This is a key milestone in the development of sustainable finance in the
European Union (EU), since it establishes the criteria for determining whether
an economic activity qualifies as environmentally sustainable by establishing a
list of environmentally sustainable activities.
June 2021 saw the approval of the European Commission Taxonomy Delegated
Act implementing the environmental objectives relating to climate change
mitigation and adaptation and, in particular, establishing a list of activities
qualifying as environmentally sustainable.
218
The Taxonomy Regulation establishes that the economic activities should
be in line with the following technical screening criteria in order to qualify as
sustainable:
∫ 1. They must contribute significantly to at least one of the following six
environmental objectives:
- Climate change mitigation.
- Climate change adaptation.
- The sustainable use and protection of water and marine resources.
The approved list includes electricity transmission, more specifically, the
“construction and operation of transmission systems that transport electricity
on the extra-high-voltage and high-voltage interconnected system”, as an
activity that contributes to climate change mitigation.
The European Commission Delegated Act on Article 8 of the Taxonomy
Regulation, concerning the transparency of undertakings in non-financial
statements, was later approved in July 2021.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents Under Article 8, non-financial undertakings are required to disclose the
following information:
∫ a) The proportion of their turnover (Revenues) derived from products or
services associated with economic activities that qualify as environmentally
sustainable under the Taxonomy Regulation.
∫ b) The proportion of their capital expenditure (CAPEX) and the proportion of
their operating expenditure (OPEX) related to assets or processes associated
with economic activities that qualify as environmentally sustainable under
the Taxonomy Regulation.
The quantitative and qualitative information to be reported (KPIs) and the criteria
for preparing such indicators are also described at length, and the mandatory
reporting date for the KPIs is partially set back.
Based on the aforementioned legislation, the RE Group’s information for 2021, in
accordance with the Taxonomy Regulation, is as follows:
- of Revenues at 2021 year-end corresponding to qualifying activities: 81.8%
(79.6% in 2020).
- % of CAPEX at 2021 year-end corresponding to qualifying activities: 75.6%
(89.4% in 2020).
Although the aforementioned delegated act makes no mention of the
telecommunications activities carried out by the Group, based on the established
parameters, we believe that such activities would not cause significant harm to
the environmental objectives laid down in the Taxonomy Regulation.
219
Methodology for calculating Revenue, CAPEX and OPEX ratios
As regards calculation of the Revenue, CAPEX and OPEX figures for Transmission
activities, as described in note 28 to the consolidated annual accounts on
segment reporting, the Red Eléctrica Group segments its business activities
based on their nature, reflecting the main branches of activity used by the Group
in its management and decision-making.
At 31 December 2021, the Group’s operating segments and their main products,
services and operations are as follows:
∫ Management and operation of domestic electricity infrastructure:
This segment comprises the Group’s principal activity, as sole transmission
agent and system operator for the Spanish electricity system (TSO). Its
mission is to guarantee the security and continuity of the electricity supply at
all times and manage high-voltage electricity transmission.
Since the activity included in the Taxonomy Regulation is specifically
Transmission (and does not include System Operation), the following
legislation is observed in order to separate the various activities:
- % of OPEX at 2021 year-end corresponding to qualifying activities: 75.1%
- Article 20.2 of Electricity Industry Law 24/2013 of 26 December 2013
(76.6% in 2020).
(Title III, “Economic and Financial Sustainability of the Electricity System”)
provides as follows: “Red Eléctrica de España, S.A.U. shall keep separate
accounts for transmission activities and system operation (mainland and
non-mainland)”.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
∫ Telecommunications (satellites and fibre optics):
Activities not covered by the Taxonomy Regulation.
220
The Group also carries out reinsurance activities and fosters innovation in the
electricity and telecommunications sectors. These activities are not covered by
the Taxonomy Regulation.
- National Energy Commission (currently the Spanish National Markets and
Competition Commission (“CNMC”)) Circular 5/2009, of 16 July 2009, on
the procurement of accounting, economic and financial information of
companies that carry out activities relating to electricity, natural gas and
pipeline gas.
- CNMC Circular 1/2015 of 22 July 2015, which establishes a regulatory
reporting system for costs related to the regulated activities of transmission,
regasification, storage and technical management of the natural gas system,
and for transmission and electricity system operation.
Therefore, the information relating to the separation of REE’s activities into
Transmission, System Operation and Other activities is already included in the
company’s annual accounts and is currently being reported to the CNMC on a
quarterly basis.
The balances taken into account for the calculation of the ratios established
by the Taxonomy Regulation were those relating to domestic Transmission
activities.
∫ Management and operation of international electricity infrastructure:
This segment comprises activities related to international business development
as a natural form of growth, mainly focused on the construction and operation of
electricity transmission networks outside Spain; at 31 December 2021, in Peru,
Chile and Brazil specifically.
The international electricity infrastructure management and operation activities
relate in full to the Transmission activities provided for in the Taxonomy
Regulation.
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
11.9 CONTENT INDEX REQUIRED BY LAW 11/2018 OF 28 DECEMBER 2018
ON NON-FINANCIAL AND DIVERSITY INFORMATION
221
Content
Page
Reporting framework
Description of the business model.
31 and thereafter
(*) 102-1, 102-2, 102-4, 102-6, 102-7, 102-40, 102-43, 102-44, 102-46, 102-47, 102-49
Business environment.
Organisation and structure.
Markets served.
Objectives and strategies.
Key factors and trends that could affect future performance.
I . I n f o r m a t i o n o n e n v i r o n m e n t a l m a t t e r s
Management approach.
Present and foreseeable impact of the company’s activities on
the environment, health and safety.
34 and thereafter
(*) 103-1, 103-2,103-3
34 and thereafter
103-1,
Environmental assessment or certification procedures.
34 and thereafter
UNE-EN ISO Standard 14001. Certified Environmental Management System.
Resources allocated to preventing environmental risks.
34 and thereafter
Environmental accounting regulations.
Application of the precautionary principle.
34 and thereafter
(*) 102-11
Provisions and guarantees for environmental risks.
34 and thereafter
Internal framework. Amount spent on environmental aspects associated with investment
projects.
Pollution
Measures to prevent, mitigate or remediate the effects of carbon emissions
(also includes noise and light pollution).
34 and 37
Internal framework. Measures for the prevention of noise, light and atmospheric
pollution, as well as measures for the reduction of carbon emissions.
The company’s activities do not cause emissions of ozone-depleting substances, such as
NOx, SOx or other significant air emissions, since they do not involve the burning of fossil
fuels (the company does not generate electricity), with the exception of the fuels used in
certain generators and in vehicles, which are not considered to be significant under this
approach.
(*) This table shows the equivalence between the requirements of Law 11/2018 and the GRI standards. Red Eléctrica has published non-financial information since 2003 in accordance
Continued on next page
with successive versions of the Sustainability Reporting Guidelines of the Global Reporting Initiative (GRI).
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Content
Page
Reporting framework
222
Circular economy and waste prevention and management
Measures for the prevention, recycling, reuse and other recovery
and disposal of waste.
Actions to combat food waste.
35
103-2
Not material.
These types of actions are not carried out due to the nature of the Group’s activities,
which do not involve food management or therefore waste.
Sustainable use of resources
Water consumption and supply.
38
(*) 303-1
Consumption of raw materials and measures to improve efficiency.
Not material.
The company’s activities do not entail direct consumption of raw materials.
Direct and indirect energy consumption.
Measures taken to improve energy efficiency.
Use of renewable energies.
Climate change
Key elements of the greenhouse gas emissions generated.
Measures taken to adapt to the consequences of climate change.
Voluntary medium and long-term emission reduction targets set
and steps taken.
38
37
37
37 and 38
37 and 38
37 and 38
(*) 302-1 / 302-2
103-2. Internal framework. Initiatives to combat climate change and energy
efficiency measures.
103-2. Internal framework. Qualitative/quantitative information on the use of
renewable energy.
(*) 305-1 / 305-2 / 305-3 / 305-4
(*) 305-5
103-2 Internal framework. Objective for reducing emissions and combating
climate change.
Protection of biodiversity
Measures to preserve and restore biodiversity.
Impacts caused by activities or operations in protected areas.
35, 36 and 38
35, 36 and 38
(*) 304-1 / 304-3
(*) 304-2
(*) This table shows the equivalence between the requirements of Law 11/2018 and the GRI standards. Red Eléctrica has published non-financial information since 2003 in accordance
Continued on next page
with successive versions of the Sustainability Reporting Guidelines of the Global Reporting Initiative (GRI).
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Content
Page
Reporting framework
223
I I . I n f o r m a t i o n o n l a b o u r a n d e m p l o y e e - r e l a t e d i s s u e s
Management approach.
39 and thereafter
(*) 103-1, 103-2,103-3
Employment
Total number and distribution of employees by gender, age, country
and professional category.
Total number and distribution of employment contract types by gender,
age and professional category.
Average annual number of permanent, temporary and part-time contracts
by gender, age and professional category.
Number of dismissals by gender, age and professional category.
Pay gap.
Average pay by gender, age and professional category.
Remuneration of like positions or average remuneration in the company.
Average remuneration of directors by gender.
Average remuneration of management personnel by gender
Implementation of policies on disconnecting from work.
Employees with disabilities.
Organisation of work
Organisation of working time.
Number of hours of absenteeism.
40 and thereafter
(*) 102-8
44
44
45
47
47
48
48
48
48 and 49
55
49
49
(*) 102-8
Law 11/2018 on non-financial and diversity information: Average annual number
of contracts by type, broken down by gender, age and professional category.
Law 11/2018 on non-financial and diversity information: Number of dismissals
in the year by gender, age and professional category.
(*) 405-2
Law 11/2018 on non-financial and diversity information: Average total salary
by gender, age and professional category.
(*) 405-2
Law 11/2018 on non-financial and diversity information: Average remuneration
of members of the Board of Directors by gender.
Law 11/2018 on non-financial and diversity information: Average remuneration
of senior management personnel by gender.
Internal framework. Measures to disconnect from work.
General Law on the Rights of Persons with Disabilities (LGD). Percentage
of employees with a disability.
Internal framework. Real and effective working day.
Internal framework. Number of hours of absenteeism
Measures aimed at facilitating a work-life balance and encouraging
sharing of responsibilities between both parents.
49 and 50
(*) 401-2
(*) This table shows the equivalence between the requirements of Law 11/2018 and the GRI standards. Red Eléctrica has published non-financial information since 2003 in accordance
Continued on next page
with successive versions of the Sustainability Reporting Guidelines of the Global Reporting Initiative (GRI).
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Content
Health and safety
Page
Reporting framework
224
Occupational health and safety conditions.
50 and thereafter
(*) 403-10 / 404-1 / 404-2
Number of work-related accidents and ill health by gender,
frequency and severity.
52
Related regulations per Ministry of Work standards.
https://herramientasprl.insst.es/Accidentesdetrabajo/RecursosAdicionales.aspx
Labour relations
Organisation of social dialogue, including procedures on worker
communication, consultation and negotiation.
52 and thereafter
(*) 402-1
Percentage of employees covered by collective bargaining agreements by country.
Summary of collective bargaining agreements, particularly in the field
of health and safety.
53
54
(*) 102-41
(*) 403-4 / 403-8
Training
Policies implemented.
Total hours of training by professional category.
Universal accessibility for people with disabilities.
54 and 55
54
(*) 404-2
(*) 404-1
Universal accessibility for people with disabilities.
55
Internal framework. Accessibility measures.
Equality
Measures taken to promote equal treatment and equal opportunities
for women and men.
Equality plans: job stimulation measures, protocols against
sexual harassment and gender bias.
55 and thereafter
Internal framework. Measures adopted to promote diversity.
55 and thereafter
Internal framework. Diversity plan.
Integration and universal accessibility for people with disabilities.
55
Internal framework. Hiring of people with disabilities and integration and accessibility measures.
Policies against all kinds of discrimination and, as the case may be,
diversity management.
55 and thereafter
406
(*) This table shows the equivalence between the requirements of Law 11/2018 and the GRI standards. Red Eléctrica has published non-financial information since 2003 in accordance
Continued on next page
with successive versions of the Sustainability Reporting Guidelines of the Global Reporting Initiative (GRI).
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I I I . I n f o r m a t i o n o n r e s p e c t f o r h u m a n r i g h t s
Management approach.
Implementation of human rights due diligence procedures.
Prevention of risks of human rights violations and, where applicable,
measures to mitigate, manage and redress any such violations.
Reported human rights violations.
Promotion of and compliance with the provisions of the conventions
of the International Labour Organization with regard to respect for freedom
of association and the right to collective bargaining; elimination of
discrimination in employment and occupation; elimination of forced
or compulsory labour; effective abolition of child labour.
57 and 58
57 and 58
57 and 58
57 and 58
53
(*) 103-1, 103-2,103-3
(*) 407-1 / 408-1 / 409-1
(*) 411-1 / 412-1 / 412-3
(*) 102-17
406, 407, 408, 409
I V. I n f o r m a t i o n o n t h e f i g h t a g a i n s t c o r r u p t i o n a n d b r i b e r y
Management approach.
Measures to prevent corruption and bribery.
Anti-money laundering measures.
58 and thereafter
(*) 103-1, 103-2,103-3
58 and thereafter
(*) 102-16 / 102-17 / 406-1
58 and thereafter
(*) 102-16 / 102-17 / 406-1
Contributions to foundations and non-profit organisations.
62
Internal framework. Contributions to foundations and non-profit organisations.
V. I n f o r m a t i o n o n s o c i a l i s s u e s
Management approach.
60 and thereafter
(*) 103-1, 103-2,103-3
The company's commitments to sustainable development.
Impact of the company’s activity on employment and local development.
Impact of the company’s activity on local populations and the local area.
Relations with local community players and types of dialogue.
Association and sponsorship actions.
60 and thereafter
62 and thereafter
64 and 65
(*) 413-1
(*) 413-1
(*) 413-1
62 and thereafter
(*) 102-13
(*) This table shows the equivalence between the requirements of Law 11/2018 and the GRI standards. Red Eléctrica has published non-financial information since 2003 in accordance
Continued on next page
with successive versions of the Sustainability Reporting Guidelines of the Global Reporting Initiative (GRI).
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Subcontracting and suppliers
Inclusion of social, gender equality and environmental issues
in the purchasing policy.
Attention given to social and environmental responsibility
in relations with suppliers and subcontractors.
66 and 67
66 and 67
(*) 414-1
(*) 414-1
Supervision systems and audits and results.
66 and 67
(*) 308-1 / 308-204-1
Consumers
Consumer health and safety measures.
Grievance mechanisms in place.
Complaints received and resolution thereof.
Tax information
Country-by-country earnings.
Income tax paid.
Government grants received.
67 and thereafter
(*) 416-1
67 and thereafter
(*) 102-43 / 102-44
67 and thereafter
(*) 102-43 / 102-44
70 and thereafter
70 and thereafter
(*) 207-4
(*) 207-4
70 and thereafter
Internal framework. Government grants received.
V I . A l i g n m e n t w i t h t h e Ta x o n o m y R e g u l a t i o n o n s u s t a i n a b l e f i n a n c e i n t h e E u r o p e a n U n i o n
Proportion of turnover (Revenues) derived from products or services
associated with economic activities that qualify as environmentally
sustainable under the Taxonomy Regulation.
Proportion of capital expenditure (CAPEX) related to assets associated
with economic activities that qualify as environmentally sustainable under
the Taxonomy Regulation.
Proportion of operating expenditure (OPEX) related to assets or processes
associated with economic activities that qualify as environmentally
sustainable under the Taxonomy Regulation.
72 and thereafter
European Commission Delegated Act on Article 8 of the Taxonomy Regulation,
concerning the transparency of undertakings in non-financial statements.
72 and thereafter
European Commission Delegated Act on Article 8 of the Taxonomy Regulation,
concerning the transparency of undertakings in non-financial statements.
72 and thereafter
European Commission Delegated Act on Article 8 of the Taxonomy Regulation, concerning
the transparency of undertakings in non-financial statements.
(*) This table shows the equivalence between the requirements of Law 11/2018 and the GRI standards. Red Eléctrica has published non-financial information since 2003 in accordance
with successive versions of the Sustainability Reporting Guidelines of the Global Reporting Initiative (GRI).
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12
A n n ua l
Co rpora te Gove rn anc e
Re po rt
The Annual Corporate Governance Report forms an integral part of
the directors' report and can be viewed at the following address:
http://www.cnmv.es/Portal/consultas/EE/InformacionGobCorp.aspx?nif=A-78003662
13
A n n ua l
Re po rt on D irec tors’
Re mun erat ion
The Annual Report on Directors’ Remuneration forms an integral
part of the directors' report and can be viewed at the following address:
https://www.cnmv.es/Portal/Consultas/EE/InformacionGobCorp.aspx?TipoInforme=6&nif=A-78003662
227
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the System of Internal Control over Financial Reporting
228
KPMG Auditores, S.L.
Pº. de la Castellana,
259 C
28046 Madrid
Independent Reasonable Assurance Report on the System of
Internal Control over Financial Reporting
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
To the Shareholders of Red Eléctrica Corporación, S.A.
Further to your request, and in accordance with our engagement letter dated 12 November 2021, we
have examined the Internal Control over Financial Reporting (hereinafter “ICOFR”) information of Red
Eléctrica Corporación, S.A. (the Parent) and subsidiaries (the Red Eléctrica consolidated Group or the
Group) described in note F of the accompanying Annual Corporate Governance Report at 31 December
2021. This system is based on the criteria established in the Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
An entity's internal control over financial reporting is designed to provide reasonable assurance that
its annual financial reporting complies with the applicable financial reporting framework. It includes
policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and assets of the Group; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of the Group's consolidated annual
accounts in accordance with the applicable financial reporting framework; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorised acquisition, use or disposal of the
Group's assets that could have a material effect on the consolidated annual accounts. In this respect
it should be borne in mind that, irrespective of the quality of the design and operation of the internal
control system adopted in relation to annual financial reporting, the system may only provide
reasonable, but not absolute assurance in relation to the objectives pursued, due to the limitations
inherent in any internal control system.
Directors' and Management's Responsibility _______________________________
The Board of Directors of the Parent and Senior Management of the Group are responsible
for adopting appropriate measures to reasonably ensure the implementation, maintenance
and oversight of an adequate system of internal control over financial reporting, evaluating
its effectiveness and developing improvements to that system, and preparing and defining
the content of the ICOFR information attached hereto.
KPMG Auditores S.L., a limited liability Spanish company and a member firm of the KPMG
global organisation of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee.
All rights reserved.
Paseo de la Castellana, 259C 28046 Madrid
On the Spanish Official Register of Auditors (“ROAC”) with No. S0702, and the
Spanish Institute of Registered Auditors’ list of companies with No. 10.
Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9
N.I.F. B-78510153
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Independent Reasonable Assurance Report on
the System of Internal Control over Financial Reporting / continued
229
2
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
3
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
Our Responsibility ________________________________________________________
Conclusion _______________________________________________________________
Our responsibility is to express an opinion on the effectiveness of the Group's Internal
Control over Financial Reporting based on our examination.
We conducted our examination in accordance with ISAE 3000 (International Standard on
Assurance Engagements 3000: Assurance Engagements other than Audits or Reviews of
Historical Financial Information), issued by the International Auditing and Assurance
Standards Board (IAASB) of the International Federation of Accountants (IFAC) for the issue
of reasonable assurance reports. This standard requires that we plan and perform our work
to obtain reasonable assurance about whether the Group maintains, in all material respects,
effective internal control over financial reporting. Our work included obtaining an
understanding of the Group's Internal Control over Financial Reporting, testing and evaluating
the design and operating effectiveness of that system, and performing such other
procedures as were considered necessary in the circumstances. We consider that our
examination provides a reasonable basis for our opinion.
Our firm applies International Standard on Quality Control (ISQC) 1 and accordingly maintains
a comprehensive system of quality control including documented policies and procedures
regarding compliance with ethical requirements, professional standards and applicable legal
and regulatory requirements.
We have complied with the independence and other ethical requirements of the International
Code of Ethics for Professional Accountants (including international standards on
independence) issued by the International Ethics Standards Board for Accountants, which is
founded on fundamental principles of integrity, objectivity, professional competence and due
care, confidentiality and professional behaviour.
Inherent Limitations _____________________________________________________
Due to the limitations inherent in any internal control system, there is always a possibility
that ICOFR may not prevent or detect misstatements or irregularities that may arise as a
result of errors of judgement, human error, fraud or misconduct. Moreover, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions or that the degree of compliance with
the policies or procedures may deteriorate.
In our opinion, the Group maintained, in all material respects, effective internal control over financial
reporting at 31 December 2021, in accordance with the criteria established in the Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Furthermore, the disclosures contained in the ICOFR information included in
note F of the Group’s Annual Corporate Governance Report at 31 December 2021 have been prepared,
in all material respects, in accordance with the requirements set forth in article 540 of the Revised
Spanish Companies Act and in Spanish National Securities Market Commission (CNMV) Circular
5/2013 of 12 June 2013, and subsequent amendments thereto, the most recent being CNMV Circular
1/2020 of 6 October 2020, with respect to the description of Internal Control over Financial Reporting
in Annual Corporate Governance Reports.
Other Matters ____________________________________________________________
Our examination did not constitute an audit of accounts and is not subject to the legislation regulating
the audit of accounts in Spain. As such, in this report we do not express an audit opinion on the
accounts under the terms provided in the above-mentioned legislation. However, on 22 February 2022
we issued our unqualified auditor's report on the consolidated annual accounts of the Group for 2021,
in accordance with the legislation regulating the audit of accounts in Spain.
KPMG Auditores, S.L.
On the Spanish Official Register of Auditors (“ROAC”) with No. S0702
(Signed on original in Spanish)
Ana Fernández Poderós
On the Spanish Official Register of Auditors (“ROAC”) No. 15547
22 February 2022
KPMG Auditores S.L., a limited liability Spanish company and a member firm of the
KPMG global organisation of independent member firms affiliated with KPMG International
Limited, a private English company limited by guarantee.
All rights reserved.
Paseo de la Castellana, 259C 28046 Madrid
On the Spanish Official Register of Auditors (“ROAC”) with No. S0702, and the
Spanish Institute of Registered Auditors’ list of companies with No. 10.
Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9
N.I.F. B-78510153
KPMG Auditores S.L., a limited liability Spanish company and a member firm of the
KPMG global organisation of independent member firms affiliated with KPMG International
Limited, a private English company limited by guarantee.
All rights reserved.
Paseo de la Castellana, 259C 28046 Madrid
On the Spanish Official Register of Auditors (“ROAC”) with No. S0702, and the
Spanish Institute of Registered Auditors’ list of companies with No. 10.
Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9
N.I.F. B-78510153
2Consolidated Statement of Financial Position1Independent Auditors’ Report3Consolidated Annual Accounts4Consolidated Directors’ ReportConsolidated Annual Accounts | 2021 | www.ree.es/enContents
Independent Assurance Report on the Consolidated
Non-Financial Statement and Information on Sustainability
230
Ernst & Young, S.L.
Torre Azca
Calle de Raimundo
Fernández Villaverde, 65
28003 Madrid
España
Tel: 915 727 200
Fax: 915 727 238
ey.com
Translation of a report originally issued in Spanish. In the event of discrepancy,
the Spanish-language version prevails
INDEPENDENT ASSURANCE REPORT ON THE CONSOLIDATED NON-FINANCIAL STATEMENT
AND INFORMATION ON SUSTAINABILITY
To the shareholders of RED ELÉCTRICA CORPORACIÓN, S.A.:
In accordance with article 49 of the Commercial Code, we have verified, with a limited scope, the
Consolidated Non-Financial Statement (hereinafter NFS) for the year ended December 31, 2021 of
RED ELÉCTRICA CORPORACIÓN, S.A. and subsidiaries (hereinafter the Group), which is part of the
Group's accompanying Consolidated Management Report
The content of the Consolidated Management Report contains information in addition to that
required by prevailing company law in respect of non-financial information that was not included in
the scope of our assurance work. Consequently, our work was limited exclusively to verifying the
information identified in the section 11.9 “Content index required by Law 11/2018 of 28 December
2018 on non-financial and diversity information” included in the accompanying Consolidated
Management Report.
Responsibility of the directors
The preparation of the NFS included in the Group’s Consolidated Management Report and its content
is the responsibility of the directors of the Group. The NFS was prepared in accordance with the
content required by prevailing company law and in conformity with the criteria outlined in the GRI
Sustainability Reporting Standards (GRI standards), selected GRI, as well as other criteria described
according to that mentioned for each subject in the section 11.9 “Content index required by Law
11/2018 of 28 December 2018 on non-financial and diversity information” of said Report.
This responsibility likewise includes the design, implementation, and maintenance of the internal
control considered necessary to ensure that the NFS is free of material misstatement, due to fraud or
error.
The directors of the Group are also responsible for defining, implementing, adapting, and maintaining
the management systems from which the necessary information for preparing the NFS is obtained.
Our independence and quality control
We have complied with the independence and other Code of Ethics requirements for accounting
professionals issued by the International Ethics Standards Board for Accountants (IESBA), which are
based on the fundamental principles of integrity, objectivity, professional competence and due care,
confidentiality, and professional behavior.
Our firm applies International Standard on Quality Control 1 (ISQC 1), and consequently maintains a
global quality control system which includes documented policies and procedures relating to
compliance with ethical requirements, professional standards, and the legal and applicable regulatory
provisions.
Domicilio Social: Calle de Raimundo Fernández Villaverde, 65. 28003 Madrid - Inscrita en el Registro Mercantil de Madrid, tomo 9.364 general, 8.130 de la sección 3ª del Libro de Sociedades, folio 68, hoja nº
87.690-1, inscripción 1ª. C.I.F. B-78970506.
A member firm of Ernst & Young Global Limited.
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Independent Assurance Report on the Consolidated
Non-Financial Statement and Information on Sustainability / continued
231
2
3
The EY team is made up of experts in non-financial information engagements and specifically,
information on economic, social, and environmental performance.
Use and distribution
This report was prepared in response to the requirement established by prevailing company law in
Spain and may not be appropriate for other uses and jurisdictions.
ERNST & YOUNG, S.L.
(Signature on the original in Spanish)
______________________
Alberto Castilla Vida
February 22, 2022
Our responsibility
Our responsibility is to express our conclusions on the Independent Assurance Report with limited
assurance, based on the work performed. We have carried out our work in accordance with the
requirements established in the International Standard on Assurance Engagements (ISAE) 3000
(revised), “Assurance Engagements Other than Audits and Review of Historical Financial Information”
issued by the International Auditing and Assurance Standards Board (IAASB) of the International
Federation of Accountants (IFAC) and the Guidelines on performing non-financial statement
assurance engagements issued by Spain’s Institute of Auditors.
In a limited assurance engagement, the procedures carried out vary in their nature and timing, and
are less in extent than those carried out for a reasonable assurance engagement. Consequently, the
level of assurance obtained in a limited assurance engagement is also substantially lower.
Our work consisted in making inquiries of management and of the Group’s various business units
participating in the preparation of the NFS, reviewing the processes for compiling and validating the
information presented therein, and applying certain analytical procedures and sample review tests as
described in general terms below. These procedures included:
Holding meetings with Group personnel to gain an understanding of the business model, the
policies and management approaches applied, and the main risks related to these matters, as
well as to gather the information needed to perform the independent assurance work.
Analyzing the scope, relevance, and integrity of the contents of the 2021 NFS, based on the
materiality assessment performed by the Group and described under 11.1 “About the Non-
Financial Information Statement”, in light of the content required under prevailing company
law.
Analyzing the processes used to compile and validate the data presented in the 2021 NFS.
Reviewing the disclosures relating to the risks, policies, and management approaches applied
with respect to the material matters presented in the 2021 NFS.
Checking, via tests of a selected sample, the information underlying the contents of the 2021
NFS and the satisfactory compilation of the NFS based on data taken from information
sources.
Obtaining a representation letter from the directors and management.
Conclusions
Based on the procedures performed and the evidence obtained, no additional matter came to our
attention that would lead us to believe that the NFS of the Society for the year ended December 31,
2021 has not been prepared, in all material respects, in accordance with the content established in
prevailing mercantile regulations and following the criteria of the selected GRI standards as well as
those other criteria described as mentioned for each subject in the section 11.9 “Content index
required by Law 11/2018 of 28 December 2018 on non-financial and diversity information” of the
report.
A member firm of Ernst & Young Global Limited
A member firm of Ernst & Young Global Limited
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Con ten ts
Published by
RED ELÉCTRICA
Paseo del Conde de los Gaitanes, 177
28109 Alcobendas (Madrid)
www.ree.es/en
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