REG-International Endesa Final Results <Origin Href="QuoteRef">ELE.MC</Origin> - Part 4

Endesa SAAnnouncement

24/02/2017 09:05

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on the part of
regulators, higher borrowing costs or increased efforts to attract customers.

Although ENDESA actively work to identify and monitor potential reputational
events and interest groups affected, and transparency forms part of its
communications policy, there is no guarantee that it will not have its image
or reputation impaired which, since the outcome would be unfavourable, will
have an adverse effect on its business, operating results, financial situation
or cash flows.

ENDESA is exposed to sustainability risks.

Sustainability issues are now much more relevant, and in the years ahead they
could increasingly affect some of the risk factors faced by ENDESA. Among
these emerging global tendencies, the following factors have been identified
as those which could affect ENDESA most: loss of biodiversity, water
availability restrictions, terrorism, waste and atmospheric pollution,
protection of human rights, digitalisation, commodity shortages, demographic
change, cybersecurity, inequality and climate change.

Information concerning ENDESA's commitment to sustainable development may be
found in Section 8 Sustainability Policy in this Consolidated Management
Report.

8. Sustainability policy.

8.1. ENDESA's sustainability commitment.

ENDESA believes that sustainability is responsible growth - in other words,
making social and environmental opportunities part of its management model and
strategy, helping it achieve its business objectives and maximising long-term
value creation for the company and the local communities it serves.

This unswerving commitment to sustainability was boosted following approval of
the Sustainability Policy on 21 December 2015 by the Board of Directors of
ENDESA, S.A., which aims to determine and formalise the Company's commitment
to sustainable development, laying this down in the mission, vision and values
that make up ENDESA's principles of conduct.

ENDESA is an energy utility, which has electricity as its core business, a
growing presence in the gas industry, and also supplies other related
services. Its objective is to supply customers with quality service
responsibly and efficiently, while providing a return to shareholders,
promoting a culture of ethics and compliance, fostering employees’
professional development, assisting with the development of the social
environments where it operates and using the natural resources necessary for
its activities in a sustainable manner, from the approach of creating value
shared with all stakeholders.

Meeting ENDESA's economic, social and environmental responsibilities in a
balanced way, on the basis of sustainability, is essential if it is to
maintain its leading position and strengthen it in the future.

To this effect, the new commitments for the future, constitute the basis and
guidelines for ENDESA's conduct in this area, and compliance with them is
expressly supported by the Company's management, concerns employees,
contractors and suppliers and is evaluated by third parties:

      
 *These commitments are fully integrated in day-to-day work and are constantly
reviewed and improved through the definition of objectives, programmes and
actions, which are included in successive sustainability plans.
      
 *ENDESA has monitoring and evaluation mechanisms available that exhaustively
measure the achievement of these commitments.
      
 *The Company's focus is on steady and fluid dialogue with stakeholders, with
the aim of incorporating their expectations in a structured manner and in
alignment with its strategy.
      
 *ENDESA is committed to the application of responsible communication practices
as its principal vehicle of transmitting the strength and solidity of its
commitment to sustainable development to its various stakeholder groups.
    
ENDESA's new commitments for the future are:

      
 *Customers: commitment to digital quality, commercial excellence and efficient
energy consumption.
      
 *Shareholders and investors: commitment to creating value and profitability.
      
 *People: commitment to personal and professional development, diversity and
work-life balance, and the occupational health and safety of the people who
work for ENDESA.
      
 *Conduct: commitment to good governance, transparency and ethical behaviour.
      
 *Environment: commitment to reducing the environmental footprint and protecting
the environment.
      
 *Innovation: commitment to innovation in technology and the scope of services.
      
 *Society: commitment to the socio-economic development of the communities in
which the company operates.
      
 *Institutions: commitment to developing public-private partnerships to promote
sustainable development.
      
 *Employees: commitment of those who work with us to be actively involved in
sustainability.
    
To this effect, the future commitments set out in the policy constitute the
basis and guidelines for ENDESA's management of its business, and in this
regard compliance is expressly supported by the Company's management, concerns
employees, contractors and suppliers, and is evaluated by third parties.
Through its Audit and Compliance Committee, the ENDESA, S.A. Board supervises
proper implementation of the principles of the Sustainability Policy
throughout the company's entire value-creation chain.

The policy is implemented by means of several Sustainability Plans at ENDESA.

8.2. Compliance with ENDESA's 2016-2019 Sustainability Plan

ENDESA's 2016-2019 Sustainability Plan, focused on encouraging sustainable
short-term and long-term economic growth by fostering a sustainable
responsible value-creation chain, established 2 priority areas for action to
be taken: promotion of a more sustainable electricity production model and a
focus on sustainable urban development.

Moreover, in a bid to guarantee the highest levels of excellence in terms of
responsible business management, 5 transversal strategic pillars were
identified for all the Company's activities: integrity, human capital,
environment, supply chain and social commitment.

With more than 80 quantitative management targets, ENDESA has responded to
each of the priorities and strategic pillars defined in its 2016-2019
Sustainability Plan, and has achieved overall compliance of more than 97%.

As part of its commitment to transparency and in a bid to gain the confidence
of its stakeholders, ENDESA discloses compliance with its objectives and the
courses of action in its 2016-2019 Sustainability Plan in its Sustainability
Report, available for consultation at its website.

8.3. ENDESA's contribution to the United Nations Sustainable Development Goals
(SDGs)

In September 2015 the General Assembly of the United Nations adopted the 2030
Agenda for Sustainable Development, consisting of 17 Sustainable Development
Goals (SDGs) as an action plan for people, the planet and prosperity, and also
in a bid to boost world peace, access to justice and to help fight climate
change, and in this regard businesses were called upon to provide proactive
assistance.

ENDESA is firmly committed to the new United Nations Agenda for Sustainable
Development, and acknowledges the historic opportunity of the new Sustainable
Development Goals (SDGs) and the implication of the private sector to meet the
main challenges faced by society.

The ENEL Group has publicly undertaken to make a specific contribution to 4 of
the 17 Sustainable Development Goals:

      
 *SDG4 (Quality education): Assistance with the education of 400,000 people by
the year 2020, in a range of educational projects.
      
 *SDG7 (Affordable and clean energy): Fostering access to sustainable,
affordable modern energy, assisting 3 million people by the year 2020.
      
 *SDG8 (Decent work and economic growth): Fostering employment and sustainable,
inclusive and sustained economic development for 1.5 million people by 2020.
      
 *SDG13 (Climate action): Adopting initiatives to combat climate change, in a
bid to attain carbon neutrality by the year 2050.
    
On 23 November 2016 ENDESA presented the new 2017-2019 Strategic Plan to
investors (see Section 6 Outlook in this Consolidated Management Report),
which sets the roadmap to encourage a more sustainable energy model and
decarbonise the energy mix by 2050, thereby falling into line with the UN's
new Sustainable Development Agenda.

In this regard ENDESA has announced its specific contribution to the
Sustainable Development Goals (SDGs):

      
 *SDG7 (Affordable and clean energy): No vulnerable customers without access to
electricity, taking action in 3 areas: signature of cooperation agreements
with public authorities, training and awareness campaigns on the responsible
use of energy and submission of a regulatory proposal concerning the Social
Bonus.
      
 *SDG9 (Industry, innovation and infrastructure): Investing Euros 1 billion up
to 2019 to promote digital transformation and develop energy solutions.
      
 *SDG13 (Climate action): Decarbonisation of the energy mix by 2050, setting
intermediate targets to reduce absolute emissions of carbon dioxide (CO(2)) by
47% by 2020 and by 61% by 2030 with respect to 2005.
    
ENDESA will also assist with ENEL's commitments to SDG4 (Quality education)
and SDG8 (Decent work and economic growth) through the social initiatives
implemented by the Company and its Foundation.

However, although these Sustainable Development Goals (SDGs) are the
priorities for ENEL and ENDESA, and therefore the emphasis will be placed on
them in the years ahead, they will also take decisive action on the rest of
the 17 Sustainable Development Goals (SDGs) through the Sustainability Plan.

9. Research, Development and Innovation Activities (R&D+i).

9.1. Context and Objectives of the Research, Development and Innovation
Activities (R&D+i)

The energy industry is in the midst of important changes which will intensify
in the future due to the growing environmental awareness of governments and
customers. ENDESA is aware that the objectives for reducing emissions and
increasing efficiency are necessary, requiring an additional effort on its
part in order to achieve them.

According to the European Union, in order to reach the targets set by the
European Council in March 2007 regarding the 20-20-20 goal for 2020,
electrification of European demand must increase to 22% by 2020 and in order
to reach the targets set in the "2050 Energy Roadmap", aimed at reducing
greenhouse gases by 90% in 2050, it must be more than 39% by the year 2050.

The foregoing will facilitate the transition from the current centralised
one-directional energy model, where customers consume energy generated at
large plants and distributed through large one-directional infrastructures,
towards a more decentralised multi-directional model where customers can
generate their own energy and exchange it with other players through
multi-directional infrastructures.

In this context, the goal of ENDESA's research, development and innovation
activities is to create a new, more sustainable energy model based on
efficient electrification of energy demand thanks to the development, testing
and application of new technologies and new business models.

ENDESA's R&D and Innovation activities, are developed in coordination with
the rest of the ENEL Group, with joint research activities being undertaken in
the areas of shared interest and in the markets in which both operate.

9.2 Investment in research, development and innovation activities (R&D+i).

Gross direct investment in Research, Development and Innovation (R+D+i) in
2016 amounted to Euros 16 million, distributed as follows:
 Million Euros                                                                                                                                       
                                                                                                               Gross direct investment in R+D+i      
                                                                       2016                                    2015               
 Generation and supply                                                                                         12                 19                 
 Distribution                                                                                                  4                  3                  
 TOTAL                                                                                                         16                 22                 
                                                                                                                                                     
 Gross direct investment in R+D+i / Gross operating profit (EBITDA)                                            0.47               0.72               
      (%) ((1))                                                                                                                                      
 Gross direct investment in R+D+i / Operating profit (EBIT) (%) ((2))                                          0.81               1.38               


(1) Gross operating profit (EBITDA) = Income - Supplies and Services + Work
carried out by the Group for its assets – Personnel expenses – Other fixed
operating expenses.

(2) Operating profit (EBIT) = Gross operating profit (EBITDA) - Depreciation
and impairment losses.

9.3 Main areas of activity

ENDESA's Research, Development and Innovation activities span all business
areas. The following details the areas of activity, their future guidelines,
and certain of the most relevant projects currently under way.

Electricity generation

Guidelines: reduce pollutants, boost digitalisation at plants, increase
efficiency and improve flexibility of conventional plants in order to optimise
operation and reduce their environmental impact.

Areas of activity:

      
 *Digitalisation of generating plants:
      
 *“IOT Besos”: Demo project to implement new digital technologies at the
Besos combined-cycle plant (applications for advanced control systems,
wireless communications, energy harvesting, virtual and enhanced reality,
artificial vision and advanced predictive diagnosis).
      
 *“Big Data”: Development of a platform and a predictive failure detection
system based on big data technology and artificial intelligence for the main
components of generating plants.
      
 *“Acombo”: Development of software for advanced calculations of the
integrity of dams at hydro power plants. Project co-financed by Spain's "I+D
Retos Colaboración" programme.
      
 *Reduction of emissions and environmental protection:
      
 *“GTTech”: evaluation and validation of the injection of large amounts of
water into gas turbines with liquid fuel to reduce nitrogen oxide (NOx)
emissions in compliance with the future upper thresholds set by the Industrial
Emissions Directive (IDE or “DEI” in Spanish).
      
 *“Ashreact”: a project aimed at recovering ash from the carbon combustion
process at thermal power plants, through the use of an alkaline pre-activation
process, to obtain substitutes for Portland cement products.
      
 *“Matching”: a project carried out alongside a number of other companies
and R+D centres, co-financed by the EU's Horizon 2020 programme. The objective
is to reduce water consumption in the energy sector through the use of new
technology, and it involves validation of the various technologies at 3 pilot
plants being installed at the As Pontes thermal power plant.
      
 *“Lessox”: Study of new operational strategies to reduce specific emissions
of nitrogen oxide (NO(x)) and sulphur oxide (SO(x)) in variable-load
coal-fired thermal units.
      
 *“Innovaalga”: Upgrading carbon dioxide (CO(2)) from combustion gases at
the Litoral (Almeria) thermal power plant, and the use of microalgae and
recovery of the biomass generated to obtain high-value proteins and
sustainable fertilisers.
      
 *“O2GEN”: Project aimed at optimising carbon dioxide (CO(2)) capture using
circulating fluidised bed oxy-combustion (OxyCFB) technology, through the use
of higher ratios of oxygen and carbon dioxide (O(2)/CO(2)) in smaller boilers
and with lower costs.
      
 *“ReCaL” and “CaO(2)”: Optimisation of the process of capturing carbon
dioxide (CO(2)) using carbonation-calcination cycles with experimentation at
the La Pereda 1.7 MWt pilot plant.
      
 *“Orpao”: Improvements to operation of desulphurisation plants by
optimising the intermediate processes to reduce operating costs, improve the
quality of gypsum and reduce liquid effluents, thereby improving quality and
the environment.
      
 *Increase the efficiency and flexibility of the power plants:
      
 *“Coalrel”: Study of strategies to boost the flexibility of fuels at
coal-fired thermal units, reducing specific emissions.
      
 *“Coal Stockpiling”: Rollout of a project to avoid energy loss at coal
facilities as a consequence of natural oxidation and spontaneous combustion
processes, or coal particles being blown away by the wind.
      
 *“Conava”: Implementation at the Teruel thermal plant of an adaptive expert
predictive control system to optimise combustion, control superheat
temperature and reduce thermal fatigue damage.
      
 *“Rubber”: Development of a new inspection technique to test the integrity
of rubber-metal joints in wet desulphurisation systems at coal-fired plants.
      
 *“Colifo”: System to monitor the remaining life of the principal components
of the boiler, with the aim of improving the operation of coal-fired thermal
units.
      
 *“Protec”: Development of new claddings to protect boiler pipes against
corrosion at high temperatures and also against erosion.
      
 *Energy storage:
      
 *“El Hierro”: Assessment of the installation of an energy storage system to
boost the quality of electricity supply on the El Hierro island grid.
    
Technology projects on advanced distribution grids.

Guidelines: to be the leader of communication technologies in the distribution
network.

Areas of activity:

      
 *Remote management project: The objective is to roll out an automatic remote
electricity supply control and management system for domestic customers (less
than 15 kW). This system, the first of its kind in Spain, will be installed in
the homes of more than 12 million of the Company's customers (2010-2018), to
replace conventional electricity meters, in compliance with prevailing Spanish
legislation (Ministerial Order IET/290/2012, of 16 February), which will help
boost efficiency and sustainability of the electricity network.
      
 *Smart grid/Smart city projects: These ensure that the grids are able to offer
a rapid response to users' needs.
      
 *ENDESA is developing its "SmartGrid" concepts on its SmartCity programmes,
which have produced a number of projects. It has now been eight years since
the "SmartCity" project was introduced in Málaga, and six since deployment of
the "SmartCity" setup in Barcelona.
      
 *Monitoring and advanced control of medium/low voltage distribution networks
(known as “Mónica”): The idea is to move forward from simple data capture
to the management and use of information that helps decision-making and the
use of smart electricity grids to optimise network performance. In 2016 ENDESA
installed and started up a sensor multitude service at 56 medium/low voltage
transformation centres in “SmartCity Málaga”.
      
 *“Dareed”: A European project carrying out tests in Sevilla on the
contribution of the general public to local energy management, whereby an
energy market has been set up to put individuals and professionals in contact
with one another.
      
 *“Resilience to cope with Climate Change in Urban Areas”: This focuses on
assessing the impacts of climate change on functional continuity and
guaranteed critical city services and analysis of their interdependences.
Three EU cities are participating in the project (Barcelona, Lisbon and
Bristol).
      
 *“La Graciosa”: This project aims to establish the strategies and systems
necessary to optimise energy flows in order to maximise the penetration of
renewable energies on La Graciosa island.
      
 *“Smartnet”: This project sets out to provide Information System solutions,
market architectures and optimum interactions between transport operators,
distributors and other participants, in the management of exchange of
information and data to monitor and acquire ancillary systems within a
pan-European context, for local needs and also to cover the requirements of
the entire system, in due consideration of distributed generation and the
flexibility it can provide.
    
Efficiency in end usage of energy

Guidelines: test the latest technologies in the field, define performance,
identify areas of improvement and define operating processes.

Areas of activity:

      
 *Active management of demand: The European EnergyTIC project enabling customers
in subsidised housing to meet their water and energy savings targets.
      
 *Large-scale energy storage ("Store" Project): Testing began in the Canary
Islands of the first 3 plants with different energy storage technologies.
    
Electric vehicles.

Guidelines: ENDESA is still firmly committed to developing e-mobility
technologies in the broadest sense, and plays an active role in this field in
order to position itself as a leader in the e-mobility industry and to develop
and test on a real scale recharge systems, which allow the energy stored to be
used and are large scale examples aimed at promoting e-mobility in real
environments.

Areas of activity:

      
 *Rapid charging:
      
 *“Prototype For Alternative Operation Of Mobility Assets”: Integration of a
new rapid charging system for electrically-powered buses and analysis of the
impact of these infrastructures on the electricity distribution network.
      
 *“Ultrafast”: An ultra-rapid charger (400 kW) service available for all
heavy electric vehicles in Barcelona; testing the technology and operating
systems associated with the first fleet of 18-metre buses. The initiative
forms part of the H2020 ZeUS “Zero Emission Urban System” Project,
developed as part of a European consortium to demonstrate the economic,
environmental and social viability of electric urban buses.
      
 *“CIRVE”: European project to deploy a network with 40 rapid-charge
stations in urban and peri-urban areas, and to encourage this kind of
infrastructure in Spain.
      
 *“Ecar”: A project in Majorca to install 6 rapid-charge stations with
energy certified as 100% renewable.
      
 *Inductive charge:
      
 *“Victoria”: Development of a Spanish dynamic-induction charging technology
for buses.
      
 *Take advantage of energy stored in electric vehicles:
      
 *“Vehicle to Grid - V2G”: Development of systems that allow vehicles to be
charged and run down. In 2016 ENDESA worked alongside ENEL to demonstrate the
validity of technology on international projects, creating the first
commercial hub in Denmark and carrying out tests in Germany and the UK.
    
New products and services.

Guidelines: develop and test new energy efficiency services linked to
communication technology applications, generation in consumption, storage,
air-conditioning and lighting.

Areas of activity:

      
 *“Flexiciency”: Large-scale demonstration of new services for all agents in
the European electricity market based on the access to almost-real-time data
from meters. Operations were carried out in 2016 to inspect and select the
best buildings and municipal sites to be included in the project. The
technical specifications for the integration devices were also defined.
    
Network innovation projects

The main projects in this area were as follows:

      
 *“Growsmarter”: ENDESA was involved in this project as part of the European
Union's Horizon 2020 Programme, and provided several solutions for the
Barcelona demo, mainly in the areas of integration of infrastructure and
sustainable urban mobility.
      
 *“STEP”: The objective is to test the ENEL “Smartinfos” devices
connected to ENDESA's Smart Meters, which will display consumption data to
real users via a web platform and a mobile phone application.
      
 *Project for the Interoperability of Substation Automation Units, “IdEAS”:
The objective on this project is to develop and demonstrate a comprehensive
fully interoperable network-integrated digital substation system.
      
 *Standardisation-Security-Synchronisation Connected Substation project,
“3S-CS”: The project sets out to develop an integral system to control
electricity substations on the basis of the "IdEAS" digital substation
project, with wireless capacity.
    
Occupational safety.

Developing and testing technologies which contribute to the objective of
reducing the accident rate:

      
 *Implementation of the application “APP5RO” to verify compliance with the 5
golden rules for working with electricity.
      
 *Analysis and monitoring of tasks in businesses operated by ENDESA, conducting
assessments of possible improvements that could be made to processes.
      
 *Inspection plan to analyse and monitor hazardous tasks in ENDESA's main lines
of business. 189,876 inspections were carried out among the various lines of
business in 2016.
      
 *Extra Checking On Site “ECoS” programme, whereby an expert team trained by
co-workers at different companies visit production centres to inspect specific
tasks, drawing up comparisons and spreading the good practices observed to the
rest of the organisation.
      
 *SPP Programme (Safety Personalised Plan) for generation facilities, where
major contractors are invited to visit the plant for bottom-up remarks on the
Risk Prevention activities they all agree are the most important. The plan is
monitored on a regular basis, and the information is stored in a corporate
application.
    
9.4. Innovation Model

ENDESA has an open innovation model and was the first Spanish electricity
company to obtain UNE 166200 certification for this model.

ENDESA's Research, Development and Innovation (R+D+i) activities are carried
out in close collaboration and cooperation with the rest of the ENEL Group,
taking advantage both of the Group's research centres and the best research
centres, universities, suppliers and emerging national and international
companies.

The following is a summary of ENDESA's innovation model:

      
 *Identification of technological challenges: in close collaboration with the
businesses and after a trend analysis.
      
 *Generation of ideas: in order to provide solutions to challenges. On two
levels:
      
 *Internal ideas:
    
(i) “Eidos Market”: a crowdsourcing platform to take advantage of the
collective intelligence of all ENDESA's employees.

(ii) "90 minutes of innovation": Internal employee innovation encounters,
focusing on the collaborative economy, blockchain or the impact of artificial
intelligence.

(iii) “ENDESA Datathon”: to develop new proposals for the Spanish market
through the analysis of the huge dataset provided to participants with
simulated information on hourly usage.

(iv) “Blockchain Lab”: Ideas laboratory to conduct a search for the best
proposals and business models with blockchain technology in energy
applications.

(v) “TEAM A”: A project to identify innovative proposals in relation to
digitalisation and new products.

      
 *External ideas: With channels open to:
    
(i) Entrepreneurs:

      
 *Incense: ENDESA, together with ENEL and two other European partners, won a
European competition to finance start-ups in the communication technologies
industry focused on energy efficiency.
    
(ii) Universities and research centres: ENDESA has an active relationship with
the academic world through involvement and collaboration agreements with 14
universities and 10 research centres.

(iii) Associations and working groups: it collaborates with various technology
platforms and working groups promoted by various administrations.

(iv) Suppliers: ENDESA works actively with its suppliers to incorporate and
develop new technological solutions.

(v) Other industries: ENDESA participates in innovation forums with other
industries.

      
 *Launch of projects: after they have been assessed by ENDESA's experts
(according to a common methodology based on the initiative's value creation),
if the evaluation is positive the ideas are converted into projects which then
embark upon a structured management and monitoring process.
      
 *Capturing value: Once the projects have been successfully completed, they move
on to production in order to create value for ENDESA. Furthermore, ENDESA
follows a prudent policy regarding the protection of intellectual property.
    
9.5. Patents and Licences

ENDESA owns various patents registered in Spain and/or the European Union
and/or in other non-European countries. If appropriate, certain patents are
transferred to ENEL Group companies with a licence for their use and,
occasionally, they are sub-licensed to third parties.

At 31 December 2016, ENDESA had 23 patents in Spain.

10. Environmental Protection

10.1. ENDESA’s environmental policy

Sustainable development is one of the main pillars of ENDESA’s strategy, and
environmental protection one of the Company’s most important commitments.
This commitment clearly distinguishes ENDESA from other companies, as it
constitutes a basic ethical principle expressly stated in its corporate
values.

Through this commitment, ENDESA undertakes to minimise the environmental
impact of its industrial activity, addressing issues related to the battle
against climate change, proper waste management, and controlling atmospheric
emissions, spillages and soil pollution, and other potentially harmful
impacts.

Environmental management focuses on the sustainable use of natural resources
and energy, and sets out to preserve biodiversity and ecosystems in which it
operates.

Evaluation of the environmental risks inherent to the Company’s activities
and environmental certifications obtained from third-party agents help ensure
excellence in the company’s environmental management, which is fully
integrated and aligned with its corporate strategy.

ENDESA has therefore been defining its environmental policy with the initial
aim of creating a business culture based on environmental excellence, and
intends to achieve this through its environmental management systems and
plans.

10.2. Environmental investment and expenditure

ENDESA's gross environmental investment and expenditure in 2016 and 2015 were
as follows:
 Million Euros                                                                     
                                      Annual gross environmental investment        
                                2016                 2015           % chg          
 Property, plant and equipment                                                     
 Generation and supply                93             75             24.0           
 Distribution                         15             9              66.6           
 Structure and others                 -              -              Na             
 TOTAL                                108            84             28.6           

 Million Euros                                                                                 
                                      Annual cumulative gross environmental investment         
                                2016  2015               % chg              
 Property, plant and equipment                                                                 
 Generation and supply                1,198              1,130              6.0                
 Distribution                         327                311                5.1                
 Structure and others                 -                  -                  Na                 
 TOTAL                                1,525              1,441              5.8                

 Million Euros                                                     
                               Annual environmental expense        
                        2016   2015        % chg       
 Annual Expense                                                    
 Generation and supply         59          75          (21.3)      
 Distribution                  17          17          -           
 Structure and others          4           7           (42.9)      
 TOTAL                  ((1))  80          99          (19.2)      
 (1) Of total environmental expenditure, Euro 25 million in 2016 and  
      Euro 41 million in 2015 went to the depreciation and amortisation of  
      the investments.                                             


10.3. ENDESA's Environmental Management Systems

ENDESA's environmental management systems are widely implemented throughout
all its businesses.

The businesses are monitored at an environmental level by environmental
management systems and indicators through which they are implemented. The
indicators include the facilities' environmental impact (atmospheric
emissions, water consumption, conventional pollutants in effluents, waste,
etc.) and enable compliance with all existing legal obligations regarding
environmental matters in relation to the business operations to be verified,
as well as alignment with the path laid out by ENDESA to evaluate the degree
to which the strategic objectives and goals defined.

Advanced environmental management.

In 2016 ENDESA made further progress in the development of its environmental
management in 2016, both in terms of certification, integrated environmental
permits and environmental impact studies; measures were also implemented to
improve the collection process and quality of the information submitted by the
different areas.

At 31 December 2016, 100% of the installed power capacity, harbour terminals
and all distribution business were certified to the ISO 14001 standard. With
regard to office buildings, the Company has been awarded Energy Efficiency
System (ISO 50001) and Environmental Management System (ISO 14001) at 16 of
its offices in Spain and 5 buildings hold certificates for Indoor Air Quality
(UNE 171330-3).

The certified environmental management system is the foundation upon which all
management systems are integrated, depending on the business and the type of
facilities, in an effort to complete and take advantage of the synergies these
systems provide with respect to comprehensive management and additional
reference to the International Standardisation Organisation (ISO) and/or the
"UNE" Spanish standards. In this connection, some mention should be made of
the EMAS Eco-Management and Audit Scheme rules applied to thermal power
plants, the quality systems for coal-fired plants, laboratories and certain
plants, the energy efficiency management systems (ISO 50001) and the interior
environmental quality certification (UNE 171330-3) for office buildings.

Integrated water management.

ENDESA has identified water as a critical resource that will be affected by
climate change and the integrated management of water is one of its major
concerns. The main tasks in this area entail improvements to consumption
efficiency, water quality by controlling dumping and wastewater and reservoir
management, with an assessment of ecological potential for birdlife, control
of invasive species and preventing dry-up in regulated rivers.

ENDESA has procedures to control and reduce water dumping and to boost
quality, mainly by means of wastewater treatment facilities, and conducts
regular analyses to pinpoint instances of hydric stress at its facilities.

Managing environmental risks and liabilities.

To comply with the requirements of the Spanish Environmental Responsibility
Law, although the legislative framework accompanying this law has still not
been fully completed, still lacking the Ministerial Order which sets the
timelines, ENDESA has developed the MIRAT Project, which aims to establish the
compulsory financial guarantee required by this law for conventional thermal
and combined-cycle power plants with a thermal capacity of over 50 MW, through
an environmental risk analysis. Subsequently, and pursuant to the time periods
established in the pending legislation, the compulsory financial guarantee for
those power stations which require it, will be set after looking at the
results of the environmental risk analysis.

As a result of its commitment to protecting the environment, ENDESA feels
obliged to eliminate environmental liabilities, and, therefore, each facility
identifies these liabilities and addresses them within the framework of their
environmental management programmes, which may be reflected in their
elimination, disposal or reuse.

Environmental footprint

Atmospheric emissions.

ENDESA closely monitors all of its emissions to verify their characteristics
and the volumes emitted. The Company meets the parameters required by the
regulations applicable, implements technology to minimise emissions, and
applies corrective measures to the impacts generated.

Between 2008 and 2015, when the National Emissions Reduction Plan was carried
out for major combustion facilities, the Company worked hard at its facilities
to reduce atmospheric emissions of the main conventional pollutants (sulphur
dioxide (SO(2)), nitrogen oxide (NO(x)) and particles). Up to 2015, this
brought about a reduction of 87% in emissions of sulphur dioxide (SO(2)), a
62% reduction in nitrogen oxide (NO(x)) emissions and an 83% reduction in
particles with respect to the base year 2006.

The transposition of EU Directive 2010/75/EU on industrial emissions into
Spanish law through Law 5/2013 of 11 June, and Royal Decree 815/2013 of 18
October, introduces new and stricter environmental restrictions in the area of
pollutant emissions. Specifically, the existing facilities must adhere to new
limits and subscribe to a number of mechanisms as of 2016.

All mainland coal-fired plants are on the National Transitory Plan, which
establishes maximum annual emission thresholds for a gradual reduction of
emissions between 2016 and mid-2020. The progressive reduction of emissions at
ENDESA's facilities on the scheme will be more than 50% in terms of sulphur
dioxide (SO(2)), nitrogen oxide (NO(x)) and around 40% of particles between
2016 and 2020.

This mechanism, the National Transitory Plan, possibly entails more stringent
requirements and a greater commitment to reduce the current emissions by
ENDESA's major thermal power plants.

With regard to the new mechanisms established by regulations for industrial
emissions, island facilities affected by Directive 2010/75/EU of 24 November
2010 form part of the "small isolated system" mechanism, through which the
deadline for compliance with the emission limits has been extended to allow
time to make the investments for compliance after 2020.

Waste.

ENDESA has waste management and reduction systems in place, which are
continually reviewed in order to identify ways to detect waste and make
improvements. Waste-reduction measures focus on reusing oil, removing
transformers contaminated with PCB (polychlorophenols), gradually removing
components containing asbestos, recovering inert waste, and treating cleaning
solvents for reuse.

Ash from coal-fired power stations, which is likely to be a part of this, has
received certification under Standard UNE-EN 450 1/2 to be used as an additive
in the production of concrete. In this way, its quality is certified and its
recovery value is maximised. In addition, the EuroGypsum quality standard has
been awarded to the gypsum from the desulphurisation unit at the Litoral
(Almería) thermal power plant, which certifies both its purity and quality
and increases its value in the market.

Likewise, 98.7% of the water captured by ENDESA for use in its facilities is
returned to the environment so that it can be reused.

Conservation of biodiversity.

At the end of 2016, the Biodiversity Conservation Plan had 26 courses of
action underway, of which 19 were launched in previous years (5 of them ended
in 2016, and 14 are still in progress) and 7 new courses of action were begun
last year. A breakdown of locations shows that 56% of them were carried out in
areas affected by ENDESA's facilities and 23% were research projects that, in
the majority of cases included the publication of articles and scientific
papers.

These actions took place throughout Spain and Portugal, in both mainland (96%)
and non-mainland (4%) territories, and included many of ENDESA's Business
Lines. Specifically, generation accounted for 54% of the activities,
distribution 27% and the remaining 19% were in the Corporate Area.

The Biodiversity Conservation Plan's objectives for 2016 remain on the same
main action lines as in previous years:

      
 *Adapting the physical environment of the Company’s land and facilities and
encouraging biodiversity in a manner that is biogeographically compliant.
      
 *Managing environmental factors at our facilities to help improve the habitat
of certain species or their biotopes.
      
 *Recognising ENDESA's natural heritage and the ecosystems this is home to,
their value and state of conservation.
      
 *Protecting native species in and around ENDESA's plants and controlling
invasive species that have a high ecological impact and an impact on ENDESA's
business.
    
11. Human Resources

11.1. ENDESA's workforce

At 31 December 2016, ENDESA had a total of 9,694 employees, 3.1% less than a
year earlier. ENDESA’s average workforce in 2016 was 9,819 employees
(-4.1%).

ENDESA's final and average headcounts in 2016 and 2015, by Business Lines, was
as follows:
 Number of Employees                                                                    
                             Final Headcount                                            
                             31 December 2016                   31 December 2015        
                             Male   Female         Total ((1))  Male    Female  Total   
 Generation and Supply       4,140  989            5,129        4,137   971     5,108   
 Distribution                2,707  467            3,174        3,019   483     3,502   
 Structure and others ((2))  679    712            1,391        697     693     1,390   
 TOTAL EMPLOYEES             7,526  2,168          9,694        7,853   2,147   10,000  
 (1) At 31 December 2016 this included the final workforce of ENEL                      
      Green Power España, S.L.U. (EGPE) (188 employees) and Eléctrica del               
      Ebro, S.A. (20 employees).                                                        
 
                                                                                      
 (2) Structure and services.                                                            

 Number of Employees                                                                 
                             Average Headcount                                       
                             2016                             2015                   
                             Male   Female       Total ((1))  Male   Female  Total   
 Generation and Supply       4,127  983          5,110        4,188  995     5,183   
 Distribution                2,841  474          3,315        3,105  490     3,595   
 Structure and others ((2))  691    703          1,394        745    720     1,465   
 TOTAL                       7,659  2,160        9,819        8,038  2,205   10,243  
 (1) In 2016 this included the average workforce of ENEL Green Power                 
      España, S.L.U. (EGPE) (86 employees) and Eléctrica del Ebro, S.A. (8           
      employees) since their respective takeover dates.                              
 
                                                                                   
 (2) Structure and services.                                                         


The breakdown by gender of the workforce at 31 December 2016 was 78% male, and
the remaining 22% were female.

Information on ENDESA's workforce is provided in Note 37 to the Consolidated
Financial Statements for the year ended 31 December 2016.

11.2. Occupational health and safety

ENDESA considers Occupational Health and Safety a priority and a fundamental
value to preserve at all times for all who work for the Company, without
distinction between own staff and its partner companies.

Integrating this goal in ENDESA strategy was materialised by the
implementation of Occupational Health and Safety policies in all the companies
comprising the Group, the implementation of specific plans that pursue the
consolidation of the leadership model based on the example of the leader, and
the implementation of a single global system for observing work conduct.

ENDESA also carries out various annual initiatives in its long-term strategy
of continuous improvement of Occupational Health and Safety. The initiatives
carried out by ENDESA within the framework of this strategy in 2016 focused
mainly on specific accident action plans, the maintenance and creation of new
alliances with partner firms and action plans with outside contractors
experiencing high accident rates.

In 2016 and 2015, the main Occupational Health and Safety indicators were as
follows:
                                       Main figures           
                                       2016          2015     
 Combined frequency index ((1))        1.01          1.28     
 Combined seriousness index ((2))      0.08          0.08     
 Number of accidents ((3))             50.27         65.0     


(1) Combined frequency index = (Number of accidents / Number of hours worked)
x 106.

(2) Combined seriousness index = (Number of days lost / Number of hours
worked) x 103.

(3) Of which 4 in 2016, 9 in 2015 were serious and fatal accidents.

11.3. Responsible personnel management

ENDESA endeavours to create a healthy, well-balanced working environment,
where respect and personal consideration take priority, an environment that
offers professional development opportunities based on merit and ability.

To achieve this responsible management of personnel, ENDESA encompasses all
its CSR initiatives for human resources in its Global Corporate Social
Responsibility Plan for Human Resources, known as “Plan Senda”, and this
was boosted in 2016 with initiatives in accordance with the Group's Diversity
and Inclusion Policy.

In 2016 the company worked on each of the dimensions of the "Plan Senda",
carrying out various initiatives:

      
 *Diversity and equal opportunities: ENDESA maintains its commitment to the
principles of gender equality and non-discrimination, and is working to become
a company that respects and manages differences between people and ensures
that all employees are treated equally and have the same opportunities. In
2016, it implemented the courses of action in the agreement on selection,
promotion and life-work balance, among other issues, signed with the Spanish
Ministry of Health, Social Services and Equality, which renewed its Equality
Award.
      
 *Work-life balance and flexibility: ENDESA also takes steps to consolidate its
flexible working environment, which is designed to enable its employees to
strike a balance between personal, family and professional life. ENDESA
continues to strive to promote a culture of promotion and a proper work-life
balance.
      
 *Integration of people with disabilities and people at risk of social
exclusion: ENDESA also developed its actions with regard to the integration of
people with disabilities into the workforce, by direct or indirect
contracting, via the purchase of goods and services, and by contracting
services from specialist employment agencies.
      
 *Promotion of volunteer work: ENDESA facilitates and encourages corporate
volunteering among its employees. It is committed to the development of the
communities in which it operates and contributes to their cultural,
educational, environmental and social development.
    
11.4. Employment climate.

The Group's Employment Climate and Safety Survey was launched in September
2016 for all employees. The Survey comprised 42 multiple-choice questions and
one open-ended question so that respondents could openly put forward proposed
actions to improve the employment climate. The Employment Climate and Safety
Survey closed on 7 October 2016. The response rate was high: 86% of employees
took part, and 54% used their answers to the open-ended question to make
suggestions.

The Employment Climate and Employment Safety Survey sought to ascertain the
level of sustainable commitment, the safety index and other key data such as
appraisals of supervisors, knowledge of strategy and safety policies.

The results of the Employment Climate and Safety Survey were similar to the
outcome of the 2012 survey. Again, younger and newer employees tended to be
more positive in their assessment. In 2016, the questionnaire engaged in a
more in-depth exploration of safety management: safety was rated highly.

The final results were shared with Management across the board via a range of
communication actions and access to the results platform. From then onwards,
work was done on designing and implementing action plans at various levels,
including top management.

The initiatives forming part of these plans aim to leverage strengths to
address the areas of improvement identified. The key initiatives aim to
continue to upgrade management skills in increasingly flexible and diverse
settings.

11.5. Leadership and personal development

ENDESA constantly strives to identify and develop the potential of its
employees, so that their performance can help make the Company a benchmark
within the sector. In this regard, ENDESA's values and codes of conduct, its
Management Model and Objective Management Systems guarantee personal
development on the basis of merit and contributions.

The leadership model is based on the Group's vision, mission, values and codes
of conduct. The Open Power values are present in all employee management and
development systems, and they are as follows: Responsibility, Innovation,
Confidence and Proactivity.

In 2016, 85.35% of ENDESA employees took part in processes to appraise their
professional performance and development through one of ENDESA's assessment
systems.

ENDESA has also continued to work on professional development in recent years,
including individual interviews to get to know staff (“Conocer”),
coaching, mentoring and reverse mentoring, consultations to develop teams,
workshops to develop skills, talks on business knowledge and definition of
succession plans.

11.6. Training

In 2016 ENDESA held 3,150 training events. 8,728 employees signed up for these
activities. 444,063.4 training hours were given, with an average of 45.8 hours
per employee (40.1 hours per employee in 2015). To undertake this activity,
ENDESA invested Euros 27 million (including the cost of work time), of which
Euros 4 million were accounted for by direct training costs.

ENDESA establishes its annual Training Plan to promote proper development of
people within its organisation in terms of safety and efficiency, and to
encourage professional development of its staff. The 2016 Training Plan
centred on achievement of the Company's strategic objectives and on promoting
its values of responsibility, innovation, proactivity and confidence.

New internal training procedures were implemented in 2016 to gain more of an
insight into people's needs and priorities, and thus boost efficiency. These
improvements were reflected in a general increase in training activity.

ENDESA's commitment to compliance with legislation in force concerning each
and every area in which it operates entails a large number of training
activities - safety, prevention of criminal risk, sustainability and the
environment.

With regard to Occupational Health and Safety, the employment hazards
prevention courses are compulsory for all employees, and consist of both an
online methodology and practical classes, depending on contents and the target
audience. Specific courses of action are carried out for positions with
specific levels of responsibility in relation to prevention, such as the
Prevention Representatives, Prevention Resources and members of emergency
teams. Courses and recycling workshops are used to update knowledge of
regulations and also of ENDESA's own procedures.

With respect to the prevention of criminal risks, in the wake of the 2015
campaign a new Criminal Risk Prevention course was rolled out for new
employees, and a "catch-up" course for those who were unable to attend the
previous year. The course was arranged by the Audit area, and aimed to
instruct employees and make them aware of the responsibilities and risks
involved in their habitual tasks, in order to prevent any criminal offences.

ENDESA's Code of Ethics and Zero Corruption Tolerance Plan furnish training
courses to provide in-depth knowledge. Some mention must be made of the online
"EDE" Conduct Course rolled out this year for all employees working in
Distribution.

The major process of transformation towards a new energy model necessarily
entails a focus on sustainability, and this is the objective of the Group's
Open Power facility. An innovative training programme was set up in the course
of the year 2016: "Súmate al reto energético" (Join the energy challenge).
The aim is to spread awareness among ENDESA employees and inform and train
them in sustainability and the Company's stance in this regard. The idea is
that ENDESA employees will be able to take sustainability principles on board
in both their professional and private lives, and their energy behaviour will
act as a model for society at large.

In 2016 work also continued on environmental programs to comply with the
requirements for renewal of the Company's ISO 14001 and Integrated
Environmental, Energy Efficiency and Indoor Air Quality Management System
certificates.

Within a digitalisation environment, digital transformation programs have
become particularly important, and more than 11,142 hours were taught in the
course of the year using methodologies such as: webinars, workshops,
e-learning, in situ classes etc. An “e-talent” training program was
devised to generate a change of cultures and mindsets. The "viralisers"
identified during the program generated an impact on 15% of employees.

Courses in management skills, social skills and leadership were implemented
transversally among different lines of business and support areas. These aim
to fine-tune the skills of the different categories and professional units in
a bid to spread the corporate culture. Investment increased significantly in
2016, surpassing 65,000 hours of instruction.

Another of ENDESA's concerns over the years has been technical capacitation
for its employees. This assists their professional development and gives them
the qualifications to go about their tasks. Almost 379,000 hours of technical
instruction were taught in 2016 at the Generation, Renewables, Distribution,
Supply,, IT, Purchases and Support Areas.

Finally, since it forms part of a multinational, ENDESA is keen to provide
language classes, chiefly English and Italian, with a wide range of program in
different formats.

11.7. Attracting and retaining talent

In order to attract the best talent, ENDESA focuses on Employer Branding to
promote the Company in the job market and present itself as an attractive
place to work. The emphasis in recent years has been placed on attracting
young talent, and the Company has therefore attended job fairs at different
universities, international job congresses and professional training centres.
Its presence at these encounters seeks to demonstrate to young people the
Company's focus on innovation, and attract profiles that match the values of
the Group: confidence, responsibility, innovation and proactivity.

Ideas competitions have also been arranged for university students and
students on professional training courses, as have initiatives such as the
"Shadowing" scheme, enabling university students to spend a day with members
of ENDESA's Management. Finally, the company also sponsors initiatives to
bring about encounters of young talent in different countries, such as
“Pangea-Unleash 2016”.

In our digital environment, communication and relations with candidates are
changing, and so the company's presence on social networks and other online
platforms has been improved and enhanced, thus boosting recruitment.

In 2016, 154 young graduates were engaged on the Grants Program. The Program
boosts their employability and allows them to put into practice the knowledge
acquired at university, and begin a professional career. 20% of them were
taken on after their grants expired, and work is ongoing to increase this
percentage year by year.

ENDESA is also keen to cover vacancies through internal promotions, giving
priority to employees who have shown themselves to be exceptional performers.
The keynotes of selection processes are diversity, meritocracy and corporate
values.

ENDESA not only carries out internal selection processes for each country, but
also occasionally arranges professional employee swaps between countries. This
aspect has come to the fore since ENDESA joined the ENEL Group.

11.8. Social dialogue

Working conditions at ENDESA are regulated by collective bargaining agreements
to improve employment regulations in fields in which the Company operates.
ENDESA guarantees the right to freedom of association for its employees and
for all its contractors, suppliers and business partners.

In Spain and Portugal there were 4 collective agreements in operation at the
end of 2016 affecting 9,103 employees, 93.9% of the workforce.

Existing Spanish employment legislation and ENDESA's employment regulations in
Spain (IV Collective Framework Agreement and the Guarantees Framework
Agreement for ENDESA SA and its electricity subsidiaries in Spain, Agreement
on Voluntary Suspension) establish the criteria that should be adhered to in
the event of business reorganisation and corporate restructuring (Chapter III
of the Guarantees Framework Agreement). It is also established that corporate
restructuring operations shall be made known to employee representatives at
least 30 days before they come into effect.

The most important actions regarding collective bargaining in 2016 were as
follows:

      
 *Negotiation and agreement on the transfer of workers between different
companies.
      
 *Negotiation of reorganisation of the commercial cycle.
      
 *Negotiation of the new organisation of the medium/low voltage network at
ENDESA Distribución Eléctrica, S.L.U.
      
 *Agreement to include ENDESA Servicios, S.L.U. within the functional scope of
the IV Collective Framework Agreement.
    
With regard to ENDESA in Spain, negotiations for ENDESA's V Collective
Framework Agreement will begin on 1 July 2017.

Spain has been an International Labour Organization (ILO) signatory since
1919, and ENDESA's conventional regulations meet the existing ILO Conventions
ratified by Spain.

12. Treasury Shares

ENDESA did not hold any treasury shares at 31 December 2016, nor did it trade
in treasury shares in 2016.

13. Other information

13.1. Stock Market 

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