José Bogas, CEO of Endesa

Dear Shareholder:

Once more, it is my pleasure to present the Endesa Activities Report , in order to report on the management we have carried out over the past financial year and what are our key objectives for the immediate future.

2017 saw severe drought and significant increases in raw material prices - two events that have had an unfavourable effect on the evolution of energy markets. However, thanks to the efforts and dedication of our excellent staff here at ENDESA, we have dealt successfully with this difficult scenario, and we have been able to present very satisfactory annual results; our EBITDA has grown by 3% in 2017, resulting in 3,542 million euros, and net profits have increased by 4%, reaching 1,463 million euros.

Among the factors positively influencing the increase in EBITDA, the following stand out: the contribution of Enel Green Power España (EGPE), the increase in our gross regulated business margin, the reduction in fixed costs and income due to return of the subsidised rate for the years 2014-2016.

All of this has enabled us, for one more year, to meet the commitments that we have to all of you, our shareholders, and especially to continue assuring you an attractive return on investment through our dividend policy. Specifically, the proposal is to distribute an ordinary dividend of 1.382 euros per share for the past financial year, which results in an increase of 4% over the previous year and makes ENDESA the IBEX-35 company that provides the best profitability per dividend.

Furthermore, we continued to take significant steps in 2017 toward becoming a company that is 100% emission-free, client focused, fully digitalised and sustainable.

In fact, we were awarded 879 MW of new renewable capacity in the auctions held throughout the year. I should add to that the purchase in 2018 of an additional 132 MW distributed across five wind farm projects. What’s more, our emission-free generation accounted for 44% of our total production in 2017.

As for our customers, we are fully aware that they are the true source of value for our business. One good example of this is that under a resolution adopted in 2017 by the entire Enel Group, of which we are a member, we have created a new line of business to promote our new value-added products and services, including digital solutions for the home, electrical mobility, efficient public lighting, more innovative and flexible solutions for the industry, etc.

In benefit of our customers, there are also efforts dedicated to the extension, modernisation and automation of our electric grids, to which we have devoted 5,800 million euros since 2010, making us the Spanish electric company that is investing the most in this area.

With regard to digitalisation, we have continued promoting digital transformation in 2017, both for our industrial assets and for the people working at the Company, thanks to technologies like artificial intelligence, machine learning, big data or advanced analytics.

Finally, sustainability has been a strategic priority for years of our corporate behaviour. For this reason, we have included among our priorities contributing to the fulfilment of the United Nations Sustainable Development Goals (SDG) that are most closely related to our business activity: the struggle against climate change, access to energy and innovation to transform the energy system.

In the final analysis, with these lines of action, which make up the backbone of our Industrial Plan for the 2018-2020 period, we are laying the foundation to make ENDESA a decarbonised, sustainable and digitalised company, capable of making a relevant contribution to the growth and competitiveness of the economy of our country and the well-being of its citizens.

For that purpose, we will continue to rely on our strengths as a solid, responsible company committed to Spanish society; on the talent and dedication of our approximately 10,000 employees at ENDESA; and of course on the trust that we receive from you, our shareholders, year after year, for which we feel honoured and grateful.

José D. Bogas Gálvez

Chief Executive Officer, ENDESA