Image of Borja Prado Eulate

Dear Shareholder:

For one more year, I have the pleasure of presenting you the ENDESA Activity Report, providing a special opportunity to personally address all our shareholders and review the achievements of our Company during the 2017 financial year. The pages following this letter will provide you with an exhaustive breakdown of the business information and numbers attesting to our success, so therefore in this regard, I would like to focus on our intangible assets – that part of our Company that cannot be summarized numbers, but is just as important in terms of what it means and involves.

ENDESA faces a significant challenge in the coming years: to be the company that will conduct an orderly energy transition in our country, steering us toward an emission-free, sustainable and profitable energy model free, that sets new goals and opportunities for the coming generations.

We have all the necessary requirements for this - the talent, experience and knowledge of the almost ten thousand employees in Spain and Portugal that manage the progress of our company every day with security. The innovative and courageous attitude of all of our employees at ENDESA is what makes it possible for us to speak for one more year of efficiency and competitiveness when we look at the results, the customer figures and production data.

ENDESA knows how to be prudent when need be In times that have not always been easy; to arrive at agreements when necessary and to understand that either we all contribute to the public discussion or else Spain will lose a unique opportunity to be in one of the top positions in Europe in this transition.

2017 cannot exactly be described as a year of political stability on the national and international level that we would have wanted. Neither the weather conditions nor the substantial increase in wholesale energy prices critical to our business have been favourable. But once again, ENDESA has outdone itself, and with our shareholders constantly in mind, has closed the year with an increase in net profits of 4%. Profits that enable us to offer a dividend in 2018 of 1.382 euros per share, 5% higher than the minimum that we had promised. It has been our understanding for some time that improving the lives of energy consumers must be our obsession. Every year we expand our range of offers and services so that all our clients, both private and industrial, can be more efficient, more sustainable and more competitive.

Innovation is what we have been practicing ever since our Company was founded. And we believe that innovation is the only path to transform our environment and put Spain in the leading group. And we have the courage to take this path, aware that being first involves risks, but also tremendous opportunities that are not available to those who lag behind. Our energy mix is constantly becoming more and more sustainable and emission- free, just as was established in the European decarbonisation objectives for 2050. We are a benchmark in the fields of digitalisation, in commitment to the electric vehicle, in the use of the latest technology in grid review processes, digital invoicing and smart meters and smart cities. And we will continue to be, with the support of our shareholders. The present and the future of everything is marked by the struggle against climate change. Meeting the decarbonisation commitments for 2050 and reaching the zero emission objective are our most relevant joint missions. This roadmap that must guide us in everything is the core of our activity, and among other things it prioritises the investments of the Company, establishes senior management compensation and awards our employees' ideas; with our mission to provide high quality, competitive service to our customers while at the same time offering the maximum profitability to our shareholders always prevailing.

Borja Prado Eulate

Chairman, ENDESA