ABENGOA...Abengoa 23 November 2010 2 KEY DATA P&L account (EURm) FY07 FY08 FY09 FY10E FY11E FY12E Cash flow (EURm) FY07 FY08 FY09 FY10E FY11E FY12E Sales 3,214 4,459 5,183 6,099 7,144

SPANISH EQUITY RESEARCHRENEWABLE ENERGY

23 November 2010

Financial Ratios FY07 FY08 FY09 FY10E FY11E FY12E

EBITDA (EURm) 384 541 750 915 1,120 1,304

Net profit (EURm) 120 140 170 185 229 263

EPS (EUR) 1.33 1.55 1.88 2.04 2.53 2.91

Adj. EPS (EUR) 1.33 1.51 1.36 2.04 2.53 2.91

P/E (x) 22.0 11.5 8.6 8.6 6.9 6.0

P/E Adj. (x) 22.0 11.8 11.9 8.6 6.9 6.0

EV/EBITDA (x) 14.9 9.7 9.2 9.5 8.3 7.6

Debt/EBITDA (x) 7.1 6.1 6.9 7.4 6.6 6.1

P/BV (x) 4.3 4.0 1.8 1.6 1.3 1.1

ROE (%) 23.9 27.4 28.2 20.9 21.3 20.2

DPS (EUR) 0.17 0.18 0.19 0.20 0.21 0.22

Dividend yield (%) 0.6 1.0 1.2 1.1 1.2 1.3

ABENGOA

Concerns generate opportunity. Strong Buy

• The operating concerns. We see three open fronts: 1) bio-ethanol: we expect 25% EBITDA CAGR 2009-12E as regulatory support is pushing up demand,which is starting to balance with supply, driving up prices & margins; 2) solar in Spain: new regulation is close to being approved and should guarantee projectIRRs >9%; 3) engineering: where a backlog ex own projects of EUR4.5bn (>3Xrevenues) should guarantee high activity levels for the coming years.

• The financial concerns: Abengoa will invest EUR4.6bn in 2010-12E, out of which EUR1.46bn should come from the parent company. We estimate that current liquidity (ex-factoring & client pre-payments) and CF generation will be enough tofinance this over the period even considering the EUR1.1bn debt maturities over 2010-12. This leaves Abengoa in a reasonably comfortable position ahead of theEUR1bn refinancing of the syndicated loan in 2013.

• The strategic concerns: Although management is somewhat ambiguous on this point, we believe that asset rotation would make sense for three main reasons:a) greater focus and group streamlining, b) unlocking value, c) achieving greater financial flexibility to undertake further projects. In our view, Telvent and therecycling & waste management parts of Befesa, are the most clear candidatesfor a disposal.

• Raising our recommendation to Strong Buy. As stated above, we believe that most of the concerns are overstated, and find Abengoa a very attractiveinvestment opportunity in view of: 1) a leading position in renewable energy; 2)strong growth prospects (CAGRs 09-12E of 24% & 29% for EBITDA & EPS); and 3) an attractive valuation: 47% upside to our EUR25.8 target price, 6.9XP/E and 8.3XEV/EBITDA in 2011E (although 25% of group’s debt will still not be contributing to EBITDA). On the back of this, we raise our recommendation to Strong Buy.

STRONG BUY Target Price

Share Price

Upside

€ 25.80

€ 17.53

+47%

ABG.MC / ABG. SM

Market Cap

Enterprise Value

Free Float

Nº Shares ('000)

Average Daily Volume

€ 1,585 m

€ 8,724 m

€ 697 m

91 m

€ 8 m

Performance 1m 3m 12m

Absolute % -11.5 -5.7 -10.5

Relative % -3.3 -4.8 4.9

0.0

5.0

10.0

15.0

20.0

25.0

30.0

11/07 03/08 07/08 11/08 03/09 07/09 11/09 03/10 07/10 11/10

– Abengoa – Ibex 35

Shareholders

Free Float 44%, Inv. Corporativa 56%

Analyst

Fernando Lafuente +34 91 550 87 16 [email protected]

Abengoa

23 November 2010 2

KEY DATA P&L account (EURm) FY07 FY08 FY09 FY10E FY11E FY12E Cash flow (EURm) FY07 FY08 FY09 FY10E FY11E FY12E

Sales 3,214 4,459 5,183 6,099 7,144 7,622 Net profit 120 140 170 185 229 263

Cost of sales (1,746) (2,010) (1,825) (2,453) (3,230) (3,827) Depreciation 97 178 319 338 401 469

Gross margin 1,468 2,449 3,358 3,647 3,914 3,795 Minorities 15 25 32 48 55 59

Opex (1,084) (1,908) (2,608) (2,732) (2,795) (2,491) Non-cash adjustments (4) (9) (11) (13) (14) (14)

EBITDA 384 541 750 915 1,120 1,304 Total cash-flow (CF) 229 335 511 558 671 777

Depreciation & Amortization (97) (178) (319) (338) (401) (469) Capex (1,301) (1,907) (2,142) (1,995) (1,273) (1,366)

EBIT 286 363 431 577 718 834 Working capital 189 601 45 (120) (1) 44

Financial costs (140) (314) (181) (302) (369) (427) Operating FCF (883) (971) (1,586) (1,558) (603) (544)

Associates 4 9 11 13 14 14 Financial investments (42) (349) (250) 0 0 0

Ordinary profit 150 58 261 288 363 421 Disposals/(acquisitions) 136 194 335 0 0 0

Extraordinary items 0 0 0 0 0 0 Rights issues 0 0 0 0 0 0

Pre-tax Profit 150 58 261 288 363 421 Other (177) 556 (312) 0 0 0

Taxes (14) 108 (58) (55) (80) (99) FCF before dividends (967) (570) (1,812) (1,558) (603) (544)

Discontinued activities Dividends (15) (16) (17) (18) (19) (20)

Minorities (15) (25) (32) (48) (55) (59) Free-cash-flow (FCF) (982) (587) (1,829) (1,576) (622) (564)

Net profit, reported 120 140 170 185 229 263 Buy-backs 0 0 0 0 0 0

Adjustments 0 (4) (47) 0 0 0 FCF after buy backs (982) (587) (1,829) (1,576) (622) (564)

Net profit adjusted 120 137 123 185 229 263

Nº of shares (m) 90 90 90 90 90 90

Nº of shares adjusted (m) 90 90 90 90 90 90 Balance sheet (EURm) FY07 FY08 FY09 FY10E FY11E FY12E

Treasury stock (m) 0 0 0 0 0 0 Equity 617 407 803 969 1,179 1,422

Minority interests 181 221 368 417 471 530

YoY Growth FY07 FY08 FY09 FY10E FY11E FY12E Provisions & others 95 (186) 19 19 19 19

Sales 18.8% 38.7% 16.2% 17.7% 17.1% 6.7% Net debt [cash] 2,733 3,319 5,148 6,724 7,346 7,910

EBITDA 33.4% 41.0% 38.7% 21.9% 22.4% 16.4% Capital invested 3,625 3,760 6,338 8,129 9,015 9,882

Net profit 20.1% 16.7% 21.3% 8.5% 23.8% 15.1%

Adjusted net profit 20.1% 13.4% -9.8% 50.0% 23.8% 15.1% Goodw ill 1,114 968 1,331 1,331 1,331 1,331

Intangible assets 974 975 1,623 1,623 1,623 1,623

Revenues by country FY07 FY08 FY09 FY10E FY11E FY12E Tangible assets 1,648 2,399 4,024 5,682 6,554 7,451

Spain 37.9% 38.0% 37.7% 39.7% 40.7% 41.0% Financial assets 226 356 343 356 370 384

Europe 18.8% 15.6% 16.2% 11.6% 11.6% 11.6% Associates 0 0 0 0 0 0

LatAm 19.7% 19.4% 21.8% 20.8% 21.3% 21.0% Working capital (337) (938) (983) (863) (863) (907)

US 14.9% 16.5% 15.5% 16.8% 15.7% 15.7% Capital employed 3,625 3,760 6,338 8,129 9,015 9,882

RoW 8.7% 10.4% 8.8% 11.1% 10.7% 10.8% Working capital/sales -10.5% -21.0% -19.0% -14.2% -12.1% -11.9%

EBITDA by country FY07 FY08 FY09 FY10E FY11E FY12E Financial ratios FY07 FY08 FY09 FY10E FY11E FY12E

Spain 37.6% 36.2% 35.6% 44.9% 47.0% 48.8% Net debt/EBITDA 7.1X 6.1X 6.9X 7.4X 6.6X 6.1X

Europe 7.1% 8.4% 8.2% 9.3% 9.4% 9.4% Net debt adjusted/EBITDA(*) 1.8X 0.7X 1.8X 2.6X 2.1X 1.7X

LatAm 24.0% 23.3% 20.2% 19.3% 18.9% 18.3% Gearing 342.6% 529.0% 439.7% 485.2% 445.1% 405.1%

US 17.4% 18.3% 26.3% 16.7% 15.2% 14.4% Interest cover 2.0X 1.2X 2.4X 1.9X 1.9X 2.0X

RoW 13.9% 13.8% 9.7% 9.8% 9.5% 9.2% (*) Corporate net debt/corporate EBITDA

Per share data FY07 FY08 FY09 FY10E FY11E FY12E Margins & ratios FY07 FY08 FY09 FY10E FY11E FY12E

EPS 1.33 1.55 1.88 2.04 2.53 2.91 EBITDA margin 11.9% 12.1% 14.5% 15.0% 15.7% 17.1%

EPS adjusted 1.33 1.51 1.36 2.04 2.53 2.91 EBIT margin 8.9% 8.1% 8.3% 9.5% 10.1% 10.9%

CFPS 2.53 3.70 5.65 6.16 7.42 8.59 Effective tax rate 9.5% n.a. 22.3% 19.0% 22.0% 23.5%

FCFPS (9.76) (10.73) (17.53) (17.22) (6.66) (6.02) Pay-out 12.8% 11.6% 10.1% 9.8% 8.3% 7.6%

BVPS 6.82 4.50 8.87 10.71 13.03 15.72 ROCE (EBIT/CE) 7.9% 9.6% 6.8% 7.1% 8.0% 8.4%

DPS 0.17 0.18 0.19 0.20 0.21 0.22 ROE 23.9% 27.4% 28.2% 20.9% 21.3% 20.2%

Abengoa

23 November 2010 3

Summary & Investment Case

Operating concerns: dispelling Abengoa’s main uncertainties In our view, there are three main focuses of concern for investors when looking at Abengoa’s operating side: bio-ethanol, the solar business and the engineering division. a) On the ethanol business, regulatory support is pushing up demand, which is starting to balance

with supply, which is not growing. We believe regulatory support will remain in the future and thus we expect to see prices and margins recovering (CAGRs of +6-10% & +15% resp. in 2009-12E). Moreover, 2nd generation bio-ethanol is still far from being commercially viable and, in any case, the company is well positioned to face its future development.

b) Regarding solar in Spain, a new regulation guarantying a project IRR above 9% is close to

being approved. This will increase the visibility of the sector, important for Abengoa considering the strong investment effort it has undertaken and will undertake in the future.

c) According to our estimates, the backlog of third parties projects is still growing (by EUR1.0-

1.5bn in 2010E) and will end the year at cEUR4.5bn, over 3X revenues, ensuring the sustainability of the business once the strong investment process undertaken by Abengoa comes to an end in 2013-2014. Moreover, this sustainability will be reinforced by Abengoa’s good positioning, especially in transmission, cogeneration, thermo-solar and water projects.

Financial concerns: liquidity and CF generation leave flexibility ahead of 2013 refinancing The second focus of the investors’ concerns relies, in our view, on Abengoa’s financial structure and its capability to finance the strong capex plan ahead. In our view, Abengoa has the financial capacity to undertake the investments, leaving it in a reasonable position ahead of the EUR1bn refinancing of the syndicated loan in 2013. More details: a) How much will be invested? We expect Abengoa will invest EUR4.5bn in 2010-12E, the bulk

on thermo-solar farms (EUR2.05bn) and transmission lines (EUR1.85bn). This will imply an equity contribution of EUR1.4-1.5bn during 2010-12E (plus EUR3.1bn of non-recourse debt);

b) Financing needs covered until 2012: Abengoa currently has a liquidity position of EUR3.6bn

(including recent USD bond) which, once adjusted by non-recourse cash (EUR662m), factoring (EUR1.09bn) and the client down-payments (EUR518m) results in a net liquidity of EUR1.3bn, available to fund cash needs and debt maturities in 2010-12E. Moreover, our estimate does not include any disposal which would further increase financial flexibility.

Strategic concerns: sales would simplify and streamline business structure Lastly, the third focus of concern is the group’s strategic vision: looking at the short-term, the main concern is the excessive diversification of the company while when referring to the long term (2014 and beyond) the issue resides in the strategic direction it should take. a) Firstly, we believe Abengoa should start to zero in on its core activities, losing weight in

businesses which have lost part of their strategic rationale. This would help to realise value and gain financial flexibility to undertake further projects. In our view, any disposal of Telvent and the sale of Befesa (especially recycling & waste management unit) would make sense.

b) Secondly, once the strong investment process is over, we believe Abengoa should focus on

digesting the latter, crystallising value in those more mature businesses, preparing itself for future investment opportunities. In our view, never-ending growth strategies have proven to be negative for companies.

We reiterate our Buy rating on the stock We are aware of Abengoa’s uncertainties and we reckon that its business and financial structure can be written off as too complicated. However, as shown above, we believe that most of the concerns are overstated. Moreover, we see some clear positives on Abengoa: 1) its leading position in renewable energies worldwide, especially in thermo-solar where it holds technological leadership; 2) its strong engineering capabilities in power-related projects; 3) the attractive investment opportunities ahead (in solar, water or electricity transmission infrastructures); 4) its strong growth prospects (CAGRs 2009-12E of 24% and 28% in recurrent EBITDA and EPS resp.); and 5) its appealing valuation: the shares trade at 6.9XP/E and 8.3XEV/EBITDA in 2011E despite 25% of group’s debt will still not be contributing to EBITDA, while our EUR25.80 TP offers over 47% upside. We thus upgrade our rating on Abengoa from Buy to Strong Buy.

Abengoa

23 November 2010 4

Contents

Summary & Investment Case ..………………………………………......3

Valuation ....………………………………………………………………….5

Sum-Of-The-Parts: EUR25.80 per share Peer comparison

I. Abengoa’s new reporting method.........................................................8

II. Operating concerns: solar & bio-ethanol .............................................9

Bio-ethanol: supply and demand are starting to balance Thermo-solar: where do we stand in terms of regulation?

III. Financial uncertainties: equity financing not at risk.........................12

Where will the money be invested? Where does the financing come from? Leverage is high, but sustainable

IV. Disposals would streamline the business structure.........................17

What do we believe could be sold? Sales will crystallise value and help finance future capex

V. Group estimates 2009-12E...................................................................19

Adjusted EPS to increase by 29% CAGR 2009-12E Revenues to grow by 14% CAGR 2009-12E Recurrent EBITDA +24% CAGR 2009-12E EUR1.8bn cash generation at the group level over 2010-12E Tax rate to gradually increase Pay-out will remain at low levels

Abengoa

23 November 2010 5

Valuation

1) Sum-Of-The-Parts: EUR25.80 per share Given the heterogeneity of its different businesses, Abengoa is valued through a SOTP method based on a DCF valuation approach for each of the different divisions. This method is important for Abengoa as it reflects the value of each of its business divisions individually, in a context in which in order to share future investment efforts, the company could reduce its exposure to some of them. The result is an EV of EUR10bn which once adjusted for our debt estimate (EUR6.3bn), for the factoring included at Abengoa’s balance sheet (EUR1.09bn) and minorities (EUR0.4bn), results in an equity value of EUR2.3bn, or a target price of EUR25.80 per share, 46% above current market prices. Our valuation implies an overall EV/EBITDA multiple of 9X in 2011E.

We adjust our EV by the factoring to avoid duplicating its contribution in our valuation, since we already include each of the projects’ contribution linked to factoring in the cash flows we used. We assumed that 60% of the factoring is linked to engineering, 25% to Telvent and 15% to Befesa. The mix of our valuation by business is as follows: 1) Engineering and Transmission lines (EUR3.6bn, 36% of EV): In order to value this

business we differentiated between the engineering business and electricity transmission lines:

a) We value the Engineering business at EUR1.4bn. In order to reach this calculation, we applied a multiple of 8.5X EV/EBITDA to 60% of the EBITDA of the business, which we consider linked to third parties projects. We do this considering that cash flows from own works are included under the valuation of each of the projects, increasing its value. Our valuation implies an EV/EBITDA multiple of 5X in 2011E for the whole unit, however, the 8.5X EBITDA used in our valuation is above the 5-6X we use to value the engineering business of the main Spanish construction groups;

b) We valued the electricity transmission lines at EUR2.2bn. In this case we used a DCF

with a blended WACC of 10.2% (16% cost of capital) and terminal growth rate of 3.5%. Our valuation results in an EV/EBITDA of 11.5X and 2X P/BV, which compares to Red Electrica’s 9X and 3.4X respectively.

ABENGOA: SUM OF THE PARTS VALUATION

(in EURm) EV Net debt 11E Factoring Minorities Equity value Criteria (2011E)

Transmission lines 2,167 1,391 777 11.5X EV/EBITDA

Traditional Engineering (*) 1,398 (160) 651 907 8.5X EV/EBITDA (*)

Bioenergy 1,765 1,576 190 8.4X EV/EBITDA

Env. Services (Befesa) 1,162 538 163 14 447 8.2X EV/EBITDA

IT (Telvent) 975 142 271 337 225 7.6X EV/EBITDA

Solar (**) 2,566 2,279 286 14.5X EV/EBITDA

Corporate & Others 494 (494) -

Total 10,033 6,261 1,085 351 2,336 9X EV/EBITDA

Number of shares (m) 90.5

Value per share (in EUR) 25.80

Current price (in EUR) 17.53

Upside 47%

(*) Multiple used to value EBITDA linked to third parties works; (**) Solar business valued net of minorities; Source: N+1 Equities

ABENGOA: VALUATION OF THE ENGINEERING AND TRANSMISSION BUSINESS

EURm Implicit EV/EBITDA 2011E

Traditional engineering 1,398 5.1

Transmission lines 2,167 11.5

Total EV 3,565 9.1 Source: N+1 Equities

EV of EUR10bn, 9X EBITDA 2011E

Debt increased by EUR1.09bn factoring

Engineering weighs 36% on EV

Abengoa

23 November 2010 6

2) Bioenergy (EUR1.8bn, 18% of the EV): We value this unit at EUR1.8bn including the more than 2,800m litres of production capacity the company will have in operation by the end of 2011. The valuation is calculated through DCFs with WACC of 11.2% and a terminal growth rate of 1%. Our valuation implies an EV/EBITDA of 8.4X 2011E and an EV of EUR0.66m per litre of production capacity.

3) Environmental Services (EUR1.16bn, 12% of the EV): We value Befesa at EUR1.16bn EV,

which once adjusted by debt, results in an equity value of EUR460m, roughly in line with the market price of the unit (3% of the company is quoted). In our valuation of Abengoa’s environmental unit we differentiated between the recycling and waste management business and the water business. :

a) We value the recycling and waste management business at EUR761m through DCFs

using a WACC of 9.2% and terminal growth rate of 1.0%. The valuation implies an EV/EBITDA of 7.0X in 2011E;

b) We value the water business also through DCFs at EUR401m, using a WACC of 6.5%

and a terminal growth rate of 2%, implying an EV/EBITDA multiple of 11.5X in 2011E. 4) Telvent (cEUR1bn, 10% of the EV): Although Telvent is listed on the Nasdaq, we calculated

our valuation through DCFs (9.3% WACC and 0.5% terminal growth rate), resulting in cEUR1bn for the whole unit. Taking out the EUR142m debt we estimate by the end of 2011E plus EUR271m factoring, we obtain an equity value of EUR562m for the unit, 10-12% above the company’s current market price.

5) Solar business (EUR2.6bn, 26% of the EV): We value Abengoa’s portfolio net of minorities

assigning different probabilities depending on the stage of development and the country of each MW:

a) For those assets already in operation in Spain (281MW by the end of 2011E) we used a multiple of EUR5.9m per MW;

b) We employed EUR5.3m/MW for those in construction (150MW); and c) EUR0.45m per MW for the rest of the 250MW already approved and included in the

Spanish pre-allocation register. d) We valued the 530MW Abengoa has in its pipeline in the US also at EUR0.45m per

MW.

e) Lastly, we valued Abengoa’s project in Algeria at EUR2.4m per MW and the Abu Dhabi project at EUR0.5m per MW.

In order to see the visibility of our solar business valuation, we have made a comparison between what we have obtained and what we estimate Abengoa has effectively invested. The result is that our valuation is 6-8% above what Abengoa has invested. Accordingly, in our view, our valuation cannot be considered as an aggressive valuation.

ABENGOA: THERMO-SOLAR VALUATION

MW EV/MW EV Minorities Abengoa EV

In operation 2011E 281 5.9 1,658 295 1,363

In construction 150 5.3 797 138 658

MW with grid connections rights 250 0.45 113 0 113

Projects in the US 530 0.45 239 0 239

Hassi R'Mel 150 2.4 358 176 183

Abu Dhabi 100 0.5 53 42 11

Total 1.461 1.308 3,217 651 2,566

Source: Abengoa; N+1 Equities

Bioenergy 18% of EV Befesa weighs 12% on EV Telvent valued 10% above market price Solar: EUR2.4bn, 26% of the EV

Abengoa

23 November 2010 7

2) Peer comparison Abengoa is halfway between being a renewable and engineering company and thus it is difficult to find a pure comparable peer. However, thanks to the new business segmentation, we can make a more accurate comparison. From the table below we obtain the following conclusions: 1) Abengoa is trading in line with its main engineering peers;

2) Compared to the main renewable and concession peers, Abengoa is trading at a 12-15%

discount;

3) Compared to the main bioethanol and environmental services players (all included under the commodity processing business), it is trading at a premium

At first sight, Abengoa’s trading multiples make sense for us since renewable energies traditionally trade at higher multiples than engineering (and engineering at a higher multiple than commodity exposed companies). That said, as the weighting of thermo-solar, transmission and desalination increases in Abengoa’s business mix, its multiples should start to be closer to those of the renewable sector than to engineering.

ABENGOA: SOLAR VALUATION VS. MONEY INVESTED

(EURm) EV Equity

Investments 2,420 265

Valuation 2,566 286

Premium 6% 8%

Source: N+1 Equities

ABENGOA: PEER COMPARISON

P/E EV/EBITDA EV/EBIT

Company Price Market cap 2010E 2011E 2010E 2011E 2010E 2011E

Fluor Corp 42.2 7,553 27.5 17.5 9.3 7.2 11.4 8.6

Tecnicas Reunidas 43.0 2,402 17.2 14.2 9.9 7.4 10.4 7.7

Engineering and construction 25.0 16.7 9.4 7.2 11.1 8.4

I. Renovables 2.5 10,480 24.8 22.0 10.2 9.6 19.6 18.1

Acciona 56.5 3,592 19.5 16.7 9.8 9.0 22.1 18.7

EDPR 4.1 3,559 24.3 18.8 12.1 10.4 24.8 19.8

EDF EN 29.9 2,319 20.6 17.6 14.6 12.9 21.8 19.4

Contracted off-takes 23.3 20.0 11.0 10.0 21.2 18.7

CropEnergies 4.4 375 22.0 18.4 10.5 9.1 22.7 17.5

VERBIO 4.1 258 51.1 17.8 12.4 6.4 27.2 10.2

Suez Environ. 14.0 6,875 17.0 14.9 7.0 6.5 15.0 13.5

ADM 21.7 13,871 9.9 10.0 7.1 6.4 9.8 9.2

Commodity processing 12.9 11.8 7.2 6.5 11.9 10.8

Abengoa 17.5 1,585 8.6 6.9 9.5 8.3 15.1 12.9

Source: FactSet and N+1 Equities

Abengoa: half way between renewables and engineering

Abengoa

23 November 2010 8

I. Abengoa’s new reporting method Since the third quarter of this year, Abengoa has changed its reporting format, moving from a reporting based on its five business groups to a new one based on three business lines. According to the company there are two main reasons behind this change: 1) firstly, to adapt the quarterly (and annual) reporting to the company’s current structure, which changed significantly over the last few years both due to the organic development of new businesses and the acquisition of additional ones; and 2) secondly to simplify the company’s business mix, grouping together assets with similar characteristics/profile, in an attempt to make it easier to understand. Accordingly, the company’s new reporting structure will be based on the following business areas: a) Engineering & Construction: this area will include all of Abengoa’s E&C activities as well as

its IT business (Telvent). Under engineering activities Abengoa will now include all works (for both Abengoa and third parties) it did previously plus works related to water and solar.

b) Contracted off-takes: this business includes all the company’s concession-related

businesses. This means assets with highly visible revenues, whether linked to a regulation or to long-term PPAs. This business line includes the transmission lines in LatAm, thermo-solar farms and the operation of the desalination plants; and

c) Commodity processing: this area includes all the activities linked to the evolution of

commodities, which includes biofuels activities as well as its waste management and recycling activities (steel dust, salt slag).

Over the coming two quarters Abengoa will disclose dual results reporting (by business group and by activity), providing reconciliation between the two reporting methods.

New reporting will better help to understand the company Although the change in the reporting method might be considered as risky by people not familiar with the company, we value it positively as it will, on the one hand, simplify the group structure, giving a clear idea of the size of each of the activities in which the company is operating and, on the other, it will likely lead to a better comprehension of the company’s different business. We also believe that this new methodology will help to place a value on some assets (like water concessions or transmission lines) diluted by previous reporting method in other business areas.

ABENGOA: REVENUES & EBITDA RECONCILIATION TO THE NEW REPORTING METHOD

Source: Abengoa

New reporting based on three business lines

New reporting will help to undestand the nature of the company’s assets

Abengoa

23 November 2010 9

II. Operating concerns: solar & bio-ethanol Out of all the businesses in which Abengoa is present, there are clearly two that are in investor sights: 1) bio-ethanol and its volatility; and 2) the solar business and the final outcome of the revision of its regulation. In our view, both concerns are close to being dispelled. In the case of bio-ethanol, supply & demand is starting to balance, which will help to increase output and margins, and, in the case of solar, final regulation is close to being approved in line with expectations, thereby increasing the visibility of future investments.

1) Bio-ethanol: supply and demand are starting to balance The past couple of years have not been easy for biofuels. On the one hand, low oil prices significantly damaged the profitability of investments made in this business and, on the other, the public debate on food vs. biofuels questioned the support this technology was receiving from governments and authorities. Moreover, the US, was suffering from clear oversupply, pushing prices downwards, and further eroding industry margins (down 27% CAGR 07-09). However, we believe the outlook now looks better in Abengoa’s main markets, basically due to: Continued regulatory support: in Europe, the 20-20-20 target for 2020 has been maintained

while in the US, the Renewables Fuels Standards set a floor for bioethanol utilisation. Moreover, in Spain, in early September, the Spanish Government approved an increase in the mandatory ethanol blend, from 7% to 10%, which, despite still pending approval, will increase the visibility of biofuels consumption in Spain.

The financial crisis removed several competitors from the market, especially in the US where

some of the bioethanol producers went bust.

Lack of new investments: furthermore, no new investments in new capacity have been seen recently. This means that only the already existing capacity will be able to return to the market once it recovers as c2 years are needed to set up new capacity.

Moreover in this context of market recovery, Abengoa will bring into operation new capacity in the US and Europe in 2010-11, taking total installed capacity to c2,850m litres by end-2011 (51% in the US, 45% in Europe and 4% in Brazil). The increase in capacity plus the expected recovery in Abengoa’s main markets will result in volumes growing by 16% CAGR 2009-12E, with the biggest increase coming from the US (+19% CAGR) and Europe (+19% CAGR).

No further investments in ethanol scheduled for the future As we mentioned earlier, Abengoa has already made all the investments needed to increase its production capacity to c2,850m litres, which will be fully in operation by end-2011. Going further, we do not expect further capacity increases in first generation technology.

ABENGOA: BIOETHANOL PRICE AND UNIT MARGIN CAGRs 2007-2009 BY MARKET

CAGRs 07-09 Price Unit Margin

Europe (4%) 3%

USA (8%) (27%)

Brazil (1%) 0%


ABENGOA: BIOETHANOL OUTPUT 2008-2012E

(in mL) 2008 09/08 2009 10/09 2010E 11/10 2011E 12/11 2012E CAGR 09-12E

Europe 492 46% 716 36% 976 11% 1,085 4% 1,123 16%

USA 590 10% 647 33% 860 23% 1,060 3% 1,093 19%

Brazil 158 1% 160 4% 165 6% 175 1% 176 3%

Total output 1,241 23% 1,523 31% 2,001 16% 2,320 3% 2,392 16%


Bio-ethanol has been under pressure in the last years

Outlook looks better based on continuos regulatory support

Output will increase by 16% CAGR 09-12E

Abengoa

23 November 2010 10

And neither do we expect either any new investment in second generation capacity in the short-term apart from the experimental project Abengoa has in Spain. We would only expect new investments in ethanol if the development of second generation technology would dramatically advance to commercial viability. In that case Abengoa would gradually adapt its current facilities to second generation bio-ethanol production.

2) Thermo-solar: where do we stand in terms of regulation? Since the beginning of the year the renewable energy sector in general has suffered from strong regulatory uncertainty in Spain, and especially the thermo-solar sector due to the potential cut in the remuneration set by RD 661 for these types of plants. In August, the main industry firms finally reached an agreement with the Government which despite slightly cutting the remuneration to thermo-solar facilities also eliminated the uncertainty for all the projects Abengoa currently has in its pipeline and that are already approved by the Spanish renewables pre-register.

a) Agreement with the Government close to be made official However, this agreement is not official yet. Its publication in the Spanish Official Gazette has been delayed in time, once again increasing the uncertainty that had been eliminated when the agreement with the Government was announced. That said after speaking to several industry sources we believe that the Royal Decree confirming the agreement with the Government will likely be published before the end of the year. Once published, it will reduce again the uncertainty and regulatory risk of the sector, leaving the path open to new investments.

b) What would happen if the Royal Decree is not approved? If the Royal Decree is not made official by the Government before the end of the year it would obviously be bad news for the renewable energy sector, and especially for wind and thermo-solar developers considering that they already had reached an agreement with the Government. More specifically, in Abengoa’s case if the RD were not approved, all project remuneration would still be subject to current remuneration and thus, it would keep on investing, although at a slower pace, while waiting for the final decision on regulation. There are two potential outcomes: The Spanish Government makes the previously reached agreement official: the

development/construction of projects with financing already closed would be resumed as well as the search for the financing of the company’s remaining pipeline.

ABENGOA: BIOETHANOL PRODUCTION CAPACITY 2008-2012E

(in mL) 2008 09/08 2009 10/09 2010E 11/10 2011E 12/11 2012E

Europe 796 0% 796 60% 1,276 0% 1,276 0% 1,276

USA 742 0% 742 90% 1,408 4% 1,458 0% 1,458

Brazil 114 0% 114 0% 114 0% 114 0% 114

Total output 1,652 0% 1,652 69% 2,798 2% 2,848 0% 2,848


ABENGOA: COMMITTED AND NON-COMMITTED THERMO-SOLAR CAPEX 2010-2012E

Project Capacity Stake (%) Partner Location Status Total capex ABG's equity

Committed

Helioenergy 1 & 2 2x50MW 50% E.On Ecija In construc. 500 88

Solacor 1 & 2 2x50MW 74% JGC El Carpio Pipeline 500 130

Total 1,000 217

Non-committed

Helios 1 & 2 2x50MW 100% Ciudad Real Pipeline 500 175

Solaben 1, 2, 3 & 6 4x50MW 100% Badajoz Pipeline 1,000 350

Total 1,500 525

Source: Abengoa

New regulation to be approved before the year-end

A delay in the regulation would put some projects on hold

Abengoa

23 November 2010 11

The Government further reduces the remuneration of thermo-solar projects: in this case, the development of the pipeline and even of the projects with already committed financing would depend on the decrease and the new economics of the regulation. According to our estimates, the average WACC of a solar project throughout its whole life could be in the region of 7.5% to 8%. Thus, looking at the table below, in order to keep the appeal of the projects, tariffs cannot be cut more than a 10-15%. Any cut below this figure would make most of the projects been finally cancelled.

In our view, a further cut in tariffs will clearly be the worst case scenario for Abengoa, as it would also put at risk the profitability of the projects already in operation, assuming that Government would also decide to cap the revenues of these assets.

c) Partnerships to reduce risk and investment effort In light of the above, starting some months ago Abengoa began taking a step forward by looking for partnerships for its solar projects. To date it has been able to share 50% of its 100MW project in Ecija with E.On and 26% of its 100MW project in El Carpio with Japan’s JGC. In our view, this strategy has two main targets: 1) on the one hand, to reduce the equity investment effort required for these kind of projects; and 2) on the other to also share the regulatory risk of these assets (the regulatory revision has still yet to be decided) by adding foreign partners with capacity to lobby the regulator.

ABENGOA: SENSITIVITY ANALYSIS OF THERMO-SOLAR IRRs TO FURTHER CUTS IN TARIFFS

Project IRR Equity IRR

0% 9.2% 13.0%

5% 8.6% 12.4%

Cut in tariff 10% 8.0% 11.8%

15% 7.5% 11.2%

20% 6.9% 10.4%


Cuts >10-15% will limit the IRR of the project

Abengoa

23 November 2010 12

III. Financial uncertainties: equity financing not at risk We expect Abengoa to invest EUR4.6bn in 2010-2012E, out of which cEUR1.5bn will be invested through equity. In this sense, Abengoa will generate EUR1.3bn cash at the corporate level, not enough to finance the expected equity contribution and the dividends of the company. That said, we estimate Abengoa has a net liquidity (net of client pre-payments, non-recourse cash and factoring) of EUR1.3bn which, together with the CF generation will be enough to finance capex and debt maturities over 2010-12E, leaving Abengoa in a comfortable position ahead of the EUR1bn refinancing in 2013.

1) Where will the money be invested? Abengoa expects to invest nearly EUR5bn during the 2010-2012E period, the bulk coming from new thermo-solar capacity (EUR2.7bn) and new transmission lines in LatAm (EUR1.8bn). Out of the total investment, 70% (EUR3.4bn) is considered committed by the company while the remaining 30% (EUR1.5bn) is considered as non-committed. The main difference between one and the other basically relies on the degree of its financing: Committed capex is considered that for which the company has already obtained the project

finance and has been able to raise the funds needed to undertake its equity contribution;

On the contrary, non-committed capex is that which, despite being included in the company’s pipeline, still lacks the required financing, the project finance, or the equity to be invested by Abengoa.

Compared to Abengoa, our estimates are slightly below guidance: we estimate the company will invest EUR4.6bn during the period, 5-6% below its target. The difference comes from the solar business where as result of the extension of the deadline to put pre-registered thermo-solar projects into operation from year end 2013 to year end 2014, we believe that some projects could also be delayed.

2) Where does the financing come from? Since it started to invest in high-capital intensive projects Abengoa has relied on non-recourse debt, and basically on project finance structures. Such has been the case that by the end of 2009, out of Abengoa’s EUR3.6bn net debt, EUR2.3bn, or over 60% of the total was non-recourse debt.

a) cEUR1.5bn equity to be invested in 2010-12E We expect Abengoa to rely on these financing structures in the coming years as long as it keeps on investing at these high levels. Looking at 2010-2012 capex plan: a) Out of the targeted capex, Abengoa expects EUR3.6bn, 72% of the total, to be financed with

non-recourse debt, mainly via project finance structures;

b) Accordingly, the remaining EUR1.4bn (28% of the total) will be financed through Abengoa’s corporate funds (although it also potentially considers the entry of a partner), or what we will call an equity contribution from Abengoa (with recourse)

ABENGOA: 2010-2012E CAPEX TARGET BY BUSINESS VS. ESTIMATES

Abengoa N+1 Equities

(in EURm) Committed Non-committed Total

Capex 2010-12 3,437 1,500 4,937 4,635

% of total 70% 30%

o/w solar 1,180 1,500 2,680 2,107

o/w Transmission 1,750 0 1,750 1,855

o/w Bioenergy 260 0 260 408

o/w Water 247 0 247 265


cEUR5.0bn to be invested in 2010-12E

Abengoa

23 November 2010 13

That said, despite the fact that our group capex forecast is below Abengoa’s guidance, we estimate that the equity contribution needed by Abengoa will be slightly above the company’s target (EUR1.46bn vs. EUR1.36bn) since we expect higher investments in the bio-energy business than those expected by Abengoa (YTD it has invested cEUR300m vs. the EUR260m target for 2010-12E), all financed via equity. Additionally, we expect to see an increase in the equity component in the project finance structures of the still-to-be-committed projects. All in all, we estimate 32% of the total slated investment will be done through equity whilst Abengoa, on average, expects 28%.

b) Equity investment above corporate cash generation in 2010-12E In light of the above, in order to turn a non-committed into committed project, the key is to close the non-recourse financing of the project. Once the project finance is closed, the next step for Abengoa is to find the way to finance its equity contribution for that project. There are basically two ways of finding these funds: a) Through organic cash generation: out of the company’s total cash generation, there is a part

which is linked to non-recourse financing and thus, not accessible to Abengoa; b) Through external financing sources, including asset disposals, new corporate debt, bond

issues (including convertible bonds) or even a capital increase. According to our estimates, Abengoa will generate EUR1.2bn cash (including working capital) at the corporate level over the 2010-2012E period, not enough to finance the cEUR1.5bn equity contribution we expect it to invest over the period. Moreover, once the dividends to be received from Telvent and the EUR18-20m annual dividend we expect it to pay out are included, we expect the cash deficit to reach cEUR475m over the period.

ABENGOA: EXPECTED EQUITY CONTRIBUTION TO CAPEX FINANCING 2010-2012E

Abengoa N+1 Equities

(in EURm) Committed Non-committed Total

Capex 2010-12 3,437 1,500 4,937 4,635

Financed by:

Non-recourse debt and partners 2,541 1,038 3,579 3,174

Corporate level funds 896 462 1,358 1,461

Equity / investment 26% 31% 28% 32%


ABENGOA: CORPORATE CASH FLOW STATEMENT 2009-2012E

(in EURm) 2009 2010E 2011E 2012E Acc. 2010-12E

Cash flow 336 361 431 468 1,260

Working Capital needs 45 (120) (1) 44 (76)

Operating cash flow 381 242 431 512 1,184

Capex (1,089) (721) (366) (374) (1,461)

Operating free cash flow (708) (479) 65 138 (276)

Rights issue 0 0 0 0 0

Other (*) (423) (150) 4 5 (140)

FCF (1,131) (629) 69 143 (417)

Disposals 335 0 0 0 0

FCF before dividends (796) (629) 69 143 (417)

Dividend (17) (18) (19) (20) (57)

Decrease (increase) in debt (813) (647) 50 123 (474)

(*) Includes Telvent’s convertible issue in 2010E and its dividends thereafter; Source: N+1 Equities

Corporate level cash generation of EUR1.3bn in 2010-12

cEUR1.5bn equity will be invested in 2010-12E

Abengoa

23 November 2010 14

c) What is Abengoa’s real liquidity? By the end of September, Abengoa reported a net liquidity of cEUR2.6bn (mostly in cash), increased to EUR3.5bn including the USD650m bond issued in November and the EUR500m loan obtained from EKN and backed by the Export Credit Agency (ECA). However, as this occurs at the debt level, liquidity should be split between corporate and non-recourse in such a way that: Out of the EUR3.5bn liquidity, EUR2.4bn, or 68% of the total, is considered corporate cash, i.e.

fully usable by Abengoa (this figure includes recent bond issues); On contrary, cash worth EUR662m is linked to non-recourse financing. This cash, despite

being in Abengoa’s hands is not fully available for the company since depending on the project any cash linked to it must be kept until the full repayment of the related loan;

Lastly, EUR461m are considered as liquid financial investments, which we in turn consider

linked to the corporate level and thus, available for Abengoa. Accordingly, adding up the corporate cash and the financial investments, we estimate Abengoa has EUR2.9bn of fully available liquidity. That said, despite that we consider the remaining EUR662m cash linked to non-recourse financing as not available for Abengoa, once debt repayment of the related projects is completed, this cash will start to be considered as corporate cash, and thus, available for Abengoa at corporate level. Going further, considering that the aim of our analysis is to obtain the amount of liquidity available to finance the equity slated for investment and debt maturities, the next step should be to adjust this corporate liquidity obtained by short-term sources of funds: Abengoa closed 2009 with a net factoring of cEUR1.1bn, which we take out from the

company’s liquidity since we are already considering the contribution of the factoring in our 2010-12 cash flows.

Furthermore, from the liquidity figure we take out EUR518m cash at the engineering business

which we estimate corresponds to client pre-payments. The result of the latter is a net corporate liquidity position of EUR1.3bn by the end of 2010E, available to finance the expected shortage of corporate cash (including equity in new projects) and future debt maturities.

d) Liquidity enough to finance capex and maturities in 2010-2012E We undertook an analysis of Abengoa’s cash needs at the corporate level and how can they be covered using current liquidity. Based on the table shown below we obtain the following conclusions:

ABENGOA: LIQUIDITY POSITION

(in EURm) Total funds % of total

Corporate cash 2,418 68%

Non-recourse cash 662 19%

Financial investments 461 13%

Total liquidity 3,540 100%


ABENGOA: CORPORATE LIQUIDITY ADJUSTED

(in EURm) Total funds

Corporate liquidity 2,878

Factoring (*) (1,085)

Client pre-payments (net of suppliers) (518)

Net liquidity adjusted 1,275

(*) Accumulated factoring by the end of 2009; Source: Abengoa; N+1 Equities

Current liquidity of EUR3.5bn…

…or EUR2.9bn excluding non-recurse cash

We also remove factoring and client pre-payments from liquidity

Abengoa

23 November 2010 15

Current liquidity is enough to finance all debt maturities and shortages of cash during 2010 and 2011, including the EUR18-19m annual dividend we expect Abengoa to pay;

Liquidity is also enough to finance the EUR584m maturity Abengoa will have to face in 2012E,

the first tranche of the syndicated loan refinanced some months ago. Moreover, liquidity would also be enough to finance the EUR20m expected dividend payment for that year.

Summing up, we believe Abengoa is currently in a comfortable position from a liquidity standpoint taking into account that current resources, excluding factoring and client pre-payments are enough to finance the company’s needs at least during the coming 24 months. This also leaves a considerable period of time to find additional sources of funds (further bonds, disposals or even convertibles) without being pressured or in a hurry.

e) The refinancing of the EUR1bn syndicated loan in 2013 is the issue In light of the above, we believe Abengoa should not face any financial hurdles in the coming 24 months. Hence, the issue should then be the refinancing of the EUR1bn tranche of the syndicated loan maturing in 2013. We believe that in our view, in order to make it easier to again refinance this loan before the end of 2012 (it matures in July 2013), it would be good to have a more manageable financial position even at the corporate level. And this could basically come from these three alternatives: 1) Reducing the level of investments: we rule out this option considering that there still are

attractive opportunities ahead, and that the majority of capex (70%) has its financing already committed;

2) Increasing capital: this option could also be ruled out in light of the profile of Abengoa’s main

shareholders. Inversión Corporativa, the founding families’s investment vehicle, controls 56% of the capital and we believe is not willing to dilute its stake;

3) Selling assets: this would be the most feasible option. Moreover, this option apart from helping

to raise funds to reduce leverage would also help to realise value from some of the company’s mature assets.

In this context, despite Abengoa having recently obtained a credit rating (BB at Fitch and Ba3 at Moody’s), we would discard further bond issues as the only way to refinance future debt maturities. That said, we do not rule out a combination of bond issues plus any other of the above mentioned options, namely a disposal.

3) Leverage is high, but sustainable Once the liquidity issue has been addressed, the next question that arises is the sustainability of Abengoa’s leverage. In order to analyse the leverage of the company we should distinguish between group leverage, including non-recourse debt, and leverage at corporate level, i.e. with recourse.

a) Group leverage peaking at 7.4X EBITDA in 2010E but falling thereafter Based on Abengoa’s cash generation, we estimate group leverage will peak in 2010E at 7.4X debt/EBITDA (net debt of cEUR6.7bn including the factoring). However, as new projects start contributing to EBITDA, we expect leverage to start falling to 6.6X in 2011E and to 6.1X in 2012E. Note that by the end of September 2010 out of the total debt, EUR1.8bn was pre-operational, which means that it does not yet contribute to EBITDA.

ABENGOA: LIQUIDITY ANALYSIS 2010-12E

(in EURm) 2010E 2011E 2012E >2013E

Cash & cash equivalents 1,275 754 671 210

Refinancing schedule (346) (134) (584) (2,383)

CF generation (pre dividends) (157) 69 143

Dividends (18) (19) (20)

Excess/(Shortfall) liquidity position 754 671 210 (2,173)


Comfortable position from a liquidity standpoint

Important refinancing of EUR1bn in 2013 A more flexible financial position will clearly help

5.3X debt/EBITDA in 2010E ex preoperational debt

Abengoa

23 November 2010 16

b) Corporate leverage below bank covenants As we have already explained, most of Abengoa’s financing is non-recourse, i.e. project-finance. Accordingly, we estimate debt at corporate level will increase from EUR1.1bn by the end of 2009 to EUR1.7bn in 2010E and remain roughly stable in 2011E and even falling slightly in 2012E. This, however, will translate into corporate debt/EBITDA ratio also peaking in 2010E at 2.6X, falling to 1.7X by the end of 2012E (total net debt of EUR7.9bn, of which EUR1.6bn with recourse). In our view, these ratios, despite being high, are manageable for Abengoa. Moreover, Abengoa has traditionally had a covenant with banks, which is in force right now: corporate debt/EBITDA below 3X. According to our estimates, Abengoa will clearly meet this covenant in the coming years, moreover considering that the EBITDA to be used to calculate this covenant includes R&D expenses, as was agreed with the banks.

ABENGOA: FINANCIAL STRUCTURE 2009-2012E

(in EURm) 2009 2010E 2011E 2012E

Net debt (*) 5,148 6,724 7,346 7,910

EBITDA 750 915 1,120 1,304

Net debt/EBITDA (X) 6.9 7.4 6.6 6.1

Net debt/EBITDA (X) adj. by preoperational debt 4.4 5.3 4.9 4.7

(*) Includes EUR1.09bn factoring; Source: N+1 Equities


(in EURm) 2009 2010E 2011E 2012E

Net debt with recourse (1) 1,130 1,777 1,727 1,604

EBITDA with recourse (2) 633 688 832 954

Net debt/EBITDA with recourse (1/2) 1.8 2.6 2.1 1.7

EBITDA with recourse for banks (3) (*) 685 739 878 996

Net debt/EBITDA with recourse for banks (1/3) (*) 1.7 2.4 2.0 1.6

(*) Including R&D costs, as agreed with lender banks; Source: N+1 Equities

Corporate debt/EBITDA at 2.6X 2010E, below covenants

Abengoa

23 November 2010 17

IV. Disposals would streamline the business structure We positively value the aggressive growth strategy followed by Abengoa in recent years and we believe the company still has plenty of interesting opportunities to keep on investing in the future. That said, we believe Abengoa should start to zero in on its core activities, losing weight in businesses which have lost part of their strategic rationale in the firm’s business mix, with the aim on the one hand of realising some value and, on the other, freeing up funds and gaining flexibility to undertake further projects.

1) What do we believe could be sold? Abengoa started its operations a long time ago by being a pure engineering company. Since then, and especially in the last 5-8 years, it has suffered a period of strong diversification significantly reducing the weight of its traditional businesses. In our view, this strategy has been positive for Abengoa, making its business mix more resilient in difficult times, as it has proved in 2008-2010. However, we now believe it is time to focus on its core activities, reducing the weight in those businesses which have lost part of their strategic rationale in the firm’s business mix. In this sense, we see clear synergies between renewable energy and the engineering businesses and even some with Bioenergy or Befesa’s water division. Accordingly, we would positively value any reduction in its exposure to Telvent and Befesa’s recycling and waste management. As previously stated, despite having several options, we believe the following ones would provide the best fit: a) Sell its 40% remaining stake in Telvent: we believe this is the asset with the least strategic fit

(it already sold 22% of the company in 2009) and, the fact that it is listed, makes it more liquid than the rest of Abengoa’s assets.

b) Increase Befesa’s free float, or at least sell some of the assets included in this division,

mainly those related to recycling and waste management. We do not see the rationale of keeping a 97% stake in the company and we believe it would make much more sense to reduce it to 50-55%. This would allow keeping the control of the company while it would be a fresh source of funds for financing its investment plans. Moreover, we would not rule out a potential spin-off and sale of the recycling and waste management activities at Befesa keeping the focus on water activities (EPC of desalination plants and operation of the desalination plants through concession contracts).

c) IPO its solar division. This unit is the most capital consuming, and is still at the early stages

of CF generation. Thus, we believe selling a minority stake makes sense, as it would: a) allow it to share the capex burden with Abengoa’s minorities; b) reduce regulatory risk given the presence of new minorities in the business; and c) would help to anticipate the realisation of the value of some of its projects.

d) Sale of stakes in mature assets. Abengoa has a portfolio of mature assets, especially in the

electricity transmission business that could be sold. This has been the case of its stake in two transmission lines in Brazil, for which it obtained an attractive price (>3X BV).

e) Sell of minority stakes in certain projects. Lastly, in order to reduce its equity effort, we do

not rule out Abengoa providing entry to new shareholders/partners in certain projects (E.On at Helioenergy and JGC at Solacor).

2) Sales will crystallise value and help finance future capex In our view, in light of the above, the best option should come from a combination of some sales of minority stakes in some projects, especially on the side of solar, together with the disposal of any of the previously mentioned assets. This, for us, would have two clear consequences: 1) Firstly, it would simplify the company’s business structure aligning it with the new reporting

structure in which Telvent and, to a lower extent, Befesa’s recycling business does not really have strategic fit;

2) Secondly, it would help to realise some value from the investments undertaken in these areas;

Asset sales would be positive after strong diversification

Telvent and Befesa should be first in the line for us…

…although an IPO or minority sales cannot be ruled out

Sales will realise value and streamline its business structure…

Abengoa

23 November 2010 18

3) Lastly, it would free-up funds that could be used to finance investments in other projects focused on what we call core areas (solar, transmission and desalination).

Regarding the timing, in our view Abengoa is not in a rush to undertake any action in the short-term considering that current long-term liquidity (excluding factoring and client pre-payments) is enough to finance cash needs (including equity investments) and debt maturities over the next 18-20 months. That said, if we were to assume that the three aforementioned selling options materialise during the next 12-18 months, Abengoa would be able to collect EUR530m, split as follows: Regarding Telvent, at market prices, the 40% stake could be worth EUR200m (10-12% below

our valuation). Despite the fact that this cannot be ruled out, reducing Abengoa’s stake further in the unit and not selling the whole stake would not really make sense;

According to our estimates, selling a 45% stake in Befesa could be worth cEUR200m, in line

with current market prices, although it has a limited free-float and liquidity.

Lastly, looking at our valuation, selling a 45% of Abengoa Solar at this stage would imply proceeds of EUR100m.

Proceeds would increase significantly the financial flexibility of the company, which would be very positive ahead of the refinancing of the EUR1bn syndicated loan maturing in July 2013.

ABENGOA: POTENTIAL IMPACT FORM DISPOSALS (*)

(in EURm) Proceeds

40% of Telvent (at market price) 200

45% of Befesa 201

45% of Solar business 129

Total proceeds 530

(*) Pre-tax proceeds; Source: Abengoa; N+1 Equities

…whilst it would raise funds increasing financial flexibility

Abengoa

23 November 2010 19

V. Group estimates 2009-12E

1) Adjusted EPS to increase by 29% CAGR 2009-12E Overall, we expect Abengoa’s top line to increase significantly over the next three years, basically driven by new projects starting operations, especially in the Bioethanol, Thermo-solar and Electricity transmission businesses. Revenues should then grow by 14% CAGR 2009-12E, which will translate into EBITDA growing by 20% CAGR during the period (24% excluding capital gains from Telvent in 2009). Looking at the bottom line, we expect adjusted EPS to grow by c50% in 2010E compared to 2009 adjusted EPS (EUR56m capital gains from Telvent), even assuming a c70% increase in financial costs (though slightly lower tax rate). From 2011E we expect growth to moderate slightly, although it will keep growing at sound levels (+24% in 11E and +15% in 12E), closing the period at 29% CAGR 09-12E.

In the presentation of third quarter results, Abengoa, for the first time, gave guidance for year-end revenues and EBITDA of EUR6.0-6.2bn and EUR900-930m respectively. In our view, this guidance can be considered as highly likely, taking into account that it was given less than two months before the closing of the year. Accordingly, we placed our estimates in the mid part of the guidance range. Moreover, Abengoa’s management has also set a long term guidance of EBITDA at EUR1.5bn in 2013 (X2 vs. 2009). Our estimates are slightly below the guidance given by the company. Lastly, it is worth highlight that consensus is significantly below both our estimates and Abengoa’s guidance for 2010. Looking at Reuters, consensus points to an EBITDA of EUR785m, 14% below the mid-part of Abengoa’s guidance range whilst Bloomberg points to an EBITDA of EUR819m, 10% below. As we said, we believe Abengoa’s guidance is highly visible and thus we should expect estimates upgrades going forward.

ABENGOA: P&L 2009-2012E

(in EURm) 2009 10/09 2010E 11/10 2011E 12/11 2012E CAGR 09-12E

Revenues 5,183 17.7% 6,099 17.1% 7,144 6.7% 7,622 13.7%

EBITDA 750 21.9% 915 22.4% 1,120 16.4% 1,304 20.2%

EBIT 431 33.9% 577 24.5% 718 16.1% 834 24.6%

Net financials (181) 66.6% (302) 22.0% (369) 15.9% (427) 33.0%

Equity income 11 15.0% 13 5.0% 14 5.0% 14 8.2%

Pre-tax profit 261 10.3% 288 26.3% 363 15.9% 421 17.3%

Taxes & minorities (90) 13.8% (103) 30.7% (135) 17.4% (158) 20.4%

Net attributable profit 170 8.5% 185 23.8% 229 15.1% 263 15.6%

EPS 1.88 8.5% 2.04 23.8% 2.53 15.1% 2.91 15.6%

Adj. EPS 1.36 50.0% 2.04 23.8% 2.53 15.1% 2.91 28.8%


ABENGOA: EBITDA GUIDANCE FOR 2010 AND 2013

2010E 2013E

(in EURm) Abengoa N+1 Equities Abengoa N+1 Equities

Revenues 6,000-6,200 6,099 - 7,487

EBITDA 900-930 915 1,500 1,437


ABENGOA: 2010 EBITDA GUIDANCE VS. CONSENSUS

Reuters Bloomberg N+1 Equities Abengoa

EBITDA 785 819 915 900-930

Difference vs. Guidance (14%) (10%)


Group revenues +14% CAGR 09-12E and +20% for EBITDA

FY10 estimates in the mid range of guidance

Consensus is 10-15% below guidance

Abengoa

23 November 2010 20

2) Revenues to grow by 14% CAGR 2009-12E Abengoa should close the year with a 18% increase in sales characterised by across the board growth except for Telvent, which should be roughly flat. For 2011E, we estimate over 15% growth thanks to the new solar, bioethanol and desalination plants together with new transmission lines in LatAm coming into operation. Growth should moderate in 2012E as a result of a slowdown in sales from the engineering business and the stabilisation Bioethanol volumes. All in all, we expect Abengoa to post a 14% sales CAGR in 2009-12E.

3) Recurrent EBITDA +24% CAGR 2009-12E We expect EBITDA to increase by 22% in 2010E basically fuelled by the expected increase in the Solar and Bioethanol businesses. That said 2009 EBITDA includes EUR56m capital gains at Telvent from the disposal of the 20% stake. If we exclude these capital gains from EBITDA, growth in 2010E should increase to 32%. Overall, recurrent EBITDA should rise by 24% CAGR over the 2009-12E period. By business unit, we expect a greater contribution from Solar (with EBITDA surging from EUR22m in 2009 to EUR240m in 2012E) and Bioenergy (a 25% CAGR 09-12E) thanks to new plants starting up. Engineering should also post significant growth (a 19% CAGR 09-12E) thanks to operations coming on stream with new transmission lines in LatAm.

Excluding capital gains at Telvent, we expect the margin to pick up by 150bp to 15% in 2010E mainly due to Solar and Bio-energy. The margin improvement should remain in 2011-12E, with EBITDA margin increases across all the company’s businesses (2010 decrease at bio-energy margin is due to the start up of new capacity), reaching 15.7% in 2011E and 17.1% in 2012E.

ABENGOA: REVENUES BREAKDOWN 2009-2012E

(in EURm) 2009 10/09 2010E 11/10 2011E 12/11 2012E CAGR 09-12E

Engineering 2,576 8.5% 2,794 23.4% 3,447 4.6% 3,606 11.9%

Telvent 759 (2.3%) 741 6.3% 788 6.5% 839 3.4%

Befesa 722 15.4% 833 7.3% 894 7.1% 957 9.8%

Bioenergy 1,010 40.0% 1,414 17.3% 1,660 6.9% 1,775 20.7%

Solar 109 191.2% 316 12.6% 356 25.1% 445 60.1%

Total Sales 5,183 17.7% 6,099 17.1% 7,144 6.7% 7,622 13.7%


ABENGOA: EBITDA BREAKDOWN 2009-2012E

(in EURm) 2009 10/09 2010E 11/10 2011E 12/11 2012E CAGR 09-12E

Engineering 314 19.4% 375 23.0% 461 14.1% 526 18.8%

Telvent 173 (31.3%) 119 7.9% 128 8.1% 138 (7.1%)

Befesa 119 8.4% 129 10.7% 142 8.7% 155 9.3%

Bioenergy 123 37.9% 170 24.2% 211 15.6% 244 25.6%

Solar 22 466.7% 122 44.6% 177 35.6% 240 123.2%

Total EBITDA 750 21.9% 915 22.4% 1,120 16.4% 1,304 20.2%

EBITDA ex Telvent cap. gains 693 32.3% 917 22.2% 1,120 16.4% 1,304 23.5%


ABENGOA: EBITDA MARGIN BREAKDOWN 2009-2012E

2009 2010E 2011E 2012E

Engineering & Industrial construction 12.2% 13.4% 13.4% 14.6%

Telvent (*) 15.3% 16.0% 16.3% 16.5%

BEFESA 16.4% 15.4% 15.9% 16.2%

Bioenergy 12.2% 12.0% 12.7% 13.8%

Solar 19.9% 38.7% 49.7% 53.9%

Total EBITDA margin 13.4% 15.0% 15.7% 17.1%

(*) Excluding capital gains from Telvent; Source: N+1 Equities

Growth in revenues driven by solar, bioethanol and transmission

Solar will grow the most at EBITDA

Margins will reach 17% by 2012E

Abengoa

23 November 2010 21

4) EUR1.8bn cash generation at the group level over 2010-12E At the group level we expect Abengoa to generate EUR2.0bn in cash flows over the next three years (2010-12E). However, it will not be enough to finance the EUR4.6bn capex we estimate the company will undertake during the period. Hence, if we also take into account the EUR57m we expect the company to pay in dividends to its shareholders, net debt will increase by EUR2.8bn during the period 2009-2012E.

Based on the latter, we estimate leverage will peak in 2010E at 7.4X debt/EBITDA (net debt of EUR6.7bn including the factoring). However, as most of Abengoa’s financing is non-recourse, i.e. project-finance, we estimate that the adjusted debt/EBITDA ratio should also peak in 2010E at 2.6X, with corporate debt of EUR1.8bn. Leverage should improve going forward and close 2012E at 6.1X and 1.7X respectively (total net debt of EUR7.9bn, of which EUR1.6bn with recourse). In our view, these ratios, despite high, are manageable for Abengoa.

By division, the Solar business will definitely be the highest leveraged which makes sense taking into account the highly capex-intensive profile of the business. Bioenergy will be the next in line, followed by Befesa and Engineering. Telvent will be the least leveraged division.

ABENGOA: CASH FLOW STATEMENT 2009-2012E

(in EURm) 2009 2010E 2011E 2012E Acc. 2010-12E

Cash flow 511 558 671 777 2,006

Capex (2,142) (1,995) (1,273) (1,366) (4,635)

Working Capital needs (57) (120) (1) 44 (76)

Financial investments (250) 0 0 0 0

Operating free cash flow (1,937) (1,558) (603) (544) (2,705)

Rights issue 0 0 0 0 0

Other (210) 0 0 0 0

FCF (2,147) (1,558) (603) (544) (2,705)

Disposals 335 0 0 0 0

FCF before dividends (1,812) (1,558) (603) (544) (2,705)

Dividend (17) (18) (19) (20) (57)

Decrease (increase) in debt (1,829) (1,576) (622) (564) (2,762)



(in EURm) 2009 2010E 2011E 2012E

Net debt 5,148 6,724 7,346 7,910

EBITDA 750 915 1,120 1,304

Net debt/EBITDA (X) 6.9 7.4 6.6 6.1

Net debt with recourse 1,130 1,777 1,727 1,604

EBITDA with recourse 633 688 832 954

Net debt/EBITDA with recourse (X) 1.8 2.6 2.1 1.7


ABENGOA: NET DEBT/EBITDA BY DIVISION 2010-2012E

(in EURm) Engineering Bioenergy Telvent Befesa Solar Other & Adj. Total

Debt 2010E 1,091 1,658 142 551 1,729 1,554 6,724

Debt/EBITDA 2010E (X) 2.9 9.7 1.2 4.3 14.1 - 7.4

Debt 2011E 1,231 1,576 142 538 2,279 1,579 7,346

Debt/EBITDA 2011E (X) 2.7 7.5 1.1 3.8 12.9 - 6.6

Debt 2012E 1,372 1,453 130 510 2,820 1,625 7,910

Debt/EBITDA 2012E (X) 2.6 5.9 0.9 3.3 11.7 - 6.1


EUR2bn cash flow generation

7.4X debt/EBITDA 2010E (2.6X at the corporate level)

Abengoa

23 November 2010 22

5) Tax rate to gradually increase We expect the tax rate to be in the region of 19% in 2010E (16% up to September) which will gradually increase to 22% in 2011E and 23.5% in 2012E. This increase will be due to rising fiscal pressure in Spain.

6) Pay-out will remain at low levels We expect Abengoa to increase its DPS by EUR0.01 per annum, which will result in a c5% annual increase. Considering that EPS should grow faster, pay-out will decrease from 10% in 2010E to 8-9% in 2012E. We do not expect pay-out to increase as long as Abengoa keeps on investing aggressively in new projects.

ABENGOA: TAX RATE 2009-2012E

(in EURm) 2009 2010E 2011E 2012E

Pre-tax profit 261 288 363 421

Taxes (58) (55) (80) (99)

Tax rate 22.3% 19.0% 22.0% 23.5%

(*) Excluding capital gains from Telvent; Source: N+1 Equities

ABENGOA: DIVIDEND ESTIMATES 2009-2012E

(in EUR) 2009 10/09 2010E 11/10 2011E 12/11 2012E CAGR 09-12E

EPS 1.88 8.5% 2.04 23.8% 2.53 15.1% 2.91 15.6%

DPS 0.19 5.3% 0.20 5.0% 0.21 4.8% 0.22 5.0%

Pay-out ratio 10.1% 9.8% 8.3% 7.6%


Rising tax rates in Spain due to fiscal pressure 5% DPS CAGR 2009-12E

Disclaimers

Explanation of Ratings: N+1 Equities Research Department provides four core ratings: Strong Buy, Buy, Neutral and Sell, based on the expected performance over the next 6 months.

Strong Buy represents an expected total return of 25% or greater (or expectations of significant market outperformance), and is used for the most attractive stocks in our coverage.

Buy represents an expected total return between +15% and +25% (or expectations of market outperformance).

Neutral represents an expected total return in a range between 0% and 15% (or expectations of performance in line with the market).

Sell represents an expected total return at or below 0% (or expectations of underperformance versus the market).

Lastly, a Suspended rating indicates that N+1 Equities is precluded from providing an investment rating or price target for compliance reasons.

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Documents

ABENGOA...Abengoa 23 November 2010 2 KEY DATA P&L account (EURm) FY07 FY08 FY09 FY10E FY11E FY12E Cash flow (EURm) FY07 FY08 FY09 FY10E FY11E FY12E Sales 3,214 4,459 5,183 6,099 7,144