ACCIONA, S.A. AND SUBSIDIARIES (Consolidated Group ...

Group policy on hedging:
At the inception of the transaction, the Group designates and formally documents the hedging
relationship and the objective and strategy for undertaking the hedge. Hedges are only recognised
when the hedging relationship is expected, prospectively, to be highly effective from inception
and in subsequent years it will be effective to offset the changes in the fair value or cash flows of
the hedged item during the life of the hedge and, retrospectively, that the actual effectiveness of
the hedge, which can be reliably calculated, is within a range of 80 - 125% of the gain or loss on
the hedged item.
The Group does not hedge forecast transactions, but rather only firm financing commitments. If
the cash flows of forecasted transactions were hedged, the Group would assess whether such
transactions were highly probable and whether they were exposed to changes in cash flows that
could ultimately affect profit for the year.
If the cash flow hedge of a firm commitment or forecast transaction results in the recognition of a
non-financial asset or a non-financial liability, then, at the time the asset or liability is recognised,
the associated gains or losses on the derivative that had previously been recognised in equity are
included in the initial measurement of the asset or liability. For hedges that do not result in
recognition of a non-financial asset or liability, amounts deferred in equity are recognised in the
income statement in the same period as that in which the hedged item affects net profit or loss.
Compound financial instruments with multiple embedded derivatives
The Acciona Group does not have any compound financial instruments with embedded
derivatives.
Measurements bases
At 31 December 2011, the changes in fair value in the various derivative financial
instruments were categorised in level two of the fair value measurement hierarchy established
in IFRS 7, as they reflect observable inputs but not quoted prices. The fair value calculations
for each type of financial instrument are as follows:
- Interest rate swaps are valued by discounting future settlements between fixed and floating
interest rates to their present value, in line with implicit market rates, obtained from long-term
interest rate swap curves. Implicit volatility is used to calculate the fair values of caps and
floors using option pricing models.
- Foreign currency hedging and option contracts are valued using the spot exchange rate, the
forward interest rate curves of the related currencies and, in the case of options, implicit
volatility until maturity.
- Commodities contracts (for fuel) are valued in a similar way, in this case, taking into account
the futures prices of the underlying and the implicit volatility of the options.
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