24.1 Guarantee commitments to third parties
IBERDROLA and its subsidiaries are required to provide the bank or corporate guarantees associated with the normal management of the Group’s activities. These include guarantees provided to market operators to enable IBERDROLA and its subsidiaries to participate in the energy markets.
a) Market guarantees i) Bank guarantees
Guarantees required by the clearing and settlement bodies of the electricity market, MEFF, OMEL and OMI Clear basically given by Iberdrola, S.A. on behalf of a Iberdrola Generación, S.A.U., Iberdrola Distribución Eléctrica, S.A. and various companies belonging to the Sub-group Iberdrola Renovables, S.A. The main guarantees are:
- Counterguarantees to Spanish forward and futures market company (MEFF) to trade in the market, totalling EUR 280,299 thousand and EUR 209,500 thousand on 31 December 2008 and 2007, respectively.
- Counterguarantees to the Operator of the Iberian Energy Market (OMEL) of EUR 218,772 thousand and EUR 212,800 thousand at 31 December 2008 and 2007, respectively.
- Counterguarantees to OMI Clear, the Portuguese Energy Market Clearing Body of EUR 35,000 thousand at 31 December 2008.
- Counterguarantees provided to OMI Clear and MEFF for participation in the CESUR auctions on 31 December 2008 and 2007 of EUR 8,540 thousand and EUR 16,360 thousand, respectively.
ii) Personal guarantees
Counterguarantees from Iberdrola, S.A. given by subsidiaries of the Renovables Group in the USA to third parties to cover risks of buying and trading electricity and gas.
b) Guarantees for the exercise of an activity
IBERDROLA guarantees the fulfilment of various obligations assumed by group subsidiaries. These cover obligations deriving from the exercise of their business.
i) Bank guarantees The most significant are:
- Guarantees of EUR 33,986 thousand at 31 December 2008, respectively, to the Mexican Federal Electricity Commission to secure electricity supplies and the operation of combined cycle plants (EUR 83,693 thousand at 31 December 2007).
- IBERDROLA has contracted guarantees for fulfilment of the various obligations deriving from the exercise of its business activities.
ii) Personal guarantees
IBERDROLA S.A. has contracted guarantees with third parties to cover the operating risks of its subsidiaries from buying and trading electricity and gas in the USA.
c) Financial guarantees
At 31 December 2008 and 2007, the IBERDROLA Group had provided guarantees to other companies as follows:
(Thousands of euros) 2008 2007
Elcogas, S.A. 32,625 33,160
Iberoamericana de Energía Ibener 4,110 9,266
Tirme, S.A. 51,346 7,000
Fudepor, S.L. 3,298 6,250
IBERDROLA also provides guarantees to the group companies Iberdrola Finanzas, S.A., Iberdrola Finance Ireland Limited and Iberdrola International, B.V., for various bond issues by them and derivatives contracted by subsidiaries.
IBERDROLA considers that any additional liabilities that could arise from the guarantees extended at 31 December 2008 and 2007 and which were unprovisioned at 31 December 2008 or 2007, would not be significant.
25. COMMITMENTS
In the normal course of its business the Group guarantees the fulfilment of contracts. These are generally personal guarantees and mainly relate to:
- Commitments on the purchase of property, plant and equipment where Iberdrola, S.A., is acting as guarantor to subsidiaries of Iberdrola Renewables Holdings, Inc.. Specifically, through the Guarantee Support Agreement (GSA) on the supply
- Commitments to PEMEX regarding supplies where IBERDROLA, S.A. acts as guarantor for Iberdrola Energía Monterrey, S.A. de C.V.
- On the fulfilment of contractual service agreements (CSA) under which General Electric de Iberdrola, S.A. acts as guarantor for Iberdrola Energía Altamira, S.A.
de C.V., Iberdrola Energía del Golfo, S.A de C.V. and Iberdrola Energía La Laguna, S.A de C.V. regarding long-term maintenance contracts.
- On the fulfilment of construction contracts by Iberdrola Ingeniería y Construcción, S.A.
The company estimates that any liabilities arising from the guarantees outstanding on commitments acquired at 31 December 2008 would be immaterial.
26. DIRECTORS’ REMUNERATION 1. 2008 Compensation stipulated in the by-laws
Article 50 of IBERDROLA’s bylaws provides that "the Company shall assign, as an expense, an amount equal to up to 2% of the profit obtained in the year by the consolidated Group” for directors' remuneration.
The Board of Directors has resolved to propose to shareholders at the General Meeting
“Compensation stipulated in the bylaws” of EUR 37,188 thousand, equivalent to 1.3% of 2008 consolidated profit for the year and below the 2% ceiling set by Article 50 of IBERDROLA’s bylaws.
The amounts of EUR 37,188 thousand and EUR 23,537 thousand assigned in this connection in 2008 and 2007, which were recognised under “Staff costs” in the accompanying income statement (Note 23.3), break down as follows:
a) Compensation stipulated in the by-laws
The payments to current Directors required by the bylaws were EUR 4,425 (*) thousand and EUR 4,246 thousand in 2008 and 2007, respectively. The amounts received by the directors depend on the duties assigned to them, the detail being as follows:
(Thousands of euros) 2008 2007
Chairman 567 515
Deputy and committee chairmen 440 400
Committee members 253 230
Directors 165 150
The sums paid in 2008 and 2007 were allocated as follows:
(Thousands of euros) 2008 2007
Chairman 567 515
Deputy and committee chairmen 1,760 1,600
Committee members 1,012 1,146
Directors 1,086 985
4,425 4,246
(*) These amounts include bylaw-stipulated remuneration for members of the Board of Directors that stepped down from their positions during the year.
b) Attendance fees
The attendance fees paid to the Directors, charged to compensation stipulated in the bylaws are as follows:
(Thousands of euros) 2008 2007
Chairman 4.0 3.6
Directors 2.0 1.8
In 2008 and 2007, the following payments were made:
(Thousands of euros) 2008 2007
Chairman 132 122
Deputy and committee chairmen 334 372
Committee members 224 131
Directors 134 131
824 756
The attendance fees paid to the Directors with a charge to bylaw-stipulated directors’
remuneration amounted to EUR 824 thousand and EUR 756 thousand in 2008 and 2007, respectively.
These amounts include attendance fees paid to members of the Board of Directors that stepped down from their positions during the year.
c) Other remuneration
In 2008 the Directors of IBERDROLA with executive responsibilities and also eligible for compensation stipulated in the bylaws, set at 1.3% of consolidated 2008 profit for the year, received fixed remuneration of EUR 2,250 thousand, variable remuneration of EUR 2,000 thousand, and compensation in kind and other payments totalling EUR 1,459 thousand.
The Board of Directors’ costs for services, compensation in kind and other items were EUR 824 thousand and EUR 710 thousand, respectively, in 2008 and 2007.
d) Provisions and guarantees provided by the Company for the directors This includes:
The accrued premium to cover benefits payable in the event of the death or disability of current directors amounted to EUR 282 thousand and EUR 256 thousand, in 2008 and 2007, respectively.
The premium paid to cover directors’ civil liability insurance in the same years was EUR 449
The premium paid for regularising the insurance policy covering the vested pensions of retired directors, chargeable against previous years’ payments required under bylaws and amounting to EUR 534 thousand and EUR 184 thousand in 2008 and 2007, respectively. In addition, EUR 3,340 thousand in 2008 and EUR 1,939 thousand in 2007, corresponding to other insurance premiums and also chargeable against previous years’ compensation stipulated in the by-laws.
In 2008, the Board of Directors of IBERDROLA, which had executive responsibilities, received a bonus of EUR 10,237 thousand for achieving targets set in multi-year strategic plans and for exceptional, one-off situations, recognised as a credit to previous years’ payments required under bylaws.
The undistributed portion of compensation stipulated in the by-laws for 2008, amounting to EUR 24,675 thousand, was used to provision the obligations incurred by the Company should they materialise.
2. Other
Also, the Directors of IBERDROLA active on the boards of IBERDROLA Group subsidiaries accrued a combined total of EUR 145 thousand and EUR 55 thousand in attendance fees and other remuneration in 2008 and 2007, respectively.
At 31 December 2008 and 2007, the IBERDROLA Group had granted no loans or advances to members of the Board of Directors of IBERDROLA.
3. 2009 by-law stipulated compensation
On the proposal of the Appointments and Remuneration Committee, the Board of Directors unanimously agreed to freeze, for the 2009 financial year, annual remuneration based on position, meeting attendance fees, and the maximum annual fixed and variable remuneration to be received by the members of the Board with executive duties.
Pursuant to Article 127 ter. of the Spanish Corporations Law, introduced by Law 26/2003, of 17 July, which amends Securities Market Law 24/1988, of 28 July, and the revised Spanish Corporations Law, in order to reinforce the transparency of publicly listed corporations, following is a detail of the companies engaging in an activity that is identical, similar or complementary to the activity that constitutes the corporate purpose of IBERDROLA in which the members of the Board of Directors own equity interests, and of the functions, if any, that they discharge thereat:
Directors Company % interest
Position or activity José Ignacio Sánchez Galán Iberdrola Renovables, S.A. 0.015 Chairman Juan Luis Arregui Ciarsolo
Gamesa Corporación
Tecnológica, S.A. 0.054 Director Grupo Empresarial Ence, S.A. 22.151 Chairman José Orbegozo Arroyo Lucas María de Oriol López
Montenegro
Endesa S.A.
Empresa de Alumbrado Eléctrico de Ceuta, S.A.
0.000 1.450
None None Ricardo Álvarez Isasi Iberdrola Renovables, S.A. 0.006 None Julio de Miguel Aynat Iberdrola Renovables, S.A. 0.000 None
Iñigo Víctor de Oriol Ibarra
Iberdrola Renovables, S.A. Braulio Medel Cámara Abertis Infraestructuras, S.A. 0.001 Director Iberdrola Renovables, S.A. 0.000 None Fomento de Construcciones y
Following is the information required under the aforementioned legislation concerning the performance by the directors, as independent professionals or as employees, of activities that are identical, similar or complementary to the activity that constitutes the corporate purpose of IBERDROLA:
Directors Company Position or activity
Xavier de Irala Estévez Enagás, S.A. BBK representative on the Board
José Luis Olivas Martínez Enagás, S.A. Deputy Chairman