Note 15.- Non-recourse Financing

As indicated in Note 2.4 of these accounts, within the Consolidation Perimeter there are certain entities for which, in general, the main commercial purpose is the long term development of integrated products which are financed through non-recourse project finance.

This note to these accounts seeks to provide further detail upon such non-recourse financing as well as any other relevant and related information upon these financing arrangements (excluding details of fixed assets financed through such project finance, which is set out in Note 6 to these annual accounts).

15.1. The balances, and movement between the periods, at the close of 2009 and 2008 of project finance are set out in the table below:

“Other movements” in general reflects entities entering into the Consolidation Perimeter for the first time, the effect of the conversion differences and exchange rate earnings and losses, primarily being a strengthening of the Brazilian Real against the Euro, as well as the incorporation of the non-recourse financing relating to the business segment of Information Technologies previously classified as non-current assets held for sale (see Note 14).

Transfers held for sale includes liabilities in relation to the Information Technology business unit (see Note 14).

Within the assets on the Statement of Financial Position and within the del heading “Financial accounts receivable” of current assets, there are reserve accounts to service debt to the amount of € 18 M relating to project finance.

The fair value of non-recourse financing is in line with the book value, as the impact of discounting is not significant.

15.2. Projects as at the end of 2009 which are financed by non-recourse project finance are:
15.3. Non-recourse financing projects completed, or financing cancelled in 2009 were:
15.4. The repayment schedule of non-recourse Project financing is forecast, as at the date of this report, is as follows, and is in accordance with the projected “cash-flows” of the related projects.
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Included within those amounts repayable in 2010 are balances relating to operations financed with non-recourse loans in process (see Note 15.5), which will be repaid upon being granted non-recourse long terms Project financing.

15.5. Non-recourse project finance applied to projects also includes Non-recourse Finance in Process. This relates to certain operations which are financed in a similar manner to non-recourse projects, generally by financial entities, and which are earmarked to be future development projects which typically will eventually be financed with non-recourse project finance. Receiving finance in process is in effect similar to receiving traditional customer prepayments during various early phases of construction or of a project; Non-Recourse Finance in Process varies slightly from traditional prepayments however in that it is not received from customers but from a financial entity. Such funding typically relates to financing transitional phases of a project (typically periods of less than 2 years) during the launch and construction phase of goods/projects which once completed and ready for operation become financed under the non-recourse project finance model (See Note 2.4).

However, if during the transitory period there is a risk of non-compliance with the debt repayment Schedule necessary for the formalisation of the Project Finance (or the construction which ultimately will requires financing), they would be re-classified to elsewhere on the balance sheet depending upon the nature of the arrangement, typically being Debt with Financial Entities.

The table below shows details of the projects in progress as of 31 December 2009 (€ thousands):