CHAPTER 6 Additional content

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RISKS DESCRIPTION AND CONTROL MEASURES

Liquidity risk

Liquidity risk refers to Cepsa's ability to meet all its payment commitments, whether i) operational and recurring, ii) future and associated with its projects and investments or iii) arising from financial debt maturities, and also to overcome stress in the financial markets or in those of its business areas or geographies; all without having to go to the market or to their banks for new financing or to refinance upcoming debt maturities. The company has a conservative financial policy whereby it keeps available amounts in cash and cash equivalents, as well as undrawn committed credit lines (with highly rated institutions) to cover its future payment commitments for a minimum period of 24 months under a cash neutral scenario. Cepsa also works with leading, highly-reputed Spanish and international financial institutions and analyses counterparty risk for all the entities, particularly when negotiating investments and contracting financial instruments.

Credit risk

Cepsa is exposed to credit risk in relation to the potential breach of contractual obligations by counterparties such as suppliers, customers, partners, financial institutions, etc. To manage this risk, the company has a solid credit assessment process in place using computer systems for the comprehensive and automated processing of external and internal commercial and financial information. Scoring models and risk analyst evaluations are then employed to classify counterparties on the basis of credit risk, a credit limit being set in each case and reviewed periodically. The company also takes out credit insurance for most of its commercial counterparties. As regards credit risk in financial investments, financial derivatives and liquid assets, Cepsa works mostly with financial institutions and insurance companies of high credit standing. The company also assesses the creditworthiness of each of these counterparties, assigning a credit limit to each of them.

Sustainable financing

The shift towards a decarbonised, more sustainable economy is one of the aspects that is receiving most attention from public authorities and economic and financial actors. Our sustainability strategy and adapting Cepsa's ESG profile to the increasingly stringent standards of society and market agents such as regulators, investors and financial institutions are priorities. The ESG Department is working on defining the Group's long-term ESG positioning and strategy so as to leverage energy transition opportunities.

Tax strategy and management

The energy industry has its own tax framework. Specific levies on profit, production or product consumption are common in the upstream and downstream sectors. In this context, Cepsa is exposed to changes to tax regulations applicable in the countries where it operates, as well as to different interpretations of legislation by the tax authorities. The main purpose of our tax strategy is to comply with tax regulations applicable to its activities and to ensure that each and every one of Cepsa's companies observes this principle. This commitment is embodied in the 'Fiscal Policy' revised and approved by the Board of Directors in 2021.