www.tecnalia.com 2011 ANNUAL REPORT

A WORD FROM THE CHAIRMAN

The establishment of TECNALIA Research & Innovation on 1 January 2011 was the main event in the technological history of the Basque and Spanish Technology and Science system. Over this first year, we

have proven that this was so, and most importantly, we have proven that TECNALIA is necessary for the society in general

and companies in particular.

We are larger, with almost 1,500 on staff; but above all, we are different. We have revolutionised the world of research with our

work philosophy: “Inspiring Business”, which perfectly summarises our mission and vision: “To transform knowledge into GDP to

improve people’s quality of life, by creating business opportunities for companies”.

This is reflected in our first Strategic Plan 2012-2014, which is based on five pillars: financial/economic sustainability, international

relevance, research excellence, economic and social impact, and committed people. With this ambitious plan we hope to extend our staff to 1,750 people and to have a turnover of 170 million euros.

Since we are convinced that innovation will be the trigger to change the economic model, we must strengthen our promotion of R&D&I,

as the leaders in Europe do.

We are now getting closer to these leaders, too: TECNALIA is number 24 out of thousands of private and public entities taking

part in the EU’s Seventh Framework Programme, and we are the first private one in Spain. We closed the year 2011 participating in 229

projects, but most importantly: leading 51 of them, thus meeting the level of trust that other companies and leading research

organisations in their respective fields have placed in us.

I would, therefore, like to thank and congratulate our staff, clients, the administrations, partners and/or collaborators and all those who

have make TECNALIA a reality today. Thank you very much.

Javier Ormazabal Chairman of TECNALIA

A WORD FROM THE MANAGING DIRECTOR

We can safely say that in 2011 we obtained “good results in very complex economic climate”. Our turnover has reached 116

million euros. 56% accounted for income from the market and the remaining 44% accounted for strategic research projects.

Our cash flow was positive - 9.1 million - which guarantees financial stability. Thanks to this, TECNALIA has invested 17 million euros,

enabling us to increase project quality, provide greater added value in the services offered to clients, totalling more than 4,000, and improve infrastructures and equipment for the benefit of society.

In 2011 we also managed to double our amount of international sales. Contracting has gone from 2.9 million in the international

market to 6.2 million. This geographical paving of the way for TECNALIA has been possible thanks to our numerous international

scientific-technological networks that help accelerate the generation of knowledge and increase the value contribution.

Regarding European projects, from 2007 until last year we contracted a total of 229 projects, leading 51 of them. Thanks to this we have

gained a return of 86 million euros over these last four years, and we are consolidated as the leading private R&D&I entity in Spain.

We have backed a total of 28 technology-based start-up companies and maintained a stake in 21 of them. These companies have had a

turnover of 10 million euros and they employ 158 people.

We are facing 2012 with our responsibility towards nearly 1,500 people on staff in TECNALIA, knowing that our contribution will

help to overcome the current economic situation through applied research, so that society will want TECNALIA to carry on existing.

Joseba Jauregizar Managing Director of TECNALIA

COMPOSITION OF THE BOARD

OF TRUSTEES OF THE TECNALIA

RESEARCH & INNOVATION

FOUNDATION

28 CORPORATE TRUSTEES

Composition of the Board of Trustees of the TECNALIA Research & Innovation Foundation

ACCIONA, S.A. Pedro Antonio Párbole

ALMAVIVA, S.p.A. Luigi Viscione

BATZ S.COOP. Bingen Aranzabal

CEMENTOS LEMONA, S.A. Ignacio Manuel Machimbarrena

CONSTRUCCIONES Y AUXILIAR DE FERROCARRILES S.A. Eduardo Etxeberria

ARTECHE CENTRO DE TECNOLOGÍA A.I.E. José Javier Arteche

EUROPEAN SOTWARE INSTITUTE- CENTER EASTERN EUROPE George Ivanov Sharkov

FAGOR EDERLAN, S.COOP. Juan María Palencia

FEDERACIÓN ESPAÑOLA DE ASOCIACIONES DE FUNDIDORES Ignacio Sáenz de Gorbea

FUNDACIÓN BBK - BBK FUNDAZIOA Fernando Irigoyen

FUNDACIÓN METRÓPOLI PARA LA INNOVA-CIÓN Y DISEÑO DEL TERRITORIO Alfonso Vegara

GAMESA CORPORACIÓN TECNOLÓGICA, S.A. José Antonio Malumbres

GRUPO IGUALMEQUISA, S.A. José Andrés Gorricho

GUARDIAN LLODIO UNIO, S.L. María Pilar Veiga

IBERDROLA DISTRIBUCIÓN ELÉCTRICA, S.A. Javier Morrás

IBERDROLA, S.A. Asís Canales

IBERMÁTICA, S.A. Iñaki Rementería

INDRA Heliodoro Ruipérez

INGETEAM, S.A. Miguel Gandiaga

LANTIK, S.A. Roberto Ibarretxe

NICOLÁS CORREA, S.A. José Ignacio Nicolás Correa

ORMAZABAL CORPORATE TECHNOLOGY A.I.E. Javier Ormazabal

SEA EMPRESARIOS ALAVESES Pascal Gómez

SDAD. FINANCIERA Y MINERA, S.A. - CEMENTOS REZOLA José María Echarri

ULMA HORMIGÓN POLÍMERO, S. COOP. Mikel Izurieta

VICINAY, S.A. Luis María Cañada

W.E.E. - HAIZERROTA A.I.E. José Manuel Sorazu

ZIV APLICACIONES Y TECNOLOGÍA, S.L. Norberto Santiago

VICECHAIRMAN

IGNACIO SÁENZ DE GORBEAFederación Española de Asociaciones de

Fundidores

SECRETARY

FÉLIX IRAOLA

VICECHAIRMAN

ASÍS CANALES

Iberdrola, S.A.

CHAIRMAN

JAVIER ORMAZABALOrmazabal Corporate

Technology A.I.E.

10 INSTITUTIONAL TRUSTEES

BASQUE GOVERNMENT Juan Ignacio Goicolea Pedro Gómez Edorta Larrauri Xabier Garmendia Olga Isabel Rivera Pedro Luis Arias

ALAVA PROVINCIAL COUNCIL Luis Viana

BIZKAIA PROVINCIAL COUNCIL Jesús Peña

GIPUZKOA PROVINCIAL COUNCIL Iñaki Errazkin

UNIVERSITY OF THE BASQUE COUNTRY Iñaki Goirizelaia

6 INDIVIDUAL TRUSTEES

Andoni Lorenzo

Carlos Olabe

Félix Iraola

Iñaki López

Luis Goenaga

Pedro Miguel Etxenike

3 NUMERARY TRUSTEES

DONOSTIA-SAN SEBASTIÁN TOWN HALL 1 Representative, designation pending

BILBAO TOWN HALL Jon Andoni Aldekoa

VITORIA-GASTEIZ TOWN HALL Iñigo Bilbao

GENERAL MANAGEMENT

MANAGING DIRECTOR Joseba Jauregizar

DEPUTY MANAGING DIRECTOR Iñaki San Sebastián

TECNALIA IS THE FIRST APPLIED RESEARCH PRIVATE CENTRE IN SPAIN AND ONE OF THE MOST IMPORTANT IN EUROPE

A unique commitment, an opportunity, a challenge.

Mission:to transform

knowledge into GDP.

IMPROVING PEOPLE´S

QUALITY OF LIFE BY GENERATING

BUSINESS OPPORTUNITIES FOR COMPANIES

At TECNALIA we identify and develop business opportunities, we turn these opportunities into competitive advantages for our clients with our attitude and methods: we observe with intent, researching passionately and tenaciously; we create with imagination and efficiency; we apply knowledge with audacity, rigour and flexibility; we work from a position of experience and specialisation; we take a global perspective in all our challenges and we share comprehensive solutions.

VALUES

We work based on our experience and expertise in each of the markets in which we operate, with an efficient and proactive

attitude, offering comprehensive solutions thanks to the transversality of our Business Divisions.

7 Business Divisions

COMMITMENT WITH THE FUTURE

BUSINESS PERSPECTIVE

RESEARCH RESPONSIBILITY

FLEXIBILITY

CONNECTIVITY

EFFICIENT CREATIVITY

SUSTAINABLE BUILDING

ENERGY AND ENVIRONMENT

TECHNOLOGICAL SERVICES

HEALTH

ICT – EUROPEANSOFTWARE INSTITUTE

INDUSTRY & TRANSPORT

INNOVATION STRATEGIES

TECNALIA IN FIGURES(31st December 2011)

192DOCTORS

27NATIONALITIES

1.475STAFF

MILLION EUROS INCOME

30%Competitive

Public Funding

56% Private Contracts

14%Non-Competitive Public Funding

116

4.059CLIENTS NTBCs

28ESTABLISHED

PATENTS 93IN OUR PORTFOLIO

17MILLION EUROS INVESTMENT

9,1 MILLION EUROS CASH FLOW

TECNALIA is the first private Spanish entity in the Seventh Framework. Programme in terms of participation, leadership and return.

According to the European Research Ranking, TECNALIA Research & Innovation is number 24 on the list of participants in the Seventh Framework Programme, and the 14th Research Organisation.

CDTI highlights TECNALIA’s involvement in one of the four great European public-private partnership initiatives: Building the Future.

It is involved in 22 European Platforms (in the Steering Committee of 9 of them).

TECNALIA is a member of EARTO-EUROTECH and was given the EARTO Innovation Prize in 2011, together with SINTEF and TNO, for their “Hyperspectral” project to detect electric and electronic waste.

Source: www.researchranking.org

TECNALIA’s INVOLVEMENT IN THE EU 7FP (2007-2011)

No. of approved projects 229 No. of

projects led 51 Return 86 M€

EUROPEAN RESEARCH RANKING

1. CENTRE NATIONAL DE LA RECHERCHE SCIENTIFIQUE

2. FRAUNHOFER GESELLSCHAFT ZUR FOERDERUNG DER ANGEWANDTEN FORSCHUNG E V

3. COMMISSARIAT A L’ENERGIE ATOMIQUE

4. MAX PLANCK GESELLSCHAFT ZUR FOERDERUNG DER WISSENSCHAFTEN EV

5. THE CHANCELLOR MASTERS AND SCHOLARS OF THE UNIVERSITY OF CAMBRIDGE

6. THE CHANCELLOR MASTERS AND SCHOLARS OF THE UNIVERSITY OF OXFORD

7. CONSEJO SUPERIOR DE INVESTIGACIONES CIENTÍFICAS

8. CONSIGLIO NAZIONALE DELLE RICERCHE

9. IMPERIAL COLLEGE OF SCIENCE TECHNOLOGY AND MEDICINE

10. EIDGENOESSISCHE TECHNISCHE HOCHSCHULE ZUERICH

11. NEDERLANDSE ORGANISATIE VOOR TOEGEPAST NATUURWETENSCHAPPELIJK ONDERZOEK TNO

12. TECHNICAL RESEARCH CENTRE OF FINLAND

13. UNIVERSITY COLLEGE LONDON

14. KATHOLIEKE UNIVERSITEIT LEUVEN

15. ECOLE POLYTECHNIQUE FEDERALE DE LAUSANNE

16. DANMARKS TEKNISKE UNIVERSITET

17. THE UNIVERSITY OF EDINBURGH

18. DEUTSCHES ZENTRUM FUER LUFT UND RAUMFAHRT EV

19. UNIVERSIDAD POLITÉCNICA DE MADRID

20. KARLSRUHER INSTITUT FUER TECHNOLOGIE

21. WAGENINGEN UNIVERSITY

22. UNIVERSITY OF COPENHAGEN

23. LUNDS UNIVERSITET

24. FUNDACIÓN TECNALIA RESEARCH & INNOVATION

25. UNIVERSITY OF AARHUS

26. STICHTING DIENST LANDBOUWKUNDIG ONDERZOEK

27. TECHNISCHE UNIVERSITEIT DELFT

28. UNIVERSITAET STUTTGART

...

TECNALIA, A EUROPEAN REFERENCE

PRIVATE SPANISH ENTITY

1ST

IN THE SEVENTH FRAMEWORK PROGRAMME

ON THE LIST OF PARTICIPANTSNo. 24

RESEARCH ORGANISATION

14th

Our international presence consists not only in structures owned by TECNALIA but also through relationship networks and other innovative formulas of collaboration. This allows us to create different typologies of TECNALIA’s presence abroad to increase sales, to be close to markets of interest and to accompany our (present and future) clients.

Branches Abroad ∙ Mexico (Monterrey) ∙ Portugal (Caparica)

Technological Nodes ∙ France (Montpellier) ∙ Italy (Pisa) ∙ Serbia (Belgrade)

Shared Innovation Centres ∙ Colombia (Bogota) ∙ Bulgaria (Sofia) ∙ Egypt (Cairo) ∙ France (Anglet)

Sales Network ∙ Colombia ∙ Korea ∙ Chile ∙ Brazil ∙ Panama ∙ Uruguay ∙ Argentina ∙ Bulgaria ∙ Peru ∙ Portugal ∙ France ∙ Finland ∙ Hungary ∙ Italy ∙ Canada

Alliances ∙ JIIP: Brussels ∙ KEMEN: Latin America, Africa and Middle East

INTERNACIONAL PRESENCE

FUTURE CHALLENGES

ENERGY AND ENVIRONMENT

INDUSTRY ANDTRANSPORT

INNOVATIONSTRATEGIES

HEALTH

SUSTAINABLE BUILDING

ICT-EUROPEANSOFTWAREINSTITUTE

The EnergySystem of the Future

Electric Storage and Mobility

Smart Grids

Renewable EnergyOcean Power

Solar Power

New Materialsfrom Waste

Prediction Systems

Water Cycle

Smart Transport Systems

Electric Cars:Electrifying Transport

Sustainable Transport

Smart Processes for Material Transformation

Smart Manufacturing Systems and Processes

Smart Robotics

Collaborative Robotics

Optimisation of Production and Life Cycle

Strategies, tools and Methods for Innovation

in SMEs Internet of Things

Assistance Technologies

E-Health

Rehabilitation

BiomaterialsBiotechnology

Implants

New Drugs

Energy Efficiency in Buildings

Sustainable and Intelligent Construction

Reduction of the environmental footprint of the built environment

Technologies for Greater Autonomy at Home

Security

Next Generation Networks

Friendly Cities

Ubiquitous Software

Interactive ContentsReduction of the Digital Gap

Helping Institutions to Design and Deploy Innovation Policies

Impulse Companies in the Elaboration and Development of their Strategic Innovation Plans

New Manufacturing Processes

Environment and Climate

Change

A Sustainable Future

for Transport

NewMaterials &

ManufacturingProcesses

A cross-connectedand Interactive

world “a friendlyPlanet”

Manufacturingthe Future

Peoplewith

Disabilities

Ageing

Healthy Lifestyle

The Urban Environment

Companies

Innovation Policies

SUSTAINABILITY AS MEGA-TREND

SUSTAINABILITY AS MEGA-TREND

SUSTAINABLE PRODUCTS AS MEGA-TREND

DIGITALISATION AS MEGA-TREND

QUALITY OF LIFE OF PEOPLE AS MEGA-TREND

QUALITY OF LIFE OF PEOPLE

AS MEGA-TREND

On the first day, 13 April, all the people from TECNALIA gathered at an event that presented “the new TECNALIA”, and showed how it works every day to achieve its main goal: transform ideas into GDP through applied research.

On the second day, 14 April, nearly 600 clients, companies and institutions were able to get to know “the new TECNALIA”, and took part in the seven workshops organised to jointly identify and find technology-based business opportunities, derived from future challenges.

There was also a technology exhibition where visitors were able to find out about more than 70 new business opportunities developed by TECNALIA.

13 AND 14 APRIL 2011 IN EUSKALDUNA CONFERENCE CENTRE, BILBAO.

INTERNATIONAL CAMPUS OF EXCELLENCE

INSPIRING DAYS TECNALIA

Corporación Tecnológica Tecnalia, made up of AZTI-Tecnalia, NEIKER-Tecnalia and TECNALIA Research & Innovation, together with DIPC (Donostia International Physics Center), has collaborated with the University of the Basque Country‐Euskal Herriko Unibertsitatea to develop the EUSKAMPUS, International Campus of Excellence project.

The aims of EUSKAMPUS are to form a hub for internationally relevant training, research, transfer and innovation, and to turn this new concept into the cornerstone of social and economic transformation in the Basque Country.

It also aims to become a teaching, science and technology benchmark for the European Atlantic Axis. To this end, the bases for this cross-border campus have been established in close collaboration with the Bordeaux University consortium, which have made up a “pôle de recherche et d’enseignement supérieur”. EUSKAMPUS is an integrating project in the knowledge value chain in the Basque Country, to promote the “education, research and innovation” knowledge triangle with international scope.

euskampus.ehu.es

EUSKAMPUS

INGRID

In 2011, in Bizkaia Technology Park, TECNALIA started to build one of the first facilities in Europe to conduct research on Smart Grids, at the service of the electrical equipment manufacturing sector.

They will help to overcome the challenge we are facing of moving and storing electricity in the most efficient way possible, to respond in real time to the increasingly complex requirements by generators and consumers.

•Electrical systems for renewable energies•Smart management of electric power consumption•Equipment and components for power grids•Smart grids

SMART GRID RESEARCH FACILITIES

READY-TO-MARKET ENERGY-EFFICIENT SOLUTIONS

3.500M2 BUILDING

7PLATFORMS

10.000M2 PLOT

14MILLION EUROS

Today there is a need for the construction of buildings with very low electricity consumption requirements as a key factor in the development of the low carbon city.

TECNALIA works on the development of a methodology for the design, construction, monitoring and use of residential and tertiary sector buildings, halving energy consumption in relation to equivalent traditional constructions.

Methodology validation will be done by means of the construction of 11 pilot buildings, thus positioning TECNALIA as a benchmark in the design of Zero Energy Buildings, an emerging market born from the application of the new European directives.

BUILDSMART

MARINE ENERGY

Ocean energy, such as offshore wind power, features significant growth and its future prospects are incredible, having as one of its most important challenges to transport the energy to the coast, an issue for which there is still no cost-effective solution.

Therefore, TECNALIA has focused on the development of a submarine device allowing the connection of umbilical cables between the energy generators to the coast evacuation cable.

TECNALIA has signed an agreement with INGEINNOVA to verify this submarine device -christened as KANPAI- in the sea. For this they will build a full-size operational prototype that will serve to prove the technical and economical viability of the system before starting the serial production.

INTERCONNECTION SYSTEM FOR MARINE ENERGY CAPTURING DEVICES.

CMMI-ACQ IS THE INTERNATIONAL QUALITY STANDARD FOR SOFTWARE SERVICES

TECNALIA and international consultant Everis have implemented, for the first time in a Spanish public body, the DGT Directorate-General for Traffic, the CMMI-ACQ model, which is the international quality standard for software services.

The goal was to improve and rationalise all the internal IT network of the DGT, simplifying, expediting and guaranteeing the quality of its processes, which is vital given that the DGT completes about 25 million transactions per year. The relations between the DGT and the almost 50 suppliers the body works with have also been unified and systematised.

Thanks to the improvement of all these internal processes, the user shall perceive, both at the DGT’s offices or through the Internet, a simpler and quicker processing of the procedures, and an improvement in the service and attention.

QUALITY OF SOFTWARE

SERVICES

MORE PROFITABLE FOUNDRY

TECNALIA reduces Foundry costs through the “Plasma Torch”, a system that has revolutionised the industry since it provides great precision when heating metal, thus reducing operation costs, improving the metallic quality and saving energy.

It is a novel system that, by applying a High-Power Thermal Plasma, allows heating the necessary amount of metal, at a certain temperature and at the precise casting moment (when the cast metal should be taken out of the furnace). It allows programming the temperature range in which they wish to cast the metal and maintains it automatically during the entire casting time.

The success of the “Plasma Torch” has been immediate and thanks to the commercial effort of SERT Metal, Fuchosa (Bizkaia) and Lingotes Especiales (Valladolid) have already installed this device in their facilities highlighting the good performance of this new equipment.

“Courtesy of Lingotes Especiales”

HIGH-POWER THERMAL PLASMA FOR FOUNDRY PROCESSES

VARSTIFF: VARIABLE STIFFNESS STRUCTURE BASED ON DEFLATABLE STRATIFICATION TECHNOLOGY

VARSTIFF® is a patented smart fabric fully developed by TECNALIA, whose singular feature lies in its variable hardness achieved under different pressure conditions.

At atmospheric pressure, it behaves as a flexible and malleable material, but at moderate vacuum conditions (removing air) it reaches a hardness similar to that of a standard plastic. The process is reversible and can be repeated as much as desired and it can adopt different shapes in each case.

VARSTIFF® is an active fabric opening a window for a new generation of uses and components. From car interiors, as a substitute for the boot shelf or functional seats, to healthcare applications such as wristbands, elbow bands or immobilisers as an alternative to plaster or other conventional materials.

It has also sport-related applications and might be used in professions where safety clothing is needed, as a protection agent in shin bands, snowboarding garments, etc.

SMART MATERIALS

SMART LIGHTING

LUIX is a technology-based company specialising in Smart Lighting thanks to the blending of wills from ACR Group, Eguzkitan and TECNALIA. The LUIX system regulates the illumination of streetlamps depending on the people and vehicles in transit in the street at a given moment. It progressively switches the streetlamps on and off, in the appropriate sequence and direction, depending on the prediction of pedestrian and vehicle movement and direction. This is achieved by a device integrated in the streetlamp which is able to detect both presence and movement.

Today, economical and energy savings are a priority for city halls, since lighting consumption accounts for 55% of their energy expenses. In order to give response to such a demand, the new system is being partially tested in different towns in Gipuzkoa and Navarre such as Gabiria, Tolosa or Uztarroz.

Once the efficiency of the system was proven, Isaba and Salinas, located in Navarre, have fully implemented it in every street. The installation works took place in September 2011 and the estimated savings for these cities is 20,000 euros in just one year, with energy savings nearing 80%.

LUIX ALLOWS ENERGY SAVINGS IN STREET LIGHTING UP TO 80%.

WE IDENTIFY AND DEVELOP BUSINESS OPPORTUNITIES FOR COMPANIES

“How do we identify opportunities for the companies?We develop a tailor-made strategy, since each business is different and its potential and possibilities are unique”.

We evaluate the business and the environment, visualising its future and translating all that into an Opportunity Map with ideas giving response to any strategic innovation challenge for that particular company.

The Opportunity Map is a flexible and adaptable performance solution on which TECNALIA relies to co-design the innovation strategy jointly with companies by identifying business opportunities strengthening their competitiveness.

From our technological know-how, the close collaboration amongst the different Business Divisions within TECNALIA and the far-sighted approach, we focus towards a clear goal: to help companies to identify business opportunities and turn them into results.

ACTION

OPPORTUNITY

MAP

ANALYSIS FOCUS

OPPORTUNITY MAP

IMAGINE

MAKE IT COME TRUE

+

Inspiring Business