ANNUAL REPORT 2015

PRYSMIAN GROUP | DIRECTORS’ REPORT

insulated with layers of oil or fluid-impregnated paper for AC and DC transmission up to 500 kV; cables

insulated with extruded polymer for AC transmission up to 400 kV and DC transmission up to 300 kV). The

Group offers specific technological solutions for power transmission and distribution in underwater

environments, which also satisfy the strictest international standards.

The range of products for the offshore oil industry includes not only submarine cables to link offshore

platforms to mainland power grids but also solutions for use in the extraction and storage of hydrocarbons.

The wide portfolio includes all the SURF (Subsea Umbilical, Riser and Flowline) products and services:

multifunction umbilicals for transmitting energy and telecommunications and for hydraulic powering of

wellheads by offshore platforms and/or by FPSOs (Floating, Production, Storage and Offloading vessels);

high-tech flexible pipes for oil extraction; special DHT (Downhole Technology) solutions, which include

cables encased in insulated tubing to control and power systems inside extraction machinery below the

seabed's surface and for the flow of hydraulic power fluids to such machinery.

MARKET OVERVIEW

The submarine cables business saw an increase in market demand in 2015 compared with the previous year,

with the award of two major interconnection projects in the year. This represents a peak in 2015, with the

market expected to be stable at around Euro 2-2.5 billion per year in the future. After an initial period of

stabilisation, demand for offshore wind farm projects recovered in the second half of the year, especially in

Britain and France. The market continued to be dominated by a few large global players who were awarded

almost all of the projects up for tender. The much more fragmented medium voltage segment of the market

slowed, with every supplier exposed to the weakness in demand for inter-array connections.

Demand in the high voltage underground business was essentially stable in the mature markets of Europe

and North America. The imbalance between high production capacity and limited demand continued to exert

pressure on prices in these markets. By contrast, demand continued to grow in the Middle and Far East,

where prices and profitability nonetheless remained well below those in mature markets due to competition

from local manufacturers and importers.

The SURF business saw an upturn in the umbilicals market in Brazil, as well as strong demand for flexible

pipes used in pre-salt fields, in which, however, the Group is not yet present. However, there was limited

demand for the post-salt products in which Prysmian competes. The DHT product segment performed well,

thanks to growth in demand by global operators for projects in both the United States and other regions,

such as Central and South America, Europe, Middle and Far East.

With a view to strengthening Prysmian's presence in the DHT market, Gulf Coast Downhole Technologies

LLC was acquired in the second half of 2015.

For the time being, the decline in oil prices has had only a limited impact on business performance.

FINANCIAL PERFORMANCE

Sales to third parties by the Energy Projects segment amounted to Euro 1,587 million in 2015, compared

with Euro 1,355 million in 2014, posting a positive change of Euro 232 million (+17.1%). Excluding the

negative impact of the Western HVDC Link project, sales to third parties would have been Euro 1,692 million.