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Galp Energia April 12th, 2019

In item 6, shareholders are called to an advisory vote on the remuneration policy statement proposed by the Remuneration Committee. We have concerns over the Committee's composition, as it includes 2 representatives of Amorim Group and only 1 independent member. The overall executive remuneration amount is reasonable (the aggregate variable remuneration is capped at 60% of the base salary) and performance conditions are disclosed. However, the portion of variable components depending on a qualitative assessment (35%) is too high and there are no equity-based incentives.

Furthermore, we regret that 75% of the annual bonus and 55% of the long-term incentive depend on the same performance condition (Cash Flow From Operations), which means that executives are rewarded twice for achieving the same target. Hence, we recommend opposition.

In item 7, the AGM is called to appoint the members of the Board of Directors, on a slate of nominees submitted by the largest shareholder Amorim Energia (33.3%). The Board will be made up of 19 members, including 7 executives, 5 representatives of Amorim Energia and only 4 independent Directors (21%) as per our guidelines (26% according to the Company). As we have concerns over the lack of independent representation on the Board, we recommend opposition.

Due to the mentioned lack of independence, we also recommend opposing the appointment of the Remuneration Committee in item 11.

In item 12, we recommend opposing the authorization to purchase own shares and bonds, as the maximum price of the repurchases (120% of the market price) exceeds ECGS' voting policy limit of 110% of the market price.

Galp Energia SGPS SA

Galp Energia is a holding company. Through its subsidiaries, Co. operates in the following segments: exploration and production, with activities relating to exploration, development and production of hydrocarbons, particularly in Angola, Brazil and Mozambique; refining and marketing, which owns refineries in Portugal and also includes activities relating to the retail and wholesale commercialization of oil products; and gas and power, which covers the purchasing, commercialization, distribution and storage of natural gas and electric and thermal power production. As of Dec 31 2014, Co. had proved and probable reserves of 638.0 million barrels of oil equivalent.


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