José Sainz Armada - Iberdrola · Dec09 Dividend . 28,362 +1,253-0,416 Grant . 28,512 +2,365 +3 618+3,618 . 25,997 (1) 24,894 (1) A c c u m u l a t e d uullaatteded t a r i f f d

London. 24th February, 2010

Financial Profile José Sainz Armada

2010 Financial Profile2010 Financial Profile

Agenda�

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√√

Tariff deficit (I)�

Tariff deficit ready for securitisation in March - April�

√√ April ‘09

√√ August ‘09

√√ October ‘09

Feb- March ‘10

New RD Draft�(02/02/10)�

Royal Decree set the framework to guarantee and securitise tariff deficit. Approved by the Parliament.

Royal Decree for the creation of an Inter-ministerial Commission to coordinate the processCommission to coordinate the process�

Fund manager for securitization process designated (TDA)�

New Royal Decree will set the procedure for securitisation.�To be approved by Cabinet.�

State FilingPublic Cabinet

Council with Market consultation (+7

(+15/21 the placement(+7 days) days)days) CNMV

3

2010-2012 future deficits are recognized via deficit ex ante in the Tariffs

Tariff deficit (II)�

New draft Royal Decree provides clarity on tariff deficit securitisation in terms of fund assets …�

Face value of tariff deficit recognized�

Past tariff deficit and current year tariff deficit eligible for securitisation

2010-2012 future deficits are recognized via deficit ex ante in the Tariffs Royal Decrees, and can be transferred to the Security Fund immediately�

Tariff deficit to be securitised in 2010

System (Eur MM) Iberdrola (Eur MM)

2006 -2008 -2009 9,719 3,618

2010 3,000 1,050

Carry cost of tariff deficit 2006-2008: 3 months EURIBOR�2009: 3 months EURIBOR + 0.2% spread�

4

Tariff deficit (III)�

…and liabilities

Securitisation Fund bonds will be guaranteed by the Kingdom of Spain

S ecu iti r s ti a on F un d i s bli o ge d t o i ss ue b f e or e 12 m th Securitisation Fund is obliged to issue before 12 months on s

Confirmation of 0% BIS weighting of the bonds

Strong incentives� for banks to invest�

5


Agenda�


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6

+ +

2009 Iberdrola financial activity highlights�

2009 Iberdrola´s actions prove the commitment to keep financial strength

40% reduction in gross� Issued Eur 5.3 Bn�investments� in capital markets*�

+� +� Liquidity to�

Cash raised� cover more than 15�

Eur 3.4 Bn�months needs�

Net debt reduction of over Average maturity of debt 1.1 billion 6.0 years

*Core level financing 7

Investments�

40% reduction in gross investments …

Eur Bn

GGrroos sss iinnvveessttmmeennttss

77..00�

-40% 44..22

2008 2009�

… demonstrating the discipline and flexibility of the Group

8

Balance sheet management�

Financial strengthening measures have delivered Eur 3,437 MM in 2009

Eur MM�

2009 2010

Capital increase 1,325 Renovables EBRD 125

US gas assets US gas assets US grants US grants 416 416 445 5

Petroceltic 44

Treasury stock disposal 459 Total Divestments 214

Divestments * 939

EDP disposal 298

Total divestments 1,696

TOTAL 2009 3,437

Divestments of around Eur 1,910 MM in 2009 & January 2010 Including grants, 93% of the Eur 2,500 MM target achieved

* Excluding EDP 9

EDP divestment�

2.7% of EDP already disposed of at €3 per share

Most of it through an equity swap made during 2009 and Q1 2010

T Total proceeds of Eur 298 MM otal proceeds of Eur 298 MM

Considered as lower net debt in 2009 Balance Sheet

Capital gains of Eur 68 MM in 2010

No further disposals in the short term

10

,

2009 Net debt evolution�

Net debt reduction of over Eur 1.1 billion�final figure under Eur 25 billion�

Dividend Divestments*Capital +649

Funds fromEur MM Investments increase EDP sale + 1,571 -939 operations

-459 2009 net tariff Others(2)

- 1,325 -298

+4,220 Treasury Stock 29,161deficit

Dec 09-3,917 +460 +649 Dividend +1,25328,362 -0,416 Grant

28,512+2,365 +3 618+3,618

25,997(1) 24,894 (1)

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(2) Including differences due to: forex translations (Eur 429 M) & others

(1) Excluding TEI and Tariff deficit

* Not taking into account EDP

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2009 Financial ratios evolution�

As a result, all the 2009 financial ratios are ahead of the committed targets …

Eur Bn 2009

2008 (exclude ‘09 dividend)

Committed Excluding Including Excluding Including targets

tariff deficit tariff deficit tariff deficit tariff deficit

L Leverage 46 2% 46.2% 49 6% 49.6% 50 3% 50.3% 52 5%52.5% 48 0% <48.0%

>19.0% FFO/Net debt 20.0% 17.4% 18.3% 16.7%

FFO/Interest� 4.7x 4.6x 4.4x 4.2x >4.5

RCF/Net debt 13.5% 11.8% 13.2% 12.1% >12.5%

… improving 2008 metrics and reaffirming current rating level

Note: Debt figures and ratio calculations exclude the impact of TEI. 2008 ratios include FY contribution from Iberdrola USA. 12

�

2009 Financial diversification�

Strong activity: raised Eur 5,301 MM in capital markets despite challenging conditions

Capital market* (Eur 5,301 MM)�

Eur 4,452 MM

GBPGBP

500500550 00 MMMM0 MMMM

UUSSDD 2,000 MM2,000 MM

EUREUR 2,500 MM2,500 MM Eur 849 MM�

Public issues Private placements�

2010´s low financing needs give us the capacity to replace� current financial debt with cheaper funding�

*Core level financing 13

�

Financial debt breakdown (I)�

Increase in bond market financing with strong diversification (to continue in 2010)

Bond market breakdown (Eur MM)�

18,92618,926 689

2,674 14,99314,993 721

Other bonds 1,742

5,856 GBP market

USD market 4,742

Euro market

7,788 9,707

2008 2009�14

BankBank

mmarrkeeta k t P. Finance 116..2%6 2% BBaBBa knkan nk mamk m rama krar ekrk tetkeett� 6.1%6.1%an

2288..66%%� TEI 2.1% BBoo nndd mmarrkeeta k t

B Bond markeetond mark t 6600..88%%

4477..22%% EIB P. finance� 7.2% 6.6%

TEI 2.5%� Commercial paper�7.6% EIB

6.5% Commercial paper

8.6%

Financial debt breakdown (II)�

Consequently, the weight of bank financing is reduced …

22000088� 22000099�

… allowing us to cut bank services costs and fees� and increase bank appetite to lend to Iberdrola�

15

�


Agenda�






16

�

FFO/Net debt >19%

2010 Financial targets�

2010 financial management will be driven by solvency ratios …

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FFO/Net debt >19%

FFO/Interest >4.5

RCF/Net debt >13%

… to maintain or A3/A- rating

17

2010 Investments

Investments will be driven by cash flow generation of the Group in order to maintain the solvency ratios (FFO/Net Debt)�

GGrroossss IInnvveessttmmeennttss

Others�6%�

Liberalised� Renewables�15%� 53%

Almost 80% of gross investments in

renewable and regulated activities�

79%�Regulated�

26%�

2010 Net Investment will be around Eur 4.0 billion�18

Eur Bn

Tariff deficit

collection

Committed financing

2010 Sources and Uses of Funds�

No need to finance in 2010 except roll over of commercial paper

88..66 88..66

42%

11%

47 47% %

2010 tariff deficit

Net investments

Gross

funds

generated

SSOOUURRCCEESS

*Assuming 30% scrip dividend

5%

53% 34%

8%

UUSSEESS

Debt repayment

Dividends*

We might appeal to the markets to anticipate 2011� and 2012 financing needs and amortise expensive Debt�

19

- ��

Financing – Liquidity (At 31 December 2009)�

In addition, strong liquidity with Eur 8,983 MM …

Eur MM

Limit Withdrawn Available

Cash & Short Term 1,091 - 1,091� Fin. Invest.

2010 2010 2,528 2,528 - 2,5282,528

2011 968 10 958�

2012 + 5,385 979 4,406�

Total 9,972 989 8,983

… that covers more than 15 months’ needs

20

Debt maturity profile�

Goal is to maintain average maturity around 6.0 years

Eur MM

Average maturity of debt: 6.0 years 14,201

3,735 3,3782,980

2,773 2,717 2,414Q4

1,650 Q3

189�508Q2 381�370�

Q1 760 140�

2015 &2010 2011 2012 2013 2014�

Onwards*

Debt maturity in 2010 and 2011 concentrated in Q4

NOTE: Excludes credit lines drawn down

*Includes commercial paper outstanding balance 2211

4.5%4.5%�

Debt structure – By interest rate�

Setting debt structure based on cash flow in different currencies and sensitivity to inflation

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55..00%% 51.3%51.3% 56.2%56.2% 5500--6600%%

44..55%%1.0%1.0% 44..44%%�

11..22%%

47.7%47.7% 42.6%42.6% 5500--4400%%�

2009 2010(e) 2012(e) 2008 2009 2010 (e)�

Floating Capped Fixed

Reducing cost of debt in 2010

22

12 months aheadTerm

FX Risk management – P&L�

Manage risk to minimize effects of FX volatility on P&L …

Main exposure Expected results in foreign currency

in P&L

Term 12 months ahead

A combination of: - Financing in local currencies

Instruments - FX forward - FX collars

… at Net Profit level

23

2010 Debt structure – By currency�

…reducing P&L risk and the volatility in solvency ratios

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19,3%19,3%7.0%7.0% 19,3%19,3%3.0%3.0%

19.19.0%0% 21.21.0%0%

Immunize�28.28.0%0% .0.27 %27 0%

FFO / Net debt�

46.46.0%0% 49.49.0%0%

2010 2010�

Euro USD

* Includes hedging through derivatives

GBP Real & Others

24


Agenda�






25

Executed through a capital increase …

Scrip dividend proposal�

Shareholders to receive at least same remuneration (0.332 €/s)* while maintaining the financial strength of the Company

A new Shareholder Remuneration proposal**, with the option of receiving 2009 final dividend as a scrip dividend

Executed through a capital increase …

… with tax benefits for shareholders

who choose to receive the newly issued shares

No withholding tax: gross dividend = net dividend

* Including attendance premium of 0.05€/share

**Pending shareholders ´approval at AGM 26

1

22 Value of rights NOT

3

2

Scrip dividend options�

Scrip issue* with 3 different options for shareholders:�

Receive new shares** 1 Do not sell No Spanish Amount equivalent to final

the rights tax withheld dividend

Value of rights NOT 2 No Spanish Get Sell the rights guaranteed tax withheld cash

in the market (market price)

Value of rights Sell the rights Spanish tax Get guaranteed 3 cash to Iberdrola withheld (equivalent to final

dividend)

Investors wanting cash dividends should apply for them through their depositary bank�

* Issuance of new shares booked against Reserves. Need to be approved in Annual General Meeting

**Default 27

Scrip dividend calendar*�

Shares or cash will be delivered on the same date as the final dividend: 1 July

- Closing prices considered for -Commencement of the rights - Proposal approval determining the average price trading period and right- - Commencement of the ordinary

at Annual General Meeting used to calculate number of purchase commitment trading of the new shares / payment rights of cash to shareholders who have so

requested March 26 June 14

2 3 4 7 8

June June Rights Tr ading period Rights Trading period Jul July 1 y 1

May 14 June 10 June 23 June 28

- Relevant fact including information - Last date to request

related to scrip dividend and scrip issue remuneration in cash (sale of - Determination of the - Commencement of the shareholder rights to Iberdrola) number of rights needed to

communication process receive one share -End of the trading period of the rights.

and of the final price of the -Acquisition of rights by Iberdrola from those

right-purchase commitment shareholders who have requested cash

- Iberdrola resignation to execute the rights

bought

-Close of scrip issue

* Subject to modification 28


Agenda�






29

Conclusion (I)�

No new funding� will be needed in 2010�

2010 gog alo sals

As a consequence of measures taken in 2009

2010 2010 goals2010 goals

Complete tariff deficit securitisation

Maintain solvency ratios for a A-/A3 rating

Anticipate 2011 & 2012 funding needs and reduce expensive debt

Reduce risk in P&L and volatility in solvency ratios

30

Conclusion (II)�

Strengthening our financial profile

Improving Maintaining 2009

credit metrics Rating A-/A3

Tariff Deficit 2010

securitisation

A solid financial profile will continue to be a key priority for the next 3 years�

31

Conclusion (III)�

… Eur 13.5 bn Net Investments after Divestments and Grants …

… to be financed by Cash Flows

Stable Debt levels by 2012

Improving solvency ratios FFO/Int.Exp. > 4.7x FFO/Net Debt > 20% RCF/Net Debt > 13.5%

32

Documents

José Sainz Armada - Iberdrola · Dec09 Dividend . 28,362 +1,253-0,416 Grant . 28,512 +2,365 +3 618+3,618 . 25,997 (1) 24,894 (1) A c c u m u l a t e d uullaatteded t a r i f f d