KEY ASPECTS:

• The Company thus consolidates its international strategy
• IBERDROLA Chairman Ignacio Galán said: “This acquisition is one of the key elements of our 2008-10 Strategic Plan and gives us an important platform to develop our growth in a market the Group has identified as key to its future development.”
• The operation, completed quickly in relation to similar deals, increases IBERDROLA’s assets in the United States to around $20 billion making it Spain’s largest investor in this country
• The transaction, first announced in June last year, has also been approved by Energy East shareholders with 93% in favour, and has obtained the green light from all required regulatory authorities.
• Energy East operates principally in distribution and marketing in five U.S. states: New York, Maine, Connecticut, Massachusetts and New Hampshire

IBERDROLA EXPANSION

• As a result of this operation, for which initial contacts began in the summer of 2006, IBERDROLA consolidates its standing as the world’s 4th largest electricity company by market capitalization, with an enterprise value today of around €65 billion.
• The IBERDROLA group also increases its volume of distributed energy by 25%, exceeds 27 million in points of supply for electricity and gas, and has generating capacity of close to 42,000 megawatts (MW).

IBERDROLA has decided to go ahead with the friendly acquisition of Energy East, for which contacts were initiated in the summer of 2006 and which was first announced on June 25 last year.

The decision came following analysis of the conditions stipulated by the New York State Public Services Commission (NYPSC) in voting to approve the transaction on September 3 and in the order granting approval issued September 9, which IBERDOLA considered to be consistent with the financial and value creation criteria it has set for corporate transactions.

In particular, the NYPSC authorization, containing conditions customary to this kind of transaction, involves no limitation on IBERDROLA’s ability to develop wind power activities in the State of New York. Regulatory approval had been previously obtained from all other federal and state authorities*.

The transaction, which has closed quickly compared with other similar deals in the United States, has also won broad support over recent months in the United States from consumer groups, unions, and political leaders from both the Democrat and Republican parties.

Energy East shareholders approved the deal with an overwhelming 93% in favour last November. Among them were major investors who were also investors in IBERDROLA and in ScottishPower before its integration in the Group.

A milestone in the Group’s 2008-2010 Strategic Plan

For IBERDROLA Chairman Ignacio Galán, the acquisition of Energy East “is one of the key elements of our 2008-2010 Strategic Plan, giving us an important platform to develop our growth in a market the Group has identified as key to its future development.” He stressed the Company’s commitment to customers, employees and local communities in the States where Energy East has operations, as well as its clear focus on improving energy infrastructure and maximizing quality of service.

With the acquisition of Energy East, IBERDROLA assets in the United States amount to $20 billion, and this country is expected to contribute 10% of Group Ebitda by 2010 under targets set in the Strategic Plan. The company is now Spain’s largest investor in the United States.

IBERDROLA’S enterprise value now stands at €65 billion and it is the world’s fourth largest electricity group by market capitalization, with a presence in 40 countries and a focus on more developed and liberalized markets such as Spain, the UK and the United States.

The Company in particular has reinforced its position in the U.S. market, where its renewable energy subsidiary is the second largest wind operator with nearly 2,000 megawatts (MW) in operation and a target of 6,900 MW by 2012, as well as the third largest independent operator in natural gas storage.

The growing international projection of IBERDROLA, a priority in the 2008-10 Strategic Plan and already boosted by last year’s integration of ScottishPower, has been reflected in first half results this year where two-thirds of operating profit came from international business and renewables.

The acquisition of Energy East will also help to continue diversifying the origin of Group results, both geographically and also from an operational standpoint, as a result of the U.S. company being an energy group whose business is largely regulated and therefore a stable source of revenue.

Energy East principally distributes and markets electricity and gas in five states in the northeast region of the United States: New York, Maine, New Hampshire, Massachusetts and Connecticut. It has approximately 2 million points of supply for electricity, more than 13,200 kilometres of transmission lines and a distribution network of around 126,000 kilometres. It also distributes gas, with close to a million points of supply through a network of 40,000 kilometres.

With the acquisition of Energy East, IBERDROLA increases its volume of distributed energy by 25% and its customer base to more than 27 million customers with generating capacity standing at around 42,000 megawatts (MW).

*The Federal Energy Regulatory Commission (FERC), Federal Communications Commission (FCC), Committee on Foreign Investment in the United States (CFIUS), Department of Justice and Federal Trade Commission (Hart-Scott-Rodino) at federal level and the state public services commissions of Maine, New Hampshire and Connecticut at state level.
IMPORTANT INFORMATION

This information does not constitute an offer to buy, sell or exchange, nor does it constitute the solicitation of an offer to buy, sell or exchange securities. Iberdrola, S.A. shares may not be offered for sale or sold in the United States except through a statement of effective notification in conformity with the provisions of the Securities Act or when a valid exemption from the obligation to provide such notification has been granted.

FORWARD-LOOKING STATEMENTS

This communication contains forward-looking information and statements about Iberdrola, S.A. and Energy East Corporation and otherwise, including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, capital expenditures, synergies, products and services, and statements regarding future performance. Forward-looking statements are statements that are not historical facts and are generally identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates” and similar expressions.

Although Iberdrola, S.A. believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of Iberdrola, S.A. shares are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of Iberdrola, S.A., that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.
 
Forward-looking statements are not guarantees of future performance. They have not been reviewed by the auditors of Iberdrola, S.A oe Energy east Corporation. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date they were made. All subsequent oral or written forward-looking statements attributable to Iberdrola, S.A. or any of its members, directors, officers, employees or any persons acting on its behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements included herein are based on information available to Iberdrola, S.A. on the date hereof. Except as required by applicable law, Iberdrola, S.A. does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.