Iberdrola projects investments of ?18 billion between 2010 and 2012

2001-2009: initial focus on energy business in Spain and Latin America and subsequently on international growth including the integration of ScottishPower and Energy East (today Iberdrola USA) and Renewables expansion around the world

2010-2012: consolidation of global leadership through the full integration of new Group companies and new drive for growth based on sustainable and high added value projects. Future challenges: establishing the foundations for Iberdrola’s growth over the médium term, based on non- CO2 emitting energy sources –renewables, hydro and nuclear power – smart grids and electric vehicles.

Iberdrola projects investments totalling €18 billion between 2010 and 2012 to promote organic growth projects and cement the international expansion begin in 2007 with the integration of ScottishPower followed by that of Energy East (today Iberdrola USA), as well as renewable energy development around the world.

Iberdrola plans to invest €9 billion of the total in renewable energy to consolidate its world leadership like wind power, €6.3 billion towards improving and extending networks and €2.7 billion to electricity generation and distribution.

Of the total, €7 billion will be invested in the United States (39%), €4.5 billion in the United Kingdom (25%), €4.3 billion in Spain (24%) where a high level of purchasing will continue, and €2.2 billion in Latin America and other areas (12%). The investments seek to sustain growth in core businesses and enhance shareholder remuneration, whilst minimizing risk and strengthening the balance sheet with a view to maintain the Company’s A credit rating.

Iberdrola anticipates average annual growth in Ebitda and in net recurring income of 5-9% (net of extraordinaries), raising shareholder remuneration in line with net profit growth.

The Company will strengthen its international diversification and projects that 70% of Ebitda will come from regulated businesses – networks and renewables – compared to 64% at prersent. In 2012, the Company expects traditional energy business in Spain to contribute 33% of operating profit, the United Kingdom 21%, Latin America 10%, the United States 8% and renewables 28%.

2001-2009: a decade of achievements

Iberdrola has undergone a profound transformation in the past decade that has converted it into the leading energy group in Spain, the fourth largest in the Ibex 35 stock index by market capitalization, world leader in wind energy and one of the largest global electricity groups.

This was made possible by a strategic vision that enabled it to anticipate trends in the energy sector, investing more than €62 billion between 2001-2009 and centred on two distinct phases:

2001-2006: Planning during this period focused on energy business in Spain and Latin America. By the end of 2006, the Company had achieved its goal of doubling both in size and earnings. Installed capacity rose from 16,500 MW to 30,500 MW, while net profit came to €1.66 billion in 2006.

2007-2009: Strategy has been marked by strong international expansion. Iberdrola completed the integration of ScottishPower and Energy East, while managing a rapid expansion at IBERDROLA RENOVABLES which today leads the world wind power sector. The Group raised capacity to nearly 45,000 MW, establishing itself as one of the world’s largest electricity groups.

Over the period, Iberdrola tripled its installed capacity, multiplied production by 2.7 and generation by 11, prioritizing clean energy sources, and improved quality of service ratios by 100%. It built a workforce of 33,000, created more than 35,000 indirect jobs, made purchases totalling €27 billion, invested €100 million a year in R+D+i and created one of the largest global energy engineering companies.

This rapid growth was accompanied by strong results. The Company recorded net profit in 2009 of €2,824 million, in line with the previous year, driven by regulated businesses and renewables and underpinned by continuing efficiency gains, balance sheet strength and the fruit of investments over the period.

Despite an adverse environment, with declining business in Spain, the Company turned in a 6.3% rise in Ebitda to €6,815.3 million, one of 7.2% in recurring net profit (net of extraordinaries) to €2,602 million, and of 11.2% in operating cash flow to €4,873 million.

10 challenges for the future

Iberdrola has prepared a clear road map to consolidate its future growth, based on sustainable and high added value projects in its core markets centred on the Atlantic area.

It has a number of challenges ahead that will enable it to stay ahead of its competitors:

* Renewables:

The Group plans to consolidate the global international leadership it currently enjoys with installed capacity of more than 11,000 MW around the world. Growth over the coming years will centre on three markets: the United States where it has become the number two wind farm operator, and the United Kingdom and Spain where it heads the rankings. All this is backed by the largest project pipeline in the world totalling 58,400 MW.

* Offshore wind power:

Iberdrola has taken a giant step towards becoming one of the leading players in marine energy. This year it was awarded the rights to build one of the largest offshore wind farms in the world in the United Kingdom, together with Vattenfall, with a potential capacity of 7,200 MW and able to supply five million homes. It is promoting additional projects in Europe with a capacity of nearly 5,000 MW. Iberdrola SA (ES:IBE) said that it’s planning to build 5 gigawatt offshore wind facilities in Europe, concentrating on Spain and the U.K. on top of the 7.2 gigawatts it already has in Britain. Iberdrola Renovables (ES:IBR) had bought the rights to build a 400 megawatt offshore wind power project in the Baltic Sea scheduled to enter production by 2014.

* Hydroelectricity:

The Company is developing some of the most important hydro power plants in the world, to start operations this decade with around 3,000 MW of capacity. In Spain it will install 1,050 MW by 2012 by expanding the La Muela, San Esteban and San Pedro hydro power stations, while in Portugal it is building the Alto Tamega complex, one of the largest to be built in Europe in the past 25 years with four dams and total capacity of 1,200 MW. In Brazil it is building another 700 MW and has other projects under study.

* Clean coal:

In line with its commitment to clean generating technologies, IBERDROLA has pioneered the development of carbon capture and storage at coal-fired plants. Its ScottishPower subsidiary started up a prototype test unit in May 2009 at Longannet and was selected a few days ago as one of two finalists in a UK government competition to implement a commercial scale plant.

* Nuclear:

The Group considers nuclear energy, together with renewables and hydroelectricity, to be the key to a low-emission electricity sector that contributes to combating climate change. Iberdrola, which has a long experience in construction, operation and maintenance of nuclear plants, is in the studies phase for a 3,600 MW power station in Sellafield, England, together with GDF Suez and Scottish & Southern Energy. Construction could begin in 2015 providing the regulatory aspects are favourable.

* Networks:

Iberdrola will continue investing in upgrading and expanding its energy distribution networks, as well as on new networks including smart grids which will improve quality of supply, facilitate access for renewable power and support the introduction of electric vehicles. The Company has projects in the United Kingdom and the United States, and will introduce the first smart grid in a Spanish city at Castellón supplying 100,000 homes.

* Electric vehicles:

The Company has been developing electric vehicles for more than 10 years, considering that the electricity sector will play a central role in their mass introduction by providing charging and recharging networks. Iberdrola has already begun installing charging points at its buildings and is involved in a number of projects in Spain and abroad: Cenit Verde (Ministry of Science), the Vizcaya regional legislature, Plan Movele (Madrid), EPV (Valencia) and the city of Glasgow.

* R+D+i:

Iberdrola will maintain its commitment to R+D+i in the next few years, after investing €90.5 million in 2009 on 150 projects. It will focus on energy efficiency, quality of supply and sustainable development, with projects in renewables, electric vehicles, smart grids and carbon capture.

* Sustainability:

Iberdrola’s global industrial project is founded on sustainable growth, with the central goal of creating value for all stakeholders: shareholders via increased remuneration, customers through improved quality of service, employees through new opportunities for career advancement, suppliers whose orders will grow with the Group’s expansion and communities who benefit from the Company’s contribution to economic and social welfare.

* Torre Iberdrola:

Iberdrola expects to open its new Bilbao headquarters in 2011, marking its lasting commitment to the Basque Country. The tower, with 41 storeys and standing 161 meters high, has represented an investment of more than €200 million. Designed by the arquitect Cesar Pelli, it is a triangular tower with curved sides and a total area of 50,000 square meters capable of holding 3,500 people.