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OFFERING MEMORANDUM IBERDROLA FINANCE IRELAND LIMITED (incorporated with limited liability in Ireland but with its tax residence in Spain) $1,000,000,000 3.800% Notes Due 2014 $1,000,000,000 5.000% Notes Due 2019 each unconditionally and irrevocably guaranteed by IBERDROLA, S.A. (incorporated with limited liability in Spain) Iberdrola Finance Ireland Limited (the ‘‘Issuer’’) is offering (the ‘‘Offering’’) $1,000,000,000 aggregate principal amount 3.800% Notes Due 2014 (the ‘‘A Notes’’) and $1,000,000,000 aggregate principal amount 5.000% Notes Due 2019 (the ‘‘B Notes’’ and, together with the A Notes, the ‘‘Notes’’), each with a direct, unconditional and irrevocable guarantee (the ‘‘Guarantee’’) from Iberdrola, S.A. (the ‘‘Guarantor’’ or ‘‘Iberdrola’’), as further described in this offering memorandum under ‘‘Terms and Conditions of the Notes’’ and ‘‘Form of Guarantee.’’ The Notes will bear interest from September 11, 2009 payable semi-annually in arrears on March 11 and September 11 in each year, commencing on March 11, 2010. The Notes will be unsecured and will rank equally in right of payment with the Issuer’s other unsecured and unsubordinated indebtedness. The Guarantee will be unsecured and will rank equally in right of payment with the Guarantor’s other unsecured and unsubordinated indebtedness. Under certain conditions, the Issuer and the Guarantor may substitute for the Issuer any company which is wholly-owned by the Guarantor, as further described in this offering memorandum under ‘‘Terms and Conditions of the Notes—Substitution.’’ Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on its regulated market. This offering memorandum has been approved by the Irish Financial Services Regulatory Authority (the ‘‘Financial Regulator’’), as competent authority under Prospective Directive 2003/71/EC (the ‘‘Prospectus Directive’’). The Financial Regulator only approves this offering memorandum as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive. The Notes are redeemable in whole, but not in part, at any time upon the occurrence of certain tax events described herein. In addition, the Issuer may redeem the Notes, in whole or in part, at any time at the greater of 100% of the principal amount or a make-whole amount described herein, in each case plus accrued interest to but not including the redemption date. If the Guarantor experiences a change of control repurchase event as described herein, the Issuer will be required to offer to repurchase or procure an offer to purchase the Notes from Noteholders. An investment in the Notes involves certain risks. See ‘‘Risk Factors’’ beginning on page 21. Prospective investors should note that the Issuer is incorporated in Ireland but tax-resident in Spain. Therefore, any income derived by owners of a beneficial interest in the Notes (each, a ‘‘Beneficial Owner’’) that are not resident in Spain for tax purposes from interest on, or the redemption of or repayment of, the Notes will be subject to Spanish Non-resident Income Tax (currently at the rate of 18%) by way of withholding, except in the case of Beneficial Owners in respect of whom the Issuer or the Guarantor receives information (which may include a tax residence certificate) concerning such Beneficial Owner’s identity and tax residence as the Issuer and the Guarantor require in order to comply with Spanish tax laws and regulations. The Issuer and the Guarantor have arranged certain procedures with Acupay System LLC (‘‘Acupay’’), The Depository Trust Company (‘‘DTC’’) and Euroclear Bank S.A./N.V. (‘‘Euroclear’’) to facilitate the collection of such information. See ‘‘Tax Considerations—Taxation in Spain.’’ The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the ‘‘Securities Act’’), or the securities laws of any other jurisdiction. Accordingly, the Notes are being offered and sold within the United States only to qualified institutional buyers (‘‘QIBs’’) in reliance on Rule 144A under the Securities Act (‘‘Rule 144A’’) and outside the United States in compliance with Regulation S under the Securities Act (‘‘Regulation S’’). Prospective purchasers that are QIBs are hereby notified that the seller of any of the Notes is relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For a description of certain restrictions on transfers of the Notes, see ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions.’’ Investment in the Notes does not have the status of a bank deposit and is not within the scope of any deposit protection scheme operated by the Financial Regulator. The Issuer is not regulated by the Financial Regulator by virtue of the issue of the Notes or otherwise. Price of the A Notes: 99.829% plus accrued interest, if any, from September 11, 2009 Price of the B Notes: 99.363% plus accrued interest, if any, from September 11, 2009 The Initial Purchasers expect to deliver the Notes to purchasers in book-entry form only through the facilities of DTC and Euroclear on or about September 11, 2009. Citi Global Coordinator Barclays Capital BofA Merrill Lynch Citi Goldman, Sachs & Co. Joint Book-Running Managers The date of this offering memorandum is September 10, 2009.

IBERDROLA, S.A. · 2018-04-23 · OFFERING MEMORANDUM IBERDROLA FINANCE IRELAND LIMITED (incorporated with limited liability in Ireland but with its tax residence in Spain) $1,000,000,000

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  • OFFERING MEMORANDUM

    IBERDROLA FINANCE IRELAND LIMITED(incorporated with limited liability in Ireland but with its tax residence in Spain)

    $1,000,000,000 3.800% Notes Due 2014

    $1,000,000,000 5.000% Notes Due 2019

    each unconditionally and irrevocably guaranteed by

    IBERDROLA, S.A.(incorporated with limited liability in Spain)

    Iberdrola Finance Ireland Limited (the ‘‘Issuer’’) is offering (the ‘‘Offering’’) $1,000,000,000 aggregate principal amount 3.800%

    Notes Due 2014 (the ‘‘A Notes’’) and $1,000,000,000 aggregate principal amount 5.000% Notes Due 2019 (the ‘‘B Notes’’ and,

    together with the A Notes, the ‘‘Notes’’), each with a direct, unconditional and irrevocable guarantee (the ‘‘Guarantee’’) from

    Iberdrola, S.A. (the ‘‘Guarantor’’ or ‘‘Iberdrola’’), as further described in this offering memorandum under ‘‘Terms and Conditions

    of the Notes’’ and ‘‘Form of Guarantee.’’

    The Notes will bear interest from September 11, 2009 payable semi-annually in arrears on March 11 and September 11 in each

    year, commencing on March 11, 2010.

    The Notes will be unsecured and will rank equally in right of payment with the Issuer’s other unsecured and unsubordinated

    indebtedness. The Guarantee will be unsecured and will rank equally in right of payment with the Guarantor’s other unsecured and

    unsubordinated indebtedness. Under certain conditions, the Issuer and the Guarantor may substitute for the Issuer any company

    which is wholly-owned by the Guarantor, as further described in this offering memorandum under ‘‘Terms and Conditions of the

    Notes—Substitution.’’

    Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on its

    regulated market. This offering memorandum has been approved by the Irish Financial Services Regulatory Authority (the

    ‘‘Financial Regulator’’), as competent authority under Prospective Directive 2003/71/EC (the ‘‘Prospectus Directive’’). The Financial

    Regulator only approves this offering memorandum as meeting the requirements imposed under Irish and EU law pursuant to the

    Prospectus Directive.

    The Notes are redeemable in whole, but not in part, at any time upon the occurrence of certain tax events described herein. In

    addition, the Issuer may redeem the Notes, in whole or in part, at any time at the greater of 100% of the principal amount or a

    make-whole amount described herein, in each case plus accrued interest to but not including the redemption date. If the Guarantor

    experiences a change of control repurchase event as described herein, the Issuer will be required to offer to repurchase or procure

    an offer to purchase the Notes from Noteholders.

    An investment in the Notes involves certain risks. See ‘‘Risk Factors’’ beginning on page 21.

    Prospective investors should note that the Issuer is incorporated in Ireland but tax-resident in Spain. Therefore, any income derived

    by owners of a beneficial interest in the Notes (each, a ‘‘Beneficial Owner’’) that are not resident in Spain for tax purposes from

    interest on, or the redemption of or repayment of, the Notes will be subject to Spanish Non-resident Income Tax (currently at the

    rate of 18%) by way of withholding, except in the case of Beneficial Owners in respect of whom the Issuer or the Guarantor

    receives information (which may include a tax residence certificate) concerning such Beneficial Owner’s identity and tax residence as

    the Issuer and the Guarantor require in order to comply with Spanish tax laws and regulations. The Issuer and the Guarantor have

    arranged certain procedures with Acupay System LLC (‘‘Acupay’’), The Depository Trust Company (‘‘DTC’’) and Euroclear Bank

    S.A./N.V. (‘‘Euroclear’’) to facilitate the collection of such information. See ‘‘Tax Considerations—Taxation in Spain.’’

    The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the ‘‘Securities Act’’), or the

    securities laws of any other jurisdiction. Accordingly, the Notes are being offered and sold within the United States only to qualified

    institutional buyers (‘‘QIBs’’) in reliance on Rule 144A under the Securities Act (‘‘Rule 144A’’) and outside the United States in

    compliance with Regulation S under the Securities Act (‘‘Regulation S’’). Prospective purchasers that are QIBs are hereby notified that

    the seller of any of the Notes is relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule

    144A. For a description of certain restrictions on transfers of the Notes, see ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions.’’

    Investment in the Notes does not have the status of a bank deposit and is not within the scope of any deposit protection scheme

    operated by the Financial Regulator. The Issuer is not regulated by the Financial Regulator by virtue of the issue of the Notes or

    otherwise.

    Price of the A Notes: 99.829% plus accrued interest, if any, from September 11, 2009

    Price of the B Notes: 99.363% plus accrued interest, if any, from September 11, 2009

    The Initial Purchasers expect to deliver the Notes to purchasers in book-entry form only through the facilities of DTC and

    Euroclear on or about September 11, 2009.

    Citi

    Global Coordinator

    Barclays Capital BofA Merrill Lynch Citi Goldman, Sachs & Co.

    Joint Book-Running Managers

    The date of this offering memorandum is September 10, 2009.

  • IMPORTANT INFORMATION

    The Issuer and the Guarantor accept responsibility for the information contained in this offering

    memorandum. To the best of the knowledge of the Issuer and the Guarantor (each having taken all

    reasonable care to ensure that such is the case), the information contained in this offering

    memorandum is in accordance with the facts and does not omit anything likely to affect the importof such information.

    None of Banc of America Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc.

    nor Goldman, Sachs & Co. (together, the ‘‘Initial Purchasers’’) makes any representation, warranty or

    undertaking, express or implied, and no responsibility or liability is accepted by the Initial Purchasersas to the accuracy or completeness of the information contained in this offering memorandum or any

    other information provided by the Issuer or the Guarantor in connection with the Notes or the

    Guarantee.

    In making an investment decision, investors must rely upon their own examination of Iberdrola,the Issuer and Iberdrola’s other subsidiaries and the terms of the offer being made, including the

    merits and risks involved. Prospective investors should not construe anything in this offering

    memorandum as legal, business or tax advice. Each prospective investor should consult its own

    advisors as needed to make its investment decision and to determine whether it is legally permitted to

    purchase the securities under applicable legal investment or similar laws or regulations.

    You should rely only on the information contained in this offering memorandum. Neither we

    nor any of the Initial Purchasers has authorized anyone to provide potential investors with

    information different from that contained in this offering memorandum. The statements contained in

    this offering memorandum are made only as of the date of this offering memorandum, regardless of

    the time of delivery of this offering memorandum or any sale of the Notes. Neither the delivery of

    this offering memorandum nor any offer, sale, allotment or solicitation made in connection with the

    offering of the Notes shall, under any circumstances, constitute a representation or create any

    implication that there has been no change in our affairs or the information contained herein since thedate hereof.

    You should understand that you will be required to bear the financial risks of your investment

    for an indefinite period of time. The Notes are subject to restrictions on transferability and resale and

    may not be transferred or resold except as permitted under applicable U.S. federal and state securitieslaw pursuant to an effective registration statement or an exemption from registration. There is no

    intention to register the Notes for resale, or to exchange a new series of registered notes and

    guarantees for the securities offered pursuant to this offering memorandum.

    None of the U.S. Securities and Exchange Commission (the ‘‘SEC’’), any state securities

    commission nor any other regulatory authority has approved or disapproved the securities offeredpursuant to this offering memorandum or passed upon or endorsed the merits of this Offering or the

    adequacy or accuracy of this offering memorandum. Any representation to the contrary is a criminal

    offense.

    IN CONNECTION WITH THE ISSUE OF THE NOTES, CITIGROUP GLOBAL MARKETSINC. (THE ‘‘STABILIZING MANAGER’’) OR ANY PERSON ACTING ON BEHALF OF THE

    STABILIZING MANAGER MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH

    A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER

    THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO

    ASSURANCE THAT THE STABILIZING MANAGER OR ANY PERSON ACTING ON BEHALF

    OF THE STABILIZING MANAGER WILL UNDERTAKE ANY STABILIZING ACTION. ANY

    STABILIZING ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE

    PUBLIC DISCLOSURE OF THE TERMS OF OFFER OF THE NOTES IS MADE AND, IFBEGUN, MAY BE ENDED AT ANY TIME BUT MUST BE BROUGHT TO AN END NO

    LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE NOTES AND

    60 DAYS AFTER THE DATE OF ALLOTMENT OF THE NOTES. FOR A DISCUSSION OF

    THESE ACTIVITIES, SEE ‘‘PLAN OF DISTRIBUTION.’’ ANY STABILIZATION ACTION OR

    OVER-ALLOTMENT MUST BE CONDUCTED BY THE STABILIZING MANAGER OR ANY

    PERSON ACTING ON BEHALF OF THE STABILIZING MANAGER IN ACCORDANCE WITH

    ALL APPLICABLE LAWS AND RULES.

    The Notes offered pursuant to this offering memorandum have not been registered under the

    Securities Act, or the securities laws of any other jurisdiction or with any securities regulatory

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  • authority of any state or other jurisdiction of the United States. The offering of the Notes is being

    made in reliance on an exemption from registration under the Securities Act for offers and sales of

    securities that do not involve a public offering. By purchasing Notes, you will be deemed to have

    made the acknowledgments, representations, warranties and agreements applicable to you as set forthin this offering memorandum under ‘‘Transfer Restrictions.’’ The Notes are being offered and sold

    within the United States only to QIBs, as defined in, and in reliance on, Rule 144A. The Notes are

    also being offered outside the United States in compliance with Regulation S.

    This offering memorandum comprises a prospectus for the purposes of the Prospectus Directive

    and the Prospectus Regulations 2005 and for the purposes of giving information with regard to us

    and the Notes in connection with the application to the Irish Stock Exchange for the Notes to be

    admitted to the Official List and trading on its regulated market.

    The Notes may not be offered or sold in Spain except in accordance with the requirements of

    the Spanish Securities Market Law (Law 24/1988, of July 28, 1988, on the securities market (‘‘SML’’),

    as amended and restated (and in particular Royal Decree 5/2005) and Royal Decree 1310/2005 onadmission of securities to trading, public offerings and prospectuses (‘‘RD1310/2005’’) as amended

    and restated), and the decrees and regulations made thereunder. The Notes may not be sold, offered

    or distributed to persons in Spain except: (i) in circumstances which do not constitute a public

    offering of securities in Spain within the meaning of Article 38 of Royal Decree 1310/2005; or (ii)

    subject to one of the exceptions of the prospectus requirements envisaged in Article 41 of Royal

    Decree 1310/2005.

    This offering memorandum has not been approved or registered in the administrative Registries

    of the Spanish National Securities Market Commission (‘‘Comisión Nacional del Mercado de Valores’’

    or the ‘‘CNMV’’) and may not be distributed in Spain in connection with the offer and sale of theNotes.

    This offering memorandum does not constitute a prospectus approved as such by the UK

    Listing Authority pursuant to the Prospectus Rules of the Financial Services Authority made

    pursuant to Part VI of the Financial Services and Markets Act 2000 (‘‘FSMA’’) (the ‘‘Prospectus

    Rules’’). This offering memorandum is only being distributed to and is only directed at (i) persons

    who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of

    the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the ‘‘Order’’) or (iii)

    persons falling within Article 49(2)(a) to (d) (‘‘high net worth companies, unincorporated associations,

    etc.’’) of the Order (all such persons together being referred to as ‘‘relevant persons’’). The Notes areonly available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire

    such Notes will be engaged in only with, relevant persons. Any person who is not a relevant person

    should not act or rely on this offering memorandum or any of its contents.

    This offering memorandum has been prepared on the basis that any offer of Notes in any

    Member State of the European Economic Area which has implemented the Prospectus Directive (each

    a ‘‘Relevant Member State’’) will be made pursuant to an exemption under the Prospectus Directive,

    as implemented in that Relevant Member State, from the requirement to publish a prospectus for

    offers of Notes. Accordingly, any person making or intending to make an offer in that Relevant

    Member State of Notes which are the subject of the Offering may only do so in circumstances inwhich no obligation arises for the Issuer, the Guarantor or any of the Initial Purchasers to publish a

    prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to

    Article 16 of the Prospectus Directive, in each case, in relation to the Offering. None of the Issuer,

    the Guarantor or the Initial Purchasers has authorized, nor does any of them authorize, the making

    of any offer of Notes in circumstances in which an obligation arises for the Issuer, the Guarantor or

    the Initial Purchasers to publish or supplement a prospectus for such offer.

    This offering memorandum has been prepared by us solely for use in connection with the

    proposed Offering. This offering memorandum is personal to each offeree and does not constitute an

    offer to any other person or to the public generally to subscribe for or otherwise acquire securities.

    The distribution of this offering memorandum, as well as the disclosure of any of its contents,and the offering or sale of the Notes in certain jurisdictions is restricted by law. This offering

    memorandum may not be used for, or in connection with, and does not constitute, any offer to, or

    solicitation by, anyone in any jurisdiction in which it is unlawful to make such an offer or

    solicitation. Persons into whose possession this document may come are required by us and the Initial

    Purchasers to inform them about and to observe such restrictions. Neither we nor any of the Initial

    3

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  • Purchasers accept any responsibility for any violation by any person, whether or not he, she or it is a

    prospective purchaser of the Notes, of any such restrictions.

    We reserve the right to withdraw this offering of Notes at any time, and we, together with the

    Initial Purchasers, reserve the right to reject any commitment to subscribe for the Notes, in whole or

    in part. We also reserve the right to allot to you less than the full amount of Notes sought by you.

    Notwithstanding anything to the contrary contained herein, each prospective investor (and each

    employee, representative, or other agent of each prospective investor) may disclose to any and all

    persons, without limitation of any kind, the tax treatment and tax structure of the transactions

    described in this offering memorandum and all materials of any kind that are provided to the

    prospective investor relating to such tax treatment and tax structure (as such terms are defined inUnited States Treasury Regulation Section 1.6011-4), other than any information for which

    nondisclosure is reasonably necessary in order to comply with applicable securities laws. This

    authorization of tax disclosure is retroactively effective to the commencement of discussions with

    prospective investors regarding the transactions contemplated herein.

    NOTICE TO NEW HAMPSHIRE RESIDENTS

    NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION

    FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B (‘‘RSA 421-B’’) OF THE NEW

    HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE, NOR THE

    FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN

    THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF

    STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE,

    COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT

    AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTIONMEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE

    MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY

    PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE

    MADE TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY

    REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

    SPANISH WITHHOLDING TAX REQUIREMENTS

    Under Spanish law, interest payments and other financial income derived from the Notes will be

    subject to withholding tax in Spain, currently at the rate of 18%, as discussed in ‘‘Tax

    Considerations—Taxation in Spain.’’ Each of the Issuer and the Guarantor is required pursuant to

    Spanish law and regulations to submit to the tax authorities of Spain or one of its administrative

    subdivisions, as the case may be (‘‘Spanish Tax Authorities’’), certain details relating to Beneficial

    Owners who receive payments of interest or income from the redemption or repayment of the Notespaid by the Issuer or the Guarantor. Beneficial Owners in respect of whom such information is not

    provided to the Issuer or the Guarantor in accordance with the procedures described herein will

    receive payments net of Spanish withholding tax, currently at the rate of 18%. Neither the Issuer nor

    the Guarantor will pay additional amounts in respect of any such withholding tax in any of the

    above cases.

    The Issuer and the Guarantor have arranged certain procedures with Acupay, DTC and

    Euroclear that will facilitate the collection of information regarding the identity and tax residence of

    Beneficial Owners who (i) are exempt from Spanish withholding tax requirements and therefore

    entitled to receive payments derived from the Notes from the Issuer or the Guarantor free and clear

    of Spanish withholding taxes and (ii) are (a) direct participants in DTC (‘‘Direct DTC Participants’’),

    (b) hold their interests through securities brokers, dealers, banks, trust companies, or clearingcorporations that clear through or maintain a direct or indirect custodial relationship with a Direct

    DTC Participant (‘‘Indirect DTC Participants’’), such as Euroclear, or (c) hold their interests through

    Direct DTC Participants. These procedures are set forth in Annexes A, B and C to this offering

    memorandum. The Issuer, the Guarantor and Acupay, as tax certification agent, will enter into a tax

    certification agency agreement as of the issue date of the Notes (the ‘‘Tax Certification Agency

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  • Agreement’’) and agree, so long as any principal amount of the Notes remains outstanding, to

    comply with the procedures set forth in Annexes A, B and C to this offering memorandum to

    facilitate the collection of information concerning the identity and tax residence of Beneficial Owners,

    provided that such collection is required under Spanish law to allow payments from the Issuer andthe Guarantor of interest and income from the redemption or repayment of the Notes free and clear

    from Spanish withholding tax. However, neither the Issuer nor the Guarantor can assure you that it

    will be practicable to do so. Beneficial Owners may not be beneficiaries under the Tax Certification

    Agency Agreement.

    Beneficial Owners must seek their own tax advice to ensure that they comply at all times with

    all procedures with respect to providing Beneficial Owner information. None of the Issuer, theGuarantor, the Initial Purchasers, Acupay, DTC or Euroclear assumes any responsibility therefor. In

    addition, no arrangements or procedures concerning the collection of information for this purpose

    have been made by the Issuer or the Guarantor with respect to any depository or clearing system

    other than the procedures arranged by Acupay, DTC and Euroclear mentioned above.

    Neither DTC nor Euroclear is under any obligation to continue to perform such procedures and

    such procedures may be modified or discontinued at any time. In addition, DTC may discontinue

    providing its services as securities depositary with respect to the Notes at any time.

    These procedures may be modified, amended or supplemented to reflect a change in applicable

    Spanish law, regulation, or any judicial or administrative interpretation thereof or to reflect a change

    in applicable clearing systems rules or procedures or to add procedures for one or more new clearing

    systems.

    In particular, the tax certification procedures described above will have to be modified, amended

    or supplemented, as the case may be, once new regulations setting forth the procedural rules forcomplying with the provisions of Law 13/1985, of May 25, 1985, as amended, or equivalent law are

    eventually promulgated. See a more detailed explanation in ‘‘Tax Considerations—Taxation in

    Spain—Evidencing of Beneficial Owner Residency in Connection with Interest Payments.’’

    The tax certification procedures set forth in Annexes A, B and C to this offering memorandum

    provide that payments of interest or income from the redemption or repayment of the Notes to any

    DTC participants that fail for any reason to comply with the procedures set forth herein for the

    provision of the required information in respect of all Beneficial Owners who are entitled to anexemption from Spanish withholding tax and who own their beneficial interests in the Notes through

    such DTC participants, will be paid net of Spanish withholding tax in respect of such DTC

    participant’s entire beneficial interest in the Notes. For further information, see ‘‘Risk Factors—Risks

    Relating to Certain Taxation Matters.’’ In particular, should the required Beneficial Owner

    information submitted by a Direct DTC Participant to Acupay be inconsistent with its EDS Elections

    (as defined in Article I (A)(2) of Annex A to this offering memorandum) and/or DTC holdings in the

    Notes on any Interest Payment Date, then such Direct DTC Participant will be paid net of Spanish

    withholding tax with respect to such Direct DTC Participant’s entire holding in the Notes. If thiswere to occur, affected Beneficial Owners who hold their beneficial interests in the Notes directly or

    indirectly through such Direct DTC Participant (other than Beneficial Owners who hold their

    beneficial interests in the Notes through Euroclear or participants in Euroclear) would be required to

    follow the Quick Refund Procedures set forth in Article II of Annex A to this offering memorandum.

    Affected Beneficial Owners who hold their beneficial interests in the Notes through Euroclear or

    participants in Euroclear would be required to follow the Quick Refund Procedures set forth in

    Article II of Annex B to this offering memorandum. Beneficial Owners who are not or do not hold

    their Notes through a Qualified Institution (as defined in ‘‘Tax Considerations—Taxation in Spain—Evidencing of Beneficial Owner Residency in Connection with Interest Payments’’) or fail to follow

    the Quick Refund Procedures set forth in Annex A or Annex B, as applicable, may also apply

    directly to the Spanish Tax Authorities for any refund to which they may be entitled pursuant to the

    procedures set forth in Article II of Annex C to this offering memorandum. See ‘‘Tax

    Considerations—Taxation in Spain—Evidencing of Beneficial Owner Residency in Connection with

    Interest Payments’’ and ‘‘Risk Factors—Risks Relating to Certain Taxation Matters.’’ Neither the

    Issuer nor the Guarantor will pay any additional amounts with respect to any such withholding. If

    DTC, the Direct DTC Participants or the Indirect DTC Participants (including Euroclear) are unableto facilitate the collection of the required Beneficial Owner information, the Issuer may attempt to

    remove the Notes from DTC, and this may affect the liquidity of the Notes. Provision has been made

    for the Notes to be exchangeable for definitive Notes under certain circumstances. See ‘‘Form of

    Notes.’’

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  • The Issuer and the Guarantor, as applicable, may, in the future, withhold amounts from

    payments for the benefit of Beneficial Owners who are subject to Corporate Income Tax in Spain if

    the Spanish Tax Authorities determine that the Notes do not comply with exemption requirements

    specified in a ruling issued by the General Directorate for Taxation (Dirección General de Tributos)dated July 27, 2004 (notably, that the Notes are placed outside of Spain and in another OECD

    country) and require a withholding to be made. If this were to occur, neither the Issuer nor the

    Guarantor will pay additional amounts in respect of such withholding. See ‘‘Tax Considerations—

    Taxation in Spain—Legal Entities with Tax Residency in Spain—Corporate Income Tax (Impuesto

    sobre Sociedades).’’

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  • TABLE OF CONTENTS

    Important Information ..................................................................................................................... 2

    Market Share, Ranking and Other Data ......................................................................................... 8

    Special Note Regarding Forward-Looking Statements.................................................................... 8

    Available Information ...................................................................................................................... 9

    Service of Process and Enforcement of Liabilities ........................................................................... 9

    Presentation of Financial and Other Information............................................................................ 10

    Exchange Rate Information ............................................................................................................. 13

    Overview ........................................................................................................................................... 14

    Summary Terms of the Offering ...................................................................................................... 16

    Risk Factors ..................................................................................................................................... 21

    Use of Proceeds ................................................................................................................................ 38

    Capitalization.................................................................................................................................... 39

    Selected Historical Consolidated Financial Data ............................................................................. 40

    Management’s Discussion and Analysis of Financial Condition and Results of Operations.......... 44

    Business............................................................................................................................................. 90

    Regulation......................................................................................................................................... 120

    Principal Shareholders of Iberdrola ................................................................................................. 140

    Management ..................................................................................................................................... 141

    The Issuer ......................................................................................................................................... 152

    The Guarantor.................................................................................................................................. 154

    Form of Notes .................................................................................................................................. 155

    Terms and Conditions of the Notes ................................................................................................. 157

    Form of Guarantee........................................................................................................................... 176

    Book-Entry Clearance Systems ........................................................................................................ 181

    Tax Considerations........................................................................................................................... 184

    Plan of Distribution.......................................................................................................................... 195

    Transfer Restrictions ........................................................................................................................ 198

    Legal Matters.................................................................................................................................... 200

    Independent Accountants ................................................................................................................. 201

    General Information......................................................................................................................... 202

    Annex A Spanish Withholding Tax Documentation Procedures for Notes Held Through an

    Account at DTC .......................................................................................................................... 204

    Annex B Spanish Withholding Tax Documentation Procedures for Notes Held through an

    Account at Euroclear ................................................................................................................... 209

    Annex C Forms of Required Spanish Withholding Tax Documentation and Procedures for Direct

    Refunds from Spanish Tax Authorities ....................................................................................... 214

    Index to Financial Statements .......................................................................................................... F-1

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  • MARKET SHARE, RANKING AND OTHER DATA

    Unless otherwise specified or the context requires otherwise, the market share, ranking and other

    data contained in this offering memorandum are based either on our management’s own estimates,

    independent industry publications, reports by market research firms or other published independent

    sources and, in each case, are believed by each of our management to be reasonable estimates.Although we believe that these sources are reliable, we have not independently verified and do not

    guarantee the accuracy and completeness of such information. Where information has been sourced

    from a third party, we confirm that this information has been accurately reproduced.

    Additionally, market share data is subject to change and cannot always be verified with

    complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of

    the data gathering process and other limitations and uncertainties inherent in any statistical survey of

    market share. In addition, consumption patterns and consumer preferences can and do change. As aresult, you should be aware that a market share, ranking and other similar data set forth herein may

    not be accurate and thus any estimates and beliefs based on such data may not be reliable.

    SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    This offering memorandum contains forward-looking statements that reflect our intentions,

    beliefs or current expectations and projections about our future results of operations, financialcondition, liquidity, performance, prospects, anticipated growth, strategies, plans, trends and the

    markets in which we operate. The words ‘‘aims,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘contemplates,’’

    ‘‘continues,’’ ‘‘could,’’ ‘‘estimates,’’ ‘‘expects,’’ ‘‘intends,’’ ‘‘may,’’ ‘‘objectives,’’ ‘‘plans,’’ ‘‘projects,’’

    ‘‘should,’’ and similar expressions commonly identify those forward-looking statements. Forward-

    looking statements may be found in sections of this offering memorandum entitled ‘‘Risk Factors,’’

    ‘‘Management’s Discussion and Analysis of Financial Conditions and Results of Operations,’’

    ‘‘Business,’’ and elsewhere in this offering memorandum. Although we believe that the expectations

    reflected in forward-looking statements are reasonable, we can give no assurance that these forward-looking statements will materialize or prove to be correct. These forward-looking statements involve

    known and unknown risks, uncertainties and other factors, which may cause our actual results,

    performance or achievement or the industry results to be materially different from those expressed or

    implied by these forward-looking statements. These forward-looking statements are based on

    numerous assumptions regarding our present and future business strategies and the environment in

    which we expect to operate in the future and relate to, among other things:

    * our inability to comply with or changes in applicable regulations;

    * our tariff deficit obligations related to our electricity generation operations in Spain;

    * our compliance with and costs related to extensive environmental regulation, national and

    international standards relating to climate change and other potential environmental and other

    liabilities;

    * involvement in litigation and other proceedings;

    * the impact of market risks affecting the volume of, and price for, electricity and natural gas and

    the cost of fuel used in generating electricity;

    * exposure to country-specific business and operational risks outside of Spain, the United

    Kingdom and the United States;

    * the effect of any modifications to or discontinuation of certain tax benefits and incentives;

    * variable climatic conditions;

    * risks relating to construction of new facilities;

    * service interruptions arising from malfunction, operational error, natural and man-made disasters

    or other events beyond our control;

    * exposure to foreign exchange rate fluctuations and currency devaluations, interest rate risk,

    liquidity risk and counterparty credit risk;

    * the possibility that certain loan repayments will be accelerated or that additional guarantees will

    be required;

    * liberalization and competition in the electricity industry;

    8

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  • * labor disruptions;

    * difficulties in comparing financial periods;

    * uncertainty of the success of the integration of potential future acquisitions;

    * the effect of recent unprecedented and challenging market and economic conditions; and

    * other factors described in this offering memorandum, including, but not limited to, thoseincluded in the section ‘‘Risk Factors.’’

    In light of these risks, uncertainties and assumptions, the forward-looking events described inthis offering memorandum may not occur. Additional risks that we may currently deem immaterial or

    that are not presently known to us could also cause the forward-looking events discussed in this

    offering memorandum not to occur. We expressly disclaim any obligation or undertaking to update

    or revise any forward-looking statements, whether as a result of new information, future events,

    changed circumstances or any other reason after the date of this offering memorandum. Accordingly,

    prospective investors are cautioned not to place undue reliance on these and other forward-looking

    statements.

    AVAILABLE INFORMATION

    To permit compliance with Rule 144A in connection with any resales or other transfers of

    Notes that are ‘‘restricted securities’’ within the meaning of the Securities Act, each of the Issuer and

    the Guarantor will undertake in a deed poll expected to be dated on or about September 11, 2009

    (the ‘‘Rule 144A Deed Poll’’) to furnish, upon the request of a holder of such Notes or any beneficial

    interest therein, to such holder or to a prospective purchaser designated by such holder, theinformation required to be delivered under Rule 144A(d)(4) under the Securities Act if, at the time of

    the request, the Issuer or the Guarantor, as the case may be, is neither a reporting company under

    Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’),

    nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder. See also ‘‘General Information.’’

    SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES

    The Issuer is a limited liability company incorporated under the laws of Ireland. All of the

    officers and directors named herein reside outside the United States and a substantial portion of the

    assets of the Issuer and of such officers and directors are located outside the United States. As a

    result, it may not be possible for investors to effect service of process outside Ireland (including in

    Spain) upon the Issuer or such persons, or to enforce judgments against them obtained in courts

    outside Ireland (including Spanish courts) predicated upon civil liabilities of the Issuer or such

    directors and officers under laws other than Irish law, including any judgment predicated upon

    United States federal securities laws.

    The Guarantor is a public limited company (sociedad anónima) incorporated under the laws of

    Spain. All of the officers and directors named herein reside outside the United States and asubstantial portion of the assets of the Guarantor and of such officers and directors are located

    outside the United States. As a result, it may not be possible for investors to effect service of process

    outside Spain upon the Guarantor or such persons, or to enforce judgments against them obtained in

    courts outside Spain predicated upon United States federal securities laws.

    In addition, we acknowledge that there is doubt as to whether a lawsuit based upon U.S.

    federal or state securities laws could be brought in an original action in Spain and as to whether a

    foreign judgment based upon U.S. securities laws would be enforced in Spain. See ‘‘Risk Factors—

    Risks Arising in Connection with Certain Insolvency Laws.’’

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  • PRESENTATION OF FINANCIAL AND OTHER INFORMATION

    Financial Information

    The following financial statements and financial information have been included in this offering

    memorandum:

    * the unaudited consolidated financial statements of Iberdrola and its subsidiaries as of and for

    the six months ended June 30, 2008 and 2009, each prepared in accordance with International

    Financial Reporting Standards, as adopted by the European Union (‘‘IFRS-EU’’);

    * the audited consolidated financial statements of Iberdrola and its subsidiaries as of and for the

    years ended December 31, 2006, 2007 and 2008, each prepared in accordance with IFRS-EU

    and audited by Ernst & Young, S.L.; and

    * the audited financial statements of Iberdrola Finance Ireland Limited as of and for the period

    from May 1, 2008 (the Issuer’s date of incorporation) and ended December 31, 2008, prepared

    in accordance with IFRS and audited by Ernst & Young at Harcourt Centre.

    Our consolidated financial statements and the financial statements of the Issuer are published in

    euro and prepared in euro in accordance with IFRS, which differs in certain respects from U.S.

    GAAP.

    We completed significant acquisitions in 2007 and 2008, and, as a result, prospective investors

    may find comparing recent financial periods to be difficult. We have not prepared pro forma financials

    of Iberdrola reflecting these transactions.

    * We acquired ScottishPower on April 23, 2007, for approximately A19,314 million. The purchaseprice consisted of A9,466 million in cash and 261,886,329 of our ordinary shares (calculatedbefore the 1 to 4 split of our shares, effective October 8, 2007). The acquisition of

    ScottishPower significantly increased our presence in the United Kingdom and the United States.

    Based upon the most recent audited financial statements prior to the date of the acquisition,ScottishPower’s revenues and total assets (as of and for its fiscal year ended March 31, 2007)

    comprised approximately 82.6% and 46.7% of our revenues and total assets, respectively, as of

    and for our fiscal year ended December 31, 2006 (translating ScottishPower’s reported results in

    pounds sterling into euro using the exchange rate of £0.67/A1.00 as of December 31, 2006). Forour consolidated financial statements as of and for the year ended December 31, 2007, we

    consolidated the accounts of ScottishPower as of April 23, 2007 (the date we acquired

    ScottishPower) which are included in our ScottishPower reporting segment, as described further

    in the section entitled ‘‘Management’s Discussion and Analysis of Financial Conditions andResults of Operations,’’ from such date and therefore are part of our consolidated financial

    information in 2007 for approximately eight months as compared to the entire year in 2008. In

    addition, with respect to segment information in 2007, the ScottishPower wind energy business

    in the United Kingdom and the United States and natural gas storage, thermal energy

    generation and energy management activities in the United States were included in the

    ScottishPower reporting segment from April 23, 2007 to September 30, 2007 only, and on

    October 1, 2007 were transferred to the Renewable Energy reporting segment.

    * We acquired Energy East on September 16, 2008, for a purchase price of approximately A3,194million in cash. The acquisition of Energy East significantly increased our presence in the

    northeast of the United States. Based upon the most recent audited financial statements prior to

    the date of the acquisition, Energy East’s revenues and total assets (as of and for the year endedDecember 31, 2007) comprised approximately 21.3% and 12.7% of our revenues and total assets,

    respectively, as of and for our fiscal year ended December 31, 2007 (translating Energy East’s

    reported results in U.S. dollars into euro using the exchange rate of $1.39/A1.00 as of December31, 2007). For our consolidated financial statements as of and for the year ended December 31,

    2008, we consolidated the accounts of Energy East as of September 16, 2008 (the date we

    acquired Energy East), which is included in our new Energy East reporting segment, as

    described further in the section entitled ‘‘Management’s Discussion and Analysis of Financial

    Conditions and Results of Operations,’’ from such date. Therefore, Energy East financialinformation is (i) not included in our consolidated financial information in 2007 and only

    included for approximately three months in 2008 and (ii) not part of our consolidated financial

    information as of and for the six months ended June 30, 2008 and is included in our

    consolidated financial information for the entire period as of and for the six months ended June

    30, 2009.

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  • Due to these transactions, the consolidated financial information presented in this offering

    memorandum for the years ended December 31, 2007 and December 31, 2008 and the six month

    periods ended June 30, 2008 and 2009 may be difficult to compare and any comparisons between

    such periods should not be relied on as indicative of our future results of operations.

    Unaudited Non-IFRS Financial Measures

    We use the non-IFRS financial measures ‘‘EBITDA’’ and ‘‘financial leverage’’ in our reporting

    to the investment community. We define EBITDA as earnings before interest, income taxes,depreciation and amortization. We define our financial leverage as our net debt divided by the sum of

    our net debt and equity (our net debt is our gross debt (bank borrowings and other financial

    liabilities, plus equity instruments having the substance of a financial liability, plus derivative financial

    liabilities related to financial liabilities), minus our cash assets (cash and cash equivalents, derivative

    financial assets related to financial liabilities, and certain other current financial assets)).

    We use EBITDA and the related ratios presented in this offering memorandum (including

    financial leverage) as supplemental measures of our performance and liquidity that are not required

    by, or presented in accordance with, IFRS-EU. EBITDA and financial leverage are included because

    they are frequently used by certain investors, securities analysts and other interested parties in

    evaluating similar companies. However, because all companies do not calculate EBITDA and financialleverage identically, our presentation of EBITDA and financial leverage may not be comparable to

    similarly titled measures of other companies. EBITDA and financial leverage are not items recognized

    under IFRS-EU and should not be considered as an alternative to profit from operations, operating

    income or any other indicator of a company’s operating performance required by IFRS-EU. EBITDA

    should not in any way be compared to the operating income, net income or cash flow resulting from

    our activities nor should it or financial leverage be used as an indicator of our past or future

    profitability or liquidity.

    Other Information

    As used herein:

    * ‘‘Distributors’’ refers to utility companies that supply electricity and/or natural gas to end-

    users;

    * ‘‘Energy East’’ refers to Energy East Corporation, which merged with a subsidiary of

    Iberdrola on September 16, 2008;

    * ‘‘euro’’ and ‘‘A’’ refer to the single currency of the participating Member States in theThird Stage of the European Economic and Monetary Union of the Treaty Establishing

    the European Community, as amended from time to time;

    * ‘‘Gigawatt’’ or ‘‘GW’’ refers to a unit of energy: 1 GW = 1,000 MW;

    * ‘‘Gigawatt hour’’ or ‘‘GWh’’ refers to an hour during which one Gigawatt of electrical

    power has been continuously produced or one Gigawatt of natural gas has been

    continuously supplied, as applicable;

    * ‘‘Iberdrola’’ and ‘‘Guarantor’’ refer to Iberdrola, S.A.;

    * ‘‘Iberdrola Finance Ireland Limited’’ and ‘‘Issuer’’ refer to Iberdrola Finance Ireland

    Limited, a limited liability company incorporated under the laws of Ireland but with its tax

    residence in Spain and a wholly-owned subsidiary of Iberdrola;

    * ‘‘Iberdrola Group,’’ ‘‘Group,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ refer to Iberdrola, together with its

    subsidiaries;

    * ‘‘Installed capacity’’ refers generally to production capacity of a power plant or wind farm

    based on its actual capacity; the ‘‘installed capacity’’ of our facilities representsconsolidated installed capacity, which is calculated by including 100% of the installed

    capacity for those subsidiaries that we fully consolidate into our consolidated financial

    statements and the portion of installed capacity attributable to us for those subsidiaries

    over which we do not exercise control, which we calculate as the same proportion in which

    we consolidate them using the proportional consolidation method;

    * ‘‘Kilowatt’’ or ‘‘kW’’ refers to a unit of energy: 1 kW = 1,000 W;

    * ‘‘Kilowatt hour’’ or ‘‘kWh’’ refers to a unit of energy: 1 kWh = 1,000 W over a period of

    one hour;

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  • * ‘‘Megawatt’’ or ‘‘MW’’ refers to a unit of energy: 1 MW = 1,000 kW or 1,000,000 W;

    * ‘‘Megawatt hour or ‘‘MWh’’ refers to a unit of energy: 1 MWh = 1,000 kW over a period

    of one hour;

    * ‘‘production,’’ unless the context otherwise requires, refers to the generation of electricity;

    * ‘‘ScottishPower’’ refers to ScottishPower plc and its subsidiaries (as named prior to its

    acquisition) acquired by Iberdrola on April 23, 2007;

    * ‘‘U.S. dollars,’’ ‘‘US$,’’ ‘‘USD’’ and ‘‘$’’ refer to the lawful currency of the United States

    dollars; and

    * ‘‘Watt’’ or ‘‘W’’ refers to a unit of energy: the amount of energy required to raise the

    temperature of one kilogram of water by one degree Celsius.

    Certain numerical figures presented in this offering memorandum have been subject to rounding

    adjustments. Accordingly, amounts shown as totals in tables or elsewhere may not be an arithmetic

    aggregation of the numbers which precede them. In addition, certain percentages presented in the

    tables in this offering memorandum reflect calculations based upon the underlying information prior

    to rounding and, accordingly, may not conform exactly to the percentages that would be derived if

    the relevant calculation were based upon the rounded numbers.

    This offering memorandum contains figures relating to projects under development (‘‘pipeline

    figures’’). Pipeline figures are internal management estimates and represent projects ranging from those

    that we believe have at least a 20% probability of successful completion, but for which a decision to

    commit resources to the project has not yet been made, to and including those projects that areunder construction. Pipeline figures presented in this offering memorandum are calculated based on

    our own criteria and, therefore, such figures may not be comparable with pipeline figures presented

    by other companies in the industry. Further, the basic and underlying assumptions used in the

    calculation of the pipeline figures may differ by business segment. Pipeline figures have not been

    audited or verified by any third party.

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  • EXCHANGE RATE INFORMATION

    The following table sets forth, for the periods indicated, information concerning the exchange

    rate for euro, expressed in U.S. dollars per A1.00, as determined by the European Central Bank(‘‘ECB’’). On September 7, 2009, such rate was 1.4296 U.S. dollars per A1.00. These rates set forthbelow are provided solely for your convenience and were not used by us in the preparation of ourfinancial statements included elsewhere in this offering memorandum. These exchange rates are based

    on the regular daily concertation procedure between central banks within and outside the European

    System of Central Banks, which normally takes place at 2:15 p.m. Central European Time. No

    representation is made that the euro could have been, or could be, converted into U.S. dollars at that

    rate, at any other rate or at all.

    U.S. dollars per E1.00

    Period

    End Average(1) High Low

    Year

    2004 ....................................................................... 1.3621 1.2439 1.3633 1.1802

    2005 ....................................................................... 1.1797 1.2441 1.3507 1.1667

    2006 ....................................................................... 1.3170 1.2556 1.3331 1.1826

    2007 ....................................................................... 1.4721 1.3706 1.4874 1.28932008 ....................................................................... 1.3917 1.4708 1.5990 1.2460

    Month in 2009

    January .................................................................. 1.2816 1.3239 1.3866 1.2795

    February ................................................................ 1.2644 1.2785 1.3008 1.2591

    March .................................................................... 1.3308 1.3050 1.3671 1.2556

    April....................................................................... 1.3275 1.3190 1.3496 1.2932

    May ....................................................................... 1.4098 1.3650 1.4098 1.3223

    June........................................................................ 1.4134 1.4016 1.4238 1.3840

    July ........................................................................ 1.4061 1.4074 1.4304 1.3832August ................................................................... 1.4308 1.4258 1.4447 1.4045

    September (through September 7, 2009) ............... 1.4296 1.4282 1.4378 1.4177

    (1) The average of the exchange rates for euro on the last day of each full month during the relevant year or each business day duringthe relevant month (or portion thereof).

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  • OVERVIEW

    This summary highlights important information contained elsewhere in this offering memorandum.

    Before making an investment decision, you should read this entire offering memorandum, including the

    ‘‘Risk Factors’’ section and the financial statements, together with the related notes, included in this

    offering memorandum.

    Overview of Iberdrola Group

    We are principally engaged in the generation and distribution of electricity and have a presence

    in approximately 40 countries worldwide, principally Spain, the United Kingdom and the United

    States, and to a lesser extent Mexico and Brazil. We generate electricity from conventional sources,

    such as fuel oil and coal, and also from renewable energy sources, such as wind and hydroelectric

    power. We are also engaged in the transmission, distribution and sale of electricity and natural gasand the management and storage of natural gas. We also operate non-energy businesses, including

    engineering and construction and real estate activities.

    We were the fifth leading electricity company in the world in terms of market capitalization asof June 30, 2009 and the second largest electricity producer in Spain. In addition, we are the world

    leader in the wind power sector and in wind power plant ownership.

    For 2007 and 2008, we had revenues of A17,468.0 million and A25,196.2 million, respectively,and net profit of A2,396.0 million and A2,968.7 million, respectively. For the six months ended June30, 2008 and June 30, 2009, we had revenues of A12,021.7 million and A13,109.0 million, respectively,and net profit of A1,959.3 million and A1,506.4 million, respectively. We completed significantacquisitions in 2007 (ScottishPower) and 2008 (Energy East), which may make comparing recent

    financial periods difficult.

    The table below sets forth our total installed capacity, electricity production and electricity

    distribution as of and for the years ended December 31, 2006, 2007 and 2008, and as of and for the

    six months ended June 30, 2008 and 2009, followed by tables that set forth the related breakdown of

    installed capacity and total production by energy source and by geographic region as of and for theyear ended December 31, 2008 and as of and for the six months ended June 30, 2009. The figures

    below reflect the acquisition of ScottishPower from April 23, 2007 and the acquisition of Energy East

    from September 16, 2008.

    As of and for the years

    ended December 31,

    As of and for the six months

    ended June 30,

    2006 2007 2008 2008 2009

    Installed Capacity (in MW, at

    period end) .................................. 30,384 41,918 43,311 41,454 43,925

    Production (in GWh) ...................... 92,010 123,460 141,268 70,815 69,847

    Electricity Distributed (in GWh)..... 127,171 160,730 181,794 87,752 100,290

    Installed Capacity Breakdown by Source Electricity Production Breakdown by Source

    As of

    December 31,

    2008

    As of

    June 30, 2009

    For the year

    ended

    December 31,

    2008

    For the six

    months ended

    June 30, 2009

    Combined Cycle .......... 30.39% 29.99% Combined Cycle........... 47.98% 45.18%

    Nuclear ........................ 7.72% 7.61% Nuclear......................... 17.52% 16.37%

    Coal ............................. 10.87% 10.72% Coal.............................. 9.33% 10.02%

    Hydroelectric ............... 22.70% 22.15% Hydroelectric................ 8.20% 9.42%

    Renewable.................... 21.48% 22.77% Renewable.................... 12.03% 15.15%Co-generation .............. 2.72% 2.69% Co-generation .............. 4.86% 3.81%

    Fuel-oil ........................ 4.12% 4.07% Fuel-oil......................... 0.08% 0.05%

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  • Installed Capacity (in MW, at period end) Geographic Breakdown Electricity Production (in GWh) Geographic Breakdown

    As of

    December 31,

    2008

    As of

    June 30, 2009

    For the year

    ended

    December 31,

    2008

    For the six

    months ended

    June 30, 2009

    Spain............................ 26,369 26,631 Spain ............................ 67,626 32,144

    United Kingdom.......... 6,701 6,826 United Kingdom.......... 26,534 13,020

    United States ............... 3,794 4,038 United States................ 8,565 5,376Latin America.............. 5,554 5,445 Latin America .............. 37,223 18,529

    Rest of the World ...... 893 984 Rest of the World ........ 1,321 778

    Total ........................... 43,311 43,925 Total ........................... 141,269 69,847

    In addition, for the years ended December 31, 2007 and December 31, 2008, we sold 90,287

    GWh and 181,202 GWh of natural gas to approximately 2.1 and 3.1 million natural gas customers,

    in each case respectively. In the six months ended June 30, 2008 and June 30, 2009, we sold 62,264

    GWh and 88,222 GWh of natural gas to approximately 2.1 and 3.1 million natural gas customers, in

    each case respectively.

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  • SUMMARY TERMS OF THE OFFERING

    This summary must be read as an introduction to this offering memorandum and any decision to

    invest in the Notes should be based on a consideration of this offering memorandum as a whole. Words

    and expressions defined in the section entitled ‘‘Terms and Conditions of the Notes’’ and ‘‘Form of

    Guarantee’’ shall have the same meanings in this summary. For a detailed description of the Notes and

    Guarantee, please refer to the sections entitled ‘‘Terms and Conditions of the Notes’’ and ‘‘Form of

    Guarantee.’’

    Issuer................................................ Iberdrola Finance Ireland Limited.

    Guarantor......................................... Iberdrola, S.A.

    Notes Offered................................... A Notes: $1,000,000,000 3.800% Notes Due 2014.

    B Notes: $1,000,000,000 5.000% Notes Due 2019.

    Guarantee......................................... The Notes issued will be unconditionally and irrevocablyguaranteed by the Guarantor.

    Issue Price and

    Minimum Aggregate

    Principal Amount ............................. A Notes: 99.829% of the principal amount, plus accrued interest, if

    any, from September 11, 2009.

    B Notes: 99.363% of the principal amount, plus accrued interest, if

    any, from September 11, 2009.

    The minimum denomination of each Note is US$75,000.

    Stated Maturity Date....................... A Notes: September 11, 2014

    B Notes: September 11, 2019

    Interest ............................................. A Notes: Each Note will bear interest at a rate of 3.800% per

    annum.

    B Notes: Each Note will bear interest at a rate of 5.000% per

    annum.

    Interest Payment Dates.................... Each Note will bear interest from the date of original issuance, and

    such interest will be payable semi-annually in arrears on March 11

    and September 11 in each year, commencing on March 11, 2010.

    Currency .......................................... U.S. dollars.

    Status of the Notes .......................... The Notes constitute direct, unconditional, unsubordinated and

    unsecured obligations of the Issuer and will rank pari passu among

    themselves and (save for certain obligations required to be preferred

    by law) with all other unsubordinated indebtedness of the Issuer

    from time to time outstanding.

    Status of the Guarantee ................... The obligations of the Guarantor under the Guarantee in respect of

    the Notes constitute direct, unconditional, unsubordinated and

    unsecured obligations of the Guarantor and will rank pari passu

    among themselves and (save for certain obligations required to be

    preferred by law) with all other unsubordinated and unsecured

    indebtedness of the Guarantor from time to time outstanding.

    Negative Pledge ............................... The Notes contain a negative pledge provision described in

    Condition 4 (Negative Pledge) under ‘‘Terms and Conditions of

    the Notes.’’

    Taxation and Additional Amounts.... Payments in respect of Notes will be made without withholding ordeduction for, or on account of, any present or future taxes, duties,

    assessments or governmental charges of whatever nature imposed

    or levied by or on behalf of Ireland or Spain or, in each case, any

    political subdivision thereof or any authority or agency therein or

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  • thereof having power to tax, unless the withholding or deduction ofsuch taxes, duties, assessments or governmental charges is required

    by law. In that event, the Issuer or, as the case may be, the

    Guarantor, will (except in certain limited circumstances described

    in Condition 8 (Taxation) under ‘‘Terms and Conditions of the

    Notes’’) pay such additional amounts as will result in the Beneficial

    Owners receiving such amounts as they would have received in

    respect of such Notes had no such withholding or deduction been

    required.

    Prospective investors should note that the Issuer is incorporated inIreland but tax-resident in Spain. Any income derived by Beneficial

    Owners that are not resident in Spain for tax purposes from interest

    on or the redemption or repayment of, the Notes will be subject to

    Spanish Non-Resident Income Tax (currently at the rate of 18%) by

    way of withholding except in the case of eligible Beneficial Owners

    in respect of whom the Issuer and the Guarantor receive

    information (which may include a tax residence certificate)

    concerning such Beneficial Owner’s identity and tax residence asthe Issuer and the Guarantor require in order to comply with the

    Relevant Regulations (see ‘‘Tax Considerations—Taxation in

    Spain—Preliminary Considerations—Applicable Law’’). See

    ‘‘Risk Factors—Risks Relating to Certain Taxation Matters’’ and

    ‘‘Tax Considerations—Taxation in Spain.’’

    Disclosure of Identity and Tax

    Residence of Beneficial Owners ........ Under the Relevant Regulations (see ‘‘Tax Considerations—

    Taxation in Spain—Preliminary Considerations—Applicable

    Law’’), the Issuer and the Guarantor are required to provide tothe Spanish Tax Authorities certain information relating to

    Beneficial Owners who receive payments of interest or income

    from the redemption or repayment of the Notes. This information

    includes the identity and tax residence of Beneficial Owners and the

    amount of such payments received by such Beneficial Owners, and

    must be obtained with respect to each such payment by 9:45 a.m.

    (New York City time) on each such Interest Payment Date and filed

    by the Issuer and the Guarantor with the Spanish Tax Authoritieson an annual basis.

    The Issuer and the Guarantor have arranged certain procedures

    with DTC, Euroclear and Acupay to facilitate the collection of

    information concerning the identity and tax residence of Beneficial

    Owners. The delivery of such information, while the Notes are in

    global form, will generally be made through the relevant Direct

    DTC Participants and Indirect DTC Participants (including

    Euroclear). The Issuer or the Guarantor, as the case may be, will

    withhold at the then-applicable rate (currently 18%) from anypayments of interest or income from the redemption or repayment

    of the Notes as to which the required information has not been

    provided or the required procedures have not been followed. See

    ‘‘Tax Considerations—Taxation in Spain—Evidencing of Beneficial

    Owner Residency in Connection with Interest Payments.’’ Neither

    the Issuer nor the Guarantor will pay any additional amount with

    respect to such withholding.

    Such tax information procedures may be revised from time to timein accordance with applicable Spanish laws and regulations or any

    judicial or administrative interpretation thereof. In particular,

    Beneficial Owners must be aware that such tax certification

    procedures may be modified, amended or supplemented, as the

    case may be, in case new regulations setting forth the procedural

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  • rules for complying with the provisions of Law 13/1985, of May 25,1985, as amended, or equivalent law are eventually promulgated

    (see ‘‘Tax Considerations—Taxation in Spain—Evidencing of

    Beneficial Owner Residency in Connection with Interest

    Payments). Beneficial Owners must seek their own advice to

    ensure that they comply at all times with all applicable

    procedures and to ensure correct tax treatment of their Notes.

    None of the Issuer, the Guarantor, the Initial Purchasers, DTC,

    Euroclear or Acupay assumes any responsibility therefor.

    Tax Redemption ............................... The Notes may be redeemed at the option of the Issuer in whole,

    but not in part, at any time on giving not less than 30 nor more than60 days’ notice to the Bank of New York Mellon, as principal

    paying agent (the ‘‘Principal Paying Agent’’), and Acupay and, in

    accordance with Condition 13 (Notices) under ‘‘Terms and

    Conditions of the Notes,’’ the Noteholders, if (a) on the occasion

    of the next payment due under the Notes, the Issuer has or will

    become obliged to pay additional amounts as provided or referred

    to in Condition 8 (Taxation) under ‘‘Terms and Conditions of the

    Notes’’ or the Guarantor would be unable for reasons outside itscontrol to procure payment by the Issuer and in making payment

    itself would be required to pay such additional amounts, in each

    case as a result of any change in, or amendment to, the laws or

    regulations of a Taxing Authority (as defined in Condition 8

    (Taxation) under ‘‘Terms and Conditions of the Notes’’) or any

    change in the application or official interpretation of such laws or

    regulations by any judicial or administrative authority therein,

    which change or amendment becomes effective on or afterSeptember 8, 2009 and (b) such obligation cannot be avoided by

    the Issuer or, as the case may be, the Guarantor taking reasonable

    measures available to do so; provided that no such notice of

    redemption shall be given earlier than 90 days prior to the earliest

    date on which the Issuer or, as the case may be, the Guarantor

    would be obliged to pay such additional amounts were a payment

    in respect of the Notes then due.

    Redemption at the Option of the

    Issuer................................................ The Notes will be redeemable at the option of the Issuer, in wholeor in part, at any time on giving not less than 30 nor more than 60

    days’ notice to the Noteholders in accordance with Condition 7

    (Notices) under ‘‘Terms and Conditions of the Notes’’ and, not less

    than 30 days before the giving of the notice to the Noteholders,

    notice to the Principal Paying Agent and the Registrar, on the

    applicable Optional Redemption Date and at a redemption price

    equal to the greater of (i) 100% of the principal amount of the Notes

    to be redeemed, and (ii) as determined by the Quotation Agent, (asdefined in ‘‘Terms and Conditions of the Notes’’) the sum of the

    present values of the remaining scheduled payments of principal

    and interest on the Notes to be redeemed (not including any portion

    of such payments of interest accrued as of the Optional Redemption

    Date) discounted to the Optional Redemption Date on a semi-

    annual basis (assuming a 360-day year consisting of twelve 30-day

    months) at the Treasury Rate plus the Make-Whole Spread plus, in

    each case, accrued interest thereon to the Optional RedemptionDate.

    Any such redemption must be of a principal amount not less than

    the applicable Minimum Redemption Amount and not more than

    the applicable Maximum Redemption Amount. In the case of a

    partial redemption of Notes, the Notes to be redeemed will be

    selected in accordance with the procedures described in Condition

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  • 7(c) (Redemption and Purchase) under ‘‘Terms and Conditions of

    the Notes.’’

    Make-Whole Spread ........................ A Notes: 0.22%.

    B Notes: 0.24%.

    Change of Control Repurchase Event Unless the Issuer has redeemed the Notes as described herein, the

    Issuer will be required to offer to repurchase or, at the Issuer’s

    option, to procure an offer to purchase all or any part (equal to

    US$75,000 or an integral multiple of US$1,000 in excess thereof) of

    the Notes held by each Noteholder upon the occurrence of a

    Change of Control Event with respect to the Guarantor as

    described in Condition 7(d) (Offer to Repurchase upon a Changeof Control Event) under ‘‘Terms and Conditions of the Notes.’’ The

    repurchase price will be an amount in cash equal to 101% of the

    aggregate principal amount of Notes repurchased, plus accrued and

    unpaid interest to the date of repurchase.

    Substitution ...................................... Subject to the conditions set forth in Condition 15 (Substitution)under ‘‘Terms and Conditions of the Notes,’’ the Issuer and the

    Guarantor may at any time, without the consent of the

    Noteholders, substitute for the Issuer any company which is

    wholly-owned by the Guarantor upon notice by the Issuer, the

    Guarantor and the designated substitute to be given in accordance

    with Condition 13 (Notices) under ‘‘Terms and Conditions of the

    Notes’’ and the rules of the Irish Stock Exchange.

    Transfer and Selling

    Restrictions ......................................

    The Notes have not been and will not be registered under the

    Securities Act or the securities laws of any other jurisdiction or with

    any securities regulatory authority of any state or other jurisdiction

    of the United States. Consequently, the Notes may not be offered or

    sold within the United States, or to or for the benefit or account of aU.S. person, except pursuant to an exemption from, or in a

    transaction not subject to, the registration requirements of the

    Securities Act, and in any case in accordance with any other

    applicable securities laws of any other jurisdiction. The Initial

    Purchasers will arrange for resale of the Notes to QIBs pursuant to

    Rule 144A or to persons outside the United States pursuant to

    Regulation S. See ‘‘Plan of Distribution.’’

    Further Issuances ............................. The Issuer may, at its option and without the consent of the then-

    existing Noteholders, issue additional notes in one or more

    transactions after the date of this offering memorandum with

    terms and conditions the same as the A Notes or the B Notes, as the

    case may be, or the same in all respects save for the amount and

    date of the first payment of interest thereon and so that the sameshall be consolidated and form a single series with the outstanding

    A Notes or the outstanding B Notes, as the case may be.

    Form and Title ................................. The Notes are represented by one or more Global Notes deposited

    in registered form with, or on behalf of, DTC and registered in the

    name of Cede & Co, as DTC’s nominee, for the benefit of DTC’sparticipants. For so long as DTC or its nominee is the registered

    holder of a Global Note, DTC or such nominee, as the case may be,

    will be considered the sole holder for all purposes under the Agency

    Agreement and the Notes except to the extent that in accordance

    with DTC’s published rules and procedures any ownership rights

    may be exercised by its participants or DTC Beneficial Owners

    through participants. See ‘‘Form of Notes.’’

    Book-entry interests in the Global Notes will be shown on, and

    transfers thereof will be effected only through, records maintained

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  • in book-entry form by DTC or any other securities intermediary

    holding an interest directly or indirectly through DTC. See

    ‘‘Book—Entry Clearance System.’’ Notes that are represented by

    a Global Note will be transferable only in accordance with the rulesand procedures for the time being of DTC and Euroclear, as the

    case may be.

    Governing Law ................................. The Notes, the Agency Agreement, the Guarantee (except theprovisions of the Guarantee relating to status, which are governed

    by, and shall be construed in accordance with, Spanish law) and the

    Rule 144A Deed Poll and the Deed of Covenant (each as defined in

    ‘‘The Issuer—Material Contracts’’) are governed by, and shall be

    construed in accordance with, English law.

    Issuing Agent, Principal Paying

    Agent and Agent Bank ..................... The Bank of New York Mellon.

    Use of Proceeds ............................... All of the net proceeds from the Offering will be on-lent to or

    deposited on a permanent basis with the Guarantor (or another

    member of the Iberdrola Group) and used for the general corporate

    purposes of the Iberdrola Group.

    Ratings ............................................. It is expected that the Notes will be rated A- (stable) by Standard &

    Poor’s, A3 (stable) by Moody’s Investors Service and A (stable) by

    Fitch Ratings, subject to confirmation at closing.

    The Guarantor’s long-term debt is rated A- (stable) by Standard &

    Poor’s and A3 (stable) by Moody’s Investors Service.

    A rating is not a recommendation to buy, sell or hold securities and

    may be subject to suspension, change or withdrawal at any time bythe assigning rating agency. Neither the rating agency nor the Issuer

    is obligated to provide the holder with any notice of any suspension,

    change or withdrawal of any rating.

    Listing .............................................. Application has been made to the Irish Stock Exchange for the

    Notes to be admitted to the Official List and trading on its

    regulated market.

    Security Codes ................................. A Notes

    CUSIPs: 144A Notes – 45074G AA8

    Regulation S Notes – G4721S AP6

    ISINs: 144A Notes – US45074GAA85

    Regulation S Notes – USG4721SAP68

    B Notes

    CUSIPs: 144A Notes – 45074G AB6

    Regulation S Notes – G4721S AQ4

    ISINs: 144A Notes – US45074GAB68

    Regulation S Notes – USG4721SAQ42

    Risk Factors

    Investing in the Notes involves substantial risks. For a detailed discussion of certain risk factors

    relevant to an investment in the Notes, see ‘‘Risk Factors.’’

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  • RISK FACTORS

    You should consider all of the information in this offering memorandum, including the following

    risk factors, before deciding to invest in the Notes. The actual occurrence of any of the following risks

    could have a material adverse effect on our business, financial condition or results of operations or result

    in other events that could lead to a decline in the value of the Notes. In that case, the trading price of

    the Notes could decline, the Issuer or the Guarantor may not be able to pay the interest or principal on

    the Notes when due and you could lose all or part of your investment.

    Iberdrola’s board of directors has approved a general policy on risk control and management, as

    well as detailed corporate and business risk policies. These risks policies, which include risk management

    strategies and limits intended to be appropriate to each of the risks and businesses considered, are part

    of a comprehensive risk control and management system. Our risk control and management systems are

    intended to take into account all material business, market, credit, operational and regulatory risks

    present in the regulated and unregulated activities of all of our businesses. The risks described below are

    those that we believe are material, but these may not be the only risks and uncertainties that we face.

    Additional risk factors not currently known or which are currently deemed immaterial may also have a

    material adverse effect on our business, financial condition or results of operations or result in other

    events that could lead to a decline in the value of the Notes. This offering memorandum also contains

    forward-looking statements that involve risks and uncertainties. The actual results could differ materially

    from those anticipated in such forward-looking statements as a result of certain factors, including the

    risks faced by us described below and elsewhere in this offering memorandum. See ‘‘Special Note

    Regarding Forward-Looking Statements’’ for further information.

    Risks Related to Our Business and Industry

    Our operations are subject to extensive government regulation, and any inability to comply with existingregulations or requirements or changes in applicable regulations or requirements may have an adverse effect onour business, financial condition or results of operations.

    We are subject to numerous energy, environmental and administrative laws and government

    regulations in each of the jurisdictions in which we conduct business, including those concerning

    electricity sales, transmission and distribution; retail pricing of electricity; natural gas transport and

    storage; natural gas sales and distribution; and renewable energy incentives as well as regulations and

    laws concerning health protection and safety standards related to air quality, waste water, the

    treatment of hazardous and non-hazardous waste, the management of nuclear facilities and LNG

    terminals and soil contamination. Each of our facilities must also comply with strict international,national, state, regional and local regulations relating to the development, construction and operation

    of power generation plants, transmission lines, distribution facilities and natural gas facilities.

    Compliance with regulatory requirements may result in substantial costs in our operations that may

    not be recovered. In addition, we cannot predict the timing or form of any future regulatory or law

    enforcement initiatives. Changes in existing energy, environmental and administrative laws and

    regulations may materially affect our business, products, services, margins and investments. Further,

    such changes in laws and regulations could, in turn, increase the size and number of claims and

    damages asserted against us or subject us to enforcement actions, fines and penalties.

    Additionally, certain of our operations are conducted pursuant to concessions, licenses and other

    legal and regulatory permits. Such concessions, licenses and permits may be not be granted, upheld orrenewed in our favor or if granted, upheld or renewed, may not be on favorable economic terms, as

    currently. Moreover, non-compliance with applicable laws or regulations in the countries in which we

    operate could result in the revocation of permits, or the imposition of sanctions, fines or criminal

    penalties. Our inability to comply with applicable laws or regulations, the introduction of new laws or

    regulations or any changes in applicable laws or regulations could have a material adverse effect on

    our business, financial condition or results of operations. See ‘‘Regulation’’ for further information.

    Furthermore, we are subject to certain conditions imposed by the regulatory authorities that

    approved the acquisition of Energy East, as well as the local laws and regulations of the U.S. states

    in which Energy East operates. For example, the New York State Public Service Commission(‘‘NYPSC’’) order approving the acquisition prohibits, among other things, certain of Energy East’s

    subsidiaries from paying common dividends or otherwise transferring assets, rights or other items of

    value to any affiliate, including us, without NYPSC approval in certain circumstances. See

    ‘‘Business—Recent Developments—Energy East Transaction.’’ There can be no assurance that we will

    be able to satisfy or comply with all of the conditions imposed by the regulatory authorities in a

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  • timely or efficient manner and failure to do so could have a material adverse effect on our business,

    financial condition or results of operations.

    Our electricity distribution operations in Spain are subject to certain regulations pursuant to which we arerequired to bear the cost, in the first instance, of any deficit resulting from the excess of regulatory costs ofelectricity distribution in Spain over certain regulated revenues.

    Our electricity distribution operations in Spain are regulated under the Electricity Sector Actand are subject to electricity tariffs established by the Spanish government. Revenues in our Spain

    Regulated segment are therefore directly affected by the electricity tariffs we are permitted to charge

    in accordance with Spanish Law. Electricity distribution tariffs have been determined by Spanish

    governmental Royal Decree on an annual basis.

    Spanish regulations require certain electric utilities, including us, to cover any amount by which

    the aggregate costs of the regulated Spanish electricity distribution system exceed the aggregateamount of regulated revenue, resulting in a ‘‘tariff deficit.’’ After settlement of regulated payments

    between us and Spain’s other electric utilities to redistribute regulated tariff revenues, we are

    responsible for bearing a cost equivalent to 35.0% of the tariff deficit each year. Our accumulated

    tariff deficit at December 31, 2008 was approximately A3,052 million, and at June 30, 2009 wasapproximately A3,661 million. According to Royal Decree-Law 6/2009 and Order ITC/1723/2009, it isestimated that the tariff deficit at the end of 2009 for all of Spain will be approximately A3,500million. See ‘‘Regulation—Spain—Settlements relating to regulated activities and shortfall in revenue.’’

    Recently, Royal Decree-Law 6/2009 of April 30, 2009, has introduced certain new measures

    aimed at relieving Spanish electricity companies from tariff deficits. To facilitate the securitization of

    ‘‘tariff receivables’’ (i.e. rights to payment of amounts equal to an electricity utility’s portion of the

    tariff deficit), the Spanish government will guarantee securitizations of existing tariff receivables (i.e.

    those that were recognized but not securitized and sold before December 31, 2008), as well as any

    future securitizations of future tariff receivables that are recorded before December 31, 2012.

    Moreover, this Royal Decree-Law provides for industry-wide caps on the amount of the deficit ofA3.5 billion in 2009, A3.0 billion in 2010, A2.0 billion in 2011 and A1.0 billion in 2012, requiring thatregulated tariffs for distribution be increased so that these caps are not exceeded. Under this Royal

    Decree-Law, beginning in 2013, regulated tariffs are to be set so as to generate sufficient proceeds to

    cover the total cost of providing regulated services, thus avoiding the incurrence of further tariff

    deficits. However, there can be no assurance that the new measures introduced by the Spanish

    government will function