Becomes one of the largest electricity companies in the country

IBERDROLA CEMENTS BRAZIL PRESENCE WITH $2.4 BILLION ACQUISITION OF ELECTRICITY DISTRIBUTION COMPANY ELEKTRO

• The friendly transaction, pending approval from Brazilian regulator ANEEL,  is consistent with the Company’s strategy of diversifying its geographical presence and reinforcing regulated business


• Elektro, being acquired from AEI, has 2.17 million customers mainly in Sao Paulo state, supplying more than 11,000 GWh in 2009 via a 105,792-kilometer distribution network

IBERDROLA has agreed to acquire Brazilian electricity distribution company Elektroi for $2.4 billion, a transaction that reaffirms its commitment to expand in one of the markets viewed as key to its international growth strategy.

The acquisition, which will be earnings per share accretive in the first year, will be paid for in cash, underlining IBERDROLA’s financial strength and liquidity. Elektro has debt totalling €369 million and in 2009 recorded Ebitda of €334 millionii in  with net earnings of €216 million.

IBERDROLA, which already holds a 39% stake in Neoenergiaiii, will as a result become one of the largest electricity companies in Brazil. The transaction, agreed with current owner AEIiv, is pending approval from Brazilian regulator ANEELv.

Elektro is one of the major electricity providers in Brazil, operating (see map) in the states Sao Paulo, where it is the third largest distributor, and Mato Grosso. It has 2.17 million customers supplying more than 11,000 GWh in 2009 through a network of 105,792 kilometers.

The transaction is fully consistent with current strategy focussed on continued international expansion in markets with high growth protential and regulatory stability (such as United States, Brazil, United Kingdom, Mexico), offering greater predictability regarding revenues and also low risk.

This strategy has also been reflected in divestment of non-strategic assets during 2010, including U.S. gas subsidiaries in Connecticut and Massachusetts and other assets in Chile and Guatemala. The Company has redirected activity towards key projects for future development such as the Maine transmission project upgrading connections between this state and Canada, (MPRPvi) and the purchase of Elektro.

IBERDROLA, strong presence in Brazil

The acquisition reinforces IBERDROLA’s presence in a country whose growth potential is among the highest in the region and positions it to take advantage of future business opportunities in Brazil, where it has had a presence since 1997.

Pro forma 2009 results for Neoenergia and Elektro show combined revenues of more than 14.4 billion reais, Ebitda of 3.399 billion and net profit of 2.072 billion. Together, they have 10.9 million points of electricity supply.

The impact on IBERDROLA  accounts, based on pro forma 2009 figures is significant. Revenues rise 7.3% to €26.349 billion, Ebitda by 9% to 7.149 billion, and net earnings by 7.6% to nearly 3.04 billion. The customer base would have stood at 25.9 million (+8.6 million).

Consolidating Elektro accounts for 2009 raises the pro forma proportion of Ebitda coming from regulated businesses to 66% from 64% otherwise, and would also have altered the breakdown of contribution by business and geographical area (see graph).

www.elektro.com.br
Tipo de cambio: 2,2543 reales/€ (19-1-2011)
www.neoenergia.com
Ashmore Energy International (www.aeienergy.com)
Agência Nacional de Energia Elétrica (www.aneel.gov.br)
www.cmpco.com/OurCompany/MPRP.html