Results for first nine months of 2008

IBERDROLA RECORDS €2,481.3 MILLION PROFIT DRIVEN BY NEW BUSINESSES AND INTERNATIONAL OPERATIONS

• Earnings per share up 53.8% in the first nine months of 2008, sustained by a business model diversified both by geographical area and also by business

POSITIVE BUSINESS PERFORMANCE

• Strong Group-wide performance, especially new businesses and international operations which contributed nearly two-thirds of Group Ebitda and made up 90% of its growth
• Major contribution from ScottishPower with 28% of total Ebitda and from Iberdrola Renovables which outperformed its own forecasts with €230.8 million in net profit
• Traditional business in Spain made up 37% of Ebitda, against 99% in 2000

KEY OPERATIONAL ASPECTS

• Electricity production rose 23% to 106,442 million kWh, of which half came from generation outside Spain
• The Company continued its focus on clean energy with 52% of worldwide capacity emission-free

STRONG GROWTH IN NINE MONTH PERIOD

• Ebitda rose 29.1% to €4,922 million driven by investments in renewables and international business, while traditional business in Spain grew modestly
• Prudent financial management maintained the Company’s sound balance sheet, with gearing of 47% and liquidity of €9,215 million covering more than a year

IBERDROLA’s international expansion and focus on new business, especially renewables, a strategy that saw €30 billion invested between 2007-2008, including last year’s integration with ScottishPower, the IPO of IBERDROLA RENOVABLES and incorporation last month of Energy East, have consolidated the Company among the world leaders in its sector.

This strategy bore clear fruit in the first nine months of the year with a 54% rise in net profit to a record €2,481.3 million. The rise reflects solid performance of all businesses, especially international operations where ScottishPower Ebitda of €1,373.3 million made up 28% of the total, and also the renewables subsidiary which outperformed its own forecasts with a 373% rise in net profit to €230.8 million.

These results vindicate IBERDROLA’s growth model based on diversification by geographical area and by business, in a year characterised in Spain by higher fuel input prices, modest growth in demand and elimination of the official industrial tariffs which account for nearly 50% of the total market.

Ebitda rose 29.1% to €4,922 million, of which 63% was contributed by renewable energy and international businesses, which in turn accounted for 90% of the increase in this item. Traditional business in Spain made up 37% of Ebitda (€1,817.4 million), compared to 99% in 2000.

Sales rose 56.5% to €17,808 million, net operating profit (Ebit) by 31.5% to €3,316.7 million, net profit by 53.8% to €2,481.3 million and earnings per share by the same percentage.

Group production rose 23% to 106,442 million kilowatt hours (kWh) in the nine-month period, of which more than half was generated outside Spain for the first time in IBERDROLA’s history. The Company continued to diversify its generation assets around the world, with a 5% rise in installed capacity during the period to 41,578 megawatts (MW).

The results reflect the major investment effort of the past few years, both in organic growth and corporate transactions,and also the positive performance in basic margin. This rose 34.3% to €7,705.4 million, a percentage increase that exceeded that of operating expenses which rose 29.3% to €2,220.8 million.

Despite the intense investment activity, €30 billion between 2007-2008, the Company maintained its solid finances with a gearing of 47.2% after the acquisition of Energy East, not counting the impact of the tariff deficit. It not only retains a solid “A” credit rating but also has €9,215 million in liquid funds covering more than a year.

This has been made possible by prudent financial management over the past few years, whereby the Company has not only improved its debt profile but has also financed growth ahead of time and to a large extent by capital increases. The financing of the Energy East operation, with funding obtained 14 months before closing, is a clear example of this strategy.

In Spain, one of the features of the period was elimination of the electricity tariff for large industrial customers, which as mentioned above makes up nearly 50% of the total market. This will contribute to mitigating the problem of the tariff deficit, a debt that is pending and whose  payment is legally recognized.

Group cash flow rose 30.6% in the nine months to €3,448.1 million, demonstrating the Company’s capacity for revenue generation  and potential for further growth in the Atlantic Area (Europe-North America-Latin America). This is a product of its successful strategy in the past few years, especially in 2007 when it consolidated its position as one of the world’s largest electricity groups.

Several milestones last year contributed to this standing: closing the friendly integration of ScottishPower, agreement to incorporate Energy East – finalized in September this year – and the IPO of IBERDROLA RENOVABLES.

Key aspects in the first nine months of 2008

1) SCOTTISHPOWER

With the integration completed, the Scottish company has become one of the principle growth vectors in IBERDROLA. ScottishPower Ebitda came to €1,373.3 million and accounted for 27.9% of gross operating profit in the period. Efficiency improved following integration in the Group, accelerating synergies and cost savings.

2) IBERDROLA RENOVABLES

The Company strengthened its leadership of the world wind power sector in the period, registering a 373% rise in net profit to €230.8 million, exceeding internal forecasts. Ebitda rose to €768 million.

It added 1,389 MW in new capacity in the nine month period, above the historical installation rate, for an accumulative total of  8,487 MW (+70.5%). It thereby achieved 70% of the 2,000 MW  programmed for this year, while production rose 83.6% to 12,095 kilowatt hours.

The Company’s flexible business model leaves it well-placed able to adapt to fluctuating scenarios. It has the largest project pipeline in the sector, standing at 54,000 MW and well diversified geographically. It has also signed turbine supply contracts with built-in flexibility that enables it to organize its investments so as to maximize value for its shareholders.

3) MORE POWER, PRODUCTION AND DISTRIBUTION

With the integration of ScottishPower, IBERDROLA has diversified and increased its generation assets around the world, ending the third quarter with installed capacity of 41,578 MW, a 5% increase over the same period last year. This comprised 31.1% from combined cycles, 23.4% from hydroelectricity, 20.4% from renewables, 11.3% from thermal, 8% from nuclear, 4.3% from fuel oil and 1.4% from cogeneration.
In Spain, capacity rose from 25,917 MW to 26,293 MW, while in the United Kingdom it increased 3.8% to 6,653 MW. In Latin America it stood at 5,554 MW; in the United States at 2,924 MW (+74.8%), and in other countries at 761 MW (+39.1%).

Helped by this significant growth in capacity, the Group increased production by 23% to 106,442 million kWh in the first nine mnths, with the figure for Spain rising 4.2% to 50,699 million kWh.

Of the total, 37.3% was free of CO2 emissions, a figure that rises to 63.6% in Spain reflecting the Company’s focus on clean electricity generating technology. At the same time, 52% of installed Group capacity worldwide was emission free.

4) ENERGY EAST

IBERDROLA competed the incorporation of Energy East in September, and anticipates a contribution to results in the final quarter of the year. This operation meets Group financial criteria and will have a positive impact on earnings per share and cash flow per share from the first year.

The transaction, which closed quicker than other similar deals, and was approved with satisfactory conditions, allows IBERDROLA to diversify its geographical presence. It also increases its presence in a triple A rated country with legal safeguards and a predictable regulatory framework, while assuring a recurrent cash flow in view of Energy East’s mostly regulated businesses.

2008-2010 Strategic Plan

IBERDROLA has ratified its net profit target contained in the 2008-2010 Strategic Plan, thereby confirming its commitment to investors, customers, employees and society in general, through a growth model founded on developing renewable energy, above all wind power, and continued improvements in quality of supply.

The Company, aware of current economic circumstances, may take a decision to adjust the rhythm of investments and manage its asset portfolio so as to optimize its value. In this respect, IBERDROLA’s geographical diversification, with operations in stable markets, as well as the fact that more than 60% of its business is regulated or partially regulated, and thereby provides a highly predictable revenue stream, gives it significant flexibility in implementing its strategic plans.

* Source: New Energy Finance (December 2007)

IMPORTANT INFORMATION
This announcement is not an offer for sale of securities in the United States, nor in any other jurisdiction. The securities referred to herein may not be sold in the United States absent registration or an exemption from registration under the US Securities Act of 1933, as amended.

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

Although Iberdrola, S.A. believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of Iberdrola, S.A. shares are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of Iberdrola, S.A., that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the public documents sent by Iberdrola, S.A. to the Comisión Nacional del Mercado de Valores.

Forward-looking statements are not guarantees of future performance. They have not been reviewed by the auditors of Iberdrola, S.A. and IBERDROLA RENOVABLES, S.A. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date they were made. All subsequent oral or written forward-looking statements attributable to Iberdrola, S.A., or any of its members, directors, officers, employees or any persons acting on its behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements included herein are based on information available on the date hereof. Except as required by applicable law, Iberdrola, S.A. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.