International Diversification Gives Iberdrola Platform for Stable Earnings and Shareholder Remuneration

-Chairman Ignacio Galán, addressing the AGM today in Bilbao
-The Company achieved net earnings of more than €2.8 billion in 2012 and maintained shareholder remuneration at around €0.3 per share
-Iberdrola is among the few European electricity groups to maintain profits and dividends since the crisis began
-Iberdrola projects investments of €12.3 billion between 2012-2014, helping to create wealth and employment in the UK, US, Spain, Brazil and Mexico
-Iberdrola continues to be an engine for growth in the countries where it operates, with annual purchases valued at more than €5 billion
-The Group gives employment to 150,000 people and last year incorporated 2,000 new professionals and trained 800 interns and apprentices
-Iberdrola invested €145 million in R+D+i in 2012


FULL INFORMATION ON THE 2013 GENERAL SHAREHOLDERS’ MEETING
(https://www.iberdrola.es/webibd/corporativa/iberdrola?IDPAG=ENWEBACCJUNTA13)

Iberdrola is one of the European and Spanish companies that have best ridden out the global crisis, Chairman Ignacio Galán said today, thanks to its strategy of international diversification which in 2012 saw 70% of net earnings obtained outside Spain, as well as to stable and predictable businesses, balance sheet strength and continued efficiency gains.

“Despite the difficult environment, Iberdrola has succeeded in becoming one of the few European companies in its sector to have maintained earnings and shareholder remuneration for five years now,” he said, addressing the Annual General meeting in Bilbao.

“These tough conditions, which fortunately we are beginning to leave behind, have without doubt underlined the strengths of Iberdrola”, he added. “We have held our course, taking the correct decisions with prudent management criteria and the determined effort of all those who work in the Company with their commitment to sustainability and innovation.

He said these attributes have set Iberdrola apart from the rest of its sector, with proven ability during the past 10 years to anticipate events ahead of its competitors: firstly with a return to core business, then with a focus on renewable energy, international expansion and on regulated businesses.

The start of an economic recovery

Galán said 2013 would be a year of transition towards recovery for the Spanish economy, with positive growth expected from the fourth quarter onwards. “The government last year implemented a series of necessary reforms which, if they had been adopted earlier, would have avoided the severe economic imbalances that we encountered,” he said. “The measures are beginning to bear fruit and the Spanish economy is showing signs of recovery.”

He said these efforts are being recognized by the international community and by the financial markets, noting that a recent United Nations study placed Spain among the 10 most promising countries for foreign investment in the next two years.

“The reforms carried out and others to be introduced in the near future will boost sustainable growth in the long term and we expect them to have a positive impact on jobs from the second half of 2014 and increasingly in following years,” he said.

Positive operational performance

Also addressing the AGM, Chief Operating Officer José Luis San Pedro pointed to the positive operational performance of the Company in 2012, founded on installed capacity of more than 46,000 megawatts (MW) around the world and production above 134,000 gigawatt hours (GWh).

“I want to highlight the significant increase in wind energy production in 2012, nearly multiplying by three the volume of hydro generation, something that would have appeared impossible less than a decade ago,” he said.

Iberdrola last year supplied more than 210,000 GWh of electricity to 28 million users, improving quality of service in all countries where it operates, and another 70,000 GWh of gas to more than 3 million customers via 1 million kilometres of electricity supply network and nearly 30,000 kms of gas pipelines.

This has all contributed to yet another year of solid and stable results, he said. Sales surpassed €34.2 billion, Ebitda was above €7.7 billion with 75% coming from regulated businesses and renewables, 70% more than its European peers. Net earnings came to €2.84 billion, with Spain now contributing only 30% compared with nearly 100% in 2000. The remainder comprised 41% from the UK and the U.S. and 28% from Latin America.

The Company has in parallel continued to strengthen its already solid finances, reducing net debt by nearly €1.4 billion and improving leverage to 47.1% at the end of the year. Liquidity stood at more than €12 billion, enough to meet financing needs for the next three years.

Shareholder benefits

At today’s AGM, the Board of Iberdrola proposed a total shareholder remuneration of €0.305 gross per share, comprising the €0.143 paid in January plus at least €0.157 to be paid in July of which €0.03 will be in cash and an additional €0.127 via scrip dividend, and €0.005 in attendance bonus.

Galán noted that net yield on Iberdrola shares is currently above 8%, one of the highest in the Spanish stock market. He said that in order to maintain a stable path in coming years, Iberdrola has drawn up an Outlook for the period 2012-2014 that was presented last October in London “with the priority objective of consolidating our financial strength and maintaining the level of earnings and dividend policy.”

Under this Outlook, Iberdrola will invest €12.3 billion in geographical areas and businesses that offer greater predictability and stability, generating positive cash flow net of investments and at the same time continuing to adopt cost savings and increase efficiency. It will divest assets in non-strategic businesses and countries amounting to €2 billion and reduce debt by around €6 billion, thereby improving its financial ratios and balance sheet.

Main projects in 2012

In the context of the 2012-2014 Outlook, San Pedro said the Company carried out investments totalling €3.2 billion in 2012, mainly in the UK and the US and in regulated businesses - networks and renewables - which are more stable and predictable, and the main source of Group earnings.

-United Kingdom: A stable and predictable regulatory environment for networks and an Electricity Market Reform that points in the right direction and will promote a renewal of 25% of the generation fleet by 2020, are the foundations for several important investments:
*Construction has begun on several networks infrastructure projects, notably the subsea cable of more than 400 kilometres linking Scotland and Wales which is scheduled for completion in 2015 with a budgeted cost of £450 million and which will give employment to more than 700 people.
*The extension of the Whitelee wind farm has been concluded, making it one of the largest onshore facilities in Europe with 540 MW of installed capacity.
*Construction has started on what will be Iberdrola’s first offshore wind farm at West of Duddon Sands, whose 400 MW of capacity will supply 300,000 homes. When it begins operations next year, around 750 people will work on the project representing an investment of £800 million.
-United States: In the wind sector the business has been supported by a one-year extension of tax incentives for renewable energy projects, while the networks businesses in Maine and New York are benefitting from a stable remuneration regime:
*The AMI project to introduce a new advanced metering system in the state of Maine has been completed with the installation of 625,000 smart meters.
*Among initiatives to improve networks reliability, the $1.4 billion Maine Power Reliability Program (MPRP) including the construction of 700 kilometres of transmission lines and five substations, as well as the expansion of six more, is making good progress.
-Spain: A number of measures have been taken in 2012 to resolve the tariff deficit – cutting retribution for networks and imposing new taxes on generation - but did not go to the heart of the problem. This year some new measures have been introduced which do begin to deal with the structural problem.
*Extension works have been completed at the San Esteban II hydro power station on the Sil river, and work continues at the La Muela II pump storage project in the province of Valencia, which is expected to start operations this year and whose 1,700 MW of capacity will be the largest installation of its type in Europe.
*12 new substations have begun operations and capacity increased at more than 40, in addition to upgrades and extensions of hundreds of kilometres of high, medium and low tension wires. Work has also continued on smart grids in eight regions, including the Basque Country, after successful implementation of the pioneer project at Castellón. In all more than a million smart meters have been installed throughout Spain.
*In the renewables business, and despite the moratorium imposed by the Government, a total of 218 MW of wind capacity has been started up at wind farms including El Candal and El Segredal in Asturias and the extension of Peñaflor in Valladolid.
-Brazil: In 2012 a tariff review process was concluded for Elektro covering four years while in 2013 this will take place for another three distribution companies in which Iberdrola has a stake: Coelba, Cosern y Celpe.
*Construction has progressed at the hydroelectric projects of Belo Monte, with 11,200 MW of planned capacity, in which Neoenergia has a 10% stake, as well as at Teles Pires (1,800 MW) and Baixo Iguaçu (350 MW).
*Work has also continued at the wind farms of Calango, in the state of Rio Grande do Norte, and Caetité, in Bahía, for a total of 250 MW.

-Mexico: A stable regulatory environment covers the Company’s activities:
*A project to extend the capacity of the Enertek cogeneration plant in Tamaulipas is under way, and installed capacity has been increased at the La Laguna combined cycle plant in Durango.
*The La Venta III wind farm has been started up in Oaxaca, one of the largest wind installations in Latin America with 121 turbines.

San Pedro emphasized that these investments mean purchases from suppliers totalling billions of euros with benefits for the economies of countries where the Company operates.

Advances in Corporate governance

In addition to highlighting the investment programme, Galán drew attention to progress in Corporate Governance in 2012, through an “ordered and transparent group of norms aimed at better defending the general interest and remaining at the forefront of best business practices, both in Spain and internationally.”

He highlighted approval of a new text in the Ethical Code “which reflects our firm commitment to promoting a preventive culture founded on the principle of zero tolerance of illicit acts and fraud, as well as applying ethics and responsible behaviour among all Group employees.” He pointed to the creation of the Compliance Unit as a reflection of this policy.

Galán also told shareholders that the courts have once again endorsed the Company’s Corporate Governance system and its objective of defending the general interest. In this regard, he said a recent decision of the Vizcaya Provincial Court ratifies the reform approved at the 2011 AGM in all its aspects.

Social and environmental commitments

Iberdrola remained true to its business ideals in 2012 as a sustainable and socially responsible company, driving the economies in countries where it operates with investments and more than €5 billion in annual purchases, and providing direct and indirect employment for nearly 150,000 people.

Galan said the workforce, which incorporated 2,000 people last year, remains always at the centre of Company strategy, and for the fifth successive year more than a million training hours were achieved, with 53% more courses offered and 82% of employees participating. Additionally, the company focused on training for younger people, with 800 interns and apprentices throughout the Group.

At the same time, the Company has focused efforts in R+D+i, investing €145 million in the area of smart grids and renewable energy, receiving recognition as the most innovative Spanish utility and number four in Europe according to a ranking compiled by the European Commission.

In environmental aspects, “Iberdrola continues to prioritise protection as it has done since its origins,” Galan said, noting that thanks to this long commitment the Company has been recognized by the main sustainability indices: Carbon Disclosure Project, FTSE4Good and the Dow Jones Sustainability Index.

At present, 60% of its installed capacity is emission-free, which led to the Company last year avoiding the emission of more than 15 million tonnes of CO2 to the atmosphere. “In this way we are succeeding in places our level of emissions per kWh at 30% below the European average”.

Finally, he paid tribute to the efforts of all men and women who work at Iberdrola, including union representatives and members of the board of directors who in an exceptionally difficult year, thanks to their hard work and professional approach have helped us meet the major challenges.

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.

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