COPENHAGEN – KEY TO CLIMATE INVESTING Corporates : Challenges and Opportunities

1. COPENHAGEN – KEY TO CLIMATE INVESTING Corporates: Challenges and Opportunities Ramón de Miguel Advisor for International Affairs Chairman Iberdrola Engineering & Construction 04 December 2009

2. Index The challenge: Sustainability and Energy Confronting the challenge: Iberdrola’s Strategy Conclusions

3. 3 Diagnosis: Today’s Energy Model We all probably agree that the current energy model is unsustainable Economic development Energy demand outperforming global GDP growth Climate change Energy sector, a main contributor Traditional energy resources Limited fossil fuel reserves Security of supply High and rising dependence on politically unstable regions

4. 4 Trends Even before the recent financial and economic turmoil, the growing tensions suffered by this model … World population expected to rise from 6.6 to 8.2 billion inhabitants by 2030, mainly concentrated in the poorest regions Developing country growth, improving life styles and convergence with the developed world's consumption levels Exponential demand growth Carbon emissions Infrastructure congestion Competition for resources

5. 5 Consequences … were leading to a collapse of the energy system Global Energy Demand CO2 Emissions Billion tons Million toe Can supply catch up with demand … at the right price? Will climate change reach a turning point? Source: World Energy Outlook 2009 Source: World Energy Outlook 2009

6. 6 New Energy Model: Challenges Three key drivers of change for the energy model “Do the same using less energy” Energy efficiency 1 “Reach a CO2-free energy mix” Decarbonization 2 “Satisfy energy demand driven by economies Security of supply 3

7. New Energy Model: Challenges 13.8 Gt 3.8 Gt Source: World Energy Outlook 2009 … 13.8 Gt of total abatement, to reach the 450ppm CO2 scenario.... Need for coordinated action to restrict the global temperature rise to 2°C (450 ppm of CO₂ concentration) …

8. New Energy Model: Challenges 9.3 Gt Source: World Energy Outlook 2009 …Power sector accounts for about 70% of world CO2 savings. … with a critical role for the electricity sector in shaping that new model...

9. 9 Role of electricity in driving the model change A higher penetration of electricity in the energy mix will strongly support these drivers of model change … Electricity generation is already the most efficient means to transform primary energy 1 A wide range of reliable and proven technologies are available to generate CO2-free electricity (wind, solar, hydro, nuclear) 2 Electricity generation presents significant advantages in terms of primary energy diversification 3

10. Role of electricity in driving the model change … with a key contribution to decarbonising the energy supply… Investments needed to achieve 450 ppm CO₂ scenario in the power sector at 2010-2030 Source: World Energy Outlook 2009 … 60% will be from renewables, 16% from nuclear and 7% from carbon capture and storage (CCS).

11. Investment drivers Need for favourable environment to commit to investments in renewables … Context • Social Consensus • Political support • Legal/regulatory framework • Macro-Economic Situation INVESTMENT Natural and Technical Conditions Regulatory framework • Profitability: defining a sufficiency scenario. • Stability: The legal framework must be based on criteria of non retroactivity. • Predictability: remuneration defined for the entire live of the assets. • Resources: sufficient, intermittent, predictability, . • Grid Access : adequate planning and implementation for the new generation access.

12. Index The challenge: Sustainability and Energy Confronting the challenge: Iberdrola’s Strategy Conclusions

13. Iberdrola Today* A world energy leader… • Market capitalisation ~ €33billion** • Among the top-five world energy utilities • 44.2 GW of generation capacity owned • World’s largest wind-power company • >10 GW operational and >57 GW pipeline of projects • 27 MM electricity and gas customers • 33,000 employees in 30 countries • >50% emission-free generation portfolio with a CCS technology plant installed in Longannet, UK *Data as of Q3 09 closing

14. Iberdrola’s regional footprint … with a distinctive positioning in key Atlantic Basin economies North America: No. 2 wind power operator Relevant electricity and gas distributor in the Northeast United Kingdom: No. 1 wind power operator Top-3 electricity distributor Top- 5 retailer Latin America: No. 1 private generator in Mexico No. 1 distributor in Brazil Iberia Leading integrated electricity operator

15. CO2 emissions reduction 2020 Today, Iberdrola is one of the cleanest companies in Europe, with emissions clearly lower than Electricity sector´s average… gr CO2/kWh 436 309 European Power Iberdrola … and has an objective to maintain emissions intensity at least 20% below the European electricity sector level in 2020

16. Index The challenge: Sustainability and Energy Confronting the challenge: Iberdrola’s Strategy Conclusions

17. Conclusions The energy sector must evolve toward one sustainable model… … in which renewable energy will play a fundamental role A stable regulatory framework is needed to consolidate this change, with important benefits to the economy Iberdrola’s investment strategy is in line with recommendations of most independent international agencies, offering a strong commitment to emission-free technologies