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

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COPENHAGEN – KEY TO CLIMATE INVESTING

Corporates: Challenges and Opportunities

Ramón de MiguelAdvisor for International AffairsChairman Iberdrola Engineering & Construction

04 December 2009

Index

The challenge: Sustainability and Energy

Confronting the challenge: Iberdrola’s Strategy

Conclusions

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Diagnosis: Today’s Energy Model

We all probably agree that the current energy model is unsustainable

Energy demand outperforming global GDP growth

Energy demand outperforming global GDP growth

Economic development

Energy sector, a main contributorEnergy sector, a main contributorClimate change

Limited fossil fuel reservesLimited fossil fuel reservesTraditional energy

resources

High and rising dependence on politically unstable regions

High and rising dependence on politically unstable regions

Security of supply

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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

Infrastructure congestion

Exponential demand growth

Competition for resources

Carbonemissions

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Consequences

… were leading to a collapse of the energy system

COCO2 2 EmissionsEmissionsBillion tonsBillion tons

Will climate change reach a turning point?

Global Energy DemandGlobal Energy Demand

Million toeMillion toe

Can supply catch up with demand … at the right price?

Source: World Energy Outlook 2009Source: World Energy Outlook 2009

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New Energy Model: Challenges

Three key drivers of change for the energy model

2 Decarbonization

1 Energy efficiency“Do the same

using less energy”

“Reach a CO2-free energy mix”

3 Security of supply

“Satisfy energy demand driven by

economies

Need for coordinated action to restrict the global temperature rise to 2°C (450 ppm of CO₂ concentration) …

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New Energy Model: Challenges

3.8 Gt13.8 Gt

Source: World Energy Outlook 2009

… … 13.8 Gt of total abatement, to reach the 450ppm CO13.8 Gt of total abatement, to reach the 450ppm CO22 scenario.... scenario....

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New Energy Model: Challenges

… with a critical role for the electricity sector in shaping that new model...

9.3 Gt

Source: World Energy Outlook 2009

……Power sector accounts for about 70% of world COPower sector accounts for about 70% of world CO22 savings. savings.

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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 meansto transform primary energy

Electricity generation presents significant advantages in terms of primary energy diversification

A wide range of reliable and proven technologies are available to generate CO2-free electricity (wind, solar, hydro, nuclear)

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… with a key contribution to decarbonising the energy supply…

Role of electricity in driving the model change

Source: World Energy Outlook 2009

Investments needed to achieve 450 ppm COInvestments needed to achieve 450 ppm CO₂₂ scenario in the power sector at scenario in the power sector at 2010-20302010-2030

… … 60% will be from renewables, 16% from nuclear and 7% from carbon 60% will be from renewables, 16% from nuclear and 7% from carbon capture and storage (CCS).capture and storage (CCS).

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Need for favourable environment to commit to investments in renewables …

ContextContext

Regulatory frameworkRegulatory frameworkNatural and Technical Natural and Technical

ConditionsConditions

Social Consensus Political supportLegal/regulatory framework Macro-Economic Situation

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.

INVESTMENT

Investment drivers

Index

The challenge: Sustainability and Energy

Confronting the challenge: Iberdrola’s Strategy

Conclusions

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44.2 GW of generation capacity owned

World’s largest wind-power company >10 GW operational and >57 GW pipeline of projects

Market capitalisation ~ €33billion**

Among the top-five world energy utilities

Iberdrola Today*

27 MM electricity and gas customers 33,000 employees in 30 countries

A world energy leader…

*Data as of Q3 09 closing

>50% emission-free generation portfolio with a CCS technology plant installed in Longannet, UK

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North America:No. 2 wind power operator

Relevant electricity and gas distributor in the Northeast

Latin America: No. 1 private generator in

MexicoNo. 1 distributor in Brazil

United Kingdom:No. 1 wind power operatorTop-3 electricity distributor

Top- 5 retailer

IberiaLeading integrated electricity operator

Iberdrola’s regional footprint

… with a distinctive positioning in key Atlantic Basin economies

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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/kWh436

309

… … and has an objective to maintain emissions intensity at least 20% and has an objective to maintain emissions intensity at least 20% below the European electricity sector level in 2020below the European electricity sector level in 2020

IberdrolaIberdrolaEuropean Power

European Power

Index

The challenge: Sustainability and Energy

Confronting the challenge: Iberdrola’s Strategy

Conclusions

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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