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IBERDROLA has completed the acquisition of Brazilian electricity distribution company Elektro(1) for $2.4 billion(2), 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 recorded Ebitda of €370 million in 2010 with net earnings of €193 million.

IBERDROLA, which already holds a 39% stake in Neoenergia(3), will as a result become one of the largest electricity companies in Brazil. The transaction, agreed with owner till now AEI(4), has received approval from Brazilian regulators.

Elektro is one of the major electricity providers in Brazil, operating (see map) in the states of Sao Paulo, where it is the third largest distributor, and Mato Grosso. It has 2.2 million customers, supplying more than 11,500 GWh in 2010 through a network of 105,800 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, (MPRP(5)) and the purchase of Elektro.

IBERDROLA: strengthened 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.

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., 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. 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.