Some uncertainty about Iberdrola’s future still exists, Moody’s said
LONDON, Feb. 6, 2001 — Moody’s has today confirmed the A1 senior unsecured long term debt ratings of Iberdrola International BV guaranteed by Iberdrola SA with a stable outlook.

The ratings were put under review for possible upgrade in October 2000 following the announcement of the proposed merger between Iberdrola and Endesa (Aa3 under review for possible downgrade). The A1 rating has been confirmed following yesterday’s decision by the Boards of both companies to abandon the merger plans given the stringent conditions imposed by the government.

Moody’s maintains a stable outlook however believes that there is increased uncertainty with regard to Iberdrola’s future. Iberdrola is expected to continue to look for further growth prospects to enhance its value; this may be through organic growth but may include significant acquisitions outside of Spain.

However, given its only moderate size within Europe but strategic location in the fast growing Spanish market, favourable asset mix and solid cash flows it is an attractive partner or acquisition target for other European electric or gas utilities, particularly since it has shown that its is open to merger discussions.

Moody’s recognises that should a merger take place with a more strongly rated entity then this could have positive implications for the company’s credit quality although an alliance with a weaker entity or significant increase in business or financial risk on a stand alone basis could be negative for the rating. Moody’s will continue to monitor competitive and regulatory developments in the Spanish electricity market for further implications for the Iberdrola and other Spanish utility ratings.

Iberdrola SA headquartered in Bilbao, is Spain’s second largest vertically integrated electric utility and accounts for 37% of the generating capacity and 36% of the distribution market. It has investments in Latin America including a participation in CELPE in Brazil and is in alliance with Telefonica in telecommunications in Spain. As at FYE 1999 it had consolidated sales of approximately EUR 3.6 billion.