Ignacio Cuenca - Director of IR Ignacio Galán - Chairman and CEO José Sáinz - CFO James Torgerson - Avangrid, CEO

Alberto Gandolfi - UBS José Javier Ruiz - Macquarie Stefano Bezzato - Credit Suisse Martin Young - RBC Pablo Cuadrado - HSBC

Good morning, ladies and gentlemen. First of all, thank you for unionized this morning. It is with great pleasure that we welcome you to the presentation of the results for the financial year 2015, as well as our outlook for the period 2016 to 2020. The agenda of the day has been already shared to all of you. First of all, it will begin with a detailed overview of the results given by our senior management team, which will then be followed by a brief Q&A session related only please to the results. This part will last no more than 45 minutes. After this block, we will have a five minutes break and then we will start with the intervention of our top management presenting the strategy for the next years that will be ended around noon. Immediately another Q&A session will be celebrated. Afterwards, two interesting speeches; one related to Avangrid, our new subsidiary in the U.S., and the second about one of the most requested topics of industry, the smart energy. Finally, similar to previous Capital Markets Day, the three different business teams will have the opportunity of meeting you in three different interesting workshops. We'd also like to remind you that this event can be followed online as well through our web page, www.iberdrola.es. Hoping that you will find the day with us informative and productive, now without further ado, I will hand over to our Chairman and CEO, Mr. Ignacio Galán. Thank you very much again. Please, Mr. Chairman. Ignacio Galán: Thank you, Ignacio. First of all, I would like to thank all of you for attending this presentation here in London or on the webcast. We appreciate very much your interest in the company. We will start with a big presentation of the 2015 result, and later we will provide the outlook, as Ignacio mentioned, for 2016-2020. In 2015, our businesses had already delivered a strong performance, thanks to the growth of our regulated and contracted activities, allowing us to reach a year in advance the outlook 2016 than we have already given to you here in 2013. Gross margin is up 5.4% to €12.8 billion, driven by 16.1% increase in Renewables and 5.2% in Networks. At the same time, we have already obtained net operating expenses down 1.6% excluding the FX impact. As a consequence, EBITDA has grown almost 5% to €7.3 billion. Operating cash flows amounts €5.8 billion, growing 8.2%, while investment increased by 13.2% to €3.2 billion on which 62% are dedicated to growth. Finally, net profit hits to €2.4 billion up to 4.1% despite having been affected by the non-one-off transaction cost for Avangrid. Without this effect, recurring net profit has increased 7% to almost €2.3 billion. As for further details on EBITDA, its 4.8% increase has been possible things to the solid performance of our regulated and contracted activities, which have grown 8% and accounts 75% of the EBITDA. By businesses. Networks is up 1.9% to €3.6 billion, thanks to 11% growth in United Kingdom, which compensate for the foreign exchange impact in Brazil and for U.S. one-off transaction cost. Let me highlight then the higher asset base in all regions, especially in the U.K. with 20%, growth in United States with 27% increase without including UIL asset base. This higher RAV will led to improved result in the future. The Renewables business has strong performance with EBITDA increasing by almost 90% to €1.6 billion, driven by higher production in Mexico, Brazil and United Kingdom. I would like to underline the very good operating performance of our West of Duddon Sands offshore wind farm which exceeds availability and resource estimate. In United States, wind output was much lower than usual due to the impact of a lean year [ph], and in Spain, production was also lower compared with a very extraordinary very good year in 2014. Our regulated generation in Mexico has increased 30% to almost 500 million due to our increased activity with private customers. Finally, our Liberalized activities recorded a negative evaluation with a 4% decrease. In Spain, production has lowered and costs were higher compared to 2014 extraordinary performance. In U.K., Liberalized EBITDA was down as well 8% due to lower prices, the rise in carbon tax, the extraordinarily cost related with the closure of Longannet and the implementation of our new financial integration system aimed at improving the services to our customers. In 2015, we have continued improving our cash flow capacity generation with an 8.2% increase in operating cash flow to €5.9 billion of exceeding investment across all businesses. Let me highlight our 13.2% increase in investment as I mentioned before to €3.2 billion on which 62% are allocated to growth project, and over 90% to regulated and contacted activities. This clearly shows our strong commitment to continuous growth focuses in predictable businesses providing long-term visibility. As a million milestone achieved during 2015, I will let underline the successful listing of Avangrid in the nearest stock exchange as a result of the measure between UIL Holdings and Iberdrola USA. It has resulted one of the leading renewables and regulated activities in United States with $12 billion market cap, over $30 billion asset, around 70,000 employees, percent in 24 states. The group brings together seven regulated companies operating in the State of New York Maine, Massachusetts and Connecticut with over three million electricity customers and regulatory asset base of around $9 billion expected to grow up to $12 billion by the end of 2020. We are also the second largest wind farm operator in United States with 5.8 gigawatts installed capacity and 700 gigawatts under construction in a byline of more than 6 gigawatts. As a consequence, Avangrid is probably one of the cleanest integrated utilities in North America with almost zero emissions. Concerning our financial position, we continue improving our main financial ratios. Excluding UIL impact, we have achieved our 2016 targets, one year in advance, with FFO to net debt above 22% and retained cash flow to net debt above 20%. And our leverage has been reduced to only 14%. To benefit from the lower internal rate, we have continued our active liability management with over €10 billion renegotiated to issues during the year, leading to expect savings of €113 million for the following years. Already in 2015, net financial expenses were down 8.9% with a positive impact of €100 million. In order to balance of the year, I would like also to briefly highlight contribution of Iberdrola to associate during the last year. Firstly, we have maintained our commitment to the creation of a stable high-quality employment with 1,750 new employees which were hired by the company, and additional 550 apprentices joining us. Moreover we have provided our employees with an average of 38 hours of training per person during the year. Additionally, we are at the forefront of work-life balance measures. As a consequence, we were again recognized as one of the best companies to work in Spain and the based company to work in Latin America. A significant part of our job creation is due to the purchases of goods and services over €7.4 billion last year to 17,600 suppliers. And in order to bring efficiency and offer better quality service to our customers, we have invested €200 million in research, development and innovation. In 2015, our total direct contribution to tax and fiscal authorities in the countries in which we are present was €5.5 billion. This figure includes our own taxes and those collected by Iberdrola to be paid to the fiscal authorities. All in all, our activity has a significant impact on the economy as a whole. According to estimate by the Analistas Financieros Internacionales, Iberdrola Group contributes to the generation of 360,000 jobs around the world, and beside acting as an engine for growth, Iberdrola is also have been smart in sustainability and corporate governance. We have outstanding position in the Dow Jones Sustainability Indices, in the FTSE4Good Indices and the Climate Disclosure Leadership indices. And despite our installed capacity emission are today 30% lower than the average in the industry in Europe, during the COP21 in Paris, we presented our commitment to reduce further 50% of our emission by 2030 and become carbon neutral by 2050. In terms of corporate governance, we are an example with practice according to Ethical Board Room and the World Finance. We are recognized in terms of the diversity of gender and nationality and transparency and independence. We were recognized for having the best initiatives in shareholders approach and engagement. The 2015 results we are presented today have allowed the Board of Directors and that is the needle that I would like to show today to you to propose a 4% increase in the shareholder remuneration to €0.28 per share consistent with €0.127 already paid in last month, and a supplementary dividend of €0.153 to be approved by the general shareholders meeting distributed in July. Moreover, the company will pay as well as usual an Annual General Meeting Attendance Premium of €0.05 per share. Additionally to avoid the dilution effect, the Board of Directors will propose to general shareholders meeting a new share buyback program in order to maintain a final total number of shares in 6.240 million. Let me conclude with a reference to our guidance for 2016. After having achieved outlook, a target a year in advance, we expect a strong performance in EBITDA with increasing growth rates over the year to be one of positive in the first part of first quarter in 2015. Our Networks activity will show a strong positive evolution namely the United States with their full-year contribution of UIL results. We also expect a good performance to all our Generation & Supply businesses having 100% of our production already sold in Spain and thanks to higher hydro output and the contribution of new power plants in Mexico. Finally in Renewables, businesses should also deliver a positive performance after a very good 2015, as we are currently seeing improved wind results in Spain and United States, better certain than last year. This should translate into mid-single-digit increase and net profit level reinforcing our commitment to the value creation to the shareholders. So thank you very much for your attention. I give now the word to José Sáinz, who will present in more detail the result. Thank you. José Sáinz: Thank you, chairman. So there are some impacts accounted for in Q4 affecting full-year results that I will point out in advance, all the results analysis. First the consolidation of Avangrid from December ‘16 onwards, had a negative contribution of €60 million to EBITDA and €45 million to the net profit, with €86 million of higher net operating expenses that included all the transaction costs and the future commitments with the Connecticut regulator. In addition, we have put a net provision of €230 million related to the Longannet impairment due to its closure this year, €288 million gross. Third, to partially compensate these impacts, the UK tax reduction to 18% has put us €170 million lower taxes of which €163 million are non-recurrent due to the new rate for deferred taxes. 2015 recurrent net profit grew 7% and operating cash flow, as the chairman has said, increased 8.2% to almost €6 billion. FX rates helped with the dollar appreciating 16.5%, the pound 10% more than compensated the real devaluation 18%. Revenues grew 4.6% to €31.4 billion, while procurements rose 4.1% to €18.6 billion. As a consequence, gross margin increased 5.4% to €12.8 billion. Our net operating expenses, excluding FX - negative FX impact, fell 1.6% but including it were up 5.4% to €3.8 billion. Including non-positive recurrent impact or positive non-recurrent impacts were €104 million, mainly due to favorable legal rulings accounted at external services level, offset by higher non-recurrent IT system cost in the U.K. and increase of OpEx in the U.S. as I have commented, and non-restructuring costs - and non-recurrent restructuring costs accounted at personnel expenses level. Personnel expenses grew 3.9%, and fell 1.6% excluding the FX impact, and net external services were up 7% decreasing 1.6% excluding the FX impact. Levies grew 7.9% to €1.7 billion, mainly affected by the FX impact and an €113 million favorable court ruling accounted for in 2014, partially mitigated by the €48 million positive court ruling accounted for in 2015 and lower legal costs in the U.K. Analyzing the different business and starting by Networks. Its reported EBITDA was up 1.9% to €3.6 billion with gross margin growth in all countries except Brazil that in the fourth quarter of last year had a positive one-off. Net operating expenses rose 10.8% mainly due to the U.S., as I will analyze in the next slide. Spain accounts for 40% of this EBITDA, the UK 32%, the U.S. 22%, and Brazil 6% or 3% of the total EBITDA of the Group. In Spain, EBITDA grew 1% to €1,450 million, thanks to a 4% improvement in net operating expenses due to efficiency measures with the flat evolution at the gross margin level. In the U.K., EBITDA in sterling was flat at £826 million in the gross margin affected by the profiling of the RIIO-ED1 applicable from April 1 was offset by a 3.3% improvement in the net operating expenses. In the U.S., the EBITDA was 16.2% down to $860 million, negatively affected by: first, the renegotiation of a supply contract for $57 million that will be recovered in the following year, so this is a non-recurrent impact; in addition, the other non-recurrent impact I commented which is the costs due to the Avangrid deal; and finally, there is a $36 million accounting reclassification that reduces EBITDA but not EBIT. Finally Elektro EBITDA decreased 5.3% to R$884 million affected by the positive impact registered in the 2014 recognizing in one go past drought impacts. Generation & Supply EBITDA grew 1.2% to €2,320 billion, driven by the continued growth in Mexico and the less negative impacts in Spain and the U.K. in the last part of the year. In Spain, the EBITDA fell 1% to €1.5 billion, with a 3.2% decrease in gross margin due to the lower output and weaker performance of our wholesale gas activity. Net operating expenses improved 14% partially offsetting the gross margin decrease. Net operating expenses had a €100 million positive non-recurring impacts and a favorable comparison with 2014 that they register higher restructuring costs. In the U.K., the EBITDA reached £305 million, 17% lower than last year. Wholesale & Generation business gross margin decreased 15% due to higher costs with a carbon cash tax increasing from £9 to £18 from April. And costs associated - extraordinary costs associated to the closure of Longannet. So EBITDA in the Generation business decreased 81% to only £10 million. The Retail business gross margin increased 0.4%. Higher unitary margins and volumes in gas with a 4% increase in demand compensate the improvement - do not compensate a 26% lower gross margin in Retail power due to increase in non-energy-related costs, ROCs, DuOS, TuOS. In addition, the non-recurrent cost in deployment of the new retail IT system increased net operating expenses by £32 million, so EBITDA in this business also decrease 5.9% to £295 million. In Mexico, EBITDA was up 6.5% to $506 million, thanks to the higher output and to the renegotiation of old contracts. Renewables’ EBITDA increased 18.6% at €1,572 million, driven by the recovery in Spain and the positive performance in the U.K. The U.S. and Spain have been the largest EBITDA contributor in renewables with 32% and 30% share, both followed very closely by the U.K. that hasn't 28% of our EBITDA share. Gross margin increased 16% and net operating expenses rose 11.9%, 4.2 percentage points below. In Spain, the EBITDA reached €473 million, 12% higher with a 10% lower output compensated by the recovery in prices. In the U.K., EBITDA was up 48% to £318 million with 19% higher output due to the better wind conditions on West of Duddon Sands offshore wind farm positive contribution. In the U.S., EBITDA was $554 million, 15% down with a 4% decrease in output due to bad climate conditions in the West, Baffin wind farm contribution that started operating in Q2 was not able to compensate the lower capacity factor. In Latin America, EBITDA was €70 million, with 30.3 higher output in Mexico and Brazil, offset by devaluation of this real. In the rest of the world, EBITDA reach €92 million, 25% up, underpinned by a better load factor that increased production by 7%. EBIT fell 2.8% to €3,829 million. Amortizations rose €251 million, driven by exchange rate, the new operating capacity in Renewables and the Networks business and the new Retail IT system in the U.K. Provisions grew €202 million, increasing in the fourth quarter basically due to the accounting of the €288 million provision linked to the Longannet closure, partially offset by €50 million less provisions in the wind business in the U.S. due to the PTC extension and lower 2015 wind provisions in other countries. Excluding the Longannet provision, EBIT would have grown 4.5% more in line with the EBITDA growth. Net financial expenses improved 8.9% to €1,023 million, that’s through a €94 million lower debt related costs driven by a cost improvement of 30 basis points that drove our costs down to 4%. The €96 million gross capital gains from the sale of our stake in EDP accounted for 2014 has been compensated by the reversal of several contingencies and interest legal claims, positive FX hedges, especially in the Brazilian real and proceeds from Euskaltel sale. Recurring net profit increased 7% to €2,261 million and reported net profit increased 4.1% to €2,421 million. Corporate tax decreased to 18% mainly as a consequence of the reversal of a tax provision in Spain accounted in the second quarter of 2015, the lower corporate tax in Spain, which is recurrent from 30% to 20%, and the U.K. corporate tax reduction that I have commented at the beginning of the presentation. Excluding the Avangrid negative impact at the net profit level minus €45 million, net profit would have reached €2,470 million. Regarding financing. The 2015 reported net debt includes €2.4 billion additional of coming from the UIL deal, €1.9 billion coming from the consolidation of the UIL and €500 million coming from the payment that we did to the UIL shareholders. Excluding this, total net debt for the Group remains stable at around €25.6 billion with €758 million of that growth due to the FX impact, compensated by €715 million coming from the cash flow generation. Our leverage ratio improved reaching 40.1% versus 41.8% at the end of 2014. Our equity continued to increase. Including UIL, the total net debt reached €20 billion and leverage 40.7%. As a consequence of that and excluding the UIL consolidation of financial ratios continued to a strength as our net debt remains stable for our cash flows and EBITDA grew. So our net debt to EBITDA reached the 3.5x target for 2016 one year ahead. Our FFO over net debt reached to 23.1%. Our retained cash flow over net debt improved to 20.5%, both well above the 2016 targets. Including UIL, the financial ratios worsened slightly as our EBITDA is only accounted for from December ‘16 and it was negative due to the extraordinary impacts. On a pro forma basis, including UIL for the whole 2015, our net debt to EBITDA was 3.6x, our FFO over net debt 22.2%, and our retained cash flow over net debt was 19.8%. So thank you very much. And I think that we are now open to questions.

Okay. We are going to start the Q&A session in the room. We have Alberto Gandolfi on the back of the room and then José Javier Ruiz.

Hi good morning. It’s Alberto Gandolfi in UBS. I have three quick ones. The first one is the achieved price for 2015 Generation in Spain, and would you mind specifying if that is base load shaped, includes or not supply ancillary, so that we can compared with the current forward curves. Second question, could you tell us, if you can disclose EBITDA for Retail or at least supply activities I should say, Spain and U.K., and if not, can you give us an understanding of how these businesses have been developing in this first part of 2016 compared to last year? Third one, José my apologies, I’m going to be a big pedantic here, but if I understand correctly all the one-offs that they see in 2015 accounts Avangrid is minus $45 million, but there is another Avangrid contract one-off that you just said $57 million. So maybe that’s another $35 million I should take out. The impairment is minus $30 million, but then I have 163 of tax benefits and I also have gains from non - how do you call it, non-recurring assets basically, the $125 million you have in the P&L gross. So when I net all of these, it seems that actually the non-recurring items are something like minus €50 million or something like that. So I'm a little bit surprised to see your net income drops so much when you go from reported to recurring. I would expect the recurring to be a bit closer to the reported. So what I'm trying to say are you slightly understating the clean net income and that will be it. Thank you. Ignacio Galán: Thank you, Alberto. José Sáinz: I will start for the last one. I mean you’ve made a lot of numbers. So I will try to start by the first, and I think at the end I got lost to be honest. Now the impact of the Avangrid deal as I was mentioned, the total impact is 86 million negative, okay, gross. But part of that, for example, the cost that we’ve paid for the lawyers or the bankers or whatever, that goes to the corporate part. So out of the 86 million, 57 million which is the part that is basically the commitments that we have to do with the Connecticut regulator et cetera, that is allocated into the Networks business and the other part from 57 million to 86 million, that is allocated into the corporate business. So that is the difference between the 57 million and the 86 million. At net profit level, the net is 45 million that compares - but all included, okay, so that is why there are some different numbers in the presentation. Okay, regarding the non-recurrent items, as you know, the Group has had during the last year several non-recurrent impacts. In 2014, we had the sale of the EDP stake. We had also €113 million of the CO2. This year we have had some other positive and negative impacts, obviously the group is so big, has always some of these things. Now we could sit with you and add the different numbers, but in fact the recurrent net income has grown more than 7%. We are close to €2.3 billion. 2014 had more positive non-recurrent impacts than 2015. That doesn't mean that 2015 doesn't have some in general recurrent positive impact, but that is something that we have been explaining through the year. So what I have tried to focus is in the non-recurrent impacts that we've seen in the fourth quarter and clearly these have a negative component in the results especially in the Networks business, especially in the US, okay, so the fourth quarter - clearly if we haven't had this non-recurrent negative impacts in the fourth quarter, the results would have been close to €2.5 billion.

Can you reply already to the first two questions, one related to the price 2015 compared with 2016 and the margins in the case of Spain on the Retail and the Wholesale as a whole? José Sáinz: Okay. And I have here the information aggregated. So I can tell you that we have finished 2015 with a price around 62.4-point something I have here, but has to be confirmed. And this is quite in line with the price we are getting for the amount of energy we have sold already for 2016, that is around - the price is around 60. So the details of this can be probably go deeper on the workshop today afternoon because I don't have here all information on the different. But on the other hand, we used to have an internal transfer prices, so it's not so significant what is in each of the different components. I mean retail or wholesale price or all that. So the total is 62.4, the figure I have here, let's confirm in the afternoon workshop and that's for 2015, and for 2016 it’s around 60.

Okay, next is José Javier Ruiz from Macquarie. José Javier Ruiz: Thank you. Just one question. Could you provide us the EBITDA contribution of Longannet in 2015 and West Duddon Sands? If that is not available, I would be happy with an answer if the closing of Longannet is fully compensated at EBITDA level with the entry of West Duddon Sands? Thank you. Ignacio Galán: It's more than compensated. I mean the EBITDA at the Generation business is only €10 million. Actually obviously Longannet is being closed because due to the CO2 - I mean the company is marginally profitable at the EBITDA level if it is profitable, and obviously West Duddon Sands is putting a lot of, I would say, tens of millions of pounds into the EBITDA level. José Javier Ruiz: So I think they both are - they are not much in one to other one [ph], one was already a problem, another one is a real, really good business.

Is there more questions? We have Stefano Bezzato from Credit Suisse.

Stefano Bezzato, Credit Suisse. Just one quick question on your Mexico EBITDA. Do you have any one-off in their positive one-off or shall we see that as that $500 million as a base for future years? Thank you. Ignacio Galán: No, they have not one-off this year and I think not only that, they base I think is that is we expect to grow because of the investment we are making already in Mexico. I think in this moment they are 1,600 megawatt under construction, which we want to be completed in next two, three years with 30% profit, 30% more power install than the existing one. So I think that is we expect to ready that is going to be one of the growing recent area.

Pablo Cuadrado and then Martin Young now, sorry.

Yes, hi. It’s Martin Young from RBC. Just one question. You mentioned in respect of the slide that for 2016, in the pack that you were looking for a mid-single-digit increase in net profit for 2016. Could you just clarify whether that's in relation to the reported net income or the recurring net income? Thank you. José Sáinz: I think that basically the mid-single-digit growth is going to be in the reported net income, and in the recurrent net income as we were talking with the Alberto, will trend towards the reported net income. So I will say that in the recurrent net income, we are expecting a high single-digit, really high single-digit growth. So that will converge to the reported net income.

Pablo, would you like to…

Hi good morning. It’s Pablo Cuadrado from HSBC. Just two quick questions on 2016. I was wondering whether you can provide a little bit of guidance on the DNA that you will expect to have during 2016, assuming basically that you won't have the same level of provisions that you have accounted in 2015. And second on the cost of debt that has decreased again 30 basis points last year. Where do you see that for to account during this year? Thank you. José Sáinz: Yes, so in terms of cost of debt, we are going to be clearly below 4%. I think that we probably will be somewhere around, I would say 3.7%. And obviously in amortizations and depreciations, we are expecting a decrease obviously from the provisions that we have had in 2015, because we don't have this Longannet impairment, so actually DNA will improve in 2016.

Okay. Any additional question in the room? We have some questions from Javier Suárez [ph] through the web. And the first one is related to Avangrid. He is asking, your U.S. subsidiary has cut quite significantly its guidance for 2016, versus their previous presentation of February 2015. Can you guide us through the reason for these changes? How your 1.9 billion CapEx per year compares with the CapEx plan you presented in last presentation in 2015, and is the CapEx increased or decreased regarding Avangrid? Second one is about Generation in Spain. Is the company still thinking on the closure of capacity or as a consequence of the economic recovery this could be reconsidered, which are your expectation for the electricity demand and prices during the next three years in light of in back coordination in Q4? The third question his U.K. Generation, environmental regulatory is coming tougher with more attention to versus supply margins, which is the strategy [indiscernible] to this tougher environment for the Liberalized activities in the U.K. And finally, the fourth one is about Brazil. Can you give us an update on the situation of Brazilian distributors in light of the significant economic deceleration there? Ignacio Galán: James, do you mind to reply the first one related to the Avangrid, which is the result of 2016 expectation and the investment that you are expecting for 2016 comparison with the previous outlook that you gave already?

The earnings related to that we had from roughly $2.25 a share that we put out in 2015 versus the $2 now is related to commodity prices for our Renewables business primarily. Commodity prices are down significantly in both the gas area and in electric, so it's really a matter of price. And then also UIL’s electric subsidiary would have filed a rate case had we not done the merger, so that affected it slightly. As far as the capital expenditures go, it's about the same as it was previously. We had said we'd spend 6.9 billion over the first five years, now we are at 6.7 billion averaging about 1.9% and that did not include the Renewables business which will be spending 1.4 billion over the first two years and then 2.8 billion over the five-year period, so that capital spending is about the same. Ignacio Galán: So related to the next three question, Ignacio, I think all the three are already related to the next session. So I think we will talk about what is going to be prices, our expectation in prices for the next few years which is going to be our policy in terms of power generation and spend other countries and we will mention as well what it is our strategy really related to Brazil. So I think with all these things later on we will comment on those ones. So...

I agree. Okay so now we are going to have a five minutes break. Just the time to distribute to you the booklet of the strategic presentation. Thank you.