IBERDROLA Reaches an Agreement to Acquire Energy East for $4.5 Billion

IBERDROLA Reaches an Agreement to Acquire Energy East for $4.5 Billion

The Agreement Reinforces the Global Leadership of IBERDROLA

The Boards of IBERDROLA S.A. and Energy East Corporation (NYSE: EAS) , meeting today in Madrid and New York, respectively, have approved a merger agreement under which IBERDROLA will acquire 100% of Energy East, which will become part of the IBERDROLA group.

According to the terms of the merger agreement, the shareholders of Energy East would receive $28.50 in cash per share at closing, representing a premium of 20.2% over Energy East’s average closing stock price for the 30 day period ending June 22, 2007 (27.4% over Energy East’s closing stock price on June 22, 2007).

The transaction values Energy East at approximately 6,400 million euros ($8.6 billion) in terms of enterprise value (market equity value plus net debt).

IBERDROLA will analyze different financing alternatives for the transaction and will select the one which best meets its requirements from the point of view of maintaining its financial solidity and ratings.

The transaction is subject to approval by the shareholders of Energy East, Federal and State authorizations, and other customary closing conditions and is expected to close in 2008.

IBERDROLA Chairman and CEO, Ignacio Galan said, “The combination with Energy East fits with the philosophy of our Strategic Plan, will serve to enhance the international expansion we initiated several years ago in markets with stable growth, and consolidates our position as one of the world’s leading electricity companies.”

Galan said “the acquisition of Energy East will allow IBERDROLA to strengthen its commitment to shareholders, improving Group results, dividends and profitability. It will also enhance our commitment to customers, through improved quality of supply, and to society, contributing to sustainable development thanks to our world leadership in renewable energy and to increased investments devoted to reducing emissions.

“This new step in the United States will allow IBERDROLA to continue working with national and State governments to make investments in infrastructure that advance clean energy policies; we welcome Energy East’s employees and look forward to leveraging our experience to help address some of the most challenging energy and environmental issues in the Northeastern US,” concluded Galan.

“This transaction is a unique opportunity to deliver enhanced value to Energy East’s shareholders and to build a stronger future for our company, employees and the states we serve,” said Wes von Schack, Chairman and Chief Executive Officer of Energy East.

“The energy industry is at a major inflection point,” continued von Schack. “Policymakers now recognize the need for our industry to make significant investments in our energy infrastructure. Our objective is to team with the States in which we do business to help meet the goals they have established to increase renewable sources of energy, improve energy efficiency, and invest in a secure and reliable energy infrastructure. We believe our combination with IBERDROLA will not only accelerate our progress but will transform the way we do business.”

“Furthermore, while IBERDROLA is a global energy company, its operations are managed locally. I’m therefore delighted to assure Energy East’s three million customers that they can continue to rely on the same local people whom they’ve come to know and trust to provide exceptional customer service,” concluded von Schack.

IBERDROLA’s expertise and track record in all aspects of delivering sustainable, clean energy make it a strong partner to help support and advance Energy East’s efforts. In particular, IBERDROLA has made almost $4 billion in transmission and distribution investments over the past three(2) years and has been successful in initiatives that have reduced customer demand and peak consumption. Its significant engineering and construction resources place it at the leading edge of environmental technologies.