iberdrola, s.a. · 2018-04-23 · offering memorandum iberdrola finance ireland limited...
TRANSCRIPT
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OFFERING MEMORANDUM
IBERDROLA FINANCE IRELAND LIMITED(incorporated with limited liability in Ireland but with its tax residence in Spain)
$1,000,000,000 3.800% Notes Due 2014
$1,000,000,000 5.000% Notes Due 2019
each unconditionally and irrevocably guaranteed by
IBERDROLA, S.A.(incorporated with limited liability in Spain)
Iberdrola Finance Ireland Limited (the ‘‘Issuer’’) is offering (the ‘‘Offering’’) $1,000,000,000 aggregate principal amount 3.800%
Notes Due 2014 (the ‘‘A Notes’’) and $1,000,000,000 aggregate principal amount 5.000% Notes Due 2019 (the ‘‘B Notes’’ and,
together with the A Notes, the ‘‘Notes’’), each with a direct, unconditional and irrevocable guarantee (the ‘‘Guarantee’’) from
Iberdrola, S.A. (the ‘‘Guarantor’’ or ‘‘Iberdrola’’), as further described in this offering memorandum under ‘‘Terms and Conditions
of the Notes’’ and ‘‘Form of Guarantee.’’
The Notes will bear interest from September 11, 2009 payable semi-annually in arrears on March 11 and September 11 in each
year, commencing on March 11, 2010.
The Notes will be unsecured and will rank equally in right of payment with the Issuer’s other unsecured and unsubordinated
indebtedness. The Guarantee will be unsecured and will rank equally in right of payment with the Guarantor’s other unsecured and
unsubordinated indebtedness. Under certain conditions, the Issuer and the Guarantor may substitute for the Issuer any company
which is wholly-owned by the Guarantor, as further described in this offering memorandum under ‘‘Terms and Conditions of the
Notes—Substitution.’’
Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on its
regulated market. This offering memorandum has been approved by the Irish Financial Services Regulatory Authority (the
‘‘Financial Regulator’’), as competent authority under Prospective Directive 2003/71/EC (the ‘‘Prospectus Directive’’). The Financial
Regulator only approves this offering memorandum as meeting the requirements imposed under Irish and EU law pursuant to the
Prospectus Directive.
The Notes are redeemable in whole, but not in part, at any time upon the occurrence of certain tax events described herein. In
addition, the Issuer may redeem the Notes, in whole or in part, at any time at the greater of 100% of the principal amount or a
make-whole amount described herein, in each case plus accrued interest to but not including the redemption date. If the Guarantor
experiences a change of control repurchase event as described herein, the Issuer will be required to offer to repurchase or procure
an offer to purchase the Notes from Noteholders.
An investment in the Notes involves certain risks. See ‘‘Risk Factors’’ beginning on page 21.
Prospective investors should note that the Issuer is incorporated in Ireland but tax-resident in Spain. Therefore, any income derived
by owners of a beneficial interest in the Notes (each, a ‘‘Beneficial Owner’’) that are not resident in Spain for tax purposes from
interest on, or the redemption of or repayment of, the Notes will be subject to Spanish Non-resident Income Tax (currently at the
rate of 18%) by way of withholding, except in the case of Beneficial Owners in respect of whom the Issuer or the Guarantor
receives information (which may include a tax residence certificate) concerning such Beneficial Owner’s identity and tax residence as
the Issuer and the Guarantor require in order to comply with Spanish tax laws and regulations. The Issuer and the Guarantor have
arranged certain procedures with Acupay System LLC (‘‘Acupay’’), The Depository Trust Company (‘‘DTC’’) and Euroclear Bank
S.A./N.V. (‘‘Euroclear’’) to facilitate the collection of such information. See ‘‘Tax Considerations—Taxation in Spain.’’
The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the ‘‘Securities Act’’), or the
securities laws of any other jurisdiction. Accordingly, the Notes are being offered and sold within the United States only to qualified
institutional buyers (‘‘QIBs’’) in reliance on Rule 144A under the Securities Act (‘‘Rule 144A’’) and outside the United States in
compliance with Regulation S under the Securities Act (‘‘Regulation S’’). Prospective purchasers that are QIBs are hereby notified that
the seller of any of the Notes is relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule
144A. For a description of certain restrictions on transfers of the Notes, see ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions.’’
Investment in the Notes does not have the status of a bank deposit and is not within the scope of any deposit protection scheme
operated by the Financial Regulator. The Issuer is not regulated by the Financial Regulator by virtue of the issue of the Notes or
otherwise.
Price of the A Notes: 99.829% plus accrued interest, if any, from September 11, 2009
Price of the B Notes: 99.363% plus accrued interest, if any, from September 11, 2009
The Initial Purchasers expect to deliver the Notes to purchasers in book-entry form only through the facilities of DTC and
Euroclear on or about September 11, 2009.
Citi
Global Coordinator
Barclays Capital BofA Merrill Lynch Citi Goldman, Sachs & Co.
Joint Book-Running Managers
The date of this offering memorandum is September 10, 2009.
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IMPORTANT INFORMATION
The Issuer and the Guarantor accept responsibility for the information contained in this offering
memorandum. To the best of the knowledge of the Issuer and the Guarantor (each having taken all
reasonable care to ensure that such is the case), the information contained in this offering
memorandum is in accordance with the facts and does not omit anything likely to affect the importof such information.
None of Banc of America Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc.
nor Goldman, Sachs & Co. (together, the ‘‘Initial Purchasers’’) makes any representation, warranty or
undertaking, express or implied, and no responsibility or liability is accepted by the Initial Purchasersas to the accuracy or completeness of the information contained in this offering memorandum or any
other information provided by the Issuer or the Guarantor in connection with the Notes or the
Guarantee.
In making an investment decision, investors must rely upon their own examination of Iberdrola,the Issuer and Iberdrola’s other subsidiaries and the terms of the offer being made, including the
merits and risks involved. Prospective investors should not construe anything in this offering
memorandum as legal, business or tax advice. Each prospective investor should consult its own
advisors as needed to make its investment decision and to determine whether it is legally permitted to
purchase the securities under applicable legal investment or similar laws or regulations.
You should rely only on the information contained in this offering memorandum. Neither we
nor any of the Initial Purchasers has authorized anyone to provide potential investors with
information different from that contained in this offering memorandum. The statements contained in
this offering memorandum are made only as of the date of this offering memorandum, regardless of
the time of delivery of this offering memorandum or any sale of the Notes. Neither the delivery of
this offering memorandum nor any offer, sale, allotment or solicitation made in connection with the
offering of the Notes shall, under any circumstances, constitute a representation or create any
implication that there has been no change in our affairs or the information contained herein since thedate hereof.
You should understand that you will be required to bear the financial risks of your investment
for an indefinite period of time. The Notes are subject to restrictions on transferability and resale and
may not be transferred or resold except as permitted under applicable U.S. federal and state securitieslaw pursuant to an effective registration statement or an exemption from registration. There is no
intention to register the Notes for resale, or to exchange a new series of registered notes and
guarantees for the securities offered pursuant to this offering memorandum.
None of the U.S. Securities and Exchange Commission (the ‘‘SEC’’), any state securities
commission nor any other regulatory authority has approved or disapproved the securities offeredpursuant to this offering memorandum or passed upon or endorsed the merits of this Offering or the
adequacy or accuracy of this offering memorandum. Any representation to the contrary is a criminal
offense.
IN CONNECTION WITH THE ISSUE OF THE NOTES, CITIGROUP GLOBAL MARKETSINC. (THE ‘‘STABILIZING MANAGER’’) OR ANY PERSON ACTING ON BEHALF OF THE
STABILIZING MANAGER MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH
A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER
THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO
ASSURANCE THAT THE STABILIZING MANAGER OR ANY PERSON ACTING ON BEHALF
OF THE STABILIZING MANAGER WILL UNDERTAKE ANY STABILIZING ACTION. ANY
STABILIZING ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE
PUBLIC DISCLOSURE OF THE TERMS OF OFFER OF THE NOTES IS MADE AND, IFBEGUN, MAY BE ENDED AT ANY TIME BUT MUST BE BROUGHT TO AN END NO
LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE NOTES AND
60 DAYS AFTER THE DATE OF ALLOTMENT OF THE NOTES. FOR A DISCUSSION OF
THESE ACTIVITIES, SEE ‘‘PLAN OF DISTRIBUTION.’’ ANY STABILIZATION ACTION OR
OVER-ALLOTMENT MUST BE CONDUCTED BY THE STABILIZING MANAGER OR ANY
PERSON ACTING ON BEHALF OF THE STABILIZING MANAGER IN ACCORDANCE WITH
ALL APPLICABLE LAWS AND RULES.
The Notes offered pursuant to this offering memorandum have not been registered under the
Securities Act, or the securities laws of any other jurisdiction or with any securities regulatory
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authority of any state or other jurisdiction of the United States. The offering of the Notes is being
made in reliance on an exemption from registration under the Securities Act for offers and sales of
securities that do not involve a public offering. By purchasing Notes, you will be deemed to have
made the acknowledgments, representations, warranties and agreements applicable to you as set forthin this offering memorandum under ‘‘Transfer Restrictions.’’ The Notes are being offered and sold
within the United States only to QIBs, as defined in, and in reliance on, Rule 144A. The Notes are
also being offered outside the United States in compliance with Regulation S.
This offering memorandum comprises a prospectus for the purposes of the Prospectus Directive
and the Prospectus Regulations 2005 and for the purposes of giving information with regard to us
and the Notes in connection with the application to the Irish Stock Exchange for the Notes to be
admitted to the Official List and trading on its regulated market.
The Notes may not be offered or sold in Spain except in accordance with the requirements of
the Spanish Securities Market Law (Law 24/1988, of July 28, 1988, on the securities market (‘‘SML’’),
as amended and restated (and in particular Royal Decree 5/2005) and Royal Decree 1310/2005 onadmission of securities to trading, public offerings and prospectuses (‘‘RD1310/2005’’) as amended
and restated), and the decrees and regulations made thereunder. The Notes may not be sold, offered
or distributed to persons in Spain except: (i) in circumstances which do not constitute a public
offering of securities in Spain within the meaning of Article 38 of Royal Decree 1310/2005; or (ii)
subject to one of the exceptions of the prospectus requirements envisaged in Article 41 of Royal
Decree 1310/2005.
This offering memorandum has not been approved or registered in the administrative Registries
of the Spanish National Securities Market Commission (‘‘Comisión Nacional del Mercado de Valores’’
or the ‘‘CNMV’’) and may not be distributed in Spain in connection with the offer and sale of theNotes.
This offering memorandum does not constitute a prospectus approved as such by the UK
Listing Authority pursuant to the Prospectus Rules of the Financial Services Authority made
pursuant to Part VI of the Financial Services and Markets Act 2000 (‘‘FSMA’’) (the ‘‘Prospectus
Rules’’). This offering memorandum is only being distributed to and is only directed at (i) persons
who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of
the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the ‘‘Order’’) or (iii)
persons falling within Article 49(2)(a) to (d) (‘‘high net worth companies, unincorporated associations,
etc.’’) of the Order (all such persons together being referred to as ‘‘relevant persons’’). The Notes areonly available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire
such Notes will be engaged in only with, relevant persons. Any person who is not a relevant person
should not act or rely on this offering memorandum or any of its contents.
This offering memorandum has been prepared on the basis that any offer of Notes in any
Member State of the European Economic Area which has implemented the Prospectus Directive (each
a ‘‘Relevant Member State’’) will be made pursuant to an exemption under the Prospectus Directive,
as implemented in that Relevant Member State, from the requirement to publish a prospectus for
offers of Notes. Accordingly, any person making or intending to make an offer in that Relevant
Member State of Notes which are the subject of the Offering may only do so in circumstances inwhich no obligation arises for the Issuer, the Guarantor or any of the Initial Purchasers to publish a
prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to
Article 16 of the Prospectus Directive, in each case, in relation to the Offering. None of the Issuer,
the Guarantor or the Initial Purchasers has authorized, nor does any of them authorize, the making
of any offer of Notes in circumstances in which an obligation arises for the Issuer, the Guarantor or
the Initial Purchasers to publish or supplement a prospectus for such offer.
This offering memorandum has been prepared by us solely for use in connection with the
proposed Offering. This offering memorandum is personal to each offeree and does not constitute an
offer to any other person or to the public generally to subscribe for or otherwise acquire securities.
The distribution of this offering memorandum, as well as the disclosure of any of its contents,and the offering or sale of the Notes in certain jurisdictions is restricted by law. This offering
memorandum may not be used for, or in connection with, and does not constitute, any offer to, or
solicitation by, anyone in any jurisdiction in which it is unlawful to make such an offer or
solicitation. Persons into whose possession this document may come are required by us and the Initial
Purchasers to inform them about and to observe such restrictions. Neither we nor any of the Initial
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Purchasers accept any responsibility for any violation by any person, whether or not he, she or it is a
prospective purchaser of the Notes, of any such restrictions.
We reserve the right to withdraw this offering of Notes at any time, and we, together with the
Initial Purchasers, reserve the right to reject any commitment to subscribe for the Notes, in whole or
in part. We also reserve the right to allot to you less than the full amount of Notes sought by you.
Notwithstanding anything to the contrary contained herein, each prospective investor (and each
employee, representative, or other agent of each prospective investor) may disclose to any and all
persons, without limitation of any kind, the tax treatment and tax structure of the transactions
described in this offering memorandum and all materials of any kind that are provided to the
prospective investor relating to such tax treatment and tax structure (as such terms are defined inUnited States Treasury Regulation Section 1.6011-4), other than any information for which
nondisclosure is reasonably necessary in order to comply with applicable securities laws. This
authorization of tax disclosure is retroactively effective to the commencement of discussions with
prospective investors regarding the transactions contemplated herein.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION
FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B (‘‘RSA 421-B’’) OF THE NEW
HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE, NOR THE
FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN
THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF
STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE,
COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT
AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTIONMEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY
PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE
MADE TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY
REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
SPANISH WITHHOLDING TAX REQUIREMENTS
Under Spanish law, interest payments and other financial income derived from the Notes will be
subject to withholding tax in Spain, currently at the rate of 18%, as discussed in ‘‘Tax
Considerations—Taxation in Spain.’’ Each of the Issuer and the Guarantor is required pursuant to
Spanish law and regulations to submit to the tax authorities of Spain or one of its administrative
subdivisions, as the case may be (‘‘Spanish Tax Authorities’’), certain details relating to Beneficial
Owners who receive payments of interest or income from the redemption or repayment of the Notespaid by the Issuer or the Guarantor. Beneficial Owners in respect of whom such information is not
provided to the Issuer or the Guarantor in accordance with the procedures described herein will
receive payments net of Spanish withholding tax, currently at the rate of 18%. Neither the Issuer nor
the Guarantor will pay additional amounts in respect of any such withholding tax in any of the
above cases.
The Issuer and the Guarantor have arranged certain procedures with Acupay, DTC and
Euroclear that will facilitate the collection of information regarding the identity and tax residence of
Beneficial Owners who (i) are exempt from Spanish withholding tax requirements and therefore
entitled to receive payments derived from the Notes from the Issuer or the Guarantor free and clear
of Spanish withholding taxes and (ii) are (a) direct participants in DTC (‘‘Direct DTC Participants’’),
(b) hold their interests through securities brokers, dealers, banks, trust companies, or clearingcorporations that clear through or maintain a direct or indirect custodial relationship with a Direct
DTC Participant (‘‘Indirect DTC Participants’’), such as Euroclear, or (c) hold their interests through
Direct DTC Participants. These procedures are set forth in Annexes A, B and C to this offering
memorandum. The Issuer, the Guarantor and Acupay, as tax certification agent, will enter into a tax
certification agency agreement as of the issue date of the Notes (the ‘‘Tax Certification Agency
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Agreement’’) and agree, so long as any principal amount of the Notes remains outstanding, to
comply with the procedures set forth in Annexes A, B and C to this offering memorandum to
facilitate the collection of information concerning the identity and tax residence of Beneficial Owners,
provided that such collection is required under Spanish law to allow payments from the Issuer andthe Guarantor of interest and income from the redemption or repayment of the Notes free and clear
from Spanish withholding tax. However, neither the Issuer nor the Guarantor can assure you that it
will be practicable to do so. Beneficial Owners may not be beneficiaries under the Tax Certification
Agency Agreement.
Beneficial Owners must seek their own tax advice to ensure that they comply at all times with
all procedures with respect to providing Beneficial Owner information. None of the Issuer, theGuarantor, the Initial Purchasers, Acupay, DTC or Euroclear assumes any responsibility therefor. In
addition, no arrangements or procedures concerning the collection of information for this purpose
have been made by the Issuer or the Guarantor with respect to any depository or clearing system
other than the procedures arranged by Acupay, DTC and Euroclear mentioned above.
Neither DTC nor Euroclear is under any obligation to continue to perform such procedures and
such procedures may be modified or discontinued at any time. In addition, DTC may discontinue
providing its services as securities depositary with respect to the Notes at any time.
These procedures may be modified, amended or supplemented to reflect a change in applicable
Spanish law, regulation, or any judicial or administrative interpretation thereof or to reflect a change
in applicable clearing systems rules or procedures or to add procedures for one or more new clearing
systems.
In particular, the tax certification procedures described above will have to be modified, amended
or supplemented, as the case may be, once new regulations setting forth the procedural rules forcomplying with the provisions of Law 13/1985, of May 25, 1985, as amended, or equivalent law are
eventually promulgated. See a more detailed explanation in ‘‘Tax Considerations—Taxation in
Spain—Evidencing of Beneficial Owner Residency in Connection with Interest Payments.’’
The tax certification procedures set forth in Annexes A, B and C to this offering memorandum
provide that payments of interest or income from the redemption or repayment of the Notes to any
DTC participants that fail for any reason to comply with the procedures set forth herein for the
provision of the required information in respect of all Beneficial Owners who are entitled to anexemption from Spanish withholding tax and who own their beneficial interests in the Notes through
such DTC participants, will be paid net of Spanish withholding tax in respect of such DTC
participant’s entire beneficial interest in the Notes. For further information, see ‘‘Risk Factors—Risks
Relating to Certain Taxation Matters.’’ In particular, should the required Beneficial Owner
information submitted by a Direct DTC Participant to Acupay be inconsistent with its EDS Elections
(as defined in Article I (A)(2) of Annex A to this offering memorandum) and/or DTC holdings in the
Notes on any Interest Payment Date, then such Direct DTC Participant will be paid net of Spanish
withholding tax with respect to such Direct DTC Participant’s entire holding in the Notes. If thiswere to occur, affected Beneficial Owners who hold their beneficial interests in the Notes directly or
indirectly through such Direct DTC Participant (other than Beneficial Owners who hold their
beneficial interests in the Notes through Euroclear or participants in Euroclear) would be required to
follow the Quick Refund Procedures set forth in Article II of Annex A to this offering memorandum.
Affected Beneficial Owners who hold their beneficial interests in the Notes through Euroclear or
participants in Euroclear would be required to follow the Quick Refund Procedures set forth in
Article II of Annex B to this offering memorandum. Beneficial Owners who are not or do not hold
their Notes through a Qualified Institution (as defined in ‘‘Tax Considerations—Taxation in Spain—Evidencing of Beneficial Owner Residency in Connection with Interest Payments’’) or fail to follow
the Quick Refund Procedures set forth in Annex A or Annex B, as applicable, may also apply
directly to the Spanish Tax Authorities for any refund to which they may be entitled pursuant to the
procedures set forth in Article II of Annex C to this offering memorandum. See ‘‘Tax
Considerations—Taxation in Spain—Evidencing of Beneficial Owner Residency in Connection with
Interest Payments’’ and ‘‘Risk Factors—Risks Relating to Certain Taxation Matters.’’ Neither the
Issuer nor the Guarantor will pay any additional amounts with respect to any such withholding. If
DTC, the Direct DTC Participants or the Indirect DTC Participants (including Euroclear) are unableto facilitate the collection of the required Beneficial Owner information, the Issuer may attempt to
remove the Notes from DTC, and this may affect the liquidity of the Notes. Provision has been made
for the Notes to be exchangeable for definitive Notes under certain circumstances. See ‘‘Form of
Notes.’’
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The Issuer and the Guarantor, as applicable, may, in the future, withhold amounts from
payments for the benefit of Beneficial Owners who are subject to Corporate Income Tax in Spain if
the Spanish Tax Authorities determine that the Notes do not comply with exemption requirements
specified in a ruling issued by the General Directorate for Taxation (Dirección General de Tributos)dated July 27, 2004 (notably, that the Notes are placed outside of Spain and in another OECD
country) and require a withholding to be made. If this were to occur, neither the Issuer nor the
Guarantor will pay additional amounts in respect of such withholding. See ‘‘Tax Considerations—
Taxation in Spain—Legal Entities with Tax Residency in Spain—Corporate Income Tax (Impuesto
sobre Sociedades).’’
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TABLE OF CONTENTS
Important Information ..................................................................................................................... 2
Market Share, Ranking and Other Data ......................................................................................... 8
Special Note Regarding Forward-Looking Statements.................................................................... 8
Available Information ...................................................................................................................... 9
Service of Process and Enforcement of Liabilities ........................................................................... 9
Presentation of Financial and Other Information............................................................................ 10
Exchange Rate Information ............................................................................................................. 13
Overview ........................................................................................................................................... 14
Summary Terms of the Offering ...................................................................................................... 16
Risk Factors ..................................................................................................................................... 21
Use of Proceeds ................................................................................................................................ 38
Capitalization.................................................................................................................................... 39
Selected Historical Consolidated Financial Data ............................................................................. 40
Management’s Discussion and Analysis of Financial Condition and Results of Operations.......... 44
Business............................................................................................................................................. 90
Regulation......................................................................................................................................... 120
Principal Shareholders of Iberdrola ................................................................................................. 140
Management ..................................................................................................................................... 141
The Issuer ......................................................................................................................................... 152
The Guarantor.................................................................................................................................. 154
Form of Notes .................................................................................................................................. 155
Terms and Conditions of the Notes ................................................................................................. 157
Form of Guarantee........................................................................................................................... 176
Book-Entry Clearance Systems ........................................................................................................ 181
Tax Considerations........................................................................................................................... 184
Plan of Distribution.......................................................................................................................... 195
Transfer Restrictions ........................................................................................................................ 198
Legal Matters.................................................................................................................................... 200
Independent Accountants ................................................................................................................. 201
General Information......................................................................................................................... 202
Annex A Spanish Withholding Tax Documentation Procedures for Notes Held Through an
Account at DTC .......................................................................................................................... 204
Annex B Spanish Withholding Tax Documentation Procedures for Notes Held through an
Account at Euroclear ................................................................................................................... 209
Annex C Forms of Required Spanish Withholding Tax Documentation and Procedures for Direct
Refunds from Spanish Tax Authorities ....................................................................................... 214
Index to Financial Statements .......................................................................................................... F-1
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MARKET SHARE, RANKING AND OTHER DATA
Unless otherwise specified or the context requires otherwise, the market share, ranking and other
data contained in this offering memorandum are based either on our management’s own estimates,
independent industry publications, reports by market research firms or other published independent
sources and, in each case, are believed by each of our management to be reasonable estimates.Although we believe that these sources are reliable, we have not independently verified and do not
guarantee the accuracy and completeness of such information. Where information has been sourced
from a third party, we confirm that this information has been accurately reproduced.
Additionally, market share data is subject to change and cannot always be verified with
complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of
the data gathering process and other limitations and uncertainties inherent in any statistical survey of
market share. In addition, consumption patterns and consumer preferences can and do change. As aresult, you should be aware that a market share, ranking and other similar data set forth herein may
not be accurate and thus any estimates and beliefs based on such data may not be reliable.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This offering memorandum contains forward-looking statements that reflect our intentions,
beliefs or current expectations and projections about our future results of operations, financialcondition, liquidity, performance, prospects, anticipated growth, strategies, plans, trends and the
markets in which we operate. The words ‘‘aims,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘contemplates,’’
‘‘continues,’’ ‘‘could,’’ ‘‘estimates,’’ ‘‘expects,’’ ‘‘intends,’’ ‘‘may,’’ ‘‘objectives,’’ ‘‘plans,’’ ‘‘projects,’’
‘‘should,’’ and similar expressions commonly identify those forward-looking statements. Forward-
looking statements may be found in sections of this offering memorandum entitled ‘‘Risk Factors,’’
‘‘Management’s Discussion and Analysis of Financial Conditions and Results of Operations,’’
‘‘Business,’’ and elsewhere in this offering memorandum. Although we believe that the expectations
reflected in forward-looking statements are reasonable, we can give no assurance that these forward-looking statements will materialize or prove to be correct. These forward-looking statements involve
known and unknown risks, uncertainties and other factors, which may cause our actual results,
performance or achievement or the industry results to be materially different from those expressed or
implied by these forward-looking statements. These forward-looking statements are based on
numerous assumptions regarding our present and future business strategies and the environment in
which we expect to operate in the future and relate to, among other things:
* our inability to comply with or changes in applicable regulations;
* our tariff deficit obligations related to our electricity generation operations in Spain;
* our compliance with and costs related to extensive environmental regulation, national and
international standards relating to climate change and other potential environmental and other
liabilities;
* involvement in litigation and other proceedings;
* the impact of market risks affecting the volume of, and price for, electricity and natural gas and
the cost of fuel used in generating electricity;
* exposure to country-specific business and operational risks outside of Spain, the United
Kingdom and the United States;
* the effect of any modifications to or discontinuation of certain tax benefits and incentives;
* variable climatic conditions;
* risks relating to construction of new facilities;
* service interruptions arising from malfunction, operational error, natural and man-made disasters
or other events beyond our control;
* exposure to foreign exchange rate fluctuations and currency devaluations, interest rate risk,
liquidity risk and counterparty credit risk;
* the possibility that certain loan repayments will be accelerated or that additional guarantees will
be required;
* liberalization and competition in the electricity industry;
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* labor disruptions;
* difficulties in comparing financial periods;
* uncertainty of the success of the integration of potential future acquisitions;
* the effect of recent unprecedented and challenging market and economic conditions; and
* other factors described in this offering memorandum, including, but not limited to, thoseincluded in the section ‘‘Risk Factors.’’
In light of these risks, uncertainties and assumptions, the forward-looking events described inthis offering memorandum may not occur. Additional risks that we may currently deem immaterial or
that are not presently known to us could also cause the forward-looking events discussed in this
offering memorandum not to occur. We expressly disclaim any obligation or undertaking to update
or revise any forward-looking statements, whether as a result of new information, future events,
changed circumstances or any other reason after the date of this offering memorandum. Accordingly,
prospective investors are cautioned not to place undue reliance on these and other forward-looking
statements.
AVAILABLE INFORMATION
To permit compliance with Rule 144A in connection with any resales or other transfers of
Notes that are ‘‘restricted securities’’ within the meaning of the Securities Act, each of the Issuer and
the Guarantor will undertake in a deed poll expected to be dated on or about September 11, 2009
(the ‘‘Rule 144A Deed Poll’’) to furnish, upon the request of a holder of such Notes or any beneficial
interest therein, to such holder or to a prospective purchaser designated by such holder, theinformation required to be delivered under Rule 144A(d)(4) under the Securities Act if, at the time of
the request, the Issuer or the Guarantor, as the case may be, is neither a reporting company under
Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’),
nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder. See also ‘‘General Information.’’
SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES
The Issuer is a limited liability company incorporated under the laws of Ireland. All of the
officers and directors named herein reside outside the United States and a substantial portion of the
assets of the Issuer and of such officers and directors are located outside the United States. As a
result, it may not be possible for investors to effect service of process outside Ireland (including in
Spain) upon the Issuer or such persons, or to enforce judgments against them obtained in courts
outside Ireland (including Spanish courts) predicated upon civil liabilities of the Issuer or such
directors and officers under laws other than Irish law, including any judgment predicated upon
United States federal securities laws.
The Guarantor is a public limited company (sociedad anónima) incorporated under the laws of
Spain. All of the officers and directors named herein reside outside the United States and asubstantial portion of the assets of the Guarantor and of such officers and directors are located
outside the United States. As a result, it may not be possible for investors to effect service of process
outside Spain upon the Guarantor or such persons, or to enforce judgments against them obtained in
courts outside Spain predicated upon United States federal securities laws.
In addition, we acknowledge that there is doubt as to whether a lawsuit based upon U.S.
federal or state securities laws could be brought in an original action in Spain and as to whether a
foreign judgment based upon U.S. securities laws would be enforced in Spain. See ‘‘Risk Factors—
Risks Arising in Connection with Certain Insolvency Laws.’’
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PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Financial Information
The following financial statements and financial information have been included in this offering
memorandum:
* the unaudited consolidated financial statements of Iberdrola and its subsidiaries as of and for
the six months ended June 30, 2008 and 2009, each prepared in accordance with International
Financial Reporting Standards, as adopted by the European Union (‘‘IFRS-EU’’);
* the audited consolidated financial statements of Iberdrola and its subsidiaries as of and for the
years ended December 31, 2006, 2007 and 2008, each prepared in accordance with IFRS-EU
and audited by Ernst & Young, S.L.; and
* the audited financial statements of Iberdrola Finance Ireland Limited as of and for the period
from May 1, 2008 (the Issuer’s date of incorporation) and ended December 31, 2008, prepared
in accordance with IFRS and audited by Ernst & Young at Harcourt Centre.
Our consolidated financial statements and the financial statements of the Issuer are published in
euro and prepared in euro in accordance with IFRS, which differs in certain respects from U.S.
GAAP.
We completed significant acquisitions in 2007 and 2008, and, as a result, prospective investors
may find comparing recent financial periods to be difficult. We have not prepared pro forma financials
of Iberdrola reflecting these transactions.
* We acquired ScottishPower on April 23, 2007, for approximately A19,314 million. The purchaseprice consisted of A9,466 million in cash and 261,886,329 of our ordinary shares (calculatedbefore the 1 to 4 split of our shares, effective October 8, 2007). The acquisition of
ScottishPower significantly increased our presence in the United Kingdom and the United States.
Based upon the most recent audited financial statements prior to the date of the acquisition,ScottishPower’s revenues and total assets (as of and for its fiscal year ended March 31, 2007)
comprised approximately 82.6% and 46.7% of our revenues and total assets, respectively, as of
and for our fiscal year ended December 31, 2006 (translating ScottishPower’s reported results in
pounds sterling into euro using the exchange rate of £0.67/A1.00 as of December 31, 2006). Forour consolidated financial statements as of and for the year ended December 31, 2007, we
consolidated the accounts of ScottishPower as of April 23, 2007 (the date we acquired
ScottishPower) which are included in our ScottishPower reporting segment, as described further
in the section entitled ‘‘Management’s Discussion and Analysis of Financial Conditions andResults of Operations,’’ from such date and therefore are part of our consolidated financial
information in 2007 for approximately eight months as compared to the entire year in 2008. In
addition, with respect to segment information in 2007, the ScottishPower wind energy business
in the United Kingdom and the United States and natural gas storage, thermal energy
generation and energy management activities in the United States were included in the
ScottishPower reporting segment from April 23, 2007 to September 30, 2007 only, and on
October 1, 2007 were transferred to the Renewable Energy reporting segment.
* We acquired Energy East on September 16, 2008, for a purchase price of approximately A3,194million in cash. The acquisition of Energy East significantly increased our presence in the
northeast of the United States. Based upon the most recent audited financial statements prior to
the date of the acquisition, Energy East’s revenues and total assets (as of and for the year endedDecember 31, 2007) comprised approximately 21.3% and 12.7% of our revenues and total assets,
respectively, as of and for our fiscal year ended December 31, 2007 (translating Energy East’s
reported results in U.S. dollars into euro using the exchange rate of $1.39/A1.00 as of December31, 2007). For our consolidated financial statements as of and for the year ended December 31,
2008, we consolidated the accounts of Energy East as of September 16, 2008 (the date we
acquired Energy East), which is included in our new Energy East reporting segment, as
described further in the section entitled ‘‘Management’s Discussion and Analysis of Financial
Conditions and Results of Operations,’’ from such date. Therefore, Energy East financialinformation is (i) not included in our consolidated financial information in 2007 and only
included for approximately three months in 2008 and (ii) not part of our consolidated financial
information as of and for the six months ended June 30, 2008 and is included in our
consolidated financial information for the entire period as of and for the six months ended June
30, 2009.
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Due to these transactions, the consolidated financial information presented in this offering
memorandum for the years ended December 31, 2007 and December 31, 2008 and the six month
periods ended June 30, 2008 and 2009 may be difficult to compare and any comparisons between
such periods should not be relied on as indicative of our future results of operations.
Unaudited Non-IFRS Financial Measures
We use the non-IFRS financial measures ‘‘EBITDA’’ and ‘‘financial leverage’’ in our reporting
to the investment community. We define EBITDA as earnings before interest, income taxes,depreciation and amortization. We define our financial leverage as our net debt divided by the sum of
our net debt and equity (our net debt is our gross debt (bank borrowings and other financial
liabilities, plus equity instruments having the substance of a financial liability, plus derivative financial
liabilities related to financial liabilities), minus our cash assets (cash and cash equivalents, derivative
financial assets related to financial liabilities, and certain other current financial assets)).
We use EBITDA and the related ratios presented in this offering memorandum (including
financial leverage) as supplemental measures of our performance and liquidity that are not required
by, or presented in accordance with, IFRS-EU. EBITDA and financial leverage are included because
they are frequently used by certain investors, securities analysts and other interested parties in
evaluating similar companies. However, because all companies do not calculate EBITDA and financialleverage identically, our presentation of EBITDA and financial leverage may not be comparable to
similarly titled measures of other companies. EBITDA and financial leverage are not items recognized
under IFRS-EU and should not be considered as an alternative to profit from operations, operating
income or any other indicator of a company’s operating performance required by IFRS-EU. EBITDA
should not in any way be compared to the operating income, net income or cash flow resulting from
our activities nor should it or financial leverage be used as an indicator of our past or future
profitability or liquidity.
Other Information
As used herein:
* ‘‘Distributors’’ refers to utility companies that supply electricity and/or natural gas to end-
users;
* ‘‘Energy East’’ refers to Energy East Corporation, which merged with a subsidiary of
Iberdrola on September 16, 2008;
* ‘‘euro’’ and ‘‘A’’ refer to the single currency of the participating Member States in theThird Stage of the European Economic and Monetary Union of the Treaty Establishing
the European Community, as amended from time to time;
* ‘‘Gigawatt’’ or ‘‘GW’’ refers to a unit of energy: 1 GW = 1,000 MW;
* ‘‘Gigawatt hour’’ or ‘‘GWh’’ refers to an hour during which one Gigawatt of electrical
power has been continuously produced or one Gigawatt of natural gas has been
continuously supplied, as applicable;
* ‘‘Iberdrola’’ and ‘‘Guarantor’’ refer to Iberdrola, S.A.;
* ‘‘Iberdrola Finance Ireland Limited’’ and ‘‘Issuer’’ refer to Iberdrola Finance Ireland
Limited, a limited liability company incorporated under the laws of Ireland but with its tax
residence in Spain and a wholly-owned subsidiary of Iberdrola;
* ‘‘Iberdrola Group,’’ ‘‘Group,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ refer to Iberdrola, together with its
subsidiaries;
* ‘‘Installed capacity’’ refers generally to production capacity of a power plant or wind farm
based on its actual capacity; the ‘‘installed capacity’’ of our facilities representsconsolidated installed capacity, which is calculated by including 100% of the installed
capacity for those subsidiaries that we fully consolidate into our consolidated financial
statements and the portion of installed capacity attributable to us for those subsidiaries
over which we do not exercise control, which we calculate as the same proportion in which
we consolidate them using the proportional consolidation method;
* ‘‘Kilowatt’’ or ‘‘kW’’ refers to a unit of energy: 1 kW = 1,000 W;
* ‘‘Kilowatt hour’’ or ‘‘kWh’’ refers to a unit of energy: 1 kWh = 1,000 W over a period of
one hour;
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* ‘‘Megawatt’’ or ‘‘MW’’ refers to a unit of energy: 1 MW = 1,000 kW or 1,000,000 W;
* ‘‘Megawatt hour or ‘‘MWh’’ refers to a unit of energy: 1 MWh = 1,000 kW over a period
of one hour;
* ‘‘production,’’ unless the context otherwise requires, refers to the generation of electricity;
* ‘‘ScottishPower’’ refers to ScottishPower plc and its subsidiaries (as named prior to its
acquisition) acquired by Iberdrola on April 23, 2007;
* ‘‘U.S. dollars,’’ ‘‘US$,’’ ‘‘USD’’ and ‘‘$’’ refer to the lawful currency of the United States
dollars; and
* ‘‘Watt’’ or ‘‘W’’ refers to a unit of energy: the amount of energy required to raise the
temperature of one kilogram of water by one degree Celsius.
Certain numerical figures presented in this offering memorandum have been subject to rounding
adjustments. Accordingly, amounts shown as totals in tables or elsewhere may not be an arithmetic
aggregation of the numbers which precede them. In addition, certain percentages presented in the
tables in this offering memorandum reflect calculations based upon the underlying information prior
to rounding and, accordingly, may not conform exactly to the percentages that would be derived if
the relevant calculation were based upon the rounded numbers.
This offering memorandum contains figures relating to projects under development (‘‘pipeline
figures’’). Pipeline figures are internal management estimates and represent projects ranging from those
that we believe have at least a 20% probability of successful completion, but for which a decision to
commit resources to the project has not yet been made, to and including those projects that areunder construction. Pipeline figures presented in this offering memorandum are calculated based on
our own criteria and, therefore, such figures may not be comparable with pipeline figures presented
by other companies in the industry. Further, the basic and underlying assumptions used in the
calculation of the pipeline figures may differ by business segment. Pipeline figures have not been
audited or verified by any third party.
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EXCHANGE RATE INFORMATION
The following table sets forth, for the periods indicated, information concerning the exchange
rate for euro, expressed in U.S. dollars per A1.00, as determined by the European Central Bank(‘‘ECB’’). On September 7, 2009, such rate was 1.4296 U.S. dollars per A1.00. These rates set forthbelow are provided solely for your convenience and were not used by us in the preparation of ourfinancial statements included elsewhere in this offering memorandum. These exchange rates are based
on the regular daily concertation procedure between central banks within and outside the European
System of Central Banks, which normally takes place at 2:15 p.m. Central European Time. No
representation is made that the euro could have been, or could be, converted into U.S. dollars at that
rate, at any other rate or at all.
U.S. dollars per E1.00
Period
End Average(1) High Low
Year
2004 ....................................................................... 1.3621 1.2439 1.3633 1.1802
2005 ....................................................................... 1.1797 1.2441 1.3507 1.1667
2006 ....................................................................... 1.3170 1.2556 1.3331 1.1826
2007 ....................................................................... 1.4721 1.3706 1.4874 1.28932008 ....................................................................... 1.3917 1.4708 1.5990 1.2460
Month in 2009
January .................................................................. 1.2816 1.3239 1.3866 1.2795
February ................................................................ 1.2644 1.2785 1.3008 1.2591
March .................................................................... 1.3308 1.3050 1.3671 1.2556
April....................................................................... 1.3275 1.3190 1.3496 1.2932
May ....................................................................... 1.4098 1.3650 1.4098 1.3223
June........................................................................ 1.4134 1.4016 1.4238 1.3840
July ........................................................................ 1.4061 1.4074 1.4304 1.3832August ................................................................... 1.4308 1.4258 1.4447 1.4045
September (through September 7, 2009) ............... 1.4296 1.4282 1.4378 1.4177
(1) The average of the exchange rates for euro on the last day of each full month during the relevant year or each business day duringthe relevant month (or portion thereof).
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OVERVIEW
This summary highlights important information contained elsewhere in this offering memorandum.
Before making an investment decision, you should read this entire offering memorandum, including the
‘‘Risk Factors’’ section and the financial statements, together with the related notes, included in this
offering memorandum.
Overview of Iberdrola Group
We are principally engaged in the generation and distribution of electricity and have a presence
in approximately 40 countries worldwide, principally Spain, the United Kingdom and the United
States, and to a lesser extent Mexico and Brazil. We generate electricity from conventional sources,
such as fuel oil and coal, and also from renewable energy sources, such as wind and hydroelectric
power. We are also engaged in the transmission, distribution and sale of electricity and natural gasand the management and storage of natural gas. We also operate non-energy businesses, including
engineering and construction and real estate activities.
We were the fifth leading electricity company in the world in terms of market capitalization asof June 30, 2009 and the second largest electricity producer in Spain. In addition, we are the world
leader in the wind power sector and in wind power plant ownership.
For 2007 and 2008, we had revenues of A17,468.0 million and A25,196.2 million, respectively,and net profit of A2,396.0 million and A2,968.7 million, respectively. For the six months ended June30, 2008 and June 30, 2009, we had revenues of A12,021.7 million and A13,109.0 million, respectively,and net profit of A1,959.3 million and A1,506.4 million, respectively. We completed significantacquisitions in 2007 (ScottishPower) and 2008 (Energy East), which may make comparing recent
financial periods difficult.
The table below sets forth our total installed capacity, electricity production and electricity
distribution as of and for the years ended December 31, 2006, 2007 and 2008, and as of and for the
six months ended June 30, 2008 and 2009, followed by tables that set forth the related breakdown of
installed capacity and total production by energy source and by geographic region as of and for theyear ended December 31, 2008 and as of and for the six months ended June 30, 2009. The figures
below reflect the acquisition of ScottishPower from April 23, 2007 and the acquisition of Energy East
from September 16, 2008.
As of and for the years
ended December 31,
As of and for the six months
ended June 30,
2006 2007 2008 2008 2009
Installed Capacity (in MW, at
period end) .................................. 30,384 41,918 43,311 41,454 43,925
Production (in GWh) ...................... 92,010 123,460 141,268 70,815 69,847
Electricity Distributed (in GWh)..... 127,171 160,730 181,794 87,752 100,290
Installed Capacity Breakdown by Source Electricity Production Breakdown by Source
As of
December 31,
2008
As of
June 30, 2009
For the year
ended
December 31,
2008
For the six
months ended
June 30, 2009
Combined Cycle .......... 30.39% 29.99% Combined Cycle........... 47.98% 45.18%
Nuclear ........................ 7.72% 7.61% Nuclear......................... 17.52% 16.37%
Coal ............................. 10.87% 10.72% Coal.............................. 9.33% 10.02%
Hydroelectric ............... 22.70% 22.15% Hydroelectric................ 8.20% 9.42%
Renewable.................... 21.48% 22.77% Renewable.................... 12.03% 15.15%Co-generation .............. 2.72% 2.69% Co-generation .............. 4.86% 3.81%
Fuel-oil ........................ 4.12% 4.07% Fuel-oil......................... 0.08% 0.05%
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Installed Capacity (in MW, at period end) Geographic Breakdown Electricity Production (in GWh) Geographic Breakdown
As of
December 31,
2008
As of
June 30, 2009
For the year
ended
December 31,
2008
For the six
months ended
June 30, 2009
Spain............................ 26,369 26,631 Spain ............................ 67,626 32,144
United Kingdom.......... 6,701 6,826 United Kingdom.......... 26,534 13,020
United States ............... 3,794 4,038 United States................ 8,565 5,376Latin America.............. 5,554 5,445 Latin America .............. 37,223 18,529
Rest of the World ...... 893 984 Rest of the World ........ 1,321 778
Total ........................... 43,311 43,925 Total ........................... 141,269 69,847
In addition, for the years ended December 31, 2007 and December 31, 2008, we sold 90,287
GWh and 181,202 GWh of natural gas to approximately 2.1 and 3.1 million natural gas customers,
in each case respectively. In the six months ended June 30, 2008 and June 30, 2009, we sold 62,264
GWh and 88,222 GWh of natural gas to approximately 2.1 and 3.1 million natural gas customers, in
each case respectively.
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SUMMARY TERMS OF THE OFFERING
This summary must be read as an introduction to this offering memorandum and any decision to
invest in the Notes should be based on a consideration of this offering memorandum as a whole. Words
and expressions defined in the section entitled ‘‘Terms and Conditions of the Notes’’ and ‘‘Form of
Guarantee’’ shall have the same meanings in this summary. For a detailed description of the Notes and
Guarantee, please refer to the sections entitled ‘‘Terms and Conditions of the Notes’’ and ‘‘Form of
Guarantee.’’
Issuer................................................ Iberdrola Finance Ireland Limited.
Guarantor......................................... Iberdrola, S.A.
Notes Offered................................... A Notes: $1,000,000,000 3.800% Notes Due 2014.
B Notes: $1,000,000,000 5.000% Notes Due 2019.
Guarantee......................................... The Notes issued will be unconditionally and irrevocablyguaranteed by the Guarantor.
Issue Price and
Minimum Aggregate
Principal Amount ............................. A Notes: 99.829% of the principal amount, plus accrued interest, if
any, from September 11, 2009.
B Notes: 99.363% of the principal amount, plus accrued interest, if
any, from September 11, 2009.
The minimum denomination of each Note is US$75,000.
Stated Maturity Date....................... A Notes: September 11, 2014
B Notes: September 11, 2019
Interest ............................................. A Notes: Each Note will bear interest at a rate of 3.800% per
annum.
B Notes: Each Note will bear interest at a rate of 5.000% per
annum.
Interest Payment Dates.................... Each Note will bear interest from the date of original issuance, and
such interest will be payable semi-annually in arrears on March 11
and September 11 in each year, commencing on March 11, 2010.
Currency .......................................... U.S. dollars.
Status of the Notes .......................... The Notes constitute direct, unconditional, unsubordinated and
unsecured obligations of the Issuer and will rank pari passu among
themselves and (save for certain obligations required to be preferred
by law) with all other unsubordinated indebtedness of the Issuer
from time to time outstanding.
Status of the Guarantee ................... The obligations of the Guarantor under the Guarantee in respect of
the Notes constitute direct, unconditional, unsubordinated and
unsecured obligations of the Guarantor and will rank pari passu
among themselves and (save for certain obligations required to be
preferred by law) with all other unsubordinated and unsecured
indebtedness of the Guarantor from time to time outstanding.
Negative Pledge ............................... The Notes contain a negative pledge provision described in
Condition 4 (Negative Pledge) under ‘‘Terms and Conditions of
the Notes.’’
Taxation and Additional Amounts.... Payments in respect of Notes will be made without withholding ordeduction for, or on account of, any present or future taxes, duties,
assessments or governmental charges of whatever nature imposed
or levied by or on behalf of Ireland or Spain or, in each case, any
political subdivision thereof or any authority or agency therein or
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thereof having power to tax, unless the withholding or deduction ofsuch taxes, duties, assessments or governmental charges is required
by law. In that event, the Issuer or, as the case may be, the
Guarantor, will (except in certain limited circumstances described
in Condition 8 (Taxation) under ‘‘Terms and Conditions of the
Notes’’) pay such additional amounts as will result in the Beneficial
Owners receiving such amounts as they would have received in
respect of such Notes had no such withholding or deduction been
required.
Prospective investors should note that the Issuer is incorporated inIreland but tax-resident in Spain. Any income derived by Beneficial
Owners that are not resident in Spain for tax purposes from interest
on or the redemption or repayment of, the Notes will be subject to
Spanish Non-Resident Income Tax (currently at the rate of 18%) by
way of withholding except in the case of eligible Beneficial Owners
in respect of whom the Issuer and the Guarantor receive
information (which may include a tax residence certificate)
concerning such Beneficial Owner’s identity and tax residence asthe Issuer and the Guarantor require in order to comply with the
Relevant Regulations (see ‘‘Tax Considerations—Taxation in
Spain—Preliminary Considerations—Applicable Law’’). See
‘‘Risk Factors—Risks Relating to Certain Taxation Matters’’ and
‘‘Tax Considerations—Taxation in Spain.’’
Disclosure of Identity and Tax
Residence of Beneficial Owners ........ Under the Relevant Regulations (see ‘‘Tax Considerations—
Taxation in Spain—Preliminary Considerations—Applicable
Law’’), the Issuer and the Guarantor are required to provide tothe Spanish Tax Authorities certain information relating to
Beneficial Owners who receive payments of interest or income
from the redemption or repayment of the Notes. This information
includes the identity and tax residence of Beneficial Owners and the
amount of such payments received by such Beneficial Owners, and
must be obtained with respect to each such payment by 9:45 a.m.
(New York City time) on each such Interest Payment Date and filed
by the Issuer and the Guarantor with the Spanish Tax Authoritieson an annual basis.
The Issuer and the Guarantor have arranged certain procedures
with DTC, Euroclear and Acupay to facilitate the collection of
information concerning the identity and tax residence of Beneficial
Owners. The delivery of such information, while the Notes are in
global form, will generally be made through the relevant Direct
DTC Participants and Indirect DTC Participants (including
Euroclear). The Issuer or the Guarantor, as the case may be, will
withhold at the then-applicable rate (currently 18%) from anypayments of interest or income from the redemption or repayment
of the Notes as to which the required information has not been
provided or the required procedures have not been followed. See
‘‘Tax Considerations—Taxation in Spain—Evidencing of Beneficial
Owner Residency in Connection with Interest Payments.’’ Neither
the Issuer nor the Guarantor will pay any additional amount with
respect to such withholding.
Such tax information procedures may be revised from time to timein accordance with applicable Spanish laws and regulations or any
judicial or administrative interpretation thereof. In particular,
Beneficial Owners must be aware that such tax certification
procedures may be modified, amended or supplemented, as the
case may be, in case new regulations setting forth the procedural
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rules for complying with the provisions of Law 13/1985, of May 25,1985, as amended, or equivalent law are eventually promulgated
(see ‘‘Tax Considerations—Taxation in Spain—Evidencing of
Beneficial Owner Residency in Connection with Interest
Payments). Beneficial Owners must seek their own advice to
ensure that they comply at all times with all applicable
procedures and to ensure correct tax treatment of their Notes.
None of the Issuer, the Guarantor, the Initial Purchasers, DTC,
Euroclear or Acupay assumes any responsibility therefor.
Tax Redemption ............................... The Notes may be redeemed at the option of the Issuer in whole,
but not in part, at any time on giving not less than 30 nor more than60 days’ notice to the Bank of New York Mellon, as principal
paying agent (the ‘‘Principal Paying Agent’’), and Acupay and, in
accordance with Condition 13 (Notices) under ‘‘Terms and
Conditions of the Notes,’’ the Noteholders, if (a) on the occasion
of the next payment due under the Notes, the Issuer has or will
become obliged to pay additional amounts as provided or referred
to in Condition 8 (Taxation) under ‘‘Terms and Conditions of the
Notes’’ or the Guarantor would be unable for reasons outside itscontrol to procure payment by the Issuer and in making payment
itself would be required to pay such additional amounts, in each
case as a result of any change in, or amendment to, the laws or
regulations of a Taxing Authority (as defined in Condition 8
(Taxation) under ‘‘Terms and Conditions of the Notes’’) or any
change in the application or official interpretation of such laws or
regulations by any judicial or administrative authority therein,
which change or amendment becomes effective on or afterSeptember 8, 2009 and (b) such obligation cannot be avoided by
the Issuer or, as the case may be, the Guarantor taking reasonable
measures available to do so; provided that no such notice of
redemption shall be given earlier than 90 days prior to the earliest
date on which the Issuer or, as the case may be, the Guarantor
would be obliged to pay such additional amounts were a payment
in respect of the Notes then due.
Redemption at the Option of the
Issuer................................................ The Notes will be redeemable at the option of the Issuer, in wholeor in part, at any time on giving not less than 30 nor more than 60
days’ notice to the Noteholders in accordance with Condition 7
(Notices) under ‘‘Terms and Conditions of the Notes’’ and, not less
than 30 days before the giving of the notice to the Noteholders,
notice to the Principal Paying Agent and the Registrar, on the
applicable Optional Redemption Date and at a redemption price
equal to the greater of (i) 100% of the principal amount of the Notes
to be redeemed, and (ii) as determined by the Quotation Agent, (asdefined in ‘‘Terms and Conditions of the Notes’’) the sum of the
present values of the remaining scheduled payments of principal
and interest on the Notes to be redeemed (not including any portion
of such payments of interest accrued as of the Optional Redemption
Date) discounted to the Optional Redemption Date on a semi-
annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Treasury Rate plus the Make-Whole Spread plus, in
each case, accrued interest thereon to the Optional RedemptionDate.
Any such redemption must be of a principal amount not less than
the applicable Minimum Redemption Amount and not more than
the applicable Maximum Redemption Amount. In the case of a
partial redemption of Notes, the Notes to be redeemed will be
selected in accordance with the procedures described in Condition
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7(c) (Redemption and Purchase) under ‘‘Terms and Conditions of
the Notes.’’
Make-Whole Spread ........................ A Notes: 0.22%.
B Notes: 0.24%.
Change of Control Repurchase Event Unless the Issuer has redeemed the Notes as described herein, the
Issuer will be required to offer to repurchase or, at the Issuer’s
option, to procure an offer to purchase all or any part (equal to
US$75,000 or an integral multiple of US$1,000 in excess thereof) of
the Notes held by each Noteholder upon the occurrence of a
Change of Control Event with respect to the Guarantor as
described in Condition 7(d) (Offer to Repurchase upon a Changeof Control Event) under ‘‘Terms and Conditions of the Notes.’’ The
repurchase price will be an amount in cash equal to 101% of the
aggregate principal amount of Notes repurchased, plus accrued and
unpaid interest to the date of repurchase.
Substitution ...................................... Subject to the conditions set forth in Condition 15 (Substitution)under ‘‘Terms and Conditions of the Notes,’’ the Issuer and the
Guarantor may at any time, without the consent of the
Noteholders, substitute for the Issuer any company which is
wholly-owned by the Guarantor upon notice by the Issuer, the
Guarantor and the designated substitute to be given in accordance
with Condition 13 (Notices) under ‘‘Terms and Conditions of the
Notes’’ and the rules of the Irish Stock Exchange.
Transfer and Selling
Restrictions ......................................
The Notes have not been and will not be registered under the
Securities Act or the securities laws of any other jurisdiction or with
any securities regulatory authority of any state or other jurisdiction
of the United States. Consequently, the Notes may not be offered or
sold within the United States, or to or for the benefit or account of aU.S. person, except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act, and in any case in accordance with any other
applicable securities laws of any other jurisdiction. The Initial
Purchasers will arrange for resale of the Notes to QIBs pursuant to
Rule 144A or to persons outside the United States pursuant to
Regulation S. See ‘‘Plan of Distribution.’’
Further Issuances ............................. The Issuer may, at its option and without the consent of the then-
existing Noteholders, issue additional notes in one or more
transactions after the date of this offering memorandum with
terms and conditions the same as the A Notes or the B Notes, as the
case may be, or the same in all respects save for the amount and
date of the first payment of interest thereon and so that the sameshall be consolidated and form a single series with the outstanding
A Notes or the outstanding B Notes, as the case may be.
Form and Title ................................. The Notes are represented by one or more Global Notes deposited
in registered form with, or on behalf of, DTC and registered in the
name of Cede & Co, as DTC’s nominee, for the benefit of DTC’sparticipants. For so long as DTC or its nominee is the registered
holder of a Global Note, DTC or such nominee, as the case may be,
will be considered the sole holder for all purposes under the Agency
Agreement and the Notes except to the extent that in accordance
with DTC’s published rules and procedures any ownership rights
may be exercised by its participants or DTC Beneficial Owners
through participants. See ‘‘Form of Notes.’’
Book-entry interests in the Global Notes will be shown on, and
transfers thereof will be effected only through, records maintained
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in book-entry form by DTC or any other securities intermediary
holding an interest directly or indirectly through DTC. See
‘‘Book—Entry Clearance System.’’ Notes that are represented by
a Global Note will be transferable only in accordance with the rulesand procedures for the time being of DTC and Euroclear, as the
case may be.
Governing Law ................................. The Notes, the Agency Agreement, the Guarantee (except theprovisions of the Guarantee relating to status, which are governed
by, and shall be construed in accordance with, Spanish law) and the
Rule 144A Deed Poll and the Deed of Covenant (each as defined in
‘‘The Issuer—Material Contracts’’) are governed by, and shall be
construed in accordance with, English law.
Issuing Agent, Principal Paying
Agent and Agent Bank ..................... The Bank of New York Mellon.
Use of Proceeds ............................... All of the net proceeds from the Offering will be on-lent to or
deposited on a permanent basis with the Guarantor (or another
member of the Iberdrola Group) and used for the general corporate
purposes of the Iberdrola Group.
Ratings ............................................. It is expected that the Notes will be rated A- (stable) by Standard &
Poor’s, A3 (stable) by Moody’s Investors Service and A (stable) by
Fitch Ratings, subject to confirmation at closing.
The Guarantor’s long-term debt is rated A- (stable) by Standard &
Poor’s and A3 (stable) by Moody’s Investors Service.
A rating is not a recommendation to buy, sell or hold securities and
may be subject to suspension, change or withdrawal at any time bythe assigning rating agency. Neither the rating agency nor the Issuer
is obligated to provide the holder with any notice of any suspension,
change or withdrawal of any rating.
Listing .............................................. Application has been made to the Irish Stock Exchange for the
Notes to be admitted to the Official List and trading on its
regulated market.
Security Codes ................................. A Notes
CUSIPs: 144A Notes – 45074G AA8
Regulation S Notes – G4721S AP6
ISINs: 144A Notes – US45074GAA85
Regulation S Notes – USG4721SAP68
B Notes
CUSIPs: 144A Notes – 45074G AB6
Regulation S Notes – G4721S AQ4
ISINs: 144A Notes – US45074GAB68
Regulation S Notes – USG4721SAQ42
Risk Factors
Investing in the Notes involves substantial risks. For a detailed discussion of certain risk factors
relevant to an investment in the Notes, see ‘‘Risk Factors.’’
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RISK FACTORS
You should consider all of the information in this offering memorandum, including the following
risk factors, before deciding to invest in the Notes. The actual occurrence of any of the following risks
could have a material adverse effect on our business, financial condition or results of operations or result
in other events that could lead to a decline in the value of the Notes. In that case, the trading price of
the Notes could decline, the Issuer or the Guarantor may not be able to pay the interest or principal on
the Notes when due and you could lose all or part of your investment.
Iberdrola’s board of directors has approved a general policy on risk control and management, as
well as detailed corporate and business risk policies. These risks policies, which include risk management
strategies and limits intended to be appropriate to each of the risks and businesses considered, are part
of a comprehensive risk control and management system. Our risk control and management systems are
intended to take into account all material business, market, credit, operational and regulatory risks
present in the regulated and unregulated activities of all of our businesses. The risks described below are
those that we believe are material, but these may not be the only risks and uncertainties that we face.
Additional risk factors not currently known or which are currently deemed immaterial may also have a
material adverse effect on our business, financial condition or results of operations or result in other
events that could lead to a decline in the value of the Notes. This offering memorandum also contains
forward-looking statements that involve risks and uncertainties. The actual results could differ materially
from those anticipated in such forward-looking statements as a result of certain factors, including the
risks faced by us described below and elsewhere in this offering memorandum. See ‘‘Special Note
Regarding Forward-Looking Statements’’ for further information.
Risks Related to Our Business and Industry
Our operations are subject to extensive government regulation, and any inability to comply with existingregulations or requirements or changes in applicable regulations or requirements may have an adverse effect onour business, financial condition or results of operations.
We are subject to numerous energy, environmental and administrative laws and government
regulations in each of the jurisdictions in which we conduct business, including those concerning
electricity sales, transmission and distribution; retail pricing of electricity; natural gas transport and
storage; natural gas sales and distribution; and renewable energy incentives as well as regulations and
laws concerning health protection and safety standards related to air quality, waste water, the
treatment of hazardous and non-hazardous waste, the management of nuclear facilities and LNG
terminals and soil contamination. Each of our facilities must also comply with strict international,national, state, regional and local regulations relating to the development, construction and operation
of power generation plants, transmission lines, distribution facilities and natural gas facilities.
Compliance with regulatory requirements may result in substantial costs in our operations that may
not be recovered. In addition, we cannot predict the timing or form of any future regulatory or law
enforcement initiatives. Changes in existing energy, environmental and administrative laws and
regulations may materially affect our business, products, services, margins and investments. Further,
such changes in laws and regulations could, in turn, increase the size and number of claims and
damages asserted against us or subject us to enforcement actions, fines and penalties.
Additionally, certain of our operations are conducted pursuant to concessions, licenses and other
legal and regulatory permits. Such concessions, licenses and permits may be not be granted, upheld orrenewed in our favor or if granted, upheld or renewed, may not be on favorable economic terms, as
currently. Moreover, non-compliance with applicable laws or regulations in the countries in which we
operate could result in the revocation of permits, or the imposition of sanctions, fines or criminal
penalties. Our inability to comply with applicable laws or regulations, the introduction of new laws or
regulations or any changes in applicable laws or regulations could have a material adverse effect on
our business, financial condition or results of operations. See ‘‘Regulation’’ for further information.
Furthermore, we are subject to certain conditions imposed by the regulatory authorities that
approved the acquisition of Energy East, as well as the local laws and regulations of the U.S. states
in which Energy East operates. For example, the New York State Public Service Commission(‘‘NYPSC’’) order approving the acquisition prohibits, among other things, certain of Energy East’s
subsidiaries from paying common dividends or otherwise transferring assets, rights or other items of
value to any affiliate, including us, without NYPSC approval in certain circumstances. See
‘‘Business—Recent Developments—Energy East Transaction.’’ There can be no assurance that we will
be able to satisfy or comply with all of the conditions imposed by the regulatory authorities in a
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timely or efficient manner and failure to do so could have a material adverse effect on our business,
financial condition or results of operations.
Our electricity distribution operations in Spain are subject to certain regulations pursuant to which we arerequired to bear the cost, in the first instance, of any deficit resulting from the excess of regulatory costs ofelectricity distribution in Spain over certain regulated revenues.
Our electricity distribution operations in Spain are regulated under the Electricity Sector Actand are subject to electricity tariffs established by the Spanish government. Revenues in our Spain
Regulated segment are therefore directly affected by the electricity tariffs we are permitted to charge
in accordance with Spanish Law. Electricity distribution tariffs have been determined by Spanish
governmental Royal Decree on an annual basis.
Spanish regulations require certain electric utilities, including us, to cover any amount by which
the aggregate costs of the regulated Spanish electricity distribution system exceed the aggregateamount of regulated revenue, resulting in a ‘‘tariff deficit.’’ After settlement of regulated payments
between us and Spain’s other electric utilities to redistribute regulated tariff revenues, we are
responsible for bearing a cost equivalent to 35.0% of the tariff deficit each year. Our accumulated
tariff deficit at December 31, 2008 was approximately A3,052 million, and at June 30, 2009 wasapproximately A3,661 million. According to Royal Decree-Law 6/2009 and Order ITC/1723/2009, it isestimated that the tariff deficit at the end of 2009 for all of Spain will be approximately A3,500million. See ‘‘Regulation—Spain—Settlements relating to regulated activities and shortfall in revenue.’’
Recently, Royal Decree-Law 6/2009 of April 30, 2009, has introduced certain new measures
aimed at relieving Spanish electricity companies from tariff deficits. To facilitate the securitization of
‘‘tariff receivables’’ (i.e. rights to payment of amounts equal to an electricity utility’s portion of the
tariff deficit), the Spanish government will guarantee securitizations of existing tariff receivables (i.e.
those that were recognized but not securitized and sold before December 31, 2008), as well as any
future securitizations of future tariff receivables that are recorded before December 31, 2012.
Moreover, this Royal Decree-Law provides for industry-wide caps on the amount of the deficit ofA3.5 billion in 2009, A3.0 billion in 2010, A2.0 billion in 2011 and A1.0 billion in 2012, requiring thatregulated tariffs for distribution be increased so that these caps are not exceeded. Under this Royal
Decree-Law, beginning in 2013, regulated tariffs are to be set so as to generate sufficient proceeds to
cover the total cost of providing regulated services, thus avoiding the incurrence of further tariff
deficits. However, there can be no assurance that the new measures introduced by the Spanish
government will function