Filed by: Iberdrola, S.A.
Pursuant to Rule 425
under the Securities Act of 1933
and deemed filed pursuant to
Rule 14d-2 of the Securities
Exchange Act of 1934
Subject Company: Scottish Power plc
Exchange Act File Number: 001-14676
Date: November 28, 2006
Iberdrola –ScottishPower
A worldwide leader emerges
November 28th, 2006
Legal Note
DISCLAIMER
This report and has been prepared by Iberdrola S.A. in relation to the potential acquisition of the shares of
ScottishPower plc. and for presentations to the media, investors and analysts. Therefore, this report can not be
disclosed, released or relied or be used by any other person for any purpose other than the purpose stated above,
except with the written consent of Iberdrola S.A.
The estimates, projections and forecasts used in this report have been prepared for illustration purposes only. The
projections and forecasts involve significant assumptions and subjective judgments, which may or may not prove to
be correct. No representation or warranty, express or implied, is or will be given by Iberdrola S.A. as to the
accuracy, completeness or fairness of any information contained in this report and, nothing in this report should be
relied upon as a promise or representation as to the past, current situation or future of Iberdrola S.A.
The content of this report is addressed to individuals and corporations who do dot have the appropriate knowledge
of Iberdrola S.A. or its activity, and therefore neither lberdrola S.A. nor its legal advisers, accountants or financial
advisers assume any liability whatsoever for this report or its use for any other purpose other than as set forth
above. By delivering this report Iberdrola S.A. does not undertake any obligation to update any of the information
contained herein or to correct any inaccuracies which may include.
This report does not constitute an offer to purchase, sell or exchange or the solicitation of an offer to purchase se
or exchange any securities with respect to Iberdrola S.A. or ScottishPower plc.
This English version of the presentation is an unofficial translation of the Spanish version.
2
Legal Note
RULE 425 LEGEND
IMPORTANT INFORMATION IN THE US
This communication does not constitute an offer to purchase, sell or exchange or the solicitation of an offer to purchase, sell or exchange any securities or the solicitation of any vote or approval with respect to the proposed acquisition by Iberdrola S.A. of ScottishPower plc (the “Acquisition”), nor shall there be any purchase, sale or exchange of securities or such solicitation in any jurisdiction in which such offer, solicitation or sale or exchange would be unlawful prior to the registration or qualification under the laws of such jurisdiction.
If and when Iberdrola S.A. commences the Acquisition for the ordinary shares of ScottishPower plc and the Acquisition is implemented by way of a scheme of arrangement under the U.K. Companies Act 1985, as amended (the “Scheme”), any securities of Iberdrola S.A. will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), but will be issued in reliance on the exemption provided by Section 3(a)(10) thereof, and ScottishPower plc will furnish the acquisition document to the SEC under cover of a Form 6-K. If and when Iberdrola S.A. determines to commence the Acquisition by way of a takeover offer under The City Code on Takeovers and Mergers of the United Kingdom (the “Offer”) rather than the Scheme, Iberdrola S.A. will, to the extent that the shares issued in connection with the proposed Acquisition are required to be registered in the United States, file a registration statement on Form F-4, which will include a prospectus, with the United States Securities and Exchange Commission (“SEC”). Investors are strongly advised to read the documents that will be made available to them, including the registration statement and prospectus, if and when available, and any other relevant documents made available to them and/or the SEC or other applicable regulatory authorities, as well as any amendments or supplements to those documents, because they will contain important information regarding Iberdrola S.A., ScottishPower plc, the Acquisition and any Offer.
ScottishPower plc shareholders should also read the related solicitation/recommendation statement on Schedule 14D-9 that may be filed with the SEC by ScottishPower plc relating to the Acquisition. If and when filed, investors may obtain free copies of the registration statement, the prospectus as well as other relevant documents filed with the SEC, at the SEC’s web site at www.sec.gov and will receive information at an appropriate time on how to obtain these transaction-related documents for free from the parties involved or a duly appointed agent.
The distribution of this communication may, in some countries, be restricted by law or regulation. Accordingly, persons who come into possession of this document should inform themselves of and observe these restrictions. To the fullest extent permitted by applicable law, the companies involved in the proposed
Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person.
The shares to be issued in connection with the proposed Acquisition may not be offered or sold in the United States except pursuant to an effective registration statement under the Securities Act or pursuant to a valid exemption from registration.
3
Legal Note
FORWARD-LOOKING STATEMENTS
This communication contains forward-looking information and statements about ScottishPower plc and Iberdrola S.A. and their combined businesses after completion of the proposed Acquisition. Forward-looking statements are statements that are not historical facts. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements are generally identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates” and similar expressions. Although the managements of ScottishPower plc and Iberdrola S.A. believe that the expectations reflected in such forward-looking statements are reasonable, investors and holders of ScottishPower plc and Iberdrola S.A. shares are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of ScottishPower plc and Iberdrola S.A., that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the public documents sent by ScottishPower plc and Iberdrola S.A. to the Comisión Nacional del Mercado de Valores and under “Risk Factors” in the annual report on Form 20-F for the year ended March 31, 2006 filed by ScottishPower plc with the SEC on June 30, 2006. Except as required by applicable law, neither ScottishPower plc nor Iberdrola S.A. undertakes any obligation to update any forward-looking information or statements.
4
Agenda
Strategic rationale
Accelerating the Strategic Plan
Terms of the Agreement
Value Creation
Financing
Conclusion
5
Strategic rationale
A unique consolidation aligned with the principles of Iberdrola 2007-2009 Strategic Plan …
Strategic Plan acceleration
Increasing size and generating more value for shareholders
Leading Group in high growth businesses and regions
Boost to internationalization
6
Strategic rationale
… that provides access
to new opportunities for long term growth …
Maintaining the financial solidity and
the commitment to shareholders
Delivers hard synergies to the bottom line
Immediately earnings accretive
Diversified sources of earnings reduces risk
7
Agenda
Strategic rationale
Accelerating the Strategic Plan
Terms of the Agreement
Value Creation
Financing
Conclusion
8
Accelerating the Strategic Plan
A further step based on the principles
of the 2007-2009 Strategic Plan …
Growth
Internationalization
Efficiency
Profitability
9
Accelerating the Strategic Plan
… and fulfilling the established criteria
for non-organic growth
Strategic Criteria
Countries with liberalized markets
Integrated businesses
Operating & technological synergies and
complimentary businesses
Financial Criteria
No dilution of EPS and CPS
Maintaining financial solidity
Form
Through a friendly agreement
between both parties
10
Growth
Significant expansion in all business areas …
Conventional
Generation 2006 (MW)
IBE SPW
IBE + SPW*
23,989 6,574
30,563 +27%
Renewables** (MW)
4,076 1,964 6,040 +48%
Total Installed Capacity
2006 (MW) 28,065
8,538 36,603 +30%
Points of Supply 2006
18.1 3.3 21.4 +18%
… creates platform for synergies,
best practice transfer and enhanced growth
* September 2006 results for Iberdrola and ScottishPower
** Renewables includes wind and mini-hydro
11
Growth: Europe
A Group prepared for the European energy market …
• An integrated Group leader in two of the five largest markets in Europe
• Diversified clean generation mix, well positioned for capacity growth
• Consolidation as leader in renewables
• Scale benefits & pan-Atlantic presence in gas procurement
• Possibility of access to new markets
• Complementary skills in network businesses
Traditional Generation Renewables in operation Renewables pipeline
Distribution Gas Others Spain U.K. Rest
20,692 MW 6.036 MW - 3,728 MW
344 MW 281 MW 6,140 MW
2,260 MW(1) 5,000 MW
9.7 Mill. S.P. 3.3 Mill. S.P.
- New entrant 1.9m customers;
Storage: 0,1 bcm
- Real Estate, Engineering - -
Source: September 2006 Results for Iberdrola and ScottishPower
(1) ScottishPower 2010 targets of the 2006 First Half Results presentation and Iberdrola’s wind farms acquisition (in development phase)
12
Growth: America
North America: 2nd group in wind energy, with high growth potential
• Creates leading pan-Americas renewables group
- SPW position as #2 developer in US enhances IBE’s portfolio
- Spans large/attractive US market and fast growth LatAm markets
- Accesses SPW innovative Wind Portfolio Structure to recycle capital
• Expansion into gas storage and energy management activities
• Adds new capabilities in gas & energy management to LatAM platform
Traditional Generation Renewables in operation Renewables pipeline
Distribution Gas North America LatAm
538 MW 1,620 MW
14,200 MW(1) -
Storage 2.6 bcm
3,297 MW
67 MW
400 MW
8.4 Mill. S.P.
-
LatAm: Focused in Mexico and Brazil
Source: September 2006 Results for Iberdrola and ScottishPower
(1) PPM Roundtable presentation
13
Leader in renewables
Significant growth opportunities
Installed capacity (MW)*
• Leading expertise in site selection,
procurement, construction & marketing
• Significant scale benefits
– Turbine procurement
– Specialist skills
• Supported by local energy management platforms
• Unparallel pipeline for future development
• Increased diversification of wind portfolio reduces risk
• Strong US demand driven by Renewable Portfolio Standards
Unrivalled scale and expertise to successfully capitalise on fast growth worldwide market
* Latest available data for installed capacity as of September 2006
6,040
1,964
3,567
4,076
2,397
IBE+SPW
FPL
Acciona / EHN
14
Based on the energy business
Complementary business model …
Electricity
Generation
Renewables
Transmission
Distribution
Supply
Generation
Renewables
Distribution
Supply
Transmission
… better positioned in the value chain
15
Based on the energy business
Balanced business portfolio between
liberalized and regulated businesses
2005 EBITDA
Iberdrola
2005 EBITDA
IBE+SPW
Liberalized Bus. (Spain)
Regulated Bus. (Spain)
Renewables (Spain)
LatAm
Liberalized Business UK
Regulated Business UK
Liberalized Business US
Non Energy Business and Others
Source: Iberdrola Annual Report December 2005. ScottishPower Annual Report March 2006
13% 16% 14% 19% 38% 9% 11% 19%
13% 9% 3% 10% 26%
16
More internationalization:
a global group
Presence in the largest markets worldwide …
2005 EBITDA IBE
2005 EBITDA SPW
2005 EBITDA
IBE + SPW
… and reduction of the exposure risk
High rating countries
Source: Iberdrola Annual Report December 2005. ScottishPower Annual Report March 2006
LatAm 84%
Spain USA
90% UK
LatAm
USA UK
Spain 29%
58%
17
Creation of an European leader
(Enterprise Value, Eur Thousand MM)
Source: Market capitalization and exchange rate as of November 27, 2006. Net Debt excludes provisions and includes minority interests.
Source: Reported Net Debt. Market Capitalization based on number of shares without dilution
108
EDF
70
E.ON
64
IBE+ SPW
44
IBERDROLA
20
SCOTTISH POWER
19
UNION FENOSA
18
GAS NATURAL
18
Financial criteria
Fulfilment of the financial criteria set
in the ’07-’09 Strategic Plan …
Positive impact in cash flow per share
Positive impact in EPS from first year
Maintaining leverage and “single A” rating
… honoring the commitment to shareholders Improving ROCE vs. Iberdrola stand alone
19
Agenda
Strategic rationale
Accelerating the Strategic Plan
Terms of the Agreement
Value Creation
Financing
Conclusion
20
Terms of the agreement
Under this agreement the value of ScottishPower is 777p per share:
400p in cash + 365p in Iberdrola’s shares + 12p in special dividend, being Eur 17,100 MM the value of the issued Shareholders’ Equity
400p in cash
765 p For each share of 0.1646 in Iberdrola’s shares= 365p 777 p Scottish Power
12p special dividend
It is expected to issue approximately 245 millions of new Iberdrola shares, representing 21.4% of the new share capital
Note: The terms of the agreement are based on Iberdrola’s closing prices as of November 27, 2006
* Based on undiluted number of shares
21
Proposed timetable
Maximum period of execution of 5 months starting
with the announcement of the transaction…
Transaction announcement
European Commission authorization
Scheme Document sent to ScottishPower shareholders and EGM official announcement
ScottishPower General Assembly to be held (judicial & extraordinary) (same day)
Court hearings (two different days). Submission of Judicial Order to the Register
28/11/06
16/2/07 6/3/07 30/3/07 17-19/4/07
27/11/06 26/02/07 29/03/07 9/4/07 10/4/07 20-23/4/07
Iberdrola and ScottishPower Boards approve the transaction
Official announcement of Iberdrola EGM, reports from managers and auditors to be made available
Iberdrola EGM and approval of the capital increase
Expert report on ScottishPower (non cash contribution to capital)
Posting of Offer Document in Spain
Effective day Settlement of transaction: Board of Directors to execute capital increase; Public deed and registration; and new shares authorized to float
Note: Estimated calendar, subject to authorizations in EU, USA and UK Court sanction (regarding the Scheme process), among other issues
22
Other considerations
Recommended by ScottishPower Board
Scheme acceptance: majority in number representing 75% by value
Subject to EGM approval of Iberdrola’s and ScottishPower’s shareholders
Subject to other common conditions, including regulatory issues
23
Agenda
Strategic rationale
Accelerating the Strategic Plan
Terms of the Agreement
Value Creation
Financing
Conclusion
24
Profit & Loss (Proforma)
Eur MM
Sales
EBITDA
EBIT
Profit before taxes
Net Profit
IBE 2005
11,738
3,378
2,262
1,958
1,382
IBE+SPW
2005 PROFORMA
19,464
4,861
3,368
2,876
2,078
Source: Iberdrola Annual Report December 2005. ScottishPower Annual Report March 2006
Eur/GBP exchange rate assumed as of close of 24 November. 1.4755
25
Market estimates
According to analysts estimates …
EBIT CAGR (´05 -´09)
14%
15%
IBE
IBE + SPW
Net Profit CAGR (´05 -´09)
14%
14%
IBE
IBE + SPW
… EBIT & Net Profit of the new Group maintain strong growth
Source: 2005 data: Iberdrola stand alone, Annual Report December 2005; IBE+SPW Annual Report (Proforma). 2009 data: analysts estimates (Lehman Brothers, Merrill Lynch, Citigroup and JP Morgan) IBE Dec. 2009 and SPW March 2010, where available
26
Synergies
Recurrent potential OPEX synergies of Eur 130 MM per year
and average annual capex synergies of Eur 44* MM
Costs synergies
• Group integration
Centre
- Central services
costs
- Shared services, including IT systems
• OPEX Synergies
- Supply: workforce optimization and processes
- Generation: workforce optimization and reduction of gas procurement costs
Operating
- Renewables: offices optimization in US efficiencies
- Renewables: turbines costs reduction and savings due to
Capex
the use of Iberinco in engineering and construction
synergies
- Distribution and Supply: Capex optimization
Additional • Efficiency in generation and processes synergies not • Option of a new nuclear plant and entrance in LNG quantified • Loss reduction in supply business contracts
* Average for initial five years
27
OPEX Synergies
Annual estimates of Eur 130 MM …
Area
Corporate centre
Shared services
Wind US
Generation, Supply and other
Description
• Efficiency improvements due to consolidation
• Integration and optimization of IT areas and purchases
• Efficiency improvements due to consolidation
• Generation: Efficiency improvements in CCGTs and coal and gas procurements
• Supply: Efficiency improvement due to consolidation
Estimated annual savings (Eur MM)
31
27
5
67
130
… less than 5% of combined Group expenses
28
OPEX synergies
implementation schedule
Growing synergies
Eur MM
40
Year 1
90
Year 2
130
Year 3
* Run rates by year end
29
CAPEX synergies
Total of Eur 192 MM over 5 years in Wind and Generation
and Eur 6 MM per annum recurrent capex savings Estimated savings Areas Description(Eur MM)
• Turbine supply from Gamesa to ScottishPower
UK Wind / CCGT • Use of Iberinco in the construction of wind farms 58
• Optimization of CGGT pipeline
• Turbine supply from Gamesa to ScottishPower 134 US Wind • Use of Iberinco in the construction of wind farms
Subtotal non-recurrent savings (five years) 192
Distribution and
• Material savings in distribution purchases
Supply (recurrent 6 p.a.
• Efficiency improvements in billing system
savings)
30
Depreciation of assets revaluations
IAS Initial estimates
Tangible
Eur 7.3 bn • 20 years depreciation
assets
• Typical value for concessions
Eur 1.0 bn • To be depreciated in a longer period or without
Intangibleassets depreciation
• Not to be depreciated
• Eur 6.1 bn according to Spanish tax law to be depreciated in 20 years for tax purposes:
Eur 5.0 bn Goodwill savings treated as deferred taxes.
Consultation to tax authorities
• Positive impact in cash flow
31
Agenda
Strategic rationale
Accelerating the Strategic Plan
Terms of the Agreement
Value Creation
Financing
Conclusion
32
Financing
• Syndicated credit facility up to GBP 7,955 MM (Eur 11,738 MM) maturing in 364 days
• 1 year term out option
Bank • Fully committed & underwritten in equal amounts by ABN, Barclays and RBS financing(to be syndicated post-announcement)
• Spread determined by ratings*: forecast £ 20 b.p.
• To be mostly refinanced in 2007 post-transaction closing
GBP MM
• Cash offer to SPW shareholders (including ADS)** 5,953
Breakdown • Cash offer to convertible bondholders 735
of amount
• Hedge for potential repayment of SPW debt 713
• Other 554
7,955
* An A3 rating by Moody’s is expected
** 400p per SPW/ share; 1,600p per ADS
Eur/GBP exchange rate assumed as of close of 24 November. 1.4755
33
Capital increase
The shares to be issued account for 21.4%
of the total new capital
Number of SPW shares Exchange New Iberdrola shares to be undiluted (MM) offer* issued (MM)
1,488 X 0.1646x = 245
Current Iberdrola Total new capital shares (MM) 1,147 m shares
902
New shares over total 21.4%
Note: Price of Iberdrola shares and assumed as of close of 27 November: Eur 32.75 & EUR/GBP exchange rate of 1.4755
* Exchange offer for ADS: 0.6584 new shares per ADS
34
Credit ratios &
financing policy
Maintaining a solid financial position
Ratios Financing policy
2005 2005 Rating “A”
(IBE)(SPW) range • Minimize structural subordination in the new company RCF / Net debt 18.4% 31.9% 13-25%
• High liquidity: 12 months of refinancing needs covered in FFO / Net debt 12.6% 15.6% 16-30% advance Net debt / 3.7x 2.5% 2.5-4.5x EBITDA
FFO / Gross
3.3x 3.6x 3.0-5.5x interest coverage Total debt / 58.6% 44.0% 40-60% Capital
Ratios that allow a “single A” rating
Source: Annual Reports IBE (December 2005) and SPW (March 2006)
35
Refinancing plan &
Maturity profile pre-financing
Target: over 5 years
average maturity of Group’s debt
Debt maturities* IBE+SPW Refinancing plan
6,000 5,000 4,000 3,000 2,000 1,000
0
2007 2008 2009 2010 2011 ‘12-’17 +2017
Iberdrola - Bonds Iberdrola - Loans ScottishPower - Bonds ScottishPower - Loans
• Long term refinancing post transaction closing
• Potential Loan Note up to GBP 500 MM
• Using capital markets and bank debt
• In the same currency as cash flows to minimize exchange rate risk
• Mostly at fixed rate
• Adequate maturity profile to limit refinancing risk
* Consolidated debt IBE+SPW pre-consolidation
36
Dividends & divestments
Maintaining DPS target announced in
‘07-’09 Strategic Plan
Dividends
Additional divestments from Iberdrola assets
Eur 1.50 / share
Over Eur 1,000 MM
(GBP 1.017 / share*)
within 12 months post
in 2009
transaction closing
* Eur/GBP exchange rate assumed as of close of 24 November: 1.4755
37
Agenda
Strategic rationale
Accelerating the Strategic Plan
Terms of the Agreement
Value Creation
Financing
Conclusion
38
Conclusion
Strategic Plan ‘01-’06 allowed for a significant value creation for Iberdrola …
31/12/1997
30/06/1998
31/12/1998
30/06/1999 Quotation in euros
31/12/1999 (Base 100= 31-12-1997)
30/06/2000 31/12/2000
30/06/2001 31/12/2001 2001-2006
30/06/2002 Strategic Plan
31/12/2002 30/06/2003 31/12/2003
30/06/2004
31/12/2004
30/06/2005
31/12/2005
30/06/2006 +43% SPW +175% IBE
… the integration represents a solid base to further value creation for IBE & SPW shareholders
Source: Bloomberg, 100 base data.
39
Conclusion
The integration fulfils all the criteria set,
In an scarce opportunities environment …
More internationalization
Liberalized markets, growing and stable
Strategic fit +
Value creation
Focus on renewables
Integrated business
Obtaining synergies and costs savings
Increase of EPS and CPS
Maintaining leverage:
Solid Credit Rating
No change in DPS
40
Conclusion
… and reinforcing our commitments
IBE & SPW • Increase in results Shareholders • Value creation
• Increasing investments Customers • Improving quality of service
• Renewables worldwide leader Society • More opportunities for suppliers
• Investments in the geographic areas of interest
• Investments in R&D&i
People • Supporting training and development
• New opportunities in a international environment
41
Conclusion
Iberdrola + ScottishPower
+ Growth
+ Profitable + Global
+ Solid + Balanced
A worldwide leader emerges
42
Iberdrola – ScottishPower
A worldwide leader emerges
November 28th, 2006