MA and Investment Banking Enel Acquisition of Endesa

M&A and Investment Banking Enel Acquisition of Endesa – Case Study 1

Table of Contents Introduction Transaction Description Strategic Rationale Financial Impact on Enel Accounts Focus on Equity Swap Contracts 2

Enel Acquisition of Endesa Introduction 3

Transaction Highlights World’s largest utility deal ever given an offer price of € 41. 3 per share, equivalent to a total EV of € 63. 6 bn Largest cross-border cash offer ever launched by an Italian company and largest PTO ever launched in Spain Rapidly designed and executed, understood to be launched within 2 months from the presentation of the opportunity to Enel The deal represented a transforming transaction for Enel, consolidating its presence in the European and Latin American electricity market 4

Global M&A in the Energy and Power Industry 5 Source: Thomson Financial, Institute of Mergers, Acquisitions and Alliances (IMAA) analysis.

Key Parties Involved in the Transaction Enel is Italy's largest power company and Europe's third largest listed utility by market capitalization Listed on the Milan and New York stock exchanges since 1999 Enel has the largest number of shareholders of any Italian company, at some 2. 3 m It has a market capitalization of about € 50 bn (as of April 2007) Total Installed Capacity: 40, 475 MW 2006 A Revenues: € 38, 513 m 2006 A EBITDA: € 8, 019 m 2006 A EBIT: € 5, 819 m 2006 A Net Debt: € 11, 690 m Acciona is one of the main Spanish corporations with activities in more than 30 countries throughout the five Continents Its activities span from infrastructures, renewable energy sources, mini-hydro, urban and environmental services, logistic and transportation, real estate, hospital management, among others Acciona is listed on the IBEX-35 (ANA. MC) selective index with a capitalization of € 10. 3 bn (as of April 2007) Total Installed Capacity: 4, 502 MW 2006 A Revenues: € 6, 272 m 2006 A EBITDA: € 960 m 2006 A EBIT: € 630 m 2006 A Net Debt: € 1, 085 m 6

Key Parties Involved in the Transaction (Cont’d) E. ON is the world’s largest private power and gas company with over 30 m customers in more than 20 European countries and the United States and a market cap of € 68 bn (as of December 2006) Since its incorporation in 2000, E. ON has focused in the energy and gas supply, having successfully developed new markets in the United States, the United Kingdom, Central and Eastern Europe and Scandinavia Total Installed Capacity: 28, 172 MW Gas Natural ranks as one of the biggest electricity operators in electricity generation and sale in Spain The main activities are: supply, distribution and sale of natural gas in Spain, France, Italy and Latin American (LATAM) countries 2006 A Revenues: € 10, 348 m 2006 A EBITDA: € 1, 912 m 2006 A EBIT : € 1, 263 m 2006 A Net Debt: € 3, 091 m Endesa is one of the largest electricity companies in the world The fifth utility in Europe and the biggest in Spain, one of the main players in LATAM countries and in Mediterranean countries, is also present in other energy sectors such as gas, cogeneration and renewables In total it has more than 22 m of costumers worldwide Small investors make up for the majority of the shareholder structure, with free float being around 80% of total shares Total Installed Capacity: 47, 113 MW 2006 A Revenues: € 20, 580 m 2006 A EBITDA: € 7, 139 m 2006 A EBIT: € 5, 239 m 2006 A Net Debt: € 19, 840 m 7 2006 A Revenues: € 67, 759 m 2006 A EBITDA: € 11, 353 m 2006 A EBIT: € 8, 150 m 2006 A Net Debt: €(268)m

Transaction Timeline Gas Natural tender offer 200 5 2006 26 March Enel and Acciona agree to launch a joint takeover for the control of Endesa 2007 E. ON tender offer 27 February Enel acquires 9. 99% of Endesa. Between 1 and 12 March Enel enters in several equity swap contracts to acquire up to 24. 97% 8 2 April Enel and Acciona agree to sell € 10 bn of their assets in order for E. ON to withdraw its offer 27 March The CNMV (Stock Exchange Regulator) gives the possibility to E. ON. to rise the offer price 11 April Enel and Acciona present their tender offer to the CNMV to acquire up to 100% of Endesa at € 41. 3 ps 4 June Enel reaches a stake of 24. 97% in Endesa through the physical settlement of the equity swaps 26 June Conclusion of the transaction to sell operational assets to E. ON. for € 11. 5 bn 19 July Start of the acceptance period for Endesa’s shareholders. Tender price is € 40. 16 ps 2008 2009 28 September The CNMV announces the final result of the tender offer. Enel acquires 42. 08% in Endesa (reaching a stake of 67. 05%), and Acciona acquires the 3. 97% of Endesa shares (reaching a stake of 25. 01%) 25 June Enel subscribes the acquisition of 25. 01% of the Acciona stake in Endesa for a consideration of € 11. 1 bn

Gas Natural Tender Offer Bidding Story: On 5 September 2005 Gas Natural launched an unsolicited offer for the entire share capital of Endesa for a consideration of € 7. 34 in cash and 0. 569 shares of Gas Natural for each Endesa share (the “Gas. Nat Offer”), valuing each share of Endesa at € 21. 3. This implied a 14. 8% premium over the previous day close (based on the price of Gas Natural before announcement) and an offer value of € 22. 6 bn In conjunction, Gas Natural announced it had reached an agreement with Iberdrola S. A. (“Iberdrola”) to transfer certain assets of the combined entity to Iberdrola, subject to the transaction being completed, (“the Iberdrola Agreement”). The objectives of the Iberdrola Agreement were to show proactiveness in relation to anti-trust issues and address part of the financing of the Gas. Nat Offer On 21 April 2006, the Spanish Supreme Court also suspended Gas. Nat Offer on the basis that the Gas. Nat Offer could be illegal since it did not follow the recommendation from the TDC(1). Effectiveness of the suspension of Gas. Nat Offer was conditional on Endesa making a deposit of € 1, 000 m Strategic Rationale: Becoming a key integrated player in the electricity and gas sector in Spain and reinforce its position in LATAM countries Reaction: Endesa considered the offer unacceptable because not consistent with the fair value of Endesa 9 Note: (1) Competition Defence Tribunal Defensive tactic: sale of € 3 bn of non-strategic assets, proceeds distributed through extraordinary

E. ON Tender Offer Bidding Story: On 21 February 2006, E. ON publicly announced the launch of a counteroffer for Endesa offering € 27. 50 in cash per share, (the “E. ON Offer”) The E. ON Offer represented a 48. 2% premium to Endesa’s undisturbed closing price on 2 September 2005 and a 24. 5% premium to the nominal value of the Gas. Nat Offer as of 24 February Endesa’s Board of Directors welcomed the fact that the E. ON Offer was superior in value to the Gas. Nat Offer, but still believed that the price offered did not reflect the real value of Endesa On 27 September 2006, E. ON announced its commitment to increase the offer to € 35 ps, all in cash (“E. ON Second Offer”) On 2 April 2007 Acciona/Enel/E. ON reached an agreement to avoid a potential situation in which none of the parties would achieve any control of Endesa and the shareholder structure would result unsustainable in the medium to long term Following the agreement E. ON withdrew the offer Strategic Rationale: Exposure to markets where E. ON was not present such as Spain, where they would become the biggest player, and LATAM countries Reaction: The Spanish Government set a series of regulatory measures to contrast the acquisition of the biggest energy player by a foreign enterprise 10

Enel Acquisition of Endesa Transaction Description 11

Minority Stake Acquisition by Enel On 27 February 2007 Enel announced the acquisition of 9. 99% of Endesa and in the following days entered into equity swap agreements (with the option of physical delivery) with MB and UBS as detailed below: On 4 June 2007 Enel reaches a 24. 97% stake in Endesa through the settlement of the equity swap contracts Acciona’s stake in Endesa: 21. 036% Enel + Acciona = 46. 01% of Endesa 12 Source: Company Information

Agreement between Enel and Acciona On 26 March 2007, Enel and Acciona signed an agreement to implement a joint management project for Endesa based on a ten-year agreement (renewable for other five years) Key elements of the agreement are: 1) Enel and Acciona to launch a tender offer 2) Creation of a New. Co to which Enel and Acciona would transfer stakes of 5. 01% of Endesa each 3) Subsequent transfer of 40. 00% of Endesa to the New. Co, which would be controlled 50. 01% by Acciona 4) 20% free float replenishment Based on the joint agreement upon settlement of the tender, Acciona would increase its stake in Endesa to 25. 02% (50. 01% ownership of New. Co which holds a 50. 02% stake in Endesa), and Enel would receive all the remaining shares 13

Agreement between Enel and Acciona (Cont’d) The agreement had a period of validity of 10 years with an extension option of 5 years Main Corporate Governance Rules New. Co Equal representation by both partners in the Board of Directors Chairman appointed by Acciona Certain “reserved matters" require unanimous consent Endesa Acciona and Enel equally represented in the Board of Directors via New. Co Chairman appointed by Acciona CEO appointed by Enel Strategic, financial and operating decisions require the unanimous consent of both partners 14 Termination Clauses In case of a “deadlock” situation concerning “reserved matters”: For the first 3 years, deadlock resolution would be solved through: Limited period of negotiations between representatives of both parties The decision with less impact on the existing situation and business practices After the third anniversary, deadlock resolution would be solved through: Asset split between the two parties Exercise of put option by Acciona to Enel

Share Price Reaction during the Process 15 Source: Bloomberg.

Enel and Acciona Agreement with E. ON On 2 April 2007, E. ON signed an agreement with Enel and Acciona in order to put an end to the substantial uncertainty surrounding the takeover bid for Endesa. The agreement establishes that E. ON: 1) Would not lift the conditionality to the takeover bid designed to acquire a majority stake in Endesa and would renounce to make a new takeover offer for Endesa in the next four years 2) Would receive a significant portfolio of assets in Spain, Italy and France as well as in Poland Turkey In Spain, E. ON would acquire the power utility Viesgo from Enel Viesgo had an installed generation capacity of ca. 2, 400 MW This generation capacity would increase by ca. 50% by 2010, as a result of ongoing construction projects Furthermore, E. ON received additional Spanish generation capacity from Endesa Following the transaction, E. ON’s Spanish power plant capacity would have a balanced energy mix in 2010 of approximately 6, 400 MW E. ON would become the No. 4 player in Spain with a market share of more than 10% In Italy, E. ON acquired Endesa Italia, with ca. 5, 000 MW in generation capacity. This would make E. ON the fourth largest power producer in Italy In France, E. ON would become the No. 3 player in the power generation sector through the acquisition of Endesa France/SNET, which had a power plant capacity of ca. 2, 500 MW 16

Enel – Acciona Joint Tender Offer On 11 April 2007 Enel and Acciona SA, following the announcement of the unsuccessful outcome of E. ON’s tender offer, filed to the Spanish Stock Exchange Authority Comision Nacional del Mercado de Valores (“CNMV”) a joint tender offer (the “Offer”) for up to 100% of Endesa shares Given that Endesa shares were listed also on the NYSE as ADSs and on the Off-Shore Exchange in Santiago de Chile, an identical offer was launched both in the US and in Chile Enel engaged five banks to act as Joint Lead Arranger and Joint Bookrunner on Enel's € 35 bn syndicated term loan facility to cover all financing requirements related to the acquisition of Endesa’s shares Offer Joint tender offer by Enel and Acciona to acquire up to 100% of the common stock of Endesa Offer Price € 41. 30 for each Endesa share (€ 43, 727 m) all in cash Offer Price Calculation € 41 per share plus interests (3 -month Euribor) accrued from the announcement of the agreement between Enel and Acciona (26 March 2007) to the date when the offer was authorized (31 May 2007). Price to be adjusted by any dividends distributed by Endesa before the results of the offer were published Conditions Reaching 50% plus one share of Endesa (Enel and Acciona controlling ca. 46% of Endesa’s share capital before launch of tender offer) Removal of certain by-laws limitations, namely, the provisions limiting the shareholders’ voting rights and envisaging restrictive criteria on the composition of Endesa’s Bo. D as well as the appointment and characteristics of its members Approvals Spanish energy regulator, Ministry of the Industry, Tourism & Commerce and Spanish competition authorities approval Financing Acciona: full funding available for up to 25% of the Offer Enel: Subscription of a € 35 bn of fully underwritten syndicated term loan facility, made up of three tranches consisting of: € 10 bn with a 1 -year maturity (subject to a term-out option for a further 18 months) € 15 bn with a 3 -year maturity € 10 bn with a 5 -year maturity Renewal of the MTN program, whose amount would be raised from € 10 to 25 bn One or more bond issues by 31 December 2007 in an aggregate amount corresponding to € 5 bn 17

Enel – Acciona Joint Tender Offer (Cont’d) The proposed financing structure of Enel for the acquisition of Endesa 74. 98% stake are summarized as follow: 18

Enel – Acciona Joint Tender Offer (Cont’d) 11 April Launching of the Tender Offer 23– 27 April Pre-notification contacts with the EU antitrust authorities 23– 27 April The “F 14 Authorisation” 07– 11 May U. S. Offer: Submission of no-action letter 07– 11 May Communication of the transaction to the EU antitrust authorities 02– 06 July Clearance from the EU antitrust authorities 09– 13 July CNE to grant F 14 Authorisation 16 July Filing Schedule Tender Offer 18 July Publication of the mandatory announcements of the Tender Offer 19 July Beginning of the acceptance period 03– 14 September Endesa General Shareholders Meeting 20 September End of the acceptance period 28 September Publication of the outcome of the Tender Offer by the CNMV 03 October Settlement of the Tender Offer 19

Enel – Acciona Joint Tender Offer (Cont’d) Following the joint tender offer launched by Enel and Endesa in 2007 resulted in Enel and Acciona controlling a 92% stake in Endesa remains listed with an 8% free float 20

Enel Disposal Plan During the course of 2009 Enel announced its intention to realize a significant disposals program with the main purpose of improving its leverage given the material increase after the acquisition of Endesa The main assets that Enel planned to dispose were the following: Enel Linee Alta Tensione Srl (“ELAT”) 18, 583 Km network of high voltage power network Enel Distribuzione Sp. A sold the entire share capital of Enel Linee Alta Tensione Srl to Terna Sp. A, pursuant to the sale agreement signed between Enel Sp. A, Enel Distribuzione and Terna on 19 December 2008. Leonardo & Co. , Mediobanca and Banca IMI served as independent advisors to Enel Distribuzione, whereas Terna availed itself of the services of Goldman Sachs and J. P. Morgan Purchase price of € 1, 152 m was paid in full at the time of closing Enel Rete Gas operates in the natural gas distribution sector in Italy, with a market share of roughly 12% in terms of gas distributed Enel Distribuzione Sp. A sold 80% of the share capital of Enel Rete Gas Sp. A to F 2 i and AXA Private Equity Purchase price of € 516 m. Before the closing, Enel Rete Gas distributed dividends to Enel Distribuzione for ca. € 209 m. Considering also the deconsolidation of Enel Rete Gas debt, Enel’s net debt cut was of over € 1, 200 m Disposal of a minority stake in Enel Greenpower Enel’s renewable energy company, with 618 factories in 16 Countries, with roughly € 1. 3 bn of EBITDA Sale of 32% of share capital of Enel Green Power through an IPO Price set at € 1. 6 per share, € 2. 3 bn raised (falling short of the target of raising € 3 bn). Greenshoe option for 210 m shares to reach an offer size of € 2. 6 bn The proceeds after fees from the transaction were € 2. 2 bn 21

Enel Rights Issue Following the transaction, in order to preserve its rating, on 12 March 2009 Enel announced to the market (strategy and FY 2008 results presentation) the intention to launch a ca. € 8. 0 bn rights issue for balance sheet strengthening purposes On 29 April, Enel’s EGM has approved the envisaged € 8. 0 bn rights issue On 6 May Enel’s Bo. D has approved the capital increase and provided instructions to file the prospectus of the offering with Consob The rights issue has been underwritten by a syndicate of banks including: Mediobanca, Banca IMI and JP Morgan acting as Joint Global Co-ordinators and Joint Bookrunners Credit Suisse, Goldman Sachs, Morgan Stanley, Uni. Credit and Bank of America / Merrill Lynch acting as Co-bookrunners CDP, exercised both the rights granted directly to it and the rights granted to the MEF (following the sale of the MEF rights to CDP). More specifically, CDP subscribed 31. 24% of the offered shares for roughly € 2. 5 bn. Therefore, following the full subscription of Enel’s capital increase, CDP reached a shareholding of 17. 36% of Enel share capital while the MEF retained a direct shareholding equal to 13. 88% Following the subscription period 99. 58% of rights has been exercised and the proceeds from the transaction has been € 7. 9 bn 22

Acciona Put Option on Endesa Shares Enel granted to Acciona the right to sell its direct and indirect stake in Endesa. This option could be exercised at any time between April 2010 until 2017 The price per Endesa share would be the higher of: The fair price (as established by investment banks) The Acciona-Enel offer price (€ 40. 16/share) adjusted for the cost of carry (3 m Euribor plus 85 bps less any dividend distributions) The exercise of the put could be accelerated with a mutual agreement of both Enel and Acciona Following the acquisition of Endesa there have been several articles and comments by the managers of Enel and Acciona indicating that the relationship between the two companies has not been as smooth as desired Tensions may be the result of two very different management styles: Acciona is perhaps the more dynamic partner, looking to maximize its negotiating position at all times, and not afraid to be aggressive Enel is a more structured and complex company but probably more oriented towards long term value creation at Endesa. Additionally, while Enel is the largest shareholder, it is the junior partner in terms of control, which could also 23 accentuate the friction

Early Break-up of the Acciona put on Endesa On 20 February 2009, Enel announced that it had reached an agreement with Acciona for an early break up of the Endesa put (equivalent to 25. 01% of the company) for a total consideration of € 11. 1 bn (the “Transaction”). Following completion, Enel would control 92. 06% of Endesa, with the remaining 7. 94% being free float The European Commission (“EC”) granted Enel clearance, on 8 April 2009, to the acquisition of sole control of Endesa (CNMV declared no squeeze out required) Key terms of the Transaction are as follows: The total consideration of € 11. 1 bn is equivalent to € 42. 0 per Endesa share, in line with the put option agreement exercisable from March 2010, and representing a 143% premium on Endesa’s current share price of € 17. 9 as of 26 May 2009 € 1. 5 bn of the cash price would be represented by the extraordinary dividend, which Endesa has distributed in March 2009 (the amount of the total extraordinary dividend distributed by Endesa is equal to € 6. 2 bn) In the context of the Transaction, Enel would also transfer € 2. 9 bn worth of renewable and hydro assets from Endesa to Acciona The remaining consideration to be paid by Enel, after dividends and asset transfer, would be € 6. 7 bn The Transaction has been financed through a syndicated loan of € 8. 0 bn agreed with a pool of 12 banks, of which € 5. 5 bn due in 2014 and € 2. 5 bn due in 2016 24

Enel Acquisition of Endesa Strategic Rationale 25

The Combined Enel + Endesa Lat. Am Western Europe CEEMEA Installed Capacity (GW) 15. 3 62. 9 7. 8 Customers (m) 11. 2 46. 9 1. 4 1, 390 68 Distribution (‘ 000 km) Leader in Energy Markets No. 1 in Italy No. 1 in Spain No. 1 in Romania and Slovakia No. 1 in Europe No. 1 in Latin America Enel Endesa Creation of a Global Energy Leader Creation of a Worldwide Leader in Renewables Enhancement of Stakeholders’ Value 26 No. 1 in Latin Renewables Creation of a global energy player with a leading position in diverse, high growth markets (Iberia, Eastern Europe, Lat. Am) Integrated player with a balanced and efficient generation portfolio and more than 60 m customers Combination of Acciona and Endesa’s renewables assets under a new company Presence in 24 countries and expected generation capacity of 13. 31 GW by 2009 Value accretive from year one Increased capacity to fund investments in distribution and generation would result in improved quality and security of services to customers

Endesa Leading Position in High Growth Markets 27 Source: Company Information

Synergies by Category 28 Source: Company Information Notes: (1) Over 2006 total cost base, excluding Europe.

Annual Savings of € 680 m by 2012 29 Source: Company Information Notes: (1) It only refers to fuel procurement.

Synergy Levers 30 Source: Company Information

New Business Mix(1) – 2006 proforma EBITDA Contribution 31 Source: Company Information Notes: (1) Considering 67. 05% stake of Endesa and 100% OGK-5; excluding contribution from Services and Other.

New Fuel Mix(1) 32 Source: Company Information Notes: (1) Based on FY 06 production.

Enel Acquisition of Endesa Financial Impact on Enel Accounts 33

€ 35 bn Credit Facility Agreement 34 Source: Company Information

Capital Structure Evolution 7. 3 x 0. 1 x 6. 6 x 6. 4 x 1. 5 x 6. 2 x 0. 6 x 0. 9 x 5. 6 x 1. 1 x 0. 2 x 5. 7 x 5. 2 x 1. 0 x 4. 0 x 3. 1 x 3. 0 x 5. 7 x 2. 5 x 2. 7 x 4. 4 x 2. 0 x 2006 A 2007 A Mkt Cap / EBITDA 35 Source: Company Information, Factset. 2008 A Net debt / EBITDA 2. 4 x 2009 A 2. 1 x 2010 A Other adjustements / EBITDA 1. 7 x 1. 8 x 2011 A 2012 A Net Debt / EV (%)

Enel Acquisition of Endesa Focus on Equity Swap Contracts 36

General Description of a Total Return Swap (“TRS”) The most simple way to consider a TRS (or CFD) is that the buyer of the TRS (the client) is fully exposed to changes in value of the underlying asset without physical ownership. Can be Cash- or Physically-Settled A TRS is a derivative instrument that allows the buyer (the Equity Amount Receiver) to receive from the seller (the Equity Amount Payer) the appreciation compared to the initial price or pay the depreciation in the share price of the underlying stock (the Equity Amount) At maturity or upon early unwind, the transaction can be Physically-settled (in which case the buyer buys shares from the seller at the initial price) Cash-settled During the life of the transaction, the buyer pays interest plus a spread and receives payments equal to the dividends paid by the underlying stock In order to mitigate the credit risk taken by the seller, the buyer would usually post cash collateral up-front corresponding to a percentage of the notional amount, and margin calls in case the share price decreases In order to hedge itself, the bank would usually purchase shares in the market. The price per share achieved by the bank for the execution of Underlying price its hedge would be the Initial Price of the TRS Increase in underlying value Client receives increase in value above initial price at maturity Initial price Decrease in underlying value Client pays decrease in value below initial price at maturity Time 37 Maturity

Cash Flows in a Total Return Swap Flows During the Trade Initial Price = 100 During Cash collateral Dividends Swap agreement Client Bank Initial price = 100 Bank Client Interest Purchase of hedge Market Physically-settled Return of cash collateral Shares Bank Client 100 Cash-settled Final Price = 70 Final Price = 150 Return of cash collateral 30 50 Client Bank 150 Client Bank 70 Sell hedge at 150 Market Shares 38 Sell hedge at 70 70 Market Shares

Total Return Equity Swap (TRS)/Contract For Difference (CFD) Does Do Does Not do ▲ A TRS gives the purchaser economic ▼ A TRS/CFD does not mean that the purchaser exposure to an underlying asset (e. g. shares) has bought the underlying asset, only exposure to changes in its economic value ▲ A TRS with physical settlement agreed upon signing gives the purchaser the right to buy shares at maturity ▲ When entering into a TRS/CFD, the bank may decide to hedge itself by buying the underlying asset ▼ A TRS/CFD with cash settlement agreed upon signing does not give the purchaser the right to buy shares. Only cash, based on the performance of the stock, is exchanged at maturity ▼ The bank does not buy the underlying asset ▲ If the bank decides to hedge itself and buy shares, this is completely independent in the way it manages the hedge and how any voting rights in relation to the hedge are voted on behalf of the purchaser of the TRS ▼ The purchaser cannot in any way influence the bank’s hedging strategy and voting decisions ▲ In certain jurisdictions there is no requirement to publicly disclose cash settled TRS/CFD ▼ A TRS/CFD does not exist to “buy shares avoiding disclosure” 39

Example of the Use of Equity Swaps in an M&A Context Structure Context Example Long Cash Settled Total Return Equity Swap Porsche on Volkswagen Schaeffler on Continental Long Total Equity Return Swap (Cash or Physically Settled) Enel/Endesa Lagardère on Vivendi Universal Publishing AEM on Edison shares Vivendi on BSky. B EDP on Optimus Sale Plus Long Total Equity Return Swap 40 Obtaining leverage economic exposure with limited or no public knowledge Acquirer needs regulatory approval (competition authority, local regulator, HSR…) before making any acquisition Delay creates a disadvantage for client Acquirer can enter into a cash or physically settled swap, where acquirer has the option to physically settle the swap if approval has been granted If regulatory approval is received, swap will be physically settled and if not, swap will be cash settled and shares placed in the market or to a new buyer In situations where counterparty is forced to divest its stake (e. g. commitment to competition authorities following M&A acquisition), it can retain economic exposure by selling the shares to the bank and entering into a Long Total Return Swap Counterparty loses voting rights and legal ownership Transaction is cash settled, unless counterparty can buy back the shares

Enel/Endesa – € 2. 9 bn Total Return Swap On 1 March 2007 Enel entered into an equity swap with over 7% of Endesa (worth € 2. 9 bn). Enel achieved 24. 97% (€ 10. 3 bn) of economic exposure to Endesa in two trading days. Building a 24. 97% Stake (worth € 10. 3 bn) in Endesa Direct acquisition of 9. 99% of Endesa SA ("Endesa") for a total consideration of approx. € 4. 1 bn Total Return Swap Flows Tender of Endesa shares worth € 2. 9 bn Tender 74. 1 m shares Execution of a Total Return Equity swap on a further 15% of Endesa Market allowed Enel to build the 24. 97% stake Any purchase of more than 10% of Endesa requires prior approval from the CNE that could take 1– 2 months As the bank was subject to the same restrictions on size, the swap had to be structured with two counterparty banks The swap allowed Enel to get additional exposure on 15% of Endesa while waiting for approval from the CNE Long Total Return Swap Appreciation + dividends Enel Bank #1 acted as broker in the acquisition of 7. 98% of Endesa's share Equity Amount Payer Bank Equity Amount receiver Enel Sp. A Number of Shares 74. 1 m Notional € 39. 0 Interest 3 months, with option to extend for 3 years Settlement In cash (by default) Option for Enel to elect for physical settlement if CNE granted approval for the transaction 41 At Maturity (Assuming Share Price @ € 40) CNE does not approve Process Overview Bank Depreciation + Interests Enel Cash settlement of swap Increase in share price Bank Sale of shares at € 40 Market/ Third Party CNE approves capital (equal to € 3. 3 bn), underlying the swap agreements between Enel and the other bank Bank Purchase price of € 39/share Sale of shares worth € 40 Enel Bank € 39/share in cash