1. UNFCCC JI workshop 14th February 2007 ENDESA´s Strategy regarding Joint Implementation David Corregidor Sanz Deputy Director of the Environment and Climate Change

2. 1 Index  A few words about Endesa  Endesa’s approach to the carbon market  A positive learning experience: Endesa Climate Initiative  ENDESA´s view on JI  Closing words

3. 2 Endesa is a global electricity player: the leading utility in the Spanish electricity system and the number one private-sector multinational electricity utility in Latin America. 23 million clients 203 TWh sold 46 GW installed Positioned in Spain, the Mediterranean and Latin America Present in 15 countries 27,200 employees 55,000 M€ in assets Our core business is energy Present along the entire value chain: Generation, distribution, and supply 185 TWh produced About Endesa

4. 3 Endesa’s approach to the carbon market ENDESA’s CLIMATE CHANGE STRATEGY 54,7 19,8 13,9 128,3* 34,3 205,0 100,5*** 85%** 65% 100% 77%*** 98% 85% 80%

5. 4 GHG Internal Reductions The Energy Wisdom Programme is a voluntary initiative launched in 2000, which demonstrates how electricity companies are improving energy efficiency and reducing CO2 emissions through the implementation of real, innovative projects. European Commission accepted the EWP as part of the Sustainable Energy European Campaign 2005-2008. What you see here is the third report. ENDESA´s contribution to this third report: More than 300 projects were analyzed and presented (Renewable, CHP, Energy efficiency, CCGT, Fuel Switching, Transmission and distribution of electricity,…). CO2 reduction of 14,7 MtCO2 in Spain and 26,7 MtCO2 in LATAM in 2003 and 2004. New capacity 07-09 CCGT +3800 MW ( ES&P ) + 800 MW ( IT ) + 800 MW ( FR ) Isolated Systems (Islands) + 850 MW Renewables + 840 MW ( ES&P ) + > 300 MW ( IT ) +150 MW ( FR ) 2009: Endesa will have about 2.900 MW of renewable installed capacity. Total installed capacity about 55.000 MW

6. 5 Endesa Climate Initiative ECI Principal Aspects Launched in Madrid in November 2005 Initial target: 15 Mt Presented in Brazil, China, India, Mexico, Chile, Canada, Germany, Russia The world's first carbon credit purchase initiative launched by an industrial company Preference on big projects (1Mt to 2012 approx.) from industrial, energy and waste management sectors. Technical assistance. Our aim is that both buyer and seller do good business.

7. 6 Results of the ECI After 1 year of operation Approximately 75% of the total ERPAs signed by Endesa come from the ECI. More than 100 projects have been analyzed and a good number of them have been successfully contracted. Excellent marketing tool. The initial objective of 15Mt CERs has been widely exceeded. China and Latin-American dominate the portfolio New areas of activity: JI countries, Africa, Rest of Asia The ECI is totally active and Endesa continues to identify and negotiate CDM and JI projects.

8. 7 ENDESA´S SPECIFIC ADVANTAGES TO JI PROJECT PARTNERS Project Finance A rated carbon buyer with a lot of experience in the market Competitive prices for ERUs Financing of carbon transaction costs possible (PDD, determination, registration…) Business-to-Business Industry expertise with understanding of how business works Reliable Sound counterpart with presence in 15 countries Possibility to support project development in the electricity sector Experienced management team ENDESA´s Joint Implementation Strategy OBJECTIVE Endesa aims at playing an important role in Joint Implementation (JI) like the company is already doing in the Clean Development Mechanism Target Volume in Russia: 25Mt Further targets to be defined in the short-term

9. 8  So far, CDM has dominated the market as its regulatory framework was defined in advance and now we can say that it is well-established and operational.  Right signals from JI  Since June 2006, PDD JI model is available  Track 2 officially launched in October 2006, paving the way for large amounts of carbon credits. “We can expect reductions in the order of several hundred million tonnes of CO2 by the end of 2012”: Yvo de Boer, UNFCCC Secretary.  Since October 2006, AIEs can submit to the JISC PDDs for JI Track 2 projects for determination.  Russian JI procedures will be formally approved in the first quarter of 2007.  …but a number of barriers and challenges still need to be solved. Endesa´s views and concerns on JI (1)

10. 9 Endesa´s views and concerns on JI (2)  More certainty should be given to post-Kyoto development: as the EU ETS is expected to continue beyond 2012, the continuation of the Kyoto mechanisms is essential to keep carbon prices at an acceptable level.  Strict quantitative limit to the use of CDM and JI credits within the EU ETS. In our opinion, EC’s recent decisions on the use of CDM and JI credits within the second round period of the ETS drastically limit the private demand for CERs and ERUs, thus threatining its short-term viability and endangering further development.  EC Decision on Avoiding Double Counting GHG emissions reductions under the EU ETS.  Country risks: - Eligibility criteria. - MoUs required by several National Laws (Poland, Romania, Bulgaria, Estonia, and maybe Russia)

11. 10 Closing words  Until now, European corporate demand, spurred through the ETS Linking Directive, has been the single largest driving force behind the CDM, both in terms of volume and price, and would be also the largest driving force behind JI in the absence of a cap for the use of CERs and ERUs.  EU Member States have requested nearly 1.9 billion tons of flexibility (CERs and ERUs) for ETS companies in the period 2008 to 2012 through their National Allocation Plans. The proposed ETS restrictions on the CDM and JI credits means a reduction of 140 million CER/ERU credits per year, down from 377 million to 237 million (a 35.95% reduction).  JI is a powerful tool to channel investments to the economies in transition. Therefore it´s worth to explore its full potential and make it operational

12. 11 THANK YOU FOR YOUR ATTENTION! ENDESA David Corregidor Sanz dcorregidor@endesa.es

13. The strict interpretation of the supplementarity principle reduces the % of use of CER/ERU for Sweden, Ireland and The Netherlands. The issue of supplementarity

14. 13 Lessons learned Attractive Buyer Endesa is a large company with a well-known name and good reputation, that is a major advantage. Endesa has been chosen by many sellers for being able to negotiate from an industry-to-industry perspective. Corporate Partnerships Long-term partnerships with large players (PEMEX, Huaneng) guarantee a sizable portfolio of projects Endesa has established partnerships with providers of technology and financial institutions. The Carbon Market The purchase of carbon credits is very complicated (but reduces the CO 2 bill). It is still a market with uncertainty Increasing competition, which increase the market price. NAPs almost known. Traders and financial institutions now active in the market. China dominates. Well defined procedures. Big number of projects Need to explore new markets After 1 year of operation