ENDESA merges its distributing companies in Spain

NEW YORK, NY, Nov. 7, 2001 – The Board of Directors of ENDESA S.A., approved yesterday, the consolidation of its five distribution companies in Spain: Fuerzas Electricas de Cataluna, Compania Sevillana de Electricidad, Gas y Electricidad Distribucion Electrica, Union Electrica de Canarias and Electricas Reunidas de Zaragoza Distribucion into one.

The consolidation of these companies constitutes another step towards the development of the corporate consolidation process that Endesa put into effect on October 1998. Other initiatives that have already taken place, as part of this process is the merge of the electricity companies in Spain participated by ENDESA, the organization by lines of business, the creation of ENDESA Energia to market in the deregulated electricity market and the integration of the peninsular electricity generation into ENDESA Generacion.

With this decision, ENDESA assumes direct responsibility for the electricity supply in each one of the areas it operates in Spain.

This decision is also a result of the common regulatory framework in the Mainland in the Islands related to electricity distribution. While regulation on electricity generation in the islands is different from the one in the mainland.

Basically, the decision reached calls for the creation of two new companies:

* ENDESA Distribucion Electrica, that will adopt electricity transmission and distribution as regulated activities as well as the regulated supply, which until now were carried out among the five electricity distribution companies already mentioned.

* ENDESA Operaciones y Servicios Comerciales, will develop commercial support activities (billing & collection, commercial offices, telephone customer support, transition of clients from regulated to deregulated market, back office, etc.) that such companies were responsible for. This new company will provide these services to ENDESA Distribucion Electrica and to ENDESA Energia, as well as to other gas Group companies.

Both companies will also be part of the sub holding ENDESA Red, which until now was called ENDESA Distribucion grouping the regional distribution companies. The reassignment of all employees of the five regional distribution companies to these three new companies will be made with total respect of their employment contracts.

ENDESA will, in this manner, be able to have one company enabled to develop and support its commercial activities in a regulated and deregulated market achieving greater levels of efficiency and operating flexibility and complying with the regulatory requirements of legal separation between regulated and deregulated electricity activities.

This new structure rationalizes and simplifies from the organizational standpoint. In addition, allows the total implementing of the redesigned processes, which will improve the efficiency of the Company, increase the quality of service and the support to its customers. This implementation would only be partial under the previous corporate structure.

The new redesigned processes, which will give Endesa a strong geographical coordination, will bring a higher flexibility and substantial costs savings, both in the operating side.

The distribution companies integration, will assure the operating costs savings arisen from the network, commercial and organizational redesigned processes that were budgeted for a five year period ending on 2005 and amounting Euro 238.6 million annually, vis a vis the 1999 costs base.

Moreover, this will produce additional costs savings amounting Euro 7.6 million annually derived from the simplified corporate structure and other operative costs reductions.

Geographical communication with the regional markets

In the framework of the distributing companies integration, the Company will manage the relationship with the Spanish regional markets in which operates through the creation of the corresponding Regional Director as well as a Advisory Committee in each of them.

Among the main responsibilities of each Regional Director of Endesa the following should be highlighted:

* As the head of the Company in the corresponding region, will assume the institutional representation in it, mainly with local authorities and regulators.

* Will also coordinate the activities of the Company’s business lines operating in the region, providing the services support and managing the infrastructure shared by them.

* Will be responsible for the service quality, customer support and the regional profit and loss account; therefore, will be involved in the planning and process targeting deployment related to this.

The Regional Directors of Endesa will manage in its corresponding market the following units: Network Planning and Quality, New Customers and Services, Operating and Supply Quality and Customer Access and Metering.

Members of the Board of Directors of the regional distributing companies will compose the Endesa Advisory Committees. In addition, between four and six representatives of the social and economic local environment may join these Boards. When required by the circumstances Endesa CEO or Chairmen will take part of the Boards as well.

The Advisory Boards will constitute the permanent via to have first hand information available about regional market expectations.

This geographical organization maintains direct relations with those markets where it has presence as a electricity distributing company, guarantees an adequate and flowing communication with its institutional representatives, social organizations and clients and takes advantage of the strong presence that the company has in its markets, as well as in the investment projects already mentioned in each one. This amounts to euro 2,802.9 million, only in respect to the electricity distribution business during the period 2001-2005.

The geographical breakdown of these investment projects attend in a balanced way to the needs and specific characteristics of each market and especially, to those resulting from the development of new generation infrastructure.

Getting ready for a total market deregulation and better customer service.

The merge of all distributing companies in Spain enables ENDESA to have a more flexible and efficient commercial structure ready to face total Spanish Electricity market deregulation that will take place January 1, 2003. Additionally, ENDESA will have the same conditions in terms of corporate structure than its competitors in Spain.

The optimization of the corporate structure, through enabling one single company to offer services within a regulated market (ENDESA Distribucion Electrica) as well as the deregulated market (ENDESA Energia), eases the traffic flow of customers from one to the other and will facilitate them to benefit from market liberalization, enjoying a faster and more efficient support.

This structure will allow a greater advantage of the network of channels of customer service that ENDESA is developing for the market deregulation.

As part of this network, the company will have in place 441 Centers of Service at the end of the year. Three-hundred and six out of these 441 Points of Service are already operating, being centers of direct and personalized customer service, operated by local installations companies, allowing fast and easy solutions related to the electricity service (applications for new supplies, contracting, supervising, claims, etc.) and to offer to clients other related basic products and services (telephony, insurance, cable communications, alarm systems, etc.)

On the other hand, the integration of the electricity distribution companies will allow the development of a unique brand strategy compatible with the sustenance of the local trade brands, approaching to the costumers of each market.

Moreover, the cutback of the operating and structure costs will leave more resources available in each market to improve the costumer care and the quality of the service, likewise with the contribution of the Regional Directors.


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