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ENEL – Società per Azioni (incorporated with limited liability in Italy) as an Issuer and Guarantor and ENEL Finance International S.A. (a public limited liability company (société anonyme), incorporated under the laws of the Grand Duchy of Luxembourg, having its registered office at 35, boulevard du Prince Henri, L-1724 Luxembourg and registered with the Luxembourg trade and companies register under number B.60.086) as an Issuer €25,000,000,000 Global Medium Term Note Programme On 7th December, 2000 ENEL – Società per Azioni (“ENEL”) entered into a Global Medium Term Note Programme (the “Programme”) and issued an offering circular on that date describing the Programme. The Programme was subsequently updated on 10th May, 2001 and was further updated on 28th October, 2002, on 29th October, 2003 and on 8th November, 2005, when ENEL Investment Holding B.V. ceased to be an issuer under the Programme and was replaced by ENEL Finance International S.A. (“ENEL S.A.”, and, each of ENEL and ENEL S.A. an “Issuer”). This Offering Circular supersedes all previous Offering Circulars. Any Notes (as defined below) issued under the Programme on or after the date of this Offering Circular are issued subject to the provisions herein. This does not affect any Notes already issued. Under the Programme, each of ENEL and ENEL S.A. may from time to time issue notes (the “Notes”) denominated in any currency agreed between the relevant Issuer and the relevant Dealer (as defined below). References in this Offering Circular to the “relevant Issuer” shall, in relation to any Tranche of Notes, be construed as references to the Issuer which is, or is intended to be, the Issuer of such Notes as indicated in the applicable Final Terms. The payment of all amounts owing in respect of Notes issued by ENEL S.A. will be unconditionally and irrevocably guaranteed by ENEL in its capacity as guarantor (the “Guarantor”). ENEL S.A. has a right of substitution as set out in Condition 16. ENEL S.A. may at any time, without the consent of the Noteholders, Receiptholders or the Couponholders, substitute for itself as principal debtor under the Notes, Receipts and the Coupons ENEL as Issuer. ENEL shall indemnify each Noteholder, Receiptholder and Couponholder against (A) any tax, duty, assessment or governmental charge which is imposed on such Noteholder, Receiptholder or Couponholder by (or by any authority in or of) the Republic of Italy with respect to any Note, Receipt or Coupon and which would not have been so imposed had the substitution not been made and (B) any tax, duty, assessment or governmental charge, and any cost or expense relating to the substitution, except that ENEL shall not be liable under such indemnity to pay any additional amounts either on account of “imposta sostitutiva” or on account of any other withholding or deduction in the event of payment of interest or other amounts paid to a non-Italian resident legal entity or a non-Italian resident individual which is resident in a country which does not allow for a satisfactory exchange of information. For further details regarding ENEL S.A.’s right of substitution see Condition 16. Notes may be issued in bearer or registered form (respectively “Bearer Notes” and “Registered Notes”). The maximum aggregate nominal amount of all Notes from time to time outstanding under the Programme will not exceed €25,000,000,000 (or its equivalent in other currencies calculated as described herein), subject to increase as described herein. The Notes may be issued on a continuing basis to one or more of the Dealers specified under “Summary of the Programme” and any additional Dealer appointed under the Programme from time to time by the relevant Issuer (each a “Dealer” and together the “Dealers”), which appointment may be for a specific issue or on an ongoing basis. References in this Offering Circular to the “relevant Dealer” shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to purchase such Notes. An investment in Notes issued under the Programme involves certain risks. For a discussion of these see “Risk Factors”. Application has been made to the Irish Financial Services Regulatory Authority (“IFSRA”) as competent authority under the Prospectus Directive (as defined below) for the Offering Circular to be approved. Approval of the IFSRA relates only to Notes which are to be admitted to trading on the regulated market of the Irish Stock Exchange or other regulated markets for the purposes of Directive 93/22/EEC or which are to be offered to the public in any member state of the European Economic Area. Application has also been made to the Irish Stock Exchange for Notes issued under the Programme to be admitted to the Official List and trading on its regulated market. Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and any other terms and conditions not contained herein which are applicable to each Tranche (as defined under “Terms and Conditions of the Notes”) of Notes will be set out in a final terms (the “Final Terms”) which, with respect to Notes to be listed on the Irish Stock Exchange, will be filed with IFSRA. The Programme provides that Notes may be listed or admitted to trading, as the case may be, on such other or further stock exchanges or markets as may be agreed between the relevant Issuer and the Guarantor (where ENEL is not the relevant Issuer) and the relevant Dealer. The relevant Issuer may also issue unlisted Notes and/or Notes not admitted to trading on any market. Application may also be made to have certain Series of Notes accepted for trading in the Private Offerings, Resales and Trading through Automated Linkages System (“PORTAL”) of the National Association of Securities Dealers, Inc. The Notes issued by ENEL will constitute “obbligazioni” pursuant to Article 2410, and the Articles that follow such Article 2410, of the Italian Civil Code, which relate to the issuance of “obbligazioni” by corporations in Italy. The Notes have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws, and may not be offered or sold within the United States or to, or for the account or benefit of, any U.S. person (as defined in Regulation S under the Securities Act) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Notes will be offered and sold in offshore transactions outside the United States in reliance on Regulation S under the Securities Act and, if so specified in the applicable Final Terms, within the United States to “qualified institutional buyers” (as defined in Rule 144A under the Securities Act), in transactions exempt from the registration requirements of the Securities Act. The Notes in bearer form are subject to U.S. tax law requirements. The relevant Issuer and the Guarantor (where ENEL is not the relevant Issuer) may agree with any Dealer that Notes may be issued in a form not contemplated by the Terms and Conditions of the Notes herein, in which event (in the case of Notes intended to be listed on the Irish Stock Exchange) a supplementary Offering Circular, if appropriate, will be made available which will describe the effect of the agreement reached in relation to such Notes.

Arrangers Deutsche Bank JPMorgan Dealers ABN AMRO Banca IMI Barclays Capital BNP PARIBAS Citi Credit Suisse Deutsche Bank Goldman Sachs International JPMorgan Lehman Brothers MEDIOBANCA S.p.A. Merrill Lynch International Morgan Stanley UBS Investment Bank The date of this Offering Circular is 4th May, 2007 WorldReginfo - 9d5bd196-b9c8-418f-aebc-fa18cac8568b Level: 6 – From: 6 – Thursday, May 3, 2007 – 5:21 pm – mac5 – 3687 Intro : 3687 Intro

The Offering Circular comprises a base prospectus in relation to each Issuer for the purposes of Article 5.4 of Directive 2003/71/EC (the “Prospectus Directive”).

The Issuers and the Guarantor accept responsibility for the information contained in this Offering Circular. To the best of the knowledge of the Issuers and the Guarantor (each having taken all reasonable care to ensure that such is the case) the information contained in this Offering Circular is in accordance with the facts and does not omit anything likely to affect the import of such information.

Copies of Final Terms will be available from the registered office of the relevant Issuer and the specified office of the Paying Agent.

This Offering Circular is to be read in conjunction with all documents which are incorporated herein by reference (see “Documents Incorporated by Reference” below). This Offering Circular shall be read and construed on the basis that such documents are incorporated in, and form part of, this Offering Circular.

The Dealers have not independently verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Dealers as to the accuracy or completeness of the information contained or incorporated in this Offering Circular or any other information provided by either Issuer or the Guarantor in connection with the Programme. No Dealer accepts any liability in relation to the information contained or incorporated by reference in this Offering Circular or any other information provided by either Issuer or the Guarantor in connection with the Programme.

Subject as provided in the applicable Final Terms, the only persons authorised to use this Offering Circular in connection with an offer of Notes are the persons named in the applicable Final Terms as the relevant Dealer, the Managers or the Financial Intermediaries, as the case may be.

No person is or has been authorised by either Issuer or the Guarantor to give any information or to make any representation not contained in or not consistent with this Offering Circular or any other information supplied in connection with the Programme or the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by either Issuer or the Guarantor or any of the Dealers.

Neither this Offering Circular nor any other information supplied in connection with the Programme or any Notes (i) is intended to provide the basis of any credit or other evaluation or (ii) should be considered as a recommendation by either Issuer or the Guarantor or any of the Dealers that any recipient of this Offering Circular or any other information supplied in connection with the Programme or any Notes should purchase any Notes. Each investor contemplating purchasing any Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the relevant Issuer and ENEL (where the relevant Issuer is not ENEL). Neither this Offering Circular nor any other information supplied in connection with the Programme or the issue of any Notes constitutes an offer or invitation by or on behalf of either Issuer or the Guarantor or any of the Dealers to any person to subscribe for or to purchase any Notes.

Neither the delivery of this Offering Circular nor the offering, sale or delivery of any Notes shall in any circumstances imply that the information contained herein concerning either Issuer or the Guarantor is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Programme is correct as of any time subsequent to the date indicated in the document containing the same. The Dealers expressly do not undertake to review the financial condition or affairs of either Issuer or the Guarantor during the life of the Programme or to advise any investor in the Notes of any information coming to their attention.

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The Notes in bearer form are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to, or for the account or benefit of, United States persons, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

This Offering Circular does not constitute an offer to sell or the solicitation of an offer to buy any Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Offering Circular and the offer or sale of Notes may be restricted by law in certain jurisdictions. The Issuers, the Guarantor and the Dealers do not represent that this Offering Circular may be lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, unless specifically indicated to the contrary in the applicable Final Terms, no action has been taken by the Issuers, the Guarantor or the Dealers which is intended to permit a public offering of any Notes or distribution of this document in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Offering Circular nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Offering Circular or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Offering Circular and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Offering Circular and the offer or sale of Notes in the United States, the European Economic Area (including the United Kingdom, France, Ireland, Luxembourg and Italy) and Japan, see “Subscription and Sale and Selling and Transfer Restrictions”.

In making an investment decision, investors must rely on their own examination of the relevant Issuer and ENEL (where the relevant Issuer is not ENEL) and the terms of the Notes being offered, including the merits and risks involved. The Notes described herein have not been approved or disapproved by the United States Securities and Exchange Commission or any state securities commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of this offering or the accuracy or adequacy of this Offering Circular. Any representation to the contrary is unlawful.

None of the Dealers, the Issuers or the Guarantor makes any representation to any investor in the Notes regarding the legality of its investment under any applicable laws. Any investor in the Notes should be able to bear the economic risk of an investment in the Notes for an indefinite period of time.

U.S. INFORMATION

If so specified in the applicable Final Terms, this Offering Circular may be submitted on a confidential basis in the United States to a limited number of QIBs (as defined under “Form of the Notes”) for informational use solely in connection with the consideration of the purchase of the Notes being offered hereby. Its use for any other purpose in the United States is not authorised. It may not be copied or reproduced in whole or in part nor may it be distributed or any of its contents disclosed to anyone other than the prospective investors to whom it is originally submitted.

If so specified in the applicable Final Terms, Registered Notes may be offered or sold within the United States only to QIBs in transactions exempt from registration under the Securities Act. Each U.S. purchaser of Registered Notes is hereby notified that the offer and sale of any Registered Notes to it may be being made in reliance upon the exemption from the

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registration requirements of the Securities Act provided by Rule 144A under the Securities Act.

Each initial and subsequent purchaser of Notes will be deemed, by its acceptance or purchase thereof, to have made certain acknowledgements, representations and agreements intended to restrict the resale or other transfer of such Note, as described in this Offering Circular and the applicable Final Terms, and, in connection therewith, may be required to provide confirmation of its compliance with such resale or other transfer restrictions in certain cases. See “Form of the Notes” and “Subscription and Sale and Selling and Transfer Restrictions”. Unless otherwise stated, terms used in this paragraph have the meanings given to them in “Form of the Notes”.

Notwithstanding any limitation on disclosure provided for in this Offering Circular, its contents, or any associated Final Terms, and effective from the date of commencement of discussions concerning any of the transactions contemplated hereby (the “Transactions”), each recipient of this Offering Circular or any associated Final Terms (a “Recipient”) (and each employee, representative, or other agent of any such Recipient) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the Transactions and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure, except to the extent that any such disclosure could reasonably be expected to cause this Programme, or any issue of Notes thereunder not to be in compliance with securities laws. For purposes of this paragraph, the tax treatment of the Transactions is the purported or claimed U.S. Federal income tax treatment of the Transactions, and the tax structure of the Transactions is any fact that may be relevant to understanding the purported or claimed U.S. Federal income tax treatment of the Transaction.

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 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 TRANSACTION MEANS 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.

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 Issuer and the Guarantor has undertaken in a deed poll dated 10th May, 2001 (the “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 him, the information required to be delivered under Rule 144A(d)(4) under the Securities Act if, at the time of the request, the relevant Issuer 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.

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SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES

Each Issuer and the Guarantor is a corporation organised under the laws of it’s jurisdiction of incorporation, as set out on the front cover of this Offering Circular. All of the officers and directors named herein reside outside the United States and all or a substantial portion of the assets of each Issuer and 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 of any such Issuer’s or Guarantor’s jurisdiction of incorporation upon any such Issuer or Guarantor or such persons, or to enforce judgments against them obtained in courts outside of its jurisdiction of incorporation predicated upon its civil liabilities or such directors and officers under laws other than of its jurisdiction of incorporation law, including any judgment predicated upon United States federal securities laws. Each Issuer and Guarantor acknowledges that there is doubt as to the enforceability in its jurisdiction of incorporation in original actions or in actions for enforcement of judgments of United States courts of civil liabilities predicated solely upon the federal securities laws of the United States.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

ENEL maintains its financial books and records and prepares its financial statements in euro in accordance with generally accepted accounting principles in Italy and ENEL S.A. maintains its financial books and records and prepares its financial statements in euro in accordance with generally accepted accounting principles in Luxembourg, both of which differ in certain important respects from generally accepted accounting principles in the United States.

All references in this document to “euro” and “€” refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community, as amended. In addition, references to “U.S.$” refer to United States dollars and to “Sterling” and “£” refer to pounds sterling.

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TABLE OF CONTENTS

Page

Summary of the Programme ...... 7

Risk Factors ...... 12

Documents Incorporated by Reference ...... 28

Overview of the Programme ...... 29

Form of the Notes ...... 34

Applicable Final Terms ...... 38

Terms and Conditions of the Notes ...... 52

Use of Proceeds ...... 81

Description of ENEL ...... 82

Description of ENEL S.A...... 162

Book-Entry Clearance Systems ...... 164

Taxation ...... 168

Subscription and Sale and Selling and Transfer Restrictions ...... 178

General Information ...... 185

In connection with the issue and distribution of any Tranche of Notes, the Dealer or Dealers (if any) named as the Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in the applicable Final Terms 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 Stabilising Manager(s) (or persons acting on behalf of a Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any over-allotment shall be conducted in accordance with all applicable laws and rules.

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SUMMARY OF THE PROGRAMME

This summary must be read as an introduction to this Offering Circular and any decision to invest in any Notes should be based on a consideration of this Offering Circular as a whole, including the documents incorporated by reference. Following the implementation of the relevant provisions of the Prospectus Directive in each Member State of the European Economic Area no civil liability will attach to the Responsible Persons in any such Member State in respect of this summary, including any translation hereof, unless it is misleading, inaccurate or inconsistent when read together with the other parts of this Offering Circular. Where a claim relating to information contained in this Offering Circular is brought before a court in a Member State of the European Economic Area, the plaintiff may, under the national legislation of the Member State where the claim is brought, be required to bear the costs of translating the Offering Circular before the legal proceedings are initiated.

Words and expressions defined in “Form of the Notes” and “Terms and Conditions of the Notes” shall have the same meanings in this summary.

Issuer: ENEL – Società per Azioni (“ENEL”)

ENEL is Italy’s largest power company, and Europe’s third-largest listed utility by market capitalisation. ENEL has been listed on the Milan and New York Stock Exchanges since 1999 and has the largest number of shareholders of any European company, at some 2.3 million. It has a market capitalisation of about €50 billion at current prices.

ENEL produces and sells electricity mostly in Europe, North and Latin America. In the power business, ENEL has 50.8 GW of generating capacity and has 32 million electricity customers.

ENEL is the second-largest Italian distributor and vendor of natural gas, with nearly 2.3 million customers and a 12 per cent. share of the Italian market.

The company has about 58,500 employees.

ENEL is actively seeking expansion internationally in the power and gas markets after consolidating its business and completing the sale of its non-core assets.

ENEL is a world leader in the sector of renewable energy resources (hydro, geothermal, wind, solar and biomass) across the world with a capacity of 19,000 MW.

On 31st December, 2006, the Italian Economy Ministry held 21.14 per cent. of ENEL while Cassa Depositi e Prestiti held 10.16 per cent., leaving a free-float of some 68.70 per cent. for other shareholders. These shareholders include leading international investment funds, insurance companies and pension funds, ethical funds, along with Italian retail investors. As at that date, no other shareholders held more than 2 per cent. of the share capital of ENEL.

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ENEL’s profit and loss accounts and balance sheets as at 31st December in each of 2006 and 2005:

11112006 1111 2005 (millions of euro) Income data Revenues 38,513 33,787 Operating income 5,819 5,538 Net income for the period (shareholders of the parent company and minority interests) 3,101 4,132(1) Net income for the period attributable to shareholders of the parent company 3,036 3,895(1) Financial data Total net financial position (11,690) (12,312) Total shareholders’ equity 19,025 19,416 Cash flow from operating activities 6,756 5,693(2) Capital expenditure on tangible and intangible assets 2,963 2,829

(1) Figures include the discontinued operation results (€1,272 million) due to mainly the capital gain realised. (2) Including cash flow from discontinued operating activities (€730 million)

For further information on the financial results of ENEL, please see the financial statements of ENEL for the years ended 31st December in each of 2006 and 2005, incorporated by reference into this Offering Circular.

ENEL Finance International S.A. (“ENEL S.A.”)

ENEL S.A. was incorporated for an unlimited duration as a public limited liability company under the laws of Luxembourg on 3rd July, 1997. ENEL S.A. is registered with the Luxembourg trade and companies register under number B 60.086. ENEL S.A. operates as a financing company for the Group, raising funds through bond issuances, loans and other facilities. The share capital of ENEL S.A. amounts to €1,391,900,230 and is represented by 139,190,023 shares with a nominal value of €10.00 each.

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The following tables summarise ENEL S.A.’s profit and loss accounts and balance sheets as at 31st December in each of 2006 and 2005.

12111112006 1211111 2005 (euro) Balance Sheet Assets Shares in affiliates undertakings 1,291,271,232 1,291,271,232 Amount owed by affiliated undertakings 733,779,541 1,454,044,662 Other debtors 1,979,122 196 Cash at bank 67 11,656,663 Prepayments1211111 4,861,225 1211111 – Total Assets 2,031,891,187 2,756,972,753 1211111 1211111 Liabilities Subscribed capital 1,391,900,230 1,391,900,230 Reserves 27,256,880 20,621,523 Profit brought forward – 298 Loss/profit for the financial year (633,000) 44,907,152 Provisions for taxation 2,313,645 8,262,838 other provisions 9,594 9,594 Debenture loans and commercial papers 544,827,871 – Amounts owed to credit institutions 1,499 – Amounts owed to affiliated undertakings 66,186,862 1,291,082,481 Other Creditors1211111 27,606 1211111 188,637 Total Liabilities 2,031,891,187 2,756,972,753 1211111 1211111 Profit and Loss Charges Other external charges 34,230 108,637 Staff costs 13,019 11,892 Other operating charges 723,947 102,884 Interest payable and similar charges 45,107,730 329,526 Tax on profit 124,431 1,498,645 Profit for the financial year1211111 - 1211111 44,907,152 46,003,357 46,958,736 1211111 1211111 Income Other operating income 884,354 – Other interest receivable and similar income 44,486,003 46,958,736 Loss for financial year1211111 633,000 1211111 – 46,003,357 46,958,736 1211111 1211111

For further information on the financial results of ENEL S.A., please see the financial statements of ENEL S.A. for the years ended 31st December in each of 2006 and 2005, incorporated by reference into this Offering Circular.

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Guarantor: ENEL

Risk Factors: There are certain factors that may affect the Issuers’ and the Guarantor’s ability to fulfil their obligations under Notes issued under the Programme. These are set out under “Risk Factors” below and include (i) the risk that future regulatory changes or enforcement initiatives, including initiatives to increase competition or environmental regulations, could have a significant adverse effect on ENEL’s energy businesses, (ii) the fact that ENEL is subject to existing regulatory action and is defendant in a number of legal proceedings, any or all of which could have a material adverse affect on its business, (iii) a range of standard electricity operator risks including operational risk and the risk of changes in fuel prices or supplies, (iv) the risk that historical financial results may not be indicative of future performance and (v) the risk that the Italian government may exercise its special powers to influence ENEL’s business. In addition, there are certain factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme. These are set out under “Risk Factors” and include the fact that the Notes may not be a suitable investment for all investors, certain risks relating to the structure of particular Series of Notes and certain market risks.

Notes issued under the Each Issuer may issue fully paid or partly paid Notes denominated Programme: in any currency agreed between the relevant Issuer and the relevant Dealer, at an issue price which is at par or at a discount to, or premium over, par and up to a maximum aggregate nominal amount of all Notes from time to time outstanding under the Programme of €25,000,000,000 (or its equivalent in other currencies), subject to increase as described in this Offering Circular. The payments of all amounts due in respect of Notes issued by ENEL S.A. will be unconditionally and irrevocably guaranteed by ENEL.

The Notes will be issued in bearer or registered form. The Notes will constitute direct, unconditional and unsecured and unsubordinated obligations of the relevant Issuer and will rank pari passu without any preference among themselves and at least equally with all other outstanding unsecured and unsubordinated obligations of the relevant Issuer, present and future, other than obligations, if any, that are mandatorily preferred by statute or by operation of law.

The Notes may be issued on a continuing basis to one or more of the Dealers specified under “Overview of the Programme” and any additional Dealer appointed under the Programme from time to time by the Issuers, which appointment may be for a specific issue or on an ongoing basis.

Notes may be distributed by way of private or public placement, subject to the restrictions set out under “Subscription and Sale and Transfer and Selling Restrictions” below, and in each case on a syndicated or non-syndicated basis.

Notes may be issued as Fixed Rate Notes, Floating Rate Notes, Zero Coupon Notes or Structured Notes (including, but not limited to, Index Linked Notes and Dual Currency Notes).

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Notes may be issued for such maturities as may be agreed between the relevant Issuer and the relevant Dealer, subject to such minimum or maximum maturities as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Specified Currency.

Notes may be issued which cannot be redeemed prior to their stated maturity (other than in specified instalments, if applicable, or for taxation reasons or following an Event of Default) or which are redeemable at the option of the relevant Issuer and/or the Noteholders upon giving notice to the Noteholders or the relevant Issuer, as the case may be, on a date or dates specified prior to such stated maturity and at a price or prices and on such other terms as may be agreed between the relevant Issuer and the relevant Dealer.

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RISK FACTORS

Each Issuer and the Guarantor believes that the following factors may affect its ability to fulfil its obligations under Notes issued under the Programme. Some of these factors are contingencies which may or may not occur and neither of the Issuers nor the Guarantor is in a position to express a view on the likelihood of any such contingency occurring.

In addition, factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme are also described below.

Each Issuer and the Guarantor believes that the factors described below represent the principal risks inherent in investing in Notes issued under the Programme, but the inability of the Issuers or the Guarantor to pay interest, principal or other amounts on or in connection with any Notes may occur for other reasons which may not be considered significant risks by the Issuers and the Guarantor based on information currently available to them and which they may not currently be able to anticipate. Prospective investors should also read the detailed information set out elsewhere in this Offering Circular and reach their own views prior to making any investment decision.

Factors that may affect the Issuers’ and the Guarantor’s ability to fulfil their obligations under Notes issued under the Programme

Risks Relating to ENEL’s Energy Business

Future regulation could have a significant adverse effect on ENEL’s energy businesses and their profitability

Future laws and regulations issued by the European Union or the Italian national and local authorities, and, in particular, decisions and policies of the Italian Authority for Energy and Gas (the “Energy Authority”), may have a material adverse effect on ENEL’s business.

Regulatory changes promoting market liberalisation in Italy have significantly increased competition in ENEL’s energy businesses

The Italian energy markets have been the object of numerous regulatory initiatives designed to foster liberalisation. The most significant effects of these initiatives on the Italian electricity market have been (i) a reduction in ENEL’s generating capacity (through the mandatory disposal of three generating companies, the Gencos); (ii) the introduction of limits on the amount of energy ENEL may produce and import; (iii) the introduction on 1st April, 2004, of the Italian power exchange, where prices are determined by competitive bidding; (iv) the required disposal of certain of ENEL’s municipal networks to local utilities; and (v) mandated increases in the number of consumers who are eligible to buy electricity on the free market (with all non-residential customers having become eligible as of 1st July, 2004, and all customers scheduled to become eligible as of 1st July, 2007).

In the energy generation business, ENEL’s competitors include independent power producers, municipal utilities and other suppliers of electricity generating capacity, including Italian and international power companies. In addition to the April 2004 introduction of the Italian power exchange, ENEL expects that competition will increase further due to: • an increase in bilateral contracts between ENEL’s competitors and customers; • the construction of new generation facilities by ENEL’s competitors and the development of new interconnection lines that will increase the volume of electricity that may be imported in Italy; and • possible initiatives taken by the Energy Authority to further competition such as the imposition of virtual power plant contracts and of restrictions on the operation of pumping plants.

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In addition, the Energy Authority issued several proposals to promote competition in the wholesale electricity market and limit the impact of market power held by dominant producers. In its resolution no. 212/05 of 7th October, 2005, the Energy Authority compelled ENEL to sell virtual production capacity totalling 3,700 MW in the Southern Italy macro-zone and 150 MW in the Sicily macro-zone. The mechanism envisages a minimum transfer price commensurate with fixed costs (which are calculated on the basis of the financial statements for 2004 and include a fair remuneration of the net invested capital. This price may, however, not be greater than the premium contemplated in the contracts which have been stipulated for 2006 between ENEL and the Acquirente Unico, a company wholly owned by the Gestore dei Servizi Elettrici S.p.A., (the “Gestore dei Servizi Elettrici”), responsible for ensuring the supply of electricity to regulated customers who do not yet have access to the liberalised electricity market (the “Single Buyer”). ENEL appealed against the resolution, which was abrogated by a decision on 6th February, 2005 at the Supreme Court.

Furthermore, in its Resolution no. 175/05 of 4th August, 2005, the Energy Authority established that Terna – Rete Elettrica Nazionale S.p.A. (“Terna”), since it acquired a going concern of the Gestore della Rete S.p.A. (“Gestore della Rete”), must be entrusted with running pumping plants of strategic importance to the system’s safety. ENEL appealed against the resolution, which was abrogated by an Administrative Court’s decision. L’Autorità per l’Energia Elettrica e il Gas (“AEEG”) appealed to the Supreme Administrative Court. The court decision on Resolution 175/05 is still pending.

In the sale of electricity, based on data from Terna, ENEL estimates that its market share in Italy has decreased from 92 per cent. in 1999 to approximately 46 per cent. in 2006 (80 per cent. in the captive market and 15 per cent. in the free market). ENEL’s market share could decline further in coming years as liberalisation progresses. In sales of electricity on the free market, ENEL faces competition both from other electricity producers as well as from wholesalers that resell the electricity they purchase.

ENEL’s ability to expand its business and increase operating profits may be limited unless ENEL is able to offset the decrease in generation and sales volumes of its electricity business through improved efficiency, increased sales in other areas of its business or international expansion.

ENEL’s gas operations also expose it to risks relating to market regulation. Italian regulations enacted in May 2000 have sought to introduce competition gradually into the Italian natural gas market. In particular, these regulations have eased entry into some activities, including the import, export and sale of gas. Although the market was supposed to be completely liberalised from 1st January, 2003, the Energy Authority has retained the right to control prices for certain customers, mainly residential. ENEL cannot predict whether or when these regulations will result in a fully liberalised market, or how the natural gas market will develop under these conditions.

ENEL’s strategy is to seek to be the cost leader in the generation of electricity and in the distribution and sale of electricity and gas in Italy and to provide high quality customer service. If ENEL is unable to implement this strategy, or is otherwise unable to adapt its core energy businesses to meet these regulatory challenges, it may have a material adverse effect on its business prospects, financial condition and results of operations.

For a more complete description of the Italian energy industry and the way ENEL expects regulatory mattes to affect the electricity and gas markets see “Description of ENEL – Regulatory Matters”.

ENEL’s facilities are subject to operating risks outside its control; certain of its activities depend on third-party patents and licences

ENEL’s generation plants, and distribution networks are exposed risks related to malfunction and other interruptions in services which are beyond its control and may result in increased costs and other losses. Although ENEL has acquired insurance cover for events of this nature in line with

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general market practice, its cover may prove insufficient to fully compensate ENEL for any increased costs or losses that may occur as a result of service interruptions or malfunctions, with a consequent adverse effect on its business prospects, financial condition and results of operations. ENEL’s insurance coverage may prove insufficient to fully compensate for such losses.

In addition, its “Telemanagement” digital electricity meter project is dependent on certain communications components and technology that are based on patents and licences as well as related maintenance services provided by third parties. Interruptions in these services may be outside ENEL’s control, and could have a material adverse effect on its “Telemanagement” digital electricity meter project. For further information, see “Description of ENEL – The ENEL Group – Domestic Infrastructure and Networks Division – Telemanagement System.”

ENEL may not be able to complete its power plant conversion and other capital investment programmes on schedule or realise the expected benefits of these programmes

In line with ENEL’s strategy to reduce generation operating costs, it is implementing a programme to convert several of its thermal generation plants to adopt more efficient technology or use cheaper fuels, such as coal. ENEL cannot predict whether it will be able to complete the conversion of its thermal generation plants to adopt more efficient technology or use cheaper fuels in accordance with the schedule it has set or whether it will be able to realise the anticipated benefits of this programme. In addition, there is public opposition to ENEL’s construction plans and conversion of power plants in certain municipalities, which may have a material adverse effect on its development plans, and, as a result, on its business.

Significant increases in fuel prices or disruptions in ENEL’s fuel supplies could have a negative effect on its business

ENEL’s thermal generation plans use fuel oil, natural gas and coal to generate electricity. Increases in energy prices have a direct effect on ENEL’s thermal generation plants’ operating costs. Both the cost and availability of fuel are subject to many economic and political factors and events occurring throughout the world, particularly those that affect fuel-producing regions. Although ENEL attempts to manage its risk through the use of financial instruments hedging its exposure to fluctuations in the price of fuel, ENEL can neither control nor accurately predict these factors and events.

Given ENEL’s conversion of significant generating capacity to combined-cycle technology, it expects natural gas to constitute a significant portion of its fuel consumption in the future. In 2006, approximately 44 per cent. of the electricity ENEL produced at its thermal plants was generated by plants using natural gas. ENEL currently obtains a significant portion of the natural gas it uses directly from Algeria and Nigeria through pipelines and by sea. Imports of natural gas from these countries may be subject to disruption due to a number of things, including maintenance works on the pipelines and bad weather conditions at sea. Any major disruption of this imported supply, as well as the emergency measures that the Ministry of Productive Activities or other Italian authorities may take in the event of such disruption, could adversely affect ENEL’s ability to generate electricity using natural gas.

If in the future there are significant or unexpected changes in the price of the fuels ENEL uses to generate electricity or if adequate supplies of fuel become unavailable, its financial condition and results of operations could be materially adversely affected.

ENEL’s expansion outside Italy subjects it to risks associated with local market conditions, as well as to risks associated with operating the businesses it acquires

In recent years, ENEL has expanded its operations outside Italy. ENEL’s operations abroad now include, among others, nuclear and wind generation plants in France, generation plants in Spain, Bulgaria, Slovakia and North, Central and South America, distribution networks and sales operations in Spain, mini-hydro plants in Brazil, generation plants in Panama and distribution networks and sales operations in Russia and Romania. For a summary of the above mentioned

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recent transactions and other recent action in various European countries, including Spain, please see “Description of ENEL – Other Recent Developments”.

This international expansion requires ENEL to become familiar with new markets and competitors in order to manage and operate these businesses effectively, and exposes ENEL to local economic, regulatory and political risks. The process of integrating acquired operations, personnel and information systems can also be difficult and could absorb management time and resources and distract management from other opportunities or problems in ENEL’s business and industry. In addition, some of the companies ENEL has acquired may require significant capital investment.

Operating internationally may also subject ENEL to risks related to currency exchange rate fluctuations, foreign investment restrictions or restrictions on remittances by local subsidiaries. Depending on the circumstances, unfavourable developments in or affecting its operations outside Italy could adversely affect its business prospects, financial condition and results of operations.

In addition, in April 2006, ENEL purchased 66 per cent. of Slovenske Elektrarne (“SE”), which currently owns four nuclear power generating units with an aggregate installed capacity of about 2,460 MW and two nuclear units under construction.

Prior to the closing of its purchase of SE, certain conditions were fulfilled, including the approval by the Slovakian government of the strategic investment plan ENEL prepared for SE for the 2006- 2013 period and the transfer to state-owned companies of the assets and liabilities of a nuclear power plant that is in the process of being decommissioned, including spent nuclear fuel and the radioactive waste produced by its operations, and the disposal of a water plant, as well as the approval by the Slovakian government of legislative provisions for a new fund for the decommissioning of nuclear installations in Slovakia and new rules governing the Slovakian electricity market. Although ENEL believes that all of SE’s existing nuclear plants use internationally accepted technologies and are managed in accordance with Western European standards, its acquisition of the majority participation in SE’s share capital exposes ENEL to the risks of ownership and operation of nuclear generating facilities, including the disposal and storage of radioactive materials and spent fuel, as well as of the potential harmful effects on the environment and human health. Potential risks may arise in connection with the methodology adopted for the decommissioning of these nuclear plants. The Slovak National Strategy for Nuclear Waste and Spent Fuel Management is undergoing the first of a series of periodic reviews: on completion of this Review, costs of liquidation of nuclear liabilities will be updated and the financial impact of revised contributions to the National Nuclear Decommissioning Fund by nuclear operators could be adverse. Before the acquisition of SE, ENEL had not owned any nuclear power plants since November 2000, and ENEL had not produced electricity from nuclear power plants since 1988.

Consistent with its strategy of international expansion, ENEL has launched a joint bid (with Acciona S.A.) for the acquisition of Spanish utility company Endesa S.A. (as more specifically set out in “History and Development of ENEL – Other Recent Events”) (the “Endesa Transaction”) and may in the future make acquisitions of other targets. In connection with the Endesa Transaction, ENEL and ENEL S.A. have executed a €35,000,000,000 Credit Facility Agreement pursuant to which certain undertakings customary for financings of this size and type have been given for the benefit of the banks participating in the facility. As such, ENEL could be required to get the consent of the relevant banks prior to being able to undertake specified types of action. Similarly, should ENEL incur significant external debt to finance any other acquisition, ENEL would likely be required to make certain undertakings to the banks financing such debt, which could require it to get the consent of these banks in order to be able to take specified types of action. In addition, should ENEL make any such large acquisition, it will have to manage the significant challenges inherent in its integration of the target’s business and ENEL cannot predict whether and to what extent any such acquisition would be successful.

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ENEL faces legal proceedings and potential regulatory measures arising from the 2003 power outage affecting all of Italy that could have a material adverse effect on its financial condition and results of operations. Further power outages involving its electricity operations could adversely affect ENEL’s financial condition and results of operations

On 28th September, 2003, Italy suffered a complete blackout of electricity supply that affected the entire country with the exception of the island of Sardinia. After the blackout, it took approximately 21 hours before electricity became available again to all customers.

The Energy Authority investigated whether companies, including ENEL’s subsidiaries ENEL Produzione S.p.A. (“ENEL Produzione”), ENEL Distribuzione S.p.A. (“ENEL Distribuzione”), and Deval S.p.A. (“Deval”) may have been partially responsible for the blackout. In 2005, ENEL settled the proceeding against ENEL Produzione with a cash settlement of €52,000. Although no further fines may be imposed on ENEL Produzione in connection with this proceeding, the Energy Authority may still impose measures to improve reliability of ENEL’s energy supply, which may have an adverse impact on its results of operations. The Energy Authority with Resolution 274/06 did not impose any sanction on Deval because it was found that this company was not involved in the events under investigation. The proceeding remains pending against ENEL Distribuzione and Deval, and a decision was expected by 31st May, 2006. If the Energy Authority finds that this company has been partially responsible for the blackout, it may impose sanctions or request undertakings from them. Certain of ENEL’s customers have brought legal actions against it. Although the claims made by these plaintiffs are for minor amounts, an increase in the number of decisions finding ENEL liable for such damages could result in an increase in the number of such claims filed and the magnitude of the damages sought. While ENEL does not believe it was responsible for the blackout, ENEL cannot exclude the possibility that it will be held liable for it by the Italian courts. For more information on the civil and administrative proceedings related to the blackout, please read “Description of ENEL – Litigation – Blackout litigation”. Furthermore, ENEL cannot guarantee that further power outages or disruptions will not occur in the future or that any such outages or disruptions would not have a material adverse effect on ENEL’s financial condition and results of operations. In January 2007, the Energy Authority issued proposals for public comment for the institution of a system of automatic compensation payable by electricity distributors to affected customers in the event of a blackout or other prolonged service interruption. For a description of this proposal, please see “Regulatory Matters — Electricity Regulation — Continuity and Quality of Service Regulation.” The adoption of this system would augment the economic risks ENEL faces in the event of any such interruption in service.

ENEL has been and is subject to abuse of dominant position, market abuse and other regulatory investigations

ENEL has been and is likely to continue to be subject to regulatory and antitrust investigations in the Italian electricity market. ENEL was subject to an investigation of the Italian Antitrust Authority (the “Antitrust Authority”) with respect to certain sharp increases in the price of electricity on the Italian Power Exchange. But the Antitrust Authority, in accordance with decision 16250 of 20th December, 2006, closed the investigation and accepted the undertakings ENEL gave to sell 1,000 MW of its virtual power plants (“VPP”) for 2007 and 700 MW for 2008 subject to a verification of its importance.

Moreover, on 28th December, 2006, ENEL’s subsidiary ENEL Viesgo Generaciòn S.L. (“ENEL Viesgo”) received a fine of €2.5 million from the “Tribunal de defensa de la competencia” for abuse of a dominant position on the restrictions market. Electra de Viesgo S.L. (“Viesgo”) appealed against the decision. Currently, two antitrust proceedings for the same alleged infringement are pending. For more information, please see “Description of ENEL – Litigation”.

In November 2005, the Energy Authority opened an inquiry against ENEL Distribuzione because it did not carry out yearly meter readings for the years 2003-2005 for customers with contracted power under or equal to 30 kW as required by an Energy Authority resolution. The final decision is

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expected by April 2007. The Energy Authority could impose ENEL a fine which could have an adverse effect on its financial and economical condition.

In December 2006, the Energy Authority started an inquiry against ENEL Distribuzione because, until March 2006, it had not stated on its bills any free method of payment offered. In March 2007, the Energy Authority imposed on ENEL a fine of €11.7 million. ENEL Distribuzione intends to appeal the Energy Authority’s resolution.

AEEG started an inquiry against ENEL Trade with regard to gas off-takes from storage during the winters of 2004-2005 and 2005-2006. The Energy Authority estimated that the off-takes from the storage were higher than strictly required by the modulation needs of the residential market and inflicted an administrative sanction on ENEL Trade of €24 million, €12 million for each year of the inquiry. ENEL Trade, despite its disagreement with the Energy Authority’s conclusion, has already made a cash settlement of €52,000 in order to avoid the fine referred to the first year. At the same time, ENEL Trade is appealing the Energy Authority’s resolution.

While ENEL does not believe it has breached any antitrust laws or energy market regulations, ENEL cannot exclude the possibility that it will be held liable in the current investigations by any antitrust authority or any other relevant authority in Italy or Spain, nor that there will be other such investigations by the Energy Authority, the Antitrust Authority or other regulatory bodies in Italy or abroad in the future. Should ENEL be held liable in the current or any future investigations, and should such liability result in the imposition of significant fines or of material restrictions on its activity, there could be a material adverse effect on its financial condition and results of operations. For more information please see “Description of ENEL – Litigation”.

The effect of the anticipated market for CO2 emissions trading on ENEL’s business is uncertain On 23rd February, 2006, the Italian Ministry for the Environment issued a decree establishing inter alia the emission quotas for ENEL Produzione from 2005 to 2007, reducing the quotas ENEL had been granted in February 2005 to 48.2, 40.5, 39.9 million tonnes of CO2 for the years 2005, 2006 and 2007 respectively. These allocations do not include allowances reserved for new entrants.

ENEL’s verified emissions in 2005-2006 were over 19 million tonnes higher than the allowances allocated. The shortage has been fully hedged. A shortage is also expected for 2007, but again it has already been fully hedged.

The Italian allocation plan for the 2008-2012 commitment period was submitted by the Government to the European Commission in December 2006.

As the PNA 2008-2012 is currently in the process of being assessed by the European Commission, ENEL is not currently able to predict whether the final allocation for the period 2008- 2012 will be sufficient to meet ENEL’s production needs.

The Spanish plan for the period 2005-2007 allocated to ENEL Viesgo the following allowances: 3.9 million tonnes for 2005, 3.4 million tonnes for 2006 and 2.65 million tonnes for 2007. Compared to actual emissions, the shortage was 2.1 million tonnes in 2005. For 2006 and 2007 an additional shortage is expected.

Spain’s plan for the period 2008-2012 was approved by the European Commission in February 2007, upon the condition that some changes be made, including a full list of installations and related allocations.

In Slovakia the allowances allocated to Slovenské Elektràrne (“SE”) for the period 2005-2007 are approximately balanced with actual emissions.

For the period 2008-2012, following the decision of the European Commission a 25 per cent. reduction on proposed annual average allocation for SE has been imposed and SE has been allocated an annual average of 9.2 million tons, but a new redistribution of allocations among

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installations has not yet been completed. ENEL is, however, confident that SE’s emissions will be covered.

The introduction of accounting and functional unbundling between the network business and the businesses in competition (supply/production companies) could adversely affect ENEL’s business, financial condition and result of operations

In 2007, the Energy Authority introduced rules for the implementation of accounting and functional separation of business essential for liberalisation (in particular in the electricity and gas network) and the businesses in competition (supply, production etc.). In particular, the incompatibility of managers and the board of directors holding positions which require functional separation and causes corporate governance problems. ENEL contests these rules and for this reason appealed the Energy Authority’s resolution in the Administrative Court.

The European Commission has launched an investigation into the functioning of the European energy market that could lead to measures which could have a material adverse effect on ENEL’s operations

In June 2005, the European Commission launched an investigation into the functioning of the European energy market. The overall objective of the inquiry is to investigate the barriers to the development of a fully functioning open and competitive EU-wide energy market. In its preliminary report issued in February 2006, the European Commission identified market concentration, vertical foreclosure, lack of market integration, lack of transparency and price formation as the five main barriers to a fully functioning EU-wide energy market.The European Commission published its final report on 10th January, 2007.

The Energy Sector Inquiry has focused on identifying areas where competition is not yet functioning well and those areas which need to be addressed the most rapidly in order for liberalisation to bear fruit. The key areas are: (1) market concentration/market power: at the wholesale level, gas and electricity markets remain national in scope, and generally maintain the high level of concentration of the pre-liberalisation period, (2) vertical foreclosure: the current level of unbundling of network and supply interests has negative repercussions on market functioning and on incentives to invest in networks. This constitutes a major obstacle to new entry and also threatens security of supply, (3) lack of market integration: cross-border sales do not currently impose any significant competitive constraint. Incumbents rarely enter other national markets as competitors. Insufficient or unavailable cross-border capacity and different market designs hamper market integration, (4) lack of transparency: there is a lack of reliable and timely information on the markets, (5) price formation: more effective and transparent price formation is needed in order to deliver the full advantages of market opening to consumers. Many users have limited trust in the price formation mechanisms, while regulated supply tariffs below market prices discourage new entry, (6) downstream markets: competition at the retail level is often limited. The duration of retail contracts for industrial customers and local distribution companies can have a substantial impact on the opportunities for alternative suppliers to successfully enter the market, (7) balancing markets: currently, balancing markets often favour incumbents and create obstacles for newcomers. The size of the current balancing zones is too small, which leads to increased costs and protects the market power of incumbents and (8) liquefied natural gas (“LNG”): LNG supplies widen Europe’s upstream supplier base and are therefore important for both security of supply and competition between upstream suppliers. The potential for LNG supplies to favour less concentrated downstream markets still needs to be realised.

A European Commission challenge to Italian regulations on hydroelectric concessions could adversely affect ENEL’s business, financial condition and result of operations

ENEL operates its hydroelectric plants pursuant to concessions granted and regulated by national and local authorities. ENEL’s hydroelectric plants accounted for approximately 36 per cent. of its net installed capacity in 2006 (with approximately 5 per cent. of ENEL’s net installed capacity attributable to the Provincial Authorities of Trento and Bolzano). In January 2004, the European

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Commission determined that certain Italian regulations regarding hydroelectric concessions were contrary to EU law. In particular, the European Commission objected to preference granted to existing holders of licences when renewing concessions (and in the region of Trentino-Alto Adige, to preference given to the operator controlled by the local authorities) as well as to the fact that the regulations provided for the expiration of all concessions in 2029 (and for the region of Trentino- Alto Adige, in 2010), even though these concessions had previously been of perpetual duration. In 2005, Italy amended the provisions of the Bersani Decree (through Law 266/2005) extending the duration of ENEL’s hydroelectric concessions and the provisions which accorded preferential treatment to ENEL and all other current licence holders in any bidding contest and postponed the expiration of all concessions for an additional ten years.

As a result, on 28th June, 2006, the European Commission decided to close the proceedings in relation to the provisions of Decree No. 79 of 16th March, 1999 and suspended the proceedings against Italy pending the next judgment of the Italian Constitutional Court in relation to the regulations in force in Trentino Alto Adige. Five regional governments in Italy and the local authorities of the region of Trentino Alto Adige have brought proceedings against these amended regulations before the Italian Constitutional Court, seeking the reinstitution of the original expiry dates for the operations that they control.

Law 17/2007 (“Mille proroghe”), reversed the extension of ten years accorded to the current hydroelectric concessions of the “Province autonome” of Trento and Bolzano as set out in Law 266/2005. Consequently, there is a risk that ENEL’s hydroelectric concessions in the region of Trentino Alto Adige may be terminated prematurely and ENEL may not be able to renew these concessions at all or on favourable terms. This could have a material adverse effect on its business prospects, financial condition and results of operations.

Communications Ministry’s Decree dated 12th May, 2006 increased postal tariffs

In May 2006, the Ministry of Communications approved a decree which increased postal tariffs. Consequently the mailing costs for ENEL are estimated to be about €30 million for 2007.

ENEL is dependent on government concessions for its electricity and gas distribution businesses

Recent laws have modified the expiration date for gas distribution concessions. In 2000, a decree of the Ministry of Productive Activities set the expiration date of gas distribution concessions awarded prior to May 2000 by means other than competitive tender at the earlier of their original expiration date or 31st December, 2005, with the expiration date extendible for up to five years under certain conditions. The Marzano Law, as interpreted by the Ministry of Productive Activities in November 2004, provided instead that these concessions are to expire at the earlier of their original expiration date or 31st December, 2007, with the expiration date still extendible for up to five years under certain conditions. The Italian administrative courts, however, disagreed with the Ministry’s interpretation. As a result, on 23rd February, 2006, a law confirmed that gas distribution concessions expire by law at the earlier of their original expiration date or 31st December, 2007, and extended the expiration date to 31st December, 2009 under certain conditions. Local authorities may extend this date by one additional year. Furthermore, certain gas distribution concessions for southern Italy, partially financed through public funds made available in the context of a public incentive plan for the use of natural gas in southern Italy, expire at the later of 21st June, 2012 or 12 years from the entry into force of their approval by the Ministry of Economy and Finance. Finally, gas distribution concessions awarded prior to May 2000 by competitive tenders expire at the earlier of their original expiration date or 31st December, 2012. Please see “Regulatory Matters — Gas Regulation” for more details on gas distribution concessions. The majority of ENEL’s existing gas distribution concessions are currently due to expire on 31st December, 2009. If the expiration date of ENEL’s gas and electricity distribution concessions is accelerated, or if ENEL is unable to renew these concessions upon their expiration, its financial condition and results of operations could be materially adversely affected.

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ENEL’s businesses are subject to numerous environmental regulations that could significantly affect its financial condition and results of operations

Italian Laws, European Union environmental regulations and directives, as well as international agreements on the environment, may influence ENEL’s business decisions and strategy. ENEL incurs significant costs to comply with environmental regulations requiring it to implement preventive or remedial measures. Environmental regulations may also influence its business decisions and strategy, such as by discouraging the use of certain fuels. In addition, expressions of public concern about environmental problems associated with electricity generating plants, power lines and other facilities may result in even more stringent regulations in the future, which could further increase costs. In 2005, ENEL spent €450 million (including environmental taxes) to reduce the impact of its operations on the environment, including measures to comply with applicable law.

In addition, ENEL is party to a significant number of legal proceedings relating to environmental matters. The aggregate amount of damages that ENEL may be required to pay and the aggregate costs of remediation or preventive measures ENEL may be required to implement in connection with these proceedings may be significant.

Other Risks Relating to ENEL’s Businesses

ENEL’s historical consolidated financial and operating results may not be indicative of future performance

In 2005, ENEL discontinued the operations of its former Telecommunications Division and Transmission Division, following the deconsolidation of Wind and Terna, respectively, as a result of its disposal of a controlling interest in each of these companies. ENEL intends to use the proceeds from these sales primarily to finance its international expansion outside of Italy through acquisitions. However, should ENEL fail to identify assets that meet the criteria set out in its investment strategy by the end of 2007, ENEL may use part of the available financial resources to buy back ENEL shares in the market.

Moreover, during 2005 and 2006 ENEL also made significant acquisitions, most notably of SE, as well as entering into agreements to make other significant acquisitions. Please see “History and Development of the Company” for additional information on these transactions.

ENEL may continue to divest assets as a part of its ongoing efforts to refocus its activities on its core electricity and gas businesses, and to acquire new businesses as part of its international expansion. As a result, its historical consolidated financial and operational performance during or as of the end of periods ending on or prior to the consummation of these transactions may not be indicative of ENEL’s future operating and financial performance.

ENEL may incur significant capital expenditures to comply with Italian legislation on electromagnetic fields; ENEL may not be fully reimbursed for these capital expenditures

On 8th July, 2003, the Italian government issued a decree establishing certain limits on the allowable amounts of electromagnetic exposure generated by both low and high frequency transmission infrastructure. ENEL is still determining the estimated costs of complying with these limits. ENEL’s financial condition and results of operations may be adversely affected as a consequence.

The Italian social security fund is seeking to impose significant liabilities on ENEL

On 6th May, 2005, the Italian social security fund (“INPS”) issued a circular purporting to extend an obligation for employers to make certain social security contributions to formerly state-owned companies and national public entities carrying out industrial activities. Although state-owned companies were exempted from this obligation, INPS indicated in its circular that this obligation would be applied to privatised companies with retroactive effect as of the date of privatisation of

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the relevant entity. As ENEL believes that this circular should not apply to it, it challenged it before the Tribunal of Rome.

In March 2006, the Council of State stated that INPS could not impose any retroactive obligation, but didn’t say anything about future obligations and obliged INPS to modify the circular. Therefore, ENEL cannot exclude the possibility that it may be required to pay such contributions in the future. It estimates that the amount it could be required to pay could total approximately €80 million per year going forward.

Recently enacted Italian legislation could increase ENEL’s local property tax burden

On 31st May, 2005, the Italian Parliament passed a new law to aid local governments that included, among other things, provisions regarding the determination of the deemed value of electricity generation facilities for purposes of assessing, inter alia, local property taxes. Under the new law, owners of electric utilities are required to include in the computation of the taxable value of their facilities not only land and buildings, but also the value of removable parts of the facilities, such as generation equipment. Should these provisions be applied to all of the electricity generation facilities that ENEL owns and the pending and prospective litigation regarding the assessment of their deemed value be unsuccessful, ENEL expects that its local property tax (imposta comunale sugli immobili, or “ICI”) burden would increase by approximately €80 million per year.

In addition, a recent interpretation of these provisions by the Italian Supreme Court, in a case relating to one of ENEL’s facilities, may lead local authorities to claim that they apply retroactively, starting from the fiscal year 2003. ENEL believes that these claims would be illegitimate and ENEL would challenge them before the competent court. However, should these claims be successful, ENEL estimates that its ICI liability would increase by approximately up to €40 million for each litigated tax period starting from 2003.

These provisions are currently under scrutiny by the Italian Constitutional Court (Corte Costituzionale), which is checking their consistency with the general principles set forth by the Italian Constitution. However, the applicability of these provisions is not suspended as a consequence of this scrutiny.

A new law being proposed by the Italian Government to complete the liberalisation of electricity and gas and to promote energy saving, if approved, could have material effects on ENEL’s business

On 9th June, 2006, the Italian government presented proposals for a new law (the “Bersani Decree”) to complete the liberalisation of the electricity and gas market and to stimulate energy savings and renewable energy generation. The proposal included increased obligations on electricity and gas distributors to make energy savings and this could become an opportunity for ENEL as long as the targets are set at attainable levels, but could otherwise have an adverse material effect on ENEL’s business prospects, financial condition and results of operations if not met.

The Bersani Decree is currently under discussion at the parliamentary commission. For further information please see “History and Development of ENEL”and “History and Development of ENEL – Regulatory Matters”.

ENEL is a defendant in a number of legal proceedings

ENEL is a defendant in a number of legal proceedings incidental to its business activities. ENEL has established reserves for litigation and other contingent liabilities for a total of €4,151 million of which €1,308 million is for litigation and other at 31st December, 2006. However, ENEL is not able to predict the ultimate outcome of any of the claims against it which may be in excess of its existing reserves. ENEL cannot exclude that unfavourable decisions in proceedings against it could have a

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material adverse effect on its financial position or results of operations. For further information, please see “Description of ENEL - Litigation”.

Risks Relating to ENEL’s Ordinary Shares and ADSs

The Italian Ministry of the Economy and Finance (the “MEF”), ENEL’s controlling shareholder, has significant influence over ENEL’s actions

Following the public offering of ENEL’s shares which occurred in the summer of 2005, the MEF currently directly owns approximately 21.12 per cent. of ENEL’s outstanding share capital and therefore controls ENEL. Cassa Depositi e Prestiti, which is controlled by the MEF, holds approximately an additional 10.15 per cent. of ENEL’s share capital. As long as the MEF retains control of ENEL for purposes of applicable Italian law on controlled companies (which is determined based on having a majority of the vote at ordinary shareholders’ meetings or otherwise exercising a dominant influence over another company), the MEF will be able to exercise significant control over all matters to be voted on by ENEL’s shareholders, including, without limitation, the election and removal of directors and possible capital increases or amendments to ENEL’s by-laws. As a result, other shareholders’ ability to influence decisions on matters submitted to a vote of ENEL’s shareholders may be limited.

The special powers of the Italian government may permit it to influence ENEL’s business, regardless of the level of its shareholding

The Italian privatisation law (as amended by Law 350 of 24th December, 2003) and ENEL’s by-laws confer upon the Italian government, acting through the MEF (which acts after consultations with and in agreement with the Ministry of Productive Activities), certain special powers with respect to ENEL’s business and actions by its shareholders. These powers, which the MEF confirmed with a decree issued on 17th September, 2004, may permit the government to influence ENEL’s business, regardless of the level of its shareholding.

The MEF also has the following specific powers: • the power to oppose the acquisition by persons or entities of an interest in ENEL equal to or in excess of 3 per cent. of the shares with voting rights at the ordinary shareholders’ meetings; • the power to oppose certain types of shareholders’ agreement entered into by holders of at least one-twentieth of the voting capital stock at ordinary shareholders’ meetings; • the power to veto any resolution to dissolve, merge or demerge ENEL, transfer a significant part of ENEL’s business or ENEL’s registered headquarters outside of Italy, change ENEL’s corporate purpose or eliminate or modify any of the MEF’s special powers; and • the power to directly appoint one non-voting member of ENEL’s board of directors, in addition to the voting members elected by ENEL’s shareholders.

The MEF may exercise these powers only for due cause when it believes that a concrete detriment to vital national interests would otherwise result.

As a result of these powers, ENEL may not enter into change of control transactions without the approval of the MEF, in agreement with the Ministry of Productive Activities. This may limit the ability of ENEL’s shareholders to benefit from a premium in connection with a change of control transaction.

The European Commission has warned that the law allowing the Italian government to hold “golden shares” in privatised companies must be changed

In October 2005, the European Commission warned that the law allowing the Italian government to hold “golden shares” in privatised companies must be changed as it is contrary to EU law. The

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law has allowed the Italian government to hold “golden shares” in ENEL, amongst other privatised companies. The European Commission referred the matter to the European Court of Justice and the case is still pending.

Factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme

The Notes may not be a suitable investment for all investors

Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:

(i) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Offering Circular or any applicable supplement;

(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;

(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including Notes with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor’s currency;

(iv) understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and

(v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.

Some Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial investments as stand-alone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of instruments unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform under the changing conditions, the resulting effects on the value of the Notes and the impact this investment will have on the potential investor’s overall investment portfolio.

Risks related to the structure of a particular issue of Notes

A wide range of Notes may be issued under the Programme. A number of these Notes may have features which contain particular risks for potential investors. Set out below is a description of the most common such features:

Notes subject to optional redemption by the Issuer

An optional redemption feature of Notes is likely to limit their market value. During any period when the Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period.

The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At these times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time.

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Index Linked Notes and Dual Currency Notes

The Issuers may issue Notes with principal or interest determined by reference to an index or formula, to changes in the prices of securities or commodities, to movements in currency exchange rates or other factors (each, a “Relevant Factor”). In addition, the Issuers may issue Notes with principal or interest payable in one or more currencies which may be different from the currency in which the Notes are denominated. Potential investors should be aware that:

(i) the market price of such Notes may be volatile;

(ii) they may receive no interest;

(iii) payment of principal or interest may occur at a different time or in a different currency than expected;

(iv) they may lose all or a substantial portion of their principal;

(v) a Relevant Factor may be subject to significant fluctuations that may not correlate with changes in interest rates, currencies or other indices;

(vi) if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than one or contains some other leverage factor, the effect of changes in the Relevant Factor on principal or interest payable likely will be magnified; and

(vii) the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the average level is consistent with their expectations. In general, the earlier the change in the Relevant Factor, the greater the effect on yield.

The historical experience of an index should not be viewed as an indication of the future performance of such index during the term of any Index Linked Notes. Accordingly, each potential investor should consult its own financial and legal advisers about the risk entailed by an investment in any Index Linked Notes and the suitability of such Notes in light of its particular circumstances.

Partly-paid Notes

The Issuers may issue Notes where the issue price is payable in more than one instalment. Failure to pay any subsequent instalment could result in an investor losing all of his investment.

Variable rate Notes with a multiplier or other leverage factor

Notes with variable interest rates can be volatile investments. If they are structured to include multipliers or other leverage factors, or caps or floors, or any combination of those features or other similar related features, their market values may be even more volatile than those for securities that do not include those features.

Inverse Floating Rate Notes

Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upon a reference rate such as LIBOR. The market values of those Notes typically are more volatile than market values of other conventional floating rate debt securities based on the same reference rate (and with otherwise comparable terms). Inverse Floating Rate Notes are more volatile because an increase in the reference rate not only decreases the interest rate of the Notes, but may also reflect an increase in prevailing interest rates, which further adversely affects the market value of these Notes.

Fixed/Floating Rate Notes

Certain Fixed/Floating Rate Notes may bear interest at a rate that converts from a fixed rate to a floating rate, or from a floating rate to a fixed rate. Where the relevant Issuer has the right to effect

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such a conversion, this will affect the secondary market and the market value of the Notes since the relevant Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If the Issuer converts from a fixed rate to a floating rate in such circumstances, the spread on such Fixed/Floating Rate Notes may be less favourable than then prevailing spreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the new Floating rate at any time may be lower than the rates on other Notes. If the relevant Issuer converts from a floating rate to a fixed rate in such circumstances, the fixed rate may be lower than then prevailing rates on its Notes.

Notes issued at a substantial discount or premium

The market values of securities issued at a substantial discount or premium from their principal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities.

Risks related to Notes generally

Set out below is a brief description of certain risks relating to the Notes generally:

Modification, waivers and substitution

The conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority.

The conditions of the Notes also provide that ENEL S.A. may at any time, without the consent of the Noteholders, the Receiptholders or the Couponholders (each as defined below), substitute for itself as principal debtor under the Notes, Receipts and the Coupons (each as defined below) ENEL as Issuer, in the circumstances described in Condition 16 of the conditions of the Notes.

EU Savings Directive

Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States are required, from 1st July, 2005, to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State. However, for a transitional period, Belgium, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories including Switzerland have agreed to adopt similar measures (a withholding system in the case of Switzerland) with effect from the same date.

If a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of tax were to be withheld from that payment, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. If a withholding tax is imposed on payment made by a Paying Agent following implementation of this Directive, the relevant Issuer will be required to maintain a Paying Agent in a Member State that will not be obliged to withhold or deduct tax pursuant to the Directive.

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Change of law

The conditions of the Notes are based on English law in effect as at the date of this Offering Circular. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of this Offering Circular.

Notes where denominations involve integral multiples: definitive Notes

In relation to any issue of Notes which have denominations consisting of a minimum Specified Denomination plus one or more higher integral multiples of another smaller amount, it is possible that such Notes may be traded in amounts that are not integral multiples of such minimum Specified Denomination. In such a case a holder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in his account with the relevant clearing system at the relevant time may not receive a definitive Note in respect of such holding (should definitive Notes be printed) and would need to purchase a principal amount of Notes such that its holding amounts to a Specified Denomination.

If definitive Notes are issued, holders should be aware that definitive Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.

Risks related to the market generally

Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk:

The secondary market generally

Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities. Illiquidity may have a severely adverse effect on the market value of Notes.

Exchange rate risks and exchange controls

The relevant Issuer will pay principal and interest on the Notes and, if relevant, the Guarantor will make any payments under the Guarantee in the Specified Currency. This presents certain risks relating to currency conversions if an investor’s financial activities are denominated principally in a currency or currency unit (the “Investor’s Currency”) other than the Specified Currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of the Specified Currency or revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the Specified Currency would decrease (1) the investor’s currency-equivalent yield on the Notes, (2) the investor’s currency- equivalent value of the principal payable on the Notes and (3) the Investor’s Currency-equivalent market value of the Notes.

Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.

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Interest rate risks

Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of the Fixed Rate Notes.

Credit ratings may not reflect all risks

One or more independent credit rating agencies may assign credit ratings to the Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time.

Legal investment considerations may restrict certain investments

The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) Notes are legal investments for it, (2) Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisors or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk- based capital or similar rules.

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DOCUMENTS INCORPORATED BY REFERENCE

The following documents which have previously been published and have been filed with the IFSRA shall be incorporated in, and form part of, this Offering Circular:

(a) the auditors report and audited consolidated annual financial statements of ENEL for the financial year ended 31st December, 2005 contained in ENEL’s annual report on form 20-F 2005 dated 28th June, 2006;

(b) the auditors report and audited consolidated annual financial statements of ENEL for the financial year ended 31st December, 2006 contained in ENEL’s Annual Report 2006; and

(c) the auditors report and audited annual financials statements of ENEL S.A. for the financial years ended 31st December, 2005 and 2006.

Following the publication of this Offering Circular a supplement may be prepared by the Issuers and approved by the IFSRA in accordance with Article 16 of the Prospectus Directive. Statements contained in any such supplement (or contained in any document incorporated by reference therein) shall, to the extent applicable (whether expressly, by implication or otherwise), be deemed to modify or supersede statements contained in this Offering Circular or in a document which is incorporated by reference in this Offering Circular. Any statement so modified or superseded shall not, except as so modified or superseded, constitute a part of this Offering Circular.

Copies of documents incorporated by reference in this Offering Circular can be obtained from the registered office of each of the Issuers and from the specified offices of the Paying Agents for the time being in London and Ireland.

The Issuers and the Guarantor will, in the event of any significant new factor, material mistake or inaccuracy relating to information included in this Offering Circular which is capable of affecting the assessment of any Notes, prepare a supplement to this Offering Circular or publish a new Offering Circular for use in connection with any subsequent issue of Notes.

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OVERVIEW OF THE PROGRAMME

The following overview does not purport to be complete and is taken from, and is qualified in its entirety by, the Summary of the Programme and the remainder of this Offering Circular and, in relation to the terms and conditions of any particular Tranche of Notes, the applicable Final Terms. The relevant Issuer and any relevant Dealer may agree that Notes shall be issued in a form other than that contemplated in the Terms and Conditions, in which event, in the case of listed Notes only and if appropriate, a supplemental Offering Circular will be published.

This Overview constitutes a general description of the Programme for the purposes of Article 22.5(3) of Commission Regulation (EC) No 809/2004 implementing the Prospectus Directive.

Words and expressions defined in “Form of the Notes” and “Terms and Conditions of the Notes” below shall have the same meanings in this overview.

Issuers: ENEL – Società per Azioni (“ENEL”)

ENEL Finance International S.A. (“ENEL S.A.”)

Guarantor: ENEL

Description: Global Medium Term Note Programme

Arrangers: Deutsche Bank AG, London Branch

J.P. Morgan Securities Ltd.

Dealers: ABN AMRO Bank N.V. Banca IMI S.p.A. Barclays Bank PLC BNP PARIBAS Citigroup Global Markets Limited Credit Suisse Securities (Europe) Limited Deutsche Bank AG, London Branch Goldman Sachs International J.P. Morgan Securities Ltd. Lehman Brothers International (Europe) Mediobanca-Banca di Credito Finanziario S.p.A. Merrill Lynch International Morgan Stanley & Co. International plc UBS Limited

and any other Dealers appointed in accordance with the Programme Agreement.

Certain Restrictions: Each issue of Notes denominated in a currency in respect of which particular laws, guidelines, regulations, restrictions or reporting requirements apply will only be issued in circumstances which comply with such laws, guidelines, regulations, restrictions or reporting requirements from time to time (see “Subscription and Sale and Selling and Transfer Restrictions”) including the following restrictions applicable at the date of this Offering Circular.

Notes having a maturity of less than one year

Notes having a maturity of less than one year will, if the proceeds of the issue are accepted in the United Kingdom,

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constitute deposits for the purposes of the prohibition on accepting deposits contained in section 19 of the Financial Services and Markets Act 2000 unless they are issued to a limited class of professional investors and have a denomination of at least £100,000 or its equivalent (see “Subscription and Sale and Selling and Transfer Restrictions”).

Issuing and Principal Paying Agent: JPMorgan Chase Bank, N.A.

Registrar: JPMorgan Chase Bank, N.A.

Programme Size: Up to €25,000,000,000 (or its equivalent in other currencies calculated as described under “General Description of the Programme”) outstanding at any time. The Issuers and the Guarantor may increase the amount of the Programme in accordance with the terms of the Programme Agreement.

Distribution: Notes may be distributed by way of private or public placement and in each case on a syndicated or non- syndicated basis.

Currencies: Subject to any applicable legal or regulatory restrictions, any currency agreed between the relevant Issuer and the relevant Dealer.

Redenomination: The applicable Final Terms may provide that certain Notes may be redenominated in euro.

Maturities: Such maturities as may be agreed between the relevant Issuer and the relevant Dealer, subject to such minimum or maximum maturities as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Issuer or the relevant Specified Currency.

Issue Price: Notes may be issued on a fully-paid or a partly-paid basis and at an issue price which is at par or at a discount to, or premium over, par. Special tax rules may apply to Notes which are issued at a discount to par, see “Taxation”.

Form of Notes: The Notes will be issued in bearer or registered form as described in “Form of the Notes”. Registered Notes will not be exchangeable for Bearer Notes and vice versa.

Fixed Rate Notes: Fixed interest will be payable on such date or dates as may be agreed between the relevant Issuer and the relevant Dealer and on redemption and will be calculated on the basis of such Day Count Fraction as may be agreed between the relevant Issuer and the relevant Dealer.

Floating Rate Notes: Floating Rate Notes will bear interest at a rate determined:

(i) on the same basis as the floating rate under a notional interest rate swap transaction in the relevant Specified Currency governed by an agreement incorporating the 2006 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc.,

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and as amended and updated as at the Issue Date of the first Tranche of the Notes of the relevant Series); or

(ii) on the basis of a reference rate appearing on the agreed screen page of a commercial quotation service; or

(iii) on such other basis as may be agreed between the relevant Issuer and the relevant Dealer.

The margin (if any) relating to such floating rate will be agreed between the relevant Issuer and the relevant Dealer for each Series of Floating Rate Notes.

Index Linked Notes: Payments of principal in respect of Index Linked Redemption Notes or of interest in respect of Index Linked Interest Notes will be calculated by reference to such index and/or formula or to changes in the prices of securities or commodities or to such other factors as the relevant Issuer and the relevant Dealer may agree.

Other provisions in relation to Floating Rate Notes and Index Linked Interest Notes may Floating Rate Notes and Index also have a maximum interest rate, a minimum interest rate Linked Interest Notes: or both.

Interest on Floating Rate Notes and Index Linked Interest Notes in respect of each Interest Period, as agreed prior to issue by the relevant Issuer and the relevant Dealer, will be payable on such Interest Payment Dates, and will be calculated on the basis of such Day Count Fraction, as may be agreed between the relevant Issuer and the relevant Dealer.

Dual Currency Notes: Payments (whether in respect of principal or interest and whether at maturity or otherwise) in respect of Dual Currency Notes will be made in such currencies, and based on such rates of exchange, as the relevant Issuer and the relevant Dealer may agree.

Zero Coupon Notes: Zero Coupon Notes will be offered and sold at a discount to their nominal amount and will not bear interest.

Redemption: The applicable Final Terms will indicate either that the relevant Notes cannot be redeemed prior to their stated maturity (other than in specified instalments, if applicable, or for taxation reasons or following an Event of Default) or that such Notes will be redeemable at the option of the relevant Issuer and/or the Noteholders upon giving notice to the Noteholders or the relevant Issuer, as the case may be, on a date or dates specified prior to such stated maturity and at a price or prices and on such other terms as may be agreed between the relevant Issuer and the relevant Dealer.

The applicable Final Terms may provide that Notes may be redeemable in two or more instalments of such amounts and on such dates as are indicated in the applicable Final Terms.

Notes having a maturity of less than one year may be subject to restrictions on their denomination and distribution, see

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“Certain Restrictions – Notes having a maturity of less than one year” above.

Denomination of Notes: Notes will be issued in such denominations as may be agreed between the relevant Issuer and the relevant Dealer save that the minimum denomination of each Note will be such as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Specified Currency, see “Certain Restrictions – Notes having a maturity of less than one year” above and save that the minimum denomination of each Note admitted to trading on a regulated market within the European Economic Area or offered to the public in a Member State of the European Economic Area in circumstances which require the publication of a prospectus under the Prospectus Directive will be €1,000 (or, if the Notes are denominated in a currency other than euro, the equivalent amount in such currency).

Taxation: All payments in respect of the Notes will be made without deduction for or on account of withholding taxes imposed by any Tax Jurisdiction, subject as provided in Condition 8. In the event that any such deduction is made, the relevant Issuer or the Guarantor, as the case may be, will, except in certain limited circumstances provided in Condition 8, be required to pay additional amounts to cover the amounts so deducted.

In relation to Notes issued by ENEL, Notes with an original maturity of less than 18 months are subject to a withholding tax at the rate of 27 per cent. per annum in respect of interest and premium (if any), pursuant to Italian Presidential Decree No. 600 of 29th September, 1973, as amended. ENEL will not be liable to pay any additional amounts to Noteholders in relation to any such withholding.

Negative Pledge: The terms of the Notes will contain a negative pledge provision as further described in Condition 4.

Cross Default: The terms of the Notes will contain a cross default provision as further described in Condition 10.

Status of the Notes: The Notes will constitute direct, unconditional and (subject to the provisions of Condition 4), unsecured and unsubordinated obligations of the relevant Issuer and will rank pari passu without any preference among themselves and at least equally with all other outstanding unsecured and unsubordinated obligations of the relevant Issuer, present and future, other than obligations, if any, that are mandatorily preferred by statute or by operation of law.

Guarantee: Notes issued by ENEL S.A. will be unconditionally and irrevocably guaranteed by ENEL. The obligations of ENEL under its guarantee will be direct, unconditional and (subject to the provisions of Condition 4) unsecured and unsubordinated obligations of ENEL and will rank at least equally with all other outstanding unsecured and

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unsubordinated obligations of ENEL, present and future, other than obligations, if any, that are mandatorily preferred by statute or by operation of law.

Rating: The rating of certain series of Notes to be issued under the Programme may be specified in the applicable Final Terms.

Listing: Application has been made to IFSRA as competent authority under the Prospectus Directive for the Offering Circular to be approved. Application has also been made to the Irish Stock Exchange for Notes issued under the Programme to be admitted to the Official List and trading on its regulated market.This Offering Circular constitutes the base prospectus in connection with the application for the Notes to be admitted to the Official List of the Irish Stock Exchange. Notes may also be listed or admitted to trading on such other or further stock exchange(s) as may be agreed between the relevant Issuer and the relevant Dealer in relation to each Series.

Notes which are neither listed nor admitted to trading on any market may also be issued.

The applicable Final Terms will state whether or not the relevant Notes are to be listed and or admitted to trading, if so, on which stock exchange(s).

Governing Law: The Notes will be governed by, and construed in accordance with, English law.

Selling Restrictions: There are restrictions on the offer, sale and transfer of the Notes in the United States, the European Economic Area (including the United Kingdom, France, Ireland, Luxembourg and Italy) and Japan and such other restrictions as may be required in connection with the offering and sale of a particular Tranche of Notes, see “Subscription and Sale and Selling and Transfer Restrictions”.

In connection with the offering and sale of a particular Tranche of Notes, additional restrictions may be imposed which will be set out in the relevant Final Terms.

Each Tranche of Notes in bearer form will be issued either in compliance with U.S. Treas. Reg.1.163-5(c)(2)(i)(D) (the “TEFRA D Rules”) or with U.S. Treas. Reg. 1.163-5(c)(2)(i)(C) (the “TEFRA C Rules”) unless the Notes are only in registered form and/or the applicable Final Terms specifies that the TEFRA Rules are not applicable.

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FORM OF THE NOTES

The Notes of each Series will be in either bearer form, with or without interest coupons (“Coupons”) attached, or registered form, without Coupons attached. Bearer Notes will be issued outside the United States in reliance on Regulation S under the Securities Act (“Regulation S”) and Registered Notes will be issued both outside the United States in reliance on the exemption from registration provided by Regulation S and within the United States in reliance on Rule 144A.

Bearer Notes

Each Tranche of Bearer Notes will be initially issued in the form of either a temporary bearer global note (a “Temporary Bearer Global Note”) or a permanent bearer global note (a “Permanent Bearer Global Note”) as indicated in the applicable Final Terms, which, in either case, will:

(i) if the Global Notes are intended to be issued in new global note (“NGN”) form, as stated in the applicable Final Terms, be delivered on or prior to the original issue date of the Tranche to a common safekeeper (the “Common Safekeeper”) for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream, Luxembourg”); and

(ii) if the Global Notes are not intended to be issued in NGN Form, be delivered on or prior to the original issue date of the Tranche to a common depositary (the “Common Depository”) for Euroclear and Clearstream, Luxembourg.

Whilst any Bearer Note is represented by a Temporary Bearer Global Note, payments of principal, interest (if any) and any other amount payable in respect of the Notes due prior to the Exchange Date (as defined below) will be made (against presentation of the Temporary Bearer Global Note if the Temporary Global Note is not intended to be issued in NGN form) only to the extent that certification (in a form to be provided) to the effect that the beneficial owners of interests in such Bearer Note are not U.S. persons or persons who have purchased for resale to any U.S. person, as required by U.S. Treasury regulations, has been received by Euroclear and/or Clearstream, Luxembourg and Euroclear and/or Clearstream, Luxembourg, as applicable, has given a like certification (based on the certifications it has received) to the Principal Paying Agent.

On and after the date (the “Exchange Date”) which is 40 days after a Temporary Bearer Global Note is issued, beneficial interests in such Temporary Bearer Global Note will be exchangeable (free of charge) upon a request as described therein either for (i) interests in a Permanent Bearer Global Note of the same Series or (ii) for definitive Bearer Notes of the same Series with, where applicable, receipts, interest coupons and talons attached (as indicated in the applicable Final Terms and subject, in the case of definitive Bearer Notes, to such notice period as is specified in the applicable Final Terms), in each case against certification of beneficial ownership thereof as required by U.S. Treasury Regulations as described above unless such certification has already been given, provided that purchasers in the United States and certain U.S. persons will not be able to receive definitive Bearer Notes.The holder of a Temporary Bearer Global Note will not be entitled to collect any payment of interest, principal or other amount due on or after the Exchange Date unless, upon due certification, exchange of the Temporary Bearer Global Note for an interest in a Permanent Bearer Global Note or for definitive Bearer Notes is improperly withheld or refused.

Payments of principal, interest (if any) or any other amounts on a Permanent Bearer Global Note will be made through Euroclear and/or Clearstream, Luxembourg (against presentation or surrender (as the case may be) of the Permanent Bearer Global Note if the Permanent Global Note is not intended to be issued in NGN form) without any requirement for certification.

The applicable Final Terms will specify that a Permanent Bearer Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Bearer Notes with, where applicable, receipts, interest coupons and talons attached upon either (i) not less than 60 days’ written notice from Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an

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interest in such Permanent Bearer Global Note) to the Principal Paying Agent as described therein or (ii) only upon the occurrence of an Exchange Event or (iii) at any time at the request of the Issuer. For these purposes, “Exchange Event” means that (i) an Event of Default (as defined in Condition 10) has occurred and is continuing, (ii) the relevant Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and no successor clearing system is available or (iii) the relevant Issuer has or will become subject to adverse tax consequences which would not be suffered were the Notes represented by the Permanent Bearer Global Note in definitive form. The relevant Issuer will promptly give notice to Noteholders in accordance with Condition 14 if an Exchange Event occurs. In the event of the occurrence of an Exchange Event, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Bearer Global Note) may give notice to the Principal Paying Agent requesting exchange and, in the event of the occurrence of an Exchange Event as described in (iii) above, the relevant Issuer may also give notice to the Principal Paying Agent requesting exchange. Any such exchange shall occur not later than 45 days after the date of receipt of the first relevant notice by the Principal Paying Agent.

The following legend will appear on all Bearer Notes with a maturity of more than 1 year and on all receipts and interest coupons relating to such Notes:

“ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.”

The provisions referred to in the legend generally provide that any United States person who holds a Bearer Note with a maturity of more than one year, with certain exceptions, will not be allowed to deduct any loss sustained on the sale, exchange or other disposition of such Bearer Note, and will be subject to tax at ordinary income rates (as opposed to capital gain rates) on any gain recognised on such sale, exchange or other disposition.

Notes which are represented by a Temporary Bearer Global Note and/or Permanent Bearer Global Note will only be transferable in accordance with the then current rules and procedures of Euroclear or Clearstream, Luxembourg, as the case may be.

Registered Notes

The Registered Notes of each Tranche offered and sold in reliance on Regulation S, which will be sold to non-U.S. persons outside the United States, will initially be represented by a global note in registered form, without Receipts or Coupons (a “Regulation S Global Note”), which will be deposited with a custodian for, and registered in the name of a nominee of, DTC for the accounts of Euroclear and Clearstream, Luxembourg. Prior to expiry of the distribution compliance period (as defined in Regulation S) applicable to each Tranche of Notes, beneficial interests in a Regulation S Global Note may not be offered or sold to, or for the account or benefit of, a U.S. person save as otherwise provided in Condition 2 and may not be held otherwise than through Euroclear or Clearstream, Luxembourg and such Regulation S Global Note will bear a legend regarding such restrictions on transfer.

The Registered Notes of each Tranche may only be offered and sold in the United States or to U.S. persons in private transactions to “qualified institutional buyers” within the meaning of Rule 144A under the Securities Act (“QIBs”). The Registered Notes of each Tranche sold to QIBs will be represented by a global note in registered form, without Receipts or Coupons (a “Rule 144A Global Note” and, together with a Regulation S Global Note, the “Registered Global Notes”), which will be deposited with a custodian for, and registered in the name of a nominee of, DTC.

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Persons holding beneficial interests in Registered Global Notes will be entitled or required, as the case may be, under the circumstances described below, to receive physical delivery of definitive Notes in fully registered form.

The Rule 144A Global Note will be subject to certain restrictions on transfer set forth therein and will bear a legend regarding such restrictions.

Payments of principal, interest and any other amount in respect of the Registered Global Notes will, in the absence of provision to the contrary, be made to the person shown on the Register (as defined in Condition 6(d)) as the registered holder of the Registered Global Notes. None of the relevant Issuer, ENEL (where ENEL is not the relevant Issuer), any Paying Agent and the Registrar will have any responsibility or liability for any aspect of the records relating to or payments or deliveries made on account of beneficial ownership interests in the Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

Payments of principal, interest or any other amount in respect of the Registered Notes in definitive form will, in the absence of provision to the contrary, be made to the persons shown on the Register on the relevant Record Date (as defined in Condition 6(d)) immediately preceding the due date for payment in the manner provided in that Condition.

Interests in a Registered Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Registered Notes without receipts, interest coupons or talons attached only upon the occurrence of an Exchange Event. For these purposes, “Exchange Event” means that (i) an Event of Default has occurred and is continuing, (ii) DTC has notified the relevant Issuer that it is unwilling or unable to continue to act as depository for the Notes and no alternative clearing system is available, (iii) DTC has ceased to constitute a clearing agency registered under the Exchange Act or the relevant Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and, in any such case, no successor clearing system is available or (iv) the relevant Issuer has or will become subject to adverse tax consequences which would not be required were the Notes represented by the Registered Global Note in definitive form. The relevant Issuer will promptly give notice to Noteholders in accordance with Condition 14 if an Exchange Event occurs. In the event of the occurrence of an Exchange Event, DTC, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Registered Global Note) may give notice to the Registrar requesting exchange and, in the event of the occurrence of an Exchange Event as described in (iv) above, the relevant Issuer may also give notice to the Registrar requesting exchange. Any such exchange shall occur not later than 10 days after the date of receipt of the first relevant notice by the Registrar.

Transfer of Interests

Interests in a Registered Global Note may, subject to compliance with all applicable restrictions, be transferred to a person who wishes to hold such interest in another Registered Global Note. No beneficial owner of an interest in a Registered Global Note will be able to transfer such interest, except in accordance with the applicable procedures of DTC, Euroclear and Clearstream, Luxembourg, in each case to the extent applicable. Registered Notes are also subject to the restrictions on transfer set forth therein and will bear a legend regarding such restrictions, see “Subscription and Sale and Selling and Transfer Restrictions”.

General

Pursuant to the Agency Agreement (as defined under “Terms and Conditions of the Notes”), the Principal Paying Agent shall arrange that, where a further Tranche of Notes is issued which is intended to form a single Series with an existing Tranche of Notes, the Notes of such further Tranche shall be assigned a common code and ISIN and, where applicable, a CUSIP and CINS number which are different from the common code, ISIN, CUSIP and CINS assigned to Notes of

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any other Tranche of the same Series until at least the expiry of the distribution compliance period applicable to the Notes of such Tranche.

For so long as any of the Notes is represented by a Bearer Global Note held on behalf of Euroclear and/or Clearstream, Luxembourg each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the relevant Issuer and the Guarantor (where ENEL is not the relevant Issuer) and its/their agents as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Notes, for which purpose the bearer of the relevant Bearer Global Note or the registered holder of the relevant Registered Global Note shall be treated by the relevant Issuer, the Guarantor (where ENEL is not the relevant Issuer) and its/their agents as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions “Noteholder” and “holder of Notes” and related expressions shall be construed accordingly.

So long as DTC or its nominee is the registered owner or holder of a Registered Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Registered Global Note for all purposes under the Agency Agreement and such 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 beneficial owners through participants.

Any reference herein to Euroclear and/or Clearstream, Luxembourg and/or DTC shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Final Terms.

A Note may be accelerated automatically by the holder thereof in certain circumstances described in Condition 10. In such circumstances, where any Note is still represented by a Global Note and the Global Note (or any part thereof) has become due and repayable in accordance with the Terms and Conditions of such Notes and payment in full of the amount due has not been made in accordance with the provisions of the Global Note then the Global Note will become void at 8.00 pm. (London time) on such day. At the same time, holders of interests in such Global Note credited to their accounts with Euroclear and/or Clearstream, Luxembourg and/or DTC, as the case may be, will become entitled to proceed directly against the relevant Issuer on the basis of statements of account provided by Euroclear, Clearstream, Luxembourg and DTC on and subject to the terms of a deed of covenant (the “Deed of Covenant”) dated 8th November, 2005 and executed by the relevant Issuer. In addition, holders of interests in such Global Note credited to their accounts with DTC may require DTC to deliver Definitive Notes in registered form in exchange for their interest in such Global Note in accordance with DTC’s standard operating procedures.

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Applicable Final Terms

[ENEL S.A. may at any time, without the consent of the Noteholders, Receiptholders or the Couponholders, substitute for itself as principal debtor under the Notes, Receipts and the Coupons ENEL as Issuer. ENEL shall indemnify each Noteholder, Receiptholder and Couponholder against (A) any tax, duty, assessment or governmental charge which is imposed on such Noteholder, Receiptholder or Couponholder by (or by any authority in or of) the Republic of Italy with respect to any Note, Receipt or Coupon and which would not have been so imposed had the substitution not been made and (B) any tax, duty, assessment or governmental charge, and any cost or expense relating to the substitution, except that ENEL shall not be liable under such indemnity to pay any additional amounts either on account of “imposta sostitutiva” or on account of any other withholding or deduction in the event of payment of interest or other amounts paid to a non-Italian resident legal entity or a non-Italian resident individual which is resident in a country which does not allow for a satisfactory exchange of information.]1

[Notes with an original maturity (for these purposes, “original maturity” shall be the period from, and including, the Issue Date to, but excluding, the Maturity Date, each as specified below) of less than 18 months are subject to a withholding tax at the rate of 27 per cent. per annum in respect of interest and premium (if any), pursuant to Italian Presidential Decree No.600 of 29th September, 1973, as amended. The Issuer will not be liable to pay any additional amounts to Noteholders in relation to any such withholding.]2

[Date]

[ENEL – Società per Azioni/ENEL Finance International S.A., a public limited liability company (société anonyme), incorporated under the laws of the Grand Duchy of Luxembourg, having its registered office at 35 boulevard du Prince Henri, L-1724 Luxembourg and registered with the Luxembourg trade and companies register under number B. 60086]3

Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes] issued under the €25,000,000,000 Global Medium Term Note Programme

PART A – CONTRACTUAL TERMS

This document constitutes the Final Terms relating to the issue of Notes described herein.

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the Offering Circular dated 4th May, 2007 which constitutes a base prospectus for the purposes of the Prospectus Directive. This document contains the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with such Offering Circular. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Offering Circular. The Offering Circular is available for viewing at, and copies may be obtained from, the Issuer [and the Guarantor] at [its/their] registered office[s].

[The following alternative language applies if the first tranche of an issue which is being increased was issued under an Offering Circular with an earlier date.]

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the Conditions) set forth in the Offering Circular dated [original date]. This document contains the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with the Offering Circular dated 4th May, 2007 which constitutes a base prospectus for the purposes of the Prospectus Directive, save in respect of the

1 Delete where the relevant Issuer is ENEL S.p.A. 2 Delete where the relevant Issuer is ENEL Finance International S.A. 3 Delete as applicable.

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Conditions which are extracted from the Offering Circular dated [original date] and are attached hereto. Full information on the Issuer [, the Guarantor] and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Offering Circulars dated 4th May, 2007 and [previous date]. Copies of such Offering Circulars are available for viewing and may be obtained free of charge at the registered office[s] of the Issuer [and the Guarantor].

[Include whichever of the following apply or specify as “Not Applicable” (N/A). Note that the numbering should remain as set out below, even if “Not Applicable” is indicated for individual paragraphs or subparagraphs. Italics denote directions for completing the Final Terms.]

[If the Notes have a maturity of less than one year from the date of their issue, the minimum denomination may need to be £100,000 or its equivalent in any other currency.]

1. (i) Issuer: [ENEL – Società per Azioni/ENEL Finance International S.A.]

(ii) [Guarantor: ENEL – Società per Azioni]

2. (i) Series Number: [ ]

(ii) Tranche Number: [ ] (If fungible with an existing Series, details of that Series, including the date on which the Notes become fungible)

3. Specified Currency or Currencies: [ ]

4. Aggregate Nominal Amount:

– Tranche: [ ]

– Series: [ ]

5. (i) Issue Price: [ ] per cent. of the Aggregate Nominal Amount [plus accrued interest from [insert date] (in the case of fungible issues only, if applicable)]

(ii) Net Proceeds: [ ] (Required only for listed issues)

6. (a) Specified Denominations: [ ] (in the case of Registered Notes, [] this means the minimum integral amount in which transfers can (Note – For an issue in bearer form, where be made) multiple denominations above €50,000 or equivalent are being used the following sample wording should be followed:

“€50,000 and integral multiples of €1,000 in excess thereof up to and including €99,000. No Notes in definitive form will be issued with a denomination above €99,000.”)

(N.B. If an issue of Notes is (i) NOT admitted to trading on an European Economic Area exchange; and (ii) only offered in the European Economic Area in circumstances where a prospectus is not required to be published under the Prospectus Directive the €1,000 minimum denomination is not required.)

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(b) Calculation Amount (If only one Specified Denomination, insert the (Applicable to Notes in definitive Specified Denomination. form.) If more than one Specified Denomination, insert the highest common factor. Note: There must be a common factor in the case of two or more Specified Denominations.)

7. (i) Issue Date: [ ]

(ii) Interest Commencement Date: [ ]

8. Maturity Date: [Fixed rate – specify date/Floating rate – Interest Payment Date falling in or nearest to [specify month]]

9. Interest Basis: [[ ] per cent. Fixed Rate] [[LIBOR/EURIBOR] +/- [ ] per cent. Floating Rate] [Zero Coupon] [Index Linked Interest] [Dual Currency Interest] [specify other] (further particulars specified below)

10. Redemption/Payment Basis: [Redemption at par] [Index Linked Redemption] [Dual Currency Redemption] [Partly Paid] [Instalment] [specify other] (N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.)

11. Change of Interest Basis or [Specify details of any provision for change of Redemption/Payment Basis: Notes into another Interest Basis or Redemption/ Payment Basis]

12. Put/Call Options: [Investor Put] [Issuer Call] [(further particulars specified below)]

13. Date of Board approval for issuance of [] Notes obtained:

14. Method of distribution: [Syndicated/Non-syndicated]

PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE

15. Fixed Rate Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph)

(i) Rate(s) of Interest: [ ] per cent. per annum [payable [annually/semi- annually/quarterly] in arrear]

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(If payable other than annually, consider amending Condition 5)

(ii) Interest Payment Date(s): [ ] in each year up to and including the Maturity Date/[specify other] (NB: This will need to be amended in the case of long or short coupons)

(iii) Fixed Coupon Amount(s): [ ] per Calculation Amount (Applicable to Notes in definitive form)

(iv) Broken Amount(s): [ ] per Calculation Amount, payable on the (Applicable to Notes in definitive Interest Payment Date falling on [ ] form) (v) Day Count Fraction: [30/360 or Actual/Actual (ICMA) or specify other]

(vi) Determination Date(s): [ ] in each year [Insert regular interest payment dates, ignoring issue date or maturity date in the case of a long or short first or last coupon (NB: This will need to be amended in the case of regular interest payment dates which are not of equal duration) (NB: Only relevant where Day Count Fraction is Actual/Actual (ICMA))]

(vii) Other terms relating to the method [None/Give details] of calculating interest for Fixed Rate Notes:

16. Floating Rate Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph)

(i) Specified Period(s)/Specified [] Interest Payment Dates:

(ii) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/[specify other]]

(iii) Additional Business Centre(s): [ ]

(iv) Manner in which the Rate of [Screen Rate Determination/ISDA Determination/ Interest and Interest Amount is to specify other] be determined:

(v) Party responsible for calculating [] the Rate of Interest and Interest Amount (if not the Agent):

(vi) Screen Rate Determination:

– Reference Rate: [ ] (Either LIBOR, EURIBOR or other, although additional information is required if other – including fallback provisions in the Agency Agreement)

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– Interest Determination Date(s): [ ] (Second day in London on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits) prior to the start of each Interest Period if LIBOR (other than Sterling or euro LIBOR), first day of each Interest Period if Sterling LIBOR and the second day on which the TARGET System is open prior to the start of each Interest Period if EURIBOR or euro LIBOR)

– Relevant Screen Page: [ ] (In the case of EURIBOR, if not Reuters EURIBOR01 ensure it is a page which shows a composite rate or amend the fallback provisions appropriately)

(vii) ISDA Determination:

– Floating Rate Option: [ ]

– Designated Maturity: [ ]

– Reset Date: [ ]

(viii) Margin(s): [+/-] [ ] per cent. per annum

(ix) Minimum Rate of Interest: [ ] per cent. per annum

(x) Maximum Rate of Interest: [ ] per cent. per annum

(xi) Day Count Fraction: [Actual/365 or Actual/Actual (ISDA) Actual/365 (Fixed) Actual/365 (Sterling) Actual/360 30/360 or 360/360 or Bond Basis 30E/360 or Eurobond Basis Other] (See Condition 5 for alternatives)

(xii) Fall back provisions, rounding [] provisions and any other terms relating to the method of calculating interest on Floating Rate Notes, if different from those set out in the Conditions:

17. Zero Coupon Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph)

(i) Accrual Yield: [ ] per cent. per annum

(ii) Reference Price: [ ]

(iii) Any other formula/basis of [] determining amount payable:

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(iv) Day Count Fraction in relation to [Conditions 7(e)(iii) and 7(j) apply/specify other] Early Redemption Amounts and (Consider applicable day count fraction if not U.S. late payment: dollar denominated)

18. Index Linked Interest Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph)

(i) Index/Formula: [give or annex details]

(ii) Calculation Agent responsible for [] calculating the interest due:

(iii) Provisions for determining [] [If appropriate, include a description of Coupon where calculation by market disruption or settlement disruption reference to Index and/or Formula events and adjustment provisions] is impossible or impracticable:

(iv) Specified Period(s)/Specified [] Interest Payment Dates:

(v) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/specify other]

(vi) Additional Business Centre(s): [ ]

(vii) Minimum Rate of Interest: [ ] per cent. per annum

(viii) Maximum Rate of Interest: [ ] per cent. per annum

(ix) Day Count Fraction: [ ]

19. Dual Currency Interest Note [Applicable/Not Applicable] Provisions (If not applicable, delete the remaining sub- paragraphs of this paragraph)

(i) Rate of Exchange/method of [give details] calculating Rate of Exchange:

(ii) Calculation Agent, if any, [] responsible for calculating the interest payable:

(iii) Provisions applicable where [][If appropriate, include a description of calculation by reference to Rate of market disruption or settlement disruption Exchange impossible or events and adjustment provisions] impracticable:

(iv) Person at whose option Specified [] Currency(ies) is/are payable:

PROVISIONS RELATING TO REDEMPTION

20. Issuer Call: [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph)

(i) Optional Redemption Date(s): [ ]

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(ii) Optional Redemption Amount and [ ] per Calculation Amount method, if any, of calculation of such amount(s):

(iii) If redeemable in part:

(a) Minimum Redemption [] Amount:

(b) Maximum Redemption [] Amount:

(iv) Notice period (if other than as set [] out in the Conditions): (N.B. If setting notice periods which are different to those provided in the Conditions, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Agent)

21. Investor Put: [Applicable/Not Applicable] (If not applicable, delete the remaining sub- paragraphs of this paragraph)

(i) Optional Redemption Date(s): [ ]

(ii) Optional Redemption Amount and [ ] per Calculation Amount method, if any, of calculation of such amount(s):

(iii) Notice period (if other than as set [] out in the Conditions): (N.B. If setting notice periods which are different to those provided in the Conditions, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Agent)

22. Final Redemption Amount: [[ ] per Calculation Amount/specify other/see Appendix] (N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.)

23. Early Redemption Amount payable on [[ ] per Calculation Amount/specify other/see redemption for taxation reasons or on Appendix] Event of Default and/or the method of calculating the same (if required or if different from that set out in Condition 7(e)):

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GENERAL PROVISIONS APPLICABLE TO THE NOTES

24. (a) Form of Notes: [Bearer Notes:

[Temporary Bearer Global Note exchangeable for a Permanent Bearer Global Note which is exchangeable for Definitive Notes [on 60 days’ notice given at any time/only upon an Exchange Event/at any time at the request of the Issuer]]

[Temporary Bearer Global Note exchangeable for Definitive Notes on and after the Exchange Date]

[Permanent Bearer Global Note exchangeable for Definitive Notes [on 60 days’ notice given at any time/only upon an Exchange Event/at any time at the request of the Issuer]]

[Registered Notes:

Regulation S Global Note ([ ] nominal amount)/Rule 144A Global Note ([ ] nominal amount)]

(Ensure that this is consistent with the wording in the “Form of the Notes” section in the Offering Circular and the Notes themselves. N.B. The exchange upon notice/at any time options should not be expressed to be applicable if the Specified Denomination of the Notes in paragraph 6 includes language substantially to the following effect: “€50,000 and integral multiples of €1,000 in excess thereof up to and including €99,000.”)

(b) New Global Note: [Yes][No]

25. Additional Financial Centre(s) or other [Not Applicable/give details] special provisions relating to Payment (Note that this item relates to the place of Dates: payment and not Interest Period end dates to which items 16(iii) and 18(vi) relate)

26. Talons for future Coupons or Receipts to [Yes/No. If yes, give details] be attached to Definitive Bearer Notes (and dates on which such Talons mature):

27. Details relating to Partly Paid Notes: [Not Applicable/give details. NB: new forms of amount of each payment comprising the Global Notes may be required for Partly Paid Issue Price and date on which each issues.] payment is to be made and consequences of failure to pay, including any right of the Issuer to forfeit the Notes and interest due on late payment:

28. Details relating to Instalment Notes:

(i) Instalment Amount(s): [Not Applicable/give details]

(ii) Instalment Date(s): [Not Applicable/give details]

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29. Redenomination applicable: Redenomination [not] applicable (if Redenomination is applicable, specify the terms of Redenomination in an Annex to the Final Terms)

30. [US Federal Income Tax considerations: [Not applicable/give details]]

31. Other final terms: [Not Applicable/give details] (when adding any other final terms consideration should be given as to whether such terms constitute “significant new factors” and consequently trigger the need for a supplement to the Offering Circular under Article 16 of the Prospectus Directive)

DISTRIBUTION

32. (i) If syndicated, names [and [Not Applicable/give names [and addresses and addresses]** of Managers [and underwriting commitments] **] underwriting commitments]**: (Include names and addresses of entities agreeing to underwrite the issue on a firm commitment basis and names and addresses of the entities agreeing to place the issue without a firm commitment or on a “best efforts” basis if such entities are not the same as the Managers.)**

(ii) Date of [Subscription] []** Agreement**:

(iii) Stabilising Manager (if any): [Not Applicable/give name]

33. If non-syndicated, name of relevant [] Dealer:

34. Total commission and concession**: [ ] per cent. of the Aggregate Notional Amount**

35. Whether TEFRA D or TEFRA C rules [TEFRA D/TEFRA C/TEFRA not applicable] applicable or TEFRA rules not applicable:

36. Additional selling restrictions: [Not Applicable/give details]

LISTING APPLICATION

These Final Terms comprise the final terms required to list and have admitted to trading the issue of Notes described herein pursuant to the €25,000,000,000 Global Medium Term Note Programme of ENEL Finance International S.A. as Issuer and ENEL – Società per Azioni as Issuer and Guarantor.

RESPONSIBILITY

The Issuer [and the Guarantor] accept [s] responsibility for the information contained in these Final Ter ms.

Signed on behalf of the Issuer: [Signed on behalf of the Guarantor:

By: ...... By: ...... Duly authorised Duly authorised]

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PART B – OTHER INFORMATION

1. LISTING

(i) Listing: [Ireland/other (specify)/None]

(ii) Admission to trading: [Application has been made for the Notes to be admitted to trading on the Irish Stock Exchange’s regulated market with effect from [ ].] [Not Applicable.]

(Where documenting a fungible issue need to indicate that original securities are already admitted to trading.)**

(iii) Estimate of total expenses related []* to admission to trading:

2. RATINGS

Ratings: The Notes to be issued have been rated:

[S & P: [ ]] [Moody’s: [ ]] [[Other]: [ ]

[Need to include a brief explanation of the meaning of the ratings if this has previously been published by the rating provider.]**

(The above disclosure should reflect the rating allocated to Notes of the type being issued under the Programme generally or, where the issue has been specifically rated, that rating.)

[3. NOTIFICATION [AND AUTHORISATION]**

The Irish Financial Services Regulatory Authority [has been requested to provide/has provided] the [names of competent authorities of host Member States] with a certificate of approval attesting that the Offering Circular has been drawn up in accordance with the Prospectus Directive.]

[The Issuer [and the Guarantor] [has/have] authorised the use of these Final Terms and the Offering Circular dated 4th May, 2007 by the Managers and [include names [and addresses] of other financial intermediaries involved in the offer] (the “Distributors” and, together with the Managers, the “Financial Intermediaries”) in connection with offers of the Notes to the public in Ireland [and[insert jurisdictions into which it has been passported]] for the period set out in paragraph 4 below.]**

4. **[PUBLIC OFFERS

(a) Offer Period: [ ] to [ ]

(Should be from the date of publication of the Final Terms to a specified date or a formula such

* Delete if the minimum denomination is less than €50,000. ** Delete if the minimum denomination is at least €50,000.

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as “the Issue Date” or "the date which falls [ ] Business Days thereafter”.)

(b) Offer Price: [The Issuer has offered the Notes to the Managers at the initial issue price of [ ] less a total commission of [ ]. OR (where the price is not determined at the date of the Final Terms) The issue price of the Notes will be determined by the Issuer and the [Managers] on or about [ ] in accordance with market conditions then prevailing, including [supply and demand for the Notes and other similar securities] [and] [the then current market price of [insert relevant benchmark security, if any].]

(c) Conditions to which the offer is [Offers of the Notes are conditional on their issue subject: [and on any additional conditions set out in the standard terms of business of the Financial Intermediaries, notified to investors by such relevant Financial Intermediaries]]

[(d)] [Description of the application N/A unless full application process is being process: followed in relation to the issue]

[(e)] [Details of the minimum and/or N/A unless full application process is being maximum amount of application: followed in relation to the issue]

[(f)] [Description of possibility to N/A unless full application process is being reduce subscriptions and followed in relation to the issue] manner for refunding excess amount paid by applicants:

[(g)] Details of the method and time [The Notes will be issued on the Issue Date limits for paying up and against payment to the Issuer of the net delivering the Notes: subscription moneys. Investors will be notified by the relevant Financial Intermediary of their allocations of Notes and the settlement arrangements in respect thereof.]

[(h)] [Manner and date in which N/A unless the issue is an “up to” issue when results of the offer are to be disclosure must be included] made public:

[(i)] [Procedure for exercise of any N/A unless full application process is being right of pre-emption, negotiability followed in relation to the issue] of subscription rights and treatment of subscription rights not exercised:

[(j)] Categories of potential investors [Offers may be made by the Financial to which the Notes are offered: Intermediaries in [insert jurisdiction where the Prospectus has been approved and published and jurisdictions into which it has been passported] to any person [insert suitability criteria, if any are deemed appropriate pursuant to any applicable conduct of business rules]. In other EEA countries, offers will only be made by the Financial Intermediaries pursuant to an

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exemption from the obligation under the Prospectus Directive as implemented in such countries to publish a prospectus.]

[(k)] [Process for notification to [Process for notification – N/A unless full applicants of the amount allotted application process is being followed in relation and the indication whether to the issue.] dealing may begin before No dealings in the Notes on a regulated market notification is made: for the purposes of the Investment Services Directive 93/22/EC may take place prior to the Issue Date.]

[(l)] [Amount of any expenses and []] taxes specifically charged to the subscriber or purchaser:

5. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE

[Save for any fees payable to the [Managers/Dealers], so far as the Issuer is aware, no person involved in the issue of the Notes has an interest material to the offer. - Amend as appropriate if there are other interests]

6. REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES

[(i) Reasons for the offer [ ] (See [“Use of Proceeds”] wording in Offering Circular – if reasons for offer different from making profit and/or hedging certain risks will need to include those reasons here.)]**

[(ii)] Estimated net proceeds: [ ] (If proceeds are intended for more than one use will need to split out and present in order of priority. If proceeds are insufficient to fund all proposed uses state amount and sources of other funding.) **

[(iii)] Estimated total expenses: [ ]. [Expenses are required to be broken down into each principal intended “use” and presented in order of priority of such “uses”.]** (N.B.: If the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies (i) above is required where the reasons for the offer are different from making profit and/or hedging certain risks and, where such reasons are inserted in (i), disclosure of net proceeds and total expenses at (ii) and (iii) above are also required.)

[7. YIELD (Fixed Rate Notes only)

Indication of yield: [ ]

[Calculated as [include details of method of calculation in summary form] on the Issue Date.]**

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The yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield.]

[8. HISTORIC INTEREST RATES (Floating Rate Notes only)**

Details of historic [LIBOR/EURIBOR/other] rates can be obtained from [Reuters].]]

[9. PERFORMANCE OF INDEX/FORMULA, EXPLANATION OF EFFECT ON VALUE OF INVESTMENT AND ASSOCIATED RISKS AND OTHER INFORMATION CONCERNING THE UNDERLYING (Index-Linked Notes only)

[Need to include details of where past and future performance and volatility of the index/formula can be obtained.]

[Need to include a clear and comprehensive explanation of how the value of the investment is affected by the underlying and the circumstances when the risks are most evident.] **

[Where the underlying is an index need to include the name of the index and a description if composed by the Issuer and if the index is not composed by the Issuer need to include details of where the information about the index can be obtained. Where the underlying is not an index need to include equivalent information.]]

[10. PERFORMANCE OF RATE[S] OF EXCHANGE AND EXPLANATION OF EFFECT ON VALUE OF INVESTMENT (Dual Currency Notes only)

[Need to include details of where past and future performance and volatility of the relevant rates can be obtained.]

[Need to include a clear and comprehensive explanation of how the value of the investment is affected by the underlying and the circumstances when the risks are most evident.] **]

11. OPERATIONAL INFORMATION

(i) ISIN Code: [ ]

(ii) Common Code: [ ]

(iii) CUSIP [ ]

(iv) CINS [ ]

(v) Any clearing system(s) other than [Not Applicable/give name(s) and number(s)] Euroclear Bank SA/NV and Clearstream Banking, société anonyme and the relevant identification number(s):

(vi) Delivery: Delivery [against/free of] payment

(vii) Names and addresses of [] additional Paying Agent(s) (if any):

(viii) Intended to be held in a manner [Yes] [No] which would allow Eurosystem eligibility: [Note that the designation "yes" simply means that the Notes are intended upon issue to be deposited with one of the ICSDs as common safekeeper and does not necessarily mean that the Notes will be recognised as eligible collateral

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for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria.] [include this text if "yes" selected in which case the Notes must be issued in NGN form]

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TERMS AND CONDITIONS OF THE NOTES

The following are the Terms and Conditions of the Notes which will be incorporated by reference into each Global Note (as defined below) and each definitive Note, in the latter case only if permitted by the relevant stock exchange (if any) and agreed by the relevant Issuer, the Guarantor (where ENEL is not the relevant Issuer) and the relevant Dealer at the time of issue but, if not so permitted and agreed, such definitive Note will have endorsed thereon or attached thereto such Terms and Conditions. The applicable Final Terms in relation to any Tranche of Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the following Terms and Conditions, replace or modify the following Terms and Conditions for the purpose of such Notes. The applicable Final Terms (or the relevant provisions thereof) will be endorsed upon, or attached to, each Global Note and definitive Note. Reference should be made to “Form of the Notes” for a description of the content of Final Terms which will specify which of such terms are to apply in relation to the relevant Notes.

This Note is one of a Series (as defined below) of Notes issued by whichever of ENEL – Società per Azioni (“ENEL”) or ENEL Finance International S.A. (“ENEL S.A.”) is specified as the “Issuer” in the applicable Final Terms (as defined below) and references to the “Issuer” shall be construed accordingly. This Note is issued pursuant to the Agency Agreement (as defined below).

References herein to the “Notes” shall be references to the Notes of this Series and shall mean:

(i) in relation to any Notes represented by a global Note (a “Global Note”), units of each Specified Denomination in the Specified Currency;

(ii) any Global Note;

(iii) any definitive Notes in bearer form (“Bearer Notes”) issued in exchange for a Global Note in bearer form; and

(iv) any definitive Notes in registered form (“Registered Notes”) (whether or not issued in exchange for a Global Note in registered form).

The Notes, the Receipts (as defined below) and the Coupons (as defined below) have the benefit of an amended and restated Agency Agreement (the “Agency Agreement”) dated 4th May, 2007 made between ENEL S.A. as an Issuer, ENEL in its capacity as both an Issuer and as Guarantor (as defined below) of Notes issued by ENEL S.A., JPMorgan Chase Bank, N.A. as issuing and principal paying agent and agent bank (the “Principal Paying Agent”, which expression shall include any successor principal paying agent) and the other paying agents named therein (together with the Principal Paying Agent, the “Paying Agents”, which expression shall include any additional or successor paying agents), JPMorgan Chase Bank, N.A. as exchange agent (the “Exchange Agent” which expression shall include any successor exchange agent) and as registrar (the “Registrar”, which expression shall include any successor registrar) and as transfer agent and the other transfer agents named therein (together with the Registrar, the “Transfer Agents”, which expression shall include any additional or successor transfer agents).

Interest bearing definitive Bearer Notes (unless otherwise indicated in the applicable Final Terms) have interest coupons (“Coupons”) and, if indicated in the applicable Final Terms, talons for further Coupons (“Talons”) attached on issue. Any reference herein to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons. Definitive Bearer Notes repayable in instalments have receipts (“Receipts”) for the payment of the instalments of principal (other than the final instalment) attached on issue. Registered Notes and Global Notes do not have Receipts, Coupons or Talons attached on issue.

The final terms for this Note (or the relevant provisions thereof) are set out in Part A of the Final Terms attached to or endorsed on this Note and supplements these Terms and Conditions (the “Conditions”) and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with these Conditions, replace or modify the Conditions for the

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purposes of this Note. References to the “applicable Final Terms” are to the Final Terms (or the relevant provisions thereof) attached to or endorsed on this Note.

Notes issued by ENEL S.A. will be unconditionally and irrevocably guaranteed by ENEL (in such capacity, the “Guarantor”) pursuant to a deed of guarantee (the “Guarantee”) dated 8th November, 2005. Under the Guarantee ENEL has guaranteed the due and punctual payment of all amounts due under such Notes and the Deed of Covenant (as defined below) executed by ENEL S.A. as and when the same shall become due and payable.

The original of the Guarantee is held by the Principal Paying Agent on behalf of the Noteholders, the Receiptholders and the Couponholders at its specified office. References herein to the Guarantor shall only be relevant where the Issuer is ENEL S.A.

Any reference to “Noteholders” or “holders” in relation to any Notes shall mean (in the case of Bearer Notes) the holders of the Notes and (in the case of Registered Notes) the persons in whose name the Notes are registered and shall, in relation to any Notes represented by a Global Note, be construed as provided below. Any reference herein to “Receiptholders” shall mean the holders of the Receipts and any reference herein to “Couponholders” shall mean the holders of the Coupons and shall, unless the context otherwise requires, include the holders of the Talons.

As used herein, “Tranche” means Notes which are identical in all respects (including as to listing) and “Series” means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (i) expressed to be consolidated and form a single series and (ii) identical in all respects (including as to listing) except for their respective Issue Dates, Interest Commencement Dates and/or Issue Prices.

The Noteholders, the Receiptholders and the Couponholders are entitled to the benefit of the Deed of Covenant (the “Deed of Covenant”) dated 8th November, 2005 and made by the Issuer. The original of the Deed of Covenant is held by the common depository for Euroclear and Clearstream, Luxembourg (each as defined below).

Copies of the Agency Agreement, the Guarantee, a deed poll (the “Deed Poll”) dated 8th November, 2005 and made by the Issuer and the Guarantor and the Deed of Covenant are available for inspection during normal business hours at the registered office of each of the Principal Paying Agent, the Registrar and the other Paying Agents and Transfer Agents (such Agents and the Registrar being together referred to as the “Agents”). Copies of the applicable Final Terms are available for viewing and obtainable during normal business hours at the registered office of the Issuer and the specified office of each of the Agents save that, if this Note is neither admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic Area in circumstances where a prospectus is required to be published under the Prospectus Directive, the applicable Final Terms will only be obtainable by a Noteholder holding one or more Notes and such Noteholder must produce evidence satisfactory to the relevant Issuer and the relevant Agent as to its holding of such Notes and identity. The Noteholders, the Receiptholders and the Couponholders are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Agency Agreement, the Deed Poll, the Deed of Covenant and the applicable Final Terms which are applicable to them. The statements in these Terms and Conditions include summaries of, and are subject to, the detailed provisions of the Agency Agreement.

Words and expressions defined in the Agency Agreement or used in the applicable Final Terms shall have the same meanings where used in these Terms and Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Agency Agreement and the applicable Final Terms, the applicable Final Terms will prevail.

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1. FORM, DENOMINATION AND TITLE

The Notes are in bearer form or in registered form as specified in the applicable Final Terms and, in the case of definitive Notes, serially numbered, in the Specified Currency and the Specified Denomination(s). Notes of one Specified Denomination may not be exchanged for Notes of another Specified Denomination and Bearer Notes may not be exchanged for Registered Notes and vice versa.

This Note may be a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index Linked Interest Note, a Dual Currency Interest Note or a combination of any of the foregoing, depending upon the Interest Basis shown in the applicable Final Terms.

This Note may be an Index Linked Redemption Note, an Instalment Note, a Dual Currency Redemption Note, a Partly Paid Note or a combination of any of the foregoing, depending upon the Redemption/Payment Basis shown in the applicable Final Terms.

Definitive Bearer Notes are issued with Coupons attached, unless they are Zero Coupon Notes in which case references to Coupons and Couponholders in these Conditions are not applicable.

Subject as set out below, title to the Bearer Notes, Receipts and Coupons will pass by delivery and title to the Registered Notes will pass upon registration of transfers in accordance with the provisions of the Agency Agreement. The Issuer, the Guarantor and any Agent will (except as otherwise required by law or ordered by a court having jurisdiction or an official authority) deem and treat the bearer of any Bearer Note, Receipt or Coupon and the registered holder of any Registered Note as the absolute owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any Global Note, without prejudice to the provisions set out in the next succeeding paragraph.

For so long as any of the Notes is represented by a Bearer Global Note held on behalf of Euroclear Bank SA/NV (“Euroclear”) and/or Clearstream Banking, société anonyme (“Clearstream, Luxembourg”), each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer, the Guarantor and the Agents as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Notes, for which purpose the bearer of the relevant Bearer Global Note shall be treated by the Issuer, the Guarantor and any Agent as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions “Noteholder” and “holder of Notes” and related expressions shall be construed accordingly.

For so long as the Depository Trust Company (“DTC”) or its nominee is the registered owner or holder of a Registered Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Registered Global Note 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 beneficial owners through participants.

Notes which are represented by a Global Note will be transferable only in accordance with the rules and procedures for the time being of DTC, Euroclear and Clearstream, Luxembourg, as the case may be. References to DTC, Euroclear and/or Clearstream,

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Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Final Terms.

2. TRANSFERS OF REGISTERED NOTES

(a) Transfers of interests in Registered Global Notes

Transfers of beneficial interests in Registered Global Notes will be effected by DTC, Euroclear or Clearstream, Luxembourg, as the case may be, and, in turn, by other participants and, if appropriate, indirect participants in such clearing systems acting on behalf of beneficial transferors and transferees of such interests. A beneficial interest in a Registered Global Note will, subject to compliance with all applicable legal and regulatory restrictions, be transferable for Notes in definitive form or for a beneficial interest in another Registered Global Note only in the authorised denominations set out in the applicable Final Terms and only in accordance with the rules and operating procedures for the time being of DTC, Euroclear or Clearstream, Luxembourg, as the case may be and in accordance with the terms and conditions specified in the Agency Agreement. Transfers of a Registered Global Note shall be limited to transfers of such Registered Global Note, in whole but not in part, to a nominee of DTC or to a successor of DTC or such successor’s nominee.

(b) Transfers of Registered Notes in definitive form

Subject as provided in paragraphs (e), (f) and (g) below, upon the terms and subject to the conditions set forth in the Agency Agreement, a Registered Note in definitive form may be transferred in whole or in part (in the authorised denominations set out in the applicable Final Terms). In order to effect any such transfer (i) the holder or holders must (a) surrender the Registered Note for registration of the transfer of the Registered Note (or the relevant part of the Registered Note) at the specified office of the Registrar or any Transfer Agent, with the form of transfer thereon duly executed by the holder or holders thereof or his or their attorney or attorneys duly authorised in writing and (b) complete and deposit such other certifications as may be required by the Registrar or, as the case may be, the relevant Transfer Agent and (ii) the Registrar or, as the case may be, the relevant Transfer Agent must, after due and careful enquiry, be satisfied with the documents of title and the identity of the person making the request. Any such transfer will be subject to such reasonable regulations as the Issuer and the Registrar may from time to time prescribe (the initial such regulations being set out in Schedule 10 to the Agency Agreement). Subject as provided above, the Registrar or, as the case may be, the relevant Transfer Agent will, within three business days (being for this purpose a day on which banks are open for business in the city where the specified office of the Registrar or, as the case may be, the relevant Transfer Agent is located) of the request (or such longer period as may be required to comply with any applicable fiscal or other laws or regulations) authenticate and deliver, or procure the authentication and delivery of, at its specified office to the transferee or (at the risk of the transferee) send by uninsured mail to such address as the transferee may request, a new Registered Note in definitive form of a like aggregate nominal amount to the Registered Note (or the relevant part of the Registered Note) transferred. In the case of the transfer of part only of a Registered Note in definitive form, a new Registered Note in definitive form in respect of the balance of the Registered Note not transferred will be so authenticated and delivered or (at the risk of the transferor) sent by uninsured mail to the address of the transferor.

(c) Registration of transfer upon partial redemption

In the event of a partial redemption of Notes under Condition 7, the Issuer shall not be required to register the transfer of any Registered Note, or part of a Registered Note, called for partial redemption.

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(d) Costs of registration

Noteholders will not be required to bear the costs and expenses of effecting any registration of transfer as provided above, except for any costs or expenses of delivery other than by regular uninsured mail and except that the Issuer may require the payment of a sum sufficient to cover any stamp duty, tax or other governmental charge that may be imposed in relation to the registration.

(e) Transfers of interests in Regulation S Global Notes

Prior to expiry of the applicable Distribution Compliance Period, transfers by the holder of, or of a beneficial interest in, a Regulation S Global Note to a transferee in the United States or who is a U.S. person will only be made:

(i) upon receipt by the Registrar of a written certification substantially in the form set out in the Agency Agreement, amended as appropriate (a “Transfer Certificate”), copies of which are available from the specified office of the Registrar or any Transfer Agent, from the transferor of the Note or beneficial interest therein to the effect that such transfer is being made to a person whom the transferor reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A; or

(ii) otherwise pursuant to the Securities Act or an exemption therefrom, subject to receipt by the Issuer of such satisfactory evidence as the Issuer may reasonably require, which may include an opinion of U.S. counsel, that such transfer is in compliance with any applicable securities laws of any State of the United States,

and, in each case, in accordance with any applicable securities laws of any State of the United States or any other jurisdiction.

In the case of (i) above, such transferee may take delivery through a Legended Note in global or definitive form. After expiry of the applicable Distribution Compliance Period (i) beneficial interests in Regulation S Global Notes may be held through DTC directly, by a participant in DTC, or indirectly through a participant in DTC and (ii) such certification requirements will no longer apply to such transfers.

(f) Transfers of interests in Legended Notes

Transfers of Legended Notes or beneficial interests therein may be made:

(i) to a transferee who takes delivery of such interest through a Regulation S Global Note, upon receipt by the Registrar of a duly completed Transfer Certificate from the transferor to the effect that such transfer is being made in accordance with Regulation S and that, if such transfer is being made prior to expiry of the applicable Distribution Compliance Period, the interests in the Notes being transferred will be held immediately thereafter through Euroclear and/or Clearstream, Luxembourg; or

(ii) to a transferee who takes delivery of such interest through a Legended Note where the transferee is a person whom the transferor reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, without certification; or

(iii) otherwise pursuant to the Securities Act or an exemption therefrom, subject to receipt by the Issuer of such satisfactory evidence as the Issuer may reasonably require, which may include an opinion of U.S. counsel, that such transfer is in compliance with any applicable securities laws of any State of the United States,

and, in each case, in accordance with any applicable securities laws of any State of the United States or any other jurisdiction.

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Upon the transfer, exchange or replacement of Legended Notes, or upon specific request for removal of the Legend, the Registrar shall deliver only Legended Notes or refuse to remove such Legend, as the case may be, unless there is delivered to the Issuer such satisfactory evidence as may reasonably be required by the Issuer, which may include an opinion of U.S. counsel, that neither the Legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act.

(g) Exchanges and transfers of Registered Notes generally

Holders of Registered Notes in definitive form may exchange such Notes for interests in a Registered Global Note of the same type at any time.

(h) Definitions

In this Condition, the following expressions shall have the following meanings:

“Distribution Compliance Period” means the period that ends 40 days after the later of the commencement of the offering and the completion of the distribution of each Tranche of Notes, as certified by the relevant Dealer (in the case of a non-syndicated issue) or the relevant Lead Manager (in the case of a syndicated issue);

“Legended Note” means Registered Notes (whether in definitive form or represented by a Registered Global Note) sold in private transactions to QIBs in accordance with the requirements of Rule 144A;

“QIB” means a “qualified institutional buyer” within the meaning of Rule 144A;

“Regulation S” means Regulation S under the Securities Act;

“Regulations S Global Note” means a Registered Global Note representing Notes sold outside the United States in reliance on Regulation S;

“Rule 144A” means Rule 144A under the Securities Act; and

“Securities Act” means the United States Securities Act of 1933, as amended.

3. STATUS OF THE NOTES AND THE GUARANTEE

(a) Status of the Notes

The Notes and any relative Receipts and Coupons are direct, unconditional and (subject to the provisions of Condition 4) unsecured and unsubordinated obligations of the Issuer and rank pari passu without any preference among themselves and at least equally with all other outstanding unsecured and unsubordinated obligations of the Issuer, present and future, other than obligations, if any, that are mandatorily preferred by statute or by operation of law.

(b) Status of the Guarantee

The obligations of the Guarantor under the Guarantee are direct, unconditional and (subject to the provisions of Condition 4) unsecured and unsubordinated obligations of the Guarantor and rank at least equally with all other outstanding unsecured and unsubordinated obligations of the Guarantor, present and future, other than obligations, if any, that are mandatorily preferred by statute or by operation of law.

4. NEGATIVE PLEDGE

Neither the Issuer nor the Guarantor will, so long as any of the Notes remains outstanding (as defined in the Agency Agreement), create or have outstanding (other than by operation

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of law) any mortgage, lien, pledge or other charge upon the whole or any part of its assets or revenues, present or future, to secure any Indebtedness unless:

(a) the same security shall forthwith be extended equally and rateably to the Notes, the Receipts and the Coupons; or

(b) such other security as shall be approved by an Extraordinary Resolution of the Noteholders shall previously have been or shall forthwith be extended equally and rateably to the Notes, the Receipts and the Coupons.

As used herein, “Indebtedness” means any present or future indebtedness for borrowed money of the Issuer or the Guarantor which is in the form of, or represented by, bonds, notes, debentures or other securities and which is or are intended to be quoted, listed or ordinarily dealt in on any stock exchange, over-the-counter or other established securities market.

5. INTEREST

(a) Interest on Fixed Rate Notes

Each Fixed Rate Note bears interest from and including the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest. Interest will be payable in arrear on the Interest Payment Date(s) in each year up to (and including) the Maturity Date.

If the Notes are in definitive form, except as provided in the applicable Final Terms, the amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but excluding) such date will amount to the Fixed Coupon Amount. Payments of interest on any Interest Payment Date will, if so specified in the applicable Final Terms, amount to the Broken Amount so specified.

As used in the Conditions, “Fixed Interest Period” means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date.

Except in the case of Notes in definitive form where a fixed Coupon Amount or Broken Amount is specified in the applicable Final Terms, interest shall be calculated in respect of any period by applying the Rate of Interest to:

(a) in the case of Fixed Rate Notes which are represented by a Global Note, the aggregate outstanding nominal amount of the Fixed Rate Notes represented by such Global Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or

(b) in the case of Fixed Rate Notes in definitive form, the Calculation Amount;

and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Fixed Rate Note in definitive form comprises more than one Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the aggregate of the amounts (determined in the manner provided above) for each Calculation Amount comprising the Specified Denomination without any further rounding.

“Day Count Fraction” means, in respect of the calculation of an amount of interest in accordance with this Condition 5(a):

(i) if “Actual/Actual (ICMA)”is specified in the applicable Final Terms:

(a) in the case of Notes where the number of days in the relevant period from (and including) the most recent Interest Payment Date (or, if none, the Interest

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Commencement Date) to (but excluding) the relevant payment date (the “Accrual Period”) is equal to or shorter than the Determination Period during which the Accrual Period ends, the number of days in such Accrual Period divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Dates (as specified in the applicable Final Terms) that would occur in one calendar year; or

(b) in the case of Notes where the Accrual Period is longer than the Determination Period during which the Accrual Period ends, the sum of:

(1) the number of days in such Accrual Period falling in the Determination Period in which the Accrual Period begins divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates (as specified in the applicable Final Terms) that would occur in one calendar year; and

(2) the number of days in such Accrual Period falling in the next Determination Period divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year; and

(ii) if “30/360” is specified in the applicable Final Terms, the number of days in the period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (such number of days being calculated on the basis of a year of 360 days with 12 30-day months) divided by 360.

In these Conditions:

“Fixed Interest Period” means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date;

“Determination Period” means each period from (and including) a Determination Date to but excluding the next Determination Date (including, where either the Interest Commencement Date or the final Interest Payment Date is not a Determination Date, the period commencing on the first Determination Date prior to, and ending on the first Determination Date falling after, such date); and

“sub-unit” means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, means one cent.

(b) Interest on Floating Rate Notes and Index Linked Interest Notes

(i) Interest Payment Dates

Each Floating Rate Note and Index Linked Interest Note bears interest from (and including) the Interest Commencement Date and such interest will be payable in arrear on either:

(A) the Specified Interest Payment Date(s) in each year specified in the applicable Final Terms; or

(B) if no Specified Interest Payment Date(s) is/are specified in the applicable Final Terms, each date (each such date, together with each Specified Interest Payment Date, an “Interest Payment Date”) which falls the number of months or other period specified as the Specified Period in the applicable Final Terms after the preceding Interest

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Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date.

Such interest will be payable in respect of each Interest Period (which expression shall, in these Conditions, mean the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date).

If a Business Day Convention is specified in the applicable Final Terms and (x) if there is no numerically corresponding day on the calendar month in which an Interest Payment Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention specified is:

(1) in any case where Specified Periods are specified in accordance with Condition 5(b)(i)(B) above, the Floating Rate Convention, such Interest Payment Date (i) in the case of (x) above, shall be the last day that is a Business Day in the relevant month and the provisions of (B) below shall apply mutatis mutandis or (ii) in the case of (y) above, shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (A) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (B) each subsequent Interest Payment Date shall be the last Business Day in the month which falls the Specified Period after the preceding applicable Interest Payment Date occurred; or

(2) the Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day; or

(3) the Modified Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day; or

(4) the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the immediately preceding Business Day.

In these Conditions, “Business Day” means a day which is both:

(A) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in London and any Additional Business Centre specified in the applicable Final Terms; and

(B) either (1) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (if other than London and any Additional Business Centre and which if the Specified Currency is Australian dollars or New Zealand dollars shall be Sydney and Auckland, respectively) or (2) in relation to any sum payable in euro, a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System (the “TARGET System”) is open.

(ii) Rate of Interest

The Rate of Interest payable from time to time in respect of Floating Rate Notes and Index Linked Interest Notes will be determined in the manner specified in the applicable Final Terms.

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(A) ISDA Determination for Floating Rate Notes

Where ISDA Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA Rate plus or minus (as indicated in the applicable Final Terms) the Margin (if any). For the purposes of this subparagraph (A), “ISDA Rate” for an Interest Period means a rate equal to the Floating Rate that would be determined by the Principal Paying Agent under an interest rate swap transaction if the Principal Paying Agent were acting as Calculation Agent for that swap transaction under the terms of an agreement incorporating the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc. and as amended and updated as at the Issue Date of the first Tranche of the Notes.(the “ISDA Definitions”) and under which:

(1) the Floating Rate Option is as specified in the applicable Final Terms;

(2) the Designated Maturity is a period specified in the applicable Final Terms; and

(3) the relevant Reset Date is either (i) if the applicable Floating Rate Option is based on the London inter-bank offered rate (“LIBOR”) or on the Euro- zone inter-bank offered rate (“EURIBOR”), the first day of that Interest Period or (ii) in any other case, as specified in the applicable Final Terms.

For the purposes of this sub-paragraph (A), “Floating Rate”, “Calculation Agent”, “Floating Rate Option”, “Designated Maturity” and “Reset Date”have the meanings given to those terms in the ISDA Definitions.

(B) Screen Rate Determination for Floating Rate Notes

Where Screen Rate Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either:

(1) the offered quotation; or

(2) the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the offered quotations,

(expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as the case may be, on the Relevant Screen Page as at 11.00 a.m. (London time, in the case of LIBOR, or Brussels time, in the case of EURIBOR) on the Interest Determination Date in question plus or minus (as indicated in the applicable Final Terms) the Margin (if any), all as determined by the Principal Paying Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Principal Paying Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations.

The Agency Agreement contains provisions for determining the Rate of Interest in the event that the Relevant Screen Page is not available or if, in the case of (1) above, no such offered quotation appears or, in the case of (2) above, fewer than three such offered quotations appear, in each case as at the time specified in the preceding paragraph.

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If the Reference Rate from time to time in respect of Floating Rate Notes is specified in the applicable Final Terms as being other than LIBOR or EURIBOR, the Rate of Interest in respect of such Notes will be determined as provided in the applicable Final Terms.

(iii) Minimum Rate of Interest and/or Maximum Rate of Interest

If the applicable Final Terms specifies a Minimum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (ii) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest.

If the applicable Final Terms specifies a Maximum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (ii) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest.

(iv) Determination of Rate of Interest and calculation of Interest Amounts

The Principal Paying Agent, in the case of Floating Rate Notes, and the Calculation Agent, in the case of Index Linked Interest Notes, will at or as soon as practicable after each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest Period. In the case of Index Linked Interest Notes, the Calculation Agent will notify the Principal Paying Agent of the Rate of Interest for the relevant Interest Period as soon as practicable after calculating the same.

The Principal Paying Agent will calculate the amount of interest (the “Interest Amount”) payable on the Floating Rate Notes or Index Linked Interest Notes for the relevant Interest Period by applying the Rate of Interest to:

(a) in the case of Floating Rate Notes or Index Linked Interest Notes which are represented by a Global Note, the aggregate outstanding nominal amount of the Notes represented by such Global Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or

(b) in the case of Floating Rate Notes or Index Linked Interest Notes in definitive form, the Calculation Amount;

and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Floating Rate Note or an Index Linked Interest Note in definitive form comprises more than one Calculation Amount, the Interest Amount payable in respect of such Note shall be the aggregate of the amounts (determined in the manner provided above) for each Calculation Amount comprising the Specified Denomination without any further rounding.

“Day Count Fraction” means, in respect of the calculation of an amount of interest for any Interest Period:

(i) if “Actual/365” or “Actual/Actual (ISDA)” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Interest Period falling in a leap year divided

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by 366 and (B) the actual number of days in that portion of the Interest Period falling in a non-leap year divided by 365);

(ii) if “Actual/365 (Fixed)” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365;

(iii) if “Actual/365 (Sterling)” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366;

(iv) if “Actual/360” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 360;

(v) if “30/360”, “360/360” or “Bond Basis” is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months (unless (a) the last day of the Interest Period is the 31st day of a month but the first day of the Interest Period is a day other than the 30th or 31st day of a month, in which case the month that includes that last day shall not be considered to be shortened to a 30-day month, or (b) the last day of the Interest Period is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month)); and

(vi) if “30E/360” or “Eurobond Basis” is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months, without regard to the date of the first day or last day of the Interest Period unless, in the case of the final Interest Period, the Maturity Date is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month).

(v) Notification of Rate of Interest and Interest Amounts

The Principal Paying Agent will cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the Issuer and any stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed and notice thereof to be given in accordance with Condition 14 as soon as possible after their determination but in no event later than the fourth London Business Day thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will be promptly notified to each stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed and to the Noteholders in accordance with Condition 14. For the purposes of this paragraph, the expression “London Business Day” means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for general business in London.

(vi) Certificates to be final

All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 5(b), whether by the Principal Paying Agent or, if applicable, the Calculation Agent, shall (in the absence of wilful default, bad faith or manifest error) be binding on the Issuer, the Guarantor, the Principal Paying Agent, the Calculation Agent (if applicable), the other Agents and all Noteholders, Receiptholders and Couponholders and (in the absence as aforesaid) no liability to the Issuer, the

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Guarantor, the Noteholders, the Receiptholders or the Couponholders shall attach to the Principal Paying Agent or the Calculation Agent (if applicable) in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions.

(c) Interest on Dual Currency Interest Notes

The rate or amount of interest payable in respect of Dual Currency Interest Notes shall be determined in the manner specified in the applicable Final Terms.

(d) Interest on Partly Paid Notes

In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest will accrue as aforesaid on the paid-up nominal amount of such Notes and otherwise as specified in the applicable Final Terms.

(e) Accrual of interest

Each Note (or in the case of the redemption of part only of a Note, that part only of such Note) will cease to bear interest (if any) from the date for its redemption unless, upon due presentation thereof, payment of principal is improperly withheld or refused. In such event, interest will continue to accrue until whichever is the earlier of:

(1) the date on which all amounts due in respect of such Note have been paid; and

(2) five days after the date on which the full amount of the moneys payable in respect of such Notes has been received by the Principal Paying Agent or the Registrar, as the case may be, and notice to that effect has been given to the Noteholders in accordance with Condition 14.

6. PAYMENTS

(a) Method of payment

Subject as provided below:

(i) payments in a Specified Currency other than euro will be made by credit or transfer to an account in the relevant Specified Currency (which, in the case of a payment in Japanese Yen to a non-resident of Japan, shall be a non-resident account) maintained by the payee with, or, at the option of the payee, by a cheque in such Specified Currency drawn on, a bank in the principal financial centre of the country of such Specified Currency (which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney and Auckland, respectively); and

(ii) payments in euro will be made by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque.

Payments will be subject in all cases to any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 8.

The Luxembourg act dated 3rd September, 1996 on the involuntary dispossession of bearer securities, as amended, requires that any amount that is payable and outstanding under the bearer Notes (if any) before opposition (if applicable) in relation to the bearer Notes has been filed is paid to the Caisse de Consignation in Luxembourg until the opposition has been withdrawn or has elapsed.

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(b) Presentation of definitive Bearer Notes, Receipts and Coupons

Payments of principal in respect of definitive Bearer Notes will (subject as provided below) be made in the manner provided in paragraph (a) above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of definitive Bearer Notes, and payments of interest in respect of definitive Bearer Notes will (subject as provided below) be made as aforesaid only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of Coupons, in each case at the specified office of any Paying Agent outside the United States (which expression, as used herein, means the United States of America (including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction)).

Payments of instalments of principal (if any) in respect of definitive Bearer Notes, other than the final instalment, will (subject as provided below) be made in the manner provided in paragraph (a) above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Receipt in accordance with the preceding paragraph. Payment of the final instalment will be made in the manner provided in paragraph (a) above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Bearer Note in accordance with the preceding paragraph. Each Receipt must be presented for payment of the relevant instalment together with the definitive Bearer Note to which it appertains. Receipts presented without the definitive Bearer Note to which they appertain do not constitute valid obligations of the Issuer. Upon the date on which any definitive Bearer Note becomes due and repayable, unmatured Receipts (if any) relating thereto (whether or not attached) shall become void and no payment shall be made in respect thereof.

Fixed Rate Notes in definitive bearer form (other than Dual Currency Notes, Index Linked Notes or Long Maturity Notes (as defined below) should be presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relative missing Coupon at any time before the expiry of 10 years after the Relevant Date (as defined in Condition 8) in respect of such principal (whether or not such Coupon would otherwise have become void under Condition 9) or, if later, five years from the date on which such Coupon would otherwise have become due, but in no event thereafter.

Upon any Fixed Rate Note in definitive bearer form becoming due and repayable prior to its Maturity Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in respect thereof.

Upon the date on which any Floating Rate Note, Dual Currency Note, Index Linked Note or Long Maturity Note in definitive bearer form becomes due and repayable, unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be, exchange for further Coupons shall be made in respect thereof. A “Long Maturity Note” is a Fixed Rate Note (other than a Fixed Rate Note which on issue had a Talon attached) whose nominal amount on issue is less than the aggregate interest payable thereon provided that such Note shall cease to be a Long Maturity Note on the Interest Payment Date on which the aggregate amount of interest remaining to be paid after that date is less than the nominal amount of such Note.

If the due date for redemption of any definitive Bearer Note is not an Interest Payment Date, interest (if any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable only against surrender of the relevant definitive Bearer Note.

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(c) Payments in respect of Bearer Global Notes

Payments of principal and interest (if any) in respect of Notes represented by any Global Note in bearer form will (subject as provided below) be made in the manner specified above in relation to definitive Bearer Notes and otherwise in the manner specified in the relevant Global Note against presentation or surrender, as the case may be, of such Global Note at the specified office of any Paying Agent outside the United States. A record of each payment made against presentation or surrender of any Global Note in bearer form, distinguishing between any payment of principal and any payment of interest, will be made on such Global Note by the Paying Agent to which it was presented and such record shall be prima facie evidence that the payment in question has been made.

(d) Payments in respect of Registered Notes

Payments of principal (other than instalments of principal prior to the final instalment) in respect of each Registered Note (whether or not in global form) will be made against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the Registered Note at the specified office of the Registrar or any of the Paying Agents. Such payments will be made by transfer to the Designated Account (as defined below) of the holder (or the first named of joint holders) of the Registered Note appearing in the register of holders of the Registered Notes maintained by the Registrar (the “Register”) at the close of business on the third business day (being for this purpose a day on which banks are open for general business in the city where the specified office of the Registrar is located) before the relevant due date (the “Record Date”). If the Notes have been issued by ENEL S.A., payments will be made to the persons shown in the register of Noteholders held by ENEL S.A. at its registered office. Notwithstanding the previous sentence, if (i) a holder does not have a Designated Account or (ii) the principal amount of the Notes held by a holder is less than U.S.$250,000 (or its approximate equivalent in any other Specified Currency), payment will instead be made by a cheque in the Specified Currency drawn on a Designated Bank (as defined below). For these purposes, “Designated Account” means the account (which, in the case of a payment in Japanese yen to a non-resident of Japan, shall be a non-resident account) maintained by a holder with a Designated Bank and identified as such in the Register and “Designated Bank” means (in the case of payment in a Specified Currency other than euro) a bank in the principal financial centre of the country of such Specified Currency (which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney and Auckland) and (in the case of a payment in euro) any bank which processes payments in euro.

Payments of interest and payments of instalments of principal (other than the final instalment) in respect of each Registered Note (whether or not in global form) will be made by a cheque in the Specified Currency drawn on a Designated Bank and mailed by uninsured mail on the business day in the city where the specified office of the Registrar is located immediately preceding the relevant due date to the holder (or the first named of joint holders) of the Registered Note appearing in the Register at the close of business on the fifteenth day (whether or not such fifteenth day is a business day) before the Record Date at his address shown in the Register on the Record Date and at his risk. Upon application of the holder to the specified office of the Registrar not less than three business days in the city where the specified office of the Registrar is located before the due date for any payment of interest in respect of a Registered Note, the payment may be made by transfer on the due date in the manner provided in the preceding paragraph. Any such application for transfer shall be deemed to relate to all future payments of interest (other than interest due on redemption) and instalments of principal (other than the final instalment) in respect of the Registered Notes which become payable to the holder who has made the initial application until such time as the Registrar is notified in writing to the contrary by such holder. Payment of the interest due in respect of each Registered Note on redemption and the final instalment of

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principal will be made in the same manner as payment of the principal amount of such Registered Note.

Holders of Registered Notes will not be entitled to any interest or other payment for any delay in receiving any amount due in respect of any Registered Note as a result of a cheque posted in accordance with this Condition arriving after the due date for payment or being lost in the post. No commissions or expenses shall be charged to such holders by the Registrar in respect of any payments of principal or interest in respect of the Registered Notes.

All amounts payable to DTC or its nominee as registered holder of a Global Note in registered form in respect of Notes denominated in a Specified Currency other than U.S. dollars shall be paid by transfer by the Registrar to an account in the relevant Specified Currency of the Exchange Agent on behalf of DTC or its nominee for conversion into and payment in U.S. dollars in accordance with the provisions of the Agency Agreement.

None of the Issuer, the Guarantor and the Agents will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

(e) General provisions applicable to payments

The holder of a Global Note shall be the only person entitled to receive payments in respect of Notes represented by such Global Note and the Issuer or, as the case may be, the Guarantor will be discharged by payment to, or to the order of, the holder of such Global Note in respect of each amount so paid. Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg or DTC as the beneficial holder of a particular nominal amount of Notes represented by such Global Note must look solely to Euroclear, Clearstream, Luxembourg or DTC, as the case may be, for his share of each payment so made by the Issuer or, as the case may be, the Guarantor to, or to the order of, the holder of such Global Note.

Notwithstanding the foregoing provisions of this Condition, if any amount of principal and/or interest in respect of Bearer Notes is payable in U.S. dollars, such U.S. dollar payments of principal and/or interest in respect of such Notes will be made at the specified office of a Paying Agent in the United States if:

(i) the Issuer has appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars at such specified offices outside the United States of the full amount of principal and interest on the Bearer Notes in the manner provided above when due;

(ii) payment of the full amount of such principal and interest at all such specified offices outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions on the full payment or receipt of principal and interest in U.S. dollars; and

(iii) such payment is then permitted under United States law without involving, in the opinion of the Issuer and the Guarantor, adverse tax consequences to the Issuer or the Guarantor.

(f) Payment Day

If the date for payment of any amount in respect of any Note, Receipt or Coupon is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not be entitled to further interest or other

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payment in respect of such delay. For these purposes, “Payment Day” means any day which (subject to Condition 9) is:

(i) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in:

(A) the relevant place of presentation;

(B) London;

(C) each Additional Financial Centre specified in the applicable Final Terms;

(ii) either (1) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (if other than the place of presentation, London and any Additional Financial Centre and which if the Specified Currency is Australian dollars or New Zealand dollars shall be Sydney and Auckland, respectively) or (2) in relation to any sum payable in euro, a day on which the TARGET System is open; and

(iii) in the case of any payment in respect of a Registered Global Note denominated in a Specified Currency other than U.S. dollars and registered in the name of DTC or its nominee and in respect of which an accountholder of DTC (with an interest in such Registered Global Note) has elected to receive any part of such payment in U.S.dollars, a day on which commercial banks are not authorised or required by law or regulation to be closed in New York City.

(g) Interpretation of principal and interest

Any reference in these Conditions to principal in respect of the Notes shall be deemed to include, as applicable:

(i) any additional amounts which may be payable with respect to principal under Condition 8;

(ii) the Final Redemption Amount of the Notes;

(iii) the Early Redemption Amount of the Notes;

(iv) the Optional Redemption Amount(s) (if any) of the Notes;

(v) in relation to Notes redeemable in instalments, the Instalment Amounts;

(vi) in relation to Zero Coupon Notes, the Amortised Face Amount (as defined in Condition 7(e)); and

(vii) any premium and any other amounts (other than interest) which may be payable by the Issuer under or in respect of the Notes.

Any reference in these Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any additional amounts which may be payable with respect to interest under Condition 8.

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7. REDEMPTION AND PURCHASE

(a) Redemption at maturity

Unless previously redeemed or purchased and cancelled as specified below, each Note (including each Index Linked Redemption Note and Dual Currency Redemption Note) will be redeemed by the Issuer at its Final Redemption Amount specified in, or determined in the manner specified in, the applicable Final Terms in the relevant Specified Currency on the Maturity Date.

(b) Redemption for tax reasons

The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (if this Note is neither a Floating Rate Note nor an Index Linked Interest Note) or on any Interest Payment Date (if this Note is either a Floating Rate Note or an Index Linked Interest Note), on giving not less than 30 nor more than 60 days’ notice to the Principal Paying Agent and, in accordance with Condition 14, the Noteholders (which notice shall be irrevocable), if:

(i) 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 or the Guarantor would be unable for reasons outside its control 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 Tax Jurisdiction (as defined in Condition 8) or any change in the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective on or after the date on which agreement is reached to issue the first Tranche of the Notes; and

(ii) such obligation cannot be avoided by the Issuer or, as the case may be, the Guarantor taking reasonable measures available to it,

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.

Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver to the Principal Paying Agent a certificate signed by two Directors of the Issuer or, as the case may be, the Guarantor stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred, and an opinion of independent legal advisers of recognised standing in a Tax Jurisdiction (as defined in Condition 8) to the effect that the Issuer or, as the case may be, the Guarantor has or will become obliged, as aforesaid, to pay such additional amounts as a result of such change or amendment.

Notes redeemed pursuant to this Condition 7(b) will be redeemed at their Early Redemption Amount referred to in paragraph (e) below together (if appropriate) with interest accrued to (but excluding) the date of redemption.

Upon the expiry of such notice, the Issuer shall be bound to redeem the Notes accordingly.

(c) Redemption at the option of the Issuer (Issuer Call)

If Issuer Call is specified in the applicable Final Terms, the Issuer may, having given:

(i) not less than 15 nor more than 30 days’ notice to the Noteholders in accordance with Condition 14 with a copy to the Guarantor; and

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(ii) not less than 15 days before the giving of the notice referred to in (i), notice to the Principal Paying Agent and, in the case of a redemption of Registered Notes, the Registrar;

(which notices shall be irrevocable and shall specify the date fixed for redemption), redeem all or some only of the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s) specified in, or determined in the manner specified in, the applicable Final Terms together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date. Any such redemption must be of a nominal amount not less than the Minimum Redemption Amount and not more than the Maximum Redemption Amount, in each case as may be specified in the applicable Final Terms. In the case of a partial redemption of Notes, the Notes to be redeemed (“Redeemed Notes”) will be selected individually by lot, in the case of Redeemed Notes represented by definitive Notes, and in accordance with the rules of Euroclear and/or Clearstream, Luxembourg and/or DTC, (to be reflected in the records of Euroclear and Clearstream, Luxembourg as either a pool factor or a reduction in nominal amount, at their discretion) in the case of Redeemed Notes represented by a Global Note, not more than 30 days prior to the date fixed for redemption (such date of selection being hereinafter called the “Selection Date”). In the case of Redeemed Notes represented by definitive Notes, a list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 14 not less than 15 days prior to the date fixed for redemption. No exchange of the relevant Global Note will be permitted during the period from (and including) the Selection Date to (and including) the date fixed for redemption pursuant to this paragraph (c) and notice to that effect shall be given by the Issuer to the Noteholders in accordance with Condition 14 at least five days prior to the Selection Date.

(d) Redemption at the option of the Noteholders (Investor Put)

If Investor Put is specified in the applicable Final Terms, upon the holder of any Note giving to the Issuer in accordance with Condition 14 (with a copy to the Guarantor) not less than 15 nor more than 30 days’ notice the Issuer will, upon the expiry of such notice, redeem, subject to, and in accordance with, the terms specified in the applicable Final Terms, in whole (but not, in the case of a Bearer Note in definitive form, in part), such Note on the Optional Redemption Date and at the Optional Redemption Amount together, if appropriate, with interest accrued to (but excluding) the Optional Redemption Date. Registered Notes may be redeemed under this Condition 7(d) in any multiple of their lowest Specified Denomination. It may be that before an Investor Put can be exercised, certain conditions and/or circumstances will need to be satisfied. Where relevant, the provisions will be set out in the applicable Final Terms.

If this Note is in definitive form, to exercise the right to require redemption of this Note the holder of this Note must deliver such Note at the specified office of any Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes) at any time during normal business hours of such Paying Agent or, as the case may be, the Registrar falling within the notice period, accompanied by a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent or, as the case may be, the Registrar (a “Put Notice”) and in which the holder must specify a bank account (or, if payment is required to be made by cheque, an address) to which payment is to be made under this Condition and, in the case of Registered Notes, the nominal amount thereof to be redeemed and, if less than the full nominal amount of the Registered Notes so surrendered is to be redeemed, an address to which a new Registered Note in respect of the balance of such Registered Notes is to be sent subject to and in accordance with the provisions of Condition 2(b). If this Note is represented by a Global Note or is in definitive form and held through Euroclear or Clearstream, Luxembourg, to exercise the right to require redemption of this Note the holder of this Note must, within the notice period, give notice to the Agent of such exercise in accordance with the standard procedures

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of Euroclear and Clearstream, Luxembourg (which may include notice being given on his instruction by Euroclear or Clearstream, Luxembourg or any common depositary for them to the Agent by electronic means) in a form acceptable to Euroclear and Clearstream, Luxembourg from time to time and, if this Note is represented by a Global Note, at the same time present or procure the presentation of the relevant Global Note to the Agent for notation accordingly.

Any Put Notice given by a holder of any Note pursuant to this paragraph shall be irrevocable except where prior to the due date of redemption an Event of Default shall have occurred and be continuing in which event such holder, at its option, may elect by notice to the Issuer to withdraw the notice given pursuant to this paragraph and instead to declare such Note forthwith due and payable pursuant to Condition 10.

(e) Early Redemption Amounts

For the purpose of paragraph (b) above and Condition 10, each Note will be redeemed at its Early Redemption Amount calculated as follows:

(i) in the case of a Note with a Final Redemption Amount equal to the Issue Price, at the Final Redemption Amount thereof;

(ii) in the case of a Note (other than a Zero Coupon Note but including an Instalment Note and a Partly Paid Note) with a Final Redemption Amount which is or may be less or greater than the Issue Price or which is payable in a Specified Currency other than that in which the Notes are denominated, at the amount specified in, or determined in the manner specified in, the applicable Final Terms or, if no such amount or manner is so specified in the applicable Final Terms, at its nominal amount; or

(iii) in the case of a Zero Coupon Note, at an amount (the “Amortised Face Amount”) calculated in accordance with the following formula:

Early Redemption Amount = RP x (1 x AY)y

where:

“RP” the Reference Price;

“AY” means the Accrual Yield expressed as a decimal; and

“y” is a fraction the numerator of which is equal to the number of days (calculated on the basis of a 360-day year consisting of 12 months of 30 days each) from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator of which is 360,

or on such other calculation basis as may be specified in the applicable Final Terms.

(f) Instalments

Instalment Notes will be redeemed in the Instalment Amounts and on the Instalment Dates. In the case of early redemption, the Early Redemption Amount will be determined pursuant to paragraph (e) above.

(g) Partly Paid Notes

Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise, in accordance with the provisions of this Condition and the applicable Final Terms.

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(h) Purchases

The Issuer, the Guarantor or any Subsidiaries (as defined in Condition 10) may at any time purchase Notes (provided that, in the case of definitive Bearer Notes, all unmatured Receipts, Coupons and Talons appertaining thereto are attached or surrendered therewith) in the open market or by tender or by private agreement at any price. Such Notes may be held, reissued, resold or, at the option of the Issuer, surrendered to any Paying Agent and/or the Registrar for cancellation.

(i) Cancellation

All Notes which are redeemed will forthwith be cancelled (together with all unmatured Receipts, Coupons and Talons attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled and the Notes purchased and cancelled pursuant to paragraph (h) above (together with all unmatured Receipts, Coupons and Talons cancelled therewith) shall be forwarded to the Principal Paying Agent and cannot be reissued or resold.

(j) Late payment on Zero Coupon Notes

If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to paragraph (a), (b), (c) or (d) above or upon its becoming due and repayable as provided in Condition 10 is improperly withheld or refused, the amount due and repayable in respect of such Zero Coupon Note shall be the amount calculated as provided in paragraph (e)(iii) above as though the references therein to the date fixed for the redemption or the date upon which such Zero Coupon Note becomes due and payable were replaced by references to the date which is the earlier of:

(i) the date on which all amounts due in respect of such Zero Coupon Note have been paid; and

(ii) five days after the date on which the full amount of the moneys payable in respect of such Zero Coupon Notes has been received by the Principal Paying Agent or the Registrar and notice to that effect has been given to the Noteholders in accordance with Condition 14.

8. TAXATION

All payments of principal and interest in respect of the Notes, Receipts and Coupons by ENEL (acting as the Issuer or Guarantor) or by ENEL S.A. will be made without withholding or deduction for or on account of any present or future taxes or duties of whatever nature imposed or levied by or on behalf of any Tax Jurisdiction unless such withholding or deduction is required by law. In such event, ENEL (acting as the Issuer or Guarantor) or, as the case may be, ENEL S.A. will pay such additional amounts as shall be necessary in order that the net amounts received by the holders of the Notes, Receipts or Coupons after such withholding or deduction shall equal the respective amounts of principal and interest which would otherwise have been receivable in respect of the Notes, Receipts or Coupons, as the case may be, in the absence of such withholding or deduction; except that no such additional amounts shall be payable with respect to any Note, Receipt or Coupon:

(a) presented for payment in any Tax Jurisdiction (as defined below); or

(b) presented for payment by or on behalf of a holder who is liable for such taxes or duties in respect of such Note, Receipt or Coupon by reason of his having some connection with a Tax Jurisdiction other than the mere holding of such Note, Receipt or Coupon; or

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(c) presented for payment by, or on behalf of, a holder who would be able to avoid such withholding or deduction by making a declaration or any other statement, including but not limited to a declaration of residence or non-residence, but fails to do so; or

(d) presented for payment by, or on behalf of, a holder who would be able to avoid such withholding or deduction by presenting the relevant Note and/or Coupon to another Paying Agent in a Member State of the European Union; or

(e) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive; or

(f) presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that the holder thereof would have been entitled to an additional amount on presenting the same for payment on such thirtieth day assuming that day to have been a Payment Day (as defined in Condition 6(f)); or

(g) having an original maturity (for these purposes, “original maturity” shall be the period from, and including, the Issue Date to, but excluding, the Maturity Date (each as specified on the applicable Final Terms)) of less than 18 months; or

(h) in the event of payment by ENEL (acting as Issuer or Guarantor) to a non-Italian resident Noteholder, to the extent that the Noteholder is resident in a country which does not allow for a satisfactory exchange of information with the Italian authorities.

As used herein:

(i) “Tax Jurisdiction” means the Republic of Italy or any political subdivision or any authority thereof or therein having power to tax in the case of payments by ENEL (also acting as Guarantor) or the Grand Duchy of Luxembourg or any political subdivision or any authority thereof or therein having power to tax in the case of payments by ENEL S.A.; and

(ii) the “Relevant Date” means the date on which such payment first becomes due, except that, if the full amount of the moneys payable has not been duly received by the Principal Paying Agent or the Registrar on or prior to such due date, it means the date on which, the full amount of such moneys having been so received, notice to that effect is duly given to the Noteholders in accordance with Condition 14.

9. PRESCRIPTION

The Notes (whether in bearer or registered form), Receipts and Coupons will become void unless presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest) after the Relevant Date (as defined in Condition 8) therefor.

There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for payment in respect of which would be void pursuant to this Condition or Condition 6(b) or any Talon which would be void pursuant to Condition 6(b).

10. EVENTS OF DEFAULT

If any one or more of the following events (each an “Event of Default”) shall occur and be continuing:

(a) a default is made for a period of 10 days or more in the payment of principal of or any interest in respect of the Notes or any of them after the due date thereof; or

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(b) the Issuer or the Guarantor shall be adjudicated or becomes insolvent or shall stop payment or announce that it shall stop payment or shall be found unable to pay its debts (and including, without limitation, in relation to ENEL S.A., bankruptcy (faillite), insolvency, its voluntary or judicial liquidation (liquidation volontaire ou judiciare), composition with creditors (concordat préventif de faillite), reprieve from payment (sursis de paiement), controlled management (gestion contrôlée), fraudulent conveyance (actio pauliana), general settlement with creditors, reorganisation or similar laws affecting the rights of creditors generally), or any order shall be made by any competent court or other competent body for, or any resolution shall be passed by the Issuer or the Guarantor for judicial composition proceedings with its creditors or for the appointment of a receiver, administrative receiver or trustee (including, without limitation in relation to ENEL S.A., any commissaire, juge-commissaire, liquidateur or curateur) or other similar official in insolvency proceedings in relation to the Issuer or the Guarantor; or

(c) the Issuer or the Guarantor fails to pay a final judgment of a court of competent jurisdiction within 60 days from the receipt of a notice that a final judgment in excess of an amount equal to the value of a substantial part of the assets or property of the Guarantor has been entered against it or an execution is levied on or enforced upon or sued out in pursuance of any such judgment against any substantial part of the assets or property of the Issuer or the Guarantor; or

(d) the Issuer or the Guarantor shall be wound up or dissolved (otherwise than for the purpose of a solvent amalgamation, merger or reconstruction under which the assets and liabilities of the Issuer or the Guarantor, as the case may be, are assumed by the entity resulting from such amalgamation, merger or reconstruction and such entity assumes the obligations of the Issuer or the Guarantor, as the case may be, in respect of the Notes or the Guarantee, as the case may be, and an opinion of an independent legal adviser of recognised standing in Luxembourg, in the case of ENEL S.A. or in Italy, in the case of ENEL, has been delivered to the Principal Paying Agent confirming the same prior to the effective date of such amalgamation, merger or reconstruction); or

(e) the Issuer or the Guarantor shall cease or announce that it shall cease to carry on its business (otherwise than for the purpose of a solvent amalgamation, merger or reconstruction under which the assets and liabilities of the Issuer or the Guarantor, as the case may be, are assumed by the entity resulting from such amalgamation, merger or reconstruction and such entity assumes the obligations of the Issuer or the Guarantor, as the case may be, in respect of the Notes or the Guarantee, as the case may be, and an opinion of an independent legal adviser of recognised standing in Luxembourg, in the case of ENEL S.A. or in Italy, in the case of ENEL, has been delivered to the Principal Paying Agent confirming the same prior to the effective date of such amalgamation, merger or reconstruction); or

(f) any Indebtedness for Borrowed Money of the Issuer or the Guarantor becomes due and repayable prematurely by reason of an event of default (however described) or the Issuer or the Guarantor fails to make any payment in respect of any Indebtedness for Borrowed Money on the due date for payment (as extended by any originally applicable grace period) or any security given by the Issuer or the Guarantor for any Indebtedness for Borrowed Money becomes enforceable or if default is made by the Issuer or the Guarantor in making any payment due under any guarantee and/or indemnity given by it in relation to any Indebtedness for Borrowed Money of any other person (as extended by any originally applicable grace period), provided that no such event shall constitute an Event of Default so long as and to the extent that the Issuer or the Guarantor, as the case may be, is contesting, in good faith, in a competent court in a recognised jurisdiction that the relevant Indebtedness for Borrowed Money or any

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such security, guarantee and/or indemnity shall be due or enforceable, as appropriate, and provided further that no such event shall constitute an Event of Default unless the aggregate Indebtedness for Borrowed Money relating to all such events which shall have occurred and be continuing shall amount to at least €100,000,000 (or its equivalent in any other currency); or

(g) default is made by the Issuer or the Guarantor in the performance or observance of any obligation, condition or provision binding on the Issuer under the Notes or on the Guarantor under this Guarantee in relation to, or in respect of, the Notes (other than any obligation for payment of any principal or interest in respect of the Notes) and (except in any case where the default is incapable of remedy when no continuation or notice as is hereinafter mentioned will be required) such default continues for 30 days after written notice thereof to the Issuer or the Guarantor, as the case may be, requiring the same to be remedied; or

(h) the Guarantee ceases to be, or is claimed by the Guarantor not to be, in full force and effect,

then any holder of a Note may, by written notice to the Issuer at the specified office of the Principal Paying Agent, effective upon the date of receipt thereof by the Principal Paying Agent, declare any Notes held by the holder to be forthwith due and payable whereupon the same shall become forthwith due and payable at the Early Redemption Amount (as described in Condition 7(e)), together with accrued interest (if any) to the date of repayment, without presentment, demand, protest or other notice of any kind.

For the purposes of this Condition:

“Indebtedness for Borrowed Money” means any present or future indebtedness (whether being principal, premium, interest or other amounts) for or in respect of (i) money borrowed, (ii) liabilities under or in respect of any acceptance or acceptance credit or (iii) any notes, bonds, debentures, debenture stock, loan stock or other securities offered, issued or distributed whether by way of public offer, private placing, acquisition consideration or otherwise and whether issued for cash or in whole or in part for a consideration other than cash.

11. REPLACEMENT OF NOTES, RECEIPTS, COUPONS AND TALONS

Should any Note, Receipt, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Principal Paying Agent (in the case of Bearer Notes, Receipts or Coupons) or the Registrar (in the case of Registered Notes) upon payment by the claimant of such costs and expenses as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Notes, Receipts, Coupons or Talons must be surrendered before replacements will be issued.

12. AGENTS

The names of the initial Agents and their initial specified offices are set out below.

The Issuer and the Guarantor are entitled to vary or terminate the appointment of any Agent and/or appoint additional or other Agents and/or approve any change in the specified office through which any Agent acts, provided that:

(a) there will at all times be a Principal Paying Agent and a Registrar;

(b) so long as the Notes are listed on any stock exchange or admitted to listing by any other relevant authority, there will at all times be a Paying Agent (in the case of Bearer Notes) and a Transfer Agent (in the case of Registered Notes) with a specified office

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in such place as may be required by the rules and regulations of the relevant stock exchange or other relevant authority;

(c) so long as any of the Registered Global Notes payable in a Specified Currency other than U.S. dollars are held through DTC or its nominee, there will at all times be an Exchange Agent with a specified office in New York City;

(d) there will at all times be a Paying Agent in a Member State of the European Union that will not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive; and

(e) there will at all times be a Paying Agent in a jurisdiction within Continental Europe, other than the jurisdiction in which the Issuer or the Guarantor is incorporated.

In addition, the Issuer and the Guarantor shall forthwith appoint a Paying Agent having a specified office in New York City in the circumstances described in Condition 6(e). Any variation, termination, appointment or change shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not less than 30 nor more than 45 days’ prior notice thereof shall have been given to the Noteholders in accordance with Condition 14.

In acting under the Agency Agreement, the Agents act solely as agents of the Issuer and the Guarantor and do not assume any obligation to, or relationship of agency or trust with, any Noteholders, Receiptholders or Couponholders. The Agency Agreement contains provisions permitting any entity into which any Agent is merged or converted or with which it is consolidated or to which it transfers all or substantially all of its assets to become the successor agent.

13. EXCHANGE OF TALONS

On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Principal Paying Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to (and including) the final date for the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition 9.

14. NOTICES

All notices regarding the Bearer Notes will be deemed to be validly given if published (i) in a leading English language daily newspaper of general circulation in London and (ii) if and for so long as the Bearer Notes are admitted to trading on, and listed on the Irish Stock Exchange, a daily newspaper of general circulation in Ireland. It is expected that such publication will be made in the Financial Times in London and the Irish Times. The Issuer (failing which the Guarantor) shall also ensure that notices are duly published in a manner which complies with the rules and regulations of any stock exchange (or any other relevant authority) on which the Bearer Notes are for the time being listed or by which they have been admitted to listing. Any such notice will be deemed to have been given on the date of the first publication or, where required to be published in more than one newspaper, on the date of the first publication in all required newspapers.

All notices regarding the Registered Notes will be deemed to be validly given if sent by first class mail or (if posted to an address overseas) by airmail to the holders (or the first named of joint holders) at their respective addresses recorded in the Register and will be deemed to have been given on the fourth day after mailing and, in addition, for so long as any Registered Notes are listed on a stock exchange or are admitted to listing by another

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relevant authority and the rules of that stock exchange (or other relevant authority) so require, such notice will be published in a daily newspaper of general circulation in the place or places required by those rules.

Until such time as any definitive Notes are issued, there may, so long as any Global Notes representing the Notes are held in their entirety on behalf of Euroclear and/or Clearstream, Luxembourg and/or DTC, be substituted for such publication in such newspaper(s) the delivery of the relevant notice to Euroclear and/or Clearstream, Luxembourg and/or DTC for communication by them to the holders of the Notes and, in addition, for so long as any Notes are listed on a stock exchange and the rules of that stock exchange (or any other relevant authority) so require, such notice will be published in a daily newspaper of general circulation in the place or places required by the rules of that stock exchange (or any other relevant authority). Any such notice shall be deemed to have been given to the holders of the Notes on the fourth day after the day on which the said notice was given to Euroclear and/or Clearstream, Luxembourg and/or DTC.

Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in the case of any Note in definitive form) with the relative Note or Notes, with the Principal Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes). Whilst any of the Notes are represented by a Global Note, such notice may be given by any holder of a Note to the Principal Paying Agent or the Registrar through Euroclear and/or Clearstream, Luxembourg and/or DTC, as the case may be, in such manner as the Principal Paying Agent, the Registrar and Euroclear and/or Clearstream, Luxembourg and/or DTC, as the case may be, may approve for this purpose.

15. MEETINGS OF NOTEHOLDERS, MODIFICATION AND WAIVER

(a) Where the Issuer is ENEL:

In accordance with the rules of the Italian Civil Code, the Agency Agreement contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution (a resolution adopted by the favourable vote of one or more persons present holding or representing Notes representing in aggregate more than 66.67 per cent. of the principal amount of the Notes outstanding at the time such resolution is adopted) of a modification of the Notes, the Receipts, the Coupons or any of the provisions of the Agency Agreement. The quorum at any such meeting for passing an Extraordinary Resolution is established by Article 2415 of the Italian Civil Code. An Extraordinary Resolution passed at any meeting of the Noteholders shall be binding on all the Noteholders, whether or not they are present at the meeting, and on all Receiptholders and Couponholders and unless the Principal Paying Agent agrees otherwise, any modification shall be notified to the Noteholders in accordance with Condition 14 as soon as practicable thereafter.

In accordance with the Italian Civil Code, a “rappresentante comune”, being a joint representative of Noteholders may be appointed in order to represent the Noteholders’ interest hereunder and to give execution to the resolutions of the Noteholders’ meeting. The “rappresentante comune” is appointed by resolution passed at the Noteholders’ meeting. In the event the Noteholders’ meeting fails to appoint the “rappresentante comune”, the appointment is made by the President of the Court of First Instance of the venue where the registered office of the Issuer is located at the request of any Noteholder or the board of directors of the Issuer.

(b) Where the Issuer is ENEL S.A.:

The Agency Agreement contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Notes, the Receipts, the Coupons or any of the provisions

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of the Agency Agreement. Such a meeting may be convened by the Issuer or Noteholders holding not less than one-twentieth in nominal amount of the Notes for the time being remaining outstanding. The quorum at any such meeting for passing an Extraordinary Resolution is one or more persons holding or representing not less than one-half in nominal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders whatever the nominal amount of the Notes so held or represented, except that at any meeting the business of which includes the modification of certain provisions of the Notes, the Receipts or the Coupons (including modifying the date of maturity of the Notes or any date for payment of interest thereon, reducing or cancelling the amount of principal or the rate of interest payable in respect of the Notes or altering the currency of payment of the Notes, the Receipts or the Coupons), the quorum shall be one or more persons holding or representing not less than two-thirds in nominal amount of the Notes for the time being outstanding, or at any adjourned such meeting one or more persons holding or representing not less than one-third in nominal amount of the Notes for the time being outstanding plus the favourable vote of the Issuer. An Extraordinary Resolution passed at any meeting of the Noteholders shall be binding on all the Noteholders, whether or not they are present at the meeting, and on all Receiptholders and Couponholders.

(c) The Principal Paying Agent, the Issuer and the Guarantor may agree, without the consent of the Noteholders, Receiptholders or Couponholders, to:

(a) any modification (except as mentioned above) of the Notes, the Receipts, the Coupons or the Agency Agreement which is not prejudicial to the interests of the Noteholders; or

(b) any modification of the Notes, the Receipts, the Coupons or the Agency Agreement which is of a formal, minor or technical nature or is made to correct a manifest or proven error or to comply with mandatory provisions of the law.

Any such modification shall be binding on the Noteholders, the Receiptholders and the Couponholders and any such modification shall be notified to the Noteholders in accordance with Condition 14 as soon as practicable thereafter.

The provisions of articles 86 to 94-8 of the Luxembourg act of 10th August, 1915 on commercial companies, as amended shall not apply in respect of the Notes.

16. SUBSTITUTION

In the case of Notes issued by ENEL S.A., ENEL S.A. may at any time, without the consent of the Noteholders, the Receiptholders or the Couponholders, substitute for itself as principal debtor under the Notes, Receipts and the Coupons ENEL as Issuer, provided that no payment in respect of the Notes, the Receipts or the Coupons is at the relevant time overdue. The substitution shall be made by a deed poll (the “Substitution Deed Poll”), to be substantially in the form set out in the Agency Agreement and may take place only if:

(i) ENEL shall, by means of the Substitution Deed Poll, agree to indemnify each Noteholder, Receiptholder and Couponholder against (A) any tax, duty, assessment or governmental charge which is imposed on such Noteholder, Receiptholder and Couponholder by (or by any authority in or of) the Republic of Italy with respect to any Note, Receipt or Coupon and which would not have been so imposed had the substitution not been made and (B) any tax, duty, assessment or governmental charge, and any cost or expense relating to the substitution, except that ENEL shall not be liable under such indemnity to pay any additional amounts either on account of “imposta sostitutiva” or on account of any other withholding or deduction in the event of payment of interest or other amounts paid to a non-Italian resident legal entity or a

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non-Italian resident individual which is resident in a country which does not allow for a satisfactory exchange of information;

(ii) all the provisions set forth in Condition 8 with respect to ENEL as Issuer of the Notes shall apply to the Notes following the substitution as if the Notes were originally issued by ENEL;

(iii) all actions, conditions and things required to be taken, fulfilled and done (including the obtaining of any necessary consents) to ensure that the Substitution Deed Poll and the Notes, the Receipts and the Coupons represent valid, legally binding and enforceable obligations of ENEL and in the case of the Substitution Deed Poll of the Issuer have been taken, fulfilled and done and are in full force and effect;

(iv) the relevant stock exchange (if any) shall have confirmed that, following the proposed substitution of ENEL as Issuer, the Notes will continue to be listed on such stock exchange;

(v) legal opinions addressed to the Noteholders shall have been delivered to them (care of the Principal Paying Agent) from a lawyer or firm of lawyers with a leading securities practice in the Republic of Italy and in England as to the fulfilment of the preceding conditions of paragraph (iii) of this Condition 16 and the other matters specified in the Substitution Deed Poll; and

(vi) the Issuer shall have given at least 14 days’ prior notice of such substitution to the Noteholders, in accordance with Condition 14 stating that “copies, or, pending execution, the agreed text, of all documents in relation to the substitution which are referred to above, or which might otherwise reasonably be regarded as material to Noteholders, will be available for inspection at the specified office of each of the Paying Agents.”

References in Condition 10 to obligations under the Notes shall be deemed to include obligations under the Substitution Deed Poll.

By subscribing to, or otherwise acquiring the Notes, the Noteholders expressly consent to the substitution of ENEL S.A. and to the release of ENEL S.A. from any and all obligations in respect of the Notes and any relevant agreements and are expressly deemed to have accepted such substitution and the consequences thereof.

17. FURTHER ISSUES

The Issuer shall be at liberty from time to time without the consent of the Noteholders, the Receiptholders or the Couponholders to create and issue further notes having terms and conditions the same as the Notes or the same in all respects save for the amount and date of the first payment of interest thereon and so that the same shall be consolidated and form a single Series with the outstanding Notes.

18. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Note, but this does not affect any right or remedy of any person which exists or is available apart from that Act.

19. GOVERNING LAW AND SUBMISSION TO JURISDICTION

(a) Governing law

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The Agency Agreement, the Programme Agreement, the Deed of Guarantee, the Deed of Covenant, the Deed Poll, the Notes, the Receipts and the Coupons are governed by, and shall be construed in accordance with, English law.

(b) Submission to jurisdiction

In relation to any legal action or proceedings arising out of or in connection with the Notes, the Receipts, the Coupons, the Agency Agreement, the Deed of Covenant and/or the Deed Poll (“Proceedings”), the Issuer irrevocably submits to the jurisdiction of the courts of England and waive any objection to Proceedings in such courts whether on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum. This submission is made for the benefit of each of the Noteholders, the Receiptholders and the Couponholders and shall not limit the right of any of them to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not) to the extent permitted by law.

(c) Appointment of Process Agent

The Issuer appoints Fleetside Legal Representative Services Limited of One Bishops Square London E1 6AO as its agent in England to receive service of process in any Proceedings in England based on any of the Notes, the Receipts, the Coupons, the Agency Agreement, the Deed of Covenant and/or the Deed Poll. If for any reason such process agent ceases to act as such or no longer has an address in England, the Issuer agrees to appoint a substitute agent for service of process and to give notice to the Noteholders of such appointment in accordance with Condition 14.

(d) Other documents

The Issuer and the Guarantor have in the Agency Agreement, the Deed of Covenant, the Deed Poll and the Guarantee (in the case of the Guarantor) submitted to the jurisdiction of the English courts and appointed an agent for service of process in terms substantially similar to those set out above.

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USE OF PROCEEDS

The net proceeds from each issue of Notes will be applied by the relevant Issuer for its general corporate purposes. If, in respect of any particular issue, there is an identified use of proceeds, this will be stated in the applicable Final Terms.

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DESCRIPTION OF ENEL

OVERVIEW

ENEL S.p.A. (the “Company”) is a società per azioni (joint stock company), incorporated under the laws of Italy. The Company’s statuto (by-laws) provides that the duration of the Company is until 31st December, 2100. ENEL’s registered office is at Viale Regina Margherita 137, Rome, Italy and its main telephone number is +39 06 83051. The Company is registered with the Italian Companies’ Register held by the Chamber of Commerce of Rome at No. 00811720580.

The Company and its consolidated subsidiaries (“ENEL” or the “Group”) constitute the principal electricity operator in Italy, with a leading position in the generation, distribution and sale of electricity. At 31st December, 2006, ENEL had net installed capacity in Italy of approximately 40.5 Gigawatts (“GW”), which ENEL estimates to have represented approximately 45 per cent. of total Italian net installed capacity at that date. ENEL’s net electricity production in Italy in 2006 was 103.9 Terawatthours (“TWh”), and, based on data provided by Terna, ENEL estimates that its production represented approximately 34 per cent. of Italian net production during 2006. In 2006, in Italy, ENEL distributed 255 TWh of electricity and sold 142.7 TWh of electricity to end users. Of the total sold, 120.4 TWh were sold on the regulated market to 30 million customers, and 22.3 TWh were sold on the free market. At 31st December, 2006, ENEL also had electricity generation plants outside Italy (mainly in Slovakia, Spain, Bulgaria and North, Central and South America) with aggregate net installed capacity of approximately 10.3 GW, as well as sales and distribution operations in Spain with more than 0.6 million customers and in Romania with approximately 1.4 million customers. In 2006, ENEL distributed 13 TWh of electricity abroad and sold about 17 TWh.

In April 2006 ENEL acquired generation operations in Slovakia with a gross installed capacity of approximately 7,000 Megawatts (“MW”).

Based on revenues, ENEL was one of the largest industrial companies in Italy in 2006, with operating revenues of €38,513 million, up 14 per cent. on 2005. ENEL earned net income for the period attributable to shareholders of the parent company of €3,036 million compared with €3,895 million in 2005, which included (under discontinued operations) the gain of €1,153 million essentially realised on the disposal of a 43.85 per cent. stake in Terna.

ENEL is also active in the import, distribution and sale of natural gas. In 2006, ENEL sold approximately 5.9 billion cubic metres of gas to third parties, of which approximately 4.5 billion cubic metres were sold to nearly 2.3 million end users.

At the end of 2005, ENEL’s management decided to re-organise the Group’s internal structure by dividing its Sales, Infrastructure and Networks Division into two separate divisions (a Domestic Sales Division and a Domestic Infrastructure and Networks Division) and by allocating its international generation and distribution operations, which had previously been included in other divisions, to a new International Division. This reorganisation was effective as of 1st January, 2006 and, therefore, ENEL’s divisions are currently the following: Domestic Generation and Energy Management Division, Domestic Sales Division, Domestic Infrastructure and Networks Division and the International Division. Each division is headed by a senior manager who reports directly to the Chief Executive Officer of ENEL. Moreover, all non-core activities provided by companies of the Group to other Group companies have been grouped in Services and Other Activities sector. ENEL, as the parent company, defines the strategic objectives for the ENEL Group and coordinates the activities of all Group companies. Each of ENEL, its divisions and the Services and Other Activities sector constitutes a reportable segment for financial reporting purposes.

ENEL has worked to face the challenges posed by market deregulation by capitalising on its expertise in the electricity and gas sectors and by seeking new opportunities for growth in Italy and abroad. ENEL has refocused its operations on its core energy businesses, and aims to achieve

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cost leadership in the generation, distribution and sale of electricity and gas, and to make customer care a high priority.

ENEL will continue its expansion in the markets it has targeted both by enhancing efficiency through the closer integration of existing assets and by making international acquisitions. In particular, with the acquisition of a stake in Endesa and the key agreements reached first with Acciona on the joint management of Endesa and then with E.On on the withdrawal of its tender for Endesa in exchange for the transfer of a number of assets, ENEL took a significant step towards the creation of a major European energy group with a substantial presence in Spain and in the rest of the world.

Ownership

The Ministry of Economy and Finance of the Republic of Italy (the “MEF”) owns 21.1 per cent. of ENEL’s shares, and Cassa Depositi e Prestiti S.p.A., a company 70 per cent. owned by the MEF and 30 per cent. owned by a consortium of Italian banking foundations, owns 10.2 per cent. of ENEL’s shares.

HISTORY AND DEVELOPMENT OF ENEL

ENEL was established in December 1962 as a state-owned entity (Ente Nazionale per l’Energia Elettrica) through the nationalisation of approximately 1,250 private power companies in Italy. In 1992, ENEL ceased to operate as a public entity and was transformed into a company limited by shares, ENEL S.p.A.

Until 1st April, 1999, Italy’s electricity market was highly regulated. On that date, a new law, Legislative Decree No. 79 of 16th March, 1999 (the “Bersani Decree”), came into force, beginning the transformation of the Italian electricity market into a liberalised market in which energy prices charged by generators are freely determined. Beginning in October 1999, as required by the Bersani Decree, ENEL formed separate subsidiary companies, to each of which ENEL assigned the responsibility (and related assets, liabilities and personnel) for each of its significant businesses. As a part of this liberalisation, ENEL was also required to transfer responsibility for the management and control of the Italian national electricity transmission grid and responsibility for electricity dispatching to the GRTN (Gestore della Rete di Trasmissione Nazionale), a company wholly owned by the MEF. In addition, as required by Italian legislation adopted as part of the liberalisation of the electricity market, ENEL has disposed of approximately 15,000 MW of its generating capacity through the sale of three generation companies and sold several municipal distribution companies.

In November 1999, the MEF sold approximately 32 per cent. of ENEL’s share capital in an initial public offering, in connection with which ENEL’s American Depositary Shares (“ADSs”) were listed on the New York Stock Exchange and ENEL’s shares were listed on the Telematico, the Italian screen-based trading market managed by Borsa Italiana S.p.A. (“Borsa Italiana”). Following this sale, as part of the privatisation and liberalisation of the Italian electricity market, the MEF subsequently sold stakes in ENEL of 6.6 per cent. in the context of a private placement transaction to Morgan Stanley & Co. International Limited in November 2003 and approximately 10 per cent. to Cassa Depositi e Prestiti, a company now 70 per cent. owned by the MEF, in December 2003. In October 2004, the MEF sold an additional interest in ENEL of approximately 19 per cent. in an offering consisting of a public offering in Italy and a private placement to international institutional investors that was not registered under the Securities Act. Finally in July 2005 the MEF sold a further interest of approximately 9.3 per cent. in ENEL in a similar offering.

Since 2000, ENEL has expanded its operations into the gas sector through the acquisition of several independent gas distributors. Since 2000, ENEL has also expanded its energy operations abroad, including the purchase in 2002 of Electra de Viesgo S.L. (“Viesgo”), a company with electricity generation and distribution operations in Spain, and, in March 2003, of a controlling

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interest in Maritza East III Power Company AD (“Maritza East III”), a company with electricity generation operations in Bulgaria. ENEL has also acquired power producers specialising in renewable resources in the Americas and has a 50 per cent. joint venture with ENEL Uniòn Fenosa Renovables S.A., or “EUFR” in Spain.

Until June 2004, ENEL owned 100 per cent. of Terna, the principal Italian electricity transmission company, which currently owns more than 90 per cent. of the transmission assets of Italy’s national electricity grid. In light of Italian laws and regulations providing for the reunification of the ownership and management of the Italian transmission grid and imposing certain ownership restrictions on the entity that owns and manages it, in June 2004, ENEL sold 50 per cent. of Terna’s share capital in an initial public offering in Italy and a private placement with certain institutional investors that was not registered under the Securities Act (the “Terna IPO”). In April 2005, ENEL sold an additional 13.86 per cent. of Terna’s share capital in another private placement that was not registered under the Securities Act. In September 2005, ENEL sold an additional 29.99 per cent. of Terna’s share capital to Cassa Depositi e Prestiti and in January 2006 ENEL distributed 1.02 per cent. of Terna’s share capital as “bonus” shares to certain Italian retail investors as part of the Terna IPO, thus reducing its current stake in Terna to 5.12 per cent. In November 2005, the management of the Italian transmission grid was transferred from the GRTN to Terna, which was renamed Terna — Rete Elettrica Nazionale.

ENEL began investing in telecommunications in 1997, when ENEL, France Télécom and Deutsche Telekom together formed the telecommunications subsidiary Wind. ENEL’s initial stake in Wind was 51 per cent., which increased to 73.4 per cent. following Deutsche Telekom’s exit from the joint venture in July 2000 and ENEL’s contribution to Wind on 30th July, 2001, of 100 per cent. of the capital stock of Infostrada, an Italian fixed-line telephone provider it purchased in 2001 from Vodafone Group plc. Infostrada was merged into Wind as of 1st January, 2002. In July 2003, ENEL acquired the 26.6 per cent. stake in Wind then held by Wireless Services Belgium SA, a subsidiary of France Télécom, becoming Wind’s sole shareholder. In accordance with its objective of focusing on its core energy businesses, ENEL discontinued its presence in the telecommunications business through the transfer in 2005 and 2006 of the entire share capital of Wind to Weather Investments (“Weather”), a company controlled by Egyptian businessman Naguib Sawiris.

On 11th August, 2005 ENEL and Weather completed the formalities envisaged for the first phase of the sale of a controlling stake in Wind Telecomunicazioni SpA to Weather, as provided for in the agreements reached on 26th May, 2005 and following approval by the competent authorities. Specifically, ENEL sold a 62.75 per cent. stake in Wind to a subsidiary of Weather for €2,986 million in cash. On 8th February, 2006, ENEL and Weather completed the second and final phase of the sale of Wind. Following the exercise by Weather of the call option provided for in the agreements of May 2005, ENEL sold a stake of 6.28 per cent. of Wind to a subsidiary of Weather for €328 million in cash. ENEL also transferred to Weather its remaining 30.97 per cent. stake in Wind in exchange for shares representing 20.9 per cent. of Weather. Taking into account the 5.2 per cent. stake in Weather acquired in August 2005 during the first phase of the transaction, on 8th February, 2006 ENEL’s stake in Weather was 26.1 per cent.

In December, 2006 ENEL sold 10 per cent. of Weather to a wholly-owned Weather subsidiary and the remaining 16.1 per cent. to its parent company Weather Investments II S.à.r.l. (“Weather II”) a holding company controlled by Sawiris. Part of the price was settled with a payment of €1 billion at the time the Weather stake was transferred, while the remaining €962 million will be settled within 18 months of the transfer. The second instalment will earn interest in line with market rates as from the date of the transfer. Upon completion of the transaction, ENEL will have received a net cash price of €4,971 million, excluding interest on payment deferral granted to the buyer.

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Other significant events in 2006

Acquisition of Slovenské elektrárne AS

On 28th April, 2006 ENEL, in line with the terms of the contract signed on 17th February, 2005, acquired 66 per cent. of Slovenské elektrárne AS (“SE”), the largest generating company in Slovakia and the second-largest in Central and Eastern Europe in terms of gross generation capacity. SE has a plant portfolio with a gross generation capacity of about 7,000 MW (83 per cent. of Slovakia’s capacity) well balanced between thermal, hydro and nuclear, which makes it possible to generate electricity at highly competitive costs. The price for the transaction was about €840 million, on which ENEL had paid a deposit of €168 million in 2005.

Disposal of 30 per cent. of ENEL Unión Fenosa Renovables

On 30th May, 2006 ENEL and Unión Fenosa completed the sale of 30 per cent. of ENEL Unión Fenosa Renovables (“Eufer”), as Unión Fenosa exercised a call option to acquire the shares from ENEL. Eufer is now equally owned by the two companies.

As already agreed in 2003, Unión Fenosa paid ENEL €71.8 million. The partners have agreed on the joint management of Eufer, with each having four representatives on the eight-member board.

Tender for part of Romanian electricity grid

On 5th June, 2006 ENEL won the tender organised by the Romanian Government for the sale of a majority stake in the Electrica Muntenia Sud SA power distribution company (“EMS”). ENEL offered €820 million to acquire 67.5 per cent. of EMS. The price includes both the sale of the shares and a simultaneous capital increase.The closing is subject to approval of the deal by the Romanian Government.

EMS serves the capital Bucharest and the surrounding regions of Ilfov and Giurgiu. It has about 2,000 employees, and in 2005 it had revenues of about €398 million and net income of about €20 million.

Acquisition of additional stake in Maritza East III Power Holding and the stake in Maritza O&M Holding Netherlands BV

On 14th June, 2006 ENEL finalised the acquisition from Entergy Power Bulgaria Ltd (“Entergy”) of 40 per cent. of Maritza East III Power Holding, a Dutch company that owns 73 per cent. of Maritza East III Power Company (now ENEL Maritza East 3), a Bulgarian company that owns the Maritza East III power plant near Stara Zagora, in south-eastern Bulgaria. ENEL had already acquired 60 per cent. of Maritza East III Power Holding from Entergy in 2003, taking the lead in modernising and operating the lignite-fired Maritza East III power plant, one of the country’s largest power plants with a capacity of 840 MW.

ENEL also acquired from Entergy the entire share capital of Maritza O&M Holding Netherlands BV, a Dutch company that owns 73 per cent. of Maritza East 3 Operating Company (now ENEL Operations Bulgaria), a Bulgarian company that operates and maintains the Maritza East III power plant.

The remaining 27 per cent. of both Bulgarian companies is still owned by NEK, the Bulgarian national electricity company.

ENEL paid Entergy a total of €47.5 million to buy the stakes in Maritza East III Power Holding (40 per cent.) and Maritza O&M Holding Netherlands (100 per cent.).

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Acquisition of holding in RusEnergoSbyt, a Russian electricity trader

On 21st June, 2006, in execution of the Memorandum of Understanding (“MoU”) dated 2nd March, 2006, ENEL completed the acquisition of a 49.5 per cent. stake in RusEnergoSbyt LLC (“RES”), a Russian company active in the energy trading market and controlled by Grigory Berezkin, chairman of the ESN Group. In the transaction, ENEL, acting through the Dutch subsidiary ENEL Investment Holding, acquired 49.5 per cent. of RES Holdings BV, a Dutch company that owns 100 per cent. of RES, for U.S. $105 million, in line with the terms of the MoU.

Disposal of power distribution and sale assets

On 27th June, 2006, ENEL and Hera signed the final contract for the disposal of the power distribution and sale grid of 18 municipalities in the Province of Modena to Hera. The price was set at €107.5 million.

The acquisition represents the execution of a preliminary agreement signed on 13th March, 2006 and effective since the end of June 2006. The business unit includes more than 3,700 km of network, about 80,000 customers and 42 employees. The transaction marks the completion of the agreement reached in the protocol of understanding signed in February 2005 between ENEL and Meta Modena, which has been merged into Hera since 1st January, 2006.

Acquisition of wind plants in France

On 13th July, 2006, ENEL finalised the acquisition of a 100 per cent. stake in Erelis SAS, a French company specialising in the development of wind plants, for €14.2 million. Erelis, which is based near Lyon, was established in 2002. Projects under development amount to about 500 MW of power, of which 14 MW will become operational in 2007, 196 MW are at an intermediate or advanced stage and about 290 MW at an initial development stage. The projects are located in various regions in France. Erelis is also developing about 110 MW for third parties.

Acquisition of gas distribution and sales business in Sicily

On 13th July, 2006 the acquisition of a 100 per cent. stake in Metansicula SpA (at the time of the transaction, the sole owner of Metansicula Vendita Srl) for €12.5 million was formalised pursuant to the share purchase agreement dated 31st May, 2006 and upon receipt of approval from the Competition Authority. Metansicula, which distributes natural gas, and Metansicula Vendita, which sells natural gas, currently provide services to about 15,000 customers in the provinces of Catania, Siracusa and Ragusa. In 2005, the companies reported consolidated revenues of about €5.3 million and distributed about 10 million cubic metres of gas.

Acquisition of hydroelectric plants in Panama

On 1st August, 2006, ENEL, acting through its Dutch subsidiary ENEL Investment Holding, acquired 100 per cent. of Hydro Quebec International Latin America Ltd (“HQILA”) – now ENEL Panama – from Hydro Quebec International Inc. and Fonds de Solidarité des Travailleurs du Québec. On 2nd February, 2007, ENEL Investment Holding acquired 100 per cent. of Globeleq Holding Fortuna SA (“GHF”) from Globeleq. The combination of the two acquisitions effectively gives ENEL an indirect stake of 49 per cent. in Empresa de Generación Electrica Fortuna SA (“Fortuna”), a Panamanian hydro generation company, which gives ENEL the operative control of Fortuna. In particular, ENEL will be responsible for running the Fortuna plant.

ENEL paid U.S. $311.3 million, equal to about €242.5 million at the acquisition date. Fortuna is one of the leading Panamanian electricity companies, operating in the province of Chiriquì with a 300 MW power plant. It generates a total of about 1,600 GWh a year, giving it a 30 per cent. share of national power output. In 2005, Fortuna posted revenues of U.S. $128.7 million, a gross operating margin of U.S. $97.8 million and operating income of U.S. $82.2 million.

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Memorandum of Understanding with NEK (Bulgarian national electricity company) and Bulgargaz

On 4th October, 2006, ENEL and NEK (the Bulgarian national electricity company) signed a Memorandum of Understanding to conduct a preliminary technical and financial feasibility study to increase generating capacity at the Maritza East III power plant by 640 MW and to subsequently implement the project.

ENEL estimates the investment required to complete the project to be about €900 million, with the introduction of the most advanced environmental impact abatement technologies while maximising synergies with the existing plant.

On the same date, ENEL also signed a Memorandum of Understanding with Bulgargaz for the joint construction of a gas pipeline between Bulgaria and Italy along “Corridor 8”, through Macedonia and Albania. The corridor is of strategic importance for these countries, which in April 2005 signed a joint statement of cooperation in the energy infrastructure field.

Acquisition of an additional 25 per cent. of ENELco

Following the agreement signed on 4th October, 2006, ENEL completed the acquisition of an additional 25 per cent. of the Greek electricity company ENELco, raising its equity investment in the company to 75 per cent. The balance remains under the control of Prometheus Gas, a joint venture between the Copelouzos Group (Greece) and Gazprom (Russia). ENELco already holds two generation licences for the development of gas combined-cycle plants at Viotia and Evros and will participate in all tenders for the development of independent generation plants in Greece, beginning with the development of 400 MW in new capacity recently announced by the Greek authorities.

ENEL, in cooperation with Prometheus Gas, intends to be a major player in the Greek market, where liberalisation is under way, and will also have the opportunity to export energy to Italy through existing interconnected infrastructure.

Acquisition of generation capacity in Brazil

On 6th October, 2006, following a previous agreement signed on 9th June, 2006, ENEL, through the Brazilian subsidiary of ENEL Latin America, ENEL Brasil Partecipações, completed the acquisition of the entire share capital of 10 companies in the Rede Group that own 20 mini-hydro plants with a total installed capacity of about 92 MW.

The price for the acquisition of the 10 companies was about 464 million Reals, equal to about €168 million at the exchange rate on the acquisition date.

The transaction also envisages the acquisition of another company operating two mini-hydro plants with an installed capacity of about 6 MW. This acquisition should be completed by the end of June of 2007, as soon as the revamping work currently under way is completed.

Agreement with Sonatrach for the supply of 2 billion cubic metres of gas per year

On 15th November, 2006, ENEL signed an agreement with Sonatrach for the supply of natural gas through the GALSI gas pipeline now under construction.The agreement will enable ENEL to import 2 billion cubic metres of gas a year for 15 years as from the entry into service of the gas pipeline, which is expected to be completed by the end of 2011. The GALSI project, in which ENEL has a stake of 13.5 per cent., involves the construction of a gas pipeline about 900 kilometres long with an initial annual capacity of 8 billion cubic metres. The pipeline will link Italy with Algeria via Sardinia and the investment is estimated to be about €2 billion.

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Partnership in Turkey

On 4th December, 2006 ENEL signed a partnership agreement with Enka, Turkey’s leading construction company, which is active in infrastructure (motorways, airports, gas and oil pipelines), as well as real estate and power stations. The partnership agreement envisages the development and execution of power generation, distribution and sale projects in Turkey. In the first stage of the partnership, ENEL and Enka will participate together in the privatisation of distribution companies undertaken by the Turkish government, submitting a joint binding offer for the acquisition of the entire share capital of the first three distribution companies to be privatised (Ayedas, Basken and Sedas), which together supply electricity to 6 million customers and account for about 21 per cent. of the Turkish market. The deadline for submitting offers was initially set for 19th January, 2007 but has now been postponed until the end of 2007.

Acquisition of 195 wind generators

On 19th December, 2006 ENEL signed a contract with the Spanish company Gamesa for the acquisition of 195 wind generators for an estimated €138 million. The generators, which have a total capacity of 166 MW, will be installed in a number of wind plants in Italy between 2007 and 2009. Once on-line, they will avoid producing CO2 emissions of 0.2 million metric tons a year. The transaction is part of the plan to invest more than €4 billion to make ENEL the world’s most advanced energy company in the search for innovative solutions to reducing the environmental impact of power generation and distribution.

Other Recent Developments

On 28th February, 2007 ENEL, through its wholly owned subsidiary ENEL Energy Europe S.r.L. (“EEE”), completed the acquisition of 105,800,000 shares of Endesa S.A. (“Endesa”), the leading Spanish utility company, representing 9.99 per cent. of the Spanish company’s share capital at the price of €39 per share, for a total consideration of €4,126.2 million.

The acquisition of Endesa’s shares, which was finalised in an off-market transaction with institutional investors, was financed through ENEL’s cash flow and existing credit lines and was conducted on a stand-alone basis without any connection to any other Endesa shareholder.

Between the 1st and the 12th of March 2007, ENEL, through EEE, entered into share swap transactions whose underlying security is represented by a maximum of 158,601,597 shares of Endesa (equal to 14.98 per cent. of the share capital of Endesa).

The procedure for the liquidation is a cash settlement, with the conditional right for EEE to elect physical settlement, which is subject among other requirements, to ENEL obtaining the required administrative authorisations needed to complete the acquisition of Endesa’s shares.

On 26th March, 2007, ENEL and Acciona S.A. (“Acciona”) agreed to manage Endesa on a joint- basis, in order to take advantage of the generation of synergies and their own joint experience.

Acciona and ENEL will prepare a business plan for Endesa based on their shared management principles, the generation of synergies and the contribution of the experience of Acciona and ENEL in the power sector. To this end, Acciona and ENEL will contribute to a joint holding company the shares of Endesa that they hold and the shares that could be acquired by them in the tender offer for Endesa shares that they launched according to the applicable legislation. Acciona and ENEL agreed to contribute to the holding company an equal number of Endesa’s shares until the first semester of 2010 until they reach an aggregate amount of 50.02 per cent. of the outstanding capital stock of Endesa. Acciona and ENEL have agreed to exercise the vote of the shares they own at any given time in the same way as for those voting rights held by the holding company.

Acciona will hold approximately 50.01 per cent. of the share capital of the holding company. Acciona and ENEL will have equal representation rights on the boards of both the holding company

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and Endesa. It is foreseen that the chairmen of such boards will have casting votes and will be appointed by Acciona. The chairman of Endesa will be an executive chairman and, acting jointly with the Chief Executive Officer appointed by ENEL, will exercise all authority of the board by delegation. The agreement also provides a list of reserved matters which will have to be agreed upon between the parties in the governing bodies of the holding company as well as of Endesa. Any disagreement existing after the third anniversary of the agreement may be resolved by dividing the assets of Endesa or, alternatively, through the exercise by Acciona of a put option granted by ENEL that requires ENEL to purchase Acciona’s shares in Endesa. The agreement will have a term of ten years starting from the date on which it was executed, with automatic extensions for five-year periods. On 2nd April, 2007 ENEL and Acciona signed an agreement with E.On Zwölfte Verwaltungs GmbH (“E.On”) in relation to the future of Endesa. This agreement provides, inter alia, that, in return for the withdrawal of the E.On’s tender offer, ENEL and Acciona will transfer to E.On the “Viesgo Group” (which comprises of ENEL Viesgo Servicios S.L., ENEL Viesgo, Electra de Viesgo Distribuciòn S.L., ENEL Viesgo Energia S.L., Barras Electricas Galaico Asturianas SA, Barras Electricas Generaciòn S.L. and Eufer), the Spanish companies which are currently owned by ENEL (with the exception of Eufer), and certain other of Endesa’s assets in Italy, France, Poland and Turkey. In addition, E.On will also receive Spanish thermal power plants, with a generation capacity of 1.475 MW (2.4 per cent. of the total installed capacity in Spain), and the supply, for 10 years from the date of the agreement, of 450 MW of nuclear generation capacity. The transfer of these assets to E.On is subject to the acquisition of control by ENEL and Acciona of Endesa, to the approval of the agreement by all the corporate bodies of Endesa and to the reception of all the relevant regulatory approvals. On 11th April, 2007 ENEL, through its subsidiary EEE, and Acciona, S.A., following the announcement of the unsuccessful outcome of the tender offer for shares in Endesa, S.A. launched by E.On, filed with the Comision Nacional del Mercado de Valores (“CNMV”) a joint tender offer for 100 per cent. of the shares of Endesa (the “Offer”).

The main terms for the Offer are the following:

1. The Offer is launched for 100 per cent. of the issued shares in Endesa, namely 1,058,752,117 shares of €1.20 par value each. 2. The consideration offered to any accepting shareholder of Endesa is €41.3 per share of Endesa, payable fully in cash. This consideration results from the €41 price per share of Endesa previously announced by the Offerors on 26th March, 2007, increased by the interest that would accrue on such amount at a three-month EURIBOR rate for the period running from 26th March, 2007 until 31st May, 2007 (rounded upwards). 3. The Offer consideration will be reduced to reflect the gross effect of any dividends, distributions, other similar concepts, splits or share dividends effective from the date hereof through to the date on which the result of the Offer is published (both dates included). 4. Any payment obligations resulting from the Offer shall be secured by a bank guarantee to be filed with the CNMV within two business days as provided for under Royal Decree 1197/1991, dated 26th July, governing tender offers in Spain. 5. The completion of the Offer is subject to full satisfaction or waiver of any and all of the following conditions: (i) that the shares of Endesa tendered in the Offer, together with any shares of Endesa held directly or indirectly by the Offerors, represent more than 50 per cent. of the share capital of Endesa; and

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(ii) that, before the end of the Offer acceptance period, a) Endesa’s General Shareholders Meeting passes the relevant resolutions to amend the company’s by-laws and, generally, remove the shareholders’ voting rights limits and other restrictions related to the composition of the board of directors, and b) such resolutions become registered with the Madrid Commercial Registry (Registro Mercantil).

6. The Offerors shall notify the concentration resulting from this Offer to the European Commission pursuant to Regulation (EC) 139/2004, dated 20th January, on the control of concentrations between undertakings, and will also file any applicable notifications with the antitrust authorities of any other jurisdiction.

7. The Offer is subject, legally, to any applicable administrative authorisations. To that end, the Offerors will file the relevant applications for authorisation and notifications with the National Energy Commission (Comisión Nacional de Energía) and with the Spanish Energy General Secretariat (Secretaría General de Energía) of the Ministry of Industry, Tourism and Commerce (Ministerio de Industria, Turismo y Comercio) as well as with any administrative authorities of any other jurisdiction.

8. Given that the shares in Endesa are admitted to trading on the New York Stock Exchange as ADSs (American Depositary Shares) and on the Off Shore Exchange (Registro de Valores Extranjeros) in Santiago de Chile, the Offerors shall comply with any applicable legal regulations requiring the launching or extension of the Offer, as the case may be, to such jurisdictions.

9. Once the Offer is authorised and announced by the CNMV, the relevant prospectus and accompanying documentation shall be made available to the general public as and when required by applicable laws.

In order to satisfy the financial commitments relating to the joint tender offer described above, ENEL and ENEL S.A. have also entered into a €35 billion syndicated term loan facility.The principal amount of this credit line will fully cover all financing requirements related to the acquisition of Endesa’s shares by the Group. This credit line is made up of three tranches consisting of: €10 billion with a 1-year maturity (subject to a term-out option for a further 18 months); €15 billion with a 3-year maturity; and €10 billion with a 5-year maturity.

The interest rate applicable to this credit line vary depending on ENEL’s rating from time to time. The credit line can be fully or partially prepaid with no penalties.

On 4th April, 2007, ENEL, through the Enineftegaz (a consortium composed 40 per cent. by ENEL and 60 per cent. by Eni), successfully acquired a group of gas assets formerly owned by Yukos for a total price of approximately U.S. $5.83 billion.

The principal assets acquired are as follows:

1. 100 per cent. of OAO Arcticgaz;

2. 100 per cent. of ZAO Urengoil;

3. 100 per cent. of OAO Neftegaztechnologia; and

4. 20 per cent. of OAO Gazprom Neft (to be transferred in full to Eni on pre-agreed terms).

The amount due from ENEL following the conclusion of the tender procedure, and after the planned spin-off of the 20 per cent. of OAO Gazprom Neft, which is for the exclusive interest of Eni, amounts to U.S. $852 million.

The acquisition represents ENEL’s entrance into the upstream natural gas sector, as part of the company’s strategy of expanding its access to international sources of gas supply.

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ORGANISATIONAL STRUCTURE

The following chart sets out ENEL’s divisions and the main companies through which it conducts its businesses as of 31st December, 2006, as well as the country in which each such company is incorporated. The chart below shows only the main businesses and operating companies within the Group and as a result does not include ENEL S.p.A.

Corporate 1111111111111111111111111111111111111111111 Domestic Generation and Energy Management Domestic Infrastructure 1111111111111Domestic Sales Division Division1111111111111 and111111111111111 Networks Division > ENEL Distribuzione > ENEL Produzione > ENEL Distribuzione > ENEL Energia > ENEL Trade > ENEL Rete Gas (formerly ENEL Gas)(1) > ENEL.si > ENEL Sole >Deval >Deval

Services and 1111111111111International Division 1111111111111 Other111111111111111 Activities > ENEL Viesgo Generación(2) > ENEL Viesgo Energía > ENEL Servizi > Slovenské elektrárne > ENEL Electrica Banat > Sfera > ENEL Maritza East 3 > ENEL Electrica Dobrogea > Dalmazia Trieste (formerly Maritza East III Power Company) > ENEL Operations Bulgaria > Electra de Viesgo > ENEL Finance International (formerly Maritza East 3 Distribución Operating Company) > ENEL North America > ENEL Servicii > ENEL Energy Europe > ENEL Latin America > ENEL Viesgo Servicios > ENEL Investment Holding > ENEL Panama > ENEL Unión Fenosa > ENEL.NewHydro Renovables > ENEL.Factor > RusEnergoSbyt > Erelis > ENEL.Re

(1) As from 1st January, 2006 ENEL Energia was merged into ENEL Gas; following the merger, the surviving company changed its name to ENEL Energia. (2) As from 1st January, 2006 ENEL Viesgo Renovables was merged into ENEL Viesgo Generación.

STRATEGY

In 2006, ENEL focused on its core businesses. Today ENEL is strongly positioned to continue its drive for efficiency and growth with the goal of becoming a leading integrated operator in the European electricity and gas market.

ENEL has the following short and medium-term strategic objectives:

• maintaining leadership in the Italian market by taking up the challenges of the full opening of the electricity market which is scheduled to take place in July 2007;

• increasing client value by continuing to invest in quality and efficiency;

• increasing the size of ENEL both in Europe and in the rest of the world in the field of renewable energy, either by investments or by acquisitions; and

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• confirming leadership in technological and environmental fields especially focussing on the environmental impact of electricity production and distribution.

BUSINESS OVERVIEW

General

ENEL is one of the largest integrated companies for gas and electricity supply in Europe. It is currently the largest electrical company in Italy and the third largest in Europe after the French Electricité de France and the German E.On. based on to the number of customers.

Since the internal reorganisation of the structure of the ENEL Group, effective from 1st January, 2006, the Group operates through four divisions: (i) Domestic Generation and Energy Management Division, (ii) Domestic Infrastructure and Networks Division, (iii) Domestic Sales Division, and (iv) International Division.

A separate area was created for Services and Other Activities, grouping the remaining services and activities of the Group.

Each Division is managed by a Chief Executive Officer who reports directly to the Chief Executive Officer of ENEL.

The Company defines the strategic objectives for the Group and coordinates the activities of all companies within the Group.

Principal Activities and Markets

ENEL is the principal electricity operator in Italy, with the leading position in the generation, distribution and sale of electricity. In 2006, ENEL had 58,548 employees. In 2006, ENEL’s revenues amounted to €38,513 million, up 14 per cent. on 2005, and net income for the period attributable to shareholders of the parent company amounted to €3,036 million in 2006, compared with €3,895 million in 2005.

ENEL believes that, in terms of the volume of electricity sold in the year 2006, it was one of the largest electric utilities in Europe.

ENEL produces and sells electricity mostly in Europe and North and Latin America. ENEL is also the second-largest Italian distributor and vendor of natural gas. In 2006, ENEL acquired about 200,000 new customers, an increase of 9 per cent., bringing the number of its customers to nearly 2.3 million.

ENEL was the first utility in the world to replace its customers’ traditional electromechanical meters with modern electronic devices that make it possible to take meter readings in real time and manage contractual relationships remotely. This innovation has enabled ENEL to implement time- of-use electricity charges, which offer customer savings for evening and weekend electricity use, an initiative that has attracted interest from many utilities around the world.

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The following table shows selected operating data for ENEL’s electricity and gas operations in Italy for each of the past three years. Net production equals gross production of electricity less consumption by units generating electricity and mechanical and electrical losses in production.

111122006 11112 2005 11112 2004 Net installed capacity (GW) in Italy at year end ...... 40.5 42.2 42.0 Net electricity production in Italy (TWh) ...... 103.9 112.1 125.9 Electricity sales to end users in Italy (TWh)(1)...... 142.7 148.2 157.8 Electricity sales on the regulated market in Italy (TWh) .. .. 120.4 129.7 137.0 Electricity sales on the free market in Italy (TWh) ...... 22.3 18.5 20.8 Total electricity distributed in Italy (TWh)(2) ...... 263.4 259.3 261.2 Natural gas sales to end users in Italy (billions of cubic metres) ...... 4.5 5.1 5.2 Natural gas sales customers in Italy at year end (millions) .. 2.3 2.1 2.0

(1) Excluding sales to resellers. (2) Including electricity distributed to resellers.

Domestic Generation and Energy Management Division

ENEL’s Domestic Generation and Energy Management Division is responsible for ENEL’s operations related to the production of electricity and the procurement and trading of fuel for electricity generation, and includes power generation activities in Italy.

The activities of the Domestic Generation and Energy Management Division are the following: • the generation and sale of electricity: – electricity generation in Italy through ENEL Produzione;

– trading on international and domestic markets through ENEL Trade; • the supply and sale of energy products through ENEL Trade: – procurement of energy products for the Group;

– the sale of natural gas to distributors; • engineering and construction through ENEL Produzione. ENEL is the largest producer of electricity in Italy. At 31st December, 2006, ENEL Produzione operated a total of 597 generating plants. ENEL’s Italian generating facilities include thermal plants (which burn fossil fuels), hydroelectric plants, geothermal plants and other facilities that generate electricity from renewable resources. At 31st December, 2006, these plants had a total net installed capacity of 40.5 GW, representing approximately 45 per cent. of the total net installed capacity in Italy. ENEL’s net electricity production in 2006 decreased by 7.3 per cent. to 103.9 TWh from 112.1 TWh in 2005.

ENEL estimates that its net electricity production in 2006 represented approximately 34 per cent. of Italian production during the year, compared to 39 per cent. in 2005.

In order to maintain profitability and provide services on competitive terms in Italy, the Domestic Generation and Energy Management Division seeks to be the lowest-cost generator of electricity, in particular by diversifying appropriately its use of fuels. In this respect, ENEL has reduced the percentage of the total production that it generates through plants fueled by oil and natural gas (excluding natural gas-fueled plants using CCGT technology) from approximately 45 per cent. in 2002 to approximately 25 per cent. in 2006. At the same time, it has increased the percentage of electricity generated through thermal plants fired by coal and orimulsion from approximately 22 per cent. in 2002 to approximately 27 per cent. in 2006, the production using renewable resources from

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approximately 24 per cent. in 2002 to approximately 29 per cent. in 2006 and the natural gas-fueled plants using CCGT from approximately 9 per cent. in 2002 to approximately 19 per cent. in 2006, ENEL does not currently generate any electricity using orimulsion.

ENEL aims at generating 30 per cent. of its electricity using renewable sources including hydroelectric power.

In order to implement this strategy, the Domestic Generation and Energy Management Division aims to:

(a) complete its conversion programme of certain thermal plants into combined cycle plants with a 5,000 MW capacity. Most of this programme has already been completed;

(b) upgrade more plants to run lower cost fuels, such as coal, while still respecting environmental norms;

(c) consolidate its position in the field of renewable energy, through an investment programme of around €1.65 billion from 2007 to 2011. This programme includes plans for the maintenance, refurbishment and construction of wind, hydroelectric and geothermal generation plants in Italy that ENEL expects will result in 400 MW of additional net installed capacity;

(d) reduce carbon dioxide emissions through (i) the conversion of old fuel stations into combined cycle plants and high performance coal plants; (ii) the increase in the capacity of renewable energies generation; and (iii) participation in the Clean Development Mechanism and the projects of Joined Plants (projects to reduce emissions according to Kyoto Protocol);

(e) continuously search for operative excellence and, at the same time, increase the efficiency and availability of its plants in order to get the levels of the best practices, by respecting the environment, health and safety of its employees; and

(f) optimise the fuel supply activities by means of diversification of suppliers and supply channels.

Operating performance of the Domestic Generation and Energy Management Division

Change from 11111112006 1111111 2005 1111111 2005 to 2006 Millions of euro Revenues ...... 15,661 12,995 2,666 Net income/(charges) from commodity risk management ...... (705) 326 (1,031) Gross operating margin ...... 3,149 3,407 (258) Depreciation, amortisation and impairment losses ...... 952 1,009 (57) Operating income ...... 2,197 2,398 (201) Operating assets ...... 16,752 16,468 284 Operating liabilities ...... 4,019 3,841 178 Employees at year-end (no.) ...... 9,573 9,006 567(1) Capital expenditure ...... 897 798 99

(1) Of which 760 employees added as the result of the acquisition of the unit from ENELpower on 1st January, 2006.

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Capital expenditure of the Domestic Generation and Energy Management Division

Change from 111212006 12111 2005 11111122111 2005 to 2006 Millions of euro Generation plants: – thermal ...... 627 487 140 28.7% – hydroelectric ...... 130 178 (48) -27.0% – geothermal ...... 77 84 (7) -8.3% – other resources ...... 31 19 12 63.2% Total generation plants ...... 865 768 97 12.6% Other investments in property, plant and equipment ...... 15 10 5 50.0% Investments in intangible assets ...... 11121 17 12111 20 12111 (3) 11211 -15.0% TOTAL ...... 897 798 99 12.4% 11121 12111 12111 11211

In 2006, capital expenditure amounted to €897 million, €865 million of which was for generation plants. The main investments for 2006 concerned the continuation of projects on thermal plants for €627 million (including the coal conversion of the Torrevaldaliga Nord plant for €303 million and the transformation of the Santa Barbara plant to combined cycle for €55 million), the refurbishing/repowering of various hydroelectric plants for €130 million, and various projects concerning geothermal generation plants (€77 million, including €25 million for drilling as part of the mining activities for new geothermal generation development opportunities) and wind plants (€31 million).

Generating Facilities

At 31st December, 2006, ENEL Produzione operated a total of 597 generating plants. ENEL’s Italian generating facilities include thermal plants (which burn fossil fuels), hydroelectric plants, geothermal plants and other facilities that generate electricity from renewable resources. In 2006, net electricity generation totaled 103,910 million kWh, a decrease of 7.3 per cent. from 2005. More specifically, thermal generation declined by 7,981 million kWh, while hydroelectric fell by 408 million kWh. These declines were partially offset by increases in geothermal generation of 183 million kWh and wind generation of 29 million kWh as a result of the entry into service of new plants.

The following table shows the gross production in 2004, 2005 and 2006 for the Italian electricity sector as a whole in kilowatt hours, broken down by type of generating plant. Imports include electricity purchased from foreign producers on the spot market or under annual or long-term contracts. Pumped storage consumption refers to the use of electricity by pumped storage hydroelectric plants to pump water to elevated areas for use at a later time to generate electricity.

111122006 11112 2005 11112 2004 (GWh) Gross production: Thermal ...... 246,125 253,072 263,252 Hydroelectric ...... 49,908 42,929 43,022 Geothermal and other renewable...... 7,288 7,671 8,742 Total gross production in Italy...... 303,321 303,672 315,016 Power used by auxiliary installations ...... (13,299) (13,064) (13,290) Total net production in Italy ...... 290,023 290,608 301,726 Net electricity imports...... 45,636 49,155 44,718 Total pumped storage consumption ...... (10,300) (9,319) (8,648) Total electricity demand in Italy ...... 325,357 330,444 337,796

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Source: Terna – Rete Elettrica Nazionale (monthly report – December 2006). Data for 2006 supplied by ENEL

The following table illustrates ENEL’s domestic generating facilities, broken down by type of plant, at 31st December, 2006, and for the year 2006. The weighted average age of the plants does not take into account refurbishments or upgrades after initial construction, but does reflect the effects of the refurbishment of geothermal plants, the conversion of thermal plants into CCGT plants and the conversion of one coal unit to clean coal technology that ENEL completed in 2005. The forced outage factor represents the amount of electricity that was not produced during the period because of unplanned outages, expressed as a percentage of the maximum theoretical amount of electricity that could have been produced during the period.

At 31st December, 11111111112006 133311111111111112 2005 Weighted Percentage Net Average of ENEL’s Forced Installed Age Net Net Outage Capacity of PlantProduction Production Factor 11112(GW) 11112 (Years) 11112 (GWh) 11112 (Per cent.) 11112 (Per cent.) Thermal ...... 25.1 19 73,842 71.1 2.3 Hydroelectric ...... 14.4 44 24,475 23.6 2.9 Geothermal and other renewable ...... 11112 1.0 8 11112 5,593 11112 5.4 1.5 Total...... 1111240.5 11112 103,910 11112 100.0 ENEL has no short-term plans to construct new plants or add significant amounts of generating capacity in Italy, other than from renewable resources, in the near term. Instead, it has focused its investment plans on its existing generating plants.

Thermal Production

In Italy, at 31st December, 2006, ENEL owned 43 thermal plants with an aggregate net installed capacity of 25.1 GW, or 62.1 per cent. of its net installed capacity at that date. In 2006, its thermal net production was 73,842 GWh, or 71.1 per cent. of its net production for the year, compared to thermal net production of 81,823 GWh of its net production in 2005.

All ENEL’s thermal plants consist of two or more generating units and most have a standardised design, with three types of generating units: steam-condensing units, gas turbine units and internal combustion units. In addition to these conventional thermal plants, ENEL owns plants with combined cycle gas turbines. At 31st December, 2006, approximately 71 per cent. of the net installed capacity of ENEL’s thermal plants consisted of steam-condensing units, approximately 3 per cent. of that capacity was represented by gas-turbine units in repowered steam plants, approximately 26 per cent. by CCGT units and less than 1 per cent. by gas-turbine units in open cycle. Internal combustion units represented a minimal part of its thermal gross installed capacity.

Each of ENEL’s conventional thermal generating units is designed to operate using one or more kinds of fuel. Single fuel units use either natural gas, petroleum products or coal, dual fuel units can use petroleum products and either natural gas or coal, while triple fuel units can use petroleum products, coal and natural gas. In 2006, single fuel units generated approximately 47 per cent. of its net production from thermal plants (compared to approximately 51 per cent. in 2005) and represented approximately 66 per cent. of the net installed capacity of these plants at year end. Dual fuel units accounted for approximately 53 per cent. of its net production from thermal plants (compared to approximately 49 per cent. in 2005) and approximately 34 per cent. of ENEL’s net installed capacity of these plants at 31st December, 2006. The average thermal efficiency, or the

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ratio of useful energy produced to the energy consumed to produce it, of ENEL’s thermal plants was 38.7 per cent. at 31st December, 2006, quite similar to 38.8 per cent. in 2005.

In 1997, ENEL began converting a number of its conventional thermal plants into combined cycle plants, to increase efficiency and reduce emissions. ENEL plans for its new combined cycle plants to have an expected average thermal efficiency of approximately 56 per cent., in line with that at its existing combined cycle plants.

Since 1997, ENEL has completed the conversion of approximately 4,600 MW of generating capacity to combined cycle technology and it expects to convert additional capacity of approximately 375 MW by the end of 2007. ENEL currently estimates the total costs of conversion over the course of the project to be approximately €350,000 per MW of net installed capacity, or a total of approximately €1,800 million through 2008. At 31st December, 2006, ENEL had spent approximately €1,700 million.

In addition to its combined cycle conversion programme, ENEL is planning to upgrade additional net installed capacity of approximately 3,800 MW by:

1. converting three units at its fuel-oil plant at Torrevaldaliga Nord to clean coal technology, a process which is in progress (accounting for approximately 1,900 MW); and

2. subject to receipt of required permits, converting another three units to clean coal technology (accounting for approximately 1,900 MW), depending on whether and when ENEL obtains the required permits.

ENEL has made significant investments since 1990 to improve the environmental standards of its thermal plants and to comply with the emission thresholds established by applicable environmental laws and regulations. These measures have included installing desulphurisation and denitrogenation units and upgrading burners and units for the treatment of waste water and ash resulting from the electricity generation process. Installation of desulphurisation and denitrogenation units allows greater flexibility to use different types of fuel, including lower-cost fuels such as high sulphur fuel oil, while maintaining compliance with emission restrictions.

ENEL’s environmental capital expenditures for conventional thermal generation in 2006 amounted to approximately €75 million, compared to approximately €35 million in 2005.

Hydroelectric Production

At 31st December, 2006, ENEL had 500 hydroelectric plants in Italy with an aggregate net installed capacity of 14.4 GW, or approximately 35.5 per cent. of its net installed capacity at that date. In 2006, its hydroelectric net production was 24,475 GWh, or approximately 23.6 per cent. of its net production for the year.

ENEL classifies its hydroelectric plants with reservoirs by fill-in rate, which represents the time required for a plant’s reservoir to fill from empty based on normal water flow. Pondage plants have fill-in rates ranging from two to 400 hours and reservoir plants have fill-in rates exceeding 400 hours. ENEL also has run-of-river plants and pumped storage hydroelectric plants.

In 2006, pondage plants generated approximately 24.3 per cent. of ENEL’s net hydroelectric production and represented approximately 19.8 per cent. of its net installed hydroelectric generation capacity at year end, while run-of-river plants accounted for approximately 25.4 per cent. of its net production from hydroelectric plants and approximately 11.5 per cent. of its net installed hydroelectric generating capacity. Pumped storage (including mixed pumped storage) plants represented 52 per cent. of ENEL’s installed hydroelectric generating capacity and generated approximately 25.5 per cent. of its net hydroelectric production in 2006 with reservoir plants accounting for the remaining approximate 24.8 per cent. of its net hydroelectric production and 16.7 per cent. of its net installed hydroelectric capacity in the same period.

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ENEL invested €130 million in 2006 on compliance with safety and environmental regulations, refurbishment and revamping of its hydroelectric plants.

Production from Geothermal and Other Renewable Resources

ENEL produces energy from renewable resources, and has significant experience in multiple technologies, including geothermal, wind and solar energy, as well as its own engineering and project development capabilities.

At 31st December, 2006, ENEL had 31 geothermal power plants with an aggregate net installed capacity of 671 MW. In 2006, its geothermal net production was 5.195 GWh, or 5.0 per cent. of its net production for the year.

ENEL also generates electricity from other forms of renewable resources, including solar photovoltaic systems and wind energy. At 31st December, 2006, ENEL operated 19 wind farms with an aggregate net installed capacity of about 305 MW and five photovoltaic solar grid connected power plants with an aggregate net installed capacity of 3 MW. Together, these plants accounted for 398 GWh of its net production in 2006.

Most of ENEL’s revenues from renewable energy come from long-term sale agreements entered into under the CIP 6 regime, which provided incentives for the production of renewable energy, and from sales of energy produced by its small hydroelectric plants, including sales on the free market through ENEL Trade. Current regulations require producers to supply a specified amount of electricity generated from qualifying new renewable resources.

ENEL can either produce electricity from renewable resources itself, or purchase “green certificates” through ENEL Trade from other qualified producers or the Gestore dei Servizi Elettrici. Based on its production for 2005, ENEL was required to produce 2.2 TWh of electricity from renewable resources in 2006. In 2006, ENEL generated approximately 1.8 TWh of energy from qualifying renewable resources, and was required to purchase “green certificates” from other qualified producers or the Gestore dei Servizi Elettrici for the remaining 0.4 TWh at a cost of approximately €56 billion. ENEL has started a capital investment programme in order to reach a level of qualifying production from renewable resources of approximately 2.7 TWh by year-end 2008, which it believes will allow it to meet the regulatory requirements. This programme is expected to result in an additional increase in ENEL’s renewable capacity (hydro, wind and geothermal) of about 400 MW by 2011.

Fuel

ENEL uses fuel oil, natural gas, coal and other fuels in operating its thermal generation plants, and also engages in fuel trading activities. ENEL does not use significant amounts of fuel in operating its hydroelectric, geothermal or other renewable resource plants. Because Italy has small reserves of fossil fuels, ENEL depends on imported fuel oil, natural gas and coal for a large proportion of its energy needs.

ENEL’s fuel costs are influenced by prices in the world market for oil, fuel oil, natural gas and coal. In 2006, the average spot market price per barrel for oil increased from U.S. $54.4 at 31st December, 2005, to U.S $65.1 at 31st December, 2006, or by 20 per cent. The average price of Brent during 2006 initially had seen a sharp rising trend until the summer period (U.S. $ 78.3 per barrel) due to geopolitical factors. Afterwards in a bearish market it declined by 23 per cent. due to high levels of stock in the USA, good weather conditions (mild temperatures and no hurricane disasters) and less international political tension. ENEL attempts to maintain secure and flexible supplies, by diversifying its sources of fuel, and it is also partially hedged against rising fuel prices. ENEL manages its fuel supply by entering into term contracts for base quantities and supplementing these contracts with purchases of fuel on spot markets both in Italy and abroad. Its long-term fuel contracts, primarily for the purchase of natural gas, will require it to pay an average of approximately €2,667 million per year over the next five years, based on current prices.

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Since 1st April, 2004, the price paid to electricity producers has been determined by competitive bidding on the Italian power exchange or through freely negotiated bilateral contracts.

The following table provides a breakdown of its net electricity production in Italy for the periods indicated by primary energy source utilised. The data represent production by ENEL Produzione (ENEL Green Power was merged into ENEL Produzione in 2005).

2006 2005 2004 1111111111 1111111111 1111111111 Net Net Net Electricity Percentage Electricity Electricity Produced of Total Produced Percentage Produced Percentage 11112 11112 11112 11112 11112 11112 (TWh) (TWh) (TWh) Thermal – Natural gas ...... 32.4 31.2 37.8 33.7 40.6 32.3 – Coal ...... 27.9 26.8 30.0 26.8 30.7 24.4 – Oil ...... 13.5 13.0 14.0 12.5 20.5 16.3 Total thermal ...... 73.8 71.0 81.8 73.0 91.8 73.0 Hydroelectric ...... 24.5 33.6 24.9 22.2 28.7 22.8 Geothermal ...... 5.2 5.0 5.0 4.5 5.1 4.1 Wind and photovoltaic ...... 0.4 0.4 0.4 0.3 0.2 0.2 11112 11112 11112 11112 11112 11112 Total ...... 103.9 100.0 112.1 100.0 125.9 100.0 11112 11112 11112 11112 11112 11112 In 2006, ENEL’s net electricity production from thermal generation was approximately composed: • 44 per cent. by natural gas; • 38 per cent. by coal; and • 18 per cent. by fuel oil. ENEL does not currently generate any electricity using orimulsion. ENEL’s subsidiary ENEL Trade is responsible for the purchase and sale of fuel for all of its domestic generating operations and its natural gas sales and distribution operations in the Italian market, as well as a portion of the fuel requirements of its Spanish subsidiary Viesgo. In addition, ENEL Trade buys and sells other energy products and has land and sea fuel shipping operations. In 2006, ENEL Trade purchased an aggregate volume of 23.3 million tons of oil and oil equivalents, including crude oil and petroleum products, coal, orimulsion and natural gas, of which 1.2 million were sold to third parties, compared to purchases of 24.3 million tons of oil and oil equivalents in 2005, of which 1.6 million were sold to third parties.

ENEL Trade also sells natural gas to gas distribution companies and other third parties, and engages in fuel trading activities, as part of its management of, and efforts to optimise, its supply of fuel to the rest of the ENEL Group, as well as in electricity trading. ENEL Trade also trades “green certificates” in Italy, engages in similar activities at a European level, and may engage in carbon dioxide emission rights trading, having obtained the necessary approvals. In 2004 and 2005 ENEL Trade was also responsible for sales of electricity to customers with an annual consumption higher than 100 GWh (such sales have been carried out by ENEL’s Domestic Sales Division since April 2006). In 2006, ENEL Trade sold approximately 12.9 TWh of electricity to Eligible Customers (in the first quarter, before the spin-off to Market Division) and 13.2 TWh to resellers in Italy, as well as 13.5 billion cubic metres of gas, of which 7.5 billion cubic metres were sold to its thermal generation operations, 5.1 billion cubic metres to its gas distribution and sales operations and 1.4 billion cubic metres to third parties.

Fuel Oil

The following table shows the amount of fuel oil supplied to its generation companies purchased from domestic and foreign suppliers in each of the periods indicated. Domestic suppliers include suppliers whose headquarters are in Italy, including the Italian energy group Eni S.p.A. (“Eni”), while foreign suppliers include producers and refiners outside of Italy and traders of primarily non- Italian sources of oil.

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11111111111111134Year Ended 31st December, 111122006 11112 2005 11112 2004 (in millions of tons) Domestic suppliers ...... 0.7 0.9 1.0 Foreign suppliers ...... 11112 3.0 11112 2.7 11112 3.8 Total fuel oil purchased ...... 3.7 3.6 4.8 11112 11112 11112

In 2006 ENEL purchased approximately 68 per cent. of its fuel oil on the spot market and approximately 32 per cent. under contracts ranging in term from one to twelve months. All purchases made on the basis of term contracts are indexed to market prices.

The following table shows the amounts of fuel oil with low, mid and high sulphur content that ENEL purchased in each of the periods indicated.

11111111111111134Year Ended 31st December, 111122006 11112 2005 11112 2004 (in millions of tons) Fuel oil purchased Low sulphur ...... 2.2 2.3 3.0 Mid sulphur ...... 1.33 1.0 1.6 High sulphur ...... 11112 0.2 11112 0.3 11112 0.2 Total ...... 3.7 3.6 4.8 11112 11112 11112

Natural Gas

ENEL purchases most of its natural gas under long-term, take-or-pay contracts. The price of natural gas under these contracts is generally tied to market prices for fuel oil. In 2006, ENEL purchased 13.8 billion cubic metres of natural gas, of which 7.5 billion cubic metres were used for its thermal generation operations. Eni, the main Italian gas supplier and transporter, supplied approximately 26 per cent. of this natural gas.

ENEL also continued to purchase large volumes under a supply contract with Sonatrach, the Algerian gas producer, which accounted for approximately 41 per cent. of the natural gas it purchased in 2006.

In 1992, ENEL entered into a 20-year take-or-pay contract with NLNG, a Nigerian joint venture, for the supply of 3.5 billion cubic metres of liquefied natural gas per year, which was due to commence in October 1999. However, due to environmental concerns, a once-planned Italian regasification facility has never been constructed. As a result, ENEL is unable to import liquefied natural gas, and instead, in 1997, entered into a swap agreement with Gaz de France and related transportation arrangements with Eni whereby Gaz de France takes the liquefied natural gas supplied by NLNG under the contract and provides ENEL with an equivalent volume of non-liquefied gas. ENEL obtained approximately 27 per cent. of the natural gas it purchased in 2006 pursuant to its Nigerian gas contract. Under current regulations, ENEL expects to continue to receive reimbursement for part of its stranded costs incurred in connection with the NLNG contract until 2009.

ENEL purchased 4 per cent. of its natural gas in 2006 from Edison S.p.A. (“Edison”), an Italian gas and electricity company, and the remaining 2 per cent. on a spot basis in the national and international markets.

On 21st June, 2005, ENEL sold to BG Group plc (formerly British Gas plc) (“BG”) its 50 per cent. interest in Brindisi LNG, which it has formed as a partnership with BG to build and manage a liquefied natural gas regasification terminal in Brindisi in southern Italy. Under the terms of the deal,

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ENEL is entitled to receive approximately €44 million, which was intended to reimburse it for the costs it has incurred for the project. Of the total consideration, ENEL received €17 million at closing in 2005, while the remaining balance of approximately €27 million (subject to certain conditions relating to BG’s continuous involvement in the project) was received in 2006.

Coal

In 2006, ENEL purchased 11.8 million tons of coal, virtually all of which was imported, mainly from South Africa, South America, the Far East and Eastern Europe.

CO2 emission rights

The Kyoto Protocol established a market mechanism for trading of CO2 emission rights. Pursuant to EU directives implementing this mechanism, the Italian Ministry for the Environment issued a decree establishing inter alia the emission quotas for ENEL Produzione from 2005 to 2007, reducing the quotas ENEL had been granted in February 2005 to 48.2, 40.5, 39.9 million tonnes of CO2 for the years 2005, 2006 and 2007 respectively.These allocations do not include allowances reserved for new entrants.

ENEL’s verified emissions in 2005-2006 were over 19 million tonnes higher than the allowances allocated. The shortage has been fully hedged. A shortage is also expected for 2007, but again it has already been fully hedged.

The Italian allocation plan for the 2008-2012 commitment period was submitted by the Government to the European Commission in December 2006. As the PNA 2008-2012 is currently in the process of being assessed by the European Commission, ENEL is not currently able to predict whether the final allocation for the period 2008-2012 will be sufficient to meet ENEL’s production needs.

The Spanish plan for the period 2005-2007 allocated to ENEL Viesgo the following allowances: 3.9 million tonnes for 2005, 3.4 million tonnes for 2006 and 2.65 million tonnes for 2007. Compared to actual emissions, the shortage was 2.1 million tonnes in 2005. For 2006 and 2007 an additional shortage is expected.

Spain’s plan for the period 2008-2012 was approved by the European Commission in February 2007, upon the condition that some changes be made, including a full list of installations and related allocations.

In Slovakia the allowances allocated to Slovenské Elektràrne (“SE”) for the period 2005-2007 are approximately balanced with actual emissions.

For the period 2008-2012, following the decision of the European Commission a 25 per cent. reduction on proposed annual average allocation for SE has been imposed and SE has been allocated an annual average of 9.2 million tons, but a new redistribution of allocations among installations has not yet been completed. ENEL is, however, confident that SE’s emissions will be covered.

Purchased Power

ENEL’s Domestic Generation and Energy Management Division purchases power to comply with certain regulatory rules. ENEL also, through ENEL Trade, purchases power to diversify its sources of electricity and to reduce its costs, as well as for supply to third parties. In 2006, ENEL’s Domestic Generation and Energy Management Division purchased approximately 9.6 TWh of power from domestic and foreign producers to supply electricity to Eligible Customers and resellers in Italy.

ENEL’s Domestic Generation and Energy Management Division also purchases power from outside Italy, through both annual contracts and on the spot market. In addition, ENEL is party to three long-term contracts for the purchase of imported electricity. These contracts are for 1,400 MW, 600 MW and 55 MW per year, expire in 2007, 2011 and 2033, respectively, and were entered

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into under regulations in effect prior to the issuance of the directive implementing the Bersani Decree. Since 1st April, 2004, ENEL has been required to sell the imported electricity purchased pursuant to these long-term supply contracts to the Single Buyer.

The table below sets forth the amount of electricity imported into Italy that ENEL purchased under long-term and annual contracts and spot purchases during each of the years indicated.

111122006 11112 2005 11112 2004 (TWh) Long-term contracts ...... 14.4 14.4 14.4 Annual contracts ...... 0.9 2.5 1.1 Spot purchases ...... 11112 1.5 11112 0.1 11112 0.1 Total imports ...... 16.8 17.0 15.7 11112 11112 11112

Since April 2004, ENEL also purchased power to comply with a new rule that took effect with the start of trading on the Italian power exchange requiring electricity generators to purchase the electricity used to power pumping at hydroelectric plants from third parties. ENEL previously used its own electricity production for these purposes.

Domestic Infrastructure and Networks Division

The Domestic Infrastructure and Networks Division is responsible for operating the electricity and gas distribution networks.

The activities are carried out by: • ENEL Distribuzione and Deval (the latter’s operations are limited to the Valle d’Aosta region) for the distribution of electricity to the free and regulated markets; • ENEL Rete Gas for the distribution of gas; and • ENEL Sole for public and artistic lighting. ENEL currently transports about 81 per cent. of the total electricity being transported in Italy, distributing, in 2006, 255 TWh of electricity to 30.4 million customers in the electricity sector. At the same time, through its gas distribution network, distributed 3.7 billion cubic metres of gas in 2006 to over 2 million customers.

In the last few years, ENEL has made an important effort to improve efficiency (33 per cent. reduction of the “cash cost” per customer from 2001 to 2006) becoming one of the most efficient distributors in Europe (“cash cost” of €87 per customer in 2006 including operative costs and conversions). At the same time ENEL achieved a substantial improvement of its quality going from a service quality index (“TIEPI”) of 128 minutes of average interruption in 2001 to 51 minutes in 2006 (60 per cent. reduction), thus getting a quality level comparable with the best international practices.

As of 31st December, 2006, ENEL had installed about 30 million digital meters and with the most part of them “telemanagement”, allowing for remote operation and reading of such meters (contrasts activation, disconnection and change of the contracted energy). In addition, ENEL exported its technology to other service companies in Italy and abroad, with more than 2 million meters sold to Italian municipalities such as Milan, Turin, Brescia and Modena during 2006. ENEL aims at being able in the short term to supply such a technology to the rest of the Italian service companies.

The Domestic Infrastructure and Networks Division’s strategy consists of continuous improvement, aiming at maintaining its position of technological leadership for its efficiency and quality. In particular ENEL aims to:

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(a) continue its programme of operative costs reduction and optimisation of its conversion costs through the continuous improvement of its administrative processes, increasing the use of technology in order to support its activities and strictly evaluating its conversions from a financial point of view;

(b) continue to improve its results regarding quality and service continuity, in line with the objectives marked by the Energy Authority;

(c) continue improvement of the digital meter in order to increase its efficiency and the service offered to the customer, also supporting its effort in countries where the International Division is present; and

(d) in the distribution of natural gas, operate as efficiently as possible and consolidate its position in the market, both through new distribution concessions and, in its case, acquiring more distribution enterprises where opportunities for significant synergies with the existing activities occur.

Operating performance of the Domestic Infrastructure and Networks Division Change from 111112006 11111 2005 111111 2005 to 2006 Millions of euro Electricity Revenues ...... 5,421 5,231 190 Gross operating margin ...... 3,297 3,247 50 Operating income ...... 2,558 2,552 6 Gas Revenues ...... 286 301 (15) Gross operating margin ...... 121 151 (30) Operating income ...... 31 76 (45) Total Revenues ...... 5,707 5,532 175 Gross operating margin ...... 3,418 3,398 20 Operating income ...... 2,589 2,628 (39) Operating assets ...... 16,875 15,708 1,167 Operating liabilities ...... 4,042 3,567 475 Employees at year-end (no.) ...... 24,701 25,769 (1,068) Capital expenditure ...... 1,459 1,570 (111)

Capital expenditure of the Domestic Infrastructure and Networks Division Change from 111212006 12111 2005 121111111134 2005 to 2006 Millions of euro Investments in electricity distribution networks ...... 1,200 1,319 (119) -9.0% Investments in gas distribution networks ...... 88 70 18 25.7% Other investments in property, plant and equipment ...... 93 100 (7) -7.0% Investments in intangible assets ...... 11121 78 12111 81 12111 (3) 11211 -3.7% Total ...... 1,459 1,570 (111) -7.1% 11121 12111 12111 11211

Capital expenditure fell by €111 million, due essentially to a decline in investments in the low- voltage distribution network as a result of the gradual completion of the digital metering project.

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Distribution of Electricity

ENEL owns and operates the principal electricity distribution network in Italy. The term “distribution” refers to the transportation of electricity from the transmission grid to end users. ENEL Distribuzione, its wholly owned subsidiary, holds almost all of ENEL’s distribution assets and operations, except for the assets and operations held by Deval in Valle d’Aosta. Its main responsibilities consist of operating and maintaining the distribution network, distributing electricity to the free market and distributing and selling electricity on the regulated market.

The following table sets out the aggregate volumes of electricity distributed to the free market and distributed (and sold) on the regulated market by ENEL Distribuzione and Deval for the periods indicated, excluding electricity distributed to resellers.

11111111111111134Year Ended 31st December, 111122006 11112 2005 11112 2004 (in GWh) Distributed to free market ...... 134,654 121,370 113,691 Distributed (and sold) to regulated market ...... 11112 120,384 11112 129,677 11112 136,961 Total(1) ...... 255,038 251,047 250,652 11112 11112 11112

(1) Excluding sales to resellers

In recent years, ENEL has focused on reducing operating costs in its electricity distribution operations, as well as in its electricity sales operations, in recent years. In particular, it has reduced the aggregate number of employees involved in these operations by 17.0 per cent. over the past four years. In the future, ENEL expects this trend to continue but the volume of reductions to decrease. The following table shows the aggregate number of employees of ENEL Distribuzione and Deval at the dates indicated:

11111111111111134Year Ended 31st December, 111122006 11112 2005 11112 2004 Employees ...... 24,474 29,299 32,595

ENEL has also been investing in its Telemanagement digital meter system since 1999 in connection with its focus on reducing costs.

Electricity Distribution Network

The table below sets forth certain information about ENEL’s primary and secondary distribution networks at 31st December, 2006.

Insulated Bare Number of Underground Aerial Lines Aerial Lines Total Lines Substations Transformer Lines (km) (km) (km) (km) (MVA) Capacity 11111 11111 11111 11111 11111 11111 Type Primary High voltage lines (40-150 kV) .. 491 – 18,313 18,804 – – Primary substations ...... ––––2,047 95,959 Secondary: Medium voltage lines (1-30 kV) .. 127,552 8,300 200,666 336,517 – – Low voltage lines ...... 232,075 388,474 120,431 740,979 – – Secondary substations ...... ––––413,887 70,475

In 2006, ENEL Distribuzione transferred 140 kilometres of high-voltage transmission lines to Terna.

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ENEL’s replacement and construction of distribution lines and substations are subject to Italian environmental and aesthetic regulatory limitations, including legislation on electromagnetic fields that may make it more difficult to build new distribution lines and substations in the future and may require removing existing distribution lines and substations. Please see “Description of ENEL — Regulatory Matters — Environmental Matters — Electromagnetic Fields” for a more detailed description of the environmental laws and regulations affecting its distribution operations and the risks they pose for its business.

Consolidation of Electricity Distribution Networks

The Bersani Decree included provisions for the consolidation of distribution networks in municipalities served by more than one electric utility, giving certain municipal networks the right to request ENEL to sell its distribution network in their municipalities. As a consequence, ENEL has been forced to sell to a significant number of these networks in the past few years.

In 2006, ENEL sold 18 local distribution networks in the province of Modena to Hera S.p.A., an Italian energy company, serving approximately 80,000 clients and having an annual sales volume of approximately 624 million kWh, for an aggregate consideration of approximately €107.5 million.

In 2005, ENEL sold the network of the Province of Trento for a total consideration of €169 million. This electricity distribution network comprises approximately 6,700 km of distribution lines and 3,000 substations and serves approximately 255,000 customers.

From 1st January, 2001 until 31st December, 2006, ENEL sold a number of local distribution networks, including those in the Rome, Milan and Turin metropolitan areas, serving an aggregate of approximately 1.986 million customers, for a total consideration of approximately €1,974 million. At the same time, ENEL acquired the distribution networks of 62 other small municipalities, serving a total of approximately 22,762 clients, for a total consideration of €18.6 million. Negotiations are currently pending regarding its sale of the distribution networks of 27 small municipalities and its acquisition of the distribution networks of certain other small municipalities.

The distribution networks that ENEL sold were more profitable than its average distribution network, mainly because distribution in metropolitan areas has lower costs because of the high customer concentration. In 2004, the Energy Authority put in place a mechanism to compensate affected distributors for some of the comparative disadvantages of serving non-urban areas. Please see “Description of ENEL — Regulatory Matters — Electricity Regulation — The Tariff Structure”.

Pursuant to the Presidential Decree no. 235/77, ENEL is currently in negotiations with the Province of Bolzano for the sale of its local distribution network in that province (approximately 85,000 customers and 5,000 km networks).

Telemanagement System

Since 1999, ENEL has been rolling out its “Telemanagement” digital metering system in Italy, in order to create an integrated system able to manage and read electricity meters remotely. This system is intended to help ENEL (i) reduce costs associated with physical measurement of consumption and on-site maintenance of meters by its personnel, as these tasks would be accomplished remotely; (ii) measure more accurately the electricity consumption of its customers; (iii) improve its response times in providing technical assistance to its customers; and (iv) offer its customers diversified tariff plans that promote the use of electricity in off-peak periods.

As of 31st December, 2006, ENEL had approximately 29.8 million digital meters installed, of which approximately 28.9 million were already remotely connected to its system. As of 31st March, 2007, ENEL had installed 30 million digital meters, of which approximately 29.3 million were connected to the remote network. To complete the roll-out, it still must install an additional 1.7 million meters and remotely connect 2.4 million meters to the system.

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Continuity and Quality of Network Service

The Energy Authority has issued guidelines setting targets for electricity service continuity (based on minutes of service interruptions per year) and quality (such as waiting time for appointments). The Energy Authority has also instituted a system that grants bonuses to companies that exceed targets for continuity of service or lack of service interruptions, and imposes penalties on companies that fail to meet them. Please see “Description of ENEL — Regulatory Matters — Electricity Regulation — Continuity and Quality of Service Regulation”.

Distributors that outperform the targets are paid their bonuses through a component of the tariff structure. ENEL has on average consistently exceeded its continuity of service targets, and received resulting bonus payments, for each year since 2000. In 2006, it received a €118 million bonus for having outperformed the continuity of service targets in 2005. It estimates that in 2006, its average duration of service interruptions per customer decreased to 51 minutes, or by approximately 19 per cent., from 63 minutes in 2005. It expects to receive, in the second half of 2007, approximately €164 million in bonus payments with respect to continuity of service for 2006.

In December 2004, the Energy Authority established automatic refunds, starting in 2006, for high- and medium-voltage customers, in the event of power outages exceeding the Energy Authority’s limits.

Public and Art Lighting

ENEL Sole operates ENEL’s public lighting services in Italy. ENEL Sole targets the general market for public lighting, as well as the market for customised lighting systems for monuments, public squares, churches and other landmarks and public spaces. ENEL Sole offers both indoor and outdoor lighting systems, and provides maintenance services for the systems and the related electricity plants.

In 2006, ENEL Sole built lighting systems for third parties with an aggregate value of approximately €37 million. In addition, ENEL Sole signed new contracts for approximately 83,000 public lighting points throughout Italy in 2006. As of 31st December, 2006, ENEL Sole managed approximately 1.9 million public lighting sites in more than 4,000 client municipalities.

For further information on the gas network, please see “Description of ENEL – Business Overview – Domestic Sales Division – Gas Distribution and Sales”.

Domestic Sales Division

The Domestic Sales Division is responsible for commercial activities, with the objective of creating an integrated package of electricity and gas products and services for end-users. The activities are carried out by: • ENEL Distribuzione and Deval (the operations of the latter are limited to the Valle d’Aosta region) for the sale of electricity on the regulated market; • ENEL Energia (formerly ENEL Gas) for the sale of electricity on the free market and the sale of natural gas to end-users; and • ENEL.si, which is responsible for engineering and franchising. ENEL is the largest seller of electricity in Italy.The market for electricity sales in Italy is divided into a regulated market and a free market. Customers in the regulated market must purchase electricity from their local distributor; customers in the free market may choose from whom to purchase their electricity.

As a result of the liberalisation process being undertaken in the gas markets, the minor market in Italy is highly competitive. ENEL claims a 15 per cent. share of sales of electricity in 2006 including only the liberalised market.

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ENEL’s strategy to maintain its long-term leadership in the market consists of:

(a) continuing to improve its quality of service;

(b) reducing sale, operation and administration costs;

(c) focusing on customers such as small and medium-sized enterprises; and

(d) promoting its brand among customers who are deciding to take part in the liberalised market.

In the sale of natural gas, ENEL tries to increase its market share, as well as margins, by expanding its customer base and retaining those who chose to participate in the liberalised market through initiatives targeting residential customers and medium-sized enterprises. Such initiatives include “double fuel” offers (gas and electricity supply through a single sales network with a service department for the customer and an invoice) as well as personalised offers to the customers.

Sales to Regulated Electricity Market

The regulated market for electricity sales in Italy now consists of: • residential customers only, who will be eligible on 1st July, 2007; or • those Eligible Customers, who choose not to participate in it. The consumption threshold for qualification as an Eligible Customer, which is set by regulation, has decreased over time, reducing the number of customers who must buy electricity on the regulated market. Please see “Description of ENEL — Regulatory Matters — Electricity Regulation — Eligible and Non-Eligible Customers” for further information. The Marzano Law provides for the complete liberalisation of sales in the electricity market from 1st July, 2007, when all customers will be eligible to purchase electricity on the free market. The law provides that the Single Buyer will nonetheless continue to supply electricity to consumers who choose not to leave the regulated market.

The following table sets out the amount of electricity ENEL distributed and sold on the regulated market in 2005 and 2006, excluding sales to resellers, broken down by type of distribution line. Revenues for electricity sold to the regulated market represent both transport charges and the cost of electricity sold. The breakdown by type of distribution line reflects the breakdown made by the Energy Authority in establishing tariff categories. Such statistics are not currently available for electricity distributed to the free market in 2006. Please see “Descripton of ENEL — Regulatory Matters — Electricity Regulation — The Tariff Structure” for additional information on electricity tariffs.

2006 2005 Distributed Distributed and Sold and Sold on the on the Regulated Regulated 11112Market 11112 Market (In GWh) (In GWh) High voltage(1) ...... 4,819 5,319 Medium voltage ...... 15,646 20,247 Low voltage ...... 11112 99,920 11112 104,111 Total ...... 120,385 129,677 11112 11112

(1) High-voltage sales on the regulated market are sales to the Ferrovie dello Stato, the Italian railway system. All high- voltage customers are Eligible Customers.

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For medium-voltage lines, which generally serve medium-sized businesses, electricity distributed and sold on the regulated market decreased by 22.7 per cent., primarily reflecting the significant increase in the number of customers eligible to participate on the free market in 2006, many of whom migrated to that market.

Electricity distributed and sold to low-voltage customers on the regulated market decreased by 4.0 per cent.

On 1st April, 2004, a new pool market for the trading of electricity, the Italian Power Exchange, became operational as part of the continuing liberalisation of the Italian electricity market. Under the new system, generation companies may sell their electricity on the Italian Power Exchange or through bilateral contracts with other market participants. In addition, as part of the new system, the Single Buyer, a company wholly owned by the GRTN, is responsible for ensuring the supply of electricity to customers who purchase their electricity on the regulated market. As a result, ENEL’s generation companies are required to sell electricity destined for regulated customers to the Single Buyer, and its distribution companies are now required to purchase electricity to be distributed and sold on the regulated market from the Single Buyer. Please see “Description of ENEL — Regulatory Matters — Electricity Regulation — The Italian Power Exchange” and “Description of ENEL — Regulatory Matters — Electricity Regulation — The Single Buyer” for additional information.

Customer Service

Providing high-quality customer service is an important part of ENEL’s commercial strategy. In recent years, ENEL Distribuzione has reorganised its sales network to change the manner in which customer relations are managed. ENEL has expanded its customer services to provide customers with access to ENEL through a number of different channels, and ENEL has introduced specialised departments to manage relations with corporate and individual customers. Among other things, ENEL has a customer call centre, targeted primarily at individual consumers, and provides a self- service area through its Internet portal. The call centre is supported by both a national documentation centre located in southern Italy, which receives, processes and electronically files all contractual documentation, and by a national printing centre, which prints and distributes all correspondence with customers.

Sales of Electricity to the Free Market

Since 1st July, 2004, all Italian non-residential customers (approximately 7 million consumers) have qualified as Eligible Customers, and may choose to purchase electricity on the free market.

According to ENEL’s internal estimates, total Italian electricity consumption on the free market increased by approximately 6 per cent. in 2006 to 144 TWh, representing approximately 49 per cent. of total Italian electricity consumption for the year. ENEL believes its share of the free market in 2006 was approximately 15 per cent. (as compared to 14 per cent. in 2005). ENEL currently expects that in 2007, total Italian electricity consumption on the free market will be approximately 161 TWh, or approximately 53 per cent. of total Italian electricity consumption for the year.

On 1st April, 2006, ENEL Energia acquired all ENEL final customers with annual consumption above 100 GWh, which were served in 2005 by ENEL Trade in its Domestic Generation and Energy Management Division. During the first quarter of 2006, ENEL Trade sold approximately 2,6 TWh of electricity to Eligible Customers. In 2006, ENEL Energia sold 19,4 TWh of electricity to Eligible Customers (of which 8.0 TWh to customers with annual consumption above 100 GWh since 1st April, 2006), generating revenues of €1,969 million. The amount of electricity sold by ENEL Energia and ENEL Trade on the free market in 2006 was approximately 19 per cent. higher than the 18,5 TWh sold in 2005.

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The progressive liberalisation of the Italian electricity market requires that ENEL Energia provide its customers with increasingly flexible and competitive services that go beyond providing a reliable supply of electricity.

As part of its marketing efforts, it has implemented a series of customer initiatives including: • specially tailored contract terms for different types of customers; and • value-added services such as energy monitoring and management.

Electricity Systems-related Services

ENEL.si offers ENEL’s clients electricity systems-related services through a franchising network made up of selected companies which operate in the electrical maintenance and installation business. ENEL.si franchises draw on the technical capabilities of the ENEL Group to assist clients in optimising their use of electricity, as well as to offer them consulting and personnel training services.

At the end of 2006, ENEL.si had a total of 260 franchise stores focusing on the retail market (residential and small office/home office customers), offering services and products aimed at providing safety (such as safer electrical installations and security systems), energy efficiency (such as air conditioning, heating, and home automation systems) and environmentally friendly energy systems (such as solar, thermal and small photovoltaic plants).

ENEL.si also provides business customers full assistance with their energy facilities, including construction and maintenance services for small co-generation power plants and medium-large photovoltaic plants.

Gas Distribution and Sales

ENEL distributes and sells natural gas to end users in Italy through: • ENEL Rete Gas and other minor companies, which own local distribution networks in specific parts of Italy and hold the related concessions for their use; and • ENEL Energia (ex ENEL Gas) and Metansicula Vendita (which ENEL acquired in July 2006), which sell natural gas to end users.

The Italian natural gas market is undergoing a process of liberalisation. Under current legislation, the natural gas market was supposed to have been completely liberalised as of 1st January, 2003, with all consumers able to freely choose their supplier and all sellers able to freely set prices to all customers. However, while all consumers are now able to freely choose their supplier, the Energy Authority retained the right to control prices for certain, mainly household consumers that qualified as Gas Non-Eligible Customers as of 1st January, 2003. Please see “Descripton of ENEL — Regulatory Matters — Gas Regulation” for a more detailed discussion of gas regulation in Italy.

While full market liberalisation is still developing, ENEL believes that the most effective way for it to build its natural gas business is through acquisitions of other distributors or client bases. It believes that expanding its natural gas distribution activities offers ENEL opportunities for potential synergies, including, for example, the ability to schedule and perform gas and electric network maintenance and upgrades in the same area at the same time and the ability to use call centres for both gas and electricity customers, as well as certain competitive advantages, including potential cost savings from economies of scale. Since March 2005, ENEL has offered Eligible Customers in several Italian cities, including Rome and Milan, “dual fuel” contracts, providing electricity and gas service through one sales network, with one customer service department and one bill.

ENEL has acquired several gas distribution companies with operations in various Italian regions over the past several years. These acquisitions include those of the Colombo Gas Group in 2000,

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So.ge.gas and Agas in 2001 and Camuzzi Gazometri (subsequently renamed ENEL Rete Gas) in 2002. Through these acquisitions, as of 2003, ENEL had become the second-largest operator in the Italian gas distribution market, second only to Eni’s subsidiary, Italgas, the incumbent provider, according to a study of the Italian gas industry by Anigas (the Italian association of gas distribution companies) published in 2005. In acquiring Camuzzi Gazometri, ENEL acquired both significant gas distribution assets and Camuzzi Gazometri’s waste management operations. In February 2004, it sold Camuzzi’s waste management operations, the Aimeri Group, to Green Holding for approximately €14 million.

In January 2004, ENEL acquired Sicilmetano and Sicilmetano Energy, which distributed and sold natural gas to 37,000 customers in Sicily, for €40 million. On 15th September, 2004, ENEL acquired from Metanambiente 100 per cent. of two gas companies — a distribution company, Ottogas Rete, and a sales company Ottogas Vendita — for an aggregate purchase price of €31.5 million. These companies together have approximately 36,000 customers in the provinces of Naples and Salerno. In December 2004, ENEL acquired 100 per cent. of Italgestioni, a distribution company, and Italgestioni Gas, a sales company, which together serve approximately 34,000 customers in 83 municipalities in the provinces of Calabria and Naples, for €32 million.

On 31st December, 2004, ENEL Distribuzione Gas, GE.AD. and Sicilmetano were merged into ENEL Rete Gas and Sicilmetano Energy was merged into ENEL Gas. On 30th June, 2005, Ottogas Rete, Italgestioni and other minor companies were merged into ENEL Rete Gas, and Ottogas Vendita and Italgestioni Gas were merged into ENEL Gas.

In October 2005, ENEL acquired two companies from Italtecna, Metanodotti Padani, a distribution company, and Easygas, a sales company, for an aggregate purchase price of about €23 million. These companies together have approximately 19,000 customers in the northern Italian provinces of Rovigo, Padova, Trento, Mantova, Ferrara and Modena. In January 2006, ENEL acquired from Thüga (an Italian subsidiary of the E.On Group) the distribution company Simeo, which serves approximately 24,000 customers in Sicily, for approximately €37 million.

In July 2006, ENEL acquired Metansicula, a distribution company, and Metansicula Vendita, a sales company, for an aggregate purchase price of about €13 milion. These companies together serve approximately 12,000 customers in Sicily.

On 31st December, 2006, Metanodotti Padani and Simeo were merged into ENEL Rete Gas, while ENEL Energia (a company of ENEL Group, which sells electricity to end users) Easygas, and Iridea were merged into ENEL Gas, which at the same time modified its corporate name in ENEL Energia.

Gas Distribution

As of 31st December, 2006, ENEL offered natural gas distribution services in 1,243 municipalities (as compared to 1,205 in 2005) and operated on approximately 31,113 kilometres of network. In 2006, ENEL distributed 412 million cubic metres of natural gas on behalf of gas companies that are not part of the ENEL Group (as compared to 333 million in 2005) and 3.2 billion cubic metres to end users on behalf of gas companies of the ENEL Group (as compared to 3.6 billion in 2005). As of 31st December, 2006, ENEL distributed natural gas to 2,023,193 end users (as compared to 1,983,741 in 2005), or approximately 12 per cent. of natural gas customers in Italy, based on figures provided by Anigas, the Italian association of gas distribution companies.

11112006 1111 2005

Customers of Gas Companies of the ENEL Group (millions of m3) .. .. 3,252 3,614 Customers-third parties (millions of m3)...... 412 333 Natural gas distributed ...... 3,664 3,947 End users ...... 2,023,193 1,983,741

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Gas Sales

In 2006, ENEL sold approximately 4.5 billion cubic metres of natural gas to more than 2.3 million end users (as compared to the approximately 5.1 billion cubic metres of natural gas sold to nearly 2.1 million end users in 2005), representing 14 per cent. of natural gas customers in Italy. The following table shows the total amount of natural gas ENEL sold to end users in 2005 and 2006 in millions of cubic metres, and the number of customers to whom these sales were made, broken down by type of customer.

111122006 11112 2005 Retail (millions of m3) ...... 2,973 3,021 Business ...... 1,572 2,068 Natural gas sold ...... 4,545 5,089 Retail ...... 2,329,184 2,140,865 Business ...... 1,867 2,129 Number of customers...... 2,331,051 2,142,994

These figures do not include the 1.6 billion cubic metres and 1.7 billion cubic metres of natural gas sold to third parties in 2005 and 2004, respectively, by ENEL Trade, which is part of its Domestic Generation and Energy Management Division.

Operating performance of Domestic Sales Division Change from 111112006 11111 2005 111111 2005 to 2006 Millions of euro Electricity Revenues ...... 19,377 17,913 1,464 Net income/(charges) from commodity risk management...... 4 (26) 30 Gross operating margin ...... 132 61 71 Operating income ...... (9) (59) 50 Gas Revenues ...... 1,731 1,574 157 Gross operating margin ...... 43 91 (48) Operating income ...... 11 71 (60) Total Revenues ...... 21,108 19,487 1,621 Net income/(charges) from commodity risk management ...... 4 (26) 30 Gross operating margin ...... 175 152 23 Operating income ...... 2 12 (10) Operating assets ...... 6,948 6,465 483 Operating liabilities ...... 6,272 5,289 983 Employees at year-end (no.) ...... 5,176 5,994 (818) Capital expenditure ...... 56 53 3

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Electricity sales Change from 111212006 12111 2005 1211111111344 2005 to 2006 Millions of euro Sales on regulated market: - high-voltage ...... 4,819 5,319 (500) -9.4% - medium-voltage ...... 15,646 20,247 (4,601) -22.7% - low-voltage ...... 99,920 104,111 (4,191) -4.0% Total for regulated market ...... 120,385 129,677 (9,292) -7.2% Sales on free market: - high-voltage...... 11,848 11,226 622 5.5% - medium-voltage ...... 7,146 6,389 757 11.8% - low-voltage ...... 3,273 869 2,404 – Total for free market ...... 11121 22,267 12111 18,484 12111 3,783 11211 20.5% TOTAL ...... 142,652 148,161 (5,509) -3.7% 11121 12111 12111 11211

Electricity sold on the regulated market in 2006 came to 120,385 million kWh, a decrease of 9,292 million kWh from the previous year due primarily to greater market liberalisation, which led to an increase of 3,783 million kWh in the volume of energy sold on the free market in 2006.

Gas sales and customers

Change from 111112006 11111 2005 111111 2005 to 2006 Gas sold (millions of cubic metres): Group network...... 3,250 3,610 (360) - third-party network ...... 1,295 1,478 (183) Total sales of gas ...... 4,545 5,088 (543) Customers at end of period (no.): - Group network ...... 1,975,949 1,962,792 13,157 - third-party network ...... 11111 355,102 11111 180,202 11111 174,900 Total customers ...... 2,331,051 2,142,994 188,057 11111 11111 11111

Gas sales for 2006 totalled 4,545 million cubic metres, a decline of 543 million cubic metres from the previous year. The decrease is attributable to the weather emergency plan established by a decree of the Ministry for Productive Activities (now the Ministry for Economic Development) of 25th January, 2006, which led to a reduction in energy consumption in the early months of the year, and to the unfavourable weather conditions in autumn and winter 2006 (leading to a fall of 17.5 per cent. in volumes in the 4th Quarter of 2006 compared with the corresponding period of 2005).

At 31st December, 2006, customers served numbered some 2.3 million, an increase of about 0.2 million over 31st December, 2005. These trends are essentially due to the increase in retail customers (those with consumption of less than 200,000 cubic metres per year), thanks in part to the contribution of acquisitions in the gas area in the 4th Quarter of 2005 and in 2006.

Capital expenditure of Domestic Sales Division

Capital expenditure amounted, in 2006, to €56 million, essentially in line with the figure for the previous year.

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International Division

Complying with the objective to convert itself into one of the greatest electricity companies in Europe and extend its operations outside Italy, ENEL is devoting all its efforts to improve its presence in the markets where it already has a presence (such as Spain, Slovakia, Rumania, Bulgaria, France, Russia and the American continent, through ENEL North America, ENEL Latin America, ENEL Panama), as well as considering the new opportunities coming from other markets (such as other markets in Central and Eastern Europe).

Spain

Spain was the first European market outside Italy where ENEL entered in 2001 by buying Viesgo which realises activities in the fields of Generation, Distribution, Commercialisation and Production with Renewable Energies.

1. Generation: ENEL Viesgo Generacion, S.L. counts a total net installed capacity of 2.199 MW (796 of coal, 672 of hydraulics and 731 of fuel gas). In 2006, the production amounted to 5.363 GWh, thereby its peninsular generation share amounted to 2.3 per cent. Since 2002, ENEL realised an important conversion effort in its generation plants thus improving the reliability and availability of its stations. The main projects presently are the construction of a combined cycle gas turbine (“CCGT”) in Escatron (800 MW) which will start to run at the end of 2007, the reconversion of the CCGT fuel plant in Algeciras (800 MW) (it will start running in 2009) and the environment compliance as well as extension of the useful life of the coal plant in Puente Nuevo (320 MW).

2. Distribution: ENEL Viesgo Distribucion, S.L. counts 638,200 customers in the regions of Cantabria, Asturias and the northern area of Burgos and Palencia (Castilla Leon). ENEL Viesgo Distribucion, S.L holds as well a 55 per cent. shareholding to Barras Electra Galaico Asturianas, S.A. (Union Fenosa holds 45 per cent.) which distributes in Lugo province. The company network includes 2,030 km of high tension, 9,703 km of medium tension and 18,257 km of low tension. Taking advantage from the experience in Italy, ENEL is extending the project of the digital meter to its customers in Spain (in April 2007 already 70,000 digital meters had been installed).

3. Commercialisation: Viesgo started from zero the commercialisation in the free market in 2003, by creating ENEL Viesgo Energia, S.L. This company became the sixth national trader with sales in 2006 amounting to 649 GWh and a 2 per cent. share with 5,600 customers both in the distribution area of ENEL Viesgo Distribucion and in the rest of Spain. In 2006, it obtained by the Ministry of Industry, Commerce and Tourism, the licence of gas trading agent.

4. Renewables: Viesgo is active as well in the Spanish field of renewable sources by participating to EUFER with a 50 per cent. share counting 456 MW of consolidated net installed capacity (of which 384 MW is wind). EUFER will increase its installed capacity to 680 MW in the period 2001-2007 mainly in wind projects.

Slovakia

ENEL is interested in the Slovakian electrical market due to its strong interconnection with other Middle European markets. As an objective of international expansion and effort to consolidate its presence in Central and Eastern Europe, on 28th April, 2006, ENEL acquired a 66 per cent. partnership with Slovenska Elektrarne (“SE”), the main company producing electricity in Slovakia, with a market share being approximately estimated around 80 per cent. SE holds a total installed net power of 6,442 MW (including 1560 MW referred to the impact of a segregation or “carve out”), of which 38 per cent. comes from nuclear sources, 37 per cent. is hydroelectric energy and 26 per cent. comes from conventional thermal energy.

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SE holds four nuclear units providing technology complying with internationally accepted criteria. The nuclear plant presently held by SE were declared by the International Association of Atomic Energy as complying with the western safety standards.

ENEL is presently involved with the development of two other groups of 440 nuclear MW for SE in 2013. It also plans to upgrade the existing nuclear plants and convert into renewable energy.

Bulgaria

In March 2003, ENEL acquired by Entergy Power Bulgaria Ltd. (“Entergy”), a majority share and the control of the Bulgarian generation company Maritza East III Power Company A.D. (“Maritza East III”). This plant has a net installed power of 560 MW and produced 3.111 GWh in 2006. A strong conversion is being realised in the upgrade of the groups as well as in the reduction of the environmental impact of the lignite-fired facility, placed at the border with Greece. It is to be expected that the total conversion of Maritza East III in the project results in an increase of installed power reaching a total of 794 MW.

Maritza III plant holds a contract for long-term energy sale with the transporter and operator of the system in Bulgaria (“NEK”) at pre-fixed conditions depending, among other conditions, on the availability and efficiency of the plant.

Romania

On 28th April, 2005, ENEL Distribuzione S.p.A. acquired a 51 per cent. shareholding with Electrica Banat, S.A. (now ENEL Electrica Banat, S.A.) and ENEL Electrica Dobrogea S.A. purchasing 25 per cent. of each of these companies’ share capital from Electrica S.A., a Romanian state-owned company and simultaneously subscribing to a capital increase of 26 per cent. in each of these companies for an aggregate consideration of €131 million (including price adjustments).

ENEL Electrica Banat S.A., which operates in western Romania, and ENEL Electrica Dobrogea S.A., which operates in eastern Romania, own an aggregate of about 80,000 km of distribution network and in 2006 distributed 7,259 GWh of electricity in the Romanian market to 1,438,000 customers. ENEL expects these two companies to undertake major conversion programmes to improve their distribution networks in order to increase efficiency and quality of service.

In June 2006, ENEL won the auction for a 67.5 per cent. stake in the Romanian power distribution company Electrica Muntenia Sud (“EMS”), an electricity distribution company with 1.1 million customers and a 45,350 km distribution grid in the region of Bucharest. Upon the successful completion of this transaction, ENEL expects to serve approximately 2.5 million customers in Romania, including the customers of ENEL Electrica Banat, S.A. and ENEL Electrica Dobrogea, S.A.

At the same time, ENEL aims at entering the production market once it is privatised.

North America and Latin America

ENEL is present in North America, Central America and South America with ENEL North America and ENEL Latin America, respectively. ENEL aims at increasing its operations in these regions, particularly in the market of renewable energies by acquisitions and development of hydroelectric, wind and geothermal plants in North America, Central America and South America.

In the United States, the regulatory framework is favourable to the development of renewable energies. ENEL North America operates 400 MW plants in the United States and Canada. In the period 2007 – 2011 ENEL is expected to convert a further 530 MW into wind energy in particular and will analyse the geothermal potential as well.

ENEL also performs generation activities in Central and South America where there is a clear potential for use of of renewable energy resource. ENEL Latin America holds a 12.5 per cent.

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partnership with geothermal energy plants with a total power of 100 MW in El Salvador and a further 620 MW (including 300 MW of the hydraulic plant of Fortuna in Panama a 98 MW of hydroelectric plants in Brazil). In the period 2007 – 2011 ENEL is expected to convert further 500 MW into hydraulic plants and will analyse both the geothermal potential in Chile and the hydraulic potential in Brazil.

Russia

In Russia, ENEL takes part in electricity generation and “trading” with a contract for the management of CCGT plant of 900 MW and a 49,5 per cent. partnership with a Russian trading company which reached a sale of 7.644 GWh from June until December 2006.

ENEL has recently acquired, in a consortium with ENI S.p.A., an active group for exploration and production of gas and petroleum which previously belonged to the Russian company YUKOS. Through this, ENEL has entered into the upstream natural gas sector.

France and Belgium

On 30th May, 2005, ENEL signed an intention agreement with EDF on an industrial association allowing ENEL to convert into the French electricity market, including the last generation project European Pressurised Reactor or “EPR”. According to the terms of this agreement, ENEL will have a 12.5 per cent. partnership with the EPR project by EDF. ENEL will receive a share of the generation capacity and production being proportional to the initial partnership with the project which might be increased provided that EDF maintains a majority share.

ENEL sold 5 TWh to France in 2006.

In 2006, ENEL acquired Erelis, a company promoting wind energy projects with a project portfolio amounting to 500 MW.

On 20th March, 20th 2007, ENEL came to an agreement with Duferco for the study and implantation of energetic initiatives in the Belgian market.

Operating performance of the International Division

Change from 2005 112112006 11211 2005 11211 to 2006 (Millions of euro) Revenues ...... 3,068 1,858 1,210 Net income/(charges) from commodity risk management .. 91 (14) 105 Gross operating margin ...... 918 485 433 Depreciation, amortisation and impairment losses ...... 399 178 221 Operating income ...... 519 307 212 Operating assets ...... 10,008 4,282 5,726 Operating liabilities ...... 4,037 813 3,224 Employees at year-end (no.) ...... 13,861 5,024 8,837 Capital expenditure ...... 467 299 168

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The following table breaks down results by geographical area:

Revenues Gross operating margin Operating income Change Change Change from 2005 from 2005 from 2005 2006 2005 to 2006 2006 2005 to 2006 2006 2005 to 2006 1111 1111 1111 1111 1111 1111 1111 1111 1111 Millions of euro Iberian peninsula.... 1,049 1,289 (240) 235 284 (49) 110 143 (33) Central Europe ...... 975 – 975 389 – 389 198 – 198 South-eastern Europe 670 452 218 180 128 52 127 112 15 Russia ...... 202 2 200 716716 Americas ...... 172 115 57 107 72 35 77 51 26 1111 1111 1111 1111 1111 1111 1111 1111 1111 Total ...... 3,068 1,858 1,210 918 485 433 519 307 212 1111 1111 1111 1111 1111 1111 1111 1111 1111

Net electricity generation

Change from 2005 111212006 12111 2005 12111 11211 to 2006 Millions of kWh Thermal ...... 9,640 9,324 316 3.4% Nuclear ...... 10,692 – 10,692 – Hydroelectric ...... 6,011 2,887 3,124 108.2% Wind ...... 846 957 (111) -11.6% Other resources ...... 11121 327 12111 457 12111 (130) 11211 -28.5% Total net generation ...... 27,516 13,625 13,891 102.0% 11121 12111 12111 11211

Net generation abroad in 2006 totalled 27,516 million kWh, an increase of 13,891 million kWh compared with 2005, attributable primarily to the consolidation of Slovenské elektrárne (15,618 million kWh), which mainly contributes with nuclear power generation (10,692 million kWh). The increase was partly offset by a decrease in net generation in Spain (2,336 million kWh of mainly thermal generation).

ENEL’s net efficient generation capacity abroad

1111111111At 31st December, Change from 2005 112112006 11211 2005 11211 to 2006 MW Thermal plants ...... 3,740 2,141 1,599 Hydroelectric plants ...... 3,772 1,159 2,613 Wind plants ...... 283 412 (129) Nuclear plants...... 2,460 - 2,460 Alternative energy resources ...... 11211 46 11211 74 11211 (28) Total ...... 10,301 3,786 6,515 11211 11211 11211

(1) Of which 1,559 MW from Slovenské elektrárne subject to the carve out: EBO V1 nuclear plant for 820 MW and hydroelectric plants for 739 MW (of which 720 MW from the Gabcikovo plant).

The net efficient generation capacity abroad increased by 6,515 MW in 2006, which mainly reflects the addition to the scope of consolidation of Slovenské elektrárne, which contributed 6,442 MW to

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the total, and of ENEL Panama, which contributed 150 MW. In addition to these, the total net efficient capacity of the plants of ENEL Latin America registered an increase of 123 MW, mainly in connection with the acquisition of hydroelectric plants in Brazil. Capacity was reduced by 145 MW as a result of the elimination of ENEL Unión Fenosa Renovables from the scope of consolidation, which also shows up in the lower figures for generation from alternative resources and wind power.

Electricity transport and distribution networks

Change from 2005 112112006 11211 2005 11211 to 2006 High-voltage lines at year-end (km) ...... 6,142 6,116 26 Primary transformer stations at year-end (no.) ...... 300 299 1 Medium-voltage lines at year-end (km) ...... 33,050 33,012 38 Secondary transformer stations at year-end (no.) ...... 22,429 22,275 154 Low-voltage lines at year-end (km) ...... 43,770 43,288 482 Satellite centers at year-end (no.) ...... 193 149 44 Electricity transported on ENEL distribution network (millions of kWh) 12,570 9,651 2,919

At 31st December, 2006, the size of the electricity distribution network was substantially unchanged with respect to the corresponding period of the previous year. Much of the increase in the electricity transported can be ascribed to the inclusion of the Romanian companies in the scope of consolidation in the second quarter of 2005, which added 2,804 million kWh to the total.

Electricity sales

Change from 111212006 12111 2005 121111111134 2005 to 2006 Millions of kWh High-voltage ...... 10,160 3,085 7,075 – Medium-voltage ...... 1,938 1,347 591 43.9% Low-voltage ...... 11121 5,055 121113,661 121111,394 11211 38.1% Total ...... 17,153 8,093 9,060 111.9% 11121 12111 12111 11211 Electricity sold by the International Division in 2006 increased by 9,060 million kWh, a rise that is mainly attributable to the inclusion in the scope of consolidation of RusEnergoSbyt (up 7.6 billion kWh) as of June 2006, and of the Romanian companies (up 1.5 billion kWh) from the end of April 2005.

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Capital expenditure of International Division

Change from 111212006 12111 2005 121111111134 2005 to 2006 Millions of euro Generation plants: - thermal ...... 139 83 56 67.5% - hydroelectric ...... 27 28 (1) -3.6% - geothermal ...... 2–2– - nuclear ...... 57 – 57 – - alternative energy resources ...... 84 111 (27) -24.3% Total generation plants ...... 309 222 87 39.2% Investments in distribution networks ...... 124 62 62 100% Other investments in property, plant and equipment ...... 11 6 5 83.3% Investments in intangible assets ...... 11121 23 12111 9 12111 14 11211 155.6% TOTAL ...... 467 299 168 56.2% 11121 12111 12111 11211

Capital expenditure amounted to €467 million, an increase of €168 million on the previous year. In particular, the increase in investments in generation plants, equal to €87 million, mainly reflects the consolidation of Slovenské elektrárne (€64 million, of which €57 million in the nuclear field), investments in America by ENEL North America and ENEL Latin America amounting to €45 million, as well as an increase of €44 million in Spain (regarding in particular the transformation of the Escatrón plant to combined-cycle technology). These developments were partially offset by the decrease in capital expenditure following the proportionate consolidation of ENEL Unión Fenosa Renovables (a reduction of €61 million), which mainly affected plants using alternative energy resources.

The increase in spending on distribution networks abroad, equal to €62 million, mainly reflects the increase in investment in Romania (€55 million) and Spain (€9 million).

Parent Company, Services and Other Activities

Parent Company: ENEL S.p.A., as the parent company, defines the strategic objectives for the Group and coordinates the activities of all Group companies. In addition, ENEL manages finance operations and insurance risk coverage for all Group companies and provides assistance and guidelines on organisational, human resources, industrial relations, accounting, administrative, tax, corporate and legal issues.

Moreover, ENEL S.p.A. is the party that enters into the Group’s long-term electricity contracts. In 2006, ENEL S.p.A. had revenues of €1,178 million, up €60 million or 5.4 per cent, compared with 2005. Accordingly, ENEL considers itself as a separate reportable segment.

Services and Other Activities: ENEL’s Services and Other Activities sector provides several services to all Group companies including real estate and to city services, information technology, personnel training and administration, administrative services and factoring and insurance services. In 2006, ENEL’s Services and Other Activities sector had revenues of €1,161 million, compared to €1,741 million in 2004.

ENEL sets forth below a description of the other services and other activities of the Group in 2006.

In accordance with ENEL new core-business-oriented strategy, in 2004 it undertook a specific project aimed at centralising responsibility for all of its services and staff activities, as well as improving quality and efficiency, including through the creation of shared services. As part of this process, in January 2005 ENEL merged its wholly owned services companies, ENEL Facility

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Management (real estate and other services) and ENEL.it (information technology) into ENEL Servizi (formerly ENEL Ape), and transferred to ENEL Servizi the Information & Communication Technology (“ICT”) units of ENEL Produzione and of ENEL Distribuzione.

ENEL Servizi is responsible for shared services related to personnel administration, accounting, general services and information technology.

In accordance with ENEL’s core business oriented strategy, in 2006 the Information Technology activities were focused on:

– supporting commercial and operative integration between gas and electric network and infrastructures and achieving opportunity from the electric market liberalisation; and

– developing Energy Management Systems to support pricing and volumes strategies on the energy market.

ENEL Servizi is also responsible for managing personnel payrolls, pension funds and social security funds and providing related administration services for Group companies. Finally, ENEL Servizi, according to agreements signed in previous years, offers third parties services similar to those provided to Group companies. In 2006, ENEL Servizi recorded revenues of approximately €939 million, of which approximately €60 million related to services provided to third parties.

Operating performance of Services and other activities

Change from 2005 112112006 11211 2005 11211 to 2006 (Millions of euro) Parent Company Revenues ...... 1,178 1,118 60 Net income/(charges) from commodity risk management .. (4) (14) 10 Gross operating margin ...... 177 67 110 Income from equity exchange transaction ...... 263 – 263 Operating income ...... 423 53 370 Operating assets ...... 1,013 1,263 (250) Operating liabilities ...... 1,275 1,604 (329) Employees at year-end (no.) ...... 652 569 83 Capital expenditure ...... 13 11 2 Services and Other Activities Revenues ...... 1,161 1,741 (580) Gross operating margin ...... 179 315 (136) Operating income ...... 86 219 (133) Operating assets ...... 1,771 2,945 (1,174) Operating liabilities ...... 1,128 2,392 (1,264) Employees at year-end (no.) ...... 4,585 5,416 (831) Capital expenditure ...... 71 98 (27)

LITIGATION

ENEL and its group are defendants in a number of legal proceedings incidental to the generation and distribution of electricity. While it does not expect these proceedings, either individually or in the aggregate, to have a material adverse effect on its financial position or results of operations, because of the nature of these proceedings, it is not able to predict their ultimate outcomes, some of which may be unfavourable to ENEL. Please see “Risk Factors — Risks Related to ENEL’s Energy Business”.

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Its pending legal proceedings include various civil and environmental claims and disputes relating to the construction and operation of several power stations, transmission and distribution lines, tax assessments, and other matters that arise in the normal course of its business. ENEL has established a reserve for litigation and other contingent liabilities where it considers it probable that a claim will be resolved unfavourably and where it can reasonably estimate the potential loss involved. This reserve, which also includes provisions for other contingencies and uncertainties related to its operations, is included in other non-current liabilities in the consolidated balance sheets in its consolidated financial statements, for a total of €4,151 million of which €1,348 million was for litigation and other at 31st December, 2006, of which €348 million related to legal proceedings.

The most significant proceedings are summarised below.

Electromagnetic field proceedings

ENEL and its group are currently defendants in numerous pending proceedings relating to the electromagnetic fields created by its distribution lines and in some pending proceedings relating to electromagnetic energy emanating from substations. In most of the proceedings, the plaintiffs seek the relocation or removal of lines or substations that are near to inhabited or occupied residential or office buildings. In a limited number of proceedings, the plaintiffs also seek damages based on its alleged non-compliance with regulations setting maximum exposure levels or minimum distance requirements for lines and substations or on the alleged health effects of exposure to electromagnetic fields.

In the cases described above, the distribution lines in question are in compliance with all applicable laws. Moreover, ENEL believes that certain of such proceedings have become moot as a result of a law enacted in March, 2001, which replaced previous legislation on electromagnetic fields and introduced measures for the restructuring of the electricity grids. In any event, if the outcome of the above civil cases is unfavourable to ENEL, its potential liability would be limited mainly to damages, to the extent plaintiffs have satisfied their burden of proof by demonstrating a causal connection between electromagnetic fields and the alleged damage. Please see “Descripton of ENEL — Regulatory Matters — Environmental Matters — Electromagnetic Fields” for a more detailed discussion of electromagnetic fields.

Blackout litigation

Italy, with the exception of Sardinia, suffered a complete blackout of electrical service on 28th September, 2003. It took approximately 21 hours to restore electricity to all customers. A joint report on the blackout by the Energy Authority and the French Commission de Régulation de l’Energie, dated 22nd April, 2004, includes among the causes of the blackout inappropriate defence measures taken by the Swiss transmission grids, the non-compliance by certain Swiss electricity companies with the rules provided by the Union for the Co-ordination of Transmission of Electricity (UCTE) and inappropriate measures taken to cure certain malfunctions. Other inquiries by Swiss, French and Italian authorities are still underway.

As of May 2007, approximately 1,900,000, mainly household, customers had requested reimbursement of approximately €25 each, in accordance with pre-existing Energy Authority rules, despite the fact that in October 2003, the Energy Authority had issued a release in which it declared that customers are not entitled to such reimbursement in connection with the blackout. ENEL believes that they were not responsible for the blackout and, accordingly, have not honoured any of these requests. In addition, as of May 2007, approximately 100,000 of its customers had brought legal actions against ENEL Distribuzione and ENEL in the Italian courts seeking aggregate damages of approximately €100 million. So far, the courts have issued more than 40,000 decisions, most of which have been unfavourable to ENEL.

Although the claims of each of the individual plaintiffs are for relatively minor amounts, an increase in decisions holding ENEL responsible for such damages could result in an increase in the number

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of such claims and the magnitude of damages sought. Italian law does not provide for the award of punitive damages in such cases, and plaintiffs will be limited to compensatory damages.

It should be said, however, that ENEL Distribuzione and ENEL have appealed all unfavourable decisions before the relevant competent courts and in nearly all cases overturned the appealed decisions on the grounds that the plaintiffs had not proven any damages, sometimes excluding the defendants of any responsibility for the blackout. So far, few unfavourable decisions have been issued by the courts and have been appealed by ENEL Distribuzione before the Supreme Court.

On 9th June, 2004, the Energy Authority published a preliminary report that, while not making any definitive finding regarding responsibility, raised the possibility that the blackout may have been partially attributable to the conduct of a number of Italian generation, distribution and transmission companies, including members of the ENEL Group. On 9th September, 2004, the Energy Authority initiated formal proceedings to determine whether any of the companies identified in the report (including ENEL Produzione, ENEL Distribuzione and Deval) were actually responsible. In June 2005, the Energy Authority notified ENEL Produzione of the results of the preliminary investigations that could have led to a relevant fine. In light of such results and in order to gain certainty and limit possible negative effects, despite having denied any responsibility with respect to the blackout, on 8th August, 2005, ENEL Produzione decided to pay a fine of €52,000 to settle the potential claim against it, as permitted by Italian law. As a result, the Energy Authority, in its resolution of 12th December, 2005, decided not to fine ENEL Produzione, although it reserved the possibility of imposing orders on it to prevent similar events. The closing of the inquiry with respect to distribution companies, initially scheduled for April 2006, has been postponed until 31st May, 2007. The Energy Authority can impose sanctions on, or request undertakings from, distribution companies it holds at fault for the blackout.

ENEL believes that the blackout, given its intensity and nature, should be considered an unforeseen and unforeseeable event. As a result, ENEL does not believe it should be held liable for this event. Furthermore, ENEL believes that the occurrence of the blackout is outside the scope of the indemnity obligations provided for under its electricity supply contracts and the Energy Authority’s regulations.

Brownout litigation

The Italian electricity supply experienced certain disruptions on 26th June, 2003. These disruptions, which ENEL effected upon request of the GRTN, were defence procedures carried out when the electricity available could not satisfy demand, and were intended to prevent the entire electricity system from collapsing. The disruptions lasted for approximately 90 minutes each and affected a total of approximately 7 million customers. The Energy Authority’s initial inquiry into these disruptions was completed in November 2003. In its December 2003 report, the Energy Authority primarily attributed the low amount of electricity available, which resulted in the adoption of these defence procedures, to certain structural causes, including insufficient domestic generation capacity, the resulting dependence of the Italian electricity system on imported electricity, and the reduction of the available interconnection capacity due to a heat wave, as well as to certain specific conditions (including an 800 MW reduction of imports of electricity from France under an import agreement between ENEL and EDF). The Energy Authority censured GRTN and generation companies, including ENEL, arguing that the disruptions were due, among other things, to the unavailability of certain plants that ENEL was required to maintain in operation. ENEL has contested the conclusions reached by the Energy Authority. In April 2004, the Energy Authority initiated a formal inquiry to determine the responsibilities of the parties involved in these events. In light of the results of the preliminary investigations and in order to gain certainty and limit the possible negative effects on ENEL, in September 2004 it decided to pay a fine of €52,000 to settle the potential claims against it, as permitted by Italian law. In January 2005, the Energy Authority ended these proceedings, and directed the GRTN not to pay ENEL approximately €75 million in sums due to it for the provision of reserve capacity in the first half of 2003. ENEL challenged the Energy Authority’s direction before the Administrative Tribunal of Lombardy, which

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on 21st July, 2005, issued a decision favourable to ENEL. The Energy Authority has appealed this decision before the Council of State. A hearing on this case has not yet been scheduled.

In addition, as of May 2006, three of ENEL’s customers had commenced legal proceedings against ENEL Distribuzione or ENEL Produzione in Italian courts to seek refunds and damages for relatively minor amounts for the disruption in service related to the brownout (two of these proceedings are still pending without any decisions) and, in some cases, also with respect to the blackout of September 2003. To date, excepting the two aforementioned proceedings, Italian courts have issued unfavourable decisions, promptly appealed by ENEL Distribuzione. Italian law does not provide for the award of punitive damages in such cases, and plaintiffs will be limited to compensatory damages, if any.

INPS circular

On 6th May, 2005, INPS, Istituto Nazionale Previdenza Sociale (“INPS”), the Italian social security fund, issued a circular purporting to extend to formerly state-owned companies and national public entities carrying out industrial activities an obligation for employers to make certain social security contributions. As state-owned entities, these companies were exempted from this obligation. In the circular, INPS indicated that this obligation would be applied with retroactive effect as of the date of privatisation of the relevant entity. The term set forth in the circular for the settlement of the outstanding contributions by the entities identified in the circular, including ENEL Group companies, was originally set for 16th August, 2005 and was postponed several times by INPS in light of the complexity of the issue.

ENEL challenged the INPS circular before the Administrative Tribunal of Lazio and subsequently the Council of State, which both declined to exercise jurisdiction. Therefore, in December 2005 ENEL brought an action before the Tribunal of Rome to determine whether the ENEL Group companies were required to make such contributions. The litigation in relation to this issue is still pending.

In March 2006, the Council of State, upon INPS’s request, expressed the opinion that INPS may not impose retroactive obligations. Though this opinion supports its position, it is not binding on the Tribunal of Rome and ENEL cannot exclude that this court will state that the INPS circular applies to ENEL, whether for the period after its issuance or retroactively. In such cases, it estimates that the amounts it would be required to pay would total approximately €80 million per year.

In December 2005, the Ministry of Labour began a formal inquiry to assess whether the conditions to exempt ENEL and its subsidiaries from the social security contributions related to involuntary unemployment still existed. At the close of this inquiry the Ministry of Labour by decree of 1st August 2006 confirmed that ENEL and the companies deriving therefrom and still forming part of the ENEL Group were exempt, from the obligation to pay social security contributions in respect of involuntary unemployment (and hence redundancy) and had been since the beginning of their activities. Despite the overall favourable situation for ENEL and contrary to the Council of State’s opinion (whose views were accepted by the Rome Labour Court in its judgment of 8th February, 2007 in the Acea v INPS case) and the findings contained in the Ministry of Labour’s decree, the fact remains that in 2006 and in the first few months of 2007 various notices of assessment arrived demanding payment of contributions for past periods in respect of temporary income support (CIG), special temporary income support (CIGS), redundancy (Mobilità) and unemployment (DS). The notices in question have been suspended from an administrative standpoint by INPS itself or by order of the Labour Court before which ENEL appealed them.

Alleged abuse of market power proceedings

Since 1997, several suppliers of equipment to ENEL’s distribution division have brought civil actions against ENEL claiming that it abused its market power in the Italian electricity distribution sector by imposing contractual terms and conditions on them. The plaintiffs have sought increases in the compensation paid to them under supply contracts with ENEL which is contesting the

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suppliers’ claims. The first three decisions rendered in these cases upheld ENEL’s contention that civil courts lack jurisdiction to hear these cases. In 1995, the Antitrust Authority, prompted by similar claims filed by the same suppliers, issued an opinion in which it held that ENEL’s conduct did not constitute an abuse of market power. Following the withdrawal of the petitions filed by several suppliers, the aggregate value of the claims currently pending against ENEL is €163 million. In January 2004, an expert appointed by the Court of Bari, where one of the proceedings was pending, confirmed the opinion issued by the Antitrust Authority and, as a result, on 9th August, 2005, the Court of Bari rejected the plaintiffs’ claim. In August 2006 the plaintiffs appealed the decision of the Court of Bari before the Supreme Court.

Alleged abuse of dominant position by ENEL and ENEL Produzione

In April 2005, the Energy Authority officially concluded that two cases of price spikes on the power exchange, one in June 2004 and one in January 2005, may not have been the result of underlying market conditions, and instead may have been caused by violations of antitrust law by ENEL. As a result, the Antitrust Authority opened an investigation into these alleged violations and the surrounding events. According to Italian law, companies subject to antitrust investigation can commit to adopt protocols aimed at ending the alleged anti-competitive behaviour, thus closing the investigation and avoiding possible sanctions. ENEL, with the aim of closing the investigation committed to offer its virtual power plants (“VPP”) in the form of contracts for difference. The prices of the contracts were set by ENEL. In particular ENEL offered 1,000 MW of VPP for 2007 and 700 MW for 2008 subject to a verification of its importance. The Autorità Garante per la concorrenza ed il mercato (“AGCM”) accepted ENEL’s commitments and on 20th December, 2006 ended the proceedings without declaring any abuse of dominant position. All the VPPs for 2007 were sold last December.

Alleged abuse of dominant position by ENEL Viesgo

ENEL has been and is likely to continue to be subject to regulatory and antitrust investigations in the Italian electricity market. Moreover, on 28th December, 2006, ENEL’s subsidiary ENEL Viesgo received a fine of €2.5 million by from “Tribunal de defensa de la competencia” for abuse of a dominant position on the restrictions market. Viesgo plans to appeal against the decision. Currently, two antitrust proceedings for the same alleged infringement are pending.

Orimulsion arbitration

Until 31st December, 2003, ENEL had a contract to purchase specified quantities of orimulsion from Bitumenes Orinoco S.A. (“Bitor”), a Venezuelan company owned by Petroleos de Venezuela S.A. At the end of 2003, it negotiated a renewal contract with Bitor that was initialled by Bitor but never formally executed. In January 2004, Bitor provided ENEL with approximately 80,000 tons of orimulsion. However, in February 2004, Bitor informed ENEL that it would no longer supply orimulsion to ENEL, as the Venezuelan Energy Ministry had not approved the contract. Nonetheless, in March 2004, Bitor sold ENEL a similar amount of orimulsion in a spot transaction. After seeking an amicable settlement of the dispute, on 17th March, 2005, ENEL filed a request for arbitration with the International Chamber of Commerce in Paris, seeking damages provisionally quantified at U.S. $200 million, as well as further damages, to be quantified subsequently, related to the loss of investments it had made in connection with plans to convert its Porto Tolle power plant to burn orimulsion. Following the appointment of the arbitration panel, the hearing of the parties’ witnesses and the delivery of the parties’ memorials, on 21st March, 2007 the arbitration was dismissed for lack of jurisdiction.

Criminal proceedings involving certain former ENELpower executives

In February 2003, the Chief Public Prosecutors Office of Milan initiated proceedings, not yet concluded, against the former chief executive and third parties for offences committed at the expense of ENELpower and for payments made by suppliers to obtain some contracts. Further to

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resolutions adopted by the boards of directors of ENEL, ENELpower and ENEL Produzione, specific steps were taken against the responsible suppliers, which led to settlements being reached with Siemens and Alstom. On the basis of what emerged from the above mentioned criminal proceedings, the former chief executive officer and a senior executive of ENELpower as well as the former chairman of ENEL Produzione were summoned to appear before the Court of Auditors for the purposes of establishing whether or not they were liable for having caused loss to the State. ENEL, ENELpower and ENEL Produzione intervened in the proceedings in support of the regional prosecutor’s case. On 22nd February, 2006 the Court of Auditors found the chief executive officer and senior executive concerned liable and awarded damages to ENELpower for about €14 million. The judgment has been appealed before the Central Appeals Section of the Court of Auditors of Rome, where the proceedings are pending.

Moreover, at the same time ENELpower and ENEL Produzione instituted an action for revocation against the successors and assigns of the former chief executive officer of ENEL Produzione, the former chief executive officer of ENELpower and a senior executive of ENELpower and obtained a judgment setting aside some transactions whereby assets had been disposed of.

Porto Tolle Thermoelectric Power Station – Atmospheric pollution – Criminal proceedings against ENEL directors and employees – Damages for environmental harm

By a judgment of 31st March, 2006, filed on 22nd September, 2006, the Court of Adria, at the outcome of criminal proceedings that had commenced in 2005, found some former directors and employees of ENEL guilty of various episodes of atmospheric pollution caused by emissions from the Porto Tolle Thermoelectric Power Station. The provisionally enforceable civil portion of the judgment ordered the defendants and ENEL, as the civilly liable parties, to jointly and severally pay damages to a series of entities, individuals and local authorities. €367,000 was awarded in favour of various private parties, mainly individuals, while the quantification of the damages payable to the local authorities (Veneto Region, Emilia Romagna Region, Province of Rovigo and various municipalities) was remanded for decision in a separate civil judgment subject to in the meantime awarding a provisional sum of about €2.5 million in this regard. The Company, the employees and former directors have appealed the judgment of the Court of Adria. Should the criminal portion of the judgment be upheld, the possible future civil lawsuit instituted by the relevant claimants in order to recover damages in respect of the full amount of the loss suffered could see the Company exposed to the risk of further payouts, whose amount cannot be assessed at this time.

Decision No. 66/07 of the Energy Authority

On 21st March, 2007 the Energy Authority published decision No. 66/07, which, concluding an investigation commenced in 2006, imposed an administrative fine of €11.7 million on ENEL Distribuzione for alleged violation of the provisions of a previous decision (No. 55/2000) laying down an obligation to state on electricity bills which of the various payment options were free of charge for customers. ENEL will seek judicial review of the Decision and the sanction before the Regional Administrative Court of Lombard on the basis that it is unlawful in various respects and that the amount of the fine is improper. This decision might significantly increase the number of claims before the lower Italian courts (Giudice di Pace). This could see the Company exposed to the risk of further payouts whose amount cannot be assessed.

MATERIAL CONTRACTS

On 26th May, 2005, ENEL entered into an agreement pursuant to which it sold Wind to Weather in a series of transactions. For further information with regard to this sale, please see “Description of ENEL – History and Development of ENEL”.

On 28th April, 2006 ENEL, in line with the terms of the contract signed on 17th February, 2005, acquired 66 per cent. of Slovenské elektrárne AS (“SE”), the largest generating company in Slovakia and the second-largest in Central and Eastern Europe. SE has a plant portfolio with a gross generation capacity of about 7,000 MW (83 per cent. of Slovakia’s capacity) well balanced

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between thermal, hydro and nuclear, which makes it possible to generate electricity at highly competitive costs. The price for the operation was about €840 million, of which ENEL had paid a deposit of €168 million in 2005. For further information on this acquisition, please see “Description of ENEL – History and Development of ENEL”.

On 28th February, 2007 ENEL completed the acquisition of 105,800,000 shares of Endesa S.A. (“Endesa”), the leading Spanish utility, representing 9.99 per cent. of the Spanish company’s share capital at the price of €39 per share, for a total consideration of €4,126.2 million. The acquisition of Endesa’s shares was finalised in an off-market transaction with institutional investors, financed through ENEL’s cash flow and existing credit lines, and conducted on a stand-alone basis without any connection to any other Endesa shareholders. For further information on the Endesa transaction please see – “Risk Factors” and “Description of ENEL – History and Development of ENEL – Other Recent Developments”.

CONSTITUTIONAL DOCUMENTS

ENEL’s registered office is in Rome, Italy, at Viale Regina Margherita No. 137, and the Company is registered with the Italian Companies’ Register held by the Chamber of Commerce of Rome at No. 00811720580. As set forth in Article 4 of ENEL’s by-laws, its corporate purpose is to acquire and manage equity holdings in Italian and foreign companies, and to provide such companies with strategic guidelines regarding their industrial organisation and business activities. ENEL’s by-laws identify the following as the principal sectors in which it carries out activities, which it may carry out through its affiliates or subsidiaries: (i) the electricity industry, including the activities of production, importation and exportation, distribution and sale, as well as transmission within the limits of existing legislation; (ii) the energy industry in general, including the fuel sector, the environmental protection sector and the water sector; (iii) the communications, telematics and information technology industries and those of multimedia and interactive services; and (iv) the network-based utility services sector (electricity, water, gas, district heating, telecommunications) and local metropolitan utility services. ENEL is generally authorised to take any actions necessary or useful to achieve the Company’s corporate purpose.

MAJOR SHAREHOLDERS

As of 31st December, 2006, the Ministry of Economy and Finance held 21.14 per cent. of ENEL, while Cassa Depositi e Prestiti held 10.16 per cent. and other shareholders the remaining 68.70 per cent. As at that date, no other shareholders held more than 2 per cent. of the share capital of ENEL.

As of the same date, there were 20,163,899 ADSs (equivalent to 100,819,495 ordinary shares) held by 28 registered holders (including The Depository Trust Company).

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MANAGEMENT

Board of Directors

The names of the nine members of ENEL’s current board of directors, whose appointment became effective on 30th May, 2005, and whose term will expire on the date of the annual general meeting approving the financial statements as of 31st December, 2007 are set forth in the following table, along with their current positions and the year each was initially appointed as a director are.

Year Initially 11111111111Name Position111111111111111111111111 111111 Appointed Piero Gnudi Chairman 2002 Fulvio Conti Director, General Manager (direttore generale), Chief Executive Officer* 2005 Fernando Napolitano Director 2002 Gianfranco Tosi Director 2002 Alessandro Luciano Director 2005 Francesco Valsecchi Director 2005 Francesco Taranto Director 2000 Augusto Fantozzi Director 2005 Giulio Ballio Director 2005

* Mr. Conti has also been ENEL’s chief financial officer since 1999.

The business addresses of each of ENEL’s current board of directors is that of ENEL’s registered office at Viale Regina Margherita 137, Rome, Italy.

The principal business activities, experience and other principal directorships, if any, of each of the Company’s current directors are summarised below.

Piero Gnudi. 68, Chairman (designated by the state representing the Economy Ministry) Piero Gnudi gained professional experience holding numerous positions on the board of directors and the board of statutory auditors of several major Italian companies, including STET S.p.A. (now Telecom Italia S.p.A.), Eni (the holding company of the Italian state-controlled energy group), Enichem S.p.A. (a subsidiary of Eni), and Credito Italiano S.p.A., a major Italian bank. He also served as economic adviser to the Ministry of Productive Activities. In 1994, Mr. Gnudi was appointed to the board of directors of IRI S.p.A., where he held a number of positions including supervisor of privatisations in 1997, chairman of the board of directors and chief executive officer in 1999, and chairman of the IRI Liquidation Committee from 2000 to 2002. He is currently chairman of the board of directors of Emittenti Titoli S.p.A., director of Unicredito Italiano, and receiver of the Fochi Group, which is under extraordinary administration. He is also a member of the steering committee of Confindustria (the organisation representing manufacturing and service industries in Italy) and Assonime (an association of Italian listed companies), as well as of the executive committee of the Aspen Institute and the Committee for Corporate Governance of listed companies re-established in April 2005 sponsored by Borsa Italiana S.p.A., the Italian Stock Exchange. He is also the chairman of the Mediterranean Energy Observatory (OME). Mr. Gnudi has been the chairman of the Company’s board of directors since May 2002.

Fulvio Conti. 59, Chief Executive Officer and General Manager (designated by the state representing by the Economy Ministry) Fulvio Conti held numerous positions in Mobil Group in Italy and abroad from 1970 to 1991, and at a number of Italian companies during the 1990s. He joined Montedison in 1991, where he served from 1993 to 1996 as head of the Montedison-Compart Group’s Finance department. He then served from 1996 to 1998 as general manager and chief financial officer of Ferrovie dello Stato S.p.A. He held the position of chief financial officer and general manager of Telecom Italia S.p.A., where he also held a number of positions at Telecom Italia group companies in 1998 and 1999. He is a director of Barclays PLC. Mr. Conti joined ENEL

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in 1999, where, from July 1999 to June 2005, he was ENEL’s chief financial officer. He has been ENEL’s chief executive officer and general manager (direttore generale) since May 2005.

Fernando Napolitano. 42, Director (designated by the state representing the Economy Ministry) Fernando Napolitano began his career working in the marketing department at Laben S.p.A. (an aerospace production company in the Finmeccanica Group), and has subsequently worked at Procter & Gamble Italia S.p.A. In 1990, he joined the Italian office of Booz Allen Hamilton, a consulting company in the management and technology sector, where he was appointed partner and vice-president in 1998. He is currently chief executive officer of Booz Allen Hamilton’s Italian operations and actively involved in international projects. Mr. Napolitano was a member of the committee for surface digital television at the Ministry of Communications from 2001 to April 2006 and was director of the European Center for Aerospace Research from July 2002 to September 2006. He has been a member of the Company’s board of directors since May 2002.

Gianfranco Tosi. 59, Director (designated by the state representing by the Economy Ministry) Gianfranco Tosi has been a professor at the Polytechnic Institute of Milan since 1982 and also taught at the University of Lecco in 1992. He has published extensively on metallurgy, the technology of metals and other related subjects. He has served as member of the board of directors of several Italian companies. He has also held several positions in associations belonging to Confindustria. Mr. Tosi was mayor of the city of Busto Arsizio from 1993 to 2002. He is the chairman of the Cultural Centre for Lombardy, established by the region to protect and develop its local culture, and has also been admitted to the journalists’ register. He has been a member of ENEL’s board of directors since May 2002.

Alessandro Luciano. 55, Director (designated by the state representing the Economy Ministry) Alessandro Luciano began his career in 1974, practicing currency law, representing leading Italian and foreign banks and pleading before the Currency Commission of the Treasury Ministry. In 1984, he extended his legal practice to the telecommunications industry, where he became a consultant of STET S.p.A., Techint S.p.A., Snam Progetti S.p.A., DSC Communications Corporation, Aquater S.p.A. and Comerint S.p.A. He has also been vice-president of two commitees of the Italian Soccer Federation. From October 1998 to March 2005, he was a commissioner of the Italian Communications Authority, where he was a member of the board and the Infrastructure and Networks Committee. Since June 2005, he has been chairman of Centostazioni S.p.A. (a company of the Ferrovie dello Stato group), and has been a member of ENEL’s board of directors since May 2005.

Francesco Valsecchi. 42, Director (designated by the state representing the Economy Ministry) Francesco Valsecchi is a lawyer and the author of several publications. From 1990 to 1992 he was the academic coordinator of a course for corporate lawyers organised by the LUISS business school. Since November 2001 he has been a member of the committee on the reform of Italian civil procedure instituted by the Minister of Justice, and since March 2002, he has taught at the Civil Service School. Since December 1994 he has been an extraordinary member of the Technical Council of the Communications Ministry, and since April 2003, has been on the committee of experts of the High Commission for the coordination of public finance and the tax system. From July 2002 to April 2003, he was chairman of Postecom, and was also member of the board of directors of Poste Italiane S.p.A. from May 2002 until May 2005. He is currently the chairman of BancoPosta Fondi SGR. He has been a member of ENEL’s board of directors since May 2005.

Francesco Taranto. 66, Director (designated by the state representing the Institutional Investors) Francesco Taranto began his career with a brokerage firm in Milan, and subsequently worked (from 1965 to 1982) at Banco di Napoli S.p.A where he eventually became head of its marketable securities service. He has held numerous managerial positions in companies operating in the mutual fund sector, working as head of security management at Eurogest S.p.A. (from 1982 to 1984), and subsequently becoming general manager of Interbancaria Gestioni S.p.A. from 1984 to 1987. He then moved to the Prime Group where he worked from 1987 to 2000, and became the chief executive officer of the group’s holding company. He is currently a member of the board of

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directors of Banca Carige S.p.A., Cassa di Risparmio di Firenze S.p.A., UniCredit Xelion Banca, Pioneer Global Asset Management S.p.A. (a company of the Unicredito Group), Kedrios S.p.A., a company providing services to financial companies, and Alto Partners SGR. He has also been a member of both the steering committee of Assogestioni and the corporate governance committee for listed companies created by Borsa Italiana, the Italian stock exchange. He has been a member of ENEL’s board of directors since October 2000.

Augusto Fantozzi. 66, Director (designated by the state representing the Institutional Investors) Augusto Fantozzi is a lawyer and the founding partner of a law firm with offices in Rome, Milan, Bologna and Lugano, as well as a professor of tax law at La Sapienza and the LUISS Guido Carli. He served as Minister of Finance from January 1995 to May 1996 in Prime Minister Lamberto Dini’s Cabinet — where for several months he also held the offices of Minister of the Budget and Economic Planning and Minister for the Coordination of E.U. Policies — and subsequently became the Minister of Foreign Trade in Prime Minister Romano Prodi’s Cabinet (from May 1996 to October 1998). He was a member of the Chamber of Deputies in the thirteenth legislature (from May 1996 to May 2001) and was chairman of the Budget, Treasury and Economic Planning Committee (from September 1999). He has been vice-president of the Finance Council, president of the Ascotributi, and a member of the Consulta of Vatican City. A former chairman of the technical committee of the International Fiscal Association, he is the author of numerous publications and has been a member of the editorial board of Italian and international law reviews. He has also been on the board of directors of numerous companies, including the Benetton Group, Lloyd Adriatico S.p.A., and Citinvest S.p.A. He has been a member of ENEL’s board of directors since May 2005 and since July 2005 has held the position of deputy chairman of the board of directors of Banca Antonveneta S.p.A

Giulio Ballio. 67, Director (designated by the state representing the Institutional Investors) Giulio Ballio has been a professor at the Milan Polytechnic Institute since 1975, where he has held the chair of steel constructions at the School of Engineering since 1983. He has been the president of the Institute since 2002. The author of many publications, he has carried on an extensive scientific activity. In 1970, he founded an engineering services company (B.C.V. Progetti), where he has been involved in numerous projects as a designer, site engineer, and consultant, both in Italy and abroad. From 1970 to 2000, he was a member of the National Research Council’s committee on regulations for steel constructions and was a member of the Board of Steel Experts from 1975 to 1985, where he served as chairman in 1981 and 1982. He was also a member of the chairman’s council of the Italian Calibration Service from 1997 to 2002 and has been involved in the renovation of several important monuments (including the Accademia Bridge in Venice). He has coordinated research activities in the fields of construction both in Italy and abroad, and has been a member of ENEL’s board of directors since May 2005.

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Officers

The table below sets forth ENEL’s current executive officers who are not also directors, their positions, the year they were appointed to such positions and their ages as of May, 2006:

Year Appointed Year joined to Current 11111111Name 211Age 111121111111111Management Position the11111 Group Position11111111 Andrea Brentan 58 Business Development and M&A 2002 2004 – Unit of International Affairs Division Alessandro 60 Information and Communication 2000 2000 Bufacchi Technology Antonio Cardani 57 Audit 2000 2000 Salvatore Cardillo 57 Legal Affairs 2000 2000 Gianluca Comin 44 Communication 2002 2002 Luigi Ferraris 45 Administration Planning and 1999 2005 Control Sandro Fontecedro 62 Head of Generation and Energy 1970 2003 Management Division Livio Gallo 57 Head of Infrastructure and 1999 2005 Networks Division Claudio Machetti 48 Finance 2000 2005 Gianfilippo Mancini 42 Energy Management Unit – 1997 2005 Generation and Energy Management Division Massimo Cioffi 46 Human Resources 1999 2006 Claudio Sartorelli 61 Corporate Affairs 1970 1996 Francesco Starace 52 Head of Domestic Sales Division 2000 2005 Carlo Tamburi 48 Procurement and Services 2002 2005

The principal business activities and experience of ENEL’s executive officers as listed above are briefly summarised below.

Andrea Brentan. Andrea Brentan was a research assistant at New York University from 1975 to 1977 and then held various positions at GIE, an Italian power plant contractor operating worldwide, until the beginning of 1991. From 1991 to 1999, he successively held the positions of chief financial officer, general manager and chief executive officer at Sae Sadelmi, a Milan-based company belonging to the ABB Group which engages in power plant engineering, procurement and construction, and electrical generation equipment manufacturing and service. From 2000 to 2002, he was the head of the worldwide steam power plant business at Alstom, based in Paris. He joined ENEL in November 2002 as head of International Operations and Business Development in its Domestic Generation and Energy Management Division. He is currently head of the Business Development and M&A Unit of its International Division.

Alessandro Bufacchi. Alessandro Bufacchi has held several positions in a number of Italian computer companies, including Ing. Olivetti & C., where he served as Vice-President Marketing of Enterprise Computer Division from 1993 to 1996; Wang Global Italia, where he served as head of the New Business Development department from 1998 to 1999; and Getronics S.p.A., where he served as head of the Enterprise Systems Division in 1999. He joined the Group in 2000. He has been head of ENEL’s e-business development department since May 2000, and head of operations of ENEL.it since April 2003, as well as of the Business and Telecommunications development department since April 2004. Since 2004 he has been head of the Company’s Information and Communication Technology department.

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Antonio Cardani. Antonio Cardani served as head of the administration department of Olivetti S.p.A. from 1984 to 1995. He then served as head of the administration and finance department of Telemedia S.p.A. from 1995 to 1997. He joined Telecom Italia S.p.A. in 1997, where he was responsible for strategic planning from 1997 to 1998 and for planning and organisational development from 1998 to 2000. He has been head of ENEL’s Audit department since 2000.

Salvatore Cardillo. Salvatore Cardillo has served as the general counsel of a number of major Italian companies, including Aeritalia-Finmeccanica from 1983 to 1991, Alitalia S.p.A. from 1991 to 1997, Edison, a subsidiary of Compart Group-Montedison, from 1997 to 1999 and De Agostini S.p.A., a major Italian publishing company, from 1999 to 2000. He joined ENEL in 2000 as general counsel and remains in this position.

Gianluca Comin. Gianluca Comin served as head of the public relations department and communications department at Montedison S.p.A. from 1999 to 2001. He also served as head of the press relations department at Telecom Italia S.p.A. from September 2001 to June 2002. He previously worked as a journalist at “Il Gazzettino,” an Italian newspaper, from 1987 to 1999. He is currently a member of the board of directors of Syremont S.p.A., a company in the Montedison Group. In July 2002, he joined ENEL as head of the Communication department and remains in this position.

Luigi Ferraris. Luigi Ferraris has held several positions in accounting and control with a number of Italian and foreign companies including Elsag Bailey Process Automation, part of the Finmeccanica group, and as a leader in process control, where he served as Area Controller for Europe until 1999. In 1999 he joined ENEL as chief financial officer of Eurogen, Elettrogen and Interpower (formerly Gencos). In 2001, he was appointed chief financial officer of the Infrastructure and Networks Division. Since June 2005 he has held the position of executive vice president of the Accounting, Planning and Control department and serves as ENEL’s chief financial officer with respect to such functions. He is currently head of the Administration, Planning and Control department, a member of the board of directors of ENEL’s main subsidiaries and sole director of the ENEL shared services company (ENEL Servizi S.r.l.).

Sandro Fontecedro. Sandro Fontecedro joined ENEL in 1970 in the engineering department. In 1979, he became head of maintenance services for thermal generation and in 1985 he became manager of the Torrevaldaliga Nord thermal power plant. In 1991, he became manager of a group of power plants and in 1997 he assumed responsibility for a regional unit comprising several plants. He served as head of thermal and renewable generation from 2000 to 2003, when he was appointed chief operating officer for the Generation and Energy Management Division.

Livio Gallo. Livio Gallo has held several positions in a number of companies in Europe. Before 1999, he served as area vice president for the Western Europe and Africa area of Elsag Bailey Process Automation, a company in the Finmeccanica group. He joined ENEL in 1999, where he served as executive vice president of the sales division of ENEL’s Gencos until 2001. From 2002 to 2004, he held the position of executive vice president of the Regulated Sales Area of ENEL Distribuzione, and from 2004 to 2005 he served as executive vice president of the Business Area Electric Network of ENEL Distribuzione. He currently holds the positions of head of the Infrastructure and Networks Division and chief executive officer of ENEL Distribuzione.

Claudio Machetti. Claudio Machetti served as manager in the central finance department of Banca di Roma in 1990. In 1992 he served as manager in the capital markets unit at Ferrovie dello Stato, the national railway company, and, from 1997 to 2000 he held the positions of head of finance and chief executive officer of Fercredit. He has also served as member of the board of directors in several finance and insurance companies. He joined ENEL in 2000, holding the position of head of the Finance department. Since June 2005, he has held the position of executive vice president of the Finance department and serves as ENEL’s chief financial officer with respect to such function. Moreover, he currently holds the positions of chairman of ENELfactor and ENEL.re, and of director of ENEL Finance International, ENEL Investment Holding, ENEL Ireland Finance, ENEL Green Power International, RNrt Produzione, ENEL Distributzione, ENEL Energia, ENEL Capital,

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ENEL Trade, ENEL New Hydro and ENEL Energy Europe. He also serves as chairman of Fondenel and Fopen.

Gianfilippo Mancini. Gianfilippo Mancini served as audit manager and then as head of the asset management department of the Olivetti Group from 1992 to 1997. He joined ENEL in 1997, where he served as chief financial officer of ENELpower and then as head of the Group Planning and Control department. From 2003 to 2005, he was head of the Fuel Business department, and he is currently responsible for the energy management activities of the Generation and Energy Management Division.

Massimo Cioffi. Massimo Cioffi is a graduate in political economics. He began his career with the Olivetti Group, where from 1995 to 1997, he was manager of Organisation and Human Resources Development. From 1997 to 1999, he was Manager of Human Resources and Organisation, Concrete Division of the Italcementi Group. He has been with ENEL since 1999, where he was manager of Planning, Organisation and Human Resources Development for the Group, prior to assuming the position at Terna as Head of Personnel and Organization in December 2003. In July 2006, he was appointed executive vice president of Human Resources for the Group. He currently holds the position of Chairman of Sfera and is a member of the Board of Directors of seven companies of the Group.

Claudio Sartorelli. Claudio Sartorelli joined ENEL in 1970. Since then he has held a number of positions. He was general counsel from 1996 to 2000. He has been head of ENEL S.p.A.’s Corporate Affairs department since 1996 and he currently serves as secretary of ENEL S.p.A’s board of directors.

Francesco Starace. Francesco Starace held a number of management positions in Italy, the US, Saudi Arabia, Egypt and the UAE in the contracting and engineering department of General Electric Company from 1982 to 1987, and subsequently worked at ABB Alstom Powers Corporation from 1987 to 2000. When he left ABB Alstom Powers Corporation, he was responsible for global sales and turn key plants for the gas turbine division. He joined ENEL in 2000 as head of Energy Management for ENEL Produzione and has been the head of the Domestic Sales Division since November 2005.

Carlo Tamburi. Carlo Tamburi has held a number of positions over the last 20 years at Citibank N.A., I.R.I. (Istituto per la Ricostruzione Industriale) and the Italian Ministry of Economy and Finance. He has been the chairman of Tirrenia di Navigazione S.p.A., as well as a member of the board of directors of several Italian companies such as Finmeccanica and Alitalia. He joined ENEL in 2003 and is currently the head of the Procurement and Services department. He is also chief executive officer of Dalmazia Trieste, the real estate company of the Group.

Conflicts of Interest

As at the date of this Offering Circular, the above-mentioned members of the board of directors and the principal officers of ENEL S.p.A. do not have any potential conflicts of interests between any duties to ENEL and their private interests or other duties.

Board of Statutory Auditors

Pursuant to the Italian Civil Code, in addition to electing the board of directors, ENEL’s shareholders also elect a board of statutory auditors.

Statutory auditors remain in office for a three-year term and may be re-elected for consecutive terms or substituted automatically by an alternate auditor if they resign or are unable to complete their term. Statutory auditors may be removed only for cause and with the approval of an Italian court.

The board of statutory auditors is responsible for reviewing ENEL’s management and financial reporting and financial condition. In conducting this review, the board of statutory auditors has a

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duty to the shareholders, to whom it reports, and to ENEL. The role of the board of statutory auditors includes reviewing the Company’s management, and, in particular, ensuring compliance with applicable law and the Company’s by-laws. Furthermore, the statutory auditors must ensure that ENEL maintains an adequate organisational structure, internal controls and administrative and accounting systems.

ENEL’s current board of statutory auditors was appointed in May 2004. The chairman of the board of statutory auditors, Eugenio Pinto, was appointed in May 2005, after the resignation of Angelo Provasoli. The term of its members will expire on the date of the annual shareholders’ meeting approving the financial statements as of 31st December, 2006, which has been called for on 23rd, 24th and 25th May, 2007. ENEL’s shareholders’ meeting shall appoint the new members of the Board of Statutory Auditors, according to the procedure described in article 25 of ENEL’s by-laws. The names of the current members, their positions and the year during which each was initially appointed are set forth in the following table.

111111111Name 111111111Position 11111111111Year Initially Appointed Eugenio Pinto Chairman 2005 Carlo Conte Auditor 2004 Franco Fontana Auditor 2001 Giancarlo Giordano Alternate Auditor 2004 Paolo Sbordoni Alternate Auditor 2004

In addition, under Italian securities regulations, the Company’s accounts must be audited by external auditors appointed by the shareholders. The appointment is communicated to CONSOB. As of the fiscal year 2005, the Company’s external auditors for both consolidated and non- consolidated accounts are KPMG S.p.A. Under Italian securities laws, as recently amended by the Legislative Decree of 29th December, 2006 n. 303, listed companies may not appoint the same auditors for more than one nine-year term, except that three years have passed from the end of the preceding mandate. At the annual meeting held on 26th May, 2005, ENEL’s shareholders reappointed KPMG S.p.A. as ENEL’s external auditors for a three-year term expiring on the date of the annual shareholders’ meeting approving the financial statements as of 31st December, 2007. With this in mind, a proposal to extend the mandate of KPMG S.p.A. as ENEL’s external auditor for a further three years (up to the date of the annual shareholders’ meeting approving the financial statements as of 31st December, 2010) will be submitted to the annual shareholders’ meeting called for on 23rd, 24th and 25th May, 2007, in order to adjust the duration of the mandate of KPMG to the new aforementioned nine-year term. The external auditors issue an opinion that the Company’s financial statements are presented fairly in all material respects. Their opinion is made available to the Company’s shareholders prior to the annual shareholders’ meeting.

Corporate Governance

Overview

Corporate governance rules for Italian companies like ENEL whose shares are listed on the Italian stock exchange are set forth in the Italian Civil Code, in the Decreto legislativo 24 febbraio 1998, n. 58: “Testo unico delle disposizioni in materia di intermediazione finanziaria, ai sensi degli articoli 8 e 21 della legge 6 febbraio 1996, n. 52”(“TUF”), as recently amended, and in the corporate governance rules set forth by the voluntary code of corporate governance issued by Borsa Italiana (the “Corporate Governance Code”), as updated in March 2006.

As a general rule, ENEL’s main corporate bodies are governed by the Italian Civil Code and the TUF and are assigned specific powers and duties that are legally binding and from which there can be no derogation. The Corporate Governance Code builds on the general framework provided for by the Italian civil code and the TUF and sets forth recommendations for responsible corporate governance intended to reflect generally accepted best practice. Listed companies are requested to issue an annual compliance report disclosing information on their adoption of the Corporate

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Governance Code and compliance with this provision indicating which recommendations, if any, are not being followed and the reason for any failure to comply with such recommendations. The annual compliance report must also contain a general description of ENEL’s corporate governance system. As stated in the Company’s annual compliance report issued in March 2006, ENEL is substantially in compliance with the recommendations set forth in the Corporate Governance Code.

ENEL follows the traditional system of Italian corporate governance, which provides for two main corporate governing bodies, the board of directors and the board of statutory auditors. The two boards are separate and no individual may be a member of both boards. Both the members of the board of directors and the members of the board of statutory auditors owe duties of loyalty and care to ENEL. The members of ENEL’s board of directors and board of statutory auditors, as well as ENEL’s external auditors, are directly and separately appointed by the shareholders at a general meeting.

As recommended by the Corporate Governance Code, ENEL’s board of directors also established an internal control committee (the “Internal Control Committee”) which is mainly responsible for assessing the adequacy of its internal control systems and accounting standards and for relations with outside auditors, and advises, assists and makes proposals to the Company’s board of directors with respect to all such matters. ENEL’s Internal Control Committee is composed of three non-executive directors, who qualify as independent under the rules of the Corporate Governance Code.

As required by Italian law, a firm of outside auditors is in charge of auditing ENEL’s financial statements.

Independent Directors

In Italy, directors’ independence is the subject of a recommendation of the Corporate Governance Code, rather than mandated by law, and is periodically assessed by the board of directors. The Corporate Governance Code recommends that the board of directors include an adequate number of non-executive directors (i.e., who are not members of ENEL’s senior management) such that their views carry significant weight in the adoption of the board’s resolutions. It also recommends that an adequate number of non-executive directors be “independent”. As of the date hereof, ENEL’s board of directors consists of nine members, seven of whom are non-executive and independent directors.

In addition, the members of ENEL’s board of statutory auditors must meet independence requirements mandated by Italian law. As with directors, statutory auditors’ independence is assessed on the basis of a few general principles, rather than detailed rules.

Finally, ENEL is required to provide in its by-laws a mechanism to permit shareholders to propose alternative lists of candidates for the board of statutory auditors.

Executive Sessions

In Italy, neither non-executive directors nor independent directors are required to meet in executive sessions. Under the provisions of the Corporate Governance Code updated in March 2006, it is recommended that independent directors meet separately from other directors at least once a year. The members of ENEL’s board of statutory auditors are required to meet at least once every 90 days.

Audit Committee and Internal Audit Function

ENEL has an internal audit function, which it has not outsourced, as noted above, in accordance with the Corporate Governance Code. Furthermore in order to bring its governance practice more in line with US regulations for companies listed on the New York Stock Exchange regarding the role

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and function of audit committees, ENEL’s board of statutory auditors was assigned further responsibilities in addition to those prescribed by Italian law. As from 31st July, 2005 the board of statutory auditors will:

– issue a binding opinion on the appointment, compensation and retention of the external auditors;

– oversee the work of external auditors and pre-approve their engagement to perform any other auditing services; and

– oversee the corporate procedures that govern the submission of complaints regarding questionable accounting or auditing matters and may engage independent counsel and other advisers.

Internal Control Committee

ENEL’s Internal Control Committee currently consists of Augusto Fantozzi (acting as coordinator), Alessandro Luciano and Francesco Valsecchi. The members are all non-executive directors and meet the independence requirements provided for in the Corporate Governance Code.

Specifically, ENEL’s Internal Control Committee is entrusted with the following tasks, which are both advisory and proactive:

– to assist the board of directors in performing the tasks regarding internal control entrusted to the latter by the Self-regulation Code;

– to evaluate, together with the executive in charge of preparing the corporate accounting documents and the external auditors, the proper use of accounting principles and their uniformity for the purpose of drawing up the consolidated financial statements;

– to express opinions, upon request by the executive director who is assigned the task, on specific aspects regarding the identification of the Company’s and Group’s main risks, as well as the planning, implementation and management of the internal control system;

– to examine the work plan prepared by the head of internal auditing, as well as the latter’s periodical reports;

– to assess the proposals made by auditing firms to obtain the related assignment, as well as the work plan prepared for the external audit and the results expounded in the report and, if there is one, the letter of suggestions;

– to oversee the effectiveness of the external audit process;

– to perform the additional tasks assigned it by the board of directors, with particular regard to the checks aimed at ensuring the transparency and fairness of transactions with related parties; and

– to report to the board of directors at least once every six months, when the financial statements and the half-year report are approved – on the work performed and the adequacy of the internal control system.

Compensation Committee

Compensation of the chairman of ENEL’s board of directors, its CEO and other members, if any, of the board of directors vested with particular offices is proposed by ENEL’s compensation committee (the “Compensation Committee”) and approved by the board of directors, after having received the opinion of the board of statutory auditors. Senior management compensation policies are proposed by ENEL’s CEO, evaluated by the Compensation Committee and approved by the board of directors. It also prepares the stock-option plans, submits them to the board of directors,

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and monitors their application, as well as periodically assessing the criteria adopted for the compensation of top management, supervising their application, and making general recommendations on the subject to the board of directors. The Corporate Governance Code recommends that a majority of the members of the Compensation Committee be non-executive directors, the majority of which shall be independent. The four current members of ENEL’s Compensation Committee are non-executive directors, and qualify as independent under Italian rules. The Company discloses the compensation of each of the members of its board of directors (including its CEO) and its board of statutory auditors in its annual unconsolidated financial statements prepared in accordance with Italian GAAP. With respect to the composition of the Compensation Committee, on 27th July, 2005, ENEL’s board of directors appointed Francesco Taranto (acting as coordinator), Giulio Ballio, Fernando Napolitano and Gianfranco Tosi to the Compensation Committee.

Corporate Governance Guidelines/Code of Business Conduct and Ethics

ENEL has adopted certain corporate governance guidelines (including with respect to its internal control system, significant transactions, management and handling of confidential information and internal dealing), a compliance programme to prevent certain criminal offences and a code of conduct for its directors, employees and others acting on its behalf. ENEL has also adopted a code of ethics.

“Zero Tolerance on Corruption” Plan

In June 2006, the Board of Directors approved the adoption of the “Zero Tolerance on Corruption – TZC” plan in order to give effect to ENEL’s adherence to the “Global Compact” (an action plan promoted by the UN in 2000) and the “Partnering Against Corruption Initiative – PACI” (an initiative sponsored by the World Economic Forum in Davos in 2005).

The plan does not replace or overlap with the code of ethics and the organisational and management model adopted pursuant to Legislative Decree No. 231/2001 but constitutes an in- depth initiative concerning the issue of corruption that is designed to incorporate a series of recommendations to implement principles in this area drawn up by Transparency International.

REGULATORY MATTERS

Overview of Regulation in the Energy Sector in Italy

The Italian Ministry of Economic Development (formerly Ministry of Productive Activities) (the “Ministry of Economic Development” or “MED”) and the Energy Authority share responsibility for overall supervision and regulation of the Italian energy sector, comprising both electricity and gas.

The Ministry of Economic Development is responsible for establishing the strategic guidelines for the energy sector and for ensuring the safety and economic soundness of the electricity and gas sectors.

The Energy Authority is responsible for:

– setting and adjusting tariffs on the basis of general criteria established by law;

– advising the Ministry of Economic Development on the structuring and administration of licensing and authorisation regimes for the energy sector;

– ensuring the quality of services provided to customers;

– overseeing the separation of utility companies into distinct units for accounting and management purposes;

– promoting competition; and

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– otherwise protecting the interests of consumers, including the authority to mediate disputes between utilities and consumers, and to impose sanctions for violations of regulations.

The EU also takes an active role in energy regulation by means of its legislative powers, as well as investigations and other action by the European Commission.

Electricity Regulation

The regulatory framework for the Italian electricity sector has changed significantly in recent years pursuant to the implementation through the Bersani Decree of the December 1996 EU Electricity Directive – Directive 96/92/EC (the “1996 Electricity Directive”).

The Bersani Decree, which entered into force on 1st April, 1999, began the liberalisation of the electricity sector through the separation of generation, transmission and distribution activities, and the gradual introduction of free competition in power generation and sales to consumers meeting certain consumption thresholds, while maintaining a regulated monopoly structure for power transmission, distribution and sales to other electricity customers in Italy who do not meet consumption thresholds entitling them to participate in the free market (“Non-Eligible Customers”). In particular, the Bersani Decree, among other things:

– liberalised, as of 1st April, 1999, the generation, import and export of electricity;

– provided that consumers, or those electricity customers in Italy who meet consumption thresholds that permit them to participate in the free market for electricity (“Eligible Customers”), meeting certain consumption thresholds, which have been progressively reduced, may negotiate supply agreements directly with any domestic or foreign producer, wholesaler or distributor of electricity, while other, Non-Eligible Customers must continue to purchase electricity from the distributor serving the area in which they are located and pay regulated prices determined by the Energy Authority;

– provided that after 1st January, 2003, no electricity company may produce or import more than 50 per cent. of the total of imported and domestically produced electricity in Italy, which limit resulted in ENEL’s sale of three generating companies, Elettrogen S.p.A. (now Endesa Italia S.p.A. (“Endesa”)), Eurogen S.p.A. (now Edipower S.p.A.) and Interpower S.p.A. (now Tirreno Power S.p.A.) (the “Gencos”);

– provided for the establishment of the Single Buyer, a central purchaser of electricity from producers on behalf of all Non-Eligible Customers;

– provided for the creation of the Italian Power Exchange, a virtual marketplace in which producers, importers, wholesalers, Terna, other Eligible Customers and Gestore dei Servizi Elettrici, responsible for ensuring the supply of electricity to regulated customers who do not yet have access to the liberalised electricity market (the “Single Buyer”), buy and sell electricity at prices determined through a competitive bidding process;

– provided for the creation of an entity, wholly owned by the Gestore dei Servizi Elettrici, that manages the Italian power exchange (the “Market Operator”);

– provided for the separation of management and operation of the national electricity transmission grid, which was to be licensed to an independent transmission system operator, the Gestore della Rete, from ownership of the grid assets, which were retained by existing owners, primarily Terna; and

– established a new licensing regime for electricity distribution and provided incentives for the consolidation of electricity distribution networks within each municipality.

The Bersani Decree was amended following the enactment of a law in October 2003 that provided, among other things, for the reunification of management and operation of the national transmission grid with its ownership under a single private entity. An implementing decree, enacted in May 2004,

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provided for the transfer, on 1st November, 2005, to Terna of the responsibility to manage the national transmission grid and the related assets by 31st October, 2005, although the Gestore della Rete still retained its other responsibilities. Following this transfer, no electricity operator, including ENEL, is entitled to voting rights in excess of 5 per cent. with respect to the appointment of Terna’s directors. In addition, the implementing decree required ENEL to reduce its holding in Terna to no more than 20 per cent. by 1st July, 2007. Accordingly, ENEL has reduced its holding to 5.12 per cent.

In 2003, the EU adopted a new directive and a related regulation to further liberalise the electricity market. The new electricity directive, Directive 2003/54/EC (the “New Electricity Directive”), which replaced the 1996 Electricity Directive, enables all consumers to freely choose their supplier by 2007, irrespective of consumption levels, with all non-household consumers enjoying this right of choice from 2004. Further, the New Electricity Directive introduces new definitions of public service obligations and security of supply, establishes a regulator in all EU member states with well-defined functions and, finally, requires legal unbundling of network activities from generation and sales. The related EU regulation establishes common rules for the cross-border trade in electricity in the EU, laying down principles on charges to be paid as a result of transit flows and access to networks as well as on congestion management. EU member states were required to implement the new directive by 1st July, 2004, and Italy did so partly through the Marzano Law, which is discussed below.

On 28th September, 2004, the Marzano Law took effect. Among other things, the Marzano Law aims to clarify the respective roles of the Italian central government, regional and local authorities, and the Energy Authority. The Marzano Law also seeks to facilitate investments in the energy sector. To further liberalise the market, and consistent with the New Electricity Directive, the Marzano Law provides that all customers will be eligible to purchase electricity on the free market from 1st July, 2007, although the law provides that the Single Buyer will nonetheless continue to purchase electricity for consumers who choose not to leave the regulated market.

The Marzano Law also authorises the Italian government to limit the ability of companies based in other EU member states to invest in the Italian energy sector if their home country does not adequately guarantee a reciprocal ability for Italian companies to invest in its energy market. The Italian government had already approved such a measure in 2001, which served to limit the ability of EDF to exercise its voting rights with respect to the stake it currently holds in Italenergia Bis S.p.A., the controlling shareholder of Edison.

However, the European Commission initiated a proceeding before the European Court of Justice seeking a declaration that the 2001 limitation is contrary to EU law. On 6th May, 2005, the Italian government passed a decree suspending this limitation and in June 2005, the European Court of Justice ruled that the limitation infringed EU law. However, the Italian government lifted the limitation before the European Court of Justice issued its judgment. Accordingly, in July 2005, EDF and AEM took control of Edison.

In November 2004, the Italian region of Tuscany challenged before the Constitutional Court certain provisions of the Marzano Law regarding the allocation of powers between the Italian state and regions in connection with the regulation of electricity and gas distribution, including concessions, but the Constitutional Court dismissed the claim.

In June 2005, the European Commission launched a sector inquiry into the effects of the regulatory measures that have been adopted which shows that progress in achieving a truly integrated energy market has been slow. According to the preliminary findings released in February 2006, market concentration, vertical foreclosure, lack of market integration, lack of transparency and price formation are the five main barriers to a fully functioning internal energy market. The final report was published on 10th January, 2007. The Energy Sector Inquiry focused on identifying areas where competition is not yet functioning well and those areas which need to be addressed the most rapidly in order for liberalisation to bear fruit. The key areas are: (1) market concentration/market power: at the wholesale level, gas and electricity markets remain national in scope, and generally

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maintain the high level of concentration of the pre-liberalisation period, (2) vertical foreclosure: the current level of unbundling of network and supply interests has negative repercussions on market functioning and on incentives to invest in networks. This constitutes a major obstacle to new entry and also threatens security of supply, (3) lack of market integration: cross-border sales do not currently impose any significant competitive constraint. Incumbents rarely enter other national markets as competitors. Insufficient or unavailable cross-border capacity and different market designs hamper market integration, (4) lack of transparency: there is a lack of reliable and timely information on the markets, (5) price formation: more effective and transparent price formation is needed in order to deliver the full advantages of market opening to consumers. Many users have limited trust in the price formation mechanisms, while regulated supply tariffs below market prices discourage new entry, (6) downstream markets: competition at the retail level is often limited. The duration of retail contracts for industrial customers and local distribution companies can have a substantial impact on the opportunities for alternative suppliers to successfully enter the market, (7) balancing markets: currently, balancing markets often favour incumbents and create obstacles for newcomers. The size of the current balancing zones is too small, which leads to increased costs and protects the market power of incumbents and (8) liquefied natural gas (“LNG”): LNG supplies widen Europe’s upstream supplier base and are therefore important for both security of supply and competition between upstream suppliers. The potential for LNG supplies to favour less concentrated downstream markets still needs to be realised.

The Commission has already indicated that it intends to carry out antitrust investigations in light of the inquiry’s conclusions. Moreover, in April 2006, the Commission started proceedings against certain Member States, including Italy, for failure to adequately enact EU legislation.

Eligible and Non-Eligible Customers

One of the most important features of the regulatory framework is the distinction between Eligible Customers and Non-Eligible Customers. All customers that do not qualify as Eligible Customers are considered Non-Eligible Customers.

Eligible Customers may enter into bilateral contracts for the retailer supply of energy at freely negotiated prices directly with any domestic or foreign producer or retailer, or, since 1st January, 2005, buy electricity directly on the power exchange. Resellers, including ENEL’s subsidiaries ENEL Energia and ENEL Trade, may buy electricity for resale to Eligible Customers from any producer or on the power exchange.

Non-Eligible Customers may purchase electricity only from the distribution company serving the geographic area in which they are located, at tariffs set by the Energy Authority. Distributors who transport electricity to the regulated market must in turn purchase the electricity so distributed from the Single Buyer, also at purchase prices fixed by the Energy Authority.

The consumption threshold for qualification as an Eligible Customer, which is set by regulation, has decreased over time, reducing the number of customers who must buy electricity on the regulated market. The consumption threshold in January 2002 was 9 GWh or more of electricity per year, declining on 1st May, 2003, to 0.1 GWh per year, which resulted in approximately 60 per cent. of ENEL’s electricity customers becoming eligible to participate in the free market.

In accordance with the 2003 New Electricity Directive, the Energy Authority on 30th June, 2004, recognised all non-residential customers, or approximately 7 million consumers, as Eligible Customers as of 1st July, 2004, permitting them to take part in the free market from that date if they so choose. From 1st July, 2007, all customers, including residential customers, will be eligible to purchase electricity on the free market.

Eligible Customers who choose not to participate in the free market will continue to purchase electricity from their local distributor on the regulated market under conditions set by the Energy Authority.The law also provides that even after all customers have become Eligible Customers, the

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Single Buyer will continue to supply electricity to distributors for resale to their customers who choose not to leave the regulated market.

The Single Buyer

The Single Buyer, a corporation formed in 1999 and wholly owned by the Gestore dei Servizi Elettrici, is responsible for ensuring the efficient, adequate and non-discriminatory supply of electricity to Non-Eligible Customers until they are allowed to freely choose their supplier. The Single Buyer became operational on 1st January, 2004. Electricity distribution companies, including ENEL, may take stakes of up to 10 per cent. in the Single Buyer, although the Gestore dei Servizi Elettrici must remain the majority shareholder. The Single Buyer remained under the control of the Gestore della Rete (now Gestore dei Servizi Elettrici) following the transfer to Terna of management of the national transmission grid.

Based on its own periodic estimates of future electricity demand and Ministry of Economic Development guidelines, starting from 1st April, 2004, the Single Buyer purchases all electricity for the regulated market from ENEL and other domestic as well as foreign producers. All distribution companies, including ENEL’s, are required to purchase electricity to be distributed on the regulated market from the Single Buyer.

The Single Buyer may purchase electricity on the power exchange, through bilateral contracts (including Contracts for Differences, as defined below) with domestic and foreign producers, or from the Gestore dei Servizi Elettrici, which resells the electricity it is required to purchase under Regulation 6/92 issued by Comitato Interministeriale Prezzi, an Italian governmental committee, which established incentives for new generation plants using renewable resources and for the sale of electricity produced from renewable resources (the “CIP 6 regime”).

The Single Buyer held an auction in March 2004 for contracts for the physical delivery of a total of 4,800 MW of electricity to be supplied to customers on the regulated market for the period from 1st April, 2004 to 31st December, 2004. Producers bid for these contracts on the basis of percentage discounts from a base price. Under these contracts, winning bidders were awarded their discounted bid price, plus a fixed component aimed at covering the cost of fuel. In these auctions, ENEL was awarded physical delivery contracts for approximately 3,620 MW of electricity purchased by the Single Buyer (or approximately 75 per cent. of the total amount awarded).

In 2004 and 2005, the Single Buyer also held a series of auctions for contracts for differences (“Contracts for Differences”), which are financial derivative contracts used to hedge the price risk of operations on the power exchange. These Contracts for Differences establish a reference price, or “strike” price for a specified quantity of electricity, which the Single Buyer then purchases on the power exchange at the market price. In 2004, these contracts were two-way Contracts for Differences: When the market price paid by Single Buyer was higher than the strike price, the counterparty would pay the Single Buyer an amount equal to the difference, while when the market price was lower than the strike price, the Single Buyer would pay the counterparty the difference. In 2005, the Single Buyer has offered only one-way contracts, under which the counterparty still pays the Single Buyer any excess of the market price for its electricity purchases over the strike price, while the Single Buyer instead pays the counterparty a contractually set premium.

For the year 2004, ENEL was awarded Contracts for Differences with the Single Buyer covering approximately 28 TWh (equal to approximately 70 per cent. of the total amount awarded). For the year 2005, the Single Buyer held auctions for Contracts for Differences in December 2004 and January 2005 with respect to a total of approximately 19,500 MW of electricity; ENEL won approximately 12,500 MW of the final amount awarded. These contracts give ENEL the right to extend their duration at its option, a right which it exercised in May 2005. As a consequence, ENEL will supply to the Single Buyer 6,660 MW until 31st December, 2006 and 5,550 MW until 31st December, 2007. Under new auctions held by the Single Buyer in October and November 2005, ENEL was awarded “two-way” Contracts for Differences for the supply of 3,300 MW in 2006.

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Finally, in November and December 2006, the Single Buyer held additional auctions for 2007, totalling 1,216 MW. ENEL was awarded “two-way” contracts for 700 MW (which add up to the 5,550 already contracted).

The total payments by the Single Buyer to electricity producers for its purchases of electricity, either through bilateral contracts or on the power exchange, plus its own operating costs, must equal the total revenues it earns from sales to the regulated market under the regulated tariff structure. As a consequence, the Energy Authority may adjust tariffs from time to time to reflect the prices actually paid by the Single Buyer, as well as other factors.

The Italian Power Exchange

The Italian Power Exchange, a virtual marketplace for the spot trading of electricity by producers and consumers under the management of the entity, wholly owned by the Gestore dei Servizi Elettrici, that manages the Italian Power Exchange (the “Market Operator”), started operations on 1st April, 2004.

In the initial phase of the Italian Power Exchange, from 1st April, 2004 to 31st December, 2004, the Gestore della Rete, based on its own estimates of aggregate electricity demand, placed bids on the power exchange on behalf of all consumers who had not fully satisfied their demand through bilateral contracts. Since 1st January, 2005, demand side operators have been able to participate directly in bidding for electricity on the Power Exchange.

The Energy Authority and the Italian Antitrust Authority (the “Antitrust Authority”) constantly monitor the power exchange to ensure that it delivers the expected results: improved competition between electricity producers and enhancement of the efficiency of the Italian electricity system. According to the Market Operator, the performance of the power exchange has been satisfactory so far, although price volatility remains high.

On 9th February, 2005, the Antitrust Authority and the Energy Authority published the results of a joint inquiry into the progress of liberalisation in the electricity sector launched in 2003. After this, the Energy Authority issued a consultation document illustrating the possible measures that can be adopted in order to promote competition in the sector, hypothesising (a) structural measures curbing market power and (b) measures restricting the advantages of exercising such power. A second consultation document published in August 2005 on the question of promoting competition contemplated the transfer of production capacity by ENEL based on the so-called “Virtual Power Plants” mechanism. In its resolution 212/05 of 7th October, 2005, the Energy Authority compelled ENEL to transfer virtual production capacity totalling 3,700 MW in the Southern Italy macro-zone and 150 MW in the Sicily macro-zone. The mechanism envisages a minimum transfer price commensurate to fixed costs (fixed costs are calculated on the basis of the financial statements for 2004 and include a fair remuneration of the net invested capital). This price may however not be greater than the premium contemplated in the contracts already stipulated for 2006 between ENEL and the Single Purchaser. However, the Administrative Court reversed those measures.

Furthermore, in its Resolution no. 175/05 of 4th August, 2005, the Energy Authority established that Terna (formerly Gestore della Rete) must be entrusted with running pumping plants of strategic importance to the system’s safety. ENEL appealed against the resolution, which was abrogated by the Administrative Court’s decision. AEEG appealed to the Supreme Administrative Court and the court’s decision on resolution 175/05 is still pending.

In addition, the Energy Authority in April 2005 officially concluded that two cases of price spikes on the power exchange, one in June 2004 and one in January 2005, may not have been the result of underlying market conditions, and instead may have been caused by violations of antitrust law by ENEL. As a result, the Antitrust Authority opened an investigation into these alleged violations and the surrounding events. ENEL, with the aim of closing the investigation, committed itself to offering VPP in the form of Contracts for Difference. The prices of the contracts were set by ENEL. In particular ENEL offered 1,000 MW of VPP for 2007 and 700 MW for 2008 subject to a verification

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of its importance. AGCM accepted ENEL’s commitments and on 20th December, 2006 ended the proceeding without declaring any abuse of dominant position. All the VPPs for 2007 were sold last December.

Imports

The volume of electricity that can be imported into Italy is limited by the capacity of transmission lines that connect the Italian grid with those of other countries and by concerns relating to the security of the system. Currently, a maximum import capacity of approximately 7,690 MW is available to import energy safely. A law passed in 2003 provides incentives to the development of new transmission infrastructures.

In 2005, ENEL controlled approximately 2,000 MW of the total import capacity pursuant to long- term supply contracts. Since 1st April, 2004, the date on which the power exchange started operations, ENEL has been required to sell the electricity imported pursuant to these contracts to the Single Buyer by the terms of a ministerial decree issued in December 2003.

Until 31st December, 2005 the energy ENEL purchased under these long-term supply contracts enjoyed priority access to interconnection capacity for transmission of electricity for up to 2,000 MW into Italy from neighbouring countries. However, in 2006, the French regulatory authority decided not to assign any transmission or any reserved capacity for ENEL to import the electricity it had purchased under a long-term contract with EDF. As a consequence, only part of the electricity bought under this contract was imported into Italy, with the remaining part being sold in France. ENEL has appealed the decision of the French regulatory authority before the competent Administrative Court. In addition, in April 2006, the European Commission started proceedings against certain Member States, including Italy, challenging priority access for long-term supply contracts. If the European Commission concludes that such rights are contrary to EU law, ENEL’s ability to import electricity under these contracts will be impaired and ENEL will be forced to sell the electricity under this contract outside Italy or to pay for congestion rights that will give it access to transmission facilities to import this energy. The impact of this measure or any other measure adopted further to a decision by the European Commission that priority access rights are contrary to EU law would be in any event limited, as the contract with EDF expires in 2007 and the revenues derived from the other contract (which expires in 2012) are not material.

The Bersani Decree authorised the Ministry of Economic Development to set terms and conditions to allocate the interconnection capacity available after deducting the capacity used by existing long-term contracts, taking into account a fair allocation of the generally less expensive imported electricity between the free and regulated markets if import demand exceeds total interconnection capacity.

The allocation mechanism for 2004 set out by the Ministry of Economic Development in accordance with EU law and applied by the Energy Authority and the Gestore della Rete considered the total interconnection capacity available at the borders with France and Switzerland (the north-west pool) and Austria and Slovenia (the north-east pool) separately. Interconnection capacity was allocated on a pro rata basis; in addition, in no case may a single importer hold more than 10 per cent. of the interconnection capacity available in any given pool. The Ministry of Economic Development put a new allocation mechanism into effect for 2005. Under the new mechanism, capacity is allocated pursuant to an implicit auction mechanism, with the price to be paid for access to this capacity determined based on the price in the power exchange’s Day-Ahead Market. Because of the link to prices on the power exchange, this mechanism may result in higher price volatility for, and an increase in the cost of, imported electricity. As a result, the Energy Authority has also established a mechanism to provide purchasers of imported electricity with an exemption from congestion charges. In 2005, this exemption was awarded by Terna on a pro rata basis in the event applications exceeded the total available quantity. In 2006, the exemption was allocated through an auction.

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Following agreement between Terna and neighbouring transmission system operators (“TSOs”), in 2007 interconnection capacity rights for each border are jointly allocated by explicit auction (on a yearly, monthly and daily basis). Revenues arising from the auction (which are shared evenly between TSOs involved) and belonging to Terna are transferred to customers on a pro rata basis (the 10 per cent. cap has been removed).

Incentives to Provide Generation Capacity

In order to address a current deficit in Italian generation capacity relative to rising electricity demand, the regulatory framework provides incentives to power generators both to build new capacity as well as to maintain their existing plants in good working order and available to cover sudden variations in electricity demand.

In 2004, the Energy Authority established a provisional system of payments to remunerate producers that make generation capacity available to the electricity system at times of peak demand, known as capacity payments (“Capacity Payments”). Capacity Payments to a given producer comprise both an amount due for capacity available on critical days designated formerly by the Gestore della Rete and now by Terna, and a further amount payable when pool market prices fall below specified thresholds, as an extra incentive. The provisional system is still in place. The Energy Authority is currently developing the definitive mechanism, which by law must be market-based and also provide incentives for new generation capacity.

New Generation Plants

In order to promote investment in new generation facilities, the October 2003 law amending the Bersani Decree included provisions to streamline the authorisation procedures relating to the construction of new power generation plants and the renovation and expansion of existing plants.

The Marzano Law requires all entities receiving authorisation to construct new plants or to increase generating capacity of existing power plants after 28th September, 2004 to pay the authorities of the region in which the plant is located compensation (based on generating capacity) for the lost alternative use of the plant site and the impact thereof on surrounding communities, unless the parties agree otherwise.

Transmission

As noted, ENEL uses the term “transmission” to refer to the transport of electricity on high and very high voltage interconnected networks from the plants where it is generated or, in the case of imported energy, from the points of acquisition, to distribution systems. The national electricity transmission grid includes all of Terna’s very high voltage (380/220 kilovolt (“kV”)) and high voltage (150/132 kV) lines.

In accordance with a law passed in 2003 that required the reunification of ownership and management of the grid, ENEL no longer controls Terna following its disposal of its controlling stake.

Distribution of Electricity

As noted, ENEL uses the term “distribution” to refer to the transport of electricity from the transmission grid to end users of electricity.

Distribution companies in Italy are required to be licensed by the state and to provide service to all customers who request it, subject to payment of applicable tariffs and compliance with technical and safety requirements. In addition, distributors serving more than 300,000 customers must distribute electricity to the regulated market through separate companies having distribution as their sole activity.

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ENEL’s concessions for the distribution of electricity are scheduled to expire in 2032.

The Bersani Decree sought to promote the consolidation of the Italian electricity distribution industry by providing for the issuance of only one distribution licence within each municipality and establishing procedures to consolidate distribution activities under a single operator in municipalities where both ENEL and a local distribution company were engaged in electricity distribution by giving municipal networks the right to request that ENEL sells its distribution network in their municipalities to them.

Substantially all of the qualifying distribution companies in municipalities with coexisting networks made requests to purchase ENEL’s networks in those cities.

On average, the distribution networks that ENEL has been required to sell were more profitable than its other distribution networks, mainly because distribution in metropolitan areas has lower costs. In 2004, the Energy Authority put in place an equalisation system to compensate distributors for the higher costs associated with serving non-urban areas.

The Tariff Structure

Prices paid by all Italian customers for electricity include a transmission component, a distribution component, a generation component covering the price of the electricity itself, and system charges.

Under the current electricity tariff regime, all customers pay regulated prices, set either directly by the Energy Authority or in accordance with Energy Authority guidelines and subject to its approval, for the transmission and distribution components, and system charges. The transmission and distribution components (the “Transport Charges”) are subject to a price cap mechanism aimed at progressively reducing these charges on the basis of annual efficiency targets. For customers purchasing electricity on the regulated market, the Energy Authority also regulates the generation component, which is set on a quarterly basis, while customers purchasing electricity on the free market pay prices agreed through bilateral contracts or on the power exchange.

The Energy Authority sets base tariff levels every four years. In setting the base tariff levels, the Energy Authority takes into account:

– operating costs of generation (for electricity prices on the regulated market), transmission and distribution activities, including procurement costs, and amortisation and depreciation. In order for operators to be able to recover particular costs, the costs must be both actually incurred by them and recognised by the Energy Authority;

– an appropriate return on invested capital, including both equity and debt financing; and

– the costs associated with system charges.

In 2004, the Energy Authority set new base tariffs for the 2004-2007 period, which have been in force since 1st February, 2004. The Energy Authority has estimated that the tariff regime in place for 2004-2007 will result in a reduction of the overall tariff paid by regulated market customers of approximately 13 per cent. in real terms (assuming no change in fuel costs and system charges) during the period.

The actual impact of tariff levels on ENEL’s revenues depends on a number of factors, including the volume of electricity ENEL sells in the regulated market, the fuel costs incurred and the mix of customers ENEL serves.

The tariff structure currently in place also includes certain mechanisms to take into account structural factors affecting distributors’ costs.

In 2004 the Energy Authority established a price equalising mechanism intended to minimise the effects of a timing discrepancy in the setting of prices distributors pay to the Single Buyer for

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electricity to be distributed on the regulated market and the prices that distributors may charge to end users on the regulated market. The prices distributors pay to the Single Buyer for electricity to be distributed on the regulated market are set monthly by the Energy Authority based on the average unit costs incurred by the Single Buyer in connection with its purchases of electricity. However, the generation component included in the overall tariff that distributors may charge to end users on the regulated market is fixed by the Energy Authority on a quarterly basis, as explained in more detail below. In order to minimise the effects of this discrepancy, the Energy Authority established a price equalising mechanism, applicable from 2004. The equalising mechanism is funded through a system charge in an amount set by the Energy Authority, applicable from 2005.

In its resolution no. 115/05, the Authority charged the Cassa Conguaglio per il Settore Elettrico (Equalisation Fund) with enforcing the equalisation mechanism, establishing reimbursement timetables and modalities and introducing a system providing for payment of interest in the event of late reimbursement.

In 2004, the Energy Authority also put in place a system to compensate distributors that serve areas where costs are significantly higher than the national average due to uncontrollable factors such as population density and geography. The costs taken into account in setting this compensation are based on infrastructural elements such as length of cables and installation type (aerial or underground). The compensation system does not apply to ENEL Distribuzione, but it applies to its subsidiary Deval, which requested approximately €2.4 million as compensation. A preliminary decision by the Energy Authority on this matter granted Deval €1.1 million as compensation. In September 2006, the Energy Authority adopted the final decision on this matter, granting Deval €1.6 million as compensation.

The Energy Authority currently defines the following six tariff categories of electricity consumer:

– low-voltage domestic consumers (residential customers);

– low-voltage public lighting;

– other low-voltage end users;

– medium-voltage public lighting;

– other medium-voltage end users; and

– high-voltage end users.

In December 2006, the Energy Authority updated charges for 2007 for the delivery of the metering service (MIS) and for the purchase and sale of electricity on the captive market (COV). They have increased, respectively, by 12 and 14 per cent.

In July 2006, the Energy Authority approved guidelines concerning the transparency of billing documents for electricity consumption. The new electricity bill must have two different sections for the presentation of data (a simplified section and a detailed section), as well as additional information concerning the type of consumption. It is also envisaged that at least once a year customers should be informed of the mix of sources used in electricity production in Italy. This obligation came into force on 1st April, 2007 for customers currently in the captive market and will come into force on 1st July, 2007 for free market customers.

In January 2007, the Energy Authority started a public consultation to introduce a new tariff system for domestic customers and to devise a mechanism to protect disadvantaged customers in view of the completion of liberalisation on 1st July, 2007. In particular the Energy Authority proposed the application of a discount on the bills of customers who are economically disadvantaged. ENEL expects a second consultation on this matter in May 2007.

The Energy Authority has opened procedures to determine the tariffs for the supply of electricity transmission, distribution and metering services for the next four-year regulatory period starting

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from 1st January, 2008 (the third regulatory period). The Energy Authority is going to examine both mechanisms promoting efficiency gains in the supply of the service and incentives for the development of infrastructure (transmission network, distribution networks, and metering devices). The Energy Authority will also promote a simplified tariff mechanism.

Generation Component of Electricity Tariffs

The generation component refers to the price paid by customers for electricity sold on the regulated market. Prior to the start of the power exchange on 1st April, 2004, the Energy Authority determined generation costs based on fixed and variable components of production costs. The fixed-cost component, which was intended to reflect non-fuel operating costs, was based on an estimate of the average recognised fixed costs associated with generation plants in Italy and was set on an annual basis.

The variable-cost component of the tariffs was principally intended to reflect fuel costs associated with thermal power generation. This system resulted in an increase in the relative profitability of:

– hydroelectric or geothermal generation, since these plants do not incur fuel costs; and

– the resale of electricity imported under long-term contracts in effect as of the date of the entry into force of the first electricity directive on 19th February, 1997 (the “First Electricity Directive”), which was frequently cheaper than electricity generated in Italy.

The Energy Authority decided to reduce this potential windfall profit for hydroelectric or geothermal producers by establishing a new surcharge to be paid by these producers to the Gestore della Rete with respect to electricity sold by them. This surcharge applied until December 2001. Pursuant to rules on stranded costs enacted in 2002 (which are described in more detail below), the surcharge on hydroelectric and geothermal generation was abolished as of 1st January, 2002.

In February 2004, the Energy Authority modified the price electricity producers were permitted to charge to distributors for the electricity to be supplied to regulated customers in order to reduce the component of electricity tariffs related to generation for the period from March through May 2004. ENEL and other electricity operators challenged this reduction before the Administrative Tribunal of Lombardy, which annulled the Energy Authority decision. The Energy Authority, in December 2004, appealed this ruling; and, on 16th January, 2006, the Council of State overruled this decision. As a consequence, ENEL was required to reimburse customers approximately €200 million, which was the difference between the price paid by regulated customers for the electricity supplied in March 2004 and the amount resulting from implementation of the reduction mandated by the Energy Authority.

Since 1st April, 2004, the Energy Authority has set the generation cost component of the electricity tariff paid by customers on the regulated market every three months on the basis of the average costs incurred by the Single Buyer for the procurement of electricity, both on the power exchange and directly from producers.

ENEL sells electricity on the free market through bilateral contracts at prices negotiated with each customer that may vary based on several elements, such as quantity purchased, type of electricity sold and duration of the contract; electricity sold on the power exchange is sold at the price determined through the relevant market mechanism.

Transmission and Distribution Components

As noted above, the regulated tariff for transmission and distribution services, or transport charges, for all customers takes into account both the operating costs of transmission and distribution activities, including procurement costs, and amortisation and depreciation, as well as an appropriate return on invested capital. In order for operators to be able to recover particular costs, the costs must be both actually incurred by them and recognised by the Energy Authority. The transmission component of the transport charges is currently set by the Energy Authority. As

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explained in more detail below, distributors may propose various price options for both residential and non-residential customers, within guidelines set by, and subject to the approval of, the Energy Authority.

The costs of transmission and distribution companies used in determining transport charges are subject to a price-cap mechanism. During the 2000-2003 period, the Energy Authority set the annual rate of reduction with respect to total costs (capital costs, depreciation and operating costs) in real terms at 4 per cent. for each of the transmission and distribution components. For the period 2004-2007, the Energy Authority has set the annual percentage decrease for operating costs and depreciation, but excluding capital costs, for transmission and distribution services at 2.5 per cent. and 3.5 per cent., respectively.

For distributors, the determination of operating costs is required to reflect the average costs incurred by the main distributors for the transport of electricity through the local distribution networks and for the sales-related services they provide to final customers, plus a specified return on invested capital. The return on capital recognised by the Energy Authority for the 2004-2007 period was set at 6.8 per cent. for distribution networks and at 6.7 per cent. for transmission networks, or a higher percentage for capital invested in transmission network development.

Depreciation and invested capital are calculated by the Energy Authority under criteria consistent with international regulatory practices. In setting tariff levels for the 2004-2007 period, the Energy Authority revised the way depreciation costs are calculated for transmission and distribution companies; whereas in the 2000-2003 period, the depreciation costs recognised were based on the value of a company’s network assets and the related depreciation expenses as recorded in companies’ statutory accounts, these costs are now calculated based on the historical cost of infrastructure, as revalued annually. The useful lives of assets considered by the Energy Authority to determine depreciation expenses to be recognised through the transport charges have also been increased to bring them into line with the expected useful life of plant and equipment.

Prior to 2004, both the transmission and distribution components of the transport charges paid by non-residential customers to distributors were set on the basis of proposals made by each distributor and approved by the Energy Authority. During that period, the transport charges for residential customers were set directly by the Energy Authority as part of the tariff paid by them to distributors.

Starting in 2004, the Energy Authority has directly set the transmission component of the transport charge for all customers, while distributors retain the ability to propose to non-residential customers one or more options for the distribution component of the transport charge, based on the distributors’ costs as described above and within limits set by the Energy Authority.

There are two types of limit: one limit sets an aggregate maximum amount of tariff revenues that each distributor will be allowed to receive from all customers belonging to the same category in a single year. A second limit sets the maximum amount of tariff revenues that any distributor will be allowed to receive from a single customer in a given category. If the aggregate limit is exceeded, the distributor must compensate customers for the amount of the excess. The Energy Authority monitors compliance with the individual limit at the time the distributor submits its price options for approval. In addition, distributors must comply with a trade policy code aimed at ensuring transparency.

Residential customers do not have any options for the distribution component per se, since the tariff they pay includes the generation component and transport charges without distinguishing between the two. However, distributors may now also offer regulated market customers different tariff options, subject to approval by the Energy Authority.

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System Charges and Other Charges

The tariff structure also addresses the need to cover various costs resulting from public policy- related requirements imposed on the Italian electricity industry by providing for the following charges, payable by all electricity consumers: • Charges concerning the electricity system, established by the Ministry of Economic Development, that consist of:

– a nuclear surcharge, covering part of the costs incurred by So.g.i.n., the company to which ENEL transferred its discontinued nuclear operations, in connection with the dismantling of nuclear plants and decommissioning of nuclear fuels; this surcharge is designed to cover substantially all of such costs when added to the funds that ENEL transferred to So.g.i.n.;

– a surcharge that benefits producers who are renewable resources;

– special surcharges covering the cost of supplying electricity at mandated discounts to certain customers (primarily the Italian state-owned railway company and Acciai Speciali Terni S.p.A., both of which transferred electricity assets to ENEL as part of the nationalisation of the Italian electricity industry in 1962);

– research and development surcharges, covering related costs; and

– certain stranded costs that have not yet been recovered. • Other general interest charges established by the Energy Authority to adjust or refine the operation of the tariff mechanism, which include adjustments to cover potential differences between distributors’ costs as recognised under the current tariff structure and actual tariff revenues. • Incentives for the enhancement of the quality of service. • Charges recovered through upward adjustments to the price caps, as established by the Energy Authority, which cover:

– costs deriving from unforeseeable events, changes in the regulatory framework or new obligations for universal service;

– costs deriving from demand-side management initiatives intended to promote a more efficient use of resources by electricity customers, including information campaigns; and

– additional recognised costs incurred in connection with the offer of value-added services on top of basic options.

Revenues deriving from system charges are remitted to and managed by the Cassa Conguaglio per il Settore Elettrico (the “Equalisation Fund”), a public entity charged with redistributing these revenues to the electricity companies entitled to receive them.

Law 80 of 2005 deferred until the end of 2010 the facilities existing as of 31st December, 2004 and extended them to aluminium, lead, silver, zinc and sodium chloride production and processing operations in factories existing as of the date on which the law came into force (29th April, 2005), located in the Region of Sardinia and supplied by high tension power. In its resolution no. 217/05, the Energy Authority established the level of special tariffs for 2005 (applying prices similar to those applied in Europe) and provided for a annual adjustment mechanism linked to yearly percentage variations in the indices of the electric power exchanges of Amsterdam and Frankfurt, with a 4 per cent. ceiling.

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Stranded Costs

Stranded costs are current costs deriving from contractual commitments or investment decisions that electricity companies:

– undertook for reasons of public policy;

– undertook at a time when the electricity markets were not yet open to competition; and

– could have been recovered in a monopoly regime but cannot be recovered under a regime of competitive electricity pricing.

To facilitate the transition to open electricity markets, the European Commission has stated that electricity companies should be refunded their stranded costs provided that:

– they minimise the impact of those costs (and hence the amount of the refund) on their future operations; and

– they submit an industrial plan demonstrating the long-term profitability of the activity related to the stranded costs.

A law enacted in April 2003 limited the amount of stranded costs ENEL is entitled to recover for periods up until 2003 to (i) certain costs relating to its generation plants incurred to comply with requirements that were imposed in the past concerning their design and operation (for example, because of governmental policies, ENEL built most of its plants to ensure a high degree of flexibility in the types of fuel that they can use) and (ii) costs arising from its inability to fulfil its Nigerian Liquefied Natural Gas (“Nigerian LNG”) contract because of the Italian government’s failure to allow construction of a required regasification terminal. The April 2003 law provides that after 1st January, 2004, ENEL will be limited to recovering only those stranded costs associated with the Nigerian LNG contract.

In August 2004, the MEF and the Ministry of Economic Development (formerly the Ministry of Productive Activities) issued a joint decree that determined the overall amount of stranded costs ENEL is entitled to recover. On 1st December, 2004, following the European Commission’s approval of the decree pursuant to the state aid rules of the European Union, ENEL became entitled to recover approximately €513 million on account of stranded costs related to its generation plants for the period 2000-2003. The amount of stranded costs related to the Nigerian LNG contract ENEL is entitled to recover was determined to be approximately €555 million in respect of the 2000-2003 period and approximately €910 million in respect of the 2004-2009 period. Although ENEL did not actually receive these funds in 2004, during that year ENEL recorded related revenues of €1,219 million, the amount it became entitled to receive in respect of 2004 and prior years under the August 2004 decree.

The timing and manner in which these amounts are to be paid to ENEL were set out in a decree issued jointly by the Ministry of Productive Activities (now the Ministry of Economic Development) and the MEF on 22nd June, 2005. The decree provides that stranded costs related to the Nigerian LNG contract for the period ending in 2004, and stranded costs related to ENEL’s generation plants, will be reimbursed by December 2009 through quarterly payments. Stranded costs related to the Nigerian LNG contract for the period from 2004 through 2009 will be limited to the value of gas effectively used for electricity generation, calculated on a yearly basis. At the end of 2006, ENEL had received €1,230 million as compensation for those stranded costs.

Continuity and Quality of Service Regulation

Since 1st July, 2000, the Energy Authority has issued guidelines setting targets for electricity service continuity and quality. Continuity of service is measured by the frequency and total duration in minutes of service interruptions and is assessed with reference to annual targets set by the Energy Authority. Quality of service is measured in terms of waiting time for the performance of the

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most frequent commercial activities (such as connection cost estimates, connections, disconnections and reconnections).

The Energy Authority has instituted an incentive system whereby it grants bonuses to companies that exceed its targets for continuity of service and imposes penalties on companies that fail to meet them. ENEL has consistently exceeded its continuity of service targets since 2000. Distributors that outperform the targets are paid their bonuses through a component of the tariff structure. ENEL received bonuses of €118 million for having out performed its continuity of service targets in 2005.

With respect to quality of service, if a distribution company fails to meet standards set by the Energy Authority in providing a particular service to a customer, the company is required to reimburse that customer an amount that is fixed by the Energy Authority. ENEL has achieved most of the quality of service targets set by the Energy Authority, and has not been required to make material reimbursements.

In January 2007, the Energy Authority published its third consultation document, which follows those issued in May 2005 and June 2006, concerning the introduction of an automatic compensation system to support customers in the event of a blackout or other prolonged service interruption. Distributors should be obliged to restore the electricity service within the same lapse of time, both for exceptional and ordinary interruptions. In particular, in the case of exceptional events, would be payable by a fund, managed by CCSE. This fund is financed by customers, through an increase in distribution tariff, by distributors and Terna, in proportion to interruptions caused by them. The sharing of responsibilities of compensations between Terna and distributors is still to be defined. The Energy Authority has not yet taken any action as a result of its consultation.

In September 2006, the Energy Authority opened a further inquiry to establish quality parameters for the electricity transmission, distribution and metering service, which will apply for the next four- year regulatory period starting from 1st January, 2008. In particular the Energy Authority is already working on different initiatives, including regulating the quality of commercial call centre services, and extending compensation to low voltage customers in cases of interruptions or failure to comply with “service continuity standards”. ENEL expects a first consultation on this matter in April, 2007.

Promotion of Renewable Resources

In 1992, the Comitato Interministeriale Prezzi, an Italian governmental committee, issued Regulation 6/92 (“CIP 6”), which established incentives for new generation plants using renewable resources and for the sale of electricity produced from renewable resources. Initially under the CIP 6 regime, ENEL had been required to purchase substantially all of the qualifying domestic production of electricity from renewable resources at fixed prices. In November 2000, the Ministry of Productive Activities issued a decree that transferred all energy produced from renewable resources under the CIP 6 regime to the Gestore della Rete as of 1st January, 2001. Under current regulations, the Gestore dei Servizi Elettrici is required to purchase all CIP 6 electricity, which it resells to Eligible Customers and, starting from 2004, also to the Single Buyer. The Single Buyer has a right to a predefined quota of CIP 6 electricity. Until 2003, Eligible Customers obtained CIP 6 electricity pursuant to an auction mechanism; starting from 2004, they are awarded CIP 6 electricity on a pro rata basis. The Gestore dei Servizi Elettrici sells green certificates representing electricity from renewable resources purchased from CIP 6 producers. In 2006, the total annual CIP 6 electricity production according to Gestore dei Servizi Elettrici estimates was approximately 49 TWh (in 2005 it amounted to approximately 50TWh).

The Bersani Decree provided that, starting in 2001, all companies introducing more than 100 GWh of electricity generated from conventional sources into the national transmission grid in any year must, in the following year, introduce into the national transmission grid an amount of electricity produced from newly qualified renewable resources equal to at least 2 per cent. of the amount of such excess over 100 GWh, net of co-generation, self-consumption and exports. Electricity from

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renewable resources may be produced directly or purchased from other producers who have obtained tradeable green certificates representing a fixed amount of electricity certified as generated from renewable resources.

In addition, the Bersani Decree directs the transmission system operator, currently Terna, to dispatch electricity into the national transmission grid so that energy produced from qualified renewable resources takes priority over other types of electricity.

The EU directive 2001/77 issued in September 2001 set indicative targets for energy production from renewable resources, requiring that by 2010 a share equal to 22 per cent. of total electricity consumed in the EU be generated from renewable resources and providing recommended national targets to achieve this goal. Italy adopted legislation to implement this directive in December 2003, setting a 22.5 per cent. target for total production of electricity from renewable resources by 2010, lower than the 25 per cent. target for Italy recommended in the EU directive. Legislation amending the Bersani Decree in December 2003 provided for a progressive increase in the 2 per cent. share of electricity produced from newly qualified renewable resources electricity generators are required to introduce into the national transmission grid. For the period 2004-2006, the obligation quota was increased by 0.35 per cent. per year. Further increases may be implemented for the three-year periods starting in 2007 and 2010. In this regard, the European Council has recently affirmed a binding target of a 20 per cent. share of renewable energies in overall EU energy consumption that could imply an electricity sector target of 34 per cent.

In February 2007, the Italian Government issued a decree concerning photovoltaic energy including fairly advantageous incentives for plants up to 3 kW and simpler administrative procedures when requesting incentives to Gestore dei Servizi Elettrici.

Hydroelectric Power

Under the Bersani Decree, the terms of all ENEL’s licences for the generation of electricity from large bodies of water, which were originally of perpetual duration, were changed to expire in April 2029. In addition, the Bersani Decree automatically extended the term of all hydroelectric licences for the generation of electricity from large bodies of water that were granted to other electricity producers to 31st December, 2010 even though they were scheduled to expire before such date. All hydroelectric licences expiring after 31st December, 2010 were to retain their original expiration date. The Bersani Decree also provided that in any bidding contest, an existing licence holder would enjoy preferential treatment over competitors in the case of equal bids.

In January 2004, the European Commission determined that some of the Italian regulations regarding hydroelectric concessions were contrary to EU law. In particular, the European Commission objected to the preference granted to existing holders of licences when renewing concessions (and in the region of Trentino-Alto Adige, to preference given to the operator controlled by the local authorities) as well as to the fact that the regulations provided for the expiration of all concessions in 2029 (and for the region of Trentino-Alto Adige, in 2010), even though these concessions had previously been of perpetual duration.

In 2005, Italy amended the provisions of the Bersani Decree (through Law 266/2005) extending the duration of ENEL’s hydroelectric concessions, and the provisions which accorded preferential treatment to ENEL and all other current licence holders in any bidding contest and postponed the expiration of all concessions for an additional ten years.

As a consequence, on 28th June, 2006, the European Commission decided to close the proceedings in relation to the provisions of Decree No. 79 of 16th March, 1999 and to suspend the proceedings, for the time being, against Italy on the same issue, relating to the regulations in force in Trentino Alto Adige, pending the next judgment of the Italian Constitutional Court. In fact, five regional governments in Italy and the local authorities of the region of Trentino Alto Adige have brought proceedings against these amended regulations before the Italian Constitutional Court, seeking the reinstitution of the original expiry dates for the operations that they control.

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Law 17/2007 (“Mille proroghe”), reversed the extension of ten years as set out in Law 266/2005 accorded to the current hydroelectric concessions of the “Province autonome” of Trento and Bolzano. As a consequence, ENEL’s hydroelectric concessions in the region of Trentino Alto Adige may be terminated prematurely and ENEL may not be able to renew these concessions at all or on favourable terms. This could have a material adverse effect on its business prospects, financial condition and results of operations.

Taxes

Since 1st January, 2001, consumers of electricity services have been subject to three indirect taxes, the first two of which are not applicable to residential customers whose consumption is below certain specified thresholds, qualifying them for a social protection scheme:

– a state tax for residential uses (of €0.0047/kWh) and for other uses (of €0.0031/kWh excluding users with consumption over 1.2 GWh per month);

– additional local taxes that vary from €0.0093/kWh up to a maximum of €0.0204/kWh; and

– value added tax of 20 per cent. for all users with the exception of residential and industrial customers (who are taxed at a rate of 10 per cent.).

Gas Regulation

Italian regulations enacted in May 2000 pursuant to EU directive 98/30 (which mandated the general liberalisation of natural gas markets in the member states) seek to introduce competition into the Italian natural gas market through the liberalisation of the import, export, transport, dispatching, distribution and sale of gas. In 2006, the government proposed a new law (the Bersani Decree) to stimulate distributor aggregations, to fix standard tenders to assign concessions and to foster competition in the Italian natural gas market pursuant to EU directive 2003/55.

Gas Eligible and Non-Eligible Customers

Until 31st December, 2002, only certain large consumers, known as gas eligible customers (“Gas Eligible Customers”), were able to freely choose their supplier of natural gas. During the same period, customers, mainly residential, who did not qualify as Gas Eligible Customers (“Gas Non- Eligible Customers”), were obliged to purchase gas from distributors operating in their local area at a tariff set by the Energy Authority. Since 1st January, 2003, all customers have had direct access to the natural gas system and the right to freely choose their natural gas supplier. However, natural gas suppliers and distributors are still subject to regulation with respect to the tariffs they may charge customers who were considered Gas Non-Eligible Customers at that date.

Transport and storage

Companies engaged in the transport and dispatching of gas must allow access to their gas transport networks to third parties, provided that they have enough capacity and that giving such access is economically and technically feasible. Transport fees are established by the Energy Authority based on proposals from the individual operators.

Operators of natural gas storage facilities must obtain a concession from the Ministry of Economic Development and are required to provide storage services to third parties upon request, provided that they have enough capacity and that giving such storage services is economically and technically feasible. In addition, importers are required to maintain storage reserves equal to 10 per cent. of the gas they import from countries outside the EU.

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Sale and Imports of Gas

The sale of gas to end users is made under an authorisation granted by the Ministry of Economic Development, which both ENEL Gas (“ENEL Gas”) and ENEL Trade (“ENEL Trade”) have obtained. ENEL Trade is also authorised to import gas to be sold to power plants and wholesalers. For each year from 1st January, 2003 to 31st December, 2010, no single operator is allowed to hold a market share higher than 50 per cent. of domestic sales to final customers. In 2004, based on data provided by the Energy Authority, ENEL had a market share in sales of natural gas of approximately 16 per cent. In addition, no single operator is allowed to introduce imported or national gas into the domestic transmission grid in a quantity exceeding a specified percentage of the total, set at 75 per cent. in 2002 and decreasing by two percentage points each year thereafter, to 61 per cent. in 2010. The applicable percentage is calculated net of quantities of gas consumed by the relevant operator or by its controlled or affiliated companies.

The Marzano Law provides incentives for investment in new natural gas pipelines and LNG regasification terminals by exempting the investing entity from the obligation to provide third-party access not less than 80 per cent. of the storage capacity of new storage facilities for a period of not less than 20 years.

The Bersani Decree will, among other things, create incentives for new interconnections, LNG plants and storage by introducing compensation for the local communities which house the infrastructures on their territories.

ENEL expects these investment incentives eventually to lead to an increased supply and as a consequence there will be more competition in the gas market.

Rules Governing Distribution of Gas

The term distribution refers to transport of gas through local networks for delivery to customer premises. Since 1st January, 2002, gas distribution activities may be carried out only by companies that are not otherwise engaged in the natural gas industry, and gas sales to end users may be made only by companies that are not otherwise engaged in the natural gas industry except as importers, producers or wholesalers. A recent resolution of the Italian regulatory authority, published in January 2007, tightened this separation by implementing the principles of accounting and functional unbundling between the network business and the businesses in competition (supply/production companies).

Under Italian regulations, distributors operate under concessions awarded by local authorities pursuant to tender procedures for periods not longer than 12 years. Through service agreements, local authorities may regulate the terms and conditions for the provision of the service and the quality objectives to be achieved. The tenders are awarded based on financial terms, quality and safety standards, investment plans, and technological and management skills offered. Distributors are required to connect to the distribution network any customer who so requests.

Prior to enactment of the Marzano Law, gas distribution concessions awarded prior to May 2000 by means other than competitive tender expired by law at the earlier of their original expiration date or 31st December, 2005, with the expiration date extendible for up to five years under certain conditions. The Marzano Law (art. 1 comma 69), as interpreted by the Ministry of Productive Activities (now Ministry of Economic Development) in November 2004, provided instead that these concessions are to expire at the earlier of their original expiration date or 31st December, 2007, with the expiration date still extendible for up to five years under certain conditions. Under the same law, local authorities have the power to extend the expiration date from 31st December, 2007 to 31st December, 2008. However, certain local authorities do not accept this revision of the expiration date, and passed measures that would terminate gas distribution concessions in their jurisdictions on 31st December, 2005.

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On 23rd February, 2006, the Italian parliament issued a law stating that gas distribution concessions expire by law on the earlier of their original expiration date and 31st December, 2007 or an extended expiration date of 31st December, 2009 under certain conditions. Local authorities may further extend the expiration date by one year. Furthermore, certain gas distribution concessions for southern Italy, partially financed through public funds under a public incentives plan for the use of natural gas in the south of Italy, expire at the later of 21st June, 2012 or 12 years from the entry into force of their approval by the Ministry of Economy and Finance. Finally, gas distribution concessions awarded prior to May 2000 by competitive tender expire at the earlier of their original expiration date or 31st December, 2012. The majority of ENEL’s existing gas distribution concessions are currently due to expire on 31st December, 2009.

Distribution Tariffs and Sales Tariffs for Gas Non-Eligible Customers

In December 2000, pursuant to Italian regulations, the Energy Authority identified tariff criteria that ENEL and other gas distributors and suppliers must apply in setting tariffs for the distribution and supply of gas to Gas Non-Eligible Customers. The tariff criteria for both distribution and supply include a fixed and a variable component reflecting the balance between fixed and variable costs incurred by distributors and suppliers, respectively, and operate to impose a cap on the rates gas distributors and suppliers may charge. The portion of the variable component in the sale tariff relating to the cost of natural gas is revised on a quarterly basis.

For distributors, the tariff criteria generally take into account average capital costs, as determined by the Energy Authority based on a sample of selected operators. However, since June 2002, the Energy Authority has permitted distributors to set their rates based on actually incurred capital costs if such costs can be adequately proven.

The Energy Authority issued new distribution tariffs for the period from October 2004 to September 2008. However, in February 2005, the Administrative Court annulled the parts under deliberation that didn’t permit consideration of new investments and that fixed a constant X factor for the regulatory period. The Energy Authority revised the tariff mechanism introducing the recognition of new investments and a decreasing X factor for the regulatory period. Moreover the X factor was reduced for companies which aggregated other distributors. The new tariff mechanism will have a positive impact on ENEL’s 2007 and 2008 results.

From 2004, distributors are also bound by regulations concerning quality of service. The Energy Authority has introduced penalties for distributors that do not comply with applicable quality of service targets, and a system of bonus payments for distributors who outperform these targets.

For suppliers, prices charged to Gas Non-Eligible Customers were supposed to be freely set from 1st January, 2003. However, in December 2002, the Energy Authority imposed a transitory regime under which suppliers were obliged to continue to supply former Gas Non-Eligible Customers using the tariff criteria established by the Energy Authority and in effect at 31st December, 2002, if the Gas Non-Eligible Customers so requested. In December 2004, the Energy Authority revised the commodity price of tariff for former Gas Non-Eligible Customers in order to reduce the effect of fuel price increases on gas prices. The application of this revision partly reduces gas revenues. In June 2005, the Administrative Tribunal of Lombardy annulled the Energy Authority’s decision in a series of judgments. The Supreme Administrative Court confirmed the annulment by the Administrative Tribunal, and as a consequence the Energy Authority is revising once again the criteria for the period 2005 and 1st Semester of 2006. From July 2006, the commodity price of the tariff was revised once again by the Energy Authority introducing a new mechanism closer to the real supplying costs of the operators.

Environmental Matters

ENEL’s electricity and other operations are subject to extensive environmental regulation, including laws adopted by the Italian parliament or government to implement regulations and directives adopted by the European Union and international agreements on the environment.

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The principal objective of ENEL’s environmental policy is to comply with all relevant legislation and to seek to reduce adverse effects that its activities may have on the environment. Since 1996, ENEL has taken the initiative of publishing an annual environmental report. In 2002, ENEL also started publishing a sustainability report, which contains an environmental section. ENEL believes that environmental performance will represent an increasingly important competitive factor in a liberalised market.

Environmental regulations affecting ENEL’s business primarily relate to air emissions, water pollution, waste disposal, noise and the clean up of contaminated sites. The principal air emissions of fossil-fuelled electricity generation that pollute the atmosphere are sulphur dioxide (“SO2”), nitrogen oxides (“NOx”), and particulate matter. A primary focus of the environmental regulations applicable to ENEL’s business is an effort to reduce these emissions. ENEL has also given particular attention to seeking to minimise the impact of electromagnetic fields and carbon dioxide

(“CO2”) and other greenhouse gas (“GHG”) emissions.

Electromagnetic Fields

The Italian government adopted regulations in 1992 and 1995 relating to exposure to electromagnetic fields applicable to low frequency infrastructure, such as that used for the transmission, distribution and consumption of electricity. These regulations set two types of limits: maximum levels of exposure to electromagnetic fields from new and existing transmission and distribution lines and distribution substations, and minimum distances between transmission or high-voltage distribution lines or substations and residential buildings, office buildings and similarly inhabited areas for lines built after the adoption of the 1992 regulation.

In February 2001, the Italian parliament passed a framework law on electromagnetic field exposure amending these earlier regulations. The 2001 law is intended to protect the general public and workers against alleged potential long-term health effects of exposure to electromagnetic fields generated by both low frequency and high-frequency infrastructures. The law has made it more difficult to install new transmission and distribution lines and substations.

Furthermore, the 2001 law provides for the adoption and implementation of programmes to restructure electricity transmission and distribution lines, substations and high frequency infrastructures, in accordance with maximum exposure levels. In 2003, two governmental decrees were enacted providing for measures to implement the 2001 law and setting maximum exposure levels, precaution levels and quality targets. However, these measures have not yet taken effect, as they require action from the Italian Authority for Environmental Protection that has not yet been taken.

ENEL believes that the costs of complying with these measures, including costs for the related restructuring described above, will not have a material impact on its results of operations. Moreover, because of the 2005 and 2006 disposal of all but 5.12 per cent. of ENEL’s stake in Terna, which owns over 97 per cent. of Italy’s power transmission lines, ENEL is no longer materially affected by regulations relating to electricity transmission. Currently, ENEL only owns power lines for the distribution of electricity.

In addition, the Bersani Decree required the Gestore della Rete to pay ENEL Distribuzione and other owners of transmission lines consideration for the use of the lines which adequately reflects the costs the owners incurred to comply with regulatory requirements.

CO2 Emissions

Both the European Union and Italy are signatories to the Kyoto Protocol that established a market mechanism for the trading of CO2 emission trading rights (the “Kyoto Protocol”), which was signed under the United Nations Framework Convention on Climate Change. In accordance with a burden-sharing agreement among EU member states, Italy has set a target to reduce emissions of CO2 and the other GHGs listed in the Kyoto Protocol over the 2008-2012 period by 6.5 per cent.

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from their 1990 levels. As of 2004, ENEL produced approximately 11 per cent. of total GHG emissions in Italy.

In January 1999, the Italian government introduced a carbon tax. Under the current Italian legislation, the amount of the tax, which is based on fossil fuel consumption, although initially scheduled to increase on an annual basis from 1999 to 2005, has been frozen at the level for 1999. The relevant EU directives provide for a periodic review of this tax, including its possible abolition. ENEL and other European electricity companies believe that with the introduction of the emission trading rules from January 2005, the carbon tax should be abolished in order to avoid market distortion and double taxation. In the period between 2003 and 2006, ENEL’s carbon tax liability decreased from approximately €40 million in 2003 and 2004 to €37 million in 2005 and €34 million in 2006.

In implementing the Kyoto Protocol, in December, 2002, the Italian inter-ministerial committee for economic planning updated the guidelines for Italian policies and measures for the reduction of

GHG emissions in order to implement the Kyoto Protocol. These guidelines set targets for CO2 and other GHG emissions to be achieved through measures concerning various sectors of the Italian economy, including a reduction of carbon produced in thermal electricity generation, an increased use of electricity generation from renewable resources and demand-side management to increase the efficiency of energy use. Furthermore, the guidelines promote certain projects aimed at the development of so called clean energy.

In the framework of the Kyoto Protocol, in 2003, the EU adopted an Emission Trading Directive, Directive 2003/87/EC (the “Emission Trading Directive”) establishing a scheme for GHG emission allowance trading. Italian legislation partially implementing this directive came into force at the end of 2004. In October 2004, the EU also passed another directive (the “Linking Directive”), which amended the Emission Trading Directive to allow other flexible mechanisms for limiting GHG emissions. Both the Emission Trading Directive and the Linking Directive have been implemented by Legislative Decree No. 216 of 4th April, 2006.

The Emission Trading Directive requires each member state to submit to the European

Commission a national allocation plan (“NAP”) by which each member state sets CO2 emission levels with regard to regulatory periods of several years. The first regulatory period (2005-2007) is currently ongoing. The Decree of the Ministry of the Environment and of the Ministry of Economic Development dated 23rd February, 2006 allocated to the Group, in accordance with the NAP 2005- 2007, 128.6 million emission allowances. These allocations do not include allowances reserved for new entrants.This allocation is not sufficient to meet ENEL’s production needs and ENEL estimates that it will be required to purchase between 25 and 30 million allowances on the market by the end of the regulatory period 2005-2007. The shortage has been fully hedged.

With regard to the second regulatory period (2008-2012), the Italian Government adopted on 18th December, 2006 the PNA 2008-2012 (published on the Official Bulletin on 13th February, 2007). According to the PNA 2008-2012, 201.7 million allowances will be granted to the Group. These allowances do not include allowances reserved for new entrants. It should be noted that the PNA 2008-2012 provides for a significant reduction of emission allowances, equal to 14.1 metric tonnes of CO2, with respect to the previous period. This reduction is entirely allocated on the thermoelectric and refinery sectors. As the PNA 2008-2012 is currently in the process of being assessed by the European Commission, ENEL is not able to predict whether the final allocation for the period 2008-2012 will be sufficient to meet ENEL’s production needs. However, on the basis of the current version of the PNA 2008-2012, it appears that ENEL will be required to undertake significant actions or to purchase a large amount of allowances in order to comply with the Emission Trading Directive.

ENEL’s verified emissions in 2005-2006 were over 19 million tonnes higher than the allowances allocated. The shortage has been fully hedged. A shortage is also expected for 2007, but again has already been fully hedged.

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The Viesgo Group has been assigned emission quotas for its existing installations of 3.9 million,

3.4 million and 2.65 million metric tons of CO2 for the years 2005, 2006 and 2007, respectively.

The Spanish NAP for the period 2005-2007 allocated to ENEL Viesgo the following allowances: 3.9 million tonnes for 2005, 3.4 million tonnes for 2006 and 2.65 million tonnes for 2007. Compared to actual emissions, the shortage was 2.1 million tonnes in 2005. For 2006 and 2007 an additional shortage is expected.

Spain’s NAP for the period 2008-2012 has been approved by the European Commission in February 2007, upon the condition that some changes be made, including a full list of installations and related allocations.

In Slovakia, the allowances allocated to Slovenské Elektràrne (“SE”) for the period 2005-2007 are substantially balanced with emissions.

As for the period 2008-2012, the decision of the European Commission has imposed a 25 per cent. reduction on proposed annual average allocation. SE had been allocated an annual average of 9.2 million tons, but a new redistribution of allocations among installations has not yet been accomplished. ENEL is however confident that SE emissions will be covered.

SO2, NOx and Other Emissions

The principal EU directive on polluting emissions in the atmosphere affecting the electricity industry is the large combustion plants directive (“LCPD”). LCPD requires each EU member state to establish and implement a programme of progressive reduction of total SO2 emissions and total NOx emissions from generation plants licensed before 1st July, 1987, and to establish emission limits for SO2, NOx and particulate matter from individual generation plants licensed after 1st July, 1987. In 2001, new, more stringent emission limits were set in an amendment to the LCPD.

In 1990, Italy established a regulation limiting emissions of polluting substances from thermal plants licensed before 1st July, 1988, that is more strict than the present LCPD and covers a much broader range of pollutants. This regulation required that individual existing thermal plants in Italy reduce emissions to levels similar to those established under the original LCPD for individual plants licensed after 1st July, 1988. This regulation also provided a time schedule for the implementation of environmental compliance measures at existing plants.

Limitations on plant emissions set by Italian legislation are stricter than those envisaged in the LCPD or the 2001 amendment (which Italy has not transposed into the national legislation by means of legislative decree no. 152 of 2006), also requiring gradual reduction targets of aggregate emissions from plants licensed prior to 1st July, 1988 to the end of 2003. ENEL achieved the required reductions in each of the years in which they were applicable including 2003.

In addition, Italy is bound by an EU directive issued in 2001 mandating that member states achieve specified reduction targets on SO2, NOx, volatile organic compounds and NH3 emissions by 2010. To this end, member states were required to establish and implement a programme of emissions reduction in order to achieve the targets set in the directive. Italy is also a member of the Helsinki Protocol and the Oslo Protocol, which require signatory countries to reduce SO2 emissions, and the Sofia Protocol, which requires signatories to reduce NOx emissions. The requirements under these protocols have been reflected in Italian law.

In response to this regulation, in 1990, ENEL implemented a significant programme of environmental measures that affect its entire thermal generation operation. ENEL submitted this programme to the relevant ministries of the Italian Government, including those for industry, environment and health. The programme was approved and provided for modifications to both physical plant and operating practices. ENEL has achieved the targets the Italian regulation provided for the implementation of these environmental compliance measures for generating facilities.

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ENEL is currently in compliance with the limits set by existing legislation. ENEL had received a derogation from the required limits with regard to its plant at Porto Tolle pending its receipt of required authorisations to effect a conversion of the plant to make it fully compliant. While this derogation expired on 31st December, 2004, ENEL expects to complete the conversion of this plant by 2012, and meanwhile is meeting the required limits at the plant through operational means.

In 1997, the Italian parliament imposed a tax on total SO2 and NOx emissions from thermal plants that have a nominal thermal capacity greater than 50 MWh. These plants are the same plants as those regulated under the LCPD. ENEL’s costs in connection with this tax were approximately €8 million in 2003, and €7 million in 2004 and €7 million in 2005.

PCBs and Asbestos

In May 1999, the Italian government adopted a legislative decree concerning the recovery and disposal of electric transformers and other equipment containing polychlorinated biphenyls (“PCBs”). ENEL’s Domestic Infrastructure and Networks Division adopted a disposal plan anticipating this legislation; they are delivering all of their equipment containing PCBs to companies authorised to recover and dispose of such equipment. The phasing out of the equipment containing more than 500 ppm is going to be completed by the end of 2007 (instead of the 2010 regulatory deadline) and the phasing out of the equipment containing less than 500 ppm is planned to be completed by 2010 (instead of the end of the equipment’s life).

ENEL also delivers waste products containing asbestos to specialised companies authorised to treat and dispose of asbestos. Such waste products derive from the clean up of ENEL’s plants it conducts in accordance with its general maintenance and environmental clean-up programmes.

IPPC

Legislative Decree No. 59 of 18th February, 2005, implemented Directive 96/61/EC concerning the integrated prevention and reduction of air pollution (“IPPC”). This directive provides that all the operators will need a single authorisation (AIA) which will replace all the authorisations provided by the previous regulations. The operators will also be requested to adopt the best available technologies (“BAT”) in order to reduce air pollution and other emissions.

The scope of Legislative Decree No.59 of 18th of February, 2005 includes energy activities and, in particular, combustion installations with a rated thermal input exceeding 50 MW. Several ENEL plants follow under IPPC regulation.

Water Pollution Prevention

ENEL is subject to environmental laws and regulations limiting heat and other characteristics of water discharges from its thermal plants and waste water from its hydroelectric plants. The most recent regulations concerning water pollution prevention are represented by Legislative Decree No. 152 of 3rd April, 2006 (“Decree 152/2006”). The aim was to unify, in a single text, the most relevant provisions of the previous regulations on this topic. In particular: • Law No. 36 of 5th January, 1994 on management of hydric resources; • Legislative Decree No. 152 of 11th May, 1999 which regulated the preservation of water from pollution; • Directive No. 2000/60/EC concerning European Community legal action on water pollution. Decree 152/2006 provides for civil, penal and administrative sanctions in case of violations of its provisions.

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Solid Waste Management

Decree 152/2006 sets out the legal framework on waste management. According to Decree 152/06 companies producing and storing waste shall be responsible and chargeable for waste transportation, recycling and disposal.

Site Clearance

Decree 152/2006 sets out the legal framework on contaminated sites. This regime substitutes the previous framework on contaminated sites, set out by Legislative Decree 22/97 and by Ministerial Decree 471/99.

Decree 152/2006 requires the entity responsible for contamination (or for potential contamination) of a site to inform the competent authorities within 24 hours and to carry out the necessary prevention measures. Subsequently, the responsible party is required to perform an investigation to verify if certain thresholds (“CSC”) have been exceeded. If such thresholds have been exceeded, it is necessary to carry out a full characterisation analysis of the site and a site specific risk analysis. If the contamination exceeds the limits identified by the risk analysis (“CSR”), the responsible party is required to perform clean up activities to reduce the contamination below CSR.

In addition, the landowner or manager of the site who is not responsible for the contamination but detects the presence of pollutants exceeding CSC must notify the relevant authorities and undertake the necessary prevention measures. The innocent landowner or manager of the site cannot be required to carry out the subsequent actions described above. The innocent landowner, however, could be required to bear the expenses borne by public authorities for the clean up of the site (i) within the limits of the commercial value of the site and (ii) upon issuance of an administrative act which attests that it was not possible to identify the responsible party or that the actions against him were ineffective.

ENEL does not expect to have significant liability associated with contamination of its sites.

Landscape Safeguard

ENEL has taken the following actions to reduce the environmental impact of its distribution lines: • re-using routes of previous power lines wherever possible; • using towers for ENEL’s high-voltage lines aimed at reducing the environmental and aesthetic impact of towers in non-urban areas of particular landscape value; • acting to reduce the impact of lines in environmentally sensitive or protected areas; • increasing use of underground cables in urban areas where possible; • for medium voltage lines, placing underground cables in urban areas and aerial cables with low environmental impact in other areas with specific environmental value; and • using aerial insulated cables or underground cables in low voltage networks (at present, ENEL has built approximately two-thirds of its network in this way).

ENEL limits use of underground high-voltage cables to urban areas because they are significantly more expensive than aerial cables and the process of installing them may involve significant logistical and environmental problems.

In 2004, ENEL’s medium voltage aerial insulated cables and underground cables represented 39 per cent. of its medium voltage lines (35.9 per cent. in 2000) and ENEL’s low voltage aerial insulated cables and underground cables represented 82.8 per cent. of its low voltage lines (80.6 per cent. in 2000).

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In 2006, due to further work on ENEL’s network, the percentage of overall overhead and underground cables rose to over 40.4 per cent. and approximately 83.7 per cent. for medium and low voltage lines respectively to be compared with 35.9 per cent. and 80.6 per cent. respectively in 2000.

Environmental Registrations, Certifications and Authorisations

ENEL has joined the Eco-Management and Audit Scheme (“EMAS”), a European Union initiative to implement a voluntary environmental management and registration system, which seeks to improve the level of environmental efficiency and disclosure of European industrial companies. Rules concerning EMAS are contained in an EU Regulation issued in 1993. Originally applicable only to individual sites, in 2001 the EU passed a new regulation which extended the scope of the EMAS system to groups of sites and no generation assets, such as distribution networks.

In October 2004, ENEL Distribuzione’s distribution network obtained ISO 14001 environmental certification which was re-confirmed in October 2006. As of December 2006, 385 generating plants that accounted for approximately 80 per cent. of ENEL’s net installed generating capacity had obtained ISO 14001 certification. 141 plants that accounted for approximately 45 per cent. of its net installed capacity have also obtained EMAS registration.

In August 1999, the Italian government enacted a legislative decree implementing the 1996 EU directive on the prevention and reduction of pollution. This legislative decree requires all industrial plants to operate under a new integrated environmental licence by 2007 and to make use of the best techniques available for the prevention and reduction of pollution. The new licences set pollution limits and are reviewed every five years or at any time plants undergo significant renovation. This law, however, allows licences for EMAS registered and ISO 14001 certified plants to be reviewed every eight and six years respectively (instead of five) in light of the stringent requirements that must be met to obtain both EMAS registrations and ISO 14001 certifications. ENEL has filed all necessary applications for licenses within the 31st March, 2007 deadline.

Cost of Compliance

The costs of ensuring compliance with applicable environmental regulation generally consist of costs associated with equipping newly constructed facilities with required technology or modifying existing facilities to comply with applicable regulation. In 2005, environmental capital expenditure was equal to €100 million, representing 3.1 per cent. of ENEL’s total capital expenditure. In 2003 and 2004, environmental capital expenditure totalled €131 million and €112 million respectively representing 3.5 per cent. and 2.9 per cent. respectively of ENEL’s total capital expenditure.

In 2005 current expenses for compliance with environmental regulations were equal to approximately €350 million, of which ENEL spent approximately €260 million on the purchase of “clean” fuels (low-sulphur oil and natural gas) in lieu of standard fuels, when required. These amounts do not include taxes on fuels, polluting emissions and geothermal generation and possible loss of revenues due to compliance with environmental standards that limit the operation of ENEL’s plants.

Discontinued Nuclear Operations

Since November 2000, ENEL has not owned any nuclear power plants. ENEL has not produced electricity from nuclear power plants since 1988. For information on the nuclear power plants ENEL now controls in Slovakia and its nuclear-related initiatives in France, please see “Description of ENEL — Nuclear Liability” below.

Following a national referendum in 1987 in which the Italian electorate expressed its opposition to the use of nuclear power, the Italian government ordered the interruption of power production from nuclear fuels and ENEL ceased operations at its four nuclear plants in Italy, which had an aggregate net installed capacity of 1,500 MW.

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In addition to its nuclear power plants, ENEL owned a 33 per cent. stake in NERSA, an electricity generation company that operated a nuclear power plant located in France (“NERSA”). French and German utilities owned the balance of NERSA. In July 1998, ENEL sold its stake in NERSA. ENEL, however, retained ownership and responsibility for the decommissioning of ENEL’s share of the nuclear fuel in the plant.

Pursuant to the Bersani Decree, ENEL transferred its discontinued nuclear operations to So.g.i.n., then one of its wholly owned subsidiaries. The principal activity of So.g.i.n. will be the decommissioning of the nuclear plants and of ENEL’s share of the nuclear fuel in the NERSA plant in France, including disposal of nuclear fuel and nuclear waste.

Under the Bersani Decree, ENEL was required to transfer to the MEF all the shares of So.g.i.n. at no cost. The transfer was completed on 3rd November, 2000.

In 2005, ENEL entered into agreements that it expects to lead to its entry into the nuclear power generation sector.

Nuclear Liability

Italy is a party to the 1960 Paris Convention on Third Party Liability in the Field of Nuclear Energy (the “Paris Convention”) and the 1963 Brussels Supplementary Convention. Italian law implementing the conventions imposes strict liability for claims relating to nuclear plants and the transportation and storage of nuclear matter. Strict liability under Italian law means that someone does not need to be negligent in order to be found liable. The law imposes strict liability for nuclear accidents only on the entity that is the operator of the plant at the time of the accident. Consequently, ENEL is not liable for any accident that may occur after the transfer to the MEF of So.g.i.n.’s shares on 3rd November, 2000, even if the cause of the accident predates the transfer. Although ENEL is not aware of any accident that predates the transfer, ENEL will remain liable for any accident that occurred before the transfer, even if the damage, or the accident itself, is discovered in the future. The operator of the plant may claim reimbursement from a third party which has contributed to the cause of the accident for any sums it may have to pay but only if that party has accepted liability contractually or is a physical person who has intentionally caused the damage. Italian law implementing the conventions imposes a maximum period of ten years from the date of the accident in which someone claiming damages must bring claims. At the time of ENEL’s transfer of So.g.i.n.’s shares, ENEL represented to the Treasury that it had performed, on a regular basis, every required test on its nuclear plants and that it was not aware, with respect to all nuclear assets owned by So.g.i.n., of any event which might be the source of civil liability for nuclear operations.

Under Italian law and in accordance with the Paris Convention, direct liability arising from nuclear liability claims is limited to 5 million International Monetary Fund Special Drawing Rights (“SDRs”) per accident. Under Italian law, to the extent any claim exceeds 5 million SDRs, someone claiming damages may sue ENEL for only 5 million SDRs and must sue the Italian government for the excess liability up to 175 million SDRs. If the claim is in excess of 175 million SDRs, that person must sue the signatories to the conventions, but then only for the excess liability up to 300 million SDRs. However, the Italian government can claim reimbursement from ENEL for any sums it may have to pay because of a nuclear accident arising from negligence on its part. On 13th May, 2005, 5 million SDRs equalled approximately €5.9 million.

A provision of the Italian law implementing the conventions states that when damage has been caused concurrently by a nuclear accident and the emission of ionising radiation, the liability of the person that caused this radiation is not subject to the limitations described above for damages caused by that emission. This provision does not fully conform to the conventions because it does not specify that the ionising radiation must not independently qualify as a nuclear accident in order to give rise to unlimited liability. ENEL believes, however, that the correct interpretation of Italian law implementing the conventions is that only radiation not classified as a nuclear accident gives rise to liability outside the limitations described above. ENEL believes all emissions of radiation

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originating from within nuclear plants would qualify as nuclear accidents. As a consequence, because ENEL held nuclear material inside its plants, ENEL believes that it could only be liable for amounts beyond the limitations described above under remote circumstances.

In April 2006, ENEL finalised the acquisition of 66 per cent. of Slovenské Elektrárne, the major generating company in Slovakia, which owns nuclear power plants. Slovakia is a party to the Vienna Convention on Civil Liability for Nuclear Damages, under which operators of nuclear installations are subject to strict liability of at least the first U.S. $5 million of claims arising from a nuclear incident, which may be claimed for a period of ten years from the date of the incident, except when national legislation provides for different limits or longer periods. Slovakian law provides for a €75 million maximum liability for the operation of nuclear power plants (€50 million for the transportation of nuclear materials) and a 20-year limit from the date of the nuclear incident for the right to compensation. ENEL has purchased insurance coverage for claims up to ten years through the insurance market and is seeking additional coverage for claims arising after ten years.

On 30th May, 2005, ENEL entered into a memorandum of understanding with EDF regarding an industrial partnership that would permit it to invest in the French electricity market, including in EDF’s latest generation European Pressurised Water Reactor (“EPR”) nuclear power plant project. Under the memorandum of understanding, EDF will be the operator of the power plant, and will bear any related nuclear civil liability.

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DESCRIPTION OF ENEL S.A.

GENERAL

ENEL Finance International S.A. (“ENEL S.A.”) was incorporated for an unlimited duration as a public limited liability company (société anonyme) under the laws of Luxembourg on 3rd July, 1997. The registered office of ENEL S.A. is 35 boulevard du Prince Henri, L-1724, Luxembourg and its telephone number is +352 26 86 13 20. It is registered with the Luxembourg trade and companies register under number B60.086. ENEL S.A. is owned as to 100 per cent. directly by ENEL. The business address of ENEL S.A. is at 35, boulevard du Prince Henri, L-1724, Luxembourg.

CORPORATE PURPOSE

According to article 3 of the articles of incorporation of ENEL S.A. (in its most recent version (statuts coordonnés) dated 25th November, 2002 which may be inspected during the normal business hours at the Luxembourg trade and companies register where copies may be obtained free of charge), the object of ENEL S.A. is the holding of participations, in any form whatsoever, in Luxembourg and foreign companies, the acquisition by purchase, subscription, or in any other manner as well as the transfer by sale, exchange or otherwise of stock, bonds, debentures, notes and other securities of any kind, and the ownership, administration, development and management of its portfolio. ENEL S.A. may also hold interest in partnerships. ENEL S.A. may borrow in any form and proceed to the issue of bonds and debentures.

In a general fashion ENEL S.A. may grant assistance to affiliated companies, take any controlling or supervisory measures and carry out any operation which it may deem useful in the accomplishment and development of its purposes.

ENEL S.A. may further carry out any commercial, industrial or financial operations, as well as any transactions on real estate or on moveable property.

ENEL S.A. is a corporate taxpayer subject to common tax law and does not fall in the scope of the holding company law of 31st July, 1929.

PRINCIPAL ACTIVITIES

It is intended that ENEL S.A. shall continue to operate as a financing company for the Group, raising funds through bond issuances, loans and other facilities. ENEL S.A. will then on-lend such funds to Group companies. As at the date hereof, ENEL S.A. has entered into, as a lender, two loan agreements with two companies of the Group in amounts, respectively, of €307,500,000 and up to U.S.$77 million (increased from U.S.$50 million in February 2007). Such loans have a duration of 12 months each, and are renewed on a yearly basis and bear market interest rates. On 2nd January, 2006, ENEL S.A. entered, as borrower, into a new loan agreement with ENEL Ireland Finance Ltd. for the amount of €57,624,000. The initial term of the loan was 31st December, 2006 but was extended to 31st December, 2007. on 18th January, 2007 ENEL S.A., as lender, entered into a revolving facility agreement with ENEL France S.A. for €15 million, which was increased in April 2007 to €22 million with termination occurring on the earlier of 31st December, 2009 or the date of exit of the borrower from the ENEL Group.

On 18th January, 2007 ENEL S.A., as lender, entered into a revolving facility agreement with Erelis S.A. for €5 million, which was increased in April 2007 to €13.5 million with termination occurring on the earlier of 31st December, 2009 or the date of exit of the borrower from the ENEL Group.

SUBSIDIARIES

ENEL S.A. holds 100 per cent. of ENEL Ireland Finance Ltd., a company established under the laws of Ireland, which acts as a financing company for the companies of the Group. The

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shareholders’ equity of ENEL Ireland Finance Ltd. as at 31st December, 2006 was equal to €1,291,271,232.

SHARE CAPITAL

The share capital of ENEL S.A. amounts to €1,391,900,230 and is represented by 139,190,023 shares with a nominal value of €10 each.

As at 31st December, 2006 shareholders’ equity comprised issued and paid in capital of €1,391,900,230, legal reserves of €12,432,880, non-distributable reserves of €14,824,000 (in accordance with article 174bis of the Luxembourg Income Tax Law), and profits for 2005 of €44,907,152.

During 2006, ENEL S.A. had a loss equal to €633,000.

MEMBERS OF THE BOARD OF DIRECTORS

ENEL S.A. is managed by a Board of Directors composed of four members, appointed by the general meeting of shareholders, who may, at any time, remove them. The Board of Directors is invested with broad powers to perform all acts of administration and disposition in compliance with the corporate objects of ENEL S.A.

ENEL S.A. may be bound by the joint signatures of any two directors or by the joint or single signatures of any person to whom such signatory power shall have been delegated by the board of directors.

As at the date hereof, the members of the Board of Directors are:

(i) Mr. Carlo Santoiemma, born in Matera (Italy) on 25th March, 1967;

(ii) Mr. Claudio Machetti, born in Rome on 30th October, 1958;

(iii) Mme Sophie Jacquet, born in Messancy (Belgium) on 7th May, 1974; and

(iv) Mr. Gabriele Frea, born in Rome on 7th May, 1967.

On 26th April, 2007, Mr Claudio Machetti was appointed as chairman of the board of directors of ENEL S.A., in accordance with article 64(2) of the Luxembourg Act dated 10th August, 1915 on commercial companies, as amended.

The business addresses of each of ENEL S.A.’s current board of directors is that of ENEL S.A.’s registered office at 35 boulevard du Prince Henri, L-1724, Luxembourg.

Conflicts of Interest

As at the date of this Offering Circular, the above mentioned members of the Board of Directors and the principal officers of ENEL S.A. do not have potential conflicts of interests between any duties to ENEL and their private interests or other duties.

EMPLOYEES

As at the date hereof, ENEL S.A. has one employee.

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BOOK-ENTRY CLEARANCE SYSTEMS

The information set out below is subject to any change in or reinterpretation of the rules, regulations and procedures of DTC, Euroclear or Clearstream, Luxembourg (together, the “Clearing Systems”) currently in effect. The information in this section concerning the Clearing Systems has been obtained from sources that the Issuers and the Guarantor believe to be reliable, but none of the Issuers, the Guarantor, nor any Dealer takes any responsibility for the accuracy thereof. Investors wishing to use the facilities of any of the Clearing Systems are advised to confirm the continued applicability of the rules, regulations and procedures of the relevant Clearing System. None of the Issuers, the Guarantor, nor any other party to the Agency Agreement will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Notes held through the facilities of any Clearing System or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

Book-entry Systems

DTC

DTC has advised the Issuers and the Guarantor that it is a limited purpose trust company organised under the New York Banking Law, a “banking organisation” within the meaning of the New York Banking Law, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to Section 17A of the Exchange Act. DTC holds securities that its participants (“Participants”) deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerised book-entry changes in Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organisations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC System is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”).

Under the rules, regulations and procedures creating and affecting DTC and its operations (the “Rules”), DTC makes book-entry transfers of Registered Notes among Direct Participants on whose behalf it acts with respect to Notes accepted into DTC’s book-entry settlement system (“DTC Notes”) as described below and receives and transmits distributions of principal and interest on DTC Notes. The Rules are on file with the Securities and Exchange Commission. Direct Participants and Indirect Participants with which beneficial owners of DTC Notes (“Owners”) have accounts with respect to the DTC Notes similarly are required to make book-entry transfers and receive and transmit such payments on behalf of their respective Owners. Accordingly, although Owners who hold DTC Notes through Direct Participants or Indirect Participants will not possess Registered Notes, the Rules, by virtue of the requirements described above, provide a mechanism by which Direct Participants will receive payments and will be able to transfer their interest with respect of the DTC Notes.

Purchases of DTC Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the DTC Notes on DTC’s records. The ownership interest of each actual purchaser of each DTC Note (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participant’s records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the DTC Notes are to be accomplished by entries made on the books of

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Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in DTC Notes, except in the event that use of the book-entry system for the DTC Notes is discontinued.

To facilitate subsequent transfers, all DTC Notes deposited by Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. The deposit of DTC Notes with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the DTC Notes; DTC’s records reflect only the identity of the Direct Participants to whose accounts such DTC Notes are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Redemption notices shall be sent to Cede & Co. If less than all of the DTC Notes within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. will consent or vote with respect to DTC Notes. Under its usual procedures, DTC mails an Omnibus Proxy to the relevant Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the DTC Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal and interest payments on the DTC Notes will be made to DTC. DTC’s practice is to credit Direct Participants’ accounts on the due date for payment in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on the due date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name”, and will be the responsibility of such Participant and not of DTC or the relevant Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the relevant Issuer, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants.

Under certain circumstances, including if there is an Event of Default under the Notes, DTC will exchange the DTC Notes for definitive Registered Notes, which it will distribute to its Participants in accordance with their proportionate entitlements and which, if representing interests in a Rule 144A Global Note, will be legended as set forth under “Subscription and Sale and Selling and Transfer Restrictions”.

Since DTC may only act on behalf of Direct Participants, who in turn act on behalf of Indirect Participants, any Owner desiring to pledge DTC Notes to persons or entities that do not participate in DTC, or otherwise take actions with respect to such DTC Notes, will be required to withdraw its Registered Notes from DTC as described below.

Euroclear and Clearstream, Luxembourg

Euroclear and Clearstream, Luxembourg each hold securities for their customers and facilitate the clearance and settlement of securities transactions by electronic book-entry transfer between their respective account holders. Euroclear and Clearstream, Luxembourg provide various services including safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg also deal with

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domestic securities markets in several countries through established depository and custodial relationships. Euroclear and Clearstream, Luxembourg have established an electronic bridge between their two systems across which their respective participants may settle trades with each other.

Euroclear and Clearstream, Luxembourg customers are world-wide financial institutions, including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Indirect access to Euroclear and Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an account holder of either system.

Book-entry Ownership of and Payments in respect of DTC Notes

The relevant Issuer may apply to DTC in order to have any Tranche of Notes represented by a Registered Global Note accepted in its book-entry settlement system. Upon the issue of any such Registered Global Note, DTC or its custodian will credit, on its internal book-entry system, the respective nominal amounts of the individual beneficial interests represented by such Registered Global Note to the accounts of persons who have accounts with DTC. Such accounts initially will be designated by or on behalf of the relevant Dealer. Ownership of beneficial interests in such a Registered Global Note will be limited to Direct Participants or Indirect Participants, including the respective depositaries of Euroclear and Clearstream, Luxembourg. Ownership of beneficial interests in a Registered Global Note will be shown on, and the transfer of such ownership will be effected only through, records maintained by DTC or its nominee (with respect to the interests of Direct Participants) and the records of Direct Participants (with respect to interests of Indirect Participants).

Payments in U.S. dollars of principal and interest in respect of a Registered Global Note registered in the name of DTC’s nominee will be made to the order of such nominee as the registered holder of such Note. In the case of any payment in a currency other than U.S. dollars, payment will be made to the Exchange Agent on behalf of DTC’s nominee and the Exchange Agent will (in accordance with instructions received by it) remit all or a portion of such payment for credit directly to the beneficial holders of interests in the Registered Global Note in the currency in which such payment was made and/or cause all or a portion of such payment to be converted into U.S. dollars and credited to the applicable Participant’s account.

The relevant Issuer expects DTC to credit accounts of Direct Participants on the applicable payment date in accordance with their respective holdings as shown in the records of DTC unless DTC has reason to believe that it will not receive payment on such payment date. The relevant Issuer also expects that payments by Participants to beneficial owners of Notes will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers, and will be the responsibility of such Participant and not the responsibility of DTC, the Principal Paying Agent, the Registrar or the relevant Issuer. Payments of principal, premium, if any, and interest, if any, on Notes to DTC is the responsibility of the relevant Issuer.

Transfers of Notes Represented by Registered Global Notes

Transfers of any interests in Notes represented by a Registered Global Note within DTC, Euroclear and Clearstream, Luxembourg will be effected in accordance with the customary rules and operating procedures of the relevant clearing system. The laws in some States within the United States require that certain persons take physical delivery of securities in definitive form. Consequently, the ability to transfer Notes represented by a Registered Global Note to such persons may depend upon the ability to exchange such Notes for Notes in definitive form. Similarly, because DTC can only act on behalf of Direct Participants in the DTC system who in turn act on behalf of Indirect Participants, the ability of a person having an interest in Notes represented by a Registered Global Note to pledge such Notes to persons or entities that do not participate in the DTC system or to otherwise take action in respect of such Notes may depend upon the ability to exchange such Notes for Notes in definitive form. The ability of any holder of Notes represented by

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a Registered Global Note to resell, pledge or otherwise transfer such Notes may be impaired if the proposed transferee of such Notes is not eligible to hold such Notes through a direct or indirect participant in the DTC system.

Subject to compliance with the transfer restrictions applicable to the Registered Notes described under “Subscription and Sale and Selling and Transfer Restrictions”, cross-market transfers between DTC, on the one hand, and directly or indirectly through Clearstream, Luxembourg or Euroclear accountholders, on the other, will be effected by the relevant clearing system in accordance with its rules and through action taken by the Registrar, the Fiscal Agent and any custodian (“Custodian”) with whom the relevant Registered Global Notes have been deposited.

On or after the Issue Date for any Series, transfers of Notes of such Series between accountholders in Clearstream, Luxembourg and Euroclear and transfers of Notes of such Series between participants in DTC will generally have a settlement date three business days after the trade date (T+3). The customary arrangements for delivery versus payment will apply to such transfers.

Cross-market transfers between accountholders in Clearstream, Luxembourg or Euroclear and DTC participants will need to have an agreed settlement date between the parties to such transfer. Because there is no direct link between DTC, on the one hand, and Clearstream, Luxembourg and Euroclear, on the other, transfers of interests in the relevant Registered Global Notes will be effected through the Registrar, the Principal Paying Agent and the Custodian receiving instructions (and where appropriate certification) from the transferor and arranging for delivery of the interests being transferred to the credit of the designated account for the transferee. In the case of cross- market transfers, settlement between Euroclear or Clearstream, Luxembourg accountholders and DTC participants cannot be made on a delivery versus payment basis. The securities will be delivered on a free delivery basis and arrangements for payment must be made separately.

DTC, Clearstream, Luxembourg and Euroclear have each published rules and operating procedures designed to facilitate transfers of beneficial interests in Registered Global Notes among participants and accountholders of DTC, Clearstream, Luxembourg and Euroclear. However, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued or changed at any time. None of the Issuers, the Guarantor, the Agents and any Dealer will be responsible for any performance by DTC, Clearstream, Luxembourg or Euroclear or their respective direct or indirect participants or accountholders of their respective obligations under the rules and procedures governing their operations and none of them will have any liability for any aspect of the records relating to or payments made on account of beneficial interests in the Notes represented by Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial interests.

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TAXATION

The statements herein regarding taxation are based on the laws in force as at the date of this Offering Circular and are subject to any changes in law occurring after such date, which changes could be made on a retroactive basis. The following summary does not purport to be a comprehensive description of all the tax considerations which may be relevant to a decision to subscribe for, purchase, own or dispose of the Notes and does not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities or commodities) may be subject to special rules. Prospective purchasers of the Notes are advised to consult their own tax advisers concerning the overall tax consequences of their ownership of the Notes.

TAXATION IN THE REPUBLIC OF ITALY

The following is a summary of current Italian law and practice relating to the taxation of the Notes. Prospective Noteholders who may be unsure as to their tax position should seek their own professional advice.

Legislative Decree No. 344 of 12th December, 2003 (“Decree No. 344”) published in the Italian Official Gazette No. 291 of 16th December, 2003 (Ordinary Supplement No. 190), effective as of 1st January, 2004 introduced the reform of taxation of corporations and of certain financial income amending the Italian Income Taxes Consolidated Code. Legislative Decree No. 247 of 19th November, 2005 (known as the “Correttivo IRES”) published in the Italian Official Gazette No. 280 of 1st December, 2005, amended Decree No. 344 on certain provisions related to the taxation of corporations and of certain financial income.

In the near future, also on the basis of the approval of Law Proposal No. 1762 of 4th October, 2006, currently under discussion by the Italian Parliament, the Italian Government could be authorised to introduce a fixed withholding tax on capital gains and financial incomes, to be levied at a rate not exceeding 20 per cent., which may impact upon the tax regime of the Notes.

Tax treatment of Notes issued by ENEL

Decree 239 provides for the applicable regime with respect to the tax treatment of interest, premium and other income (including the difference between the redemption amount and the issue price) from notes falling within the category of bonds (obbligazioni) or debentures similar to bonds (titoli similari alle obbligazioni) issued, inter alia, by companies listed on an Italian regulated market, provided that the notes are issued for an original maturity of not less than 18 months.

Italian resident Noteholders

Where the Notes have an original maturity of at least 18 months, and an Italian resident Noteholder is (i) an individual not engaged in an entrepreneurial activity to which the Notes are connected (unless he has opted for the application of the risparmio gestito regime – see under “Capital gains tax” below), (ii) a non-commercial partnership, (iii) a non-commercial private or public institution, or (iv) an investor exempt from Italian corporate income taxation, interest, premium and other income relating to the Notes, accrued during the relevant holding period, are subject to a withholding tax, referred to as “imposta sostitutiva”, levied at the rate of 12.5 per cent. In the event that the Noteholders described under (i) or (iii) above are engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva applies as a provisional tax.

Where an Italian resident Noteholder is a company or similar commercial entity, or a permanent establishment in Italy of a foreign company to which the Notes are effectively connected, and the Notes are deposited with an authorised intermediary, interest, premium and other income from the Notes will not be subject to imposta sostitutiva, but must be included in the relevant Noteholder’s

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income tax return and are therefore subject to general Italian corporate taxation (and, in certain circumstances, depending on the “status” of the Noteholder, also to imposta regionale sulle attività produttive, the regional tax on productive activities (“IRAP”)).

Under the current regime provided by Law Decree No. 351 of 25th September, 2001 converted into law with amendments by Law No. 410 of 23rd November, 2001, as clarified by the Italian Ministry of Economics and Finance through Circular No. 47/E of 8th August, 2003, payments of Interest in respect of the Notes made to Italian resident real estate investment funds established pursuant to Article 37 of Legislative Decree No. 58 of 24th February, 1998, as amended and supplemented, and Article 14-bis of Law No. 86 of 25th January, 1994 are subject neither to substitute tax nor to any other income tax in the hands of a real estate investment fund.

If the investor is resident in Italy and is an open-ended or closed-ended investment fund (the “Fund”) or a SICAV, and the Notes are held by an authorised intermediary, interest, premium and other income accrued during the holding period on the Notes will not be subject to imposta sostitutiva, but must be included in the management results of the Fund accrued at the end of each tax period, subject to an ad-hoc substitute tax (the “Collective Investment Fund Tax”) applicable at a 12.5 per cent. rate.

Where an Italian resident Noteholder is a pension fund (subject to the regime provided for by Article 17 of Legislative Decree No. 252 of 5th December, 2005, and the Notes are deposited with an authorised intermediary, interest, premium and other income relating to the Notes and accrued during the holding period will not be subject to imposta sostitutiva, but must be included in the result of the relevant portfolio accrued at the end of the tax period, to be subject to a 11 per cent. substitute tax.

Pursuant to Decree 239, imposta sostitutiva is applied by banks, SIMs, fiduciary companies, SGRs, stockbrokers and other entities identified by a decree of the Ministry of Finance (each an “Intermediary”).

An Intermediary must (i) be resident in Italy or be a permanent establishment in Italy of a non- Italian resident financial intermediary and (ii) intervene, in any way, in the collection of interest or in the transfer of the Notes. For the purpose of the application of the imposta sostitutiva, a transfer of Notes includes any assignment or other act, either with or without consideration, which results in a change of the ownership of the relevant Notes or in a change of the Intermediary with which the Notes are deposited.

Where the Notes are not deposited with an Intermediary, the imposta sostitutiva is applied and withheld by any entity paying interest to a Noteholder.

Non-Italian resident Noteholders

Where the Noteholder is a non-Italian resident, an exemption from the imposta sostitutiva applies provided that the non-Italian resident beneficial owner is either (i) resident, for tax purposes, in a country which allows for a satisfactory exchange of information with Italy; or (ii) an international body or entity set up in accordance with international agreements which have entered into force in Italy; or (iii) a Central Bank or an entity which manages, inter alia, the official reserves of a foreign State; or (iv) an institutional investor which is resident in a country which allows for a satisfactory exchange of information with Italy, even if it does not possess the status of taxpayer in its own country of residence.

The imposta sostitutiva will be applicable at the rate of 12.5 per cent. (or at the reduced rate provided for by the applicable double tax treaty, if any) to interest, premium and other income paid to Noteholders who are resident, for tax purposes, in countries which do not allow for a satisfactory exchange of information with Italy.

In order to ensure gross payment, non-Italian resident Noteholders must be the beneficial owners of the payments of interest, premium or other income and (i) deposit, directly or indirectly, the

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Notes with a resident bank or SIM or a permanent establishment in Italy of a non-Italian resident bank or SIM or with a non-Italian resident entity or company participating in a centralised securities management system which is in contact, via computer, with the Ministry of Economics and Finance and (ii) file with the relevant depository, prior to or concurrently with the deposit of the Notes, a statement of the relevant Noteholder, which remains valid until withdrawn or revoked, in which the Noteholder declares to be eligible to benefit from the applicable exemption from imposta sostitutiva. Such statement, which is not requested for international bodies or entities set up in accordance with international agreements which have entered into force in Italy nor in case of foreign Central Banks or entities which manage, inter alia, the official reserves of a foreign State, must comply with the requirements set forth by Ministerial Decree of 12th December, 2001.

Early Redemption

Without prejudice to the above provisions, in the event that Notes issued by an Italian resident Issuer are redeemed, in full or in part, prior to 18 months from the Issue Date, the relevant Issuer will be required to pay a tax equal to 20 per cent. of the interest and other amounts accrued up to the time of the early redemption. Such payment will be made by the relevant Issuer and will not affect the amounts to be received by the Noteholder by way of interest or other amounts, if any, under the Notes.

Notes with an original maturity of less than 18 months

Interest payments relating to Notes issued with an original maturity of less than 18 months are subject to a withholding tax, levied at the rate of 27 per cent. pursuant to Article 26, first paragraph, of Presidential Decree No. 600 of 29th September, 1973, as subsequently amended.

Where the Noteholder is (i) an individual engaged in an entrepreneurial activity to which the Notes are connected, (ii) an Italian company or a similar Italian commercial entity, (iii) a permanent establishment in Italy of a foreign entity to which the Notes are effectively connected, (iv) an Italian commercial partnership, or (v) an Italian commercial private or public institution, such withholding tax is a provisional withholding tax. In all other cases, including when the Noteholder is a non- Italian resident, the withholding tax is a final withholding tax. In case of non-Italian resident Noteholders, the 27 per cent. withholding tax rate may be reduced by the applicable double tax treaty, if any.

Tax treatment of Notes issued by ENEL S.A.

Decree No. 239 also provides for the applicable regime with respect to the tax treatment of interest, premium and other income (including the difference between the redemption amount and the issue price) from notes falling within the category of bonds (obbligazioni) or debentures similar to bonds (titoli similari alle obbligazioni) issued, inter alia, by non-Italian resident issuers.

Italian resident Noteholders

Pursuant to Decree 239, an imposta sostitutiva equal to (a) 12.5 per cent. in relation to Notes issued for an original maturity of not less than 18 months, and (b) 27 per cent, in relation to Notes issued for an original maturity of less than 18 months, is applied on interest, premium and other income relating to the Notes issued by a non-Italian resident Issuer accrued during the relevant holding period, if received by (i) an Italian individual not engaged in an entrepreneurial activity to which the Notes are connected (unless he has opted for the application of the risparmio gestito regime – see under “Capital gains tax” below), (ii) an Italian non-commercial partnership, (iii) an Italian non-commercial private or public institution, or (iv) an Italian investor exempt from Italian corporate income taxation. If the Noteholders described under (i) and (iii) above are engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva applies as a provisional tax.

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Where an Italian resident Noteholder is a company or similar commercial entity, or a permanent establishment in Italy of a foreign company to which the Notes are effectively connected and the Notes are deposited with an Intermediary, interest, premium and other income from the Notes will not be subject to imposta sostitutiva, but must be included in the relevant Noteholder’s annual income tax return and are therefore subject to general Italian corporate taxation (and, in certain circumstances, depending on the “status” of the Noteholder, also to IRAP).

If the Notes are issued for an original maturity of less than 18 months, the 27 per cent. imposta sostitutiva is also applied to any payment of interest or premium relating to the Notes made to (i) Italian pension funds (subject to the regime provided for by Article 17 of Legislative Decree No. 252 of 5th December, 2005, (ii) Italian open-ended or closed-ended investment funds, and (iii) Italian SICAVs.

For those categories of Noteholder not specifically mentioned in this paragraph, please refer to paragraph “Tax treatment of Notes issued by ENEL – Italian resident Noteholders” above.

Non-Italian resident Noteholders

No Italian imposta sostitutiva is applied on payments to a non-Italian resident Noteholder of interest or premium relating to Notes issued by a non-Italian resident Issuer provided that the non-Italian resident Noteholder declares itself to be a non-Italian resident according to Italian tax regulations.

Early Redemption

Without prejudice to the above provisions, in the event that Notes issued by a non-Italian resident Issuer and having an original maturity of at least 18 months are redeemed, in full or in part, prior to 18 months from the Issue Date, Italian resident Noteholders will be required to pay, by way of a withholding to be applied by the Italian intermediary responsible for payment of interest or the redemption of the Notes, an amount equal to 20 per cent. of the interest and other amounts accrued up to the time of the early redemption.

Payments made by an Italian resident guarantor

With respect to payments on the Notes made to Italian resident Noteholders by an Italian resident guarantor, in accordance with one interpretation of Italian tax law, any payment of liabilities equal to interest and other proceeds from the Notes may be subject to a provisional withholding tax at a rate of 12.5 per cent. pursuant to Presidential Decree No. 600 of 29th September, 1973, as subsequently amended. In case of payments to non-Italian resident Noteholders, the withholding tax may be applied at (i) 12.5 per cent. if the payment is made to non-Italian resident Noteholders, other than those mentioned under (ii); or (ii) 27 per cent. if payments are made to non-Italian resident Noteholders who are resident in “tax haven” countries (as defined and listed in Ministerial Decree 23rd January, 2002, as amended from time to time). Double taxation treaties entered into by Italy may apply allowing for a lower (on, in certain cases, nil) rate of withholding tax. In accordance with another interpretation, any such payment made by the Italian resident guarantor will be treated, in certain circumstances, as a payment by the relevant Issuer and will thus be subject to the tax regime described in the previous paragraphs of this section.

Atypical securities

Interest payments relating to Notes that are not deemed to fall within the category of bonds (obbligazioni) or debentures similar to bonds (titoli similari alle obbligazioni) may be subject to a withholding tax, levied at the rate of 27 per cent. For this purpose, debentures similar to bonds are securities that incorporate an unconditional obligation to pay, at maturity, an amount not lower than their nominal value.

Where the Notes are issued by an Italian resident Issuer and the Noteholder is (i) an Italian individual engaged in an entrepreneurial activity to which the Notes are connected, (ii) an Italian

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company or a similar Italian commercial entity, (iii) a permanent establishment in Italy of a foreign entity, (iv) an Italian commercial partnership or (v) an Italian commercial private institution, such withholding tax is a provisional withholding tax. In all other cases, including when the Noteholder is a non-Italian resident, the withholding tax is a final withholding tax.

If the Notes are issued by a non-Italian resident Issuer, the 27 per cent. withholding tax mentioned above does not apply to interest payments made to a non-Italian resident Noteholder and to an Italian resident Noteholder which is (i) a company or similar commercial entity (including the Italian permanent establishment of foreign entities), (ii) a commercial partnership, or (iii) a commercial private or public institution.

Capital gains tax

Any gain obtained from the sale or redemption of the Notes would be treated as part of the taxable income (and, in certain circumstances, depending on the “status” of the Noteholder, also as part of the net value of the production for IRAP purposes) if realised by an Italian company or a similar commercial entity (including the Italian permanent establishment of foreign entities to which the Notes are connected) or Italian resident individuals engaged in an entrepreneurial activity to which the Notes are connected.

Where an Italian resident Noteholder is an individual not engaged in an entrepreneurial activity to which the Notes are connected and certain other persons, any capital gain realised by such Noteholder from the sale or redemption of the Notes would be subject to an imposta sostitutiva, levied at the current rate of 12.5 per cent. Noteholders may set-off losses with gains.

In respect of the application of imposta sostitutiva, taxpayers may opt for one of the three regimes described below.

Under the tax declaration regime (regime della dichiarazione), which is the default regime for Italian resident individuals not engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva on capital gains will be chargeable, on a cumulative basis, on all capital gains, net of any incurred capital loss, realised by the Italian resident individual Noteholder holding the Notes not in connection with an entrepreneurial activity pursuant to all sales or redemptions of the Notes carried out during any given tax year. Italian resident individuals holding the Notes not in connection with an entrepreneurial activity must indicate the overall capital gains realised in any tax year, net of any relevant incurred capital loss, in the annual tax return and pay imposta sostitutiva on such gains together with any balance income tax due for such year. Capital losses in excess of capital gains may be carried forward against capital gains realised in any of the four succeeding tax years.

As an alternative to the tax declaration regime, Italian resident individual Noteholders holding the Notes not in connection with an entrepreneurial activity may elect to pay the imposta sostitutiva separately on capital gains realised on each sale or redemption of the Notes (the “risparmio amministrato” regime). Such separate taxation of capital gains is allowed subject to (i) the Notes being deposited with Italian banks, SIMs or certain authorised financial intermediaries and (ii) an express election for the risparmio amministrato regime being timely made in writing by the relevant Noteholder. The depository is responsible for accounting for imposta sostitutiva in respect of capital gains realised on each sale or redemption of the Notes (as well as in respect of capital gains realised upon the revocation of its mandate), net of any incurred capital loss, and is required to pay the relevant amount to the Italian tax authorities on behalf of the taxpayer, deducting a corresponding amount from the proceeds to be credited to the Noteholder or using funds provided by the Noteholder for this purpose. Under the risparmio amministrato regime, where a sale or redemption of the Notes results in a capital loss, such loss may be deducted from capital gains subsequently realised, within the same securities management, in the same tax year or in the following tax years up to the fourth. Under the risparmio amministrato regime, the Noteholder is not required to declare the capital gains in the annual tax return.

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Any capital gains realised by Italian resident individuals holding the Notes not in connection with an entrepreneurial activity who have entrusted the management of their financial assets, including the Notes, to an authorised intermediary and have opted for the so-called “risparmio gestito” regime will be included in the computation of the annual increase in value of the managed assets accrued, even if not realised, at year end, subject to a 12.5 per cent. substitute tax, to be paid by the managing authorised intermediary. Under the risparmio gestito regime, any depreciation of the managed assets accrued at year end may be carried forward against increase in value of the managed assets accrued in any of the four succeeding tax years. Under the risparmio gestito regime, the Noteholder is not required to declare the capital gains realised in the annual tax return.

Any capital gains realised by a Noteholder who is an Italian open-ended or a closed-ended investment fund or a SICAV will be included in the result of the relevant portfolio accrued at the end of the tax period, to be subject to the 12.5 per cent. substitute tax.

Any capital gains realised by a Noteholder who is an Italian pension fund (subject to the regime provided for by Article 17 of Legislative Decree No. 252 of 5th December, 2005, will be included in the result of the relevant portfolio accrued at the end of the tax period, to be subject to the 11 per cent. substitute tax.

Capital gains realised by non-Italian-resident Noteholders from the sale or redemption of Notes issued by an Italian resident Issuer and traded on regulated markets are not subject to the imposta sostitutiva.

Capital gains realised by non-Italian resident Noteholders from the sale or redemption of Notes issued by an Italian resident Issuer not traded on regulated markets are not subject to the imposta sostitutiva, provided that the effective beneficiary: (i) is resident in a country which allows for a satisfactory exchange of information with Italy; or (ii) is an international entity or body set up in accordance with international agreements which have entered into force in Italy; or (iii) is a Central Bank or an entity which manages, inter alia, the official reserves of a foreign State; or (iv) is an institutional investor which is resident in a country which allows for a satisfactory exchange of information with Italy, even if it does not possess the status of taxpayer in its own country of residence.

If none of the conditions above is met, capital gains realised by non-Italian resident Noteholders from the sale or redemption of Notes issued by an Italian resident Issuer not traded on regulated markets are subject to the imposta sostitutiva at the current rate of 12.5 per cent.

In any event, non-Italian resident individuals or entities without a permanent establishment in Italy to which the Notes issued by an Italian resident Issuer are connected that may benefit from a double taxation treaty with Italy providing that capital gains realised upon the sale or redemption of Notes are to be taxed only in the country of tax residence of the recipient, will not be subject to imposta sostitutiva in Italy on any capital gains realised upon the sale or redemption of Notes issued by an Italian resident Issuer.

Capital gains realised by non-Italian resident Noteholders from the sale or redemption of Notes issued by a non-Italian resident Issuer are not subject to Italian taxation, provided that the Notes are held outside Italy.

Inheritance and gift taxes

Pursuant to Law Decree No. 262 of 3rd October, 2006 (“Decree No. 262”), converted into Law No. 286 of 24th November, 2006, the transfers of any valuable asset (including shares, bonds or other securities) as a result of death or donation are taxed as follows:

(i) transfers in favour of spouses and direct descendants or direct ancestors are subject to an inheritance and gift tax applied at a rate of 4 per cent. on the value of the inheritance or the gift exceeding €1,000,000;

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(ii) transfers in favour of relatives to the fourth degree or relatives-in-law to the third degree are subject to an inheritance and gift tax at a rate of 6 per cent. on the entire value of the inheritance or the gift. Transfers in favour of brothers/sisters are subject to the 6 per cent. inheritance and gift tax on the value of the inheritance or the gift exceeding €100.000; and

(iii) any other transfer is subject to an inheritance and gift tax applied at a rate of 8 per cent. on the entire value of the inheritance or the gift.

Transfer tax

Pursuant to Italian Legislative Decree No. 435 of 21st November, 1997, which partly amended the regime set forth by Royal Decree No. 3278 of 30th December, 1923, the transfer of the Notes may be subject to the Italian transfer tax, which is currently payable at a rate between a maximum of €0.0083 and a minimum of €0.00465 per €51.65 (or fraction thereof) of the price at which the Notes are transferred. Where the transfer tax is applied at a rate of €0.00465 per €51.65 (or fraction thereof) of the price at which Notes are transferred, the transfer tax cannot exceed €929.62.

However, the transfer tax does not apply, inter alia, to: (i) contracts entered into on regulated markets relating to the transfer of securities, including contracts between the intermediary and its principal or between qualified intermediaries; (ii) off-market transactions regarding securities listed on regulated markets, provided that the contracts are entered into (a) between banks, SIMs or other financial intermediaries regulated by Decree No. 415 of 23rd July, 1996 as superseded by Decree No. 58 of 24th February, 1998, or stockbrokers; (b) between the subjects mentioned in (a) above, on the one hand, and non-Italian residents, on the other hand; and (c) between the subjects mentioned in (a) above, even if non-resident in Italy, on the one hand, and undertakings for collective investment in transferable securities, on the other hand; (iii) contracts related to sales of securities occurring in the context of a public offering (offerta pubblica di vendita) aimed at the listing on regulated markets, or involving financial instruments already listed on regulated markets, (iv) contracts regarding securities not listed on a regulated market entered into between the authorised intermediaries referred to in (ii)(a) above, on the one hand, and non-Italian residents on the other hand.

EU Savings Directive

Under EC Council Directive 2003/48/EC on the taxation of savings income (“EU Savings Directive”), Member States are required, from 1st July, 2005, to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State. However, for a transitional period, Belgium, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories including Switzerland have agreed to adopt similar measures (a withholding system in the case of Switzerland) with effect from the same date.

Implementation in Italy of the EU Savings Directive

Italy has implemented the EU Savings Directive through Legislative Decree No. 84 of 18th April, 2005 (Decree No. 84). Under Decree No. 84, subject to a number of important conditions being met, in the case of interest paid starting from 1st July, 2005 to individuals which qualify as beneficial owners of the interest payment and which are resident for tax purposes in another Member State, Italian qualified paying agents shall not apply the withholding tax and shall report to the Italian Tax Authorities details of the relevant payments and personal information on the individual beneficial owner. Such information is transmitted by the Italian Tax Authorities to the competent foreign tax authorities of the State of residence of the beneficial owner.

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LUXEMBOURG TAXATION

The following summary is of a general nature and is included herein solely for information purposes. It is based on the laws presently in force in Luxembourg, though it is not intended to be, nor should it be construed to be, legal or tax advice. Prospective investors in the Notes should therefore consult their own professional advisers as to the effects of state, local or foreign laws, including Luxembourg tax law, to which they may be subject.

Please be aware that the residence concept used under the respective headings below applies for Luxembourg income tax assessment purposes only. Any reference in the present section to a tax, duty, levy, impost or other charge or withholding of a similar nature refers to Luxembourg tax law and/or concepts only. Also, please note that a reference to Luxembourg income tax encompasses corporate income tax (impôt sur le revenu des collectivités), municipal business tax (impôt commercial communal), a solidarity surcharge (contribution au fonds de chômage) as well as personal income tax (impôt sur le revenu) generally. Investors may further be subject to net wealth tax (impôt sur la fortune) as well as other duties, levies or taxes. Corporate income tax, municipal business tax as well as the solidarity surcharge invariably apply to most corporate taxpayers resident of Luxembourg for tax purposes. Individual taxpayers are generally subject to personal income tax and the solidarity surcharge. Under certain circumstances, where an individual taxpayer acts in the course of the management of a professional or business undertaking, municipal business tax may apply as well.

TAXATION OF THE HOLDERS OF NOTES

Withholding Tax

(i) Non-resident holders of Notes

Under Luxembourg general tax laws currently in force, there is no withholding tax on payments of principal, premium or interest made to non-resident holders of Notes, except where the Notes entitle to an interest which is dependent on the profits distributed by the Issuer, nor on accrued but unpaid interest in respect of the Notes, nor is any Luxembourg withholding tax payable upon redemption or repurchase of the Notes held by non-resident holders of Notes.

However, under the Luxembourg laws of 21st June, 2005 (the “Laws”), implementing the Council Directive 2003/48/EC of 3rd June, 2003 on taxation of savings income in the form of interest payments and ratifying the treaties entered into by Luxembourg and certain dependent and associated territories of EU Member States (the “Territories”), payments of interest or similar income made or ascribed by a paying agent established in Luxembourg to or for the immediate benefit of an individual beneficial owner or a residual entity, as defined by the Laws, which are resident of, or established in, an EU Member State (other than Luxembourg) or one of the Territories will be subject to a withholding tax unless the relevant recipient has adequately instructed the relevant paying agent to provide details of the relevant payments of interest or similar income to the fiscal authorities of his/her/its country of residence or establishment, or, in the case of an individual beneficial owner, has provided a tax certificate issued by the fiscal authorities of his/her country of residence in the required format to the relevant paying agent. Where withholding tax is applied, it will be levied at a rate of 15 per cent. during the first three-year period starting 1st July, 2005, at a rate of 20 per cent. for the subsequent three-year period and at a rate of 35 per cent. thereafter. Responsibility for the withholding of the tax will be assumed by the Luxembourg paying agent. Payments of interest under the Notes coming within the scope of the Laws would at present be subject to withholding tax of 15 per cent..

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(ii) Resident holders of Notes

Under Luxembourg general tax laws currently in force, there is no withholding tax on payments of principal, premium or interest made to Luxembourg resident holders of Notes, except where the Notes entitle to an interest which is dependent on the profits distributed by the Issuer, nor on accrued but unpaid interest in respect of Notes, nor is any Luxembourg withholding tax payable upon redemption or repurchase of Notes held by Luxembourg resident holders of Notes.

However, under the Luxembourg law of 23rd December, 2005 (the “Law”) payments of interest or similar income made or ascribed by a paying agent established in Luxembourg to or for the immediate benefit of an individual beneficial owner who is resident of Luxembourg will be subject to a withholding tax of 10 per cent.. Such withholding tax will be in full discharge of income tax if the beneficial owner is an individual acting in the course of the management of his/her private wealth. Responsibility for the withholding of the tax will be assumed by the Luxembourg paying agent. Payments of interest under the Notes coming within the scope of the Law would be subject to withholding tax of 10 per cent..

Income Taxation

(i) Non-resident holders of Notes

A non-resident holder of Notes, not having a permanent establishment or fixed place of business in Luxembourg to which such Notes are attributable, is not subject to Luxembourg income tax on interest accrued or received, redemption premiums or issue discounts, under the Notes. A gain realised by such non-resident holder of Notes on the sale or disposal, in any form whatsoever, of the Notes is further not subject to Luxembourg income tax.

A non-resident corporate holder of Notes or an individual holder of Notes acting in the course of the management of a professional or business undertaking, who has a permanent establishment or fixed place of business in Luxembourg to which such Notes are attributable, is subject to Luxembourg income tax on interest accrued or received, redemption premiums or issue discounts, under the Notes and on any gains realised upon the sale or disposal, in any form whatsoever, of the Notes.

(ii) Resident holders of Notes

A corporate holder of Notes must include any interest accrued or received, any redemption premium or issue discount, as well as any gain realised on the sale or disposal, in any form whatsoever, of the Notes, in its taxable income for Luxembourg income tax assessment purposes. The same inclusion applies to an individual holder of Notes, acting in the course of the management of a professional or business undertaking.

A holder of Notes that is governed by the law of 31st July, 1929, on pure holding companies, as amended, or by the laws of 30th March, 1988 and 20th December, 2002 on undertakings for collective investment, as amended, is neither subject to Luxembourg income tax in respect of interest accrued or received, any redemption premium or issue discount, nor on gains realised on the sale or disposal, in any form whatsoever, of the Notes.

An individual holder of Notes, acting in the course of the management of his/her private wealth, is subject to Luxembourg income tax in respect of interest received, redemption premiums or issue discounts, under the Notes, except if withholding tax has been levied on such payments in accordance with the Law. A gain realised by an individual holder of Notes, acting in the course of the management of his/her private wealth, upon the sale or disposal, in any form whatsoever, of Notes is not subject to Luxembourg income tax, provided this sale or disposal took place more than six months after the Notes were acquired. However, any

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portion of such gain corresponding to accrued but unpaid interest income is subject to Luxembourg income tax.

Net Wealth Taxation

A corporate holder of Notes, whether it is resident of Luxembourg for tax purposes or, if not, it maintains a permanent establishment or a fixed place of business in Luxembourg to which such Notes are attributable, is subject to Luxembourg wealth tax on such Notes, except if the holder of Notes is governed by the law of 31st July, 1929 on pure holding companies, as amended, or by the laws of 30th March, 1988 and 20th December, 2002 on undertakings for collective investment, as amended, or is a securitisation company governed by the law of 22nd March, 2004 on securitisation, or a capital company governed by the law of 15th June, 2004 on venture capital vehicles.

An individual holder of Notes, whether he/she is resident of Luxembourg or not, is not subject to Luxembourg wealth tax on such Notes.

Other Taxes

Neither the issuance nor the transfer of Notes will give rise to any Luxembourg stamp duty, value added tax, issuance tax, registration tax, transfer tax or similar taxes or duties.

Where a holder of Notes is a resident of Luxembourg for tax purposes at the time of his/her death, the Notes are included in his/her taxable estate for inheritance tax assessment purposes.

Gift tax may be due on a gift or donation of Notes if embodied in a Luxembourg deed or recorded in Luxembourg.

U.S. Taxation

The applicable Final Terms relating to any Tranche of Notes, all or a portion of which are to be offered or sold to, or for the account or benefit of, a U.S. person will set forth information regarding the United States Federal income tax treatment of any such Notes. U.S. persons considering the purchase of Notes should consult their own tax advisers concerning the application of United States Federal income tax laws to their particular situations as well as any consequences of the purchase, ownership and disposition of Notes arising under the laws of any other taxing jurisdictions.

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SUBSCRIPTION AND SALE AND SELLING AND TRANSFER RESTRICTIONS

The Dealers have in an amended and restated programme agreement (as amended or supplemented from time to time, the “Programme Agreement”) dated 4th May, 2007 agreed with the Issuers and the Guarantor a basis upon which they or any of them may from time to time agree to purchase Notes. Any such agreement will extend to those matters stated under “Form of the Notes” and “Terms and Conditions of the Notes”. In the Programme Agreement, the Issuers and the Guarantor have agreed to reimburse the Dealers for certain of their expenses in connection with the establishment and any future update of the Programme and the issue of Notes under the Programme and to indemnify the Dealers against certain liabilities incurred by them in connection therewith.

Selling Restrictions

United States

The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.

The Notes in bearer form are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986 and regulations thereunder.

In connection with any Notes which are offered or sold outside the United States in reliance on an exemption from the registration requirements of the Securities Act provided under Regulation S (“Regulation S Notes”), each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it will not offer, sell or deliver such Regulation S Notes (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the completion of the distribution, as determined and certified by the relevant Dealer or, in the case of an issue of Notes on a syndicated basis, the relevant lead manager, of all Notes of the Tranche of which such Regulation S Notes are a part, within the United States or to, or for the account or benefit of, U.S. persons. Each Dealer has further agreed, and each further Dealer appointed under the Programme will be required to agree, that it will send to each dealer to which it sells any Regulation S Notes during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Regulation S Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.

Until 40 days after the later of the commencement of the offering and the completion of the distribution of any Series of Notes, an offer or sale of such Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act.

If so specified in the applicable Final Terms, Dealers may arrange for the resale of Notes to QIBs pursuant to Rule 144A and each such purchaser of Notes is hereby notified that the Dealers may be relying on the exemption from the registration requirements of the Securities Act provided by Rule 144A. The minimum aggregate principal amount of Notes which may be purchased by a QIB pursuant to Rule 144A is U.S.$100,000 (or the approximate equivalent thereof in any other currency). To the extent that the relevant Issuer or the Guarantor (where ENEL is not the relevant Issuer) is not subject to or does not comply with the reporting requirements of Section 13 or 15(d) of the Exchange Act or the information furnishing requirements of Rule 12g3-2(b) thereunder, the relevant Issuer or the Guarantor (where ENEL is not the relevant Issuer) has agreed to furnish to

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holders of Notes and to prospective purchasers designated by such holders, upon request, such information as may be required by Rule 144A(d)(4).

Each Dealer has agreed that it will have in effect, in connection with the offer and sale of the Notes in bearer form during any restricted period under the United States Internal Revenue Code of 1986, as amended relating thereto, procedures reasonably designed to ensure that its employees or agents who are directly engaged in selling the Notes are aware that the Notes cannot be offered or sold during such restricted periods to a U.S. person or a person within the United States.

Each issuance of Index Linked Notes or Dual Currency Notes shall be subject to such additional U.S. selling restrictions as the relevant Issuer and the relevant Dealer may agree as a term of the issuance and purchase of such Notes, which additional selling restrictions shall be set out in the applicable Final Terms.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of Notes to the public in that Relevant Member State, except that it may, with effect from and including the Relevant Implementation Date, make an offer of Notes to the public in that Relevant Member State:

(a) in (or in Germany, where the offer starts within) the period beginning on the date of publication of a prospectus in relation to those Notes which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive and ending on the date which is 12 months after the date of such publication;

(b) at any time to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities;

(c) at any time to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or

(d) at any time in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of Notes to the public” in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

United Kingdom

Each Dealer has represented and agreed and each further Dealer appointed under the Programme will be required to represent and agree that:

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(i) in relation to any Notes having a maturity of less than one year, (a) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (b) it has not offered or sold and will not offer or sell any Notes other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses where the issue of the Notes would otherwise constitute a contravention of Section 19 of the Financial Services and Markets Act 2000 (the “FSMA”) by the Issuer;

(ii) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue of any Notes in circumstances in which Section 21(1) of the FSMA does not apply to the relevant Issuer or the Guarantor; and

(iii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.

France

Each of the Dealers, the Issuers and the Guarantor has represented and agreed that:

(i) it has only made and will only make an offer of Notes to the public (appel public à l’épargne) in France in the period beginning (i) when a prospectus in relation to those Notes has been approved by the Autorité des marchés financiers (“AMF”), on the date of its publication or, (ii) when a prospectus has been approved by the competent authority of another Member State of the European Economic Area which has implemented the EU Prospectus Directive 2003/71/EC, on the date of notification of such approval to the AMF and ending at the latest on the date which is 12 months after the date of the approval of this Offering Circular, all in accordance with articles L.412-1 and L.621-8 of the French Code monétaire et financier and the Règlement général of the AMF; and

(ii) it has not offered or sold and will not offer or sell, directly or indirectly, Notes to the public in France, and it has not distributed or caused to be distributed and will not distribute or cause to be distributed to the public in France, the Offering Circular, the relevant Final Terms or any other offering material relating to the Notes and such offers, sales and distributions have been and will be made in France only to (a) providers of investment services relating to portfolio management for the account of third parties, and/or (b) qualified investors (investisseurs qualifiés) other than individuals, all as defined in, and in accordance with, articles L.411-1, L.411-2 and D.411-1 of the French Code monétaire et financier.”

Luxembourg

In addition to the cases described in the European Economic Area selling restrictions in which the Issuer can make an offer of Notes to the public in a Relevant Member State (including the Grand Duchy of Luxembourg), the Issuer can also make an offer of Notes to the public in the Grand Duchy of Luxembourg:

(a) at any time, to national and regional governments, central banks, international and supranational institutions (such as the International Monetary Fund, the European Central Bank, the European Investment Bank) and other similar international organisations;

(b) at any time, to legal entities which are authorised or regulated to operate in the financial markets (including, credit institutions, investment firms, other authorised or regulated financial institutions, insurance companies, undertakings for collective investment and their

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management companies, pension and retirement funds and their management companies, commodity dealers) as well as entities not so authorised or regulated whose corporate purpose is solely to invest in securities; and

(c) at any time, to certain natural persons or small and medium-sized enterprises (as defined in the Luxembourg act dated 10th July, 2005 relating to prospectuses for securities implementing the Prospectus Directive into Luxembourg law) recorded in the register of natural persons or small and medium-sized enterprises considered as qualified investors as held by the Commission de surveillance du secteur financier, as competent authority in Luxembourg in accordance with the Prospectus Directive.

Republic of Italy

The offering of Notes has not been registered pursuant to Italian securities legislation and, accordingly, no Notes may be offered, sold or delivered, nor may copies of the Offering Circular or of any other document relating to any Notes be distributed in the Republic of Italy, except:

(i) to professional investors (“operatori qualificati”) (the “Professional Investors”), as defined in Article 31, second paragraph, of CONSOB (the Italian Securities Exchange Commission) Regulation No.11522 of 1st July, 1998 as amended (“Regulation No. 11522”); or

(ii) in circumstances which are exempted from the rules on solicitation of investments pursuant to Article 100 of Legislative Decree No. 58 of 24th February, 1998 (the “Financial Services Act”) and Article 33, first paragraph, of CONSOB Regulation No.11971 of 14th May, 1999, as amended (“Regulation No. 11971”).

Any offer, sale or delivery of the Notes or distribution of copies of this Offering Circular or any other document relating to the Notes in the Republic of Italy under (i) or (ii) above must be:

(a) made by an investment firm, bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the Financial Services Act, Regulation No. 11522 and Legislative Decree No.385 of 1st September, 1993 (the “Banking Act”); and

(b) in compliance with Article 129 of the Banking Act and the implementing guidelines of the Bank of Italy, as amended from time to time, pursuant to which the Bank of Italy may request information on the issue or the offer of securities in the Republic of Italy; and

(c) in accordance with any other applicable laws and regulations or requirement imposed by CONSOB.

Please note that in accordance with Article 100-bis of the Financial Services Act, where no exemption from the rules on solicitation of investments applies under (i) and (ii) above, the subsequent distribution of the Notes on the secondary market in Italy must be made in compliance with the public offer and the prospectus requirement rules provided under the Financial Services Act and Regulation No. 11971. Failure to comply with such rules may result in the sale of such Notes being declared null and void and in the liability of the intermediary transferring the financial instruments for any damages suffered by the investors.

Japan

The Notes have not been and will not be registered under the Securities and Exchange Law of Japan (the “Securities and Exchange Law”) and each Dealer has agreed and each further Dealer appointed under the Programme will be required to agree that it will not offer or sell any Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organised under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan except pursuant to an exemption from the registration requirements of, and

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otherwise in compliance with, the Securities and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

General

Each Dealer has agreed and each further Dealer appointed under the Programme will be required to agree that it will (to the best of its knowledge and belief) comply with all applicable securities laws and regulations in force in any jurisdiction in which it purchases, offers, sells or delivers Notes or possesses or distributes this Offering Circular and will obtain any consent, approval or permission required by it for the purchase, offer, sale or delivery by it of Notes under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers, sales or deliveries and none of the Issuers, the Guarantor nor any of the other Dealers shall have any responsibility therefor.

None of the Issuers, the Guarantor nor the Dealers represents that Notes may at any time lawfully be sold in compliance with any applicable registration or other requirements in any jurisdiction, or pursuant to any exemption available thereunder, or assumes any responsibility for facilitating such sale.

With regard to each Tranche, the relevant Dealer will be required to comply with such other restrictions as the relevant Issuer and the relevant Dealer shall agree and as shall be set out in the applicable Final Terms.

Transfer Restrictions

As a result of the following restrictions, purchasers of Notes in the United States are advised to consult legal counsel prior to making any purchase, offer, sale, resale or other transfer of such Notes.

Each purchaser of an interest in Registered Notes or person wishing to transfer an interest from one Registered Global Note to another or from global to definitive form or vice versa, will be required to acknowledge, represent and agree as follows (terms used in this paragraph that are defined in Rule 144A or in Regulation S are used herein as defined therein):

(i) that (a) it is a QIB, purchasing (or holding) the Notes for its own account or for the account of one or more QIBs and it is aware that any sale to it is being made in reliance on Rule 144A or (b) it is outside the United States and is not a U.S. person;

(ii) that the Notes are being offered and sold in a transaction not involving a public offering in the United States within the meaning of the Securities Act, and that the Notes have not been and will not be registered under the Securities Act or any other applicable U.S. State securities laws and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as set forth below;

(iii) that, if it holds an interest in a Rule 144A Global Note, if in the future it decides to resell, pledge or otherwise transfer the Notes or any beneficial interests in the Notes, it will do so only (a) to the relevant Issuer or any affiliate thereof, (b) inside the United States to a person whom the seller reasonably believes is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A, (c) outside the United States in compliance with Rule 903 or Rule 904 under the Securities Act, (d) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available) or (e) pursuant to an effective registration statement under the Securities Act, in each case in accordance with all applicable U.S. state securities laws;

(iv) it will, and will require each subsequent holder to, notify each person to whom it transfers the Notes of the resale restrictions referred to in paragraph (iii) above, if then applicable;

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(v) that Notes initially offered in the United States to QIBs will be represented by one or more Rule 144A Global Notes and that Notes offered outside the United States in reliance on Regulation S will be represented by one or more Regulation S Global Notes;

(vi) that the Notes, other than the Regulation S Global Notes, will bear a legend to the following effect unless otherwise agreed to by the relevant Issuer:

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER APPLICABLE U.S. STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (A) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER”(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) PURCHASING THE SECURITIES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ONE OR MORE QUALIFIED INSTITUTIONAL BUYERS; (B) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE SECURITIES EXCEPT IN ACCORDANCE WITH THE AGENCY AGREEMENT AND (1) TO THE ISSUER OR ANY AFFILIATE THEREOF, (2) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 903 OR RULE 904 UNDER THE SECURITIES ACT, (4) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND ANY OTHER JURISDICTION; AND (C) IT AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.

THIS SECURITY AND RELATED DOCUMENTATION (INCLUDING, WITHOUT LIMITATION, THE AGENCY AGREEMENT REFERRED TO HEREIN) MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, WITHOUT THE CONSENT OF, BUT UPON NOTICE TO, THE HOLDERS OF SUCH SECURITIES SENT TO THEIR REGISTERED ADDRESSES, TO MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS SECURITY TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO RESALES OR OTHER TRANSFERS OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY SHALL BE DEEMED, BY ITS ACCEPTANCE OR PURCHASE HEREOF, TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT (EACH OF WHICH SHALL BE CONCLUSIVE AND BINDING ON THE HOLDER HEREOF AND ALL FUTURE HOLDERS OF THIS SECURITY AND ANY SECURITIES ISSUED IN EXCHANGE OR SUBSTITUTION THEREFOR, WHETHER OR NOT ANY NOTATION THEREOF IS MADE HEREON).”;

(vii) if it is outside the United States and is not a U.S. person, that if it should resell or otherwise transfer the Notes prior to the expiration of the distribution compliance period (defined as 40 days after the later of the commencement of the offering and the completion of the distribution of each Tranche of Notes as certified by the relevant Dealer, in the case of a non- syndicated issue, or the relevant lead manager, in the case of a syndicated issue, and except in either case in accordance with Regulation S under the Securities Act, it will do so only (a)(i) outside the United States in compliance with Rule 903 or 904 under the Securities Act or (ii) to a QIB in compliance with Rule 144A and (b) in accordance with all applicable U.S. State securities laws; and it acknowledges that the Regulation S Global Notes will bear a

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legend to the following effect unless otherwise agreed to by the relevant Issuer:

“THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER APPLICABLE U.S. STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE AGENCY AGREEMENT AND PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT. THIS LEGEND SHALL CEASE TO APPLY UPON THE EXPIRY OF THE PERIOD OF 40 DAYS AFTER THE LATER OF THE COMMENCEMENT OF THE OFFERING AND THE COMPLETION OF THE DISTRIBUTION OF ALL THE NOTES OF THE TRANCHE OF WHICH THIS NOTE FORMS PART.”; and

(viii) that the relevant Issuer and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that if any of such acknowledgements, representations or agreements made by it are no longer accurate, it shall promptly notify the relevant Issuer; and if it is acquiring any Notes as a fiduciary or agent for one or more accounts it represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such account.

No sale of Legended Notes in the United States to any one purchaser will be for less than U.S.$100,000 (or its foreign currency equivalent) principal amount and no Legended Note will be issued in connection with such a sale in a smaller principal amount. If the purchaser is a non-bank fiduciary acting on behalf of others, each person for whom it is acting must purchase at least U.S.$100,000 (or its foreign currency equivalent) of Registered Notes.

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GENERAL INFORMATION

Authorisation

ENEL has obtained all necessary consents, approval and authorisations in Italy in connection with the Programme. The establishment, increase in size and update of the Programme by ENEL have been duly authorised by resolutions of the Board of Directors of ENEL dated 23rd June, 2000, 26th January, 2001, 1st October, 2003, 29th September, 2005 and 9th April, 2007. The Officers in charge of the Administration, Financing and Control Department and responsible for International Structured Finance of ENEL respectively are authorised on the basis of the delegation of powers given to them on 24th April, 2007 to update the Programme. The giving of the Guarantee has been duly authorised by resolution of the Board of Directors of ENEL dated 26th January, 2001, 23rd June, 2003, 29th September, 2005 and 9th April, 2007. The issue of Notes by ENEL under the Programme will be authorised prior to each issue of Notes, by resolutions of the shareholders and Board of Directors of ENEL.

The issue of Notes by ENEL S.A. under the Programme has been authorised by a board resolution of ENEL S.A. dated 26th April, 2007.

Listing of Notes on the Irish Stock Exchange

Application has been made to IFSRA to approve this document as a base prospectus. Application has also been made to the Irish Stock Exchange for Notes issued under the Programme to be admitted to the Official List and trading on its regulated market. The Irish Stock Exchange’s regulated market is a regulated market for the purposes of the Investment Services Directive (Directive 93/22/EEC) and, after its coming into force and implementation, for purposes of the Markets in Financial Instruments Directive (Directive 2004/39/EC).

Documents Available

So long as Notes are capable of being issued under the Programme, copies of the following documents will, when published, be available for inspection in hard copy, without charge, from the registered office of the relevant Issuer or the Guarantor and from the specified office of the Paying Agent for the time being in Ireland:

(i) the by-laws (with an English translation thereof) of each Issuer and the Guarantor;

(ii) the Programme Agreement, the Agency Agreement, the Guarantee, the Deeds of Covenant, the Deed Poll and the forms of the Global Notes, the Notes in definitive form, the Receipts, the Coupons and the Talons;

(iii) the consolidated audited financial statements of ENEL as at and for the years ended 31st December, 2005 and 2006 and the non-consolidated audited financial statements of ENEL S.A., as at and for the years ended 31st December, 2005 and 2006 (in each case with an English translation thereof);

(iv) a copy of this Offering Circular;

(v) any future offering circulars, prospectuses, information memoranda and supplements including Final Terms (save that a Final Terms relating to a Note which is neither admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic Area in circumstances where a prospectus is required to be published under the Prospectus Directive will only be available for inspection by a holder of such Note and such holder must produce evidence satisfactory to the relevant Issuer or the Guarantor and the Paying Agent as to its holding of Notes and identity) to this Offering Circular and any other documents incorporated herein or therein by reference; and

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(vi) in the case of each issue of Notes admitted to trading on the Irish Stock Exchange’s regulated market subscribed pursuant to a subscription agreement, the subscription agreement (or equivalent document).

Clearing Systems

The Notes in bearer form have been, and the Notes in registered form will be (if they are to be listed on the Irish Stock Exchange), accepted for clearance through Euroclear and Clearstream, Luxembourg. The appropriate Common Code and ISIN for each Tranche of Bearer Notes allocated by Euroclear and Clearstream, Luxembourg will be specified in the applicable Final Terms. In addition, the relevant Issuer may make an application for any Notes in registered form to be accepted for trading in book-entry form by DTC. The CUSIP and/or CINS numbers for each Tranche of Registered Notes, together with the relevant ISIN and common code, will be specified in the applicable Final Terms. If the Notes are to clear through an additional or alternative clearing system the appropriate information will be specified in the applicable Final Terms.

The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210 Brussels, the address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg and the address of DTC is 55 Water Street, New York, New York 10041.

Material and Significant Change

There has been no material adverse change in the financial position or prospects of ENEL or ENEL and its subsidiaries taken as a whole since 31st December, 2005 or ENEL S.A. since 31st December, 2006. There has been no significant change in the financial or trading position of ENEL or ENEL and its subsidiaries taken as a whole since 31st December, 2006 or ENEL S.A. since 31st December, 2006.

Litigation

Except as set out in this Offering Circular, none of the Issuers, the Guarantor nor any subsidiary of ENEL is or has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuers, the Guarantor or any subsidiary of ENEL is aware) in the 12 months proceeding the date of this document which may have or have in such period had a significant effect on the financial position or profitability of any of the Issuers or the Guarantor.

Auditors

The Auditors of ENEL are KPMG S.p.A., a member of KPMG International, a Swiss cooperative, whose registered office is Via Ettore Petrolini 2, 00197 Roma, Italy. KPMG is an accounting firm registered with CONSOB (the Italian Stockmarket regulator) and with the Registro dei Revisori (the professional body of chartered accountants in Italy). KPMG S.p.A. have audited ENEL’s accounts, without qualification, in accordance with generally accepted auditing standards in Italy and accounting standards applied in accordance with International Financial Reporting Standards for each of the two financial years ended 31st December, 2005 and 31st December, 2006. The auditors of ENEL have no material interest in ENEL.

KPMG Audit S.à.r.l., a member of KPMG International, a Swiss cooperative, whose registered office is 31, Allée Scheffer, L-2520 Luxembourg. KPMG Audit S.à.r.l. is registered with the institut des réviseurs d’entreprises. KPMG Audit S.à.r.l. have audited ENEL S.A.’s accounts, without qualification, in accordance with International Standards on Auditing as adopted by the institut des réviseurs d’entreprises and accounting standards applied in accordance with Luxembourg legal and regulatory requirements (Luxembourg GAAP) for each of the two financial years ended 31st December, 2005 and 31st December, 2006. The auditors of ENEL S.A. have no material interest in ENEL S.A.

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Post-issuance information

The relevant Issuer does not intend to provide any post-issuance information in relation to any issues of Notes.

Dealers transacting with the Issuers or the Guarantor

Certain of the Dealers and their affiliates have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform services to the Issuers, the Guarantor and their affiliates in the ordinary course of business.

Foreign languages used in the Offering Circular

Any foreign language text included within this Offering Circular is for convenience only and does not form part of this Offering Circular.

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THE ISSUERS ENEL – Società per Azioni ENEL Finance International S.A. Viale Regina Margherita 137 35, Boulevard du Prince Henri 00198 Rome L-1724 Luxembourg Italy

PRINCIPAL PAYING AGENT AND TRANSFER AGENT JPMorgan Chase Bank, N. A. Trinity Tower 9 Thomas More Street London E1W 1YT United Kingdom

REGISTRAR JPMorgan Chase Bank, N. A. 4 New York Plaza New York, NY 10004 United States of America

PAYING AGENT AND TRANSFER AGENT Deutsche International Corporate Services (Ireland) Limited Guild House Guild Street IFSC Dublin 1 Ireland

LEGAL ADVISERS To ENEL – Società per Azioni To ENEL Finance International S.A. as to Italian law as to Luxembourg law Allen & Overy Allen & Overy Luxembourg Corso Vittorio Emanuele II, 284 56-58, rue Charles Martel 00186 Rome L-2134 Luxembourg Italy

To the Dealers as to English law Allen & Overy LLP One Bishops Square London E1 6AO United Kingdom

AUDITORS To ENEL – Società per Azioni To ENEL Finance International S.A. KPMG S.p.A. KPMG Audit S.à.r.l. Via Ettore Petrolini 2 31, Allée Scheffer 00197 Roma L-2520 Luxembourg Italy WorldReginfo - 9d5bd196-b9c8-418f-aebc-fa18cac8568b Level: 6 – From: 6 – Thursday, May 3, 2007 – 5:25 pm – mac5 – 3687 Section 07 : 3687 Section 07

DEALERS ABN AMRO Bank N.V. Banca IMI S.p.A. 250 Bishopsgate Corso Matteotti 6 London EC2M 4AA 20121 Milan United Kingdom Italy

Barclays Bank PLC BNP PARIBAS 5 The North Colonnade 10 Harewood Avenue London E14 4BB London NW1 6AA United Kingdom United Kingdom

Citigroup Global Markets Limited Credit Suisse Securities (Europe) Limited Citigroup Centre One Cabot Square Canada Square London E14 4QJ Canary Wharf United Kingdom London E14 5LB United Kingdom

Deutsche Bank AG, London Branch Goldman Sachs International Winchester House Peterborough Court 1 Great Winchester Street 133 Fleet Street London EC2N 2DB London EC4A 2BB United Kingdom United Kingdom

J.P. Morgan Securities Ltd. Lehman Brothers International 125 London Wall (Europe) London EC2Y 5AJ 25 Bank Street United Kingdom London E14 5LE United Kingdom

Mediobanca-Banca di Credito Merrill Lynch International Finanziario S.P.A. Merrill Lynch Financial Centre Piazzetta Enrico Cuccia, 1 2 King Edward Street 20121 Milan London EC1A 1HQ Italy United Kingdom

Morgan Stanley & Co. International plc UBS Limited 25 Cabot Square 1 Finsbury Avenue Canary Wharf London EC2M 2PP London E14 4QA United Kingdom United Kingdom

IRISH LISTING AGENT

Deutsche Bank Luxembourg S.A. 2 Boulevard Konrad Adenauer L-1115 Luxembourg WorldReginfo - 9d5bd196-b9c8-418f-aebc-fa18cac8568b printed by eprintfinancial.com tel: + 44 (0) 20 7613 1800 document number 3687 WorldReginfo - 9d5bd196-b9c8-418f-aebc-fa18cac8568b