ENDESA Will Appeal to the Minister for Industry against the National Energy Commission's (CNE) Decision Regarding Gas Natural's

ENDESA (NYSE: ELE) will lodge an appeal tomorrow with
the Industry Minister directly citing the CNE, contesting the two
decisions adopted yesterday, Tuesday 8 November, by five of the nine
CNE members concerning i) the transfer of gas distribution
installations from Gas Natural SDG to two subsidiaries and ii) Gas
Natural's hostile bid for ENDESA.
   ENDESA considers that the CNE's decisions are distinctly
inconsistent with previous decisions made by that regulatory body in
similar cases. ENDESA also believes that the decisions suggest that
regulated activities can be used to finance operations that go against
the public interest, and that the decisions impose conditions that do
not go no further than the strict legal minimum requirements.
   ENDESA also believes that the procedure followed by the CNE was
patently unorthodox in denying ENDESA access to the bulk of the
existing documentation, preventing ENDESA from practicing a petition
of proof and awarding ENDESA the minimum legal timeframe to launch an
appeal against its decisions.
   In this latter respect, we note that only a few hours before the
appeal timeframe conceded to ENDESA expired, the CNE approved a
resolution proposal of roughly two hundred pages, which suggests that
the final resolution had already been decided upon.

   Separation of Gas Natural's regulated activities

   The first of the two decisions taken by the CNE authorises Gas
Natural to create two subsidiaries destined to takeover the regulated
activities of natural gas transport and distribution that have until
now been controlled by the mother company.
   The CNE's decision is very surprising indeed, especially as the
regulatory body now admits the creation of companies founded more than
a year ago and a transfer of activities that Gas Natural has already
carried out, despite the fact that authorisation should have been
obtained before such a transfer was made.
   Moreover, the authorisation, that was adopted without any
explanation of its technical and /or economic rationale, allows and
approves the transfer of more than three billion euros of regulated
income to other types of activities - essentially the financing of Gas
Natural's takeover bid.
   This transfer - authorised by the CNE - is a direct negation of
the public interest, particularly in respect of the gas markets in
Madrid and Catalonia, and it completely ignores the authorities of
these autonomous regions.

   Authorisation conditioned by the take-over bid

   The second decision adopted by five of the nine CNE board members
yesterday authorises the take-over of ENDESA by Gas Natural, subject
to conditions.
   Examination of the resolution reveals that the CNE adopted the
resolution on the basis of data put forward by Gas Natural, the bulk
of which it describes as "prudent". In this heedless way, the CNE has
given the green light to an operation that will affect 52% of the
regulated income of the gas and electricity sectors based on data
provided - in the main - by only one of the parties involved.
   In addition, the document signed by the CNE asserts that the
majority of the arguments are completely "generic", such that the
resolution, or any other resolution, could have been adopted without
any necessity whatsoever of examining or assessing the risks or
negative effects highlighted by ENDESA.

   Below we enumerate ENDESA's main arguments against the CNE ruling:

   --  The ruling clearly differs from precedents set by the
        regulatory body itself. This lack of consistency is all the
        more surprising if considering that:

       --  The precedents are relatively recent (2001 and 2003).

       --  Case history relates to the same sector and markets as the
            Gas Natural - Endesa bid.

       --  The earlier instances relate to the same companies.

       --  These previous cases generated the same issues and
            uncertainties as the Gas Natural bid for ENDESA in terms
            of the so-called 14th Function: financial viability of the
            transaction, potential for conflict between regulated and
            unregulated businesses, etc.

   Therefore it is surprising that the same regulatory authority
should take contradictory decisions within such as short timeframe in
respect od similar operations taking place in the same sector and
affecting the same companies.

   --  This contradiction generates serious uncertainty surrounding
        the rules of the game governing this and other potential
        corporate mergers since it gives the impression that the body
        of decisions taken by the regulatory organism do not
        constitute a reliable and useful precedent. It also suggests
        that that decision-making process is subject to other variable
        factors or criteria, undermining the credibility of the
        regulatory framework, of legal protection and of the sector
        players' legitimate confidence.

   --  It is surprising that the conditions on the takeover bid are
        restricted to the minimal legal requirements: information
        disclosure obligations, investment in transmission assets,
        etc.

   --  The conditions imposed clearly allow the regulated businesses
        to finance the debt taken on to fund the acquisition. They
        essentially mean that the customers will pay the price of the
        deal, resulting in an inevitable upward pressure on tariffs.

   --  Some of the conditions confirm that the deal poses serious
        uncertainty for ENDESA shareholders, as they significantly
        limit the newco's ability, if the deal goes ahead, to pay
        dividends in the future, calling into question the commitment
        made publicly by Gas Natural to the market just a few short
        weeks ago to pay out Euro 5 billion in dividends through 2009.

   --  In terms of the newco's financial situation, should the deal
        go ahead, the CNE's ruling quotes word for word that "Gas
        Natural has requested Standard & Poor's to determine what
        credit rating it would apply to the newco in the wake of the
        transaction. To this end, Standard & Poor's unofficially
        indicated to Gas Natural that the newco's rating would be
        between a single A and A-. Both group's current financial
        strength and solvency would therefore remain intact although
        at the low end of the range should the final outcome be an A-
        rating". It is astonishing that the CNE should base its
        judgment on something as essential as the newco's financial
        strength on undocumented statements made by the company
        promoting the takeover in question, which is in turn based on
        unofficial information attributed to a ratings agency.

   --  Regarding the transaction the CNE ruling actually states that
        "it is possible that the transaction timeline will not
        coincide with the previously outlined regulatory reforms. On
        the other hand, the fact that the Commission is not in a
        position to guarantee the completion of the new regulation in
        the short term, this cannot and should not be a reason to rule
        against the deal". This statement by the CNE means that the
        takeover bid will determine the course of the future
        regulatory framework.

   --  Finally, we find the 10th condition particularly serious,
        since it leaves the exercise of the so-called 14th Function in
        the hands of the CNE in the event that Gas Natural modifies
        the terms of its bid. The regulatory framework is very clear
        on this issue setting forth exactly when an approval of this
        nature can be requested. In no instance can a decision of this
        nature by taken by the CNE itself.

   --  The CNE ruling does not provide for efficient mechanisms to
        ensure compliance with the conditions imposed, which are
        woefully insufficient in light of the potential damage and
        risks posed to the regulated businesses and, accordingly, to
        the interests of both shareholders and customers.

   --  In any event, the conditions imposed by the CNE, despite their
        limitations and lack of thoroughness, introduce an element of
        uncertainty to the deal which is incompatible with
        guaranteeing protection of shareholder rights and complying
        with applicable securities markets legislation.

   ENDESA to appeal the CNE rulings

   Tomorrow, 10 November 2005, ENDESA's legal services will appeal
the above rulings before the Minister for Industry, Commerce and
Tourism.
   ENDESA trusts that, given the importance of the decisions in
question, the government will rule on the appeal in an expeditious
manner, without applying the period of administrative silence provided
for.
   In addition, ENDESA will lodge a formal complaint with the
competent European authorities in the coming days.

   * This document may contain certain forward-looking statements
regarding anticipated financial and operating results and statistics
that are subject to risks and uncertainties as well as to material
risks, changes and other factors which may be difficult to predict,
including, without limitation, those factors described in the
Documento de Registro de Acciones of Endesa filed within the Comision
Nacional del Mercado de Valores and in the Form 20-F of Endesa filed
within the Securities and Exchange Commission, both for the fiscal
year ended December 31, 2004. For all of these forward-looking
statements, we claim the protection of the safe harbour for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.