Endesa's response to Gas Natural's bid; Endesa: ``Stronger business, greater value.''

The following is a transcript of an interview by UK
based Cantos Communications with Endesa's (NYSE:ELE) CEO and CFO
regarding Gas Natural's bid:

   Endesa's response to Gas Natural's bid 
   Endesa: "Stronger business, greater value."

   Rafael Miranda Robredo, CEO

   Unacceptable offer

   Q: Why aren't you recommending this takeover to your shareholders?
   A: Because Endesa offers higher value and strong growth with less
risk than the offer made by Gas Natural, which is completely
unacceptable, is at a ridiculous price, offers very little cash, no
takeover premium and also the stock component has a huge risk.

   Q: So what's the reaction of your major shareholders so far?
   A: We are starting our roadshow now. Within the next three weeks,
we will see most of our major shareholders. I'm completely convinced
that they will support us, rejecting the offer of Gas Natural, which
is an opportunistic offer.

   Q: Why do you think a takeover by Gas Natural would destroy value?
   A: Because they are proposing selling strategic assets cheaply,
destroying our leading position in Spain. They are also proposing to
destroy our European platform, which clearly will give us growth of
approximately 15 per cent. in the near future. Also, they are
introducing a declining business, which is losing market share, and,
on top of that, there are a lot of execution risks and huge negative
synergies.

   Q: But isn't there some logic in integrating electricity and gas
going forward?
   A: It depends on the integration and with whom you integrate. In
the case of Gas Natural, Gas Natural is mainly a distribution company.
They are not adding value to our project. For example, they do not
have reserves and, also, we are now buying cheaper gas than them.

   Q: Now, you've talked about shareholders losing out, but wouldn't
consumers actually benefit from this deal?
   A: Clearly no, because they are proposing to create a duopoly in
Spain. It would also create monopolies for gas and electricity in
large regions of the country. This would mean that will be a step
backwards in the liberalisation process of Spain. So, clearly, there
is no benefit for consumers.

   Growth prospects

   Q: Why do you believe Endesa is stronger as an independent
company?
   A: Because we are convinced that Endesa will deliver superior
growth and value than the combined entity, with less risk.

   Q: But can you deliver the same growth that can be achieved by a
merger of the two companies?
   A: Absolutely, yes. The growth, in our case, will come from
markets with high potential growth, such as Spain and Portugal, which
will grow at 7 per cent., or our business in Italy that will grow
close to double digits. It will also come from operational
improvements and from our ongoing cost reduction programme that will
deliver us a margin above EUR 500m.

   Q: So what are your mid-term targets?
   A: We have clear targets for the next five years. EBITDA will grow
between 10 per cent. to 11 per cent. and the dividend will grow above
12 per cent.

   "Stronger business, greater value"

   Q: Germany and France have both effectively created "national
champions" in the utility sectors. So why shouldn't Spain?
   A: The combined entity would not be larger than the current
Endesa. In fact, in enterprise value, it would only be 12 per cent.
larger than us, because they propose to dispose of assets. Also, let
me say that, in electricity, they are smaller and weaker.
   I believe that "national championship" is an old-fashioned idea
and probably an anti-competitive idea.

   Q: So why should shareholders stand by this management?
   A: This management is the one that has really created a leading
and respected company in the world. We have been able to maintain our
leadership in Spain even after the liberalisation measures in 1997.
   We have created a platform of growth in Europe, being in the top
five of European utilities. We also have a good business in Latin
America. We have created value for our shareholders and we are
probably now in our best moment.

   Q: And are you looking for a "white knight"?
   A: All I can say is that we know everybody in the industry. We are
very well known by the industry and, of course, I am sure that there
is a lot of interest in this transaction because Endesa is a great
company. Anything could happen, but I'm sure that Endesa has a clear
and great future as an independent company.

   Q: So you're confident that Endesa can retain its independence?
   A: Absolutely, yes.

   Jose - Luis Palomo, CFO

   Valuation and bid structure

   Q: Endesa has characterised the Gas Natural bid as cheap and
hostile, so what would be a fair price for your stock?
   A: Well, I don't want to be specific on the price because I don't
want to put a cap on the valuation of the company for the
shareholders. But the bid that we have on the table, and the price, is
very low. It's clearly very low for the shareholders and the market
has already discounted the offer in less than two weeks.

   Q: So what do you make of the mixed cash/stock bid structure?
   A: It is totally unacceptable. The cash component is very small -
only one third - and the cash is coming from the assets of our
company, so there is no cash component on the offer. And the paper -
that is two thirds - is overvalued paper. It has a lot of risk, and
there is also a risk of flowback.

   Q: So what do you make of the proposal to on-sell some of your
assets to one of your biggest competitors, Iberdrola?
   A: I think it's kind of a rip-off of our shareholders. Those
assets have been earmarked for a large competitor, and they are not
getting the proper value that they should have. Actually, in a public
auction, they would have a much higher value than the one they have
announced.

   Regulatory issues

   Q: Why do you believe Brussels should oversee this bid?
   A: Well, we have received clear advice on how to calculate the
revenues of the company, according to the regulations of mergers and
concentrations with the regulations of the European Union. It is clear
that more than one third of the turnover - more than one third of the
revenues - is outside of Spain, because we have large operations in
Italy and France. So we do not have two thirds in one country.
Therefore, the competitive authorities in this case should be
Brussels.

   Q: So do you feel you'll be disadvantaged by regulators if the bid
doesn't go through?
   A: We do not think so. The regulator has to be fair. They have to
regulate for everybody and they cannot discriminate.
   Maybe just the opposite; the White Paper studies the regulations
and it goes very much along the lines that Endesa has been supporting.

   Returns to shareholders

   Q: Why are you announcing the sale of non-strategic assets? Is
this just to bolster your defence?
   A: Not at all. It is not that we announced the sale of
non-strategic assets. We have already sold other non-strategic assets;
for instance, the telecom assets, for close to EUR 3bn. Therefore, we
have a policy of selling those non-strategic assets and in the last 12
months we have sold more than EUR 3.5bn worth of assets.
   Right now, what we are doing is keeping going with this policy of
selling the non-strategic assets. We have identified another EUR 750m
worth of assets that are going to be sold in the short-term.

   Q: So what are you promising in terms of dividends?
   A: We are promising something that the shareholders are going to
like. We are promising 12 per cent. growth in the dividend, based on
ordinary income, plus 100 per cent. in dividends rising from the
capital gains of the company.

   Q: So why are you announcing specific performance targets for the
first time now?
   A: Well, there is a bad bid on the table right now and we want our
shareholders to evaluate properly the value of Endesa. We want to
share with them the vision that we have for the company and the
targets that we think we can achieve.
   We have identified growth in EBITDA of close to 11 per cent. That
is a EUR 3bn growth in EBITDA. The shareholders should now have this
information, given the transparency that is needed right now.

   Q: And you're saying this management's committed to that?
   A: Absolutely. We are committing our own compensation to those
targets and to achieving the goals that we are now promising to our
shareholders.