Iberdrola : Supplement to the information memorandum relating to the second edition of the Iberdrola Retribución Flexible optional dividend system corresponding to the fiscal year 2018

Julián Martínez-Simancas Secretary of the Board of Directors

Bilbao, 4 January 2019

To the National Securities Market Commission

Subject:Supplement to the information memorandum (documento informativo) relating to the terms and conditions of the second edition of the "Iberdrola Retribución Flexible" optional dividend system corresponding to the fiscal year 2018

Dear Sirs,

Pursuant to article 227 of the restated text of the Securities Market Law approved by the Royal Legislative

Decree 4/2015, of 23 October (texto refundido de la Ley del Mercado de Valores aprobado por el Real Decreto Legislativo 4/2015, de 23 de octubre) and related provisions, and further to our notices of significant event (hecho relevante) filed with this National Commission on 23 October and 18 December 2018 (with official registry numbers 270,765 and 272,762, respectively), we hereby advise you that on the date hereof the matters summarised below regarding the terms and conditions of the second edition of the "Iberdrola Retribución Flexible" optional dividend system corresponding to the fiscal year 2018 have been determined.

In particular, the following matters have been determined in connection with: (a) the implementation of the second paid-up capital increase approved by the General Shareholders' Meeting of Iberdrola, S.A. ("Iberdrola") held on 13 April 2018 under item number eight on the agenda and under the section titled «Common terms and conditions to the dividend distribution and increase in capital resolutions proposed under items number six, seven and eight on the agenda, by virtue of which the new "Iberdrola Flexible Remuneration" system is implemented» (the "Capital Increase") and (b) the distribution of an interim dividend corresponding to the fiscal year 2018 (the "Interim Dividend"):

• (i) The maximum market value of reference for the Capital Increase amounts to 988 million euros. This amount guarantees a gross amount of the Interim Dividend of, at least, 0.150 euros per share.

• (ii) The maximum number of shares to be issued by means of the Capital Increase is 142,169,533.

• (iii) The number of free-of-charge allocation rights required to receive one new share is 45.

• (iv) The maximum nominal amount of the Capital Increase is 106,627,149.75 euros.

• (v) The gross amount of the Interim Dividend per share is 0.151 euros.

NOTICE: This document is a translation of a duly approved Spanish-language document, and is provided for informational purposes only. In the event of any discrepancy between the text of this translation and the text of the original Spanish-language document which this translation is intended to reflect, the text of the original Spanish-language document shall prevail.

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(vi)

The aggregate maximum gross amount of the Interim Dividend is 966,041,979 euros. This amount results from multiplying the total number of outstanding shares of Iberdrola as of the date hereof1 (without deducting Iberdrola's treasury stock) by the gross amount per share previously mentioned (i.e., 0.151 euros).

Likewise, and for the purposes of article 26.1.e) of Royal Decree 1310/2005, of 4 November, which

partially elaborates upon the provisions of Law 24/1988 of 28 July, on the Securities Market, in connection with the admission of securities to trading on official secondary markets, public offers for the sale or subscription of securities and the prospectus required for such purposes (Real Decreto 1310/2005, de 4 de noviembre, por el que se desarrolla parcialmente la Ley 24/1988, de 28 de julio, del Mercado de Valores, en materia de admisión a negociación de valores en mercados secundarios oficiales, de ofertas públicas de venta o suscripción y del folleto exigible a tales efectos), we provide you, attached hereto as an annex, with the supplement to the information memorandum (documento informativo) covered by the notice of significant event filed on 23 October 2018 regarding the second edition of the "Iberdrola Retribución Flexible" optional dividend system corresponding to the fiscal year 2018, which has been approved today.

Please be advised that the summary included above is part of the supplement to the above referred information memorandum, and should therefore be read in conjunction with such supplement.

This information is provided to you for the appropriate purposes.

Yours faithfully,

Secretary of the Board of Directors

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Assuming that the number of outstanding shares of the Company as of 10 January 2019 (record date) will be the same (i.e.,6,397,629,000 shares).

NOTICE: This document is a translation of a duly approved Spanish-language document, and is provided for informational purposes only. In the event of any discrepancy between the text of this translation and the text of the original Spanish-language document which this translation is intended to reflect, the text of the original Spanish-language document shall prevail.

www.iberdrola.com

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IMPORTANT INFORMATION

This communication does not constitute an offer to purchase, sell or exchange or the solicitation of an offer to purchase, sell or exchange any securities. The shares of Iberdrola, S.A. may not be offered or sold in the United States of America except pursuant to an effective registration statement under the Securities Act or pursuant to a valid exemption from registration.

This communication contains forward-looking information and statements about Iberdrola, S.A., including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, capital expenditures, synergies, products and services, and statements regarding future performance. Forward-looking statements are statements that are not historical facts and are generally identified by the words "expects", "anticipates", "believes", "intends", "estimates" and similar expressions.

Although Iberdrola, S.A. believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of Iberdrola, S.A. shares are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of Iberdrola, S.A., that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the public documents sent by Iberdrola, S.A. to the Comisión Nacional del Mercado de Valores.

Forward-looking statements are not guarantees of future performance. They have not been reviewed by the auditors of Iberdrola, S.A. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date they were made. All oral or written forward-looking statements hereby made or otherwise attributable to Iberdrola, S.A. or any of its members, directors, officers, employees or any persons acting on its behalf are expressly qualified on its entirety by the cautionary statement above. All the forward-looking statements included herein are based on information available to Iberdrola, S.A. on the date hereof. Except as required by applicable law, Iberdrola, S.A. does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

NOTICE: This document is a translation of a duly approved Spanish-language document, and is provided for informational purposes only. In the event of any discrepancy between the text of this translation and the text of the original Spanish-language document which this translation is intended to reflect, the text of the original Spanish-language document shall prevail.

www.iberdrola.com

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Annex

Supplement to the information memorandum relating to the terms and conditions of the second edition of the "Iberdrola Retribución Flexible" optional dividend system corresponding to the fiscal year 2018

NOTICE: This document is a translation of a duly approved Spanish-language document, and is provided for informational purposes only. In the event of any discrepancy between the text of this translation and the text of the original Spanish-language document which this translation is intended to reflect, the text of the original Spanish-language document shall prevail.

www.iberdrola.com

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SUPPLEMENT TO THE INFORMATION MEMORANDUM RELATING TO THE TERMS AND CONDITIONS OF THE SECOND EDITION OF THE "IBERDROLA RETRIBUCIÓN FLEXIBLE" OPTIONAL DIVIDEND SYSTEM CORRESPONDING TO THE FISCAL YEAR 2018

1. PURPOSE

1.1. Background

The General Shareholders' Meeting of Iberdrola, S.A. (hereinafter, "Iberdrola" or the "Company") held on 13 April 2018 (the "General Shareholders' Meeting") approved, under item number eight on the agenda and under the section titled "Common terms and conditions of the dividend distribution and increase in capital resolutions proposed under items numbers six, seven and eight on the agenda by virtue of which the new «Iberdrola Flexible Remuneration» system is implemented" (the "Capital Increase Resolution" and the "Common Terms", respectively), an increase in wholly paid-up share capital with a charge to the reserves contemplated in article 303.1 of the Companies Act (Ley de Sociedades de Capital), by means of the issuance of ordinary shares for their free-of-charge allocation to the shareholders of the Company (the "Capital Increase").

The Board of Directors of the Company approved on 23 October 2018 the implementation of the Capital Increase and resolved to set the market value of reference for the Capital Increase in an amount within the minimum of 975 million euros and the maximum of 1,033 million euros, which is, in any case, within the maximum limit established in the Capital Increase Resolution (i.e., 1,140 million euros), and to delegate to the chairman and chief executive officer of the Company the power to determine the concrete amount of such market value of reference within the referred range.

Furthermore, on 23 October 2018, the Board of Directors of the Company resolved to distribute an interim dividend corresponding to the fiscal year 2018 (the "Interim Dividend"), which gross amount per share has to be equal to the Cash Remuneration (as defined below) and that will be a minimum of 0.150 gross euros per share and a maximum of 0.155 gross euros per share. After attesting the compliance of the requirements set forth in article 277 of the Spanish Companies Act (Ley de Sociedades de Capital), the referred resolution was ratified by the Board of Directors at its meeting held on 18 December 2018, which was made available to the public on such date by means of a notice of significant event (hecho relevante) (with official registry number 272,762).

Within this context, the Company issued an information memorandum (documento informativo), pursuant to the provisions of article 26.1.e) of Royal Decree 1310/2005, of 4 November, which partially elaborates upon the provisions of Law 24/1988 of 28 July, on the Securities Market, in connection with the admission of securities to trading on official secondary markets, public offers for the sale or subscription of securities and the prospectus required for such purposes (Real Decreto 1310/2005, de 4 de noviembre, por el que se desarrolla parcialmente la Ley 24/1988, de 28 de julio, del Mercado de Valores, en materia de admisión a negociación de valores en mercados secundarios oficiales, de ofertas públicas de venta o suscripción y del folleto exigible a tales efectos) ("Royal Decree 1310/2005"), in which information available on such date "with respect to the second edition of the «Iberdrola Retribución Flexible» optional dividend system corresponding to the fiscal year 2018 and with the Flexible Remuneration Options" was provided, which was made available to the public by means of a notice of significant event (hecho relevante) dated 23 October 2018 (with official registry number 270,765) (the "Information Memorandum").

1.2.

Purpose

This document supplements the Information Memorandum and is intended to provide the public with the information regarding the Capital Increase and the payment of the Interim Dividend that was not available on the publication date of the Information Memorandum, particularly, the maximum market value of reference for the Capital Increase, the number of free-of-charge allocation rights necessary to receive one new share of Iberdrola,

NOTICE: This document is a translation of a duly approved Spanish-language document, and is provided for informational purposes only. In the event of any discrepancy between the text of this translation and the text of the original Spanish-language document which this translation is intended to reflect, the text of the original Spanish-language document shall prevail.

www.iberdrola.com

Take care of the environment.

Printed in black and white and only if necessary

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