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SECURITIES AND EXCHANGE COMMISSION
FORM 20-F

|o                                                             | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------------
|OR                                                           
|ý                                                             | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934          
|For the fiscal year ended: December 31, 2002                 
|OR                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      
|For the transition period
from                             to

Commission file number: 1-9932

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ENDESA, S.A.(Exact name of Registrant as specified in its charter)

Kingdom of Spain(Jurisdiction of incorporation)

Ribera de Loira, 60
28042 Madrid, Spain(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

|Title of each classOrdinary shares, nominal value €1.20 each*
American Depositary Shares, each representing the
right to receive one ordinary share |  | Name of each exchange on which registeredNew York Stock Exchange
New York Stock Exchange
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------

| 
|-
|*

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Securities registered or to be registered pursuant to Section 12(g) of the Act: None

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Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

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The number of issued shares of each class of stock of Endesa, S.A. as of December 31, 2002 was:

Ordinary shares, nominal value €1.20 each: 1,058,752,117

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days.

Yes ý                                    
            No o

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o                                    
            Item 18 ý

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TABLE OF CONTENTS

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|                                      |  |                                                                              |  | PAGE
|------------------------------------- |  | ---------------------------------------------------------------------------- |  | ----
|Certain Terms and Conventions         |  | 1                                                                           
|Presentation of Financial Information |  | 1                                                                           
|Forward-Looking Statements            |  | 1                                                                           
|PART I                               
|Item 1.                               |  | Identity of Directors, Senior Management and Advisers                        |  | 2   
|Item 2.                               |  | Offer Statistics and Expected Timetable                                      |  | 2   
|Item 3.                               |  | Key Information                                                              |  | 2   
|Item 4.                               |  | Information on the Company                                                   |  | 11  
|Item 5.                               |  | Operating and Financial Review and Prospects                                 |  | 64  
|Item 6.                               |  | Directors, Senior Management and Employees                                   |  | 111 
|Item 7.                               |  | Major Shareholders and Related Party Transactions                            |  | 118 
|Item 8.                               |  | Financial Information                                                        |  | 119 
|Item 9.                               |  | The Offer and Listing                                                        |  | 121 
|Item 10.                              |  | Additional Information                                                       |  | 129 
|Item 11.                              |  | Quantitative and Qualitative Disclosures about Market Risk                   |  | 139 
|Item 12.                              |  | Description of Securities other than Equity Securities                       |  | 159 
|PART II                              
|Item 13.                              |  | Defaults, Dividend Arrearages and Delinquencies                              |  | 159 
|Item 14.                              |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 159 
|Item 15.                              |  | Controls and Procedures                                                      |  | 159 
|Item 16.                              |  | Reserved                                                                     |  | 159 
|PART III                             
|Item 17.                              |  | Financial Statements                                                         |  | 159 
|Item 18.                              |  | Financial Statements                                                         |  | 159 
|Item 19.                              |  | Exhibits                                                                     |  | 160 

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CERTAIN TERMS AND CONVENTIONS

As used in this annual report on Form 20-F, "Endesa" and first person, personal pronouns such as "we", "us" or "our" refer to Endesa, S.A. and
its consolidated subsidiaries which comprise the Endesa Group unless the context otherwise requires. When we use second person, personal pronouns in this report, such as "you" and "your", we mean
exclusively persons who have purchased securities issued or guaranteed by Endesa or one of its consolidated subsidiaries as the context requires.

References
to "GW" and "GWh" are to gigawatts and gigawatt hours, respectively; references to "MW" and "MWh" are to megawatts and megawatt hours, respectively; references to "kW" and
"kWh" are to kilowatts and kilowatt hours, respectively; and references to "kV" are to kilovolts. References to "Nm3" are to normal cubic meters and references to "bcm" are to billions of cubic
meters. Unless otherwise indicated, statistics provided in this annual report with respect to electricity generation facilities are expressed in MW, in the case of the installed capacity of such
facilities, and in GWh, in the case of the aggregate annual electricity production of such facilities. One GW = 1,000 MW, and one MW = 1,000 kW. Statistics relating to aggregate annual
electricity production are expressed in GWh and are based on a year of 8,760 hours. Statistics relating to our production do not include electricity consumed by our generators.

Energy
losses of our Latin American subsidiaries are calculated on a 12-month rolling basis by (i) subtracting the number of GWh of energy sold from the aggregate GWh
of energy purchased and self-generated within a given 12-month period and (ii) calculating the percentage that the resulting quantity bears to the aggregate number of
GWh of energy purchased and self-generated within the same 12-month period.

PRESENTATION OF FINANCIAL INFORMATION

When we use "euro" or "€" in this annual report, we mean the European Union euro, which is Spain's legal currency. When we use "dollars", "U.S.$"
or "$" in this annual report, we mean United States dollars. When we use "pesetas" or "Ptas" in this annual report, we mean Spanish pesetas, which was formerly Spain's legal currency. The word
"billion" refers to one thousand million.

We
historically published our financial statements in Spanish pesetas. Beginning in 2001, we began publishing our financial statements in euro. The exchange rate at which the Spanish
peseta has been irrevocably fixed against the euro is Ptas 166.386 = €1.00. Financial data for periods prior to January 1, 1999 were restated from Spanish pesetas into
euro using the irrevocably-fixed rate of exchange. Comparative financial data for periods prior to January 1, 1999 reported in euro depict the same trends that would have been presented had we
continued to present financial statements in Spanish pesetas. However, financial data for periods prior to January 1, 1999 are not comparable with that of other companies reporting in euro that
restated these amounts from a currency other than the Spanish peseta.

FORWARD-LOOKING STATEMENTS

This annual report contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995,
such as statements that include the words "expect", "project", "anticipate", "believe", "should", "seek", "intend", "probability", "risk", "target", "goal", "objective", "estimate", "future" and
similar expressions or variations on such expressions. These statements appear in a number of places in this annual report and include statements regarding our intent, belief or current expectations
with respect to, among other things, trends affecting our business, financial condition or results of operations.

These
forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in the forward-looking
statements as a

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result
of various factors that may be beyond our control. The accompanying information contained in this annual report, including, without limitation, the information under "Item 3. Key
InformationRisk Factors", "Item 4. Information on the Company" and "Item 5. Operating and Financial Review and Prospects" identifies important factors that could cause such differences.

Readers
are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We undertake no obligation to release publicly the result of
any revisions to these forward-looking statements which may be made to reflect events or circumstances after the dates thereof, including, without limitation, changes in our business strategy or
planned capital expenditures, or to reflect the occurrence of unanticipated events.

PART I

ITEM 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

A.    DIRECTORS AND SENIOR MANAGEMENT.

Not applicable.

B.    ADVISERS

Not applicable.

C.    AUDITORS

Not applicable.

ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.    KEY INFORMATION

A.    SELECTED FINANCIAL DATA

Selected Consolidated Financial Information

The following table presents selected consolidated financial data of Endesa, S.A. You should read this table in conjunction with "Item 5. Operating and Financial
Review and Prospects" and our audited consolidated financial statements appearing elsewhere in this annual report. The consolidated income statement data for each of the three years in the period
ended December 31, 2002 and the consolidated balance sheet data of December 31, 2002 and 2001 set forth below have been derived from, and are qualified in their entirety by reference to,
our audited consolidated financial statements and notes thereto appearing elsewhere in this annual report. Our audited consolidated financial statements have been prepared in accordance with Spanish
GAAP, which differs in certain significant respects from U.S. GAAP. See Note 26 to our consolidated financial statements. The principles of consolidation are described in Note 3 to our
consolidated financial statements. The consolidated income statement data for each of the two years in the period ended December 31, 1999 and the

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consolidated
balance sheet data as of December 31, 2000, 1999 and 1998 set forth below have been derived from our audited consolidated financial statements, which are not included herein.

|                                                                          |  | Year Ended December 31,
|------------------------------------------------------------------------- |  | -----------------------
|
|
|CONSOLIDATED INCOME STATEMENT DATA                                        |  |                        
|Amounts in accordance with Spanish GAAP:                                  |  |                        
|Net sales(1)                                                              |  | 6,611                  
|Expenses capitalized                                                      |  | 91                     
|Other operating revenues                                                  |  | 134                    
|Operating income                                                          |  | 1,903                  
|Income from continuing operations                                         |  | 1,695                  
|Consolidated income before taxes                                          |  | 1,602                  
|Income attributed to minority interests                                   |  | (190                   
|Net income                                                                |  | 1,097                  
|Dividends                                                                 |  | 505                    
|Operating income per ordinary share                                       |  | 1.99                   
|Income from continuing operations per
    ordinary share                  |  | 1.70                   
|Net income per ordinary share or ADS(2)                                   |  | 1.10                   
|Dividends per ordinary share or ADS (euro)                                |  | 0.50                   
|Dividends per ordinary share or ADS($)                                    |  | 0.62                   
|Basic and diluted net income per ordinary
    share or ADS                |  | 1.10                   
|Weighted average number of ordinary shares
    outstanding (in thousands) |  | 997,453                
|Amounts in accordance with U.S. GAAP:                                     |  |                        
|Net income                                                                |  | 1,144                  
|Net income per ordinary
    share or ADS(2)                               |  | 1.15                   
|Basic and diluted net income per ordinary
    share or ADS                |  | 1.15                   

|                                          |  | At December 31,
|----------------------------------------- |  | ---------------
|
|
|CONSOLIDATED BALANCE SHEET DATA           |  |                
|Amounts in accordance with Spanish GAAP:  |  |                
|Utility plant, net                        |  | 17,047         
|Advance and construction work in progress |  | 534            
|Financial investments                     |  | 5,202          
|Other fixed and non-current assets        |  | 1,736          
|Current assets                            |  | 3,056          
|Total assets                              |  | 27,930         
|Current liabilities                       |  | 5,269          
|Long-term debt(3)                         |  | 8,100          
|Other non-current liabilities(4)          |  | 5,337          
|Minority interests                        |  | 1,659          
|Stockholders' equity                      |  | 7,566          
|                                          |  |                

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|Capital stock(5)                      |  | 1,148  |  | 1,271  |  | 1,271  |  | 1,271  |  | 1,271 
|------------------------------------- |  | ------ |  | ------ |  | ------ |  | ------ |  | ------
|Amounts in accordance with U.S. GAAP: |  |        |  |        |  |        |  |        |  |       
|Utility plant, net                    |  | 14,032 |  | 27,264 |  | 28,346 |  | 28,678 |  | 23,988
|Total assets                          |  | 24,611 |  | 48,293 |  | 47,247 |  | 50,228 |  | 44,954
|Long-term debt                        |  | 8,118  |  | 17,738 |  | 19,290 |  | 23,222 |  | 20,141
|Minority interests                    |  | 1,850  |  | 6,080  |  | 4,369  |  | 4,435  |  | 2,496 
|Stockholders' equity                  |  | 6,629  |  | 9,151  |  | 9,428  |  | 9,052  |  | 8,594 

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Exchange Rates

The following table sets forth, for the periods and dates indicated, certain information concerning the noon buying rate for dollars expressed in pesetas per
$1.00.

|                          |  | Noon Buying Rate
|------------------------- |  | ----------------
|
|1998                      |  | 142.15          
|1999 (through January 15) |  | 143.55          

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Effective
January 1, 1999, the following 11 European Union member states adopted the euro as a common currency: Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, The Netherlands, Portugal and Spain. They also established fixed conversion rates between their respective former sovereign currencies and the euro. On January 1, 2001, Greece
joined the European Economic and Monetary Union. The exchange rate at which the Spanish peseta had been irrevocably fixed against the euro is Ptas 166.386 = €1.00. On
January 1, 2002, the participating member states began issuing new euro-denominated bills and coins for use in cash transactions. As of March 1, 2002, the participating
member states have withdrawn the bills and coins denominated in their respective former currencies from circulation, and they are no longer legal tender for any transactions.

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The
Federal Reserve Bank of New York no longer quotes a noon buying rate for the currencies of any of the participating member states, including Spain. The noon buying rate for the euro
on June 20, 2003 was $1.1616 = €1.00.

The
following tables set forth, for the periods and dates indicated, certain information concerning the noon buying rate for euro expressed in U.S. dollars per euro.

|                             |  | Noon Buying Rate
|---------------------------- |  | ----------------
|
|Year ended December 31, 1999 |  | 1.0070          
|Year ended December 31, 2000 |  | 0.9388          
|Year ended December 31, 2001 |  | 0.8901          
|Year ended December 31, 2002 |  | 1.0485          

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|                                            |  | Noon Buying Rate
|------------------------------------------- |  | ----------------
|
|Month ended January 31, 2003                |  | 1.0739          
|Month ended February 28, 2003               |  | 1.0779          
|Month ended March 31, 2003                  |  | 1.0900          
|Month ended April 30, 2003                  |  | 1.1180          
|Month ended May 31, 2003                    |  | 1.1766          
|Month ended June 30, 2003 (through June 20) |  | 1.1616          

Unless
otherwise indicated, where this annual report provides translations into euro of amounts denominated in or resulting from transactions effected in currencies other than the euro,
the conversion has been effected at the relevant exchange as published by the Spanish Central Bank.

Our
ordinary shares are quoted on the Spanish stock exchanges in euro. Currency fluctuations may affect the dollar equivalent of the euro price of our ordinary shares listed on the
Spanish stock exchanges and, as a result, the market price of our American depositary shares (ADSs), which are listed on the New York Stock Exchange. Currency fluctuations may also affect the dollar
amounts received by holders of American depositary receipts (ADRs) on conversion by the depositary of cash dividends (if any) paid in euro on the underlying ordinary shares.

Our
consolidated results are affected by fluctuations between the euro and the currencies in which the revenues and expenses of our consolidated subsidiaries are denominated (principally
the Chilean peso, the Colombian peso, the Argentine peso, the Brazilian real, the Peruvian nuevo sol and the U.S. dollar). See "Item 11. Quantitative and Qualitative Disclosures about Market Risk".

B.    CAPITALIZATION AND INDEBTEDNESS

Not applicable.

C.    REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

D.    RISK FACTORS

Risks Related to Our Latin American Operations



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The
future results of operations of our Latin American subsidiaries will depend in significant part upon their ability to implement some of their principal strategies, namely, operating
and financial cost reductions. The success of the plan to cut costs substantially, generally will depend upon numerous factors, including the cost and availability of financing and the ability to
achieve operating efficiencies. If any of these strategies are unsuccessful, the profitability of our Latin American subsidiaries could suffer. The ability to carry out these strategies could be
harmed by a number of factors, including among others, the failure of new meters and transformers being installed in Argentina, Brazil, Colombia and Peru to reduce electricity theft from our
operations in those countries



A
material portion of our operations and investments outside Spain are located in Latin America and are exposed to various risks inherent in operating and investing in Latin America,
including risks related to the following:



In
addition, revenues from operations of our Latin American subsidiaries, their market value and the dividends collected from these subsidiaries are exposed to material country risk as a
result of adverse economic conditions in the region that may adversely affect demand, consumption and exchange rates.



Since
the end of 2001, Argentine companies have continued to encounter difficulties as a result of the serious economic and political crisis affecting Argentina. Monetary and currency
exchange control measures, including restrictions on bank deposit withdrawals and tight restrictions on transferring funds abroad, the suspension of payments by Argentina on its external debt and
abrogation of the peso convertibility (and the consequent depreciation of the peso against the dollar) had a significant negative impact on the Argentine economic system, resulting in a contraction of
economic activity, increasing inflation and exchange rate volatility.

In
March 2003, Argentina elected a new president, Mr. Néstor Kirchner. He took office on May 25, 2003 and decided to retain Mr. Roberto Lavagna
as the Minister of Economy. One of the administration's first tasks will be to negotiate with the International Monetary Fund (IMF) to replace, through a long-term agreement, the
$6.8 billion loan secured by the previous administration. The failure by the new government to successfully negotiate such agreement with the IMF may completely block Argentina's access to
international financing, affecting the new government's ability to implement reforms required to restore stability, economic growth and public confidence. Furthermore, there can be no assurances that
the Kirchner Administration will not adopt social, economic or other policies that have a material adverse effect on our business, financial condition or results of operations.

The
main risks we continue to face because of our operations in Argentina are the following:



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In
early December 2001, the Argentine government imposed a number of monetary and currency exchange control measures that included restrictions on the free withdrawal of funds
deposited with banks and tight restrictions on transferring funds abroad (including payments of dividends, principal and interest on debt), with certain exceptions for transfers related to foreign
trade and other authorized transactions. Although most of these monetary and exchange control restrictions were recently lifted or softened, there is no assurance that the Argentine government will
not reinstate such restrictions in the future, affecting Edesur's business and/or its ability to repay foreign debt.

Currently,
the prior approval of the Argentine Central Bank is not required for the remittance of dividends. However, such approval is required to prepay foreign debt abroad while
principal and interest payments due and payable can only be paid outside Argentina after compliance with information and documentation requirements imposed by the Argentine Central Bank. We cannot
assure you that the Argentine Central Bank will accept this information and documentation, or otherwise authorize such transfers.

As
of December 31, 2002, the debt of our Argentine subsidiaries amounted to approximately €628 million. As a matter of policy for all of our Argentine
subsidiaries, including generation and distribution companies, as long as the foreign currency restrictions remain in Argentina, and as long as fundamental issues concerning the electricity sector
remain unresolved, we are primarily making interest payments when due, as permitted by the Argentine Central Bank, and we are rolling over most of our outstanding debt. Our international creditors
have understood the extraordinary circumstances that have led us to take these steps and to date have accepted these refinancing arrangements. No assurance can be given that our creditors will
continue to accept, or that the Argentine Central Bank will continue to permit, rolling over debt principal when it becomes due.

Risks Related to Our Business and Industry



Our
operating subsidiaries which are public utilities are subject to extensive regulation of tariffs and other aspects of their business in Spain and in each of the other countries in
which we operate. While we believe that we are in substantial compliance with applicable laws and regulations, we remain subject to a varied and complex body of laws and regulations that both public
officials and private parties may seek to enforce. In addition, the introduction of new laws or regulations or changes in existing laws or regulations could have a material adverse effect on our
business, financial condition and results of operations.

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We and our operating subsidiaries are also subject to environmental regulations, which, among other things, require us to perform environmental impact studies on future projects, to
obtain regulatory licenses, permits and other approvals and to comply with the requirements of such licenses, permits and regulations. As with any regulated company, we cannot assure you:





In
Spain, we sell energy to the wholesale market or the energy pool that is subject to market forces which may determine the amount and price of the energy that we sell. Our business,
financial condition and results of operations may be adversely affected by adverse changes in the amount or price of energy we are able to sell.



Under
Spanish law, we are entitled to receive partial compensation for the costs we incur as a result of the transition to a fully-liberalized electricity industry in Spain. We refer to
these as "competition transition costs", or CTCs. As a result of a change in Spanish regulation in 2001, CTCs are recoverable exclusively pursuant to what we refer to as the "system of differences".
In accordance with the system
of differences, we are entitled to receive as CTCs our corresponding portion of the positive difference between (i) the aggregate amount of electricity tariffs billed to final customers and
(ii) a basket of costs related to the generation, transmission and distribution of electricity such as the aggregate cost of electricity purchased by distribution companies from the energy
pool, transmission costs and distribution costs, as determined by the Spanish government on a yearly basis. If, however, the basket of costs, as determined by the Spanish government in a given year,
is greater than the aggregate amount of electricity tariffs billed to final customers, then the Spanish electricity companies entitled to receive CTCs, including us, are liable for their proportionate
share of the difference between (i) such basket of costs and (ii) the aggregate amount of electricity tariffs billed to final customers. We refer to this difference as a "tariff
deficit". Because certain costs included in the basket of costs, particularly the cost of energy purchased from the energy pool, are determined in a competitive market, whereas electricity tariffs are
fixed by the government, our results of operations may be adversely affected if prices in the energy pool increase.



Our
operations in Spain and those of our Latin American affiliates, particularly Endesa Chile, involve hydroelectric generation and, accordingly, we and our Latin American affiliates are
dependent upon hydrological conditions prevailing from time to time in the broad geographic regions in which our hydroelectric generation facilities are located. If hydrological conditions result in
droughts or other conditions that negatively affect our hydroelectric generation business, our results of operations could be materially adversely affected.



We
are exposed to various types of market risk in the normal course of business, including the impact of interest rate changes and foreign currency exchange rate fluctuations. Our risk
management strategies may not be successful, however, in limiting our exposure to changes in interest rates and

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foreign
currency exchange rates, which could adversely affect our financial condition and results of operations.



The
development of power generation, transmission and distribution facilities can be time-consuming and highly complex. In connection with the development of such facilities,
we must generally obtain government permits and approvals, land purchase or leasing
agreements, equipment procurement and construction contracts, operation and maintenance agreements, fuel supply and transportation agreements, off-take arrangements and sufficient equity
capital and debt financing. Factors that may affect our ability to construct new facilities include:



Any
of these factors may cause delays in completion or commencement of operations of our construction projects and may increase the cost of contemplated projects. If we are unable to
complete the projects contemplated, the costs incurred in connection with such projects may not be recoverable.



We
face environmental risks inherent in our operations. Accordingly, we may be subject to claims for environmental and other damages in connection with our power generation, distribution
and transmission facilities as well as our coal mining activities. We are also subject to risks arising from the operation of nuclear facilities and the storage and handling of low-level
radioactive materials. Spanish law and regulations limit the liability of nuclear plant owners. Such limits are consistent with international treaties ratified by Spain. Spanish law provides that the
owners of each unit at each nuclear facility are liable for no more than €150 million as a result of claims relating to a single nuclear accident. We are jointly and severally
liable with the owners of other interests for nuclear risks at each unit in which we have an interest. Our potential liability relating to our interests in nuclear facilities is fully covered by
insurance for liabilities up to €150 million. If we were subject to liability for environmental and other damages in connection with our operations (other than our nuclear
operations), it could have a material adverse effect on our business, financial condition and results of operations.



The
liberalization of the electricity industry in the European Union (including the countries in which we are present, such as Spain, Italy, France and Portugal) has led to increased
competition as a result of consolidation and the entry of new market participants in European Union electricity markets, including the Spanish electricity market. The liberalization of the electricity
industry in the European Union has also led to lower electricity prices in some market segments as a result of the entry of new competitors and cross-border energy suppliers and the establishment of
European electricity exchanges, which have led to increased liquidity in the electricity markets. The exact scope of increased competition and any adverse effects on our results of operations and
market share resulting from the full liberalization of European electricity markets, in particular, the Spanish electricity market in January 2003, will depend on a variety of factors that
cannot be assessed with precision and that are beyond our control.

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As
part of our strategic plan 2002-2006, we expect to divest between €6-7 billion of financial investments and other assets not related to
our core business or with limited strategic value, of which €4.2 billion had been divested as of the date of this annual report. Nevertheless, we may not be able to sell the
rest of these assets for regulatory or other reasons, including our inability to locate interested buyers of such assets or to agree to the terms of such sales. If we are unable to make these
divestitures as planned, we may be unable to make our anticipated capital expenditures or to strengthen our balance sheet and our results of operations may be adversely affected.

Risks Related to Integrating Our Acquired Companies



We
made a significant acquisition in Italy in the first quarter of 2002. This acquisition and any future acquisitions may expose us to the following risks:



Additionally,
in connection with an acquisition, we will generally record goodwill that must be amortized under Spanish GAAP and which would reduce our earnings per ordinary share under Spanish GAAP.
We cannot assure you that we would be successful in overcoming these risks, and our failure to overcome these risks could have a negative effect on our results of operations and financial condition.

Other Risks



We
have made forward-looking statements in this annual report that are subject to risks and uncertainties. These forward-looking statements relate to among other things:



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These
statements reflect our current expectations. They are subject to a number of risks and uncertainties, including but not limited to:



In
light of the many risks and uncertainties, you should understand that we cannot assure you that the forward-looking statements contained in this annual report will be realized. You
are cautioned not to put undue reliance on any forward-looking information.

ITEM 4.    INFORMATION ON THE COMPANY

A.    HISTORY AND DEVELOPMENT OF THE COMPANY

We are a limited liability company (sociedad anónima) organized under the laws of the Kingdom of
Spain. Our ordinary shares are publicly traded on the Madrid, Barcelona, Bilbao and Valencia stock exchanges and the Santiago Off Shore Stock Exchange in Chile, and our ADSs are listed on the New York
Stock Exchange. We were formed under the laws of Spain on November 18, 1944 as "Empresa Nacional de Electricidad, S.A." and changed our name to Endesa, S.A. by resolution of the shareholders'
meeting of June 25, 1997. Our principal executive office is located at Ribera de Loira, 60, 28042 Madrid, Spain, and our telephone number is (3491) 213 1000. Our agent for service of process in
the United States is Endesa North America, Inc., 410 Park Avenue, Suite 410, New York, NY 10022.

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B.    BUSINESS OVERVIEW

Overview

We are the largest electricity company in Spain in terms of installed capacity, market share in generation and distribution, and market capitalization, with a
presence in Italy, France, Portugal and North Africa and the first multinational private electricity company in Latin America. Our core business is energy. We are also involved in other activities
related to our core energy business such as renewable energies and co-generation and the distribution and supply of natural gas. In addition, we hold interests in other businesses such as
telecommunications.

Our
electricity business is principally focused on Spain, the Mediterranean region (including Italy, France, Portugal and North Africa) and Latin America.

At
December 31, 2002, we had a total installed capacity of 39,941 MW, and in 2002, we generated 155,849 GWh and distributed 133,096 GWh, supplying electricity to approximately
20.6 million customers in 12 countries. At that date, we had 26,354 employees, 12,334 of whom were located outside Spain, and our total assets amounted to approximately
€48,176 million, 44.0% of which were located outside Spain.

The
geographic breakdown of net sales for the periods indicated is as follows:

|Market         |  | 2002   |  | 2001   |  | 2000  
|-------------- |  | ------ |  | ------ |  | ------
|
|Spain          |  | 11,145 |  | 10,338 |  | 10,275
|Italy          |  | 1,109  |  |       |  |       
|Rest of Europe |  | 635    |  |       |  |      
|Chile          |  | 1,171  |  | 1,359  |  | 1,373 
|Argentina      |  | 385    |  | 1,302  |  | 1,326 
|Brazil         |  | 1,111  |  | 1,277  |  | 1,182 
|Colombia       |  | 685    |  | 775    |  | 719   
|Peru           |  | 498    |  | 525    |  | 389   
|               |  |        |  |        |  |       
|Total          |  | 16,739 |  | 15,576 |  | 15,264
|               |  |        |  |        |  |       

Our Core Business



Our electricity business is conducted in three geographic regions:





We are the leading electricity generator and distributor in Spain with an approximately 42.1% market share (including purchases from the Special Regime and
imports) in generation and a 43.4% market share in distribution at December 31, 2002. We operate hydroelectric, nuclear, coal, fuel oil and gas generating facilities with a total installed
capacity in Spain of 20,956 MW at December 31, 2002 and a total net generation of 89,357 GWh in 2002. In 2002, we sold 62,805 GWh to approximately 10.3 million regulated customers (i.e.,
those who have not chosen to contract with suppliers) in Catalonia, Andalusia, Aragon, Cantabria, the Balearic Islands, the Canary Islands, parts of Extremadura, Ceuta and Melilla. Through Endesa
Energía, we are also one of the largest suppliers of electricity to deregulated customers (i.e., those who have chosen to contract with suppliers) with an

12

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approximately
36.7% market share at December 31, 2002. In 2002, Endesa Energía sold approximately 21,246 GWh to 8,314 points of supply corresponding to deregulated customers. In
2002, we began to supply natural gas through Endesa Energía to deregulated customers to whom we also supply electricity.



We have entered into the electricity business in Southern Europe, taking advantage of opportunities arising from the deregulation process in Europe and the demand
for the cross-border supply of electricity to deregulated customers throughout Europe. We operate plants in Italy with total installed capacity of 5,720 MW and have interests in an additional 3,534 MW
in France and Portugal at December 31, 2002 and a total net generation in the participated companies amounted to 29,708 GWh in 2002. In 2002, we supplied electricity to 547 points of
consumption in Europe (outside Spain) and North Africa. In April 2001, we acquired a 30.0% interest in Societé Nationale d'Electricité et Thermique (Snet),
France's second largest electricity generator. In September 2001, a consortium led by us, with a 45.3% stake, acquired Elettrogen (subsequently renamed Endesa Italia), one of the three largest
generators of electricity in Italy. We acquired an additional 5.7% stake in the consortium in March 2002. Due to our 51% stake in the consortium that owns Endesa Italia, we control the
consortium and have consolidated the results of Endesa Italia in our financial statements for 2002. We also have an option to acquire an additional 34.3% stake in Endesa Italia, which may be exercised
through 2006.

In
Northern Africa, we hold an 18% stake in Lydec, a distributor of electricity and water in Casablanca, and we hold a 32% stake in a consortium with Office National de
l'Electricité (ONE) to construct a 384 MW combined cycle gas turbine plant (named Tahaddart).



We are involved in the generation, transmission, distribution and supply of electricity in six countries in Latin America. We participate in more than 20
electricity companies in the region, either directly or through our controlling stake in the Latin American electricity group, Enersis, of which we acquired control in 1999, becoming the leading
electricity group in Latin America. We are the largest electricity operator in Chile, Argentina, Colombia and Peru and have a significant presence in Brazil and, to a lesser extent, in the Dominican
Republic. In each of these countries, we operate both generation and distribution assets. Endesa Chile manages our electricity generation business in Latin America and Chilectra manages our
electricity distribution business in Latin America. Both Endesa Chile and Chilectra are controlled by Enersis. In 2002, we had a total installed capacity of 13,265 MW in the region, generated 43,116
GWh and distributed 47,494 GWh to more than 10.3 million customers. At December 31, 2002, assets in Latin America represented 33.7% of our total consolidated assets. For 2002, Latin
American operations contributed 35.4% of operating income and 21.4% of operating income, adjusted for minority interests.



We conduct our natural gas distribution business through Endesa Gas which, together with the natural gas distribution companies in which it holds stakes, had more
than 290,000 customers in Spain and approximately 200,000 customers in Portugal at December 31, 2002, an approximate increase of 12.1% from December 31, 2001. We are the second largest
private natural gas distributor in Spain, with an approximately 4% market share in the domestic regulated market and an approximately 12% market share in the liberalized market (including supplies to
our gas-powered facilities) at December 31, 2002. We also seek to secure the supply of natural gas for our generation activities. In Spain, our goal is to

13

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be
present in the businesses of import, re-gasification, transport, distribution and supply of natural gas. In 2002, we began to supply natural gas through Endesa Energía to
deregulated customers to whom we also supply electricity.



We maintain a leading position in the cogeneration and renewable energies market in Spain, with an estimated market share of approximately 15% at
December 31, 2002. At that date, our total installed capacity in this business area amounted to 1,805 MW, and we had an additional 122 MW of capacity under construction.



We have stakes in several companies that operate in the water distribution and treatment sector in Spain.



In Spain, we are the largest shareholder of Auna, with an approximately 29.89% interest at December 31, 2002. Auna is the second largest integrated
telecommunications operator in Spain principally through:



In
Latin America, we own 100.0% of Smartcom, a Chilean wireless communications operator.



We are present in the field of technologies related to information and electricity networks through our various initiatives in electronic commerce and the
transmission of voice and data through the low-voltage electricity network, which is known as powerline communications technology, or PLC.

Through
Endesa Servicios, we also provide a variety of products and services, including information and management control systems, supply management and environmental services, to other
companies within the Endesa Group as well as third parties.

Strategy

During the past several years, we have focused on strengthening and improving the profitability of our electricity business in light of the significant changes
occurring in the electricity sector in Spain and internationally as a result of the liberalization process and decreasing electricity prices. As part of this strategy, we sought to expand
internationally with the goal of becoming an electricity operator in Latin America and Europe's Mediterranean region, where in 2001, we acquired interests in Elettrogen (renamed Endesa Italia) and
Snet (France). As a result of our acquisitions, we have achieved our prior expansion goals and believe that we have acquired a competitive asset base. Accordingly, in February 2002, we
announced our strategic plan 2002-2006, which we subsequently updated in October 2002 in response to the underlying macroeconomic and industry conditions. We believe we are
achieving results in line with our strategic plan 2002-2006, and our overall priorities continue to be:



14

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Currently,
we place significant emphasis on generation of free cash flow, strengthening our balance sheet and consolidating and increasing the profitability of our core electricity
business.

In
order to achieve these goals, we currently intend to invest approximately €9.7 billion, which represents a reduction of €3.3 billion from
the level of investments contemplated by the February 2002 plan, during the period 2002-2006. Of this amount, approximately €5.4 billion is expected to be
dedicated to maintaining existing assets and approximately €4.3 billion is expected to be dedicated to growing our businesses organically. In 2002, we invested
€1.1 billion in relation to asset maintenance and €1.9 billion in relation to organic growth. Additionally, we intend to dispose of
€6-7 billion in non-core assets during the period 2002-2006. For a discussion of our progress in achieving the objectives of our strategic
plan 2002-2006, see "Item 5. Operating and Financial Review and ProspectsFactors Impacting Our BusinessStrategic Plan 2002-2006".



In Spain, we intend to reinforce our leadership position by preserving our balanced portfolio, increasing our installed capacity without significant investment in
our generation assets, reducing costs, improving
efficiency and significantly increasing our presence in the market for natural gas. During the period 2002-2006, we plan to build seven combined cycle gas turbine plants and transform a
coal-fired power station into an imported coal power station, which will extend its useful life by 20 years. As part of our strategic plan 2002-2006, we intend to make
€2.0 billion of investments for growth and approximately €3.0 billion for asset maintenance. We aim to continue to improve our customer loyalty in light
of the full liberalization of the Spanish electricity market as of January 1, 2003 by promoting the sale of integrated services, cross-selling gas and electricity to our eligible customers and
improving the quality of our customer service. We plan to expand our market share in Spain's market for natural gas by:



15

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As a result of our acquisition of minority interests in Snet in April 2001 and in Endesa Italia in September 2001, we achieved our previous goals
with respect to expanding the geographic presence of our electricity generation business in Europe. In March 2002, we acquired an additional 5.7% of Endesa Italia from Santander Central Hispano
for €126.9 million, as a result of which we now hold a controlling 51.0% interest. We are currently negotiating with CDF over the purchase of its remaining 51.25% interest in
Snet.

Our
goal with respect to each of these companies is to increase installed capacity and output, reduce operating and maintenance costs and increase productivity. In Italy, we plan to
increase Endesa Italia's installed capacity by 2007 through the addition of new combined cycle gas turbines to our thermal plants. We also plan to increase Endesa Italia's output significantly by
2007. We further seek to reduce Endesa Italia's operating and maintenance costs and improve its productivity ratios through the implementation of a cost reduction plan, increasing the available
capacity of our plants and completing the repowering plan. In France, we plan to increase Snet's operating efficiency by improving operating processes and entering into new coal supply contracts. We
are also selling Snet-generated electricity to eligible customers in France. In Portugal, where our interests currently consist of our 35% stake in the generation company, Tejo Energia,
which owns and operates a 600 MW imported coal-fired plant and our activities in the marketing and supply of natural gas, we aim to increase our energy trading activities, the supply of
electricity to eligible customers and the distribution of natural gas.



In Latin America, our main objective for the period 2002-2006 is to strengthen our position as the leading multinational electricity company in the
region by continuing to cut costs and implement best practices. In addition, as part of the financial strengthening plan of Enersis and Endesa Chile, we expect to see the benefits of the bank debt
refinancing, the capital increase, asset sales and cash flow improvement. See "Item 5. Operating and Financial Review and ProspectsLiquidity and Capital ResourcesFinancial
Strengthening Plan of Enersis and Endesa Chile". We also plan to participate actively in the regulatory process in order to minimize regulatory risks in Latin American countries. In order to take
advantage of our growth potential in Latin America, our strategic plan 2002-2006 includes investments of €500 million for organic growth and
€1.7 billion for the maintenance of assets.



Our strategy with respect to our other businesses, especially our investments in Auna and Smartcom, is to extract value in the medium-term. We plan to
continue to participate only in those services and new technologies that add value to our core energy and related businesses.

Electricity Business in Spain



A new regulatory framework for the electricity industry, established by Law 54/1997 of November 27 (the "Electricity Sector Law"), came into effect on
January 1, 1998. It is a deregulated system in which generation units compete in a wholesale market and provides a growing number of customers with the opportunity to choose their electricity
supplier. The management and operation of transmission and distribution networks remain a regulated business.

In
1999, the government adopted measures to decrease the legal threshold for customers to become eligible to choose their electric power suppliers ("eligible customers"). The electricity
and natural gas sectors were completely liberalized as of January 1, 2003: from that moment on, all consumers are eligible, that is, free to choose whether to remain regulated and subject to
the electricity

16

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tariff,
or to become deregulated and contract with a supplier at a market rate. We refer to the latter clients as "deregulated clients".

Spanish
electricity rates, which are established annually pursuant to Royal Decrees, have been decreasing in real terms every year since 1992, which has accelerated since 1996. The
cumulative rate of reduction in nominal terms for all Spanish customers was approximately 15.8% (32.6% in real terms) from 1996 through 2002. Spanish rates are now below the European average for the
majority of consumer categories.

On
June 23, 2000, Royal Law-Decree 6/2000 was adopted to increase competition in the electricity sector. This measure principally provided:



Regulations
adopted pursuant to the Electricity Sector Law established a fixed amount of competition transition costs for electricity companies that were in operation as of
December 31, 1997. These competition transition costs provide for partial recovery of the costs borne by electricity generators during a period of transition to competition that continues
through the year 2010. See "RegulationRegulation of the Spanish Electricity SectorCompetition Transition Costs (CTCs)" and "Item 5. Operating and Financial
Review and ProspectsChange in Accounting Treatment and Recovery Period for Competition Transition Costs".



We operate coal, nuclear, hydroelectric and fuel oil and gas generation facilities in Spain with a total installed capacity of 20,956.0 MW at December 31,
2002, representing 42.2% of total installed capacity in Spain (excluding installed capacity of cogeneration and renewable energies facilities with an installed
capacity of less than 50 MW). Our net energy production in Spain in the year ended December 31, 2002 was 89,357 GWh, representing a market share of approximately 47.3%. In 2002, we produced an
additional 2,463.7 GWh using renewable energies (e.g., wind, small-scale hydro power cogeneration and others). The following table sets forth our total installed capacity by type of generating
facility at December 31, 2002.

|                  |  | Installed
Capacity
(in MW) |  | Percentage of
Spanish
Total |  
|----------------- |  | -------------------------- |  | --------------------------- | -
|Coal              |  | 6,268.6                    |  | 29.9                        | %
|Nuclear           |  | 3,632.0                    |  | 17.3                        | %
|Hydroelectric     |  | 5,367.7                    |  | 25.6                        | %
|Fuel Oil/Gas/CCGT |  | 5,687.7                    |  | 27.2                        | %
|                  |  |                            |  |                             |  
|Total generation  |  | 20,956.0                   |  | 100.0                       | %
|                  |  |                            |  |                             |  

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The
changes in installed energy generation capacity in 2002 were primarily the result of:



Our
investment in generation capacity in 2002 totaled approximately €427 million, consisting of investments in the construction of new facilities and the expansion
and improvement of existing ones. We built two new CCGTs at San Roque (Cádiz) and Sant Adriá del Besós (Barcelona), which commenced operations in
July 2002 and which provide aggregate generation capacity of approximately 400 MW. Construction costs related to these two CCGTs amounted to €368 million.

In
July 2002, we completed the construction of a new CCGT plant, Son Reus I, in Mallorca (in the Balearic Islands). The Son Reus I plant increased our total installed capacity in
the Balearic Islands by 225.8 MW to 1,366.7 MW and will enable us to meet the sustained increase in demand in the Balearic Islands. Construction costs related to the Son Reus I plant amounted to
€161 million.

We
are in the process of constructing five new CCGT plants: two in the Canary Islands (in Tenerife and Gran Canaria), one in Baleares at Son Reus, one in Huelva and one in Tarragona. The
expected total installed capacity of these five plants is 1,052 MW.

The
following table sets forth for each type of generating facility the percentage of our total electricity generated, average age of plant, average capacity utilization and average
availability factor.

|              |  | Percentage of
Total
Electricity
Generated in
2002 |   | Average Age
of Plant
(years) |  | Average
Capacity
Utilization in
2002(1) |   | Average
Availability
Factor in
2002(2) |  
|------------- |  | ------------------------------------------------- | - | ---------------------------- |  | --------------------------------------- | - | -------------------------------------- | -
|Coal          |  | 29.9                                              | % | 22                           |  | 77.4                                    | % | 92                                     | %
|Nuclear       |  | 17.3                                              | % | 19                           |  | 93.2                                    | % | 93                                     | %
|Hydroelectric |  | 25.6                                              | % | 36                           |  | 16.8                                    | % | 100                                    | %
|Fuel Oil/Gas  |  | 27.2                                              | % | 29                           |  | 28.2                                    | % | 79                                     | %
|              |  |                                                   |   |                              |  |                                         |   |                                        |  
|              |  | 100.0                                             | % |                              |  |                                         |   |                                        |  
|              |  |                                                   |   |                              |  |                                         |   |                                        |  

---

The
balance in the types of generation facilities means our plants' energy output is highly regular. We also believe our production centers are well-located, with ease of
access to fuels, proximity to gas pipelines and target markets, convenient interconnections with other systems and potential for enlargement.

The
table below sets forth our gross production of electricity (excluding production by cogeneration and renewable energies facilities with a capacity of less than 50 MW) measured at the
point of production by type of power station during the past five years. Our gross electricity production

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in
2002 totaled 93,740 GWh, and our energy production, net of our own consumption, was 89,357 GWh.

|              |  | 1998   |  | 1999   |  | 2000   |  | 2001   |  | 2002   |  | Percentage
of Spanish
Total in 2002 |  
|------------- |  | ------ |  | ------ |  | ------ |  | ------ |  | ------ |  | ----------------------------------- | -
|Coal          |  | 41,684 |  | 45,342 |  | 46,755 |  | 43,108 |  | 42,497 |  | 45.3                                | %
|Nuclear       |  | 27,661 |  | 27,726 |  | 29,134 |  | 29,566 |  | 29,644 |  | 31.6                                | %
|Hydroelectric |  | 11,437 |  | 10,429 |  | 9,521  |  | 12,966 |  | 8,067  |  | 8.6                                 | %
|Fuel Oil/Gas  |  | 8,874  |  | 9,556  |  | 10,718 |  | 12,357 |  | 13,532 |  | 14.4                                | %
|              |  |        |  |        |  |        |  |        |  |        |  |                                     |  
|Total         |  | 89,656 |  | 93,052 |  | 96,128 |  | 97,997 |  | 93,740 |  | 47.0                                | %
|              |  |        |  |        |  |        |  |        |  |        |  |                                     |  



We operate coal-fired power stations in Spain with total installed capacity of 6,268.6 MW at December 31, 2002. The following table sets forth
our coal-fired power stations at December 31, 2002, installed capacities, years of commencement of operation, average capacity utilization and average availability factor.

|Coal-fired Power Station |  | Type of Coal                              |  | Installed Capacity
at December 31,
2002 (in MW) |     | Year(s) of
Commencement of
Operation |  | Average Capacity
Utilization in
2002(1) |   | Average
Availability Factor
in 2002(2) |  
|------------------------ |  | ----------------------------------------- |  | ----------------------------------------------- | --- | ------------------------------------ |  | --------------------------------------- | - | -------------------------------------- | -
|As Pontes (Four Units)   |  | Brown Lignite and Imported Sub-bituminous |  | 1,468.5                                         |     | 1976-79                              |  | 88.3                                    | % | 98.1                                   | %
|Compostilla (Five Units) |  | Steam, Coal and Anthracite                |  | 1,340.6                                         |     | 1961-84                              |  | 65.7                                    | % | 86.4                                   | %
|Teruel
(Three Units)     |  | Black Lignite and Imported Bituminous     |  | 1,101.4                                         |     | 1979-80                              |  | 76.4                                    | % | 97.3                                   | %
|Anllares
(One Unit)      |  | Steam Coal and Anthracite                 |  | 121.7                                           | (3) | 1982                                 |  | 88.7                                    | % | 97.7                                   | %
|Los Barrios (One Unit)   |  | Imported Bituminous                       |  | 567.5                                           |     | 1985                                 |  | 82.0                                    | % | 92.9                                   | %
|Alcudia
(Four Units)     |  | Imported Bituminous                       |  | 510.0                                           |     | 1980-82                              |  | 79.3                                    | % | 92.9                                   | %
|Litoral
(Two Units)      |  | Imported Bituminous                       |  | 1,158.9                                         |     | 1984-97                              |  | 73.8                                    | % | 85.7                                   | %
|                         |  |                                           |  |                                                 |     |                                      |  |                                         |   |                                        |  
|Total                    |  |                                           |  | 6,268.6                                         |     | n.a.                                 |  | 77.4                                    | % | 92.3                                   | %
|                         |  |                                           |  |                                                 |     |                                      |  |                                         |   |                                        |  

---

Beginning
in summer 2003, we will invest €274 million on the conversion to imported coal of our As Pontes plant in order to extend its useful life for
20 years. The first converted unit is expected to

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commence
operations in 2005. This investment is in line with the environmental requirements contained in European Council Directive 88/609/EEC on the limitation of emission of certain pollutants from
large combustion plants.

Our
coal-fired power stations were supplied with 21,800 KT of coal in 2002, of which 31.2% was provided by our coal operations. We use approximately 80% of the coal we
produce in our generation activities. In order to meet our total needs for coal, we supplement our own coal production with purchases in Spain and foreign markets. We have consolidated fuel purchase
functions into a single management group, which operates through Carboex, our coal, liquid fuel and gas importer.

The
following table sets forth the amounts of coal we extracted and the amounts purchased in Spain and foreign markets in each of the last five years.

|                |          | 1998  |      | 1999  |      | 2000  |      | 2001  |      | 2002 
|--------------- | -------- | ----- | ---- | ----- | ---- | ----- | ---- | ----- | ---- | -----
|
|Extracted       |          | 8.65  |      | 8.46  |      | 8.29  |      | 8.31  |      | 8.40 
|                |          |       |      |       |      |       |      |       |      |      
|Purchased:      |          |       |      |       |      |       |      |       |      |      
|                | In Spain |       | 7.45 |       | 6.84 |       | 6.15 |       | 5.36 |      
|                | Abroad   |       | 8.62 |       | 9.71 |       | 9.92 |       | 8.91 |      
|                |          |       |      |       |      |       |      |       |      |      
|Total purchased |          | 16.07 |      | 16.55 |      | 16.07 |      | 14.27 |      | 14.99
|                |          |       |      |       |      |       |      |       |      |      

We
have a significant interest in the mining of Spanish coal. Our interest amounted to 38% of overall Spanish production in 2002. Many of the coal mines are located near our
coal-fired power stations. The following table sets forth our coal production in 2000, 2001 and 2002 by type of coal.

|              |  | Coal Production | 
|------------- |  | --------------- | 
|
|
|Brown Lignite |  | 10,463          | 
|Black Lignite |  | 3,307           | 
|Anthracite    |  | 1,626           | 
|Brown Coal    |  | 4,349           | 
|              |  |                 | 
|Total         |  | 19,745          | 
|              |  |                 | 

Total
coal production in our mines in 2002 was 8.4 million tons, equal to 20 billion therms, representing a 1.1% increase in terms of tonnage and a 4.4% increase in terms
of therms compared with 2001. In 2002, adjustments of production were made in accordance with the 1998-2005 Coal Plan in connection with our strategy to achieve a more environmentally
friendly fuel mix. In accordance with environmental regulations on emissions, we mix imported coal, which has a higher calorific and a lower sulfur content, with domestic coal at our As Pontes and
Teruel facilities, which improves the competitiveness of those facilities. The interest in shaft mining as a proportion of the total production of the Endesa Group has decreased from 2.7% in 2001 to
1.3% in 2002. Open cast mine production increased 2.1% in 2002 compared with 2001.

We
believe that our coal reserves in open cast mines will be sufficient to cover a substantial part of our coal requirements during the useful life of our conventional
coal-fired plants. In addition, we have a combination of short-term self-renewing and long-term supply contracts with coal producers in Spain which we
believe are sufficient to meet our needs for domestic coal in the long term.

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We have controlling interests in three nuclear power stations, Ascó I, Ascó II and Vandellós II, all located in
northeastern Spain. In addition, we have a 50% interest in Nuclenor, S.A., which owns the Santa Maria de Garoña nuclear power station. We also have interests in three additional nuclear
power stations, including the Central Nuclear Almaraz, A.I.E., consisting of Almaraz I and II, and Trillo. All such stations are operational.

The
following table sets forth our nuclear power stations at December 31, 2002, our ownership interest and each station's installed capacity, system type, year of commencement of
operation and average availability factor.

|Nuclear Power Station |  | Ownership
Interest |   | Installed
Capacity at
December 31,
2002 (in MW)(1) |  | System Type |     | Year of
Commencement
of Operation |  | Average
Availability
Factor 2002(2) |  
|--------------------- |  | ------------------ | - | -------------------------------------------------- |  | ----------- | --- | --------------------------------- |  | ----------------------------------- | -
|Ascó I                |  | 100                | % | 1,028.0                                            |  | PWR         | (3) | 1983                              |  | 97.7                                | %
|Ascó II               |  | 85                 | % | 1,027.2                                            |  | PWR         |     | 1986                              |  | 90.6                                | %
|Vandellós II          |  | 72                 | % | 1,087.1                                            |  | PWR         |     | 1988                              |  | 87.7                                | %
|Santa Maria de Garoña |  | 50                 | % | 466.0                                              |  | BWR         | (4) | 1971                              |  | 97.8                                | %
|Trillo                |  | 1                  | % | 1,066.0                                            |  | PWR         |     | 1988                              |  | 90.3                                | %
|Almaraz I             |  | 36                 | % | 973.5                                              |  | PWR         |     | 1983                              |  | 90.3                                | %
|Almaraz II            |  | 36                 | % | 982.6                                              |  | PWR         |     | 1983                              |  | 98.4                                | %
|                      |  |                    |   |                                                    |  |             |     |                                   |  |                                     |  
|Total                 |  |                    |   | 6,630.4                                            |  |             |     |                                   |  | 93.2                                | %
|                      |  |                    |   |                                                    |  |             |     |                                   |  |                                     |  

---

Nuclear
facilities use enriched uranium as fuel. Spanish law requires all enriched uranium supplies to be purchased from Empresa Nacional del Uranio (Enusa), which is owned by Spanish
government agencies.

Enusa
meets its requirements for uranium in part from its own mines in Spain and the remainder through long-term supply contracts with various suppliers outside Spain. Enusa
is also party to contracts with various uranium enrichment facilities outside Spain. Our management believes that Enusa can meet the requirements for uranium of all nuclear generating facilities in
Spain throughout their useful lives.

Empresa
Nacional de Residuos Radioactivos (Enresa) administers a fund to finance certain activities in connection with a program to decommission nuclear power stations and dispose of
nuclear waste (the "Plan General de Residuos Radioactivos"). Enresa and the fund are financed by contributions of a specified portion of rates collected
by all electricity distribution utilities. Enresa is solely responsible for the decommissioning of nuclear stations and the treatment and disposal of nuclear waste.

Nuclear
waste from power stations in which we participate is temporarily stored at storage facilities at each station's site. Given the number of years of operation of such nuclear power
stations, the amount of nuclear waste generated to date is small and we believe that the current storage facilities are sufficient to meet future storage needs.

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Each
Spanish operator of a nuclear facility has an agreement with Enresa that defines its responsibilities with respect to stored nuclear waste. Once transported off-site,
the responsibility for the nuclear waste lies with Enresa, until permanently stored, at which point the Spanish Government assumes full responsibility.

The
operation of all nuclear power stations in Spain is regulated and supervised by the Nuclear Safety Council (Consejo de Seguridad
Nuclear), a government agency that reports directly to the Spanish Parliament. The Nuclear Safety Council also has jurisdiction over the safety, construction and operation of
nuclear power stations.

The
countries that are signatories to the Paris and Brussels Conventions are proportionately responsible for liabilities between 105 million and 300 million special drawing
rights (approximately €120 million and €344 million, respectively, at December 31, 2002). The special drawing right is a basket currency
established by the International Monetary Fund. Neither
of these treaties nor Spanish law or regulations allocates responsibility for liabilities in excess of 300 million special drawing rights. Additionally, since 1995, nuclear power plants in
which we hold an interest are currently insured against damages to their facilities and against machinery breakdowns, with maximum coverages as of December 31, 2002 of
€1.35 billion and €75.1 million, respectively.



At December 31, 2002, we operated hydroelectric generating facilities in Spain with an installed capacity of 5,367.7 MW, which vary widely as to type and
size. The hydroelectric generating facilities were constructed between 1933 and 1993 and are located primarily along rivers in the northwest, northeast and south of Spain. Our hydroelectric power
plants are operated by concession from the Kingdom of Spain for a maximum term of 75 years.

The
following table sets forth the installed capacity of our hydroelectric facilities.

|                            |               | Installed Capacity at
December 31, 2002
|--------------------------- | ------------- | ---------------------------------------
|
|Northwest                   |               | 727.6                                  
|Ebro-Pyrenees:              |               |                                        
|                            | Pont de Suert |                                        
|                            | Zaragoza      |                                        
|                            | Lleida        |                                        
|South:                      |               |                                        
|                            | Cordoba       |                                        
|                            | Antequera     |                                        
|Moralets                    |               | 221.4                                  
|Sallente and Montamara      |               | 539.0                                  
|Ip and Urdiceto             |               | 84.0                                   
|Tajo Encantada and Guillena |               | 570.0                                  
|El Mulato                   |               | 0.8                                    
|                            |               |                                        
|                            | Total         |                                        
|                            |               |                                        

We
believe that substantially all of Spain's hydroelectric power potential has been developed.



We operate fuel oil and gas power stations in Spain with total installed capacity of 5,687.7 MW, including the combined cycle gas turbine plants in San Roque 2
and Besós 3, at December 31, 2002, which are located in the Balearic and Canary Islands, Catalonia, Andalusia and the Spanish cities of

22

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Ceuta
and Melilla on the northern coast of Africa. These power stations form part of our generation and production network in those localities. The following table sets forth the installed capacity of
our fuel oil and gas power stations.

|Service Area         |                                    | Installed Capacity at
December 31, 2002
(in MW)
|-------------------- | ---------------------------------- | -----------------------------------------------
|Besós 2              |                                    | 450.0                                          
|Besós 3 (CCGT)       |                                    | 373.1                                          
|Foix                 |                                    | 520.0                                          
|San Adrian 1&3       |                                    | 700.0                                          
|San Roque 2 (CCGT)   |                                    | 366.8                                          
|San Adrian 2         |                                    | 350.0                                          
|Cristobal Colon      |                                    | 378.0                                          
|                     |                                    |                                                
|                     | Total Mainland                     |                                                
|                     |                                    |                                                
|Alcudia              |                                    | 75.0                                           
|Son Molinas          |                                    | 64.0                                           
|Son Reus             |                                    | 386.8                                          
|Mahón                |                                    | 123.4                                          
|Ibiza                |                                    | 193.5                                          
|Formentera           |                                    | 14.0                                           
|Jinamar              |                                    | 415.6                                          
|Barranco de Tirajana |                                    | 235.0                                          
|Candelaria           |                                    | 288.2                                          
|Granadilla           |                                    | 287.5                                          
|Punta Grande         |                                    | 174.5                                          
|Las Salinas          |                                    | 116.1                                          
|El Palmar            |                                    | 16.1                                           
|Llanos Blancos       |                                    | 9.0                                            
|Los Guinchos         |                                    | 60.6                                           
|Ceuta                |                                    | 49.0                                           
|Melilla              |                                    | 41.5                                           
|                     |                                    |                                                
|                     | Total Extrapeninsular              |                                                
|                     |                                    |                                                
|                     | Total Mainland and Extrapeninsular |                                                
|                     |                                    |                                                

At
December 31, 2002, the mean age of our fuel oil and gas power plants on the Spanish mainland was 27 years, and the mean age of our fuel oil and gas power plants outside
the Spanish mainland (i.e., the Balearic Islands, the Canary Islands, Ceuta and Melilla) was 14 years.

We
have a portfolio of gas supply contracts that provides us with flexibility in determining the amount of gas required. We have several collaboration agreements with Gas Natural SDG,
S.A., including a long-term contract under which we expect to have a reliable source of natural gas supply available at competitive terms and prices, which will be necessary for our
construction program for new combined cycles gas turbine plants. Prices under this contract are linked to the price of certain baskets of fuel-oils and oil products. Through this contract,
which is not exclusive for either of the two parties, we purchase an amount of gas from Gas Natural that is equal to a significant part of our estimated installed power consumption needs for combined
cycle gas turbine plants until 2005-2006. Supply began in 2002 according to a delivery schedule that is based on our combined cycle construction plan, which will consist of between 2,500
and 3,000 MW of installed capacity. We also have a long-term supply contract with Sonatrach which secures the aggregate supply of 1 bcm of natural gas. We are also seeking additional
sources of gas in order to diversify our portfolio of suppliers.

23

---

In 2001, we participated in the auction by the Spanish government of 25% of the natural gas supplied by Sonatrach, the Algerian state petroleum company, via the Europe-Maghreb pipeline
to natural gas marketers for resale to non-affiliated qualified consumers, i.e., consumers meeting the minimum consumption requirements. See "RegulationRegulation
of the Natural Gas Sector in Spain". Pursuant to this auction, we obtained the rights to supply approximately 18.0% of the auctioned amount, or approximately 4.5% of the aggregate amount of natural
gas supplied via the Europe-Maghreb pipeline for the period commencing November 2001 and ending in December 2003.



The price of coal decreased throughout 2002 until September, when the price reached historic lows. Subsequently, the price increased steadily until the end of the
year, which was principally due to increased demand in Asia.

The
price of oil increased significantly throughout 2002 from less than $20 a barrel of Brent crude at the beginning of the year to more than $30 a barrel at the end of the year, which
was principally due to the conflict in Iraq and labor and civil unrest in Venezuela, which led to corresponding increases in the price of oil-derived fuels and natural gas. As of the date
of this annual report, the price of Brent crude had fallen to approximately $26.50 a barrel.



In 2002, we supplied electricity to approximately 10.3 million customers throughout Spain resulting in sales of approximately
€6.4 billion in distribution, transmission and supply and representing approximately 42% of total energy sales in Spain. Approximately 15% of our customers are commercial and
industrial clients and 85% are residential customers. In 2002, we sold 62,805 GWh to regulated retail customers and 29,828 GWh to deregulated customers (including 8,582 GWh to foreign customers), for
total sales of 92,633 GWh, an 8.4% increase over 2001. In the wholesale market, we sold 78,922 GWh and acquired 70,428 GWh (including 1,400 GWh used to pump water from hydroelectric facilities) to
supply our distribution and supply subsidiaries. The difference between the energy we generated and the energy we sold is due to:



We currently distribute electricity in the following regions in Spain: Catalonia, Andalusia, Aragón, the Balearic Islands, the Canary Islands,
Ceuta, Melilla and parts of Extremadura. We formerly distributed electricity in Cantabria and parts of Asturias through a distribution company that we sold as part of our divestiture of certain
generation and distribution assets. See "Capital Expenditures and Divestitures". As part of the culmination of the corporate restructuring process which we commenced in 1998, in
November 2001, our Board of Directors approved the consolidation of our five retail electricity distribution companies, each of which operated in a separate region. As part of this
consolidation process, we formed two new companies, Endesa Distribución Eléctrica and Endesa Operaciones y Servicios Comerciales, each of which is wholly-owned by our
newly-named distribution holding company, Endesa Red. Endesa Distribución Eléctrica will assume the transmission, distribution and regulated supply activities formerly
carried out by the five retail electricity distribution companies.

24

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Endesa
Operaciones y Servicios Comerciales will provide support functions such as billing and collections, customer support, sales offices and other administrative functions. Endesa Operaciones y
Servicios Comerciales will also provide these support functions to other companies in the Endesa Group, including Endesa Energía, which supplies electricity to deregulated customers,
and companies involved in the distribution of natural gas. We believe that this new structure will enable us to improve our operating efficiency and quality of service.

In
2002, we distributed 62,805 GWh to approximately 10.25 million customers, representing a 2.2% decrease in the number of customers over 2001, which was principally due to the
divestiture of Viesgo, and a 43.4% share of the regulated market at December 31, 2002.



As of January 1, 2003, the Spanish electricity sector became completely liberalized, as a result of which all consumers are able to choose their
electricity supplier. See "RegulationRegulation of the Spanish Electricity SectorNew Regulatory Structure" and "Eligible Customers".

At
December 31, 2002, there were approximately 75,000 points of consumption by eligible customers, accounting for approximately 53% of Spain's energy consumption. Eligible
customers who exercised the right to choose their own suppliers, and therefore became deregulated, accounted for approximately 29% of Spanish energy consumption. We expect that this number will
increase as a result of the full liberalization of the Spanish energy sector.

We
sell to deregulated customers through Endesa Energía. During 2002, Endesa Energía sold 21,246 GWh to 8,314 points of consumption in Spain, which
represents a 1.6% increase over the prior year and a 36.7% share of the liberalized market. We seek to provide integrated and flexible energy solutions at affordable prices, and offer to supply
electricity, steam, natural gas, compressed air and demineralized water.

During
2002, in anticipation of growth in the number of retail customers allowed to choose their electricity supplier, we have focused on improving customer service through:



We
have created regional cycle centers (centros regionales de ciclo) to:



We
have integrated our telephone customer service capabilities into fourCentros de Atención Telefónica(CATS), which handled over 9.7 million calls in 2002. We have also carried out telephone polls in 2002 regarding the level of satisfaction with our service and level of customer support. We
have also implemented promotional programs aimed at the household and small- and medium-sized business sectors.

Our
on-line initiatives include:



25

---



Throughout
2002, we developed a range of products designed for customers in the deregulated market, such as free home repair services. We also implemented a new billing system which will
make invoices easier to read and will provide our clients with information on our products and services. In addition, we are leveraging our household customer base for sales of additional value added
products such as life insurance policies and electrical appliances, including air conditioners and heating machines.



Since 2001, as part of our efforts to strengthen our core energy business and customer base, we have offered integrated home services to our electricity customers
in three major Spanish cities, Sevilla, Zaragoza and Valladolid, under the brand name Egar. We market home repair and refurbishing services, security system installation, air conditioning
installation, insurance and telecommunications services, including fixed-line telephony, mobile telephony and cable.



We believe that there is a tendency towards convergence of the markets for the supply of electricity and natural gas in the Iberian peninsula, and as part of our
new strategy, we have become an integrated energy supplier, providing both electricity and natural gas to our customers. We believe that we were well-positioned for our entry into the
natural gas supply market in 2001 as a result of our consumption of large quantities of natural gas in connection with our electricity generation business and our experience supplying electricity to
our customers. In 2001, we began to supply natural gas through Endesa Energía to eligible customers to whom we also supply electricity. At December 31, 2002, we had 71 customers
whose annual consumption requirements total approximately 5,852 GWh. Our market share for the supply of natural gas in Spain at December 31, 2002 was an estimated 4.3% and an estimated 12.0%
including the supply to our power plants.



The wholesale market, which was established in 1998, performed well in 2002. Our market share of daily sales was approximately 42.2%, a decrease from 45.8% the
prior year primarily due to the divestiture of Viesgo in January 2002.

We
sold a total of 77,938 GWh in the daily market in 2002, with a total value of €3.0 billion and a unit value of €3.89 cents/kWh. This represents
a decrease in energy supply of 4.1% in physical terms and an increase of 16.1% in economic terms over 2001. Sales in the set of markets downstream of the daily market (such as intraday, constraints
management and ancillary services) resulted in total sales in the wholesale market of 78,922 GWh with a value of €3.6 billion in 2002. Acting as purchaser, we contracted for a
total of 70,482 GWh (excluding energy used to pump water from hydroelectric facilities), of which 58,645 GWh went to our retail distribution subsidiaries and the remainder went to Endesa
Energía.



At December 31, 2002, the total length of our transmission and distribution network was approximately 280,166 kilometers, 21.6% of which was underground
lines.

26

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The
table below provides summary information of the transmission and distribution lines of our electricity transmission network at the dates indicated.

|                                      |  | At December 31, |  |         | 
|------------------------------------- |  | --------------- |  | ------- | 
|
|
|Aerial high-voltage lines (km)        |  | 27,076          |  | 27,327  | 
|Underground high-voltage lines (km)   |  | 515             |  | 552     | 
|Aerial medium-voltage lines (km)      |  | 90,469          |  | 91,810  | 
|Underground medium-voltage lines (km) |  | 23,429          |  | 25,153  | 
|Aerial low-voltage lines (km)         |  | 129,623         |  | 131,994 | 
|Underground low-voltage lines (km)    |  | 35,235          |  | 38,082  | 
|Transformer centers (MVA)             |  | 42,810          |  | 40,205  | 
|Substations (MVA)                     |  | 58,755          |  | 59,669  | 

---

Royal
Decree 1955/2000 dated December 1, 2000 established the conditions for engaging in transmission, distribution and trading activities. This decree regulates access to the
electricity networks and renewed the system of electricity connections to new supplies, which had been in effect since 1982. Under the Electricity Sector Law, remuneration for transmission and
distribution continues to be fixed by the government.

In
November 2002, our board of directors approved the sale of our Spanish mainland electricity transmission assets, including any assets that became operational prior to
December 31, 2002 to Red Eléctrica de España (REE) for €1,052 million. As part of the transaction, we will retain the right to use the fiber
optic cable installed in the electricity lines we sold for a period of 99 years and will share with REE the right to install new fiber optic lines over the existing electricity lines. The
transaction will not affect our ability to carry out electricity transmission activities pursuant to the prevailing regulatory framework in Spain. The transaction closed in the first quarter of 2003.
See "Capital Expenditures and DivestituresDivestitures".

In
2002, we invested €658 million in our transmission and distribution network in Spain, approximately 34% of which was dedicated to meeting new supply
requirements due to the 3.0% increase in the amount of energy sold and the connection of 260,000 new customers. The other approximately 66% was invested in improving quality of service and procedures.
As a result of these investments, in 2002 we increased the total length of our transmission and distribution network by more than 4,650 kilometers to 280,166 kilometers as at December 31, 2002.
Of this increase, 102 kilometers related to high-voltage lines, 1,650 kilometers related to medium-voltage lines and 2,898 kilometers related to low-voltage lines. In 2002, we
also constructed 934 new substations and more than 4,555 transforming centers (from medium- to low-voltage). Investments to improve quality of service and procedures included:



27

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We
have continued work on the integration of systems and procedures which are key to improving operational efficiency. We have identified best practices in the provision of services,
which are being introduced. We have also begun to consolidate the sales systems of former distributors. This will enable us to take advantage of the economies of scale provided by a larger customer
base to develop advanced technology.



In anticipation of the liberalization of the Spanish natural gas market, we have acquired direct ownership interests in several regasification plants with the
goal of guaranteeing access to gas supplies for our new combined cycle gas turbine plants and new and existing customers.

We
are currently participating in the following three Liquid Natural Gas (LNG) Maritime Regasification Terminal projects:

We
hold a 21% interest in Reganosa, which will be built in Mugardos (La Coruña) and which is expected to have a storage and regasification capacity of 300,000 cubic meters
and distribution capacity of 412,500 Nm3 per hour, equivalent to 3.6 bcm per year of natural gas. This plant will include a 130 kilometer pipeline network and is expected to commence operations in the
second half of 2005.

We
hold a 20% interest in Planta Regasificadora de Sagunto, S.A., which will be built in Sagunto (Valencia) and which is expected to have a storage capacity of 300,000 cubic meters and a
regasification capacity of 600,000 Nm3 per hour, equivalent to 5.25 bcm per year. We expect this plan to commence operations in the fourth quarter of 2005.

We
hold a 64.0% interest in Gasificadora Regional Canarias (Gascan). We are currently carrying out studies and initial activities for new projects in Arinaga (Gran Canaria) and
Granadilla (Tenerife), which we expect to commence operations in 2007 and 2009, respectively. Each of the Arinaga and Granadilla plants are expected to have a storage capacity of 150,000 cubic meters
and a regasification capacity of 210,000 Nm3 per hour, equivalent to 1.8 bcm per year.

Electricity Business in Europe



Our strategy with respect to our electricity business in Europe responds to the business opportunities arising from the current liberalization and deregulation of
the European electricity market. Directive 96/92/EC of the European Union sets forth as its goal the creation of a single electricity market.

We
have focused principally on markets in the Mediterranean region and on specific opportunities outside of such region. We believe that we have achieved a satisfactory footprint in
France, Italy, Portugal and Northern Africa and we now consider improving our operating efficiency in such countries as our primary focus in Europe and Northern Africa.

We
have commercial offices in Paris, Frankfurt, Milan and Lisbon for our energy supply activities and our trading activities are centralized in London.



In September 2001, a consortium in which we held a 45.3% stake acquired the Italian generation company, Elettrogen, from Enel SpA for approximately
€2.6 billion. The other members of the consortium include Santander Central Hispano and ASM Brescia. In January 2002, we merged Elettrogen with and into a newly-formed
company, Endesa Italia SRL (Endesa Italia), as a result of

28

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which
Endesa Italia became the successor to Elettrogen. In connection with this acquisition, we entered into an agreement with Santander Central Hispano pursuant to which we have the option to acquire
its 40.0% stake, in whole or in part, at any time through the fifth anniversary of the date of its acquisition of such stake. In March 2002, we partially exercised this option, acquiring an
additional 5.7% stake in the consortium from Santander Central Hispano for €126.9 million, as a result of which we currently hold a 51% stake in Endesa Holding Italia. In
addition, Santander Central Hispano may require us to purchase its remaining interest in Endesa Holding Italia for a period of 30 days commencing on the fifth anniversary of Santander Central
Hispano's acquisition of its interest in Endesa Holding Italia. For a description of the terms of our agreements with Santander Central Hispano and ASM Brescia relating to these options, see "Item 5.
Operating and Financial Review and ProspectsLiquidity and Capital Resources Contractual ObligationsCommercial Commitments".

Endesa
Italia, a wholly owned subsidiary of Endesa Holding Italia, is one of the three largest generators of electricity in Italy with an installed capacity of approximately 5,720 MW at
December 31, 2002, including 2,740 MW of installed capacity relating to its fuel oil and gas generating plants, 1,014 MW relating to its hydroelectric plants, 359 MW relating to its
coal-fired plants and 617 MW relating to alternative fuel plants using orimulsion, a fossil fuel produced from bitumen.

We
have entered into shareholders' agreements with Santander Central Hispano and ASM Brescia which define certain rights and obligations in connection with our investment in Endesa
Italia. Pursuant to these agreements, we have the right to appoint the president and secretary of the board of directors of Endesa Italia. The other members of the board of directors include three
members appointed by Santander Central Hispano, one member appointed by ASM Brescia and an independent member nominated by Santander Central Hispano and ASM Brescia. Decisions by Endesa Italia's board
of directors may only be taken by an affirmative vote of 66 2/3% of the board of directors. Under our shareholders' agreement with ASM Brescia, resolutions adopted by shareholders at general
shareholders' meetings require the approval of 55% of the shareholder votes and resolutions adopted at extraordinary shareholders' meetings require the approval of 60% of the shareholder votes. In
addition, we have granted to ASM Brescia certain rights customarily given to minority shareholders. Our shareholders' agreement with ASM Brescia is valid for a term of seven years and is renewable for
one or more three-year periods, unless terminated earlier upon the occurrence of certain events, including if either party ceases to be a shareholder of Endesa Italia or upon a change of
control of either party.



In November 2000, we entered into an agreement with Charbonnages de France (CDF) to acquire a 30% interest in the French electricity generator, Societe
Nationale d'Electricité et de Thermique (Snet). We acquired our 30% interest in Snet, following our receipt of clearance from the European Commission, in April 2001 for
€452 million. CDF continues to hold a 51.25% interest in Snet and Electricité de France holds an 18.75% interest. Snet, which is the second largest electricity
company in France, has eight coal plants with an aggregate installed capacity of 2,604 MW at December 31, 2002 and generated 7,363 GWh in 2002, with an approximately 5.4% market share in
France.

In
connection with our acquisition of a 30.0% interest in Snet, we entered into an agreement with CDF pursuant to which we may acquire CDF's remaining 51.25% interest in Snet.

Between
January 1, 2003 and January 1, 2004, we may offer to purchase CDF's remaining interest in Snet. If CDF refuses to sell to us its remaining interest in Snet, we may
either request CDF to purchase our interest in Snet or sell our interest in Snet to a third party.

At
any time prior to December 31, 2004, CDF has the right to request that we purchase its remaining 51.25% interest in Snet. Following CDF's request, we may elect to purchase
CDF's remaining 51.25% interest within a three-month period. If we elect not to purchase CDF's remaining

29

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interest
in Snet, CDF may request that we sell to CDF our interest in Snet, or it may seek a third-party purchaser for its interest.

In
addition, in the event that either party proposes to sell its interest in Snet to a third party, the other party has the right to sell its entire interest to such third party.

When
we acquired our 30% stake in Snet, we also entered into a shareholders' agreement with CDF which defined certain rights and obligations in connection with our investment in Snet.
This shareholders' agreement has been terminated as a consequence of our ongoing negotiations with CDF.

In
2002, CDF offered to us its remaining 51.25% interest in Snet. In response, we made a proposal to CDF pursuant to which we would accept ownership of CDF's 51.25% interest in Snet
immediately and
defer part of the payment for such interest until 2006. The precise terms and conditions of our offer are still under negotiation.

We
also have a 25% interest in Soprolif, whose principal business is the construction and operation of a circulating fluidized-bed plant at Gardanne (France), with capacity
of 250 MW. Snet also owns a 10% interest in Soprolif.



In Portugal, we hold a 35% stake in Tejo Energia-Producão e Distribucião de Energia Eléctrica S.A., which owns a 600
MW coal-fired plant, accounting for 6.7% of generation capacity in Portugal at December 31, 2002. In 2002, the plant generated approximately 4,794 GWh of electricity. All of the
electricity generated by the plant is sold under a long-term power purchase agreement with the national grid concessionaire.

We
intend to evaluate the possibility of new generation projects in Portugal. We also lead Portugal's cogeneration market through our 50% interest in Sociedade Termica Portuguesa, which
has 71 MW of installed capacity in Portugal.



We hold a 32% stake in Energie Eléctrique du Tahaddart, S.A. (EET), ONE (Office Nationale d'Electricité) holds a 48% stake and
Siemens holds the remaining 20%. EET has initiated the construction of a combined cycle gas turbine plant with an installed capacity of 384 MW in Morocco. We expect that the plant will commence
operations in February 2005.



Morocco's geographical proximity to Spain and strategic position made it the focus of our expansion in Northern Africa. We operate in water and electricity
distribution in the city of Casablanca with an 18% stake in the company Lyonnaise Des Eaux Casablanca, Lydec.



We seek to take advantage of the opportunities arising from the growing number of customers in Europe that can contract freely with suppliers. We have entered
into supply agreements with deregulated customers in France, Italy, Germany, Belgium, Andorra and Portugal, and in 2002, we supplied more than 8,582 GWh to 547 points of supply in these countries and
in 2003, we expect to supply more than 10,500 GWh to deregulated customers in these countries.

In
France, Snet supplied 4,645 GWh of electricity in 2002, and in Italy, Endesa Italia supplied 2,386 GWh to deregulated customers.

30

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In
Portugal we have strengthened our position in the supply of electricity to deregulated customers through a 50:50 joint venture with the Sonae Group, called Sodesa S.A. The joint
venture intends to initially target large customers, selling electricity and offering a wide range of energy-related services.

In
February 2003, we entered into an agreement with Forces Electriques d'Andorra to supply electricity to Andorra until December 2008, which agreement extends a prior
agreement from December 1998. Under the terms of the agreement, we will supply 50% of Andorra's electricity needs.



In 2002, we exported 881 GWh to Endesa Energía's customers outside Spain (principally, Forces Electriques D'Andorra in Andorra and Office Nationale
d'Electricité (ONE) in Morocco), conducted
wholesale electricity sales to other electricity systems (specifically, REN in Portugal) and, through Endesa Trading, sold energy to other electricity systems across the French border.



Deregulation of the European electricity sector has led to the development of wholesale markets where agents can buy energy from and sell energy to a number of
producers, traders and suppliers directly or through brokers, both bilaterally and through exchanges. As a result, generation assets and supply activities in Europe are increasingly exposed to market
risks. The European electricity sector has evolved towards several regional wholesale electricity markets, the most important of which is the Central European market, including Germany, France,
Switzerland and Austria and, with a lower degree of integration, The Netherlands and Belgium.

Endesa
has followed a proactive strategy to facilitate the development of wholesale markets in Europe. In 1999, we acquired a 10% interest in the Amsterdam Power Exchange (which has been
renamed ENDEX), which established the first organized spot market in continental Europe, of which we now hold 2.5% due to our decision not to participate in a capital increase in 2002. We were
subsequently a founding member and owner of a 10% interest in Gielda Energii, a company that operates a power exchange in Poland. In November 2001 we acquired a 5% interest in Powernext, which
began operating an organized spot market in France at the end of 2001.

The
objective of our trading activities in Europe is to support our generation and supply businesses by seeking to increase the return on our assets while hedging the market risk
associated with generation and supply activities. During 2002, our trading activities involved purchases and sales of electricity, substantially all of which were physical transactions, both under
medium-term (typically one year) contracts and in short-term transactions through over-the-counter markets (bilateral transactions) and the main
European exchanges. Other important activities have involved sourcing energy for sales to deregulated customers in France, as well as hedging purchases and sales of natural gas to deregulated
customers in Spain.

Our
energy trading activities are developed through a collaboration agreement with Morgan Stanley & Co. International Limited, an affiliate of Morgan Stanley, that has been
effective since the beginning of 2000. Trading activities are based in London and are carried out by personnel from both parties.

In
2002, we managed a total volume of 16,076 GWh, which corresponded to supply of Snet's and Endesa Energía's commercial activities, the sales of Snet's production and to
contracts with large customers, distributors and other wholesalers in France, The Netherlands, Germany, Belgium and Switzerland.

31

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Electricity Business in Latin America



We are involved in the generation, transmission, distribution and supply of electricity in six countries in Latin America, where we had an installed capacity of
13,265 MW and approximately 10.3 million customers at December 31, 2002. We are the largest electricity operator in Chile, Argentina, Colombia and Peru and have a significant presence in
Brazil and a smaller presence in the Dominican Republic.

Our
electricity business in Latin America is conducted principally through our subsidiary Enersis in which we currently hold a 65% interest. See "Item 5. Operating and Financial
Review and ProspectsLiquidity and Capital ResourcesFinancial Strengthening Plan of Enersis and Endesa Chile". We acquired control of Enersis in April 1999. Enersis is
an electric utility company primarily engaged, through its principal subsidiaries and related companies, in the generation, transmission and distribution of electricity in Chile, Argentina, Brazil,
Colombia and Peru. Through Endesa Chile, one of Enersis' consolidated subsidiaries, Enersis is the largest private sector electricity generation company in Latin America in terms of installed
capacity. Enersis is also the largest privately-owned electric distribution company in Latin America with over 10 million customers at December 31, 2002. Each of Enersis' and Endesa
Chile's American depositary shares, evidencing American depositary receipts, are traded on the New York Stock Exchange, and each of Enersis and Endesa Chile is a reporting company in the United States
that files annual reports on Form 20-F with the SEC and furnishes periodic reports to the SEC.

The
following table sets forth, at December 31, 2002, our principal subsidiaries active in the Latin American electricity business before Enersis' capital increase. See "Item 5.
Operating and Financial Review and ProspectsLiquidity and Capital ResourcesFinancial Strengthening Plan of Enersis and Endesa Chile".

|Company                   |  | Direct
Economic
Interest of
Endesa |   | Economic
Interest
Through the
Enersis Group |   | Total
Economic
Ownership
Interest |   | Voting
Interest |   | Installed
Capacity |  | No. of clients
|------------------------- |  | ---------------------------------- | - | ------------------------------------------- | - | --------------------------------- | - | --------------- | - | ------------------ |  | --------------
|
|Argentina:                |  |                                    |   |                                             |   |                                   |   |                 |   |                    |  |               
|Central Costanera         |  |                                    |   | 20.23                                       | % | 20.23                             | % | 51.93           | % | 2,302              |  |               
|Hidroeléctrica el Chocon  |  |                                    |   | 18.49                                       | % | 18.49                             | % | 65.19           | % | 1,320              |  |               
|Dock Sud                  |  | 39.86                              | % | 0.00                                        | % | 39.86                             | % | 69.76           | % | 822                |  |               
|Edesur                    |  | 6.22                               | % | 42.28                                       | % | 48.50                             | % | 99.45           | % |                    |  | 2.09          
|TESA                      |  | 54.98                              | % | 17.54                                       | % | 72.52                             | % | 100.00          | % |                    |  |               
|CTM                       |  | 54.99                              | % | 17.54                                       | % | 72.53                             | % | 100.00          | % |                    |  |               
|CEMSA                     |  | 55.00                              | % | 17.53                                       | % | 72.53                             | % | 100.00          | % |                    |  |               
|Brazil:                   |  |                                    |   |                                             |   |                                   |   |                 |   |                    |  |               
|Cachoeira                 |  |                                    |   | 36.04                                       | % | 36.04                             | % | 99.58           | % | 658                |  |               
|Central Térmica Fortaleza |  | 51.18                              | % | 31.72                                       | % | 82.90                             | % | 100.00          | % | 310                |  |               
|Cerj                      |  | 21.34                              | % | 40.25                                       | % | 61.59                             | % | 83.92           | % |                    |  | 1.78          
|Cien*                     |  | 54.99                              | % | 17.54                                       | % | 72.53                             | % | 99.99           | % | 2,100              |  |               
|Coelce                    |  | 27.92                              | % | 17.80                                       | % | 45.72                             | % | 58.86           | % |                    |  | 2.01          
|Colombia:                 |  |                                    |   |                                             |   |                                   |   |                 |   |                    |  |               
|C.H. Betania              |  |                                    |   | 33.36                                       | % | 33.36                             | % | 85.62           | % | 540                |  |               
|Emgesa                    |  | 26.70                              | % | 9.54                                        | % | 36.24                             | % | 48.48           | % | 2,214              |  |               
|Codensa                   |  | 29.61                              | % | 15.37                                       | % | 44.98                             | % | 48.48           | % |                    |  | 1.91          
|                          |  |                                    |   |                                             |   |                                   |   |                 |   |                    |  |               

32

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|Chile:       |  |       |   |       |   |       |   |        |   |       |  |     
|------------ |  | ----- | - | ----- | - | ----- | - | ------ | - | ----- |  | ----
|Endesa Chile |  |       |   | 38.97 | % | 38.97 | % | 59.98  | % | 3,935 |  |     
|San Isidro** |  |       |   | 29.23 | % | 29.23 | % | 50.00  | % |       |  |     
|Pangue**     |  |       |   | 37.02 | % | 37.02 | % | 94.99  | % |       |  |     
|Celta**      |  |       |   | 38.97 | % | 38.97 | % | 100.00 | % |       |  |     
|Pehuenche**  |  |       |   | 36.10 | % | 36.10 | % | 92.65  | % |       |  |     
|Chilectra    |  |       |   | 63.82 | % | 63.82 | % | 98.24  | % |       |  | 1.32
|Río Maipo(1) |  |       |   | 64.15 | % | 64.15 | % | 98.74  | % |       |  | 0.30
|Peru:        |  |       |   |       |   |       |   |        |   |       |  |     
|Edegel       |  |       |   | 14.77 | % | 14.77 | % | 63.56  | % | 1,003 |  |     
|Etevensa     |  | 43.50 | % | 0.00  | % | 43.50 | % | 60.00  | % | 325   |  |     
|E. de Piura  |  | 48.00 | % | 0.00  | % | 48.00 | % | 60.00  | % | 146   |  |     
|Edelnor      |  | 18.00 | % | 21.70 | % | 39.70 | % | 60.00  | % |       |  | 0.88

---



On October 4, 2002, Enersis' and Endesa Chile's Boards of Directors unanimously approved a financial strengthening plan in order to enhance their capital
structure and permit them to be better positioned in light of the current economic situation in Latin America, which has been affecting their investments and liquidity risk. This plan consists of four
main objectives: (i) refinancing of $2.33 billion of bank debt (which has already closed), (ii) a capital increase of up to $2 billion, (iii) asset sales of up to
$900 million and (iv) improvement in the generation of free cash flow. See "Item 5. Operating and Financial Review and ProspectsLiquidity and Capital
ResourcesFinancial Strengthening Plan of Enersis and Endesa Chile".

In
1999, we designed and Enersis implemented a cost reduction program called the Genesis Project to improve the overall efficiency and competitive position of our Latin American
operations. Most of the objectives of the project were achieved ahead of schedule despite the adverse macroeconomic conditions affecting Latin American markets. Nonetheless, at December 31,
2002, Endesa Internacional embarked on an ambitious program to improve its operating, commercial and financial capabilities in the form of the financial strengthening plan described above and in "Item
5. Operating and Financial Review and ProspectsLiquidity and Capital ResourcesFinancial Strengthening Plan of Enersis and Endesa Chile". The financial strengthening plan
supersedes the Genesis Project as it extends to all of our generation and distribution companies held by Endesa Internacional.



At December 31, 2002, we had an installed capacity of 13,265 MW in Latin America, most of which is held through our subsidiary Endesa Chile, of which we
hold a 38.97% economic interest. Approximately 81% of the installed capacity corresponds to hydroelectric power stations and approximately 19% to thermal power stations.

33

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Through
Enersis, we own an approximately 38.97% economic interest in Endesa Chile, a publicly-held Chilean electric generation company. Endesa Chile had an aggregate
installed capacity of 3,935 MW in Chile at December 31, 2002, which amounts are included in the table above, of which 76% was hydroelectric. In addition, Endesa Chile has significant holdings
in electric generation companies in Argentina, Brazil, Colombia and Peru, with a total installed capacity at December 31, 2002 of 9,330 MW, including the installed capacity of generation
companies Endesa, S.A. holds directly in Argentina. The following table shows the installed capacity of our consolidated subsidiaries in Latin America by country for the periods indicated.

|Country   |       | 2000  |        | 2001  |        | 2002    |        | Percentage
change
2002/2001 |     
|--------- | ----- | ----- | ------ | ----- | ------ | ------- | ------ | --------------------------- | ----
|
|Chile     |       | 4,035 |        | 3,935 |        | 3,935(1 | )      |                            |     
|Argentina |       | 3,691 |        | 4,424 |        | 4,444   |        | 0.5                         | %   
|Colombia  |       | 3,035 |        | 3,035 |        | 2,754   |        | (9.3                        | )%  
|Peru      |       | 997   |        | 1,486 |        | 1,474   |        | (0.8                        | )%  
|Brazil    |       | 658   |        | 658   |        | 658     |        |                            |     
|          |       |       |        |       |        |         |        |                             |     
|          | Total |       | 12,417 |       | 13,538 |         | 13,265 |                             | (2.0
|          |       |       |        |       |        |         |        |                             |     

---

In
2002, our gross production of electricity in Latin America totaled 43,116 GWh, a decrease of 3.0% over 2001. The following table shows the gross production of electricity by our
consolidated subsidiaries in Latin America by country for the periods indicated.

|Country   |       | 2000   |        | 2001   |        | 2002   |        | Percentage
change
2002/2001 |     
|--------- | ----- | ------ | ------ | ------ | ------ | ------ | ------ | --------------------------- | ----
|
|Chile     |       | 15,346 |        | 15,741 |        | 16,495 |        | 4.8                         | %   
|Argentina |       | 10,470 |        | 11,864 |        | 8,750  |        | (26.2                       | )%  
|Colombia  |       | 9,618  |        | 10,106 |        | 10,837 |        | 7.2                         | %   
|Peru      |       | 3,623  |        | 4,480  |        | 4,567  |        | 1.9                         | %   
|Brazil    |       | 3,406  |        | 2,256  |        | 2,467  |        | 9.4                         | %   
|          |       |        |        |        |        |        |        |                             |     
|          | Total |        | 42,463 |        | 44,447 |        | 43,116 |                             | (3.0
|          |       |        |        |        |        |        |        |                             |     

In
June 2001, we commenced operations of a combined cycle gas turbine plant at Dock Sud in Argentina with an aggregate installed capacity of 775 MW. In December 2001, we
and Enersis reached an agreement pursuant to which we will hold a 51% interest and Enersis will hold a 49% interest in a project to build a combined cycle gas turbine plant at Fortaleza (Brazil) with
an aggregate installed capacity of 310 MW for an aggregate of approximately $210 million. The plant will be located in the Brazilian state of Ceará and is expected to commence
operations at the end of 2003. During 2002, Endesa Chile continued to construct the hydroelectric plant at Ralco (Chile), with a planned aggregate installed capacity of 570 MW and an estimated cost of
approximately $568 million. The plant is expected to commence operations in the second half of 2004.

The
Peruvian Government auctioned the contractual rights to the gas deposits in Camisea to the private sector, as well as a electricity purchase contract on behalf of
Electroperú, on the condition that such gas is used in open cycle plants between 2004 and 2006, and that 50% is used at CCGT plants thereafter.

34

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Our
Peruvian affiliate Etevensa is the provisional winner of this auction, subject to final determination. In the event that Etevensa emerges as the winner of the auction, it will need
to reconvert TG diesel to natural gas at its plants by August 2004 and close at least one CCGT plant by May 2006 in order to sell all of the gas it produces to Electroperú
for the next seven years.

The
conversion of its existing plants to gas turbine plants will require an investment of $1.2 million and the closure thereafter of a CCGT plant will require an additional
$81.3 million through May 2006. Over the long term, the closure of a second CCGT plant will require a further $80 million.



Through our 72.53% economic interest in Companhia de Interconexão Energética, or CIEN, we participate in a project to connect the
Argentine and Brazilian transmission systems and to sell electricity generated in Argentina in the Brazilian market. In order to connect the Argentine and Brazilian transmission systems, CIEN operates
two 500 kV transmission lines with a total installed capacity of 2,100 MW over a total distance of 1,000 kilometers. The cost of the two lines was estimated to be $650 million. The first line
commenced operations in June 2000. The second line commenced operations in August 2002. The two lines transmitted 340 GWh during 2002. CIEN has received two 20-year
authorizations from ANEEL, the Brazilian regulatory authority, to operate the transmission lines, after which time the transmission lines and the related converter stations will become the property of
the Brazilian government. CIEN has executed four power purchase agreements to sell the energy in Brazil.

In
early 2003, the Brazilian company Copel suspended payments to CIEN on certain contracts. Copel is one of the four Brazilian companies to which CIEN sells energy in Brazil under power
and energy supply contracts signed in 1999. Copel stopped making payments to CIEN in January 2003. We estimate that the current payments due by Copel to CIEN amount to approximately
$100 million, according to supply invoices and cost reimbursements for the months of December 2002 and January through May 2003. Such amount includes contractual interest and
fines. CIEN and Copel are currently in discussions aimed at reaching an agreement on this matter in order to continue the current contracts. These discussions will probably result in a modification of
the contractual terms and conditions, which may in turn result in less favorable pricing on the contracts. Consequently, CIEN may suffer a material decline in sales revenues under its power supply
contracts with Copel, which may reduce revenues that we derive from our interest in CIEN.

In
November 2001, Endesa acquired a 14.3% interest in Empresa Propietaria de la Red (EPR) (formerly named the Siepac project), which was formed in 1998 to construct, operate and
maintain a transmission line interconnecting six Central American countries. In connection with this acquisition, Endesa assumed management responsibility over the company. The project, which is
expected to cost an estimated $320 million, will involve the construction of a 230 kV transmission line over a distance of 1,830 kilometers. In 2003, we expect to award the contract for the
construction of the transmission line pursuant to a bidding process. Construction of the transmission line is expected to take place between 2004 and 2006, when the line is expected to become
operational.

We
also participate in transmission activities in Argentina through our 22.2% interest in Yacylec.



In 2002, the companies in which we have stakes distributed 47,494 GWh, an increase of 1.5% from 2001, to approximately 10.3 million customers in Chile,
Argentina, Peru and Colombia. In addition, we own a 40% interest in the Punta Cana Macao Energy consortium, which owns a generation and

35

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distribution
company in the Dominican Republic that operates a 54 MW plant. The following table shows our total customers and sales of electricity in Latin America by country in 2002.

|Country   |       | Customers |        | Sales 
|--------- | ----- | --------- | ------ | ------
|
|Argentina |       | 2,090     |        | 12,140
|Brazil    |       | 3,788     |        | 12,657
|Chile     |       | 1,620     |        | 9,895 
|Colombia  |       | 1,911     |        | 8,951 
|Peru      |       | 883       |        | 3,851 
|          |       |           |        |       
|          | Total |           | 10,292 |       
|          |       |           |        |       

Distribution in Argentina.In Argentina, through Enersis, we own an approximately 48.5% economic interest in Empresa
Distribuidora Sur S.A., or Edesur, one of the largest privatized electric distribution companies in Argentina in terms of operating revenues. Edesur serves approximately 2.1 million customers
in the greater Buenos Aires metropolitan area and is operated by Chilectra. The concession from the Argentine regulators to transmit and distribute electricity in Argentina is due to expire in 2087.

Distribution in Brazil.In Brazil, we conduct our electric distribution business through Companhia de Eletricidade de Rio de
Janeiro, or Cerj, the second largest electricity distributor in the State of Rio de Janeiro, and Companhia Energética de Ceará, or Coelce, the sole electricity
distributor in the State of Ceará in northeastern Brazil. Cerj serves approximately 1.8 million customers and Coelce serves approximately 2.0 million customers in their
respective concession areas. Both Cerj and Coelce are operated by Chilectra, a Chilean distribution company. We currently hold an approximate economic interest of 61.6% in Cerj. Our economic interest
in Coelce is approximately 45.7%.

Distribution in Chile.In Chile, through Enersis, we conduct our electricity distribution business through Chilectra S.A.
Chilectra is the largest electric distribution company in Chile and served approximately 1.3 million customers in the greater Santiago metropolitan area in 2002. In April 2003, we sold
Compañía Eléctrica del Río Maipo, S.A., through which we served approximately 300,000 customers of our Chilean electricity distribution
business.

Distribution in Colombia.In Colombia, we hold, together with Enersis, an approximately 45.0% interest in
Compañía de Comercialización y Distribución S.A. E.S.P. Codensa, or Codensa, an electricity distribution company that was created from the
division of the generation and distribution assets of Empresa de Energía de Bogotá S.A. Codensa serves approximately 2.0 million customers in its service area and
is operated by Endesa.

Distribution in Peru.In Peru, we own an approximately 39.7% interest in Edelnor S.A., an electric distribution company that
serves approximately 883,000 customers in its concession area in the northern part of Lima. Chilectra is the operator of Edelnor.

Other Businesses: Related Businesses



We distribute piped natural gas to residential, commercial and industrial consumers in seven Spanish autonomous regions through Endesa Gas and several companies
in which it holds stakes. In addition, Endesa Gas holds stakes in companies that distribute piped natural gas in Portugal. We are the second largest private natural gas distributor in Spain, with a
market share of approximately 4% at December 31, 2002. We are also present in the Portuguese natural gas distribution market through our interests in Setgas and Portgas. At December 31,
2002, Endesa Gas and the companies in which it

36

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holds
stakes had more than 291,000 customers in Spain and approximately 200,000 customers in Portugal. In 2002, the volume of energy sold in Spain by Endesa Gas and the companies in which it holds
stakes increased 6% to 3,610 GWh and the volume of energy sold in Portugal increased 27% to 2,171 GWh. In accordance with our strategic plan 2002-2006, we intend to increase our market
share in each of the Spanish and Portuguese markets for the distribution of natural gas. The following table shows certain information with respect to the companies in which Endesa Gas held stakes at
December 31, 2002:

|Company                            |       | Percent
Participation |   | Amount Invested
in 2002 |    | No. of Customers
at December 31,
2002 |         | Energy Supplied
in 2002 |         | Activity                
|---------------------------------- | ----- | --------------------- | - | ----------------------- | -- | ------------------------------------- | ------- | ----------------------- | ------- | ------------------------
|
|Gesa Gas                           |       | 100.0                 | % | 5.5                     |    | 77,295                                |         | 399.9                   |         | Gas distribution        
|Distribuidora
    Regional de Gas  |       | 45.0                  | % | 1.6                     |    | 9,876                                 |         | 538.9                   |         | Gas distribution        
|Meridional de Gas                  |       | 100.0                 | % | 3.1                     |    | 6,981                                 |         | 42.1                    |         | Gas distribution        
|D.C. Gas
    Extremadura           |       | 30.0                  | % | 6.6                     |    | 21,818                                |         | 705.3                   |         | Gas distribution        
|NQF Gas SGPS                       |       | 49.0                  | % |                        |    |                                      |         |                        |         | Holding company         
|Gas Aragón                         |       | 60.7                  | % | 7.8                     |    | 172,198                               |         | 1,907.8                 |         | Gas distribution        
|Gasificadora
    Regional Canarias |       | 64.0                  | % |                        |    |                                      |         |                        |         | Complete piped gas cycle
|Kromschroeder                      |       | 27.9                  | % |                        |    |                                      |         |                        |         | Gas distribution        
|Gas Alicante                       |       | 100.0                 | % | 2.5                     |    | 2,913                                 |         | 15.6                    |         | Gas distribution        
|Transportista Gas
    Canarias     |       | 73.9                  | % |                        |    |                                      |         |                        |         | Gas distribution        
|Endesa Gas
    Transportista       |       | 100.0                 | % | 1.0                     |    |                                      |         |                        |         | Gas transmission        
|Transportista
    Regional de Gas  |       | 45.0                  | % | 2.2                     |    |                                      |         |                        |         | Gas transmission        
|Portgas                            |       | 12.4                  | % | 33.1                    |    | 118,573                               |         | 1,687.4                 |         | Gas distribution        
|Setgas                             |       | 9.7                   | % | 17.6                    |    | 81,379                                |         | 483.6                   |         | Gas distribution        
|                                   |       |                       |   |                         |    |                                       |         |                         |         |                         
|                                   | Total |                       |   |                         | 81 |                                       | 491,033 |                         | 5,780.6 |                         
|                                   |       |                       |   |                         |    |                                       |         |                         |         |                         



Endesa Diversificación carries out its cogeneration and renewable energies business through its wholly-owned subsidiary, Endesa
Cogeneración y Renovables, S.A. The main sources of energy produced by this division are wind power, cogeneration, small-scale hydroelectric power and solid waste treatment. At
December 31, 2002, our cogeneration and renewable energies facilities had a total installed capacity of 1,805 MW. At that date, we also had projects under construction with an expected
aggregate installed capacity of 122 MW.

37

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The
following table shows certain information relating to our cogeneration and renewable energies capacity at December 31, 2002.

|Type of Energy            |       | No. of Plants |     | Installed
Capacity and
Capacity under
Construction |       | Percent of Total
Installed
Capacity |      
|------------------------- | ----- | ------------- | --- | -------------------------------------------------- | ----- | ----------------------------------- | -----
|
|Cogeneration              |       | 81            |     | 655                                                |       | 34.0                                | %    
|Wind                      |       | 63            |     | 854                                                |       | 44.3                                | %    
|Small-scale Hydroelectric |       | 38            |     | 207                                                |       | 10.7                                | %    
|Biomass                   |       | 7             |     | 61                                                 |       | 3.2                                 | %    
|Urban Waste               |       | 5             |     | 90                                                 |       | 4.7                                 | %    
|Other                     |       | 9             |     | 60                                                 |       | 3.1                                 | %    
|                          |       |               |     |                                                    |       |                                     |      
|                          | Total |               | 203 |                                                    | 1,927 |                                     | 100.0
|                          |       |               |     |                                                    |       |                                     |      

In
2002, we had an estimated market share of approximately 15% in the cogeneration and renewable energies market in Spain. During 2002, we commenced operations of 12 new renewable
energies facilities with an aggregate installed capacity of 211 MW, of which approximately 70% related to wind farms. During 2002, we also divested cogeneration plants with an aggregate installed
capacity of 45.5 MW in order to optimize our portfolio of cogeneration and renewable energies assets.

In
2002, we received approval for the construction of new wind farms in the regions of Castilla-La Mancha, Andalusia, Aragón, Valencia and
Castilla-León, with a potential aggregate installed capacity of 1,500 MW. Construction of these facilities is expected to begin between 2003 and 2007, and they are expected
to commence operations before 2008. The new wind farms are expected to increase Endesa Cogeneración y Renovable's installed capacity by 17%. Endesa expects to make a total investment of
€292 million in connection with these wind farms. This investment forms part of our strategic plan 2002-2006.

We
expect to continue to grow our renewable energies business. We currently have plans to increase our renewable energies capacity by more than 2,000 MW over the next five years. In
addition, we are seeking a strategic partner for our renewable energies operation.



We have an approximately 11.6% interest in Sociedad General de Aguas de Barcelona, S.A. (AGBAR), an integrated water company providing water and sewage services
throughout Spain. In addition to AGBAR, we hold stakes in companies providing integrated water management services to approximately 193,000 customers in the Canary Islands and Andalusia.

In
2002, we sold our approximately 40.0% interest in Interagua and our stakes in Emasagra, Aguas Vega Sierra Elvira and Gestión de Aguas de Aragón to AGBAR,
which owns the other approximately 60.0% of Interagua and is also a shareholder in the other companies, for approximately €25.7 million. The sale of our stake in these companies
is part of our 2002-2006 strategic plan that provides for, among other things, the disposition of non-core and non-strategic assets.

Other Businesses: Non-Core Businesses



We formed Auna, of which we currently hold 29.89% directly and indirectly, in conjunction with Telecom Italia, Unión Fenosa and other minority
shareholders to serve as a holding company for our respective interests in telecommunications businesses in Spain. Auna is the second largest integrated telecommunications operator in Spain, providing
fixed-line telecommunications and mobile telephony

38

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services
as well as cable telecommunications services. At December 31, 2002, Auna had approximately 7 million customers in Spain. Auna's objective is to reach a market share in Spain of
over 16% by 2006. Auna has, among others, interests in:



At
December 31, 2002, our total investment in Auna amounted to €1.7 billion (with a book value of €1.1 billion at such date),
including €432 million in 2002.

As
part of the capital restructuring of Auna in 2002, Telecom Italia sold its stake to Santander Central Hispano, which became the second largest shareholder in Auna. In 2002, Endesa
Telecomunicaciones increased by 2% its interest in Auna to 29.89%, which transformed it into the largest shareholder in the telecommunications group. Endesa has a call option to purchase up to an
additional 5.5% interest in Auna from Santander Central Hispano, which may be exercised in whole or in part at any time before July 30, 2003 with no obligation to pay for such interest until
January 2004. Santander Central Hispano has a put option to sell to Endesa up to 3% of Auna in January 2004. The interest in Auna that Santander Central Hispano may sell to us pursuant to the
put option will be reduced by the same amount as the amount that we purchase, if any, of Auna pursuant to our call option. As of the date of this annual report, Endesa Telecomunicaciones is analyzing
whether or not it will exercise the call option (the approximate maximum price of such option amounts to €477 million). See "Item 5. Operating and Financial Review and
ProspectsLiquidity and Capital ResourcesCommercial Commitments".

Although
as part of our strategic plan 2002-2006 we intend to divest certain non-core assets, we have shown, together with the other core shareholders of Auna,
our commitment to the development of Auna in the medium term.

In
October 2002, Auna sold to Wanadoo its interest in eresMas Interactiva (formerly Retevisión Interactiva), a provider of free Internet access, for
€182 million, which represented a capital gain of €21.5 million.



We formed Auna Telecomunicaciones, S.A. in 2002 with the goal of integrating all of Auna's fixed-line telephony assets, which previously had been held
by Retevisión and the cable operators (Auna Cable, Madritel, Able, Menta, Supercable and Canarias Telecom) in order to achieve greater levels of efficiency in our fixed-line
telephony businesses.

Auna
Telecomunicaciones, which is 29.50% owned by Endesa, is the second-largest fixed-line telecommunications operator in Spain. At December 31, 2002, Auna
Telecomunicaciones had over 521,000 direct access customers representing an approximate 5% market share.

We
also own 10.01% of the telecommunications operator Euskaltel, of which 10% is held directly and 0.01% is held indirectly through our interest in Auna.



Retevisión Móvil, Spain's third largest mobile telephony operator, was commercially launched in January 1999 under the brand
name Amena. In March 2000, Amena, which is 29.26% owned by Endesa, was awarded one of four new UMTS licenses in Spain. This new technology, once it becomes available, will allow for wireless
broadband services, including Internet access and high-speed data transmission. At December 31, 2002 Amena had approximately 6.45 million customers, representing an increase
of approximately 23.6% over 2001 and an estimated market share of approximately 19.6%.

39

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In June 2000, we acquired 100.0% of Smartcom, a Chilean mobile telephony operator. Since acquiring Smartcom, we have made investments totaling approximately $652 million
(including €57 million in 2002) to expand its client base, upgrade its networks, increase the quality of its signal, expand its coverage area, develop new products and roll out
its commercial distribution and sales network. We have also undertaken to improve its management systems and customer service. In part as a result of these efforts, at December 31, 2002,
Smartcom had approximately 946,500 subscribers with an estimated market share of approximately 15.4% compared with approximately 609,000 subscribers and an estimated market share of approximately
13.5% at December 31, 2001.



New Technologies.In 2002, in order to provide value added services to our customers more efficiently, we rationalized our
activities related to the internet and the new technologies sector. We integrated two of Endesa Net Factory's initiatives: Endesa Marketplace, a major Spanish B2B electronic marketplace operator that
offers private e-procurement solutions to medium-to-large enterprises, into Endesa Servicios, and Endesa Web Hogar or Portae.com, a website that markets
comprehensive home and housing services to our residential customer base, into Endesa Energía. Consequently, Endesa Net Factory is now focused on the management of Power Line
Communications and supervision of its financial investments.

In
order to enhance the value of our electricity distribution network and to provide new value-added services to our residential and SME clients, we have continued our research and
development project related to the transmission of data and voice through our electricity network, which is known as power line communications, or PLC. In 2002, we conducted a large-scale trial of the
technology in the Spanish city of Zaragoza, which included approximately 2,100 clients in the residential and SME sectors using technologies developed by DS2 and Ascom. We are also developing pilot
programs to implement PLC technology in Chile and Mexico.

Other services.Through Endesa Servicios, we provide a variety of products and services to other Endesa Group companies and
third parties that are aimed at increasing operating efficiency. These products and services include information and management control systems, supply management and environmental services. We also
provide maintenance services with respect to these systems.

Non-Core Diversified Assets

On March 27, 2003, we sold our 3.01% interest in Repsol YPF, S.A. for €506 million. During 2002, we accounted for our interest in
Repsol under the equity method.



In August 2001, the Enersis Group acquired a 0.672% stake in exchange for €5 million in cash in the Cachoeira Dourada hydroelectric
plant through a public tender offer as a result of which we increased our stake in the plant to 99.6%.

In
December 2000, Enersis completed two tender offers for Chilectra and Río Maipo for an aggregate amount of $381 million. Following these tender offers,
Enersis owned 98.03% of Chilectra and 98.46% of Río Maipo. In 2001, Enersis acquired additional interests in these companies from minority shareholders pursuant to public offers, as a
result of which it owned 98.2% of Chilectra and 98.7% of Río Maipo at December 31, 2001.

40

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The following table sets forth our capital expenditures and investments by type for the years 2000 to 2002. Financing in those years consisted primarily of
internally generated funds.

2000

2001

2002(in millions of euro)Capital Expenditures:Power stations

708

797

1,121Distribution facilities

1,025

1,281

1,060Other

239

325

191Total capital expenditures

1,972

2,403

2,372Investments:Investments for consolidation, diversification and international

1,668

2,231
(1)
1,359
(2)Other

473

812

232Total investments

2,141

3,043

1,591Total capital expenditures and investments

4,113

5,446

3,963


---



During the first quarter of 2003, we made total capital expenditures of €386 million, 51.6% of which was made in our domestic electricity
business, 13.7% of which was made in our European electricity business, 32.9% of which was made in our Latin American electricity business and 1.8% of which was made in our other businesses. Of the
total capital expenditures, €203 million was recurrent capital expenditures and €183 million was invested in increased capacity and other
non-recurrent capital expenditures. These capital expenditures were financed by internally generated funds.

In
2002, we made total capital expenditures of €2,372 million, 56.9% of which was made in our domestic electricity business, 29.9% of which was made in our Latin
American electricity business, 10.3% of which was made in our European electricity business and 2.8% of which was made in our other businesses. Of the total capital expenditures,
€1,253 million was recurrent capital expenditures and €1,119 million was invested in increased capacity and other non-recurrent capital
expenditures.

In
2001, we made total capital expenditures of €2,403 million, 50% of which was made in our domestic electricity business, 41% of which was made in our
international electricity business and 9% of which was made in our other businesses. Of the total capital expenditures, €792 million was recurrent capital expenditures and
€1,611 million was invested in increased capacity and other non-recurrent capital expenditures.

In
2000, we made total capital expenditures of €1,972 million, 57% of which was made in Spain and 43% of which was made in Latin America. Of the total capital
expenditures, €1,142 million was recurrent capital expenditures and €830 million was invested in increased capacity and other non-recurrent
capital expenditures.

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As part of our strategic plan 2002-2006, we expect to divest certain financial investments and other assets not related to our core business or with
limited strategic value. We plan to make total divestitures (including Viesgo) with an aggregate estimated value of €6-7 billion between 2002 and 2006. See
"Item 5. Operating and Financial Review and ProspectsFactors Impacting Our BusinessStrategic Plan 2002-2006". From January 1, 2002 through the date
of this annual report, we have disposed of approximately €4.2 billion in non-core assets, principally through the sales of Viesgo, the transmission network and
certain real estate agents in Spain and our stake in Repsol YPF, S.A. and Red Eléctrica de España, S.A. and certain assets in Chile.

We
have made, or are in the process of making, significant divestitures. The following describes our principal divestitures since 2000:



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Environmental Matters

The environment is a primary concern in all of our activities and we intend for all of our services to contribute to environmental protection and sustainable
development. Towards this end, we have set up an Environment and Sustainable Development Executive Committee to ensure that management considers sustainability when it makes its decisions and the
constitution of an Environment and Sustainable Development Direction to drive the development of a sustainable strategy for us. In addition, we are adopting an Environmental and Sustainable
Development Plan for Endesa, which we expect to implement between 2003 and 2007.

In
2002, Endesa voluntarily joined The Global Compact, a United Nations initiative addressed to enterprises, international trade unions and non-profit organizations,
promoting the adoption of nine principles in human rights, labor standards and environment. Through our participation in this initiative, we seek to demonstrate our leadership in the area of social
responsibility and in the

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application
of sustainable principles in decisions of our management. Furthermore, in recognition of our commitment to the environment, this past year we were added to the Dow Jones Sustainability
World Index and attained the highest rating of any company in the utilities sector.

The
nature of our principal business (electricity generation through hydroelectric, fuel-oil, nuclear and coal-powered facilities and distribution) and the fact
that we undertake coal mining activities means that we are subject to a number of environmental laws and regulations affecting many aspects of our present and future operations including:



Such
laws and regulations generally require us to obtain and comply with a wide variety of licenses, permits and other approvals. We believe that we are in material compliance with all
such laws and regulations. If new regulations are adopted, they could have an adverse impact on our operations.

In
particular, we are subject to the risks arising from the operation of nuclear facilities and the storage and handling of low-level radioactive materials. These risks
include limitations on the type of insurance available in respect of losses that might arise in connection with nuclear operations.
The Nuclear Safety Council has broad authority under Spanish law to impose safety-related requirements upon owners and operators of nuclear generating facilities and, in the event of
non-compliance, has the authority to impose fines or shut down a unit, or both, depending upon its assessment of the severity of the situation, until compliance is achieved.

The
objective of our principal environmental investments in 2002 has been to reduce and control emissions and to improve water treatment and management through investments in
desulfurization plants, water treatment plants, development of energy sources, improvements in electrical lines and other projects to minimize environmental impact of our business activities. Our
accumulated investment included in the assets on our balance sheet at December 31, 2002 was approximately €723 million, with €75 million of
environmental expenses incurred in 2002.

During
2002, our primary efforts in this regard included:



Since
1998, we have sought to comply with ISO 14001 by developing SGMAs in the areas of thermal, nuclear and hydroelectric energy generation, transmission and distribution of energy and
mining activities. We continue to make progress in these areas. Our most important plant certifications during 2002 have been for our plants in Melilla, Ibiza and Mahón. These join the
list of plants certified in prior years, including As Pontes, Almería, Puertollano, Los Barrios, Granadilla, Teruel, Alcudia and Barranco de Tirajana. As a result of our SGMAs, we
estimate that 81% of the energy that we produced in Spain during 2002 (including energy produced by our nuclear plants) was generated by plants compliant with ISO 14001. Moreover, our Compostilla,
Ceuta, Jinamar and Candelaria plants are currently in the final stages of ISO 14001 certification and our combined cycle gas turbine plants at

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Besós
and San Roque are under review for ISO 14001 certification. We have also continued to implement SGMAs at our hydroelectric plants. After the appropriate documentation has been
produced, we expect our Northwest, Ebro-Pyrenees and South plants to be fully compliant, and we are preparing the documentation necessary for a SGMA at our Minas de Andorra plant.

The
adjustments dictated by our SGMAs will improve our control over atmospheric emissions and enhance our ability to monitor air quality, to prevent spills and to manage noise pollution.

Our
approach to controlling air pollution has centered on three basic strategies:



The
Teruel plant has enjoyed particular success in modifying its desulfurization scrubbers to achieve 92% desulfurization. Similarly, we have undertaken studies to ensure that monitoring
and control networks at our major thermal plants conform to European Union Directive 1999/30/CE, a comprehensive air quality statute. Our goal has been to improve our monitoring capacity and bring it
into compliance with the requirements of the European Union. We have also established an environmental monitoring network for our new combined cycle plant at San Roque, optimizing for this purpose the
networks at Los Barrios and Bahia de Algeciras. As a result of the modernization of our
atmospheric quality control programs, our As Pontes plant saw continued improvement in its efforts to minimize disruptions to surrounding air quality. In so doing, it further developed its capacity to
estimate and evaluate emissions of compounds likely to be restricted by future legislation.

Insofar
as our nuclear plants at Asco and Vandellos are concerned, we have maintained our radiological monitoring program (Programa de Vigilancia
Radiológica) and we continue to test for radioactivity and temperature increases in the Ebro River and waters surrounding Asco.

Our
efforts to comply with ISO 14001 have also yielded improvements in our warehousing and monitoring of waste products. Enhancements have been made to our nuclear, hydroelectric and
nonrenewable fuel plants in this area. Of particular significance is the fact that we have been successful in marketing our waste products. All of the waste products of the Puente Nuevo and
Puertollano plants have been sold, while more than 85% of those generated at Los Barrios and Litoral have been sold.

In
addition, we have met our 2002 objectives set by the Plan for the Elimination of PCB submitted to the regulatory authorities in 2000. As far as wastes produced by our distribution
business are concerned, we have successfully retired dangerous wastes at each of our plants, which highlights the progress we have achieved in retiring transformers we no longer use.

Of
the environmental impact studies we performed in 2002, those pertaining to the Son Reus II combined cycle gas turbine, the new groups at El Palmar, the two new gas turbines at Arona
and the new gas turbine at Mahón merit special emphasis. We have also performed studies of several hydroelectric facilities, most notably of the Saltos de Riós Barjacoba
and El Mulato, Aitona, Baserca, Marboré and Riós Barroja and Flix facilities. In the area of distribution, more than 100 studies, environmental reports and basic
construction or installation improvement projects have been undertaken.

We
are working on two projects related to hydrogen and CO2, priority areas as established by the European Commission in the field of energy-related research. We continue
research on a fuel cell program designed to show the performance of polymer cells in electricity applications. We are also carrying out research projects by individual plants in the pursuit of
advances in clean air technology. The Ceuta and Melilla diesel plants are conducting a research project with the goal of reducing emissions and waste through the mechanical breaking of fuel molecules.
The As Pontes and

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Compostilla
fossil-fuel plants are engaged in research on atmospheric forecasting, and desulfurization and closed-loop combustion, respectively, and the Los Barrios fossil fuel
plant is working on new ways to optimize anti-fouling treatments.

Our
growing overseas activities have been accompanied by the implementation of our Spanish environmental management programs abroad. We estimate that 54% and 50% of the thermal energy
produced by Endesa Italia and our Latin American subsidiaries, respectively, were generated by plants compliant with ISO 14001. Similarly, 27% of the electricity distributed in Latin America was
generated by plants compliant with ISO 14001. Among Endesa's ISO 14001 certified plants in Latin America are Costanera and Dock Sud in Argentina, San Isidro in Chile and our distributor Edesur in
Argentina, which is the first distributor in the Enersis group to receive this exacting certification. We have also conducted "Environment Distribution Workshop" and "Environment Management Workshop"
programs in which representatives from our Latin American affiliates participated. Furthermore, we have formulated an Environmental Plan for our Latin American distribution affiliates and Enersis,
which establishes guidelines and best practices consistent with our company-wide commitment to sustainable environmental management.

Regulation



The Spanish electricity sector has recently changed to a free-market system that incorporates elements of competition and liberalization. The new
regulatory framework provides for:



On
November 27, 1997 the Spanish government passed Law 54/1997, which we refer to as the Electricity Sector Law, providing for a gradual transition to a liberalized system under
which every consumer will be free to contract for electric power from generators or other suppliers. Under the Electricity Sector Law, Spanish electricity operations are no longer a public service
provided by the government through Red Eléctrica de España, S.A., a state-controlled entity, which we refer to as Red Eléctrica. Red
Eléctrica's dispatching functions have been taken over by the market operator, Compañía Operadora del Mercado Español de Electricidad, S.A.
(OMEL). Red Eléctrica continues to serve as the system operator. OMEL is responsible for the economic management of the wholesale market, and Red Eléctrica is responsible
for the technical management of the transmission grid and the balancing mechanism which ensures that energy supplied is equal to the demand for energy.

The
Electricity Sector Law introduces competition by creating a competitive electricity generation market, allowing:



The
Spanish government passed a Hydrocarbons Law on October 7, 1998. The Hydrocarbons Law creates the National Energy Commission, which replaced the National Electricity System
Commission. The National Energy Commission supervises the electricity industry as well as the hydrocarbons and natural liquid gas industries in Spain.

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Under some of the basic provisions of the new regulatory scheme, electricity transmission and distribution activities will continue to be regulated, since their
particular characteristics impose severe limitations on the possibility of introducing competition. The new regulatory framework does, however, change the manner in which electricity businesses
receive payment, in order to promote efficiency and quality of service.

The
regulations take into account the investment and operation costs related to transmission activities. Fixed remuneration for distribution is based on investment, operational and
maintenance costs, and also take into account distribution areas, incentives for supply quality and availability of equipment, loss reduction and commercial management costs. In addition, the new
regulations provide for:



In
September 2002, the Council of Ministers approved the first Electricity and Gas Industry Plan subsequent to the passage of the Electricity Sector Law 54/1997. The Energy Plan,
as approved, covers the period from 2002 to 2011 and is binding as to what constitutes the basic system of electricity transmission facilities and gas pipelines. The Energy Plan contemplates certain
measures to be taken by generators and suppliers of electricity and gas, which will require investments by such generators and suppliers of more than €2.7 billion in the period
from 2002 to 2011. The Ministry of Economy has predicted that in the period from 2002 to 2011 that demand will increase an average of 3.2% per year and that gross installed capacity will increase to
79,853 MW in 2011 from 58,892 MW in 2002, which represents a 35.6% increase, principally due to renewable energy and CCGT production.



On June 23, 2000, Royal Law-Decree 6/2000 was adopted to increase competition in the electricity and other sectors. The main consequences of
these measures were a moratorium on generation capacity increases until June 23, 2005, excluding capacity increases related to projects currently under construction at the date of the Royal
Law-Decree that have received the necessary administrative permits and future projects to replace current generation capacity (1,600 MW plus 2,365 MW sold to Viesgo in our case).

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The Electricity Sector Law seeks to create a competitive electricity generation market. The new system provides for:



Under
the Electricity Sector Law, power generation plants are dispatched based on the results of a competitive bidding process. Each generating company must report to the market operator
on a daily basis for each hour of the following day the price and quantity of electricity they are prepared to supply. Plants offering the lowest bids are dispatched first by the pool operator, while
the plants with higher bids come on line later until demand is satisfied. The price of all the electricity produced during the scheduled period is determined by the bid submitted by the last plant
dispatched to satisfy the
demand for electricity at the time. In addition, electricity generators are compensated by a "capacity payment", calculated based on each individual plant's availability and capacity. Electricity
generators will also be compensated for providing ancillary services that complement electricity generation and ensure the quality, reliability and safety of the electricity supplied.

However,
plants using cogeneration and other renewable energy sources with a capacity of less than 50 MW operate under a "special regime". The Electricity Sector Law provides that
existing "special regime" facilities may:



Some
generation plants operating under the "special regime" will receive economic incentives for their contribution to environmental preservation and energy efficiency.



In order to administer the bid process, the Electricity Sector Law established an independent company to serve as "market operator" to:



The
market operator, OMEL, is a private entity which is expected to perform its duties subject to the principles of transparency, objectivity and independence. No shareholder is entitled
to own, directly

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or
indirectly, more than 10% of the share capital of OMEL, and the aggregate direct or indirect holdings of entities operating in the Spanish electricity sector may not exceed 40%.



The Electricity Sector Law also provides that a private entity shall carry out the functions of "system operator". The system operator is responsible for the
technical operation of the electricity system, including:



The
system operator performs its duties subject to the principles of transparency, objectivity and independence and coordinates its activities with the market operator. Following the
passage of Law 53/2002 on December 30, 2002, the system operator's shareholders are subject to the maximum shareholding limitation of 3%, which represents a reduction from the prior limitation
of 10%. The Electricity Sector Law provides for Red Eléctrica to carry out the functions of system operator and of
manager of the transmission network. Sociedad Española de Participaciones Industriales (SEPI) is required to hold at least 25% of the share capital of Red Eléctrica until
December 31, 2003 and thereafter to hold at least 10%.



The process of fuel purchasing by generating plants has been liberalized, except for a specific regime applicable to domestic coal which is affected by the
Spanish government's Coal Plan. Plants that use domestic coal purchased under three-year renewable supply contracts with domestic suppliers will receive an average premium of approximately
€0.006 per kWh generated until 2010 at the latest. The Coal Plan will be effective until 2005, and it is anticipated that the amount of domestic coal under purchase contracts will be
reduced approximately 28.3% during the life of the Coal Plan.

Nuclear
facilities use enriched uranium as fuel. Spanish law requires that all enriched uranium supplies be purchased from Empresa Nacional de Uranio (Enusa), which is owned by Spanish
government agencies.



In 1999, measures were adopted to decrease the legal threshold for customers who were eligible to choose their electric power suppliers, which we refer to as
eligible customers. At December 31, 2002, there were approximately 75,000 points of consumption by eligible customers, accounting for 53% of Spain's energy consumption. Consumers who exercised
the right to choose their suppliers accounted for 29% of Spain's energy consumption in 2002. Since January 1, 2003 all consumers of electricity are able to freely choose their supplier.



On December 30, 2002 the Spanish government passed Law 53/2002, which empowers the Spanish government to establish, by Royal Decree, the methodology by
which average electricity tariffs and reference electricity tariffs will be fixed from January 1, 2003 until December 31, 2010. In setting the

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average
and regulated electricity tariffs by Royal Decree, the following considerations must be taken into account:



Royal
Decree 1432/2002, of December 27, established the methodology by which average tariffs will be approved or modified, and amended in certain respects Royal Decree 2017/1997.
The new methodology is intended to fix average and regulated tariffs that reflect the cost base of electricity generation and the level of demand, while at the same time setting limits on the amount
by which average tariffs may change over time.

The
average tariff may not increase or decrease by more than 1.40% per year. Nevertheless, if the projected straight-line recuperation of competition transition costs would
not result in a zero balance at December 31, 2010, the Spanish government may consider an increase of 1.40% in its calculation of the average or regulated tariff. In addition, the average and
regulated tariff may not increase more than 0.60% year to year,as a consequence of the revision of the projections used in the calculation of the
tariffs in effect during the two preceding years in relation to certain variables and so long as certain limits are exceeded, such as consumer demand (1%), interest rates (50 basis points), Special
Regime surcharges (5%) and gas prices (5%). Consequently, total increases in the average or regulated tariffs may not exceed 2% per year.

Variations
in the average or regulated tariffs will be allocated among the different tariffs, subject to the limitation that no one tariff may increase or decrease more than 0.60%.

Finally,
Royal Decree 1432/2002 establishes that in the period 2003 through 2010, a portion of the electricity system's revenues will go towards the payment of tariffs deficits incurred
by the relevant companies in 2000, 2001 and 2002 and the additional compensation for the extrapeninsular operations in 2001 and 2002, expressly contemplating that such revenues could be securitized by
the parties entitled to payments of the tariff deficits.



Spanish electricity rates, which are established annually by Royal Decree and have been decreasing in real terms every year since 1984 (except 1991). The
cumulative rate of reduction in nominal terms for all Spanish customers from 1996 through 2002 has been approximately 15.7% (approximately 32.6% in real terms). Consequently, electricity rates in
Spain are currently below the European average for the majority of consumer categories.

In
December 1998, the Spanish government approved an average rate reduction for non-qualifying consumers of 2.5% per kWh, which became effective on January 1,
1999. In addition, in April 1999 the Spanish government approved an average rate reduction of 1.5% per kWh for residential non-eligible consumers to apply to the rates which were
effective on January 1, 1999 and an additional 0.74% reduction in the rate paid by distribution companies to cogeneration and renewable energies producers.

In
2000, the average rate for all consumers, including eligible and non-eligible consumers, decreased 4.85% (8.5% in real terms). The average rate reduction for 2001 for all
consumers, including eligible and non-eligible consumers, as approved in December 2000, was approximately 1.52% (4.1% in

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real
terms). Royal Law-Decree 6/2000 features a maximum reduction in residential tariffs of 4% in 2001 and 9% during the 2001-2003 period. However, Royal Decree 1483/2001, of
December 27, froze residential electricity tariffs for 2002 and increased electricity tariffs for other categories of consumers by approximately 1.0% on average. As a result, average
electricity tariffs for 2002 were approximately 0.3% greater than 2001 in nominal terms, which represents a decrease of approximately 3.5% in real terms.

Royal
Decree 1436/2002, of December 31, approved an increase of 1.65% in average electricity tariffs for 2003. An additional significant change established in Royal Decree
1436/2002 is that the tariff schedule does not distinguish among geographical locations; therefore, the costs of electricity generation in respect of island and extrapeninsular demand will be included
in the calculation of electricity tariffs. Residential electricity tariffs increased 1.5%, while all other tariffs increased approximately 2.0%.



The Electricity Sector Law, as amended, provides for a transition period until 2010 during which power generation companies (including Endesa) subject to the
Stable Legal Framework (regulated by Royal Decree 1538/1987) as of December 31, 1997 will be entitled to partial compensation for the costs they incur in connection with the transition to the
competitive market regime. This payment is made from amounts collected from consumers and liquidated by the National Energy Commission (Comisión Nacional de
Energía).

Due
to tariff reductions and increases in the price of electricity purchased by electricity companies from the pool, the amount collected from consumers during 2000 was insufficient to
pay the full amount that we and other electric companies are entitled to receive for regulated activities (i.e., remuneration for transmission and distribution). In light of this situation, the
Ministry of Economy issued an order on November 21, 2000, which provides that this deficit will be shared by all generation companies entitled to recover competition transition costs in
proportion to the competition transition costs they received in previous years. The amounts used to cover this deficit are taken into account to determine the competition transition costs to be
recovered at the end of the year.

Law
54/1997, as amended by Royal Law-Decree 2/2001, dated February 2, 2001, states that the overall base present value of the remuneration for competition transition
costs (CTCs), in constant 1997 value, may not exceed €10.44 billion. This overall base amount consists of the following components:



Royal
Law-Decree 2/2001 clarified the payment mechanism for competition transition costs. Each year, the Minister of Economy will determine the portion of competition
transition costs corresponding to each generation company. Any excess amounts received by a generation company from sales at a rate above approximately €0.036/kWh will be deducted from
the balance of competition transition costs that the company is entitled to receive. As a result, the deduction affects the competition transition cost balance at the end of each year.

Other
significant changes introduced by Royal Law-Decree 2/2001 are:



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The
Ministry of Economy issued an order on March 28, 2001, allowing the set off against reserves of capitalized competition transition costs that could be recovered by assignment
of 4.5% of amounts billed prior to the enactment of Royal Law-Decree 2/2001, but whose recovery through the fixed amount of competition transition costs cannot be reasonably deemed
certain.

In
July 2001, the European Commission determined that Spain's competition transition costs program is in compliance with the Amsterdam treaty and its requirements for state aid.
See "Regulation of the European Internal Electricity Market".

For
a discussion of the inclusion of the compensation for competition transition costs in the calculation of average and reference electricity tariffs, see "New Electricity
Tariff Methodology".



The Electricity Sector Law provides for the installation of new power generation plants to be completely liberalized and not subject to government planning,
subject only to authorizations required by applicable laws and regulations. New electricity generators will be entitled to the same rights and remunerated on the same terms as existing electricity
generators. These new electricity generators will not, however, be entitled to competition transition cost payments.



The Electricity Sector Law maintains the principle established under the historical regulatory framework that generation and distribution activities must be
performed by separate companies, although these companies may have common ownership. In addition, distribution activities must be carried out by companies that have as their exclusive purpose the
performance of this regulated activity. The separation of generation and distribution activities carried out by any one company was required to take place before December 31, 2000. The
Electricity Sector Law guarantees the transparency of the payments for transmission and distribution, which will continue to be fixed by the government.



Under the new regulatory system, generation companies and customers who are supplied at a nominal voltage greater than 1,000 volts or consume more than 1 GWh may
contract freely to purchase power. As of January 1, 2003 all consumers are entitled to contract freely with power generation companies or to change suppliers. In addition, beginning in 2003,
generation companies and supply companies may contract among themselves.

Under
the Electricity Sector Law, entities which supply electricity, eligible customers and authorized foreign entities will be entitled to use freely the existing power distribution
networks upon payment of the applicable tariffs. Remuneration for transmission and distribution continues to be fixed by the government.

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Royal
Decree 1955/2000 dated December 1, 2000 established the conditions for engaging in transmission, distribution and trading activities. This decree regulates access to the
electricity networks and renewed the system of electricity connections to new supplies, which had been in effect since 1982. This decree also sets out the minimum levels of technical quality and
customer support required in connection with electricity services, both on an individual customer basis and on a geographical basis. In addition, this decree regulates the discounts to be applied with
respect to amounts billed to individual customers that exceed certain interruption levels.



The Electricity Sector Law recognizes that Spanish electric companies operating off mainland Spain, such as GESA, UNELCO and Endesa with its activities in Ceuta
and Melilla, require special treatment given the special technical and financial requirements arising from their small size and isolation. They may be excluded from the competitive bid process and
their remuneration may include an additional component to cover specific costs. This additional component will be characterized as a permanent cost of the system and will be covered by the entire
national electricity system. As of the date of this annual report, the special regulations in respect of electricity supply in the extrapeninsular and island system contemplated by the Electricity
Sector Law were not yet developed.



Hydrocarbon Sector Law 34/1998, which was adopted in October 1998, substantially liberalized the natural gas industry in Spain. Subsequent laws and
regulations, including Royal Decree Laws 6/1999 and 6/2000, have sought to increase competition.

Royal
Decree Laws 6/1999 and 6/2000 accelerated the entry of new competitors in the unregulated natural gas commercialization and supply markets by reducing the minimum consumption
requirements for consumers to choose their natural gas supplier. Royal Decree Law 6/2000 reduced the minimum consumption requirement to three million cubic meters of natural gas per year. This minimum
requirement is being gradually eliminated. As of January 1, 2002, the minimum requirement was
reduced to one million cubic meters of natural gas per year, and beginning January 1, 2003, the minimum consumption requirement will be eliminated, allowing all consumers to freely choose their
natural gas supplier.

Royal
Decree 949/2001, of August 3, regulates third-party access to natural gas facilities and establishes an integrated economic system for the natural gas sector. The basic
provisions of Royal Decree 949/2001 are as follows:



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The
above-mentioned Royal Decree was developed through three resolutions adopted by the Ministry of Economy on February 15, 2002, which set forth a framework for remuneration of
regulated operators and established charges for using transmission and distribution networks and tariffs.

Royal
Decree 1434/2002, of December 27, which established a regulatory framework for the transmission, distribution, marketing, supply and authorization procedures in respect of
natural gas operators, included the following provisions:



Pursuant
to the Ministerial Order dated June 29, 2001, 25% of the natural gas supplied by Sonatrach, the Algerian state petroleum company, via the Europe-Maghreb pipeline has been
allocated temporarily (until 2004) to natural gas marketers on a non-discriminatory and transparent basis for resale to non-affiliated qualified consumers, i.e., consumers
meeting the minimum consumption requirements. See "Electricity Business in Spain".



On December 19, 1996, the Energy Council approved the Internal Electricity Market Directive, which became effective on February 19, 1997. In 2001,
the European Commission proposed a set of new measures to open the electricity market to full competition by amending the Electricity Market Directive. These measures include moving forward the
scheduled opening of the market to full competition, reinforcing the conditions which encourage real and fair competition and introducing a genuine single market. The proposed measures include:



During
2001, significant progress towards the development of a harmonized system of access and tariffs for the European transmission grid was made. So far this has led to a provisional
harmonized system of tariffs for cross-border electricity exchanges that was implemented in mid-2002.

On
March 16, 2002, the European Council of Barcelona adopted important conclusions on the internal electricity market.

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On
November 25, 2002, the European Council reached an agreement, which will serve as the basis of discussions with a view to reaching mutual agreement. Under this agreement, the
Council confirmed the two-stage approach to the liberalization of the internal market for natural gas and electricity, as well as the following:



As
of the date of this annual report, the agreements have been passed in the Second Lecture by the European Parliament and are expected to be published in the European Official Journal
in July 2003.



In the European countries in which we operate, significant regulatory developments occurred in 2002 and early 2003, the highlights of which are outlined below.



Consultations continued between the government regulator and the various participants in the Italian gas and electricity markets in advance of the expected
deregulation of both markets in 2004. The Italian government has passed a draft energy law, known as the "Marzano law", the purpose of which is to accelerate the deregulation of the energy industry,
by defining the principles for energy industry regulation and administrative responsibilities. It also introduced environmental measures based on the Kyoto Protocol, including through the promotion of
the use of natural gas and renewable energies. The "Marzano law" also provides measures on the security of supply networks, simplification of the administrative authorization process, service quality
and radioactive waste management.

The
Italian and French energy sector regulators agreed to a common mechanism for assigning interconnection capacity for 2003.

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The French government passed Law No. 2003-08, which sets forth the conditions under which competition will be introduced in the French gas
market and contains provisions relating to the public electricity sector.

In
2002, the European Commission claimed, before the European Court of Justice, that France's delay in implementing the EC directive in gas contravened the EC directive. As of the date
of this annual report, these claims are still pending.



The Portuguese electricity regulator published a proposal which would permit consumers to choose their medium-tension electricity supplier.

On
November 14, 2001, the Spanish and Portuguese Ministers of Economy signed a Protocol for Cooperation between the Spanish and Portuguese Governments for the Creation of the
Iberian Electricity Market, whereby the countries agreed to set up, from January 1, 2003, a single electricity market encompassing the whole Iberian peninsula, based on principles of free
competition, transparency, objectiveness and efficiency.

This
market, which covers the entire peninsula, is based on free bilateral trading between the players, the creation of an organized medium-term financial market and the
performance of short-term transactions in a daily and intradaily market. The two countries have maintained their System Operators, which are responsible for security of supply and the
management of the ancillary services.

The
creation of this market has been delayed, due to the problems posed by the existence of current contracts between the Portuguese producers and Rede Eléctrica Nacional
(REN), the System Operator, which must be terminated before the new market is in place.

However,
on June 17, 2003, the Portuguese Government approved a liberalization package enabling the creation of the Iberian Market in 2004.



Electricity System.Chile's electricity industry is organized into four separate interconnected electricity systems, the most
important of which is theSistema Interconectado Central(the "SIC") which covers a region that includes more than 90% of Chile's population. The Sistema Interconectado de Norte
Grande(the "SING") is the second most important system, providing electricity to the northern mining regions of Chile.
There are several other isolated and immaterial systems, including those in regions of southern Chile that provide electricity in remote areas outside the interconnected electricity systems.

Regulation.The electricity sector in Chile is regulated pursuant to Ley Eléctrica DFL No. 1 of 1982
and regulations under Decree No. 327 of 1998, as amended from time to time, which we collectively refer to as the Chilean Electricity Law. In May 2002, the Chilean executive authority
introduced an amendment to the Chilean Electricity Law to the Chilean Parliament. The purpose of the amendment, known as the "Ley Corta" or the "Short Law", is, among other things, to modify
provisions of the Chilean Electricity Law relating to payment for the use of electricity transmission networks, to establish mechanisms for the remuneration of ancillary services (including frequency
regulation, among others) and to create specific markets for such services. As of the date of this annual report, this amendment has not been approved by the Chilean Parliament.

Activities.Generation, transmission and distribution activities are legally separated in Chile. Generation companies and
distribution companies may supply electricity to eligible customers (i.e.,

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customers
with a connected capacity greater than 2 MW) in a liberalized market. The generation, transmission and distribution to customers with maximum consumption capacity equal to or less than 2 MW
is regulated.

Distribution Tariffs.Distribution tariffs in Chile are set every four years and will be set next in 2004. The tariff charged
by distribution companies to their final customers is determined by the sum of the cost of electricity purchased by the distribution company (the node prices for capacity and energy consumption at the
point of purchase from the generation company), a sub-transmission surcharge, a factor for distribution losses of capacity and energy and the value added by the distribution network (VAD),
which includes an allowed return on investment.

Regulatory Bodies.The following are the principal regulatory bodies in Chile and their respective functions:



Limits on Property.In Chile, there are no maximum limits on vertical or horizontal integration in the electricity industry.



Electricity System.Argentina's electricity industry is organized into two separate interconnected electricity systems, the
most important of which is theSistema Argentino de Interconexión(the "SADI") which includes approximately 96% of the country's
installed capacity. The second system, theSistema Patagónico, is located in the Austral region. A project is currently underway to
connect the two systems through a 500 KV transmission line.

Regulation.The electricity sector in Argentina is regulated pursuant to Ley Nacional No. 24.065 of
January 1992, which we refer to as the Argentine Electricity Sector Act. TheCompañía Administradora del Mercado Mayorista
Eléctrico S.A.("CAMMESA") is responsible for the operation of the wholesale electricity market in Argentina.

Activities.Generation, transmission, distribution and supply activities are legally separated in Argentina. There are three
categories of eligible customers in Argentina that may freely negotiate contracts with electricity suppliers, depending on their peak demand: Major Large Users ("GUMAs" according to their Spanish
acronym), Minor Large Users ("GUMEs" according to their Spanish acronym) and Large Particular Users ("GUPAs" according to their Spanish acronym). The generation, transmission and distribution of
energy to non-eligible customers are regulated activities.

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Distribution Tariffs.Distribution tariffs in Argentina are set every four years and are comprised of generation costs (i.e.,
the cost of capacity in the wholesale market) and distribution costs, which are designed to allow a distribution company to recover its variable energy costs. The tariff schedule was scheduled to be
revised in 2002, but theEnte Nacional Regulador de la Electricidad("ENRE") has postponed presentation of the tariff proposal pending changes made by
the Public Emergency and Reform of the Exchange Regime Act.

Regulatory Bodies.The following are the principal regulatory bodies in Argentina and their respective functions:



Limits on Property.In Argentina, transmission companies that hold concessions cannot buy or sell electricity. Generation
companies, distribution companies and large users of electricity cannot own nor be majority shareholders of transmission companies. In order for transmission or distribution companies to merge, they
must obtain the authorization of ENRE. ENRE must also authorize purchases of shares of distribution and transmission companies by other distribution and transmission companies, respectively. Suppliers
may sell up to 5% of aggregate annual energy demand in the electricity market.

Emergency Measures.In January 2002, the Argentine government adopted Ley No. 25,561, of Public Emergency and
Reform of the Exchange Regime. Although this law did not derogate the Argentine Electricity Sector Act, it introduced significant changes relating to the functioning of the Argentine economy. This law
establishes tariffs for public services and local contracts in Argentine pesos and authorizes the Argentine national executive authority to renegotiate public service concession contracts with private
entities. As of the date of this annual report, minimal progress in the negotiation process has been achieved and we cannot predict the outcome of the negotiations.



Electricity System.Brazil's electricity industry is organized into one large interconnected electricity system, which is
known as theSistema Interconectado Nacional(the "Brazilian SIN"), which is comprised of electricity companies in the southern, southeast,
central-western, northeast and parts of the northern regions of Brazil, and several other small, isolated systems.

Regulation.The regulatory framework for the electricity sector in Brazil is comprised of several articles from Brazil's
constitution, ancillary laws and rules and regulations promulgated by the Ministry of Mines and Energy. Brazil's regulatory framework for the electricity sector has been modernized by Law Nos. 8,987
and 9,074 of 1995 (each relating to public service concession contracts), Law No. 9,427 of 1996 (which created the Agência Nacional de Energía
Elétrica, or ANEEL), Law No. 9648195 of 1999 (which created theOperador Nacional del Sistema, or ONS, and transferred supervisory
power over the Brazilian SIN to it) and Law No. 10,433 of 2002 (which restructured the wholesale energy market).

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Activities.Generation, transmission, distribution and supply activities are legally separated in Brazil. Eligible customers
in Brazil are currently those customers who demand 3,000 kW or more annually, though this threshold is under discussion. In accordance with the model for deregulation of the Brazilian energy sector
established in 1995, existing concession contracts held by generation and distribution companies were divided into three contracts: one for the purchase and sale of energy, one for the use of the
transmission network and one for interconnection with the electricity distribution network. According to this model, electricity companies were to have a defined contracted capacity until 2003, then
such capacity was to be reduced by 25% annually. The first bundle of energy was liberalized in January 1, 2003, previously having been auctioned among generators in September 2002. The
auction had little success, with only 33% of the energy offered successfully auctioned. The lack of interest was due in part to the decline in energy demand in Brazil and in part to consumption
pattern changes after rationing, whereby consumers continue to save energy as they were legally required to do during the rationing period.

Distribution Tariffs.Distribution tariffs charged to regulated customers in Brazil are based on a system of maximum tariffs
that each distribution company may charge, which are established in each distribution company's respective concession contract. There are three types of tariff revisions:



Regulatory Bodies.The following are the principal regulatory bodies in Brazil and their respective functions:



Limits on Property.In Brazil, the direct ownership of the property of electricity companies is not restricted. Resolution
No. 278 of 2000, however, prohibits the supply of more than 30% of the electricity sold in the market by one agent, irrespective of whether such agent participates in different companies. The
resolution, however, does not apply to transmission companies. The significance of this limitation is expected to increase as the defined contracted capacity requirements are eliminated. There are no
ownership limitations with respect to transmission companies, since transmission is a regulated business subject to the supervision of the ONS.

Changes in the Brazilian Regulatory Framework.During the first quarter of 2002, the Brazilian government proposed a number
of measures with the goal of optimizing the regulatory framework for the Brazilian electricity sector. These measures aim to improve competition, increase the security and quality of service and
provide incentives for greater private investment in the electricity sector. The

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Brazilian
government and market participants are currently analyzing and discussing the proposed measures.



Electricity System.Colombia's electricity industry is organized into a large interconnected electricity system, which is
known as theSistema Interconectado Nacional(the "Colombian SIN") and several other small, isolated systems that provide electricity to rural areas.

Regulation.Law No. 142 of 1994 provides the broad regulatory framework for the provision of residential public
services, including electricity, and Law No. 143 of 1994 (the "Colombian Electricity Law") provides the regulatory framework for the generation, trading, transmission and distribution of
energy. The basic principles for the electricity industry are implemented in resolutions promulgated by theComisión de Regulación de
Energía y Gas("CREG") and other regulatory bodies governing the electricity sector.

Activities.Generation, transmission, distribution and supply activities are legally separated in Colombia. Distribution and
supply companies are authorized to sell electricity to eligible and non-eligible customers. Eligible customers are those who demand 100 kW or more annually. The transmission, distribution
and sale of electricity to non-eligible customers is a regulated activity. Although the purchase of energy for sale to non-eligible customers is not regulated, tariffs for
electricity sold by such purchasers are subject to regulation.

Distribution Tariffs.Distribution electricity tariffs in Colombia are set every five years. In December 2002, the
CREG passed new regulations pursuant to which compensation levels for distribution throughout the next tariff period would be set. The distribution companies have requested the approval of the
regulatory charges based on this methodology in December 2002. Currently, the CREG is considering this request. The new regulatory charges were expected to be approved in May 2003 in
line with the Renegotiation Commission's schedule. As of June 2003, the tariffs process is still under consideration and probably new tariffs will be enacted in October 2003. Despite the
fact that the current state of these negotiations could lead to improvements in the tariff system (and in particular, higher rates of return and greater acknowledgement of operating, maintenance and
administrative costs on the part of the regulator), some public leaders and politicians are asking for public service tariff increases to be capped by an inflation adjustment, or alternatively, an
increase in the minimum wage.

Regulatory Bodies.The following are the principal regulatory bodies in Colombia and their respective functions:



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Limits on Property.Prior to the adoption of the Colombian Electricity Law, the Colombian electricity sector was extensively
vertically integrated. In accordance with the Colombian Electricity Law, companies formed after the adoption of the law may jointly undertake either (i) generation and supply activities or
(ii) distribution and supply activities. Such law, however, prohibits or sets limits on the integration of generation and transmission activities, generation and distribution activities,
transmission and distribution activities and transmission and supply activities. In addition, effective as of January 1, 2002, generation companies may not own more than a 25% interest in a
distributor, and vice versa. However, this limitation only applies to individual companies and does not preclude cross ownership by companies of the same corporate group, nor by its parents,
affiliates or subsidiaries. Companies that were vertically integrated at the time the Colombian Electricity Law became effective may continue to engage in all the generation, transmission,
distribution and trading activities in which they were engaged prior to the effectiveness of such law but must maintain separate accounting records for each activity.

The
market share of generation companies, energy traders and distribution companies is limited as follows:



In
order to calculate these limits, the participation of a given company is added to companies of the same corporate group, of parent companies, of affiliates and of subsidiaries. In
2000, the CREG issued Resolution 42 which established that no generation company may increase, directly or indirectly, its participation in the generation market pursuant to acquisitions or mergers,
if the net effective capacity resulting therefrom exceeds the so-called "Capacity Band" as set by the CREG. Through Resolution 5 of 2002, the CREG set the Capacity Band at 4,250 MW.



Electricity System.Peru's electricity industry is organized into a principal interconnected electricity system, which is
known as theSistema Eléctrico Interconectado Nacional(the "SIEN") and several other small, isolated systems that provide electricity to
rural areas.

Regulation.The main components of the Peruvian regulatory framework are Law No. 25,844 of 1992 (Law on Electricity
Concessions) and Law No. 26,876 of 1997 (Antitrust Law on the Electrical Sector).

Activities.Generation, transmission and distribution activities are legally separated in Peru. Generation and distribution
companies may supply electricity to eligible customers. Eligible customers are those
who demand 1,000 kW or more annually. The transmission, distribution and sale of electricity to non-eligible customers is a regulated activity.

Distribution Tariffs.Distribution tariffs for regulated customers in Peru are set every four years (the last time being in
2001) and include a charge for value added from distribution (VAD) which takes into account certain distribution costs based on a distribution company with model efficiency. Different distribution
tariffs apply based on voltage levels and the type of customer activity.

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Regulatory Bodies.The following are the principal regulatory bodies in Peru and their respective functions:



Limits on Property.Authorization is required for the horizontal integration of generation, transmission and distribution
activities which result in a greater than 15% share of the market. Authorization is required for the vertical integration of generation, transmission and distribution activities which result in a
greater than 5% share of the market.

Reform of the Electricity Sector.The Ministry of Energy and Mines has summoned regulators, consumer representatives and
electricity operators who are members of theComité de Energía de la Sociedad Nacional de Minería, Petróleo y
Energíato discuss the so-called "Reform to the Second Generation of the Electricity Sector". The agenda for this reform includes strengthening the
reform of the electricity sector, stimulating private investment and improving economic efficiency (including improvements in the tariff-setting process), as well as other technical issues.

C. ORGANIZATIONAL STRUCTURE

Endesa operates through the following wholly-owned subsidiaries in its principal lines of business.



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The
chart below illustrates the structure and holdings of Endesa and its significant subsidiaries and their treatment in our consolidated financial statements at December 31,
2002. For a list of our subsidiaries, their country of incorporation and our percentage interest (voting and economic) in such subsidiaries, see Note 1 to our consolidated financial statements.

GRAPHIC

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D. PROPERTY, PLANTS AND EQUIPMENT

See "Business Overview" and "Item 5. Operating and Financial Review and ProspectsInternational Electricity Business".

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A. OPERATING RESULTS

The following discussion of our operating results, financial condition and prospects is based on our audited consolidated financial statements included in this
annual report. Such audited consolidated financial statements have been prepared in accordance with Spanish GAAP. For a reconciliation of net income (loss) and stockholders' equity to U.S. GAAP and a
discussion of the significant differences between U.S. GAAP and Spanish GAAP, see Note 25 to our consolidated financial statements.

Overview

We are the largest electricity company in Spain in terms of installed capacity, market share in generation and distribution, and market capitalization, with a
presence in Italy, France, Portugal and North Africa and the first multinational private electricity company in Latin America. Our core business is energy. We are also involved in activities related
to our core energy business such as renewable energies and cogeneration and the distribution and supply of natural gas. In addition, we hold interests in other businesses such as telecommunications.

Factors Impacting Our Business

Our results of operations, financial condition and businesses have been and will continue to be affected by changes in the regulatory systems in the countries in
which we operate, principally in Spain, which has fully liberalized the electricity and gas markets as of January 1, 2003. In addition, fluctuations in the local currencies of the countries in
which we operate in Latin America against the euro will affect our results of operations, which we report in euro, as well as the reported value of our consolidated assets and liabilities. Finally,
macroeconomic conditions in the countries in which we operate will affect overall demand for electricity and gas and correspondingly, affect our results of operations, financial condition and
businesses.



We announced our strategic plan 2002-2006 in February 2002 and updated the plan in October 2002 in response to the underlying
macroeconomic and industry conditions, which were represented by the following:



In
2002, we believe that we made progress in achieving the four core objectives set out in the strategic plan:



We
reduced capital expenditures and investments in new initiatives by 27.2% to €3,963 million in 2002 compared with €5,446 million in 2001.
This sharp decrease in capital expenditures and investments was due principally to a reduction in investments to €1.6 billion in 2002 from €3.0 billion
2001. In fact,

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the
amount of capital expenditures we made in 2002 remained steady at €2.4 billion compared with 2001 and in our Spanish electricity business, we increased the level of capital
expenditures by 11.5% in 2002. In addition, during 2002 and through the date of this annual report we disposed of €4.2 billion in non-core assets, principally
through the sales of Viesgo, the transmission network and certain real estate assets in Spain and our stake in Repsol YPF, S.A. and Red Eléctrica de España, S.A. and
certain assets in Chile.

To
achieve the goals of our strategic plan, we intend to maintain the level of recurring capital expenditures in Spain, identify a partner for our renewable energy business, reconsider
the acquisition of new financial stakes in Europe, limit investments in organic growth of our Latin American generation business and reduce recurring maintenance capital expenditures in Latin America.



In our Spanish and European electricity businesses, our initiatives are the following:



As
part of the development of our cross-selling efforts, we decided to integrate our national gas operations into Endesa Red, S.A., our wholly-owned subsidiary responsible for our
electricity distribution business in Spain.

In
our Latin American electricity business, our initiatives are the following:



In
our other businesses, our initiatives are the following:



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As part of our strategic plan 2002-2006, in 2002 we reduced our net financial debt by €2.3 billion to
€22.7 billion outstanding at December 31, 2002 compared with €25.0 billion outstanding at December 31, 2001.

At December 31,2002

2001(in millions of euro)Net financial debt

22,747

25,007Accrued unpaid interest

154

204Debt of unconsolidated affiliates

(209
)
(145
)Debt with interest assigned to creditors

(527
)
(621
)Swap effects accounted for as non-financial debt

91

(85
)Cash

201

352Short-term financial deposits

1,489

89Other



3Consolidated debt on the balance sheet

23,946

24,804




Under Spain's regulatory structure, electricity generated in Spain is:



Accordingly,
all of the energy we produce (excluding cogeneration and renewable energy production) is either sold through the energy pool or sold through bilateral physical contracts. We
may also sell energy which is not produced by us to the energy pool by selling imported energy or selling energy on behalf of another energy producer. We then buy out of the energy pool to meet the
requirements of our customers. Because the administrator of the energy pool's settlement system does not provide information about counterparties to transactions, all sales by Endesa Group companies
through the energy pool are recorded as sales included in operating revenues and all purchases through the energy pool are recorded as purchases included in operating expenses even if the actual
counterparties to certain of these transactions were each members of the Endesa Group.



Our companies in Spain operate within a regulatory framework for the electricity industry that came into effect on January 1, 1998. The most significant
aspects of the Electricity Sector Law and subsequent laws affecting the electricity sector are as follows:



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The
Electricity Sector Law, as modified by an Additional Disposition of Law 34/1998, of October 7, of the Hydrocarbon Sector, recognizes that Spanish electricity companies
operating off mainland Spain (specifically, in the Balearic Islands, the Canary Islands, Ceuta and Melilla, which we refer to as the extrapeninsular system) require special treatment given the special
technical and financial requirements due to their small size and isolation. They may be excluded from the competitive bid process and their remuneration may include an additional component to cover
specific costs. This additional component will be characterized as a permanent cost of the system and will be covered by the entire national electricity system. As of the date of this annual report,
the system of compensation under this special off-mainland regime has not been developed. Since 1998, tariffs for electricity produced in the extrapeninsular system have included a
permanent cost which has been estimated by the Ministry of Economy.



Under Spain's regulatory structure, average electricity rates have been reduced at an accelerated rate. We estimate that, from 1996 through 2002, the cumulative
rate of reduction in nominal terms for all Spanish customers has been approximately 15.7% (approximately 32.6% in real terms). Consequently, electricity rates in Spain are currently below the European
average for the majority of consumer categories.

In
2000, the average rate for all consumers, including deregulated and regulated consumers, decreased 4.85% (8.5% in real terms). The average rate reduction for 2001 for all consumers,
including deregulated and regulated consumers, as approved in December 2000, was approximately 1.52% (4.1% in real terms). Royal Law-Decree 6/2000 features a maximum reduction in
residential tariffs of 4% in 2001 and 9% during the 2001-2003 period. However, Royal Decree 1483/2001, of December 27, froze residential electricity tariffs for 2002 and increased
electricity tariffs for other categories of consumers by approximately 1.0% on average. As a result, average electricity tariffs for 2002 were approximately 0.3% greater than 2001 in nominal terms,
which represents a decrease of approximately 3.5% in real terms.

Royal
Decree 1436/2002, of December 31, approved an increase of 1.65% in average electricity tariffs for 2003. An additional significant change established in Royal Decree
1436/2002 is that the tariff schedule does not distinguish among geographical locations; therefore, the costs of electricity generation in respect of island and extrapeninsular demand will be included
in the calculation of electricity tariffs. Residential electricity tariffs increased 1.5%, while all other tariffs increased approximately 2.0%. See "Item 4. Information on the
CompanyRegulationRegulation of the Spanish Electricity Sector".



As a result of our international diversification strategy, many of our subsidiaries are located outside Spain (principally in Latin America), and their functional
currency is their respective local currency. Because our reporting currency is the euro, the income statements of these subsidiaries are translated into euro for inclusion of the results of these
subsidiaries in our consolidated financial

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statements.
Period-to-period changes in the average exchange rate for a particular country's currency can significantly affect the translation into euro of both revenues and
operating income denominated in that currency. In addition, we have significant assets and liabilities outside Spain (principally in Latin America) which are denominated in local currencies. Effects
from currency fluctuations on the translation of net asset amounts into euro are reflected in our equity position. See "Item 11. Quantitative and Qualitative Disclosures about Market Risk".

The
devaluation of these currencies relative to the dollar has an adverse effect on the financial statements of our subsidiaries, which are denominated in their respective local
currency, because it increases in local currency the dollar value of their dollar-denominated debt and results in a negative exchange difference in their statement of operations.

At
December 31, 2002, the rate of exchange in Argentina had fallen to $1.00 = 3.37 Argentine pesos, resulting in a decrease in net income of
€67 million during 2002 and a reduction in shareholders' equity of €189 million at December 31, 2002. Our business, financial condition and results
of operations may be adversely affected by any further declines in the values of the currencies of the various Latin American countries where we operate. Accordingly, during 2002, we recorded
provisions of €145 million to cover potential risks related to potential further devaluations in the Argentine currency and the risk of default on loans made by us directly to
our Argentine affiliates.

In
addition, the portion of our debt denominated in foreign currencies is exposed to the risk of fluctuations in exchange rates. To minimize this risk, we have entered into different
contracts to hedge against exchange rate risk. See "Item 11. Quantitative and Qualitative Disclosures about Market Risk".



Our principal business is the generation and distribution of electricity in Spain. Consequently, our results of operations are, to a large extent, dependent on
the level of demand for electricity in Spain which, in turn, is directly related to the overall level of economic activity in the country. During 2002:



For
2002, total electricity consumed in Spain was 222,247 GWh, an increase of 2.4% from 2001 as a result of economic growth in Spain. To satisfy this demand, the electricity industry
generated 216,918 GWh of electricity (including production by cogeneration and renewable energies facilities with an installed capacity of less than 50 MW), an increase of 1.5% from 2001. Total
hydroelectric power generated for 2002 was 22,560 GWh, a decrease of 42.8% from 2001. In addition, for 2002 there was a 12.9% increase in power production by cogeneration and renewable energies
facilities with an installed capacity of less than 50 MW in the Spanish electricity sector totaling approximately 34,858 GWh, representing 16.1% of the total power generated in Spain.



Italy's GDP growth was 0.3% in 2002 down from 1.8% in 2001. Despite sluggish economic growth and modest increases in produce prices, consumer price inflation rose
sharply in the second half of 2002. However it is expected that inflation will ease from 2.6% in 2002 to about 2.3% for 2003 as a whole, according to the EU harmonized rate. Inflationary pressures
will be dampened by the impact on import prices of a substantial appreciation of the euro and still sluggish domestic demand growth in the first half of the year. GDP growth for 2003 is projected to
be 1.5%.

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Results of operations from our Latin American businesses are impacted by macroeconomic conditions in the region. Our future results of operations from our Latin
American businesses will depend on our ability to implement the financial strengthening plan effectively and improve cash generation and the evolution of economic conditions in Latin America.

Chile.Chile's GDP growth slowed to 2.0% in 2002 down from 2.9% in 2001. Although Chilean inflation has been moderate in
recent years, Chile has experienced high levels of inflation in the past. In 2002, inflation was 2.8%, and officials at the Chilean Central Bank expect inflation to be approximately 3.2% in 2003. The
Chilean peso has been subject to large devaluations in the past and may be subject to significant fluctuations in the future. The recent weakness of the Chilean peso has been largely related to copper
prices, which have experienced 30-year lows. The devaluation of Chilean peso relative to the U.S. dollar was 8.9% in 2002, 14.1% in 2001 and 8.2% in 2000. New trade agreements between
Chile and the United States are expected to lessen to a certain extent the impact of regional political and economic risks on Chile's economy.

Argentina.Argentina's economy is in its fourth straight year of recession. In January 2002, the Argentine government
removed the peg of the Argentine peso to the U.S. dollar, resulting in a significant devaluation of the peso against the dollar. The Argentine government has also defaulted on the payment of its debt
obligations. Whether companies doing business in Argentina will default on their obligations depends upon their own financial condition, and, in the case of U.S. dollar obligations, continued access
to the foreign exchange markets. The default by the Argentine government and its decision to devalue the currency resulted in considerable uncertainty about the government's political stability, its
management of the economy and the current exchange rate regime, uncertainty which exists as of the date of this annual report in respect of the new administration. Economic activity slowed sharply in
the last weeks of 2001, and GDP declined an estimated 10.9% (in real terms) in 2002,
principally as a result of currency devaluation. Argentina also experienced 41% inflation in 2002 as a consequence of the currency devaluation.

Our
business and results of operations have been, and may continue to be, materially and adversely affected by economic, political and regulatory developments in Argentina. The following
is a description of the most significant adverse developments in respect of our Argentine operations since the end of 2001:



Brazil.Brazil's GDP grew in 2002 by only 1.5% due to weak domestic demand principally due to political uncertainty in the
months leading up to the general elections in October 2002. Monetary policy has been kept tight by the Brazilian government in order to limit inflation and to bolster the currency.

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The
Brazilian real depreciated approximately 34% relative to the U.S. dollar in 2002 largely due to increased governmental financing requirements and decreases in inflows of foreign capital prior to
the October 2002 elections.

Colombia.Colombia's GDP grew by 1.6% (in real terms) in 2002 compared with 1.5% growth in 2001. Inflation reached 7.0% in
2002. The Colombian peso depreciated approximately 10% relative to the U.S. dollar in 2002.

Peru.Peru's GDP grew by 4.3% in 2002. The Peruvian nuevo sol depreciated approximately 2.1% relative to the U.S. dollar in
2002. Inflation was low in 2002 at 2.0% for the year.

Factors Affecting the Comparability of Our Results of Operations



In January 2002, we sold our 87.5% stake in Viesgo. As a result, we have not consolidated Viesgo's results of operations for the fiscal year ended
December 31, 2002 in our consolidated financial statements.

In
the first quarter of 2002, Endesa Europa acquired an additional 5.7% interest in Endesa Italia, which raised its stake in Endesa Italia to 51.0%. As a result, we have consolidated
Endesa Italia's result of operations for all of the fiscal year ended December 31, 2002 in our consolidated financial statements.

As
of January 1, 2002, we no longer consolidate the results of operations of Smartcom, our wholly-owned Chilean mobile telephony operator, due to the fact that it has an
insignificant effect on our results of operations as a whole and investments in the telecommunications sector do not form part of our principal lines of business. For the fiscal year ended
December 31, 2002, we have accounted for Smartcom's results of operations by the equity method.



In April 2001, we acquired a 30.0% interest in Snet, and in September 2001, we acquired a 45.3% interest in Elettrogen (subsequently renamed Endesa
Italia). As a result of the acquisition of minority interests in these companies, we accounted for these companies by the equity method in 2001.

In
2001, we acquired an additional 0.88% stake in Repsol YPF, S.A. in the open market. As a result of this acquisition, we held a 3.01% stake in Repsol YPF at December 31, 2001.
We sold our stake in Repsol YPF in March 2003 for €506 million. Because our ownership interest represented more than 3.0% of Repsol YPF's outstanding share capital at
that date, we accounted for our interest under the equity method as of January 1, 2001, whereas we accounted for our interest in Repsol YPF, S.A. under the cost method for most of 2000.



Royal Decree 2/2001 of February 2, 2001 resulted in a change in our accounting treatment of and the recovery period for competition transition costs
(CTCs). See "Item 4. Information on the CompanyRegulationRegulation of the Spanish Electricity SectorCompetition Transition Costs (CTCs)". Prior to the
effectiveness of Royal Decree 2/2001, we recovered competition transition costs as follows:



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Royal
Decree 2/2001, however, established that competition transition costs will be recoverable only through the system of differences through 2010. As a result of this new regulation,
in 2001 we changed our accounting treatment of and recovery period for competition transition costs as follows:



The
net tax effect of the application of these changes in 2000 would have been €9 million more in corporate income tax expense than we recorded in our historical
results of operations for 2001.

As
a result of these accounting changes related to CTCs, our historical results of operations for 2001 are not fully comparable to our historical results of operations for 2000.

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Critical Accounting Policies

The preparation of our consolidated financial statements requires us to make certain estimates, judgments and assumptions that we believe are reasonable based
upon the information available under Spanish GAAP. These estimates, judgments and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the periods presented. We believe that of our significant accounting policies the following may involve a high degree of judgment: property, plant and
equipment and other long-lived assets; goodwill; net investment hedges; provisions and derivatives.



Property, plant and equipment and other long-lived assets are recorded at cost and is depreciated over its estimated useful life. The estimated useful
lives of our generation and distribution facilities range from 25 to 40 years. A significant decrease in the estimated useful life of a material amount of property, plant or equipment or other
long-lived assets could have a material adverse impact on our operating results in the period in which the estimate is revised and subsequent periods.

Additionally,
under Spanish GAAP property, plant and equipment and other long-lived assets are impaired when their book value exceed their respective fair value. The
determination of property, plant and equipment and other long-lived asset fair value is calculated on the basis of the future discounted cash flows to be generated by the assets, including
the remuneration for the transition to competition. The factors considered in the determination of the fair value depend upon the company's estimate of future prices and interest rate. The amount of
property, plant or equipment or other long-lived asset impairment could have a material adverse impact on our operating results in the period depending on the estimations made. At
December 31, 2002, December 31, 2001 and December 31, 2000, our directors consider that the book value of the revalued assets does not exceed their market value.



Under Spanish GAAP, the difference in consolidation between the purchase price paid in cash for which the investment in a subsidiary is recorded and the
participation of the parent company in the equity of the subsidiary should be allocated to the identified assets and liabilities of the subsidiary, up to the limit applicable to the parent's
investment in the difference between the book value and the fair value of the related item. The remaining difference, if positive, should be shown on the asset side of the consolidated balance sheet
as goodwill and should be amortized over a maximum period of twenty years, since this is deemed to be the average period over which the investments made will be recovered. Acquisitions through the
exchange of shares are recorded as pooling of interest in most cases under Spanish GAAP.

Each
year the recoverability of the net values recorded is analyzed by reviewing the discounted cash flows that such assets for which goodwill has been recorded are expected to generate.
The assumptions used in calculating expected discounted cash flows relate to expected sale prices, demand in the electricity market, interest rates, exchange rates and other factors, all of which have
a significant effect on the calculation. Any difference in the assumptions used in these calculations could have a significant effect on the value of the goodwill recorded on our balance sheet as well
as our net income.

Based
on estimates of the revenues expected to be generated by the various investments made, as of December 31, 2002, the Group's directors considered that the goodwill recorded
will be able to be recovered in full.

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We arrange exchange rate hedges for part of our investments in foreign companies by financing these investments in the functional currency of the country
concerned or in a currency closely correlated thereto. These hedges also ensure that the cash flow generated by the investment is sufficient to ensure repayment of the full amount of the related loans
throughout the term thereof.

For
debts considered to hedge investments outside Spain, under Spanish GAAP the exchange differences multiplied by the percentage of correlation between the euro/functional currency
exchange rate and the euro/U.S. dollar exchange rate are recorded under the "Translation Differences" caption in the equity section of the consolidated balance sheet as a balancing item for the
fluctuation in the exchange rates relating to hedged foreign assets, which are recorded in the same account. For these
purposes, the hedging debt is deemed to be U.S. dollar debt financing assets in countries whose currencies have had a high historical correlation with the U.S. dollar and only up to the related degree
of correlation.

Facts
and circumstances that change the correlation between the hedge currency and the hedge instruments may cease our hedge strategy and could have a material impact on our operating
results and financial condition.



In order to calculate the amounts we record under "Provisions for Contingencies and Expenses", it is necessary to evaluate and estimate the amounts that we may be
required to pay in the future, including additional amounts in the form of taxes or pursuant to contractual obligations, or amounts owed in respect of the settlement of pending litigation or other
contingent liabilities.

The
amounts that we will be required to pay in respect of any of the contingent events described above may vary significantly compared with the estimates we have made due to differing
interpretations of applicable law, pursuant to which damages caused or indemnification owed will be calculated as well as other factors.



Under US GAAP, we apply SFAS 133, which requires that certain derivatives, including "embedded" derivatives, are recorded on the balance sheet at fair
value. The value of those derivatives that are not market traded require the use of financial and valuation models developed internally, such that we are required to make certain assumptions relating
to yields, volatility, correlation, interest rates and other factors. The high sensitivity of these valuations to the key assumptions and the volatility of such assumptions could produce significant
differences in respect of the amounts recognized on our results of operations under US GAAP.

73

---

Results of Operations for the Year Ended December 31, 2002 Compared with the Year Ended December 31, 2001

The table below presents, for the periods indicated, the breakdown of our results of operations and the percentage variation from period to period.

|                                                              |                                       | 2002   |       | 2001  |       
|------------------------------------------------------------- | ------------------------------------- | ------ | ----- | ----- | ------
|
|
|Operating revenues                                            |                                       | 11,075 |       | 8.0   | %     
|Operating expenses                                            |                                       | 8,944  |       | 5.8   | %     
|                                                              | Purchases                             |        | 6,426 |       | 9.2   
|                                                              | Personnel expenses                    |        | 825   |       | (5.0  
|                                                              | Depreciation and
    amortization     |        | 1,074 |       | (1.9  
|                                                              | Variation in
    operating provisions |        | (22   | )     | (195.7
|                                                              | Other operating expenses              |        | 641   |       | 9.8   
|Operating income (loss)                                       |                                       | 2,131  |       | 18.5  | %     
|Financial revenues                                            |                                       | 130    |       | 293.9 | %     
|Financial expenses                                            |                                       | 603    |       | (10.5 | )%    
|Financial income (loss), net                                  |                                       | (473   | )     | 26.2  | %     
|Income (loss) from
    associated companies                   |                                       | 75     |       | 50.0  | %     
|Amortization of goodwill                                      |                                       | (7     | )     | (61.1 | )%    
|Non-operating income (loss),
    net                          |                                       | 825    |       | 446.4 | %     
|Consolidated income
    (loss) before taxes                   |                                       | 2,551  |       | 90.2  | %     
|Corporate income tax                                          |                                       | 522    |       | 108.8 | %     
|Minority interests                                            |                                       | 3      |       | n.a.  |       
|Income (loss)
    attributable to the
    controlling company |                                       | 2,026  |       | 85.7  | %     

---

74

---

In September 2001, a consortium led by us, with a 45.3% stake, acquired Elettrogen (subsequently renamed Endesa Italia), one of the three
largest generators of electricity in Italy. We acquired an additional 5.7% stake in the consortium in March 2002. Due to our 51% stake in the consortium that owns Endesa Italia, we have
consolidated the results of Endesa Italia in our financial statements as of January 1, 2002. In the first quarter of 2002, Endesa Italia's operating revenues amounted to
€314 million and operating income amounted to €86 million. Under US GAAP, we have not consolidated the results of operations of Endesa Italia. See
Note 25 to our consolidated financial statements.

For
the fiscal years ended December 31, 2001, we reported our results of operations according to our three lines of business: (i) domestic electricity,
(ii) international electricity and (iii) other businesses. Due to our purchase of a majority stake in Endesa Italia in March 2002, as described above, we now report our results of
operations according to our four lines of business: (i) domestic electricity, (ii) European electricity, (iii) Latin American electricity and (iv) other businesses. Prior
to the fiscal year ended December 31, 2002, we referred to our Latin American electricity business as our international electricity business; however, the results of operations of our
international electricity business did not reflect any significant operations outside of Latin America. Therefore, we believe that the results of operations of the Latin American electricity business
in 2002 are directly comparable with the results of operations of the international electricity business in 2001. We are unable to compare the results of operations of our European electricity
business in 2002 with our 2001 results because we did not consolidate the results of operations of Endesa Italia until January 1, 2002.

The
following table shows net sales, operating income and net income for 2002 by principal lines of business.

Net Sales

Operating
Income

Net Income
(loss)(millions of euro)Domestic electricity business:

10,885

2,131

2,026Generation

4,345

1,364

2,082Distribution

5,597

684

498Supply

1,323

98

38European electricity business

1,744

150

21Latin American electricity business

3,850

1,268

(281
)Other businesses

260

33

(496
)Services

254

6

27Corporate structure

211

(27
)
(619
)Intercompany adjustments

(845
)
6

n.a.Total

16,739

3,582

1,270




Operating revenues increased 7.2% to €17,238 million in 2002 from €16,085 million in 2001 due to an 8.0% increase in
operating revenues from our domestic electricity business to €11,075 million in 2002 from €10,254 million in 2001 and the inclusion of
€1,760 million in operating revenues from our European electricity business, offset in part by a 23.3% decrease in operating revenues from our Latin American electricity
business to €4,084 million in 2002 from €5,325 million in 2001 and a 37.0% decrease in operating revenues from our other businesses to
€319 million in 2002 from €506 million in 2001.

75

---



Operating expenses increased 5.8% to €13,656 million in 2002 from €12,910 million in 2001 due to a 5.8% increase in
operating expenses of our domestic electricity business to €8,944 million in 2002 from €8,455 million in 2001 and the inclusion of
€1,610 million in operating expenses of our European electricity business, offset in part by a 27.8% decrease in operating expenses of our Latin American electricity business to
€2,816 million in 2002 from €3,902 million in 2001 and a 48.3% decrease in operating expenses of our other businesses to
€286 million in 2002 from €553 million in 2001.



Operating income increased 12.8% to €3,582 million in 2002 from €3,175 million in 2001 due to a 18.5% increase in
operating income of our domestic electricity business to €2,131 million in 2002 from €1,799 million in 2001, the inclusion of
€150 million in operating income of our European electricity business in 2002 and operating income of our other businesses of €33 million in 2002 compared
with operating loss of €47 million in 2001, offset in part by a 10.9% decrease in operating income of our Latin American electricity business to
€1,268 million in 2002 from €1,423 million in 2001.



As a result of the following, operating income from our domestic electricity business increased 18.5% to €2,131 million in 2002 from
€1,799 million in 2001.

Net Sales.Net sales from our domestic electricity business increased 7.9% to €10,885 million in 2002
from €10,086 million in 2001. Net sales from our domestic electricity business in 2002 did not include the net sales of Viesgo, which we sold in January 2002 and which
had contributed €654 million in net sales in 2001.

The
following table shows the breakdown of net sales from our domestic electricity business for 2002 and 2001.

2002

2001

Percentage Change(millions of euro)Sales of energy

10,579

9,656

9.6
%Competition transition costs

90

147

(38.8
)%Services

216

283

(23.7
)%Total

10,885

10,086

7.9
%


Net
sales from our domestic electricity business in 2002 did not include net sales by Viesgo, which we sold in January 2002 and which had contributed
€654 million in net sales in 2001.

The
7.9% increase in sales from our domestic electricity business in 2002 was principally due to a 9.6% increase in sales of energy to €10,579 million in 2002 from
€9,656 million in 2001 (of which Viesgo accounted for €612 million), offset in part by a 38.8% decrease in competition transition costs to
€90 million in 2002 from €147 million in 2001 (of which Viesgo accounted for €10 million) and a 23.7% decrease in services to
€216 million in 2002 from €283 million in 2001 (of which Viesgo accounted for €32 million).

76

---

The
following table shows a breakdown of sales of energy by our domestic electricity business for 2002 and 2001.

2002

2001

Percentage Change(millions of euro)Mainland generation

3,739

3,432

8.9
%Mainland distribution and transmission

4,306

3,978

8.2
%Supply

1,209

1,085

11.4
%Trading

121

173

(30.1
)%Extrapeninsular systems(1)

872

845

3.2
%Compensation for extrapeninsular system(2)

204

126

61.9
%Other(3)

128

17

652.9
%Total

10,579

9,656

9.6
%


---

Net
sales of energy by our domestic electricity business in 2002 did not include net sales by Viesgo, which we sold in January 2002 and which had contributed
€612 million in net sales in 2001.

The
increase in net sales of energy by our domestic electricity business in 2002 was mainly due to an 8.9% increase in sales of energy generated by Endesa in the Spanish mainland to
€3,739 million in 2002 from €3,432 million in 2001 (of which Viesgo accounted for €347 million) and an 8.2% increase in
distribution and transmission sales in the Spanish mainland to €4,306 million in 2002 from €3,978 million in 2001 (of which Viesgo accounted for
€265 million), an 11.4% increase in supply sales to €1,209 million in 2002 from €1,085 million in 2001 and a 652.9% increase in
other revenues to €128 million in 2002 from €17 million in 2001, offset in part by a 30.1% decrease in sales from energy trading to
€121 million in 2002 from €173 million in 2001.



77

---



The
following table shows the breakdown of energy produced by us and the Spanish electricity sector on the Spanish mainland by type of generating facility for 2002 and 2001.

|              |  |       |   |       |   | Spanish Electricity Sector |  
|------------- |  | ----- | - | ----- | - | -------------------------- | -
|
|
|
|Nuclear       |  | 36.3  | % | 34.4  | % | 33.8                       | %
|Coal          |  | 47.5  | % | 45.2  | % | 43.1                       | %
|Hydroelectric |  | 10.1  | % | 15.4  | % | 12.2                       | %
|Fuel Oil/Gas  |  | 3.9   | % | 5.0   | % | 7.9                        | %
|CCGT          |  | 2.2   | % | n.a.  |   | 3.0                        | %
|              |  |       |   |       |   |                            |  
|Total         |  | 100.0 | % | 100.0 | % | 100.0                      | %
|              |  |       |   |       |   |                            |  

The
preceding table reflects the mix of generating capacity we possess in the Spanish mainland, which we believe provides us with stable sources of energy. We believe that our mix of
generating capacity in the Spanish mainland is not particularly susceptible to hydrological conditions and will enable us to substitute energy generated at our coal-fired plants for
decreases in energy generated at our hydroelectric facilities instead of resorting to our fuel oil and gas facilities, which are more costly than our coal facilities when costs are measured per KWh
generated.



78

---



Year Ended December 31,Type of CTC

Percentage Change2002

2001(millions of euro)Technology

49

70

(30.0
)%Coal

41

77

(46.8
)%Total

90

147

(38.8
)%


CTC
revenues decreased 38.8% to €90 million in 2002 from €147 million in 2001 (of which Viesgo accounted for
€10 million), mainly due to the higher average energy pool prices in 2002.

Operating Expenses.The table below sets forth the breakdown of operating expenses of our domestic electricity business for
2002 and 2001 and the percentage variation from year to year.

Year Ended December 31,Percentage Change2002

2001(millions of euro)Purchases

6,426

5,885

9.2
%Energy

4,605

4,074

13.0
%Fuel

1,434

1,476

(2.8
)%Transmission and other external expenses

387

335

15.5
%Personnel expenses

825

868

(5.0
)%Depreciation and amortization

1,074

1,095

(1.9
)%Variation in operating provisions

(22
)
23

n.a.Other operating expenses

641

584

9.8
%Total

8,944

8,455

5.8
%


Operating
expenses of our domestic electricity business in 2002 did not include operating expenses of Viesgo, which we sold in January 2002 and which had contributed
€542 million in operating expenses in 2001.

Operating
expenses of our domestic electricity business increased 5.8% to €8,944 million in 2002 from €8,455 million in 2001 (of which
Viesgo accounted for €542 million), principally due to a 9.2% increase in purchases to €6,426 million in 2002 from €5,885 million
in 2001 (of which Viesgo accounted for €396 million).

Purchases
increased 9.2% to €6,426 million in 2002 from €5,885 million in 2001 (of which Viesgo accounted for
€396 million), principally due to a 13.0% increase in purchases of energy to €4,605 million in 2002 from €4,074 million in 2001 (of
which Viesgo accounted for €237 million), which was principally as a result of an increase of €531 million in purchases of electricity by our distribution
and commercialization affiliates as a result of a 17.6% increase in average energy pool prices.

Personnel
expenses decreased 5.0% to €825 million in 2002 from €868 million in 2001 (of which Viesgo accounted for
€45 million), primarily due to decreases in the average number of employees.

79

---

Depreciation
and amortization costs decreased 1.9% in 2002 to €1,074 million from €1,095 million in 2001. The decrease in 2002 was mainly
due to the absence of depreciation and amortization expense related to Viesgo in 2002, which we sold in January 2002, and which had accounted for €66 million of our
depreciation and amortization expense in 2001.



The results of operations of Endesa Italia comprise substantially all of the results of operations of our European electricity business. See "Item 4. Information
on the CompanyElectricity Business in EuropeGenerationItaly".

In
2002, operating revenues amounted to €1,760 million, operating expenses amounted to €1,610 million and operating income was
€150 million. Throughout 2002, Endesa Italia continued to implement efficiency initiatives set forth in its business plan, including the 20.7% reduction of it total workforce to
1,108 employees at December 31, 2002 compared with 1,398 employees at December 31, 2001.

80

---





Operating income from our Latin American electricity business decreased 10.9% to €1,268 million in 2002 from
€1,423 million in 2001. Operating revenues from our Latin American electricity business decreased 23.3% to €4,084 million from
€5,325 million in 2001, while operating expenses of our Latin American electricity business decreased 27.8% to €2,816 million from
€3,902 million in 2001.

The
table below sets forth a breakdown of operating income (loss) and operating revenues from our Latin American electricity business for 2002 and 2001.

|                              |       | Operating Income |       | Operating Revenues |      
|----------------------------- | ----- | ---------------- | ----- | ------------------ | -----
|
|
|Generation                    |       | 627              |       | 653                |      
|Distribution and Transmission |       | 679              |       | 774                |      
|Other                         |       | (38              | )     | (4                 | )    
|                              |       |                  |       |                    |      
|                              | Total |                  | 1,268 |                    | 1,423
|                              |       |                  |       |                    |      

The
following table shows operating income and operating revenues from generation in each country for 2002 and 2001.

|          |       | Operating Income |     | Operating Revenues |    
|--------- | ----- | ---------------- | --- | ------------------ | ---
|
|
|Chile     |       | 281              |     | 256                |    
|Colombia  |       | 124              |     | 132                |    
|Argentina |       | 64               |     | 81                 |    
|Brazil    |       | 40               |     | 63                 |    
|Peru      |       | 118              |     | 121                |    
|          |       |                  |     |                    |    
|          | Total |                  | 627 |                    | 653
|          |       |                  |     |                    |    

Operating
income from generation by our Latin American electricity business decreased 4.0% to €627 million in 2002 from €653 million in
2001. The decrease in operating income from generation by our Latin American electricity business was mainly due to a 20.9% decrease in operating income from generation in Argentina to
€64 million in 2002 from €81 million in 2001 and a 36.5% decrease in operating income from generation in Brazil to €40 million in
2002 from €63 million in 2001, offset in part by a 9.8% increase in operating income from generation in Chile to €281 million in 2002 from
€256 million in 2001.

The
following table shows output figures in Latin America by country for 2002 and 2001.

2002

2001

Percentage Change(GWh)Chile

16,495

15,741

4.8
%Colombia

10,837

10,106

7.2
%Argentina

8,750

11,864

(26.2
)%Brazil

2,467

2,256

9.4
%Peru

4,567

4,480

1.9
%Total

43,116

44,447

(3.0
)%


81

---

Operating
income from generation in Chile increased 9.8% to €281 million in 2002 from €256 million in 2001. The amount of energy sold in
Chile increased 4.8% to 16,495 GWh in 2002 from 15,741 GWh in 2001, while the average sales price per KWh decreased 0.4% in 2002.

Operating
income from generation in Colombia decreased 6.1% to €124 million in 2002 from €132 million in 2001. The amount of energy sold in
Colombia increased 7.2% to 10,837 GWh in 2002 from 10,106 GWh in 2001, while the average sales price per KWh decreased 3.4% in 2002.

Operating
income from generation in Argentina decreased 20.9% to €64 million in 2002 from €81 million in 2001 The amount of energy sold in
Argentina decreased 26.2% to 8,750 GWh in 2002 from 11,864 GWh in 2001, while the average sales price per KWh increased 0.7% in 2002.

Operating
income from generation in Brazil decreased 36.5% to €40 million in 2002 from €63 million in 2001. The amount of energy sold in
Brazil increased 9.4% to 2,467 GWh in 2002 from 2,256 GWh in 2001, while the average sales price per KWh increased 5.5% in 2002.

Operating
income from generation in Peru decreased 2.5% to €118 million in 2002 from €121 million in 2001. The amount of energy sold in Peru
increased 1.9% to 4,567 GWh in 2002 from 4,480 GWh in 2001, while the average sales price per KWh increased 6.4% in 2002.

The
following table shows operating income and operating revenues from distribution in each country for 2002 and 2001.

|          |       | Operating Income |     | Operating Revenues |    
|--------- | ----- | ---------------- | --- | ------------------ | ---
|
|
|Chile     |       | 171              |     | 184                |    
|Colombia  |       | 56               |     | 65                 |    
|Argentina |       | 54               |     | 235                |    
|Brazil    |       | 343              |     | 228                |    
|Peru      |       | 55               |     | 62                 |    
|          |       |                  |     |                    |    
|          | Total |                  | 679 |                    | 774
|          |       |                  |     |                    |    

Operating
income from distribution by our Latin American electricity business decreased 12.3% to €679 million in 2002 from €774 million in
2001. The decrease in operating income from distribution by our Latin American electricity business was mainly due to a 77.0% decrease in operating income from distribution in Argentina to
€54 million in 2002 from €235 million in 2001, offset in part by a 50.4% increase in operating income from distribution in Brazil to
€343 million in 2002 from €228 million in 2001.

The
following table shows the amount of electricity sold in Latin America by country for 2002 and 2001.

2002

2001

Percentage Change(GWh)Chile

9,895

9,527

3.9
%Colombia

8,951

8,608

4.0
%Argentina

12,140

12,909

(6.0
)%Brazil

12,657

12,091

4.7
%Peru

3,851

3,675

4.8
%Total

47,494

46,810

1.5
%


82

---

Operating
income from distribution in Chile decreased 7.1% to €171 million in 2002 from €184 million in 2001. The average sales price per
KWh increased 5.9% in 2002, and the amount of energy distributed in Chile increased 3.9% to 9,895 GWh in 2002 from 9,527 GWh in 2001 due to a 2.2% increase in the number of customers and a 1.6%
increase in average electricity consumption per customer. In 2002, purchases of energy increased in Chile.

Operating
income from distribution in Colombia decreased 13.8% to €56 million in 2002 from €65 million in 2001. The average sales price per
KWh increased 4.7% in 2002, while the amount of energy distributed in Colombia increased 4.0% to 8,951 GWh in 2002 from
8,608 GWh in 2001 due to a 0.8% increase in consumption per customer and a 3.3% increase in the number of customers.

Operating
income from distribution in Argentina decreased 77.0% to €54 million in 2002 from €235 million in 2001. The average sales price
per KWh increased 1.6%, and the amount of energy distributed in Argentina decreased 6.0% to 12,140 GWh in 2002 from 12,909 GWh in 2001. In addition, energy losses, which are principally due to
illegally-tapped energy, faulty metering and inadequate billing and collections systems, increased to 11.6% in 2002 from 9.9% in 2001.

Operating
income from distribution in Brazil increased 50.4% to €343 million in 2002 from €228 million in 2001. The amount of energy
distributed in Brazil increased 4.7% to 12,657 GWh in 2002 from 12,091 GWh in 2001 due to a 5.0% increase in the number of customers, offset in part by a 0.4% decrease in consumption per customer.

Operating
income from distribution in Peru decreased 11.3% to €55 million in 2002 from €62 million in 2001. In 2002, the average sales price
per KWh decreased 3.9%, and the amount of energy distributed in Peru increased 4.8% to 3,851 GWh in 2002 as a result of a 3.2% increase in consumption per customer and a 1.8% increase in the number of
customers. In 2002, purchases of energy in Peru increased, while energy losses decreased to 8.5% in 2002.



Operating income from our other businesses was €33 million in 2002 compared with operating loss of €47 million in
2001, broken down as follows:

2002

2001

Percentage Change(millions of euro)Telecommunications

6

(62
)
(109.7
)%Gas

19

25

(24.0
)%Cogeneration and renewable energies

29

15

93.3
%New technologies

(10
)
(16
)
(37.5
)%Other

(11
)
(9
)
22.2
%Total

33

(47
)
n.a.




Financial loss, net decreased 5.1% to €1,634 million in 2002 from €1,722 million in 2001. The decrease in 2002 was
mainly due to the 7.9% decrease in financial expenses to €1,499 million in 2002 from €1,628 million in 2001 and the 55.7% increase in financial income to
€260 million in 2002 from €167 million in 2001, offset in part by the 37.9% increase in foreign exchange losses to €549 million in
2002 from €398 million in 2001.

Financial
expenses, mainly consisting of interest expenses, decreased 7.9% to €1,499 million in 2002, principally due to the net reduction of
€2,260 million in debt principally due to the decline of all Latin American currencies against the euro in 2002, which accounted for €2,072 million of the
net debt reduction figure and the decrease in the average cost of debt to 5.05% in 2002 compared with 5.85% in

83

---

2001,
offset in part by the inclusion of €1,330 million of debt incurred by Endesa Italia. In 2002, average cost of debt related to our domestic electricity business was 4.26%,
average cost of debt related to our Latin American electricity business was 6.25%, average cost of debt related to our European electricity business was 3.83% and average cost of debt related to our
other businesses was 4.13%.

Foreign
exchange losses increased 37.9% to €549 million in 2002 from €398 million in 2001, principally due to the devaluation of the
Argentine peso and the Brazilian real against the euro and dollar. At December 31, 2002, the Argentine peso had fallen to 3.37 Argentine pesos per dollar, which reflects 70.3% devaluation
against the exchange rate of one Argentine peso to the dollar at December 31, 2001. The effect on our results of operations for the year ended December 31, 2002, however, reflects only a
49.6% devaluation because we prepared our consolidated financial statements for the year ended December 31, 2001 using an exchange rate of 1.7 Argentine pesos to the dollar.

In
2002, the depreciation of the Argentine peso had a negative effect of €392 million in the "translation differences in consolidation" account in our consolidated
balance sheet at December 31, 2002, which resulted in a decrease in net income of €67 million. The depreciation of the Brazilian real had an insignificant impact because
most of our Brazilian affiliates' dollar-denominated debt was hedged, either through derivatives or contractually through contracts denominated in dollars.



Our share in the income (losses) of companies carried by the equity method resulted in a loss of €93 million in 2002 compared with a loss
of €118 million in 2001. In 2002, this loss was principally due to our participation in the losses incurred by Auna, including its operating losses as well as the provisions it
made for the closure of Quiero TV and certain other write-offs, totaling €160 million, and Smartcom, totaling €53 million.



Amortization of goodwill increased 22.8% to €355 million in 2002 from €289 million in 2001, principally due to the
amortization of goodwill attributable to Endesa Italia.



Non-operating income, net was €71 million in 2002 compared with non-operating income, net of
€579 million in 2001. Non-operating income, net in 2002 consisted of €1,745 million in non-operating income, offset in part by
€1,674 million in non-operating loss.

Non-operating
income in 2002 principally included €1,066 million in capital gain from the sale of 87.5% of Viesgo in January 2002 and the
recognition of €86 million in tariff deficit compensation from the extrapeninsular system and €128 million in additional compensation corresponding to
costs associated with our activities in the extrapeninsular system in prior years.

Non-operating
loss in 2002 principally included provisions of €404 million to cover the risks of potential capital losses on our assets and goodwill in
Latin America and €380 million to cover the risks related to our domestic electricity business, including a decrease in the useful life of certain assets which will increase
depreciation expense, regulatory developments and additional funding requirements related to our pension commitments due to higher than expected inflation, as well as the extraordinary amortization of
€317 million in goodwill related to our interest in Smartcom due to declining values across the telecommunications sector and a provision of €75 million
to cover the effect of a drop in the market price of our treasury shares.

84

---

\



Our corporate income tax expense increased 396.6% to €437 million in 2002 from €88 million in 2001 principally due
to the absence of certain factors that significantly decreased our corporate income tax expense in 2001. See "Results of Operations for the Year Ended December 31, 2001 Compared
with the Year Ended December 31, 2000Corporate Income Tax".

Our
corporate tax expense in 2002 was 27.8% of our consolidated income before tax. Of our corporate income tax expense in 2002, €522 million related to our
domestic electricity business and €39 million related to our international electricity business, less tax credits of €124 million
(€64 million related to our European electricity business and €60 million related to our other businesses).



Loss attributed to minority interests was €136 million in 2002 compared with income attributed to minority interests of
€58 million in 2001, principally as a result of losses at our Latin American affiliates in 2002.



As a result of the foregoing, net income decreased 14.1% to €1,270 million in 2002.

Results of Operations for the Year Ended December 31, 2001 Compared with the Year Ended December 31, 2000

In 2001, we began reporting our results of operations along the following business segments: domestic electricity business, international electricity business and
telecommunications and other businesses. Previously, we reported our results of operations along the following business segments: domestic, international and international diversification. As a
result, solely for purposes of comparison of our results of operations for the year ended December 31, 2001 versus the year ended December 31, 2000, we have modified the results of
operations of our business segments for the year ended December 31, 2000 to reflect our new business segments. These modifications have no effect on our consolidated results of operations.

The
table below presents, for the periods indicated, the breakdown of our results of operations and the percentage variation from period to period.

|                                                   |                                   | 2001   |       | 2000  |      
|-------------------------------------------------- | --------------------------------- | ------ | ----- | ----- | -----
|
|
|Operating revenues                                 |                                   | 10,254 |       | 0.7   | %    
|Operating expenses:                                |                                   | 8,455  |       | 0.7   | %    
|                                                   | Purchases                         |        | 5,885 |       | 6.5  
|                                                   | Personnel expenses                |        | 868   |       | (1.6 
|                                                   | Depreciation and amortization     |        | 1,095 |       | (17.4
|                                                   | Variation in operating provisions |        | 23    |       | (72.6
|                                                   | Other operating expenses          |        | 584   |       | 0.9  
|Operating income (loss)                            |                                   | 1,799  |       | 0.7   | %    
|Financial revenues                                 |                                   | 33     |       | (15.4 | )%   
|Financial expenses                                 |                                   | 674    |       | 5.3   | %    
|Financial income (loss), net                       |                                   | (641   | )     | (6.7  | )%   
|Income (loss) from associated companies            |                                   | 50     |       | 72.4  | %    
|Amortization of goodwill                           |                                   | (18    | )     | 350.0 | %    
|Non-operating income (loss), net                   |                                   | 151    |       | (46.3 | )%   
|Consolidated income before taxes                   |                                   | 1,341  |       | (10.1 | )%   
|Corporate income tax                               |                                   | 250    |       | (38.3 | )%   
|Minority interests                                 |                                   |        |       |       |      
|Income attributable to the controlling
    company |                                   | 1,091  |       | 0.4   | %    

---

85

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The following table shows net sales, operating income and net income for 2001 by principal lines of business.

|                                        |              | Net sales |        | Operating
Income |       | Net
Income |      
|--------------------------------------- | ------------ | --------- | ------ | ---------------- | ----- | ---------- | -----
|
|Domestic electricity business:          |              |           |        |                  |       |            |      
|                                        | Generation   |           | 4,149  |                  | 1,018 |            | 663  
|                                        | Distribution |           | 5,129  |                  | 730   |            | 334  
|                                        | Supply       |           | 1,115  |                  | 51    |            | 26   
|International electricity business      |              | 5,125     |        | 1,423            |       | 489        |      
|Telecommunications and other businesses |              | 365       |        | (47              | )     | (101       | )    
|Services                                |              | 239       |        | 15               |       | 3          |      
|Corporate structure                     |              | 350       |        | (9               | )     | 65         |      
|Intercompany adjustments                |              | (896      | )      | (6               | )     |           |      
|                                        |              |           |        |                  |       |            |      
|                                        | Total        |           | 15,576 |                  | 3,175 |            | 1,479
|                                        |              |           |        |                  |       |            |      



Operating revenues increased 2.6% to €16,085 million in 2001 from €15,682 million in 2000 due to a 0.7% increase in
operating revenues from our domestic electricity business to €10,254 million in 2001 from €10,185 million in 2000, a 3.0% increase in operating revenues
from our international electricity business to €5,325 million in 2001 from €5,169 million in 2000 and a 54.3% increase in operating revenues from our
telecommunications and other businesses to €506 million in 2001 from €328 million in 2000. If the changes in the accounting treatment of and recovery
period for CTCs applied in 2001 had been applied in 2000, our total operating revenues would have increased 4.5% to €16,085 million in 2001 from
€15,389 million in 2000 and operating revenues from our domestic electricity business would have increased 3.7% to €10,254 million in 2001 from
€9,892 million in 2000.



Operating expenses increased 2.3% to €12,910 million in 2001 from €12,621 million in 2000 due to a 0.7% increase in
operating expenses of our domestic electricity business to €8,455 million in 2001 from €8,398 million in 2000, a 0.9% increase in operating expenses of
our international electricity business to €3,902 million in 2001 from €3,867 million in 2000 and a 55.3% increase in operating expenses of our
telecommunications and other businesses to €553 million in 2001 from €356 million in 2000. If the changes in the accounting treatment of and recovery
period for CTCs applied in 2001 had been applied in 2000, our total operating expenses would have increased 3.9% to €12,910 million in 2001 from
€12,423 million in 2000 and operating expenses of our domestic electricity business would have increased 3.1% to €8,455 million in 2001 from
€8,200 million in 2000.



Operating income increased 3.7% to €3,175 million in 2001 from €3,061 million in 2000 due to a 0.7% increase in
operating income of our domestic electricity business to €1,799 million in 2001 from €1,787 million in 2000, a 9.3% increase in operating income of our
international electricity business to €1,423 million in 2001 from €1,302 million in 2000, offset in part by a 67.8% increase in operating loss of our
telecommunications and other businesses to €47 million in 2001 from €28 million in 2000. If the changes in the accounting treatment of and recovery period
for CTCs applied in 2001 had been applied in 2000, our total operating income would have increased 7.1% to €3,175 million in 2001 from €2,966 million in
2000 and operating income of our domestic electricity business would have increased 6.3% to €1,799 million in 2001 from €1,692 million in 2000.

86

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The
following table shows the effect in euro on certain of the line items in our consolidated statement of income if the changes in the accounting treatment of and recovery period for
CTCs applied in 2001 had been applied in 2000. See "Factors Affecting the Comparability of Our Results of OperationsChange in Accounting Treatment and Recovery Period for
Competition Transition Costs".

|                                                      |                                   | Year Ended December 31, 2000 |      
|----------------------------------------------------- | --------------------------------- | ---------------------------- | -----
|
|
|Net sales                                             |                                   | 10,030                       |      
|Operating revenues                                    |                                   | 10,185                       |      
|Operating expenses                                    |                                   | 8,398                        |      
|                                                      | Purchases                         |                              | 5,528
|                                                      | Personnel expenses                |                              | 882  
|                                                      | Depreciation and amortization     |                              | 1,325
|                                                      | Variation in operating provisions |                              | 84   
|                                                      | Other operating expenses          |                              | 579  
|Operating income (loss)                               |                                   | 1,787                        |      
|Financial revenues                                    |                                   | 39                           |      
|Financial expenses                                    |                                   | 640                          |      
|Financial income (loss), net                          |                                   | (601                         | )    
|Income (loss) from consolidated companies             |                                   | 29                           |      
|Amortization of goodwill                              |                                   | (4                           | )    
|Non-operating income (loss), net                      |                                   | 281                          |      
|Consolidated income before taxes                      |                                   | 1,492                        |      
|Corporate income tax                                  |                                   | 405                          |      
|Minority interests                                    |                                   | 0                            |      
|Income (loss) attributable to the controlling company |                                   | 1,087                        |      

---



As a result of the following, operating income from our domestic electricity business increased 0.7% to €1,799 million in 2001 from
€1,787 million in 2000. If the changes in the accounting treatment of and recovery period for CTCs applied in 2001 had been applied in 2000, operating income from our domestic
electricity business would have increased 6.3% to €1,799 million in 2001 from €1,692 million in 2000.

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Net sales.Net sales from our domestic electricity business increased 0.6% to €10,086 million in 2001
from €10,030 million in 2000. If the changes in the accounting treatment of and recovery period for CTCs applied in 2001 had been applied in 2000, net sales from our domestic
electricity business would have increased 3.6% to €10,086 million in 2001 from €9,737 million in 2000.

The
following table shows the breakdown of net sales from our domestic electricity business for 2001 and 2000.

|                             |       | 2001  |        | 2000  |        | Percentage Change |    
|---------------------------- | ----- | ----- | ------ | ----- | ------ | ----------------- | ---
|
|Sales of energy              |       | 9,656 |        | 9,276 |        | 4.1               | %  
|Competition transition costs |       | 147   |        | 530   |        | (72.3             | )% 
|Services                     |       | 283   |        | 224   |        | 26.3              | %  
|                             |       |       |        |       |        |                   |    
|                             | Total |       | 10,086 |       | 10,030 |                   | 0.6
|                             |       |       |        |       |        |                   |    

The
0.6% increase in net sales from our domestic electricity business in 2001 was due to a 4.1% increase in sales of energy to €9,656 million in 2001 from
€9,276 million in 2000 and a 26.3% increase in sales of services to €283 million in 2001 from €224 million in 2000, offset in part
by a 72.3% decrease in competition transition costs to €147 million in 2001 from €530 million in 2000.

The
following table shows a breakdown of sales of energy by our domestic electricity business for 2001 and 2000.

|                                           |       | 2001  |       | 2000  |       | Percentage Change |    
|------------------------------------------ | ----- | ----- | ----- | ----- | ----- | ----------------- | ---
|
|Mainland generation                        |       | 3,432 |       | 3,228 |       | 6.3               | %  
|Mainland distribution and transmission     |       | 3,978 |       | 3,964 |       | 0.4               | %  
|Supply                                     |       | 1,085 |       | 952   |       | 14.0              | %  
|Trading                                    |       | 173   |       | 10    |       | 1,630.0           | %  
|Extrapeninsular systems(1)                 |       | 845   |       | 792   |       | 6.7               | %  
|Compensation for extrapeninsular system(2) |       | 126   |       | 114   |       | 10.5              | %  
|Other                                      |       | 17    |       | 216   |       | (92.1             | )% 
|                                           |       |       |       |       |       |                   |    
|                                           | Total |       | 9,656 |       | 9,276 |                   | 4.1
|                                           |       |       |       |       |       |                   |    

---

The
increase in sales of energy by our domestic electricity business in 2001 was mainly due to a 6.3% increase in sales of energy generated by Endesa in the Spanish mainland to
€3,432 million in 2001 from €3,228 million in 2000, a significant increase in sales from energy trading to €173 million in 2001
from €10 million in 2000 and a 14.0% increase in supply sales to €1,085 million in 2001 from €952 million in 2000, offset in part
by a 92.1% decrease in other revenues to €17 million in 2001 from €216 million in 2000.



88

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The
following table shows the breakdown of energy produced by us and the Spanish electricity sector in the Spanish mainland by type of generating facility for 2001 and 2000.

|              |       | Endesa |       | Spanish Electricity Sector |      
|------------- | ----- | ------ | ----- | -------------------------- | -----
|
|Nuclear       |       | 34.4   | %     | 34.4                       | %    
|Coal          |       | 45.2   | %     | 50.3                       | %    
|Hydroelectric |       | 15.4   | %     | 11.5                       | %    
|Fuel Oil/Gas  |       | 5.0    | %     | 3.8                        | %    
|              |       |        |       |                            |      
|              | Total |        | 100.0 | %                          | 100.0
|              |       |        |       |                            |      

---



89

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Our
CTC revenues decreased 72.3% to €147 million in 2001 from €530 million in 2000. The table below sets forth a breakdown of our CTC
revenues for 2001 and 2000.

|           |       | Year Ended December 31, |     |     |    
|---------- | ----- | ----------------------- | --- | --- | ---
|
|
|
|Technology |       | 70                      |     | 420 |    
|Coal       |       | 77                      |     | 110 |    
|           |       |                         |     |     |    
|           | Total |                         | 147 |     | 530
|           |       |                         |     |     |    

Competition
transition costs decreased 72.3% to €147 million in 2001 from €530 million in 2000, mainly due to:



If
the changes in the accounting treatment of and recovery period for CTCs applied in 2001 had been applied in 2000, CTC revenues would have decreased 38.0% to
€147 million in 2001 from €237 million in 2000.

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Operating Expenses.The table below sets forth the breakdown of operating expenses of our domestic
electricity business for
2001 and 2000 and the percentage variation from year to year.

|                                  |                                          | 2001  |       | 2000  |       | Percentage
Change |     
|--------------------------------- | ---------------------------------------- | ----- | ----- | ----- | ----- | ----------------- | ----
|
|Purchases                         |                                          | 5,885 |       | 5,528 |       | 6.5               | %   
|                                  | Energy                                   |       | 4,074 |       | 3,656 |                   | 11.4
|                                  | Fuel                                     |       | 1,476 |       | 1,546 |                   | (4.5
|                                  | Transmission and other external expenses |       | 335   |       | 326   |                   | 2.8 
|Personnel expenses                |                                          | 868   |       | 882   |       | (1.6              | )%  
|Depreciation and amortization     |                                          | 1,095 |       | 1,325 |       | (17.4             | )%  
|Variation in operating provisions |                                          | 23    |       | 84    |       | (72.6             | )%  
|Other operating expenses          |                                          | 584   |       | 579   |       | 0.9               | %   
|                                  |                                          |       |       |       |       |                   |     
|                                  | Total                                    |       | 8,455 |       | 8,398 |                   | 0.7 
|                                  |                                          |       |       |       |       |                   |     

Operating
expenses of our domestic electricity business increased 0.7% to €8,455 million in 2001 from €8,398 million in 2000, principally
due to a 6.5% increase in purchases to €5,885 million in 2001 from €5,528 million in 2000, offset in part by a 17.4% decrease in depreciation and
amortization costs to €1,095 million in 2001 from €1,325 million in 2000. If the changes in the accounting treatment of and recovery period for CTCs
applied in 2001 had been applied in 2000, operating expenses of our domestic electricity business would have increased 3.1% to €8,455 million in 2001 from
€8,200 million in 2000.

Purchases
increased 6.5% to €5,885 million in 2001 from €5,528 million in 2000, principally due to an 11.4% increase in purchases of energy
to €4,074 million in 2001 from €3,656 million in 2000 as a result of:



91

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The
increase in purchases of energy was offset in part by a 4.5% decrease in purchases of fuel to €1,476 million in 2001 from
€1,546 million in 2000, mainly due to declining prices for fuel oil during the latter part of 2001 and an increase in the amount of hydroelectric production during 2001 as a
result of favorable hydrological conditions during the first half of 2001, offset in part by higher fuel costs in connection with energy produced by our extrapeninsular system (i.e., the Balearic
Islands, the Canary Islands, Ceuta and Melilla) and increased consumption of fuel oil and gas by our thermal facilities due to increases in production to meet demand and poor hydrological conditions
during the latter part of the year. Hydroelectric production has lower fuel-related costs than thermal production.

Personnel
expenses decreased 1.6% to €868 million in 2001 from €882 million in 2000. The decrease in 2001 was mainly due to workforce
reductions. Our total average number of employees in our domestic electricity business in 2001 was 15,891 compared with 17,734 in 2000. The unit cost per employee, including pensions and social
security, was 9.0% lower in 2001 compared with 2000.

Depreciation
and amortization costs decreased 17.4% in 2001 to €1,095 million from €1,325 million in 2000. The decrease in 2001 was mainly
due to the change in the amortization period for certain assets as a result of the change in recovery period for CTCs. If the changes in the accounting treatment of and recovery period for CTCs
applied in 2001 had been applied in 2000, depreciation and amortization would have decreased 2.8% to €1,095 million in 2001 from €1,127 million in 2000.



Operating income from our international electricity business increased 9.3% to €1,423 million in 2001 from
€1,302 million in 2000. Operating revenues from our international electricity business increased 3.0% to €5,325 million in 2001 from
€5,169 million in 2000, while operating expenses of our international electricity business increased 0.9% to €3,902 million in 2001 from
€3,867 in 2000.

The
table below sets forth a breakdown of operating income (loss) and operating revenues from our international electricity business for 2001 and 2000.

|                              |       | Operating Income |       | Operating Revenues |      
|----------------------------- | ----- | ---------------- | ----- | ------------------ | -----
|
|
|Generation                    |       | 653              |       | 531                |      
|Distribution and Transmission |       | 774              |       | 679                |      
|Other                         |       | (4               | )     | 92                 |      
|                              |       |                  |       |                    |      
|                              | Total |                  | 1,423 |                    | 1,302
|                              |       |                  |       |                    |      

The
following table shows operating income and operating revenues from generation in each country for 2001 and 2000.

|          |       | Operating Income |     | Operating Revenues |    
|--------- | ----- | ---------------- | --- | ------------------ | ---
|
|
|Chile     |       | 256              |     | 115                |    
|Colombia  |       | 132              |     | 127                |    
|Argentina |       | 81               |     | 99                 |    
|Brazil    |       | 63               |     | 71                 |    
|Peru      |       | 121              |     | 119                |    
|          |       |                  |     |                    |    
|          | Total |                  | 653 |                    | 531
|          |       |                  |     |                    |    

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Operating
income from generation by our international electricity business increased 23.0% to €653 million in 2001 from €531 million in
2000. The increase in operating income from generation by our international electricity business was mainly due to a 122.6% increase in operating income from generation in Chile to
€256 million in 2001 from €115 million in 2000, offset in part by an 18.2% decrease in operating income from generation in Argentina to
€81 million in 2001 from €99 million in 2000 and an 11.3% decrease in operating income from generation in Brazil to €63 million in
2001 from €71 million in 2000.

The
following table shows output figures in Latin America by country for 2001 and 2000.

|          |       | 2001   |        | 2000   |        | Percentage
Change |    
|--------- | ----- | ------ | ------ | ------ | ------ | ----------------- | ---
|
|Chile     |       | 15,741 |        | 15,346 |        | 2.6               | %  
|Colombia  |       | 10,106 |        | 9,618  |        | 5.1               | %  
|Argentina |       | 11,864 |        | 10,470 |        | 13.3              | %  
|Brazil    |       | 2,256  |        | 3,406  |        | 33.8              | %  
|Peru      |       | 4,480  |        | 3,623  |        | 23.7              | %  
|          |       |        |        |        |        |                   |    
|          | Total |        | 44,447 |        | 42,463 |                   | 4.7
|          |       |        |        |        |        |                   |    

Operating
income from generation in Chile increased 122.6% to €256 million in 2001 from €115 million in 2000. In 2001, the amount of energy
sold in Chile increased 2.6% to 15,741 GWh in 2001 from 15,346 GWh in 2000, and the average sales price per KWh increased 34.9% in 2001. In 2001, transmission tolls in Chile increased 5.0% as a result
of the sale of the distribution company, Transelec, in September 2000 while fuel costs decreased as a result of the increase in hydroelectric production in 2001.

Operating
income from generation in Colombia increased 3.9% to €132 million in 2001 from €127 million in 2000. In 2001, the amount of energy
sold in Colombia increased 5.1% to 10,106 GWh in 2001 from 9,618 GWh in 2000, and the average sales price per KWh increased 16.4% in 2001. In 2001 purchases of energy in Chile increased.

Operating
income from generation in Argentina decreased 18.2% to €81 million in 2001 from €99 million in 2000. In 2001, the amount of energy
sold in Argentina increased 13.3% to 11,864 GWh in 2001 from 10,470 GWh in 2000, principally as a result of the commencement of operation of the combined cycle gas turbine plant at Dock Sud, while the
average sales price per KWh decreased 3.5% in 2001.

Operating
income from generation in Brazil decreased 11.3% to €63 million in 2001 from €71 million in 2000. In 2001, the amount of energy
sold in Brazil decreased 33.8% to 2,256 GWh in 2001 from 3,406 GWh in 2000 as a result of the severe drought which adversely affected hydroelectric generation in Brazil, while the average sales price
per KWh increased 20.0% in 2001 as a result of the 17.2% increase in tariffs effected in September 2000.

Operating
income from generation in Peru increased 1.7% to €121 million in 2001 from €119 million in 2000. In 2001, the amount of energy
sold in Peru increased 23.7% to 4,480 GWh in 2001 from 3,623 GWh in 2000, and the average sales price per KWh increased 10.1% in 2001. Operating expenses for generation in Peru were impacted by an
increase in depreciation and amortization expenses related to Edegel's new hydroelectric plants which commenced operations near the end of 2000.

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The
following table shows operating income and operating revenues from distribution in each country for 2001 and 2000.

|          |       | Operating Income |     | Operating Revenues |    
|--------- | ----- | ---------------- | --- | ------------------ | ---
|
|
|Chile     |       | 184              |     | 259                |    
|Colombia  |       | 65               |     | 65                 |    
|Argentina |       | 235              |     | 201                |    
|Brazil    |       | 228              |     | 156                |    
|Peru      |       | 62               |     | 62                 |    
|          |       |                  |     |                    |    
|          | Total |                  | 774 |                    | 743
|          |       |                  |     |                    |    

Operating
income from distribution by our international electricity business increased 4.2% to €774 million in 2001 from €743 million in
2000. The increase in operating income from distribution by our international electricity business was mainly due to a 46.2% increase in operating income from distribution in Brazil to
€228 million in 2001 from €156 million in 2000 and a 16.9% increase in operating income from distribution in Argentina to
€235 million in 2001 from €201 million in 2000, offset in part by a 29.0% decrease in operating income from distribution in Chile to
€184 million in 2001 from €259 million in 2000.

The
following table shows the amount of electricity sold in Latin America by country for 2001 and 2000.

|          |       | 2001   |        | 2000   |        | Percentage
Change |     
|--------- | ----- | ------ | ------ | ------ | ------ | ----------------- | ----
|
|Chile     |       | 9,527  |        | 10,265 |        | (7.2              | )%  
|Colombia  |       | 8,608  |        | 8,776  |        | (1.9              | )%  
|Argentina |       | 12,909 |        | 12,597 |        | 2.5               | %   
|Brazil    |       | 12,091 |        | 13,472 |        | (10.3             | )%  
|Peru      |       | 3,675  |        | 3,564  |        | 3.1               | %   
|          |       |        |        |        |        |                   |     
|          | Total |        | 46,810 |        | 48,674 |                   | (1.0
|          |       |        |        |        |        |                   |     

Operating
income from distribution in Chile decreased 29.0% to €184 million in 2001 from €259 million in 2000, mainly due to mainly due to a
decrease of 7.2% to 9,527 GWh in 2001 from 10,265 GWh in 2000, offset in part by a 10.7% increase in the average sales price per KWh, a 2.2% increase in the number of customers and a 3.1% increase in
average electricity consumption per customer. In 2001, purchases of energy increased in Chile. Operating income from distribution in Chile was also adversely affected by the significant devaluation of
the Chilean peso relative to the euro in 2001.

Operating
income from distribution in Colombia remained flat in 2001 at €65 million. In 2001, the average sales price per KWh increased 12.7%, while the amount of
energy distributed in Colombia decreased 1.9% to 8,608 GWh in 2001 from 8,776 GWh in 2000 due to a 3.8% decrease in consumption per customer and a 2.7% decrease in the number of customers.

Operating
income from distribution in Argentina increased 16.9% to €235 million in 2001 from €201 million in 2000. In 2001, the average
sales price per KWh increased 6.3%, and the amount of energy distributed in Argentina increased 2.5% to 12,909 GWh in 2001 from 12,597 GWh in 2000 despite the adverse macroeconomic conditions
prevailing in Argentina and a decrease in the number of

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customers.
In addition, energy losses, which are principally due to illegally-tapped energy, faulty metering and inadequate billing and collections systems, decreased to 9.9% in 2001 from 10.3% in
2000.

Operating
income from distribution in Brazil increased 46.2% to €228 million in 2001 from €156 million in 2000. In 2001, we received
€160.0 million in compensation provided by the Brazilian government to distribution companies to offset the effects of electricity rationing measures imposed by the government
as a result of the severe drought in Brazil in 2001. The amount of energy distributed in Brazil decreased 10.3% to 12,091 GWh in 2001 from 13,472 GWh in 2000 due to a 16.5% decrease in consumption per
customer as a result of electricity rationing measures, offset in part by an increase in the number of customers.

Operating
income from distribution in Peru remained flat in 2001 at €62 million. In 2001, the average sales price per KWh increased 8.0%, and the amount of energy
distributed in Peru increased 3.1% to 3,675 GWh in 2001 from 3,564 GWh in 2000 as a result of a 1.1% increase in consumption per customer and a 1.8% increase in the number of customers. In 2001,
purchases of energy in Peru increased, while energy losses decreased to 8.9% in 2001 from 9.9% in 2000.



Operating loss from our telecommunications and other businesses was €47 million in 2001 compared with an operating loss of
€28 million in 2000, broken down as follows:

|                                    |  | 2001 |   | 2000 |   | Percentage
Change |   
|----------------------------------- |  | ---- | - | ---- | - | ----------------- | --
|
|Telecommunications                  |  | (62  | ) | (57  | ) | 8.8               | % 
|Gas                                 |  | 25   |   | 26   |   | (3.9              | )%
|Cogeneration and renewable energies |  | 15   |   | 9    |   | 66.7              | % 
|New technologies                    |  | (16  | ) | (6   | ) | 166.7             | % 
|Other                               |  | (9   | ) |     |   |                   |   
|                                    |  |      |   |      |   |                   |   
|Total                               |  | (47  | ) | (28  | ) | 67.8              | % 
|                                    |  |      |   |      |   |                   |   



Financial loss, net increased 50.7% to €1,722 million in 2001 from financial loss, net of €1,143 million in 2000.
The increase in 2001 was mainly due to foreign exchange losses, net of €398 million in 2001 compared with foreign exchange gains, net of €139 million in
2000, principally as a result of the significant devaluation of the Brazilian real and the Chilean peso during 2001 and of the Argentine peso in January 2002.

Financial
expenses, mainly consisting of interest expenses, decreased 2.1% to €1,628 million in 2001 from €1,663 million in 2000,
principally due to lower average cost of debt as a result of a decrease in interest rates during 2001, offset in part by a 14.0% increase in net financial debt to
€25,007 million at December 31, 2001 from €21,936 million at December 31, 2000. In 2001, average cost of debt was 5.85% compared with 6.47%
in 2000. In 2001, average cost of debt related to our domestic electricity business was 4.57%, average cost of debt related to our international electricity business was 7.02% and average cost of debt
related to our telecommunications and other businesses was 5.77%.



Our share in the income (losses) of companies carried by the equity method resulted in a loss of €118 million in 2001 compared with income
of €53 million in 2000. This loss was principally due to our

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participation
in the losses incurred by Auna, totaling €198 million. Losses from companies carried by the equity method were offset in part by our share of the income from our
participation in Elettrogen (which we began to account for under the equity method in the fourth quarter of 2001), totaling €28 million, and to a lesser extent income from our
interests in Aguas de Barcelona, Red Eléctrica de España, Repsol YPF, S.A., Snet and Tejo Energia. In March 2002, we acquired a controlling interest in Endesa
Italia, as successor to Elettrogen, as a result of which we will consolidate this entity in our financial statements for 2002.



Amortization of goodwill increased 6.3% to €289 million in 2001 from €272 million in 2000, principally due to the
amortization of goodwill arising from our investments made in 2001 in Elettrogen, Snet and Repsol.



Non-operating income, net was €579 million in 2001 compared with non-operating income, net of
€913 million in 2000. Non-operating income, net in 2001 included mainly €494 million in
capital gains from the sale of Endesa's direct and indirect holdings in Edenor and €152 million in capital gains from the receipt of 12.5% of the purchase price in connection
with the sale of Viesgo in December 2001. Non-operating income, net in 2001 was offset in part by extraordinary provisions, principally consisting of a provision of
€114 million to cover contingent liabilities in connection with Cerj's pension and other commitments to its workforce. If the changes in the accounting treatment of and recovery
period for CTCs applied in 2001 had been applied in 2000, non-operating income, net would have been €1,034 million in 2000.



Our corporate income tax expense decreased 85.8% to €88 million in 2001 from €618 million in 2000. This decline
resulted principally from:



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As
a result of the foregoing, our corporate tax expense in 2001 was 5.4% of our consolidated income before tax compared with 23.7% in 2000. Of our corporate income tax expense in 2001,
€250 million related to our domestic electricity business and €132 million related to our international electricity business and a tax credit of
€294 million related to our telecommunications and other businesses.



Income attributed to minority interests in 2001 decreased 90.1% to €58 million in 2001 from €587 million in 2000,
principally as a result of decreases in income from our Latin American subsidiaries, especially our Argentine subsidiaries as a result of the devaluation of the Argentine peso.



As a result of the foregoing, net income increased 5.1% to €1,479 million in 2001 from €1,407 million in 2000. If
the changes in the accounting treatment of and recovery period for CTCs applied in 2001 had been applied in 2000, net income would have increased 3.9% to €1,479 million in 2001
from €1,424 million in 2000.

U.S. GAAP Reconciliation

Our consolidated financial statements have been prepared in accordance with Spanish GAAP, which differs in certain significant respects from U.S. GAAP. Our net
income for 2002, 2001 and 2000 under Spanish GAAP was €1,270 million, €1,479 million and €1,407 million, respectively, and under
U.S. GAAP was €1,545 million, €1,034 million and €950 million, respectively. Our stockholders' equity at December 31, 2002,
2001 and 2000 under Spanish GAAP was €8,043 million, €8,656 million and €8,638 million, respectively, and under U.S. GAAP was
€8,594 million, €9,052 million and €9,428 million, respectively. The principal differences between Spanish GAAP and U.S. GAAP with
respect to our consolidated financial statements relate to:



See
Note 25 to our consolidated financial statements for a complete description of these adjustments.

New U.S. Accounting Pronouncements



In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 143 (SFAS 143),
"Accounting for Asset Retirement Obligations". SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if
a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. An entity shall

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measure
changes in the liability for an asset retirement obligation due to passage of time by applying an interest method of allocation to the amount of the liability at the beginning of the period.
The interest rate used to measure that change shall be the credit-adjusted risk-free rate that existed when the liability was initially measured. That amount shall be recognized as an
increase in the carrying amount of the liability and as an expense classified as an operating item in the statement of income. SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002.

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As stated in Note 3-c to our consolidated financial statements, Empresa Nacional de Residuos Radioactivos, S.A. (ENRESA) is responsible for the decommissioning of
nuclear power plants and the treatment and final disposal of radioactive nuclear waste. A contract between ENRESA and the electric utilities was executed on November 30, 1989, to formally
document the transfer to ENRESA of responsibility for the treatment and final disposal of nuclear waste. Management of Endesa considers that the cost that will be incurred until the aforementioned
transfer will not be material. For the rest of the power plants, we plan to continue with the current locations and, accordingly, no significant costs are expected to be incurred in this connection.

We
have not yet assessed what effect, if any, the application of this Statement will have on our financial position or results of operations. However, due to the factors cited above, we
do not expect this Statement to have a significant effect on our financial position or results of operations.



In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections". This Statement rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that Statement, SFAS No. 64, "Extinguishments of
Debt Made to Satisfy Sinking-Fund Requirements". This statement also rescinds SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers". This Statement amends
SFAS 13, "Accounting for Leases", to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed conditions. The provisions of this Statement related to the rescission of SFAS No. 4 shall be applied in fiscal
years beginning after May 15, 2002. The provisions of this Statement related to SFAS No. 13 shall be effective for transactions occurring after May 15, 2002, with early
application encouraged. All other provisions of this statement shall be effective for financial statements issued on or after May 15, 2002, with early application encouraged. We do not
anticipate that application of this Statement will have any impact on our financial position or results of operations, as of December 31, 2002.



In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" (SFAS 146). This Statement
addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring ("EITF 94-3"). SFAS 146 eliminates the definition and requirements for
recognition of exit costs in EITF 94-3. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.
Under EITF 94-3, a liability for an exit cost as defined in EITF 94-3 was recognized at the date of an entity's commitment to an exit plan. SFAS 146 also concluded that
an entity's commitment to a plan, by itself, does not create a present obligation to others that meets the definition of a liability. SFAS 146 also establishes that fair value is the objective
for initial measurement of the liability. The provisions of this Statement shall be effective for exit or disposal activities that are initiated after December 31, 2002, and are to be applied
prospectively. We do not anticipate that adoption of SFAS No. 146 will have a material impact on our consolidated results of operations, financial position or cash flows.

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In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure" ("SFAS 148"). This
Statement amends SFAS No. 123, "Accounting for Stock-Based Compensation ("SFAS 123"), to provide alternative methods of transition to the fair value method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure provisions of SFAS 123 to require disclosure of the effects of an entity's accounting policy with respect to
stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements in the summary of significant accounting policies. SFAS 148 does not
amend SFAS 123 to require companies to account for their employee stock-based awards using the fair value method. However, the disclosure provisions are required for all companies with stock-
based employee compensation, regardless of whether they utilize the fair value method of accounting described in SFAS 123 or the intrinsic value method described in APB 25. SFAS 148 is
effective for fiscal years beginning after December 15, 2002 and early application is permitted. We do not anticipate that adoption of this statement will have a material effect on our
consolidated financial position, results of operations or cash flows.



In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires certain disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain
guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The
initial recognition and measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements
are effective for financial statements for periods ending after December 15, 2002 and as such have been included in Note 21 to our consolidated financial statements. We are assessing the
impact of FIN 45, but at this point we do not believe that adoption of the recognition and initial measurement requirements of FIN 45 will have a material impact on our consolidated financial
position, results of operations or cash flows.



In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entitiesan interpretation of ARB
No. 51" ("FIN 46"). FIN 46 clarifies the application of Accounting Research Bulletin No. 51, "Consolidated Financial Statements", to certain entities in which equity investors do not
have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from
other parties. FIN 46 explains how to identify variable interest entities and how an enterprise assesses its interests in a variable interest entity to decide whether to consolidate that entity. It
requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. It also requires
certain disclosures by the primary beneficiary of a variable interest entity and by an enterprise that holds significant variable interests in a variable interest entity where the enterprise is not
the primary beneficiary. FIN 46 is effective immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which an enterprise obtains an
interest after that date, and effective for the first fiscal year or interim period beginning after June 15, 2003 to variable interest entities in which an enterprise holds a variable interest
that it acquired before February 1, 2003.

As
of December 31, 2002 we did not hold any variable interest entities (VIE).

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B. LIQUIDITY AND CAPITAL RESOURCES



In 2002, 2001 and 2000, Endesa used cash provided by operating activities, external borrowings (including available lines of credit) and proceeds from the
disposal of assets and businesses to manage its liquidity. Endesa used these sources of liquidity primarily for capital expenditures and investments. Endesa's management believes that the funding
available to it from these and other sources will be sufficient to satisfy its working capital and debt service requirements for the foreseeable future.



Our cash and cash equivalents were €2,188 million at December 31, 2002, €1,053 million at December 31,
2001 and €885 million at December 31, 2000. The increase in 2002 was due to the increase in cash provided by operating activities to
€4,285 million in 2002 from €3,347 million in 2001, the decrease in cash used in investing activities to €2,020 million in 2002
from €4,198 million in 2001 and net cash provided by working capital of €2,371 million, offset in part by the increase in net cash used in financing
activities to €3,633 million compared with net cash provided by financing activities of €1,303 million in 2001. As a percentage of total assets, cash and
cash equivalents was 4.5% at December 31, 2002 compared with 2.1% at December 31, 2001.

The
following table sets forth our consolidated cash flows for 2002, 2001 and 2000. Positive figures refer to cash inflows and negative figures, which are indicated in brackets, refer to
cash outflows.

|                                                    |  | Year Ended December 31, |  
|--------------------------------------------------- |  | ----------------------- | -
|
|
|Net cash provided by (used in) operating activities |  | 4,285                   |  
|Net cash provided by (used in) working capital(1)   |  | 2,371                   |  
|Net cash provided by (used in) investing activities |  | (2,020                  | )
|Net cash provided by (used in) financing activities |  | (3,633                  | )

---



Our cash provided by operating activities increased 28.0% to €4,285 million in 2002 from €3,347 million in 2001. Of
the cash provided by operating activities in 2002, €2,537 million related to cash provided by operating activities of our domestic electricity business (24.6% more than in
2001), €179 million related to cash provided by operating activities of our European electricity business, €1,444 million related to cash provided by
operating activities of our Latin American electricity business (4.4% more than in 2001) and €125 million related to cash provided by our other businesses (271.2% more than in
2001).

Our
cash provided by operating activities of €3,347 million in 2001 remained virtually unchanged from €3,340 million in 2000, principally
due to a 29.7% increase in cash provided by our international electricity business, offset in part by a 9.5% decrease in cash provided by our domestic electricity business. Of the cash provided by
operating activities in 2001, €2,037 million related to cash provided by operating activities of our domestic electricity business, €1,383 million related
to cash provided by operating activities of our international business and €73 million related to negative cash provided by our other businesses.

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Our cash used in investing activities decreased 51.9% to €2,020 million in 2002 from €4,198 million in 2001. The
decrease in cash used in investing activities in 2002 was primarily due to a 52.7% decrease in financial investments to €1,366 million in 2002 from
€2,890 million in 2001.

Our
cash used in investing activities increased 223.7% in 2001 to €4,198 million from €1,297 million in 2000. The increase in cash used in
investing activities in 2001 was primarily due to our acquisitions of interests in Endesa Italia and Snet.



Our net cash used in financing activities was €3,633 million in 2002 compared with net cash provided by financing activities of
€1,303 million in 2001, primarily due to a reduction in external borrowings in 2002.

Our
net cash provided by financing activities was €1,303 million in 2001 compared with net cash used in financing activities of
€2,126 million in 2000, primarily due to a reduction in external borrowings in 2001.

In
2002, 2001 and 2000 our primary financing activities have involved a variety of short-and medium-term financial instruments, principally bonds and debentures,
commercial paper and borrowings from financial institutions. The amount of bonds and debentures payable by Endesa was approximately €14,312 million at December 31, 2002,
€13,922 million at December 31, 2001 and €12,536 million at December 31, 2000. The amount of borrowings from financial institutions payable
by Endesa was €9,634 million at December 31, 2002, €10,882 million at December 31, 2001 and €9,232 million at
December 31, 2000.

At
December 31, 2002, our net financial liabilities of €22.7 billion were primarily in euro (59%), U.S. dollars (33%) and Latin American currencies (8%),
principally the Chilean peso, the Brazilian real and the Argentine peso. The aggregate borrowing rate of our outstanding indebtedness was 5.05% for 2002. The aggregate borrowing rate of our domestic
electricity business was 4.26% in 2002, the aggregate borrowing rate of our Latin American electricity business was 6.25% the aggregate borrowing rate of our European electricity business was 3.83%
and the aggregate borrowing rate of our other businesses was 4.13% in 2002. Approximately 72% of our financial liabilities was at fixed and hedged rates at December 31, 2002. Our net financial
debt was 202.8% of total stockholders' equity and liabilities at December 31, 2002 compared with 201.4% at December 31, 2001.

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The following table sets forth our capital expenditures and capital investments for 2002, 2001 and 2000.

|                      |                                        | 2002                                       |       | 2001  |       | 2000 
|--------------------- | -------------------------------------- | ------------------------------------------ | ----- | ----- | ----- | -----
|Capital expenditures: |                                        |                                            |       |       |       |      
|                      | Power stations                         |                                            | 1,121 |       | 797   |      
|                      | Distribution facilities                |                                            | 1,060 |       | 1,281 |      
|                      | Other                                  |                                            | 191   |       | 325   |      
|                      |                                        |                                            |       |       |       |      
|                      |                                        | 2,372                                      |       | 2,403 |       | 1,972
|Investments:          |                                        |                                            |       |       |       |      
|                      | Acquisitions of consolidated companies |                                            | 127   |       | 12    |      
|                      | Repurchase of shares in affiliates     |                                            |      |       |      |      
|                      | Financial investments                  |                                            | 1,232 |       | 2,219 |      
|                      | Other                                  |                                            | 232   |       | 812   |      
|                      |                                        |                                            |       |       |       |      
|                      |                                        | Total investments                          |       | 1,591 |       | 3,043
|                      |                                        |                                            |       |       |       |      
|                      |                                        | Total capital expenditures and investments |       | 3,963 |       | 5,446
|                      |                                        |                                            |       |       |       |      

Total
capital expenditures and investments decreased 27.2% to €3,963 million in 2002 from €5,446 million in 2001. Of the
€3,963 million in capital expenditures and investments in 2002, €2,372 million related to capital expenditures and €1,232 million
related to financial investments. Financial investments in 2002 included mainly financing of the tariff deficit and the extrapeninsular compensation deficit and purchase of an additional interest in
Auna.

In
2002, we sold 13,148,816 of our own ordinary shares for €160.3 million and acquired 11,263,659 of our own ordinary shares for
€131.7 million, as a result of which the number of treasury shares decreased to 10,559,826 at December 31, 2002, representing 0.997% of our outstanding share capital,
from 12,444,988 treasury shares at December 31, 2001.

Total
capital expenditures and investments increased 32.4% to €5,446 million in 2001 from €4,113 million in 2000 due to a 21.9% increase in
capital expenditures to €2,403 million in 2001 from €1,972 million in 2000 and a 42.1% increase in investments to €3,043 million in
2001 from €2,141 million in 2000. The increase in capital expenditures in 2001 was principally due to continued increases in investments in distribution in Spain to
€591 million, representing approximately 24.6% of total capital expenditures for 2001, and €555 million in capital expenditures to increase installed
capacity in Spain, principally through the construction of new combined cycle gas turbine plants. Investments in 2001 consisted principally of €2,219 million of financial
investments. Financial investments in 2001 included mainly:



In
2001, we sold 6,174,655 of our own ordinary shares for €118 million and acquired 15,356,827 of our own ordinary shares for €265 million,
as a result of which the number of treasury shares increased

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to
12,444,983 million at December 31, 2001, representing 1.18% of our outstanding share capital, from 3,262,811 treasury shares at December 31, 2000.

In
2001, 61.5% of the €5,446 million in total capital investments was financed with internally generated funds, partly from our cash flow of
€3,347 million and partly from divestitures in an aggregate amount of €1,236 million, principally consisting of our sale of Edenor and the receipt of
12.5% of the sale price in connection with our sale of Viesgo. In addition, a part of the subscription price for our portion of the capital increase of Auna was financed through the cancellation of
debt owed by Auna to us.



As part of our strategic plan 2002-2006, we plan to invest approximately €9.7 billion during the period 2002-2006,
as follows:



Approximately
88% of our total planned investment during the period will be dedicated to our core electricity business.

We
expect our planned investment of €4.3 billion for organically growing our businesses to be allocated as follows:



Of
our planned investment of €5.4 billion for the maintenance of fixed assets, we expect that 56% will be made in Spain, 32% will be made in Latin America, 5% will
be made throughout the rest of Europe and 7% will be dedicated to other activities.

The
funds for our investment plan are expected to be generated from our cash flows and planned divestitures. As part of our strategic plan 2002-2006, we expect to divest
non-core assets in an amount of €6-7 billion between 2002 and 2006, €4.2 billion of which has already been divested as of the date
of this annual report. See "Item 4. Information on the CompanyBusiness OverviewCapital Expenditures and Divestitures".

Our
forecasted amounts of capital expenditures and divestitures and the underlying assumptions are subject to risks and uncertainties, and actual capital expenditures and divestitures
may be less than or exceed these amounts. See "Forward-Looking Statements".



Our net financial debt was €22.7 billion at December 31, 2002, a decrease of €2.3 billion compared with net
financial debt of €25.0 billion at December 31, 2001.

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The
following table sets forth the amortization schedule for our consolidated debt at December 31, 2002:

|                                      |  | 2003  |  | 2004  |  | 2005  |  | 2006  |  | 2007  |  | Subsequent
Years |  | Total 
|------------------------------------- |  | ----- |  | ----- |  | ----- |  | ----- |  | ----- |  | ---------------- |  | ------
|
|Debentures and bonds                  |  | 864   |  | 1,621 |  | 733   |  | 1,826 |  | 430   |  | 5,561            |  | 11,035
|Notes payable                         |  | 3,235 |  |      |  |      |  | 42    |  |      |  |                 |  | 3,277 
|Loans and credits in euro             |  | 1,650 |  | 273   |  | 13    |  | 1,404 |  | 460   |  | 496              |  | 4,296 
|Loans and credits in foreign currency |  | 1,339 |  | 327   |  | 1,319 |  | 1,160 |  | 138   |  | 1,055            |  | 5,338 
|                                      |  |       |  |       |  |       |  |       |  |       |  |                  |  |       
|Total(1)                              |  | 7,088 |  | 2,221 |  | 2,065 |  | 4,432 |  | 1,028 |  | 7,112            |  | 23,946
|                                      |  |       |  |       |  |       |  |       |  |       |  |                  |  |       

---



In the past, our main sources of liquidity have been our cash flows from operations, bank financing, issuance of commercial paper, debt securities and the
proceeds from our divestment plan. As of December 31, 2002, total available liquidity was approximately €2.6 billion, consisting of approximately
€2.1 billion available in unused credit lines, of which approximately €700 million will expire by the end of 2003 and approximately
€1.4 billion will expire thereafter, and approximately €475 million in cash and liquid investments. Any future downgrades will not preclude us from using
any of our existing credit lines.

At
March 31, 2003, our liquidity position amounted to €4,896 million, of which €2,631 million corresponded to unused lines of credit.

The
following is a discussion of certain of the material financing transactions entered into by Endesa, S.A. or its wholly-owned subsidiaries.



We have short-term revolving credit facilities in an aggregate amount of €721 million, €697 million of
which was used at December 31, 2002. These credit facilities are separately provided by six banks and have an average maturity period of 89 days. Interest in respect of any borrowings
under these credit facilities are at a floating rate (EURIBOR or LIBOR) plus an average margin of six basis points.

Our
short-term credit facilities include customary default provisions that could impact the continued availability of credit or result in the acceleration of repayment.



In 1998, our wholly-owned finance subsidiary, International Endesa B.V., established a commercial paper program under which it may issue up to an aggregate
principal amount of $2 billion. At December 31, 2002, an aggregate principal amount of €1,287 million was outstanding under this commercial paper program.



In 1995, International Endesa B.V. established a medium-term note program under which it may issue up to an aggregate principal amount of
€9 billion of medium term notes. The notes issued under this program have maturities between two and 40 years. At December 31, 2002, an aggregate principal amount
of €7,578 million was outstanding under this medium term note program.

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We also had loan facilities of €2,690 million at December 31, 2002, €2,876 million at December 31,
2001 and €3,756 million at December 31, 2000, of which approximately €1,386 million were unused at December 31, 2002,
€1,425 million were unused at December 31, 2001 and €1,527 million were unused at December 31, 2000. In 2002, the weighted average interest
rate payable under our loan facilities was 2.84%. These loan facilities are separately provided by 11 banks and have an average maturity period of three and a half years. Interest in respect of any
borrowings under these loan facilities are at a floating rate (EURIBOR or LIBOR) plus an average spread of 12.5 basis points. Our loan facilities may serve as back stops for issuances of commercial
paper although they have not been used for such purpose as of the date of this annual report.

In
2001, we received a long-term loan from Eniti LLC, an affiliate of Citibank, N.A. In connection with this transaction, we formed Teneguía
Gestión Financiera, S.L., Sociedad Comanditaria, a Canary Islands corporation, for the sole purpose of entering into this transaction. We consolidate our interest in
Teneguía Gestión Financiera, S.L., Sociedad Comanditaria. As part of this transaction, we made a capital contribution of €1.5 billion to
Teneguía Gestión Financiera, S.L.,
Sociedad Comanditaria (representing a 95.72% equity interest in the company) and Eniti LLC made a capital contribution of €67 million (representing a 4.28% equity interest in
the company). In addition, Eniti LLC provided a loan to Teneguía Gestión Financiera, S.L., Sociedad Comanditaria in the principal amount of
€433 million. In connection with this transaction, we entered into certain agreements with Eniti LLC which include customary default provisions that could result in the
acceleration of repayment of such loan to Eniti LLC.



Endesa's financial debt generally contains customary covenants for contracts of this nature, including negative pledge, material adverse change and cross-default
clauses, which in certain cases relate as well to debt, if any, of Endesa's most significant Spanish subsidiaries. There are no cross-default clauses in Endesa's indebtedness which relate to debt of
our Latin American subsidiaries.

Additionally,
a significant portion of Enersis' financial indebtedness is subject to cross-default provisions. In the new bank facilities, defaults in relation to any single indebtedness
of Endesa Chile or some of its more relevant subsidiaries, with an outstanding amount equal to or in excess of $30 million, could give rise to a cross-default under the facilities after the
applicable grace periods, if any, have expired. Likewise, defaults in relation to any single indebtedness of Enersis or some of its more relevant subsidiaries, including Endesa Chile, with an
outstanding amount equal to or in excess of $30 million after the applicable grace periods (if any) have expired could give rise to a cross-default under the Enersis facility. In addition, if
Enersis or any of its subsidiaries defaults in the payment on any single indebtedness having an aggregate principal amount exceeding $30 million, an Event of Default would be triggered under
the Enersis Yankee Bonds after the applicable grace periods, if any, have expired. Finally, any Event of Default arising out of Endesa Chile's or Enersis' Yankee Bonds would trigger a cross-default
under most of the existing bank credit agreements.

As
of the date of this annual report, our long-term debt rating for senior unsecured debt was A from Standard & Poor's, Baa1 from Moody's and A from Fitch and our
short-term credit rating was P2 from Moody's, A1 from Standard & Poor's and F1 from Fitch. Our current ratings outlook is negative according to Standard & Poor's and Fitch,
and stable according to Moody's agencies. Our ability to use external sources of financing will depend in large part on our credit ratings. Our securities ratings may be revised or withdrawn at any
time, and each rating should be evaluated independently of any other rating.

Except
as described below, we do not have any ratings downgrade triggers that would accelerate the maturity dates of our debt or trigger any other contractual obligation on our part.
However, a

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downgrade
in our credit rating could have a material adverse effect on the cost of renewing existing, or obtaining access to new, credit facilities in the future. Approximately
€600 million of our debt at December 31, 2002 with the European Investment Bank could require customary guarantees if Moody's or Standard & Poor's change their
respective views regarding our credit rating and €333 million of our other debt at such date would be subject to renegotiation if our credit rating were downgraded to below
BBB/Baa2.



At December 31, 2002, we guaranteed €14,576 million of debt, most of which was incurred by our affiliates (principally by
International Endesa, B.V.) and reflected in our consolidated balance sheet. This figure includes a guarantee of €459 million of debt incurred by Auna which matures on
December 30, 2003.



On March 28, 2003 our wholly-owned subsidiary, Endesa Capital Finance, LLC, issued €1.5 billion in preference shares and authorized
the issuance of an additional €500 million. This amount will be accounted for under "Minority Interests" in our consolidated balance sheet. Endesa guaranteed these securities as
to payment of dividends, liquidation preference and redemption amount. Payments of dividends to holders of these securities will be made quarterly and the amount of such payments will be linked to
EURIBOR. The preference shares are perpetual, subject to early redemption by Endesa Capital Finance, LLC at any time after 10 years from the issuance date.



On February 11, 2003, we entered into a €1.5 billion loan facility with a group of 14 banks, which we drew down in full on
February 19, 2003. The loan matures in five years, and requires us to make semiannual amortization payments after a four year grace period.



We intend to securitize or pledge our rights to recover the tariff deficit of 2000, 2001 and 2002, as well as our right to recover the costs of our
extrapeninsular generation activities in 2001 and 2002.



On October 4, 2002, Enersis' and Endesa Chile's Boards of Directors unanimously approved a financial strengthening plan in order to enhance their capital
structure and permit them to be better positioned in light of the current economic situation in Latin America, which has been affecting their investments and liquidity risk. The financial
strengthening plan had no effect on our results of operations in the fiscal year ended December 31, 2002.

The
plan consists of four main objectives:

Refinancing Bank Debt.Enersis and Endesa Chile have refinanced $2.33 billion of bank debt so as to:



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On
May 15, 2003, Enersis and Endesa Chile closed credit agreements for approximately $1,588 million and $743 million, respectively. These facilities refinanced most
of the existing bank indebtedness of both borrowers. As part of this refinancing, Enersis and Endesa Chile combined their outstanding syndicated and bilateral credit agreements, which would have
otherwise matured in 2003 and 2004, into the facilities. The facilities mature in May 2008. The facilities have a 30-month grace period prior to the commencement of debt repayment,
during which period Enersis and Endesa Chile will only make interest payments on the facilities, subject to certain mandatory prepayments in the event of certain asset sales, or debt or equity
issuances.

The
facilities require Enersis and Endesa Chile to comply with specified financial covenants related to maximum ratios of indebtedness to cash flow, indebtedness to EBITDA and
indebtedness to stockholders' equity, and a minimum ratio of cash flow to interest expense. The facilities require the application of 75% of Enersis's excess cash, as defined in the facilities, after
the minimum legal dividend has been paid, and most of the proceeds derived from asset sales, equity issuances or debt issuances to prepay the facilities. In addition, the facilities contain other
restrictive covenants, including covenants on issuing guarantees or providing other credit support, selling or transferring essential operating assets, consummating mergers, consolidations,
liquidations or dissolutions, making capital expenditures in excess of certain agreed thresholds and entering into agreements (other than the facilities) which restrict the ability of Enersis's
subsidiaries to pay dividends or repay intercompany indebtedness, among others. Under the new facilities, any adjustments to Enersis' credit rating will have no impact on the terms of the facilities.
The new facilities have been filed as exhibits to the annual report on Form 20-F by Enersis. These facilities are non-recourse to Endesa.

In
connection with the execution of the financial strengthening plan agreements, we renewed our commitment to support Enersis and Endesa Chile in respect of any potential liquidity
difficulties, such that upon their request, we will acquire assets from either of the companies in an amount up to $150 million at any time up to December 31, 2005 or until the date on
which more than 50% of the debt incurred under the financial strengthening plan facilities has been paid.

Capital Increase.On March 31, 2003, at an extraordinary shareholders' meeting, Enersis approved a capital increase of
up to $2 billion. This capital increase, which commenced on May 31, 2003, allowed for the capitalization of all of our loans (which were made by our subsidiary Elesur, S.A.) to Enersis
(with a face value of approximately $1.37 billion), as well as the subscription of shares for cash.

To
facilitate the capitalization of indebtedness, the extraordinary shareholders' meeting also approved the removal of the 65% maximum that any one shareholder was permitted to own in
Enersis.

The
second step of the capital increase, in which we have agreed not to participate, is scheduled to take place between November 20 and December 20, 2003 and will allow for
the capitalization of Enersis' local bonds (with a face value of approximately $151 million), as well as the subscription of shares for cash.

We
agreed not to exercise any votes during the capital increase period in excess of those to which we are currently entitled as per our 65% shareholding. We also agreed to vote in favor
of reinstituting the 65% shareholding limit should the capital increase be wholly subscribed and, subsequent to such increase, we did not hold in excess of 65% of the issued and outstanding share
capital of Enersis. Likewise, we agreed not to sell or transfer to third parties our rights to subscribe for Enersis shares during the capital increase period. We also agreed that, once the debt is
capitalized, we would acquire Enersis shares in the secondary market only in a public tender offer directed at the entire share capital of Enersis.

As
of June 24, 2003, Enersis has collected more than $150 million in cash and has capitalized all of our loans to it.

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Asset Sales.Asset sales are intended to generate proceeds of approximately $900 million, of
which
€300 million will correspond to debt that is expected to be deconsolidated. The proceeds will be used to repay the indebtedness relating to obligations on certain bonds and
options due in 2003. As of the date of this annual report, Enersis and Endesa Chile had sold approximately 75% of their target.

Cash Flow Improvement.Enersis expects to improve the generation of free cash flow by $130 million by
December 31, 2005 compared with December 2002 figures. Enersis expects to achieve this goal primarily through cost and capital expenditure reductions and efficiency improvements in their
distribution and generation companies through energy and risk management, electricity loss reductions and improvements in collections.



The following table shows our most significant contractual obligations with definitive payment terms which will require significant cash outlays in the future.
The amounts are payable as of December 31, 2002.

|     |  | Payments Due by Period
|---- |  | ----------------------
|
|
|Debt |  | 23,946                
|     |  |                       

In
connection with the externalization of our pension funding obligations, we will be required to make a payment at a future date, which has not yet been determined. In
addition, pursuant to our workforce restructuring plans, we will be required to make payments to certain employees upon retirement. At December 31, 2002, the aggregate amount of these
obligations was €2.7 billion. We have recorded provisions for this entire amount in our consolidated financial statements.

We
also have a long-term contract with Gas Natural SDG, S.A. under which we expect to have a reliable source of natural gas supply available at competitive terms and prices.
Pursuant to this agreement, we are required to purchase minimum amounts of natural gas annually from Gas Natural SDG, S.A. Prices under this contract are linked to the price of certain baskets of
fuel-oils and oil products. Under the terms of the agreement, we may sell to third parties any natural gas that we do not consume.



The following discussion of our commercial commitments with definitive payment terms which may require significant cash outlays in the future includes
forward-looking statements.

We
are party to certain contractual arrangements that could require us to make payments if certain circumstances occur, including the exercise by third parties of rights to require us to
purchase certain securities. Our material commitments of this type are described below.

In
connection with our acquisition of Endesa Holding Italia (formerly named Elettrogen), we entered into a put/call arrangement with Santander Central Hispano, a member of the consortium
through which we acquired our interest in Endesa Holding Italia. Pursuant to this put/call arrangement:



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In
each case, the purchase price we pay Santander Central Hispano for any shares of Endesa Holding Italia shall be based on the initial purchase price paid by Santander Central Hispano
(approximately €750 million).

In
addition, pursuant to the terms of our shareholders' agreement with ASM Brescia in the event that either party breaches its obligations under the terms of such shareholders'
agreement, the non-breaching party shall have the right to (1) purchase the shares of the breaching party at fair market value (as defined under the terms of the agreement), less a
specified discount or (2) require the breaching party to purchase its shares at fair market value (as defined under the terms of the agreement), plus a specified premium.

Endesa
has a call option to purchase up to an additional 5.5% interest in Auna from Santander Central Hispano, which may be exercised in whole or in part at any time before
July 30, 2003 with no obligation to pay for such interest until January 2004. Santander Central Hispano has a put option to sell to Endesa up to 3% of Auna in January 2004. The interest
in Auna that may sell to us pursuant to the put option will be reduced by the same amount as the amount that we purchase, if any, of Auna pursuant to our call option. As of the date of this annual
report, Endesa Telecomunicaciones is analyzing whether or not it will exercise the call option (the approximate maximum price of such option amounts to €477 million).



As of the date of this annual report, we had no material transactions with non-consolidated special purpose entities or majority-owned subsidiaries
that are not included in our consolidated financial statements or any other interest in or relationship with any other special purpose entities that are not reflected in our consolidated financial
statements.



We are exposed to various types of market risk in the normal course of business, including the impact of interest rate changes, changes in equity, investment
prices and foreign currency exchange rate fluctuations. To manage this exposure, we employ risk management strategies including the use of derivatives such as interest rate swap agreements, foreign
currency forwards and currency swap agreements. As of December 31, 2002, approximately 72% of our financial liabilities was at fixed and hedged rates. We do not hold financial derivatives for
trading purposes. See "Item 11. Quantitative and Qualitative Disclosures About Market Risk".

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

Endesa conducts environmental research and development projects primarily in connection with developing renewable energy sources, clean combustion and
improvements in electrical lines. We spent approximately €11 million on these activities in the year ended December 31, 2002. Moreover, in 2002,
€75 million was recorded as environmental expenses, a portion of which was spent in relation to environmental research and development projects.

D. TREND INFORMATION

For information on the principal trends and uncertainties affecting our results of operations, financial condition and businesses, see "Item 3. Key
InformationRisk Factors", "Item 4. Information on the CompanyBusiness Overview" "Item 4. Information on the CompanyElectricity Business in Spain", "Item 4.
Information on the CompanyElectricity Business in Latin America", "Item 4. Information on the CompanyRegulation" and "Operating Results" and
"Liquidity and Capital Resources".

E.    [Reserved]

F.    [Reserved]

G.    [Reserved]

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

The following table sets forth the names of the members of our Board of Directors, their current positions with us, the year they were appointed to the board, the
year in which their current term expires and their principal positions outside Endesa.

|Name                                       |  | Position                             |  | Year First
Appointed |     | Current
Term
Expires |  | Present Principal Occupations Outside Endesa                                                                                                                                        
|------------------------------------------ |  | ------------------------------------ |  | -------------------- | --- | -------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Manuel Pizarro Moreno(2)(5)                |  | Chairman                             |  | 1996
2002            | (1) | 2005                 |  | Chairman, Ibercaja; Deputy Chairman, Sociedad Rectora de la Bolsa de Madrid; Deputy Chairman, Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A.
|Rafael Miranda Robredo(2)(5)               |  | Director and Chief Executive Officer |  | 1997                 |     | 2005                 |  | Director, Red Eléctrica de España, S.A. (REE); Deputy Chairman, Aguas de Barcelona, S.A.                                                                                            
|Alberto Alonso Ureba(2)(6)                 |  | Director                             |  | 1998                 |     | 2007                 |  | Director, Zeltia, S.A.; Director, Lazarejo, S.L.                                                                                                                                    
|Miguel Blesa de la Parra(2)(7)             |  | Director                             |  | 2000                 |     | 2005                 |  | Chairman, Caja Madrid; Chairman, Altae Banco; Deputy Chairman, Iberia, L.A.E., S.A.; Director, Dragados y Construcciones S.A.; Director, Ente Público Radio Televisión de Madrid.   
|Rafael Español Navarro(4)(6)               |  | Director                             |  | 1996                 |     | 2005                 |  | Director, Dogi, S.A.; Chairman, Majórica; Chairman, Grupo la Seda.                                                                                                                  
|José María Fernández
    Cuevas(2)(6)      |  | Director                             |  | 1998                 |     | 2007                 |  | Director, CLINER, S.A.; Director, Intercontinental Química, S.A.; Director, Fundación ADA.                                                                                          
|José Manuel
    Fernández-Norniella(2)(6)  |  | Director                             |  | 1998                 |     | 2007                 |  | Chairman, Ebro Puleva, S.A.; Director, Enagás, S.A.; Deputy Chairman, CSCCIN.                                                                                                       
|José Fernández Olano(4)(6)                 |  | Director                             |  | 1996                 |     | 2005                 |  | Chairman, Aldeasa Group; Director, Altadis.                                                                                                                                         
|Rafael González-Gallarza
    Morales(4)(6) |  | Director                             |  | 1998                 |     | 2007                 |  | Chairman, Larios, Grupo Pernod Ricard; Director, Pernod Ricard, S.A.; Chairman, Prensa Malagueña, S.A.                                                                              
|Francisco Nuñez Boluda(3)(6)               |  | Director                             |  | 1998                 |     | 2006                 |  | Manager, Ilustre Colegio Notarial de Madrid.                                                                                                                                        
|José Luis Oller Ariño(3)(6)                |  | Director                             |  | 1997                 |     | 2005                 |  | Director, Bansabadell Vida,.S.A. de Seguros y Reaseguros; Director, Bansabadell Pensiones E.G.F.P., S.A.                                                                            
|Francisco Javiér Ramos
    Gascón(3)(6)    |  | Director                             |  | 2001                 |     | 2005                 |  | Director, Sociedad Rectora de la Bolsa de Madrid; Chairman, IEB; Chairman, Araluz de Inversiones, S.A.                                                                              
|Manuel Ríos Navarro(4)(6)                  |  | Director                             |  | 1998                 |     | 2007                 |  | Managing Director, Inpelsa; Director, Bancaja; Director, Tenerías Alfa, S.A.; Director, CISA; Director, SBB.                                                                        
|                                           |  |                                      |  |                      |     |                      |  |                                                                                                                                                                                     

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|José Serna Masiá(3)(6)                   |  | Director                           |  | 2000 |  | 2004 |  | Notary for Barcelona.
|---------------------------------------- |  | ---------------------------------- |  | ---- |  | ---- |  | ---------------------
|Salvador Montejo
    Velilla(2)(3)(4)(8) |  | Secretary General and to the Board |  | 1999 |  |      |  |                      

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Those directors next to whose name appears the footnote (6), that is, independent directors may only be reelected for two terms.

The
following table sets forth the names of our executive officers, their current positions with us, the number of years at their positions, the number of years at the Endesa Group,
their areas of experience at the Endesa Group and their business experience outside Endesa Group during the past five years. Each executive officer is appointed for an indefinite term.

|Name                            |                                | Position                                      |                                              | Number of
Years at
Position |    | Number of
Years at
Endesa Group |    | Areas of Experience at
Endesa Group       |                                                                              | Business Experience
Outside Endesa Group
during Past 5 Years
|------------------------------- | ------------------------------ | --------------------------------------------- | -------------------------------------------- | --------------------------- | -- | ------------------------------- | -- | ----------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------------------
|Rafael Miranda
    Robredo(1)   |                                | Chief Executive Officer                       |                                              | 6                           |    | 15                              |    | Chief Executive Officer                   |                                                                              |                                                             
|Salvador Montejo
    Velilla(1) |                                | Company Secretary                             |                                              | 4                           |    | 4                               |    |                                           |                                                                              | congressional auditor                                       
|General Managers                |                                |                                               |                                              |                             |    |                                 |    |                                           |                                                                              |                                                             
|José Damián Bogas
    Gálvez(1) |                                | Executive Vice President Electricity Business |                                              | 15                          |    | 21                              |    | General management electricity business   |                                                                              |                                                             
|                                | Pedro Larrea Paguaga           |                                               | Senior Vice President
Energy Management      |                             | 1  |                                 | 7  |                                           | General management energy management                                         |                                                             
|                                | José Félix Ibáñez Guerra       |                                               | Senior Vice President
Mining                 |                             | 13 |                                 | 24 |                                           | General management mining                                                    |                                                             
|                                | Manuel Morán Casero            |                                               | Senior Vice President Generation             |                             | 5  |                                 | 5  |                                           | General management generation                                                |                                                             
|                                | Javier Uriarte Monereo         |                                               | Senior Vice President
Supply                 |                             | 4  |                                 | 4  |                                           | General management supply                                                    |                                                             
|                                | José Luis Marín López-Otero(1) |                                               | Senior Vice President Distribution           |                             | 1  |                                 | 6  |                                           | General management diversification                                           |                                                             
|Luis Rivera Novo(1)             |                                | Executive Vice President International        |                                              | 1                           |    | 5                               |    | General management planning and resources |                                                                              |                                                             
|                                | Alberto Martín Rivals          |                                               | Senior Vice President Internacional Business |                             | 1  |                                 | 5  |                                           | General management organization                                              |                                                             
|Alfredo Llorente Legaz(1)       |                                | Senior Vice President Diversification         |                                              | 1                           |    | 16                              |    | General management international          |                                                                              |                                                             
|Antonio Pareja Molina(1)        |                                | Senior Vice President Planning and Resources  |                                              | 16                          |    | 16                              |    | General management planning and resources |                                                                              |                                                             
|                                | Evaristo Villa Ruiz            |                                               | Senior Vice President Corporate Services     |                             | 5  |                                 | 15 |                                           | General management finance and economics, Compañía Sevillana de Electricidad |                                                             

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|Corporate Managers                   |  |                                            |  |    |  |    |  |                         |  |                        
|------------------------------------ |  | ------------------------------------------ |  | -- |  | -- |  | ----------------------- |  | -----------------------
|Francisco de Borja
    Acha Besga(1) |  | Senior Vice President
Legal Affairs        |  | 5  |  | 5  |  | Legal department        |  |                        
|José Luis Palomo
    Alvarez(1)      |  | Chief Financial Officer                    |  | 11 |  | 11 |  | Chief Financial Officer |  |                        
|Carlos Torres Vila(1)                |  | Senior Vice President
Strategy             |  | 1  |  | 1  |  | Strategy                |  | partner, McKinsey & Co.
|Germán Medina
    Carrillo(1)        |  | Senior Vice President
Human Resources      |  | 15 |  | 16 |  | Human resources         |  |                        
|José Luis Puche Castillejo           |  | Senior Vice President
Audit                |  | 5  |  | 5  |  | Audit                   |  |                        
|Gabriel Castro
    Villalba(1)       |  | Senior Vice President Communications       |  | 5  |  | 6  |  | Communications          |  |                        
|Ma Isabel Fernández
    Lozano       |  | Senior Vice President Planning and Control |  | 1  |  | 20 |  | Planning and control    |  |                        

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B. COMPENSATION

In 2002, our Board of Directors accrued an aggregate compensation of approximately €1.27 million, equal to 0.001% of our net income, as
approved by the general shareholders' meeting. This compensation was divided as follows:



Monthly
attendance allowances for attending the meetings of the boards of directors of our subsidiaries are deducted from the overall compensation. In 2002, these attendance allowances
totaled €0.25 million.

In
accordance with the provisions of Article 130 of the Spanish Corporations Law, remuneration by way of profit sharing may only be paid after the legal and statutory reserve
requirements have been complied with and after a minimum dividend of 4% has been paid to shareholders.

For
the year ended December 31, 2002, the aggregate compensation (including performance-based bonuses) of the executive officers of Endesa, S.A. (including executive officers who
are members of the
Board of Directors) paid or accrued, was €9.7 million. Executive officers are eligible for variable compensation under a bonus plan, calculated as a percentage of the fixed
compensation and primarily based on Endesa's overall economic performance and on each officer's individual performance. The total variable remuneration for 2002 was
€2.0 million, which was paid on April 1, 2003. The amounts set aside or accrued in 2002 to provide pension and retirement benefits for our executive officers (including
executive officers who are members of the Board of Directors) totaled €8.8 million.

C. BOARD PRACTICES

The composition of the Audit and Compliance Committee and the Appointments and Remuneration Committee is indicated in the table above describing the board of
directors.



The Audit and Compliance Committee is composed of four directors. It performs the following functions:



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Francisco
Javier Ramos Gascón has served as chairman of this committee since May 2002.



The Appointments and Remuneration Committee, which is composed of four directors, is responsible for:



Rafael
González-Gallarza Morales has served as chairman of this committee since May 2002.



Endesa's Board of Directors may authorize the creation of an advisory body that, although it is not a corporate body, may discuss, study and report on those
topics that the Board considers appropriate.
The Board, upon a proposal by the Chairman, may designate the members of the advisory body, who will be only those persons recognized within and without Spain for other relevant business experience.
On March 13, 2000, the Board approved the charter for the advisory body. In addition, on November 6, 2001, the Board approved the creation of a regional consulting body.

D. EMPLOYEES

At December 31, 2002, Endesa had 26,354 employees, which represents a decrease of 2.0% from the number of employees at December 31, 2001. Of those
employees, 14,020 were located in Spain and 12,334 were located outside Spain compared with 15,621 and 11,264, respectively, at December 31, 2001. The decrease in the number of employees in
Spain during 2002 was principally due to the disposal of Viesgo in January 2002. See "Item 4. Information on the CompanyBusiness OverviewCapital Expenditures and
Divestitures".

Endesa
has continued to pursue a policy of staff reductions and workforce rationalization which has resulted in a steady reduction in employment levels. Endesa has a voluntary early
retirement plan in place which is expected to reduce its personnel in Spain by approximately 8,200 employees in the five-year period ending December 31, 2003. During 2002, 918
employees retired in accordance with the terms of this plan. In addition, in October 2000 Endesa signed a new voluntary early retirement plan pursuant to which our workforce may be reduced by
an additional approximately 5,000 eligible employees. During 2002, 567 employees retired in accordance with the terms of this plan.

The
table below shows Endesa's employment levels at the dates indicated. For a discussion of personnel costs, see "Item 5. Operating and Financial Review and Prospects".

The
following table sets forth the number of employees in Spain and outside Spain at the dates indicated:

|                              |       | At December 31,
|----------------------------- | ----- | ---------------
|
|Total employees in Spain      |       | 17,274         
|Total employees outside Spain |       | 11,788         
|                              |       |                
|                              | Total |                
|                              |       |                

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The
increase in employees outside Spain was principally due to the inclusion of Endesa Italia's workforce, which we have included due to the fact that Endesa Italia is now a member of
the consolidated group.

The
following tables provide a breakdown of our employees by main category of activity and geographic distribution at December 31, 2002.

|Employees in Spain |       | Number
|------------------ | ----- | ------
|Managerial staff   |       | 2,583 
|Mid-level staff    |       | 2,700 
|Clerical staff     |       | 1,246 
|Workers            |       | 7,491 
|                   |       |       
|                   | Total |       
|                   |       |       
|
|Managerial staff   |       | 1,693 
|Mid-level staff    |       | 2,637 
|Clerical staff     |       | 4,528 
|Workers            |       | 3,476 
|                   |       |       
|                   | Total |       
|                   |       |       

In
Spain, our non-management personnel are represented by a total of seven unions, three of which currently maintain general representation for 97% of our
non-management employees. The three representative unions negotiate collective bargaining agreements relating to salary and benefits with companies belonging to the Endesa Group through
negotiating committees comprised of representatives of each such union. While we have experienced work stoppages for short periods of time, we have never experienced a work interruption having a
material effect on our results of operations.

In
October 2000, we signed a general framework collective bargaining agreement which applied to 17 of our Spanish operating subsidiaries. This agreement was in effect for 2000 and
2001 and was terminated in October 2002. We are currently negotiating a new general framework collective bargaining agreement, which we expect will feature the collective bargaining, among
other things, a uniform classification system, fringe benefits and risk prevention plans for employees across each of our relevant Spanish operating subsidiaries.

For
information with respect to our pension and benefit plans, see Notes 15 and 18 to our consolidated financial statements. Our pension and benefit plans are fully funded. As required
by Spanish law, we transferred our pension and benefits plans to independent pension funds in 2002.



A collective bargaining agreement for electric sector workers, which includes the employees at Endesa Italia, will expire, in terms of economic issues, at the end
of June 2003, with negotiations expected up until such time. Other aspects of the collective bargaining agreement will continue in force until June 2005. Endesa Italia is expected to
negotiate an agreement regarding performance salaries with its employees, which is expected to enter into force from 2004.

Our
Latin American subsidiaries are party to various collective bargaining agreements.

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Collective bargaining agreements with employees of Enersis will expire on December 31, 2003. Collective bargaining agreements with employees of Chilectra
took effect on December 31, 2000 and will expire on December 31, 2004. Endesa-Chile's existing collective bargaining agreements expire in May 2002, December 2003 and
May 2004, respectively.



Edesur is a party to two collective bargaining agreements that expire in July 2003 and February 2004. Costanera is also a party to two collective
bargaining agreements that expire in April 2005 and October 2005, respectively. El Chocón's collective bargaining agreement has no fixed expiration date.



Coelce is a party to a collective bargaining agreement that is scheduled to expire in October 2004. Cachoeira Dourada is a party to two collective
bargaining agreements: one expires in May 2004 and the other is currently being negotiated. Cerj is a party to collective bargaining agreements that expire in October and November 2004,
respectively. Such agreements establish salaries, productivity bonuses, individual performance evaluation and general working conditions. Brazilian law stipulates that collective bargaining agreements
cannot be of more than two years in duration.



Codensa is a party to two-year collective bargaining agreements that expire in December 2003. Typically, collective bargaining agreements have
two-year terms; however, there are no legal restrictions on the maximum duration of such agreements. Emgesa is a party to a collective bargaining agreement that expires in
December 2003.



Edelnor is a party to two collective bargaining agreements that expire in November and December 2005, respectively.

E. SHARE OWNERSHIP

None of our executive officers beneficially owns ordinary shares representing one percent or more of our share capital. At June 5, 2003, the members of our
Board of Directors directly owned an aggregate of 90,936 of our ordinary shares and indirectly owned an aggregate of 1,737 ordinary shares,

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representing
a total of approximately 0.00859% of our outstanding capital stock, as shown in the table below:

|                                 |       | Number of
Ordinary Shares
Beneficially Owned |        | % of Capital
Stock
|-------------------------------- | ----- | -------------------------------------------- | ------ | ------------------
|Manuel Pizarro Moreno            |       | 50,004                                       |        | 0.00472           
|Rafael Miranda Robredo           |       | 7,258                                        |        | 0.00069           
|Alberto Alonso Ureba             |       | 1                                            |        |                  
|Miguel Blesa de la Parra(1)      |       | 600                                          |        | 0.00006           
|Rafael Español Navarro           |       | 846                                          |        | 0.00008           
|José María Fernández Cuevas      |       | 1                                            |        |                  
|José Manuel Fernández-Norniella  |       | 1                                            |        |                  
|José Fernández Olano             |       |                                             |        |                  
|Rafael González-Gallarza Morales |       | 3,301                                        |        | 0.00031           
|Francisco Nuñez Boluda           |       | 4,000                                        |        | 0.00038           
|José Luis Oller Ariño            |       | 3,400                                        |        | 0.00032           
|Francisco Javiér Ramos Gascón    |       | 2,251                                        | (2)    | 0.00021           
|Manuel Ríos Navarro              |       | 3,889                                        |        | 0.00037           
|José Serna Masiá                 |       | 15,384                                       | (3)    | 0.00145           
|                                 |       |                                              |        |                   
|                                 | Total |                                              | 90,936 |                   
|                                 |       |                                              |        |                   

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

All shareholders have the same voting rights. In accordance with applicable Spanish law, the following have reported to the Comisión Nacional del
Mercado de Valores (CNMV) that they beneficially own more than 5% of our share capital.

|Title of Class  |  | Identity of Person or Group                               |  | Number of Ordinary
Shares Beneficially
Owned |  | Percent of Class |  
|--------------- |  | --------------------------------------------------------- |  | -------------------------------------------- |  | ---------------- | -
|Ordinary shares |  | Caja de Ahorros y Monte de Piedad de Madrid (Caja Madrid) |  | 53,043,481                                   |  | 5.01             | %
|Ordinary shares |  | Caja de Ahorros y Pensiones de Barcelona(La Caixa)(1)     |  | 52,975,235                                   |  | 5.00             | %

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B. RELATED PARTY TRANSACTIONS

We have not entered into any transactions with members of our Board of Directors, executive officers, senior management or any shareholders with representatives
on our Board of Directors that are unusual in their nature or conditions or that are material to us.

In
the ordinary course of our business, our two principal shareholders, Caja Madrid and La Caixa, have extended loans, guarantees and other services to Endesa, S.A. and our affiliates.
We believe that all such loans, guarantees and other services we have received from Caja Madrid and La Caixa have been entered into on arms-length terms and conditions.

The
aggregate amount of advances and loans granted to our executive officers (including executive officers who are also members of our Board of Directors) outstanding at
December 31, 2002 was €4.7 million. Of these loans, €3.3 million accrue interest at EURIBOR plus 0.5% and €1.4 million are
interest-free.

ITEM 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

Financial Statements

See Item 18 for our consolidated financial statements.

Legal Proceedings

Two shareholders of Enher, representing 0.07% of Enher's share capital, have commenced a legal action against Endesa challenging the resolutions regarding the
merger of Endesa and Enher approved at the general shareholders' meeting of April 22, 1998. The claim has been dismissed by the trial court, but such dismissal was appealed by the claimants. We
believe this action is completely without merit.

On
May 30, 2000, Pérez Companc S.A. (subsequently renamed Pecom Energía S.A.) and PCI Power Edesur Holding Limited (together "Pérez
Companc") commenced an action against Endesa Chile, Chilectra and Enersis before the Arbitration Court of the International Chamber of Commerce, Paris, France. Pérez Companc petitioned
the court either to:



Endesa
Chile, Chilectra and Enersis have contested Pérez Companc's action. On September 2, 2002, the Arbitration Court rendered its opinion and announced an
arbitration award on September 12, 2002 in favor of Pérez Companc, which Endesa Chile, Chilectra and Enersis appealed for annulment in Uruguay, the jurisdiction in which the
arbitration proceedings took place. This appeal stayed the Arbitration Court's judgment and had as its objective the declaration of the arbitration award as null and void. On June 18, 2003, the
Arbitration Court in Montevideo rejected the appeal. Therefore, the arbitration award is now final and enforceable in Argentina and Pérez Companc and the Enersis group will each have an
equal number of directors in Distrilec Inversora.

In
2002, EDF International commenced an action against Endesa Internacional, Repsol YPF, S.A. and YPF, S.A. before the Arbitration Court of the International Chamber of Commerce, Paris,
France. EDF International petitioned the court to require Endesa Internacional to pay to it $256 million plus interest, arising out of EDF International's purchase of the respective interests
of Endesa Internacional and YPF, S.A. in two Argentine companies, EASA and EDENOR. Endesa Internacional is contesting

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this
claim and has counterclaimed in an amount of $57.9 million. Our legal counsel has advised us that EDF International's action is completely without merit.

In
April 2003, CELG initiated legal proceedings against Cachoeira Dourada and ANEEL demanding the annulment of the energy sale contract signed with Cachoeira Dourada in 1998,
alleging, among other things, that the contract is extremely onerous and damaging to the financial stability of CELG, causing it supposed damages of approximately $250 million from 1997 to
2003.

CELG
obtained a preliminary and provisional judgment that suspends the effects of the contract and authorizes CELG to stop payments, also provisionally, of the amounts contractually due
to Cachoeira Dourada which correspond to the energy sale price.

Both
Cachoeira Dourada and ANEEL presented their defenses and legal argument against the decision to suspend the contract. All parties are waiting for the judge to decide whether or not
to confirm the preliminary decision of suspending the effects of the contract. Should the judge confirm the decision to suspend the effects of the contract, Cachoeira Dourada and ANEEL will have the
opportunity to appeal to an appropriate authority.

Both
Cachoeira Dourada and its lawyers believe that there is a high probability of obtaining a favorable final decision.

Until
December 31, 1996, Endesa and our affiliates paid corporate income tax within the Consolidated Tax Group, whose controlling company is theSociedad
Estatal de Participaciones Industriales (SEPI). The corporate income tax law establishes that companies that leave the Group must apply deductions that have not been used by
the Group in the manner and to the same extent as their contribution to the deductions. Pursuant to this provision, the Tax and Financial Inspector concluded that Endesa and Unelco were entitled to
take certain deductions in 1997 and thereafter in respect of certain investments that they made from 1992 to 1996. Nevertheless, subsequent to such resolution, and as a consequence of the audits
conducted by SEPI, the Tax and Financial Inspector initiated proceedings on behalf of the SEPI Group in 1996 in respect of deductions taken in whole or in part by Endesa and Unelco that were generated
by Endesa Group companies from 1992 to 1996. On June 14, 2001, the Ministry of Economy and Finance approved certain resolutions declaring unduly adverse the Tax and Financial Inspector's
conclusions in respect of Endesa's and Unelco's proceedings, whereby it recognized their
right to apply the deductions generated in the aforementioned years. Separately, the Tax and Financial Inspector initiated proceedings against Endesa in which it challenges Endesa's right to take
certain deductions generated in 1992 to 1996. These proceedings have been appealed to the Economic-Administrative Central Court.

There
are no other legal proceedings to which we are a party that are material to us. However, at December 31, 2002, we had a total provision of
€4,221 million, of which €2,374 million relates to coverage for future liabilities (excluding pension funding liabilities) derived from the restructuring
plans carried out as a consequence of the transition to competition, principally liabilities relating to our obligations with respect to certain categories of employees who are terminated in
connection with our restructuring plans. Of the remaining amount, €302 million of the provision relate to future extraordinary repairs and restructuring of our facilities,
€232 million relate to future employee welfare obligations, €621 million represent the estimated amount required to cover probable or certain liabilities
in connection with current litigation, €215 million represent the estimated amount required to cover indemnities or contingent liabilities and
€145 million relate to the amount required to cover direct and indirect risks related in respect of investments made in, and loans made to, Argentine companies.

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Dividend Policy

As in previous years, we expect to declare an interim dividend and a final dividend. The interim dividend is normally paid on the first business day of the year,
following approval by the Board of Directors. The final dividend is normally paid on the first business day of July, following approval by the shareholders of our financial statements and management
report at our general meeting of shareholders, which is required to be held during the first half of the year.

The
following table sets forth the interim, final and total dividends paid by Endesa per ordinary share in respect of each year indicated.

|     |  | euro per ordinary share | 
|---- |  | ----------------------- | 
|
|1998 |  | 0.192                   | 
|1999 |  | 0.216                   | 
|2000 |  | 0.240                   | 
|2001 |  | 0.264                   | 
|2002 |  | 0.264                   | 

The
amount of dividends, if any, paid by us in the future will depend on our results of operations, financial condition, cash requirements and other factors deemed relevant by the Board
of Directors. Our rate of income distribution was 56.9% in 2002 compared with 48.9% in 2001.

Dividends
payable by Endesa to holders of our ordinary shares or ADSs not residing in Spain for tax purposes and not operating through a permanent establishment in Spain are subject to
Spanish withholding tax at the rate of 15%, subject to reduction pursuant to applicable tax treaties. See "Item 10. Additional InformationTaxationSpanish Tax
ConsiderationTaxation of Dividends".

ITEM 9. THE OFFER AND LISTING

A. OFFER AND LISTING DETAILS

Market Price Information

Endesa's ordinary shares are currently listed on the Spanish stock exchanges in Madrid, Bilbao, Barcelona and Valencia ("Spanish stock exchanges") and are traded
on the Automated Quotation System of the Spanish stock exchanges. Endesa's ordinary shares are also listed on the Santiago Off Shore Stock Exchange in Chile.

Endesa's
ADSs representing ordinary shares of Endesa are listed on the New York Stock Exchange. Each Endesa ADS represents one ordinary share of Endesa. Effective on May 18, 2000,
Citibank, N.A. became Endesa's depositary issuing the ADRs evidencing the Endesa ADSs. Endesa's ticker symbol on the New York Stock Exchange is "ELE".

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The
table below sets forth, for the periods indicated, the reported high and low closing sales prices per Endesa ADS on the New York Stock Exchange.

|      |                 | Per ADS                              
|----- | --------------- | -------------------------------------
|
|
|1998  |                 | 27.94                                
|1999  |                 | 29.50                                
|2000  |                 | 23.69                                
|2001: |                 |                                      
|      | First Quarter   |                                      
|      | Second Quarter  |                                      
|      | Third Quarter   |                                      
|      | Fourth Quarter  |                                      
|2002: |                 |                                      
|      | First Quarter   |                                      
|      | Second Quarter  |                                      
|      | Third Quarter   |                                      
|      | Fourth Quarter  |                                      
|2003: |                 |                                      
|      | First Quarter:  |                                      
|      |                 | Month ended January 31               
|      |                 | Month ended February 28              
|      |                 | Month ended March 31                 
|      | Second Quarter: |                                      
|      |                 | Month ended April 30                 
|      |                 | Month ended May 31                   
|      |                 | Month ended June 30 (through June 20)

At
December 31, 2002, approximately 4.3% of our ordinary shares were held in the form of ADSs by 198 holders of record. The number of ADSs outstanding was 45,565,352 at
December 31, 2002.

The
table below sets forth, for the periods indicated, the reported high and low closing sales prices per Endesa ordinary share on the Automated Quotation System, which is the principal
market for the ordinary shares. Such prices have also been translated into dollars at the Noon Buying Rate on the respective dates of such quotations. See "Item 3. Key InformationExchange
Rates" regarding exchange rates applicable during the periods set forth below.

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|      |                 | Per Ordinary Share(1)                 |       | Per Ordinary Share
|----- | --------------- | ------------------------------------- | ----- | ------------------
|
|
|1998  |                 | 25.18                                 |       | 16.05             
|1999  |                 | 25.21                                 |       | 17.70             
|2000  |                 | 24.37                                 |       | 17.30             
|2001: |                 |                                       |       |                   
|      | First Quarter   |                                       | 20.26 |                   
|      | Second Quarter  |                                       | 19.89 |                   
|      | Third Quarter   |                                       | 19.18 |                   
|      | Fourth Quarter  |                                       | 18.12 |                   
|2002: |                 |                                       |       |                   
|      | First Quarter   |                                       | 17.86 |                   
|      | Second Quarter  |                                       | 17.45 |                   
|      | Third Quarter   |                                       | 14.62 |                   
|      | Fourth Quarter  |                                       | 12.28 |                   
|2003: |                 |                                       |       |                   
|      | First Quarter:  |                                       |       |                   
|      |                 | Month ended January 31                |       | 12.05             
|      |                 | Month ended February 28               |       | 11.90             
|      |                 | Month ended March 31                  |       | 11.77             
|      | Second Quarter: |                                       |       |                   
|      |                 | Month ended April 30                  |       | 13.27             
|      |                 | Month ended May 31                    |       | 13.60             
|      |                 | Month ended June 30 (through June 20) |       | 14.88             

---

B. PLAN OF DISTRIBUTION

Not applicable.

C. MARKETS

Spanish Securities Market

The Spanish securities market for equity securities (the "Spanish stock exchanges") consists of the four stock exchanges located in Madrid, Barcelona, Bilbao and
Valencia (the "local exchanges"), the majority of the transactions on which are conducted through the Automated Quotation System (Sistema de Interconexión Bursátil
Español or "S.I.B.E.").

At
December 31, 2002, there were 162 companies listed with shares traded through the Automated Quotation System. The total market capitalization of these companies at
December 31, 2002, was approximately €404.2 billion ($423.8 billion), and their reported trading volume for the year ended December 31, 2002, was
€439.9 billion ($461.3 billion).

Automated Quotation System

In April 1989, the Spanish stock exchanges began to implement the Automated Quotation System, a system of computer-based trading of securities that
connects the four Spanish stock exchanges. During 2002, the Automated Quotation System accounted for the majority of the total trading volume of equity securities on the Spanish stock exchanges. The
remaining transactions involving only the local exchanges, and not the Automated Quotation System, were carried out on the local stock exchanges.

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The Automated Quotation System provides those securities listed on it with a uniform continuous market that eliminates certain of the differences among the local exchanges. The principal
feature of the system is the computerized matching of buy and sell orders at the time of entry of the order. Each order is executed as soon as a matching order is entered, but can be modified or
canceled until executed. The activity of the market can be continuously monitored by investors and brokers. The Automated Quotation System is quoted and regulated bySociedad
de Bolsas, S.A.(the "Sociedad de Bolsas"). All trades on the Automated Quotation System must be placed through a brokerage
firm, an official stock broker, a dealer firm or a credit entity that is a member of a Spanish stock exchange.

In
a pre-opening session held from 8:30 a.m. to 9:00 a.m. each trading day, an opening price is established for each security traded on the Automated Quotation
System based on a real-time auction in which orders can be entered, modified or cancelled but are not executed. During this pre-opening session, the system continuously
displays the price at which orders would be executed if trading were to begin. Market participants only receive information relating to the auction price (if applicable) and trading volume permitted
at the current bid and offer price. If an auction price does not exist, the best bid and offer price, and associated volumes, are shown. The auction terminates with a random period of 30 seconds in
which share allocation takes place. Until the allocation process has finished, orders cannot be entered, modified or cancelled. In exceptional circumstances (including the inclusion of new securities
on the Automated Quotation System) and after giving notice to the CNMV, theSociedad de Bolsasmay establish an opening price without regard to the
reference price (the previous trading day's closing price), alter the price range for permitted orders with respect to the reference price or modify the reference price.

The
computerized trading hours are from 9:00 a.m. to 5:30 p.m. During the trading session, the trading price of a security is permitted to vary up to a maximum
so-called "static" range of the reference price, provided that the trading price for each trade of such security is not permitted to vary in excess of a maximum so-called
"dynamic" range with respect to the trading price of the immediately preceding trade of the same security. If, during the trading session, there exist matching bid and ask orders over a security
within the computerized system which exceed any of the above "static" and "dynamic" ranges, trading on the security is automatically suspended and a new auction is held where a new reference price is
set, and the "static" and "dynamic" ranges will apply over such reference price. The "static" and "dynamic" ranges applicable to each particular security are set up and reviewed periodically by the Sociedad de
Bolsas.

Between
5:30 p.m. and 8:00 p.m., trades may occur outside the computerized matching system without prior authorization of theSociedad de
Bolsas, at a price within the range of 5% above the higher of the average price and closing price for the day and 5% below the lower of the average price and closing price for
the day, if there are no outstanding bids or offers, as the case may be, on the system matching or bettering the terms of the proposed off-system transaction, and if the trade involves
more than €300,000 and more than 20% of the average daily trading volume of the
stock during the preceding three months. These trades must also relate to individual orders from the same person or entity and be reported to theSociedad de
Bolsasbefore 8:00 p.m At any time trades may take place (with the prior authorization of theSociedad de Bolsas) at any price
if:



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Information
with respect to computerized trades between 9:00 a.m. and 5:30 p.m. is made public immediately, and information with respect to trades outside the computerized
matching system is reported to theSociedad de Bolsasby the end of the trading day and published in theBoletín
de Cotización(the "Stock Exchange Official Gazette") and on the computer system by the beginning of the next trading day.

Clearance and Settlement System

Transactions carried out on the Spanish stock exchanges are cleared and settled through Iberclear (the "Securities Clearing and Settlement Service"). Only members
of the system are entitled to use it, and membership is restricted to authorized members of the Spanish stock exchanges, the Bank of Spain
(when an agreement, approved by the Spanish Ministry of Economy, is reached with Iberclear) and, with the approval of the CNMV, other brokers not members of the Spanish stock exchanges, banks, savings
banks and foreign settlement and clearing systems. Iberclear is owned byBolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros,
S.A.(Spanish Exchanges and Markets, Holding Company of Markets and Financial Systems, S.A.), a newly incorporated holding company which holds a 100% interest in each of the
Spanish official secondary markets and settlement systems. See "Integration of the Spanish Official Organized Secondary Markets and Clearing and Settlement Systems into a Single Holding
Company". The clearance and settlement system and its members are responsible for maintaining records of purchases and sales under the book entry system. Shares of listed Spanish companies are held in
book-entry form. Iberclear, which manages the clearance and settlement system, maintains a registry reflecting the number of shares held by each of its member entities on its own behalf as
well as the number of shares held on behalf of third parties. Each member entity, in turn, maintains a registry of the owners of such shares. Spanish law considers the legal owner of the shares to be:



Iberclear
has approved regulations introducing the so-called "T+3 Settlement System" by which the settlement of any transactions must be made within three business days
following the date on which the transaction was carried out.

Obtaining
legal title to shares of a company listed on a Spanish stock exchange requires the participation of an official Spanish stockbroker, broker-dealer or other entity authorized
under Spanish law to record the transfer of shares. To evidence title to shares, at the owner's request the relevant member entity must issue a certificate of ownership. If the owner is a member
entity, Iberclear is in charge of the issuance of the certificate with respect to the shares held in the member entity's name. However, Spanish Law 24/1988, as amended by Law 37/1998, which implements
a European Union directive, allows, in specified circumstances, for the transfer of ownership of shares of a company listed on a Spanish stock exchange without complying with one or more of the
requirements described above, though secondary legislation required to implement this law in Spain has not been enacted as of this date.

Brokerage
commissions are not regulated. Brokers' fees, to the extent charged, will apply upon transfer of title of shares from Citibank, N.A. (the "Depositary") to a holder of American
Depositary Receipts ("ADRs") in exchange for such American Depositary Shares ("ADSs"), and upon any later sale of such shares by such holder. Transfers of ADSs do not require the participation of an
official stockbroker. The Deposit Agreement, as amended and restated as of May 18, 2000 (the "Deposit Agreement"), provides that holders depositing shares with the Depositary in exchange for
ADSs or withdrawing shares in exchange for ADSs will pay the fees of the official stockbroker or other person or entity authorized under Spanish law applicable both to such holder and to the
Depositary.

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Integration of the Spanish Official Organized Secondary Markets and Clearing and Settlement Systems into a Single Holding Company

On June 20, 2001 the Management Companies (Sociedades Rectoras) of the Spanish stock exchanges, the AIAF
Private Debt Wholesale Market, the MEFF and Citrics Futures and Options Markets, Senaf, A.V., S.A. and Iberclear entered into a protocol relating to their integration into a single holding company.

In
furtherance of this protocol, on February 5 and 6, 2002, virtually all the shareholders of the different companies involved entered into a framework agreement whereby, subject
to certain conditions, including obtaining the authorization of the Spanish government, as provided for in the 17th Additional Provision of the Securities Market Act 1988, as amended,
the shareholders of the relevant companies which operate the different secondary markets and settlement systems agreed to the incorporation of a holding company, to be named Bolsas y Mercados Españoles, Sociedad Holding
de Mercados y Sistemas Financieros, S.A.The agreement also stipulates that the holding
company must launch an offer to all the shareholders of the relevant companies to exchange their shares in such companies for newly issued shares in the holding company.

In
compliance with the framework agreement,Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros,
S.A.was incorporated on February 15, 2002. As of October 2002 all of the shareholders of the different companies involved have contributed their shares into the
holding company in exchange for newly issued shares in the holding company and thus, the holding company has become the sole shareholder of the companies which operate the different secondary markets
and settlement systems in Spain.

Securities Market Legislation

The Securities Markets Act was enacted in 1988 with the purpose of reforming the organization and supervision of the Spanish securities markets. This legislation
and the regulation implementing it



On
February 14, 1992, Royal Decree No. 116/92 established the clearance and settlement system and the book entry system, and required that all companies listed on a Spanish
stock exchange adopt the book entry system.

In
November 1998, the Securities Markets Act was amended by Law 37/1998, which implements two EU directives into Spanish law. The first is Directive 93/22/CE, relating to investment
services in securities, which was later amended by Directive 95/26/CE of the European Parliament and Council. The second is Directive 97/9/CE of the European Parliament and Council, relating to
investor compensation systems.

The
first directive modifies the Securities Markets Act by introducing the principle of "community passport" or "single license" pursuant to which a services company authorized by a
Member State of

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the
European Union can provide investment services and related activities in Spain by offering its services or establishing itself as a branch. This modification permits the direct admission of
certain entities into the stock exchange area. The second directive enlarges the scope of the Securities Markets Act by extending the controls applicable to negotiable instruments to a broader list of
financial instruments, such as financial exchange contracts, swaps, options, futures or installment financial contracts.

Other
modifications under Law 37/1998 include:



As
a necessary response to the challenges resulting from the globalisation of the financial markets, the Law 44/2002 (Ley de Medidas de Reforma del Sistema
Financiero) has been passed in order to update the current Spanish financial legislation by, among other issues, amending the Securities Markets Act. The main objectives of the
reform are (i) to facilitate the integration of the financial markets; (ii) to increase their transparency and competitiveness; and (iii) to enhance consumer protection in the
financial services sector.

One
of the main objectives of the reform is increasing market transparency and efficiency in the protection of investors through the improvement of the accuracy and reliability of
corporate disclosures made pursuant to securities laws. Included amongst such public disclosures are accounting and financial statements and audit reports. In this regard, in response to the recently
publicized international scandals and in line with the Sarbanes-Oxley Act in the United States, the new reform has seized the opportunity to update the regulation of audit activities in Spain and, in
particular, to impose the obligation on all Spanish listed companies to create an Audit Committee. The reform also deals specifically with the disclosure of transactions with related parties (both
individuals and corporations) where conflicts of interest may arise

In
response to the public's growing intolerance for insider-dealing and information abuses (and the unfair profits resulting therefrom), the provisions applicable to these matters have
also been updated,
particularly with regard to transactions with related parties (both individuals and corporations) where conflicts of interest may arise.

Regarding
disclosure obligations, the reform sets forth that information will be deemed "relevant" if the disclosure of such information (i) may reasonably have a foreseeable
effect on any investor with regard to the purchase or transfer of securities or financial instruments; and (ii) consequently, may

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significantly
alter the market price of such securities or financial instruments. Therefore, information must reasonably affect the decisions made by an investor with general professional knowledge
and have a certain degree of specificity in order to have an impact on an investment decision. Relevant information should be disclosed to the market as soon as possible by filing a written prior
notice with the CNMV and by means of a public disclosure on the Internet websites of the issuers of the negotiable securities involved. The length of the period during which the relevant information
must be published on the Internet websites shall be determined by the CNMV.

In
this regard, it should be noted that the priority conferred upon the CNMV implies that issuers of securities intending to distribute any material information to financial analysts,
institutional investors, or the media, must previously have provided such information to the CNMV for the purposes of registering it as a relevant fact (hecho
relevante). In addition, and according to the full disclosure principle, it should be noted that any relevant fact or relevant information disclosed must be accurate, complete,
relevant, reliable and, when appropriate, quantified, in order to avoid misleading or false news which may distort the price of the relevant securities.

Notwithstanding
the above, should the relevant issuer of securities consider that the disclosure of material information may affect its legitimate interests, it may immediately request
from the CNMV the discharge of its disclosure obligation. The CNMV may exempt the issuer from the aforementioned obligations if it considers that such disclosure may cause serious detriment to the
relevant issuer, provided that the non-disclosure of the material information is unlikely to mislead the public with regard to essential facts and circumstances, the knowledge of which is
essential to evaluate the relevant securities.

In
order to prevent any leaking of information that may result in insider-dealing, and to safeguard the confidentiality of the information until the CNMV discloses it to the public, the
reform imposes certain obligations on issuers during the preliminary operations and negotiations prior to any legal or financial transaction, such as, among others: (i) limiting the number of
individuals dealing with the relevant information; (ii) informing them about their confidentiality duties; (iii) maintaining a duly updated register of the persons having access to the
relevant information and the dates on which they had such access; and (iv) supervising the evolution of the market price of their securities.

The
reform also sets forth a set of rules regarding inside information and adopts certain measures for the purposes of increasing market efficiency and transparency with regard to
investment analysts and entities rendering investment services or giving advice in connection with investments in the securities markets. It has made significant amendments to strengthen the rules of
conduct within the securities market.

Trading by Endesa and its Subsidiaries in Endesa Ordinary Shares

The Spanish Corporations Law dated December 22, 1989 (the "Spanish Corporations Law") prohibits the purchase by Endesa and its subsidiaries of Endesa
ordinary shares in the secondary market except in limited circumstances. Such a purchase of ordinary shares must be authorized by the general meeting of stockholders of Endesa and, in the case of a
purchase of Endesa ordinary shares by a subsidiary of Endesa, also by a general meeting of shareholders of the subsidiary. The ordinary shares so purchased have no economic or voting rights while held
by the Endesa Group and have no voting rights while held by Endesa's subsidiaries. The purchaser must create reserves equal to the purchase price of any Endesa ordinary shares that are purchased and,
if a subsidiary is the acquirer, the reserve must also be recorded by the parent company. The total number of Endesa ordinary shares held by Endesa and its subsidiaries may not exceed 5% of the total
capital of the Endesa Group. At December 31, 2002, Endesa owned 10,559,826 of its own ordinary shares, or approximately 1.00% of Endesa ordinary shares then outstanding. See Note 12 to
our consolidated financial statements for information relating to transactions by Endesa in its own ordinary shares.

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Royal
Decree 377/1991 on the Reporting of Relevant Holdings and Acquisition of Treasury Stock provides that any holding of its own equity stock by a company or by its affiliates equaling
1% or more of the capital stock must be reported to the CNMV within seven business days.

D. SELLING SHAREHOLDERS

Not applicable.

E. DILUTION

Not applicable.

F. EXPENSES OF THE ISSUE

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not applicable.

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

The following summary of the current terms of the capital stock of Endesa is not meant to be complete and is qualified by reference to our bylaws
(estatutos).

Set
forth below is condensed information concerning the ordinary shares and a summary of certain provisions of our bylaws in effect at the date hereof and of certain requirements of
Spanish law. This summary contains all material information concerning the Endesa ordinary shares but does not purport to be complete. References to provisions of the bylaws are qualified in their
entirety by reference to the bylaws which have been filed as an exhibit to this annual report.

General

The issued capital of Endesa at December 31, 2002 was €1,270,502,540.40 divided into a single series of 1,058,752,117 ordinary shares in
book-entry form, with a nominal value of €1.20 each. All of the ordinary shares are fully paid and non-assessable. Non-residents of Spain may hold
and vote ordinary shares subject to the restrictions set forth under "Foreign Investment and Exchange Control Regulations."

We
are registered with the Commercial Registry of Madrid (Spain). Our registration number at the Commercial Registry of Madrid is volume 323, folio 1, page 6,405. Our business objective,
as described in Article 2 of the Articles of Association, consists of:



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Directors

All members of the Board of Directors are elected by a majority of our shareholders at the annual general meeting of shareholders to serve four-year
terms.

The
articles of association provide that directors must retire from the Board of Directors at age 70. The age limit for the position of managing director is 65, but managing directors
may continue to serve as directors until age 70.

Dividend and Liquidation Rights

Our Board of Directors has normally declared an interim dividend in the fourth quarter of each year. Payment of final dividends is proposed by our Board of
Directors and must be authorized by the shareholders at the annual general meeting. Holders of newly-issued ordinary shares participate in such dividends for each year from the date agreed by the
general shareholders' meeting. According to the Spanish corporations law and our bylaws, dividends may be paid out of profits or distributable reserves only if (1) the value of our net worth is
not, and as a result of distribution would not be, smaller than the capital stock and (2) the amount of distributable reserves is equal to or greater than the amount of any pending amortization
of start-up costs, certain research and development expenses and goodwill. Pursuant to the deposit agreement dated as of May 18, 2000 with Citibank, N.A., as depositary, under which
ADSs are issued, the depositary will receive such dividends with respect to ordinary shares underlying the ADSs. The right to a dividend lapses and reverts to us if it is not claimed within five years
after it becomes due.

Upon
a liquidation of Endesa, stockholders would be entitled to receive pro rata any assets remaining after the payment of our debts and taxes and expenses of the liquidation.

Legal Reserve

Under Spanish law, Endesa is required to allocate 10% of each fiscal year's profit to a legal reserve, until such reserve reaches at least 20% of Endesa's capital
stock. The legal reserve may only be
allocated to offset losses if there are not other available reserves sufficient for this purpose. Endesa's legal reserve currently meets this 20% requirement.

General Meetings

Our annual general meeting of shareholders is required to be held in Madrid within the first six months of each fiscal year on a date fixed by our Board of
Directors. Extraordinary meetings may be called from time to time by our Board of Directors whenever deemed appropriate or at the request of shareholders representing five percent of the outstanding
share capital. Notices of all meetings are published in the Commercial Registry's Official Gazette and in one of the newspapers with a large circulation in the Madrid area at least 15 days
before the date fixed for the meeting or at least one month before the date fixed for the meeting if the agenda includes a proposal relating to a merger or split-up.

Attendance and Voting at General Stockholders' Meetings

Record holders of at least 50 Endesa ordinary shares may attend general shareholders' meetings. Holders of less than 50 Endesa ordinary shares may join other
shareholders in order to hold an aggregate of at least 50 Endesa ordinary shares and may then appoint a representative to attend the meeting and vote their ordinary shares. Only holders of record of
ordinary shares may attend the meeting.

Proxies
may be given only to individuals acting in their individual capacity or to legal entities, must be in writing and are valid only for a single meeting. The representative may not
represent more than

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3%
of the share capital. Our shareholders approved at our annual general shareholders' meeting on June 19, 2003 an amendment to our by-laws to remove such restriction. Our amended
by-laws are pending inscription in the Commercial Registry of Madrid (Spain) as required by applicable law. A proxy may be revoked by written notice to Endesa prior to the meeting or by
attendance by the shareholders at the meeting.

Only
holders of ordinary shares



may
attend and vote at the meeting. At the June 19, 2003 annual general shareholders' meeting, our shareholders also approved an amendment to remove the requirement that the
relevant entity issue the corresponding card two days prior to the meeting. Our amended by-laws are pending inscription in the Commercial Registry of Madrid (Spain) as required by
applicable law.

Subject
to the above, the depositary (or its nominee) is entitled to vote the ordinary shares underlying the ADSs. The deposit agreement requires the depositary (or its nominee) to
accept voting instructions from holders of ADRs and to execute such instructions to the extent permitted by law.

In
accordance with Spanish law, our bylaws provide that the quorum requirement for shareholders' meetings is that established by law, which in turn provides that, on first call, a duly
constituted ordinary or extraordinary general meeting of shareholders requires the presence in person or by proxy of shareholders representing at least 25% of the paid-in capital of
Endesa. On second call there is no quorum requirement. Consideration of such extraordinary matters as modifications of our bylaws including changes in our share capital, bond issuances, merger,
split-up, dissolution or changes in corporate form requires on first call the presence in person or by proxy of shareholders representing at least 50% of the paid-in capital of
Endesa, and on second call the presence in person or by proxy of shareholders representing at least 25% of the paid-in capital. If on this second call, the shareholders present in person
or by proxy represent less than 50% of the paid-in capital, the resolutions relating to extraordinary matters may be adopted only with the vote of shareholders representing
two-thirds of the capital present or represented at such meeting. A resolution relating to an amendment to limit voting rights requires the affirmative vote of a majority of the
outstanding capital entitled to vote at both first and second call.

Resolutions
at general meetings are in all other cases passed by a simple majority of the votes cast. In general, resolutions passed by a general meeting are binding upon all
shareholders. In certain circumstances (such as change in corporate purpose or certain changes in corporate form), Spanish law gives dissenting or absent shareholders the right to have their ordinary
shares redeemed by Endesa at prices determined in accordance with established formulae.

Ordinary
shares held by Endesa or subsidiaries of Endesa are counted for purposes of determining quorums although they have no vote.

At
the general meeting of shareholders of May 12, 1998, the shareholders passed a resolution to limit the voting rights attaching to the ordinary shares such that the shareholders
shall have the right to one vote for each ordinary share which they own or represent, except that no shareholder may exercise a number of votes which exceeds the number of votes which corresponds to
10% of the total capital stock with voting rights existing from time to time even though the number of ordinary shares held by such shareholder exceeds 10% of the capital stock of Endesa. This
limitation applies to the number of

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votes
cast by any two shareholding companies which belong to the same group of companies or to any two or more shareholding companies which are controlled by any one shareholder, whether the ordinary
shares held by such companies are issued jointly or separately. In spite of the limitations on voting rights, all of the ordinary shares belonging to one holder, or to one group of companies or to one
person and the companies which such person controls will be included together for the purpose of establishing whether a quorum is present for the carrying on of business at any general shareholders'
meeting.

Registration and Transfers

Our ordinary shares are in book-entry form. Ordinary shares are indivisible. Co-owners of one ordinary share must designate a single
person to exercise their shareholders' rights, but they shall be jointly and severally liable to Endesa for all the obligations relating to their status as shareholders.

Iberclear,
which manages the clearance and settlement system of the Spanish stock exchanges, maintains a registry reflecting the number of ordinary shares held by each of its member
entities, as well as the amount of such shares held on behalf of beneficial owners. Each member entity, in turn, maintains a registry of the owners of such shares.

Transfers
of ordinary shares quoted on a Spanish stock exchange must be made through or with the participation of a member of a Spanish stock exchange that is an authorized broker or
dealer (Sociedad o Agencia de Valores) by book-entry registry.

Requirement of Government Approval for Certain Transactions

Endesa, S.A. and certain of our affiliates are subject to the prior governmental approval regime in accordance with Royal Decree 929/1998 of May 14, as
amended by Royal Decree 1113/1999 of June 25, as a consequence of Law 5/1995 of March 23.

Under
this regime,, prior government approval would be required for the direct or indirect acquisition by a single group or individual of 5% or more of the capital stock of Endesa or, in
the case of certain of its affiliates, 10% or more of their respective capital stock, or any securities which confer directly or indirectly a right to subscribe or acquire 5% or more of the capital
stock of Endesa or, in the case of certain of its affiliates, 10% or more of their respective capital stock. This regime also extends to any resolution to sell, dispose of or encumber in any way any
of the capital stock in certain of our affiliates of which Endesa may be the holder or any securities held by Endesa which confer a right to subscribe or acquire capital stock of such affiliate, as
well as any resolution by Endesa or certain of its affiliates for the voluntary liquidation (disolución voluntaria) of such company, the
split up (escisión) of such company or the merger (fusión) of such company
with any other company.

The
consequences of carrying out any of the transactions described above without first obtaining the requisite government approval will be that any such acts, agreements or transactions
will be null and void and strict limitations will apply to the voting and other rights attaching to any shares or securities which are subscribed, acquired or transferred pursuant to such unapproved
transaction.

In
December 2000, the European Commission filed a complaint against the Kingdom of Spain before the Justice Tribunal with respect to the requirement for government approval in
connection with certain transactions of Endesa and certain other Spanish companies. On May 13, 2003, the Justice Tribunal rendered its opinion that Royal Decree 1113/1999, of June 25,
among other laws and regulations, violated European Union law due to the level and nature of discretion permitted the Spanish government in relation to corporate decision-making. Nonetheless, the
Tribunal affirmed the possibility that certain authorization regimes would be permissible so long as the regulatory powers were limited.

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The
Spanish government has announced its intention to modify the regulatory regime related to prior governmental approval for acquisition of certain Spanish companies in order to bring
such regime into line with European Union laws.

Reporting Requirements

Because Endesa ordinary shares are listed on a Spanish stock exchange, agreements with respect to the acquisition or disposition of Endesa's ordinary shares must
be reported within seven business days of the acquisition or disposal to Endesa, the CNMV, the relevant Spanish stock exchanges and, where the person or group effecting the transaction is a
non-Spanish resident, the Spanish Registry of Foreign Investment, where:



Any
member of our Board of Directors must report to Endesa, the CNMV and the relevant Spanish stock exchanges, any percentage or number of shares and stock options held at the time of
becoming a member of the Board of Directors. Endesa's officers must report to the CNMV any acquisition of Endesa's ordinary shares or options if such transactions are part of a compensation plan.

Furthermore,
any member of our Board of Directors must similarly report any acquisition or disposal, regardless of size, of ordinary shares or stock options.

Withholding Tax on Dividends

Dividends payable by Endesa to holders of ordinary shares or ADRs not residing in Spain for tax purposes and not operating through a permanent establishment in
Spain are subject to a Spanish withholding tax at the rate of 15%, subject to reduction by applicable tax treaties. See "TaxationSpanish Tax Considerations."

Preemptive Rights

Pursuant to the Spanish corporations law, shareholders and holders of convertible bonds have preemptive rights to subscribe for any new shares issued by Endesa,
including ordinary shares, and for bonds convertible into shares. These preemptive rights may not be available under special circumstances if rescinded by a resolution passed at a meeting of
shareholders in accordance with Article 159 of Spanish corporations law. Further, these preemptive rights, in any event, will not be available in the event of an increase in capital to meet the
requirements of a convertible bond issue or a merger in which ordinary shares are issued as consideration. These preemptive rights are transferable, are traded on the Automated Quotation System of the
Spanish stock exchanges and may be of value to existing shareholders because the new ordinary shares may be offered for subscription at prices lower than prevailing market price. Ordinary shares
issuable upon exercise of preemptive rights must be registered under the U.S. Securities Act of 1933, as amended, in order to be offered to holders of ADRs. If Endesa decided not to register such
ordinary shares, the preemptive rights would not be distributed to holders of ADRs. Pursuant to the deposit agreement, however, holders of ADRs are entitled to receive their proportionate share of
proceeds, if any, from the sale by the depositary of any preemptive rights pertaining to holders of ADRs.

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C. MATERIAL CONTRACTS



On September 19, 2001 we entered into an agreement to sell our 100% interest in Electra de Viesgo I (Viesgo) to Enel SpA. Enel SpA acquired 12.5% of Viesgo in
December 2001 and the remaining 87.5% in January 2002 for an aggregate purchase price of €2,147 million. For further details regarding the terms of this contract, see "Item 4.
Information on the CompanyB. Business OverviewNon-Core Diversified, AssetsCapital Expenditures and DivestituresDivestitures".



In September 2001, a consortium in which we held a 45.3% stake acquired the Italian generation company, Elettrogen, from Enel SpA for approximately
€2.6 billion. The other members of the consortium include Santander Central Hispano and ASM Brescia. In January 2002, we merged Elettrogen with and into a newly-formed company, Endesa
Italia SRL (Endesa Italia). In connection with this acquisition, we entered into an agreement with Santander Central Hispano pursuant to which we have the option to acquire its 40.0% stake, in whole
or in part, at any time through the fifth anniversary of the date of its acquisition of such stake. In addition, Santander Central Hispano may require us to purchase its remaining interest in Endesa
Holding Italia for a period of 30 days commencing on the fifth anniversary of Santander Central Hispano's acquisition of its interest in Endesa Holding Italia. For more detailed information regarding
these agreements see "Item 4. Information on the CompanyB. Business OverviewElectricity Business in EuropeGeneration" and "Item 5. Operating and Financial Review
and ProspectsLiquidity and Capital ResourcesContractual ObligationsCommercial Commitments".

D. EXCHANGE CONTROLS

Foreign Investment and Exchange Control Regulations

Under present Spanish regulations, foreign investors may transfer invested capital, capital gains and dividends out of Spain without limitation as to amount other
than applicable taxes. The Spanish stock exchanges and securities markets are open to foreign investors, although any foreign investment over 50% of the share capital of a Spanish company by an entity
resident in a tax haven requires prior clearance from the Ministry of Economy. Any other purchase of shares by a foreign entity or individual only requires that the Spanish authorities be notified of
such purchase.

E. TAXATION

Material Tax Considerations

The following is a discussion of the material Spanish and U.S. federal income tax consequences to you of the acquisition, ownership and disposition of the Endesa
ADSs or ordinary shares.

This
discussion only applies to you if you are a beneficial owner of Endesa ADSs or ordinary shares and you are either:



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The
discussion of Spanish tax consequences below applies to you only if you are a non-resident of Spain and your ownership of Endesa ADSs or ordinary shares is not
effectively connected with a permanent establishment or fixed base in Spain.

You
should consult your own tax advisor regarding the particular tax consequences to you of owning and disposing of Endesa ADSs or ordinary shares, including your eligibility for the
benefits of the treaty for the avoidance of double taxation between Spain and the United States (the "Treaty"), the applicability or effect of any special rules to which you may be subject, and the
applicability and effect of state, local, foreign and other tax laws and possible changes in tax law.

For
purposes of the Treaty and the U.S. Internal Revenue Code of 1986, as amended (the "Code"), United States owners of ADSs will generally be treated as the owners of the ordinary
shares
represented by such ADSs. Accordingly, no gain or loss will be recognized if you exchange ADSs for the underlying ordinary shares represented by those ADSs.

Spanish Tax Considerations

The following discussion describes the material Spanish tax consequences to US persons described herein of the acquisition, ownership and disposition of Endesa
ADSs or ordinary shares. This discussion is based upon the tax laws of Spain and regulations thereunder, which are subject to change, possibly with retroactive effect.



Under Spanish law, dividends paid by a Spanish resident company to a holder of ordinary shares or ADSs not residing in Spain for tax purposes and not operating
through a permanent establishment in Spain are subject to an income tax withheld at source on the gross amount of dividends, currently at an 15% tax rate. This tax rate is the same as the rate
established in the Treaty.



For Spanish tax purposes, income obtained by you from the sale of ADSs or ordinary shares of Endesa will be treated as capital gains. Spanish
non-resident income tax is currently levied at a 35% tax rate on capital gains obtained by persons not residing in Spain for tax purposes who are not entitled to the benefit of any
applicable treaty for the avoidance of double taxation.

Notwithstanding
the above, capital gains derived from the transfer of shares in an official Spanish secondary stock market by any holder who is resident in a country that has entered
into a treaty for the avoidance of double taxation with Spain containing an "exchange of information" clause will be exempt from taxation in Spain. Under the Treaty, capital gains realized by you upon
the disposition of ADSs or shares will not be taxed in Spain provided you have not held, directly or indirectly, 25% of the capital of Endesa during the 12 months preceding the disposition of
the stock. In principle, you are required to establish that you are entitled to this exemption by providing to the relevant Spanish tax authorities an IRS certificate of residence in the United
States.



Individuals not residing in Spain who hold shares or ADSs located in Spain are subject to the Spanish wealth tax (Spanish Law 19/1991), which imposes a tax on
property located in Spain on the last day of any year. The Spanish tax authorities may take the view that all shares of Spanish corporations and all ADSs representing such shares are located in Spain
for Spanish tax purposes. If such a view were to prevail, non-residents of Spain who held shares or ADSs on the last day of any year would be subject to the Spanish wealth tax for such
year at marginal rates varying between 0.2% and 2.5% of the average market value of such shares or ADSs during the last quarter of such year. In relation to this

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tax,
the Ministry of Economy and Finance will publish the average market value of such shares for the fourth quarter of the year.



Transfers of shares or ADSs on death or by gift are subject to Spanish inheritance and gift taxes (Spanish Law 29/1987) if the transferee is a resident in Spain
for tax purposes, or if the shares or ADSs are located or exercisable in Spain at the time of death or gift, regardless of the residence of the beneficiary. In this regard, the Spanish tax authorities
may determine that all shares of Spanish corporations and all ADSs representing such shares are located in Spain for Spanish tax purposes. The applicable tax rate, after applying all relevant factors,
ranges between 0 and 81.6% for individuals.

Gifts
granted to corporations non-resident in Spain are subject to Spanish Non-Resident Income Tax at a 35% tax rate on the fair market value of the shares as a
capital gain. If the donee is a United States corporation, the exclusions available under the Treaty described in the section "Taxation of Capital Gains" above will generally be applicable.



Transfers of ADSs or shares will be exempt from any transfer tax or value-added tax. Additionally, no stamp duty will be levied on such transfers.

United States Tax Considerations



The following describes the material U.S. federal income tax consequences of the ownership and disposition of Endesa ADSs or ordinary shares by the US persons
described herein. The discussion is based on the tax laws of the United States, including the Code, its legislative history, final, temporary and proposed regulations, published rulings and court
decisions, as well as on the Treaty, all as currently in effect and all subject to change at any time, perhaps with retroactive effect.

This
discussion deals only with Endesa ADSs or ordinary shares held by you as capital assets and does not address the tax treatment of persons that are subject to special treatment under
the U.S. income tax laws. Persons subject to special treatment include, but are not limited to:



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Moreover,
the effect of any applicable U.S. state or local tax laws is not discussed herein.

This
discussion assumes that we are not, and will not become, a passive foreign investment company (a "PFIC") for U.S. federal income tax purposes, as described more fully below. This
discussion also assumes that each obligation of the deposit agreement between us, Citibank, N.A., as depositary, and all holders of Endesa ADSs and any related agreement will be performed in
accordance with its terms and that the representations made by Citibank, N.A., as depositary, regarding the pre-release of Endesa ADSs are true. The U.S. Treasury has expressed concerns
that parties to whom ADSs are released may be taking actions that are inconsistent with the claiming of foreign tax credits. Accordingly, the creditability of Spanish taxes described below could be
affected by actions that may be taken by the U.S. Treasury.



Distributions (other than certain pro rata distributions of ordinary shares) paid on ADSs or ordinary shares out of current or accumulated earnings and profits,
as determined for U.S. federal tax purposes, before reduction for any Spanish income tax withheld by us, will be taxable to you as foreign source dividend income and will not be eligible for the
dividends-received deduction generally allowed to U.S. corporations. Under recently enacted legislation, dividends received by noncorporate U.S. holders on ADSs or ordinary shares may be subject to
U.S. federal income tax at lower rates than other types of ordinary income if certain conditions are met. You should consult your own tax advisor regarding the application of this new legislation to
your particular circumstances.

You
will be required to include dividends paid in euro in income in an amount equal to their U.S. dollar amount calculated by reference to the exchange rate in effect on the date the
euro are received. If you hold ordinary shares, dividends are received on the date you receive the distribution regardless of whether the euro are converted into U.S. dollars. If you hold ADSs, that
date is the date Citibank, N.A., receives the dividend. If the euro are not converted into U.S. dollars on the day they are received, you may be required to recognize foreign currency gain or loss,
which will be U.S. source ordinary income or loss, as the case may be, upon a subsequent sale or other disposition of the euro.



For U.S. federal income tax purposes, you will be treated as having received the gross amount of any dividend, including Spanish taxes withheld by us, and then as
having paid over the withheld taxes to the Spanish taxing authorities. As a result, the amount of income included in gross income for U.S. federal income tax purposes by you in connection with such
payments will be greater than the amount of cash actually received or receivable by you.

Subject
to generally applicable limitations and restrictions, you will be entitled to a credit against your U.S. federal income tax liability, or a deduction in computing your U.S.
federal taxable income, for Spanish income taxes withheld by us. The limitation on foreign taxes eligible for credit is calculated separately for specific classes of income. For this purpose,
depending on your particular circumstances, dividends paid by us on our ordinary shares will generally constitute "passive income" or "financial services income". We urge you to consult your tax
advisor to determine whether and to what extent a foreign tax credit would be available to you.



Upon a sale or exchange of Endesa ADSs or ordinary shares, you will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference,
if any, between the amount realized on the sale or exchange and your adjusted tax basis in the ADSs or ordinary shares. This gain or loss

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will
be long-term capital gain or loss if your holding period in the ADSs or ordinary shares exceeds one year. Any gain or loss will be U.S. source gain or loss. You should consult your
own tax advisor about the treatment of capital gains, which may be taxed at lower rates than ordinary income for non-corporate taxpayers, and capital losses, the deductibility of which may
be limited.



We believe that we were not a PFIC for U.S. federal income tax purposes for our most recent taxable year. However, since PFIC status depends upon the composition
of a company's income and the market value of its assets, including, among others, equity investments in various entities, from time to time, there can be no assurance that we will not be considered a
PFIC for any taxable year. If we were a PFIC for any taxable year, certain adverse consequences could apply to you.



Payments of dividends and other proceeds in connection with ADSs or ordinary shares by a U.S. paying agent or other U.S. intermediary may be reported to the IRS
and to you. Backup withholding at the rate specified in the Code may apply to these payments if you fail to provide an accurate taxpayer identification number or fail to report all interest and
dividends required to be shown on your U.S. federal income tax returns. Some persons, such as corporations are not subject to backup withholding. Depending on the type of person you are, you may
qualify for exemption from backup withholding provided you comply with the procedure for obtaining the exemption. Any amounts withheld under the backup withholding rules may be refunded (or credited
against the beneficial owner's U.S. federal income tax liability, if any), provided that the required information is furnished to the IRS.

F. DIVIDENDS AND PAYING AGENTS

Not applicable.

G. STATEMENTS BY EXPERTS

Not applicable.

H. DOCUMENTS ON DISPLAY

Endesa files annual reports on Form 20-F with the SEC and furnishes periodic reports on Form 6-K to the SEC. You may read
and copy any of these reports at the SEC's public reference room in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. You may also obtain copies from the SEC's website at http://www.sec.gov.

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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various types of market risk in the normal course of our business, including the impact of changes in interest rates, foreign currency exchange
rates, commodity prices and equity investment prices. These changes may adversely affect our operating results and financial condition. We seek to manage these risks through the use of derivative
financial instruments and, in the case of exchange rate risk, by balancing asset- and liability-generating operations and collections and payments by currency to the extent possible.

During
2002, we formally approved our Global Risk Management Policy that establishes the principles governing and corporate body responsible for the management and control of risks. This
policy is applicable to each of the companies that are majority-owned, controlled or managed by Endesa. The policy includes the establishment of the Risk Management Committee responsible for defining
our global risk management policies and establishes the limits on levels of risk for Endesa's businesses and corporate bodies. Previously, our business and corporate bodies applied specific risk
management policies that are now fully coordinated by our Global Risk Management Policy.

All
of our derivative financial instruments are entered into for hedging purposes. We do not use derivative financial instruments for speculative purposes.



Our objective in managing interest rate risk is to maintain a balance of fixed and variable debt that will lower our overall borrowing costs within reasonable
risk parameters. We use interest rate swaps and options to convert a portion of our debt portfolio from a floating rate to a fixed rate or from a fixed rate to a floating rate.

The
structure of our debt at December 31, 2002, distinguishing between fixed- and floating-rate debt, is as follows:

|                     |       | Fixed rate |        | Floating
rate |        | Total 
|-------------------- | ----- | ---------- | ------ | ------------- | ------ | ------
|
|Bonds and debentures |       | 9,741      |        | 2,552         |        | 12,293
|Commercial paper     |       | 42         |        | 1,894         |        | 1,936 
|Bank debts           |       | 1,075      |        | 8,622         |        | 9,697 
|                     |       |            |        |               |        |       
|                     | Total |            | 10,858 |               | 13,068 |       
|                     |       |            |        |               |        |       

In
accordance with the requirements of this Item 11 of Form 20-F, in order to show more fully our exposure to interest rate changes, we present our debt in the table
above, excluding the effect of derivatives. For purposes of our consolidated financial statements, however, we calculate our debt net of the effect of derivatives. See Note 16 to our
consolidated financial statements.

Our
floating rate debt is principally subject to fluctuations in the European Interbank Offered Rate (EURIBOR) and the London Interbank Offered Rate (LIBOR).



Our foreign currency exchange rate risk principally relates to:



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We
have incurred foreign currency-denominated debt obligations in order to fund investments outside Spain, principally in Latin America. Substantially all of our foreign debt obligations
are denominated in U.S. dollars and Latin American currencies.

In
order to mitigate the potential impact of currency exchange rate fluctuations, we hedge a portion of those risks through the use of derivative financial instruments, such as swaps,
options and exchange rate forward contracts, and exchange rate insurance. The success of these strategies, however, depends on many factors and, as a result, such hedging may be ineffective.



Many of our subsidiaries are located outside the euro zone (principally in Latin America), and their functional currency is their respective local currency.
Because our reporting currency is the euro, the income statements of these subsidiaries are translated into euro for inclusion of the results of these subsidiaries in our consolidated financial
statements. Period-to-period changes in the average exchange rate for a particular country's currency can significantly affect the translation into euro of both revenues and
operating income denominated in that currency. We have not hedged our accounting translation exposure to foreign currency fluctuations relative to these investments, and the tables below do not
indicate the extent to which we would be affected by such fluctuations. Effects from currency fluctuations on the translation of net asset amounts into euro are reflected in our equity position.



We are exposed to commodity price risk principally in connection with our electricity generation and supply business in Spain. In particular, we are exposed to
market price risk for:



We
have entered into long-term revolving fuel supply contracts in order to provide for the secure supply of fuel for our generation activities in Spain. Because the prices
under these contracts are not fixed, we enter into derivative contracts (primarily swaps) in order to manage the market price risk relating to our fuel requirements. At December 31, 2002, the
fair value of our fuel oil purchases hedge position was positive $20.7 million. This amount is not necessarily indicative of the value realized when such contracts settle.

We
are exposed to market price risk with respect to a portion of the energy that we generate in Spain, consisting of the excess of our production over the amount of energy that we sell
to deregulated and regulated customers. This amount is equivalent to approximately 10% of the energy that we produce in Spain annually. We do not hedge this exposure to electricity price volatility.
To the extent a net open position exists, fluctuating electricity prices can impact our financial position or results of operations, either favorably or unfavorably.

We
are also subject to commodity price risk in connection with our energy trading activities, which we engage in mainly to hedge our exposure to commodity price risk and to fix the
selling price of our electricity sales to final customers in Europe (outside Spain). However, this risk was not material in 2001 or 2002 because these activities were not significant. At
December 31, 2002, the fair value of our trading portfolio (which includes purchases and sales of electricity) was €2.25 million.



We hold investments in equity securities. These securities are subject to risks due to changes in the market values of such securities. We record such investments
on our consolidated balance sheet at the lower of cost (revalued, if appropriate, pursuant to applicable legislation) or market value. For listed

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securities,
market value is based on the lower of the average market price during the last quarter of the year and the market price at year end. For unlisted securities, market value is based on the
underlying book value of the investment. We do not use derivative instruments, such as forward contracts, option contracts, interest rate swaps and forward rate agreements, to manage these market
risks, nor do we hold or issue derivative or other financial instruments for trading purposes.



All existing financing and derivatives operations at December 31, 2002 and at December 31, 2001 are described below. Average weighted interest rates
are expressed as a margin applied to the benchmark rate indicated. The information presents the equivalent amount in euro. The exchange rates are those set by the Bank of Spain as at the date of each
table (or the immediately preceding business day if such date is not a business day). The cash flows of the instruments are denominated in the currency indicated. All of the commitments in foreign
currencies appear both in tables under the heading "Interest Rate Sensitivity" and in the tables under the heading "Exchange Rate Sensitivity".



The following tables provide information on our financial instruments at December 31, 2002 and at December 31, 2001 that are sensitive to interest
rate fluctuations and include debt instruments, interest rate swaps and options.

For
debt commitments, the tables present the main cash flows and the average interest rates weighted by expected maturity date. For swaps, the tables present the notional amounts and the
weighted interest rates in accordance with the expected maturity. The notional amounts are used to calculate the contractual payments to be exchanged in accordance with the agreement.

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INTEREST-RATE SENSITIVITY December 31, 2002

|                                   |                                          |                  |  | Maturity Dates |       |      
|---------------------------------- | ---------------------------------------- | ---------------- |  | -------------- | ----- | -----
|
|
|
|FLOATING RATE DEBT                 |                                          |                  |  |                |       |      
|Bank loans                         |                                          | EURO             |  | 1,354          |       | 2    
|                                   | Weighted average spreadEuribor          |                  |  |                | 0.4   | %    
|Structured Loans                   |                                          | EURO             |  |                |       |      
|                                   | Weighted average spreadEuribor          |                  |  |                |       |      
|EIB Loans                          |                                          | EURO             |  |                |       | 38   
|                                   | Weighted average spreadEuribor          |                  |  |                |       |      
|Credits                            |                                          | EURO             |  | 65             |       |      
|                                   | Weighted average spreadEuribor          |                  |  |                | 0.2   | %    
|Intercompany loans and credits     |                                          | EURO             |  | 14             |       |      
|                                   | Weighted average spreadEuribor          |                  |  |                | 0.0   | %    
|Bilateral loans and credits        |                                          | EURO             |  | 58             |       | 12   
|                                   | Weighted average spreadEuribor          |                  |  |                | 1.3   | %    
|MTN                                |                                          | EURO             |  | 545            |       | 300  
|                                   | Weighted average spreadEuribor          |                  |  |                | 0.2   | %    
|MTN                                |                                          | EURO             |  |                |       |      
|                                   | Weighted average spreadEQL              |                  |  |                |       |      
|MTN                                |                                          | EURO             |  |                |       |      
|                                   | Weighted average spreadIRS              |                  |  |                |       |      
|MTN                                |                                          | EURO             |  |                |       |      
|                                   | Weighted average spreadIRSGBP          |                  |  |                |       |      
|Debentures and bonds               |                                          | EURO             |  |                |       | 550  
|                                   | Weighted average spreadEuribor          |                  |  |                |       |      
|Public sector loans                |                                          | EURO             |  | 285            |       |      
|                                   | Weighted average spreadEuribor          |                  |  |                | 0.0   | %    
|International debentures and bonds |                                          | EURO             |  | 364            |       |      
|                                   | Weighted average spreadBank liabilities |                  |  |                | 0.8   | %    
|Commercial paper                   |                                          | EURO             |  | 1,294          |       |      
|                                   | Weighted average spreadEuribor          |                  |  |                | 0.0   | %    
|Bank loans                         |                                          | USD              |  | 1,066          |       | 50   
|                                   | Weighted average spreadLibor            |                  |  |                | 1.3   | %    
|Credits                            |                                          | USD              |  | 4              |       |      
|                                   | Weighted average spreadLibor            |                  |  |                | 0.1   | %    
|EIB Loans                          |                                          | USD              |  | 42             |       | 47   
|                                   | Weighted average spreadLibor            |                  |  |                | (0.13 | )%   
|Project financing                  |                                          | USD              |  | 40             |       | 36   
|                                   | Weighted average spreadLibor            |                  |  |                | 1.7   | %    
|Commercial paper                   |                                          | USD              |  | 163            |       |      
|                                   | Weighted average spreadLibor            |                  |  |                | 0.0   | %    
|Credits                            |                                          | JPY              |  |                |       |      
|                                   | Weighted average spreadLibor            |                  |  |                |       |      
|Bank loans                         |                                          | JPY              |  | 61             |       | 10   
|                                   | Weighted average spreadLibor            |                  |  |                | 2.6   | %    
|Commercial paper                   |                                          | CHF              |  | 72             |       |      
|                                   | Weighted average spreadLibor            |                  |  |                | 0.0   | %    
|MTN                                |                                          | CZK              |  |                |       |      
|                                   | Weighted average spreadPribor           |                  |  |                |       |      
|Commercial paper                   |                                          | GBP              |  | 365            |       |      
|                                   | Weighted average spreadLibor            |                  |  |                | 0.0   | %    
|Bank loans                         |                                          | CLP              |  |                |       | 62   
|                                   | Weighted average spreadTAB.             |                  |  |                |       |      
|Project financing                  |                                          | Brazilian Real   |  | 2              |       | 2    
|                                   | Weighted average spreadFINELIGPM       |                  |  |                | 1.1   | %    
|Public sector loans                |                                          | Brazilian Real   |  |                |       | 16   
|                                   | Weighted average spreadTJLPTRIGPM     |                  |  |                |       |      
|Lines of credit                    |                                          | Brazilian Real   |  | 5              |       |      
|                                   | Weighted average spreadCDI              |                  |  |                | 3.0   | %    
|Bank loans                         |                                          | Other Currencies |  |                |       | 12   
|                                   | Weighted average spreadDTFVACCFB      |                  |  |                |       |      
|Debentures and bonds               |                                          | Other Currencies |  |                |       | 4    
|                                   | Weighted average spreadDTFVACCF       |                  |  |                |       |      
|Debentures and bonds               |                                          | Other Currencies |  | 2              |       | 2    
|                                   | Weighted average spreadDTFVACCF       |                  |  |                | 0.5   | %    
|TOTAL FLOATING                     |                                          |                  |  | 5,801          |       | 1,143

142

---



INTEREST-RATE SENSITIVITY  December 31, 2002

|                                   |                                |                  |  | Maturity Dates |      |      
|---------------------------------- | ------------------------------ | ---------------- |  | -------------- | ---- | -----
|
|
|
|FIXED RATE DEBT                    |                                |                  |  |                |      |      
|Structured loans                   |                                | EURO             |  |                |      | 30   
|                                   | Weighted average interest rate |                  |  |                |      |      
|EIB loans                          |                                | EURO             |  | 1              |      | 1    
|                                   | Weighted average interest rate |                  |  |                | 10.1 | %    
|Commercial paper                   |                                | EURO             |  |                |      |      
|                                   | Weighted average interest rate |                  |  |                |      |      
|Debentures and bonds               |                                | EURO             |  | 180            |      | 200  
|                                   | Weighted average interest rate |                  |  |                | 8.8  | %    
|MTN                                |                                | EURO             |  | 300            |      | 510  
|                                   | Weighted average interest rate |                  |  |                | 4.8  | %    
|EIB Loans                          |                                | CHF              |  | 6              |      | 6    
|                                   | Weighted average interest rate |                  |  |                | 6.4  | %    
|MTN                                |                                | CZK              |  |                |      | 32   
|                                   | Weighted average interest rate |                  |  |                |      |      
|MTN                                |                                | GBP              |  |                |      |      
|                                   | Weighted average interest rate |                  |  |                |      |      
|Bank loans                         |                                | USD              |  | 15             |      | 19   
|                                   | Weighted average interest rate |                  |  |                | 6.0  | %    
|EIB loans                          |                                | USD              |  | 0              |      | 0    
|                                   | Weighted average interest rate |                  |  |                | 14.4 | %    
|Public sector loans                |                                | USD              |  | 2              |      | 2    
|                                   | Weighted average interest rate |                  |  |                | 1.8  | %    
|Project financing                  |                                | USD              |  | 30             |      | 30   
|                                   | Weighted average interest rate |                  |  |                | 5.4  | %    
|MTN                                |                                | USD              |  | 491            |      |      
|                                   | Weighted average interest rate |                  |  |                | 5.9  | %    
|International debentures and bonds |                                | USD              |  | 227            |      | 3    
|                                   | Weighted average interest rate |                  |  |                | 7.6  | %    
|Local debentures and bonds         |                                | USD              |  |                |      |      
|                                   | Weighted average interest rate |                  |  |                |      |      
|Other debt                         |                                | USD              |  | 16             |      | 14   
|                                   | Weighted average interest rate |                  |  |                | 7.8  | %    
|EIB Loans                          |                                | JPY              |  | 0              |      | 0    
|                                   | Weighted average interest rate |                  |  |                | 8.0  | %    
|MTN                                |                                | JPY              |  |                |      |      
|                                   | Weighted average interest rate |                  |  |                |      |      
|Bank loans                         |                                | CLP              |  | 2              |      | 2    
|                                   | Weighted average interest rate |                  |  |                | 9.0  | %    
|Local debentures and bonds         |                                | CLP              |  | 14             |      | 14   
|                                   | Weighted average interest rate |                  |  |                | 6.0  | %    
|Public sector loans                |                                | Brazilian Real   |  | 10             |      | 11   
|                                   | Weighted average interest rate |                  |  |                | 10.2 | %    
|Project financing                  |                                | Brazilian Real   |  | 3              |      | 3    
|                                   | Weighted average interest rate |                  |  |                | 7.9  | %    
|Local debentures and bonds         |                                | Brazilian Real   |  | 1              |      |      
|                                   | Weighted average interest rate |                  |  |                | 12.0 | %    
|Bank loans                         |                                | Other Currencies |  | 10             |      |      
|                                   | Weighted average interest rate |                  |  |                | 4.6  | %    
|Debentures and bonds               |                                | Other Currencies |  | 9              |      | 22   
|                                   | Weighted average interest rate |                  |  |                | 7.4  | %    
|Other debt                         |                                | Other Currencies |  |                |      | 4    
|                                   | Weighted average interest rate |                  |  |                |      |      
|TOTAL FIXED                        |                                |                  |  | 1,317          |      | 903  
|TOTAL FIXED + FLOATING             |                                |                  |  | 7,118          |      | 2,046

143

---



INTEREST-RATE SENSITIVITY  December 31, 2002

|                                                                 |                          |     |     | Maturity Dates |       |       |     
|---------------------------------------------------------------- | ------------------------ | --- | --- | -------------- | ----- | ----- | ----
|
|
|
|INTEREST RATE SWAPS                                              |                          |     |     |                |       |       |     
|Swap in Euro                                                     |                          |     |     |                |       |       |     
|From floating to fixed                                           |                          |     |     | 644            |       | 1,239 |     
|                                                                 | Spread receivedEuribor  |     | EUR |                | 0.00  | %     | 0.00
|                                                                 | Rate paid                |     | EUR |                | 4.77  | %     | 4.20
|From fixed to floating                                           |                          |     |     | 633            |       | 540   |     
|                                                                 | Rate received            |     | EUR |                | 6.3   | %     | 3.7 
|                                                                 | Spread paidEuribor      |     | EUR |                | 0.04  | %     | 0.12
|From floating to floating                                        |                          |     |     |                |       |       |     
|                                                                 | Spread receivedEuribor  |     | EUR |                |       |       |     
|                                                                 | Spread paidEuribor      |     | EUR |                |       |       |     
|From floating to floating                                        |                          |     |     |                |       |       |     
|                                                                 | Spread receivedEQL      |     | EUR |                |       |       |     
|                                                                 | Spread paidEuribor      |     | EUR |                |       |       |     
|From floating to floating                                        |                          |     |     |                |       |       |     
|                                                                 | Spread receivedIPCL     |     | EUR |                |       |       |     
|                                                                 | Spread paidEuribor      |     | EUR |                |       |       |     
|From floating to floating                                        |                          |     |     |                |       |       |     
|                                                                 | Spread receivedIRS Euro |     | EUR |                |       |       |     
|                                                                 | Spread paidEuribor      |     | EUR |                |       |       |     
|From floating to floating                                        |                          |     |     |                |       |       |     
|                                                                 | Spread receivedIRS GBP  |     | EUR |                |       |       |     
|                                                                 | Spread paidEuribor      |     | EUR |                |       |       |     
|Forward Rate Agreements in Euro                                  |                          |     |     |                |       |       |     
|Amount                                                           |                          |     |     | 2,600          |       |       |     
|Rate purchased                                                   |                          | EUR |     | 3.78           | %     |       |     
|Interest Rate Swap in Foreign
    CurrencyFrom floating to fixed |                          |     |     | 191            |       | 95    |     
|                                                                 | Spread receivedLibor    |     | USD |                | 0.00  | %     | 0.00
|                                                                 | Rate paid                |     | USD |                | 6.20  | %     | 7.10
|From fixed to floating                                           |                          |     |     | 477            |       |       |     
|                                                                 | Rate received            |     | USD |                | 5.875 | %     |     
|                                                                 | Spread paidEuribor      |     | USD |                | 0.0   | %     |     
|From fixed to floating                                           |                          |     |     |                |       | 32    |     
|                                                                 | Rate received            |     | CHF |                |       |       | 6.35
|                                                                 | Spread paidLibor        |     | CHF |                |       |       | 3.8 
|From floating to fixed                                           |                          |     |     | 80             |       |       |     
|                                                                 | Spread receivedLibor    |     | EUR |                | 0.0   | %     |     
|                                                                 | Rate paid                |     | JPY |                | 0.6   | %     |     
|From floating to floating                                        |                          |     |     | 364            |       | 107   |     
|                                                                 | Spread receivedEuribor  |     | EUR |                | 0.80  | %     | 0.25
|                                                                 | Spread paidLibor        |     | USD |                | 0.99  | %     | 0.29
|From floating to fixed                                           |                          |     |     | 6              |       |       |     
|                                                                 | Spread receivedEuribor  |     | EUR |                | 0.40  | %     |     
|                                                                 | Raid paid                |     | USD |                | 6.45  | %     |     
|From floating to floating                                        |                          |     |     | 135.4          |       | 114   |     
|                                                                 | Spread paidLibor        |     | USD |                | 0.000 | %     | 0.29
|                                                                 | Spread receivedEuribor  |     | EUR |                | 0.000 | %     | 0.33
|                                                                 |                          |     |     |                |       |       |     

144

---

|From floating to floating                   |                               |     |                | 374.1 |        |       |       |       |       |       |        |     |      |       |       | 374    |     | (9.59   | )     
|------------------------------------------- | ----------------------------- | --- | -------------- | ----- | ------ | ----- | ----- | ----- | ----- | ----- | ------ | --- | ---- | ----- | ----- | ------ | --- | ------- | ------
|                                            | Spread receivedLibor         |     | GBP            |       | 0.0    | %     |       |       |       |       |        |     |      |       |       |        |     |         |       
|Spread paidEuribor                         |                               | EUR |                | 0.0   | %      |       |       |       |       |       |        |     |      |       |       |        |     |         |       
|                                            | From fixed to fixed           |     |                |       |        |       |       |       |       |       |        |     |      |       | 624   |        | 624 |         | (28.94
|                                            | Rate received                 |     | GBP            |       |        |       |       |       |       |       |        |     |      |       | 6.13  | %      |     |         |       
|                                            | Rate paid                     |     | EUR            |       |        |       |       |       |       |       |        |     |      |       | 6.02  | %      |     |         |       
|From floating to floating                   |                               |     |                | 72    |        |       |       |       |       |       |        |     |      |       |       | 72     |     | 0.67    |       
|                                            | Spread receivedLibor         |     | CHF            |       | 0.0    | %     |       |       |       |       |        |     |      |       |       |        |     |         |       
|                                            | Spread paidEuribor           |     | EUR            |       | 0.0    | %     |       |       |       |       |        |     |      |       |       |        |     |         |       
|From fixed to floating                      |                               |     |                | 13    |        |       |       |       |       |       |        |     |      | 319   |       | 332    |     | 70.87   |       
|                                            | Rate received                 |     | USD            |       | 5.19   | %     |       |       |       |       |        |     |      |       | 6.00  | %      |     |         |       
|                                            | Spread paidEuribor           |     | EUR            |       | 0.000  | %     |       |       |       |       |        |     |      |       | 0.115 | %      |     |         |       
|From fixed to floating                      |                               |     |                |       |        | 28    |       |       |       |       |        |     |      |       |       | 28     |     | 6.75    |       
|                                            | Rate received                 |     | CZK            |       |        |       | 6.25  | %     |       |       |        |     |      |       |       |        |     |         |       
|                                            | Spread paidEuribor           |     | EUR            |       |        |       | 0.07  | %     |       |       |        |     |      |       |       |        |     |         |       
|From floating to floating                   |                               |     |                |       |        |       |       |       |       |       |        |     |      | 17    |       | 17     |     | (0.75   | )     
|                                            | Floating rate receivedPribor |     | CZK            |       |        |       |       |       |       |       |        |     |      |       | 0.23  | %      |     |         |       
|                                            | Spread paidEuribor           |     | EUR            |       |        |       |       |       |       |       |        |     |      |       | 0.29  | %      |     |         |       
|From fixed to floating                      |                               |     |                | 10    |        | 11    |       | 11    |       | 150   |        | 13  |      | 21    |       | 216    |     | 8.6     |       
|                                            | Rate received                 |     | UF             |       | 5.50   | %     | 5.50  | %     | 5.50  | %     | 6.14   | %   | 5.50 | %     | 5.50  | %      |     |         |       
|                                            | Spread paidLibor             |     | USD            |       | 0.80   | %     | 0.80  | %     | 0.80  | %     | 1.44   | %   | 0.80 | %     | 0.80  | %      |     |         |       
|From fixed to floating                      |                               |     |                | 140   |        | 42    |       | 13    |       | 48    |        |     |      |       |       | 243    |     | 44.00   |       
|                                            | Rate received                 |     | USD            |       | 10.56  | %     | 7.88  | %     | 11.00 | %     | 5.49   | %   |      |       |       |        |     |         |       
|                                            | Spread paid    % CDI         |     | Brazilian Real |       | 108.19 | %     | 95.00 | %     | 87.00 | %     | 100.00 | %   |      |       |       |        |     |         |       
|From floating to floating                   |                               |     |                | 91    |        |       |       |       |       |       |        |     |      |       |       | 91     |     | 0.00    |       
|                                            | Spread receivedYen           |     | JPY            |       | 2.88   | %     |       |       |       |       |        |     |      |       |       |        |     |         |       
|                                            | Spread paidLibor             |     | USD            |       | 3.18   | %     |       |       |       |       |        |     |      |       |       |        |     |         |       
|From fixed to floating                      |                               |     |                |       |        |       |       |       |       | 49    |        |     |      | 74    |       | 123    |     | (16.51  | )     
|                                            | Rate received                 |     | JPY            |       |        |       |       |       |       |       | 0.698  | %   |      |       | 1.073 | %      |     |         |       
|                                            | Spread paidEuribor           |     | EUR            |       |        |       |       |       |       |       | 0.32   | %   |      |       | 0.35  | %      |     |         |       
|From variable to fixed                      |                               |     |                |       |        |       |       |       |       | 48    |        |     |      |       |       | 48     |     | (0.73   | )     
|                                            | Spread received               |     | USD            |       |        |       |       |       |       |       | 1.50   | %   |      |       |       |        |     |         |       
|                                            | Rate paid                     |     | UF             |       |        |       |       |       |       |       | 5.31   | %   |      |       |       |        |     |         |       
|From floating to floating                   |                               |     |                |       |        | 89    |       |       |       |       |        |     |      |       |       | 89     |     | 2.30    |       
|                                            | Spread receivedLibor         |     | USD            |       |        |       | 3.00  | %     |       |       |        |     |      |       |       |        |     |         |       
|                                            | Spread paid    % CDI         |     | Brazilian Real |       |        |       | 75.35 | %     |       |       |        |     |      |       |       |        |     |         |       
|Forward Rate Agreements in Foreign Currency |                               |     |                |       |        |       |       |       |       |       |        |     |      |       |       |        |     |         |       
|Amount                                      |                               |     |                | 1,368 |        |       |       |       |       |       |        |     |      |       |       | 1,368  |     | 0.00    |       
|Rate purchased                              |                               | USD |                | 3.2   | %      |       |       |       |       |       |        |     |      |       |       |        |     |         |       
|EXCHANGE RATE FORWARDS                      |                               |     |                |       |        |       |       |       |       |       |        |     |      |       |       |        |     |         |       
|                                            | Forward                       |     | JPY/USD        |       | 72     |       | 11    |       |       |       |        |     |      |       |       |        | 83  |         | (9.67 
|                                            | Forward                       |     | UF/USD         |       | 360    |       |       |       |       |       |        |     |      |       |       |        | 360 |         | (1.48 
|                                            | Forward                       |     | BRL/USD        |       | 135    |       |       |       |       |       |        |     |      |       |       |        | 135 |         | 9.96  
|                                            | Forward                       |     | COP/USD        |       | 21     |       |       |       |       |       |        |     |      |       |       |        | 21  |         | 0.94  
|                                            | Forward                       |     | SOL/USD        |       | 21     |       |       |       |       |       |        |     |      |       |       |        | 21  |         | (0.37 
|INTEREST RATE OPTIONS                       |                               |     |                |       |        |       |       |       |       |       |        |     |      |       |       |        |     |         |       
|COLLAR                                      |                               |     |                | 571   |        | 331   |       |       |       | 100   |        |     |      |       |       | 1,002  |     | (7.32   | )     
|                                            | Buy CAPEuribor               |     | EUR            |       | 4.7    | %     | 4.8   | %     |       |       | 5.3    | %   |      |       |       |        |     |         |       
|                                            | Sell FloorEuribor            |     | EUR            |       | 2.9    | %     | 3.5   | %     |       |       | 3.5    | %   |      |       |       |        |     |         |       
|Exchange Rate COLLAR                        |                               |     |                |       |        | 1,310 |       | 508   |       | 1,335 |        |     |      |       |       | 3,153  |     | (128.54 | )     
|                                            | Buy CAPLibor                 |     | USD            |       |        |       | 5.4   | %     | 5.5   | %     | 5.5    | %   |      |       |       |        |     |         |       
|                                            | Sell FloorLibor              |     | USD            |       |        |       | 3.6   | %     | 3.8   | %     | 3.5    | %   |      |       |       |        |     |         |       
|TOTAL                                       |                               |     |                | 8,378 |        | 3,949 |       | 1,600 |       | 4,078 |        | 398 |      | 6,071 |       | 24,474 |     | 231.78  |       

145

---



INTEREST-RATE SENSITIVITY  December 31, 2001

|                                   |                                          |                  |  | Maturity Dates |      | Fair Value
at
December 31,
2001
|---------------------------------- | ---------------------------------------- | ---------------- |  | -------------- | ---- | -------------------------------
|
|
|
|FLOATING RATE DEBT                 |                                          |                  |  |                |      |                                
|Bank loans                         |                                          | EURO             |  | 2              |      | 2                              
|                                   | Weighted average spreadEuribor          |                  |  |                | 0.1  | %                              
|Structured loans                   |                                          | EURO             |  |                |      |                                
|                                   | Weighted average spreadEuribor          |                  |  |                |      |                                
|EIB loans                          |                                          | EURO             |  |                |      |                                
|                                   | Weighted average spreadEuribor          |                  |  |                |      |                                
|Credits                            |                                          | EURO             |  | 137            |      | 130                            
|                                   | Weighted average spreadLibor            |                  |  |                | 0.2  | %                              
|Intercompany loans and credits     |                                          | EURO             |  |                |      |                                
|                                   | Weighted average spreadEuribor          |                  |  |                |      |                                
|MTN                                |                                          | EURO             |  |                |      | 50                             
|                                   | Weighted average spreadEuribor          |                  |  |                |      |                                
|MTN                                |                                          | EURO             |  |                |      |                                
|                                   | Weighted average spreadEQL              |                  |  |                |      |                                
|MTN                                |                                          | EURO             |  |                |      |                                
|                                   | Weighted average spreadIRS              |                  |  |                |      |                                
|Debentures and bonds               |                                          | EURO             |  | 60             |      |                                
|                                   | Weighted average spreadEuribor          |                  |  |                | 0.0  | %                              
|                                   | Bank liabilities                         |                  |  |                |      |                                
|International debentures and bonds |                                          | EURO             |  |                |      |                                
|                                   | Weighted average spreadBank liabilities |                  |  |                |      |                                
|Commercial paper                   |                                          | EURO             |  | 860            |      |                                
|                                   | Weighted average spreadEuribor          |                  |  |                | 0.0  | %                              
|Other                              |                                          | EURO             |  |                |      |                                
|                                   | Weighted average spreadEuribor          |                  |  |                |      |                                
|Bank loans                         |                                          | USD              |  | 1,435          |      | 956                            
|                                   | Weighted average spreadLibor            |                  |  |                | 0.3  | %                              
|Credits                            |                                          | USD              |  |                |      | 5                              
|                                   | Weighted average spreadLibor            |                  |  |                |      |                                
|EIB Loans                          |                                          | USD              |  | 50             |      | 50                             
|                                   | Weighted average spreadLibor            |                  |  |                | (0.1 | %)                             
|Project financing                  |                                          | USD              |  | 7              |      | 7                              
|                                   | Weighted average spreadLibor            |                  |  |                | 1.2  | %                              
|MTN                                |                                          | USD              |  | 57             |      |                                
|                                   | Weighted average spreadLibor            |                  |  |                | 0.1  | %                              
|MTN                                |                                          | USD              |  | 30             |      |                                
|                                   | Weighted average spreadEQL              |                  |  |                | 0.0  | %                              
|Commercial paper                   |                                          | USD              |  | 454            |      |                                
|                                   | Weighted average spreadLibor            |                  |  |                | 0.0  | %                              
|Credits                            |                                          | JPY              |  |                |      |                                
|                                   | Weighted average spreadLibor            |                  |  |                |      |                                
|Bank loans                         |                                          | JPY              |  | 77             |      | 75                             
|                                   | Weighted average spreadLibor            |                  |  |                | 2.2  | %                              
|Commercial paper                   |                                          | CHF              |  | 61             |      |                                
|                                   | Weighted average spreadLibor            |                  |  |                | 0.0  | %                              
|Commercial paper                   |                                          | GBP              |  | 749            |      |                                
|                                   | Weighted average spreadLibor            |                  |  |                | 0.0  | %                              
|Commercial paper                   |                                          | AUD              |  | 6              |      |                                
|                                   | Weighted average spreadLibor            |                  |  |                | 0.0  | %                              
|Bank loans                         |                                          | CLP              |  | 75             |      | 0                              
|                                   | Weighted average spreadTAB              |                  |  |                | 0.9  | %                              
|Other debt                         |                                          | CLP              |  | 3              |      | 339                            
|                                   | Weighted average spreadTAB              |                  |  |                | 0.0  | %                              
|Local debentures and bonds         |                                          | Brazilian Real   |  |                |      | 28                             
|                                   | Weighted Average SpreadCDI              |                  |  |                |      |                                
|Short-term local                   |                                          | Brazilian Real   |  | 31             |      |                                
|                                   | Weighted average spreadCDI              |                  |  |                | 0.6  | %                              
|Bank loans                         |                                          | Brazilian Real   |  | 154            |      |                                
|                                   | Weighted average spreadCDI              |                  |  |                | 1.1  | %                              
|Project financing                  |                                          | Brazilian Real   |  | 5              |      | 7                              
|                                   | Weighted average spreadFINELIGPM       |                  |  |                | 8.4  | %                              
|Public sector loans                |                                          | Brazilian Real   |  | 0              |      | 0                              
|                                   | Weighted average spreadTJLPTRIGPM     |                  |  |                | 9.5  | %                              
|Lines of credit                    |                                          | Brazilian Real   |  | 26             |      |                                
|                                   | Weighted Average SpreadCDI              |                  |  |                | 1.3  | %                              
|Bank loans                         |                                          | Other Currencies |  | 8              |      | 8                              
|                                   | Weighted average spreadDTFVACCFB      |                  |  |                | 7.0  | %                              
|Debentures and bonds               |                                          | Other Currencies |  | 1              |      | 0                              
|                                   | Weighted average spreadDTF              |                  |  |                | 4.1  | %                              
|Debentures and bonds               |                                          | Other Currencies |  |                |      |                                
|                                   | Weighted average spreadVAC              |                  |  |                |      |                                
|Short-term local                   |                                          | Other Currencies |  | 15             |      |                                
|                                   | Weighted average spreadVAC              |                  |  |                | 0.8  | %                              
|TOTAL FLOATING                     |                                          |                  |  | 4,303          |      | 1,657                          

146

---



INTEREST-RATE SENSITIVITY  December 31, 2001

|                       |                                |                  |  | Maturity Dates |      |      
|---------------------- | ------------------------------ | ---------------- |  | -------------- | ---- | -----
|
|
|
|FIXED RATE DEBT        |                                |                  |  |                |      |      
|EIB loans              |                                | EURO             |  | 1              |      | 1    
|                       | Weighted average interest rate |                  |  |                | 9.0  | %    
|Commercial Paper       |                                | EURO             |  |                |      |      
|                       | Weighted average interest rate |                  |  |                |      |      
|Debentures and bonds   |                                | EURO             |  | 60             |      | 180  
|                       | Weighted average interest rate |                  |  |                | 5.6  | %    
|Loans                  |                                | EURO             |  | 68             |      | 68   
|                       | Weighted average interest rate |                  |  |                | 5.7  | %    
|MTN                    |                                | EURO             |  | 30             |      | 300  
|                       | Weighted average interest rate |                  |  |                | 6.5  | %    
|EIB Loans              |                                | CHF              |  | 6              |      | 6    
|                       | Weighted average interest rate |                  |  |                | 6.9  | %    
|MTN                    |                                | CZK              |  | 0              |      |      
|                       | Weighted average interest rate |                  |  |                | 6.5  | %    
|Bank loans             |                                | USD              |  | 136            |      | 36   
|                       | Weighted average interest rate |                  |  |                | 10.4 | %    
|EIB loans              |                                | USD              |  | 0              |      | 0    
|                       | Weighted average interest rate |                  |  |                | 14.4 | %    
|Public sector loans    |                                | USD              |  | 7              |      | 7    
|                       | Weighted average interest rate |                  |  |                | 2.0  | %    
|Project financing      |                                | USD              |  | 4              |      | 4    
|                       | Weighted average interest rate |                  |  |                | 0.0  | %    
|MTN                    |                                | USD              |  | 0              |      | 378  
|                       | Weighted average interest rate |                  |  |                | 6.5  | %    
|Debentures and bonds   |                                | USD              |  | 18             |      | 356  
|                       | Weighted average interest rate |                  |  |                | 8.0  | %    
|Other debt             |                                | USD              |  | 35             |      | 43   
|                       | Weighted average interest rate |                  |  |                | 5.8  | %    
|EIB loans              |                                | JPY              |  | 1              |      | 1    
|                       | Weighted average interest rate |                  |  |                | 8.0  | %    
|MTN                    |                                | JPY              |  |                |      |      
|                       | Weighted average interest rate |                  |  |                |      |      
|Bank loans             |                                | CLP              |  |                |      |      
|                       | Weighted average interest rate |                  |  |                |      |      
|Debentures and bonds   |                                | CLP              |  | 18             |      | 18   
|                       | Weighted average interest rate |                  |  |                | 6.0  | %    
|Short-term local       |                                | Brazilian Real   |  | 36             |      |      
|                       | Weighted average interest rate |                  |  |                | 21.0 | %    
|Project financing      |                                | Brazilian Real   |  |                |      |      
|                       | Weighted average interest rate |                  |  |                |      |      
|Bank loans             |                                | Other Currencies |  | 105            |      |      
|                       | Weighted average interest rate |                  |  |                | 8.7  | %    
|Debentures and bonds   |                                | Other Currencies |  | 0              |      | 12   
|                       | Weighted average interest rate |                  |  |                | 0.0  | %    
|TOTAL FIXED            |                                |                  |  | 525            |      | 1,410
|TOTAL FIXED + FLOATING |                                |                  |  | 4,828          |      | 3,067

147

---



INTEREST-RATE SENSITIVITY  December 31, 2001

|                                       |                         |     |                | Maturity Dates |        |       |      
|-------------------------------------- | ----------------------- | --- | -------------- | -------------- | ------ | ----- | -----
|
|
|
|INTEREST RATE SWAPS                    |                         |     |                |                |        |       |      
|Swap in Euros                          |                         |     |                |                |        |       |      
|From floating to fixed                 |                         |     |                | 300            |        | 492   |      
|                                       | Spread receivedEuribor |     | EUR            |                | 0.00   | %     | 0.00 
|                                       | Rate paid               |     | EUR            |                | 4.28   | %     | 4.79 
|From fixed to floating                 |                         |     |                | 110            |        | 633   |      
|                                       | Rate received           |     | EUR            |                | 9.7    | %     | 5.9  
|                                       | Spread paidEuribor     |     | EUR            |                | 0.22   | %     | 0.05 
|From floating to floating              |                         |     |                | 222            |        |       |      
|                                       | Spread receivedEuribor |     | EUR            |                | 0.19   | %     |      
|                                       | Spread paidEuribor     |     | EUR            |                | 0.14   | %     |      
|From floating to floating              |                         |     |                |                |        |       |      
|                                       | Spread receivedIPCL    |     | EUR            |                |        |       |      
|                                       | Spread paidEuribor     |     | EUR            |                |        |       |      
|From floating to floating              |                         |     |                |                |        |       |      
|                                       | Spread receivedEQL     |     | EUR            |                |        |       |      
|                                       | Spread paidEuribor     |     | EUR            |                |        |       |      
|From floating to floating              |                         |     |                |                |        |       |      
|                                       | Spread receivedIRS     |     | EUR            |                |        |       |      
|                                       | Spread paidEuribor     |     | EUR            |                |        |       |      
|Forward Rate Agreements in Euros       |                         |     |                |                |        |       |      
|Amount                                 |                         |     |                | 1,100          |        | 2,200 |      
|Rate purchased                         |                         | EUR |                | 3.72           | %      | 3.94  | %    
|Interest Rate Swap in Foreign Currency |                         |     |                |                |        |       |      
|From floating to fixed                 |                         |     |                |                |        | 340   |      
|                                       | Rate paid               |     | USD            |                |        |       | 0.0  
|                                       | Spread receivedLibor   |     | USD            |                |        |       | 6.5  
|From fixed to floating                 |                         |     |                |                |        | 567   |      
|                                       | Spread paidEuribor     |     | USD            |                |        |       | 5.875
|                                       | Rate received           |     | USD            |                |        |       | 0.0  
|From fixed to floating                 |                         |     |                |                |        |       |      
|                                       | Rate received           |     | CHF            |                |        |       |      
|                                       | Spread paidLibor       |     | CHF            |                |        |       |      
|From fixed to floating                 |                         |     |                | 159            |        |       |      
|                                       | Rate received           |     | Brazilian Real |                | 20.6   | %     |      
|                                       | Spread paidCDI         |     | Brazilian Real |                | 4.0    | %     |      
|From floating to floating              |                         |     |                |                |        |       |      
|                                       | Spread receivedLibor   |     | USD            |                |        |       |      
|                                       | Spread paidLibor       |     | USD            |                |        |       |      
|From floating to fixed                 |                         |     |                |                |        | 87    |      
|                                       | Spread receivedLibor   |     | JPY            |                |        |       | 0.0  
|                                       | Rate paid               |     | EUR            |                |        |       | 0.6  
|From floating to floating              |                         |     |                |                |        | 15    |      
|                                       | Spread receivedEuribor |     | USD            |                |        |       | 0.0  
|                                       | Spread paidLibor       |     | EUR            |                |        |       | 0.0  
|From floating to floating              |                         |     |                | 501            |        |       |      
|                                       | Spread receivedLibor   |     | USD            |                | 0.010  | %     |      
|                                       | Spread paidEuribor     |     | EUR            |                | 0.010  | %     |      
|From floating to floating              |                         |     |                | 21             |        |       |      
|                                       | Spread receivedEQL     |     | USD            |                | 0.00   | %     |      
|                                       | Spread paidEuribor     |     | EUR            |                | (0.180 | %)    |      
|From floating to floating              |                         |     |                | 749            |        |       |      
|                                       | Spread receivedLibor   |     | GBP            |                | 0.0    | %     |      
|                                       | Spread paidEuribor     |     | EUR            |                | 0.0    | %     |      
|From floating to floating              |                         |     |                | 61             |        |       |      
|                                       | Spread receivedLibor   |     | CHF            |                | 0.0    | %     |      
|                                       | Spread paidEuribor     |     | EUR            |                | 0.0    | %     |      
|From floating to floating              |                         |     |                | 6              |        |       |      
|                                       | Spread receivedLibor   |     | AUD            |                | 0.0    | %     |      
|                                       |                         |     |                |                |        |       |      

148

---

|                                            | Spread paidEuribor   |     | EUR                |       | 0.0  | %     |       |       |      |       |      |       |       |       |       |        |     |        |        |  
|------------------------------------------- | --------------------- | --- | ------------------ | ----- | ---- | ----- | ----- | ----- | ---- | ----- | ---- | ----- | ----- | ----- | ----- | ------ | --- | ------ | ------ | -
|From fixed to floating                      |                       |     |                    |       |      | 13    |       |       |      |       |      |       |       | 319   |       | 332    |     | 100.83 |       
|                                            | Rate received         |     | USD                |       |      |       | 5.19  | %     |      |       |      |       |       |       | 6.00  | %      |     |        |        |  
|                                            | Spread paidEuribor   |     | EUR                |       |      |       | 0.000 | %     |      |       |      |       |       |       | 0.115 | %      |     |        |        |  
|From fixed to floating                      |                       |     |                    |       |      |       |       | 28    |      |       |      |       |       |       |       | 28     |     | 7.35   |       
|                                            | Rate received         |     | CZK                |       |      |       |       |       | 6.25 | %     |      |       |       |       |       |        |     |        |        |  
|                                            | Spread paidEuribor   |     | EUR                |       |      |       |       |       | 0.07 | %     |      |       |       |       |       |        |     |        |        |  
|From fixed to floating                      |                       |     |                    |       |      |       |       |       |      | 597   |      |       |       | 105   |       | 702    |     | (24.4  | )     
|                                            | Rate received         |     | UF                 |       |      |       |       |       |      |       | 6.80 | %     |       |       | 5.50  | %      |     |        |        |  
|                                            | Spread paidLibor     |     | USD                |       |      |       |       |       |      |       | 1.20 | %     |       |       | 0.80  | %      |     |        |        |  
|From fixed to varible                       |                       |     |                    |       |      | 80    |       |       |      |       |      |       |       |       |       | 80     |     | (11.23 | )     
|                                            | Rate received         |     | USD                |       |      |       | 7.4   | %     |      |       |      |       |       |       |       |        |     |        |        |  
|                                            | Spread paidCDI       |     | Brazilian Real     |       |      |       | 0.0   | %     |      |       |      |       |       |       |       |        |     |        |        |  
|From floating to floating                   |                       |     |                    |       |      | 108   |       |       |      |       |      |       |       |       |       | 108    |     | (21.56 | )     
|                                            | Spread receivedYen   |     | JPY                |       |      |       | 2.7   | %     |      |       |      |       |       |       |       |        |     |        |        |  
|                                            | Spread paidLibor     |     | USD                |       |      |       | 3.2   | %     |      |       |      |       |       |       |       |        |     |        |        |  
|From fixed to floating                      |                       |     |                    |       |      |       |       |       |      |       |      | 49    |       | 74    |       | 123    |     | (10.31 | )     
|                                            | Rate received         |     | JPY                |       |      |       |       |       |      |       |      |       | 0.698 | %     | 1.073 | %      |     |        |        |  
|                                            | Spread paidEuribor   |     | EUR                |       |      |       |       |       |      |       |      |       | 0.32  | %     | 0.35  | %      |     |        |        |  
|From floating to floating                   |                       |     |                    | 191   |      |       |       |       |      |       |      |       |       |       |       | 191    |     | (43.23 | )     
|                                            | Spread received       |     | ARG                |       |      |       |       |       |      |       |      |       |       |       |       |        |     |        |        |  
|                                            | Spread paidLibor     |     | USD                |       |      |       |       |       |      |       |      |       |       |       |       |        |     |        |        |  
|From floating to floating                   |                       |     |                    | 74    |      |       |       |       |      |       |      |       |       |       |       | 74     |     | (1.15  | )     
|                                            | Spread receivedLibor |     | USD                |       | 6.35 | %     |       |       |      |       |      |       |       |       |       |        |     |        |        |  
|                                            | Spread paidCDI       |     | Brazilian Real     |       | 3.00 | %     |       |       |      |       |      |       |       |       |       |        |     |        |        |  
|Forward Rate Agreements
in Foreign Currency |                       |     |                    |       |      |       |       |       |      |       |      |       |       |       |       |        |    
|Amount                                      |                       |     |                    | 260   |      |       |       |       |      |       |      |       |       |       |       | 260    |     | 0.16   |       
|Rate purchased                              |                       | USD |                    | 0.0   | %    |       |       |       |      |       |      |       |       |       |       |        |     |        |       
|EXCHANGE RATE FORWARDS                      |                       |     |                    |       |      |       |       |       |      |       |      |       |       |       |       |        |    
|                                            | Forward               |     | UF/USD             |       | 574  |       |       |       |      |       |      |       |       |       |       |        | 574 |        | (14.18 | )
|                                            | Forward               |     | Brazilian Real/USD |       | 272  |       |       |       |      |       |      |       |       |       |       |        | 272 |        | (25.19 | )
|                                            | Forward               |     | COP/USD            |       | 4    |       |       |       |      |       |      |       |       |       |       |        | 4   |        | (0.11  | )
|                                            | Forward               |     | SOL/USD            |       | 33   |       |       |       |      |       |      |       |       |       |       |        | 33  |        | (0.11  | )
|INTEREST RATE OPTIONS                       |                       |     |                    |       |      |       |       |       |      |       |      |       |       |       |       |        |    
|COLLAR                                      |                       |     |                    | 511   |      | 571   |       | 331   |      |       |      | 100   |       |       |       | 1,513  |     | (0.44  | )     
|                                            | Buy CAPEuribor       |     | EUR                |       | 4.6  | %     | 4.7   | %     | 4.8  | %     |      |       | 5.3   | %     |       |        |     |        |        |  
|                                            | Sell FloorEuribor    |     | EUR                |       | 3.1  | %     | 2.9   | %     | 3.5  | %     |      |       | 3.5   | %     |       |        |     |        |        |  
|CAP                                         |                       |     |                    | 1,042 |      |       |       |       |      |       |      |       |       |       |       | 1,042  |     | 0      |       
|                                            | Buy CAPEuribor       |     | EUR                |       | 5.0  | %     |       |       |      |       |      |       |       |       |       |        |     |        |        |  
|Exchange Rate COLLAR                        |                       |     |                    |       |      |       |       | 1,729 |      | 557   |      | 340   |       |       |       | 2,626  |     | (23.78 | )     
|Buy CAPLibor                               |                       | USD |                    |       |      |       |       | 5.6   | %    | 5.4   | %    | 5.6   | %     |       |       |        |     |        |       
|Sell FloorLibor                            |                       | USD |                    |       |      |       |       | 3.6   | %    | 3.4   | %    | 3.0   | %     |       |       |        |     |        |       
|TOTAL                                       |                       |     |                    | 6,190 |      | 5,106 |       | 4,026 |      | 2,127 |      | 2,873 |       | 4,513 |       | 24,835 |     | 79.34  |       

149

---



The following tables provide information regarding our financial instruments and derivatives at December 31, 2002 and at December 31, 2001 that are
sensitive to exchange rate fluctuations. These include bond instruments, currency swaps and exchange rate insurance.

For
debt commitments, the tables present the main cash flows and average interest rate weighted by the expected maturity date. For swaps, the tables present the notional amounts and the
interest rate weighted by the expected contractually agreed expiry (maturity) date. For exchange rate insurance, the tables show the notional amounts weighted by the expected maturity (contractual
expiry) date. The
notional amounts are used to calculate the contractual payments to be exchanged in accordance with the agreement.

The
average weighted interest rates are presented as a margin applied to the benchmark rate indicated. Except where indicated, the information presents the equivalent amount in pesetas,
since the euro is the currency in which Endesa presents its accounts. The exchange rates used are those fixed by the Bank of Spain as at the date of each table (or the immediately preceding business
day if such date is not a business day). The cash flows of the instruments are denominated in the currency indicated. All of the commitments in foreign currencies appear in both the following tables
and the tables under the heading "Interest Rate Sensitivity" above.

150

---



EXCHANGE RATE SENSITIVITY  December 31, 2002

|                     |                                      |                  |  | Maturity Dates |       |    
|-------------------- | ------------------------------------ | ---------------- |  | -------------- | ----- | ---
|
|
|
|FLOATING RATE DEBT   |                                      |                  |  |                |       |    
|Bank Loans           |                                      | USD              |  | 1,066          |       | 50 
|                     | Weighted average spreadLibor        |                  |  |                | 1.3   | %  
|Credits              |                                      | USD              |  | 4              |       |    
|                     | Weighted average spreadLibor        |                  |  |                | 0.1   | %  
|EIB loans            |                                      | USD              |  | 42             |       | 47 
|                     | Weighted average spreadLibor        |                  |  |                | (0.12 | )% 
|Project financing    |                                      | USD              |  | 40             |       | 36 
|                     | Weighted average spreadLibor        |                  |  |                | 1.7   | %  
|Commercial paper     |                                      | USD              |  | 163            |       |    
|                     | Weighted average spreadLibor        |                  |  |                | 0.0   | %  
|Credits              |                                      | JPY              |  |                |       |    
|                     | Weighted average spreadLibor        |                  |  |                |       |    
|Bank loans           |                                      | JPY              |  | 61             |       | 10 
|                     | Weighted average spreadLibor        |                  |  |                | 2.6   | %  
|Commercial paper     |                                      | CHF              |  | 72             |       |    
|                     | Weighted average spreadLibor        |                  |  |                | 0.0   | %  
|MTN                  |                                      | CZK              |  |                |       |    
|                     | Weighted average spreadPribor       |                  |  |                |       |    
|Commercial paper     |                                      | GBP              |  | 365            |       |    
|                     | Weighted average spreadLibor        |                  |  |                | 0.0   | %  
|Bank loans           |                                      | CLP              |  |                |       | 62 
|                     | Weighted average spreadTAB          |                  |  |                |       |    
|Project financing    |                                      | Brazilian Real   |  | 2              |       | 2  
|                     | Weighted average spreadFINELIGPM   |                  |  |                | 1.1   | %  
|Public sector loans  |                                      | Brazilian Real   |  |                |       | 16 
|                     | Weighted average spreadTJLPTRIGPM |                  |  |                |       |    
|Lines of credit      |                                      | Brazilian Real   |  | 5              |       |    
|                     | Weighted average spreadCDI          |                  |  |                | 3.0   | %  
|Bank loans           |                                      | Other Currencies |  |                |       | 12 
|                     | Weighted average spreadDTFVAC-CF    |                  |  |                |       |    
|Debentures and bonds |                                      | Other Currencies |  |                |       | 4  
|                     | Weighted average spreadDTF          |                  |  |                |       |    
|Debentures and bonds |                                      | Other Currencies |  | 2              |       | 2  
|                     | Weighted average spreadVAC          |                  |  |                | 0.5   | %  
|TOTAL FLOATING       |                                      |                  |  | 1,822          |       | 241

151

---



EXCHANGE RATE SENSITIVITY  December 31, 2002

|                                   |                                |                  |  | Maturity Dates |       |    
|---------------------------------- | ------------------------------ | ---------------- |  | -------------- | ----- | ---
|
|
|
|FIXED RATE DEBT                    |                                |                  |  |                |       |    
|EIB Loans                          |                                | CHF              |  | 6              |       | 6  
|                                   | Weighted average interest rate |                  |  |                | 6.4%  |    
|MTN                                |                                | CZK              |  |                |       | 32 
|                                   | Weighted average interest rate |                  |  |                |       |    
|MTN                                |                                | GBP              |  |                |       |    
|                                   | Weighted average interest rate |                  |  |                |       |    
|Bank loans                         |                                | USD              |  | 15             |       | 19 
|                                   | Weighted average interest rate |                  |  |                | 6.0%  |    
|EIB loans                          |                                | USD              |  | 0              |       | 0  
|                                   | Weighted average interest rate |                  |  |                | 14.4% |    
|Public sector loans                |                                | USD              |  | 2              |       | 2  
|                                   | Weighted average interest rate |                  |  |                | 1.8%  |    
|Project financing                  |                                | USD              |  | 30             |       | 30 
|                                   | Weighted average interest rate |                  |  |                | 5.4%  |    
|MTN                                |                                | USD              |  | 491            |       |    
|                                   | Weighted average interest rate |                  |  |                | 5.9%  |    
|International debentures and bonds |                                | USD              |  | 227            |       | 3  
|                                   | Weighted average interest rate |                  |  |                | 7.6%  |    
|Local debentures and bonds         |                                | USD              |  |                |       |    
|                                   | Weighted average interest rate |                  |  |                |       |    
|Other debt                         |                                | USD              |  | 16             |       | 14 
|                                   | Weighted average interest rate |                  |  |                | 7.8%  |    
|EIB Loans                          |                                | JPY              |  | 0              |       | 0  
|                                   | Weighted average interest rate |                  |  |                | 8.0%  |    
|MTN                                |                                | JPY              |  |                |       |    
|                                   | Weighted average interest rate |                  |  |                |       |    
|Bank loans                         |                                | CLP              |  | 2              |       | 2  
|                                   | Weighted average interest rate |                  |  |                | 9.0%  |    
|Local debentures and bonds         |                                | CLP              |  | 14             |       | 14 
|                                   | Weighted average interest rate |                  |  |                | 6.0%  |    
|Public sector loans                |                                | Brazilian Real   |  | 10             |       | 11 
|                                   | Weighted average interest rate |                  |  |                | 10.2% |    
|Project financing                  |                                | Brazilian Real   |  | 3              |       | 3  
|                                   | Weighted average interest rate |                  |  |                | 7.9%  |    
|Local debentures and bonds         |                                | Brazilian Real   |  | 1              |       |    
|                                   | Weighted average interest rate |                  |  |                | 12.0% |    
|Bank loans                         |                                | Other Currencies |  | 10             |       |    
|                                   | Weighted average interest rate |                  |  |                | 4.6%  |    
|Debentures and bonds               |                                | Other Currencies |  | 9              |       | 22 
|                                   | Weighted average interest rate |                  |  |                | 7.4%  |    
|Other debt                         |                                | Other Currencies |  |                |       | 4  
|                                   | Weighted average interest rate |                  |  |                |       |    
|TOTAL FIXED                        |                                |                  |  | 836            |       | 162
|TOTAL FIXED + FLOATING             |                                |                  |  | 2,658          |       | 403
|                                   |                                |                  |  |                |       |    

152

---



EXCHANGE RATE SENSITIVITY  December 31, 2002

|                          |                         |  |                | Maturity Dates |         | Fair Value at December 31, 2002 |       
|------------------------- | ----------------------- |  | -------------- | -------------- | ------- | ------------------------------- | ------
|
|
|EXCHANGE RATE SWAPS       |                         |  |                |                |         |                                 |       
|From floating to fixed    |                         |  |                | 191            |         | 95                              |       
|                          | Spread receivedLibor   |  | USD            |                | 0.00%   |                                 | 0.00% 
|                          | Rate paid               |  | USD            |                | 6.20%   |                                 | 7.10% 
|From fixed to floating    |                         |  |                | 477            |         |                                 |       
|                          | Rate received           |  | USD            |                | 5.875%  |                                 |       
|                          | Spread paidEuribor     |  | USD            |                | 0.00%   |                                 |       
|From fixed to floating    |                         |  |                |                |         | 32                              |       
|                          | Rate received           |  | CHF            |                |         |                                 | 6.35% 
|                          | Spread paidLibor       |  | CHF            |                |         |                                 | 3.8%  
|From floating to fixed    |                         |  |                | 80             |         |                                 |       
|                          | Spread receivedLibor   |  | EUR            |                | 0.0%    |                                 |       
|                          | Rate paid               |  | JPY            |                | 0.6%    |                                 |       
|From floating to floating |                         |  |                | 364            |         | 107                             |       
|                          | Spread receivedEuribor |  | EUR            |                | 0.80%   |                                 | 0.25% 
|                          | Spread paidLibor       |  | USD            |                | 0.99%   |                                 | 0.29% 
|From floating to fixed    |                         |  |                | 6              |         |                                 |       
|                          | Spread receivedEuribor |  | USD            |                | 0.40%   |                                 |       
|                          | Rate paid               |  | EUR            |                | 6.45%   |                                 |       
|From floating to floating |                         |  |                | 135.4          |         | 114                             |       
|                          | Spread receivedLibor   |  | USD            |                | 0.000%  |                                 | 0.29% 
|                          | Spread paidEuribor     |  | EUR            |                | 0.000%  |                                 | 0.33% 
|From floating to floating |                         |  |                | 374.1          |         |                                 |       
|                          | Spread receivedLibor   |  | GBP            |                | 0.0%    |                                 |       
|                          | Spread paidEuribor     |  | EUR            |                | 0.0%    |                                 |       
|From fixed to fixed       |                         |  |                |                |         |                                 |       
|                          | Rate receivedLibor     |  | GBP            |                |         |                                 |       
|                          | Rate paid               |  | EUR            |                |         |                                 |       
|From floating to floating |                         |  |                | 71.8           |         |                                 |       
|                          | Spread receivedLibor   |  | CHF            |                | 0.0%    |                                 |       
|                          | Spread paidEuribor     |  | EUR            |                | 0.0%    |                                 |       
|From fixed to floating    |                         |  |                | 12.9           |         |                                 |       
|                          | Rate received           |  | USD            |                | 5.19%   |                                 |       
|                          | Spread paidEuribor     |  | EUR            |                | 0.000%  |                                 |       
|From fixed to floating    |                         |  |                |                |         | 27.6                            |       
|                          | Rate received           |  | CZK            |                |         |                                 | 6.25% 
|                          | Spread paidEuribor     |  | EUR            |                |         |                                 | 0.07% 
|From floating to floating |                         |  |                |                |         |                                 |       
|                          | Rate receivedPribor    |  | CZK            |                |         |                                 |       
|                          | Spread paidEuribor     |  | EUR            |                |         |                                 |       
|From fixed to floating    |                         |  |                | 10             |         | 11                              |       
|                          | Rate received           |  | UF             |                | 5.50%   |                                 | 5.50% 
|                          | Spread paidLibor       |  | USD            |                | 0.80%   |                                 | 0.80% 
|From fixed to floating    |                         |  |                | 140            |         | 42                              |       
|                          | Rate received           |  | USD            |                | 10.56%  |                                 | 7.88% 
|                          | Spread paidCDI         |  | Brazilian Real |                | 108.19% |                                 | 95.00%
|From floating to floating |                         |  |                | 91             |         |                                 |       
|                          | Spread receivedYen     |  | JPY            |                | 2.88%   |                                 |       
|                          | Spread paidLibor       |  | USD            |                | 3.18%   |                                 |       
|From fixed to floating    |                         |  |                |                |         |                                 |       
|                          | Rate received           |  | JPY            |                |         |                                 |       
|                          | Spread paidEuribor     |  | EUR            |                |         |                                 |       
|From floating to fixed    |                         |  |                |                |         |                                 |       
|                          | Spread received         |  | USD            |                |         |                                 |       
|                          | Rate paid               |  | UF             |                |         |                                 |       
|From floating to floating |                         |  |                |                |         | 89                              |       
|                          | Spread receivedLibor   |  | USD            |                |         |                                 | 3.00% 
|                          | Spread paidCDI         |  | Brazilian Real |                |         |                                 | 75.35%
|                          |                         |  |                |                |         |                                 |       

153

---

|Forward Rate Agreements in Foreign Currency |                      |  |         |       |       |       |       |     |      |       |       |    |  |       |  |        |       |       |        
|------------------------------------------- | -------------------- |  | ------- | ----- | ----- | ----- | ----- | --- | ---- | ----- | ----- | -- |  | ----- |  | ------ | ----- | ----- | -------
|                                            | Amount               |  |         |       | 1,368 |       |       |     |      |       |       |    |  |       |  |        | 1,368 |       | 0.0    
|                                            | Rate purchased       |  | USD     |       | 3.2%  |       |       |     |      |       |       |    |  |       |  |        |       |       |        
|EXCHANGE RATE FORWARDS                      |                      |  |         |       |       |       |       |     |      |       |       |    |  |       |  |        |      
|                                            | Forward              |  | JPY/USD |       | 72    |       | 11    |     |      |       |       |    |  |       |  |        | 83    |       | (9.67  
|                                            | Forward              |  | UF/USD  |       | 360   |       |       |     |      |       |       |    |  |       |  |        | 360   |       | (1.48  
|                                            | Forward              |  | BRL/USD |       | 135   |       |       |     |      |       |       |    |  |       |  |        | 135   |       | 9.96   
|                                            | Forward              |  | COP/USD |       | 21    |       |       |     |      |       |       |    |  |       |  |        | 21    |       | 0.94   
|                                            | Forward              |  | SOL/USD |       | 21    |       |       |     |      |       |       |    |  |       |  |        | 21    |       | (0.37  
|INTEREST RATE OPTIONS                       |                      |  |         |       |       |       |       |     |      |       |       |    |  |       |  |        |      
|                                            | Exchange Rate COLLAR |  |         |       |       |       | 1,310 |     | 508  |       | 1,335 |    |  |       |  |        | 3,153 |       | (128.54
|                                            | Buy CAPLibor        |  | USD     |       |       |       | 5.4%  |     | 5.5% |       | 5.5%  |    |  |       |  |        |       |       |        
|                                            | Sell FloorLibor     |  | USD     |       |       |       | 3.6%  |     | 3.8% |       | 3.5%  |    |  |       |  |        |       |       |        
|TOTAL                                       |                      |  |         | 3,930 |       | 1,839 |       | 780 |      | 2,138 |       | 13 |  | 1,347 |  | 10,047 |       | 93.65 |        

154

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EXCHANGE RATE SENSITIVITY  December 31, 2001

|                           |                                            |                  |  | Maturity Dates |      |      
|-------------------------- | ------------------------------------------ | ---------------- |  | -------------- | ---- | -----
|
|
|
|FLOATING RATE DEBT         |                                            |                  |  |                |      |      
|Bank Loans                 |                                            | USD              |  | 403            |      | 1,059
|                           | Weighted average spread  Libor            |                  |  |                | 1.0  | %    
|Credits                    |                                            | USD              |  |                |      | 5    
|                           | Weighted average spread  Libor            |                  |  |                |      |      
|EIB Loans                  |                                            | USD              |  | 50             |      | 50   
|                           | Weighted average spread  Libor            |                  |  |                | (0.1 | %)   
|Project Financing          |                                            | USD              |  | 7              |      | 7    
|                           | Weighted average spread  Libor            |                  |  |                | 1.2  | %    
|MTN                        |                                            | USD              |  | 57             |      |      
|                           | Weighted average spread  Libor            |                  |  |                | 0.1  | %    
|MTN                        |                                            | USD              |  | 30             |      |      
|                           | Weighted average spread  EQL              |                  |  |                | 0.0  | %    
|Commercial paper           |                                            | USD              |  | 454            |      |      
|                           | Weighted average spread  Libor            |                  |  |                | 0.0  | %    
|Credits                    |                                            | JPY              |  |                |      |      
|                           | Weighted average spread  Libor            |                  |  |                |      |      
|Bank Loans                 |                                            | JPY              |  | 77             |      | 75   
|                           | Weighted average spread  Libor            |                  |  |                | 2.2  | %    
|Commercial paper           |                                            | CHF              |  | 61             |      |      
|                           | Weighted average spread  Libor            |                  |  |                | 0.0  | %    
|Commercial paper           |                                            | GBP              |  | 749            |      |      
|                           | Weighted average spread  Libor            |                  |  |                | 0.0  | %    
|Commercial paper           |                                            | AUD              |  | 6              |      |      
|                           | Weighted average spread  Libor            |                  |  |                | 0.0  | %    
|Bank Loans                 |                                            | CLP              |  | 89             |      | 0    
|                           | Weighted average spread  TAB              |                  |  |                | 0.9  | %    
|Other Debt                 |                                            | CLP              |  | 3              |      | 1,654
|                           | Weighted average spread  TAB              |                  |  |                | 0.0  | %    
|Local debentures and bonds |                                            | Brazilian Real   |  |                |      | 28   
|                           | Weighted average spread -CDI               |                  |  |                |      |      
|Short-term local           |                                            | Brazilian Real   |  | 31             |      |      
|                           | Weighted average spread  CDI              |                  |  |                | 0.6  | %    
|Bank Loans                 |                                            | Brazilian Real   |  | 154            |      |      
|                           | Weighted average spread  CDI              |                  |  |                | 1.1  | %    
|Project financing          |                                            | Brazilian Real   |  | 5              |      | 7    
|                           | Weighted average spread  FINEL  IGPM     |                  |  |                | 8.4  | %    
|Public sector loans        |                                            | Brazilian Real   |  | 0              |      | 0    
|                           | Weighted average spread  TJLP  TR  IGPM |                  |  |                | 9.5  | %    
|Lines of Credits           |                                            | Brazilian Real   |  | 26             |      |      
|                           | Weighted Average Spread  CDI              |                  |  |                | 1.3  | %    
|Bank loans                 |                                            | Other Currencies |  | 8              |      | 8    
|                           | Weighted average spread  DTF VAC-CF BIRF  |                  |  |                | 7.0  | %    
|Debentures and bonds       |                                            | Other Currencies |  | 1              |      | 0    
|                           | Weighted average spread  DTF              |                  |  |                | 4.1  | %    
|Debentures and bonds       |                                            | Other Currencies |  |                |      |      
|                           | Weighted average spread  VAC              |                  |  |                |      |      
|Short-term local           |                                            | Other Currencies |  | 15             |      |      
|                           | Weighted average spread  VAC              |                  |  |                | 0.8  | %    
|TOTAL FLOATING             |                                            |                  |  | 2,226          |      | 2,893

155

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EXCHANGE RATE SENSITIVITY  December 31, 2001

|                       |                                |                  |  | Maturity Dates |      |      
|---------------------- | ------------------------------ | ---------------- |  | -------------- | ---- | -----
|
|
|
|FIXED RATE DEBT        |                                |                  |  |                |      |      
|EIB Loans              |                                | CHF              |  | 6              |      | 6    
|                       | Weighted average interest rate |                  |  |                | 6.9  | %    
|MTN                    |                                | CZK              |  | 0              |      |      
|                       | Weighted average interest rate |                  |  |                | 6.5  | %    
|Bank loans             |                                | USD              |  | 136            |      | 36   
|                       | Weighted average interest rate |                  |  |                | 10.4 | %    
|EIB loans              |                                | USD              |  | 0              |      | 0    
|                       | Weighted average interest rate |                  |  |                | 14.4 | %    
|Public Sector Loans    |                                | USD              |  | 7              |      | 7    
|                       | Weighted average interest rate |                  |  |                | 2.0  | %    
|Project financing      |                                | USD              |  | 4              |      | 4    
|                       | Weighted average interest rate |                  |  |                | 0.0  | %    
|MTN                    |                                | USD              |  | 0              |      | 584  
|                       | Weighted average interest rate |                  |  |                | 6.5  | %    
|Debentures and bonds   |                                | USD              |  | 42             |      | 371  
|                       | Weighted average interest rate |                  |  |                | 8.0  | %    
|Other debt             |                                | USD              |  | 35             |      | 43   
|                       | Weighted average interest rate |                  |  |                | 5.8  | %    
|EIB Loans              |                                | JPY              |  | 1              |      | 1    
|                       | Weighted average interest rate |                  |  |                | 8.0  | %    
|MTN                    |                                | JPY              |  |                |      |      
|                       | Weighted average interest rate |                  |  |                |      |      
|Bank loans             |                                | CLP              |  |                |      |      
|                       | Weighted average interest rate |                  |  |                |      |      
|Debentures and bonds   |                                | CLP              |  | 18             |      | 18   
|                       | Weighted average interest rate |                  |  |                | 6.0  | %    
|Short-term local       |                                | Brazilian Real   |  | 73             |      |      
|                       | Weighted average interest rate |                  |  |                | 21.0 | %    
|Project Financing      |                                | Brazilian Real   |  |                |      |      
|                       | Weighted average interest rate |                  |  |                |      |      
|Bank Loans             |                                | Other Currencies |  | 105            |      |      
|                       | Weighted average interest rate |                  |  |                | 8.7  | %    
|Debentures and bonds   |                                | Other Currencies |  |                |      | 12   
|                       | Weighted average interest rate |                  |  |                |      |      
|TOTAL FIXED            |                                |                  |  | 427            |      | 1,082
|TOTAL FIXED + FLOATING |                                |                  |  | 2,653          |      | 3,975

156

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EXCHANGE RATE SENSITIVITY  December 31, 2001

|                          |                         |  |                | Maturity Dates |        |      |      
|------------------------- | ----------------------- |  | -------------- | -------------- | ------ | ---- | -----
|
|
|
|EXCHANGE RATE SWAPS       |                         |  |                |                |        |      |      
|From floating to fixed    |                         |  |                |                |        | 340  |      
|                          | Spread receivedLibor   |  | USD            |                |        |      | 0.0  
|                          | Rate paid               |  | USD            |                |        |      | 6.5  
|From fixed to floating    |                         |  |                |                |        | 567  |      
|                          | Rate received           |  | USD            |                |        |      | 5.875
|                          | Spread paidEuribor     |  | USD            |                |        |      | 0.0  
|From fixed to floating    |                         |  |                |                |        |      |      
|                          | Rate received           |  | CHF            |                |        |      |      
|                          | Spread paidLibor       |  | CHF            |                |        |      |      
|From fixed to floating    |                         |  |                | 159            |        |      |      
|                          | Rate received           |  | Brazilian Real |                | 20.6   | %    |      
|                          | Spread paidCDI         |  | Brazilian Real |                | 4.0    | %    |      
|From floating to floating |                         |  |                |                |        |      |      
|                          | Spread receivedLibor   |  | USD            |                |        |      |      
|                          | Spread paidLibor       |  | USD            |                |        |      |      
|From floating to fixed    |                         |  |                |                |        | 87   |      
|                          | Spread receivedLibor   |  | EUR            |                |        |      | 0.0  
|                          | Rate paid               |  | JPY            |                |        |      | 0.6  
|From floating to floating |                         |  |                |                |        | 15   |      
|                          | Spread receivedEuribor |  | EUR            |                |        |      | 0.0  
|                          | Spread paidLibor       |  | USD            |                |        |      | 0.0  
|From floating to floating |                         |  |                | 501.4          |        |      |      
|                          | Spread receivedLibor   |  | USD            |                | 0.010  | %    |      
|                          | Spread paidEuribor     |  | EUR            |                | 0.010  | %    |      
|From floating to floating |                         |  |                | 21.4           |        |      |      
|                          | Spread receivedEQL     |  | USD            |                | 0.00   | %    |      
|                          | Spread paidEuribor     |  | EUR            |                | (0.180 | )    |      
|From floating to floating |                         |  |                | 749.2          |        |      |      
|                          | Spread receivedLibor   |  | GBP            |                | 0.0    | %    |      
|                          | Spread paidEuribor     |  | EUR            |                | 0.0    | %    |      
|From floating to floating |                         |  |                | 61.1           |        |      |      
|                          | Spread receivedLibor   |  | CHF            |                | 0.0    | %    |      
|                          | Spread paidEuribor     |  | EUR            |                | 0.0    | %    |      
|From floating to floating |                         |  |                | 5.6            |        |      |      
|                          | Spread receivedLibor   |  | AUD            |                | 0.0    | %    |      
|                          | Spread paidEuribor     |  | EUR            |                | 0.0    | %    |      
|From fixed to floating    |                         |  |                |                |        | 12.9 |      
|                          | Rate received           |  | USD            |                |        |      | 5.19 
|                          | Spread paidEuribor     |  | EUR            |                |        |      | 0.000
|From fixed to floating    |                         |  |                |                |        |      |      
|                          | Rate received           |  | CZK            |                |        |      |      
|                          | Spread paidEuribor     |  | EUR            |                |        |      |      
|From fixed to floating    |                         |  |                |                |        |      |      
|                          | Rate received           |  | UF             |                |        |      |      
|                          | Spread paidLibor       |  | USD            |                |        |      |      
|From fixed to floating    |                         |  |                |                |        | 80   |      
|                          | Rate received           |  | USD            |                |        |      | 7.4  
|                          | Spread paidCDI         |  | Brazilian Real |                |        |      | 0.0  
|From floating to floating |                         |  |                |                |        | 108  |      
|                          | Spread receivedYen     |  | JPY            |                |        |      | 2.7  
|                          | Spread paidLibor       |  | USD            |                |        |      | 3.2  
|From fixed to floating    |                         |  |                |                |        |      |      
|                          | Rate received           |  | JPY            |                |        |      |      
|                          | Spread paidEuribor     |  | EUR            |                |        |      |      
|                          |                         |  |                |                |        |      |      

157

---

|From floating to floating                   |                       |  |                    | 191   |      |       |  |       |     |       |     |       |     |     |  | 191   |     | (43.23 | )     
|------------------------------------------- | --------------------- |  | ------------------ | ----- | ---- | ----- |  | ----- | --- | ----- | --- | ----- | --- | --- |  | ----- | --- | ------ | ------
|                                            | Spread received       |  | ARG                |       |      |       |  |       |     |       |     |       |     |     |  |       |     |        |       
|                                            | Spread paidLibor     |  | USD                |       |      |       |  |       |     |       |     |       |     |     |  |       |     |        |       
|From floating to floating                   |                       |  |                    | 74.0  |      |       |  |       |     |       |     |       |     |     |  | 74    |     | (1.15  | )     
|                                            | Spread receivedLibor |  | USD                |       | 6.35 | %     |  |       |     |       |     |       |     |     |  |       |     |        |       
|                                            | Spread paidCDI       |  | Brazilian Real     |       | 3.00 | %     |  |       |     |       |     |       |     |     |  |       |     |        |       
|Forward Rate Agreements in Foreign Currency |                       |  |                    |       |      |       |  |       |     |       |     |       |     |     |  |       |     |        |       
|                                            | Amount                |  |                    |       | 260  |       |  |       |     |       |     |       |     |     |  |       | 260 |        | 0.16  
|                                            | Rate purchased        |  | USD                |       | 0.0  | %     |  |       |     |       |     |       |     |     |  |       |     |        |       
|EXCHANGE RATE FORWARDS                      |                       |  |                    |       |      |       |  |       |     |       |     |       |     |     |  |       |     |        |       
|                                            | Forward               |  | UF/USD             |       | 574  |       |  |       |     |       |     |       |     |     |  |       | 574 |        | (14.18
|                                            | Forward               |  | Brazilian Real/USD |       | 272  |       |  |       |     |       |     |       |     |     |  |       | 272 |        | (25.19
|                                            | Forward               |  | COP/USD            |       | 4.1  |       |  |       |     |       |     |       |     |     |  |       | 4   |        | (0.11 
|                                            | Forward               |  | SOL/USD            |       | 32.8 |       |  |       |     |       |     |       |     |     |  |       | 33  |        | (0.11 
|INTEREST RATE OPTIONS                       |                       |  |                    |       |      |       |  |       |     |       |     |       |     |     |  |       |     |        |       
|Exchange Rate COLLAR                        |                       |  |                    |       |      |       |  | 1,729 |     | 557   |     | 340   |     |     |  | 2,626 |     | (23.78 | )     
|                                            | Buy CAPLibor         |  | USD                |       |      |       |  |       | 5.6 | %     | 5.4 | %     | 5.6 | %   |  |       |     |        |       
|                                            | Sell FloorLibor      |  | USD                |       |      |       |  |       | 3.6 | %     | 3.4 | %     | 3.0 | %   |  |       |     |        |       
|TOTAL                                       |                       |  |                    | 2,905 |      | 1,210 |  | 1,916 |     | 1,695 |     | 1,333 |     | 845 |  | 9,904 |     | 3.82   |       

158

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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

ITEM 15. CONTROLS AND PROCEDURES

Within 90 days prior to the date of this report, Endesa, under the supervision and with the participation of its management, including the Chief Executive
Officer and the Chief Financial Officer, performed an evaluation of the effectiveness of Endesa's disclosure controls and procedures. Based on this evaluation, Endesa's Chief Executive Officer and
Chief Financial Officer concluded that Endesa's disclosure controls and procedures are effective for gathering, analyzing and disclosing the information Endesa is required to disclose in the reports
it files under the Securities Exchange Act of 1934, within the time periods specified in the SEC's rules and forms. Endesa's management necessarily applied its judgment in assessing the costs and
benefits of such controls and procedures, which by their nature can provide only reasonable assurance regarding management's control objectives.

There
have been no significant changes in Endesa's internal controls or other factors that could significantly affect internal controls subsequent to the date of their evaluation.

ITEM 16. RESERVED

Not applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

The Registrant has responded to Item 18 in lieu of responding to this Item.

ITEM 18. FINANCIAL STATEMENTS

See Item 19(a) for a list of financial statements filed under Item 18.

159

---

ITEM 19. EXHIBITS



|                                                                                                                                                                            |  | Page
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|Report of Deloitte & Touche España, S.L. for Endesa, S.A. for the years ended December 31, 2001 and 2002                                                                    |  | F-2 
|Report of Arthur Andersen y Cía, S. Com. for Endesa, S.A. for the year ended December 31, 2000                                                                              |  | F-3 
|Report of Ernst & Young for Empresa Nacional de Electricidad S.A. (Endesa Chile) for the year ended December 31, 2002                                                       |  | F-4 
|Report of Deloitte & Touche Tohmatsu for Empresa Nacional de Electricidad S.A. (Endesa Chile) for the years ended December 31, 2000 and 2001                                |  | F-6 
|Report of Pistrelli, Henry Martin y Asociados S.R.L. (Member Firm of Ernst & Young Global) for Empresa Distribuidora Sur S.A. (Edesur) for the year ended December 31, 2002 |  | F-8 
|Consolidated Balance Sheets as of December 31, 2002 and 2001                                                                                                                |  | F-9 
|Consolidated Statements of Income for the years ended December 31, 2002, 2001 and 2000                                                                                      |  | F-11
|Notes to the Consolidated Financial Statements                                                                                                                              |  | F-12



|1.1  |  | Articles of Association, as amended.*                                                                                                                                                              
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.2  |  | Articles of Association, as amended (English translation).*                                                                                                                                        
|4.1  |  | Purchase and Sale Contract for 100% of the Shares of Elettrogen S.p.A., dated as of July 30, 2001, between Enel S.p.A. and Endesa S.A., ASM Brescia S.p.A. and Banco Santander Central Hispano S.A.
|4.2  |  | Option Agreement for Purchase of Shares of Elettrogen, S.p.A., dated as of June 13, 2001, between Endesa, S.A. and Banco Santander Central Hispano S.A.                                            
|4.3  |  | Shareholder Agreement relating to purchase of Elettrogen, S.p.A., dated as of June 13, 2001, between Endesa, S.A. and Banco Santander Central Hispano S.A.                                         
|4.4  |  | Contract for the Sale of Shares in Electra de Viesgo, S.L., dated as of September 19, 2001, between Enel S.p.A. and Endesa Generación, S.A., Endesa Distribución, S.A. and Endesa, S.A.            
|8.1  |  | List of Subsidiaries.                                                                                                                                                                              
|10.1 |  | Section 906 Certification.                                                                                                                                                                         

---

160

---



SIGNATURES

The Registrant certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

| |  | ENDESA, S.A.
| |  | ------------
| |  | By:         

Date:
June 30, 2003

161

---

I, Rafael Miranda Robredo, certify that:

1.     I
have reviewed this annual report on Form 20-F of Endesa, S.A.;

2.     Based
on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based
on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The
registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



5.     The
registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent function):



6.     The
registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.

| |  | /s/ Rafael Miranda RobredoName: Rafael Miranda Robredo
Title: Chief Executive Officer
| |  | -------------------------------------------------------------------------------------

Date:
June 30, 2003

162

---

I,
José Luis Palomo Alvarez, certify that:

1.     I
have reviewed this annual report on Form 20-F of Endesa, S.A.;

2.     Based
on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based
on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The
registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



5.     The
registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent function):



6.     The
registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.

| |  | /s/ José Luis Palomo AlvarezName: José Luis Palomo Alvarez
Title: Chief Financial Officer
| |  | -----------------------------------------------------------------------------------------

Date:
June 30, 2003

163

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INDEX TO ENDESA S.A.'s CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                                                                                            |  | Page
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|Report of Deloitte & Touche España, S.L. for Endesa, S.A. for the years ended December 31, 2001 and 2002                                                                    |  | F-2 
|Report of Arthur Andersen y Cía, S. Com. for Endesa S.A. for the year ended December 31, 2000                                                                               |  | F-3 
|Report of Ernst & Young for Empresa Nacional de Electricidad S.A. (Endesa Chile) for the year ended December 31, 2002                                                       |  | F-4 
|Report of Deloitte & Touche Tohmatsu for Empresa Nacional de Electricidad S.A. (Endesa Chile) for the years ended December 31, 2000 and 2001                                |  | F-6 
|Report of Pistrelli, Henry Martin y Asociados S.R.L. (Member Firm of Ernst & Young Global) for Empresa Distribuidora Sur S.A. (Edesur) for the year ended December 31, 2002 |  | F-8 
|Consolidated Balance Sheets as of December 31, 2002 and 2001                                                                                                                |  | F-9 
|Consolidated Statements of Income for the years ended December 31, 2002, 2001 and 2000                                                                                      |  | F-11
|Notes to the Consolidated Financial Statements                                                                                                                              |  | F-12

F-1

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LOGO

INDEPENDENT ACCOUNTANTS' REPORT

To
the Shareholders of Endesa, S.A.:

We
have audited the accompanying consolidated balance sheets of Endesa, S.A. and Subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of income
for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on
our audits. We did not audit the 2002 financial statements of Empresa Distribuidora Sur, S.A. (Edesur) and Empresa Nacional de Electricidad, S.A. (Endesa Chile) and some of its Subsidiaries and the
2001 financial statements of Empresa Nacional de Electricidad, S.A. (Endesa Chile) and some of its Subsidiaries, which statements reflect total assets constituting 10% and 12%, respectively, of
consolidated total assets as of December 31, 2002 and 2001, and net sales constituting 5% and 5%, respectively, of consolidated net sales for the years then ended. Those statements were audited
by other auditors whose reports have been furnished to us and our opinion, insofar as it relates to the amounts included for Empresa Distribuidora Sur, S.A. (Edesur) and Empresa Nacional de
Electricidad, S.A. (Endesa Chile) and some of its Subsidiaries, is based solely on the reports of such other auditors.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements
presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.

In
our opinion, based on our audit and on the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Endesa, S.A. and Subsidiaries as of December 31, 2002 and 2001, and the results of their operations and the funds obtained and applied by them for the years then ended in
conformity with accounting principles generally accepted in Spain.

Accounting
principles generally accepted in Spain vary in certain significant respects from accounting principles generally accepted in the United States of America. The application of
the latter would have affected the determination of consolidated net income for each of the two years in the period ended December 31, 2002 and the determination of stockholders' equity and financial
position as of December 31, 2002 and 2001, to the extent summarized in Note 25.

|DELOITTE & TOUCHE ESPAÑA, S.L.     |  | 
|---------------------------------- |  | 
|                                   |  | 
|/s/ Deloitte & Touche España, S.L. |  | 
|                                   |  | 
|Madrid, Spain                      |  | 
|                                   |  | 
|March 26, 2003                     |  | 
|                                   |  | 
|LOGO                               |  | 

F-2

---



LOGO

REPORT OF INDEPENDENT ACCOUNTANTS

To
the Shareholders of Endesa, S.A.:

We
have audited the accompanying consolidated statement of income and the notes referred to of Endesa, S.A. and Subsidiaries for the year ended December 31, 2000. The consolidated
statement of income and the notes referred to above are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statement and the
notes referred to based on our audit. We did not audit the statement of income of Empresa Nacional de Electricidad, S.A. (Endesa Chile) and some of its Subsidiaries, which statement reflect net sales
of 4% in 2000 of the related consolidated totals. That statement was audited by other auditors whose report has been furnished to us and our opinion, insofar as it relates to the amounts included for
these companies, is based solely on the reports of the other auditors.

We
conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.

In
our opinion, based on our audit and on the reports of the other auditors, the consolidated statement of income and the notes referred to above present fairly, in all material aspects,
the results of operations and the funds obtained an applied of Endesa, S.A. and Subsidiaries for the year ended December 31, 2000, in conformity with accounting principles generally accepted in
Spain.

Accounting
practices used by Endesa, S.A. and Subsidiaries in preparing the consolidated statement of income and the notes referred to conform with accounting principles generally
accepted in Spain, but do not conform with accounting principles generally accepted in the United States of America. A description of these differences and a reconciliation of net consolidated income
as of December 31, 2000 to accounting principles generally accepted in the United States of America, is set forth in Note 25.

|Arthur Andersen y Cia, S. Com.                            |  | 
|--------------------------------------------------------- |  | 
|                                                          |  | 
|(A member firm of Andersen Worldwide until April 1, 2002) |  | 
|                                                          |  | 
|/s/ Arthur Andersen y Cia, S. Com                         |  | 
|                                                          |  | 
|MadridSpain,                                             |  | 
|                                                          |  | 
|March 13, 2002                                            |  | 

F-3

---

LOGO

Report of Independent Auditors

To
the Board of Directors and Shareholders of
Empresa Nacional de Electricidad S.A. (Endesa-Chile):

We
have audited the accompanying consolidated balance sheet of Endesa-Chile and subsidiaries (the "Company") as of December 31, 2002, and the related consolidated statements of
income, changes in shareholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. We did not audit the financial statements as of December 31, 2002 and for the year then ended of certain consolidated companies which
statements reflect total revenues and total assets representing of 31.93 percent and 40.06 percent respectively, of the related consolidated totals. We also did not audit the financial statements as
of December 31, 2002 and for the year then ended of certain investments accounted for under the equity method, which statements reflect investments and equity participation in income of 0.87
percent and 61.23 percent, respectively, of total assets and total net income, respectively. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion,
insofar as it relates to the amounts included for those entities, is based solely on the reports of the other auditors. The report of other auditors over the consolidated financial statements of the
subsidiary, Endesa Argentina S.A. and subsidiaries, contains an emphasis paragraph regarding the instability of the economic and political situation in Argentina.

We
conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the reports of other auditors provide a reasonable basis for our opinion.

In
our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of Endesa-Chile and subsidiaries as of December 31, 2002, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles
generally accepted in Chile.

F-4

---

Accounting
principles generally accepted in Chile vary in certain significant respects from generally accepted accounting principles in the United States of America. Application of
generally accepted accounting principles in the United States of America would have affected consolidated shareholders' equity as of December 31, 2002 and the consolidated results of operations
for the year ended December 31, 2002, to the extent summarized in Note 34 of the Notes to the consolidated financial statements.

|ERNST & YOUNG LTDA. |  | 
|------------------- |  | 
|                    |  | 
|/s/ Ernst & Young   |  | 
|                    |  | 

Santiago,
Chile
January 24, 2003
(except for Notes 32 and 34 for which the dates are June 12, 2003)

F-5

---



LOGO

INDEPENDENT AUDITORS' REPORT

To
the President and Directors of
Empresa Nacional de Electricidad S.A.

We
have audited the consolidated balance sheets of Empresa Nacional de Electricidad S.A. and Subsidiaries as of December 31, 2001 and 2000 and the related consolidated statements
of income and of cash flows for each of the two years in the period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements for 2000 and 2001 of certain consolidated companies, which
statements reflect total assets constituting 41.99% (41.18% in 2000) and total revenues constituting 41.92% (48.56% in 2000 and 55.06% in 1999) as of December 31, 2001, of the related
consolidated totals. Those financial statements were audited by other auditors for the purpose of the Company's Chilean annual financial statements and their reports have been furnished to us. The
report of these auditors on the 2001 financial statements of Endesa Argentina S.A. include emphasis paragraphs expressing the uncertainty on the Argentinean subsidiaries' capacity to meet their
obligations and continue operations, and to disclose the major effects that the severe changes made by the Argentinean Government to the economic model and to the International Exchange Law that had
been in force since 1991 might have on the companies. Our opinion, insofar as it relates to the amounts included for those companies for 2000 and 2001, is based solely on the reports of such other
auditors. Their report referred to other auditors, one of whom was a member firm of a worldwide organization that has ceased operations, and another who has ceased to exist.

We
conducted our audits in accordance with auditing standards generally accepted in Chile and in the United States of America. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report of the other auditors provides a reasonable basis for our
opinion.

In
our opinion, based on our audits and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Empresa Nacional de Electricidad S.A. and subsidiaries as of December 31, 2000 and 2001 and the results of their operations and their cash flows for each of the two years in the
period ended December 31, 2001, in conformity with accounting principles generally accepted in Chile.

F-6

---

Accounting
principles generally accepted in Chile vary in certain significant respects from accounting principles generally accepted in the United States of America. The application of
the latter would have affected the determination of consolidated net income expressed in Chilean pesos for each of the two years in the period ended at December 31, 2001 and the determination
of shareholder's equity, also expressed in Chilean pesos, at December 31, 2000 and 2001 to the extent summarized in Note 32 to the consolidated financial statements.

As
indicated in Note 26, the Company holds direct investments in Argentinean subsidiaries and indirect investments through the subsidiaries Compañía
Eléctrica Cono Sur S.A. and Inversiones Endesa Norte S.A., whose financial statements show total assets and revenues amounting to 13.58% and 21.42%, respectively, of the corresponding
consolidated totals. Due to the current economic situation in Argentina and considering the effects of the application of the Public Emergency Law referred to in Note 31, these direct and
indirect subsidiaries are exposed to situations that might affect the values of their assets and liabilities and uncertainties arise with respect to their capacity to meet their obligations and
continue operations. The present financial statements do not include adjustment that might arise from the resolution of these uncertainties.

|/s/ Deloitte & Touche |  | 
|--------------------- |  | 
|                      |  | 

Santiago,
Chile
February 1, 2002

F-7

---

LOGO

REPORT OF INDEPENDENT AUDITORS

To
the Board of Directors of EMPRESA DISTRIBUIDORA SUR S.A.
(EDESUR S.A.)

We have audited the balance sheet of EDESUR S.A. (an Argentine corporation) as of December 31, 2002, and the related statements of income, changes in
shareholders' equity and cash flows for the year then ended, all expressed in U.S. dollars (not presented separately herein). Those financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on those financial statements based on our audit.

The
financial statements of EDESUR S.A. as of December 31, 2001 and 2000, and for the years then ended (not presented separately herein), have been audited by other auditors who
have ceased operations. Those auditors expressed an unqualified opinion on those financial statements in their report dated February 26, 2002.

We
conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In
our opinion, the 2002 financial statements referred to above (not presented separately herein) present fairly, in all material respects, the financial position of EDESUR S.A. as of
December 31, 2002, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles in Chile.

Accounting
principles generally accepted in Chile vary in certain significant respects from generally accepted accounting principles in the United States of America. Application of
generally accepted accounting principles in the United States of America would have affected shareholders' equity as of December 31, 2002 and the results of operations for the year ended
December 31, 2002, to the extent summarized in Note 29 of the Notes to the financial statements.

|Buenos Aires, Argentina
February 7, 2003 |  |  |  | PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L.
(Member Firm of Ernst & Young Global)
|---------------------------------------- |  |  |  | --------------------------------------------------------------------------------
|                                         |  |  |  |                                                                                 
|                                         |  |  |  | /s/ Enrique C. GrotzName: Enrique C. Grotz
Title: Partner                       

F-8

---



ENDESA, S.A. AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS        AS OF DECEMBER 31, 2002 and 2001

|                                  |                                         | 2002                                                                        |        | 2002    |        | 2001    |       
|--------------------------------- | --------------------------------------- | --------------------------------------------------------------------------- | ------ | ------- | ------ | ------- | ------
|
|ASSETS                            |                                         |                                                                             |        |         |        |         |       
|FIXED AND OTHER NONCURRENT ASSETS |                                         | 37,526                                                                      |        | 35,792  |        | 37,858  |       
|                                  | Start-up expenses                       |                                                                             | 17     |         | 16     |         | 43    
|                                  | Intangibles assets (Note 8)             |                                                                             | 526    |         | 502    |         | 525   
|                                  |                                         | Intangible assets and rights                                                |        | 950     |        | 906     |       
|                                  |                                         | Allowances and accumulated amortization                                     |        | (424    | )      | (404    | )     
|                                  | Utility plant (Note 9)                  |                                                                             | 29,085 |         | 27,741 |         | 30,152
|                                  |                                         | Land and structures                                                         |        | 2,056   |        | 1,961   |       
|                                  |                                         | Electricity Plant                                                           |        | 48,606  |        | 46,358  |       
|                                  |                                         | Other fixtures, machinery, tools, furniture and other tangible fixed assets |        | 1,759   |        | 1,678   |       
|                                  |                                         | Electricity Plant in progress                                               |        | 2,060   |        | 1,965   |       
|                                  |                                         | Other construction work in progress                                         |        | 260     |        | 248     |       
|                                  |                                         | Accumulated depreciation of electricity plant                               |        | (23,320 | )      | (22,241 | )     
|                                  |                                         | Other accumulated depreciation and allowances                               |        | (2,336  | )      | (2,228  | )     
|                                  | Long-Term investements (Note 10)        |                                                                             | 7,812  |         | 7,451  |         | 7,037 
|                                  |                                         | Investments accounted for by the equity method                              |        | 2,137   |        | 2,038   |       
|                                  |                                         | Loans to companies accounted for by the equity method                       |        | 50      |        | 48      |       
|                                  |                                         | Long-term investment securities                                             |        | 565     |        | 539     |       
|                                  |                                         | Other loans                                                                 |        | 1,758   |        | 1,677   |       
|                                  |                                         | Prepaid taxes (Note 17)                                                     |        | 3,411   |        | 3,253   |       
|                                  |                                         | Allowances                                                                  |        | (109    | )      | (104    | )     
|                                  | Parent Company shares (Note 12)         |                                                                             | 86     |         | 82     |         | 101   
|                                  |                                         |                                                                             |        |         |        |         |       
|CONSOLIDATION GOODWILL (Note 7)   |                                         | 5,211                                                                       |        | 4,970   |        | 5,543   |       
|                                  |                                         |                                                                             |        |         |        |         |       
|DEFERRED CHARGES (Note 6)         |                                         | 564                                                                         |        | 538     |        | 663     |       
|                                  |                                         |                                                                             |        |         |        |         |       
|CURRENT ASSETS                    |                                         | 7,213                                                                       |        | 6,876   |        | 6,123   |       
|                                  | Due from stockholders for capital calls |                                                                             |        |         |        |         | 1     
|                                  | Inventories (Note 11)                   |                                                                             | 800    |         | 763    |         | 732   
|                                  | Accounts receivable                     |                                                                             | 4,052  |         | 3,865  |         | 4,280 
|                                  |                                         | Trade reivables for sales and services                                      |        | 2,928   |        | 2,793   |       
|                                  |                                         | Receivable from companies accounted for by the equity method                |        | 22      |        | 21      |       
|                                  |                                         | Other accounts receivable                                                   |        | 1,361   |        | 1,298   |       
|                                  |                                         | Allowances                                                                  |        | (259    | )      | (247    | )     
|                                  | Short-term investments                  |                                                                             | 2,084  |         | 1,987  |         | 701   
|                                  |                                         | Short-term investments securities                                           |        | 131     |        | 125     |       
|                                  |                                         | Loans to companies accounted for by equity method                           |        | 263     |        | 251     |       
|                                  |                                         | Other loans                                                                 |        | 1,699   |        | 1,620   |       
|                                  |                                         | Allowances                                                                  |        | (9      | )      | (9      | )     
|                                  | Cash                                    |                                                                             | 214    |         | 201    |         | 352   
|                                  | Prepaid Expenses                        |                                                                             | 63     |         | 60     |         | 57    
|                                  |                                         |                                                                             |        |         |        |         |       
|TOTAL ASSETS                      |                                         | 50,514                                                                      |        | 48,176  |        | 50,187  |       
|                                  |                                         |                                                                             |        |         |        |         |       

The accompanying Notes 1 to 25 are an integral part of these consolidated balance sheets.

F-9

---

ENDESA, S.A. AND SUBSIDIARIES        STOCKHOLDERS' EQUITY AND LIABILITIES

|                                                   |                                                            | 2002                                            |        | 2002   |        | 2001   |       
|-------------------------------------------------- | ---------------------------------------------------------- | ----------------------------------------------- | ------ | ------ | ------ | ------ | ------
|
|STOCKHOLDERS' EQUITY (Note 12)                     |                                                            | 8,434                                           |        | 8,043  |        | 8,656  |       
|                                                   | Capital Stock                                              |                                                 | 1,333  |        | 1,271  |        | 1,271 
|                                                   | Additional paid-in capital                                 |                                                 | 1,443  |        | 1,376  |        | 1,376 
|                                                   | Revaluation reserve                                        |                                                 | 1,802  |        | 1,719  |        | 1,719 
|                                                   | Other reserves of the Parent Company                       |                                                 | 3,819  |        | 3,642  |        | 3,519 
|                                                   |                                                            | Unrestricted reserves                           |        | 3,236  |        | 3,086  |       
|                                                   |                                                            | Restricted reserves                             |        | 583    |        | 556    |       
|                                                   | Reserves at fully or proportionally consolidated companies |                                                 | 2,314  |        | 2,207  |        | 1,370 
|                                                   | Reserves at companies accounted for by the equity method   |                                                 | 67     |        | 64     |        | 61    
|                                                   | Translation diffences at fully consolidated companies      |                                                 | (3,382 | )      | (3,226 | )      | (1,859
|                                                   | Income atributable to the Parent Company                   |                                                 | 1,332  |        | 1,270  |        | 1,479 
|                                                   |                                                            | Consolidated income                             |        | 1,189  |        | 1,134  |       
|                                                   |                                                            | (Income) Loss atributable to minority interests |        | 143    |        | 136    |       
|                                                   | Interim dividend paid during the year                      |                                                 | (294   | )      | (280   | )      | (280  
|                                                   |                                                            |                                                 |        |        |        |        |       
|MINORITY INTERESTS (Note 13)                       |                                                            | 3,329                                           |        | 3,175  |        | 3,762  |       
|                                                   |                                                            |                                                 |        |        |        |        |       
|NEGATIVE CONSOLIDATION GOODWILL                    |                                                            | 14                                              |        | 13     |        | 29     |       
|                                                   |                                                            |                                                 |        |        |        |        |       
|DEFERRED REVENUES (Note 14)                        |                                                            | 1,422                                           |        | 1,356  |        | 1,214  |       
|                                                   | Capital subsidies                                          |                                                 | 972    |        | 927    |        | 813   
|                                                   | Other deferred revenues                                    |                                                 | 450    |        | 429    |        | 401   
|                                                   |                                                            |                                                 |        |        |        |        |       
|PROVISIONS FOR CONTINGENCES AND EXPENSES (Note 15) |                                                            | 4,426                                           |        | 4,221  |        | 4,216  |       
|                                                   | Provisions for pensions and similar obligations            |                                                 | 348    |        | 332    |        | 661   
|                                                   | Other provisions                                           |                                                 | 4,078  |        | 3,889  |        | 3,555 
|                                                   |                                                            |                                                 |        |        |        |        |       
|LONG-TERM DEBT (Note 16)                           |                                                            | 20,745                                          |        | 19,786 |        | 22,700 |       
|                                                   | Debentures and other marketable debt securities            |                                                 | 10,708 |        | 10,213 |        | 11,339
|                                                   | Payable to credit institutions                             |                                                 | 6,967  |        | 6,645  |        | 8,433 
|                                                   | Other payables                                             |                                                 | 3,063  |        | 2,921  |        | 2,919 
|                                                   | Capital payments payable                                   |                                                 | 7      |        | 7      |        | 9     
|                                                   |                                                            |                                                 |        |        |        |        |       
|CURRENT LIABILITIES                                |                                                            | 12,144                                          |        | 11,582 |        | 9,610  |       
|                                                   | Debentures and other marketable debt securities (Note 16)  |                                                 | 4,298  |        | 4,099  |        | 2,583 
|                                                   | Payable to credit institutions (Note 16)                   |                                                 | 3,134  |        | 2,989  |        | 2,449 
|                                                   | Payable to companies accounted for by the equity method    |                                                 | 9      |        | 9      |        | 28    
|                                                   | Trade accounts payable                                     |                                                 | 2,698  |        | 2,573  |        | 2,253 
|                                                   | Other nontrade payables                                    |                                                 | 1,965  |        | 1,874  |        | 2,192 
|                                                   | Operating allowances                                       |                                                 | 19     |        | 18     |        | 79    
|                                                   | Deferred expenses                                          |                                                 | 21     |        | 20     |        | 26    
|                                                   |                                                            |                                                 |        |        |        |        |       
|TOTAL STOCKHOLDERS' EQUITY AND LIABILITIES         |                                                            | 50,514                                          |        | 48,176 |        | 50,187 |       
|                                                   |                                                            |                                                 |        |        |        |        |       

The accompanying Notes 1 to 25 are an integral part of these consolidated balance sheets.

F-10

---



ENDESA, S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

AS OF DECEMBER 31, 2002, 2001 and 2000

|                                                         |                                                                                    | 2002                                                    |        | 2002   |        | 2001   |        | 2000   |       
|-------------------------------------------------------- | ---------------------------------------------------------------------------------- | ------------------------------------------------------- | ------ | ------ | ------ | ------ | ------ | ------ | ------
|
|OPERATING REVENUES                                       |                                                                                    | 18,075                                                  |        | 17,238 |        | 16,085 |        | 15,682 |       
|                                                         | Net sales (Note 18)                                                                |                                                         | 17,551 |        | 16,739 |        | 15,576 |        | 15,264
|                                                         |                                                                                    | a) Sales                                                |        | 16,983 |        | 16,197 |        | 14,925 |       
|                                                         |                                                                                    | b) Services                                             |        | 474    |        | 452    |        | 504    |       
|                                                         |                                                                                    | c) Remuneration for the transition to competition       |        | 94     |        | 90     |        | 147    |       
|                                                         | Expenses capitalized (Note 4-b)                                                    |                                                         | 336    |        | 320    |        | 330    |        | 220   
|                                                         | Other operating revenues                                                           |                                                         | 188    |        | 179    |        | 179    |        | 198   
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|OPERATING EXPENSES                                       |                                                                                    | 14,318                                                  |        | 13,656 |        | 12,910 |        | 12,621 |       
|                                                         | Procurements                                                                       |                                                         | 9,882  |        | 9,425  |        | 8,338  |        | 7,819 
|                                                         |                                                                                    | a) Electricity purchased                                |        | 6,523  |        | 6,221  |        | 5,678  |       
|                                                         |                                                                                    | b) Cost of raw materials and other supplies             |        | 2,580  |        | 2,461  |        | 2,013  |       
|                                                         |                                                                                    | c) Electricity transmission and other external expenses |        | 779    |        | 743    |        | 647    |       
|                                                         | Personal expenses                                                                  |                                                         | 1,312  |        | 1,251  |        | 1,332  |        | 1,362 
|                                                         |                                                                                    | a) Wages, salaries, and similar expenses                |        | 997    |        | 951    |        | 1,009  |       
|                                                         |                                                                                    | b) Employee welfare expenses                            |        | 315    |        | 300    |        | 323    |       
|                                                         | Depreciation and amortization expense                                              |                                                         | 1,778  |        | 1,696  |        | 1,829  |        | 2,031 
|                                                         | Variation in operating allowances                                                  |                                                         | 2      |        | 2      |        | 109    |        | 218   
|                                                         | Other operating expenses                                                           |                                                         | 1,344  |        | 1,282  |        | 1,302  |        | 1,191 
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|OPERATING INCOME                                         |                                                                                    | 3,757                                                   |        | 3,582  |        | 3,175  |        | 3,061  |       
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|FINANCIAL REVENUES                                       |                                                                                    | 682                                                     |        | 651    |        | 584    |        | 769    |       
|                                                         | Revenues from equity investments                                                   |                                                         | 27     |        | 26     |        | 26     |        | 33    
|                                                         | Other financial revenues                                                           |                                                         | 416    |        | 397    |        | 282    |        | 366   
|                                                         | Exchange gains (Note 4-g)                                                          |                                                         | 239    |        | 228    |        | 276    |        | 370   
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|FINANCIAL EXPENSES                                       |                                                                                    | 2,396                                                   |        | 2,285  |        | 2,306  |        | 1,912  |       
|                                                         | Financial expenses                                                                 |                                                         | 1,572  |        | 1,499  |        | 1,628  |        | 1,663 
|                                                         | Variation in investement valuation allowances                                      |                                                         | 9      |        | 9      |        | 4      |        | 18    
|                                                         | Exchange losses (Note 4-g)                                                         |                                                         | 815    |        | 777    |        | 674    |        | 231   
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|FINANCIAL LOSS                                           |                                                                                    | (1,714                                                  | )      | (1,634 | )      | (1,722 | )      | (1,143 | )     
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|                                                         | Equity in the income of companies accounted for by the equity method               |                                                         | 140    |        | 134    |        | 102    |        | 159   
|                                                         | Equity in the losses of companies accounted for by the equity method               |                                                         | (238   | )      | (227   | )      | (220   | )      | (106  
|                                                         | Amortization of consolidation goodwill                                             |                                                         | (372   | )      | (355   | )      | (289   | )      | (272  
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|ORDINARY INCOME                                          |                                                                                    | 1,573                                                   |        | 1,500  |        | 1,046  |        | 1,699  |       
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|NONOPERATING REVENUES (Note 18)                          |                                                                                    | 1,829                                                   |        | 1,745  |        | 1,212  |        | 1,474  |       
|                                                         | Gains on fixed assets                                                              |                                                         | 72     |        | 69     |        | 64     |        | 298   
|                                                         | Gains on disposals of investment in fully or proportionally consolidated companies |                                                         | 1,118  |        | 1,066  |        | 152    |        | 232   
|                                                         | Gains on disposals of investments in companies accounted for by the equity method  |                                                         | 20     |        | 19     |        | 496    |        | 186   
|                                                         | Capital subsidies transferred to income for the year                               |                                                         | 26     |        | 25     |        | 35     |        | 32    
|                                                         | Nonoperating revenues or income                                                    |                                                         | 593    |        | 566    |        | 465    |        | 726   
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|NONOPERATING EXPENSES (Note 18)                          |                                                                                    | 1,755                                                   |        | 1,674  |        | 633    |        | 561    |       
|                                                         | Losses on fixed assets                                                             |                                                         | 27     |        | 26     |        | 47     |        | 45    
|                                                         | Variation in allowances for utility plant and intangible assets                    |                                                         | 150    |        | 143    |        | 33     |        | (30   
|                                                         | Nonoperating expenses and losses                                                   |                                                         | 1,578  |        | 1,505  |        | 553    |        | 546   
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|NONOPERATING INCOME                                      |                                                                                    | 74                                                      |        | 71     |        | 579    |        | 913    |       
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|CONSOLIDATED INCOME BEFORE TAXES                         |                                                                                    | 1,647                                                   |        | 1,571  |        | 1,625  |        | 2,612  |       
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|Corporate income tax (Note 17)                           |                                                                                    | 458                                                     |        | 437    |        | 88     |        | 618    |       
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|CONSOLIDATED INCOME FOR THE YEAR                         |                                                                                    | 1,189                                                   |        | 1,134  |        | 1,537  |        | 1,994  |       
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|Income (Loss) attributed to minority interests (Note 13) |                                                                                    | (143                                                    | )      | (136   | )      | 58     |        | 587    |       
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|INCOME FOR THE YEAR ATTRIBUTED TO THE PARENT COMPANY     |                                                                                    | 1,332                                                   |        | 1,270  |        | 1,479  |        | 1,407  |       
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       
|Net earnings per share (euros)                           |                                                                                    | 1.26                                                    |        | 1.20   |        | 1.40   |        | 1.33   |       
|                                                         |                                                                                    |                                                         |        |        |        |        |        |        |       

The accompanying Notes 1 to 25 are an integral part of these consolidated statements of income.

F-11

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ENDESA, S.A. AND SUBSIDIARIES        NOTES TO 2002 AND 2001        CONSOLIDATED FINANCIAL STATEMENTS

1.    GROUP DESCRIPTION

Endesa, S.A. and its subsidiaries form the Endesa Group, whose corporate purpose is the electricity business in all its various industrial and commercial areas;
the exploitation of primary energy resources of all types; the provision of industrial services, particularly in the areas of telecommunications, water and gas and those preliminary or complementary
to the business activities forming the Group's corporate purpose, and the management of the corporate Group comprising investments in other companies. The Group may carry on the business activities
composing its corporate purpose in Spain and abroad directly or through its holdings in other companies.

The
"Endesa Group Companies" section in the Exhibit to these notes to consolidated financial statements lists the companies composing the Endesa Group.

2.    GROUP STRUCTURE AND SCOPE OF CONSOLIDATION



On July 1, 2001, Endesa Generación, S.A. contributed several power plants to Viesgo Generación, S.L. and, subsequently,
contributed the shares of Viesgo Generación, S.L. to Electra de Viesgo, S.L. Also, Endesa Distribución, S.A. contributed the full amount of its holding in Electra de
Viesgo I, S.A. to Electra de Viesgo, S.L. The purpose of these contributions was to divest from Electra de Viesgo, S.L.

On
December 31, 2001, effective for accounting purposes from January 1, 2001, the corporate restructuring of Endesa Generación, S.A. was completed through
the absorption by Endesa Generación, S.A. of Endesa Puertos, S.L. and the subsequent dissolution of the Litoral de Almería fossil-fuel plant, Los Barrios
fossil-fuel plant and Ascó I nuclear plant joint property associations.

In
December 2001 the directors of Compañía Sevillana de Electricidad, S.A.U., Fuerzas Eléctricas de Cataluña, S.A.U.,
Eléctricas Reunidas de Zaragoza, S.A.U., Termoeléctrica del Ebro, S.A.U., Gas y Electricidad Distribución Eléctrica, S.A.U. and
Unión Eléctrica de Canarias, S.A.U. approved the total spin-off of these companies into two lines of business, namely electricity distribution and
transmission and commercial activities and services. The distribution business will be received by Endesa Distribución Eléctrica, S.L. and the commercial activities will
be received by Endesa Operaciones y Servicios Comerciales, S.L. These spin-offs took place in 2002 and are effective for accounting purposes from January 1, 2002.

On
January 23, 2002, Endesa Internacional S.A and Endesa S.A contributed various European financial investments to Endesa Europa, S.L., including most notably the investments in
Endesa Holding Italia S.R.L, Endesa Trading, S.A.U and Societé Nationale d'Electricité et de Thermique S.A. (Snet).

These
transactions relate only to an internal corporate changes, without giving rise to any gains or losses for the Group.



The consolidated Group is described in the Exhibit to these notes to consolidated financial statements.

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The
changes in the scope of consolidation in 2001 were as follows:



The
main changes in the scope of consolidation in 2002 were as follows:



F-13

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3.    BASIS OF PRESENTATION AND CONSOLIDATION PRINCIPLES

a)    True and fair view

The consolidated financial statements as of December 31, 2002 and 2001, of Endesa, S.A. ("Endesa" or "the Company") and its subsidiaries composing the
Endesa Group (referred to as a whole as "the Endesa Group" or "the Group"), which were prepared from the individual financial statements of the consolidated companies, are presented in accordance with
the revised Corporations Law, the Spanish National Chart of Accounts, Royal Decree 1815/1991 approving the regulations for the preparation of consolidated financial statements, and Royal Decree
437/1998 approving the regulations adapting the Spanish National Chart of Accounts for electric utilities ("the Electricity Industry Chart of Accounts"),
and the related implementing regulations, and present a true and fair view of the net worth and financial position of the consolidated Group and of the results of its operations and of the funds
obtained and applied by it.

Differences
between Spanish GAAP and accounting principles generally accepted in the United States of America ("US GAAP") and their effect on the consolidated net income for each of the
three years in the period ended December 31, 2002 and on the stockholders' equity as of December 31, 2002 and 2001 are set forth in Note 25.

The
consolidated financial statements of the Endesa Group and the individual financial statements of Endesa and of the subsidiaries as of December 31, 2002, have not yet been
approved by the respective Stockholders' Meetings, although it is considered that they will be approved without any changes. The 2001 individual financial statements and, where applicable,
consolidated financial statements of each of the companies consolidated were approved by the respective Stockholders' Meetings.

The
financial information expressed in U.S. dollars is presented for the convenience of the readers and in based on the Noon Buying Rate in New York City for cable transfer in euros as
certified for customers purposes by the Federal Reserves Bank of New York on December 31, 2002 which was 0.9537 euros for each dollar. No representation is made those euros amounts could have
been, or could be, converted into U.S dollars at the rate on December 31, 2002 or at any other rate.

b)    Consolidation principles

The subsidiaries in which Endesa has direct or indirect holdings exceeding 50% were generally fully consolidated, unless they were not material with respect to
giving a true and fair view of the GROUP.

The
unlisted companies between 20% and 50% owned by Endesa and the listed companies between 3% and 50% owned by Endesa are accounted for by the equity method, except for NUCLENOR which,
despite being 50% owned, was, as in prior years, proportionally consolidated because it is a multigroup company. Also, the Economic Interest Groupings and the Joint Property Associations in which the
Group has ownership interests are proportionally consolidated in the consolidated financial statements.

The
Exhibit to these notes to consolidated financial statements includes a detail of the fully consolidated companies and the companies accounted for by the equity method.

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The
subsidiaries not consolidated in 2002 and 2001 because as a whole they are not material in respect of the true and fair view of the consolidated financial statements are listed in
the Exhibit to these notes to consolidated financial statements and were valued at the lower of cost or market (see Note 4-d). Had these subsidiaries been consolidated, the
consolidated assets, liabilities, net worth and income would not have varied materially.

The
operations of Endesa and of the subsidiaries were consolidated in accordance with the following basic principles:





F-15

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The
effect of the translation differences on the assets and liabilities in the consolidated balance sheet is included in the related notes to consolidated financial statements in the
"Other" column.

4.    ACCOUNTING POLICIES

The main valuation methods used in preparing the accompanying consolidated financial statements, in accordance with the Spanish National Chart of Accounts and the
Electricity Industry Chart of Accounts, were as follows:

a)    Intangible assets

Intangible assets are valued at cost and are generally amortized over five years.

The
hydroelectric power plants are operated under the temporary administrative concession system, under which at the end of the concession period the facilities must revert to the State
in good working order. Also, the mines are operated under the administrative concession system for periods of at least 30 years, which may be extended subject to compliance with current legal
requirements. The Group's directors consider that no reversion reserve needs to be recorded since the facility maintenance programs and land restoration plans ensure their good working and delivery
condition at all times.

b)    Utility plant

Utility plant is carried at cost revalued, in the case of assets in Spain, pursuant to the applicable enabling legislation, including Royal Decree-Law
7/1996 (see Notes 9 and 12).

The
capitalized costs include direct and indirect labor and financial expenses, the latter for projects with a construction period of more than one year. Including the nuclear fuel costs
capitalized to the "Inventories" caption, €320 million and €330 million were capitalized in this connection in 2002 and 2001, respectively, and this
amount is recorded under the "Expenses Capitalized" caption in the accompanying consolidated statements of income.

The
Company's directors consider that the book value of the assets does not exceed their market value, which is calculated on the basis of the future cash flows to be generated by the
assets, including the remuneration for the transition to competition (see Note 9).

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c)    Depreciation

Depreciation of the utility plant is based on the following years of useful life:

|                           |  | Average Years of Estimated Useful Life
|-------------------------- |  | --------------------------------------
|
|Hydroelectric power plants |  | 35-65                                 
|Fossil-fuel power plants   |  | 25                                    
|Nuclear power plants       |  | 30                                    
|Transmission facilities    |  | 40                                    
|Distribution facilities    |  | 40                                    

The
cost of the assets that will be recovered through the remuneration for the transition to competition is being allocated to operating income as the remuneration is received during the
transitional period which ends in 2010 (see Note 6).

Empresa
Nacional de Residuos Radiactivos, S.A. (ENRESA) is responsible for the decommissioning of nuclear power plants and the treatment and final disposal of radioactive nuclear waste.
ENRESA is
funded by contributions of a specific portion of the electricity rate revenues. A contract between ENRESA and the electric utilities was executed on November 30, 1989, to formally document the
transfer to ENRESA of responsibility for the treatment and final disposal of nuclear waste. Management of the Group considers that the costs that will be incurred until the aforementioned transfer
will not be material. Consequently, no provision was recorded in this connection in the accompanying consolidated financial statements.

d)    Long-term financial investments

The Group's holdings, which are recorded as long-term investments when not consolidated, regardless of its percentage of ownership, are presented
individually at the lower of cost, revalued where appropriate pursuant to the applicable enabling legislation, or market. The market value is taken to be the underlying book value in the case of the
holdings in unlisted companies and the lower of average market price in the last quarter or market price at the year-end in the case of the holdings in listed companies.

Unrealized
losses (market value lower than cost at year-end) are recorded under the "Allowances" caption on the asset side of the accompanying consolidated balance sheets.

The
investments in companies accounted for by the equity method are valued at the underlying book value corresponding to the Group's percentage of ownership. The net income or loss
obtained through these companies each year is recorded under the "Equity in the Income/Losses of Companies Accounted for by the Equity Method" caption in the consolidated statement of income.

e)    Inventories

Inventories (mostly coal) are valued at the lower of weighted average cost or market (see Note 11).

Nuclear
fuel is recorded at acquisition cost, which includes the capitalized financial expenses assigned to its financing, and is allocated to income on the basis of the amount burnt
during the year.

f)    Capital subsidies

The subsidies collected in connection with fixed assets are recorded as deferred revenues under the "Capital Subsidies" caption and are recognized annually by the
straight-line method on the basis of the useful lives of the facilities to which they relate (see Note 14).

F-17

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g)    Translation of foreign currency balances

Foreign currency balances are translated to euros at the exchange rates prevailing at the transaction date. As of December 31 each year, the outstanding
balances of these transactions are reflected in the consolidated balance sheet at the exchange rates ruling as of that date.

Although
as of December 31, 2001, the value of the Argentine peso was still legally tied to that of the U.S. dollar at a rate of ARP 1/US$ 1, the balances of the Argentine
subsidiaries as of that date were translated taking the following into account:

On
January 6, 2002, the Argentine authorities enacted a law eliminating the fixed exchange rate between the Argentine peso and the U.S. dollar and established, with certain
conditions, a floating exchange rate between the two currencies.

This
legal change immediately triggered a sharp drop in the value of the Argentine peso with respect to the U.S. dollar and, therefore, to other currencies. Consequently, in accordance
with the accounting principle of prudence and with a ruling issued by the Spanish Accounting and Audit Institute (ICAC) on January 31, 2002, in response to an inquiry made to it in this
connection, the Argentine peso balances in the consolidated balance sheet as of December 31, 2001, were translated at an exchange rate of ARP 1.7/US$ 1, relating to the first representative
market value of the Argentine peso following the devaluation.

The
"Exchange Differences" caption in the 2001 consolidated statement of income includes €260 million arising from application of the exchange rate of ARP 1.7/US$
1 to the U.S. dollar balances in the balance sheets of the Group companies in Argentina. The related effect on net income after taxes and minority interests amounted to
€84 million.

Exchange
differences were recorded as follows:





F-18

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h)    Monetary adjustment

The value of nonmonetary assets and liabilities, including stockholders' equity and the balances of minority interests, relating to countries whose local
accounting standards so permit (Chile, Colombia
and Peru), are adjusted for inflation, against the "Monetary Correction" account, the balance of €163 million of which is included under the "Other Financial Revenues" caption
in the 2002 accompanying consolidated statement of income. The effect of the monetary correction recorded by the subsidiaries located in the aforementioned countries on net income after taxes and
minority interests amounted to €38 million. In 2001 €141 million were recorded as a monetary adjustment by the subsidiaries located in these countries.

The
effect of the monetary adjustment on the assets and liabilities is included in the respective notes in the "Other" column in the tables showing the variations during the year.

Although
Argentine accounting regulations approved the application of a monetary adjustment in 2002, pursuant to Spanish accounting regulations no monetary adjustment was made to the
balances of the Argentine subsidiaries since it is considered that in 2002 the conditions required for treating Argentina as a hyperinflationary country did not exist.



F-19

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j)    Other provisions

The provision for third-party liability relates to the estimated amount required for probable or certain third-party liability arising from outstanding
obligations of undetermined amount. This provision is recorded when the liability or obligation giving rise to the indemnity or payment arises (see Note 15).

In the accompanying consolidated balance sheets, debts maturing in under 12 months from year-end are classified as current liabilities and
those maturing at over 12 months as long-term debt.

Corporate income tax is recorded as a period expense. This expense is calculated on the basis of book income before taxes, increased or decreased, as appropriate,
by the permanent differences from taxable income, net of tax credits. The difference between the corporate income tax expense and the tax payable is due to timing differences in the recognition of the
expenses and revenues giving rise to prepaid or deferred taxes (see Note 17).

m)    Recognition of revenues and expenses

Revenues and expenses are recognized on an accrual basis. However, in accordance with the accounting principle of prudence, only realized income is recognized at
year-end, whereas foreseeable contingencies and losses, including possible losses, are recorded as soon as they become known.

n)    Customer connection charges

The Group records the extension charges included in the customer connection charges assigned to fixed assets under the "Deferred Revenues" caption in the
consolidated balance sheet, and allocates them to income over the years of useful life of the assets financed thereby. The access charges included in the connection charges and the inspection and
coupling charges are recorded as revenues in the year in which they are contracted, since they are not allocated to any fixed asset.

o)    Treasury stock

Since there is no plan for the retirement of the shares of treasury stock of the Parent Company, they are valued at the lower of acquisition cost or underlying
book value per the accompanying consolidated balance sheets, and a restricted reserve was recorded in this connection (see Note 12).

If
the cost of the shares of treasury stock is higher than their market value (taken to be the lower of year-end market price or average market price in the last quarter of
the year), the provision required to cover this difference is charged to the "Nonoperating Income" caption in the consolidated

F-20

---

statement
of income. The remainder of the provisions recorded for the difference between the underlying book value and the lower of the cost or market value of the shares is charged to unrestricted
reserves (see Note 12).

p)    Derivatives and hedging transactions

The financial derivatives held by the Group relate to interest rate, exchange rate and electricity price or supply hedging transactions (since they are intended
to eliminate or significantly reduce such risks in other transactions), and they are generally tied to the related underlying transactions. The premiums paid for these derivatives are deferred and
charged to income each year by the interest method.

The
gains or losses arising during the term of these derivatives transactions are allocated to income by the same timing of recognition method as that used to record the gains or losses
arising on the underlying transaction hedged by these derivatives.

The
Company values unmatured transactions at year-end, which are not deemed to be hedging transactions, and records the unrealized losses (acquisition price higher than
market value), if any, in the consolidated statement of income.

Exchange
differences arising in the year and year-end exchange differences are recorded as described in Note 4-g.

q)    Methods used to allocate assets, liabilities, expenses and revenues to the business activities

The various activities carried on by the Group were legally unbundled and, accordingly, the assignment of assets, liabilities, expenses and revenues relates to
the companies engaging in these activities, and they are included as a separate business activity in the "Corporate Activities" column, which relates mainly to the activities of Endesa, S.A., Endesa
Financiación Filiales, S.A. and to certain consolidation adjustments.

5.    INDUSTRY REGULATION

a)    Spain:

The regulation of the Spanish electricity industry is basically provided for in Law 54/1997. The main features of the Law and subsequent implementing regulations
are as follows:



F-21

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Article 12
of Electricity Industry Law 54/1997 establishes that the activities for the supply of electricity carried on in the Balearic and Canary Islands and Ceuta and Melilla
will be subject to specific regulations which will address the special nature of their geographical location. However, regulations that cater for the specific costs and special features required to
carry on production, transmission, distribution and retail management activities in the Balearic and Canary Islands and Ceuta and Melilla have not yet been passed.

Article 94
of Law 53/2002, implemented by Royal Decree 1432/2002, established the methodology to be used in calculating the regulated rate for the period from January 1,
2003 through December 31, 2010.

The
aforementioned Royal Decree initially limited the annual variation in the average rate to a maximum of 1.40%. However, it establishes that if using an assumed
straight-line recovery of CTCs it is observed that the uncollected balance thereof as of December 31, 2010, is not equal to zero, in calculating the average or reference electricity
rate, the government will apply an increase equal to 1.40%.

Additionally,
an additional increase or reduction of up to 0.60%, is provided for as a result of the revision of the forecasts made in calculating the rate for the two previous years in
relation to certain variables, provided that they exceed certain limits: demand at the end consumer (1%), interest rate for money (50 basis points), additional costs of the special regime premiums
(5%) and the price of gas (5%).

The
new rate methodology expressly envisages as a cost to be taken into account in the calculation of the average or reference rate the cost relating to the shortfall in revenues from
regulated activities
prior to 2003. Based on this, through 2010, the annual payment necessary for straight-line recovery of the net present value of the payment made by the utilities to finance the shortfall
relating to the regulated activities for 2000, 2001 and 2002 will be included as a cost in the rate.

Accordingly,
the utilities' right to recover the shortfalls arising in the period from 2000 through 2002, as a result of the fact that the revenues obtained in those years through the
system rates and fees were not sufficient to cover the costs of the regulated activities, has been recognized. In the assignment of this shortfall to the utilities which have contributed thereto, the
percentage attributed to ENDESA is 43.22%.

ENDESA
recognized €658 million in this connection, and this amount is recorded as an asset in the accompanying consolidated balance sheet (see Note 10). Of
this amount, €86 million relate to the 2000 shortfall, which was deducted from 2000 income and, accordingly, it was recorded in 2002 as a revenue under the "Nonoperating Income"
caption (see Note 18).

Additionally,
the Royal Decree establishing the rate methodology recognizes as an additional system cost, to be recovered together with the shortfall in revenues in the settlement of the
mainland regulated activities for 2000, 2001 and 2002, the revisions of the compensation for the island and other nonmainland systems for 2000 and 2001.

A
nonoperating revenue of €128 million (see Note 18) and financial revenues of €5 million were recorded in this connection, and,
accordingly, an asset of €133 million (see Note 10) has been recorded in the accompanying consolidated balance sheet in this connection.

For
the purposes of their settlement and collection, these amounts will be treated in the same way as the revenues from regulated activities. Additionally, it is expressly established
that these costs can be securitized.

F-22

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In
the Balearic and Canary Islands, a specific system, adapted to the conditions of nonmainland Spain and isolated island subsystems, and which establishes the mechanisms for calculating
the costs recognized for the related utilities, applies.

b)    Latin America:

The legislation of the Latin American countries in which the Group operates differs from one country to another; however the main features are as follows:

Generation:in general, they are deregulated markets in which private-sector players take investment decisions freely based on the
authorities' guidelines.

In
all the countries, there is a centralized dispatching system based on variable production costs which, depending on each country, are tied to U.S. dollars in varying degrees to
determine the marginal generation price, except in Colombia where dispatching is based on bids tendered. In Argentina there is a margin whereby producers can set aside in their cost bid declarations
up to 15% of the audited variable costs, and the regulator sets the maximum values.

Distribution:in the five countries listed below, the selling price to non-eligible customers is regulated and is based on the
price at which electricity is purchased from producers plus a component associated with the aggregate distribution price, which in certain cases is tied to fluctuations in the U.S. dollar. In
Argentina, Chile and Peru the purchase price is tied to the marginal generation cost. In Brazil the purchase price is regulated, and prices are currently set by the regulator in two cases. The first
relates to prices under contracts approved by the regulator which are known as "initial contracts" and the second relates to the "regulatory value", which is the reference price set by the regulator
for different technologies and represents the highest price that can be charged by the distributor to its regulated customers. In Colombia the purchase price is negotiated directly with the producers,
but the price charged to the end customer carries an efficiency surcharge for the distributors as a whole when the prices are agreed on with the producers.

Eligible customers:the minimum supply thresholds at which electricity can be freely contracted in each country are as follows:

|COUNTRY   |  | MINIMUM MW
|--------- |  | ----------
|ARGENTINA |  | 0.03      
|BRAZIL    |  | 3.0       
|CHILE     |  | 2.0       
|COLOMBIA  |  | 0.1       
|PERU      |  | 1.0       

Integration and concentration limits:vertical integration is generally allowed if the activities are unbundled for accounting purposes.
However, in Argentina there are restrictions on producers or distributors being majority stockholders of transmission companies. In Peru companies with an ownership interest of over 5% in a given
business require authorization from the regulator to acquire a holding in a company operating in a different business segment. In Colombia companies formed after 1994 may not be vertically integrated,
and there are restrictions on producers or distributors being majority stockholders of transmission companies. In Brazil the integration of generation and distribution is limited to 30%.

As
regards concentration, in Argentina there is no clear limit in the case of horizontal concentration. The law only safeguards competition, and expressly prohibits acts involving unfair
competition or abuse of dominant position in the market. The legislation in force establishes that the

F-23

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regulator
must authorize consolidations or mergers between players in the same business segment. In Brazil there are limits on concentration for both generation and distribution, and at both national
and electricity subsystem level. At national level concentration is confined to 20% for both generation and distribution; at electricity subsystem level the limits are 35% in the North and North East
subsystems, and 25% in the South-South East and Central-West subsystems. In Peru there is no limit on concentration, and authorization is only required from the regulator for the
acquisition of another company when, including the company acquired, the ownership interest in the segment concerned exceeds 15%. There are currently no limits in Chile. In Colombia the maximum limit
for horizontal concentration is 25% of the industry taken as a whole.

Network access:in Argentina, Brazil, Colombia and Peru access rights and the related fee or access price are regulated by the relevant
authority. In Chile access to the transmission network and the related access price are freely negotiated in accordance with a procedure established in the related legislation.

6.    COSTS OF TRANSITION TO COMPETITION AND REMUNERATION FOR THE TRANSITION TO COMPETITION

Remuneration for the transition to competition was regulated by Transitional Provision Six of Law 54/1997, the wording of which was modified by Article 107
of Law 50/1998 and, subsequently, by Royal Decree Law 2/2001.

a)    Concept

In order to ensure a smooth transition to competition, Transitional Provision Six of Law 54/1997 established a maximum period of ten years from the entry into
force of the Law over which the existence of costs relating to the transition to the competitive market envisaged in Law 54/1997 are recognized for the companies owning the electricity production
facilities which as of December 31, 1997, were included in the scope of application of Royal Decree 1538/1987 on the determination of the electricity rate for the electricity service management
companies. These costs are known as "Costs of Transition to Competition" (CTCs), and their recovery is provided for through the remuneration for transition to competition.

F-24

---

These costs are the result of comparing the remuneration that the companies would have received from their generation facilities under the former ratemaking system, which guaranteed
recovery of the related investments, operating and maintenance costs, overheads and fuel costs and a return on the capital invested, with the flow of discounted revenues that they would obtain under
market conditions. An efficiency factor of 32.5% was applied across-the-board for all the utilities. Also, certain costs relating to coal stocks and a premium for the use of
Spanish coal were also recognized.

b)    Maximum amount of the remuneration

Law 54/1997 stated that the overall base present value of the remuneration as of December 31, 1997, could not exceed
€11,951 million. This amount was reduced to €10,438 million by subsequent legislation. The maximum overall amount as of December 31 of each year of
the components referred to in the preceding point will be calculated by adjusting the maximum overall base amount as of December 31 of the preceding year by the average three-month EURIBOR for
the year.

The
overall base amount as of December 31, 1997, comprised the following components:



c)     Procedure and recovery period

Law 54/1997 established that, during the transitional period from 1998 to 2007, the utilities owning the electricity production facilities that as of
December 31, 1997, were included in the scope of application of Royal Decree 1538/1997 would receive an amount of remuneration defined as the difference between the average revenues obtained by
the aforementioned utilities through the electricity rate and the remuneration for the production activity recognized under the Electricity Industry Law.

In
1999 and 2000 Article 107 of Law 50/1998, which modified the way in which the remuneration for transition to competition was paid, was in force. This Law established that
23.81% of the technological costs of transition to competition would be recovered through 2007 by the system of differences previously established (differences between the actual revenues obtained by
the utilities and those that they would have obtained under the system in force through the introduction of competition) and the remaining 76.19% would be recovered by the assignment of 4.5% of
billings, without any time limit.

Royal
Decree Law 2/2001 eliminated the assignment of 4.5%, returning to a situation in which all the technological costs of transition to competition would be treated as a maximum amount
to be recovered through the previously established system of differences with a time limit through December 31, 2010.

If
the average annual generation price is higher than €0.03606 (Pts.6)/kWh, this excess will be deducted from the value of the remuneration for transition to competition
not yet received.

d)    Accounting treatment

For accounting purposes, the remuneration will cover, in the following order, the items described below:



F-25

---



The
amounts indicated above that were not covered by the remuneration were retired from the balance sheet in 1997 or 1998 with a charge to reserves at fully consolidated companies,
minority interests and prepaid taxes, as follows.

|                  |                          | Reserves |     | 1997
Minority
Interests |     | Prepaid Taxes |     | Reserves |     | 1998
Minority
Interests |    | Prepaid Taxes
|----------------- | ------------------------ | -------- | --- | ----------------------- | --- | ------------- | --- | -------- | --- | ----------------------- | -- | -------------
|Fixed assets      |                          |          |     |                         |     |               |     | 4        |     |                         |    | 2            
|Deferred charges: |                          |          |     |                         |     |               |     |          |     |                         |    |              
|                  |  Exchange differences   |          | 1   |                         |     |               | 1   |          |     |                         |    |              
|                  |  Accruals and other     |          |     |                         |     |               |     |          | 37  |                         | 5  |              
|                  |  Restructuring expenses |          | 416 |                         | 107 |               | 256 |          | 100 |                         | 12 |              

A
Ministry of Economy Order dated March 28, 2001, provided for the possibility of writing off against reserves the amount of the capitalized costs of transition to competition
which would be recovered through the remuneration as of December 31, 2000, whose recovery was not considered to be reasonably assured through the remuneration for the transition to competition
arising solely as a result of the elimination by Royal Decree Law 2/2001 of the assignment of 4.5% of billings for electricity sales to consumers.

In
this respect, under the provisions of the aforementioned Ministerial Order, the 2000 consolidated statement of income was prepared without taking into account the effects of Royal
Decree Law 2/2001 including the analysis of the recoverability, in the aforementioned situation, of the costs of the assets to be offset with the CTCs under various assumptions in relation to the
evolution of electricity rates, demand for electricity, pool prices, interest rates, etc. Subsequently, the Company's directors, in accordance with the accounting principle of prudence, considered
that in the event of the unfavorable evolution of the assumptions made, the amount of the cost of assets to be offset through the remuneration as of December 31, 2000, which would not be
recovered as a result of the elimination of the assignment of 4.5% of billings by Royal Decree Law 2/2001 would amount to €1,899 million, and this amount was charged off against
reserves as of December 31, 2000. Of this amount, €172 million relate to the account receivable recorded in 1999 and 2000 as a result of the recording of the revenues for
remuneration for transition to competition which exceeded the amount collected based on the recovery rate established, and the remaining €1,727 million to labor force reduction
expenses.

The
charge to reserves was reduced by €665 million due to the tax effect of the aforementioned adjustment and, accordingly, the net effect on reserves amounted to
€1,234 million.

Despite
this accounting treatment, which was applied solely on the basis of utmost prudence, the Company's directors consider that the costs of transition to competition constitute an
irrevocable right of the Company, and that all the necessary steps will be taken to ensure that the maximum amount assigned is recovered in full.

F-26

---

If
the amount of the remuneration for transition to competition recovered in the future exceeds the amount estimated to record the accounting entry against reserves, the excess will also
be recorded in reserve accounts.

After
making the adjustments indicated above, the costs of transition to competition covered by the remuneration for the transition to competition were as follows:

|                         |  | Electricity Plant |  | Deferred Charges for the Transition to Competition |   | Total |  
|------------------------ |  | ----------------- |  | -------------------------------------------------- | - | ----- | -
|
|
|1998                     |  | 2,102             |  | (126                                               | ) | 1,976 |  
|Adjustments              |  |                   |  |                                                    |   | (147  | )
|Total 12/31/98           |  |                   |  |                                                    |   | 1,829 |  
|1999                     |  | 1,829             |  | (132                                               | ) | 1,697 |  
|Adjustments              |  |                   |  |                                                    |   |       |  
|Total 12/31/99           |  |                   |  |                                                    |   | 1,697 |  
|2000                     |  | 1,697             |  | (150                                               | ) | 1,547 |  
|Adjustments              |  |                   |  |                                                    |   | (22   | )
|Charged to reserves      |  |                   |  |                                                    |   |       |  
|Total 12/31/00           |  |                   |  |                                                    |   | 1,525 |  
|2001                     |  | 1,525             |  | (118                                               | ) | 1,407 |  
|Total 12/31/01           |  |                   |  |                                                    |   | 1,407 |  
|2002                     |  | 1,407             |  | (81                                                | ) | 1,326 |  
|Effect of sale of Viesgo |  |                   |  |                                                    |   | (105  | )
|Total 12/31/02           |  |                   |  |                                                    |   | 1,221 |  

The adjustments made to electricity plant in 1998 and 2000 related mainly to the effect arising from the new estimate of the rate at which the
value of the assets will be recovered through the market, based on the market situation.

The
adjustments made in 1998 to deferred charges related to the additional provisions to cover the cost of the labor force reduction plans agreed on in 1998. The adjustments made in 1999
and 2000 included the cost of the labor force reduction plans agreed on in 2000.

The
Company's directors consider that, based on the estimates made of the trend in electricity system revenues and of the CTC collections, the amounts included in the foregoing table,
which are recorded on the asset side of the consolidated balance sheet as of December 31, 2002, will be able to be recovered in full.

e)     Evolution of the outstanding amounts recoverable through the remuneration

The detail of the balance of the remuneration recoverable since the remuneration was first introduced is as follows:

|                                            |  | 1998  |   | 1999  |   | 2000  |   | 2001  |   | 2002  |  
|------------------------------------------- |  | ----- | - | ----- | - | ----- | - | ----- | - | ----- | -
|
|Beginning balance                           |  | 4,388 |   | 4,313 |   | 4,095 |   | 3,768 |   | 3,631 |  
|Effect of sale of Viesgo                    |  |      |   |      |   |      |   |      |   | (224  | )
|Accrued interest                            |  | 221   |   | 130   |   | 170   |   | 157   |   | 111   |  
|Collections                                 |  | (296  | ) | (348  | ) | (267  | ) | (25   | ) |      |  
|Amount exceeding 0.03606 (Ptas. 6) per /kWh |  |      |   |      |   | (192  | ) | (214  | ) | (709  | )
|Rate shortfall                              |  |      |   |      |   | 170   |   |      |   | 475   |  
|Recognition of shortfall                    |  |       |   |       |   |       |   |       |   | (610  | )
|Prior years' adjustments                    |  |      |   |      |   | (208  | ) | (55   | ) | 4     |  
|Ending balance                              |  | 4,313 |   | 4,095 |   | 3,768 |   | 3,631 |   | 2,678 |  

F-27

---

Of
the outstanding amount recoverable as of December 31, 2001, €224 million relate to the VIESGO Group and, accordingly, the remuneration recoverable was
reduced by this amount in January 2002.

In
1998 the related amounts of the 1998 electricity rate were recorded as revenues from remuneration for the transition to competition. The cost of the assets covered by this
remuneration was depreciated in 1998 at a rate of 6.52%, the coefficient established in the schedule for recovery of this remuneration for 1998, since this coefficient was higher than the principal
amount of the remuneration for the transition to competition collected in 1998.

In
1999 and 2000 the amount of the remuneration for the transition to competition to be recovered by the system of differences was recorded, as in 1998, for the related amount of each
year's electricity rate; however the amount to be recovered through the 4.5% of the electricity rate was recorded as a
revenue based on the recovery rate of the established nine-year period, the recovery rates being 7.19% for 1999 and 8.22% for 2000. The related expenses for those years were amortized by
the same percentages.

Based
on this method, in 1999 and 2000 revenues relating to the remuneration for the transition to competition amounting to €395 million and
€420 million, respectively.

In
2001 and 2002 the CTC revenues were recorded for the related amount of the electricity rate for each year. Since these revenues were lower than those envisaged in the established
recovery schedule, the percentages of 7.75% and 6.24% envisaged for 2001 and 2002, respectively, in the schedule were applied in depreciating the cost of the assets to be recovered through the CTCs.

In
the coming years, the cost of the assets recoverable through the CTCs will be depreciated on the basis of the percentage, which the revenues represent of the total unrecovered
remuneration, applying the minimum recovery schedule percentage:

F-28

---

This recovery schedule was calculated in accordance with the projected recovery of CTCs included in the Economic Report accompanying Royal Decree 1432/2002, which establishes the method
for calculating the rate for 2003 - 2010, as follows:

Year

Percentage of Projected Total2003

1.262004

3.692005

5.042006

7.622007

9.412008

22.912009

24.412010

25.66TOTAL

100.00


7.     CONSOLIDATION GOODWILL

The detail, by company, of the consolidation goodwill as of December 31, 2002 and 2001, is as follows:

|                      |  | 2000  |  | Additions |  | Retirements
and
Amortization |   | Other |   | 2001  |  | Additions |  | Retirements |   | Amortization |   | Other |   | 2002 
|--------------------- |  | ----- |  | --------- |  | ---------------------------- | - | ----- | - | ----- |  | --------- |  | ----------- | - | ------------ | - | ----- | - | -----
|
|ENERSIS GROUP         |  | 2,374 |  |          |  | (133                         | ) | (176  | ) | 2,065 |  |           |  |             |   | (123         | ) | (512  | ) | 1,430
|ENDESA CHILE          |  | 1,295 |  |          |  | (71                          | ) | (61   | ) | 1,163 |  |           |  |             |   | (64          | ) | (233  | ) | 866  
|CERJ                  |  | 209   |  |          |  | (6                           | ) |      |   | 203   |  | 14        |  |             |   | (13          | ) | (2    | ) | 202  
|CHILECTRA             |  | 233   |  | 7         |  | (13                          | ) | (11   | ) | 216   |  |           |  |             |   | (11          | ) | (43   | ) | 162  
|SMARTCOM              |  | 423   |  |          |  | (29                          | ) | 1     |   | 395   |  |           |  | (317        | ) | (21          | ) | 1     |   | 58   
|RETEVISIÓN            |  | 251   |  |          |  |                             |   | (251  | ) |      |  |           |  |             |   |              |   |       |   |      
|AUNA                  |  |      |  |          |  | (17                          | ) | 300   |   | 283   |  | 123       |  |             |   | (20          | ) | (1    | ) | 385  
|REPSOL                |  |      |  | 109       |  | (3                           | ) |      |   | 106   |  |           |  |             |   | (5           | ) |       |   | 101  
|EASA                  |  | 19    |  |          |  |                             |   | (19   | ) |      |  |           |  |             |   |              |   |       |   |      
|SNET                  |  |      |  | 284       |  | (9                           | ) |      |   | 275   |  |           |  |             |   | (14          | ) |       |   | 261  
|ENDESA HOLDING ITALIA |  |      |  | 773       |  | (10                          | ) |      |   | 763   |  |           |  |             |   | (77          | ) | 774   |   | 1,460
|OTHER                 |  | 131   |  | 1         |  | (4                           | ) | (54   | ) | 74    |  | 8         |  | (21         | ) | (7           | ) | (9    | ) | 45   
|                      |  |       |  |           |  |                              |   |       |   |       |  |           |  |             |   |              |   |       |   |      
|TOTAL                 |  | 4,935 |  | 1,174     |  | (295                         | ) | (271  | ) | 5,543 |  | 145       |  | (338        | ) | (355         | ) | (25   | ) | 4,970
|                      |  |       |  |           |  |                              |   |       |   |       |  |           |  |             |   |              |   |       |   |      

Extraordinary amortization of the goodwill relating to Smartcom amounting to €317 million was taken as a result of the
decline in value of companies in the telecommunications industry. This amount was allocated to the "Nonoperating Expenses" caption in the accompanying consolidated statement of income (see
Note 18).

In
2002 goodwill of €774 million relating to ENDESA Holding Italia was recorded as a result of the full consolidation of this company

F-29

---

8.     INTANGIBLE ASSETS

The variations in intangible assets in 2002 and 2001 were as follows:

2002

2001Millions of EurosBeginning balance

525

453Inclusion/Exclusion of other companies in/from consolidation

46

(18
)Additions

98

142Amortization and retirements

(86
)
(70
)Other

(81
)
18Ending balance

502

525


9.     UTILITY PLANT

The detail of the book value of the utility plant and of the related accumulated depreciation as of December 31, 2002 and 2001, is as follows:

2002

2001Cost

Accumulated
Depreciation

Construction
Work in
Progress

Cost

Accumulated
Depreciation

Construction
Work in
ProgressMillions of EurosLand and structures

1,961

(881
)


1,636

(495
)Electricity Plant

46,358

(22,241
)
1,965

48,216

(21,904
)
2,035 Hydroelectric power plants

10,709

(4,082
)
276

11,891

(4,504
)
334 Fossil-fuel power plants

10,640

(6,883
)
219

10,187

(5,986
)
305 Nuclear power plants

8,206

(4,652
)
64

8,169

(4,376
)
37 Combined-cycle power plants

859

(67
)
602





 Other alternative power plants

273

(57
)
13

192

(47
)
332 Transmission facilities

1,731

(672
)
139

1,386

(528
)
264 Distribution facilities

12,730

(5,191
)
531

14,738

(5,828
)
604 Dispatching and energy control
   centers

500

(317
)
44

509

(317
)
44 Other electricity facilities

710

(320
)
77

1,144

(318
)
115Other fixtures, machinery, tools, furniture and other tangible fixed assets

1,678

(1,120
)
248

1,911

(1,306
)
224Total

49,997

(24,242
)
2,213

51,763

(23,705
)
2,259


Also, allowances recorded for utility plant amount to €227 million and €165 million in 2002 and
2001, respectively.

F-30

---

The variations in 2002 and 2001 in the utility plant in service, in the related accumulated depreciation and in construction work in progress were as follows:

|UTILITY PLANT IN SERVICE                                                   |                                             | Balance at 12/31/00 |        | Inclusions/
Exclusions |    | Additions |     | Retirements |      | Transfers |     | Other  |        | Balance at 12/31/01 |        | Inclusions/
Exclusions |       | Additions |     | Retirements |      | Transfers |     | Other  |        | Balance at 12/31/02 |       
|-------------------------------------------------------------------------- | ------------------------------------------- | ------------------- | ------ | ---------------------- | -- | --------- | --- | ----------- | ---- | --------- | --- | ------ | ------ | ------------------- | ------ | ---------------------- | ----- | --------- | --- | ----------- | ---- | --------- | --- | ------ | ------ | ------------------- | ------
|
|Land and structures                                                        |                                             | 1,471               |        | 5                      |    | 90        |     | (21         | )    | 116       |     | (25    | )      | 1,636               |        | 525                    |       | 11        |     | (40         | )    | 10        |     | (181   | )      | 1,961               |       
|Technical electricity installations                                        |                                             | 47,926              |        | 103                    |    | 419       |     | (285        | )    | 1,535     |     | (1,482 | )      | 48,216              |        | 1,619                  |       | 484       |     | (225        | )    | 1,553     |     | (5,289 | )      | 46,358              |       
|                                                                           |  Hydroelectric power plants                |                     | 11,949 |                        |   |           | 150 |             | (7   | )         | 11  |        | (212   | )                   | 11,891 |                        | 790   |           | 152 |             | (3   | )         | 167 |        | (2,288 | )                   | 10,709
|                                                                           |  Fossil-fuel power plants                  |                     | 10,190 |                        | 67 |           | 54  |             | (106 | )         | 562 |        | (1,303 | )                   | 9,464  |                        | 1,672 |           | 57  |             | (155 | )         | 42  |        | (440   | )                   | 10,640
|                                                                           |  Combined-cycle power plants               |                     |       |                        |   |           |    |             |     |           |    |        | 731    |                     | 731    |                        |      |           | 14  |             |     |           | 429 |        | (315   | )                   | 859   
|                                                                           |  Nuclear power plants                      |                     | 8,136  |                        |   |           | 15  |             |     |           | 19  |        | (1     | )                   | 8,169  |                        |      |           | 14  |             |     |           | 15  |        | 8      |                     | 8,206 
|                                                                           |  Other alternative power plants            |                     | 114    |                        | 33 |           |    |             | (3   | )         | 45  |        | 3      |                     | 192    |                        |      |           |    |             | (1   | )         | 85  |        | (3     | )                   | 273   
|                                                                           |  Transmission facilities                   |                     | 1,114  |                        |   |           | 31  |             | (24  | )         | 297 |        | (32    | )                   | 1,386  |                        | (18   | )         | 163 |             | (4   | )         | 389 |        | (185   | )                   | 1,731 
|                                                                           |  Distribution facilities                   |                     | 14,641 |                        | (3 | )         | 53  |             | (67  | )         | 682 |        | (568   | )                   | 14,738 |                        | (744  | )         | 28  |             | (26  | )         | 410 |        | (1,676 | )                   | 12,730
|                                                                           |  Dispatching and energy control
   centers |                     | 592    |                        |   |           | 3   |             | (74  | )         | (8  | )      | (4     | )                   | 509    |                        | (39   | )         |    |             | (6   | )         | 30  |        | 6      |                     | 500   
|                                                                           |  Other electricity installations           |                     | 1,190  |                        | 6  |           | 113 |             | (4   | )         | (73 | )      | (96    | )                   | 1,136  |                        | (42   | )         | 56  |             | (30  | )         | (14 | )      | (396   | )                   | 710   
|Other installations, machinery, tools and furniture                        |                                             | 1,814               |        | 184                    |    | 30        |     | (31         | )    | (43       | )   | (43    | )      | 1,911               |        | (47                    | )     | 33        |     | (95         | )    | 51        |     | (175   | )      | 1,678               |       
|                                                                           |                                             |                     |        |                        |    |           |     |             |      |           |     |        |        |                     |        |                        |       |           |     |             |      |           |     |        |        |                     |       
|TOTAL                                                                      |                                             | 51,211              |        | 292                    |    | 539       |     | (337        | )    | 1,608     |     | (1,550 | )      | 51,763              |        | 2,097                  |       | 528       |     | (360        | )    | 1,614     |     | (5,645 | )      | 49,997              |       
|                                                                           |                                             |                     |        |                        |    |           |     |             |      |           |     |        |        |                     |        |                        |       |           |     |             |      |           |     |        |        |                     |       
|
|Land and structures                                                        |                                             | (482                | )      |                       |    | (27       | )   | 8           |      |          |     | 6      |        | (495                | )      | (336                   | )     | (46       | )   | 19          |      |          |     | (23    | )      | (881                | )     
|Technical electricity installations                                        |                                             | (21,126             | )      | (11                    | )  | (1,605    | )   | 189         |      | (26       | )   | 675    |        | (21,904             | )      | (639                   | )     | (1,424    | )   | 148         |      | (4        | )   | 1,582  |        | (22,241             | )     
|Other installations, machinery, tools, furniture and other tangible assets |                                             | (1,190              | )      | (38                    | )  | (94       | )   | (56         | )    | 27        |     | 45     |        | (1,306              | )      | 16                     |       | (107      | )   | 90          |      | 4         |     | 183    |        | (1,120              | )     
|                                                                           |                                             |                     |        |                        |    |           |     |             |      |           |     |        |        |                     |        |                        |       |           |     |             |      |           |     |        |        |                     |       
|TOTAL                                                                      |                                             | (22,798             | )      | (49                    | )  | (1,726    | )   | 141         |      | 1         |     | 726    |        | (23,705             | )      | (959                   | )     | (1,577    | )   | 257         |      |          |     | 1,742  |        | (24,242             | )     
|                                                                           |                                             |                     |        |                        |    |           |     |             |      |           |     |        |        |                     |        |                        |       |           |     |             |      |           |     |        |        |                     |       
|
|Electricity Plant                                                          |                                             | 1,836               |        | 11                     |    | 1,757     |     | (18         | )    | (1,423    | )   | (128   | )      | 2,035               |        | 62                     |       | 1,761     |     | (1          | )    | (1,576    | )   | (316   | )      | 1,965               |       
|Other fixtures, machinery, tools, furniture and other tangible assets      |                                             | 320                 |        |                       |    | 106       |     |             |      | (185      | )   | (17    | )      | 224                 |        | (33                    | )     | 101       |     | (2          | )    | (38       | )   | (4     | )      | 248                 |       
|                                                                           |                                             |                     |        |                        |    |           |     |             |      |           |     |        |        |                     |        |                        |       |           |     |             |      |           |     |        |        |                     |       
|TOTAL                                                                      |                                             | 2,156               |        | 11                     |    | 1,863     |     | (18         | )    | (1,608    | )   | (145   | )      | 2,259               |        | 29                     |       | 1,862     |     | (3          | )    | (1,614    | )   | (320   | )      | 2,213               |       
|                                                                           |                                             |                     |        |                        |    |           |     |             |      |           |     |        |        |                     |        |                        |       |           |     |             |      |           |     |        |        |                     |       

F-31

---

On December 31, 1996, most of the Group companies in Spain revalued their fixed assets pursuant to Royal Decree-Law 7/1996. The net increase in value resulting from
these revaluations will be depreciated over the tax periods in the remaining useful lives of the revalued assets. The 1996 revaluations increased the 2002 and 2001 depreciation charge by approximately
€175 million and €209 million, respectively.

Endesa
and its subsidiaries have taken out insurance policies to cover the possible risks to which their utility plant is subject and any possible claims that may be filed against them
in carrying on their business activities. It is considered that these policies sufficiently cover the risks to which their assets are subject.

The
directors of Endesa, based on their best estimates of the cash flows that will be generated by their assets, together with the revenues arising from the remuneration for the
transition to competition, consider that there is no doubt that the amounts recorded as of December 31, 2002, in the utility plant accounts will be recovered.

In
November 2002 Endesa assumed a commitment to sell most of its mainland transmission assets in Spain to Red Eléctrica de España for
€950 million, of which €485 million were collected as an advance in 2002. The book value of these assets as of December 31, 2002, amounted to
€425 million. The transfer will be formalized when the related administrative authorizations have been obtained.

10.    LONG-TERM FINANCIAL INVESTMENTS

The detail of this caption as of December 31, 2002 and 2001, excluding the prepaid taxes (see Note 17) and of the variations therein in 2002 and
2001 is as follows:

F-32

---

|LONG-TERM INVESTMENTS                                |  | Balance
at
12/31/00 |   | Period
Additions |   | Inclusions
in/
Exclusions
from
Consolidation |   | Companies
Accounted
by the
Equity
Method |   | Divest-
ments |   | Transfers
and Other |   | Balance
at
12/31/01 |   | Period
Additions |   | Inclusions
in/
Exclusions
from
Consolidation |   | Companies
Accounted by the Equity
Method |   | Divest-
ments |   | Transfers
and Other |   | Balance
at
12/31/02 |  
|---------------------------------------------------- |  | ------------------- | - | ---------------- | - | -------------------------------------------- | - | ---------------------------------------- | - | ------------- | - | ------------------- | - | ------------------- | - | ---------------- | - | -------------------------------------------- | - | ---------------------------------------- | - | ------------- | - | ------------------- | - | ------------------- | -
|
|Investments accounted for by the equity method       |  | 1,177               |   | 2,147            |   | (7                                           | ) | (150                                     | ) | (316          | ) | (845                | ) | 2,006               |   | 496              |   | (9                                           | ) | (133                                     | ) | (1            | ) | (321                | ) | 2,038               |  
|SPAIN:                                               |  |                     |   |                  |   |                                              |   |                                          |   |               |   |                     |   |                     |   |                  |   |                                              |   |                                          |   |               |   |                     |   |                     |  
|AUNA (formerly RETEVISIÓN)                           |  | 240                 |   | 498              |   | 0                                            |   | (198                                     | ) | 0             |   | (24                 | ) | 516                 |   | 432              |   | 0                                            |   | (160                                     | ) | 0             |   | (98                 | ) | 690                 |  
|SMARTCOM                                             |  | 0                   |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 0                   |   | 0                   |   | 57               |   | 0                                            |   | (53                                      | ) | 0             |   | 174                 |   | 178                 |  
|REPSOL                                               |  | 0                   |   | 194              |   | 0                                            |   | 0                                        |   | 0             |   | 241                 |   | 435                 |   | 0                |   | 0                                            |   | 60                                       |   | 0             |   | (63                 | ) | 432                 |  
|ENDESA HOLDING ITALIA                                |  | 0                   |   | 999              |   | 0                                            |   | 28                                       |   | 0             |   | (773                | ) | 254                 |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | (254                | ) | 0                   |  
|SNET                                                 |  | 0                   |   | 452              |   | 0                                            |   | 6                                        |   | 0             |   | (284                | ) | 174                 |   | 0                |   | 0                                            |   | 2                                        |   | 0             |   | 0                   |   | 176                 |  
|AGBAR                                                |  | 120                 |   | 0                |   | 0                                            |   | 13                                       |   | 0             |   | (2                  | ) | 131                 |   | 0                |   | 0                                            |   | 9                                        |   | 0             |   | (28                 | ) | 112                 |  
|RED ELÉCTRICA                                        |  | 77                  |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 0                   |   | 77                  |   | 0                |   | 0                                            |   | 3                                        |   | 0             |   | 0                   |   | 80                  |  
|NQF GAS                                              |  | 21                  |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 0                   |   | 21                  |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 0                   |   | 21                  |  
|ABROAD:                                              |  |                     |   |                  |   |                                              |   |                                          |   |               |   |                     |   |                     |   |                  |   |                                              |   |                                          |   |               |   |                     |   |                     |  
|INFRAESTRUCTURA. 2000                                |  | 0                   |   | 0                |   | 0                                            |   | 1                                        |   | 0             |   | 63                  |   | 64                  |   | 0                |   | 0                                            |   | 1                                        |   | 0             |   | (14                 | ) | 51                  |  
|NOPEL                                                |  | 63                  |   | 0                |   | 0                                            |   | (6                                       | ) | 0             |   | 4                   |   | 61                  |   | 0                |   | 0                                            |   | (8                                       | ) | 0             |   | (8                  | ) | 45                  |  
|TEJO                                                 |  | 42                  |   | 0                |   | 0                                            |   | 7                                        |   | 0             |   | (1                  | ) | 48                  |   | 0                |   | 0                                            |   | 5                                        |   | 0             |   | 0                   |   | 53                  |  
|GAS, NORESTE                                         |  | 52                  |   | 0                |   | 0                                            |   | (8                                       | ) | 0             |   | 3                   |   | 47                  |   | 0                |   | 0                                            |   | 4                                        |   | 0             |   | (8                  | ) | 43                  |  
|GAS, ATACAMA                                         |  | 32                  |   | 0                |   | 0                                            |   | 6                                        |   | 0             |   | 1                   |   | 39                  |   | 0                |   | 0                                            |   | 5                                        |   | 0             |   | (7                  | ) | 37                  |  
|YACILEC                                              |  | 13                  |   | 0                |   | 0                                            |   | 1                                        |   | 0             |   | 0                   |   | 14                  |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | (3                  | ) | 11                  |  
|INV ELÉCTRICA QUILLOTA                               |  | 14                  |   | 0                |   | 0                                            |   | (1                                       | ) | 0             |   | 0                   |   | 13                  |   | 0                |   | 0                                            |   | 1                                        |   | 0             |   | (3                  | ) | 11                  |  
|ELECAR                                               |  | 0                   |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 0                   |   | 0                   |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 0                   |   | 0                   |  
|CIEN                                                 |  | 0                   |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 0                   |   | 0                   |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 0                   |   | 0                   |  
|CEMSA                                                |  | 0                   |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 0                   |   | 0                   |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 0                   |   | 0                   |  
|EDENOR                                               |  | 170                 |   | 0                |   | 0                                            |   | 0                                        |   | (170          | ) | 0                   |   | 0                   |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 0                   |   | 0                   |  
|ELECTRICIDAD DE ARGENTINA                            |  | 142                 |   | 0                |   | 0                                            |   | 0                                        |   | (137          | ) | (5                  | ) | 0                   |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 0                   |   | 0                   |  
|INVERSIONES ELECTROGAS                               |  | 0                   |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 10                  |   | 10                  |   | 0                |   | 0                                            |   | 1                                        |   | 0             |   | (2                  | ) | 9                   |  
|CABO BLANCO                                          |  | 31                  |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | (31                 | ) | 0                   |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 0                   |   | 0                   |  
|GENERALIMA                                           |  | 30                  |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | (30                 | ) | 0                   |   | 0                |   | 0                                            |   | 0                                        |   | 0             |   | 0                   |   | 0                   |  
|Other investments accounted for by the equity method |  | 130                 |   | 4                |   | (7                                           | ) | 1                                        |   | (9            | ) | (17                 | ) | 102                 |   | 7                |   | (9                                           | ) | (3                                       | ) | (1            | ) | (7                  | ) | 89                  |  
|Loans to companies accounted by the equity method    |  | 467                 |   | 40               |   | 0                                            |   | 0                                        |   | (184          | ) | 19                  |   | 342                 |   | 11               |   | 0                                            |   | 0                                        |   | (30           | ) | (275                | ) | 48                  |  
|Long-term investment securities                      |  | 1,096               |   | 120              |   | 13                                           |   | 0                                        |   | (56           | ) | (521                | ) | 652                 |   | 30               |   | 0                                            |   | 0                                        |   | (22           | ) | (121                | ) | 539                 |  
|Other investments                                    |  | 694                 |   | 584              |   | 0                                            |   | 0                                        |   | (122          | ) | (46                 | ) | 1,110               |   | 829              |   | 0                                            |   | 0                                        |   | (101          | ) | (161                | ) | 1,677               |  
|Allowances                                           |  | (126                | ) | (59              | ) | 7                                            |   | 0                                        |   | 43            |   | 46                  |   | (89                 | ) | (17              | ) | 0                                            |   | 0                                        |   | 5             |   | (3                  | ) | (104                | )
|Total                                                |  | 3,308               |   | 2,832            |   | 13                                           |   | (150                                     | ) | (635          | ) | (1,347              | ) | 4,021               |   | 1,349            |   | (9                                           | ) | (133                                     | ) | (149          | ) | (881                | ) | 4,198               |  

F-33

---

In 2001 additional shares of REPSOL were acquired for €194 million, increasing the ownership interest to 3%, which is recorded under the "Investments Carried by
the Equity Method" caption.

In
April 2001 a 30% holding in SOCIÉTÉ NATIONALE D'ÉLECTRICITÉ ET DU THERMIQUE (SNET) was acquired for
€452 million, and this holding is carried by the equity method. Endesa arranged with CHARBONNAGES DE FRANCE (CDF), which owns 51.3% of SNET, a call option whereby Endesa can ask
CDF to sell its remaining SNET shares to the Company in the period from January 1, 2003 to January 1, 2004, at a pre-established reference price. If CDF does not agree to
sell its holding within six months, it is obliged to acquire Endesa's holding. Also, Endesa and CDF arranged a put option whereby CDF can ask Endesa to acquire its remaining SNET shares before
January 1, 2004, at an initially agreed on price. If Endesa does not agree to acquire these shares within three months, it must sell its shares. On September 2, 2002, CdF exercised its
option under the terms initially agreed on.

In
view of the changes in SNET's situation that have taken place since these agreements were entered into, Endesa has commence negotiations with the aforementioned selling company to
assess the possibility of acquiring the shares which are still owned by CdF under conditions and terms different from those initially agreed upon. No response had been received to this proposal at the
date of preparation of these consolidated financial statements. The Company's directors consider that despite the changes in SNET's situation, based on the guarantees provided for in the purchase
agreement entered into in 2001, the value for this holding recorded as of December 2002, will be recovered.

In
September 2001 Endesa Holding Italia, S.R.L. was incorporated. The purpose of this company, in which Endesa has a 45.3% holding acquired for
€999 million, is to acquire all the shares of the Italian electricity producer ELETTROGEN. This company was carried by the equity method, since, based on the stockholder
structure as of December 31, 2001, Endesa was not able to appoint a majority of the company's Board members.

In
2002 Endesa acquired an additional 5.7% holding in ENDESA Holding Italia from SCH for €127 million. As a result of this acquisition Endesa now owns 51% of this
company's shares and, accordingly the holding was retired from long-term investments and was fully consolidated.

Endesa
arranged with SCH, which now has a holding of 34.3% in ENDESA Holding Italia, an option to acquire the full amount of this holding, which can be exercised, fully or partially, at
any time from
the date on which the bank subscribed and paid its holding in September 2001 through the fifth anniversary of that date, and granted the bank a put option on the full amount of its holding,
which can be exercised from the fifth year from the aforementioned subscription date onwards The price of exercising the two options is based on the acquisition price of Endesa's initial holding in
Endesa Holding Italia, S.R.L.

The
main investments made in 2002 were the acquisition from Telecom Italia of an additional 2% holding in AUNA for €159 million. The Group also subscribed the
capital increases carried out at AUNA for an investment of €273 million. Also, Endesa has an option to acquire from SCH for an additional 5.5% of the capital of AUNA, which can
be exercised through July 2003 and, if the aforementioned option is not exercised, SCH has an option to sell a holding of 3% to Endesa. The two options are based on the prices for which the
holding was acquired from Telecom Italia. Also Smartcom shares were subscribed for €57 million.

The
investments in 2001 recorded under the "Other Loans" caption include most notably a deposit of €151 million to cover and assure the amount of the future
contributions to Endesa's employment-based pension plan, and the subscription of fixed-income securities for €100 million by TENEGUÍA GESTIÓN
FINANCIERA, S. COMANDITARIA. Also, in 2001 the Group sold its holdings in the Argentine companies EDENOR and Electricidad de Argentina, giving rise to a gain of €494 million

F-34

---

which
was recorded under the "Nonoperating Income" caption in the consolidated statement of income (see Note 18).

As
of December 31, 2001, the agreements entered into in 2000 for the acquisition of the Dutch distributor NRE for €400 million and of all the shares of the
Dutch company N.V Regionale Energie Maatschappij Utrecht ("REMU"), owned by the Utrecht City Council, for €1,145 million had not yet been performed. The performance of these
transactions was subject, inter alia, to the approval of the Dutch Ministry of Economic Affairs, based on the changes made recently to Dutch electricity industry legislation. The new criteria that the
aforementioned authorities could consider in order to permit the transactions were key to the conclusion of the acquisitions by the parties.

In
2002 the acquisition commitments which ENDESA had in relation to the Dutch companies NRE and REMU were definitively resolved, as a result of substantial changes in the regulatory
framework of the Dutch electricity industry. No amount was paid in connection with these transactions.

The
balance of the "Other Loans" account as of December 31, 2002, includes €587 million of the financing of the shortfall in revenues from regulated
activities for 2000, 2001 and 2002 and €119 million of compensation to offset the additional costs
of the nonmainland systems which are recoverable in a period of more than one year (see Note 5-a). The "Short-Term Investments" caption on the asset side of the
accompanying consolidated balance sheet includes €71 million and €14 million, respectively, relating to the amounts to be recovered in connection with
this in 2003.

Below,
there is a detail of the loans to companies accounted by the equity method for the years ended December 31, 2002 and 2001, respectively.

|Subsidiary                                            |  | Balance at
12/31/2002 |  | Average interest
in 2002 |   | Balance at
12/31/2001 |  | Average interest
in 2001 |  
|----------------------------------------------------- |  | --------------------- |  | ------------------------ | - | --------------------- |  | ------------------------ | -
|
|Megasa                                                |  | 11                    |  | 3.9                      | % | 8                     |  | 4.6                      | %
|Senda Ambiental                                       |  | 2                     |  | 4.4                      | % | 3                     |  | 5.2                      | %
|Enditel                                               |  | 15                    |  | 4.4                      | % | 24                    |  | 5.3                      | %
|Soprolif                                              |  | 5                     |  | 10.5                     | % | 5                     |  | 10.5                     | %
|Atacama Finance Co.                                   |  |                      |  |                         |   | 284                   |  | 6.3                      | %
|Puignerel Ecyr                                        |  | 3                     |  | 4.5                      | % | 3                     |  | 5.76                     | %
|Foraneto                                              |  | 1                     |  | 4.5                      | % | 1                     |  | 5.37                     | %
|Rencat                                                |  | 1                     |  | 4                        | % | 1                     |  | 4.76                     | %
|Others                                                |  | 10                    |  |                         |   | 13                    |  |                         |  
|                                                      |  |                       |  |                          |   |                       |  |                          |  
|Loans to companies accounted for by the equtiy method |  | 48                    |  |                          |   | 342                   |  |                          |  
|                                                      |  |                       |  |                          |   |                       |  |                          |  

F-35

---

11.    INVENTORIES

The detail of this caption as of December 31, 2002 and 2001, and the variations therein in 2002 and 2001 is as follows:

|                      |  | 2002 |  | 2001
|--------------------- |  | ---- |  | ----
|
|
|Fuel stocks           |  | 562  |  | (16 
|-Nuclear fuel         |  | 237  |  |     
|-Other                |  | 325  |  | (16 
|Materials             |  | 224  |  | (15 
|Advances to suppliers |  | 8    |  |     
|                      |  |      |  |     
|TOTAL                 |  | 794  |  | (31 
|                      |  |      |  |     

Endesa
has entered into an agreement with Gas Natural, S.A., whereby, inter alia, the latter undertakes to supply gas to the Endesa Group's fossil-fuel plants. This agreement
will come into force when the first combined cycle plant comes into service. This agreement contains "take or pay" clauses. Since the Company considers that it will be able to fulfil these
commitments, it does not expect any contingency to arise in this connection.

12.    STOCKHOLDERS' EQUITY

The detail of the balances of this caption as of December 31, 2002, 2001 and 2000, and of the variations therein in 2002, 2001 and 2000 is as follows:

F-36

---



|                                                         |  |       |  |       |  |       |  | Other Reserves of the
Controlling Company |   |     |  |     |   |      |   |    |  |      |   |       |  
|-------------------------------------------------------- |  | ----- |  | ----- |  | ----- |  | ----------------------------------------- | - | --- |  | --- | - | ---- | - | -- |  | ---- | - | ----- | -
|
|
|
|
|Balance at December 31, 1999                             |  | 1,271 |  | 1,376 |  | 1,719 |  | 3,384                                     |   | 544 |  | 63  |   | 517  |   |   |  | (607 | ) | 1,278 |  
|                                                         |  |       |  |       |  |       |  |                                           |   |     |  |     |   |      |   |    |  |      |   |       |  
|Distribution of 1999 income                              |  |       |  |       |  |       |  |                                           |   |     |  |     |   |      |   |    |  |      |   |       |  
|-Interim dividend                                        |  |      |  |      |  |      |  |                                          |   |    |  |    |   |     |   |   |  |     |   | (228  | )
|-Final dividend                                          |  |      |  |      |  |      |  |                                          |   |    |  |    |   |     |   |   |  |     |   | (395  | )
|-Other reserves                                          |  |      |  |      |  |      |  | 296                                       |   | 23  |  |    |   | 328  |   | 8  |  |     |   | (655  | )
|Transfers                                                |  |      |  |      |  |      |  | 32                                        |   |    |  | (32 | ) | (32  | ) | 32 |  |     |   |      |  
|Translation differences                                  |  |      |  |      |  |      |  |                                          |   |    |  |    |   |     |   |   |  | (391 | ) |      |  
|Application of Ministerial Order of 03/28/01(see Note 6) |  |      |  |      |  |      |  | (708                                      | ) |    |  |    |   | (527 | ) |   |  |     |   |      |  
|Other (*)                                                |  |      |  |      |  |      |  | 5                                         |   |    |  |    |   | 184  |   |   |  |     |   |      |  
|2000 income                                              |  |      |  |      |  |      |  |                                          |   |    |  |    |   |     |   |   |  |     |   | 1,407 |  
|2000 interim dividend                                    |  |      |  |      |  |      |  |                                          |   |    |  |    |   |     |   |   |  |     |   |      |  
|                                                         |  |       |  |       |  |       |  |                                           |   |     |  |     |   |      |   |    |  |      |   |       |  
|Balance at December 31, 2000                             |  | 1,271 |  | 1,376 |  | 1,719 |  | 3,009                                     |   | 567 |  | 31  |   | 470  |   | 40 |  | (998 | ) | 1,407 |  
|                                                         |  |       |  |       |  |       |  |                                           |   |     |  |     |   |      |   |    |  |      |   |       |  

---

F-37

---



|                              |  |       |  |       |  |       |  | Other Reserves of the Controlling Company |   |     |  |     |  |       |  |    |  |        |   |       |  
|----------------------------- |  | ----- |  | ----- |  | ----- |  | ----------------------------------------- | - | --- |  | --- |  | ----- |  | -- |  | ------ | - | ----- | -
|
|
|
|
|Balance at December 31, 2000  |  | 1,271 |  | 1,376 |  | 1,719 |  | 3,009                                     |   | 567 |  | 31  |  | 470   |  | 40 |  | (998   | ) | 1,407 |  
|                              |  |       |  |       |  |       |  |                                           |   |     |  |     |  |       |  |    |  |        |   |       |  
|Distribution of 2000 income   |  |       |  |       |  |       |  |                                           |   |     |  |     |  |       |  |    |  |        |   |       |  
|-Interim dividend             |  |      |  |      |  |      |  |                                          |   |    |  |    |  |      |  |   |  |       |   | (254  | )
|-Final dividend               |  |      |  |      |  |      |  |                                          |   |    |  |    |  |      |  |   |  |       |   | (433  | )
|-Other reserves               |  |      |  |      |  |      |  | 23                                        |   |    |  |    |  | 676   |  | 21 |  |       |   | (720  | )
|Transfers                     |  |      |  |      |  |      |  | (70                                       | ) |    |  | 70  |  | 34    |  |   |  | (34    | ) |      |  
|Provisions for treasury stock |  |      |  |      |  |      |  | (109                                      | ) |    |  |    |  |      |  |   |  |       |   |      |  
|Translation differences       |  |      |  |      |  |      |  |                                          |   |    |  |    |  |      |  |   |  | (827   | ) |      |  
|Other (*)                     |  |      |  |      |  |      |  | (2                                        | ) |    |  |    |  | 190   |  |   |  |       |   |      |  
|2001 income                   |  |      |  |      |  |      |  |                                          |   |    |  |    |  |      |  |   |  |       |   | 1,479 |  
|2001 interim dividend         |  |      |  |      |  |      |  |                                          |   |    |  |    |  |      |  |   |  |       |   |      |  
|                              |  |       |  |       |  |       |  |                                           |   |     |  |     |  |       |  |    |  |        |   |       |  
|Balance at December 31, 2001  |  | 1,271 |  | 1,376 |  | 1,719 |  | 2,851                                     |   | 567 |  | 101 |  | 1,370 |  | 61 |  | (1,859 | ) | 1,479 |  
|                              |  |       |  |       |  |       |  |                                           |   |     |  |     |  |       |  |    |  |        |   |       |  

---

F-38

---



|                              |  |       |  |       |  |       |  | Other Reserves of the Parent Company |  |     |   |     |   |       |  |    |  |        |   |       |  
|----------------------------- |  | ----- |  | ----- |  | ----- |  | ------------------------------------ |  | --- | - | --- | - | ----- |  | -- |  | ------ | - | ----- | -
|
|
|
|
|Balance at December 31, 2001  |  | 1,271 |  | 1,376 |  | 1,719 |  | 2,851                                |  | 567 |   | 101 |   | 1,370 |  | 61 |  | (1,859 | ) | 1,479 |  
|                              |  |       |  |       |  |       |  |                                      |  |     |   |     |   |       |  |    |  |        |   |       |  
|Distribution of 2001 income   |  |      |  |      |  |      |  |                                     |  |    |   |    |   |      |  |   |  |       |   |      |  
|-Interim dividend             |  |      |  |      |  |      |  |                                     |  |    |   |    |   |      |  |   |  |       |   | (280  | )
|-Final dividend               |  |      |  |      |  |      |  |                                     |  |    |   |    |   |      |  |   |  |       |   | (443  | )
|-Other reserves               |  |      |  |      |  |      |  | 37                                   |  |    |   |    |   | 716   |  | 3  |  |       |   | (756  | )
|Transfers                     |  |      |  |      |  |      |  | 112                                  |  | (93 | ) | (19 | ) |      |  |   |  |       |   |      |  
|Provisions for treasury stock |  |      |  |      |  |      |  | 77                                   |  |    |   |    |   |      |  |   |  |       |   |      |  
|Translation differences       |  |      |  |      |  |      |  |                                     |  |    |   |    |   |      |  |   |  | (1,367 | ) |      |  
|Other (*)                     |  |      |  |      |  |      |  | 9                                    |  |    |   |    |   | 121   |  |   |  |       |   |      |  
|2002 income                   |  |      |  |      |  |      |  |                                     |  |    |   |    |   |      |  |   |  |       |   | 1,270 |  
|2002 interim dividend         |  |      |  |      |  |      |  |                                     |  |    |   |    |   |      |  |   |  |       |   |      |  
|                              |  |       |  |       |  |       |  |                                      |  |     |   |     |   |       |  |    |  |        |   |       |  
|Balance at December 31, 2002  |  | 1,271 |  | 1,376 |  | 1,719 |  | 3,086                                |  | 474 |   | 82  |   | 2,207 |  | 64 |  | (3,226 | ) | 1,270 |  
|                              |  |       |  |       |  |       |  |                                      |  |     |   |     |   |       |  |    |  |        |   |       |  

---

(*)    Relating mainly to the monetary adjustment of Latin American companies (see Note 4-h).

F-39

---





The capital stock amounts to €1,270,502,540.40 and consists of 1,058,752,117 fully subscribed and paid shares of €1.2 par value
each, all of which are listed on the Spanish Stock Exchanges. As of December 31, 2002, and 2001 46 million and 48 million, respectively of these shares were listed on the New York
Stock Exchange in the form of ADRs Endesa, S.A.'s shares are also traded on the Santiago de Chile offshore stock exchange.



The breakdown, by subsidiary, of the contribution to consolidated income, of "Reserves at at Fully or Proportionally Consolidated Companies" and of "Reserves at
Companies Accounted for by the Equity Method" is as follows:

|                                             |  | 2002  |   | 2001  |  
|-------------------------------------------- |  | ----- | - | ----- | -
|
|
|ENDESA                                       |  | (979  | ) | 407   |  
|ENDESA GENERACIÓN GROUP                      |  | 2,082 |   | 185   |  
|ENDESA RED GROUP                             |  | 498   |   | 86    |  
|ENDESA ENERGÍA                               |  | 38    |   | 46    |  
|ENDESA SERVICIOS                             |  | 27    |   | (73   | )
|ENDESA DIVERSIFICACIÓN GROUP                 |  | (500  | ) | 88    |  
|ENDESA INTERNACIONAL GROUP                   |  | (281  | ) | 1,449 |  
|ENDESA NET FACTORY GROUP                     |  | 4     |   | (24   | )
|ENDESA FINANCIACIÓN FILIALES                 |  | 234   |   | 14    |  
|TENEGUÍA                                     |  | 51    |   | 2     |  
|Other                                        |  | 21    |   | 27    |  
|                                             |  |       |   |       |  
|SUBTOTAL                                     |  | 1,195 |   | 2,207 |  
|                                             |  |       |   |       |  
|Companies accounted for by the equity method |  |       |   |       |  
|REPSOL                                       |  | 65    |   | 5     |  
|RED ELÉCTRICA                                |  | 10    |   | 59    |  
|SNET                                         |  |      |   |      |  
|ENDESA HOLDING ITALIA                        |  |      |   |      |  
|                                             |  |       |   |       |  
|SUBTOTAL                                     |  | 75    |   | 64    |  
|                                             |  |       |   |       |  
|TOTAL                                        |  | 1,270 |   | 2,271 |  
|                                             |  |       |   |       |  

Substantially
all the translation differences relate to the Endesa Internacional Group.

Legal Reserve

Under the revised Corporations Law, 10% of a company's net income for each year must be transferred to the legal reserve until the balance of this reserve reaches
at least 20% of paid-in capital stock. The legal reserve can be used to increase capital provided that the remaining reserve balance does not fall below 10% of the increased capital stock
amount. Otherwise, until the legal reserve exceeds 20% of capital stock, it can only be used to offset losses, provided that sufficient other reserves are not available for this purpose. The legal
reserve is included under the restricted reserves caption.

F-40

---

Treasury stock

The variations in the "Treasury Stock" caption in 2002 and 2001 were as follow:

|                                                      |  | 2002 |   | 2001 |  
|----------------------------------------------------- |  | ---- | - | ---- | -
|
|Beginning balance                                     |  | 101  |   | 31   |  
|Acquisitions                                          |  | 131  |   | 264  |  
|Sales                                                 |  | (152 | ) | (115 | )
|Provisions recorded with a charge to income (Note 18) |  | (75  | ) |     |  
|Provisions recorded with a charge to reserves         |  | 77   |   | (79  | )
|                                                      |  |      |   |      |  
|Ending balance                                        |  | 82   |   | 101  |  
|                                                      |  |      |   |      |  

The
treasury stock sales gave rise to a gain of €7 million and €3 million in 2002 and 2001, respectively.

In
2001 all the treasury stock existing as of December 31, 2000, was sold, and the provision of €30 million recorded in prior years was reversed with a
credit to the "Nonoperating Income" caption in the consolidated statement of income.

Subsequently,
transactions were carried out giving rise to the treasury stock balance as of December 31, 2001. Pursuant to a ruling issued by the ICAC (in Official ICAC Gazette
No. 48) in response to an inquiry made to it in this connection, the related provision of €109 million was recorded with a charge to unrestricted reserves.

As
of December 31, 2002, the Company held 10,559,826 shares of treasury stock, acquired for an average price of €13.60 per share, totaling
€143 million. Since the cost of these shares is higher than their underlying book value, the underlying book value amount was reduced by recording an allowance of
€61 million. Additionally, a restricted reserve was recorded for a net value of €82 million.

13.    MINORITY INTERESTS

The breakdown, by company, of the balances of the "Minority Interests" caption and of the income/loss attributed to minority interests as of December 31,
2002 and 2001, is as follows:

F-41

---



|                             |  | 2002 |   | 2001 
|---------------------------- |  | ---- | - | -----
|
|
|Endesa Diversificación Group |  | 8    |   | 58   
|Endesa Internacional Group   |  | (182 | ) | 1,895
|Endesa Net Factory Group     |  | (1   | ) |     
|Endesa Servicios             |  |     |   | 2    
|Viesgo                       |  |     |   |     
|Teneguía                     |  | 3    |   | 90   
|Endesa Europa Group          |  | 36   |   | 1,130
|                             |  |      |   |      
|                             |  | (136 | ) | 3,175
|                             |  |      |   |      

The
variations in the "Minority Interests" in 2002 and 2001 were as follows:

|                  |                                              | 2002  |        | 2001  |     
|----------------- | -------------------------------------------- | ----- | ------ | ----- | ----
|
|Beginning balance |                                              | 3,762 |        | 4,190 |     
|                  |                                              |       |        |       |     
|                  | Income/Loss for the year                     |       | (136   | )     | 58  
|                  | Inclusions in/Exclusions from consolidation  |       | 1,024  |       | 81  
|                  | Contribution by minority interests           |       |       |       | 179 
|                  | Dividends distributed and capital reductions |       | (114   | )     | (132
|                  | Translation differences                      |       | (1,479 | )     | (728
|                  | Monetary adjustment                          |       | 134    |       | 112 
|                  | Other                                        |       | (16    | )     | 2   
|                  |                                              |       |        |       |     
|Ending balance    |                                              | 3,175 |        | 3,762 |     
|                  |                                              |       |        |       |     

The
contribution by minority interests includes in 2001 €89 million relating to the 12.5% holding in Electra de VIESGO, S.L. sold in December 2001. This
holding was sold in 2001 for €241 million, giving rise to a gain before taxes of €152 million which was recorded under the "Nonoperating Income" caption
in the consolidated statement of income (see Note 18).

F-42

---

14.   SUBSIDIES AND OTHER DEFERRED REVENUES

The variations in these captions in 2002 and 2001 were as follows:

|                                                           |  | Subsidies |   | Other Deferred
Revenues |  
|---------------------------------------------------------- |  | --------- | - | ----------------------- | -
|
|Balance at 12/31/00                                        |  | 703       |   | 410                     |  
|                                                           |  |           |   |                         |  
|Additions                                                  |  | 132       |   | 173                     |  
|Inclusion in/Exclusion of other companies in consolidation |  | 1         |   | 2                       |  
|Retirements/Allocation to income                           |  | (35       | ) | (111                    | )
|Other                                                      |  | 12        |   | (73                     | )
|                                                           |  |           |   |                         |  
|Balance at 12/31/01                                        |  | 813       |   | 401                     |  
|                                                           |  |           |   |                         |  
|Additions                                                  |  | 174       |   | 228                     |  
|Inclusions in/Exclusions from consolidation                |  | (39       | ) | (12                     | )
|Retirements/Amounts allocated to income                    |  | (25       | ) | (62                     | )
|Other                                                      |  | 4         |   | (126                    | )
|                                                           |  |           |   |                         |  
|Balance at 12/31/02                                        |  | 927       |   | 429                     |  
|                                                           |  |           |   |                         |  

15.   PROVISIONS FOR CONTINGENCIES AND EXPENSES

The main items included under this caption in the consolidated balance sheets as of December 31, 2002 and 2001, were as follows:

|                                          |  | 2002  |  | 2001 
|----------------------------------------- |  | ----- |  | -----
|
|Provisions for pensions                   |  | 332   |  | 661  
|Provisions for labor force reduction plan |  | 2,374 |  | 2,571
|Other provisions                          |  | 1,515 |  | 984  
|                                          |  |       |  |      
|Total                                     |  | 4,221 |  | 4,216
|                                          |  |       |  |      

F-43

---

a)    Provisions for pensions and similar obligations

The variations in this account in 2002 and 2001 were as follows:

|                                            |                                        | 2002 |      | 2001  |     
|------------------------------------------- | -------------------------------------- | ---- | ---- | ----- | ----
|
|Beginning balance                           |                                        | 661  |      | 1,479 |     
|                                            |                                        |      |      |       |     
|Inclusions in/Exclusions from consolidation |                                        | 23   |      |      |     
|Amounts used:                               |                                        |      |      |       |     
|                                            | Credited to income                     |      | (27  | )     | (24 
|                                            | Payments (1)                           |      | (328 | )     | (879
|Provisions charged to income:               |                                        |      |      |       |     
|                                            | Personnel expenses                     |      | 17   |       | 20  
|                                            | Financial and other operating expenses |      | 20   |       | 38  
|                                            | Nonoperating expenses (Note 18)        |      | 65   |       | 85  
|Transfers and other                         |                                        | (99  | )    | (57   | )   
|                                            |                                        |      |      |       |     
|Ending balance                              |                                        | 332  |      | 661   |     
|                                            |                                        |      |      |       |     

---

The
liability was discounted to present value at a rate of 4%.

b)    Provisions for labor force reduction plan

The variations in the provisions for labor force reduction plans in 2002 and 2001 were as follows:

|                                            |                        | 2002  |      | 2001  |     
|------------------------------------------- | ---------------------- | ----- | ---- | ----- | ----
|
|Beginning balance                           |                        | 2,571 |      | 2,917 |     
|                                            |                        |       |      |       |     
|Inclusions in/Exclusions from consolidation |                        | (105  | )    |      |     
|Amounts used:                               |                        |       |      |       |     
|                                            | Payments (*)           |       | (235 | )     | (517
|                                            | Credited to income     |       | (2   | )     |    
|Provisions charged to income:               |                        |       |      |       |     
|                                            | Financial expenses     |       | 93   |       | 117 
|                                            | Non operating expenses |       | 12   |       |    
|Transfers and others                        |                        | 40    |      | 54    |     
|                                            |                        |       |      |       |     
|Ending balance                              |                        | 2,374 |      | 2,571 |     
|                                            |                        |       |      |       |     

These
provisions relate basically to the estimated cost of the labor force reduction plans approved in Spain affecting employees who reach the age of 50 though 2005 and who have more
than ten years' service at the Group. As of December 31, 2002, 7,800 persons had availed themselves of these labor force reduction plans, and 4,517 employees had not yet been included under the
plans.

This
cost was discounted to present value at a rate of 4% and GRM/F-95 mortality tables.

F-44

---

c)     Other provisions

The variations in 2002 and 2001 in the "Other Provisions" caption were as follows:

|                                            |                                             | 2002  |     | 2001 |     
|------------------------------------------- | ------------------------------------------- | ----- | --- | ---- | ----
|
|Beginning balance                           |                                             | 984   |     | 975  |     
|                                            |                                             |       |     |      |     
|Inclusions in/Exclusions from consolidation |                                             | 141   |     |     |     
|Provisions:                                 |                                             |      |     |      |     
|                                            | Charged to nonoperating expenses (Note 18)  |       | 507 |      | 155 
|                                            | Charged to operating and financial expenses |       | 104 |      | 89  
|Amounts used:                               |                                             |      |     |      |     
|                                            | Credit to income                            |       | (75 | )    | (89 
|                                            | Payments                                    |       | (77 | )    | (112
|Transfers and others                        |                                             | (69   | )   | (34  | )   
|                                            |                                             |       |     |      |     
|Ending balance                              |                                             | 1,515 |     | 984  |     
|                                            |                                             |       |     |      |     

The
items included in this balance as of December 31, 2002 and 2001, were as follows



F-45

---







16.   LOANS, FINANCIAL DEBTS AND OTHER PAYABLES



The detail of the balances of debentures and other marketable debt securities as of December 31, 2002 and 2001, and of the scheduled maturity dates is as
follows:

|                         |  |        |  |        |  |       |  | Maturing at Long Term
|------------------------ |  | ------ |  | ------ |  | ----- |  | ---------------------
|
|
|Debentures and bonds     |  | 11,470 |  | 10,966 |  | 795   |  | 1,621                
|Promissory notes         |  | 2,356  |  | 3,277  |  | 3,235 |  | 0                    
|Accrued interest payable |  | 96     |  | 69     |  | 69    |  | 0                    
|                         |  |        |  |        |  |       |  |                      
|Total                    |  | 13,922 |  | 14,312 |  | 4,099 |  | 1,621                
|                         |  |        |  |        |  |       |  |                      

These transactions bore average interest of 4.76% and 5.6%, in 2002 and 2001, respectively.



The detail of the balances payable to credit institutions as of December 31, 2002 and 2001, and of the scheduled due dates is as follows:

|                         |              |        |       |       |       |       |       | Maturing at Long Term
|------------------------ | ------------ | ------ | ----- | ----- | ----- | ----- | ----- | ---------------------
|
|
|In euros:                |              |        |       |       |       |       |       |                      
|Principal                |              | 4,154  |       | 4,264 |       | 1,618 |       | 273                  
|                         |              |        |       |       |       |       |       |                      
|Accrued interest payable |              | 68     |       | 32    |       | 32    |       | 0                    
|                         |              |        |       |       |       |       |       |                      
|SUBTOTAL                 |              | 4,222  |       | 4,296 |       | 1,650 |       | 273                  
|                         |              |        |       |       |       |       |       |                      
|In foreign currency:     |              |        |       |       |       |       |       |                      
|                         | U.S. dollars |        | 6,477 |       | 4,797 |       | 1,214 |                      
|                         | Yen          |        | 80    |       | 136   |       | 74    |                      
|                         | Other        |        | 63    |       | 393   |       | 39    |                      
|Accrued interest payable |              | 40     |       | 12    |       | 12    |       | 0                    
|                         |              |        |       |       |       |       |       |                      
|SUBTOTAL                 |              | 6,660  |       | 5,338 |       | 1,339 |       | 327                  
|                         |              |        |       |       |       |       |       |                      
|TOTAL                    |              | 10,882 |       | 9,634 |       | 2,989 |       | 600                  
|                         |              |        |       |       |       |       |       |                      

F-46

---

In
2002 and 2001 the accounts payable in euros to credit institutions bore average interest of 5.15% and 4.6%, respectively, and the foreign currency debt bore average interest of 5.75%
and 6.7%, respectively.

The
total interest-bearing debt bore average interest of 5.05% and 5.8% in 2002 and 2001, respectively.

As
of December 31, 2002 and 2001, the Group companies had unused credit lines amounting to €2,083 and €1,816 million, respectively. Since
2002 year-end the Company has arranged certain financial transactions aimed at increasing liquidity (see Note 23). The Company's directors consider that once these
transactions materialize, the undrawn amounts in credit accounts, together with the short-term investments, will amply cover the amounts of the debt maturing in the following
12 months.

The
detail of the outstanding balance of the interest rate hedging transactions not included in the initial structure of the related transaction, mainly in euros and U.S. dollars, at
2002 year-end is as follows: €7,122 million of interest-rate swaps; €4,154 million of collars; and
€3,968 million of FRAs. The cost of arranging these transactions was charged to income by the interest method. The exchange rate hedging transactions as of December 31,
2002,
included currency swaps totaling €1,972 million and forward transactions totaling €542 million.

Additionally,
International Endesa BV arranged certain derivatives transactions to supplement transactions carried out by that company under the Euro Medium Term Note (EMTN) and Euro
Commercial Paper (ECP) issue programs, which are guaranteed by Endesa S.A. The breakdown of these transactions at 2002 year-end is as follows: €4,823 million
of interest rate swaps; and €1,896 million of currency swaps.

F-47

---

The impact of the Company's hedging activities on the weighted average borrowing rate and on the reported interest expense is as follows:

|                                                                                      |  | Balance at
12/31/02 |   | Balance at
12/31/01 |   | Balance at
12/31/00 |  
|------------------------------------------------------------------------------------- |  | ------------------- | - | ------------------- | - | ------------------- | -
|Weighted average interest rate                                                        |  | 4.79                | % | 4.79                | % | 6.56                | %
|Impact of hedging activities                                                          |  | 0.26                | % | 0.44                | % | -0.06               | %
|Net weighted average interest rate                                                    |  | 5.05                | % | 5.23                | % | 6.50                | %
|Financial and similar expenses                                                        |  | 1,436               |   | 1,522               |   | 1,682               |  
|Impact of hedging activities under Spanish GAAP                                       |  | 63                  |   | 106                 |   | (19                 | )
|                                                                                      |  |                     |   |                     |   |                     |  
|Gross financial and similar expenses as reported in the consolidated income statement |  | 1,499               |   | 1,628               |   | 1,663               |  
|                                                                                      |  |                     |   |                     |   |                     |  

Additionally,
the weighted average interest rate of short-term borrowing is as follows:

Category of Aggregate
Short-term Borrowings

Weighted Average
Interest RateYear 2002:Loans from provate banks

5.06
%Comercial paper

3.89
%Debentures

4.93
%Year 2001:Loans from provate banks

7.06
%Comercial paper

4.99
%Debentures

5.42
%Year 2000:Loans from provate banks

5.98
%Comercial paper

6.56
%Debentures

4.40
%


c)    Other payables

The detail of the balances of other long-term payables as of December 31, 2002 and 2001, and of the scheduled repayment dates is as follows:

|                              |  | Balance at
12/31/01 |  | Balance at
12/31/02 |  | Due at
Short Term |  | Due at
Long Term
|----------------------------- |  | ------------------- |  | ------------------- |  | ----------------- |  | ----------------
|
|Guarantees and deposits, etc. |  | 1,425               |  | 734                 |  | 5                 |  | 729             
|Foreign currency payables     |  | 455                 |  | 897                 |  | 27                |  | 870             
|Deferred taxes (Note 17)      |  | 1,117               |  | 1,322               |  | 0                 |  | 1,322           
|Accrued interest payable      |  | 4                   |  | 30                  |  | 30                |  | 0               
|                              |  |                     |  |                     |  |                   |  |                 
|Total                         |  | 3,001               |  | 2,983               |  | 62                |  | 2,921           
|                              |  |                     |  |                     |  |                   |  |                 

F-48

---

The
accrued interest payable for all the debts in 2002 and 2001 amounted to €143 million and €208 million, respectively.

17.    TAX MATTERS

ENDESA files consolidated tax returns with certain Group companies. As of December 31, 2002, the consolidated tax group comprised 87 companies, of which
the most significant were Endesa, Endesa Generación, Endesa Distribución Eléctrica, Endesa Red, Endesa Operaciones y Servicios Comerciales, Gesa
Generación, Unelco Generación, Endesa Energía, Endesa Financiación Filiales, Endesa Internacional, Endesa Diversificación and
Endesa Europa.

The
reconciliation of the income per books for 2002 and 2001 to the taxable income for corporate income tax purposes is as follows:

|                                                          |                           | 2002                       |                           | 2001  |       
|--------------------------------------------------------- | ------------------------- | -------------------------- | ------------------------- | ----- | ------
|
|
|Consolidated income for the year per books (before Taxes) |                           |                            |                           |       |       
|                                                          |                           |                            |                           |       |       
|Permanent differences:                                    |                           |                            |                           |       |       
|                                                          | Individual companies      |                            | 887                       |       | (1,157
|                                                          | Consolidation adjustments |                            | 320                       |       | (2,469
|                                                          |                           |                            |                           |       |       
|Timing differences:                                       |                           |                            |                           |       |       
|                                                          | Individual companies:     |                            |                           |       |       
|                                                          |                           | Arising in the year        |                           | 2,278 |       
|                                                          |                           | Arising in the prior year  |                           | 545   |       
|                                                          |                           | Consolidation adjustments: |                           |       |       
|                                                          |                           |                            | Arising in the year       |       | 365   
|                                                          |                           |                            | Arising in the prior year |       | 81    
|                                                          |                           |                            |                           |       |       
|Offset of prior years' tax losses                         |                           |                            |                           |       |       
|                                                          |                           |                            |                           |       |       
|Taxable income                                            |                           |                            |                           |       |       
|                                                          |                           |                            |                           |       |       
|Gross tax payable                                         |                           |                            |                           |       |       
|                                                          |                           |                            |                           |       |       
|Tax credits on:                                           |                           |                            |                           |       |       
|                                                          | Investments               |                            |                           |       |       
|                                                          | Dividends and tax relief  |                            |                           |       |       
|                                                          |                           |                            |                           |       |       
|Provisions for current income tax                         |                           |                            |                           |       |       
|                                                          |                           |                            |                           |       |       

Corporate income tax is calculated on the basis of income per books determined by application of generally accepted accounting principles, which
does not necessarily coincide with taxable income.

F-49

---

The reconciliation of the corporate income tax expense for 2002 and 2001 to the tax charge for those years is as follows:

|                                                                   |  | 2002 |   | 2001 |  
|------------------------------------------------------------------ |  | ---- | - | ---- | -
|
|Corporate income tax expense for the year                          |  | 437  |   | 88   |  
|Tax allocated to translation differences and reserves (note 3 -b5) |  | (581 | ) |     |  
|Net tax effect in the year of the timing differences               |  | 184  |   | 520  |  
|Other adjustments                                                  |  | 53   |   | (99  | )
|                                                                   |  |      |   |      |  
|Net tax payable in the year                                        |  | 93   |   | 509  |  
|                                                                   |  |      |   |      |  

These
timing differences were calculated on the basis of the income or loss of each consolidated company plus the effect of consolidation adjustments.

The
increases due to permanent differences relate mainly to the recording of nondeductible provisions. The decreases arose mainly from dividends.

For
the capital gains arising from certain divestments in prior years which had qualified for reinvestment deferral, the Group decided to avail itself of the possibility provided for in
Law 24/2001 of ceasing to defer payment of tax and to take instead a tax credit of 17%.

The
net tax effect in 2001 of the timing differences includes €461 million in this connection, and a tax credit of €224 million was taken.
This latter amount was the extraordinary positive tax effect included in the consolidated statement of income for 2001 in this connection.

€202 million
and €363 million of tax credits and tax relief were taken in 2002 and 2001, respectively. All the tax credits and tax relief
were recorded regardless of whether or not key were taken in the year, as provided for in the ICAC Resolution dated March 15, 2002.

The
difference between the tax charge allocated to 2002, and prior years and the taxes already paid or payable for those years, which is recorded in the "Prepaid Taxes" or "Deferred
Taxes" accounts, arose from timing differences in various years. The prepaid taxes relate mainly to period provisions for pensions and labor force reduction plans that were not yet tax deductible,
whereas the deferred taxes arose mainly as a result of accelerated depreciation for tax purposes and the deferral for accounting purposes of the effect on income of the tax deductibility of the
provisions recorded for the telecommunications subsidiaries. The variations in these accounts in 2002 and 2001 were as follows:

|                  |                                                          | 2002  |      | 2001  |     
|----------------- | -------------------------------------------------------- | ----- | ---- | ----- | ----
|
|
|Beginning balance |                                                          | 3,016 |      | 1,117 |     
|                  | Inclusion/Exclusion of other companies in consolidation |       | 78   |       | 235 
|                  | Variations in income                                    |       | 352  |       | 168 
|                  | Other variations                                        |       | (193 | )     | (198
|                  |                                                          |       |      |       |     
|Ending balance    |                                                          | 3,253 |      | 1,322 |     
|                  |                                                          |       |      |       |     

The
Group companies generally have the last four years open for review by the tax inspection authorities for all the taxes applicable to them. The directors do not expect any additional
material liabilities to arise for the Group as a result of inspection of the open years.

F-50

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18.   REVENUES AND EXPENSES

Net sales

The breakdown of net sales by geographical market is as follows:

|Market         |  | 2002   |  | 2001   |  | 2000  
|-------------- |  | ------ |  | ------ |  | ------
|
|Spain          |  | 11,145 |  | 10,338 |  | 10,275
|Italy          |  | 1,109  |  |       |  |      
|Rest of Europe |  | 635    |  |       |  |      
|Chile          |  | 1,171  |  | 1,359  |  | 1,373 
|Argentina      |  | 385    |  | 1,302  |  | 1,326 
|Brazil         |  | 1,111  |  | 1,277  |  | 1,182 
|Colombia       |  | 685    |  | 775    |  | 719   
|Peru           |  | 498    |  | 525    |  | 389   
|               |  |        |  |        |  |       
|Total          |  | 16,739 |  | 15,576 |  | 15,264
|               |  |        |  |        |  |       

F-51

---





The average number of employees in 2002 and 2001, by professional category, was as follows:

2002

2001Executives and university graduates

4,105

4,682Junior college graduates

5,016

5,424Other line personnel and clerical staff

10,598

11,325Manual workers

6,809

6,399Total

26,528

27,830




The detail of the fees for the services in 2002 by the auditors of the financial statements of the various companies composing the Group is as follows:

Principal
Auditor

Other Auditors of
SubsidiariesEurosAuditor of financial statements

2,755,957

705,922Audits other than of the financial statements and other services relating to audits

2,392,829

162,247Other non audit services

230,142

369,078Total

5,378,928

1,237,247




The detail of the balances of the "Nonoperating Revenues" and "Nonoperating Expenses" captions in 2002 and 2001 is as follows:

F-52

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|NONOPERATING REVENUES                                                                        |  | 2002  |  | 2001  |  | 2000 
|-------------------------------------------------------------------------------------------- |  | ----- |  | ----- |  | -----
|
|Gains on fixed assets                                                                        |  | 88    |  | 66    |  | 80   
|Subsidies (Note 14)                                                                          |  | 25    |  | 35    |  | 32   
|Gain on disposal of holding in Transelec and other associated assets                         |  |      |  |      |  | 348  
|Gain on sale of Viesgo                                                                       |  | 1,066 |  | 152   |  |     
|Recognition of the nonmainland system compensation payments relating to prior years (Note 5) |  | 128   |  |      |  |     
|Recognition of prior year's rate shortfall (Note 5)                                          |  | 86    |  |      |  |     
|Gain on disposal of Edenor                                                                   |  |      |  | 494   |  |     
|Gain on disposal of Aguas Cordillera                                                         |  |      |  |      |  | 106  
|Gain on disposal of Aguas Puerto                                                             |  |      |  |      |  | 47   
|Gain on disposal of Repsol                                                                   |  |      |  |      |  | 109  
|Gain on disposal of Elecar                                                                   |  |      |  |      |  | 56   
|Provisions released                                                                          |  | 76    |  | 79    |  | 313  
|Other nonoperating revenues                                                                  |  | 276   |  | 386   |  | 383  
|                                                                                             |  |       |  |       |  |      
|Total                                                                                        |  | 1,745 |  | 1,212 |  | 1,474
|                                                                                             |  |       |  |       |  |      

In
2002 the 87.5% holding in VIESGO owned by Endesa as of December 31, 2001, was sold for €1,684 million, giving rise to a gross gain of €1,066 million.

|NONOPERATING EXPENSES                                                                               |  | 2002  |  | 2001 |  | 2000 |  
|--------------------------------------------------------------------------------------------------- |  | ----- |  | ---- |  | ---- | -
|
|Losses on fixed assets                                                                              |  | 26    |  | 47   |  | 45   |  
|Write-off goodwill (Note 7)                                                                         |  | 338   |  |     |  |     |  
|Provision for treasury stock (Note 12)                                                              |  | 75    |  |     |  |     |  
|Variation in utility plant, intangible asset and investment valuation allowances                    |  | 68    |  | 33   |  | (30  | )
|Provisions for contingencies and third-party liability (Note 15)                                    |  | 507   |  | 155  |  | 99   |  
|Nonoperating expenses relating to provisions for pensions and labor force reduction plans (Note 15) |  | 77    |  | 85   |  | 20   |  
|Other nonoperating expenses                                                                         |  | 582   |  | 313  |  | 427  |  
|                                                                                                    |  |       |  |      |  |      |  
|Total                                                                                               |  | 1,673 |  | 633  |  | 561  |  
|                                                                                                    |  |       |  |      |  |      |  

The
provisions for contingencies and third-party liability include €145 million recorded to fully cover the direct and indirect risk exposure relating to the
investments made and the loans granted to Argentine companies in view of the present uncertainty with regard to the evolution of the economic situation in Argentina, and possible losses on assets and
future risks for various types of contingency in the various Latin American companies and for transactions carried out by ENDESA in that region, amounting to €174 million.

Also,
as a result of the deregulation of the electricity market in Spain and of the new regulations on meters, nonoperating expenses amounting to €128 million were
recorded, of which €61 million relate to provisions for contingencies and third-party liability and the remaining €67 million relate to provisions for
fixed assets.

The
other nonoperating expenses and revenues relate to nonrecurring items or items allocable to prior years the individual amount of which is not material.

19.   THE ENVIRONMENT

The Group treats as environmental investments those made in assets, which will be used on an ongoing basis to minimize the impact on, and to protect, the
environment. These investments are

F-53

---

recorded
as utility plant or intangible assets in accordance with the general methods described in Notes 4-a, 4-b, and 4-c.

The
main environmental investments were aimed at reducing and controlling emissions, and the treatment and subsequent discharge of water.

These
investments related specifically to desulfurization facilities, water treatment plants, underwater discharge outlets, fluidized bed plants, burying of transmission and distribution
lines and other measures aimed at minimizing environmental impact.

As
of December 31, 2002 and 2001, these investments recorded on the asset side of the balance sheet amounted to €723 million and
€836 million, respectively, and the related accumulated depreciation amounted to €330 million and €403 million, respectively.

Environmental
expenses amounted to €75 million and €64 million in 2002 and 2001, respectively. In 2002, this amount is recorded under the
"Other Operating Expenses" in the accompanying consolidated statement of income.

The
possible environmental contingencies that might arise for the Group companies are covered by a third-party liability insurance policy which covers, among other contingencies, those
arising from accidental pollution, waste handling and wave, radiation or electromagnetic fields.

20.   COMPENSATION AND OTHER BENEFITS OF THE DIRECTORS AND SENIOR EXECUTIVES



The members of the Board of Directors of ENDESA received compensation as directors of the Company and, in certain cases, as members of the Boards of Directors of
investees.

Since
July 1, 1998, the compensation of the directors has consisted of the following items: fixed monthly salary, attendance fees and a share in profits. The overall annual
compensation for the Board as a whole and including all these items represents 1 per mil of the income approved by the Stockholders' Meeting. In 2002 the breakdown of this compensation was as follows:
fixed monthly salaries of €4,006.74 through August 31, and of €2,404.05 from that date through December 31; fees for attending each meeting of the Board
of Directors, the Executive Committee, the Appointments and Compensation Committee and the Audit and Compliance Committee of €2,003.37 through August 31, 2002, and of
€1,202.02 from that date through December 31, 2002.

The
detail of the amounts received in 2002 and 2001 is as follows:

|                     |  | 2002      |  | 2001     
|-------------------- |  | --------- |  | ---------
|
|Fixed monthly salary |  | 558,540   |  | 721,210  
|Attendance fees      |  | 711,551   |  | 720,010  
|Share in profits     |  | 0         |  | 37,345   
|                     |  |           |  |          
|Total                |  | 1,270,091 |  | 1,478,565
|                     |  |           |  |          

---

The
compensation received by the members of the Board of Directors of Endesa for their membership of the Board of Directors of investees amounted to €248,120 in 2002 and.
In 2001 the total amount received in this connection was €373,427.

F-54

---



The
pension and life and accident insurance premium payment commitments to members of the Board of Directors amounted to €69,581.65 in 2002. In 2001 the total amount
received in this connection was and €61,236.53. It should be taken into account that in 2001 this item also included the obligations assumed in relation to the members of the Board of
Directors in their capacity as executives, which are now included in the new section on senior executives.

The
members of the Board of Directors are covered by the same third-party liability policy as all the directors and executives of ENDESA and of its investees.

The
members of the Board of Directors do not receive advances or loans in their capacity as such. In the notes to the 2001 consolidated financial statements this note also included the
advances and loans granted to the members of the Board of Directors in their capacity as executives. In this Annual Report, this item is included in the special section on senior executives.

B.    Senior executives

Senior
executives have the compensation and rights established in the contract establishing their professional relationship with Endesa, S.A. under the terms and conditions approved by
the Appointments and Compensation Committee.

The
compensation comprises a fixed and a variable component. The variable component is a given percentage of the fixed compensation in each case, based on the fulfillment of certain
objectives. Also, the total compensation received, if any, for attending Board meetings of other investees is deducted from this amount.

On
May 9, 2000, the Board of Directors of Endesa approved an additional variable compensation component for certain executives, to be reviewed every three years, linked to the
Company's results.

This
section details fixed and variable compensation received by the Company's 40 senior executives, including the directors who are also senior executives.

The
variable compensation relating to 2002 will be received in 2003, conditional upon fulfillment of the objectives set in 2002.

The
detail of the amounts received in 2002 is as follows:

EurosFixed compensation

10,019,660Variable compensation

3,660,240Other compensation and compensation in kind

3,317,570TOTAL

16,997,470


The
pension and life and accident insurance premium payment commitments to senior executives amounted to €10,466,185 in 2002.

The
senior executives are covered by the same third-party liability policy as all the directors and executives of Endesa S.A. and of its investees.

F-55

---

The
outstanding principal as of December 31, 2002, of the advances and loans granted to senior executives, amounted to €8,408,100. Of this amount,
€5,953,120 earn interest at Euribor+0.5% and €2,454,980 are interest-free advances. The advances and loans are repayable at over one year.

In
order to adapt to the regulation in force in the markets in which its shares are listed, the Company has not granted any advances or loans to its senior executives since the approval
in the U.S. of the Sarbanes-Oxley Law in July 2002, and it has not modified the conditions of the advances and loans already granted as of that date.

21.    COMMITMENTS AND CONTINGENCIES

Under current legislation in Spain and pursuant to Spanish Electricity System Law 54/1997, the Group is insured against third-party liability claims for nuclear
accidents arising from the operation of nuclear plants up to €150 million. Any damages in excess of this amount would be governed by the international conventions entered into
by the Spanish State. The nuclear power plants are also insured against damage to their facilities and machinery breakdowns, with maximum coverage of €700 million for each power
plant.

As
of December 31, 2002 and 2001, ENDESA, S.A. had provided guarantees totaling €14,576 million and €13,163 million, respectively, to
third parties in connection with its activities. Substantially all these amounts relate to guarantees provided for Group companies to secure debts included on the liability side of the consolidated
balance sheet, mainly the marketable security issues of Internacional ENDESA, B.V.

As
of December 31, 2002 and 2001, the Group had arranged electricity options and futures transactions for 31,543 GWh and 20,953 Gwh, respectively of power, and there was an open
position on 524 GWh and 33 GWh, respectively.

The
directors of ENDESA do not consider that any significant liabilities additional to those recorded in the accompanying consolidated balance sheet will arise for the transactions
described in this Note.

22.    UNBUNDLING OF ACTIVITIES

The financial statements unbundled by business activity are presented below in accordance with Law 54/1997.

In
relation to the electricity activities carried out abroad, a distinction is drawn between the activities carried on in Europe, substantially all of which relate to generation, and
those carried on in Latin America, which in turn are unbundled by activity.

F-56

---



BALANCE SHEET BY ACTIVITY AND COST ACCOUNTING STATEMENT OF INCOME BY ACTIVITY FOR 2002    (Millions of Euros)

|                                           |  |                                                  |  |         |   |       |  |        |   |     |  |     |   |       |  |       |   |       |  | Activities Carried on Abroad |   |        |  |        |   |        |  |        |  
|------------------------------------------ |  | ------------------------------------------------ |  | ------- | - | ----- |  | ------ | - | --- |  | --- | - | ----- |  | ----- | - | ----- |  | ---------------------------- | - | ------ |  | ------ | - | ------ |  | ------ | -
|
|
|1.                                         |  | Due from stockholders for uncalled capital       |  | 0       |   | 0     |  | 0      |   | 0   |  | 0   |   | 0     |  | 0     |   | 0     |  | 0                            |   | 0      |  | 0      |   | 0      |  | 0      |  
|2.                                         |  | Fixed and other noncurrent assets                |  | 9,357   |   | 13    |  | 8,067  |   | 11  |  | 416 |   | 1     |  | 2,574 |   | 4     |  | 2,854                        |   | 4      |  | 10,837 |   | 15     |  | 39,943 |  
|2.1.                                       |  | Intangible assets and start-up expenses          |  | 32      |   | 6     |  | 144    |   | 26  |  | 26  |   | 5     |  | 188   |   | 34    |  | 41                           |   | 8      |  | 87     |   | 16     |  | 29     |  
|2.2.                                       |  | Utility plant                                    |  | 8,316   |   | 30    |  | 6,729  |   | 25  |  | 10  |   | 0     |  | 564   |   | 2     |  | 2,349                        |   | 9      |  | 9,286  |   | 33     |  | 154    |  
|2.2.1.                                     |  | Electricity plant                                |  | 18,951  |   | 41    |  | 11,212 |   | 25  |  | 17  |   | 0     |  | 470   |   | 1     |  | 3,805                        |   | 8      |  | 11,583 |   | 25     |  | 0      |  
|2.2.2.                                     |  | Electricity plant in progress                    |  | 557     |   | 28    |  | 434    |   | 22  |  | 0   |   | 0     |  | 90    |   | 5     |  | 287                          |   | 15     |  | 597    |   | 30     |  | 0      |  
|2.2.3.                                     |  | Other tangible fixed assets                      |  | 1,092   |   | 30    |  | 383    |   | 10  |  | 1   |   | 0     |  | 311   |   | 9     |  | 880                          |   | 24     |  | 957    |   | 26     |  | 18     |  
|2.2.4.                                     |  | Advances and other construction work in progress |  | 7       |   | 3     |  | 22     |   | 9   |  | 0   |   | 0     |  | 6     |   | 2     |  | 0                            |   | 0      |  | 68     |   | 27     |  | 145    |  
|2.2.5.                                     |  | Depreciation of electricity plant                |  | (11,251 | ) | 50    |  | (5,046 | ) | 23  |  | (8  | ) | 0     |  | (136  | ) | 1     |  | (2,185                       | ) | 10     |  | (3,619 | ) | 16     |  | 0      |  
|2.2.6.                                     |  | Other depreciation                               |  | (928    | ) | 46    |  | (166   | ) | 8   |  | 0   |   | 0     |  | (176  | ) | 9     |  | (425                         | ) | 21     |  | (300   | ) | 15     |  | (9     | )
|2.2.7.                                     |  | Allowances                                       |  | (112    | ) | 48    |  | (110   | ) | 47  |  | 0   |   | 0     |  | (1    | ) | 0     |  | (13                          | ) | 5      |  | 0      |   | 0      |  | 0      |  
|2.3.                                       |  | Long-term investments                            |  | 1,009   |   | 2     |  | 1,194  |   | 3   |  | 380 |   | 1     |  | 1,822 |   | 4     |  | 464                          |   | 1      |  | 1,464  |   | 3      |  | 39,678 |  
|2.4.                                       |  | Treasury stock                                   |  | 0       |   | 0     |  | 0      |   | 0   |  | 0   |   | 0     |  | 0     |   | 0     |  | 0                            |   | 0      |  | 0      |   | 0      |  | 82     |  
|3.                                         |  | Consolidation goodwill                           |  | 0       |   | 0     |  | 7      |   | 0   |  | 0   |   | 0     |  | 446   |   | 9     |  | 1,720                        |   | 35     |  | 2,705  |   | 56     |  | 0      |  
|4.                                         |  | Deferred charges                                 |  | 25      |   | 3     |  | 155    |   | 16  |  | 1   |   | 0     |  | 5     |   | 0     |  | 0                            |   | 0      |  | 126    |   | 13     |  | 663    |  
|5.                                         |  | Current assets                                   |  | 1,261   |   | 12    |  | 1,207  |   | 11  |  | 528 |   | 5     |  | 427   |   | 4     |  | 382                          |   | 4      |  | 2,565  |   | 24     |  | 4,228  |  
|5.1.                                       |  | Inventories                                      |  | 483     |   | 63    |  | 24     |   | 3   |  | 3   |   | 1     |  | 59    |   | 8     |  | 71                           |   | 9      |  | 123    |   | 16     |  | 0      |  
|5.2.                                       |  | Trade receivables                                |  | 695     |   | 16    |  | 1,154  |   | 28  |  | 427 |   | 10    |  | 197   |   | 5     |  | 285                          |   | 7      |  | 1,004  |   | 24     |  | 418    |  
|5.3.                                       |  | Other current assets                             |  | 83      |   | 1     |  | 29     |   | 1   |  | 98  |   | 2     |  | 171   |   | 3     |  | 26                           |   | 1      |  | 1,438  |   | 25     |  | 3,810  |  
|                                           |  |                                                  |  |         |   |       |  |        |   |     |  |     |   |       |  |       |   |       |  |                              |   |        |  |        |   |        |  |        |  
|TOTAL ASSETS                               |  | 10,643                                           |  | 12      |   | 9,436 |  | 10     |   | 945 |  | 1   |   | 3,452 |  | 4     |   | 4,956 |  | 6                            |   | 16,233 |  | 18     |   | 44,834 |  | 49     |  
|                                           |  |                                                  |  |         |   |       |  |        |   |     |  |     |   |       |  |       |   |       |  |                              |   |        |  |        |   |        |  |        |  
|STOCKHOLDERS' EQUITY AND LIABILITIES       |  |                                                  |  |         |   |       |  |        |   |     |  |     |   |       |  |       |   |       |  |                              |   |        |  |        |   |        |  |        |  
|1.                                         |  | Stockholders' equity                             |  | 4,188   |   | 15    |  | 1,449  |   | 5   |  | 29  |   | 0     |  | 441   |   | 2     |  | 1,443                        |   | 5      |  | 2,098  |   | 7      |  | 18,948 |  
|2.                                         |  | Minority interests                               |  | 0       |   | 0     |  | 0      |   | 0   |  | 0   |   | 0     |  | 60    |   | 2     |  | 1,130                        |   | 37     |  | 1,897  |   | 61     |  | 0      |  
|3.                                         |  | Negative consolidation goodwill                  |  | 27      |   | 23    |  | 68     |   | 59  |  | 0   |   | 0     |  | 3     |   | 3     |  | 0                            |   | 0      |  | 17     |   | 15     |  | 0      |  
|4.                                         |  | Deferred revenues                                |  | 103     |   | 7     |  | 1,042  |   | 74  |  | 1   |   | 0     |  | 129   |   | 9     |  | 2                            |   | 0      |  | 120    |   | 9      |  | 12     |  
|4.1.                                       |  | Capital subsidies                                |  | 102     |   | 11    |  | 833    |   | 88  |  | 0   |   | 0     |  | 11    |   | 1     |  | 2                            |   | 0      |  | 0      |   | 0      |  | 0      |  
|4.2.                                       |  | Other                                            |  | 1       |   | 0     |  | 209    |   | 45  |  | 1   |   | 0     |  | 118   |   | 26    |  | 0                            |   | 0      |  | 120    |   | 26     |  | 12     |  
|5.                                         |  | Provisions for contingencies and expenses        |  | 1,165   |   | 28    |  | 1,717  |   | 41  |  | 34  |   | 1     |  | 186   |   | 4     |  | 146                          |   | 3      |  | 659    |   | 16     |  | 290    |  
|6.                                         |  | Long-term debt                                   |  | 3,333   |   | 9     |  | 3,259  |   | 9   |  | 524 |   | 1     |  | 1,829 |   | 5     |  | 627                          |   | 2      |  | 8,137  |   | 21     |  | 20,301 |  
|7.                                         |  | Current liabilities                              |  | 1,827   |   | 12    |  | 1,901  |   | 13  |  | 357 |   | 2     |  | 804   |   | 5     |  | 1,608                        |   | 11     |  | 3,305  |   | 22     |  | 5,283  |  
|                                           |  |                                                  |  |         |   |       |  |        |   |     |  |     |   |       |  |       |   |       |  |                              |   |        |  |        |   |        |  |        |  
|TOTAL STOCKHOLDERS' EQUITY AND LIABILITIES |  | 10,643                                           |  | 12      |   | 9,436 |  | 10     |   | 945 |  | 1   |   | 3,452 |  | 4     |   | 4,956 |  | 6                            |   | 16,233 |  | 18     |   | 44,834 |  | 49     |  
|                                           |  |                                                  |  |         |   |       |  |        |   |     |  |     |   |       |  |       |   |       |  |                              |   |        |  |        |   |        |  |        |  

F-57

---



|   |                                                                                  |  |        |   |        |   |        |   |       |   |       |   |     |  |      |   |     |   | Activities Carried on Abroad |   |     |   |        |   |       |   |      |  
|-- | -------------------------------------------------------------------------------- |  | ------ | - | ------ | - | ------ | - | ----- | - | ----- | - | --- |  | ---- | - | --- | - | ---------------------------- | - | --- | - | ------ | - | ----- | - | ---- | -
|
|
|   | Net sales and services                                                           |  | 3,831  |   | 22     |   | 5,603  |   | 33    |   | 1,323 |   | 8   |  | 514  |   | 3   |   | 1,744                        |   | 10  |   | 3,850  |   | 23    |   | 211  |  
|-  | Sales allocated among activities                                                 |  | 514    |   | 101    |   | (6     | ) | (1    | ) | 0     |   | 0   |  | 0    |   | 0   |   | 0                            |   | 0   |   | 0      |   | 0     |   | 0    |  
|   | Other operating revenues                                                         |  | 55     |   | 9      |   | 127    |   | 22    |   | 54    |   | 9   |  | 59   |   | 10  |   | 16                           |   | 3   |   | 234    |   | 40    |   | 38   |  
|=  | Production value                                                                 |  | 4,400  |   | 24     |   | 5,724  |   | 31    |   | 1,377 |   | 8   |  | 573  |   | 3   |   | 1,760                        |   | 10  |   | 4,084  |   | 23    |   | 249  |  
|   |                                                                                  |  |        |   |        |   |        |   |       |   |       |   |     |  |      |   |     |   |                              |   |     |   |        |   |       |   |      |  
|   | Materials used                                                                   |  | (1,711 | ) | 20     |   | (3,217 | ) | 38    |   | (804  | ) | 9   |  | (150 | ) | 2   |   | (1,248                       | ) | 15  |   | (1,257 | ) | 15    |   | (111 | )
|-  | Procurements allocated among activities                                          |  | 0      |   | 0      |   | (508   | ) | 100   |   | 0     |   | 0   |  | 0    |   | 0   |   | 0                            |   | 0   |   | 0      |   | 0     |   | 0    |  
|   | External and operating expenses                                                  |  | (384   | ) | 15     |   | (610   | ) | 23    |   | (429  | ) | 16  |  | (242 | ) | 9   |   | (169                         | ) | 6   |   | (755   | ) | 29    |   | (47  | )
|=  | Value added of the company                                                       |  | 2,305  |   | 35     |   | 1,389  |   | 21    |   | 144   |   | 2   |  | 181  |   | 3   |   | 343                          |   | 5   |   | 2,072  |   | 32    |   | 91   |  
|-  | Personnel expenses                                                               |  | (329   | ) | 26     |   | (341   | ) | 27    |   | (32   | ) | 3   |  | (74  | ) | 6   |   | (79                          | ) | 6   |   | (317   | ) | 25    |   | (79  | )
|=  | Gross operating income                                                           |  | 1,976  |   | 38     |   | 1,048  |   | 20    |   | 112   |   | 2   |  | 107  |   | 2   |   | 264                          |   | 5   |   | 1,755  |   | 33    |   | 12   |  
|   |                                                                                  |  |        |   |        |   |        |   |       |   |       |   |     |  |      |   |     |   |                              |   |     |   |        |   |       |   |      |  
|-  | Depreciation and amortization expense                                            |  | (660   | ) | 39     |   | (341   | ) | 20    |   | (11   | ) | 1   |  | (65  | ) | 4   |   | (113                         | ) | 7   |   | (467   | ) | 27    |   | (39  | )
|-  | Bad debts and variation in operating allowances                                  |  | 48     |   | (2,400 | ) | (23    | ) | 1,150 |   | (3    | ) | 150 |  | (3   | ) | 150 |   | (1                           | ) | 50  |   | (20    | ) | 1,000 |   | 0    |  
|=  | Net operating income (loss)                                                      |  | 1,364  |   | 38     |   | 684    |   | 19    |   | 98    |   | 3   |  | 39   |   | 1   |   | 150                          |   | 4   |   | 1,268  |   | 36    |   | (27  | )
|   |                                                                                  |  |        |   |        |   |        |   |       |   |       |   |     |  |      |   |     |   |                              |   |     |   |        |   |       |   |      |  
|+  | Financial revenues                                                               |  | 35     |   | 3      |   | 7      |   | 1     |   | 2     |   | 0   |  | 30   |   | 2   |   | 3                            |   | 0   |   | 492    |   | 35    |   | 834  |  
|-  | Financial expenses                                                               |  | (150   | ) | 5      |   | (220   | ) | 7     |   | (21   | ) | 1   |  | (94  | ) | 3   |   | (63                          | ) | 2   |   | (1,521 | ) | 50    |   | (953 | )
|-  | Depreciation and amortization expense and investment valuation provisions        |  | 0      |   | 0      |   | 0      |   | 0     |   | 0     |   | 0   |  | (9   | ) | 100 |   | 0                            |   | 0   |   | 0      |   | 0     |   | 0    |  
|+- | Equity in the income/losses of companies accounted for by the equity method      |  | 0      |   | 0      |   | 0      |   | 0     |   | 0     |   | 0   |  | (192 | ) | 207 |   | 17                           |   | (18 | ) | 7      |   | (8    | ) | 75   |  
|-  | Amortization of consolidation goodwill                                           |  | 0      |   | 0      |   | 1      |   | 0     |   | 0     |   | 0   |  | (41  | ) | 11  |   | (92                          | ) | 26  |   | (215   | ) | 61    |   | (8   | )
|=  | Ordinary income (loss)                                                           |  | 1,249  |   | 83     |   | 472    |   | 32    |   | 79    |   | 5   |  | (267 | ) | (18 | ) | 15                           |   | 1   |   | 31     |   | 2     |   | (79  | )
|   |                                                                                  |  |        |   |        |   |        |   |       |   |       |   |     |  |      |   |     |   |                              |   |     |   |        |   |       |   |      |  
|+  | Gains on fixed assets and nonoperating revenues                                  |  | 1,264  |   | 72     |   | 280    |   | 16    |   | 8     |   | 0   |  | 107  |   | 6   |   | 9                            |   | 1   |   | 118    |   | 7     |   | (41  | )
|-  | Losses on fixed assets and nonoperating expenses                                 |  | (176   | ) | 12     |   | (391   | ) | 26    |   | (33   | ) | 2   |  | (377 | ) | 25  |   | (32                          | ) | 2   |   | (573   | ) | 37    |   | 54   |  
|-  | Variation in intangible asset, utility plant and investment valuation allowances |  | (5     | ) | 3      |   | (67    | ) | 46    |   | 0     |   | 0   |  | (1   | ) | 1   |   | 1                            |   | (1  | ) | 0      |   | 0     |   | (74  | )
|=  | Income (Loss) before taxes                                                       |  | 2,332  |   | 148    |   | 294    |   | 19    |   | 54    |   | 3   |  | (538 | ) | (34 | ) | (7                           | ) | 0   |   | (424   | ) | (27   | ) | (140 | )
|   |                                                                                  |  |        |   |        |   |        |   |       |   |       |   |     |  |      |   |     |   |                              |   |     |   |        |   |       |   |      |  
|-  | Corporate income tax                                                             |  | (250   | ) | 57     |   | 204    |   | (47   | ) | (16   | ) | 4   |  | 76   |   | (17 | ) | 64                           |   | (15 | ) | (39    | ) | 9     |   | (476 | )
|=  | Income (Loss) after taxes                                                        |  | 2,082  |   | 184    |   | 498    |   | 44    |   | 38    |   | 3   |  | (462 | ) | (41 | ) | 57                           |   | 5   |   | (463   | ) | (41   | ) | (616 | )
|   |                                                                                  |  |        |   |        |   |        |   |       |   |       |   |     |  |      |   |     |   |                              |   |     |   |        |   |       |   |      |  
|-  | Income (Loss) attributed to minority interests                                   |  | 0      |   | 0      |   | 0      |   | 0     |   | 0     |   | 0   |  | (7   | ) | (5  | ) | (36                          | ) | (27 | ) | 182    |   | 134   |   | (3   | )
|=  | INCOME (LOSS) FOR THE YEAR ENDED 12/31/02                                        |  | 2,082  |   | 164    |   | 498    |   | 39    |   | 38    |   | 3   |  | (469 | ) | (37 | ) | 21                           |   | 2   |   | (281   | ) | (22   | ) | (619 | )
|   |                                                                                  |  |        |   |        |   |        |   |       |   |       |   |     |  |      |   |     |   |                              |   |     |   |        |   |       |   |      |  

F-58

---



BALANCE SHEET BY ACTIVITY AND COST ACCOUNTING STATEMENT OF INCOME BY ACTIVITY FOR 2001    (Millions of Euros)

|ASSETS                                     |  | Generation                                          |  | %       |   | Distribution |  | %      |   | Retailing |  | %   |   | Other Non-
electricity
Activities |  | %     |   | Activities
Carried on
Abroad |  | %      |   | Corporate
Activities |  | %      |   | Unallocated
Adjustments |   | Total   |  
|------------------------------------------ |  | --------------------------------------------------- |  | ------- | - | ------------ |  | ------ | - | --------- |  | --- | - | --------------------------------- |  | ----- | - | ---------------------------- |  | ------ | - | -------------------- |  | ------ | - | ----------------------- | - | ------- | -
|1.                                         |  | Due from stockholders for uncalled capital          |  | 0       |   | 0            |  | 0      |   | 0         |  | 0   |   | 0                                 |  | 0     |   | 0                            |  | 0      |   | 0                    |  | 0      |   | 0                       |   | 0       |  
|2.                                         |  | Fixed and other noncurrent assets                   |  | 9,156   |   | 12           |  | 8,275  |   | 11        |  | 242 |   | 0                                 |  | 2,376 |   | 3                            |  | 15,308 |   | 20                   |  | 40,554 |   | 54                      |   | (38,053 | )
|2.1.                                       |  | Intangible assets                                   |  | 43      |   | 8            |  | 109    |   | 19        |  | 28  |   | 5                                 |  | 221   |   | 38                           |  | 135    |   | 24                   |  | 32     |   | 6                       |   | 0       |  
|2.2.                                       |  | Utility plant                                       |  | 8,564   |   | 30           |  | 6,946  |   | 23        |  | 34  |   | 0                                 |  | 898   |   | 3                            |  | 13,112 |   | 44                   |  | 107    |   | 0                       |   | 491     |  
|2.2.1.                                     |  | Technical electricity installations                 |  | 19,675  |   | 41           |  | 11,436 |   | 24        |  | 40  |   | 0                                 |  | 382   |   | 1                            |  | 16,216 |   | 34                   |  | 0      |   | 0                       |   | 467     |  
|2.2.2.                                     |  | Technical electricity installations in progress     |  | 664     |   | 33           |  | 379    |   | 19        |  | 0   |   | 0                                 |  | 188   |   | 9                            |  | 804    |   | 39                   |  | 0      |   | 0                       |   | 0       |  
|2.2.3.                                     |  | Other tangible fixed assets                         |  | 1,200   |   | 34           |  | 412    |   | 12        |  | 0   |   | 0                                 |  | 650   |   | 18                           |  | 1,270  |   | 35                   |  | 18     |   | 1                       |   | (3      | )
|2.2.4.                                     |  | Advances and other construction work in progress    |  | 10      |   | 4            |  | 8      |   | 4         |  | 0   |   | 0                                 |  | 40    |   | 18                           |  | 69     |   | 31                   |  | 97     |   | 43                      |   | 0       |  
|2.2.5.                                     |  | Depreciation of technical electricity installations |  | (11,850 | ) | 54           |  | (5,086 | ) | 23        |  | (6  | ) | 0                                 |  | (121  | ) | 1                            |  | (4,856 | ) | 22                   |  | 0      |   | 0                       |   | 15      |  
|2.2.6.                                     |  | Other depreciation                                  |  | (1,016  | ) | 56           |  | (165   | ) | 9         |  | 0   |   | 0                                 |  | (226  | ) | 13                           |  | (389   | ) | 22                   |  | (8     | ) | 0                       |   | 3       |  
|2.2.7.                                     |  | Provisions                                          |  | (119    | ) | 68           |  | (38    | ) | 22        |  | 0   |   | 0                                 |  | (15   | ) | 9                            |  | (2     | ) | 1                    |  | 0      |   | 0                       |   | 9       |  
|2.3.                                       |  | Long-term financial investments                     |  | 549     |   | 1            |  | 1,220  |   | 3         |  | 180 |   | 0                                 |  | 1,257 |   | 3                            |  | 2,061  |   | 5                    |  | 40,314 |   | 88                      |   | (38,544 | )
|2.4.                                       |  | Treasury stock                                      |  | 0       |   | 0            |  | 0      |   | 0         |  | 0   |   | 0                                 |  | 0     |   | 0                            |  | 0      |   | 0                    |  | 101    |   | 100                     |   | 0       |  
|3.                                         |  | Goodwill                                            |  | 0       |   | 0            |  | 8      |   | 0         |  | 0   |   | 0                                 |  | 683   |   | 16                           |  | 3,718  |   | 84                   |  | 0      |   | 0                       |   | 1,134   |  
|4.                                         |  | Deferred charges                                    |  | 53      |   | 4            |  | 225    |   | 17        |  | 1   |   | 0                                 |  | 5     |   | 0                            |  | 182    |   | 14                   |  | 855    |   | 65                      |   | (658    | )
|5.                                         |  | Current assets                                      |  | 1,889   |   | 21           |  | 1,448  |   | 16        |  | 347 |   | 4                                 |  | 547   |   | 6                            |  | 2,555  |   | 28                   |  | 2,197  |   | 25                      |   | (2,860  | )
|5.1.                                       |  | Inventories                                         |  | 496     |   | 65           |  | 27     |   | 4         |  | 1   |   | 0                                 |  | 81    |   | 11                           |  | 156    |   | 21                   |  | 0      |   | 0                       |   | (29     | )
|5.2.                                       |  | Customer receivables                                |  | 1,346   |   | 27           |  | 1,344  |   | 27        |  | 304 |   | 6                                 |  | 327   |   | 7                            |  | 1,335  |   | 27                   |  | 297    |   | 6                       |   | (673    | )
|5.3.                                       |  | Other current assets                                |  | 47      |   | 1            |  | 77     |   | 2         |  | 42  |   | 1                                 |  | 139   |   | 4                            |  | 1,064  |   | 33                   |  | 1,900  |   | 59                      |   | (2,158  | )
|                                           |  |                                                     |  |         |   |              |  |        |   |           |  |     |   |                                   |  |       |   |                              |  |        |   |                      |  |        |   |                         |   |         |  
|TOTAL ASSETS                               |  | 11,098                                              |  | 12      |   | 9,956        |  | 11     |   | 590       |  | 1   |   | 3,611                             |  | 4     |   | 21,763                       |  | 24     |   | 43,606               |  | 48     |   | (40,437                 | ) | 50,187  |  
|                                           |  |                                                     |  |         |   |              |  |        |   |           |  |     |   |                                   |  |       |   |                              |  |        |   |                      |  |        |   |                         |   |         |  
|STOCKHOLDERS' EQUITY AND LIABILITIES       |  |                                                     |  |         |   |              |  |        |   |           |  |     |   |                                   |  |       |   |                              |  |        |   |                      |  |        |   |                         |   |         |  
|1.                                         |  | Stockholders' equity                                |  | 3,941   |   | 14           |  | 1,362  |   | 5         |  | 28  |   | 0                                 |  | 933   |   | 3                            |  | 3,578  |   | 12                   |  | 19,190 |   | 66                      |   | (20,376 | )
|2.                                         |  | Minority interests                                  |  | 31      |   | 1            |  | 39     |   | 1         |  | 0   |   | 0                                 |  | 58    |   | 2                            |  | 3,530  |   | 96                   |  | 0      |   | 0                       |   | 104     |  
|3.                                         |  | Negative goodwill                                   |  | 27      |   | 17           |  | 82     |   | 50        |  | 0   |   | 0                                 |  | 32    |   | 20                           |  | 23     |   | 14                   |  | 0      |   | 0                       |   | (135    | )
|4.                                         |  | Deferred revenues                                   |  | 117     |   | 9            |  | 902    |   | 74        |  | 2   |   | 0                                 |  | 55    |   | 4                            |  | 161    |   | 13                   |  | 5      |   | 0                       |   | (28     | )
|4.1.                                       |  | Capital subsidies                                   |  | 115     |   | 14           |  | 709    |   | 85        |  | 0   |   | 0                                 |  | 10    |   | 1                            |  | 0      |   | 0                    |  | 0      |   | 0                       |   | (21     | )
|4.2.                                       |  | Other                                               |  | 2       |   | 1            |  | 193    |   | 47        |  | 2   |   | 1                                 |  | 45    |   | 11                           |  | 161    |   | 40                   |  | 5      |   | 1                       |   | (7      | )
|5.                                         |  | Provisions for contingencies and expenses           |  | 1,233   |   | 29           |  | 1,845  |   | 44        |  | 23  |   | 1                                 |  | 178   |   | 4                            |  | 493    |   | 12                   |  | 449    |   | 11                      |   | (5      | )
|6.                                         |  | Long-term debt                                      |  | 4,312   |   | 11           |  | 3,911  |   | 10        |  | 207 |   | 1                                 |  | 986   |   | 3                            |  | 10,811 |   | 27                   |  | 19,746 |   | 48                      |   | (17,273 | )
|7.                                         |  | Current liabilities                                 |  | 1,437   |   | 12           |  | 1,815  |   | 15        |  | 330 |   | 3                                 |  | 1,369 |   | 11                           |  | 3,167  |   | 26                   |  | 4,216  |   | 33                      |   | (2,724  | )
|                                           |  |                                                     |  |         |   |              |  |        |   |           |  |     |   |                                   |  |       |   |                              |  |        |   |                      |  |        |   |                         |   |         |  
|TOTAL STOCKHOLDERS' EQUITY AND LIABILITIES |  | 11,098                                              |  | 12      |   | 9,956        |  | 11     |   | 590       |  | 1   |   | 3,611                             |  | 4     |   | 21,763                       |  | 24     |   | 43,606               |  | 48     |   | (40,437                 | ) | 50,187  |  
|                                           |  |                                                     |  |         |   |              |  |        |   |           |  |     |   |                                   |  |       |   |                              |  |        |   |                      |  |        |   |                         |   |         |  

F-59

---



|INCOME STATEMENTS |                                                                                    | Generation |        | % |      | Distribution |        | % |     | Retailing |       | % |    | Other Non-electricity
Activities |      | % |      | Activities
Carried on
Abroad |        | % |     | Corporate
Activities |      | % |      | Unallocated
Adjustments |      | Total |       
|----------------- | ---------------------------------------------------------------------------------- | ---------- | ------ | - | ---- | ------------ | ------ | - | --- | --------- | ----- | - | -- | -------------------------------- | ---- | - | ---- | ---------------------------- | ------ | - | --- | -------------------- | ---- | - | ---- | ----------------------- | ---- | ----- | ------
|                  | Net sales and services                                                             |            | 3,605  |   | 22   |              | 5,271  |   | 33  |           | 1,115 |   | 7  |                                  | 604  |   | 4    |                              | 5,125  |   | 32  |                      | 350  |   | 2    |                         | (494 | )     | 15,576
|-                 | Sales allocated among activities                                                   |            | 544    |   | 135  |              | (142   | ) | (35 | )         |       |   |    |                                  |      |   |      |                              | 0      |   | 0   |                      | 0    |   | 0    |                         | (402 | )     | 0     
|                  | Other operating revenues                                                           |            | 61     |   | 11   |              | 111    |   | 20  |           | 15    |   | 3  |                                  | 142  |   | 26   |                              | 200    |   | 37  |                      | 18   |   | 3    |                         | (38  | )     | 509   
|=                 | Production value                                                                   |            | 4,210  |   | 25   |              | 5,240  |   | 31  |           | 1,130 |   | 7  |                                  | 746  |   | 4    |                              | 5,325  |   | 31  |                      | 368  |   | 2    |                         | (934 | )     | 16,085
|                  |                                                                                    |            |        |   |      |              |        |   |     |           |       |   |    |                                  |      |   |      |                              |        |   |     |                      |      |   |      |                         |      |       |       
|                  | Materials used                                                                     |            | (1,763 | ) | 23   |              | (2,843 | ) | 37  |           | (721  | ) | 9  |                                  | (248 | ) | 3    |                              | (1,877 | ) | 25  |                      | (199 | ) | 3    |                         | (40  | )     | (7.691
|-                 | Procurements allocated among activities                                            |            |        |   | 0    |              | (402   | ) | 100 |           |       |   | 0  |                                  |      |   | 0    |                              |        |   | 0   |                      |      |   | 0    |                         | 402  |       | 0     
|                  | External and operating expenses                                                    |            | (359   | ) | 14   |              | (543   | ) | 22  |           | (329  | ) | 13 |                                  | (327 | ) | 13   |                              | (871   | ) | 35  |                      | (86  | ) | 3    |                         | 566  |       | (1,949
|=                 | Value added of the company                                                         |            | 2,088  |   | 32   |              | 1,452  |   | 23  |           | 80    |   | 1  |                                  | 171  |   | 3    |                              | 2,577  |   | 40  |                      | 83   |   | 1    |                         | (6   | )     | 6,445 
|-                 | Personnel expenses                                                                 |            | (346   | ) | 26   |              | (380   | ) | 29  |           | (20   | ) | 2  |                                  | (95  | ) | 7    |                              | (418   | ) | 31  |                      | (73  | ) | 6    |                         | 0    |       | (1,332
|=                 | Gross operating income                                                             |            | 1,742  |   | 34   |              | 1,072  |   | 21  |           | 60    |   | 1  |                                  | 76   |   | 2    |                              | 2,159  |   | 42  |                      | 10   |   | 0    |                         | (6   | )     | 5,113 
|                  |                                                                                    |            |        |   |      |              |        |   |     |           |       |   |    |                                  |      |   |      |                              |        |   |     |                      |      |   |      |                         |      |       |       
|-                 | Period depreciation and amortization                                               |            | (718   | ) | 39   |              | (329   | ) | 18  |           | (6    | ) | 0  |                                  | (95  | ) | 5    |                              | (663   | ) | 37  |                      | (18  | ) | 1    |                         | 0    |       | (1,829
|-                 | Bad debts and variation in operating provisions                                    |            | (6     | ) | 6    |              | (13    | ) | 12  |           | (3    | ) | 3  |                                  | (13  | ) | 12   |                              | (73    | ) | 67  |                      | (1   | ) | 1    |                         | 0    |       | (109  
|=                 | Net operating income (loss)                                                        |            | 1,018  |   | 31   |              | 730    |   | 23  |           | 51    |   | 2  |                                  | (32  | ) | (1   | )                            | 1,423  |   | 45  |                      | (9   | ) | (0   | )                       | (6   | )     | 3,175 
|                  |                                                                                    |            |        |   |      |              |        |   |     |           |       |   |    |                                  |      |   |      |                              |        |   |     |                      |      |   |      |                         |      |       |       
|+                 | Financial revenues                                                                 |            | 16     |   | 1    |              | 15     |   | 1   |           | 0     |   | 0  |                                  | 18   |   | 2    |                              | 535    |   | 46  |                      | 588  |   | 50   |                         | (588 | )     | 584   
|-                 | Financial expenses                                                                 |            | (228   | ) | 8    |              | (265   | ) | 9   |           | (11   | ) | 0  |                                  | (115 | ) | 4    |                              | (1,507 | ) | 52  |                      | (770 | ) | 27   |                         | 594  |       | (2,302
|-                 | Period depreciation and amortization and financial provisions                      |            | 5      |   | (125 | )            | 0      |   | 0   |           | 0     |   | 0  |                                  | (20  | ) | 500  |                              | 3      |   | (75 | )                    | 8    |   | (200 | )                       | 0    |       | (4    
|+-                | Equity in the income/losses of companies carried by the equity method              |            | 0      |   | 0    |              | 0      |   | 0   |           | 0     |   | 0  |                                  | (178 | ) | 151  |                              | 10     |   | (9  | )                    | 50   |   | (42  | )                       | 0    |       | (118  
|-                 | Amortization of goodwill in consolidation                                          |            | 0      |   | 0    |              | 0      |   | 0   |           | 0     |   | 0  |                                  | (44  | ) | 15   |                              | (227   | ) | 79  |                      | (18  | ) | 6    |                         | 0    |       | (289  
|=                 | Ordinary income                                                                    |            | 811    |   | 77   |              | 480    |   | 46  |           | 40    |   | 4  |                                  | (371 | ) | (36  | )                            | 237    |   | 23  |                      | (151 | ) | (14  | )                       | 0    |       | 1,046 
|                  |                                                                                    |            |        |   |      |              |        |   |     |           |       |   |    |                                  |      |   |      |                              |        |   |     |                      |      |   |      |                         |      |       |       
|+                 | Gains on fixed assets and nonoperating revenues                                    |            | 245    |   | 20   |              | 149    |   | 12  |           | 2     |   | 0  |                                  | 64   |   | 5    |                              | 766    |   | 64  |                      | (14  | ) | (1   | )                       | 0    |       | 1,212 
|-                 | Losses on fixed assets and nonoperating expenses                                   |            | (75    | ) | 13   |              | (166   | ) | 27  |           | (3    | ) | 1  |                                  | (60  | ) | 10   |                              | (331   | ) | 55  |                      | 35   |   | (6   | )                       | 0    |       | (600  
|-                 | Variation in intangible assets, utility plant and control provisions for portfolio |            | (49    | ) | 148  |              | (4     | ) | 12  |           | 0     |   | 0  |                                  | (15  | ) | 46   |                              | 0      |   | 0   |                      | 35   |   | (106 | )                       | 0    |       | (33   
|=                 | Income (Loss) before taxes                                                         |            | 932    |   | 58   |              | 459    |   | 28  |           | 39    |   | 2  |                                  | (382 | ) | (23  | )                            | 672    |   | 41  |                      | (95  | ) | (6   | )                       | 0    |       | 1,625 
|                  |                                                                                    |            |        |   |      |              |        |   |     |           |       |   |    |                                  |      |   |      |                              |        |   |     |                      |      |   |      |                         |      |       |       
|-                 | Corporate income tax                                                               |            | (269   | ) | 306  |              | (125   | ) | 142 |           | (13   | ) | 15 |                                  | 291  |   | (331 | )                            | (132   | ) | 150 |                      | 160  |   | (182 | )                       | 0    |       | (88   
|=                 | Income (Loss) after taxes                                                          |            | 663    |   | 43   |              | 334    |   | 22  |           | 26    |   | 2  |                                  | (91  | ) | (6   | )                            | 540    |   | 35  |                      | 65   |   | 4    |                         | 0    |       | 1,537 
|                  |                                                                                    |            |        |   |      |              |        |   |     |           |       |   |    |                                  |      |   |      |                              |        |   |     |                      |      |   |      |                         |      |       |       
|-                 | Income (Loss) attributed to minority interests                                     |            | 0      |   | 0    |              | 0      |   | 0   |           | 0     |   | 0  |                                  | (7   | ) | 12   |                              | (51    | ) | 88  |                      | 0    |   | 0    |                         | 0    |       | (58   
|=                 | Income (Loss) for the year attributed to the Controlling Company                   |            | 663    |   | 45   |              | 334    |   | 23  |           | 26    |   | 2  |                                  | (98  | ) | (7   | )                            | 489    |   | 33  |                      | 65   |   | 4    |                         | 0    |       | 1,479 
|                  |                                                                                    |            |        |   |      |              |        |   |     |           |       |   |    |                                  |      |   |      |                              |        |   |     |                      |      |   |      |                         |      |       |       

F-60

---



Cost accounting statement of income by activity for 2000    (Millions of Euros)

|INCOME STATEMENTS |                                                                                    | Generation |        | % |     | Distribution |        | % |     | Retailing |      | % |    | Other Non-electricity
Activities |      | % |     | Activities Carried on Abroad |        | % |     | Corporate Activities |      | % |     | Unallocated Adjustments |      | Total |       
|----------------- | ---------------------------------------------------------------------------------- | ---------- | ------ | - | --- | ------------ | ------ | - | --- | --------- | ---- | - | -- | -------------------------------- | ---- | - | --- | ---------------------------- | ------ | - | --- | -------------------- | ---- | - | --- | ----------------------- | ---- | ----- | ------
|                  | Net sales and services                                                             |            | 3,728  |   | 24  |              | 5,027  |   | 32  |           | 959  |   | 6  |                                  | 545  |   | 4   |                              | 4,941  |   | 31  |                      | 431  |   | 3   |                         | (367 | )     | 15,264
|-                 | Sales allocated among activities                                                   |            | 365    |   | 100 |              | 1      |   | 0   |           | 0    |   | 0  |                                  | 0    |   | 0   |                              | 0      |   | 0   |                      | 0    |   | 0   |                         | (366 | )     | 0     
|                  | Other operating revenues                                                           |            | 63     |   | 14  |              | 101    |   | 22  |           | 14   |   | 3  |                                  | 36   |   | 8   |                              | 228    |   | 50  |                      | 19   |   | 4   |                         | (43  | )     | 418   
|=                 | Production value                                                                   |            | 4,156  |   | 25  |              | 5,129  |   | 30  |           | 973  |   | 6  |                                  | 581  |   | 4   |                              | 5,169  |   | 31  |                      | 450  |   | 3   |                         | (776 | )     | 15,682
|                  |                                                                                    |            |        |   |     |              |        |   |     |           |      |   |    |                                  |      |   |     |                              |        |   |     |                      |      |   |     |                         |      |       |       
|                  | Materials used                                                                     |            | (1,688 | ) | 24  |              | (2,781 | ) | 39  |           | (630 | ) | 9  |                                  | (173 | ) | 2   |                              | (1,888 | ) | 26  |                      | (5   | ) | 0   |                         | (92  | )     | (7,257
|-                 | Procurements allocated among activities                                            |            | (1     | ) | 0   |              | (365   | ) | 100 |           | 0    |   | 0  |                                  | 0    |   | 0   |                              | 0      |   | 0   |                      | 0    |   | 0   |                         | 366  |       | 0     
|                  | External and operating expenses                                                    |            | (368   | ) | 16  |              | (575   | ) | 26  |           | (294 | ) | 13 |                                  | (247 | ) | 11  |                              | (748   | ) | 33  |                      | (23  | ) | 1   |                         | 502  |       | (1,753
|=                 | Value added of the company                                                         |            | 2,099  |   | 31  |              | 1,408  |   | 21  |           | 49   |   | 1  |                                  | 161  |   | 2   |                              | 2,533  |   | 39  |                      | 422  |   | 6   |                         | 0    |       | 6,672 
|-                 | Personnel expenses                                                                 |            | (358   | ) | 26  |              | (406   | ) | 30  |           | (13  | ) | 1  |                                  | (85  | ) | 6   |                              | (447   | ) | 33  |                      | (53  | ) | 4   |                         | 0    |       | (1,362
|=                 | Gross operating income                                                             |            | 1,741  |   | 33  |              | 1,002  |   | 19  |           | 36   |   | 1  |                                  | 76   |   | 1   |                              | 2,086  |   | 39  |                      | 369  |   | 7   |                         | 0    |       | 5,310 
|                  |                                                                                    |            |        |   |     |              |        |   |     |           |      |   |    |                                  |      |   |     |                              |        |   |     |                      |      |   |     |                         |      |       |       
|-                 | Period depreciation and amortization                                               |            | (759   | ) | 37  |              | (346   | ) | 17  |           | (2   | ) | 0  |                                  | (85  | ) | 4   |                              | (660   | ) | 33  |                      | (179 | ) | 9   |                         | 0    |       | (2,031
|-                 | Bad debts and variation in operating provisions                                    |            | (70    | ) | 32  |              | (11    | ) | 5   |           | (3   | ) | 1  |                                  | (10  | ) | 5   |                              | (124   | ) | 57  |                      | 0    |   | 0   |                         | 0    |       | (218  
|=                 | Net operating income                                                               |            | 912    |   | 30  |              | 645    |   | 21  |           | 31   |   | 1  |                                  | (19  | ) | (1  | )                            | 1,302  |   | 43  |                      | 190  |   | 6   |                         | 0    |       | 3,061 
|                  |                                                                                    |            |        |   |     |              |        |   |     |           |      |   |    |                                  |      |   |     |                              |        |   |     |                      |      |   |     |                         |      |       |       
|+                 | Financial revenues                                                                 |            | 24     |   | 2   |              | 19     |   | 2   |           | 0    |   | 0  |                                  | 29   |   | 2   |                              | 701    |   | 59  |                      | 415  |   | 35  |                         | (419 | )     | 769   
|-                 | Financial expenses                                                                 |            | (221   | ) | 10  |              | (229   | ) | 10  |           | (6   | ) | 0  |                                  | (62  | ) | 3   |                              | (1,195 | ) | 51  |                      | (600 | ) | 26  |                         | 419  |       | (1,894
|-                 | Period depreciation and amortization and financial provisions                      |            | 0      |   | 0   |              | 5      |   | (28 | )         | 0    |   | 0  |                                  | (23  | ) | 128 |                              | 0      |   | 0   |                      | 0    |   | 0   |                         | 0    |       | (18   
|+-                | Equity in the income/losses of companies carried by the equity method              |            | 1      |   | 2   |              | 0      |   | 0   |           | 0    |   | 0  |                                  | (43  | ) | (81 | )                            | 68     |   | 128 |                      | 27   |   | 51  |                         | 0    |       | 53    
|-                 | Amortization of goodwill in consolidation                                          |            | 0      |   | 0   |              | 0      |   | 0   |           | 0    |   | 0  |                                  | (28  | ) | 10  |                              | (240   | ) | 88  |                      | (4   | ) | 2   |                         | 0    |       | (272  
|=                 | Ordinary income                                                                    |            | 716    |   | 42  |              | 440    |   | 26  |           | 25   |   | 2  |                                  | (146 | ) | (9  | )                            | 636    |   | 37  |                      | 28   |   | 2   |                         | 0    |       | 1,699 
|                  |                                                                                    |            |        |   |     |              |        |   |     |           |      |   |    |                                  |      |   |     |                              |        |   |     |                      |      |   |     |                         |      |       |       
|+                 | Gains on fixed assets and nonoperating revenues                                    |            | 161    |   | 11  |              | 265    |   | 18  |           | 2    |   | 0  |                                  | 58   |   | 4   |                              | 801    |   | 54  |                      | 187  |   | 13  |                         | 0    |       | 1,474 
|-                 | Losses on fixed assets and nonoperating expenses                                   |            | (134   | ) | 23  |              | (233   | ) | 39  |           | (7   | ) | 1  |                                  | (50  | ) | 9   |                              | (186   | ) | 32  |                      | 19   |   | (4  | )                       | 0    |       | (591  
|-                 | Variation in provisions for intangible assets, utility plant and control portfolio |            | 0      |   | 0   |              | (22    | ) | (73 | )         | 0    |   | 0  |                                  | 3    |   | 10  |                              | 0      |   | 0   |                      | 49   |   | 163 |                         | 0    |       | 30    
|=                 | Income before taxes                                                                |            | 743    |   | 28  |              | 450    |   | 17  |           | 20   |   | 1  |                                  | (135 | ) | (5  | )                            | 1,251  |   | 48  |                      | 283  |   | 11  |                         | 0    |       | 2,612 
|                  |                                                                                    |            |        |   |     |              |        |   |     |           |      |   |    |                                  |      |   |     |                              |        |   |     |                      |      |   |     |                         |      |       |       
|-                 | Corporate income tax                                                               |            | (237   | ) | 38  |              | (75    | ) | 12  |           | (7   | ) | 1  |                                  | 61   |   | (10 | )                            | (264   | ) | 43  |                      | (96  | ) | 16  |                         | 0    |       | (618  
|=                 | Income (Loss) after taxes                                                          |            | 506    |   | 25  |              | 375    |   | 19  |           | 13   |   | 1  |                                  | (74  | ) | (4  | )                            | 987    |   | 50  |                      | 187  |   | 9   |                         | 0    |       | 1,994 
|                  |                                                                                    |            |        |   |     |              |        |   |     |           |      |   |    |                                  |      |   |     |                              |        |   |     |                      |      |   |     |                         |      |       |       
|-                 | Income (Loss) attributed to minority interests                                     |            | 0      |   | 0   |              | 0      |   | 0   |           | 0    |   | 0  |                                  | (7   | ) | 1   |                              | (581   | ) | 99  |                      | 1    |   | (0  | )                       | 0    |       | (587  
|=                 | Income (Loss) for the year attributed to the Controlling Company                   |            | 506    |   | 36  |              | 375    |   | 27  |           | 13   |   | 1  |                                  | (81  | ) | (6  | )                            | 406    |   | 29  |                      | 188  |   | 13  |                         | 0    |       | 1,407 
|                  |                                                                                    |            |        |   |     |              |        |   |     |           |      |   |    |                                  |      |   |     |                              |        |   |     |                      |      |   |     |                         |      |       |       

F-61

---



Unbundled balance sheet and cost accounting statement of income relating to activities carried on in Latin America in 2002    (Millions of Euros)

|ASSETS                                     |  | Generation                                          |  | %      |   | Distribution |  | %      |   | Corporate
Activities |   | %     |   | Other
Nonelectricity
Activities |   | %   |   | Unallocated
Adjustments |   | Latin
America |  
|------------------------------------------ |  | --------------------------------------------------- |  | ------ | - | ------------ |  | ------ | - | -------------------- | - | ----- | - | ------------------------------- | - | --- | - | ----------------------- | - | ------------- | -
|1.                                         |  | Due from stockholders for uncalled capital          |  | 0      |   | 0            |  | 0      |   | 0                    |   | 0     |   | 0                               |   | 0   |   | 0                       |   | 0             |  
|2.                                         |  | Fixed and other noncurrent assets                   |  | 6,282  |   | 44           |  | 2,857  |   | 20                   |   | 4,995 |   | 35                              |   | 87  |   | 1                       |   | (3,384        | )
|2.1.                                       |  | Intangible assets                                   |  | 23     |   | 27           |  | 62     |   | 71                   |   | 2     |   | 2                               |   | 0   |   | 0                       |   | 0             |  
|2.2.                                       |  | Utility plant                                       |  | 5,846  |   | 63           |  | 3,348  |   | 36                   |   | 20    |   | 0                               |   | 74  |   | 1                       |   | (2            | )
|                                           |  |                                                     |  |        |   |              |  |        |   |                      |   |       |   |                                 |   |     |   |                         |   |               |  
|2.2.1.                                     |  | Technical electricity installations                 |  | 7,462  |   | 64           |  | 4,117  |   | 36                   |   | 4     |   | 0                               |   | 0   |   | 0                       |   | 0             |  
|2.2.2.                                     |  | Technical electricity installations in progress     |  | 335    |   | 56           |  | 262    |   | 44                   |   | 0     |   | 0                               |   | 0   |   | 0                       |   | 0             |  
|2.2.3.                                     |  | Other tangible fixed assets                         |  | 527    |   | 55           |  | 300    |   | 32                   |   | 32    |   | 3                               |   | 100 |   | 10                      |   | (2            | )
|2.2.4.                                     |  | Advances and other construction work in progress    |  | 1      |   | 1            |  | 67     |   | 99                   |   | 0     |   | 0                               |   | 0   |   | 0                       |   | 0             |  
|2.2.5.                                     |  | Depreciation of technical electricity installations |  | (2,333 | ) | 65           |  | (1,271 | ) | 35                   |   | (15   | ) | 0                               |   | 0   |   | 0                       |   | 0             |  
|2.2.6.                                     |  | Other depreciation                                  |  | (146   | ) | 49           |  | (127   | ) | 42                   |   | (1    | ) | 0                               |   | (26 | ) | 9                       |   | 0             |  
|2.2.7.                                     |  | Provisions                                          |  | 0      |   | 0            |  | 0      |   | 0                    |   | 0     |   | 0                               |   | 0   |   | 0                       |   | 0             |  
|                                           |  |                                                     |  |        |   |              |  |        |   |                      |   |       |   |                                 |   |     |   |                         |   |               |  
|2.3.                                       |  | Long-term financial investments                     |  | 413    |   | 9            |  | (553   | ) | (11                  | ) | 4,973 |   | 102                             |   | 13  |   | 0                       |   | (3,382        | )
|2.4.                                       |  | Treasury stock                                      |  | 0      |   | 0            |  | 0      |   | 0                    |   | 0     |   | 0                               |   | 0   |   | 0                       |   | 0             |  
|                                           |  |                                                     |  |        |   |              |  |        |   |                      |   |       |   |                                 |   |     |   |                         |   |               |  
|3.                                         |  | Goodwill                                            |  | 110    |   | 4            |  | 326    |   | 11                   |   | 2,551 |   | 85                              |   | 0   |   | 0                       |   | (282          | )
|4.                                         |  | Deferred charges                                    |  | 40     |   | 31           |  | 74     |   | 59                   |   | 12    |   | 10                              |   | 0   |   | 0                       |   | (0            | )
|5.                                         |  | Current assets                                      |  | 858    |   | 25           |  | 1,346  |   | 39                   |   | 1,081 |   | 32                              |   | 135 |   | 4                       |   | (855          | )
|5.1.                                       |  | Inventories                                         |  | 41     |   | 33           |  | 37     |   | 30                   |   | 0     |   | 0                               |   | 45  |   | 37                      |   | 0             |  
|5.2.                                       |  | Customer receivables                                |  | 228    |   | 20           |  | 803    |   | 70                   |   | 51    |   | 4                               |   | 65  |   | 6                       |   | (143          | )
|5.3.                                       |  | Other current assets                                |  | 589    |   | 27           |  | 506    |   | 24                   |   | 1,030 |   | 48                              |   | 25  |   | 1                       |   | (712          | )
|                                           |  |                                                     |  |        |   |              |  |        |   |                      |   |       |   |                                 |   |     |   |                         |   |               |  
|TOTAL ASSETS                               |  | 7,290                                               |  | 35     |   | 4,603        |  | 22     |   | 8,639                |   | 42    |   | 222                             |   | 1   |   | (4,521                  | ) | 16,233        |  
|                                           |  |                                                     |  |        |   |              |  |        |   |                      |   |       |   |                                 |   |     |   |                         |   |               |  
|STOCKHOLDERS' EQUITY AND LIABILITIES       |  |                                                     |  |        |   |              |  |        |   |                      |   |       |   |                                 |   |     |   |                         |   |               |  
|1.                                         |  | Stockholders' equity                                |  | 320    |   | 10           |  | (466   | ) | (14                  | ) | 3,291 |   | 101                             |   | 95  |   | 3                       |   | (1,142        | )
|2.                                         |  | Minority interests                                  |  | 1,350  |   | 71           |  | 1,272  |   | 67                   |   | (762  | ) | (40                             | ) | 36  |   | 2                       |   | 1             |  
|                                           |  |                                                     |  |        |   |              |  |        |   |                      |   |       |   |                                 |   |     |   |                         |   |               |  
|3.                                         |  | Negative goodwill                                   |  | 293    |   | 97           |  | 9      |   | 3                    |   | 1     |   | 0                               |   | 0   |   | 0                       |   | (286          | )
|                                           |  |                                                     |  |        |   |              |  |        |   |                      |   |       |   |                                 |   |     |   |                         |   |               |  
|4.                                         |  | Deferred revenues                                   |  | 27     |   | 20           |  | 71     |   | 51                   |   | 40    |   | 29                              |   | 0   |   | 0                       |   | (18           | )
|4.1.                                       |  | Capital subsidies                                   |  | 0      |   | 0            |  | 0      |   | 0                    |   | 0     |   | 0                               |   | 0   |   | 0                       |   | 0             |  
|4.2.                                       |  | Other                                               |  | 27     |   | 20           |  | 71     |   | 51                   |   | 40    |   | 29                              |   | 0   |   | 0                       |   | (18           | )
|                                           |  |                                                     |  |        |   |              |  |        |   |                      |   |       |   |                                 |   |     |   |                         |   |               |  
|5.                                         |  | Provisions for contingencies and expenses           |  | 43     |   | 6            |  | 319    |   | 47                   |   | 321   |   | 47                              |   | 2   |   | 0                       |   | (26           | )
|6.                                         |  | Long-term debt                                      |  | 3,656  |   | 36           |  | 1,622  |   | 16                   |   | 4,978 |   | 48                              |   | 30  |   | 0                       |   | (2,149        | )
|7.                                         |  | Current liabilities                                 |  | 1,601  |   | 39           |  | 1,776  |   | 42                   |   | 770   |   | 18                              |   | 59  |   | 1                       |   | (901          | )
|                                           |  |                                                     |  |        |   |              |  |        |   |                      |   |       |   |                                 |   |     |   |                         |   |               |  
|TOTAL STOCKHOLDERS' EQUITY AND LIABILITIES |  | 7,290                                               |  | 35     |   | 4,603        |  | 22     |   | 8,639                |   | 42    |   | 222                             |   | 1   |   | (4,521                  | ) | 16,233        |  
|                                           |  |                                                     |  |        |   |              |  |        |   |                      |   |       |   |                                 |   |     |   |                         |   |               |  

F-62

---



|INCOME STATEMENTS |  | Generation                                                                         |  | %     |   | Distribution |   | %      |   | Corporate
Activities |   | %    |   | Other
Non-electricity
Activities |   | %   |   | Unallocated
Adjustments |   | Latin America |  
|----------------- |  | ---------------------------------------------------------------------------------- |  | ----- | - | ------------ | - | ------ | - | -------------------- | - | ---- | - | -------------------------------- | - | --- | - | ----------------------- | - | ------------- | -
|                  |  | Net sales and services                                                             |  | 1,371 |   | 31           |   | 2,815  |   | 65                   |   | 8    |   | 0                                |   | 159 |   | 4                       |   | (503          | )
|-                 |  | Sales allocated among activities                                                   |  | 0     |   | 0            |   | 0      |   | 0                    |   | 0    |   | 0                                |   | 0   |   | 0                       |   | 0             |  
|                  |  | Other operating revenues                                                           |  | 35    |   | 12           |   | 168    |   | 59                   |   | 6    |   | 2                                |   | 76  |   | 27                      |   | (51           | )
|=                 |  | Production value                                                                   |  | 1,406 |   | 31           |   | 2,983  |   | 64                   |   | 14   |   | 0                                |   | 235 |   | 5                       |   | (554          | )
|                  |  |                                                                                    |  |       |   |              |   |        |   |                      |   |      |   |                                  |   |     |   |                         |   |               |  
|                  |  | Materials used                                                                     |  | (162  | ) | 10           |   | (1,446 | ) | 85                   |   | 0    |   | 0                                |   | (80 | ) | 5                       |   | 431           |  
|-                 |  | Procurements allocated among activities                                            |  | 0     |   | 0            |   | 0      |   | 0                    |   | 0    |   | 0                                |   | 0   |   | 0                       |   | 0             |  
|                  |  | External and operating expenses                                                    |  | (315  | ) | 36           |   | (427   | ) | 49                   |   | (58  | ) | 7                                |   | (78 | ) | 8                       |   | 123           |  
|=                 |  | Value added of the company                                                         |  | 929   |   | 45           |   | 1,110  |   | 54                   |   | (44  | ) | (2                               | ) | 77  |   | 3                       |   | 0             |  
|-                 |  | Personnel expenses                                                                 |  | (66   | ) | 21           |   | (184   | ) | 58                   |   | (33  | ) | 10                               |   | (34 | ) | 11                      |   | 0             |  
|=                 |  | Gross operating income (loss)                                                      |  | 863   |   | 49           |   | 926    |   | 53                   |   | (77  | ) | (4                               | ) | 43  |   | 2                       |   | 0             |  
|                  |  |                                                                                    |  |       |   |              |   |        |   |                      |   |      |   |                                  |   |     |   |                         |   |               |  
|-                 |  | Period depreciation and amortization                                               |  | (232  | ) | 50           |   | (231   | ) | 50                   |   | (2   | ) | 0                                |   | (2  | ) | 0                       |   | 0             |  
|-                 |  | Bad debts and variation in operating provisions                                    |  | 1     |   | (5           | ) | (21    | ) | 105                  |   | 0    |   | 0                                |   | 0   |   | 0                       |   | 0             |  
|=                 |  | Net operating income (loss)                                                        |  | 632   |   | 50           |   | 674    |   | 53                   |   | (79  | ) | (6                               | ) | 41  |   | 3                       |   | 0             |  
|                  |  |                                                                                    |  |       |   |              |   |        |   |                      |   |      |   |                                  |   |     |   |                         |   |               |  
|+                 |  | Financial revenues                                                                 |  | 194   |   | 19           |   | 445    |   | 44                   |   | 376  |   | 37                               |   | 2   |   | 0                       |   | (525          | )
|-                 |  | Financial expenses                                                                 |  | (887  | ) | 44           |   | (841   | ) | 41                   |   | (311 | ) | 15                               |   | (7  | ) | 0                       |   | 525           |  
|-                 |  | Period depreciation and amortization and financial provisions                      |  | 0     |   | 0            |   | 0      |   | 0                    |   | 0    |   | 0                                |   | 0   |   | 0                       |   | 0             |  
|+-                |  | Equity in the income/losses of companies carried by the equity method              |  | 67    |   | 965          |   | (60    | ) | (865                 | ) | 0    |   | 0                                |   | 0   |   | 0                       |   | 0             |  
|-                 |  | Amortization of goodwill in consolidation                                          |  | (9    | ) | 4            |   | (31    | ) | 15                   |   | (175 | ) | 81                               |   | 0   |   | 0                       |   | 0             |  
|=                 |  | Ordinary income (loss)                                                             |  | (3    | ) | (10          | ) | 187    |   | 602                  |   | (189 | ) | (608                             | ) | 36  |   | 116                     |   | 0             |  
|                  |  |                                                                                    |  |       |   |              |   |        |   |                      |   |      |   |                                  |   |     |   |                         |   |               |  
|+                 |  | Gains on fixed assets and nonoperating revenues                                    |  | 56    |   | 41           |   | 43     |   | 31                   |   | 36   |   | 26                               |   | 3   |   | 2                       |   | (20           | )
|-                 |  | Losses on fixed assets and nonoperating expenses                                   |  | (136  | ) | 23           |   | (135   | ) | 23                   |   | (294 | ) | 50                               |   | (28 | ) | 4                       |   | 20            |  
|-                 |  | Variation in provisions for intangible assets, utility plant and control portfolio |  | 0     |   | 0            |   | 0      |   | 0                    |   | 0    |   | 0                                |   | 0   |   | 0                       |   | 0             |  
|=                 |  | Income (Loss) before taxes                                                         |  | (83   | ) | 20           |   | 95     |   | (22                  | ) | (447 | ) | 105                              |   | 11  |   | (3                      | ) | 0             |  
|                  |  |                                                                                    |  |       |   |              |   |        |   |                      |   |      |   |                                  |   |     |   |                         |   |               |  
|-                 |  | Corporate income tax                                                               |  | (167  | ) | 423          |   | (144   | ) | 365                  |   | 277  |   | (701                             | ) | (5  | ) | 13                      |   | 0             |  
|=                 |  | Income after taxes                                                                 |  | (250  | ) | 54           |   | (49    | ) | 11                   |   | (170 | ) | 37                               |   | 6   |   | (2                      | ) | 0             |  
|                  |  |                                                                                    |  |       |   |              |   |        |   |                      |   |      |   |                                  |   |     |   |                         |   |               |  
|-                 |  | Income (Loss) attributed to minority interests                                     |  | 126   |   | 69           |   | 35     |   | 19                   |   | 21   |   | 12                               |   | 0   |   | 0                       |   | 0             |  
|=                 |  | Income (Loss) for the year attributed to the Controlling Company                   |  | (124  | ) | 44           |   | (14    | ) | 5                    |   | (149 | ) | 53                               |   | 6   |   | (2                      | ) | 0             |  
|                  |  |                                                                                    |  |       |   |              |   |        |   |                      |   |      |   |                                  |   |     |   |                         |   |               |  

F-63

---



Unbundled balance sheet and cost accounting statement of income relating to activities carried on in Latin America in 2001    (Amounts in millions of Euros)

|ASSETS                                     |  | Generation                                          |  | %      |   | Distribution |  | %      |   | Other
Nonelectricity
Activities |  | %   |   | Corporate
Activities |  | %     |   | Unallocated
Adjustments |   | Total  |  
|------------------------------------------ |  | --------------------------------------------------- |  | ------ | - | ------------ |  | ------ | - | ------------------------------- |  | --- | - | -------------------- |  | ----- | - | ----------------------- | - | ------ | -
|1.                                         |  | Due from stockholders for uncalled capital          |  | 0      |   | 0            |  | 0      |   | 0                               |  | 0   |   | 0                    |  | 0     |   | 0                       |   | 0      |  
|2.                                         |  | Fixed and other noncurrent assets                   |  | 8,952  |   | 43           |  | 5,078  |   | 24                              |  | 133 |   | 0                    |  | 6,816 |   | 33                      |   | (5,671 | )
|2.1.                                       |  | Intangible assets                                   |  | 37     |   | 27           |  | 95     |   | 71                              |  | 0   |   | 0                    |  | 3     |   | 2                       |   | 0      |  
|2.2.                                       |  | Utility plant                                       |  | 8,023  |   | 61           |  | 4,952  |   | 38                              |  | 110 |   | 0                    |  | 27    |   | 0                       |   | 0      |  
|                                           |  |                                                     |  |        |   |              |  |        |   |                                 |  |     |   |                      |  |       |   |                         |   |        |  
|2.2.1.                                     |  | Technical electricity installations                 |  | 10,286 |   | 63           |  | 5,926  |   | 37                              |  | 0   |   | 0                    |  | 4     |   | 0                       |   | 0      |  
|2.2.2.                                     |  | Technical electricity installations in progress     |  | 282    |   | 35           |  | 522    |   | 65                              |  | 0   |   | 0                    |  | 0     |   | 0                       |   | 0      |  
|2.2.3.                                     |  | Other tangible fixed assets                         |  | 633    |   | 50           |  | 453    |   | 36                              |  | 143 |   | 11                   |  | 41    |   | 3                       |   | 0      |  
|2.2.4.                                     |  | Advances and other construction work in progress    |  | 3      |   | 4            |  | 66     |   | 96                              |  | 0   |   | 0                    |  | 0     |   | 0                       |   | 0      |  
|2.2.5.                                     |  | Depreciation of technical electricity installations |  | (3,019 | ) | 62           |  | (1,820 | ) | 38                              |  | 0   |   | 0                    |  | (17   | ) | 0                       |   | 0      |  
|2.2.6.                                     |  | Other depreciation                                  |  | (162   | ) | 42           |  | (193   | ) | 50                              |  | (33 | ) | 9                    |  | (1    | ) | 0                       |   | 0      |  
|2.2.7.                                     |  | Provisions                                          |  | 0      |   | 0            |  | (2     | ) | 100                             |  | 0   |   | 0                    |  | 0     |   | 0                       |   | 0      |  
|                                           |  |                                                     |  |        |   |              |  |        |   |                                 |  |     |   |                      |  |       |   |                         |   |        |  
|2.3.                                       |  | Long-term financial investments                     |  | 892    |   | 12           |  | 31     |   | 0                               |  | 23  |   | 0                    |  | 6,786 |   | 88                      |   | (5,671 | )
|2.4.                                       |  | Treasury stock                                      |  | 0      |   | 0            |  | 0      |   | 0                               |  | 0   |   | 0                    |  | 0     |   | 0                       |   | 0      |  
|                                           |  |                                                     |  |        |   |              |  |        |   |                                 |  |     |   |                      |  |       |   |                         |   |        |  
|3.                                         |  | Goodwill                                            |  | 207    |   | 5            |  | 568    |   | 14                              |  | 0   |   | 0                    |  | 3,326 |   | 81                      |   | (383   | )
|4.                                         |  | Deferred charges                                    |  | 69     |   | 38           |  | 99     |   | 54                              |  | 0   |   | 0                    |  | 14    |   | 8                       |   | 0      |  
|5.                                         |  | Current assets                                      |  | 828    |   | 24           |  | 1,803  |   | 52                              |  | 182 |   | 5                    |  | 667   |   | 19                      |   | (925   | )
|5.1.                                       |  | Inventories                                         |  | 49     |   | 31           |  | 49     |   | 31                              |  | 58  |   | 37                   |  | 0     |   | 0                       |   | 0      |  
|5.2.                                       |  | Customer receivables                                |  | 390    |   | 26           |  | 1,032  |   | 69                              |  | 95  |   | 6                    |  | (21   | ) | (1                      | ) | (161   | )
|5.3.                                       |  | Other current assets                                |  | 389    |   | 21           |  | 722    |   | 40                              |  | 29  |   | 2                    |  | 688   |   | 38                      |   | (764   | )
|                                           |  |                                                     |  |        |   |              |  |        |   |                                 |  |     |   |                      |  |       |   |                         |   |        |  
|TOTAL ASSETS                               |  | 10,056                                              |  | 35     |   | 7,548        |  | 26     |   | 315                             |  | 1   |   | 10,823               |  | 38    |   | (6,979                  | ) | 21,763 |  
|                                           |  |                                                     |  |        |   |              |  |        |   |                                 |  |     |   |                      |  |       |   |                         |   |        |  
|STOCKHOLDERS' EQUITY AND LIABILITIES       |  |                                                     |  |        |   |              |  |        |   |                                 |  |     |   |                      |  |       |   |                         |  
|1.                                         |  | Stockholders' equity                                |  | 725    |   | 12           |  | 501    |   | 9                               |  | 119 |   | 2                    |  | 4,557 |   | 77                      |   | (2,324 | )
|2.                                         |  | Minority interests                                  |  | 2,350  |   | 67           |  | 2,132  |   | 60                              |  | 44  |   | 1                    |  | (996  | ) | (28                     | ) | 0      |  
|                                           |  |                                                     |  |        |   |              |  |        |   |                                 |  |     |   |                      |  |       |   |                         |   |        |  
|3.                                         |  | Negative goodwill                                   |  | 387    |   | 98           |  | 9      |   | 2                               |  | 0   |   | 0                    |  | 0     |   | 0                       |   | (373   | )
|                                           |  |                                                     |  |        |   |              |  |        |   |                                 |  |     |   |                      |  |       |   |                         |   |        |  
|4.                                         |  | Deferred revenues                                   |  | 56     |   | 35           |  | 100    |   | 62                              |  | 0   |   | 0                    |  | 5     |   | 3                       |   | 0      |  
|4.1.                                       |  | Capital subsidies                                   |  | 0      |   | 0            |  | 0      |   | 0                               |  | 0   |   | 0                    |  | 0     |   | 0                       |   | 0      |  
|4.2.                                       |  | Other                                               |  | 56     |   | 35           |  | 100    |   | 62                              |  | 0   |   | 0                    |  | 5     |   | 3                       |   | 0      |  
|                                           |  |                                                     |  |        |   |              |  |        |   |                                 |  |     |   |                      |  |       |   |                         |   |        |  
|5.                                         |  | Provisions for contingencies and expenses           |  | 52     |   | 11           |  | 428    |   | 87                              |  | 5   |   | 1                    |  | 8     |   | 2                       |   | 0      |  
|6.                                         |  | Long-term debt                                      |  | 5,519  |   | 39           |  | 2,458  |   | 17                              |  | 39  |   | 0                    |  | 6,089 |   | 43                      |   | (3,294 | )
|7.                                         |  | Current liabilities                                 |  | 967    |   | 23           |  | 1,920  |   | 46                              |  | 108 |   | 3                    |  | 1,160 |   | 28                      |   | (988   | )
|                                           |  |                                                     |  |        |   |              |  |        |   |                                 |  |     |   |                      |  |       |   |                         |   |        |  
|TOTAL STOCKHOLDERS'
EQUITY AND LIABILITIES |  | 10,056                                              |  | 35     |   | 7,548        |  | 26     |   | 315                             |  | 1   |   | 10,823               |  | 38    |   | (6,979                  | ) | 21,763 |  
|                                           |  |                                                     |  |        |   |              |  |        |   |                                 |  |     |   |                      |  |       |   |                         |   |        |  

F-64

---



|INCOME STATEMENTS |                                                                                    | Generation |       | % |     | Distribution |        | % |     | Other Non-
electricity
Activities |     | % |    | Corporate
Activities |      | % |      | Unallocated
Adjustments |      | Total |       
|----------------- | ---------------------------------------------------------------------------------- | ---------- | ----- | - | --- | ------------ | ------ | - | --- | --------------------------------- | --- | - | -- | -------------------- | ---- | - | ---- | ----------------------- | ---- | ----- | ------
|                  | Net sales and services                                                             |            | 1,724 |   | 33  |              | 3,752  |   | 66  |                                   | 243 |   | 4  |                      | 7    |   | 0    |                         | (601 | )     | 5,125 
|-                 | Sales allocated among activities                                                   |            | 0     |   | 0   |              | 0      |   | 0   |                                   | 0   |   | 0  |                      | 0    |   | 0    |                         | 0    |       | 0     
|                  | Other operating revenues                                                           |            | 58    |   | 29  |              | 127    |   | 64  |                                   | 11  |   | 6  |                      | 4    |   | 2    |                         | 0    |       | 200   
|=                 | Production value                                                                   |            | 1,782 |   | 30  |              | 3,879  |   | 66  |                                   | 254 |   | 4  |                      | 11   |   | 0    |                         | (601 | )     | 5,325 
|                  |                                                                                    |            |       |   |     |              |        |   |     |                                   |     |   |    |                      |      |   |      |                         |      |       |       
|                  | Materials used                                                                     |            | (377  | ) | 16  |              | (1,877 | ) | 80  |                                   | (96 | ) | 4  |                      | (6   | ) | 0    |                         | 479  |       | (1.877
|-                 | Procurements allocated among activities                                            |            | 0     |   | 0   |              | 0      |   | 0   |                                   | 0   |   | 0  |                      | 0    |   | 0    |                         | 0    |       | 0     
|                  | External and operating expenses                                                    |            | (355  | ) | 36  |              | (545   | ) | 55  |                                   | (80 | ) | 8  |                      | (13  | ) | 1    |                         | 122  |       | (871  
|=                 | Value added of the company                                                         |            | 1,050 |   | 41  |              | 1,457  |   | 57  |                                   | 78  |   | 3  |                      | (8   | ) | 0    |                         | 0    |       | 2,577 
|-                 | Personnel expenses                                                                 |            | (82   | ) | 20  |              | (269   | ) | 64  |                                   | (33 | ) | 8  |                      | (34  | ) | 8    |                         | 0    |       | (418  
|=                 | Gross operating income (loss)                                                      |            | 968   |   | 45  |              | 1,188  |   | 55  |                                   | 45  |   | 2  |                      | (42  | ) | (2   | )                       | 0    |       | 2,159 
|                  |                                                                                    |            |       |   |     |              |        |   |     |                                   |     |   |    |                      |      |   |      |                         |      |       |       
|-                 | Period depreciation and amortization                                               |            | (315  | ) | 48  |              | (341   | ) | 51  |                                   | (4  | ) | 1  |                      | (3   | ) | 1    |                         | 0    |       | (663  
|-                 | Bad debts and variation in operating provisions                                    |            | 0     |   | 0   |              | (73    | ) | 100 |                                   | 0   |   | 0  |                      | 0    |   | 0    |                         | 0    |       | (73   
|=                 | Net operating income (loss)                                                        |            | 653   |   | 46  |              | 774    |   | 54  |                                   | 41  |   | 3  |                      | (45  | ) | (3   | )                       | 0    |       | 1,423 
|                  |                                                                                    |            |       |   |     |              |        |   |     |                                   |     |   |    |                      |      |   |      |                         |      |       |       
|+                 | Financial revenues                                                                 |            | 278   |   | 27  |              | 357    |   | 35  |                                   | 7   |   | 1  |                      | 378  |   | 37   |                         | (485 | )     | 535   
|-                 | Financial expenses                                                                 |            | (846  | ) | 43  |              | (684   | ) | 34  |                                   | (13 | ) | 0  |                      | (449 | ) | 23   |                         | 485  |       | (1,507
|-                 | Period depreciation and amortization and financial provisions                      |            | 0     |   | 0   |              | 0      |   | 0   |                                   | 0   |   | 0  |                      | 3    |   | 100  |                         | 0    |       | 3     
|+-                | Equity in the income/losses of companies carried by the equity method              |            | 20    |   | 100 |              | (10    | ) | 0   |                                   | 0   |   | 0  |                      | 0    |   | 0    |                         | 0    |       | 10    
|-                 | Amortization of goodwill in consolidation                                          |            | (14   | ) | 7   |              | (35    | ) | 17  |                                   | 0   |   | 0  |                      | (178 | ) | 78   |                         | 0    |       | (227  
|=                 | Ordinary income (loss)                                                             |            | 91    |   | 36  |              | 402    |   | 157 |                                   | 35  |   | 14 |                      | (291 | ) | (122 | )                       | 0    |       | 237   
|                  |                                                                                    |            |       |   |     |              |        |   |     |                                   |     |   |    |                      |      |   |      |                         |      |       |       
|+                 | Gains on fixed assets and nonoperating revenues                                    |            | 175   |   | 22  |              | 79     |   | 10  |                                   | 12  |   | 2  |                      | 535  |   | 67   |                         | (35  | )     | 766   
|-                 | Losses on fixed assets and nonoperating expenses                                   |            | (133  | ) | 36  |              | (240   | ) | 66  |                                   | (8  | ) | 2  |                      | 15   |   | (4   | )                       | 35   |       | (331  
|-                 | Variation in provisions for intangible assets, utility plant and control portfolio |            | 0     |   | 0   |              | 0      |   | 0   |                                   | 0   |   | 0  |                      | 0    |   | 0    |                         | 0    |       | 0     
|=                 | Income (Loss) before taxes                                                         |            | 133   |   | 19  |              | 241    |   | 35  |                                   | 39  |   | 6  |                      | 259  |   | 39   |                         | 0    |       | 672   
|                  |                                                                                    |            |       |   |     |              |        |   |     |                                   |     |   |    |                      |      |   |      |                         |      |       |       
|-                 | Corporate income tax                                                               |            | (111  | ) | 84  |              | (106   | ) | 81  |                                   | (8  | ) | 6  |                      | (93  | ) | (71  | )                       | 0    |       | (132  
|=                 | Income after taxes                                                                 |            | 22    |   | 4   |              | 135    |   | 24  |                                   | 31  |   | 6  |                      | 352  |   | 65   |                         | 0    |       | 540   
|                  |                                                                                    |            |       |   |     |              |        |   |     |                                   |     |   |    |                      |      |   |      |                         |      |       |       
|-                 | Income (Loss) attributed to minority interests                                     |            | 7     |   | (14 | )            | (73    | ) | 144 |                                   | (2  | ) | 4  |                      | 17   |   | (34  | )                       | 0    |       | (51   
|=                 | Income (Loss) for the year attributed to the Controlling Company                   |            | 29    |   | 1   |              | 62     |   | 15  |                                   | 29  |   | 6  |                      | 369  |   | 76   |                         | 0    |       | 489   
|                  |                                                                                    |            |       |   |     |              |        |   |     |                                   |     |   |    |                      |      |   |      |                         |      |       |       

F-65

---



Unbundled accounting statement of income relating to activities carried on in Latin America in 2000    (Amounts in millions of Euros)

|INCOME STATEMENTS |                                                                                    | Generation |       | % |    | Distribution |        | % |     | Other Non-
electricity
Activities |     | % |    | Corporate
Activities |      | % |     | Unallocated
Adjustments |      | Total |       
|----------------- | ---------------------------------------------------------------------------------- | ---------- | ----- | - | -- | ------------ | ------ | - | --- | --------------------------------- | --- | - | -- | -------------------- | ---- | - | --- | ----------------------- | ---- | ----- | ------
|                  | Net sales and services                                                             |            | 1,634 |   | 30 |              | 3,628  |   | 66  |                                   | 258 |   | 5  |                      | 8    |   | 0   |                         | (587 | )     | 4,941 
|-                 | Sales allocated among activities.                                                  |            | 0     |   | 0  |              | 0      |   | 0   |                                   | 0   |   | 0  |                      | 0    |   | 0   |                         | 0    |       | 0     
|                  | Other operating revenues                                                           |            | 82    |   | 36 |              | 144    |   | 63  |                                   | 0   |   | 0  |                      | 2    |   | 1   |                         | 0    |       | 228   
|=                 | Production value                                                                   |            | 1,716 |   | 30 |              | 3,772  |   | 66  |                                   | 258 |   | 4  |                      | 10   |   | 0   |                         | (587 | )     | 5,169 
|                  |                                                                                    |            |       |   |    |              |        |   |     |                                   |     |   |    |                      |      |   |     |                         |      |       |       
|                  | Materials used                                                                     |            | (579  | ) | 24 |              | (1,712 | ) | 72  |                                   | (91 | ) | 4  |                      | 0    |   | 0   |                         | 494  |       | (1,888
|-                 | Procurements allocated among activities                                            |            | 0     |   | 0  |              | 0      |   | 0   |                                   | 0   |   | 0  |                      | 0    |   | 0   |                         | 0    |       | 0     
|                  | External and operating expenses                                                    |            | (188  | ) | 22 |              | (524   | ) | 62  |                                   | (90 | ) | 11 |                      | (39  | ) | 5   |                         | 93   |       | (748  
|=                 | Value added of the company                                                         |            | 949   |   | 37 |              | 1,536  |   | 61  |                                   | 77  |   | 3  |                      | (29  | ) | (1  | )                       | 0    |       | 2,533 
|-                 | Personnel expenses                                                                 |            | (92   | ) | 21 |              | (297   | ) | 66  |                                   | (30 | ) | 7  |                      | (28  | ) | 6   |                         | 0    |       | (447  
|=                 | Gross operating income                                                             |            | 857   |   | 41 |              | 1,239  |   | 59  |                                   | 47  |   | 2  |                      | (57  | ) | (3  | )                       | 0    |       | 2,086 
|                  |                                                                                    |            |       |   |    |              |        |   |     |                                   |     |   |    |                      |      |   |     |                         |      |       |       
|-                 | Period depreciation and amortization                                               |            | (312  | ) | 47 |              | (342   | ) | 52  |                                   | (3  | ) | 0  |                      | (3   | ) | 0   |                         | 0    |       | (660  
|-                 | Bad debts and variation in operating provisions                                    |            | 0     |   | 0  |              | (124   | ) | 100 |                                   | 0   |   | 0  |                      | 0    |   | 0   |                         | 0    |       | (124  
|=                 | Net operating income                                                               |            | 545   |   | 42 |              | 773    |   | 59  |                                   | 44  |   | 3  |                      | (60  | ) | (5  | )                       | 0    |       | 1,302 
|                  |                                                                                    |            |       |   |    |              |        |   |     |                                   |     |   |    |                      |      |   |     |                         |      |       |       
|+                 | Financial revenues                                                                 |            | 323   |   | 24 |              | 398    |   | 30  |                                   | 9   |   | 1  |                      | 614  |   | 46  |                         | (643 | )     | 701   
|-                 | Financial expenses                                                                 |            | (604  | ) | 33 |              | (523   | ) | 28  |                                   | (15 | ) | 1  |                      | (696 | ) | 38  |                         | 643  |       | (1,195
|-                 | Period depreciation and amortization and financial provisions                      |            | 0     |   | 0  |              | 0      |   | 0   |                                   | 0   |   | 0  |                      | 0    |   | 0   |                         | 0    |       | 0     
|+-                | Equity in the income/losses of companies carried by the equity method              |            | 3     |   | 4  |              | 0      |   | 0   |                                   | 0   |   | 0  |                      | 65   |   | 96  |                         | 0    |       | 68    
|-                 | Amortization of goodwill in consolidation                                          |            | (16   | ) | 7  |              | (39    | ) | 16  |                                   | 1   |   | 0  |                      | (186 | ) | 78  |                         | 0    |       | (240  
|=                 | Ordinary income (Loss)                                                             |            | 251   |   | 39 |              | 609    |   | 96  |                                   | 39  |   | 6  |                      | (263 | ) | (41 | )                       | 0    |       | 636   
|                  |                                                                                    |            |       |   |    |              |        |   |     |                                   |     |   |    |                      |      |   |     |                         |      |       |       
|+                 | Gains on fixed assets and nonoperating revenues                                    |            | 514   |   | 62 |              | 58     |   | 7   |                                   | 10  |   | 1  |                      | 245  |   | 30  |                         | (26  | )     | 801   
|-                 | Losses on fixed assets and nonoperating expenses                                   |            | (146  | ) | 69 |              | (76    | ) | 36  |                                   | (5  | ) | 2  |                      | 15   |   | (7  | )                       | 26   |       | (186  
|-                 | Variation in provisions for intangible assets, utility plant and control portfolio |            | 0     |   | 0  |              | 0      |   | 0   |                                   | 0   |   | 0  |                      | 0    |   | 0   |                         | 0    |       | 0     
|=                 | Income (Loss) before taxes                                                         |            | 619   |   | 49 |              | 591    |   | 47  |                                   | 44  |   | 4  |                      | (3   | ) | 0   |                         | 0    |       | 1,251 
|                  |                                                                                    |            |       |   |    |              |        |   |     |                                   |     |   |    |                      |      |   |     |                         |      |       |       
|-                 | Corporate income tax                                                               |            | (208  | ) | 79 |              | (118   | ) | 45  |                                   | (5  | ) | 2  |                      | 67   |   | (25 | )                       | 0    |       | (264  
|=                 | Income (Loss) after taxes                                                          |            | 411   |   | 42 |              | 473    |   | 48  |                                   | 39  |   | 4  |                      | 64   |   | 6   |                         | 0    |       | 987   
|                  |                                                                                    |            |       |   |    |              |        |   |     |                                   |     |   |    |                      |      |   |     |                         |      |       |       
|-                 | Income attributed to minority interests                                            |            | (238  | ) | 41 |              | (170   | ) | 29  |                                   | 0   |   | 0  |                      | (173 | ) | 30  |                         | 0    |       | (581  
|=                 | Income (Loss) for the year attributed to the Controlling Company                   |            | 173   |   | 43 |              | 303    |   | 75  |                                   | 39  |   | 10 |                      | (109 | ) | (27 | )                       | 0    |       | 406   

F-66

---

23.    EVENTS SUBSEQUENT TO YEAR-END

In February 2003 certain properties were sold for €385 million, giving rise to a gain before taxes of
€152 million.

In
February 2003 International ENDESA BV subscribed all the capital of Endesa Capital Finance, L.L.C. As of the date of preparation of these consolidated financial statements, the
issue of preferred shares of that company amounting to €1,500 million, which can be increased to €2,000 million, underwritten by Cajamadrid and SCH was at
the placement phase. These preferred shares will be recorded as "Minority Interests" in the consolidated balance sheet.

Also,
in February 2003 €700 million of Medium Term Notes (MTNs) maturing at ten years were issued. A "club deal" loan of
€1,500 million maturing in 2008 was also arranged with 14 banks.

F-67

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24.    CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION

Following are the consolidated statements of changes in financial position of Endesa, S.A. and Subsidiaries for the years ended December 31, 2002, 2001 and
2000 (in millions of euros):

|FUNDS WERE USED FOR                                                                  |                          | 2002   |       | 2001   |       | 2000  
|------------------------------------------------------------------------------------ | ------------------------ | ------ | ----- | ------ | ----- | ------
|
|Intangible assets additions                                                          |                          | 98     |       | 141    |       | 115   
|Utility plant additions:                                                             |                          |        |       |        |       |       
|Cost                                                                                |                          | 2,084  |       | 2,112  |       | 1,773 
|Expenses and interest capitalized                                                   |                          | 288    |       | 291    |       | 199   
|Long-term financial investment additions                                             |                          | 1,366  |       | 2,890  |       | 672   
|Acquisition of Parent Company shares                                                 |                          | 131    |       | 265    |       | 41    
|Dividends of the Parent Company                                                      |                          | 723    |       | 713    |       | 649   
|Dividends of Group companies attributed to minority interests and capital reductions |                          | 116    |       | 132    |       | 568   
|Acquisition of additional holdings in consolidated companies                         |                          | 127    |       | 12     |       |       
|Funds used in the acquisitions of consolidated companies                             |                          |       |       |       |       | 1,151 
|Long-term debt:                                                                      |                          |        |       |        |       |       
|                                                                                     | Repayment of long-term  |        | 2,126 |        | 7,778 |       
|                                                                                     | Transfers to short-term |        | 3,969 |        | 1,238 |       
|Provisions for contingencies and expenses                                            |                          | 640    |       | 1,508  |       | 1,332 
|                                                                                     |                          |        |       |        |       |       
|TOTAL FUNDS USED                                                                     |                          | 11,668 |       | 17,080 |       | 10,927
|                                                                                     |                          |        |       |        |       |       
|FUNDS OBTAINED IN EXCESS OF FUNDS USED (INCREASE IN WORKING CAPITAL)                 |                          |       |       | 452    |       |      

|FUNDS WERE OBTAINED FROM                                                         |  | 2002   |   | 2001   |  | 2000  
|-------------------------------------------------------------------------------- |  | ------ | - | ------ |  | ------
|Operations:                                                                      |  |        |   |        |  |       
|Attributed to the Parent Company                                                |  | 4,421  |   | 3,289  |  | 2,753 
|Attributed to minority interest                                                 |  | (136   | ) | 58     |  | 587   
|Contributions from minority interests and from the Parent Company's stockholders |  |       |   | 90     |  | 252   
|Capital subsidies                                                                |  | 309    |   | 303    |  | 198   
|Long-term debt:                                                                  |  |        |   |        |  |       
|Debt securities and other similar liabilities                                   |  |       |   |       |  |      
|Other Payables                                                                  |  | 3,287  |   | 12,098 |  | 4,374 
|Disposal of fixed assets                                                         |  | 132    |   | 995    |  | 1,461 
|Disposal Parent Company shares                                                   |  | 204    |   | 118    |  | 53    
|Funds obtained from the disposal of consolidated companies                       |  | 1,684  |   |        |  | 973   
|Early redemption or transfer to short-term of long-term financial investments    |  | 399    |   | 340    |  | 193   
|Partial disposal of holdings in consolidated companies                           |  |        |   | 241    |  |       
|                                                                                 |  |        |   |        |  |       
|TOTAL FUNDS OBTAINED                                                             |  | 10,300 |   | 17,532 |  | 10,844
|                                                                                 |  |        |   |        |  |       
|FUNDS USED IN EXCESS OF FUNDS OBTAINED (DECREASE IN WORKING CAPITAL)             |  |        |   | 1,368  |  | 83    

F-68

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|                                        |  | 2002  |  | 2001  |  | 2000
|--------------------------------------- |  | ----- |  | ----- |  | ----
|
|
|
|Due from stockholders for capital calls |  |      |  |      |  | 1   
|Inventories                             |  | 20    |  |      |  |    
|Accounts receivable                     |  |      |  | 294   |  | 446 
|Accounts payable                        |  |      |  | 2,113 |  |    
|Short-term investments                  |  | 1,346 |  |      |  | 7   
|Cash                                    |  |      |  | 343   |  | 161 
|Prepaid Expenses                        |  | 16    |  |      |  | 18  
|TOTAL                                   |  | 1,382 |  | 2,750 |  | 633 
|                                        |  |       |  |       |  |     
|Variation in working capital            |  |       |  | 1,368 |  | 452 

F-69

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25.    DIFFERENCES BETWEEN SPANISH AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

As discussed in Note 3-a, the accompanying financial statements were prepared in accordance with generally accepted accounting principles in
Spain ("Spanish GAAP"), which differ in certain significant respects from U.S. GAAP. These differences are discussed in the following paragraphs.

Reconciliation of Net income and stockholders' equity from Spanish GAAP to U.S. GAAP

The following table ("Reconciliation Table") is a summary of the estimated adjustments to consolidated net income and to consolidated stockholders' equity that
would have been required if U.S. GAAP had been applied instead of Spanish GAAP:

F-70

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|                                                                                                  |                                                                       |         |      | Net Income |       | Shareholders' Equity |     
|------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ------- | ---- | ---------- | ----- | -------------------- | ----
|
|
|
|
|
|Amounts per accompanying Financial statements:                                                    |                                                                       |         |      | 1,270      |       | 1,479                |     
|Increases (decreases) due to                                                                      |                                                                       |         |      |            |       |                      |     
|Effect of discontinuance of SFAS No. 71                                                           |                                                                       | 1       |      | 2          |       | 3                    |     
|Adjustments to cost of fixed assets:                                                              |                                                                       |         |      |            |       |                      |     
|                                                                                                  | Elimination of legal restatements of fixed assets                    |         | 2.1  |            | 357.0 |                      | 224 
|                                                                                                  | Other adjustments to the cost of property, plant and equipment       |         | 2.2  |            | (97   | )                    | (11 
|                                                                                                  | Liquidated damages for late delivey of property, plant and equipment |         | 2.3  |            | 2     |                      | (25 
|Equity method                                                                                     |                                                                       | 3       |      | 2          |       | (49                  | )   
|Pension plans                                                                                     |                                                                       | 4.1/4.2 |      | (25        | )     | 21                   |     
|Special termination benefits                                                                      |                                                                       | 4.3     |      | (333       | )     | (365                 | )   
|Goodwill                                                                                          |                                                                       |         |      |            |       |                      |     
|                                                                                                  | Goodwill arising under U.S. GAAP                                     |         | 5.1  |            | 46    |                      | (34 
|                                                                                                  | Reversal of goodwill amortization                                    |         | 5.2  |            | 274   |                      |    
|Negative goodwill                                                                                 |                                                                       | 6       |      | (1         | )     | 2                    |     
|Income taxes                                                                                      |                                                                       | 7       |      | (15        | )     | (76                  | )   
|Accounting for certain investments in debt and equity securities (SFAS No. 115)                   |                                                                       | 8       |      | (115       | )     |                     |     
|Treasury stock                                                                                    |                                                                       | 9       |      | 22         |       | (32                  | )   
|Restructuring of the mining business                                                              |                                                                       | 10      |      | 2          |       | 8                    |     
|Foreign currency gains and losses                                                                 |                                                                       | 11      |      | 95         |       | (37                  | )   
|Stock issuance expenses and start up cost                                                         |                                                                       |         |      |            |       |                      |     
|                                                                                                  | Stock issuance expenses                                              |         | 12.1 |            | 5     |                      | 5   
|                                                                                                  | Start up cost                                                        |         | 12.2 |            | 24    |                      | (55 
|Research and development                                                                          |                                                                       | 13      |      | (15        | )     | (18                  | )   
|Capitalization of interest                                                                        |                                                                       | 14      |      | 26         |       | 49                   |     
|Revenue recognition (SAB 101)                                                                     |                                                                       |         |      |            |       |                      |     
|                                                                                                  | Effect in period                                                     |         | 15   |            | (29   | )                    | (74 
|Translation of financial statements of ENERSIS' subsidiaries                                      |                                                                       | 16      |      | (30        | )     | (33                  | )   
|Loss contingencies                                                                                |                                                                       | 17      |      | 235        |       | (15                  | )   
|Derivative instruments and hedging activities (SFAS No. 133)                                      |                                                                       |         |      |            |       |                      |     
|                                                                                                  | Effect in period                                                     |         | 18   |            | (155  | )                    | (353
|Currency translation adjustment                                                                   |                                                                       | 20      |      |           |       | 35                   |     
|Tax effect of the above adjustments                                                               |                                                                       | 7       |      | (74        | )     | 32.6                 |     
|Effect of minority interest                                                                       |                                                                       |         |      | 72         |       | 178.5                |     
|                                                                                                  |                                                                       |         |      |            |       |                      |     
|Amounts in accordance with U.S. GAAP before cumulative effect of a change in accounting principle |                                                                       |         |      | 1,545      |       | 859                  |     
|Cumulative effect of a change in accounting principle:                                            |                                                                       |         |      |            |       |                      |     
|Revenue Recognition-As of January 1, 2000                                                         |                                                                       | 15      |      |           |       |                     |     
|Derivatives and hedging activities-As of January 1, 2001                                          |                                                                       | 18      |      |           |       | 420                  |     
|Tax effect of the above adjustments                                                               |                                                                       | 7       |      |           |       | (149                 | )   
|Effect of minority interest                                                                       |                                                                       |         |      |           |       | (96.5                | )   
|                                                                                                  |                                                                       |         |      |            |       |                      |     
|Amounts under U.S. GAAP                                                                           |                                                                       |         |      | 1,545      |       | 1,034                |     
|                                                                                                  |                                                                       |         |      |            |       |                      |     
|Basic and Diluted Earnings per share before cumulative effect of a change in accounting principle |                                                                       |         |      | 1.46       |       | 0.81                 |     
|                                                                                                  |                                                                       |         |      |            |       |                      |     
|Cumulative effect of a change in accounting principle per share                                   |                                                                       |         |      |           |       | 0.16                 |     
|                                                                                                  |                                                                       |         |      |            |       |                      |     
|Basic and Diluted Earnings per share in accordance with U.S. GAAP                                 |                                                                       |         |      | 1.46       |       | 0.98                 |     
|                                                                                                  |                                                                       |         |      |            |       |                      |     
|Weighted average of shares (thousands)                                                            |                                                                       |         |      | 1,058,752  |       | 1,058,752            |     

F-71

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|Statements of changes in shareholder's equity               |                                                              | 2002  |        | 2001  |     
|----------------------------------------------------------- | ------------------------------------------------------------ | ----- | ------ | ----- | ----
|
|U.S. GAAP shareholders' equity at the beginning of the year |                                                              | 9,052 |        | 9,428 |     
|Movements during the year:                                  |                                                              |       |        |       |     
|Net income for the year                                     |                                                              | 1,545 |        | 1,034 |     
|Interim dividend                                            |                                                              | (280  | )      | (280  | )   
|Supplementary dividend                                      |                                                              | (443  | )      | (433  | )   
|Accumulated other comprehensive income (loss):              |                                                              |       |        |       |     
|                                                            | Currency Translation Adjustment                              |       | (1,423 | )     | (715
|                                                            | Accumulated other comprehensive income net of tax (SFAS 133) |       | 139    |       | 171 
|                                                            | Effect of SFAS No. 115, net of tax effect                    |       | (69    | )     | (9  
|Treasury stock                                              |                                                              | 73    |        | (147  | )   
|Others                                                      |                                                              |      |        | 3     |     
|                                                            |                                                              |       |        |       |     
|U.S. GAAP shareholder's equity at the end of the year       |                                                              | 8,594 |        | 9,052 |     
|                                                            |                                                              |       |        |       |     

The
differences included in the Reconciliation Table above are explained in the following items:

1.     Discontinuance of SFAS No. 71

As a result of the facts explained in notes 5 and 6, the Group began analyzing the continued applicability of Statement Of Financial Accounting Standard
No. 71 (SFAS No. 71) "Accounting for the effects of certain types of regulation" for some of its operations in Spain and, the period in which discontinuation should occur. The analysis
resulted in a decision to discontinue applying SFAS No. 71 as of December 31, 1996. The primary reasons were:



The
impact of discontinuing SFAS No. 71 was to write off related regulatory assets in 1996 that are still capitalized under Spanish GAAP in the amounts of
€34 million and €36 million for the years 2002 and 2001, respectively.

2.     Adjustments to the cost of property and equipment

2.1. Elimination of legal restatements of fixed assets

As described in Note 4-b, the cost and accumulated depreciation of the utility plants in Spain of the Endesa Group was revalued following
Spanish regulations. Under U.S. GAAP, such revaluations are not acceptable. The adjustments shown in the reconciliation include a reduction in stockholders' equity to eliminate these revaluations and
an increase in income of each year that results from the recomputation of the depreciation expense on a historical cost basis.

2.2. Other adjustments to the cost of property, plant and equipment



F-72

---



2.3. Liquidated damages for late delivery of property, plant and equipment

Under U.S. GAAP a purchaser of property, plant and equipment should account for a receipt of liquidated damages for late delivery from the seller as a reduction
of the cost of the property, plant and equipment. There has been included an adjustment to U.S. GAAP related to the liquidated
damages for late delivery reimbursed by Nortell to Smartcom, S.A. (subsidiary of Endesa Group) which was recorded in net income under Spanish GAAP as of December 31, 2001.

3.     Equity method and currency translation adjustment

3.1. Equity method

Under Spanish GAAP significant influence is presumed to exist where the investor has more than a 3% interest in listed companies. Under U.S. GAAP significant
influence is presumed to exist for investments above 20%. The Endesa Group has recorded the investments mentioned below under the equity method following Spanish GAAP. However, for U.S. GAAP purposes
these investments would be classified as available-for-sale, as defined by Statement of Financial Accounting Standard No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS No. 115). Under U.S. GAAP unrealized holding gains and losses are reflected as a separate component of stockholders' equity until realized. The investments
described below are included in the presentation of certain debt and equity investments described in the reconciliation table.



F-73

---



3.2. Companies acquired in 2001 and carried by the equity method pursuant to U.S. GAAP.

In
the third quarter of 2001 the Company acquired a 45.3% participation in Endesa Holding Italia, S.R.L. (a holding company). This company in turn owns all the shares of the Italian
electric utility Elettrogen. Also, in April, 2001 the Company acquired a 30% participation in the French producer Societé Nationale de Electricité et du thermique (SNET).

As
explained in Note 2, in the first quarter of 2002 Endesa Europa, S.L. acquired an additional 5.7% holding in Endesa Holding Italia, S.R.L., and, accordingly, since that date
this investment has been fully consolidated under Spanish GAAP, since the Endesa Group has the majority of the shares of this company. According to EITF 96-16, for U.S. GAAP, since
decisions by Endesa Holding Italia's board of directors may only be taken by an affirmative vote of 662/3% of the board of directors and because the shareholders' agreement between the
Endesa Group and ASM Brescia, resolutions adopted by shareholders at general shareholders' meetings require the approval of 55% of the shareholder votes and resolutions adopted at extraordinary
shareholders' meetings require the approval of 60% of the shareholder votes, this investment is accounted for the equity method as of December 31, 2002.

In
2002 and 2001, it has been included in the reconciliation table a reconciling adjustment for these equity investees relating to the differences in the income and equity between
Spanish GAAP and U.S. GAAP, which, were applicable, are similar to the differences related to Endesa Group.

According
to U.S. GAAP, as of December 31, 2002, Endesa Holding Italia, S.R.L. should have been consolidated under the equity method. This adjustment has no effect on net income
or shareholders'
equity. The only effect would be to (reduce) / increase the following financial statement captions by the following amounts (in millions of Euros):

F-74

---



|                                                                   |  | At December 31, 2002 |  
|------------------------------------------------------------------ |  | -------------------- | -
|
|Assets:                                                            |  |                      |  
|Equity investments                                                 |  | 1,174                |  
|Current assets                                                     |  | (288                 | )
|Utility plant and intangible assets                                |  | (2,390               | )
|Other fixed assets                                                 |  | (1,659               | )
|                                                                   |  |                      |  
|Total assets of discontinued operations                            |  | (3,163               | )
|                                                                   |  |                      |  
|Liabilities:                                                       |  |                      |  
|Current liabilities                                                |  | (1,543               | )
|Long term liabilities                                              |  | (490                 | )
|Minority interest                                                  |  | (1,130               | )
|                                                                   |  |                      |  
|Total liabilities and minority interest of discontinued operations |  | (3,163               | )
|                                                                   |  |                      |  
|
|
|Operating income                                                   |  | (163                 | )
|Equity in the income/(losses) of companies accounted for by the    |  |                      |  
|equity method                                                      |  | 36                   |  
|Income before taxes                                                |  | (13                  | )
|Income tax                                                         |  | 57                   |  
|Income attributed to minority interest                             |  | (34                  | )
|                                                                   |  |                      |  
|Income for the year attributed to the controlling company          |  | 0                    |  
|                                                                   |  |                      |  
|
|
|Cash flow from operating activities                                |  | 1,070                |  
|Cash flow from investing activities                                |  | (247                 | )
|Cash flow from financing activities                                |  | (1,011               | )
|                                                                   |  |                      |  
|Net change in cash and cash equivalents                            |  | (188                 | )
|                                                                   |  |                      |  

4.     Pension plans, social benefits and special termination benefits



As mentioned in Note 4-i, the Endesa Group companies have certain supplementary pension obligations to their personnel. Pursuant to current
legislation, prior to November 16, 2002 those internal funded plans have been transferred to an outside third party specialized in management of pension plans ("externalization of a plan").

F-75

---

The
differences between Spanish GAAP for pensions and U.S. GAAP are described below:





The
Endesa Group initiated the externalization process in 2000. During this process, those U.S GAAP adjustments related to pension plans that were settled have been properly eliminated
and all effects recorded in earnings.

The
main differences described above between Spanish GAAP and U.S. GAAP basically relates to a different criteria relating to unrecognized/recognized net actuarial gain or loss for both,
defined benefit and defined contribution pension plans. The following table presents the differences related the Spanish pension plans:

F-76

---

|                                                                 |  | Year end Balances as
of December 31, |  | Income/Expenses for the period
ended December 31, | 
|---------------------------------------------------------------- |  | ------------------------------------ |  | ------------------------------------------------- | 
|
|
|Spanish GAAP Unrecognized/ recognized net actuarial gain or loss |  | 103                                  |  | 123                                               | 
|Change 1999, Actuarial Assumptions                               |  | 37                                   |  | 47                                                | 
|Change 1991-95, Actuarial Assumptions                            |  |                                     |  | 28                                                | 
|Change 2002, Actuarial gains recorded in earnings                |  | 42                                   |  |                                                  | 
|Adjustment under U.S. GAAP                                       |  | 79                                   |  | 75                                                | 
|                                                                 |  |                                      |  |                                                   | 
|U.S. GAAP unrecognized/recognized net actuarial gain or loss     |  | 182                                  |  | 198                                               | 
|                                                                 |  |                                      |  |                                                   | 

Except
for the paragraphs mentioned above, the accounting policy of the Group under Spanish GAAP for pension and other postretirement benefit plans is similar with SFAS 87 and
SFAS 106. The following disclosures have been prepared according to the requirements established by Statement of Financial Accounting Standards No. 132 (SFAS No. 132).

Pensions

The Group's pension commitments are organized around pension plans as well as on insurance agreements. The majority of staff are covered by defined contribution
pension plans or fully-insured defined benefit pension plans, of which the Group has integrally passed on the biometric and financial risks to the Insurance Companies and Pension Plans entities. As
for retired employees, most commitments are covered with insurance policies.

In
consequence, the following charts show exclusively the commitments for defined benefit pensions under Spanish GAAP in which the Group assumes actuarial deviation risks, including
Fecsa-Enher I, Fecsa-Enher II and Hidroeléctrica de L'empordá pension plans, and book reserves for changes in assumptions on pension and life insurance commitments.

The
following is a reconciliation of beginning and ending balances of the benefit obligation:

|Change in benefit obligation            |               | 2002 |    | 2001  |   
|--------------------------------------- | ------------- | ---- | -- | ----- | --
|
|Benefit obligation at beginning of year |               | 993  |    | 1,014 |   
|                                        | Service cost  |      | 21 |       | 23
|                                        | Interest cost |      | 41 |       | 40
|Plan participants' contributions        |               | 0    |    | 0     |   
|Amendments, Settlements                 |               | (184 | )  | (37   | ) 
|Actuarial (gain)/loss                   |               | 16   |    | (30   | ) 
|Acquisition                             |               | 0    |    | 0     |   
|Benefits paid                           |               | (24  | )  | (17   | ) 
|Benefit obligation at end of year       |               | 863  |    | 993   |   

F-77

---

The
epigraph "Settlements" contains the commitments externalized by the Group in 2002. Specifically, the Group has purchased annuity and lump sum contracts in order to settle the
obligations with active and retired employees, has acknowledged past service liabilities through the corresponding rebalancing plans in accordance with the Royal Decree 1988/1999 of
October 15th and reduced its obligations due to the sale of Electra de Viesgo, S.L.

The
components of net periodic benefit cost under Spanish GAAP for 2002, 2001 and 2000 are as follows:

|Components of net periodic benefit cost                               |               | 2002 |    | 2001 |    | 2000 |   
|--------------------------------------------------------------------- | ------------- | ---- | -- | ---- | -- | ---- | --
|
|Net periodic defined benefit pension cost                             |               | 62   |    | 63   |    | 92   |   
|                                                                      | Service cost  |      | 21 |      | 23 |      | 21
|                                                                      | Interest cost |      | 41 |      | 40 |      | 71
|Net periodic defined contribution pension cost and similar obligation |               | 33   |    | 32   |    | 13   |   
|Expected return on plan assets                                        |               | (5   | )  | (2   | )  | (2   | ) 
|Amortization of prior service cost                                    |               | 0    |    | 0    |    | 0    |   
|Recognized net actuarial loss                                         |               | 65   |    | 13   |    | 14   |   
|Net periodic benefit cost                                             |               | 154  |    | 106  |    | 117  |   

As
a consequence of the externalization of the Spanish Pension Plans, the Group was able to subscribe upon acceptances of third parties a debt for the rebalancing of the Plans ("PdR
Debt"). Under these agreements the Company was entitle to finance the internally funded obligations in a period up to 15 years. In the change in plan assets the related debt is considered as
part of the assets considered to fund each plan.

The
following is the change in plan assets for the period ended December 31, 2002 and 2001:

|Change in plan assets                          |                       | 2002 |     | 2001 |    
|---------------------------------------------- | --------------------- | ---- | --- | ---- | ---
|
|Fair value of plan assets at beginning of year |                       | 784  |     | 46   |    
|                                               | Pension plan's assets |      | 134 |      | 46 
|                                               | "PdR" Debt            |      | 650 |      | 0  
|Actual return on plan assets                   |                       | (19  | )   | (17  | )  
|Acquisition                                    |                       | 0    |     | 0    |    
|Employer contribution (*)                      |                       | 118  |     | 106  |    
|Plan participants' contributions               |                       | 0    |     | 0    |    
|Benefits paid                                  |                       | (13  | )   | (1   | )  
|"PdR" Debt Variation (**)                      |                       | (147 | )   | 650  |    
|Fair value of plan assets at end of year       |                       | 724  |     | 784  |    
|                                               | Pension plan's assets |      | 222 |      | 134
|                                               | "PdR" Debt            |      | 502 |      | 650

F-78

---

The
detail of the funded status in the consolidated balance sheet are as follows:

|Funded Status                    |  | 2002 |   | 2001 |  
|-------------------------------- |  | ---- | - | ---- | -
|
|Funded status                    |  | (139 | ) | (209 | )
|Unrecognized net actuarial loss  |  | 83   |   | 102  |  
|Unrecognized prior service cost  |  | 0    |   | 0    |  
|Prepaid / (accrued) benefit cost |  | (56  | ) | (107 | )

The
following actuarial assumptions were used in 2002, 2001 and 2000:

|Weighted-average assumptions as of December 31, |  | 2002 |   | 2001 |  
|----------------------------------------------- |  | ---- | - | ---- | -
|Discount rate                                   |  | 4.0  | % | 4.0  | %
|Expected return on plan assets                  |  | 4.0  | % | 4.0  | %
|Rate of compensation increase                   |  | 2.5  | % | 2.5  | %

Other Post-retirement Benefit Plans

For U.S. GAAP purposes, the Group adopted the requirements of Statement of Financial Accounting Standards No. 106 (SFAS No. 106) with respect to
energy to be supplied on a subsidized basis to retired employees of the Group. In previous years the Group has been operating under a regulatory plan and consequently the estimated value of those
future post employment benefits was factored into the computation of the electricity rates to be charged to external customers, and any recorded liability under U.S. GAAP in previous years was
compensated by a corresponding recoverable asset. However, as described in item 1, the Company decided to discontinue applying SFAS No. 71 in 1996 and therefore, since that year has
recorded a provision for subsidized energy. This adjustment has been considered as part of item 1 in the reconciliation note. Until December 31, 2000, there was a difference between
Spanish GAAP to U.S. GAAP regarding this concept, basically because this provision was recorded
under Spanish GAAP until that date. After December 31, 2000, the criteria for Spanish GAAP and U.S. GAAP became the same.

The
Group has undertaken the commitment to finance power consumption by both active and retired employees, so the company may accrue the estimated cost of retiree benefits payments,
other than pensions, during the employee's active service periods.

The
following is a reconciliation of beginning and ending balances of the benefit obligation:

F-79

---

|Change in benefit obligation            |  | 2002 |   | 2001 |  
|--------------------------------------- |  | ---- | - | ---- | -
|
|Benefit obligation at beginning of year |  | 175  |   | 161  |  
|Service cost                            |  | 1    |   | 1    |  
|Interest cost                           |  | 7    |   | 6    |  
|Amendments, Settlements                 |  | (5   | ) | 7    |  
|Actuarial (gain)/loss                   |  | 31   |   | 11   |  
|Acquisition                             |  | 0    |   | 0    |  
|Benefits paid                           |  | (9   | ) | (11  | )
|Benefit obligation at end of year       |  | 200  |   | 175  |  

The
components of net periodic benefit cost for 2002, 2001 and 2000 are as follows:

|Amortization of prior service cost |  | 2002 |  | 2001 |  | 2000
|---------------------------------- |  | ---- |  | ---- |  | ----
|
|Service cost                       |  | 1    |  | 1    |  | 1   
|Interest cost                      |  | 7    |  | 6    |  | 4   
|Expected return on plan assets     |  | 0    |  | 0    |  | 0   
|Amortization of prior service cost |  | 0    |  | 0    |  | 0   
|Recognized net actuarial loss      |  | 31   |  | 11   |  | 38  
|Net periodic benefit cost          |  | 39   |  | 18   |  | 43  

As
the obligation is covered by a book reserve, the detail of the funded status of the plans and the amounts recognized and not recognized in the statement of financial position are as
follows:

|Funded Status                    |  | 2002 |   | 2001 |  
|-------------------------------- |  | ---- | - | ---- | -
|
|Funded status                    |  | (200 | ) | (175 | )
|Unrecognized net actuarial loss  |  |     |   |     |  
|Unrecognized prior service cost  |  |     |   |     |  
|Prepaid / (accrued) benefit cost |  | (200 | ) | (175 | )

The
following actuarial assumptions were used in 2002, 2001 and 2000:

|Weighted-average assumptions as of December 31, |  | 2002 |   | 2001 |  
|----------------------------------------------- |  | ---- | - | ---- | -
|Discount rate                                   |  | 4.0  | % | 4.0  | %
|Expected return on plan assets                  |  |     |   |     |  
|Rate of compensation increase                   |  | 2.0  | % | 0.0  | %

F-80

---





Enersis
S.A. and its subsidiaries (Enersis Group) sponsor various benefit plans for its current and retired employees. A description of such benefits is as follows:



The provision for severance indemnities is calculated using the current salary levels of all employees covered under the severance indemnities agreement, an
assumed discount rate of 9.5% for the years ended December 31, 2000, 2001 and 2002, and an estimated average service period based on the years of services for the Company.



Other benefits provided to certain retired personnel of Enersis Group include electrical service rate subsidies, additional medical insurance and additional
post-retirement benefits. Descriptions of these benefits for retired personnel are as follows:



This
benefit provides supplementary health insurance, which covers a portion of health benefits not covered under the institutional health benefits maintained by employees of Enersis
Group. This benefit expires at the time of death of the pensioner.



This
benefit is extended only to certain retired personnel of Enersis Group. These electric rate subsidies result in the eligible retired employees paying a percentage of their total
monthly electricity costs, with Group paying the difference.



Eligible
employees are able to receive a monthly amount designed to cover a portion of the difference between their salary at the point of retirement and the theoretical pension that
would have been received had the employee reached the legal retirement age of the Institución de Previsión Social (Institute of Social Welfare). This benefit expires upon
the death of the pensioner for the Enersis Group employee, however, continues to cover the surviving-spouse in the case of employees of the subsidiary Endesa-Chile.



Employees
that were entitled to Worker's compensation insurance in prior years for work related accidents receive benefits from the Company as such insurance has expired. This benefit
continues at the time of death of the pensioner, to cover the surviving-spouse.

The
Company has recognized liabilities related to complementary pension plan benefits and other post-retirement benefits as stipulated in collective bargaining agreements.
Under U.S. GAAP, post-retirement employee benefits have been accounted for in accordance with SFAS No. 87 and SFAS No. 106, which gave rise to an adjustment in the
reconciliation to U.S. GAAP relating to CERJ (Endesa Group's Brazilian subsidiary) of a decrease in net income of €29 million for the year ended December 31, 2002, an
increase of €80 million for the year ended 31, 2001 and a decrease in net income of €21 million for the year ended December 31, 2000, which is
presented in the reconciliation table.

The
following data are presented under U.S. GAAP for Company's post-retirement benefit plans:

F-81

---

Disclosures of pension benefits under SFAS No. 132 (Enersis Group)

|                                                                                   |  | Pension Benefits |  
|---------------------------------------------------------------------------------- |  | ---------------- | -
|
|
|Change in benefit obligation                                                       |  |                  |  
|Benefit obligation at beginning of year                                            |  | 400              |  
|Translation differences                                                            |  | (168             | )
|Service cost                                                                       |  | 1                |  
|Interest cost                                                                      |  | 19               |  
|Amendments, Settlements                                                            |  | 0                |  
|Actuarial (gain)/loss                                                              |  | 22               |  
|Unrecognized net obligation of Brazilian subsidiary at date of initial application |  | 0                |  
|Acquisition                                                                        |  | 0                |  
|Benefits paid                                                                      |  | (17              | )
|Benefit obligation at end of year                                                  |  | 257              |  
|
|Change in plan assets                                                              |  |                  |  
|Fair value of plan assets at beginning of year                                     |  | 130              |  
|Effect of exchange adjustment                                                      |  | (61              | )
|Actual return on plan assets                                                       |  | 24               |  
|Acquisition                                                                        |  | 0                |  
|Employer contribution                                                              |  | 23               |  
|Plan participants' contributions                                                   |  | 0                |  
|Plan participants' contributions                                                   |  | 1                |  
|Benefits paid                                                                      |  | (16              | )
|Fair value of plan assets at end of year                                           |  | 99               |  
|
|Funded Status                                                                      |  |                  |  
|Funded status                                                                      |  | (158             | )
|Unrecognized net actuarial (gain) loss                                             |  | (23              | )
|Unrecognized transition obligation                                                 |  | 13               |  
|Prepaid (accrued) benefit cost                                                     |  | (168             | )

|                                                                |  | 2002 |   | 2001  |   | 2000  |  
|--------------------------------------------------------------- |  | ---- | - | ----- | - | ----- | -
|
|Weighted-average assumptions for major plans as of December 31, |  |      |   |       |   |       |  
|Discount rate                                                   |  | 13   | % | 11.2  | % | 15.0  | %
|Expected return on plan assets                                  |  | 11   | % | 10.4  | % | 10.4  | %
|Rate of compensation increase                                   |  | 7    | % | 7.0   | % | 9.6   | %
|                                                                |  |      |   |       |   |       |  
|Components of net periodic benefit cost                         |  |      |   |       |   |       |  
|Service cost                                                    |  | 1    |   | 3.8   |   | 1     |  
|Interest cost                                                   |  | 19   |   | 47.7  |   | 28.4  |  
|Expected return on plan assets                                  |  | (9   | ) | (23.5 | ) | (1.8  | )
|Amortization of transition obligation                           |  | 1    |   | 3.3   |   | 2.6   |  
|Recognized net actuarial loss/(gain)                            |  | 6    |   | 0     |   | (10.8 | )
|Net periodic benefit cost                                       |  | 18   |   | 32    |   | 20    |  

F-82

---

Disclosures of other benefits under SFAS No. 132 (Enersis Group)

|                                        |  | Other benefits |  
|--------------------------------------- |  | -------------- | -
|
|
|Change in benefit obligation            |  |                |  
|Benefit obligation at beginning of year |  | 58             |  
|Translation differences                 |  | (31            | )
|Service cost                            |  | 7.63           |  
|Interest cost                           |  | 5.5            |  
|Actuarial (gain)/loss                   |  | (2             | )
|Benefits paid                           |  | 0              |  
|Benefit obligation at end of year       |  | 38             |  

|                                       |  | 2002  |   | 2001 |  
|-------------------------------------- |  | ----- | - | ---- | -
|Funded Status                          |  |       |   |      |  
|Funded status                          |  | (38   | ) | (58  | )
|Unrecognized net actuarial (gain) loss |  | (17.5 | ) | 0    |  
|Unrecognized transition obligation     |  | 17.1  |   | 32   |  
|Prepaid (accrued) benefit cost         |  | (38.8 | ) | (26  | )

|                                                                |  | 2002 |   | 2001 |   | 2000 |  
|--------------------------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|Weighted-average assumptions for major plans as of December 31, |  |      |   |      |   |      |  
|Discount rate                                                   |  | 12   | % | 11.8 | % | 9.5  | %

|                                        |  | 2002 |  | 2001 |   | 2000 |  
|--------------------------------------- |  | ---- |  | ---- | - | ---- | -
|Components of net periodic benefit cost |  |      |  |      |   |      |  
|Service cost                            |  | 2.6  |  | (0.9 | ) | (0   | )
|Interest cost                           |  | 10.5 |  | 5.5  |   | 0.7  |  
|Amortization of transition obligation   |  | 1.7  |  | 1.9  |   | 0.4  |  
|Recognized net actuarial loss           |  | 16.1 |  | 0    |   | 0    |  
|Net periodic benefit cost               |  | 31   |  | 6.6  |   | 1    |  

F-83

---

4.3. Special termination benefits

As described in Notes 6 and 15, the Endesa Group recorded provisions, for special termination benefits to employees who might retire in future years, as a result
of the electric utilities' transition to a competitive market. These future costs were considered costs of transition to a competitive environment (see Note 6) and were recorded mainly to
reserves and deferred charges. Additionally, as explained in Note 6-d, the Ministerial Order dated March 28, 2001, provided for the possibility of writing off against
reserves the amount of the capitalized costs of transition to competition that would be recovered through the fixed remuneration but, as of December 31, 2000, were not considered to be
recoverable through the fixed remuneration for the transition to competition arising solely as a result of the elimination by Royal Decree Law 2/2001 of the assignment of 4.5% of billings for
electricity sales to consumers. Accordingly, a portion of the deferred charges due to the transition to competition relating to the labor force reduction plans approved by the Company was written off
against reserves in shareholders' equity.

Under
U.S. GAAP the employer shall recognize the liability for voluntary retirements as an expense in the Income Statement during each respective year only when the employees accept the
offer and will be entitle to benefits. Therefore such costs have been adjusted in the reconciliation table.

5.     Goodwill

5.1. Goodwill arising under US GAAP

Under Spanish GAAP, the difference in consolidation between the purchase price paid in cash for which the investment in a subsidiary is recorded and the
participation of the parent company in the equity of the subsidiary should be allocated to the identified assets and liabilities of the subsidiary, up to the limit applicable to the parent's
investment in the difference between the book value and the fair value of the related item. The remaining difference, if positive, should be shown on the asset side of the consolidated balance sheet
as goodwill and should be amortized over a maximum period of twenty years. Acquisitions through the exchange of shares are recorded as pooling of interest in most cases under Spanish GAAP.

Under
U.S. GAAP, assets acquired and liabilities assumed are recorded at their estimated fair values, and the excess of the purchased price over the estimated fair value of the net
identifiable assets is recorded as goodwill.

The
main adjustments to goodwill included in the reconciliation table are as follows::



F-84

---



5.2. Reversal of goodwill amortization

Effective January 1, 2002, the Company adopted SFAS No. 142,Goodwill and Other Intangible Assets(SFAS 142). Under SFAS 142, goodwill is no longer amortized over its estimated useful life, but is instead tested for impairment on an annual basis and whenever indicators of impairment
arise. The goodwill impairment test, which is based on fair value, is performed on a reporting unit level. Additionally, goodwill on equity method investments is no longer amortized; however, it will
continue to be tested for impairment in accordance with Accounting Principles Board ("APB") Opinion No. 18,The Equity Method of Accounting for Investments in Common
Stock("APB 18").

Under
SFAS 142, intangible assets with indefinite lives will not be amortized. Instead they will be carried at the lower of cost or market value and tested for impairment at least
annually. All other recognized intangible assets will continue to be amortized over their estimated useful lives. The Group does not have intangible assets with indefinite useful lives (see
Note 4.a). The main intangible assets under Spanish GAAP relates to research and developments expenses, concessions, patents, licenses, trademarks and EDP applications. Assuming no new
acquisitions or disposals, the Group estimates that the carrying amount of intangible assets as of December 31, 2002 will be amortized on a straight-line basis over the remaining
useful lives of the assets. Thus the estimated aggregate amortization expense for each of the five succeeding fiscal years is € 80 million.

The
Group has performed the transitional goodwill impairment test required by SFAS No. 142 as of January 1, 2002 and the annual goodwill impairment test as of
December 31, 2002. At January 1, 2002 the Group has determined that no impairment is required for the adoption of SFAS No. 142. At December 31, 2002, as a result of the
test performed an impairment of €279 million was recorded. This impairment relates basically to Smartcom as a result of the decline in the value of companies in the
telecommunications industry.

The
fair value of the reporting units for which goodwill has been assigned was considered to be the best reasonably consistent measurement of fair value measurements that included both
income and market approaches. The income approach used considered the traditional cash flow method. Goodwill in each operating segment will be tested for impairment as of December 31 of every
year.

As
a result, the application of this Standard has consisted mainly in the elimination under U.S. GAAP of all goodwill amortization recorded in 2002 under Spanish GAAP for consolidated
entities and entities carried by the equity method (see Note 7). Accordingly, net income for the year ended December 31, 2002 and shareholder's equity as of December 31, 2002
should be increased by €274 million and €244 million, respectively before the minority interest.

F-85

---

The
changes in the carrying amount of goodwill arising on entities fully consolidated, under U.S. GAAP, for the year ended December 31, 2002 are as follow:

|                                                |  | Domestic electricity business |  | International electricity business |   | Other business |  
|----------------------------------------------- |  | ----------------------------- |  | ---------------------------------- | - | -------------- | -
|
|
|
|
|Balance as of January 01, 2002                  |  | 486                           |  | 168                                |   | 1,440          |  
|Additions                                       |  |                              |  |                                   |   | 5              |  
|Retirements                                     |  |                              |  | (12                                | ) |               |  
|Translation differences and monetary adjustment |  |                              |  |                                   |   | (294           | )
|Impairments                                     |  |                              |  |                                   |   |               |  
|                                                |  |                               |  |                                    |   |                |  
|Balance as of December 31, 2002                 |  | 486                           |  | 156                                |   | 1,151          |  
|                                                |  |                               |  |                                    |   |                |  

The
pro-forma effect of applying SFAS 142 for the periods presented is as follows:

|                                                        |  | As of December 31,
|------------------------------------------------------- |  | ------------------
|
|
|Reported net income under U.S. GAAP                     |  | 1,034             
|Add back: Goodwill amortization Spanish GAAP            |  | 276               
|Add back: Amortization on additional U.S. GAAP goodwill |  | 35                
|                                                        |  |                   
|Adjusted net income under U.S. GAAP                     |  | 1,345             
|                                                        |  |                   
|Net income per share, under U.S. GAAP                   |  | 1.27              
|                                                        |  |                   

---

6.     Negative Goodwill

As of December 31, 2002 and 2001, the carrying value of the negative goodwill in consolidation under Spanish GAAP amounted to
€13 million and €29 million, respectively.

Under
Spanish GAAP, the negative goodwill must be credited to a specific liability account with no amortization or reduction, except for additional liabilities of the subsidiary at the
purchase date not considered in the initial consolidation, unfavorable evolution of the results of the acquired company, or as a result of a change in the ownership interest in the subsidiary. Under
U.S. GAAP, all negative goodwill was allocated to proportionately reduce the values assigned to non-current assets.

7.     Income Taxes

The Spanish accounting principles for recording income taxes differ from those applicable under U.S. GAAP as regards the period in which certain prepaid and
deferred taxes must be recorded and with respect to the required disclosures. The differences affecting the Group are as follows:



F-86

---



Deferred
tax assets and liabilities as of December 31, 2002 and 2001 are as follows:

|                                     |  | Deferred Taxes
|------------------------------------ |  | --------------
|
|
|
|Balance under Spanish GAAP (Note 17) |  |               
|Current                              |  | 38            
|Non-current                          |  | 3,215         
|                                     |  |               
|                                     |  | 3,253         
|                                     |  |               
|Adjustments under U.S. GAAP          |  |               
|Tax credits                          |  |               
|Legal Restatements                   |  | 602           
|Early retirements                    |  | (279          
|SFAS 133                             |  | (136          
|Valuations allowance                 |  | (27           
|Capitalized interest cost            |  | (32           
|Foreign currency gains and losses    |  | 30            
|Others                               |  | (35           
|                                     |  |               
|Total adjustments under U.S. GAAP    |  | 123           
|                                     |  |               
|Deferred tax under U.S. GAAP         |  | 3,376         
|                                     |  |               

F-87

---

As a consequence of changes during 1997 in the consolidated tax regime, some companies of the consolidated group were able to generate certain income taxes credits, which were not
previously available to the Group. These additional tax credit carryforwards were utilized to reduce future taxable income and expired after 5 years. Since the realization of the credit
carryforward is more likely than not to be realized by the Group, a deferred tax credit under U.S. GAAP was recorded for this amount since 1997. As of December 31, 2001, after applying the tax
credits and tax relief for the year, there were no significant unused tax credits for Spanish GAAP purposes and, therefore, this difference no longer exists.

Under
U.S. GAAP, reaching a conclusion that a valuation allowance is not needed is difficult when there is significant objective negative evidence, such as cumulative losses, in recent
years. Smartcom, S.A. (subsidiary of the Endesa Group) has incurred such losses in each tax-reporting period since its inception. Based on this evidence, a valuation allowance would be
provided in full against the deferred tax assets related to the net operating losses of Smartcom, S.A. under U.S. GAAP. The net change during the year 2002 in the total valuation allowance is shown in
the table above.

The
deferred tax assets under U.S. GAAP arose from the following:

|                                                                                                                                                                              |  | 2002  |   | 2001 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- | - | -----
|
|Provisions for internal pension allowance which, under Spanish GAAP tax regulations, are not tax deductible until effectively paid or contributed to an external pension fund |  | 382   |   | 382  
|Provision for personnel restructuring plans, which become tax deductible when they are effectively paid                                                                       |  | 709   |   | 864  
|Legal Restatements                                                                                                                                                            |  | 602   |   | 731  
|Tax basis for depreciation of investements in excess of accounting basis                                                                                                      |  | 1,542 |   | 519  
|Revenue Recognition                                                                                                                                                           |  | 73    |   | 72   
|Tax loss carryforwards and tax credits                                                                                                                                        |  | 256   |   | 93   
|Allowance for bad debts                                                                                                                                                       |  | 38    |   | 70   
|Other deferred tax assets (extraordinary repairs, obligations, restructuring of facilities,...)                                                                               |  | (226  | ) | 381  
|                                                                                                                                                                              |  |       |   |      
|                                                                                                                                                                              |  | 3,376 |   | 3,112
|                                                                                                                                                                              |  |       |   |      

The
deferred tax liabilities arose mainly from:

|                                                                      |  | 2002  |  | 2001 
|--------------------------------------------------------------------- |  | ----- |  | -----
|
|Accounting basis for depreciation of propertly in excess of tax basis |  | 594   |  | 618  
|Capital gains and others                                              |  | 728   |  | 499  
|                                                                      |  |       |  |      
|                                                                      |  | 1,322 |  | 1,117
|                                                                      |  |       |  |      

8.     Accounting for certain investments in debt and equity securities (SFAS No. 115)

Under
Spanish GAAP investments in debt and marketable equity securities are stated at the lower of cost and market value. Market value is the lower of the average market price for the
last quarter and the year-end market price. Where the interest in a listed equity security exceeds 3% such investments are recorded using the equity method under Spanish GAAP. The
adjustment to eliminate the effect of equity accounting is dealt with in item 3.

F-88

---

U.S.
GAAP (SFAS No. 115) requires investments in debt and marketable equity securities to be classified on the basis of the purpose for which they were acquired
(held-to-maturity securities, trading securities and available-for-sale securities). The treatment of the unrealized gains and losses differs depending
on the classification: unrealized gains and losses (except other than temporary impairments) on securities that the company considers held-to-maturity are not recorded;
unrealized gains and losses on securities considered available-for-sale are not recorded in the income statement but as a separate component of shareholders' equity, other
comprehensive income; and unrealized gains or losses on trading securities are recorded in the income statement. Market value is determined using the year-end market price. The Group has
classified all of its marketable securities as available-for-sale. As of December 31, 2002 and 2001, the classification was as follows:

|                              |  |     |  |     |  | Gross Unrealized | 
|----------------------------- |  | --- |  | --- |  | ---------------- | 
|
|
|
|Year 2002:                    |  |     |  |     |  |                  | 
|Available-for-sale-securities |  | 775 |  | 750 |  | 130              | 
|Year 2001:                    |  |     |  |     |  |                  | 
|Available-for-sale-securities |  | 775 |  | 971 |  | 196              | 

For
U.S. GAAP purposes, unrealized gains/losses are included in stockholders' equity as a component of other comprehensive income net of tax effect until they are realized or recorded
into earnings due to other than temporary decline of value. During 2002 due to the market conditions, the Endesa Group recorded an other than temporary impairment of
€115 million of its investments in equity securities.

9.     Treasury Stock

Pursuant to Spanish GAAP, since there are no plans to retire the treasury stock of the Controlling Company (Endesa, S.A.), these shares are recorded at the lower
of cost or underlying book value in the accompanying consolidated balance sheet, and a restricted reserve was recorded in this connection. If the cost of the shares of treasury stock is higher than
their market value, the provision required to cover this difference is charged to the "Nonoperating Income" caption in the consolidated statement of income. The remainder of the provisions recorded
for the difference between the underlying book value and the lower of the cost or market value of the shares is charged to unrestricted reserves. Gains and losses on subsequent sales of treasury stock
are recorded in net income.

Under
U.S. GAAP capital stock acquired that is not retired may be treated as if it had been retired or, if not prohibited by law, carried at cost and reflected as a separate deduction
from shareholders' equity. Gains and losses on subsequent sales of treasury stock are not recognized in net income.

10.   Restructuring of the mining business

As part of the contemplated restructuring of the mining business in future years, the Group recorded, in its 1995 Spanish GAAP financial statements, a provision
for restructuring costs. Under U.S. GAAP, some of the costs included in the provision could not be accrued under the guidelines of EITF 94-3. Since then, the Company has recorded accrued
costs for the year and re-estimated the final value of the provision. Accordingly, such costs have been adjusted in the reconciliation to U.S. GAAP, since the accrued costs have never met
the applicable criteria.

F-89

---

11.   Foreign currency transaction gains and losses

Under Spanish GAAP, gains arising as a result of foreign currency exchange rate fluctuations are deferred until their realization. Under U.S. GAAP, foreign
currency transaction gains or losses are generally recorded in the Statement of Income immediately.

12.   Stock issuance expenses and start-up cost

An
adjustment to account for these differences is included in the reconciliation table.

13.   Research and Development

In accordance with Spanish GAAP, the Company capitalizes certain Research and Development expenses when:



Under
U.S. GAAP all research and development expenses must be expensed as incurred. The related subsidies should be credited to income as the referred costs are expensed.

14.   Capitalization of interest

Interest
incurred during construction of tangible fixed assets is capitalized under Spanish GAAP. In accordance with Royal Decree 437/1998, the method used to determine the amount of
financial expenses capitalized is as follows:



F-90

---





The
accounting differences between Spanish and U.S. GAAP for financing costs and the related depreciation expense are included in the reconciliation table

15.   Revenue recognition





F-91

---

16.   Translation of financial statements of ENERSIS' subsidiaries

In 1998, the Chilean Association of Accountants issued its Technical Bulletin ("BT") No. 64. BT 64 requires the adoption of the U.S. dollar as the
"functional currency" as part of a comprehensive basis of adjusting for inflation for those financial statements of foreign subsidiaries that operated in "unstable countries" (as defined by BT 64),
and which are not considered to be an extension of the parent company's operations. The Enersis Group (a Chilean SEC registrant which is a subsidiary of the Endesa Group) applies this accounting
policy also under U.S. GAAP, since BT-64 constitutes a comprehensive basis of adjusting for inflation, in accordance with SEC requirements, and does not need to be eliminated from accounts
of the Chilean company.

However
in view of the changes in the economic circumstances in the Latin American region, the Company determined that consideration of the US dollar as the functional currency of these
subsidiaries as required by BT-64 was no longer appropriate in 2001. As a result, management decided to discontinue the use of BT-64 in preparation of the U.S. GAAP accounts
and apply the provisions of SFAS 52, "Foreign Currency Translation," beginning January 1, 2001. As a result, the adjustment included in net income and shareholder's equity in the reconciliation
for 2002 and 2001 represents the difference between the historical rates applied under Spanish GAAP and U.S. GAAP to the translation of the financial statements of certain Latin American subsidiaries,
due to the application of BT-64 prior to 2001 which is being amortized over the average life of the assets of each of the companies.

17.   Loss contingencies

Under Spanish GAAP, foreseeable contingencies, including possible losses, are recorded as soon as they become known.

Under
U.S. GAAP, loss contingencies are accrued when it is probable that an asset has been impaired or a liability has been incurred as of the balance sheet date and the amount of the
loss can be reasonably estimated. If a loss is only reasonably possible, it should only be disclosed.

The
Group, following the generally accepted accounting principle, recorded as of December 31, 2002 and 2001 some provisions for possible loss contingencies. Under U.S. GAAP only
those provisions considered probable ("events that are likely to occur") and that the amount of loss can be reasonable
estimated can be recorded. Therefore, those provisions that did not meet that definition where reversed (Basically, due to the Argentinean risk included in Note 15).

18.   Derivative instruments and hedging activities

Under U.S. GAAP the Endesa Group adopted, effective January 1, 2001, Statement of Financial Accounting Standards No. 133, ("SFAS No. 133"), Accounting for Derivative Instruments and Hedging Activities, which establishes accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts (embedded derivatives) and for hedging activities. SFAS No. 133 requires that all derivatives, whether designated in hedging
relationships or not, be recorded on the balance sheet at fair value. The difference between a derivative's previous carrying amount and its fair value shall be reported as a transition adjustment in
net income or other comprehensive income ("OCI"), as appropriate, as the effect of a change in accounting principle. The accounting for changes in fair value of a derivative instrument depends on its
intended use and the resulting designation.

If
the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings.
If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in OCI and are recognized in the income statement when the
hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings. The gain or loss on a hedging derivative instrument that is designated
as, and is effective as, an economic hedge of the net investment in a foreign operation shall be reported in the same manner as a translation adjustment to the extent it is effective as a hedge. The
ineffective portion of net investment hedges shall be reported in earnings.

F-92

---

Upon
adoption of SFAS No. 133 on January 1, 2001, Endesa, S.A. and its dependent companies designated all its hedging relationships anew. The adoption resulted in an
after-tax and minority interest non-cash gain of approximately €175 million in earnings.

The
pro forma effect of this change in accounting principle for the year ended December 31, 2000 would be the following:

|                             |                                            | 2000
|---------------------------- | ------------------------------------------ | ----
|
|Historical U.S. GAAP amounts |                                            |     
|                             | Net income for the year ended December 31, |     
|                             | Net income per ADS or share                |     
|Pro forma U.S. GAAP amounts  |                                            |     
|                             | Net income for the year ended December 31, |     
|                             | Net income per ADS or share                |     

As
part of its overall risk management strategy, the Endesa Group uses derivatives to convert some of its fixed-rate notes into variable-rate debt to manage the
interest rate exposure. These derivatives are typically designated as fair value hedges.

Under
Spanish GAAP those derivatives designated as fair value hedges are not recorded at fair value and the respective hedged item is recorded taking into consideration the
characteristics of the hedging instrument. Under U.S. GAAP all derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. Additionally, those
hedging relationships that are designated as fair value hedges under U.S. GAAP have their respective hedged items recorded at fair value and all hedging ineffectiveness is included in earnings. For
the years ended December 31, 2002 and 2001, there was not any material ineffective portion for this hedging transaction.

The
Endesa Group arranges net investment hedges for some investments in foreign companies by financing these investments in the functional currency of the country concerned or in a
currency closely correlated thereto. This policy is implemented either by financing in the related currency or using derivatives, such as currency swaps, which provide a synthetic effect of a foreign
currency loan, thereby reducing the exchange risk.

Among
other operations, the Endesa Group has been managing its currency exposure in foreign operations. Additionally, under Spanish GAAP, the requirements to qualify as net investment
hedge are different from U.S. GAAP. The main difference relates to the measurement of the hedge ineffectiveness.

For
these purposes, the Group redesignated all hedging relationships at new for U.S. GAAP purposes at December 31, 2000. Those economic hedge instruments under Spanish GAAP that
do not qualify as net investment hedges under U.S. GAAP were recorded at fair value through earnings. Additionally, all differences regarding net investment hedges under Spanish GAAP and U.S. GAAP
were recorded in net income for the year ended December 31, 2002 and 2001 for approximately €184 million and €200 million, respectively, net of tax
and minority interest effects. For those hedging relationship effective under U.S. GAAP, the Company remained basically with hedging instruments deemed in U.S. dollar debt to hedge its net investment
in its South American operations. In 2002 and 2001, €139 million of exchange gains and €177 million of exchange losses, respectively, related to
non-derivative instruments used as net investments were recorded under the "Translation Differences" caption, after considering the related tax effect and the portion relating to minority
interests.

F-93

---

The
breakdown in 2002 and 2001 of the hedging instruments, their recorded amounts and the amount accounted under the Cumulative Translation Adjustment caption were as follows:

|Millions of Euro |  | Recorded amount at: |  | Impact in Cumulative Translation
Adjustment for the year ended: | 
|---------------- |  | ------------------- |  | --------------------------------------------------------------- | 
|
|
|Loans            |  | 1,344               |  | 2,517                                                           | 
|                 |  |                     |  |                                                                 | 
|Total            |  | 1,344               |  | 2,517                                                           | 
|                 |  |                     |  |                                                                 | 

As
part of its overall risk management strategy, the Endesa Group uses derivatives to convert its variable-rate notes into fixed-rate debt to manage the cash flow
exposure due to interest rate. Most of these derivatives, considered effective according to SFAS No. 133, are designated as cash flow hedges.

All
components of each derivative's gain or loss were included in the assessment of the hedge's effectiveness. The Endesa Group did not reclassify any gains or losses into earnings from
accumulated other comprehensive income as a result of the discontinuance of cash flow hedges because management estimated that it was still probable that originally forecasted transactions would occur
by the end of the originally specified time period.

F-94

---

Under Spanish GAAP those derivatives designated as cash flow hedges of interest rate are not recorded at fair value and the respective hedged item is recorded taking into consideration
the characteristics of the hedging instrument.

Under
U.S. GAAP all derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. Additionally, those hedging relationships which are
designated as cash flow hedges under U.S. GAAP, have their respective effective portion of the gain or loss recorded in other comprehensive income until it is necessary to be adjusted against net
income in order to offset the respective change in expected future cash flows on the hedged transaction. All of the ineffective portion and excluded component of the derivative instruments is included
in earnings.

As
of December 31, 2002 and 2001 approximately the total amount of €19 million and €10 million, respectively is expected to be
reclassified as losses during the next twelve months. The events that are expected to occur in the next twelve months that will trigger the reclassification of these components into earnings include
the expiration of the forecasted transaction and the termination of the hedging relationships. The maximum time over which the Endesa Group is hedging exposure to variability of cash flow is
102 months. For the years ended December 31, 2002 and 2001, there were not any material ineffective portion for this hedging transaction.

d)
Embedded Derivatives

The
Endesa Group has entered into various contracts which may contain "embedded" derivative instrumentsimplicit or explicit terms that affect some or all of the cash flows
or the value of other exchanges required by the contract in a manner similar to a derivative instrument and which, according to the requirements of SFAS No. 133, need to be bifurcated from the
host contract and accounted for as a derivative instrument. The Endesa Group has assessed the existence of potential embedded derivatives contained in its contracts entered into or substantively
modified since January 1, 1999. Embedded derivatives in contracts that required bifurcation were recorded at their fair value, which consisted basically of certain energy contracts that under
the provisions of SFAS No. 133 and related interpretation, require the bifurcation of certain clauses, and their impact in net income after-tax and minority interest as of
December 31, 2002 and 2001 was €32 million and €118 million, respectively.

e)
Other Derivative Contracts

The
Endesa Group holds various interest rate, foreign exchange and commodity derivative instruments, which were not formally designated under SFAS No. 133 for the application of
hedge accounting. The purpose of entering into these derivative contracts is to provide the Endesa Group with economic hedges of exposed risks.

The
Endesa Group enters into other derivative contracts used primarily to mitigate the effects of the fluctuation in interest rates. The purpose of entering into these derivative
contracts is to provide the Endesa Group with economic hedges of exposed risks. The Endesa Group has decided not to formally designate these contracts as under the provisions of SFAS 133.

Under
Spanish GAAP these derivatives are recorded at lower of cost or market value. Under U.S. GAAP all derivatives not designated as economic hedges are recorded on the balance sheet at
fair value with all changes in fair value being recorded as a component of income from continuing operations during the period that such contracts remain outstanding.

In
the normal course of operations the Endesa Group is involved in energy trading and risk management activities as defined by EITF No. 98-10, Accounting for Contracts Involved in Energy Trading and Risk Management
Activities, (EITF 98-10), as superseded by EITF Issued
No. 02-03,Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in energy Trading and Risk Management
Activities(EITF 02-03).. EITF 02-03 requires that all contracts entered into for trading purposes by an entity involved in such activities (energy
trading contracts) and

F-95

---

contracts
considered to be derivatives pursuant to Statement 133 should be measured at fair value and recorded in the consolidated balance sheet with gains and losses included in current earnings.
Gains and losses on energy trading contracts and contracts considered to be derivatives pursuant to Statement 133 are classified as other income or other expense. EITF 02-03 applies to all
energy trading contracts and not just those that meet the definition of a derivative.

As
of December 31, 2002 and 2001, the Endesa Group had open energy trading contracts that pursuant to EITF No. 02-03 should be marked to market (i.e. measured
at fair value determined as of the balance sheet date) with gains and losses recorded in current earnings and an impact in net income of € 3 million and
€4 million, respectively before the tax effect.

The
approximate fair value as of December 31, 2002 and 2001 of these other derivatives used as economic hedges, but not designated under SFAS No. 133, is set forth below
(before tax effect):

|       |  | Years ended December 31,
|------ |  | ------------------------
|
|
|
|
|Collar |  |                        
|Swaps  |  | 43                      
|Fras   |  |                        

19.   Assets held for sale

In October 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 144,"Accounting for
the Impairment and Disposal of Long-Lived Assets" (SFAS No.144) which supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" and certain provisions of Accounting Principles Board Opinion No. 30 (APB 30) "Reporting Results of OperationsReporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions". SFAS No. 144 requires that long-lived assets to be
disposed of by sale, including discontinued operations, be measured at the lower of the carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued
operations. SFAS No. 144 also broadens the reporting requirements of discontinued operations to include all components of an entity that have
operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity.

The
Company's Board of Directors approved a plan to sell a number of the y assets during 2002. The following assets to be sold meet the definition of long-lived assets held
for sale:



The
Group evaluated the carrying values of all assets held for sale, recording a loss in those cases, if any, that one of the assets' fair value less cost to sell was lower than the
carrying value of those assets. As of December 31, 2002 there is not any adjustment related to these assets in the reconciliation table.

F-96

---

Under
Spanish GAAP, no restatement to the financial statement information presented in previous years is required after a divestiture has occurred. Under U.S. GAAP, in accordance with
SFAS No. 144, the discontinued operations of a component must be retroactively separated form the continuing operations of an entity, when the operations and cash flows of a component which
will be eliminated form the ongoing operations of an entity as a result of a disposal transaction and will not have any significant continuing involvement in the operations of a component after the
disposal transaction.

The
Group evaluated whether any of the assets held for sale met either criteria, noting that the transmission lines and power plant are not components, as the are included as part of
larger cash flow generating groups, and the operations of these assets cannot be separated from their respective groups. Additionally, the Group plans to continue generating revenues from Canutillar
through a purchase power agreement, managements agreement, and a transmission leasing arrangement with the future buyer. As regards the sale of the Spanish mainland transmission system, the Endesa
Group will continue to use the system and will pay the related fee to Red Eléctrica de España (REE). Rio Maipo and Infrastructure 2000 do meet the conditions for
discontinued operations because they have distinct and separable financial results from operations and cash flows. As a result of the disposal the results of operations of these companies have been
eliminated from the ongoing operations of the Company as the Group will not have any continuing involvement in the operations of Rio Maipo and Infrastructure 2000 after they are sold.

The
major classes of discontinued consolidated assets, consolidated liabilities, minority interest and consolidated statement of income and cash flow included in the Spanish GAAP ENDESA
consolidated financial statements are as follows:

F-97

---



|                                                                   |  | At December 31, |  
|------------------------------------------------------------------ |  | --------------- | -
|
|
|Assets:                                                            |  |                 |  
|Equity investments(*)                                              |  | (51             | )
|Current assets (discontinued)                                      |  | 95              |  
|Utility plant and intangible assets (discontinued)                 |  | 277             |  
|Other fixed assets (discontinued)                                  |  | 32              |  
|                                                                   |  |                 |  
|Total assets of discontinued operations                            |  | 353             |  
|                                                                   |  |                 |  
|Liabilities:                                                       |  |                 |  
|Current liabilities (discontinued)                                 |  | 132             |  
|Long term liabilities (discontinued)                               |  | 158             |  
|Minority interest (dscontinued)                                    |  | 45              |  
|                                                                   |  |                 |  
|Total liabilities and minority interest of discontinued operations |  | 335             |  
|                                                                   |  |                 |  
|Cash flow from operating activities (discontinued)                 |  | 28              |  
|Cash flow from investing activities (discontinued)                 |  | (30             | )
|Cash flow from financing activities (discontinued)                 |  | 41              |  
|                                                                   |  |                 |  
|Net change in cash and cash equivalents (discontinued)             |  | 39              |  
|                                                                   |  |                 |  

---

|                                                                         |  | At December 31, |  
|------------------------------------------------------------------------ |  | --------------- | -
|
|
|Operating income (discontinued)                                          |  | 36              |  
|Ordinary Income (discontinued)                                           |  | 22              |  
|Consolidated income before taxes (discontinued)                          |  | 22              |  
|Corporate income tax (discontinued)                                      |  | (3              | )
|Income attributed to minority interests (discontinued)                   |  | (6              | )
|                                                                         |  |                 |  
|Income for the year attributed to the controlling company (discontinued) |  | 13              |  
|                                                                         |  |                 |  
|Net income per share, under Spanish GAAP(*)                              |  | 0.012           |  
|                                                                         |  |                 |  

---

20.   Currency Translation Adjustment

Under Spanish GAAP, the Currency Translation Adjustment (CTA) arising from the translation of the financial statements of foreign subsidiaries and associated
companies is recorded to Shareholders' Equity as well as under U.S. GAAP, except for the translation of goodwill arising from acquisition of foreign entities, which under Spanish GAAP are recorded at
their historical amounts in Euros and under U.S. GAAP is translated at the balance sheet date. Additionally under Spanish GAAP when an investment in a foreign company is sold, the accumulated CTA is
reclassified to consolidated retained earnings and under U.S. GAAP, the accumulated CTA should be credited to income in the disposal. This last adjustment does not affect Shareholders' Equity.

In
2002 none of the foreign companies were sold and, accordingly, the reconciliation of Spanish GAAP to U.S. GAAP does not include any adjustments in this connection.

F-98

---

21.   New accounting standards

SFAS No. 143Accounting for Asset Retirement Obligations

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 143 (SFAS No.143),
"Accounting for Asset Retirement Obligations." SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if
a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. An entity shall measure
changes in the liability for an asset retirement obligation due to passage of time by applying an interest method of allocation to the amount of the liability at the beginning of the period. The
interest rate used to measure that change shall be the credit-adjusted risk-free rate that existed when the liability was initially measured. That amount shall be recognized as an increase
in the carrying amount of the liability and as an expense classified as an operating item in the statement of income. SFAS No. 143 is effective for fiscal years beginning after June 15,
2002.

As
stated in Note 3-c, Empresa Nacional de Residuos Radioactivos, S.A. (ENRESA) is responsible for the decommissioning of nuclear power plants and the treatment and
final disposal of radioactive nuclear waste. A contract between ENRESA and the electric utilities was executed on November 30, 1989, to formally document the transfer to ENRESA of
responsibility for the treatment and final disposal of nuclear waste. Management of ENDESA considers that the cost that will be incurred until the aforementioned transfer will not be material. For the
rest of the power plants, the Endesa Group plans to continue with new power plants in the current locations and, accordingly, no significant costs are expected to be incurred in this connection.

The
Group has not yet assessed what effect, if any, the application of this Statement will have on the financial position or results of operations of the Group but because the comments
above, the Endesa Group does not expect a significant impact on its financial position or results of operations.

SFAS No. 145Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections

On April 2002, the FASB issued SFAS No. 145,Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections. This Statement rescinds SFAS No. 4,Reporting Gains and Losses from Extinguishment of
Debt, and an amendment of that Statement, SFAS No. 64,Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements. This Statement also rescinds SFAS No. 44,Accounting for Intangible Assets of Motor Carriers. This
Statement
amends SFAS No. 13,Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other
existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The provisions of this Statement related to the
rescission of SFAS No. 4 shall be applied in fiscal years beginning after May 15, 2002. The provisions of this Statement related to SFAS No. 13 shall be effective for transactions
occurring after May 15, 2002, with early application encouraged. All other provisions of this Statement shall be effective for financial statements issued on or after May 15, 2002, with
early application encouraged. The Group does not anticipate that application of this Standard will have any impact on its financial position or results of operations as of December 31, 2002.

SFAS No. 146Accounting for Costs Associated with Exit or Disposal Activities

In June 2002, the FASB issued SFAS No. 146,Accounting for Costs Associated with Exit or Disposal
Activities("SFAS 146"). This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue
No. 94-3,Liability Recognition for

F-99

---

Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring("EITF 94-3"). SFAS 146
eliminates the definition and requirements for recognition of exit costs in EITF 94-3. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Under EITF 94-3, a liability for an exit cost as defined in EITF 94-3 was recognized at the date of an entity's commitment to an exit
plan. SFAS 146 also concluded that an entity's commitment to a plan, by itself, does not create a present obligation to others that meets the definition of a liability. SFAS 146 also
establishes that fair value is the objective for initial measurement of the liability. The provisions of this Statement shall be effective for exit or disposal activities that are initiated after
December 31, 2002, and are to be applied prospectively. The Group does not anticipate that adoption of SFAS No. 146 will have a material impact on its consolidated results of operations,
its financial position, or its cash flows.

SFAS No. 148Accounting for Stock-Based Compensation- Transition and Disclosure

In December 2002, the FASB issued SFAS No. 148,Accounting for Stock-Based Compensation- Transition and
Disclosure("SFAS 148"). SFAS 148 amends SFAS No. 123,Accounting for Stock-Based Compensation("SFAS 123"), to provide alternative methods of transition to the fair value method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure
provisions of SFAS 123 to require disclosure of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in
annual and interim financial statements in the summary of significant accounting policies. SFAS 148 does not amend SFAS 123 to require companies to account for their employee stock-based
awards using the fair value method.
However, the disclosure provisions are required for all companies with stock-based employee compensation, regardless of whether they utilize the fair value method of accounting described in
SFAS 123 or the intrinsic value method described in APB 25. SFAS 148 is effective for fiscal years beginning after December 15, 2002 and early application is permitted. The Group
does not anticipate that adoption of this Statement will have a material effect on its consolidated financial position, results of operations, or its cash flows.

FIN No. 45Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others

In November 2002, the FASB issued Interpretation No. 45,Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others("FIN 45"). FIN 45 requires certain disclosures to be made by a guarantor in its interim and annual financial statements
about its obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial recognition and measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosure requirements are effective for financial statements for periods ending after December 15, 2002 and as such have been included in Note 21 to these
financial statements. The Company is assessing, but at this point does not believe that adoption of the recognition and initial measurement requirements of FIN 45 will have a material impact on its
consolidated financial position, results of operations, or its cash flows.

FIN No. 46Consolidation of Variable Interest Entitiesan interpretation of ARB No. 51

In January 2003, the FASB issued Interpretation No. 46,Consolidation of Variable Interest Entitiesan
interpretation of ARB No. 51("FIN 46"). FIN 46 clarifies the application of Accounting Research Bulletin No. 51,Consolidated Financial
Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial support from other parties.

F-100

---

FIN 46
explains how to identify variable interest entities and how an enterprise assesses its interests in a variable interest entity to decide whether to consolidate that entity. It requires
existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. It also requires certain
disclosures by the primary beneficiary of a variable interest entity and by an enterprise that holds significant variable interests in a variable interest entity where the enterprise is not the
primary beneficiary. FIN 46 is effective immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which an enterprise obtains an interest
after that date, and effective for the first fiscal year or interim period beginning after June 15, 2003 to variable interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003.

The
Group does not hold as of December 31, 2002 any variable interest entities (VIE).

F-101

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22.   Disclosures about the fair value of financial instruments and about derivative financial instruments

Statement of Financial Accounting Standard No. 107 (SFAS No. 107) requires that the Company disclose the estimated fair values of its financial
instruments as of December 31, 2002 and 2001. The following methods and assumptions were used by the Group to estimate the fair value of each class of financial instruments for which it is
practicable to estimate such value:

1.     Cash,
short-term financial investments, accounts receivable and payable, and other short- term debt and credit

The
carrying values reflected in the consolidated financial statements are reasonable estimates of fair value because of the relatively short period of time between the origination of
the instruments and their expected realization.

2.     Financial
investments in non-consolidated companies

The
fair value of the long-term investment securities of the companies not consolidated as of December 31, 2002 and 2001, is as follows:



Listed
companies were valued at their market price on the last trading day in 2002 and 2001. As of December 31, 2002 and 2001, the market value of these holdings, based on the
stock market price was as follows:

|           |  | Carrying Amounts |  | Fair Value | 
|---------- |  | ---------------- |  | ---------- | 
|
|
|AGBAR      |  | 90               |  | 90         | 
|REPSOL (*) |  | 619              |  | 619        | 
|REE        |  | 66               |  | 66         | 

---

None
of the investments in the companies included under this caption has a quoted market price. In view of the small volume of these investments and the immaterial results to be derived,
there is little cost benefit of performing a valuation based on an estimate of future cash flows discounted at market interest rates for investments of this type.

Due
to uncertainties in the determination of future cash flows from these investments, historic cost remains the best estimate of fair value, unless circumstances indicate that the
carrying values have been impaired.

3.     Loans
to companies accounted for by the equity method and other loans

The
fair value is the book value since they accrue interest cost at market rates.

4.     Controlling
company shares

The
total balance of treasury stock acquired directly by the Group as of December 31, 2002 and 2001, relates to 10,559,826 and 12,444,983 shares of the Group, respectively, a
listed company. They are valued under Spanish GAAP at the lower of acquisition cost or underlying book value. Under U.S. GAAP treasury stock has been recorded as a reduction of equity at the original
purchase cost

F-102

---

5.     Debentures
and bonds

Since
all the debentures and bonds are listed, the fair values reflect the market price on the last trading day in 2002 and 2001.

6.     Commercial
paper

Commercial
paper notes were discounted to present value on the basis of the market interest rates borne by these securities as of December 31, 2002 and 2001.

7.     Fixed-interest
loans and credits

The
fair value of fixed-interest loans and credits was estimated by discounting at the market interest rate for similar transactions arranged at 2002 and
2001 year-end.

8.     Variable-interest
loans and credits

Since
these debts are valued at prevailing market interest rates, their fair value as of December 31, 2002 and 2001, is the same as their carrying amounts.

9.     Other
long-term debt

This
caption includes various long-term debt items, principally guarantees received, which, because of their nature, are not transferable and whose fair value is the same as
their book value.

10.   Derivative
financial instruments

The
fair value of derivatives is determined based on quotes received from banks for instruments with similar terms and remaining maturities.

Following
is a summary of the carrying amounts and fair value of the financial instruments as of December 31, 2002 and 2001:

F-103

---



|                                                  |                          | 2002   |       | 2001   |     
|------------------------------------------------- | ------------------------ | ------ | ----- | ------ | ----
|
|
|Cash                                              |                          | 201    |       | 201    |     
|Short-term financial investments                  |                          | 1,987  |       | 1,987  |     
|Accounts receivable                               |                          | 3,865  |       | 3,865  |     
|Trade accounts payable                            |                          | 2,573  |       | 2,573  |     
|Payable to companies carries by the equity method |                          | 9      |       | 9      |     
|Other non trade payable                           |                          | 1,874  |       | 1,874  |     
|Financial investments (non consolidated):         |                          |        |       |        |     
|Listed companies                                  |                          | 775    |       | 750    |     
|Unlisted companies                                |                          | 539    |       | 539    |     
|Loans to companies carried by the equity method   |                          | 48     |       | 48     |     
|Other loans                                       |                          | 1,677  |       | 1,677  |     
|Controlling company shares                        |                          | 82     |       | 82     |     
|Short and long term debt:                         |                          |        |       |        |     
|Debentures and bonds                              |                          | 10,957 |       | 12,894 |     
|Commercial paper                                  |                          | 3,272  |       | 1,945  |     
|Cross Currency Swaps                              |                          | (93    | )     | (225   | )   
|Payable to credit entities:                       |                          |        |       |        |     
|Fixed interest loans                              |                          | 1,076  |       | 976    |     
|Variable interest loans                           |                          | 8,621  |       | 8,565  |     
|Other accounts payable                            |                          | 729    |       | 729    |     
|Capital payment payable                           |                          | 7      |       | 7      |     
|                                                  |                          |        |       |        |     
|
|Derivative financial instruments:                 |                          |        |       |        |     
|Interest rate SWAPS and FRAs agreement            |                          | 19,781 |       | 359    |     
|Foreign currency futures and options             |                          |        |       |        |     
|                                                  | Purchase                 |        | 542   |        | 9   
|                                                  | Sale                     |        |       |        |     
|                                                  | Cap and Collar contracts |        | 4,154 |        | (136
|                                                  |                          |        |       |        |     

F-104

---

23.   Classification differences and other



As disclosed in Note 4, under Spanish GAAP, the Company has classified Nuclear Fuel in Inventory that under US GAAP constitutes a depreciable asset.
Consequently, under US GAAP, €214 million and €208 million should be reclassified from inventory to long-term asset as of December 31,
2002 and 2001, respectively. The related US GAAP depreciation expense of €93 million, €93 million and €88 million for the years
ended December 31, 2002, 2001 and 2000, respectively, is reclassified but remains unchanged.



As described in Note 18, in 2002, 2001 and 2000, under Spanish GAAP the Company recorded as non-operating results items that under U.S. GAAP
would be recorded as operating revenues (expenses). These reclassifications do not affect the reconciliation of net income and stockholders' equity.

Additionally
the "Capitalized expenses" recorded in the consolidated statements of income under Spanish GAAP, should be reduced from the respective expenses instead of income.



The preparation of financial statements in conformity with Spanish GAAP as well as the additional note on differences between Spanish GAAP and U.S. GAAP and other
required disclosures (see
Note 25) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



Under Spanish GAAP, the Company uses the proportional consolidation method for its investment in Nuclenor, S.A.

F-105

---

As
U.S. GAAP does not permit proportional consolidation, this company should have been accounted for using the equity method. This difference has no effect on Net Income or
Shareholders? Equity. The amounts proportionally consolidated by the Company are summarized below:

|                                         |  | Years ended December, 31 |  
|---------------------------------------- |  | ------------------------ | -
|
|
|Total fixed and other non-current assets |  | 73                       |  
|Total current assets                     |  | 67                       |  
|                                         |  |                          |  
|Total assets                             |  | 140                      |  
|                                         |  |                          |  
|Total non-current liabilities            |  | 27                       |  
|Total current liabilities                |  | 41                       |  
|                                         |  |                          |  
|Total liabilities                        |  | 68                       |  
|                                         |  |                          |  
|
|
|Operating Revenues                       |  | 82                       |  
|Operating Expenses                       |  | 47                       |  
|                                         |  |                          |  
|Net Operating Revenue                    |  | 35                       |  
|                                         |  |                          |  
|Cash flow from operating activities      |  | 36                       |  
|Cash flow from investing activities      |  | (6                       | )
|Cash flow from financing activities      |  | (30                      | )
|                                         |  |                          |  
|Net change in cash and cash equivalents  |  | 0                        |  
|                                         |  |                          |  

24.   Comprehensive Income

Total Comprehensive income under U.S. GAAP for the years ended December 31, 2002, 2001 and 2000 was €192 million,
€481 million and €862 million, respectively. The following is a Statement of Comprehensive Income for the years ended December 31, 2002, 2001 and
2000:

|                                                 |                                                    | 2002   |     | 2001  |     | 2000 |  
|------------------------------------------------ | -------------------------------------------------- | ------ | --- | ----- | --- | ---- | -
|
|Net Income according to U.S. GAAP                |                                                    | 1,545  |     | 1,034 |     | 950  |  
|Currency Translation Adjustment (*)              |                                                    | (1,423 | )   | (680  | )   | 91   |  
|Translation differences related to disposals (*) |                                                    |       |     | (35   | )   | (16  | )
|Net effect of SFAS No. 115 (**)                  |                                                    | (69    | )   | (9    | )   | (163 | )
|Derivative instruments:                          |                                                    |        |     |       |     |      |  
|                                                 | Deferred revenues on SFAS No. 133 hedge net of tax |        | 139 |       | 171 |      | 
|Comprehensive (loss)/Income                      |                                                    | 192    |     | 481   |     | 862  |  

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F-106

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The table below shows changes in Accumulated Other Comprehensive Income:

|                                             |                                                    | 2002   |     | 2001 |     | 2000 |  
|-------------------------------------------- | -------------------------------------------------- | ------ | --- | ---- | --- | ---- | -
|
|Beginning balance, January 1                 |                                                    | (515   | )   | 38   |     | 126  |  
|Currency Translation Adjustment (*)          |                                                    | (1,423 | )   | (680 | )   | 91   |  
|Translation differences related to disposals |                                                    |       |     | (35  | )   | (16  | )
|Net effect of SFAS No. 115 (**)              |                                                    | (69    | )   | (9   | )   | (163 | )
|Derivative instruments:                      |                                                    |        |     |      |     |      |  
|                                             | Deferred revenues on SFAS No. 133 hedge net of tax |        | 139 |      | 171 |      | 
|Ending balance, December 31                  |                                                    | (1,868 | )   | (515 | )   | 38   |  

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25.   Valuation and Qualifying Accounts

The movement in allowance for doubtful accounts is as follows:

|                               |                               | 2002 |     | 2001 |     | 2000 |    
|------------------------------ | ----------------------------- | ---- | --- | ---- | --- | ---- | ---
|
|Balance at beginning of period |                               | 353  |     | 268  |     | 222  |    
|Additions                      |                               |      |     |      |     |      |    
|                               | Charged to operating expenses |      | 120 |      | 206 |      | 104
|                               | Charged to other accounts     |      |    |      | 2   |      | 5  
|Deductions                     |                               | (226 | )   | (123 | )   | (63  | )  
|Balance at end of period       |                               | 247  |     | 353  |     | 268  |    

26.   Consolidated statements of cash flows

Note 24 includes a statement of sources and applications of funds prepared according to Spanish GAAP. Under U.S. GAAP, SFAS No. 95, Statements of
cash flow, requires of cash flows to be presented in accordance with U.S. GAAP format as part of a full set of financial statements.

The
consolidated statements of cash flows of the Endesa Group for the years ended December 31, 2002, 2001, and 2000 prepared in accordance with U.S. GAAP format is presented
below. For purposes of this statement, short-term investments are considered to be cash equivalents.

F-107

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|                                                                      |  | Years Ended December 31, |  
|--------------------------------------------------------------------- |  | ------------------------ | -
|
|
|Cash flows from operating activities:                                 |  |                          |  
|Net income                                                            |  | 1,270                    |  
|Adjustment to reconcile net income to net cash provided by operations |  |                          |  
|Depreciation and amortization                                         |  | 2,416                    |  
|Provisions for pensions and third-party liabilities                   |  | 904                      |  
|Losses on disposal of fixed assets and others                         |  | (1,123                   | )
|Deferred taxes                                                        |  | 440                      |  
|Income allocated to minority interest                                 |  | (136                     | )
|Equity in the income of companies carried by equity                   |  | 133                      |  
|Other non-cash items, net                                             |  | 381                      |  
|Changes in operating assets and liabilities:                          |  |                          |  
|Inventories                                                           |  | (20                      | )
|Accounts receivable                                                   |  | 294                      |  
|Trade accounts payable                                                |  | 2,113                    |  
|Prepaid expenses                                                      |  | (16                      | )
|                                                                      |  |                          |  
|Net cash provided by operations                                       |  | 6,656                    |  
|Cash flows from investing activities:                                 |  |                          |  
|Capital expenditures                                                  |  | (2,084                   | )
|Profits from sales of property plant in equipment and investment      |  | 1,816                    |  
|Expenses and interest capitalized                                     |  | (288                     | )
|Other property and investments                                        |  | (1,464                   | )
|Net cash used in investing activities                                 |  | (2,020                   | )
|                                                                      |  |                          |  
|Cash flows from financing activities:                                 |  |                          |  
|Issuance of long-term debt                                            |  | 3,287                    |  
|Dividends paid in cash, including interim dividend                    |  | (723                     | )
|Repayments of long-term debt                                          |  | (6,095                   | )
|Other financing activities                                            |  | (102                     | )
|                                                                      |  |                          |  
|Net cash provided by financing activities                             |  | (3,633                   | )
|                                                                      |  |                          |  
|Increase (Decrease) in cash and cash equivalents                      |  | 1,003                    |  
|Cash and cash equivalents at the beginning of year                    |  | 1,053                    |  
|Variations in working capital for additions                           |  | 132                      |  
|                                                                      |  |                          |  
|Cash and cash equivalents at the end of year                          |  | 2,188                    |  

Supplementary
information required by SFAS No. 95 is as follows:

1.
Cash paid during the period for:

|                                   |  | Years Ended December 31,
|---------------------------------- |  | ------------------------
|
|
|
|
|Interest, net of amount capitalize |  | 1,386                   
|Income taxes                       |  | 520                     

F-108

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27.   Segment disclosures

Description of the types of products and services from which each reportable segment derives its revenues:

The
Endesa Group manages and evaluates its operations in four reportable segments: Domestic Electricity Businesses, International Electricity Businesses, European Electricity Business
and Other Businesses. The European Electricity Business arises in year 2002 when Endesa Europa (subsidiary of Endesa) starts its activity.

The
Domestic Electricity Business includes generation (coal, nuclear, hydroelectric and fuel oil and gas generation facilities), transmission, distribution and sales to customers of
electricity. This segment also includes distribution and supply of Natural Gas.

The
Latin America Electricity Businesses is involved in the generation, transmission, distribution and supply of electricity in six countries in Latin America.

The
European Electricity Business includes the activities of generation (Italy, France, Portugal and Northern Africa), distribution (Northern Africa) and supply of electricity. This
activity begins since 2002 when Endesa Holding Italia, S.R.L. is full consolidated under Spanish GAAP and there is a meaningful presence in Europe (outside Spain).

The
Other Businesses includes the related business (renewable energies and cogeneration, water distribution and treatment), and the non-core business (basically
telecommunications and new technologies).

Prior
to the fiscal year ended December 31, 2002, the Endesa Group referred to its Latin American Electricity Business as the International Electricity Business; however, the
results of operations of the International Electricity Business did not reflect any significant operations outside of Latin America and therefore, the Management believes that the comparison between
the results of operations of the Latin American Electricity Business in 2002 is directly comparable with the results of operations of the International Electricity Business in 2001. There is not any
possibility of comparison between the results of operations of the European electricity business in 2002 and the results in 2001 because Endesa Holding Italia, S.R.L. was not consolidated.



The accounting policies of the segments are the same as those described in the summary of accounting polices in Note 4. The Group accounts for intersegment
sales and transfers as if the sales or transfers were to third parties, that is, at current market prices.



Each segment of the Group is managed separately because each offers different products or serves different markets.

The
following table presents information regarding the Company's business segments for the year ended December 31, 2002, 2001 and 2000:

F-109

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|                                               |                                   | 2002   |      
|---------------------------------------------- | --------------------------------- | ------ | -----
|
|
|Operating revenues                             |                                   | 11,075 |      
|Operating expenses                             |                                   | 8,944  |      
|                                               | Purchases                         |        | 6,426
|                                               | Personnel expenses                |        | 825  
|                                               | Depreciation and amortization     |        | 1,074
|                                               | Variation in operating provisions |        | (22  
|                                               | Other operating expenses          |        | 641  
|Operating income (loss)                        |                                   | 2,131  |      
|Financial revenues                             |                                   | 130    |      
|Financial expenses                             |                                   | 603    |      
|Financial income (loss), net                   |                                   | (473   | )    
|Income (loss) from associated companies        |                                   | 75     |      
|Amortization of goodwill                       |                                   | 7      |      
|Non-operating income (loss), net               |                                   | 825    |      
|Consolidated income before taxes               |                                   | 2,551  |      
|Corporate income tax                           |                                   | 522    |      
|Minority interests                             |                                   | 3      |      
|Income attributable to the controlling company |                                   | 2,026  |      
|Funds obtained from operations (*)             |                                   | 2,537  |      
|Segment assets                                 |                                   | 23,885 |      

|                                               |                                   | 2001   |      
|---------------------------------------------- | --------------------------------- | ------ | -----
|
|
|Operating revenues                             |                                   | 10,254 |      
|Operating expenses                             |                                   | 8,455  |      
|                                               | Purchases                         |        | 5,885
|                                               | Personnel expenses                |        | 868  
|                                               | Depreciation and amortization     |        | 1,095
|                                               | Variation in operating provisions |        | 23   
|                                               | Other operating expenses          |        | 584  
|Operating income (loss)                        |                                   | 1,799  |      
|Financial revenues                             |                                   | 33     |      
|Financial expenses                             |                                   | 674    |      
|Financial income (loss), net                   |                                   | (641   | )    
|Income (loss) from associated companies        |                                   | 50     |      
|Amortization of goodwill                       |                                   | 18     |      
|Non-operating income (loss), net               |                                   | 151    |      
|Consolidated income before taxes               |                                   | 1,341  |      
|Corporate income tax                           |                                   | 250    |      
|Minority interests                             |                                   |       |      
|Income attributable to the controlling company |                                   | 1,091  |      
|Funds obtained from operations (*)             |                                   | 2,037  |      
|Segment assets                                 |                                   | 25,174 |      

|                                               |                                   | 2000   |      
|---------------------------------------------- | --------------------------------- | ------ | -----
|
|
|Operating revenues                             |                                   | 10,185 |      
|Operating expenses                             |                                   | 8,398  |      
|                                               | Purchases                         |        | 5,528
|                                               | Personnel expenses                |        | 882  
|                                               | Depreciation and amortization     |        | 1,325
|                                               | Variation in operating provisions |        | 84   
|                                               | Other operating expenses          |        | 579  
|Operating income (loss)                        |                                   | 1,787  |      
|Financial revenues                             |                                   | 39     |      
|Financial expenses                             |                                   | 640    |      
|Financial income (loss), net                   |                                   | (601   | )    
|Income (loss) from associated companies        |                                   | 29     |      
|Amortization of goodwill                       |                                   | 4      |      
|Non-operating income (loss), net               |                                   | 281    |      
|Consolidated income before taxes               |                                   | 1,492  |      
|Corporate income tax                           |                                   | 405    |      
|Minority interests                             |                                   |       |      
|Income attributable to the controlling company |                                   | 1,087  |      
|Funds obtained from operations (*)             |                                   | 2,330  |      
|Segment assets                                 |                                   | 22,855 |      

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Revenues from Compañía Operadora del Mercado Español de Electricidad, S.A. (OMEL) of the Endesa
Group's Domestic Electricity Business, represents €3,826 million of the Endesa Group's consolidated revenues as of December, 31, 2002. The total operating income with OMEL
represents €247 million.

F-110

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Exhibit Index

|1.1  |  | Articles of Association, as amended.*                                                                                                                                                              
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.2  |  | Articles of Association, as amended (English translation).*                                                                                                                                        
|4.1  |  | Purchase and Sale Contract for 100% of the Shares of Elettrogen S.p.A., dated as of July 30, 2001, between Enel S.p.A. and Endesa S.A., ASM Brescia S.p.A. and Banco Santander Central Hispano S.A.
|4.2  |  | Option Agreement for Purchase of Shares of Elettrogen, S.p.A., dated as of June 13, 2001, between Endesa, S.A. and Banco Santander Central Hispano S.A.                                            
|4.3  |  | Shareholder Agreement relating to purchase of Elettrogen, S.p.A., dated as of June 13, 2001, between Endesa, S.A. and Banco Santander Central Hispano S.A.                                         
|4.4  |  | Contract for the Sale of Shares in Electra de Viesgo, S.L., dated as of September 19, 2001, between Enel S.p.A. and Endesa Generación, S.A., Endesa Distribución, S.A. and Endesa, S.A.            
|8.1  |  | List of Subsidiaries.                                                                                                                                                                              
|10.1 |  | Section 906 Certification.                                                                                                                                                                         

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