GAS NATURAL SDG, S.A. (Incorporated with limited liability in the Kingdom of Spain) Euro 8,000,000,000 Euro Medium Term Note Programme

Transcription

1 SUPPLEMENT DATED 8 MAY 2009 TO THE BASE PROSPECTUS DATED 2 DECEMBER 2008 GAS NATURAL FINANCE B.V. (Incorporated with limited liability in The Netherlands and having its statutory domicile in Amsterdam) and GAS NATURAL CAPITAL MARKETS, S.A. (Incorporated with limited liability in the Kingdom of Spain) Guaranteed by GAS NATURAL SDG, S.A. (Incorporated with limited liability in the Kingdom of Spain) Euro 8,000,000,000 Euro Medium Term Note Programme This supplement (the Supplement) to the base prospectus (the Base Prospectus) dated 2 December 2008, which comprises a base prospectus for the purposes of the Prospectus Directive 2003/71 EC (the Prospectus Directive), constitutes a supplement for the purposes of section 87G of the UK Financial Services and Markets Act 2000, as amended (the FSMA), and is prepared in connection with the Euro Medium Term Note Programme established by Gas Natural Finance B.V. and Gas Natural Capital Markets, S.A. (each, an Issuer, and together, the Issuers) and guaranteed by Gas Natural SDG, S.A. (the Guarantor or Gas Natural SDG). Terms defined in the Base Prospectus have the same meaning when used in this Supplement, unless otherwise indicated. This Supplement is supplemental to, and should be read in conjunction with, the Base Prospectus and any other supplements to the Base Prospectus issued by the Issuers and the Guarantor. Investors should be aware of their rights under section 87Q(4) of the FSMA. Each of the Issuers and the Guarantor accepts responsibility for the information contained in this Supplement and declares that, having taken all reasonable care to ensure that such is the case, the information contained in this Supplement is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import. Certain information incorporated by reference in the Base Prospectus by virtue of this Supplement has been translated from the original Spanish. Each such translation is a direct, complete and accurate translation of the Spanish language text. The English language information has been provided for information purposes only and, in the event of any discrepancy, the Spanish version shall prevail. The purpose of this Supplement is (a) to provide updated information on the Guarantor s acquisition of Unión Fenosa, S.A. (Unión Fenosa), (b) to provide additional information on Unión Fenosa and its consolidated subsidiaries (the Unión Fenosa Group), and (c) to provide certain updated financial information on Gas Natural SDG and its consolidated subsidiaries (the Group) and the Unión Fenosa Group. In relation to financial information of the Group, this Supplement incorporates by reference (i) the audited consolidated annual accounts of the Guarantor in respect of the year ended 31 December 2008, and (ii) the unaudited consolidated financial information of the Guarantor as of and for the three months ended 31 March In relation to financial information of the Unión Fenosa Group, this Supplement incorporates by reference (i) the audited consolidated annual accounts of Unión Fenosa in respect of each of the years ended 31 December 2008 and 2007, and (ii) the unaudited consolidated financial information of Unión Fenosa as of and for the three months ended 31 March In addition, this Supplement incorporates by reference certain unaudited pro forma consolidated financial information to illustrate, on a pro forma basis, how the Guarantor s consolidated balance sheet at 31 December 2008 and consolidated income statement for the year then ended might have been affected by its acquisition of Unión Fenosa, based on the assumptions stated therein. Copies of all documents incorporated by reference in the Base Prospectus (via this Supplement or otherwise) may be inspected, free of charge, at the offices of each Issuer and the Guarantor and the specified office of the Agent in London (each, as detailed on page 144 of the Base Prospectus) and can be viewed on the website of the Regulatory News Service operated by the London Stock Exchange plc at To the extent there is any inconsistency between (a) any statement in this Supplement or any statement incorporated by reference into the Base Prospectus by this Supplement, and (b) any other statement, pre-dating this Supplement, in, or incorporated by reference in, the Base Prospectus, the statements referred to in (a) above shall prevail. If documents that are incorporated by reference into this Supplement themselves incorporate any information or other documents therein, either expressly or implicitly, such information or other documents will not form part of this Supplement for the purposes of the Prospectus Directive, except where such information or other documents are specifically incorporated by reference into this Supplement. Save as disclosed in this Supplement, no other significant new factor, material mistake or inaccuracy relating to information included in the Base Prospectus has been noted or, to the best of the knowledge of each Issuer and the Guarantor, has arisen, as the case may be, since the publication of the Base Prospectus.

2 1. Interim financial information of the Guarantor as of and for the three months ended 31 March 2009 On 6 May 2009, the Guarantor published its First Quarter Results 2009, which include certain unaudited consolidated financial, operating and other information of the Guarantor as of and for the three months ended 31 March 2009 (the First Quarter Results). By virtue of this Supplement, the First Quarter Results are incorporated by reference in, and form part of, the Base Prospectus. The First Quarter Results can be viewed via the Regulatory News Service of the London Stock Exchange plc (the LSE) and have been filed with the UK Financial Services Authority (the FSA). 2. Annual accounts of the Guarantor as of and for the year ended 31 December 2008 On 10 February 2009, the Guarantor filed its audited consolidated annual accounts as of and for the year ended 31 December 2008 with the Spanish National Securities Market Commission (Comisión Nacional del Mercado de Valores or CNMV) (the English translation thereof, the Audited Consolidated Annual Accounts). By virtue of this Supplement, the Audited Consolidated Annual Accounts are incorporated by reference in, and form part of, the Base Prospectus. The Audited Consolidated Annual Accounts can be viewed via the Regulatory News Service of the LSE and have been filed with the FSA. 3. Interim financial information of Unión Fenosa as of and for the three months ended 31 March 2009 On 6 May 2009, Unión Fenosa published its Earnings Report January March 2009, which includes certain unaudited consolidated financial, operating and other information of Unión Fenosa as of and for the three months ended 31 March 2009 (the Unión Fenosa First Quarter Results). By virtue of this Supplement, the Unión Fenosa First Quarter Results are incorporated by reference in, and form part of, the Base Prospectus. The Unión Fenosa First Quarter Results can be viewed via the Regulatory News Service of the LSE and have been filed with the FSA. 4. Annual accounts of Unión Fenosa as of and for each of the years ended 31 December 2008 and 2007 On 18 February 2009 and 11 March 2008, Unión Fenosa filed with the CNMV its audited consolidated annual accounts as of and for the years ended 31 December 2008 and 2007, respectively, (the English translation thereof, the Unión Fenosa Audited Consolidated Annual Accounts). By virtue of this Supplement, the Unión Fenosa Audited Consolidated Annual Accounts are incorporated by reference in, and form part of, the Base Prospectus. The Unión Fenosa Audited Consolidated Annual Accounts can be viewed via the Regulatory News Service of the LSE and have been filed with the FSA. 5. Amendment to the risk factors The section titled Risk Factors Risks Relating to the Takeover Offer for, and Integration of, Unión Fenosa, S.A. on pages 17 to 20 of the Base Prospectus is, by virtue of this Supplement, deleted and replaced in its entirety by the following text: Risks Relating to the Acquisition of Unión Fenosa On 30 July 2008, Gas Natural SDG announced that it had reached an agreement with ACS, Actividades de Construcción y Servicios, S.A. (ACS) and other members of its group (the ACS Group) to acquire the 45.31% stake (the ACS Stake) held by the ACS Group in the voting share capital of Unión Fenosa, one of Spain s principal utility groups. The price agreed with the ACS Group was per share in cash, less the gross amount of any dividend paid, or any capital distribution made, to Unión Fenosa shareholders. Pursuant to the terms of such agreement, Gas Natural SDG initially acquired a 9.99% stake in Unión Fenosa on 6 August 2008 for a total amount of 1,675 million at a price of per

3 share, with the acquisition of the balance of the 45.31% stake subject to certain regulatory and competition clearances. In March 2009, following receipt of such clearances, Gas Natural SDG acquired the balance of the ACS Stake, representing 35.31% of the voting share capital of Unión Fenosa. Together with certain other market and off-market purchases of Unión Fenosa shares made by Gas Natural SDG, the Group thereby increased its aggregate shareholding in Unión Fenosa to 50.02%, and had agreements in place to acquire a further 10.45%, of its voting share capital. For a description of these market and offmarket purchases, please refer to Note 2.2(e) to the Audited Consolidated Annual Accounts. As a result of acquiring more than 30% of the voting share capital of Unión Fenosa, Gas Natural SDG was required, under the Spanish takeover regulations, to make a mandatory takeover offer for Unión Fenosa at a price per share of 18.05, being the price agreed in respect of the ACS Stake, net of the dividend of 0.28 per share paid by Unión Fenosa on 2 January 2009 (the Offer). The offer document was approved by the CNMV on 18 March Settlement of the Offer took place on 21 April 2009 and as a result of the acquisition of the ACS Stake, the market and off-market purchases referred to above and acceptances of the Offer, Gas Natural SDG held, as of 8 May 2009, 870,362,851 Unión Fenosa shares, representing approximately 95.2% of its voting share capital. As of 8 May 2009, Gas Natural SDG had also nominated 15 of the 20 directors on the board of directors of Unión Fenosa. The intention of Gas Natural is to achieve the complete integration of Unión Fenosa and its affiliates into the Gas Natural Group through, among other things, the statutory merger of Gas Natural SDG, Unión Fenosa and Unión Fenosa Generación, as described in Description of Gas Natural SDG, S.A. Recent Developments. In this risk factor, (i) the Unión Fenosa Group refers to Unión Fenosa and its consolidated subsidiaries, (ii) the Gas Natural Group refers to the Group, excluding the Unión Fenosa Group, and (iii) the Enlarged Group refers to the Gas Natural Group and the Unión Fenosa Group, taken together. Set out below are certain risks relating to the acquisition of Unión Fenosa by Gas Natural SDG: The Gas Natural Group has not been able to conduct a complete due diligence review of the Unión Fenosa Group or to verify the reliability of all public information regarding the Unión Fenosa Group. Any undisclosed or inadequately disclosed liabilities of the Unión Fenosa Group of which the Group is not aware could have a material adverse effect on the business, prospects, financial condition and results of operations of the Enlarged Group. The operational integration of the Gas Natural Group and the Unión Fenosa Group and the merger of the respective parent companies may prove difficult and the benefits derived from, and/or costs associated with, such integration and merger, if approved, may not be in line with expectations. Gas Natural SDG may not be able to manage the broader organisation efficiently, which could result in the loss of key employees and/or customers and have a material adverse effect on the business, financial condition and operational results of the Enlarged Group. Change of control provisions in the contractual arrangements of the Unión Fenosa Group may have been triggered upon the acquisition of control by Gas Natural SDG and may lead to adverse consequences, including the forfeit of contractual rights and benefits, early termination and/or the payment of penalties or other liquidated damages or, in the case of financing arrangements, the acceleration of loans made to members of the Unión Fenosa Group, requiring the immediate repayment or renegotiation of such loans. In this regard, please see Description of Gas Natural SDG, S.A. Recent Developments Certain possible consequences of the change of control of Unión Fenosa below. Page 3

4 On 11 February 2009, the Spanish National Competition Commission (the Comisión Nacional de Competencia or CNC), authorised the acquisition of Unión Fenosa by Gas Natural SDG subject to certain undertakings presented by the Group and accepted by the CNC. On 17 February 2009, the Spanish Ministry for Economy and Taxation resolved not to refer the matter to the Spanish Council of Ministers and the authorisation from the CNC therefore became definitive and binding on that date. See Description of Gas Natural SDG, S.A. Recent Developments Acquisition of Unión Fenosa Spanish competition approval and divestitures for a description of these undertakings. Gas Natural intends to effect disposals with a view to realising gross proceeds of approximately 3,000 million (including the disposals necessary to comply with the undertakings given to the CNC) over the course of 2009 and, failing which, However, as the gross proceeds the Enlarged Group receives from any sales will be dependent on prevailing market conditions, competition among buyers for such assets and other factors, many of which will be beyond the control of the Enlarged Group, Gas Natural can give no assurance regarding the amount of any sale proceeds or that such proceeds will reach what the Enlarged Group estimates to be the fair market value of such assets. The sale of the required assets is subject to review by the CNC and the undertakings granted by Gas Natural to the CNC may be challenged by the Enlarged Group s competitors and other third parties with a legitimate interest in the subject matter. Gas Natural can provide no assurance that it will be able to complete the required divestitures within the required timeframes or at all or that, if completed, such divestitures will be on terms favourable to the Enlarged Group. The Enlarged Group s failure to sell such assets within the required timeframes could result in the imposition of fines (which may be substantial), the forced sale of assets within a limited timeframe and/or the imposition of other obligations of a regulatory nature. Any such failure, or the Enlarged Group s failure to sell such assets on favourable terms, could have a material adverse effect on the business, prospects, financial condition and results of operations of the Enlarged Group. Furthermore, as Gas Natural SDG is required to prepay amounts under the Acquisition Facilities using the net proceeds of sale of these assets, to the extent it is unable to complete the required sales, or they are completed on terms that are not favourable to the Group, Gas Natural may not be able to reduce the consolidated net debt of the Enlarged Group to the extent anticipated. Finally, the rationale behind, and the express purpose of, the conditions imposed is to create effective competition in the Spanish gas and electricity markets in relation to the Enlarged Group s market share. Accordingly, the Enlarged Group is likely to face increased competition in these markets, and it may not be successful in retaining all of those customers that it does not transfer as part of the required divestments. Any loss of its share of the gas and electricity markets in Spain, its primary markets, could have a material adverse effect on the business, prospects, financial condition and results of operations of the Enlarged Group. Mandatory tender offers for the capital of certain of Unión Fenosa s subsidiaries that are required in Colombia may take longer and may be more costly than anticipated. Page 4

5 On 7 August 2008, Gas Natural SDG, as borrower, entered into the Acquisition Facilities Agreement in relation to the financing of the Offer (the Financing). For a summary of the terms and conditions of the Acquisition Facilities Agreement and the amounts drawn and prepaid thereunder, see Description of Gas Natural SDG, S.A. Recent Developments Acquisition of Unión Fenosa Financing of the acquisition of Unión Fenosa. Set out below are certain risks relating to the Financing: 6. Rights offering Tranches A1, D1, A2 and D2 of the Acquisition Facilities, with an aggregate principal amount of 12,078 million, must be fully repaid by 6 February Gas Natural SDG has, however, the option to extend the maturity dates for Tranches A2 and D2 (with an aggregate principal amount of 6,039 million) until 7 February 2011 by accepting a 0.10% increase in the margin for those tranches. Gas Natural SDG has used the net proceeds of a 3,500 million capital increase in March 2009 to prepay part of Tranche A1 and intends to repay the A and D Tranches in full using a combination of cash generated from ordinary operations, the issue of debt instruments in the capital markets (possibly including notes under the Programme) and the sale of assets. The extent to which Gas Natural SDG is able to repay these tranches on maturity will therefore depend on a number of factors outside the control of the Group, including the liquidity and demand in the equity and debt markets and the availability of credit to potential purchasers of assets to be sold. If Gas Natural SDG is unable to repay any of the tranches on maturity, by these or any other means, then the lenders under the Acquisition Facilities may declare all amounts outstanding thereunder immediately due and payable, which would affect the solvency of the Enlarged Group. In addition, the inability of the Group to repay amounts due under the Acquisition Facilities on maturity may trigger cross-default provisions contained in its other current or future financing agreements, causing any amounts advanced thereunder to become immediately due and payable, which could have a material adverse effect on the solvency, business, financial condition and results of operations of the Enlarged Group. A significant portion of the cash flow of the Group must be used to service the payment obligations of Gas Natural SDG under the Acquisition Facilities, thereby reducing the availability of the Group s cash flow to fund working capital, capital expenditures, operations, dividend payments, strategic acquisitions, expansion of its operations and other business activities. This may increase the Group s vulnerability to general adverse economic and industry conditions and place Gas Natural at a competitive disadvantage compared to its competitors that are less leveraged. In addition, the significant increase in the total consolidated debt of the Group and the financial and other restrictive covenants imposed by the Acquisition Facilities Agreement and other financing arrangements may limit, together with the terms of the Group s other debt instruments, the ability of Gas Natural to borrow additional funds or dispose of assets. The following text is, by virtue of this Supplement, inserted to the section of the Base Prospectus titled Description of Gas Natural SDG, S.A. Recent Developments at the beginning of that section: 3,500 million capital increase with preferential subscription rights On 12 March 2009, the CNMV approved a prospectus in respect of a capital increase with preferential subscription rights of the Guarantor, comprising 447,776,028 new ordinary shares, with a nominal value of 1.00 each, at a subscription price of 7.82 per new ordinary share (the Rights Offering). On 31 March 2009, Gas Natural SDG announced that it had successfully completed the Rights Offering, which had been over-subscribed by approximately 36%. Preferential subscription rights were exercised in respect of 447,343,331 new ordinary shares (representing 99.9% of the new shares offered) and requests from rightsholders for shares in excess of their respective proportionate Page 5

6 entitlement were received in respect of a further 159,971,494 new ordinary shares (representing 35.7% of the new shares offered). Pursuant to the Rights Offering, Gas Natural SDG raised proceeds, net of transaction costs, of approximately 3,401 million which it has applied, in full, in mandatory prepayment of tranche A1 of the Acquisition Facilities, as described under Acquisition of Unión Fenosa Debt servicing Rights Offering below. 7. Acquisition of Unión Fenosa The section of the Base Prospectus titled Description of Gas Natural SDG, S.A. Recent Developments Potential takeover offer for Unión Fenosa, S.A. set forth on page 105 of the Base Prospectus is, by virtue of this Supplement, deleted in its entirety and replaced with the following text: Acquisition of Unión Fenosa On 30 July 2008, Gas Natural SDG announced that it had reached an agreement with ACS and other members of the ACS Group to acquire the 45.31% stake held by the ACS Group in the voting share capital of Unión Fenosa, one of Spain s principal utility groups. The price agreed with the ACS Group was per share in cash, less the gross amount of any dividend paid, or any capital distribution made, to Unión Fenosa shareholders. Pursuant to the terms of such agreement, Gas Natural SDG initially acquired a 9.99% stake in Unión Fenosa on 6 August 2008 for a total amount of 1,675 million at a price of per share, with acquisition of the balance of the 45.31% stake subject to regulatory and competition clearances. In March 2009, following receipt of the relevant regulatory and competition clearances, Gas Natural SDG acquired the balance of the ACS Stake, representing 35.31% of the voting share capital of Unión Fenosa. Together with certain other market and off-market purchases of Unión Fenosa shares made by Gas Natural SDG, the Group increased its aggregate shareholding in Unión Fenosa to 50.02%, and had agreements in place to acquire a further 10.45%, of its voting share capital. For a description of these market and off-market purchases, please refer to Note 2.2(e) to the Audited Consolidated Annual Accounts. As a result of acquiring more than 30% of the voting share capital of Unión Fenosa, Gas Natural SDG was required, under the Spanish takeover regulations, to make a mandatory takeover offer for Unión Fenosa at a price per share of 18.05, being the price agreed in respect of the ACS Stake, net of the dividend of 0.28 per share paid by Unión Fenosa on 2 January The offer document was approved by the CNMV on 18 March Settlement of the Offer took place on 21 April 2009 and as a result of the acquisition of the ACS Stake, the market and off-market purchases referred to above and acceptances of the Offer, Gas Natural SDG held, as of 8 May 2009, 870,362,851 Unión Fenosa shares, representing approximately 95.2% of its voting share capital. As of 8 May 2009, Gas Natural SDG had also nominated 15 of the 20 directors on the board of directors of Unión Fenosa. - Financing of the acquisition of Unión Fenosa The total cost of the acquisition of Unión Fenosa (excluding transaction costs) was approximately 16,457 million. Gas Natural SDG relied exclusively on loans from financial institutions to fund its acquisition of Unión Fenosa shares. For the purpose of financing the acquisition, Gas Natural SDG, as borrower, entered into a credit facilities agreement dated 7 August 2008 for an initial principal amount of 19,000 million with the financial institutions named therein, as original lenders and original mandated lead arrangers, and Caixa d Estalvis i Pensions de Barcelona ( la Caixa ), as facility agent, (as amended, the Acquisition Facilities Agreement), comprising 10 term loan tranches (A1, A2, B, C1, C2, D1, D2, D3, D4 and D5, together, the Acquisition Facilities) with maturity dates ranging from 6 February 2010 to 7 August Page 6

7 As a result of the voluntary cancellation of certain commitments, as of 8 May 2009, the principal amount under the Acquisition Facilities was 18,260 million, of which 12,456 million had been drawn and remained outstanding as of that date. All of the tranches of the Acquisition Facilities, other than Tranche C2 and the D Tranches, have been used (i) to fund the market and off-market purchases of the Unión Fenosa shares referred to above, (ii) to fund the acquisition of Unión Fenosa shares tendered in the Offer, and (iii) to refinance 200 million of existing debt of the Gas Natural Group. Tranche C2 and the D Tranches may only be used to refinance certain existing debt of the Unión Fenosa Group up to the aggregate principal amount of those tranches of 1,100 million. - Certain key terms and conditions of the Acquisition Facilities Agreement For the purposes of the Acquisition Facilities, the Borrower Group means Gas Natural SDG and those other entities within the Group in respect of which Gas Natural SDG exercises control, directly or indirectly, or in which it holds, directly or indirectly, more than 50% of the voting share capital. The restrictions and obligations set forth in the Acquisition Facilities Agreement generally apply to members of the Borrower Group and the financial covenants are generally tested by reference to the Borrower Group. Mandatory prepayment. The Acquisition Facilities Agreement requires the mandatory prepayment of the Acquisition Facilities, in whole or in part, in the following circumstances. Sales of assets, businesses or shares. The net proceeds received by any member of the Borrower Group in respect of any disposal of assets, businesses or shares must be applied in prepayment of Tranche A1 and Tranche A2, in that order. Once Gas Natural SDG has applied in prepayment proceeds in an amount equal to 3,000 million or the A1 and A2 tranches have been repaid and cancelled in full, whichever is the earlier, such mandatory prepayment obligation will cease to apply. Proceeds from divestments of Unión Fenosa shares, however, are subject to mandatory prepayment at all times during the life of the Acquisition Facilities. Funding event. If any member of the Borrower Group receives proceeds from any public issue, public offering or private placement of any equity, debt or convertible securities (including hybrid securities, bonds, notes, debentures and loan stock, among others) for cash consideration (in whole or in part), or raises finance through any loan, acceptance credit, note purchasing facility or other raising of financial indebtedness (including an issue of notes under the Programme), the net proceeds thereof must be applied subject to the terms set out in the Acquisition Facilities Agreement and subject to certain exceptions agreed between the parties. Notwithstanding such exceptions, until all amounts outstanding under Tranches A1 and A2 have been repaid in full, all net proceeds from any issue of debt instruments in the debt capital markets (including an issue of notes under the Programme) must be applied in mandatory prepayment, as described above, save only for debt instruments issued for the purposes specified in the Acquisition Facilities Agreement by SPVs without recourse to Gas Natural SDG. Illegality. If it becomes unlawful for any lender in any jurisdiction to perform its obligations under the Acquisition Facilities Agreement or to fund or maintain its commitment thereunder, Gas Natural SDG is required to repay or prepay all amounts outstanding attributable to that lender and to cancel any available commitments of that lender. Change of control. If any person or group of persons acting in concert gains control of Gas Natural SDG, the total amount outstanding under the Acquisition Facilities must be Page 7

8 prepaid in full. Control is defined as the acquisition of the right to exercise more than 50% of the voting rights exercisable at the general shareholders meeting of Gas Natural SDG or the power to direct its management and policies, whether through the ownership of voting rights, by contract or otherwise. Interest rates. The annual interest rate payable by Gas Natural SDG under each tranche of the Acquisition Facilities is equal to the sum of (i) the EURIBOR rate applicable to the interest period in question, (ii) an agreed margin (see Margins below), and (iii) a percentage, determined by la Caixa, as facility agent, to take account of mandatory costs assumed by the lenders for the purposes of complying with certain regulatory requirements of banking supervisory bodies, such as the European Central Bank and the Bank of England. Margins. The margins applicable under the Acquisition Facilities as of 8 May 2009 are based on an attributed long-term credit rating of BBB (stable) from Standard & Poor s and Baa2 (stable) from Moody s. From 1 July 2009 onwards, the margin for each tranche will be adjusted, upwards or downwards, to reflect the actual long-term credit rating awarded by each rating agency from time to time. Until 30 June 2009, the margin for each tranche may be adjusted upwards, with retroactive effect from 21 April 2009, the settlement date of the Offer, if the long-term credit rating assigned to Gas Natural SDG falls below BBB (stable) or Baa2 (stable). No downwards adjustment to the margins is permitted until 1 July Events of default. The Acquisition Facilities Agreement contains customary events of default for syndicated financings of this type, including (i) non-payment, (ii) breach of other obligations, (iii) misrepresentation, (iv) cross-default, (v) insolvency and analogous events, (vi) cessation of business, (vii) illegality, (viii) litigation and (ix) material adverse change. Guarantees and security. The Group has not granted any guarantees or security interests to the lenders under the Acquisition Facilities Agreement. General covenants. The Acquisition Facilities Agreement contains customary non-financial covenants for syndicated financings of this type, including (i) restrictions on the incurrence of financial indebtedness, (ii) restrictions on disposals, (iii) restrictions on the creation or maintenance of guarantees and other security interests, (iv) restrictions on group restructurings and reorganisations and (v) restrictions on acquisitions, in each case subject to certain agreed exceptions. Financial covenants. The Acquisition Facilities Agreement contains financial covenants relating to interest cover, leverage, total assets of Gas Natural SDG and net Group debt, which are tested for each measurement period. Based on the current financial period of the Group, the interest cover and leverage ratios will be calculated as of each 30 June and 31 December for the twelve-month periods then ended and the first measurement period will be the six months ended 31 December Debt servicing Gas Natural SDG intends to service the payment of interest and the repayment of principal under the Acquisition Facilities using the net proceeds of the Rights Offering, the net proceeds from the sale of certain assets and other sources of funds. - Anticipated investments and divestments Gas Natural SDG anticipates that the Group will target investments for the period 2008 to 2012 of approximately 9,000 million, which will principally be destined to the organic growth of the Group, and divestments of approximately 3,000 million during 2009 and, failing which, Spanish competition approval and divestitures On 11 February 2009, the CNC authorised the acquisition of Unión Fenosa by Gas Natural SDG subject to certain undertakings presented by the Group and accepted by the CNC. On 17 February 2009, the Page 8

9 Spanish Ministry for Economy and Taxation resolved not to refer the matter to the Spanish Council of Ministers and the authorisation from the CNC therefore became definitive and binding on that date. Pursuant to these undertakings, Gas Natural has agreed that, within a limited timeframe, it will dispose of: 600,000 gas distribution connection points (equivalent to approximately 9% of the national total, according to the CNC) through the sale of complete gas distribution networks in Spain; its portfolio of customers residential-commercial and small- and medium-sized companies associated with such gas distribution connection points; 2,000 MW of installed capacity of combined cycle technology in Spain; and its participation in Enagás, S.A. The Group has also undertaken to the CNC that it will ensure that Unión Fenosa Gas Comercializadora, S.A. will continue to operate autonomously with regard to the supply of gas to third parties in Spain. - Certain possible consequences of the change of control of Unión Fenosa Offer for Colombian subsidiaries. Unión Fenosa Colombia, S.A., a wholly-owned subsidiary of Unión Fenosa, currently holds 63.8% of the share capital of Empresa de Energía del Pacífico, S.A., ESP (EPSA), which, in turn, owns a 86.29% shareholding in Compañía de Electricidad de Tuluá, S.A. ESP (CETSA). The ordinary shares of both EPSA and CETSA are registered with the Colombian National Securities and Issuers Registry (Registro Nacional de Valores y Emisores) and listed on the Colombian Stock Exchange (Bolsa de Valores de Colombia). Under Colombian securities laws, Gas Natural SDG is required, within three months following its acquisition of control of Unión Fenosa, to formulate separate public takeover offers for EPSA and CETSA in respect of all of the shares not already held by Unión Fenosa at that time. To the extent the offers are not made within such three-month period, the voting rights held by Unión Fenosa in EPSA and CETSA would remain suspended until such time as the offers are made. Gas Natural SDG has obtained an independent valuation of each company for the purposes of calculating the relevant offer price. Key contracts with change of control provisions. change of control provisions. Unión Fenosa is a party to certain contracts with Unión Fenosa Gas. Unión Fenosa and Eni S.p.A. jointly own Unión Fenosa Gas, S.A. (Unión Fenosa Gas) in equal proportions. The shareholders agreement entered into between Unión Fenosa and Eni in relation to Unión Fenosa Gas contains a change of control provision that allows the shareholder not affected by the change of control (in this case, Eni) to make an offer, during a limited period following the change of control, for the acquisition of the 50% stake of the other shareholder at a price to be determined by an independent valuation. The shareholder affected by the change of control (in this case, Unión Fenosa) may then sell its stake at such price or acquire the 50% shareholding held by the other shareholder at that price plus a premium. EUFER. The joint venture agreement between Unión Fenosa and Enel S.p.A. in relation to Enel Unión Fenosa Renovables, S.A. (EUFER) contains a similar change of control provision to the shareholders agreement between Unión Fenosa and Eni in relation to Unión Fenosa Gas described above. Page 9

10 In addition to the above, Unión Fenosa is a party to other agreements which contain change of control provisions, including financing agreements in relation to certain CCGT plants and agreements in relation to gas supply, financing and infrastructure. Although the Acquisition Facilities provide 1,100 million to repay indebtedness of the Unión Fenosa group that is accelerated upon a change of control, Unión Fenosa reported current and non-current bank borrowings of 1,368 million and 5,517 million as of 31 December 2008, respectively, and there can be no assurance that the Acquisition Facilities would be adequate to repay all accelerated amounts. If the Acquisition Facilities are insufficient, the Group would need to seek alternative sources of liquidity to meet Unión Fenosa s repayment obligations. Employment agreements with certain key Unión Fenosa employees. Employment agreements or other employment benefit arrangements with Unión Fenosa s directors, senior management and other Unión Fenosa employees contain change of control provisions providing for additional compensation to be paid in the event that the employment of these employees is terminated, by employer or employee, following a change of control. In particular, certain guarantee clauses for 50 members of Unión Fenosa s senior management provide for a severance payment of up to five times the relevant individual s annual remuneration in the case of a termination of employment following a takeover offer for Unión Fenosa. 8. Description of the Unión Fenosa Group A new section of the Base Prospectus titled Description of Unión Fenosa, S.A. is, by virtue of this Supplement, inserted immediately after the section titled Description of Gas Natural SDG, S.A. and immediately before the section titled Taxation and Disclosure of Noteholder Information in connection with the Notes, with the following text: Introduction DESCRIPTION OF UNIÓN FENOSA, S.A. The primary business of Unión Fenosa and its subsidiaries is the generation, distribution and transmission of electric power. In 2008, it had a market share of 14.4% of the ordinary regime generation on the Spanish peninsular, supplying electricity to almost 3.7 million customers throughout Spain. Although in recent years the Unión Fenosa Group diversified its activities into different business areas, the company is currently focused in consolidating and developing its domestic energy businesses. Net revenues for the Unión Fenosa Group for the year ended 31 December 2008 was 7,189 million, an increase of 19.9% over Operating income for the year ended 31 December 2008 was 1,675 million, an increase of 14.2% over History Unión Fenosa was incorporated on 10 February 1912 as a Spanish limited company (sociedad anónima) under the Spanish Companies Act (Ley de Sociedades Anónimas) under the name of Unión Eléctrica Madrileña, S.A. Its name was subsequently changed to Unión Eléctrica, S.A. on 26 May 1970 and, following the merger with Fuerzas Eléctricas del Noroeste (Fenosa) on 23 November 1982, the company became Unión Eléctrica Fenosa, S.A. On 16 October 2001, it changed its name from Unión Eléctrica Fenosa, S.A. to Unión Fenosa, S.A. and its registered address to Avenida de San Luis, 77, Madrid, Spain, telephone number Unión Fenosa is registered with the Madrid Mercantile Registry (Tomo general del Libro de Sociedades 68, Hoja 2764, Folio 73, Fiscal Identification Code: A ). The main activities of Unión Fenosa have traditionally been the generation, distribution and transmission of electrical energy in central and northern Spain. As a direct result of Law 54/1997 of 27 November 1997 requiring regulated electricity activities, such as distribution, to be carried out by Page 10

11 companies independent from those carrying out non-regulated activities, such as generation, on 1 June 1999, Unión Fenosa transferred its generation and large customer business to Unión Fenosa Generación, S.A. ( UFG ), and its distribution and transmission business to Unión Fenosa Distribución, S.A. ( UFD ). Unión Fenosa sold 25% of the capital of UFG to National Power plc on 30 June 1999 for 567 million. With effect from 1 July 2001, Unión Fenosa approved the repurchase of the 25% shareholding in UFG held by International Power plc (formerly National Power plc) for 604 million. As a result of this transaction, Unión Fenosa again owns 100% of UFG. Share Capital Unión Fenosa s share capital is made up of 914,037,978 shares of 1 nominal value each, represented by book entries and forming a single class. The share capital of Unión Fenosa is fully subscribed and paid up. Unión Fenosa s shares are publicly traded on the Madrid, Barcelona, Bilbao and Valencia stock exchanges. Unión Fenosa Group Business The Unión Fenosa Group is a broad corporate group with activities in diverse business areas. In order to enhance the management and growth of these activities, the corporate structure of the Unión Fenosa Group is organised under a controlling company (Unión Fenosa, S.A.) with different business divisions. At the date hereof, the activities of the Unión Fenosa Group are organised under the following business divisions: electricity generation and commercialisation, gas, networks (electricity distribution and transmission), international and other businesses. The controlling company determines the general strategies and corporate policies and is responsible for the overall control of all of the Unión Fenosa Group s activities. The corporate structure of the Unión Fenosa Group as at 31 December 2008 is as follows: Union Fenosa Finance, B.V. Clover Financial and Treasury Services, LTD. 100% 100% 18% 5% 1% INDRA CEPSA REE Union Fenosa Financial Services USA, LLC. 100% 100% SOCOIN Union Fenosa Emisiones, S.A. 100% 100% UFINET Union Fenosa Preferentes, S.A. 100% 96,5% CEDIE Union Fenosa Financiación, S.A. 100% 100% O& M ENERGY 100% 100% 100% 100% 50% 100% Unión Fenosa Generación, S.A. Unión Fenosa Comercial, S.A. Unión Fenosa Minería, S.A. Unión Fenosa Distribución, S.A. Unión Fenosa Gas, S.A. Unión Fenosa Internacional, S.A. Electricity Generation The Unión Fenosa Group operates thermal, nuclear and hydroelectric generating facilities through Unión Fenosa Generación, S.A. ( UFG ). In 2008, UFG was the third largest generator in Spain with approximately 13.4% of the ordinary regime generation (14.4% in mainland Spain). Sales of electricity to customers outside the regulated tariff are made through Unión Fenosa Comercial, S.A. ( UFC ). In addition, Unión Fenosa Minería, S.A. ( UFM ) carries out the mining activities of the group. Net Page 11

12 revenues for Unión Fenosa from its generation, commercialisation and mining activities in 2008 were 2,838 million. As at 31 December 2008, the generation plants of the Unión Fenosa Group in the Spanish peninsular ordinary regime had an installed capacity of 8,877 MW, representing 14.4% of the total installed capacity of the Spanish peninsular ordinary regime. The net output of these plants in 2008 was 30,480 GWh. Unión Fenosa does not have any installed capacity in Spain outside the Spanish mainland. The Unión Fenosa Group s hydroelectric output in 2008 was 2,612 GWh, 13.0% lower than in The nuclear output in 2008 was 4,402 GWh, 1.3% lower than the previous year. The output of the Unión Fenosa Group s conventional fossil fuel powered plants in 2008 was 7,199 GWh, 41.9% lower than in On the other hand, the output of the Unión Fenosa Group s CCGT plants reached 16,266 GWh in 2008, 23.1% higher than the previous year, which represented a share of 18.6% of the total of electricity generated using combined cycle plants in Spain. In 2008, the Unión Fenosa Group increased its generation capacity in the ordinary regime with the addition of 454 MW of CCGT plant capacity, of which 389 MW was attributable to the entry into operation of the Sabón CCGT plant and 65 MW from the increase in capacity at the Sagunto CCGT plant. Unión Fenosa Energías Especiales, S.A. ( UFEE ) was established by the Unión Fenosa Group to develop renewable energy sources and high efficiency energy systems. These sources receive the most favourable treatment under current Spanish regulations (see Electricity Regulation Regulation of the electricity industry in Spain Generation ). On 16 June 2003, the Unión Fenosa Group and Enel announced an agreement regarding the subscription by Enel of an 80% stake in UFEE for an amount equal to 178 million, including a premium of 10 million for the construction of generation capacity of at least 300 MW by After this agreement, UFEE changed its name to Enel Unión Fenosa Renovables, S.A. ( EUFER ). On 30 May 2006 the Unión Fenosa Group made effective the option to buy back 30% of EUFER shares for a total amount of 71.8 million, and at 31 December 2008, the Unión Fenosa Group held a 50% holding in EUFER. As at 31 December 2008, the total operating capacity owned by Unión Fenosa in renewables, including its share in EUFER, was 453 MW, an increase of 8.9% over Net production amounted to 1,074 GWh in 2008, an increase of 11.6% over Commercialisation On 1 January 2003, the electricity and gas markets in Spain were fully deregulated, providing the Unión Fenosa Group with the opportunity to increase its presence in such markets. The Unión Fenosa Group aims to use its existing customer base to increase the profitability of its current products and services. For this purpose, UFC supplies its entire customer base with a wide array of products and services, offering comprehensive energy (electricity and gas) solutions. The gas retail to large manufacturers and CCGT plants is handled directly by Unión Fenosa Gas Comercializadora. The abolition of the general high tension tariff and the low pool prices have resulted in a significant increase in the importance of the liberalised market, which accounted for 44% of total energy supplied on the Spanish peninsular in UFC had a market share of 16.4% during the year, with increases in its electricity and gas commercialisation activities of 60% and 35%, respectively, compared with Page 12

13 UFC s strategy in recent years has directed its efforts both towards gaining a market share similar to that in generation, as a way to hedge from future market risk, as well as securing customer loyalty under different market conditions in those market segments that contribute most to the profitability of the group by bolstering its relationship channels, providing personalised advice on energy efficiency, offering multiple products for dual fuel supplies and energy services. Most recently, this policy has translated into an effort to attract large account customers, such as corporate and government entities. The main market lines of UFC are the following: Gas Electricity: For the year ended 31 December 2008, total electricity supplied by UFC was approximately 16,033 GWh, 60.3% higher than the previous year. Gas: In 2001, UFC offered gas for the first time to customers in the unregulated market. In the following years UFC has managed to design several gas-marketing tools to offer gas in the unregulated market. For the year ended 31 December 2008, total gas supplied by UFC was approximately 2,726 GWh, an increase of 34.9% on the previous year. Other services: For many years the Unión Fenosa Group has offered personalised solutions to households and companies, creating a wide knowledge base which enables it to manage all aspects of the energy offered to its customers. The Unión Fenosa Group has paid particular attention to counselling its customers on energy efficiency as a differentiating element of its positioning and strategy of achieving durable relationships with its customers. In July 2000, the Egyptian government approved an agreement between the Egyptian General Petroleum Corporation and the Unión Fenosa Group for the construction of a liquefied natural gas plant in Damietta, Egypt and the long term supply of approximately 4 bcm of gas per year over 25 years, which can be extended by a further 25 years. Construction of this plant commenced in 2001, starting operation on 15 January This plant allows the Unión Fenosa Group to sell the gas it produces into Spain and other parts of the world. Unión Fenosa Gas, S.A. ( Unión Fenosa Gas ) has an 80% stake in the plant, and the other 20% is owned by local state-owned companies Egypt General Petroleum Corporation ( EGPC ) and Egypt Gas ( EGAS ). The nominal capacity of the plant is 7.56 bcm/year. During the year 2008 a total of 53 vessels were loaded, with an average capacity of 137,000 m3, being approximately half of the production addressed to Unión Fenosa Gas. Unión Fenosa Gas also has a 7.3% interest in a liquefaction plant in Qalhat, Oman, in which the Government of Oman is the majority shareholder. The nominal capacity of the plant is 4.4 bcm/year. As with the Damietta liquefaction plant, approximately half of the liquefied gas is supplied to Unión Fenosa Gas. On 14 March 2003, Unión Fenosa and Eni S.p.A. ( Eni ) entered into an agreement to develop the gas business following the announcement of this alliance in December By this agreement, Eni acquired a 50% of Unión Fenosa Gas through its subscription of a 440 million capital increase by Unión Fenosa Gas that was completed on 24 July As part of its commitment to the development of Spain s energy infrastructure, Unión Fenosa has a 21% holding in the Reganosa regasification plant (18.9% is held indirectly through Unión Fenosa Gas and 2.1% is held directly). Unión Fenosa Gas also holds a 42.5% stake in the Sagunto regasification plant through its subsidiary Infraestructuras de Gas. Infraestructuras de Gas has a 50% interest in the plant and is jointly owned by Unión Fenosa Gas (85%) and Oman Oil Holding Spain (15%). Page 13

14 Unión Fenosa Gas s fleet of LNG tankers consists of two vessels that were built in 2004 with nominal capacities of 140,500 m 3 and 138,000 m 3, respectively. These ships are contracted under a Time Charter regime for 25 years. The commercialisation activity of Unión Fenosa Gas has been developed in the electricity generation and industrial markets. Unión Fenosa Gas Comercializadora operates in the Spanish market and had total sales of 54,815 GWh (equivalent to 4.7 bcm) and a market share of over 12% in In addition to its gas commercialisation business, Unión Fenosa Gas has a 60% holding in Gas Directo S.A. ( GD ), the company through which Unión Fenosa distributes and sells natural gas to commercial and industrial clients in Spain. Cepsa is the other shareholder in GD. GD currently operates in the Spanish autonomous communities of Galicia, Madrid, and Castilla-La Mancha, with a total of 5,000 customer connections. Electricity Distribution and Transmission Unión Fenosa distributes and transmits electricity to customers through its wholly-owned subsidiary, Unión Fenosa Distribución ( UFD ). UFD supplies electricity in an area of Spain covering 81,000 km 2, mainly in the autonomous communities of Madrid, Galicia, Castilla-León and Castilla-La Mancha. In 2008, Unión Fenosa had a domestic market share of approximately 14% of the energy distributed in mainland Spain, supplying almost 3.7 million customers. Total energy invoiced in 2008 amounted to 36,189 GWh, a 3.0% increase over In 2008, 23,200 GWh of power was sold on the regulated market, a decrease of 12.5% over the preceding year. On the other hand, the 12,989 GWh invoiced through third party access tariffs represented a 50.5% increase over In 2008, Unión Fenosa invested approximately 361 million in its distribution and transmission network, which was intended mainly to enhance supply capacity, quality of service, optimise network performance and increase the sustainability of its infrastructure. International Investments The international activities of the Unión Fenosa Group are carried out through Unión Fenosa Internacional, S.A. ( UFI ) and include a range of businesses including electricity power generation, electricity distribution and transmission. The international activities of the Unión Fenosa Group accounted for 25.6% of the Unión Fenosa Group s operating profit in The following table sets out the main international investments of Unión Fenosa as at 31 December 2008: Sector/Company Country % owned Generation Iberafrica Power Kenya Hermosillo Mexico Naco Nogales Mexico Tuxpan Mexico La Joya Torito Costa Rica Costa Rica Generadora Palamara La Vega Dominican Republic Generadora Palamara La Vega Dominican Republic EPSA (also transport and distribution) Colombia Transport and Distribution Edemet Edechi Panama Page 14

15 Sector/Company Country % owned Deocsa Guatemala Deorsa Guatemala Disnorte Dissur Nicaragua Nicaragua Red Unión Fenosa, S.A. Moldova Electri Caribe Colombia As at 31 December 2008, Unión Fenosa had ownership interests in companies that supply approximately 5.7 million customers outside Spain: Mexico: The Unión Fenosa Group wholly owns three CCGT plants with a total generation capacity of 1,570 MW, and has an additional CCGT plant under construction with a capacity of 450 MW. Production for the year ended 31 December 2008 amounted to 11,063 GWh. Colombia: The Unión Fenosa Group acquired Empresa de Energía del Pacífico ( EPSA ) following a successful bid for 64.2% of the company in December EPSA generates, distributes and markets electricity in south-west Colombia to over 465,600 customers covering an area of 22,142 km 2. It has a capacity of 950 MW and generated 4,196 GWh in In addition, UFI owns 81.3% of Electri Caribe, which distributes and markets electricity in seven northern regions of Colombia covering 132,000 km and manages over 1,995,900 customers. 11,525 GWh of energy was invoiced in Guatemala: Distribuidora de Occidente ( Deocsa ) and Distribuidora de Oriente ( Deorsa ) distribute electricity to over 1.3 million customers over an area of 102,000 km 2. In 2008, they invoiced 1,863 GWh. Nicaragua: The distribution companies Disnorte and Dissur service over 691,200 customers covering an area of over 52,000 km 2. For the year ended 31 December 2008, they invoiced 2,214GWh. Panama: Distribuidora Eléctrica de Metro Oeste ( Edemet ) and Distribuidora Eléctrica de Chiriqui ( Edechi ) manage over 435,700 customers and have 26 MW of generating capacity, and service a distribution market covering 46,000 km 2. Energy invoiced amounted to 3,144 GWh for the year ended 31 December Moldova: Distributors Red Chisinau, Red Centru and Red Sud merged in 2007 to form Red Unión Fenosa, S.A., which operates in central and south Moldova in an area of nearly 22,000 km and provide electricity to approximately 794,000 customers. In 2008, electricity invoiced reached 2,262 GWh. Dominican Republic: In February 2001, the La Vega thermal generating plant, with a capacity of 88 MW, became operational. This plant complements the Palamara thermal plant which has a capacity of 106 MW and which became operational in The two plants, which were integrated into a single company in 2002, produced 1,085 GWh in Kenya: Through Iberafrica Power, the Unión Fenosa Group owns Kenya s first independently operated generating plant, which has a capacity of 58 MW. Production for the year ended 31 December 2008 amounted to 327 GWh. In 2008, Iberafrica Power reached an agreement with Kenya Power & Light Company (KPLC) to increase the actual installed capacity by 50 MW for 25 years, and this new capacity is expected to become operational during KPLC is the state-owned electricity company to which Iberafrica Power sells electricity under Page 15

16 a power purchase agreement. The pension fund of KPLC holds a 20% stake in Iberafrica Power. Costa Rica: The Unión Fenosa Group owns 65% of a hydroelectric plant with an installed capacity of 50 MW that came into operation during In the year ended 31 December 2008 total production of the plant was 281 GWh. In March 2008, the regulator, Instituto Costarricense de Electricidad (ICE), granted Unión Fenosa the construction and operation of the Torito hydroelectric plant for a period of 20 years. Entry into operation is expected by Other Business Unión Fenosa s other businesses include its investments in telecommunications, industry, and other areas. SOCOIN Unión Fenosa s subsidiary, Socoin, is responsible for the Unión Fenosa Group s engineering activities in the energy sector. UFINET Unión Fenosa Redes de Telecomunicaciones (UFINET) is the group s telecommunications operator, covering all the telecommunication needs of the group and unlocking value from its excess capacity. O&M ENERGY O&M Energy develops the Group s activity in the international markets, offering integral operation and maintenance services. CEDIE The Unión Fenosa Group has a majority interest in the industrial additives company Compañía Española de Industrias Electroquímicas (CEDIE) and several construction materials companies. CEDIE, which is 96.5% owned by Unión Fenosa, focuses on the production of lime and calcium, as well as other products for the iron and steel industry. GESS General de Edificios y Solares, a wholly owned subsidiary of Unión Fenosa, was incorporated in 1995 to manage the Unión Fenosa Group s real estate assets. Environmental Matters The nature of the Unión Fenosa Group s principal business (electricity generation and distribution) and its coal mining activities subject the Unión Fenosa Group to a number of environmental and other laws and regulations affecting many aspects of its operations. These include the regulation of air emissions and waste water discharges, the generation, storage and discharge of various types of waste (including the storage of radioactive materials), land use and reclamation activities. Such laws and regulations generally require the Unión Fenosa Group to obtain and comply with a wide variety of licences, permits and other approvals. Unión Fenosa believes that it is in material compliance with all such laws and regulations. There can be no assurance, however, that new regulations will not be adopted, which could have an adverse impact on its operations. Unión Fenosa believes that the conservation of the environment is a priority for all of its activities. Consequently it has established its own environmental policy and follows environmentally friendly activities. Page 16

17 9. Unaudited Pro Forma Consolidated Financial Information Gas Natural has prepared certain unaudited pro forma consolidated financial information to illustrate, on a pro forma basis, how the Guarantor s consolidated balance sheet at 31 December 2008 and consolidated income statement for the year then ended might have been affected by its acquisition of Unión Fenosa, assuming that such acquisition had been completed on (i) 31 December 2008, for the purpose of presenting the Guarantor s unaudited pro forma consolidated balance sheet information as of 31 December 2008, and (ii) 1 January 2008, for the purpose of presenting the Guarantor s unaudited pro forma consolidated income statement information for the year ended 31 December The unaudited pro forma consolidated financial information set out in Annex 1 to this Supplement, is, by virtue of this Supplement, incorporated by reference in, and forms part of, the Base Prospectus. The unaudited pro forma consolidated financial information, has been prepared in accordance with the requirements of Annex II of Commission Regulation (EC) 809/2004 and with the content of the recommendation issued by the Commission of European Securities Regulators (CESR) for the consistent implementation of the aforementioned Regulation (CESR/05-054b). 10. Merger between Gas Natural SDG and Unión Fenosa and other corporate transactions The following text is, by virtue of this Supplement, inserted to the section of the Base Prospectus titled Description of Gas Natural SDG, S.A. Recent Developments, immediately after the text referred to in section 4 above: Anticipated merger between Gas Natural SDG and Unión Fenosa The intention of Gas Natural is to achieve the full legal and operational integration of Unión Fenosa and its subsidiaries within the Group to form an international energy group with a significant presence across all stages of the gas and electricity value chains. In this regard, the directors of Gas Natural SDG, Unión Fenosa and the latter s wholly-owned subsidiary, Unión Fenosa Generación, S.A., Sociedad Unipersonal (Unión Fenosa Generación) have approved a merger project (proyecto de fusión) in which Gas Natural SDG would absorb Unión Fenosa and Unión Fenosa Generación and remain as the surviving entity. It is anticipated that this merger project will be presented to the annual general shareholder meetings of each company in June 2009 and that, if approved, the merger would be implemented during the second half of the year. The exchange ratio set out in the merger project, which has not yet been made public, has been determined through the application of consistent valuation criteria, so as to ensure that minority shareholders of both companies are not unfairly prejudiced. The fairness of the exchange ratio, from a financial point of view, has been confirmed in valuation reports prepared by separate independent experts acting for Gas Natural SDG and Unión Fenosa, respectively. In accordance with Spanish law and regulation, the exchange ratio will also be confirmed by a further independent expert appointed by the Mercantile Registry (Registro Mercantil). In the event of a statutory merger between Gas Natural SDG, Unión Fenosa and Unión Fenosa Generación, with Gas Natural SDG surviving the merger, Unión Fenosa shareholders would automatically become shareholders of Gas Natural SDG and Unión Fenosa would cease to be listed on the Spanish stock exchanges. 11. Amendment to the no significant or material change statement in General Information Paragraph 6(c) of the section titled General Information on page 142 of the Base Prospectus is deleted and replaced in its entirety by the following text: There has been no material adverse change in the prospects of the Guarantor since 31 December 2008 nor has there been any significant change in the trading position of the Group since 31 March 2009 (being the date of the latest available consolidated financial information of the Group). Save as Page 17

18 regards the net increase of 4,605 million in the aggregate principal amount outstanding under the Acquisition Facilities used to finance the Guarantor s acquisition of Unión Fenosa, as described in Description of Gas Natural SDG, S.A. Recent Developments Acquisition of Unión Fenosa Financing of the acquisition of Unión Fenosa, there has been no significant change in the financial position of the Group since 31 March 2009 (being the date of the latest available consolidated financial information of the Group). 12. Removal of certain information incorporated by reference in the Base Prospectus The unaudited consolidated interim financial information of the Guarantor relating to the nine-month periods ended 30 September 2008 and 2007, which is currently incorporated by reference in the Base Prospectus, is no longer incorporated by reference in, and no longer forms part of, the Base Prospectus, such financial information having been superseded by the First Quarter Results and the Audited Consolidated Annual Accounts incorporated by reference in the Base Prospectus by virtue of sections 1 and 2, respectively, of this Supplement. Page 18

19 ANNEX 1 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION Page 19

20

21

22

23

24

25

26

27

28

29

30

31

32