Action Plan for the Year 2000 Problem.

NEW YORK--(BUSINESS WIRE)--Dec. 21, 1998--

(As approved by the Board of Directors on 11 December 1998)

EXECUTIVE SUMMARY

1.- INTRODUCTION

THE PROBLEM

From the first applications that automated repetitive tasks to the sophisticated control systems used in the chemical, aeronautical or energy production industries, information technologies have been ever more present in the business world. Data processing systems base a significant amount of calculations and comparisons based on dates.

The issue commonly known as the "Year 2000 Bug" arises because many existing computer programs traditionally have used two digits rather than four to define the applicable year. As a consequence, these computer programs may recognize a date using "00" as the year 1900 rather than 2000. This could result in systems misinterpreting dates, causing errors, which might eventually paralyze the functions, supported by them. This problem will be significant in all companies which rely on data processing systems, control systems telecommunications, etc. in their operations, as is the case of the electric industry in the activities of production and operation and management.

ENDESA GROUP BEFORE THE MILLENIUM BUG

In 1996, the Endesa Group started to analyze the magnitude of the issue and to develop different strategies for dealing with the Year 2000 problem. As a consequence of the preliminary analysis on the data processing systems which coincided with the consolidation of the Endesa Group as an integrated industrial group, a joint strategy was developed in 1997 for the replacement of the data processing systems in order to deal with the adaptation to the European single currency, the Millennium Bug and the technological convergence. The implementation will be carried out until all of the central systems used by the group companies are unified, which is expected to reduce the costs and risks associated with the year 2000 bug. The different areas of activity have also begun to implement processes for assessing the impact of the Millennium Bug and making any necessary remedial changes.

The follow-up of this problem by Endesa's top management both in the internal aspects and external issues, such as relationships with clients, investors, government organizations, financial entities, insurance companies, etc. led the action to be taken from a single corporate department, in which the following measures were taken:

- appointment of a general coordinator of the project "Millennium

Bug" - hiring the consulting firm Profit (Gartner Group) to ensure the

project's quality and good performance - formulation of an action plan which joined the actions for

reporting to and approval by the Board of Directors.

To date, the tasks programmed are progressing according to plan and contacts are held with the chain of suppliers and related entities. Nevertheless, the Endesa Group is aware of the interactions involved in the electric industry and their importance for the continuity of the service, as well as the important role of the suppliers in the process, for which the necessary measures for the development of a joint effort are being taken.

The costs involved are presently estimated to amount to Pta. 14,068 million, of which approximately Pta. 8,400 million correspond to the implementation of new systems (not necessarily linked to the Millennium Bug project), the rest being costs associated with adaptation of current equipment and systems. These costs are included in the companies' operating budgets as they actually correspond to both maintenance and renewal of current equipment and systems. However, the Endesa Group's anticipated expenditures may increase as the Group completes the Millennium Bug project and the remediation plans are effected.

To conclude, the Endesa Group is fully aware of the issues brought by the "Millennium Bug", has developed a plan to face these issues and is implementing the necessary actions to minimize risks in the Group's activities.

2.- PROJECT ORGANIZATION

The Management Committee appointed the Group's Telecommunications and Control Systems Manager as Millennium Bug project manager, who is assisted by a project office (Year 2000 Office) with the following tasks:

- manage all necessary actions to face the problems linked to the

Millennium Bug issue, coordinating the activities of each related

department - carry out an inventory of those systems and equipment potentially

related to the Millennium Bug, obtaining information on the

actions taken - manage the design and implementation of the adaptation plan - carry out consultations with suppliers - formalize procedures for the follow-up and validation of the

solutions to be adopted - obtain the certificate from an outside consultant on the

compatibility of all our appliances and systems - channel all communications with internal and external agents - reporting to the Management Committee on the actual implementation

of the plan

The project's design calls for the involvement of all levels of decision by areas, which allows for the full use of synergies.

Each line of business has appointed a manager responsible for the development of the project: generation (Nuclear, Thermal, Hydroelectric), distribution, trading, information systems, telecommunications, control systems, mining, infrastructures, etc., and specific task force teams were appointed. Intranet discussion forums were implemented for the inventory and exchange of experiences. Periodic meetings are held for the follow-up.

3.- SCOPE OF THE PROGRAM

The Millennium Bug Project faces the problem globally taking into account all the business areas. Therefore the following activities are taken into account:

- analysis of the processes which are potentially affected, both

critical and non-critical - appraisal of risks and allocation of priorities - obtention of suppliers' certificates - implementation of adaptation works - compatibility tests - auditing and consultant's certification

Specific action plans have been devised which will ensure that the adequate measures have been taken to replace or correct the affected elements. Moreover, contingency plans have been devised for unforeseen events or events outside the scope of Endesa Group. The project also coordinates third party relations, with both suppliers and clients, with the assistance of the financial and legal departments.

The scope of the Millennium Bug Project encompasses the coordination, supervision and follow-up of the efforts to cope with the millennium issue made by the Group companies: CSE, FECSA, ENDESA, ENHER, ERZ, GESA, UNELCO, NANSA and VIESGO, for the areas of generation, distribution, telecommunications and control systems, information systems, mining and infrastructure services.

The devising of plans for the adaptation to the millennium issue has been promoted by giving the relevant instructions to the management of international, diversification and affiliated companies. The Year 2000 Office also has the task of fostering the use of the same standards across the organization, collaborating in the necessary tasks of coordination and prevention.

4.- METHODOLOGY

The program is based on a series of phases, activities and tasks which ensure the certification of each and every one of the Group's automated activities and systems, as well as the external elements which might have an effect on them.

-- From an internal viewpoint (automated activities and systems which

support the company's processes) the following phases have been

taken into account:

-- Awareness

-- Inventory of systems and equipment

-- Analysis

-- Tests and corrections

-- Implementation

-- From an external viewpoint a series of coordinated action

guidelines were established on the following:

-- Suppliers

-- Clients, official institutions and financial community

-- Legal aspects

-- Coverage by insurance companies

As a certificate for the compatibility the DISC PD 20000-1:1998 "A definition of year 2000 conformity requirements" standard has been adopted. This standard was developed by the Technical Committee BDD/1/3 from the British Standard Institution.

Other international guidelines and requirements have also been taken into account, such as the NEI/NUSMG 97-07 Guide published by the US Institute for Nuclear Studies.

5.- CORPORATE PLAN

The Endesa Group's corporate action plan is made up of the ensemble of the year 2000 conformity plans of each line of business for the companies detailed in the previous section "Scope of the Project".

The master guidelines evolve around the following principles:

- Detection of automated activities and systems which might be

affected by the Year 2000 issue, identifying their criticality in

the processes where they are integrated. - Establishing of the external dependencies, supply chains and

services to clients. - Delimitation of risks - Identification of persons accountable for the implementation of

the activities, both by company and line of business. - Activity programming, identifying key items and dependencies - Production and evaluation of budgets and necessary resources - Setting up of follow-up guidelines both in individual plans and

information to the Group's management

Homogeneous criteria and standards were set and a common database was put in place for the detailed follow-up of each and every equipment or system potentially affected enabling a differentiated analysis by company, technology, situation, etc.

The complexity of the processes existing in the Group has required the selection of different strategies for the solution of the problems, which were detected. As an example, in the information systems area a decision was made to replace the equipment. In other areas, the adaptation only required the replacement of the software.

For most of the equipment and systems, the compatibility tests and the adaptation works have to be carried out without interrupting the service while guaranteeing safety. This demands establishing the adequate priorities, as well as the maximum usage of the time frame available.

5.- CURRENT STATUS

Currently the activities have been developed according to plan. The current status and the foreseen accomplishment dates are shown below:

Presently in conformity: 31% Conformity in 1st half 1999: 47% Conformity in 2nd half 1999: 22%

This Form 6-K contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe", "expect", "anticipate", "intend" and "estimate" and other expressions which are predictions of or indicate future events and trends and which do no relate to historical matters identify forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results could differ materially from those projected in such forward-looking statements as a result of various factors that may be beyond Endesa's control, including but not limited to the willingness of Endesa's third party vendors, suppliers, clients and related entities to take the necessary remediation actions to become Year 2000 compliant; Endesa's ability to coordinate with third party suppliers, clients and outside consultants in implementing its Year 2000 project and Endesa's ability to successfully achieve compliance by certain targeted accomplishment dates. Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Endesa undertakes 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 date hereof, or to update or revise any of them, whether as a result of new information, future events or otherwise.